Good morning, everyone, and welcome to the 2013 First Quarter Financial Results Conference Call for American Shared Hospital Services. [Operator Instructions] I would now like to turn the call over to Dr. Ernest Bates, Chairman and Chief Executive Officer; Craig Tagawa, Chief Operating and Financial Officer; Norm Houck, Controller of American Shared Hospital Services; and Ernest R. Bates, Vice President, Sales and Business Development. Mr. Tagawa, you may begin.

Thank you, Ellen, and thank you all for joining us for AMS' first quarter financial results conference call and webcast. Please note that various remarks that we may make on this conference call about future expectations, plans and prospects for the company constitute forward-looking statements for the purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the year ended December 31, 2012, and the definitive proxy statement for the annual meeting of shareholders held on June 11, 2013. The company assumes no obligation to update the information contained in this conference call. We had an encouraging quarter highlighted by higher revenue, gross margin and net income. Our results would have been even better, but for the one-time charge related to the sublease of a portion of our office space associated with the cost reduction program we announced last month. And while I'm not yet at liberty to reveal any details, I can say that we continue to work to modify the reduction in Medicare reimbursement for Gamma Knife services imposed under Provision 634 of the American Taxpayer Relief Act of 2012 or ATRA. We are diligently pursuing all avenues for remediation. We are also taking steps to offset the impact of Provision 634 through progressive cost reductions. We expect the program we announced last month to reduce AMS' future cash outlays by approximately $1 million annually once all steps are fully implemented over the next few months. In addition to the salary cuts for our senior executives, the estimated $1 million in annual cash savings include reduced fees we have negotiated with our vendors, the subleasing of a portion of our office space and the refinancing of certain of our existing equipment, loans and leases. We expect to realize a small portion of these savings in the second quarter, mostly from reduced rent. The major impact of the cost-reduction program will begin in the third quarter. As we reported to you last quarter, MD Anderson Orlando's dedicated proton center is under construction. We continue to expect this facility to begin treating patients next year. As we announced previously, AMS has received a firm financing commitment for the MEVION S250 Proton Therapy System we will supply for this $25 million facility. FDA approval of the MEVION device was received last year. The MD Anderson Cancer Center Orlando will be the model for additional proton centers we are developing. Now I'm going to turn the call over to Norm Houck to go over the results in detail. Norm?

Thanks, Craig. For the 3 months ended March 31, 2013, medical services revenue increased 6% to $4.668 million. This compares to medical services revenue for the first quarter of 2012 of $4.403 million. Net income for the first quarter of 2013 was $25,000 or $0.01 per diluted share, which included a one-time charge related to the subleasing of a portion of the company's office space. Net income for the first quarter of 2013 was impacted by $0.01 per share from this one-time charge. This compares to net income of $9,000 or $0.00 per diluted share for the first quarter of 2012. The number of procedures performed on Gamma Knife Perfexion systems supplied by AMS increased 15.5% for the first quarter of 2013 compared to the same period of 2012. The total number of procedures performed in AMS' Gamma Knife business including Gamma Knife and Gamma Knife Perfexion procedures, increased 20.8% for the first quarter of 2013 compared to the same period of 2012. Revenue increased more slowly than procedure volume, primarily due to the mix of procedures by location. Medical services gross margin for the first quarter of 2013 increased to 45.4% compared to medical services gross margin of 41.7% for the first quarter of 2012. Selling and administrative expenses for the first quarter of 2013 increased to $1.235 million compared to $1.024 million for the fourth quarter of 2011. This increase included expenses incurred in connection with the company's efforts to rescind or modify Provision 634 of the American Taxpayer Relief Act of 2012. In addition, as I mentioned previously, the company entered into an agreement to sublease a portion of its office space at a rental rate less than the company pays for the space, resulting in a one-time pretax charge of $115,000. Operating income for the first quarter of 2013 increased 72% to $412,000 compared to operating income for the first quarter of 2012 of $239,000. The decrease in interest and other income reflects a foreign currency translation adjustment, primarily due to the quarterly remeasurement of the Turkish lira. Cash flow, as measured by earnings before interest, taxes, depreciation and amortization, EBITDA, was $2.036 million for the first quarter of 2013 compared to $2.139 million for the first quarter of 2012. Turning to the balance sheet. At March 31, 2013, cash, cash equivalents and certificates of deposit were $10.302 million compared to $10.564 million at December 31, 2012. Shareholders' equity at March 31, 2013 was $24.845 million or $5.39 per outstanding share. This compares to shareholders' equity at December 31, 2012 of $24.830 million or $5.39 per outstanding share. Craig?

Thank you, Norm. Before we turn the call over for questions, Dr. Bates would like to update you on some of the recent developments at MEVION. Dr. Bates?

Thank you, Craig. This is a statement that we received yesterday from Joe Jachinowski, President and Chief Executive Officer of Mevion Medical Systems. And Joe has allowed us to quote him, and I'm going to read as follows as Joe had sent us. "Our focus this year has been on ramping up production and deployment of our MEVION S250 Proton Therapy System. As of today, there are a total of 5 facilities in various stages of construction and installation of half a dozen others architectural planning. Our first system, at Kling Proton Center at Barnes-Jewish Hospital in Washington University is fully installed, clinically calibrated and being prepped for a final acceptance. We expect patient treatment to start in the next few months following the customers being commissioned. The lessons learned from this first installations are paying off greatly in streamlining subsequent installations. The second MEVION 250 unit is delivered and installed at Robert Wood Johnson University Hospital, with the next step of being calibration ready to start. Our third MEVION 250 is under installation in Oklahoma's only comprehensive academic medical center, the Stephenson Cancer Center, the University of Oklahoma. This proton accelerator is shipping this week after fully completing its optimization in our factory. Manufacturing of Units 4 and 5 and units being the first American Shared Systems has also begun. With our rapidly growing experience, the installation timeframe for this year has now decreased to under 12 months. Designed to preserve all the treatment benefits of traditional proton systems while removing the obstacles of size, cost and complexity. The MEVION 250 continues to redefine the economics, availability, and the future direction of proton therapy as demonstrated by the successful manufacturing ramp-up and deployment of multiple systems". That is the end of Joe's statement. Operator, we are ready for the first question.

[Operator Instructions] Our first question comes from Tony Kamin with the Eastwood Partners.

First question, good quarter in terms of Perfexion growth of treatments. Can you talk about the growth you saw this quarter and sort of break it down with a little more color on domestic versus international in Turkey?

We actually experienced good growth in both of the international and domestic. The Turkish units are starting to ramp up now that they've been in place for several months. And we did have very growth in most of our domestic units as well.

Okay...

Ernie, do you want to make a comment about the Turkey units?

Well, just echoing what Norm said, we are -- We're experiencing very strong growth in our unit in southern -- Gamma Knife unit in Southern Turkey at Adana. I will say that we are treating upwards of 40 patients a month now at this site and expecting that monthly number to continue to grow, so we're pleased with the performance of that unit.

Okay. The -- we all know the reduction in compensation has now hit during the current quarter and I know you probably don't want to give guidance. But can you talk about what you've seen in terms of if there's any behavioral change from either physicians or hospitals in the sense that, are they ordering less procedures? Are they switching to Varian systems? Have you been able to observe anything that would give a little color on the behavior?

No, we haven't seen any behavioral changes. So we have not seen that. I think as we mentioned -- if I mentioned in some of our comments, we are continuing to work to have a Section 634, either modified or rescind it, so that effort is ongoing.

Okay. On the -- it was helpful, I think, the remarks from Still River. Can you talk in terms of AMS just so I understand it. AMS' strategy is essentially to compete for any proton units that are being considered in the country that are in need of this kind of financing solution, is that correct?

Yes, we are not -- we do not have an exclusive contract with Mevion. As we do with our other technologies, we're free to place what we feel is the right technology for the customer, including what the customer's preference is.

And I know that the delay in the first Mevion treatments at Barnes has-- everyone feels has, sort of, slowed down the ability to get contracts inked, but can you give us a little color on your expectations that once that treatments happen, do you expect to see an acceleration in AMS proton activity?

Yes, we do. I think our focus right now is to get our first unit up and running and then the second and third unit. I think as we've mentioned in the past, we have opportunities to do additional centers and we will continue to do those. But I think from a standpoint of it driving revenue through AMS, our goal is to get that first one up and running as quickly as possible.

Tony, we're very encouraged by Joe Jachinowski's statement, which he released yesterday, and so are our future and potential hospital customers. It's been clear to us that everyone is waiting for that first patient to be treated at Barnes, and we're going to see that in the next few months. And that's very exciting. And I know after that happens, there will be people lining up to acquire this equipment. It's very clear to us and to others in the business that this is a direction where it's going. That is single room systems, not multiple-room systems, not these behemoths that are selling for $150 million to $200 million, but rather those that sell for less than $20 million. So we think we've made the right choice in going with Mevion.

Another question in terms of the lighting initiative that you'd discussed on some prior calls and some other initiatives towards maybe an expanded line of equipment, which may be more important, given the Gamma Knife developments. Can you -- do you expect to be able to announce news on any of these over the next quarter or 2?

Yes, I think what we've mentioned in terms of the lighting is our OR21 concept, in which the company holds several patents with our architectural firm partner, MBBJ. And we are continuing to forge ahead in licensing some of these patents. And yes, we do expect to be able to, hopefully, announce something in the next quarter or so.

I might add, Tony, that we are in, I hope, the final stages of a term sheet with a company in Europe that will manufacture these lights. And I'm hoping that we can announce that in the next-- next month. Craig? There are still some things we have to work out in terms of percentage of license fees, but it looks very encouraging. And what I want to point out here is that this does not require us to put any great monies into it.

It's a departure from our standard formula and this will be -- not capital intensive.

One final sort of comment and question. And although we all know that several developments here that are really not in the company's control have contributed greatly to one I'm going to discuss. It's still very important. The shares are down from $4 in 2011 from a high of $3.60 last year from $2.80 at year's end, down to $1.60 in a year when the markets are roaring. And again, they're for reasons not really under the company's control. But I've talked to a number of holders recently who have supported by buying shares all the way down, and frankly, it gets harder and harder in the sense that people didn't expect it to be this far and have put a lot of capital behind the company. When I listen to the commentary, I think there's very strong arguments to be made that the company is now selling and at capitalization that's, in my mind, potentially less than the value of its Mevion shares, that's less than the accretion in the options or the Mevion deposits has put down and what those -- what the optionality in accretion in those contracts are worth. I think the company is potentially worth less than that. And you look at all that and put it together, and I think that it would be extremely important for the Board itself to make a very strong statement by individually and collectively making a really a reach [ph] buyback of shares by the Directors. I think that they presumably know the value of the company best, and I think that it would send a very strong message if they did such a buyback. I would point out in the last couple of days, there's 47,000 shares offered just above the market, which further stock is a lot. And I think again, if they took this move, I think it would send a very strong signal of what they believe the ultimate value of this company is, as do I. And if they don't take the step, I think it would send kind of a funny message. So anyway, that would be my very strong encouragement, if you could relate that to the Board.

Yes. Tony, we are doing that. And 2 Board members have said that they would step up and would purchase stock. One is going to do it under, I don't know if I have the right number. So it's called a 1015 or a 101 program. But they can't do it now because this is a quiet period, and that was the problem with the earlier part of this year, that there wasn't time for them to step in and purchase stock.

Great. That's a 10b-5, and I think that would be...

A 10b-5, I'm sorry, it's a 10b-5.

I think that would be extremely encouraging, and I'd really -- I mean, as I think I would encourage you to ask each of your Board members to sort of make a stretch buy here. I truly believe, I think a lot of other shareholders believe that this company is ridiculously undervalued, but you guys know it best. So we'd like to see it, I think.

We will deliver that message to them again, Tony. Thank you.

The next question comes from Steve [indiscernible] with [indiscernible] Investments.

The SG&A was higher this year than last year by about $210,000 and you accounted for $110,000 and -- or $115,000 and $40,000 of that. What was the other $55,000? Where do that come from?

I think we accounted for $155,000. Is that what you just said, Steve?

Yes, yes, yes.

There was nothing significant in there. There was some increases, decreases across the board. It's hard to get a specific thing, but salary costs were up a little bit, our payroll related costs, and that's partly because we had some temporary help in Turkey that we are using to market the Gamma Knife units over in Turkey. And really there's nothing specific there, it's just sometimes SG&A is up a little bit, depending on legal fees and a variety of other things.

Okay. Next question. Regarding what you've done to get Provision 634 rescinded and some of the lobbying efforts, can you outline what steps you're taking?

At this point, we prefer not to make that public from a strategic standpoint. I think we are working with other entities and just because of the sensitive nature, we prefer not to do that at this time. We don't think that would be in the shareholder's best interest.

Could you provide a little bit more color as to why you can't talk about that?

Really, because it's a very -- as you know, a very competitive market in terms of having the opposition lobby against having this rescinded. So we do not want to tip our hand at this point as to what our strategy is in terms of trying to get it either modified or rescinded.

What I suggest you do, Steve, is you get out 634, and you read it. Read the way it's written and see if you see any flaws in that.

I think you made a pretty strong argument on the last call, so I'm just trying to learn what steps have been taken so, but if you can't talk about it, I understand.

Steve, there's active opposition from the LINAC backed lobbyists for this thing not to be rescinded. And to the point where we don't want to disclose our strategy. I'm feeling very comfortable that we are going to prevail.

Okay. Another question, and this question is more if Provision 634 stays in place, once contracts end with your existing Gamma Knife customers, do you foresee these clients terminating contracts rather than renewing them?

I believe that we will get them renewed, only from the standpoint the -- what the Gamma Knife does is quite different than the other systems. It is shown throughout the years that it is the gold standard in terms of cranial radiosurgery and if you look at-- based on what we said in the past, in terms of doing single-fraction radiosurgery, the Gamma Knife predominantly does most of those treatments in the United States. And I think that's a great advantage, both in terms of patient receiving the best treatment, but also their convenience of not having to go back multiple times for treatment, as well as we mentioned before, we believe when fractionation occurs, it's a higher bill both to Medicare, but also the patient because the patient pays for 20% of that coinsurance. So we think there's a significant benefit to the Gamma Knife. We believe the Gamma Knife does cases that the competing linear accelerator radiosurgery devices can't do, and we're pushing to just increase the volume of what our centers can do based on some of the literature that has come out, recently.

We feel very strongly that the Gamma Knife reduces Medicare cost in the end because most patients, a great majority of them, get treated with one single treatment. And with the LINAC systems, at least 66% is that the correct number, Craig?

Close to -- in the upper 50s.

Upper 50s. Get treated with multiple fractions. And that's 5 fractions.

Four.

4 fractions. So the cost in the end is more than a Gamma Knife. So the cost of Medicare is going to be more.

Okay. If a -- let's say when a contract, when the time period ends up and let's say a customer terminates a contract. And you're left holding a Gamma Knife machine, what would you do with that? Is there a market to sell that? Would you try to get that with another customer? What's the process there?

What we do is we would relocate it to another customer. We would have enough advance warning to do that and we've been successful of doing that in the past in the few instances, and I would underline few, in the few instances where we haven't renewed with a customer or upgraded their equipment. We have moved it and you've got to remember at the end of the contract, we won't be any debt on this machine, so we will have very good options at that point, if someone didn't want to renew.

Okay. And then moving on to the OR for the 21st century, have you forecasted any revenue streams for this? And how big would they be in relation to the revenues that the company is already generating? Is it significant? Is it small? Can you provide some color there?

We haven't provided guidance on this, and it would be several years out before it's a commercial product. So we haven't fully vetted what the market's going to be because it's going to depend on some of the price that these will be sold at, so we have not done that. We think it's a, potentially, a very lucrative market for the company and that it will be more of a cash generator of the company that doesn't require the company to take on any debt or any capital commitments.

It sounds like it will be very high margin if it -- if and when happens.

Well, it will be a high margin and that there will be revenues with variable expenses. So yes it will have a very high gross margin, but we haven't really pegged what the revenue flows would be at this point.

It could be a very large number of the business opportunities. There are, like, 6,000 acute care hospitals in the United States, and all of these do have operating rooms, some just 1 or 2, some as many as 20 and 30. So it could be a very large market and our potential partner, the manufacturing companies is already in the lighting business and has been very successful. I think this -- it could be exciting, and there are other things that we can add to it. OR21 has other opportunities. I don't know if I pointed out to you that we have already 16 patents in the United States and now undergoing a pool in Europe for these OR21 and the lights in particular. So this could be big. We don't know yet. But hopefully, we'll announce that we've signed the final documents with this company within the next month or so.

Okay. Moving on to Mevion. Are there any concerns of a Provision 634-type of event happening with PBRT machines?

I am hopeful that will never happen again. Even our foes who have pursued this and made this happen, have to see the folly of what they've done. And if we can allow that Congress to overrule CMS, this would be a disaster for all of us. I don't think that's going to happen. That was totally strongly it in the medical innovation. I think that's going to happen again. But I can't say with an absolute certainty that it won't happen.

Sure. Sure. And then one more question on Mevion. Let's assume Mevion continues successfully building out this first machine, and they get a few more machines installed, do you anticipate increasing the value of the Mevion stock on the AMS balance sheet?

Currently, the value of the stock is at book value. We've -- as we've mentioned in our SEC filings, we believe it's temporarily impaired. So we have not reduced it. So we would not be -- we wouldn't have to increase it either when Mevion starts producing these on a commercial basis.

[Operator Instructions] The next question comes from Lenny Dunn with Freedom Investors.

The way I analyze the company, there's really 3 parts and then there's a fourth small part, which is the OR21, which certainly can't hurt, it can certainly help. But your Mevion stock is very likely when it goes public, which you will once they have the treatment center at Barnes up and running where they're treating patients, it's probably worth about where the current share price is. Then you have a second part, which with the disastrous news that came out with the Harry Reid thing, that has been impaired and people aren't really giving value to that. And it certainly has real value and even in a worst-case scenario, now with the cost-cutting you've done, this could be a profitable company just with the Perfexion Gamma Knife. And then the third part is the future of the company, which is clearly a few years out, but if you got 3 proton beams centers up and running with the deposits you have on them, I can see them generating $0.80, $0.90 a share because it's a different type of procedure and it could be extremely profitable. So you have the future, which is certainly not this year or next, and then you have the present, which is a small profitable company, and then you have the Mevion stock. So if you talk of these 3 different pieces and add the value of the 3 pieces together, and add the value of the 3 pieces together, and I've seen Mario Bobelli [ph]do this a number of times with investments. You certainly can get back to the book value, which is over $5.00. So I think the reason you're selling where you are is that no one is paying attention to you, frankly, and the people that were have kind of thrown in the towel in many cases, but I'm comfortable with our investment which is substantial and we can be very patient here.

We understand shareholder's frustrations, and we started at Mevion in 2006, and expecting that we'd have FDA approval and be up and running by 2008 and it didn't happen. But it's going to happen now. I think we've finally seen light at the end of the tunnel, and this is a remarkable machine.

I'm very encouraged by the progress, and it's taken this long, but now it's finally looking like we can see the endgame where for a while there, just almost seemed like pie in the sky for a while, but it's not. And certainly, the basic Gamma Knife business is a very viable business and I believe that you will prevail to at least an extent, if not fully on the reimbursement, and will have better earnings. But the only concern that I have, and I want to express one, is that you've identified the cost cuts, and I think you've been good about doing it. But why not a little sooner than the second half of the year? I mean, we're in the mid-May, can't we get some of that a little more benefit still in this quarter.

Norm, can you answer that? And by the way I'm putting Norm on the spot and I want to tell all of you that this is Norm's last earnings call, he's going to retire. And we're going to miss him.

Lenny, it's just not possible to get some of the reductions in place in time to make any kind of serious impact on the second quarter. We were able to do the sublease and make that arrangement, and so that's why you'll see that impact in the second quarter. But going forward, there's just too many variables in there to have that make a strong impact in the second quarter.

Yes. I would also, from what you just said, and I certainly wish you well and you've served the company well, I'm going to take a leap of faith here and that with the elimination of your salary, that perhaps is going to take place until the third quarter. So that will probably be part of the cost-cutting I'm assuming.

You're very observant.

So okay. And we certainly wish you well, and not that because of cost-cutting measure, I think you served the company well.

Thank you.

Thank you, Lenny. We agree.

We do agree.

Mr. Tagawa, there are no further questions. Would you like to make your closing remarks?

No, I'd just like to thank everybody for joining us this afternoon. And we look forward to speaking with you on our second quarter results conference call in August.

Thank you. This call will be available in digital replay immediately following today's conference. To access the system, dial (888) 843-7419, and enter the passcode 34825828 followed by the pound sign to access the replay. The webcast of this call will be available at www.ashs.com and www.earnings.com. This concludes today's teleconference. Thank you for participating. You may now disconnect.