Craig Tagawa – COO and CFO Alexis Wallace – Controller Ernest Bates – Chairman and CEO

Tony Kamin – Eastwood Partners Lenny Dunn – Freedom Investors

Good afternoon, everyone. And welcome to the 2014 Second Quarter Financial Results Conference Call for American Shared Hospital Services. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). Joining us on the call today are Dr. Ernest Bates, Chairman and Chief Executive Officer; Craig Tagawa, Chief Operating and Financial Officer; Ernest R. Bates, Vice President, Sales and Business Development and Alexis Wallace Controllers of American Shared Hospital Services. I will now turn the call over Mr. Craig Tagawa, you may begin, sir.

Thank you, Brandon. And thank you all for joining us for AMS’ second quarter 2014 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 and 10-K (a) for the year ended December 31, 2013, a quarterly reports on Form 10-Q for the quarter ended on March 31, 2014 and the definitive proxy statement for the Annual Meeting of Shareholders held on June 10, 2014. The company assumes no obligation to update the information contained in this conference call. Obviously the main issue in the second quarter was a decrease in procedure volume and revenue. In addition to lower procedure volume and many of AMS’s Gamma Knife sites, in the sale of our Turkey operations effective May 31, 2014. The decrease in revenue was exacerbated by several factors. The severe winter weather in the Midwest and East Coast that affected us in the first quarter lingered into April, one site was down for the entire quarter due to personnel issues that have now been resolved and two sites which generated significant procedure volumes in second quarter 2013 had been mutually slow second quarter this year. I’m glad to report that both sites have bounced back to the usual treatment levels in July. We have worked diligently to resolve all the issues and restore normal procedure volumes as quickly as we can. We appear to be making good progress as Gamma Knife revenues in July improved 18% and 33% compared to average monthly revenues for the first and second quarter of 2014 respectively and improve 5% compared to July 2013 net of volume in Turkey. We closed the sale of our business in Turkey effective May 31, 2014. While we viewed our Turkey operations a good long-term investment, the continued volatility, the Turkish Lira against the U.S. Dollar resulted in cumulative foreign currency transaction losses of $908,000 and absorbed a great deal of management time. This plus the opportunity to generate approximately $540,000 in cash for our domestic operations were compelling reasons to consummate the sale. We also completed the private placement of common stock to several AMS directors in the second quarter which raised approximately $1.6 million. We used the proceeds of this transaction to strengthen our balance sheet in anticipation of our proton therapy initiatives. We also are encouraged by the continued growth of our domestic profession portfolio. We’ve recently announced a contract to supply Perfexion System to PeaceHealth Sacred Heart Medical Center at RiverBend in Springfield Oregon. This new Perfexion System, the 14th in AMS’s portfolio is expected to begin treating patients in the fourth quarter of 2014. This installation will also mark our 28th new Gamma Knife site. Another reason for optimism are the proposed Medicare Hospital outpatient prospective payment rates for calendar year 2015, recently posted by the centers for Medicare and Medicaid Services. Effective January 1, 2015, the proposed comprehensive reimbursement rate for both Gamma Knife and LINAC 1 session cranial radiosurgery of approximately $9,768 will be inclusive of the delivery and ancillary codes but exclusive of co-insurance payments or other adjustments. The average currency CMS reimbursement rate for delivery and ancillary codes exclusive of co-insurance and other adjustments is approximately $5,600. While these reimbursement rates are not final and could change, we are pleased that CMS is proposing increase with this life-saving therapy. The cost reduction program we announced in April 2013 is to help mitigate the impact of lower revenue on our financial results. General and administrative expenses decreased 18.7% for this year’s second quarter and 22.2% for the first half versus the same periods a year ago. We are on track to reduce cash-outlays by approximately $1 million annually compared to our cash outlays of 2013. Turning to the company’s Photon Therapy business, construction of the dedicated proton center at the University of Florida Health Cancer Center at Orlando Health is moving forward. AMS will supply MEVION S250 proton therapy system for this facility, delivery of the MEVION synchrocyclotron to the UF Health Cancer Center is expected this fall in the facility expected to begin training patients in first quarter 2016. The UF Health Cancer Center at Orlando Health is the model for additional proton centers AMS is developing. Now, I’m going to turn the call over to Alexis Wallace to go over the results in detail. Alexis.

Thank you, Craig. For the three months ended June 30, 2014 medical services revenue decreased 26.3% to $3,379,000 compared to $4,583,000 for the second quarter of 2013. As Craig explained, an addition to lower procedure volume at many of AMS’s Gamma Knife site and the sale of our Turkey operations effective May 31, 2014, the decrease in revenue as exacerbated by one site being down for the entire quarter due to personnel issues that have now been resolved and two sites with (inaudible) significant procedure volumes in the second quarter of 2013, having unusually low second quarter this year. The net loss for the second quarter of 2014 was $927,000 or $0.20 per share which included a pre-tax loss from the sales of Turkish subsidiary of $572,000 of pre-tax gains from foreign currency transactions of $146,000 due to the strengthening of the Turkish Lira against the U.S. Dollar. And an income tax charge of $165,000 which offset an income tax benefit of $131,000 from the company’s operating loss. Although, the sale resulted in above loss, it generated approximately $540,000 in cash for the company. This compared to net loss for the second quarter of 2013 of $122,000 or $0.03 per share which included a pre-tax loss from foreign currency transactions of $393,000. A number of procedures for well-known Gamma Knife Perfexion Systems supplied by AMS decreased 25% for the second quarter and 12% for the first six months of 2014, compared to the same period of 2013. The total number of procedures performed in AMS’s Gamma Knife services, including Gamma Knife and Gamma Knife Perfexion procedures, decreased 28% for the second quarter and 17% for the first six months of 2014 compared to the same period of 2013. Medical services gross margin for the second quarter 2014 was 25% compared to medical services gross margin of 41.3% for the second quarter of 2013. In addition to the impacts of lower revenue, the decrease in gross margin reflected higher depreciation and maintenance cost associated with the opening of a new Perfexion site in the second quarter of 2013, as well as the upgrade to Perfexion specifications of Gamma Knife at another site and two, cobalt reloads which occurred in the fourth quarter of 2013. Because an upgrade or cobalt reload increases the book value of the unit, depreciation expense also increases. Selling and administrative expenses for the second quarter of 2014 decreased 18.7% to $937,000 compared to $1,153,000 for the second quarter of 2013. For the six months ended June 30, 2014, medical services revenue decreased to $7,443,000, compared to medical services revenue of $9,251,000 for the first six months of 2013. The net loss for the first six months of 2014 of $1,023,000, or $0.22 per share, included a pre-tax loss from the sale of the Turkish subsidiary of $572,000, a pre-tax gain from foreign currency transactions of $161,000, and an income tax charge of $165,000, which offset an income tax benefit of $161,000. In comparison, the net loss for the first six months of 2013 of $97,000, or $0.02 per share, included a pre-tax loss from foreign currency transactions of $534,000. On the balance sheet at June 30, 2014, cash, cash equivalents and certificates of deposit were $9,944,000 compared to $10,909,000 at December 31, 2013. Shareholders’ equity at June 30, 2014 was $25,021,000, or $4.76 per outstanding share. This compares to shareholders’ equity at December 31, 2013 of $24,055,000, or $5.22 per outstanding share. Craig?

Thank you, Alexis. Brandon, we are now ready for the first question.

Thank you. (Operator Instructions). And we have Steven Mystain (ph) on the line. Please go ahead.

Yes, hello. Several questions, first of all, when the Turkish operations were initiated, one of the – I guess, I would call a partner was brought on board as a board of director. Is that person still on the board?

Yes, he is.

Okay. Is there a need to, now that the Turkish operations have been closed, is there a need to keep that person on the board given that it’s an expense to the company to have the board of directors?

Okay. He’s a very effective board member. And he’s been very helpful to the board.

Okay, very helpful outside of the Turkish operations?

Yes.

Okay. And looking to the proposed rates that the CMS has suggested, I believe we’ve spent the last two years, they’ve suggested a very high rate in the middle portion of the year. And then when the final rates come out towards the end of the year, it ends up being a much lower number. What’s to say that this won’t happen again in this year that the number that’s finalized is a much lower number than what’s proposed?

Well, yes, that could always happen. It’s unusual what happened last year in that there was so much change in the initial proposal to the final number. There could be some slight variances due to refinements of the figure but last year was quite unusual. Can’t say that it won’t change again this year, because we have no control over that, I think one of the things that is different this year is a comprehensive rate which is something completely new. And we’re very happy that CMS is allowing to radiosurgery – single session radiosurgery for cranial procedures to be a part of that study. And I think from what I’m told there were a number, a greater number of claims that were processed to come up with the numbers. So we’re hopeful that there is no significant change but there can be no guarantee since we were not in control of that.

Okay. You provided an update on the University of Florida MEVION proton beam. Can you provide a sort of a quick update on the other centers that AMS is involved with?

Well, the other centers, that we’re involved with is one that will hopefully be going into a hospital in Southern California that is progressing well. We have several institutions that we have been in serious discussions about financing that going forward. And the same is true of the third year which hopefully we’re going to put into the San Francisco Bay Area, very encouraging. We have spoken to several investors. I do not anticipate any major problems getting those – all three of those units financed.

Okay. It seems like in the past news items and conference calls, there were more than three potential centers. Has there been a center or two that’s dropped off the radar?

I think what Dr. Bates was referring to the three MEVION systems that we’ve been committed to.

Okay.

But we are then in discussions with over 25 hospitals over the last few years.

Okay. So, as of right now there are three that are?

Three companies we’re committed to?

Yes.

Okay. And looking at MEVION, is it possible to provide an update on to how many systems in total they’ve committed to and is there growth there or is it stalled or any feedback you can provide just on their business as a whole?

Well, we were in discussions with MEVION this morning asking those similar questions. They did not feel that they were comfortable giving us a backlog number today although when we last discussed this on our last earnings call, we thought the backlog was close to 17 machines. And it’s my understanding that they have gone beyond that. But we did not get a firm number today.

Okay, all right. Okay, that’s it. Thank you very much.

Thank you.

Thank you.

We have Tony Kamin on the line. Please go ahead. Tony Kamin – Eastwood Partners: Hi guys.

Hi Tony. Tony Kamin – Eastwood Partners: The previous caller was touching on the topics that I’m curious about which again are sort of on the pipeline of the 25 or so hospitals you’ve spoken to beyond the three that are committed. Can you talk about what you’ve learned from MEVION in terms of where they are with Barnes because I know that that was one of the gating factors you felt until that caught up to a certain number of procedures. What do you think it will take to start to convert some of those 25 into the next level of agreement as opposed to just being prospects?

Well, to answer the question about Barnes, we were told this morning that Barnes is doing quite well. They are doing over 20 patients a day. The breakeven at the Barnes unit similar to Barnes would be about 26 patients a day, is that correct Craig?

No, I’m sure it’s a lot lower than that. But we’re not familiar with their financials so it’s our position. Tony Kamin – Eastwood Partners: But what is our breakeven on the average?

It’s going to vary by how we structure these transactions. So I wouldn’t give a number and be committed.

I think what Craig is trying to say is that we feel very comfortable that the way the Barnes unit is performing that we will meet breakeven sort of with all of our machines. By the way the uptime for that Barnes unit since this operation over the last I guess you’ve said several months is 100%. So, we know that this machine works and works well. Tony Kamin – Eastwood Partners: Okay. And the second part of the question in terms of last I think, on the last call, that seemed to be a lot of the gating factor in getting other hospitals to move forward, the fact that they’ve been up 100% of the time is terrific news, the fact they’ve got patients with terrific news. So, what do you think it will take to start to move discussions forward with even more hospitals?

I think what people are waiting for is an understanding of where MEVION is going with its fundraising. How it intends to bring more money into the company so that they can meet this demand. And hopefully we’ll hear something from them in the near future about what they intend to do to raise more money. Tony Kamin – Eastwood Partners: Okay, anything new that you’re aware of on the sort of clinical study side on actually on either proton or Gamma Knife?

Nothing new that I’m aware at this point. I think still in our minds and most believe in protons is very clearly the clinical evidence suggest that there is better local tumor control and life extension with protons versus photons. Tony Kamin – Eastwood Partners: Okay. And our final question, you had your big raise this quarter and it was terrific to see your director step up so strongly. Can you talk a little about that what you feel it says about the director’s motivation and their commitment to the company? And I mean, if it’s anything more than an investment to what it means because it was, it was certainly very encouraging to see them step up?

I think it’s fixed for itself, they believe in what the company is doing. They like the progress thus far. They’re pleased with the way management has run the company in the last several years. And it shows their personal commitment. And it wouldn’t be a surprise it wouldn’t surprise me if they don’t step up at some point in the future if that is required. Tony Kamin – Eastwood Partners: Okay, great. Thank you guys.

(Operator Instructions). We do have Lenny Dunn on the line. Please go ahead. Lenny Dunn – Freedom Investors: Yes, good afternoon.

Hello Lenny. Lenny Dunn – Freedom Investors: Hi, the quarter was disappointing but was explained why it was disappointing. And you say that July things have picked up again. So we should have a decent quarter in the current quarter. And with MEVION, it’s been my hope and I’m sure yours that they take this company public because to have monetize as our stake. And that would be the best way for them to go forward. Do you think that that maybe the direction they take before the end of this year?

Well, Lenny, as you well know, if that instant case is not something that we can talk about. But I’m very encouraged that the management of MEVION is doing everything they can to raise money. And it would not surprise me if they don’t announce something by the end of the year. But if we did know at this point, it would not be something that we could discuss. Lenny Dunn – Freedom Investors: Okay. No, I understand that.

Lenny, one thing that is clear to me that this MEVION single-room machine is the only machine and I mean that the only machine that is economically feasible. All the other machines which are going to cost well over $25 million to $30 million make no economic sense. Lenny Dunn – Freedom Investors: No, I understand that and I’m – I believe they are the future. But they have taken longer than initially expected to get to the stage where they could start mass producing these things.

God knows you’re right Lenny. And I agree with you.

And the other thing that clearly, if this reimbursement holds up, the M&I business could return to the levels it was producing for you seven or eight years ago. The risk of this is pretty compelling at that per procedure. And I also believe that one of the reasons for a little bit lower procedures this is not as profitable to do it at the royal rates that we were reimbursing. So, everybody wins with a better reimbursement rate. So, I could see this being terrific shot in the arm and you guys, you used to earn $0.50 or $0.60. So I could see that happening again if this holds up, (inaudible). Craig, you want to comment on that this is your?

Well, we think it will definitely be a big shot in the arm for the company. And we’re just hoping that the proposal stays as announced.

No, I understand that’s anything you can control. It’s more likely just stays announced and it was last year, when all the initial uncertainty with ObamaCare was out there. So, I think that’s realistic to expect it but it’s not a certainty, I understand that. So, certainly like to see the company showing some nice quarterly numbers again. So, and it would really – it would also help out with the proton being in the products because you can then transfer real cash over. Lenny Dunn – Freedom Investors: Okay. Well, again, I’m looking forward to seeing what they finally decide. But I think you got a pretty good shot at it getting something very close to those numbers. And I also understand you keep the Turkish director around besides the fact that he brings things in the board. He stepped up and bought quite a few shares that at around $3.30 a share about a year ago and he’s made open market purchases, he’s a shareholder. So he’s got skill of the game?

You’re absolutely correct. It wouldn’t surprise me if he gets the step up at some point in the future because he has confidence in what we’re doing. He has been a good director. Lenny Dunn – Freedom Investors: I have no problems with him or any of the directors. I think the directors are only huge percentage of the business now, according to yourself, so you have a terrific insider ownership which should lead to the right booze because it’s your money. So, thank you very much.

Okay.

We have Anthony Marcozzi (ph) on the line. Please go ahead.

Hi guys. I have a question for you maybe it’s a question that Craig can answer or you Dr. Bates. In the stock trades of hassle book, obviously there was some confidence in the company because I see some of the directors buying the stock. Frankly I’m a little surprised that the Turkish director didn’t buy any stock in the private placement given that he’s stepped both stock at higher price than last year. But in any case, what – I mean, I’d love an opinion from you guys, a, why do you think the company trades at half of what I think its tangible book, if I’m not mistaken? And what can the company do to perhaps close that gap? To help close the gap, obviously I’m saying?

We have no knowledge as to why just like you do, we have no knowledge as to why there is that really that gap or imbalance between the two. I think what we try to do is run the company and manage the company as well as we can. And I think what we’re doing now would be the proton initiatives and as that takes effect, I think the value – you’ll see the value in the future increase above what the book is, because I think there are a lot of people that have been waiting for a number of years for the proton initiative to start. In that I think each month we get closer to that happening. Now we’re within 18 months of first treatment at our first centers. So we’re very excited about that. And we’re hopeful that people will see the value in that. And it should increase our EBITDA significantly once we’re up and running. So, I think the metrics will drive the stock up, that’s our hope.

I think for the micro-cap investor, 18 months is literally an eternity. I mean, most micro-cap investors find that hard to see beyond three months. So, while I agree with you that the value is there, I’m wondering if there aren’t any, investor awareness initiatives that on a short-term basis could highlight or bring to investor attention the merits of the company, the disparity between book value and share price. So I guess that’s what I was thinking. Craig, I believe 18 months from now, no question. But between now and then, to see the stocks rating an half a book is just, in my opinion the service to current shareholders and to yourselves?

I think what everybody is waiting for is to see at least two machines that are really clinical machines that are not at an academic center like Barnes to get them up and running and treating patients. And I think you’re going to see that within the next 12 months. And what are those two units Craig?

The next two units that will be up and running, there is one at the University of Oklahoma in Oklahoma City and the second one is Robert Wood Johnson in New Jersey.

And I think when those two machines get up and running, you’ll see their numbers. I suspect that they’ll even surpass what Barnes is doing.

Okay, all right. Thank you.

We have no further questions at this time. Mr. Tagawa, I will turn it back to you for closing remarks.

Thank you, Brandon. I have no other closing remarks other than thank everyone for joining us this afternoon. And we look forward to speaking with you on our third quarter results conference call in about three months.

Thank you. And 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 37873970, 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. We thank you for joining. You may now disconnect.