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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, 2007
 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 1-08789
 
 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
(Address of Principal Executive Offices)

    94111
(Zip Code)
 Registrants telephone number, including area code: (415) 788-5300
 þ o
  o o þ
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ITEM 1 FINANCIAL STATEMENTS
 AMERICAN SHARED HOSPITAL SERVICES
 (unaudited)
    
    
    (audited)June 30, 2007
    
    
    December 31, 2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,012,000
    
    
    $
    3,952,000Securities-current
    
    
    2,315,000
    
    
    
    1,574,000Restricted cash
    
    
    50,000
    
    
    
    50,000Accounts receivable, net of allowance for doubtful accounts of $170,000 in
2007 and $170,000 in 2006
    
    
    4,188,000
    
    
    
    4,248,000Other receivables
    
    
    120,000
    
    
    
    102,000Prepaid expenses and other current assets
    
    
    513,000
    
    
    
    598,000Current deferred tax assets
    
    
    601,000
    
    
    
    601,000Total current assets
    
    
    12,799,000
    
    
    
    11,125,000Property and equipment:Medical equipment and facilities
    
    
    62,716,000
    
    
    
    61,828,000Office equipment
    
    
    675,000
    
    
    
    515,000Deposits and construction in progress
    
    
    6,374,000
    
    
    
    3,137,00069,765,000
    
    
    
    65,480,000Accumulated depreciation and
amortization
    
    
    (34,253,000
    )
    
    
    (31,314,000
    )Net property & equipment
    
    
    35,512,000
    
    
    
    34,166,000Securities
    
    
    3,170,000
    
    
    
    3,380,000Investment in preferred stock
    
    
    2,000,000
    
    
    
    2,000,000Other assets
    
    
    294,000
    
    
    
    234,000Total assets
    
    $
    53,775,000
    
    
    $
    50,905,000LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    443,000
    
    
    $
    340,000Accrued interest and other liabilities
    
    
    1,035,000
    
    
    
    995,000Customer deposits
    
    
    3,225,000
    
    
    
    100,000Employee compensation and benefits
    
    
    133,000
    
    
    
    116,000Accrued dividends
    
    
    239,000
    
    
    
    239,000Advances on line of credit
    
    
    3,525,000
    
    
    
    4,000,000Current portion of long-term debt
    
    
    5,548,000
    
    
    
    4,867,000Current portion of capital leases
    
    
    1,050,000
    
    
    
    1,009,000Total current liabilities
    
    
    15,198,000
    
    
    
    11,666,000Long-term debt, less current portion
    
    
    11,105,000
    
    
    
    11,378,000Long-term capital leases, less current portion
    
    
    3,276,000
    
    
    
    3,811,000Deferred income taxes
    
    
    1,996,000
    
    
    
    1,996,000Minority interest
    
    
    3,129,000
    
    
    
    3,045,000Shareholders equity:Common stock, without par value:authorized shares - 10,000,000; issued
& outstanding shares, 5,025,418 in 2007
and 5,023,418 in 2006
    
    
    9,317,000
    
    
    
    9,317,000Additional paid-in capital
    
    
    4,283,000
    
    
    
    4,251,000Retained earnings
    
    
    5,471,000
    
    
    
    5,441,000Total shareholders equity
    
    
    19,071,000
    
    
    
    19,009,000Total liabilities and shareholders equity
    
    $
    53,775,000
    
    
    $
    50,905,000
  2




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AMERICAN SHARED HOSPITAL SERVICES
 Three Months ended June 30,
    
    
    Six Months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue:Medical services
    
    $
    4,910,000
    
    
    $
    5,309,000
    
    
    $
    9,659,000
    
    
    $
    10,354,000Costs and expenses:Costs of revenue:Maintenance and supplies
    
    
    233,000
    
    
    
    308,000
    
    
    
    579,000
    
    
    
    644,000Depreciation and amortization
    
    
    1,439,000
    
    
    
    1,454,000
    
    
    
    2,892,000
    
    
    
    2,916,000Other direct operating costs
    
    
    792,000
    
    
    
    913,000
    
    
    
    1,512,000
    
    
    
    1,737,0002,464,000
    
    
    
    2,675,000
    
    
    
    4,983,000
    
    
    
    5,297,000Gross margin
    
    
    2,446,000
    
    
    
    2,634,000
    
    
    
    4,676,000
    
    
    
    5,057,000Selling and administrative expense
    
    
    1,209,000
    
    
    
    1,078,000
    
    
    
    2,370,000
    
    
    
    1,992,000Interest expense
    
    
    470,000
    
    
    
    560,000
    
    
    
    937,000
    
    
    
    1,123,000Operating income
    
    
    767,000
    
    
    
    996,000
    
    
    
    1,369,000
    
    
    
    1,942,000Interest and other income
    
    
    100,000
    
    
    
    87,000
    
    
    
    218,000
    
    
    
    177,000Minority interest expense
    
    
    (335,000
    )
    
    
    (349,000
    )
    
    
    (635,000
    )
    
    
    (665,000
    )Income before income taxes
    
    
    532,000
    
    
    
    734,000
    
    
    
    952,000
    
    
    
    1,454,000Income tax expense
    
    
    252,000
    
    
    
    286,000
    
    
    
    447,000
    
    
    
    570,000Net income
    
    $
    280,000
    
    
    $
    448,000
    
    
    $
    505,000
    
    
    $
    884,000Earnings per share:Basic
    
    $
    0.06
    
    
    $
    0.09
    
    
    $
    0.10
    
    
    $
    0.18Diluted
    
    $
    0.06
    
    
    $
    0.09
    
    
    $
    0.10
    
    
    $
    0.18Basic shares
    
    
    5,024,000
    
    
    
    5,023,000
    
    
    
    5,024,000
    
    
    
    5,021,000Diluted shares
    
    
    5,047,000
    
    
    
    5,054,000
    
    
    
    5,049,000
    
    
    
    5,051,000
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AMERICAN SHARED HOSPITAL SERVICES
 Six Months ended June 30,2007
    
    
    2006Operating activities:Net income
    
    $
    505,000
    
    
    $
    884,000Adjustments to reconcile net cash provided by operating activities:Depreciation and amortization
    
    
    2,963,000
    
    
    
    2,967,000Deferred income taxes
    
    
    112,000
    
    
    
    569,000Loss on sale of assets
    
    
    0
    
    
    
    3,000Stock based compensation expense
    
    
    35,000
    
    
    
    15,000Minority interest in consolidated subsidiaries
    
    
    635,000
    
    
    
    665,000Changes in operating assets and liabilities:Receivables
    
    
    42,000
    
    
    
    (987,000
    )Prepaid expenses and other assets
    
    
    1,000
    
    
    
    (45,000
    )Accounts payable and accrued liabilities
    
    
    48,000
    
    
    
    (220,000
    )Customer deposits
    
    
    3,125,000
    
    
    
    100,000Net cash from operating activities
    
    
    7,466,000
    
    
    
    3,951,000Investing activities:Payment for purchase of property and equipment
    
    
    (4,285,000
    )
    
    
    (1,383,000
    )Proceeds from sale and maturity of marketable securities
    
    
    1,208,000
    
    
    
    2,916,000Investment in marketable securities
    
    
    (1,739,000
    )
    
    
    (1,719,000
    )Investment in convertible preferred stock
    
    
    0
    
    
    
    (2,000,000
    )Proceeds from sale of assets
    
    
    0
    
    
    
    20,000Net cash from investing activities
    
    
    (4,816,000
    )
    
    
    (2,166,000
    )Financing activities:Principal payments on long-term debt
    
    
    (2,432,000
    )
    
    
    (2,859,000
    )Principal payments on capital leases
    
    
    (494,000
    )
    
    
    (442,000
    )Long-term debt financing on purchase of property and equipment
    
    
    2,840,000
    
    
    
    0Advances on line of credit
    
    
    1,225,000
    
    
    
    4,000,000Payments on line of credit
    
    
    (1,700,000
    )
    
    
    (750,000
    )Payment of dividends
    
    
    (478,000
    )
    
    
    (476,000
    )Distribution to minority owners
    
    
    (551,000
    )
    
    
    (418,000
    )Proceeds from exercise of stock options
    
    
    0
    
    
    
    5,000Net cash from financing activities
    
    
    (1,590,000
    )
    
    
    (940,000
    )Net change in cash and cash equivalents
    
    
    1,060,000
    
    
    
    845,000Cash and cash equivalents at beginning of period
    
    
    3,952,000
    
    
    
    1,298,000Cash and cash equivalents at end of period
    
    $
    5,012,000
    
    
    $
    2,143,000Supplemental cash flow disclosure:Cash paid during the period for:Interest paid
    
    $
    937,000
    
    
    $
    1,123,000Income taxes paid
    
    $
    335,000
    
    
    $
    255,000Schedule of noncash investing and financial activities:Accrued dividends
    
    $
    239,000
    
    
    $
    239,000Acquisition of equipment with capital lease financing
    
    $
    0
    
    
    $
    1,540,000
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Note 1. Basis of Presentation
       Note 2. Per Share Amounts
  5




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Note 3. Stock-based Compensation
   Accounting for Stock-Based
Compensation
  Note 4. Convertible Preferred Stock Investment
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.
  Note 5. Line of Credit
  Note 6. Accounting for Uncertainty in Income Taxes
    7




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 st ®
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Liquidity and Capital Resources
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held-to-maturity
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Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures
 Changes in internal control over financial reporting
 PART II  OTHER INFORMATION
 Item 1.
    
    Legal Proceedings.None.
 12




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Item 1A. Risk FactorsThere are no changes from those listed in the Companys Annual Report on Form 10-K for
the year ended December 31, 2006.Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.None.Item 3.
    
    Defaults Upon Senior Securities.None.Item 4.
    
    Submission of Matters to a Vote of Securities Holders.The Companys Annual Shareholder Meeting (Meeting) was held on June 14, 2007. There
were present in person or by proxy at said Meeting shareholders voting 4,474,339 shares
that represented 89.1% of the 5,023,418 shares outstanding and entitled to vote at the
Meeting, which represented a quorum. At the Meeting, the shareholders:
 1)
    
    Voted on the Election of Directors as follows:
 Nominee
    
    For
    
    AbstainedErnest A. Bates, M.D.
    
    4,321,311
    
    153,028Olin C. Robison
    
    4,340,576
    
    133,763John F. Ruffle
    
    4,340,371
    
    133,968Stanley S. Trotman, Jr.
    
    4,326,941
    
    147,398
  2)
    
    Voted on the ratification of Moss Adams LLP as the Companys
Independent Registered Public Accounting Firm. There were 4,381,523 votes for,
77,863 votes against, and 14,953 votes abstained for a 87.2% vote in favor of
total available votes.
 Item 5.
    
    Other Information.None.Item 6.
    
    Exhibits
 (a)
    
    Exhibits
  Exhibit Number
    
    Description10.35a
    
    Addendum to Lease Agreement for Gamma Knife Unit effective April 13, 2007
between GK Financing, LLC and OSF HealthCare System.
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Exhibit Number
    
    Description(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).10.54
    
    Amendment Five to Lease Agreement for Gamma Knife Unit
effective May 9, 2007 between GK Financing, LLC and The Regents of the
University of California. (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).10.55
    
    Addendum Two to Lease Agreement for Gamma Knife Unit
effective June 20, 2007 between GK Financing, LLC and Sunrise Hospital and
Medical Center, LLC. (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).10.56
    
    Agreement to Purchase Gamma Knife
Perfexion Unit effective May 7, 2007 between GK Financing, LLC and
The Regents of the University of California. (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).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.
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Date: August 14, 2007
    
    /s/ Ernest A. Bates, M.D.

Ernest A. Bates, M.D.Chairman of the Board and Chief Executive OfficerDate: August 14, 2007
    
    /s/ Craig K. TagawaCraig K. TagawaSenior Vice PresidentChief Operating and Financial Officer
 15