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10-Q





ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934











American Shared Hospital Services





California94-2918118(State or other jurisdiction ofincorporation or organization)(IRS EmployerIdentification No.)





Two Embarcadero Center, Suite 410, San Francisco, California(Address of Principal Executive Offices)94111(Zip Code)





Yes








Non-Accelerated Filer











Title of each classTrading Symbol(s)Name of each exchange on whichregisteredAmerican Shared Hospital Services Common Stock, No Par ValueAMSNYSE AMERICAN


5,816,000















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ASSETSSeptember 30, 2019December 31, 2018Current assets:Cash and cash equivalents$1,297,000$1,442,000Restricted cash350,000350,000Accounts receivable, net of allowance for doubtful accounts of $100,000 at September 30, 2019 and $100,000 at December 31, 20186,511,0005,502,000Other receivables insurance proceeds—1,137,000Other receivables261,000239,000Prepaid expenses and other current assets1,825,0001,276,000Total current assets10,244,0009,946,000Property and equipment:Medical equipment and facilities90,672,00094,031,000Office equipment578,000589,000Deposits and construction in progress5,589,0006,082,00096,839,000100,702,000Accumulated depreciation and amortization(53,836,000)(54,008,000)Net property and equipment43,003,00046,694,000Right of use assets1,173,000—Other assets838,000862,000Total assets$55,258,000$57,502,000LIABILITIES AND SHAREHOLDERS' EQUITYSeptember 30, 2019December 31, 2018Current liabilities:Accounts payable$1,097,000$435,000Employee compensation and benefits289,000207,000Other accrued liabilities1,482,0001,329,000Other accrued liabilities insurance payable—977,000Current portion of lease liabilities272,000—Current portion of long-term debt1,666,0002,119,000Current portion of obligations under capital leases3,972,0004,407,000Total current liabilities8,778,0009,474,000Long-term lease liabilities, less current portion901,000—Long-term debt, less current portion2,230,0003,332,000Long-term capital leases, less current portion8,881,00010,308,000Deferred revenue, less current portion302,000382,000Deferred income taxes2,744,0002,958,000Shareholders' equity:Common stock, no par value (10,000,000 authorized; 5,816,000 and 5,714,000 shares issued and outstanding at September 30, 2019 and at December 31, 2018)10,752,00010,711,000Additional paid-in capital6,665,0006,495,000Retained earnings8,362,0007,896,000Total equity-American Shared Hospital Services25,779,00025,102,000Non-controlling interest in subsidiary5,643,0005,946,000Total shareholders' equity31,422,00031,048,000Total liabilities and shareholders' equity$55,258,000$57,502,000












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Three Months ended September 30,Nine Months ended September 30,2019201820192018Revenues$5,301,000$4,470,000$15,819,000$14,944,000Costs of revenue:Maintenance and supplies648,000470,0001,968,0001,723,000Depreciation and amortization1,817,0001,761,0005,719,0005,082,000Other direct operating costs1,023,000605,0002,653,0002,218,0003,488,0002,836,00010,340,0009,023,000Gross Margin1,813,0001,634,0005,479,0005,921,000Selling and administrative expense1,065,0001,050,0003,201,0003,067,000Interest expense302,000399,0001,015,0001,230,000Operating income446,000185,0001,263,0001,624,000Proceeds received from investment in equity securities———22,000Interest and other income7,000185,00015,000194,000Income before income taxes453,000370,0001,278,0001,840,000Income tax expense99,00082,000250,000401,000Net income354,000288,0001,028,0001,439,000Less: Net income attributable to non-controlling interest(189,000)(120,000)(562,000)(594,000)Net income attributable to American Shared Hospital Services$165,000$168,000$466,000$845,000Net income per share:Earnings per common share - basic$0.03$0.03$0.08$0.14Earnings per common share - diluted$0.03$0.03$0.08$0.14












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FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2019CommonSharesCommonStockAdditionalPaid-inCapitalRetainedEarningsSub-TotalASHSNon-controllingInterests inSubsidiariesTotalBalances at January 1, 20195,714,000$10,711,000$6,495,000$7,896,000$25,102,000$5,946,000$31,048,000Stock-based compensation expense——55,000—55,000—55,000Cash distributions to non-controlling interests—————(19,000)(19,000)Net income———270,000270,000125,000395,000Balances at March 31, 20195,714,00010,711,0006,550,0008,166,00025,427,0006,052,00031,479,000Stock-based compensation expense86,000—53,000—53,000—53,000Cash distributions to non-controlling interests—————(57,000)(57,000)Net income———31,00031,000248,000279,000Balances at June 30, 20195,800,00010,711,0006,603,0008,197,00025,511,0006,243,00031,754,000Stock-based compensation expense——62,000—62,000—62,000Options exercised1600041000——41000$—41000Cash distributions to non-controlling interests—————(789,000)(789,000)Net income———165,000165,000189,000354,000Balances at September 30, 20195,816,000$10,752,000$6,665,000$8,362,000$25,779,000$5,643,000$31,422,000





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FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018CommonSharesCommonStockAdditionalPaid-inCapitalRetainedEarningsSub-TotalASHSNon-controllingInterests inSubsidiariesTotalBalances at January 1, 20185,710,000$10,711,000$6,272,000$6,873,000$23,856,000$6,029,000$29,885,000Stock-based compensation expense——55,000—55,000—55,000Net income———390,000390,000261,000651,000Balances at March 31, 20185,710,00010,711,0006,327,0007,263,00024,301,0006,290,00030,591,000Stock-based compensation expense4,000—57,000—57,000—57,000Cash distributions to non-controlling interests—————(77,000)(77,000)Net income———287,000287,000213,000500,000Balances at June 30, 20185,714,00010,711,0006,384,0007,550,00024,645,0006,426,00031,071,000Stock-based compensation expense——57,000—57,000—57,000Cash distributions to non-controlling interests—————(393,000)(393,000)Net income———168,000168,000120,000288,000Balances at September 30, 20185,714,000$10,711,000$6,441,000$7,718,000$24,870,000$6,153,000$31,023,000












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Nine Months ended September 30,20192018Operating activities:Net income$1,028,000$1,439,000Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization5,772,0005,138,000Non cash lease expense189,000—Deferred income tax(214,000)45,000Stock-based compensation expense170,000169,000Net accrued interest on lease financing9,00039,000Interest expense associated with lease liabilities59,000—Changes in operating assets and liabilities:Receivables(896,000)(398,000)Prepaid expenses and other assets(559,000)(473,000)Customer deposits/deferred revenue(60,000)(93,000)Lease liability(248,000)—Accounts payable and accrued liabilities877,000359,000Net cash provided by operating activities6,127,0006,225,000Investing activities:Payment for purchase of property and equipment(889,000)(1,187,000)Proceeds from insurance160,000—Net cash used in investing activities(729,000)(1,187,000)Financing activities:Principal payments on long-term debt(1,564,000)(1,875,000)Principal payments on capital leases(3,155,000)(3,006,000)Distributions to non-controlling interests(865,000)(470,000)Proceeds from options exercised41,000—Net cash used in financing activities(5,543,000)(5,351,000)Net change in cash, cash equivalents, and restricted cash(145,000)(313,000)Cash, cash equivalents, and restricted cash at beginning of period1,792,0002,502,000Cash, cash equivalents, and restricted cash at end of period$1,647,000$2,189,000Supplemental cash flow disclosure:Cash paid during the period for:Interest$1,015,000$1,307,000Income taxes paid$418,000$277,000Schedule of non-cash investing and financing activitiesRight of use assets and lease liabilities$1,362,000$—Interest capitalized to property and equipment$82,000$77,000Acquisition of equipment with capital lease financing$1,293,000$1,679,000












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Basis of Presentation




















50 50













---







one





1,362,000





















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Property and Equipment


3 10


20 20








September 30,December 31,20192018Medical equipment and facilities$90,672,000$94,031,000Office equipment578,000589,000Deposits and construction in progress3,339,0003,832,000Deposits towards purchase of proton beam systems2,250,0002,250,00096,839,000100,702,000Accumulated depreciation(53,836,000)(54,008,000)Net property and equipment$43,003,000$46,694,000


2,961,000 729,000




Long-Term Debt Financing


Long-term debt consists of seven notes with three financing companies collateralized by the Gamma Knife equipment, the individual customer contracts, and related accounts receivable at September 30, 2019. As of September 30, 2019, long-term debt on the Condensed Consolidated Balance Sheets was $3,896,000. See disclosure of future payments below under the heading “Commitments”.




Capital Lease Financing


Capital lease financing consists of ten leases with three financing companies, collateralized by Gamma Knife and PBRT equipment, the individual customer contracts, and related accounts receivable at September 30, 2019. As of September 30, 2019, obligations under capital leases on the Condensed Consolidated Balance Sheets were $12,853,000. See disclosure of future payments below under the heading “Commitments”.
























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Leases








6.0 3 5 1,173,000





Year ending December 31,Operating Leases2019 (excluding the nine-months ended September 30, 2019)$84,0002020340,0002021347,0002022331,0002023214,000Thereafter6,000Total lease payments1,322,000Less imputed interest(149,000)Total$1,173,000






























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Per Share Amounts


513,000 176,000 519,000








Three Months ended September 30,Nine Months ended September 30,2019201820192018Net income attributable to American Shared Hospital Services$165,000$168,000$466,000$845,000Weighted average common shares for basic earnings per share5,889,0005,841,0005,899,0005,831,000Diluted effect of stock options and restricted stock19,00050,00018,00024,000Weighted average common shares for diluted earnings per share5,908,0005,891,0005,917,0005,855,000Basic earnings per share$0.03$0.03$0.08$0.14Diluted earnings per share$0.03$0.03$0.08$0.14












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Stock-based Compensation


1,630,000


62,000 170,000 57,000 169,000 94,000 five years


161,766
  108,000 434,000 129,000





StockOptionsGrant DateWeighted-AverageExercisePriceWeighted-AverageRemainingContractualLife (inYears)IntrinsicValueOutstanding at January 1, 2019613,000$2.853.18$—Granted18,000$2.917.00$—Exercised(16,000)$2.59—$—Forfeited(12,000)$3.05—$—Outstanding at September 30, 2019603,000$2.862.09$42,000Exercisable at September 30, 2019478,000$2.861.97$—Outstanding at January 1, 2018615,000$2.873.48$—Granted16,000$2.686.96$—Forfeited(18,000)$3.15—$—Outstanding at September 30, 2018613,000$2.852.93$337,000Exercisable at September 30, 2018389,000$2.862.83$—












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Income Taxes


The Company generally calculates its effective income tax rate at the end of an interim period using an estimate of the annualized effective income tax rate expected to be applicable for the full fiscal year. However, when a reliable estimate of the annualized effective income tax rate cannot be made, the Company computes its provision for income taxes using the actual effective income tax rate for the results of operations reported within the year-to-date periods. The Company’s effective income tax rate is highly influenced by relative income or losses reported and the amount of the nondeductible stock-based compensation associated with grants of its common stock options and from the results of foreign operations. A small change in estimated annual pretax income (loss) can produce a significant variance in the annualized effective income tax rate given the expected amount of these items. As a result, the Company has computed its provision for income taxes for the three and nine-month periods ended September 30, 2019 by applying the actual effective tax rates to income or (loss) reported within the condensed consolidated financial statements through those periods.





















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Payments Due by PeriodContractual ObligationsTotal amountscommittedas of 9/30/20192020-20222023After5 yearsLong-term debt (includes interest)$4,383,000$611,000$2,686,000$334,000$752,000Capital leases (includes interest)14,509,0001,195,00011,947,000846,000521,000Future equipment purchases40,960,000—40,960,000——Equipment service contracts10,182,00086,0007,651,000345,0002,100,000Operating leases1,224,00086,000962,000176,000—Total contractual obligations$71,258,000$1,978,000$64,206,000$1,701,000$3,373,000












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Incorporated by reference hereinExhibit NumberDescriptionFormExhibitDate10.1#Third Amendment to Purchased Services Agreement (for a Gamma Knife Unit) dated as of March 28, 2019 between GK Financing, LLC and Kettering Medical Center31.1*Certification of Chief Executive Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*Certification of Chief Financial Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1ǂCertifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Extension Schema Document101.CAL*XBRL Taxonomy Calculation Linkbase Document101.DEF*XBRL Taxonomy Definition Linkbase Document101.LAB*XBRL Taxonomy Label Linkbase Document101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document*Filed herewith.ǂFurnished herewith.#Portions of this exhibit (indicated therein by asterisks) have been omitted for confidential treatment.












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Date:November 7, 2019/s/ Ernest A. Bates, M.D.Ernest A. Bates, M.D.Chairman of the Board and Chief Executive OfficerDate:November 7, 2019/s/ Craig K. TagawaCraig K. TagawaSenior Vice PresidentChief Operating and Financial Officer