Good morning, everyone and welcome to the 2016 Third 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; and Alexis Wallace, Controller of American Shared Hospital Services. Mr. Tagawa, you may begin.

Thank you, Mattie and thank you all for joining us for AMS’s 2016 third quarter and nine month 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, 2015; its Form 10-Q for the quarters ended March 31, 2016, and June 30, 2016; and the definitive proxy statement for the Annual Meeting of Shareholders held on June 21, 2016. The company assumes no obligation to update the information contained in this conference call. We are pleased and encouraged by the third quarter results we reported this morning. AMS is running efficiently. Our Gamma Knife business is delivering solid results and our proton therapy initiatives are now beginning to generate the growth we are striving for. Treatment revenue, system reliability and throughput of the MEVION S250 and supplied our first proton center at UF Health Cancer Center-Orlando Health, all are meeting or exceeding our expectations. Volume ramped up rapidly in the third quarter to 869 fractions, nearly double the 442 fractions performed during the second quarter. It’s important to note that the Orlando center still has considerable additional treatment capacity, so we expect further gains in treatment volume in the fourth quarter. What’s more the success of the Orlando Center demonstrates that AMS has the ability to bring a proton project from inception to completion. This has opened the door to new opportunities for AMS with other hospitals seeking to develop proton centers of their own. We have always believe that proton therapy represented an outstanding opportunities for AMS. With a strong performance of our proton system in Orlando, we are increasingly confident that the leadership position we have built in this new market will be the foundation for AMS’s long-term growth. Now I will turn the call over to Alexis Wallace to go over the financial results in detail. Alexis?

Thank you, Craig. For the 3 months ended September 30, 2016, medical services revenue increased 26% to $4,884,000 compared to medical services revenue of $3,875,000 for the third quarter of 2015. Revenue from the company’s initial Proton Therapy System installed at the Marjorie and Leonard Williams Center for Proton Therapy at UF Health Cancer Center-Orlando Health in Florida, which began treating patients in April, was $800,000. Revenue for the company’s Gamma Knife operations increased to $3,932,000 for the third quarter of 2016 compared to $3,770,000 for the third quarter of 2015. This increase was primarily due to a favorable mix of treatments of the company’s retail sites as treatment volume was flat versus prior year. Net income attributable to the company for the third quarter of 2016 was $334,000 or $0.06 per share. This compares to net income attributable to the company for the third quarter of 2015 of $43,000 or $0.01 per share. Medical services gross margin for the third quarter of 2016 increased to 49.1% of revenue compared to medical services gross margin of 37.5% of revenue for the third quarter of 2015, reflecting the increase in revenue from proton therapy as well as the favorable mix at Gamma Knife procedures. Operating income nearly tripled to $896,000 for the third quarter of 2016 compared to operating income of $315,000 for the same period a year earlier. Income from foreign income taxes was $899,000 for the third quarter of 2016 compared to $318,000 for the third quarter of 2015. Adjusted pre-tax income net of income attributable to non-controlling interest was $601,000 for the third quarter of 2016. This compares to adjusted pre-tax income, net of income attributable to non-controlling interest of $135,000 for the third quarter of 2015. Selling and administrative expenses for the third quarter of 2016 increased to $999,000 compared to selling and administrative expenses of $904,000 for the third quarter of 2015. With the addition of the proton center in Orlando, interest expense increased to $501,000 for the third quarter of 2016 compared to interest expense of $235,000 for the third quarter of 2015. Adjusted EBITDA, a non-GAAP financial measure, was $2,831,000 for the third quarter of 2016 compared to $1,949,000 for the third quarter of 2015. For the nine months ended September 30, 2016, medical services revenue increased 10.1% to $13,640,000 compared to medical services revenue of $12,386,000 for the first nine months of 2015. Excluding treatments at our customer site whose contract expired at the end of the first quarter of 2015, Gamma Knife volume decreased marginally for this year’s first nine months compared to the first nine months of 2015. Net income attributable to the company for the first nine months of 2016 was $478,000 or $0.09 per share. This compares to a net loss attributable to the company for the first nine months of 2015 of $1,799,000 or $0.33 per share. Excluding the loss on early extinguishment of debt of $108,000, net of estimated taxes, adjusted net income attributable to the company for the first nine months of 2016 was $542,000 or $0.10 per share. This compares to adjusted net income attributable to the company for the first nine months of 2015 excluding the loss attributable to an impairment charge of $315,000 or $0.06 per share. Adjusted EBITDA was $7,288,000 for the first nine months of 2016 compared to $6,314,000 for the first nine months of 2015. Please refer to the financial statements included with our third quarter earnings release for a reconciliation of GAAP to non-GAAP financial measures of adjusted EBITDA, adjusted pre-tax income, adjusted net income attributable to the company and adjusted net income per share. At September 30, cash, cash equivalents and restricted cash was $2,096,000 compared to $2,259,000 at December 31, 2015. Shareholders’ equity at September 30, 2016 was $26,151,000 or $4.87 per outstanding share. This compares to shareholders’ equity at December 31, 2015 of $25,180,000 or $4.69 per outstanding share. And final note on Medicare reimbursement, based on the hospital outpatient prospective payment rates for 2017 recently announced by the Centers for Medicare and Medicaid Services, AMS estimate that the average CMS reimbursement rate per Gamma Knife 1 session cranial radiosurgery treatment will increase to approximately $9,000 from $8,800 in 2016. In 2017, CMS reimbursement rates for delivery of proton therapy will be $494 versus $506 in 2016 for simple treatment without compensation. The rate will be $994 versus $1,150 in 2016 for a simple treatment without compensation intermediate or complex treatment. Craig?

Thank you, Alexis. Mattie, Dr. Bates, Alexis and myself, are now ready for the first question.

Thank you. [Operator Instructions] And our first question comes from Anthony Marchese.

Good morning, guys. Great quarter. It’s nice to finally see the fruits of all your labors for the last, I don’t know, 2 or 3 years. Couple of questions for you. Number one, is there a seasonality to the proton beam? I realized they just started, but is there typically as far as you can tell any type of seasonality to procedures? So, you said fourth quarter is going up, but is that – number one, is there typical seasonality to that business or to the procedures that are performed?

Not that we can tell so far. And the only thing that might be different in the fourth quarter is the Christmas holidays. So December might be impacted a little bit, but we are seeing continued growth sales, so we are very optimistic.

What is the – I mean again, they are not at table, what do you think is the realistic maximum number of fractions that, that hospital could do eventually?

It really is going to depend on the types of treatments that they perform, because obviously the more complex treatments take a little longer to do, especially pediatric patients take longer than say, a prostate case. But they can probably feel the effort, 20s to 30s is probably a good number that they could do based on the types of indications that they plan on treatment, that’s per day.

And what are they doing now in that? Okay, I am sorry, I didn’t mean to cut you off, what are they doing right now on average?

Never mind, go ahead. I am sorry Tony go ahead.

Again, our signals crossed. How many are they doing currently on average per day?

What we could you is they do – currently, they are probably in the up-20s, low-20s on average.

Okay. Secondly and I think we have asked this on every call, can you give us an update on potential progress on additional proton beam systems or what you are looking at in terms of timing?

Anthony, we are in negotiations with six centers, luminary type hospitals with [indiscernible]. It will take some time to get – but we think within the next 24 months, you will have most of these signed up.

Okay. So you think it’s realistic for six new centers over the next 24 months and the timing depends on what, is it more the hospital itself that needs to finance this to get the space?

I think there are two things that go into part of that. Hospital needs go through their capital allocation process that they do it like we normally do, where the hospital would – about the facility and we would provide the equipment. But there is just – it’s just a long cycle because it’s a large capital commitment, so these projects take a little longer than say, a Gamma Knife. Once they are signed, it’s probably about 2 years from shovel in the ground to about the first treatment.

Okay. So are you saying that you would think you can have them open within 2 years or just sign contracts within 2 years?

Sign contracts.

I see, okay. And in terms of your basic Gamma Knife business, should we anticipate that – is that sort of steady stream or are you anticipating any type of growth in – are you still striving to open you Gamma Knife treatment centers?

Yes. We are still looking to grow that business. We think it still has many opportunities going forward. Stereotactic radiosurgery, cranial radiosurgery is becoming more and more prevalent as a usage, mainly because of the – on the promulgations from ASTRO, which is the professional organization of the radiation oncologists, really suggesting that radiosurgery is a much better alternative for many patients than – for metastatic brain tumors than whole the brain radiation. So if that becomes more standard, we think there will be growth opportunities.

The numbers of tumors is growing in the United States and worldwide. We really think that the Gamma Knife is the treatment of choice for metastatic brain tumors.

I see, alright. Thank you.

Thank you.

Our next question comes from Tony Kamin.

Alright. A very large congratulations, I think this was the quarter that a lot of us who have been interested in the company since you first got affiliated with Mevion in 2006 have been looking for, so really I think it’s really notable, my question is you mentioned in the press release that there is runway to do more procedures in Orlando, but just given the quarter, not asking for guidance of any sort, but in terms of how to think about the kinds of numbers you put up here, is it reasonable that under normal circumstances, these are repeatable or was there something in this quarter that you think might not be repeatable?

We think it’s very repeatable, the number of fractions. And actually we believe it’s the growth.

Great. From a – we certainly got the quantitative numbers, which are great, I wonder if you could – if there is anything to report, give us a sense of the qualitative nature of what’s going on in Orlando, have you had any feedback from doctors or the hospital or even patients in terms of what their experience has been so far with the Mevion machine?

Yes. They are very happy with it. They think the clinical results really met or exceeded their expectations on the patients they have treated so far. I think it’s quite possible that in the near future, we will be looking at a second room for them. Very large practice and we are firm believers in proton therapy as something that they should be offering to their patients.

Great, that’s encouraging. I wanted to follow-on, on Mr. Marchese’s question about new centers and you talked about six centers, can you kind of stratify that a little bit in terms of obviously, you have probably been talking to some of those six for longer than the others. And just in terms of – with no guarantees, but in terms of expectations, we are almost at end of the year, do you feel sort of by – potentially by the first – at the end of the first half of 2017, one or two of those might actually be signed?

Yes.

Great. And then beyond that, beyond the six, given the good results you got here in Orlando and maybe you are still at the early stages of letting people know about that, but can you talk beyond the six, sort of the earlier or broader – early pipeline interest that might be out there, what I am trying to get at is now that these Mevion units are out there and working and doing great numbers, is it your expectations that you will start to have a lot of early stage discussions with an even broader range of institutions?

Absolutely, I think what has changed dramatically within the proton therapy segment is the single room concept. I think many hospitals were turned off by protons mainly because many of the three and five room centers have not done well. But now that the single room systems are out there, they function very well and it’s a much lower hurdle rate in terms of patient acquisitions to make these centers profitable. So I think, people believed in the proton therapy concept from a clinical standpoint, but the economics of these large systems, I think steer people away from protons. But – now that the concept has been proven, I think we are going to see a much greater interest in proton therapy by a number of the designated cancer facilities in the United States.

In one of the recent study in the New England Journal showing that the prostate cameras tumors watch for waiting, it’s not the treatment of choice. These are surgery or radiation therapy.

Great. And that’s from the hospital side, so also on the proton beams, can you – the other group, I would hope that these numbers coming out would give confidence to our – the financial institutions from [Technical Difficulty] our partner was to get financing, so can you talk about how your discussions or relationships or what the atmosphere is around the financing of these units?

I think it’s much more favorable now than it was 2 years ago, to be honest with you, now that the concept has been proven. Finance companies have looked at proton therapy projects but they have been mostly three-room and five-room projects and they didn’t want to do those. But we have a lot more interest and I think as these single-room facilities prove out, not just ours but the other ones as well, I think that will bode well for the financing of these projects.

Okay. And a final question and Dr. Bates, you just sort of touched on it with the prostate mentioned, but I am curious in terms of either usage by docs of – for more broader indications and also on the research side, is there anything either in progress or coming out that’s starting to tell the proton store a little bit more than it’s been done before?

I think the studies are coming out and clearing files randomized and non-randomized files comparing protons with protons. We do think that these trails are going to show that there really is an advantage of protons over, in terms of lots of tumor control, life expectancy.

Great. Thank you very much.

Thank you.

Our next question comes from Steve Miscagen [ph].

Yes, hi. To reiterate what the other two callers said, fantastic quarter, very, very nice. Can I ask a question I have asked before? So, it’s really been two quarters where you have had revenues coming out of the MEVION system and it represented about over 15% of your total revenues and it looks like it could go up to 20%. You have got 2 MEVION systems under contract, why not hire or bring on more sales staff to really take advantage of this opportunity right now? I mean, I know you have your inner circle of hospitals you work with, but why not expand that beyond that circle?

Well, I think, there is a couple of reasons. These, let’s say, sales are not your typical easy sales. They are very complex in nature and you need a lot of experience in doing these. I think the other thing is the amount of due diligence that’s required. Remember, one of the differences that we do that a typical leasing company does not do is there are no minimum volume guarantees, nor do we have any guarantees regarding the reimbursement rates. So, there is a lot of analytics that go into the process of really deciding which hospitals to partner with. So, it’s not as simple as canvassing hospitals. And we focused in on those that we think we want to do and we can do fairly quickly. And I think for now, at least, that’s what we will stay with. Dr. Bates, any...

I don’t think we can find any salesmen who are as knowledgeable and seasoned as our three principals are, all three of us calling on lot of these hospitals.

Okay, great. And in the proton system competition area, there is a lot of companies now, including some of the big players like Varian that have a single room proton system. Could you talk about the competitive landscape out there and is that a hindrance to your sales opportunities?

Well, I don’t think so, because the Varian machine is a lot more expensive than the MEVION machine.

Okay. How about some of the other players out there? Are they in line with MEVION? Are they more expensive or?

I think IVA is getting very close to MEVION in terms of pricing. I think what the many factors we are seeing is that our concept of the single room really sells under $20 million. It’s the only thing that really works and is going to be profitable.

Okay. And then you mentioned the prospects for a second room at the Orlando Hospital, would that mean a second machine?

Yes.

Okay. And then finally, you posted the reimbursement rates, it didn’t seem like there were any significant changes from this year. Any color you can provide on those new rates? Do you expect it to be accretive to revenues and earnings or hurt it by a little bit or...

It will hurt it by a little bit. But there is going to be fluctuations annually. We have gone through this with Gamma Knife, but we don’t expect any major fluctuations. What I will say is more and more hospital based proton centers that come online, it will sort of even out the cost reporting fluctuations that CMS comes up with. Right now, there aren’t that many hospital based systems that – on which this reimbursement rate is based on, but if we get more and more, I think you will get a more normalized number.

Okay. And then finally, do you view – Donald Trump was elected President, do you view him as being a more friendly President in terms of what these reimbursement rates will be or no effect at all or because Hillary was talking about really reigning in some of these healthcare costs. Any impact from the Presidential elections on your business?

Well, I think, Hillary from the very beginning since the first Clinton administration has always said that what she wants is a single payer system. My opinion is that probably if she got elected, she had pushed that, if not in her first term, in her second term. And the single payer system would not be good for companies like ourselves.

Okay.

And all things you got with the Trump administration.

Alright. Thank you very much and again a great quarter. Appreciate it.

[Operator Instructions] Our next question comes from Lenny Dunn.

Yes, good morning I guess it is out there, but we are in the afternoon, but good quarter and along with the other people who complement you on that. And looking forward to the fourth quarter, which should be stronger because even if you don’t get much done over the Christmas holiday, you are going to be doing more procedures per day. You probably already have a handle on how they are going in October and November. I don’t know if you want to comment on that, but it would appear to be that from the comments in the release that it is obviously picked up already when you put that in there. So – but more importantly, do you see any Gamma Knife signings between now and the end of the year or do you think that, that’s probably the first quarter of next year events?

We expect one more signing. We hope it’s before the end of the year, but if not the end of the year, at the beginning of next year.

Okay. And I know that it’s a very, very long process to get one of the MEVION systems signed up, but do you think it by the first quarter of next year that we could see at least the signing of an agreement with somebody?

Yes.

Okay. And the previous caller said something about you have favorable pricing on 2 more units, but that doesn’t mean that you can sell 9 units instead of 6, because only the first two are going to have the favorable pricing. And obviously, you can only sell so many at a time because of the startup costs and all the other variables. You would be extending the company too far if you somehow miraculously could sign 6 next year. So I think you have full plate, the good pipeline and I am looking forward to us finally getting where we need to be with this company, because it’s been a long wait, but it’s been worth it if it continues to do what we are doing. And the last comment would be that if MEVION continues to do well, it’s very likely that they will go public at some point or in a worst case scenario and it’s not necessarily a bad one, somebody buys them out in which case the value of your stock is worth more than you are carrying it for because you have written down already. Is that realistic?

No, we really can’t speculate on MEVION. We are not privy to that. We are not in the inner circle in that regards.

I understand, but I am just looking at it from a business standpoint. If things go well, the stock is worth more and you wrote it down dramatically the other year. So, we can see it right up at some point. That’s all I am saying.

And that would be our hope as well. We are very – we feel they are on the right track.

Okay. And thank you again for the hard work you put in and the good quarter. And we are looking forward for good quarters. Thank you.

Thank you.

Our next question comes from Richard Greulich.

Thank you. I wanted to hone in a little bit on the earnings contribution of the proton business, so if I look at Q2 and Q3, the revenues contributed by the proton business was about $1.2 million or $1.3 million in total as you were ramping it up. And I was looking into Q1, your net income before the non-operating interests are taken out was about $330,000, on a total basis, that’s increased about $350,000 from that run rate over the last two quarters, now I understand that probably the mix was a little bit better, but my conclusion is that about $200,000 of net income was contributed by the proton business, maybe a little bit more. And I would say that because of the non-operating interest – or non-controlling interest, sorry, take on that earnings was only increased slightly, indicating to me that your Gamma Knife business was probably pretty much flat in terms of earnings contribution and almost the entire gain was due to the proton business, is that accurate?

We really don’t speculate on dividing them out, to be honest with you, so we can’t comment on that.

But the amount about the non-controlling interest is out there and that’s pretty clear that, that kind of is a pretty good barometer of what the Gamma Knife business is doing, there is obviously some puts and takes besides that with the ones that you totally control, but the encouraging thing to me is the tremendous amount of earnings leverage, about 100% owned proton business and the margin is terrific?

We would agree with that.

And that’s not even operating at full capacity. The reason I took the Q2 and Q3 is because I am assuming you are conservative in Q2 and maybe that helped Q3 slightly, but then the Q4 will be even better, so I guess the net of it from what I can see is like is that proton machine is going to contribute close to $0.15 a share net in earnings over on a run rate basis in the next 12 months?

We really – again, we don’t comment on what individual units do. We don’t comment on what individual Gamma Knives do either, so that’s just the policy.

Okay. Thank you.

Our next question comes from Mitra Ramgopal Sidoti & Company.

Yes. Hi, good afternoon. I just had a quick question, clearly you are having some nice success with the proton installations going forward, I was just wondering if you had to look on the radiosurgery or even on the Gamma operations side, any focus there in terms of adding new centers?

Yes. I think as we mentioned, we expect to sign one more in the next 30 days to 60 days and our unit in Peru will be opening up in the first part of next year as well.

Okay. Thanks.

Our next question comes from Bill Sutherland.

Thanks for taking the question. Craig, I was little confused on where you guys are with the Orlando machine in terms of capacity, in terms of fractions, so can you just clarify that, I guess is what I am looking for?

I think if you look at what capacity and it’s going to vary by center by center. It will vary by types of implications of degree. But for them, based on the complexity of the patients being treated, it’s probably in the – let’s use a round number. I am not trying to say this is the hard math because it could vary, but the capacity could be about 30 or thereabouts, it would be a little bit more than that, but 30 could be a good number.

And you are currently close to 20?

It’s varying. It’s around in that area.

How – curious how quickly second room could come online at Orlando if they decide it?

It’s about a 2-year process.

It will be the same, okay.

Yes, because we already have one up and running. But it’s still – you still have to go through the construction process and then the installation process. So it could be quicker since we have already done one there, but it’s still not a simple process.

And then from the hospital’s perspective, is it your sense that on their P&L, at this level of utilization, that they are past breakeven?

I can’t comment on that, because I am not privy to their books, so I really couldn’t be a positive yes or no.

Sure. And then last, kind of curious – again, this is conjecture, but you guys have informed opinions, the cost curve that you think is likely on the Mevion machine over the next 2 years, 3 years, 4 years and I realize it’s not a high volume situation, but do you think there is going to be a typical technology cost curve?

It’s hard to tell. It’s going to really depend on when systems really start getting installed since I would imagine for them, I can’t speak for them, but I guess, it will be like an area of the manufacturer that probably needs scale. That’s what’s going to reduce the cost going forward.

Yes. I am just getting it – what I am getting at is the acceleration of market gaps when a certain inflection point comes into being and obviously, that is still a big decision and always will be, but just kind of curious kind of how the price elasticity over time, but that’s great. Thanks for all your help.

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

I would just like to thank everyone for joining us this afternoon and we look forward to speaking with you in a few months on our fourth quarter and 2016 results conference call. Thank you again, everybody.

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 43776965 followed by the pound sign to access the replay. The webcast of this call will be available at www.ashs.com and www.streetevents.com. This concludes today’s teleconference. Thank you for participating. You may now disconnect.