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SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarterly period ended June 30, 2005 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 1-8789
 
 American Shared Hospital Services
 (Exact name of registrant as specified in its charter)
 California
(State or other jurisdiction of
Incorporation or organization)
    
    94-2918118
(IRS Employer
Identification No.)Four Embarcadero Center, Suite 3700, San Francisco, California
    
    94111(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (415) 788-5300
 þ o
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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItem 1. Legal ProceedingsItem 2. Changes in Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Securities HoldersItem 5. Other InformationItem 6. Exhibits and Reports on Form 8-KSIGNATURESExhibit 10.46Exhibit 10.47Exhibit 10.48Exhibit 31.1Exhibit 31.2Exhibit 32.1    Table of Contents  
  
 ITEM 1. FINANCIAL STATEMENTS
 AMERICAN SHARED HOSPITAL SERVICES
  (unaudited)
    
    (audited)June 30, 2005
    
    December 31, 2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,509,000
    
    
    $
    8,121,000Restricted cash
    
    
    50,000
    
    
    
    50,000Securities
    
    
    1,258,000
    
    
    
    957,000Accounts receivable, net of allowance for
for doubtful accounts of $220,000 in
2005 and $170,000 in 2004
    
    
    2,956,000
    
    
    
    2,950,000Prepaid expenses and other assets
    
    
    543,000
    
    
    
    594,000Current deffered tax assets
    
    
    263,000
    
    
    
    0Total current assets
    
    
    12,579,000
    
    
    
    12,672,000Property and equipment:Medical equipment and facilities
    
    
    55,196,000
    
    
    
    49,282,000Office equipment
    
    
    440,000
    
    
    
    492,000Deposits and construction in progress
    
    
    2,535,000
    
    
    
    4,499,00058,171,000
    
    
    
    54,273,000Accumulated depreciation and
amortization
    
    
    (22,598,000
    )
    
    
    (20,001,000
    )Net property & equipment
    
    
    35,573,000
    
    
    
    34,272,000Other assets
    
    
    163,000
    
    
    
    162,000Total assets
    
    $
    48,315,000
    
    
    $
    47,106,000LIABILITIES AND
SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    648,000
    
    
    $
    282,000Employee compensation and benefits
    
    
    158,000
    
    
    
    88,000Accrued dividends
    
    
    231,000
    
    
    
    215,000Other accrued liabilities
    
    
    855,000
    
    
    
    808,000Current portion of long-term debt
    
    
    6,535,000
    
    
    
    6,562,000Current portion of long-term capital leases
    
    
    277,000
    
    
    
    0Total current liabilities
    
    
    8,704,000
    
    
    
    7,955,000Long-term debt, less current portion
    
    
    16,181,000
    
    
    
    18,924,000Long-term capital leases, less current portion
    
    
    2,014,000
    
    
    
    0Deferred income taxes
    
    
    923,000
    
    
    
    366,000Minority interest
    
    
    2,477,000
    
    
    
    2,315,000Shareholders equity:Common stock, without par value: authorized
shares - 10,000,000; issued
& outstanding shares, 4,853,840 in
2005
and 4,776,173 in 2004
    
    
    9,247,000
    
    
    
    9,238,000Additional paid-in capital
    
    
    4,533,000
    
    
    
    4,410,000Retained earnings
    
    
    4,236,000
    
    
    
    3,898,000Total shareholders equity
    
    
    18,016,000
    
    
    
    17,546,000Total liabilities and shareholders equity
    
    $
    48,315,000
    
    
    $
    47,106,000
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AMERICAN SHARED HOSPITAL SERVICES
 
 Three Months ended June 30,
    
    Six Months ended June 30,2005
    
    2004
    
    2005
    
    2004Revenue:Medical services
    
    $
    4,730,000
    
    
    $
    4,114,000
    
    
    $
    9,179,000
    
    
    $
    8,343,000Costs and expenses:Costs of revenue:Maintenance and supplies
    
    
    262,000
    
    
    
    219,000
    
    
    
    517,000
    
    
    
    422,000Depreciation and amortization
    
    
    1,341,000
    
    
    
    1,178,000
    
    
    
    2,633,000
    
    
    
    2,356,000Other direct operating costs
    
    
    829,000
    
    
    
    599,000
    
    
    
    1,439,000
    
    
    
    1,252,0002,432,000
    
    
    
    1,996,000
    
    
    
    4,589,000
    
    
    
    4,030,000Gross margin
    
    
    2,298,000
    
    
    
    2,118,000
    
    
    
    4,590,000
    
    
    
    4,313,000Selling and administrative expense
    
    
    933,000
    
    
    
    762,000
    
    
    
    1,854,000
    
    
    
    1,528,000Interest expense
    
    
    511,000
    
    
    
    562,000
    
    
    
    1,046,000
    
    
    
    1,174,000Operating income
    
    
    854,000
    
    
    
    794,000
    
    
    
    1,690,000
    
    
    
    1,611,000Interest and other income
    
    
    57,000
    
    
    
    20,000
    
    
    
    100,000
    
    
    
    43,000Minority interest
    
    
    (287,000
    )
    
    
    (246,000
    )
    
    
    (561,000
    )
    
    
    (497,000
    )Income before income taxes
    
    
    624,000
    
    
    
    568,000
    
    
    
    1,229,000
    
    
    
    1,157,000Income tax expense
    
    
    233,000
    
    
    
    179,000
    
    
    
    443,000
    
    
    
    398,000Net income
    
    $
    391,000
    
    
    $
    389,000
    
    
    $
    786,000
    
    
    $
    759,000Earnings per share:Basic
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.16
    
    
    $
    0.19Diluted
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.15
    
    
    $
    0.15Basic shares
    
    
    4,854,000
    
    
    
    3,958,000
    
    
    
    4,841,000
    
    
    
    3,941,000Diluted shares
    
    
    5,135,000
    
    
    
    5,062,000
    
    
    
    5,133,000
    
    
    
    5,083,000
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AMERICAN SHARED HOSPITAL SERVICES
 
 Six Months ended June 30,2005
    
    2004Operating activities:Net income
    
    $
    786,000
    
    
    $
    759,000Adjustments to reconcile net cash provided by operating
activities:Depreciation and amortization
    
    
    2,680,000
    
    
    
    2,399,000Deferred income taxes
    
    
    418,000
    
    
    
    297,000Minority interest in consolidated subsidiaries
    
    
    561,000
    
    
    
    497,000Changes in operating assets and liabilities:Receivables
    
    
    (6,000
    )
    
    
    (87,000
    )Prepaid expenses and other assets
    
    
    36,000
    
    
    
    (99,000
    )Accounts payable and accrued liabilities
    
    
    483,000
    
    
    
    50,000Net cash from operating activities
    
    
    4,958,000
    
    
    
    3,816,000Investing activities:Purchase of property and equipment (net of financing)
    
    
    (778,000
    )
    
    
    (501,000
    )Investment in securities
    
    
    (301,000
    )
    
    
    0Net cash from investing activities
    
    
    (1,079,000
    )
    
    
    (501,000
    )Financing activities:Principal payments on long-term debt and capitalized leases
    
    
    (3,668,000
    )
    
    
    (3,822,000
    )Distribution to minority owners
    
    
    (399,000
    )
    
    
    (114,000
    )Payment for stock/option repurchase
    
    
    0
    
    
    
    (45,000
    )Payment received for exercise of stock options
    
    
    9,000
    
    
    
    12,000Payment of dividends
    
    
    (433,000
    )
    
    
    (314,000
    )Net cash from financing activities
    
    
    (4,491,000
    )
    
    
    (4,283,000
    )Net change in cash and cash equivalents
    
    
    (612,000
    )
    
    
    (968,000
    )Cash and cash equivalents at beginning of period
    
    
    8,121,000
    
    
    
    10,312,000Cash and cash equivalents at end of period
    
    $
    7,509,000
    
    
    $
    9,344,000Supplemental cash flow disclosure:Cash paid during the period for:Interest paid
    
    $
    1,046,000
    
    
    $
    1,284,000Income taxes paid
    
    $
    101,000
    
    
    $
    101,000Schedule of noncash investing and financial activities:Acquisition of equipment with lease/debt financing
    
    $
    3,189,000
    
    
    $
    775,000Accrued dividends
    
    $
    231,000
    
    
    $
    171,000Income tax benefit from exercise of stock options and
warrants
    
    $
    124,000
    
    
    $
    172,000
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Note 1. Basis of Presentation
       Note 2. Per Share Amounts
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Note 3. Stock-based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
 Three months ended June 30
    
    Six Months Ended June 302005
    
    2004
    
    2005
    
    2004Net income, as reported
    
    $
    391,000
    
    
    $
    389,000
    
    
    $
    786,000
    
    
    $
    759,000Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related
tax effects
    
    ($
    6,000
    )
    
    $
    0
    
    
    ($
    8,000
    )
    
    $
    0Pro forma net income
    
    $
    385,000
    
    
    $
    389,000
    
    
    $
    778,000
    
    
    $
    759,000Earnings per share:Basic-as reported
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.16
    
    
    $
    0.19Basic-pro forma
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.16
    
    
    $
    0.19Diluted-as reported
    
    $
    0.08
    
    
    $
    0.08
    
    
    $
    0.15
    
    
    $
    0.15Diluted-pro forma
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.15
    
    
    $
    0.15
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
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Liquidity and Capital Resources
      held-to-maturity
 
 Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures
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Changes in internal control over financial reporting
 
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 2. Changes in Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Securities Holders.
  1)
    
    Voted on the Election of Directors as follows:
 Nominee
    
    For
    
    AbstainedErnest A. Bates, M.D.
    
    
    4,584,039
    
    
    
    47,025Ernest R. Bates
    
    
    4,583,939
    
    
    
    47,125Olin C. Robison
    
    
    4,583,039
    
    
    
    48,025John F. Ruffle
    
    
    4,583,139
    
    
    
    47,925Stanley S. Trotman, Jr.
    
    
    4,584,939
    
    
    
    46,125
 2)
    
    Voted on the ratification of Moss Adams, LLP as the Companys
independent accountants for the year ending December 31, 2005. There were
4,599,069 votes for, 22,145 votes against and 9,850 votes abstained.Moss Adams, LLP was ratified as the Companys independent accountants for
the year ending December 31, 2005.
 
 Item 5. Other Information.
  
 Item 6. Exhibits and Reports on Form 8-K.
 (a)
    
    ExhibitsThe following exhibits are filed herewith:
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Exhibit Number
    
    Description10.46
    
    Lease Agreement for a Gamma Knife
unit dated as of March 21, 2003 between GK Financing, LLC and Northern Westchester
Hospital Center. (Confidential material
appearing in this document has been omitted and filed
separately with the Securities and Exchange Commission in
accordance with Rule 24b-2, promulgated under the Securities
and Exchange Act of 1934, as amended. Omitted information has
been replaced with asterisks.)10.47
    
    Addendum Four to Lease Agreement
for a Gamma Knife unit effective
as of December 1, 2002 between GK Financing, LLC and Hoag
Memorial Hospital Presbyterian.10.48
    
    Line of credit agreement between American Shared Hospital
Services and Bank of America dated July 1, 2004 and related
amendments No. 1 and No. 2 dated June 23, 2005.31.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 (b)
    
    Reports on Form 8-KThe following report on Form 8-K was filed during the three months ended
June 30, 2005:
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Form 8-K dated and filed May 3, 2005 relating to a press release
announcing the Companys preliminary financial results for its first
quarter of fiscal year 2005.
 The following reports on Form 8-K were filed after June 30, 2005:
 Form 8-K dated and filed July 5, 2005 announcing an increase in its
existing line of credit with Bank of America.Form 8-K dated and filed July 26, 2005 relating to a press release
announcing the Companys preliminary financial results for its second
quarter of fiscal year 2005.
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Date: August 12, 2005
    /s/ Ernest A. Bates, M.D.Ernest A. Bates, M.D.Chairman of the Board and Chief Executive Officer Date: August 12, 2005
    /s/ Craig K. TagawaCraig K. TagawaSenior Vice President
Chief Operating and Financial Officer 13