Ernest Bates – Chairman and Chief Executive Officer Craig Tagawa – Senior Vice President, Chief Operating Officer and Chief Financial Officer Alexis Wallace – Controller

Lenny Dunn – Freedom Investors Anthony Marchese – TriPoint Global Equities Tony Kamin – Eastwood Partners Chuck Blatz – Benjamin Edwards and Company

Hello and welcome to the First Quarter 2015 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] 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; and Alexis Wallace, Controller of American Shared Hospital Services. Mr. Tagawa, you may begin.

Thank you, Hilda. And thank you all for joining us for AMS' first quarter 2015 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 results -- 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, 2014 and the definitive proxy statement for the Annual Meeting of Shareholders to be held on June 16, 2015. The company assumes no obligation to update the information contained in this conference call. The trend of improved operating performance for AMS’s Gamma Knife business that began last year continued in the first quarter of 2015. Revenue increased 10.3% versus last year’s first quarter excluding revenue in Turkey. Operating income increased to $456,000 versus an operating loss of $103,000 last year, a $559,000 improvement. And net income improved to $224,000 increasing to $126,000 compared to a loss of $96,000 last year. These gains are a result of increased procedure volume, higher Medicare reimbursement for certain procedures and continued tight control over operating expenses. The Gamma Knife Perfexion remains the 'gold standard' for cranial radiosurgery. It is an excellent device for treating metastatic brain tumors, which are diagnosed in an estimated 180,000 new patients annually. We remain optimistic about our Gamma Knife business in 2015. Let me add a footnote here to refresh your memory regarding Medicare reimbursement. The Centers for Medicare and Medicaid Services established a comprehensive Ambulatory Payment Classification for Gamma Knife and LINAC accelerator one session cranial radiosurgery, one of the most common procedures performed on these devices. Beginning January 1, 2015, the comprehensive reimbursement rate of approximately $9,768 is inclusive of the delivery and ancillary codes, but exclusive of co-insurance payments or other adjustments. For 2014, the average CMS reimbursement rate for delivery and ancillary codes exclusive of co-insurance and other adjustments was approximately $5,600. In the long run, we believe that proton therapy will be the primary driver of AMS' growth. Our first proton center, now under construction at UF Health Cancer Center at Orlando Health. This facility is expected to begin treating patients in the first quarter of 2016. We are in discussions with other hospitals around the country that have expressed strong interest in partnering with AMS to develop proton centers of their own. These centers would also employ the advanced, single treatment room MEVION S250 proton therapy system now being installed in Orlando. The MEVION system is delivering outstanding clinical performance, with more than a year of clinical experience with the world's first MEVION S250 system at the S. Lee Kling Proton Therapy Center at Barnes-Jewish Hospital and Washington University School of Medicine in St. Louis, the issues of the device's reliability and throughput-top priorities for many hospitals considering this system have largely been put to rest. The clinical data from the first year of treating patients at this site recently reported by Mevion are remarkably positive. The MEVION S250 took just 11 months to treat its first 100 patients the fastest per treatment room ramp-up of any proton therapy system. The system has already treated more than 20 patients in a single day and in a single work shift. The system also has demonstrated efficient treatment times, with 97% operational uptime just five months after opening, and the ability to treat a diverse and complex array of cancers in both children and adults. And just last month, MEVION announced that its proton therapy system located at the Ackerman Cancer Center in Jacksonville, Florida began treating patients. This is the second MEVION S250 that has initiated patient treatments. This is why we are confident that we can launch additional proton projects in short order once appropriate financing is available. With the outstanding performance of the MEVION S250 in St. Louis, initial patient treatments at the Ackerman Cancer Center, and the progress of our device in Orlando, lenders we speak with are increasingly comfortable that the demonstrated clinical advantages of proton technology in the treatment of a wide range of cancers will support a robust economic return for the Mevion device, and this is true even with its relatively high purchase price and long lead time required to get the system up and running compared to other radiotherapy devices. Now, I will turn the call over to Alexis Wallace to go over the financial results in detail. Alexis?

Thank you, Craig. For the three months ended March 31, 2015, medical services revenue increased 1.3% to $4,117,000 compared to medical services revenue of $4,064,000 for the first quarter of 2014. Revenue for last year's first quarter included the Company's operations in Turkey, which were sold effective May 31, 2014. Excluding prior year's revenue in Turkey, medical services revenue increased 10.3% for the first quarter of 2015 compared to the first quarter of 2014. Net income for the first quarter of 2015 was $128,000 or $0.02 per share. This compares to a net loss for the first quarter of 2014 of $96,000 or $0.02 per share, which included a pre-tax gain from foreign currency transactions of $15,000 due to the strengthening of the Turkish Lira against the US Dollar. The total number of procedures performed in AMS' U.S. Gamma Knife business increased 8.1% for the first quarter compared to the same period of 2014, excluding procedures performed in Turkey. Medical services gross margin for the first quarter of 2015 increased to 38.8% compared to medical services gross margin of 31.7% for the first quarter of 2014, primarily the result of lower costs due to the sale of the Turkish subsidiary. Operating income increased to $456,000 for the first quarter of 2015 compared to an operating loss of $103,000 for the same period a year earlier. Pre-tax income, net of income attributable to non-controlling interest, increased to $258,000 for the first quarter of 2015 compared to a pre-tax loss of $126,000 for the first quarter of 2014. Selling and administrative expenses for the first quarter of 2015 decreased to $821,000 compared to $922,000 for the first quarter of 2014. This decrease was primarily due to the sale of the Company's operations in Turkey, as well as lower payroll-related costs and rent expense. Turning to the balance sheet; at March 31, 2015, cash and cash equivalents were $927,000 compared to $1,059,000 at December 31, 2014. As of December 31, 2014, AMS had a $9,000,000 renewable line of credit with a bank secured by a certificate of deposit. On January 2, 2015, we paid this line in full using the proceeds from the certificate of deposit. As a result, current liabilities decreased to $7,583,000 at March 31, 2015 compared to $16,251,000 at December 31, 2014. Shareholders' equity at March 31, 2015 was $26,434,000 or $4.93 per outstanding share. This compares to shareholders' equity at December 31, 2014 of $26,154,000 or $4.78 per outstanding share. Craig?

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

Thank you. [Operator Instructions] We have a question from Lenny Dunn from Freedom Investors.

Good afternoon. Actually these were kind of as expected numbers, I would hope going forward we could do a little better on the earnings. The SG&A did come down, but a lot of that was due to the hard work you did last year to get it under control, and I didn’t know if the SG&A can come down a little further going forward or if you feel that you’ve cut it down to the bone?

I think looking – going forward, I think this is probably about where we’re going to be. I think we’ve really looked over the last two years when the reimbursement rate cut went into effect as to what we could do. So I think as we ramp up our initiative in protons there will be ups and downs in terms of the SG&A depending on what we’re doing with protons going forward.

Okay. And as I think of – you mentioned in previous calls that, I look at this company in three pieces; the one piece is the Gamma Knife business, which is a very viable business particularly with the better reimbursement and probably can you bring a little more in earnings that you’re currently getting, and the second piece is the proton beam therapy, which has very bright future, but that won't start get you any money until a year from a now, and the third pieces is the MEVION piece where you both own stock and have $1 million deposit on two other machines at a very favorable price, so that the next two units you put in, you’re probably about half of what it cost you if you were ordering them today. So there's some substantial value both in your MEVION stock and the deposits at favorable prices on the machines, do you still look at it that way?

Yes we do, I think, as to the MEVION stock, it's a privately held company, so there is no gauge for that at this point in time. But we do feel that we were early adopters of the MEVION concept and we did get our first three units at, as you said below what the current market is. So we think for us that's a very favorable position to be in.

[Indiscernible] with that, and the book value at $4.93 is probably a little understated because it's not taking into account the value of which we have for deposits on these machines. But the book value did go up $0.50, which I was very pleased to see and our stock is trading at a huge discount to book of which I have always felt was due to the lack of earnings, while we’re waiting. And if the earnings can pick up some I think the discount to book will close fairly quickly. So hopefully as the year revolves we get a little bit better earnings power per quarter, but I don’t know if I'm being overly optimistic and expecting that, but that is what I expect.

Thank you.

We have a question from Anthony Marchese from TriPoint Global Equities.

Hi Craig, how are you doing? Nice turnaround. Couple of questions for you, what impact did the new reimbursement rates have for this quarter. I don’t know if it’s a proper question, I’m not sure if I’m asking it correctly, but did the rates fully kick-in this quarter, in other words, what percentage of your business is typically affected by these new reimbursement rates?

It varies according to the paramedics of the individual units, but in fact the rates did not kick into a great extent in the first quarter because there wasn't enough data coming through yet because remember the rate shift went into effect on January 1 of this year. So we didn't want to overestimate what that effect was based on the data that we had so far, so I think we'll see a little bit more of that in the second quarter. We’ll have a better feel for that.

So I guess I’m little confused, so what you’re saying is you don't know to what extent, so are you going to face sort of catch up, in other words will the second quarter sort of then have reimbursement from the first quarter once you find out the actual rate?

We incorporated some of it, but maybe not all of it because as we said in the past there are several factors in the Medicare rate there's one the actual reimbursement rate for the delivery of the code, and then in the past there have also been adjustments what we call the Medicare outpatient outlier. So we want to see exactly what the difference was before we make some of those estimates because it takes a while from the time you actually treat a patient, you build a patient and you get the results in as to what that payment is. So we did make some estimates, but what I will tell you is the effect on revenue from the increase wasn't a significant amount in the first quarter that we booked.

So basically, it sounds like about putting words in the mouth that the prospect of the company was quite conservative, let’s put it that way in the first quarter given your conservatism on the reimbursement rates would that be a fair statement?

We estimated to the best of our ability.

I get it. No, I understand what you’re saying. Okay, no I get that. Second question, can you give us any update on your – when we could expect some type of announcement regarding financing efforts for future MEVION’s you mentioned. I know in the past you guys have mentioned that you know until lenders and frankly users start to see experience from Barnes-Jewish they wouldn’t make a final commitment, are we there yet in your opinion?

Tony, this is Dr. Bates. Yes, we are in discussions with several institutions looking at financing MEVION’s going forward, and it looks very encouraging.

And I guess the third question I have is, I'm trying to figure out why you guys do not do more presentations on the road. I've been to your presentations, and I know you guys with LD Micro, if not last year, the year before, every time you guys go out on the road stock goes up, liquidity increases. So it would seem to me that you would want to do more of that because I do believe that the stock is significantly in the valley, but also it would be good for your own situation in terms of doing any further financings or going out and acquiring anything to have a currency, which actually trades that in my opinion would be a fair market value, which is significantly higher than where it trades out today. So I’m just trying to figure out, could you guys go out and do more road shows or shake more hands, because you do a good job of it, you just don’t, in my opinion don’t do enough of it.

I think there are a couple of things we're waiting to have happen, one is obviously a settlement of the reimbursement rate for the Gamma Knife, and two, getting a little closer to the start of our Orlando project. Remember, a lot of the presentations that we did one of the concerns that people had was the – they were still two years out or two and a half years out for the Orlando project to start and a lot of people have a lot of interest in that. But it was just too far out, but now that we’re within the year I think that's a good idea we should probably go back out on the road more and we’ll certainly talk to Neil about that.

Yes. I just think that you, I’d like to say you’re not going to go from zero to 70 in two seconds, you're going to have to get the market acclimated to what you're doing and I think you want to be in a position where people can judge you and say well, gee they said they will go into this and this is what they did therefore I should be buying some stocks. So I just think that it has to be a gradual process, I don't think tomorrow, like some blockbuster event that people will all of a sudden revalue the stock and have the stock up. I just think it's a gradual process that does take some handholding and shaking hands. In any case, good quarter and hopefully you guys will continue the trend.

Thanks.

We have a question from Tony Kamin from Eastwood Partners.

Hi guys.

Hi, Tony.

Tony kind of beat me to the first question I have, so I’m going to maybe shift in a different way, which again is around the financing and Craig you indicated and Dr. Bates you followed up that these financing institutions are getting more comfortable. I want to ask the question around interest rate, the potential for interest rate rises to affect the company either in the actual signing of a commitment or how you manage it going on. I’m assuming that these are sort of LIBOR plus financings, where you’d buy an interest rate cap, is that a fair way to look at it?

They are based on a LIBOR, but we’re going with fixed rates, as opposed to variable rates. We just think that we'd rather know what that amount is and that our projections could easily support that whatever that interest rate turns out to be. So we're not using variable rates, we’re definitely going to be using fixed rates, if that’s the question?

Yeah. And given at least from our trading perspective the rates are potentially really going to sort of rise, I just hope you can – if they’re fixed, I hope you can walk them in fairly soon. That would certainly be our sense of what the right thing to do would be. Next question on – from the hospital side you also mentioned that you're talking to several hospitals around the country and is the, you know they're wanting to understand your – what finance you can offer them, is that the main limiting factor on getting signs assigned or are there other issues that are – that you’re coming across when you're talking to them.

I don’t think the problem is that we’re asking – many of these situations we are asking the hospitals to pay for the construction of the building and the facility. And at that point they want to be certain that MEVION is the machine that we're going to use. And to my mind that's the only one that is economically feasible and we are waiting to get in the production line with MEVION and it’s a little bit slow going because they’re just ramping up, they have not completed all of their financing, hopefully they’ll have it completed by the end of the year, we spoke with the CFO two days ago in preparation for this call. Things are looking good at MEVION. They’re quite excited about the way the machine has performed at Barnes and to my mind if we were using our metrics that machine would be profitable and that's probably the first proton beam machine that was profitable in its first year. And we’re anticipating a similar situation with our machines now. Craig is rolling his eyes, and give you the guidance.

Forward looking statement.

But I'm really encouraged by the hospitals that we’re talking to and I'm anticipating that we are going to see good healthy robust volumes with these hospitals.

That’s great. It’s actually very, very encouraging. Shifting gears slightly, you paid off the $9 million line, and I’m curious though, is that line still available to you at some level, if you wanted to re-borrow some of that money?

No, not at this point, but we’re looking at other, you know we always look at avenues as to how we can better our capital structure. So we’re looking at a number of things, but we haven’t settled on anything at this point.

And then, you know I think the most exciting thing coming up. I just wanted to see if you guys can give us a little color on the University of Florida proton beam and how the doctors or the administrators or whatever you characterize that the hospital itself is, what they're thinking. And the reason I asked this, there is a couple of videos on YouTube and places where they had sort of kickoff parties for the construction and I think the installation of the beam. And you know, there's a lot of doctors in those videos talking very excitedly and optimistically about the business and what it could turn out to be. And at the end of the day that’s going to be so important to AMS that some sort of a color and read through on what term our ultimate partner down there is thinking about what that business could be, I think would be very helpful.

I think you’ve characterized their enthusiasm, I think there's one important thing to remember about our partner. They were an early adopter, they thought that the MEVION system was the system that would suit their needs very early on, and that was in – I believe we side with them in 2008. So you know they believed in protons from that early period and their enthusiasm has not lagged, it's only increased with what they’ve seen that the Barnes unit has, what their capabilities are. And I think we’re going to continue to see as more units come up and more academic facilities writing more papers really the clinical efficacy of protons as opposed to photon therapy, and I think we need to see more of that, and I think that will really submit a cement the place of protons going forward and really even jumpstarted even more. So we’re very excited and I think the people at Orlando health are extremely excited and continue to be.

Do they have, I mean obviously the open date is not set and stone at the moment, but are they planning to kickoff a big marketing campaign around that or just kind of slowly have the business build or could you give any visibility on that?

You know, we will – we’re kicking off, we will kick-off a significant marketing campaign, but as you know even when they did the initial installation and the groundbreaking, they got a lot of really TV coverage and newspaper coverage, and they will continue to get that. So they will use some of the essentially free media and then we will do a lot of work on the Internet and the doctors will obviously reach out to referring physician. So we will do a multitude of marketing activities, but this is a very robust cancer center, so we are not concerned in the least about the volumes, the volumes will be there.

Great, very encouraging quarter.

We were told that the Aqueon machine, which is the only machine protons unit owned by an individual practitioner is doing quite well. We just recently heard now up to 18 patients a day, and that’s in a matter of how many weeks Craig?

Less than a month.

Less than a month, very exciting.

Yeah. True, very much so. Well, thank you guys, good quarter.

Thank you.

Thank you.

[Operator Instruction] We have a question from Chuck Blatz from Benjamin Edwards.

Hi Dr. Bates, hi Craig, how are you?

Hi.

Very good.

Good. Very good quarter, I’m pretty happy and I have to say that both Tony's pretty much asked every question and got every detail that I was looking for. So I just wanted to say, thank you for having a good quarter. I think the progress in my opinion getting there, so I will chime in with what Tony Marchese said and this is that I couldn't agree more about now that you're kind of coming-of-age in terms of delivering to definitely go out in some way shape or form on the road visibility, have some sort of calls with different people who might be new investors that Neil could bring to the table because you’ve pretty much almost arrived, and yes, this is your currency. So given the fact that it would be much nicer and much more conducive for you to do more things, if the stock was more like $5, $6 plus, I think you've got enough let’s say arrows in your quiver to be able to go out there and do this now. So I'd be all for that in any way shape or form that we could help with et cetera. So again, lastly I guess I just wanted to – from the last call we have, which wasn’t that long ago must have been barely a month, is everything still in the same notch on target for so called first quarter for the MEVION system to be quote up and running.

Yeah, so far.

Yes.

Okay. Well, again, nice quarter and we’d love to see it keep up because we’ve all had a lot of patience for a long time and I think we’re coming to fruition here.

That’s been a long time since 2006, so it’s finally happening.

Good. Glad to hear that.

Thanks Chuck.

You’re welcome. Thank you.

We have a follow-up question from Anthony Marchese, please go ahead.

Hi, I forgot to ask earlier, your lighting business, any update on that? I know in the past you guys have said it’s a longer-term project, but I'm wondering if there is any anything that you can report.

Well there is some bad news and there is some good news. And I’ll let Craig tell you the bad news and I’ll tell you the good news.

We’ve been delayed, clearly in terms of the progress. But we’re looking at other avenues to really complete what some of the vision that Dr. Bates and some of his colleagues had about how to really make the operating room better. So it won't happen within a year, it’s still going to take probably a couple of years to really get something commercialized, but we have not given up and we know the product works. And we do have the patents on the process and the concept. So we've not given up, it’s not costing us a lot of money to continue, so we will continue to forge ahead and hopefully will have something more to report to you at a later date.

And Tony, what happens that the company that we were in negotiations with, in the final stages of getting our license agreement for these lights was bought by another company. And that company has decided that they don't want to go ahead with it at this point. We’re not going to wait any longer, so we are in discussions with another larger group with licensing.

Let me ask you just one final, final question, I promise it will be final one, but as you look around the public marketplace, are there any comps? I think one of the problems I think people sometime have in valuing, you know American Care Hospital is, you know people in the public markets like to look at comps and say, okay well if you're trading at X, then the other one should be also trading at this. Is there anything out there? I’m having a hard time finding something – I'm wondering if you guys have, who do you compare yourself to with anybody?

Well there are no company that are public that are doing what we’re doing with protons. There are some…

No, I’m aware of that.

None that we know of, now we just got an announcement today that General Electric, Varian has concluded a financing agreement for its unit down in San Diego.

Maryland.

I’m sorry in Maryland, very exciting and that's probably over a 100 million?

Couple hundred.

Couple hundred million.

And that’s GE that’s doing the financing?

No it’s…

Varian is doing that.

I’m sorry I thought you said GE.

I misspoke, I said GE, but it’s Varian.

Varian and Deutsche Bank.

Varian and Deutsche Bank, you might look at our announcement today, it’s over $100 million.

Okay. So what you’re saying, if that bodes well for the industry I guess that should be a guideline for people's interest?

Yes.

Well, everything sounds great. I just think – I truly believe that at $5, $6 fair value price, you know, you have a lot more options open to you in terms of future funding, future projects and I just think that's kind of personally I think that could be one of your priorities to get the stock to more profitable level. So just to give you more flexibility in the things you want to do.

We agree.

Okay. Thank you. Appreciate it.

Thank you. Mr. Tagawa, we have no further questions. Would you like to make your closing remarks?

We would just like to thank everyone for joining us this afternoon, and we look forward to speaking with you in August on our second quarter 2015 financial results conference call.

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 passcode 3972-5527 followed by the # sign to access the replay. The webcast of this call will be available at www.ashs.com and at www.earnings.com. This concludes today's teleconference. Thank you for participating. You may now disconnect.