Misonix, Inc.
Q3 2013 Earnings Call Transcript

Published: 10 May 2013

[Operator:]

Good afternoon, and welcome to the Misonix Inc. Third Quarter of Fiscal Year 2013 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Joe Diaz of Lytham Partners. Please go ahead, sir.

[Joe Diaz:]

Thank you, Denise, and thank all of you for joining us today to review the financial results of Misonix Inc. for the third quarter of fiscal year 2013, which ended on March 31, 2013. And as the conference call operator indicated, my name is Joe Diaz. I'm with Lytham Partners. We are the investor relations consulting firm for Misonix. With us on the call, representing the company today, are Mr. Michael A. McManus, Jr., President and Chief Executive Officer; and Richard Zaremba, Senior Vice President and Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. If anyone participating on today's call does not have a full text copy of the release, you can retrieve it from the company's website at misonix.com or numerous other financial sites. Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of Misonix Inc. during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will and other similar statements of expectation identify forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Investors are cautioned that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include, but are not limited to

[Michael A. McManus:]

Thanks, Joe. And my thanks to all of you for participating on today's call to review the financial results of the third quarter and the 9 months of 2013 ended March 31, 2013. As always, we appreciate your time and your continued interest in Misonix. As you know, revenue for the 9 months increased 7% to $11.1 million, while revenues for the third quarter decreased 17% to $3.0 million. It's important to note that BoneScalpel domestic units placed increased 44% and disposable revenues increased 48% in the third quarter. Going forward, we would expect to see the economic model that includes more placement of BoneScalpel units result in less near-term revenue but an increase in domestic units, generating high-margin disposable revenue. As we continue to sell and place instruments in hospitals throughout the United States, disposable sales, which carry significantly higher margin than instruments, will continue to grow and become larger percentage of total revenue, driving profitability and greater market penetration. Our razor-razorblade model is working effectively and is moving us to a point where we will have a more diversified and predictable revenue stream in the coming years. In the last quarter's conference call, I mentioned to you that we're starting to see increased utilization of VACs, sometimes called value assessment committees, in hospitals to determine the efficacy and the cost-effectiveness of medical devices, particularly new technology, before purchase orders are issued. In the third quarter, we saw this process expand throughout the country. While we welcome the added level of evaluation because we believe our ultrasonic surgical tools provide a compelling value proposition compared to the traditional tool sets used in spinal and orthopedic surgical suites, the additional product review clearly lengthens the sales cycle and impacted number of units that we were able to sell or place during the quarter. However, this development brings into focus the impressive growth in the recurring revenue component of our revenue stream, as represented by disposable sales for the BoneScalpel, SonicOne and SonaStar products. For the third fiscal quarter, disposable sales were $1.3 million or 42% of net sales. For the 9 months, disposable sales were $4.8 million or 43% of net sales. On a sequential basis, BoneScalpel disposable revenue and unit sales increased 48% and 44%, respectively, in the 2013 third fiscal quarter from the 2013 second fiscal quarter. There continues to be a strong interest in our flagship products. Excluding revenue from end-of-life legacy products, BoneScalpel, SonicOne and SonaStar revenue increased 27% for the first 9 months of fiscal 2013 to $10.2 million versus the comparable period 2012. The BoneScalpel continues to gain acceptance from the surgical community as an efficient bone-cutting device with soft-tissue-sparing capabilities that generate less blood loss and result in safer procedures. The impact of less blood loss in procedures not only improves visibility, but reduces the use of things that are used with the procedures, like bone wax and DuraSeal and, perhaps most important, in long or complex procedures, reduces the potential need for blood transfusions. The use of the BoneScalpel also results in less bone fragmentation, with cleaner cuts and less time in reconstruction. For the 9-month period of fiscal 2013, BoneScalpel sales were up 55%. As it relates to SonicOne, the continued explosive growth of diabetes throughout the world sets the stage for another serious health threat, the diabetic ulcer. It is a very serious condition, which, if not effectively treated on a timely basis, overwhelmingly results in the loss of a limb. The SonicOne is consistently becoming recognized as a preferred method of treating diabetic ulcers in the operating room environment. The soft-tissue-discriminating nature of ultrasound, with its antibacterial effect and its positive effect on protein and growth factors in the cells, allows for debridement of the wound while preserving as much of the viable tissue as possible. For the 9-month period, SonicOne sales increased 83% versus the comparable period in 2012 as surgeons increasingly recognized its benefits, particularly as compared to Versajet. International revenue for the 9-month period was up 16%. We have an expectation of increased disposable sales in the coming quarters as the original stocking supplies continue to dwindle. There is, however, a significant level of reuse of blades and tubing kit supplies in certain international markets, unlike the onetime usage common in the United States. That being the case, we believe that the international disposable supply sales will be at a slower rate than in the U.S. Nevertheless, we believe that the international markets represent the potential for meaningful disposable revenue in the coming years, especially when you think about the fact that we've got more than 40 distributors out there in markets around the world. During the just-completed quarter, we also earned revenue license fees of $1 million from Covidien, up 21% on a sequential basis, from $832,000 in the previous quarter, as they utilized our ultrasonic technology in one of their product lines that is currently on a strong growth curve, we believe. While there are no guarantees, we think that we will continue to benefit from this revenue stream for the foreseeable future. And we note, in the release, the number of patents that we have applied for and the number of patents that we received around the BoneScalpel and our other products, and this intellectual property in the form of a very valuable asset is something that we continue to build on because we expect that it will continue to have revenue, not only as a way to protect our products, but also as an opportunity for us to generate additional revenues in the future. Operating expenses for the 9-month period increased 17% as the company continued to invest in sales, marketing, customer support capabilities and research and development. In that regard, during the just-completed quarter, we were awarded 2 method-of-use patents related to the BoneScalpel and we applied for 5 additional patents. We believe these are important ongoing investments that will pay very significant dividends in the future. An important and continuing component of our marketing strategy is to work with leading surgical teaching institutions like Johns Hopkins, the Texas Back Institute, the University of Pennsylvania, New England Baptist Hospital, among others; and training the next generation of spine and maxillofacial surgeons with the Misonix BoneScalpel as part of their surgical tool kit. Our goal is for the Misonix products to become the tools of choice for this upcoming generation of surgical professionals. Hands-on experience with our products during their residencies and fellowships set the stage for Misonix products to be the operating rooms -- to be in their operating rooms when they commence their professional careers. With that, let me turn the call over to Rich Zaremba, our Chief Financial Officer, for a review of the numbers. And at the completion of Rich's remarks, I will open for some questions.

[Richard Zaremba:]

Thanks, Mike. Revenues for the 3 months ended March 31, 2013, were $3 million, a 17% decrease when compared with revenues of $3.6 million for the same period in fiscal 2012. BoneScalpel revenues declined 10% to $1.1 million; SonicOne revenues increased 86% to $398,000 and SonaStar revenue decreased 15% to $1.3 million. BoneScalpel, SonicOne and SonaStar product revenues decreased 6% for the 3 months ended March 31, 2013, compared to the comparable period in fiscal 2012. Domestic BoneScalpel disposables increased 48% this quarter over last quarter. Consigned domestic BoneScalpel units increased 44% to 34 units this quarter over last quarter. Net royalties increased 717% to $1 million for the 3 months ended March 31, 2013, over the 3 months ended March 31, 2012. The company reported a loss for the 3 months ended March 31, 2013, of $528,000, or $0.08 loss per share, including income of $172,000 from discontinued operations. This compares to a net loss of $214,000, or $0.03 loss per share, including income of $62,000 from discontinued operations for the 3 months ended March 31, 2012. Revenues for the 9 months ended March 31, 2013 were $11.1 million, a 7% increase when compared with revenues of $10.4 million for the same period in fiscal 2012. The BoneScalpel increased 55% to $4.8 million; SonicOne revenue increased 83% to $1.4 million; and SonaStar revenue decreased 5.6% to $3.9 million as compared to the 9 months ended March 31, 2012. BoneScalpel, SonicOne and SonaStar revenues increased 26.6% for the 9 months ended March 31, 2013, compared to the same period in fiscal 2012. Domestic sales, excluding LySonix and Covidien, increased 27% to $10.2 million for the 9 months ended March 31, 2013, compared with a comparable period in fiscal 2012. Net royalty income increased 211% to $1.7 million for the 9 months ended March 31, 2013, compared to the same period in fiscal 2012. The company reported a net loss for the 9 months ended March 31, 2013, of $1.1 million or $0.16 loss per share, including $182,000 income from discontinued operations, compared to a net loss of $78,000 or $0.01 loss per share, which included $774,000 of income from discontinued operations as of March 31, 2012. The company's cash position as of March 31, 2013, was $6.1 million. Day sales outstanding is 69 days. Inventory turnover is 1.5x, and the company has low long-term debt. The company's provided $131,000 of cash flow from operating activity from the 9 months ended March 31, 2013, compared with $1.6 million of cash used in operating activities for the 9 months ended March 31, 2012. The company's backlog of unfilled orders as of March 31, 2013, was $1.4 million. Now I'd like to turn it back to Mike.

[Michael A. McManus:]

Thanks for that review, Rich. While we are experiencing changing dynamics in our markets, we want you to know that we're well positioned to continue to grow in the coming years. We continue to have a solid financial base, as Rich mentioned, as of March 31, with $6.1 million in cash and equivalents and no long-term debt. We run our businesses as efficiently as possible, constantly looking for ways to reduce costs. We aggressively manage the businesses, and we work to make our products even more effective. I should let you know that tomorrow, we'll be announcing that, at our last board meeting on Tuesday, we added to our board Mr. Stavros Vizirgianakis, who is one of our major distributors and has been for a long period of time. He operates his business out of South Africa and Australia. A very knowledgeable international businessman, he previously was involved running the European operations of U.S. Surgical and has a lot of large medical devices as his customers. Stavros will be a significant addition to our board and a very active member, helping us look around the world at what other people are doing, looking for opportunities for us to sell our products and also helping us to find the opportunities to, perhaps, bring some other technologies into Misonix. So we welcome Stavros to the board, and we're very excited to have him on board. He was here in person for the meeting on Tuesday and was a substantial contributor right out of the gate. So with all of that, let me open up the call for your questions. Operator, if you could instruct the audience, I'd appreciate it.

[Operator:]

[Operator Instructions] The first question will come from Joe Munda of Sidoti & Company.

[Joseph P. Munda:]

Really quick, Rich, I wanted to go over some of these numbers. You had said disposables were $1.3 million. The royalty from Covidien was $1 million in the quarter. So roughly, you guys sold about $700,000 of hardware, do I have that straight?

[Richard Zaremba:]

Well, the Covidien has nothing to do with the hardware we sell. Remember, we get a royalty on the technology...

[Joseph P. Munda:]

Oh, I'm sorry. I'm looking at the wrong line. I'm sorry. You're right.

[Richard Zaremba:]

In the $1 million...

[Michael A. McManus:]

It's 5% on Covidien sales of products using our patents.

[Joseph P. Munda:]

Got you. Okay. So, Mike, to your comments about the razor-razorblade model and the placements, is there any chance you could give us the number of placements there were in the quarter?

[Michael A. McManus:]

12.

[Joseph P. Munda:]

Okay. As far as the model...

[Michael A. McManus:]

That's just BoneScalpel.

[Joseph P. Munda:]

Okay. So are we -- is it safe to assume that the revenue is going to decline here based on the fact -- going forward, based on the fact that BoneScalpel -- you're looking to put more placements out there and then capture your sales through the disposable line? How should -- I mean, just how should we look at top line going forward?

[Michael A. McManus:]

Well, I think it's going to depend upon mix because we still continue to sell the BoneScalpel and the SonaStar and the SonicOne to customers that want to buy it. In some cases, we will rent to -- particularly, with regard to the SonicOne more than the BoneScalpel these days. And the other part of the mix will depend upon international sales, where there is revenue from the sale of the systems. So it will depend upon the mix. But with regard to the BoneScalpel, right now, it appears that the preferred way of trying to move into hospitals faster, dealing with the environment that we're operating in, is a placement with a commitment for x number of disposables over a period of time. And so, with that model, you're right; top line is not affected because it's placement, and the revenue starts coming as soon as they start using the blades, the disposables. And those sales are, of course, much higher margin than are the sales of the systems.

[Joseph P. Munda:]

Okay. So on average, I mean, what's the -- how long would it take for you -- or how many disposables would it take for you to sell to capture that -- the selling price for the unit?

[Michael A. McManus:]

So if you're doing it on the basis of cost, which we don't disclose, it's a couple of months.

[Joseph P. Munda:]

Couple of months. Okay. But -- okay, so did you place more units in the third quarter than you did in the second quarter?

[Michael A. McManus:]

Yes.

[Joseph P. Munda:]

Okay. So then, we should see the benefits of that in the fourth quarter, then, from those placements, you're saying?

[Michael A. McManus:]

Yes, and we did in the last quarter, as we saw the number of disposables increase in both units and dollars.

[Joseph P. Munda:]

No, I understand that. I'm just trying to get a handle here because total revenue in the second quarter was down 2%. Now we're seeing an even more drastic drop to 16% here in the third quarter. I'm just trying to get my hands around this. I mean, are we expecting to see growth in the fourth quarter and continuing to 2013, or are we going to continue to see this steady decline until those consumables do hit?

[Michael A. McManus:]

Well, the way I think we ought to look at it is, given the present day model of how we feel the best way is to deal with these hospitals and -- you don't want to have to deal with a $35,000 budget committee and a VAC committee if you can avoid it. And so you go to either a rental or a placement. And if the placement model is the one that continues to be the favorite model, as it is right now, then I'd have to say that you're right. We're not looking at a model that suggests revenue growth. We all ought to be looking at a model that looks at unit growth and -- in terms of systems and in terms of disposables.

[Richard Zaremba:]

If you look at the 9 months, with BoneScalpel, SonicOne and SonaStar, the combination of those 3 are ahead of last year's 9 months by $2.1 million. So you have to factor in the fact that we no longer supply product to Covidien and LySonix has dropped dramatically. So if you compare those 2, that's a huge drop just in those products, but we're making it up in the BoneScalpel, SonicOne and SonaStar. And as Mike had said, we're making it up a little bit slower from the sale of units because we're placing them.

[Joseph P. Munda:]

Yes -- no, I understand that. But can you -- Rich, can you give us a clean number on what was AutoSonix and LySonix revenue in the quarter?

[Richard Zaremba:]

In the quarter? Yes, I can. In the quarter, the AutoSonix was 0 and the LySonix was $5,000. So if you go back and you look at over the last couple of years, until last year, we were making generators and probes here at Misonix for Covidien, and that was generating revenue. J&J was buying systems from us for LySonix because they were more active in the liposuction market. Last year, Covidien moved their production, as they have the right to do, outside of Misonix to a third-party vendor down in Florida. We're not doing anything right now for Covidien. But we do have, separate from operations, the 5% royalty that continues for the next 3.5 years on sales of a product that they have introduced using our technology that appears to be growing very well, and we will benefit from that for the next 3.5 years.

[Joseph P. Munda:]

Okay. So you expect this royalty income to then continue at this level or to be even higher?

[Richard Zaremba:]

At least at this level, yes.

[Operator:]

The next question will come from Michael Kaufman of MK Investments.

[Michael D. Kaufman:]

I have spent a lot of time in my early career at Xerox, and it sounds like it's a pretty powerful model if the payback for consumables is only a few months and if you put the unit out for use without charging them -- or maybe it's a de minimis charge or something. So it would be helpful if we could get some granularity on what the starting units that are out there under those terms are; what are the net adds of those kind of units, the new placements each quarter; what are the returns from that population; and what's the ending population of units that we're getting paid for based on consumables usage? So that would start to track because, certainly, sales, you've got $35,000 on this thing, you don't get that kind of ramp. But long term, you get a lot of residuals, and it's a much more palatable model if the breakeven in terms of the manufacturing cost is very low. So is that something that the company can start to provide?

[Michael A. McManus:]

Yes, and we are, to some extent, because you'll notice that the release that we put out focuses more than we have in the past on the number of units quarter-to-quarter because that's what we and you ought to be looking at. And so we've said before that, if you place a BoneScalpel unit in a hospital, the retail selling price, if you will, for a BoneScalpel blade is about $440 for a disposable pack and about $50 for a tubing set. Now the average selling price is below -- or about $400 because, for the first couple of cases, you're giving the doctor the blades that he uses to do his evaluations. But if you assume around $400 for a blade and if you assume that, if you place a system, we're suggesting to hospitals that they should be obligated to buy 5 blades a month, it does become pretty powerful if you assume that there is substantial margin between the cost of goods and the...

[Michael D. Kaufman:]

It's a $2,000-a-month rental revenue stream, basically, because it's a relatively kind of low cost of goods sold. But -- so the question is, what -- how many of these placements did you make this quarter that are under that basis? I missed it, I guess.

[Michael A. McManus:]

It's 12 units placed this quarter, and we started the fiscal year with 6 already in the field. And we have a total of 34.

[Michael D. Kaufman:]

So we now have 34?

[Michael A. McManus:]

Right.

[Michael D. Kaufman:]

I guess, is there any way to get a cosmic feel where -- with that strategy, what is the potential market for these units out there under that basis in the U.S.?

[Michael A. McManus:]

What is the potential market?

[Michael D. Kaufman:]

Yes. I mean, is it a....

[Michael A. McManus:]

Well, if we took...

[Michael D. Kaufman:]

Is it 100 units or 10,000 units? I have no idea.

[Michael A. McManus:]

Well, the business that we're in is a $400 million market for just saws and burrs and spine.

[Michael D. Kaufman:]

But I'll tell you, if you approached these various hospitals and doctors and whatever and say, "Okay, we're going to give you the unit and we're going to train you, and we expect that you're going to do 4 procedure or 5 procedures a month," and it's, in effect, $2000 a month, and they're going to get a hell of a lot more than that in revenue from the procedures, then you eliminate the problem with the adoption cycle and the committees and everything else...

[Michael A. McManus:]

No, no. No, unfortunately, that's not the case. What the placement -- or the low-cost rental of a unit does is it gets you by a budget...

[Michael D. Kaufman:]

A capital review committee?

[Michael A. McManus:]

A budget restriction. Whether you sell it, rent it or place it, if it's something that has never appeared on a purchase order before, it has to go before one of these value assessment committees to determine if this is something that the hospital needs because it didn't need it before and it probably has something that substitutes for it or was used before this technology was developed. So that's the purpose of the committee that we're going through at the final assessment. The good news is you only have to go through it once. The bad news is, sometimes, there are 3 or 4 other products ahead of you.

[Michael D. Kaufman:]

Yes. I guess I'm still groping with how do you understand how big the animal is, and at what rate are you approaching eating it?

[Michael A. McManus:]

Yes. So there are more than 3,000 neurosurgeons in the United States, and there's probably equally as many orthopedic surgeons. And some of those, but not all of them, do large volumes of spine surgery. So if you assume that just 70% of them do some volume of spine surgery, it gives you a sense of a substantial opportunity to put the BoneScalpel into the hands of people that don't have one now going forward with very impressive growth potential.

[Michael D. Kaufman:]

Yes, I guess, if you were getting $2000 a month from a reasonable number of these, you'd have a very big business.

[Michael A. McManus:]

Yes. And so what we have to look at is what is the ramp-up of units per quarter. It's been slower than we'd like. There's no question about that. Part of that is, if you go from 19 of these sales agency distributors to 40, that's 20 people -- or 20 agencies with several people in each agency that need to be trained. And so, you've got to get them a demo unit, you've got to get out there, and you've got to train them to use the product. They have the relationships with the doctors, but they're not going to go see the doctor until they've been trained. So we need to train them and get out there. We need to put more of these people on that have these kinds of relationships and get them trained, get them demo units, get them in the field, get them in front of doctors and accelerate the growth quarter-to-quarter of the number of units that are being placed, driving the receivable revenue up of those placements.

[Michael D. Kaufman:]

So you're saying we have something like 36 now?

[Richard Zaremba:]

34.

[Michael D. Kaufman:]

Excuse me?

[Richard Zaremba:]

36 -- no, wait...

[Michael A. McManus:]

On the BoneScalpel side, we've got about 42.

[Michael D. Kaufman:]

42. And -- I mean, if you were looking at just BoneScalpel, how many units would have to be in the field under this kind of scenario to have the company to be able to break even? The idea is how quickly can you stop using the cash?

[Michael A. McManus:]

Well, we're generating cash right now.

[Michael D. Kaufman:]

You're generating cash? I don't see the cash flow. Is that because of Covidien? In the quarter, you generated cash?

[Michael A. McManus:]

Well, it's a cumulative 9 months.

[Michael D. Kaufman:]

Yes, I understand that. But -- I mean, that is very laudable, but I don't know whether the magic number is 500 or 300 or whatever, but there's got to be some number that you shoot for that says, "We could really rest easy because, just in the U.S. alone, we're always going to be profitable."

[Michael A. McManus:]

Yes, well, you're right. In a perfect world, that would be a terrific place to be. And someday, I hope we have that kind of visibility. Right now, every customer is a new customer. It's not like we've had customers for the last 5 years and we have a history of their use. We've said before that our -- based upon the number of units that we have in the United States, it appears that the average use was 5 BoneScalpel blades a month, and then it went up to 10. And as we put more in and more new users start using them, they're not going to start right out of the chute at 10 per month, so that number is going to vary over time. And our job is going to be to do a couple of things

[Michael D. Kaufman:]

Yes. I mean, if there was a way to show that in your -- when you do the -- your quarterly, or whatever you do, kind of a write-up on a company, then people would get a feel that this thing is ramping.

[Michael A. McManus:]

That's right, Mike. And that's why I'd be happy to talk to you about it on-line or off-line. All I'm suggesting to you is, to be able to do that with credibility, you have to have history.

[Michael D. Kaufman:]

Well, I'm not saying an outlook. I'm saying just to show the actual how it's starting to build.

[Michael A. McManus:]

I hear you, and I appreciate it.

[Operator:]

Your next question will come from Sanford Brink [ph], a private investor.

[Unknown Attendee:]

Your new board member, I had a question on him. What is -- has he gotten a large position of the stock with buying in the open market? And has he filed a 13D, or will he?

[Michael A. McManus:]

Yes, Sanford, he has filed a 13D some time ago. He has about 5.3% of the stock, I believe. We will file an 8-K tomorrow that will speak about the fact that he has a 13D, but his -- we're not -- we didn't bring him on the board because he owns more than 5%, although he does. We brought him on the board because he is a very energetic, very experienced international medical device professional who has had years of experience selling our products to his customer doctors in South Africa and Australia. He has a very large business, and his brother is a neurosurgeon. And they can provide a lot of benefit to us in terms of an understanding of what international doctors are looking for, introducing us to international customers and distributors and helping us grow the business here in the United States. So he's going to be a very exciting, valuable addition to our team.

[Operator:]

Ladies and gentlemen, the question-and-answer session has now concluded. I would like to turn the conference back over to Mr. Michael McManus for his closing remarks.

[Michael A. McManus:]

Well, thank you, operator, and thank all of you. And once again, we appreciate your questions, and the kind of questions that come from Joe Munda and Mike Kaufman are always spot on. And we recognize the fact that we need to create greater granularity and visibility, as people say in the investment banking world these days, and they're right. I'd just suggest to you that the importance in these numbers are -- become more relevant over time as you develop markets here in the United States. We are still a very small player. There is no question about it. And some of our ability to put the BoneScalpel into the hands of people that can use it often is slower than I would like. There's no question about it. But I should tell you that I have not heard yet a story of somebody who has been exposed to the product who wasn't excited about it and didn't want to try it and, in a lot of cases, is pushing hard for these VAC committees to approve it. And that's not just in this country. We had our Italian distributor over here, as well as Stavros, over the last week, and I was extremely pleased to hear them talk about the fact that the BoneScalpel is -- it continues to be a door opener for them. Everybody wants to see it. Everybody that they've shown it to has shown an interest in it, and we're building usage around the world, slower than I'd like, slower than you'd like, but we're going to keep working at it very hard, pushing as hard as we can and dealing with environment as we find it. As I said in the release, there's one good thing about this, and that is that we have an opportunity to convince these VAC committees that, not only is this new technology, but it does provide a benefit to both the patient, the doctor -- or all of the patient, the doctor and the hospital, and we can show that in terms of recovery time. We can show it in terms of blood loss. We can show it -- less blood loss. We can show it in terms of safety and speed of reconstruction and better reconstruction. Now we need to continue to do work with our doctors and get some clinical data to support that. We have some now. As a matter of fact, starting tomorrow, if you go on the site, you'll see a report that's done by a Dr. Pakzaban from Houston, Texas that talks about the BoneScalpel and does a wonderful job of explaining why it provides a benefit in these kinds of surgeries and talks about the time saving, talks about the saving from loss of blood and talks about the safety of this. So we are making progress. It is too slow, but I can assure that we're continuing to do everything that we can, and we will be focusing on opportunity to shorten the sales cycle and to continue to grow overseas. And I thank you very much for your continued support and your participation in this call. And I hope you have a good evening. Thank you very much.

[Operator:]

Thank you. Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.