UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10-Q




(Mark One)




x            Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.




For the quarterly period ended June 30, 2010


or




o            Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.




For the transition period from ______to______.




Commission file number 000-50354




AMERICAN SURGICAL HOLDINGS, INC.


(Exact name of registrant as specified in its charter)




Delaware

98-0403551(State or other jurisdiction of

(I.R.S. Employer Identification No.)incorporation or organization)10039 Bissonnet, Suite #250

Houston, Texas

77036-7852(Address of principal executive offices)

(Zip Code)





(713) 779-9800


(Registrants telephone number, including area code)




Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes  ̈ No x




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act (Check one):




Large accelerated filer o      Accelerated filer o      Non-accelerated filer o      Smaller reporting company x




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o   No x




State the number of shares outstanding of each of the issuer's classes of common equity, as of July 26, 2010: 12,590,872 shares of common stock.









Table of Contents


PART I. – FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS
2ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
16ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
23ITEM 4. CONTROLS AND PROCEDURES
23PART II - OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS.
24ITEM 1A. RISK FACTORS.
24ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
24ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
24ITEM 4. REMOVED AND RESERVED
24ITEM 5. OTHER INFORMATION.
24ITEM 6. EXHIBITS.
24


Page




1





PART I. – FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES


(F/K/A ASAH Corp.)


CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


AS OF JUNE 30, 2010


(UNAUDITED)




CONTENTS




PAGECONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009
3CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (UNAUDITED)
4CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
5CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (UNAUDITED)
6NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8





2





AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES

(formerly ASAH Corp.)

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2010 AND DECEMBER 31, 2009June 30,


December 31,

20092010(unaudited)ASSETSCURRENT ASSETSCash and cash equivalents

$
3,405,106


$
2,705,488Accounts receivable, net


3,497,196



3,855,401Advances to employees


52,522



31,453Prepaid federal income tax


224,033



302,024Prepaid expenses and other current assets


36,836



28,263TOTAL CURRENT ASSETS


7,215,693



6,922,629PROPERTY AND EQUIPMENT, NET


41,414



54,103HOSPITAL CONTRACT COSTS & NON-COMPETE, NET


-



13,667TOTAL ASSETS

$
7,257,107


$
6,990,399LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses

$
353,184


$
116,386Accrued/deferred income tax


5,658



94,506Accrued salaries, bonuses & payroll taxes


843,901



1,180,957TOTAL CURRENT LIABILITIES


1,202,743



1,391,849STOCKHOLDERS' EQUITYPreferred stock, $0.001 par value, 10,000,000 sharesauthorized, none issued and outstanding


-



-Common stock, $0.001 par value, 100,000,000 sharesauthorized, 12,590,872 and 11,632,161 shares issuedand outstanding, respectively


12,591



11,632Additional paid-in capital


3,184,527



3,601,927Deferred compensation


(18,750
)


(43,750
)Retained earnings


2,875,996



2,028,741TOTAL STOCKHOLDERS' EQUITY


6,054,364



5,598,550TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
7,257,107


$
6,990,399See accompanying notes to condensed consolidated financial statements.





3





AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES


(formerly ASAH Corp.)


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


FOR THE THREE AND SIX MONTHS ENDED JUNE 30,


(UNAUDITED)




Three months ended


Six months ended2010


2009


2010


2009RevenuesService fees, net

$
6,098,304


$
5,659,201


$
11,227,680


$
9,507,482Contract fees


308,474



279,494



617,588



470,610Total net revenues


6,406,778



5,938,695



11,845,268



9,978,092Cost of revenues


2,441,343



1,919,232



4,887,574



3,916,341GROSS PROFIT


3,965,435



4,019,463



6,957,694



6,061,751OPERATING EXPENSESGeneral and administration


302,274



312,526



583,971



549,887Legal and professional fees


495,105



41,499



805,788



121,279Director fees


296,308



73,390



481,360



127,816Salaries


2,332,367



1,726,681



3,801,368



2,393,114Rent


27,153



22,941



54,306



45,282TOTAL OPERATING EXPENSES


3,453,207



2,177,037



5,726,793



3,237,378NET INCOME FROM OPERATIONS:


512,228



1,842,426



1,230,901



2,824,373Other income (expense)Interest expense


-



(106,417
)


-



(280,583
)Interest income


1,796



974



5,498



2,051OTHER INCOME (EXPENSE)


1,796



(105,443
)


5,498



(278,532
)INCOME FROM OPERATIONS


514,024



1,736,983



1,236,399



2,545,841Provision for income taxes


(82,824
)


(644,369
)


(389,144
)


(961,546
)NET INCOME

$
431,200


$
1,092,614


$
847,255


$
1,584,295Net income per share – basic

$
0.04


$
0.13


$
0.07


$
0.19Net income per share – diluted

$
0.03


$
0.10


$
0.06


$
0.18Weighted average number of shares outstandingduring the period - basic


12,013,201



8,525,484



11,913,161



8,492,887Weighted average number of shares outstanding during the period –diluted


14,121,242



11,483,817



14,056,767



9,052,887




See accompanying notes to condensed consolidated financial statements





4




AMERICAN SURGICAL HOLDINGS, INC.

(formerly ASAH Corp.)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)Additional








TotalPreferred Stock


Common Stock


Paid-in


Deferred


Retained


Stockholders'Shares


Amount


Shares


Amount


Capital


Compensation


Earnings


EquityBalances, December 31, 2009


-


$
-



11,632,161


$
11,632


$
3,601,927


$
(43,750
)

$
2,028,741


$
5,598,550Deferred compensation


-



-



-



-



-



25,000



-



25,000Options issued to officers


-



-



-



-



49,360



-



-



49,360Options issued to employees


-



-



-



-



3,428



-



-



3,428Options issued to directors


-



-



-



-



4,860



-



-



4,860Stock issued upon exercise of  options










636,394



636



50,275



-



-



50,911Stock issued upon exercise of warrants


-



-



322,317



323



37,177



-



-



37,500Cancellation and repurchase of options


-



-



-



-



(562,500
)


-



-



(562,500
)Net income


-



-



-



-



-



-



847,255



847,255Balances, June 30, 2010


-


$
-



12,590,872


$
12,591


$
3,184,527


$
(18,750
)

$
2,875,996


$
6,054,364See accompanying notes to condensed consolidated financial statements.





5







AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES

(formerly ASAH Corp.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(UNAUDITED)June 30,


June 30,2010


2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
847,255


$
1,584,295Adjustments to reconcile net income to net cashprovided by operating activities:Depreciation and amortization


26,356



38,147Provision for uncollectible accounts


-



(19,000
)Amortization of discount of convertible notes payable


-



131,493Deferred compensation


25,000



25,000Options issued for services


3,428



6,700Options issued to officers


49,360



106,933Options issued to directors


4,860



11,384Changes in operating assets and liabilities:(Increase) Decrease in accounts receivable, net


358,205



1,214,945(Increase) Decrease in advances to employees


(21,069
)


(10,674
)(Increase) Decrease in prepaid expenses


(8,573
)


(60,621
)(Increase) Decrease in FIT receivable


77,991



-Increase (Decrease) in accounts payable and accrued expenses


236,798



(36,838
)Increase (Decrease) in accrued salaries


(337,056
)


518,553Increase (Decrease) in accrued taxes


(88,848
)


261,546Net cash provided  by operating activities


1,173,707



3,771,863CASH FLOWS FROM INVESTING ACTIVITIES:(Increase) Decrease in restricted cash


-



373,653Purchase of hospital contracts & non-compete


-



(50,000
)Net cash provided by investing activities


-



323,653CASH FLOWS FROM FINANCING ACTIVITIES:Repurchase of options


(562,500
)


-Repayment of note payable from related party


-



(150,000
)Issuance of common stock upon exercise of warrants


88,411



-Repayment of convertible notes payable


-



(2,715,000
)Net cash used in financing activities


(474,089
)


(2,865,000
)NET INCREASE IN CASH


699,618



1,230,516CASH AND CASH EQUIVALENTS AT BEGINNINGOF PERIOD


2,705,488



431,731CASH AND CASH EQUIVALENTS AT END OF PERIOD

$
3,405,106


$
1,662,247


See accompanying notes to condensed consolidated financial statements.




6




AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES

(formerly ASAH Corp.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(UNAUDITED)June 30,


June 30,2010


2009NON-CASH INVESTING AND FINANCING ACTIVITIES:Cash paid for income taxes

$
400,000


$
700,000Cash paid for interest expense


-


$
218,169SUPPLEMENTAL NON-CASH DISCLOSUREStock issued in acquisition


-


$
20,000See accompanying notes to condensed consolidated financial statements.





7





AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES(formerly ASAH Corp.)NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2010

(UNAUDITED)




NOTE 1 - BASIS OF PRESENTATION




The accompanying consolidated, condensed unaudited financial statements are presented in accordance with generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q under the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal occurring accruals) considered necessary in order to make the financial statements not misleading have been included. The financial statements are presented on the accrual basis.  Intercompany transactions and balances have been eliminated.




These financial statements should be read in conjunction with the Company’s audited financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC. The results of operations for the three and six months ended June 30, 2010 are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire fiscal year.




Organization




Through our wholly owned subsidiary, American Surgical Assistants, Inc. (“ASA”), we provide professional surgical assistant services to patients, surgeons, and healthcare institutions. Our high quality services results in cost savings for patients, insurance carriers, hospitals, surgeons, and healthcare institutions without compromising the quality of patient care. We are certified by The Joint Commission (formerly Joint Commission on Accreditation of Healthcare Organizations (JCAHO)).




Surgical assistants are highly skilled, fully trained professionals credentialed through an extensive process similar to that utilized to evaluate physicians.  These assistants are an integral part of the surgical team and they provide their services to surgeons and their patients. These services include, but are not limited to: identifying anatomical landmarks, securing blood vessels, recognizing pathological situations and providing and securing adequate, safe and proper assistance in exposure of the operative field, closing the surgical wound, and applying casts and dressings. They also perform other duties within the scope of their professional license as instructed or delegated by the operating surgeon. ASA surgical assistants are trained in general surgery, obstetrics, and gynecology, orthopedic surgery, plastic surgery, urology, cardiovascular surgery, neurosurgery and other surgical disciplines. ASA’s recruiting strategies are designed to attract and retain surgical assistant professionals from both domestic and international sources.




We market our services to hospitals, surgeons and healthcare facilities. Presently, we provide service in Texas, Oklahoma, Virginia, Tennessee and Georgia. We plan to extend our services to other healthcare facilities in other states.




Our business model is designed to accommodate various modalities to suit our licensed and/or certified professionals to work either as full-time salaried employees, hourly employees or independent contractors. Currently, we have a total of 111 surgical assistants, of which 96 are full or part time employees and 15 are independent contractors. We also have 24 full-time administrative and billing employees




Cash and cash equivalents




The Company considers all highly liquid investments with an original maturity at acquisition of three months or less to be cash equivalents.  These accounts may from time to time exceed federally insured limits. The Company has not experienced any losses on such accounts.  At June 30, 2010 and December 31, 2009, the Company had approximately$2,985,150and $2,269,511, respectively, in excess of FDIC insurance limits.




8


AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES(formerly ASAH Corp.)NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2010

(UNAUDITED)




Convertible Notes




The Company issued convertible notes in 2007.  The conversion feature of the notes became effective only if the Company commenced a Qualified Offering. The notes were paid off in March and June 2009; the conversion feature is no longer applicable.




Use of Estimates




The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.




Significant estimates include revenue recognition, the allowance for doubtful accounts and share-based compensation. These estimates have the potential to have a significant impact on our financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events which are continuous in nature.




Income Taxes




The Company records deferred taxes in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 740, Accounting for Income Taxes.  The statement requires recognition of deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.




Stock-Based Compensation




The Company accounts for its stock-based compensation under the provisions of FASB ASC No. 718,Accounting for Stock Based Compensation. Under FASB ASC No. 718, the Company is permitted to record expenses for stock options and other employee compensation plans based on their fair value at the date of grant. Any such compensation cost is charged to expense on a straight-line basis over the periods the options vest. If the options had cashless exercise provisions, the Company utilizes variable accounting.




Common stock, stock options and common stock warrants issued to other than employees or directors are recorded on the basis of their fair value, as required by FASB ASC No. 718, which is measured as of the date required by FASB ASC No. 505,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.  In accordance with FASB ASC No. 505, the stock options or common stock warrants are valued using the Black-Scholes model on the basis of the market price of the underlying common stock on the valuation date, which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense is computed under the Black-Scholes model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected in the expense recorded in the subsequent period in which that change occurs.




The Company recognized a fair value of $57,648for stock options earned for the six months ended June 30, 2010.




9




AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES(formerly ASAH Corp.)NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2010

(UNAUDITED)




Basic and Diluted Net Income (Loss) Per Share




Basic and diluted net income (loss) per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, Earnings Per Share.  Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares estimated to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. The Company’s outstanding stock options were2,034,106and warrants were 340,215on June 30, 2010. 30,000 common stock options and 7,715warrants were excluded from the computation of diluted earnings per share on June 30, 2010 since their effect remains anti-dilutive.  Excluded from the Company’s June 30, 2009 computation of diluted earnings per share due to their anti-dilutive effect were 1,705,000 common stock options and 3,258,000 warrants, respectively.





Reclassification




Certain amounts from prior periods have been reclassified to conform to the current period presentation.




Revenue Recognition




The Company recognizes revenue over the period the service is performed in accordance with FASB ASC No. 605, Revenue Recognition in Financial Statements.  In general, ASC No. 605 requires that four basic criteria must be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services rendered, (iii) the fee is fixed and determinable, and (iv) collectability is reasonably assured.




Established billing rates are not the same as actual amounts recovered.  They generally do not reflect what the Company is ultimately paid and therefore are not reported in our financial statements.  The Company is typically paid amounts based on established charges per procedure with guidance from the annually updated Current Procedural Terminology (“CPT”) guidelines (a code set maintained by the American Medical Association through the CPT Editorial Panel), that designates relative value units (“RVU's”) and a suggested range of charges for each surgical procedure which is then assigned a CPT code.  This fee is discounted to reflect the percentage paid to the Company “using a modifier” recognized by each insurance carrier for surgical assistant services, less deductible, co-pay, and contractual adjustments which are deducted from the calculated surgical assistant fee.




The Company reports revenues derived from providing licensed and/or certified surgical assistants to assist physicians in surgical procedures, and in emergency surgery (“Service Fees, net”). Additional revenues are derived from contracts with hospitals for 24/7 Surgical Assistant On-Call services (“Contract Fees”).




“Service Fees, net” includes revenues generated from services performed by surgical assistants on the date the services are performed based on established billing rates less allowances for contractual adjustments and uncollectible amounts. These contractual adjustments vary by insurance company and self-pay patients. The Company computes these contractual adjustments and collection allowances based on its historical collection experience.




Completing the paperwork for each case and preparing it for billing takes approximately ten business days. The majority of claims are then filed electronically except for those remaining insurance carriers requiring paper filing. An initial response is usually received within four weeks from electronic filing and up to six weeks from paper filing. Responses may be a payment, a denial, or a request for additional information.




10




AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES(formerly ASAH Corp.)NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2010

(UNAUDITED)


Historical collection rates are estimated using the most current prior 12 month historical payment and collection percentages. The Company generally receives 99% of its collections within 12 months from the date of service. Amounts greater than one-year past due are written off as a bad debt. The Company accounts for charge-backs as they occur and records an estimate for expected charge-backs as they are received from insurance companies.




The Company also earns revenue (“Contract Fees”) derived from contracts with hospitals for providing surgical assistant twenty-four hour per day On-Call coverage. Contract Fees are invoiced monthly throughout the respective contract period as services are provided and revenue is recognized monthly as the fees are earned.




Allowance for Doubtful Accounts




The Company generally provides for an allowance against accounts receivable for an amount that could become uncollectible whereby such receivables are reduced to their estimated net realizable value. The Company estimates this allowance based on the aging of its accounts receivable, its historical collection experience and other relevant factors. There are various factors that can impact the collection trends, such as changes in the number of uninsured patients, the increased burden of co-payment to be made by patients with insurance and business practices related to collection efforts. These factors continuously change and can have an impact on collection trends and the estimation process.




The Company evaluates the collectability of its receivables at least quarterly, using various factors including the financial condition and payment history on patient accounts, an overall review of collections experience on accounts and other economic factors or events expected to affect the Company’s future collections experience.




As part of the evaluation discussed above concerning Service Fees Revenue and the appropriate Collection Percentage, the Company determined that an allowance was necessary at June 30, 2010 in the amount of $260,000 compared to an allowance of $260,000 at December 31, 2009.  The $260,000 at June 30, 2010 and $260,000 at December 31, 2009were for estimated chargebacks.




Long-Lived Assets




Long-lived assets and certain identifiable assets related to those assets are periodically reviewed for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable.  If the non-discounted future cash flows of the enterprise are less than their carrying amount, their carrying amounts are reduced to fair value and an impairment loss is recognized.   As of June 30, 2010, the Company did not record any impairment of its long-lived assets.




Identifiable Intangible Assets




Intangible assets are stated at cost net of accumulated amortization and impairment.  Intangible assets other than goodwill are amortized over their individual estimated useful lives.  In March 2009, the Company acquired assets, primarily hospital contracts, of a small surgical assistant services provider and required the owner to enter into an employment and non-compete agreement.  The acquired hospital contracts are amortized over the life of the contracts and the non-compete agreement is amortized over the year life of the agreement.    As of June 30, 2010, the Company has recognized $13,667of amortization expense related to the intangible assets.  The intangible assets were fully amortized as of June 30, 2010.





Recent Accounting Pronouncements




In October 2009, the FASB issued an Accounting Standard Update (“ASU”) No. 2009-13, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services separately rather than as a combined unit and modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. The ASU significantly expands the disclosure requirements for multiple-deliverable revenue arrangements. The ASU will be effective for the first annual reporting period beginning on or after June 15, 2010, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted, provided that the guidance is retroactively applied to the beginning of the year of adoption. The Company does not expect the adoption of ASU No. 2009-13 to have any effect on its financial statements upon its required adoption on January 1, 2011.




11




AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES(formerly ASAH Corp.)NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2010

(UNAUDITED)
  In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for the Company with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for the Company with the reporting period beginning July 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on the Company’s financial statements.





NOTE 2 – EQUITY




Stock Options and Warrants




The fair market value of the stock options and warrants at the date of grant was estimated using the Black-Scholes option-pricing model with the following assumptions:




2009Expected Life
1 to 3 yearsInterest Rate
4.14%Dividend Yield
$0Volatility
259%Forfeiture Rate
0





The Company has not issued any new options or warrants in 2010.




Expected life represents the period of time that options are expected to be outstanding and is based on the Company’s historical experience or the simplified method, as permitted by FASB ASC No. 718 where appropriate. The risk-free interest rate is based on U.S. Treasury interest rates at the time of the grant whose term is consistent with the expected life of the stock options.




Expected dividend yield was considered to be $0 in the option pricing formula since the Company has not paid dividends.  Expected volatility is based on the Company’s historical experience. The forfeiture rate was considered to be none insofar as the historical experience of the Company is very limited.  As required by ASC No. 718, the Company will adjust the estimated forfeiture rate based upon actual experience.




The Company recognized an expense of $57,648and $125,017 for common stock options earned during the six months ended June 30, 2010 and  June 30, 2009, respectively.





The following tables summarize all stock option grants as of December 31, 2009, the cancellations as of June 30, 2010 and the related changes during these periods are presented below.




12




AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES(formerly ASAH Corp.)NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2010

(UNAUDITED)




Number of Options


Weighted Average Exercise PriceBalance at December 31, 2009


3,295,500


$
0.54Cancelled and repurchased


(625,000
)

$
2.36Exercised


(636,394
)

$
0.08Balance at June 30, 2010


2,034,106


$
0.12Options exercisable on June 30, 2010


30,000


$
3.10Weighted average fair value of options granted during 2010





$
-





Of the total options granted, 30,000 are fully vested, exercisable and non-forfeitable.




June 30, 2010 Options Outstanding


Options ExercisableRange of Exercise Price


Number Outstanding at June 30, 2010


Weighted Average Remaining Contractual Life (Years)


Weighted Average Exercise Price


Number Exercisable at June 30, 2010


Weighted Average Exercise Price$
0.08



2,004,106



1.56


$
0.08



-



-$
3.10



30,000



1.51


$
3.10



30,000


$
3.10







December 31, 2009 Options Outstanding

Options ExercisableRange of Exercise Price

Number Outstanding at December 31, 2009

Weighted Average Remaining Contractual Life (Years)

Weighted Average Exercise Price

Number Exercisable at December 31, 2009

Weighted Average Exercise Price$     0.08

2,640,500

2.06

$             0.08

-

-$2.00
-
2.20

125,000

0.26

$             2.13

119,384

$           2.12$2.21
-
3.10

530,000

0.12

$             2.46

529,543

$           2.46




13




AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES(formerly ASAH Corp.)NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2010

(UNAUDITED)


Warrants





The Company did not issue any warrants in 2009 or the first six months of 2010.  Changes to the warrants are given below:




Number of Warrants


Weighted Average Exercise PriceBalance at December 31, 2009


727,715


$
0.44Exercised


(387,500
)

$
0.50Balance at June 30, 2010


340,215


$
0.54Warrants exercisable on June 30, 2010


340,215


$
0.54Weighted average fair value of Warrants granted during 2010





$
-





Of the total warrants granted, 340,215 are fully vested, exercisable and non-forfeitable.




June 30, 2010 Warrants Outstanding

Warrants ExercisableRange of Exercise Price


Number Outstanding at June 30, 2010


Weighted Average Remaining Contractual Life (Years)


Weighted Average Exercise Price


Number Exercisable at June 30, 2010


Weighted Average Exercise Price$
0.10-0.75



332,500



0.06


$
0.51



332,500


$
0.43$
2.00



7,715



0.02


$
2.00



7,715


$
2.00December 31, 2009 Warrants Outstanding

Warrants ExercisableRange of Exercise Price


Number Outstanding at December 31, 2009


Weighted Average Remaining Contractual Life (Years)


Weighted Average Exercise Price


Number Exercisable at December 31, 2009


Weighted Average Exercise Price$
0.10-0.75



720,000



0.56


$
0.43



720,000


$
0.43$
2.00



7,715



0.56


$
2.00



7,715


$
2.00




NOTE 3 – RELATED PARTY TRANSACTION




On January 21, 2010, the independent members of the Board of Directors upon the recommendation of the Compensation Committee approved and awarded payments of $562,500 to the Company’s officers and directors in exchange for, among other things, the cancellation of options to purchase 625,000 shares of the Company's common stock.


14




AMERICAN SURGICAL HOLDINGS, INC. AND SUBSIDIARIES(formerly ASAH Corp.)NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2010

(UNAUDITED)




NOTE 4 – COMMITMENTS





On June 13, 2010, the Compensation Committee established performance targets for bonuses related to the Company's performance in July and August 2010.  If the Company's senior management team achieves these targets, they will receive bonuses in the aggregate amount of $250,000 in September 2010. Based on the Company’s collection trends to date, it is likely the performance targets will be achieved and the bonuses will be paid.  The compensation committee may establish additional performance goals in the future.


NOTE 5 – SUBSEQUENT EVENTS





The Company's Compensation Committee approved performance-based bonuses to select members of the Company's senior management team based on the achievement of certain collection targets in connection with May and June performance.  The performance targets were achieved, and a special bonus of $250,000 was paid in July 2010.




On July 27, 2010, the Company’sBoard of Directors declared a special dividend of $0.08 per share for each share of the Company's common stock, par value $0.001 per share, that is issued and outstanding on August 12, 2010.  The dividend will be paid on approximately August 30, 2010. The dividend, which is expected to aggregate approximately $1,030,000, will be paid from our cash flows from operations.


15




ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




FORWARD-LOOKING STATEMENTS




This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, which are based on management’s exercise of business judgment as well as assumptions made by and information currently available to, management. When used in this report, the words" may," "will", "anticipate," "believe," "estimate," "expect," "intend" and words of similar import, are intended to identify any forward-looking statements.  You should not place undue reliance on these forward-looking statements.  These statements reflect our current view of future events and are subject to certain risks and uncertainties as described in this report on Form 10-Q as well as other periodic reports, filed with the Securities and Exchange Commission, and as noted below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements.  We undertake no obligation, and do not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize.




GENERAL




The following Management’s Discussion and Analysis of Financial Condition and Results of Operations highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the six months ended June 30, 2010.




We were incorporated in the State of Delaware under the name Renfrew, Inc. on July 22, 2003 as a blank check company as defined under Rule 419 of the Securities Act.  On August 2, 2005, we filed Articles of Amendment with the State of Delaware changing our name to ASAH Corp.  On January 9, 2007, we filed Articles of Amendment with the State of Delaware changing our name to American Surgical Holdings, Inc.




Pursuant to a Stock Purchase Agreement and Share Exchange between us and American Surgical Assistants, Inc. ("ASA") dated October 10, 2005, we acquired all of the shares of ASA, from Zak Elgamal, our Chief Executive Officer, and Jaime Olmo-Rivas, one of our executive officers. As a result of and in consideration for the issuance of 1,714,286 shares of our common stock to Mr. Elgamal and 1,714,286 shares of our common stock to Mr. Olmo-Rivas, for an aggregate amount of 3,428,572 shares of our common stock, ASA became our wholly owned subsidiary.




Our staff and associates are credentialed and provide services to surgeons and patients at numerous hospitals and surgery centers in Texas, Oklahoma, Georgia and Virginia.  We commenced operations in Tennessee in 2010.  The majority of our revenue comes in the form of Service Fees paid by third party insurers on behalf of their clients (the patients).  A small percentage of our revenue is generated from payments by the patients for deductibles and co-pays not covered by the insurers and payments from patients who are self-insured.  We generate additional revenue in the form of fees earned under contracts for “On-Call Coverage” from hospitals and other healthcare facilities.  Our agreements with these healthcare facilities usually include an exclusivity arrangement whereby ASA is the only entity entitled to provide surgical assistants within the client facility except under very limited and clearly defined circumstances.




Our cost of revenues includes those costs and expenditures that are incurred directly by or associated with the surgical assistants’ performance of their duties.  The following items are included in the cost of revenues:




·  Insurance - worker’s compensation, malpractice, medical and dental;




·  Licenses and permits;




·  Professional contract services;




·  Postage and delivery;




·  Salaries and wages;




·  Payroll taxes; and




·  Telephone and communications.




16




Critical Accounting Policies




Revenue Recognition




We recognize revenue over the period the service is performed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 605, Revenue Recognition in Financial Statements.  In general, ASC No. 605 requires that four basic criteria must be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services rendered, (iii) the fee is fixed and determinable, and (iv) collectability is reasonably assured.




Established billing rates are not the same as actual amounts recovered.  They generally do not reflect what we are ultimately paid and therefore are not reported in our financial statements.  We are typically paid amounts based on established charges per procedure with guidance from the annually updated Current Procedural Terminology (“CPT”) guidelines (a code set maintained by the American Medical Association through the CPT Editorial Panel), that designates relative value units (“RVU's”) and a suggested range of charges for each surgical procedure which is then assigned a CPT code.  This fee is discounted to reflect the percentage paid to us “using a modifier” recognized by each insurance carrier for surgical assistant services, less deductible, co-pay, and contractual adjustments which are deducted from the calculated surgical assistant fee.




We report revenues derived from providing licensed and/or certified surgical assistants to assist physicians in surgical procedures, and in emergency surgery (“Service Fees, net”). Additional revenues are derived from contracts with hospitals for 24/7 Surgical Assistant On-Call services (“Contract Fees”).




“Service Fees, net” includes revenues generated from services performed by surgical assistants on the date the services are performed based on established billing rates less allowances for contractual adjustments and uncollectible amounts.  These contractual adjustments vary by insurance company and self-pay patients.  We compute these contractual adjustments and collection allowances based on our historical collection experience.




Completing the paperwork for each case and preparing it for billing takes approximately ten business days.  The majority of claims are then filed electronically except for those remaining insurance carriers requiring paper filing.  An initial response is usually received within four weeks from electronic filing and up to six weeks from paper filing.  Responses may be a payment, a denial, or a request for additional information.




Historical collection rates are estimated using the most current prior 12 month historical payment and collection percentages.  We generally receive 99% of our collections within 12 months from the date of service.  Amounts greater than one-year past due are written off as a bad debt.  We account for charge-backs as they occur and record an estimate for known charge-backs as they are received from insurance companies.




We also earn revenue (“Contract Fees”) derived from contracts with hospitals for providing surgical assistant twenty-four hour per day On-Call coverage.  Contract Fees are invoiced monthly throughout the respective contract period as services are provided and revenue is recognized monthly as the fees are earned.




Other Policies




Our other significant accounting policies are summarized in Note 1 of our Condensed Consolidated Financial Statements, included elsewhere in this report. Policies determined to be significant are those policies that have the greatest impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.  Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this annual report.




17




Recent Accounting Pronouncements




In October 2009, the FASB issued an Accounting Standard Update (“ASU”) No. 2009-13, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services separately rather than as a combined unit and modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. The ASU significantly expands the disclosure requirements for multiple-deliverable revenue arrangements. The ASU will be effective for the first annual reporting period beginning on or after June 15, 2010, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted, provided that the guidance is retroactively applied to the beginning of the year of adoption. We do not expect the adoption of ASU No. 2009-13 to have any effect on our financial statements upon its required adoption on January 1, 2011.




In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for us with the reporting period beginning July 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on  our  financial statements.


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2010 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2009




Operating Results




The table below provides a brief recap of operating results for the three months and six months ended June 30, 2010 and 2009 expressed as a percentage of Net Revenue.





FOR THE THREE MONTHS ENDED JUNE 30,


FOR THE SIX MONTHS ENDED JUNE 30,2010


2009


2010

2009Revenues, net


100
%


100
%


100
%


100
%Cost of Revenues


(38
%)


(32
%)


(41
%)


(39
%)Gross Profit


62
%


68
%


59
%


61
%Operating Expenses


(54
%)


(37
%)


(48
%)


(32
%)Net Income from Operations


8
%


31
%


11
%


29
%Other (Expense) Income


-



(2
%)


-



(3
%)Income from Operations


8
%


29
%


11
%


26
%Provision for Income Taxes


(1
%)


(11
%)


(3
%)


(10
%)Net Income


7
%


18
%


8
%


16
%





18




Revenue:Revenue increased by $468,083,or 8%,to $6,406,778 for the three months ended June 30, 2010 from$5,938,695 for the three months ended June 30, 2009.  The increase in revenue is due primarily to a15% increase of approximately 850 cases performed by our surgical assistants during the second quarter of 2010 compared to the comparable quarter in 2009.  Those new cases originated in part due to our provision of services at five additional facilities in Georgia, Tennesseeand Texas during the second quarter of 2010 as compared to the same quarter in 2009.  In addition, our surgical assistants performed additional services at our existing facilities.





Cost ofRevenues:  Cost revenues increased to $2,441,343 for the three months ended June 30, 2010 from $1,919,232 for the three months ended June 30, 2009, which represented an increase of $522,111, or 27%.  The increase in cost of revenues was 12% higher than the increase in revenue.  The increase is primarily due to the increase in the number of surgical assistants from 80 to 111 during the second quarter of 2010 as compared to the same quarter last year to serve our additional business and for performance bonuses paid to certain surgical assistants.





Gross Profit:Gross profit was $3,965,435 for the three months ended June 30, 2010 from $4,019,463 for the three months ended June 30, 2009, which represented a decrease of $54,028.  The 1% decrease in gross profit resulted from the increase in cost of revenues.   As a percentage of revenue, gross profit margins were 62% for the three months ended June 30, 2010, as compared to 68% for the three months ended June 30, 2009, which represents a decrease of 6%. The decrease in gross profit margin resulted primarily from the increase in revenue offset by a greater increase in the cost of revenues, as a percentage of revenue.





Operating Expenses:Operating expenses, which are comprised of general and administrative expense, legal and professional fees, director’s fees, salaries and rent, increased to $3,453,207 for the three months ended June 30, 2010, from $2,177,037 for the comparable period in 2009, which represented an increase of $1,276,170, or 59%. During the three months ended June 30, 2010, general and administrative expenses decreased by $10,252, or 3%, as compared to the comparable period in 2009.


Legal and professional fees and director fees increased by $453,606and $222,918,respectively, as compared to the comparable period in 2009.  The increase in legal and professional fees and director fees resulted from the creation of the Mergers and Acquisitions Committee of the Board of Directors in the third quarter of 2009 and the evaluation by such committee of potential transactions.  In addition, legal and professional fees also increased as a result of the retention of a law firm to expand the review of all our SEC filings and other regulatory filings, including state filings which were required as a result of the expansion of our business into additional states.





Salaries for the three months ended June 30, 2010 increased to $2,332,367 from $1,726,681 for the comparable period in 2009, representing an increase of $605,686,or 35%.  During 2008, we implemented cost cutting measures, which included a reduction in the salaries paid to management.  In addition, our convertible notes were outstanding in 2009, which prohibited us from increasing the compensation and/or benefits payable to certain of our management and key personnel.  The convertible notes were repaid in the first and second quarters of 2009. Thereafter, salaries were reinstated to their original levels during the second quarter of 2009. In addition, during the first quarter of 2010, the salaries of our Chief Executive Officer and Chief Operating Officer were increased by 5% as required by the terms of their respective employment agreements. During the second quarter of 2010, we also paid performance bonuses of $1,372,000 to senior management and key employees.  Bonuses paid in the second quarter of 2009 were $380,000. Our Compensation Committee has approved performance-based bonuses in the aggregate amount of $250,000 to select members of our senior management based on their achievement of certain collection targets for the period between May and June 2010.  These bonuses were paid in July 2010.  In addition, our Compensation Committee has established performance targets for bonuses related to our performance in July and August 2010.  If our senior management achieves these targets, they will receive bonuses in the aggregate amount of $250,000 in September 2010.





Rent increased by $4,212as compared to the comparable period in 2009.  Rent increased as a result of the annual increases in rent required under the terms of our lease agreement and the departure of our sub-tenant.





Interest Expense:Interest expense for the three months ended June 30, 2010 was $0 compared to $106,417 for the three months ended June 30, 2009.  The decreasein interest expense resulted primarily from the repayment of the convertible notes in March and June 2009 and a note to a related party in March 2009.




19





Income Tax Expense:We recorded a provision for income tax for the three months ended June 30, 2010 in the amount of $82,824 as compared to a provision for income tax of $644,369 for the three months ended June 30, 2009.  The decrease in income tax due in 2010 as compared to the income tax due in 2009 is primarily a result of the decrease in net income and a timing difference due to a change in accounting methods for tax purposes.





Net Income:Our net income for the three months ended June 30, 2010 was $431,200, which represented a decrease of $661,414, or 61%, compared to net income of $1,092,614 for the three months ended June 30, 2009.  This decrease was primarily the result of the increase in our legal and professional fees, director fees and salaries, which was partially offset by the increase in our revenue.





RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2010 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2009





Revenue:  Revenue increased to $11,845,268 for the six months ended June 30, 2010 compared to $9,978,092 for the six months ended June 30, 2009, which represented an increase of $1,867,176, or 19%, over the same period in 2009.    The increase in revenue is due primarily to a 22% increase in cases performed by our surgical assistants during the first six months of 2010 compared to the comparable period in 2009.  Those new cases originated in part due to our provision of services at five additional facilities in Georgia, Tennessee, and Texas during the second quarter of 2010 as compared to the same quarter in 2009.  In addition, our surgical assistants performed additional services at our existing facilities.





Cost ofRevenues:  Our Cost of Revenues increased to $4,887,574 for the six months ended June 30, 2010 from $3,916,341 for the comparable period in 2009, which represented an increase of $971,233,or 25%. The increase in cost of revenues was 6% higher than the increase in revenue.  The increase is primarily due to the increase in the number of surgical assistants from 80 to 111 during the second quarter of 2010 as compared to the same quarter last year to serve our additional business and for performance bonuses paid to certain surgical assistants.





Gross Profit:  Our Gross Profit was $6,957,694 for the six months ended June 30, 2010 from $6,061,751 over the same period ended June 30, 2009, which represented an increase of $895,943,or 15%.   This is the result of an increase in net revenue equal to 19% and a cost of revenues increase of 25% for the six months of 2010 over the same six months in 2009.





Operating Expenses:Operating expenses, which are comprised of general and administrative expense, legal and professional fees, director’s fees, salaries and rent, increased to $5,726,793 for the six months ended June 30, 2010, from $3,237,378 for the comparable period in 2009, which represented an increase of$2,489,415, or 77%.





During the six months ended June 30, 2010, general and administrative expenses increased by$34,084,or 6%, as compared to the comparable period in 2009.   This increase occurred primarily due to increased costs related to the increase in personnel and the higher cost of medical insurance.  Medical insurance for the first six months of 2010 increased $33,000.





Legal and professional fees and director fees increased by $684,509and $353,544respectively, as compared to the comparable period in 2009.  The increase in legal and professional fees and director fees resulted from the creation of the Mergers and Acquisitions Committee of the Board of Directors in the third quarter of 2009 and the evaluation by such committee of potential transactions.  In addition, legal and professional fees also increased as a result of the retention of a law firm to expand the review of all our SEC filings and other regulatory filings, including state filings which were required as a result of the expansion of our business into additional states.





Salaries for the six months ended June 30, 2010 increased to $3,801,368 from $2,393,114 for the comparable period in 2009, representing an increase of $1,408,254or 59%.  During 2008, we implemented cost cutting measures, which included a reduction in the salaries paid to management.  In addition, our convertible notes were outstanding in 2009, which prohibited us from increasing the compensation and/or benefits payable to certain of our management and key personnel.  The convertible notes were repaid in the first and second quarters of 2009. Thereafter, salaries were reinstated to their original levels during the second quarter of 2009. In addition, during the first quarter of 2010, the salaries of our Chief Executive Officer and Chief Operating Officer were increased by 5% as required by the terms of their respective employment agreements. During the six months of 2010, we also paid performance bonuses in the amount of $2,114,500.  Bonuses paid in the same period last year were $380,000.  Our Compensation Committee has approved performance-based bonuses in the aggregate amount of $250,000 to select members of our senior management based on their achievement of certain collection targets for the period between May and June 2010.  These bonuses were paid in July 2010.  In addition, our Compensation Committee has established performance targets for bonuses related to our performance in July and August 2010.  If our senior management achieves these targets, they will receive bonuses in the aggregate amount of $250,000 in September 2010.




20


Rent increased by $9,024 as compared to the comparable period in 2009.  Rent increased as a result of the annual increases in rent required under the terms of our lease agreement and the departure of our sub-tenant.





Interest Expense:Interest expense for the six months ended June 30, 2010 was $0 compared to $280,583 for the six months ended June 30, 2009.  The decreasein interest expense resulted primarily from the repayment of the convertible notes in March and June 2009 and a note to a related party in March 2009.





Income Tax Expense:We recorded a provision for income tax for the six months ended June 30, 2010 in the amount of $389,144 as compared to a provision for income tax of $961,546 for the six months ended June 30, 2009.  The decrease in income tax due in 2010 as compared to the income tax due in 2009 is primarily a result of the decrease in net income and a timing difference due to a change in accounting methods for tax purposes.





Net Income:Our net income for the six months ended June 30, 2010 was $847,255, which represented a decrease of $737,040,or 47%, compared to net income of $1,584,295 for the six months ended June 30, 2009.  This decrease was primarily the result of the increase in our legal and professional fees and salaries, which was partially offset by the increase in our revenue.





LIQUIDITY AND CAPITAL RESOURCES




To date, we have relied primarily upon cash flow from operations, the net proceeds of our convertible note offering completed during 2007 and a promissory note from a related party to finance our operations.  Our primary use of cash from operations has been the repayment of our convertible notes, as more fully described below, and payment of our operating expenses.




As a result of various changes implemented in 2008 and our dramatic increase in revenue in 2009, we improved our cash flow dramatically in 2009 and we believe that our cash flow will continue to remain stable or improve in 2010. As of June 30, 2010, we had $3,405,106 in cash and cash equivalents on hand compared to $2,705,488 on hand at December 31, 2009.  Our working capital at June 30, 2010 was $6,012, 950compared to $5,530,780 at December 31, 2009.  We had a working capital ratio (current assets/current liabilities) as of June 30, 2010 of 6:1 and 5.:1 as of December 31, 2009.  We believe that our cash flows from operations will be sufficient to meet our working capital needs.





On July 27, 2010, our Board of Directors declared a special dividend of $0.08 per share for each share of our common stock, par value $0.001 per share, that is issued and outstanding on August 12, 2010.  The dividend will be paid on approximately August 30, 2010.  The dividend, which is expected to aggregate approximately $1,030,000, will be paid from our cash flows from operations.  We have not yet determined whether we will pay additional dividends in the future.




Although we do anticipate some capital needs in the future to expand our information technology systems in response to our growth, we have not yet established a budget or timeline for such capital improvements.  If such capital needs occur in the coming year and are not significant, they will likely be funded from our cash flow from operations.  If such capital needs are significant, we would likely seek additional financing to meet them.




Operating Activities: Net cash provided by operating activities was $1,173,707 for the six months ended June 30, 2010 as compared to net cash provided by operating activities of $3,771,863 during the comparable period in 2009. This $1,173,707 in cash provided by operating activities for the six months ended June 30, 2010 is primarily a result of $847,255 in net income a decrease in accounts receivable of $358,205 due to better collection efforts, and an increase of $236,798 in accounts payable and accrued expenses due to an increase in legal fees, offset by a decrease in accrued salaries of $337,056 resulting from a decrease in paid time off of $122,000, a decrease of $81,000 due to the number of days being less at June 30, 2010 versus December 31, 2009 for the accrual of the payroll and a decrease in bonuses of $117,000. Net cash provided by operating activities for the six months ended June 30, 2009 is primarily a result of $1,584,295 in net income, a decrease of $1,214,945 in accounts receivable due to better collection efforts, an increase in accrued salaries of $518,553 due to bonuses declared in June 2009, and a $261,546 increase in accrued taxes due to higher taxable income.




21





Investing Activities:  Net cash provided by investing activities was $0 for the six months ended June 30, 2010 as compared to net cash provided by investing activities of $323,653 for the comparable period in 2009.  During the six months ended June 30, 2010, we had no investing activities.  During the six months ended June 30, 2009, net cash provided by investing activities was primarily a result of a decrease of $373,653 in restricted cash, which restriction was removed upon payment of our 2007 convertible notes, and the use of $50,000 to purchase hospital contracts and a non-compete agreement.


Financing Activities: Net cash used in financing activities for the six months ended June 30, 2010 was $474,089 as compared to net cash used in financing activities of $2,865,000 in the comparable period in 2009.  During the six months ended June 30, 2010, we received $88,411 as a result of option and warrant exercises, which was offset by the use of $562,500 in payments to our officers and directors, in exchange for, among other things, the cancellation of options to purchase 625,000 shares of our common stock.  During the six months ended June 30, 2009, we used $2,715,000 to repay our convertible notes issued in 2007 and $150,000 to repay a note to a related party.





We anticipate continuing to generate positive operating cash flow which, combined with available cash resources, should be sufficient to meet our planned working capital, capital expenditures and operating expenses. However, there can be no assurance that we will not require additional capital. Even if such funds are not required, we may seek additional equity or debt financing.





Convertible Notes




In May 2007, we commenced an offering of a minimum of 12 Units and a maximum of 35 Units pursuant to a private placement memorandum at a price of $100,000 per Unit.  Each Unit consisted of (i) a one year 15% interest bearing unsecured promissory note (“Note”) in the principal amount of $100,000 and (ii) a warrant to purchase 100,000 shares of our common stock at an exercise price of $2.00 per share (the "Warrants”).  We also agreed to register the shares of common stock underlying the warrants under certain circumstances.




The Notes were secured by our accounts receivable and an assignment of any proceeds received by us from judgments against or settlements with insurance carriers with respect to certain past due claims.




The Notes were convertible into our common stock if we commenced a “Qualified Offering” prior to the maturity date of the Notes. In lieu of repayment of principal and interest on the Notes, the Holders of the Notes could acquire our securities in the amount of such principal and interest at a purchase price equal to 85% of the price per security sold in the Qualified Offering. For purposes of the Notes, a Qualified Offering was the completion of an offering or offerings of our securities, including any offering of debt or equity securities, or securities convertible into debt or equity securities, in an amount not less than $3.0 million.




Dawson James Securities, Inc. (“Dawson”) was hired as the exclusive placement agent for the offering.  For its services, Dawson earned a cash commission equal to 10% and a non-accountable expense allowance equal to 3% of the gross proceeds of each Unit sold.  In addition, for each Unit sold Dawson earned warrants to purchase 20,000 shares of our common stock at an exercise price of $2.00 per share.




In June 2007, we accepted subscriptions for the minimum number of Units and executed Notes in the principal amount of $1,230,000 and issued warrants to purchase 1,230,000 shares of common stock to the note holders.  We received net proceeds of $1,070,100 after payment of commissions to Dawson.  In July 2007, we accepted subscriptions for an additional 14.85 Units and executed Notes in the principal amount of $1,485,000 and issued warrants to purchase 1,485,000 shares of common stock to the note holders. We received net proceeds of $1,291,950 after payment of commissions to Dawson. The value of the warrants issued as part of the Units was recorded as a discount on the Notes and was charged to interest expense and accreted to the balance of the Notes over the life of the Notes.  In connection with the offering, we issued warrants to purchase 543,000 shares of our common stock to Dawson.  The value of the warrants issued to Dawson as part of the compensation for the offering and the cash commission paid to Dawson was recorded as deferred financing costs and amortized to interest expense over the life of the Notes.




22




In July 2008, the terms of the Notes were renegotiated with half due in March 2009 and the due date of the remaining balance automatically extended to December 2009 upon payment of the amount of principal due on March 31, 2009.  The warrants were re-priced with one half re-priced at an exercise price of $0.10 per share and one half re-priced with an exercise price of $0.75 per share.  The warrants held by Dawson were not re-priced.  The fair value of the options was reset and a portion was charged to interest expense in 2008 and the remainder amortized in 2009.




We paid the Notes on a timely basis from cash generated from operations.  One half of the Notes were paid off in March 2009 and the other half in June 2009.  In November 2009, we received a request to register the shares of common stock underlying the warrants.  In response, we filed a registration statement with the SEC on a timely basis as required by the agreement with the warrant holders.  The registration statement was declared effective by the SEC on February 11, 2010.




Note from a Related Party




The note payable due to a related party of $150,000 was signed on June 12, 2008 and extended on September 12, 2008 to a new maturity date of June 15, 2009.  The note accrued interest at a rate of 15% annually.  During 2009, we recorded $4,685 of interest expense.  All accrued interest on this note as of December 31, 2008 was paid in January 2009 and the principal and accrued interest from January 1, 2009 was paid in full during March 2009.





Exercise of Warrants and Options




During the six months ended June 30, 2010, warrant holders exercised 387,500 warrants to purchase 322,317 shares of our common stock. We realized cash proceeds of $37,500 from the exercise of 50,000 warrants and the remaining 337,500 warrants were exercised using the cashless method.




During the three months ended June 30, 2010, option holders exercised stock options to purchase 636,394 shares of our common stock for total proceeds to us of $50,911.  No stock options were exercised during the first three months of 2010.




Off-Balance Sheet Arrangements




We are not a party to any “off-balance sheet arrangements,” as defined by applicable GAAP and SEC rules.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS




We conduct our business in United States Dollars. Our market risk is limited to United States domestic, economic and regulatory factors.




ITEM 4. CONTROLS AND PROCEDURES




Evaluation of Disclosure Controls.  Our Chief Executive Officer and our Chief Financial and Accounting Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of our second fiscal quarter of 2010 pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934.  Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure.  Based on their evaluation, the Chief Executive Officer and Chief Financial and Accounting Officer concluded that our disclosure controls and procedures were effective as of June 30, 2010.




It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.




Changes in Internal Control Over Financial Reporting.  There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




23







PART II - OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS.




We have pending actions against several insurance carriers to recover underpayments of amounts due by these carriers that were below their respective contractual commitments to us.   We have settled some of these actions and continue to pursue the remaining actions.




ITEM 1A. RISK FACTORS.




Not applicable.




ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS




None.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES.




None




ITEM 4.REMOVED AND RESERVED.




None




ITEM 5. OTHER INFORMATION.




None




ITEM 6. EXHIBITS.




(a)           Exhibits




Exhibit No.

Description31.1

Certifications of Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 200231.2

Certifications of Chief financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 200232.1

Certifications of Chief Executive Officer pursuant to Section 906 of Sarbanes Oxley Act of 200232.2

Certifications of Chief financial Officer pursuant to Section 906 of Sarbanes Oxley Act of 2002




24


SIGNATURES




Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




Date: August 13, 2010                                                                           AMERICAN SURGICAL HOLDINGS, INC.




By:/s/ Zak W. Elgamal


Zak W. Elgamal,


Chairman and Chief Executive Officer and Principal Executive Officer




Date: August 13, 2010                                                                           By:/s/ James A. Longaker


James A. Longaker,


Chief Financial Officer and Principal Accounting Officer