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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 March 31, 2006
 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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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. Unregistered Sales of Equity 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 10.19AEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1    Table of Contents  
  
 ITEM 1. FINANCIAL STATEMENTS
 AMERICAN SHARED HOSPITAL SERVICES
 (unaudited)
    
    
    (audited)March 31, 2006
    
    
    Dec. 31, 2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,166,000
    
    
    $
    1,298,000Restricted cash
    
    
    50,000
    
    
    
    50,000Securities-current
    
    
    6,663,000
    
    
    
    4,537,000Accounts receivable, net of
allowance for
doubtful accounts of $170,000
in 2006
and $170,000 in 2005
    
    
    4,071,000
    
    
    
    3,832,000Other receivables
    
    
    232,000
    
    
    
    187,000Prepaid expenses and other assets
    
    
    465,000
    
    
    
    464,000Current deferred tax assets
    
    
    341,000
    
    
    
    341,000Total current assets
    
    
    12,988,000
    
    
    
    10,709,000Property and equipment:Medical equipment and facilities
    
    
    61,635,000
    
    
    
    59,147,000Office equipment
    
    
    552,000
    
    
    
    549,000Deposits and construction in progress
    
    
    42,000
    
    
    
    703,00062,229,000
    
    
    
    60,399,000Accumulated depreciation and
amortization
    
    
    (26,898,000
    )
    
    
    (25,409,000
    )Net property & equipment
    
    
    35,331,000
    
    
    
    34,990,000Securities-long term
    
    
    601,000
    
    
    
    2,797,000Other assets
    
    
    160,000
    
    
    
    172,000Total assets
    
    $
    49,080,000
    
    
    $
    48,668,000LIABILITIES AND
SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    329,000
    
    
    $
    555,000Employee compensation and benefits
    
    
    189,000
    
    
    
    120,000Accrued dividends
    
    
    238,000
    
    
    
    238,000Other accrued liabilities
    
    
    1,127,000
    
    
    
    996,000Current portion of long-term debt
    
    
    5,376,000
    
    
    
    5,631,000Current portion of obligations
under capital leases
    
    
    951,000
    
    
    
    746,000Total current liabilities
    
    
    8,210,000
    
    
    
    8,286,000Long-term debt, less current portion
    
    
    14,060,000
    
    
    
    15,253,000Long term capital leases, less current
portion
    
    
    4,575,000
    
    
    
    3,452,000Deferred income taxes
    
    
    1,111,000
    
    
    
    828,000Minority interest
    
    
    2,598,000
    
    
    
    2,529,000Shareholders equity:Common
stock, without par value: authorized shares  10,000,000;
issued
& outstanding shares, 5,018,885
in 2006
and 5,018,885 in 2005
    
    
    9,306,000
    
    
    
    9,306,000Additional paid-in capital
    
    
    4,282,000
    
    
    
    4,274,000Retained earnings
    
    
    4,938,000
    
    
    
    4,740,000Total shareholders equity
    
    
    18,526,000
    
    
    
    18,320,000Total liabilities and shareholders
equity
    
    $
    49,080,000
    
    
    $
    48,668,000
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AMERICAN SHARED HOSPITAL SERVICES
 Three Months ended March 31,2006
    
    
    2005Medical services revenue
    
    $
    5,045,000
    
    
    $
    4,449,000Costs of revenue:Maintenance and supplies
    
    
    336,000
    
    
    
    255,000Depreciation and amortization
    
    
    1,462,000
    
    
    
    1,292,000Other direct operating costs
    
    
    824,000
    
    
    
    610,0002,622,000
    
    
    
    2,157,000Gross Margin
    
    
    2,423,000
    
    
    
    2,292,000Selling and administrative expense
    
    
    914,000
    
    
    
    921,000Interest expense
    
    
    563,000
    
    
    
    535,000Operating income
    
    
    946,000
    
    
    
    836,000Interest and other income
    
    
    90,000
    
    
    
    43,000Minority interest expense
    
    
    (316,000
    )
    
    
    (274,000
    )Income before income taxes
    
    
    720,000
    
    
    
    605,000Income tax expense
    
    
    284,000
    
    
    
    210,000Net income
    
    $
    436,000
    
    
    $
    395,000Net income per share:Earnings per common share  basic
    
    $
    0.09
    
    
    $
    0.08Earnings per common share  assuming dilution
    
    $
    0.09
    
    
    $
    0.08
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AMERICAN SHARED HOSPITAL SERVICES
 Three Months ended March 31,2006
    
    
    2005Operating activities:Net income
    
    $
    436,000
    
    
    $
    395,000Adjustments to reconcile net income to net cash from operating activities:Depreciation and amortization
    
    
    1,492,000
    
    
    
    1,315,000Deferred income tax
    
    
    283,000
    
    
    
    210,000Minority interest in consolidated subsidiaries
    
    
    316,000
    
    
    
    274,000Stock options expensed
    
    
    8,000
    
    
    
    0Changes in operating assets and liabilities:Receivables
    
    
    (284,000
    )
    
    
    215,000Prepaid expenses and other assets
    
    
    8,000
    
    
    
    5,000Accounts payable and accrued liabilities
    
    
    (26,000
    )
    
    
    51,000Net cash from operating activities
    
    
    2,233,000
    
    
    
    2,465,000Investing activities:Purchase of property and equipment
    
    
    (1,830,000
    )
    
    
    (2,276,000
    )Proceeds from sales and maturities of marketable securities
    
    
    577,000
    
    
    
    0Investment in securities
    
    
    (507,000
    )
    
    
    (10,000
    )Net cash from investing activities
    
    
    (1,760,000
    )
    
    
    (2,286,000
    )Financing activities:Payment of dividends
    
    
    (238,000
    )
    
    
    (215,000
    )Payment received for exercise of options
    
    
    0
    
    
    
    9,000Distribution to minority owners
    
    
    (247,000
    )
    
    
    (171,000
    )Long term debt financing on purchase of property and equipment
    
    
    0
    
    
    
    1,533,000Capital lease financing on purchase of property and equipment
    
    
    1,540,000
    
    
    
    240,000Principal payments on capital leases
    
    
    (211,000
    )
    
    
    (43,000
    )Principal payments on long-term debt
    
    
    (1,449,000
    )
    
    
    (1,811,000
    )Net cash from financing activities
    
    
    (605,000
    )
    
    
    (458,000
    )Net change in cash and cash equivalents
    
    
    (132,000
    )
    
    
    (279,000
    )Cash and cash equivalents at beginning of period
    
    
    1,298,000
    
    
    
    8,121,000Cash and cash equivalents at end of period
    
    $
    1,166,000
    
    
    $
    7,842,000Supplemental cash flow disclosure:Cash paid during the period for:Interest
    
    $
    563,000
    
    
    $
    535,000Income taxes
    
    $
    127,000
    
    
    $
    77,000Schedule of non-cash investing and financing activitiesAccrued dividends
    
    $
    238,000
    
    
    $
    218,000Income tax benefit from exercise of stock options
    
    $
    0
    
    
    $
    78,000
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Note 1. Basis of Presentation
       Note 2. Per Share Amounts
  Note 3. Stock-based Compensation
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Accounting for Stock-Based
Compensation
   Quarter Ended March 312006
    
    
    2005Net income, as reported
    
    $
    436,000
    
    
    $
    395,000Deduct: Total stock-based employee compensation
expense determined under fair
value based method for all awards, net of
related tax effects
    
    
    0
    
    
    
    (2,000
    )Pro forma net income
    
    $
    436,000
    
    
    $
    393,000Earnings per share:Basicas reported
    
    $
    0.09
    
    
    $
    0.08Basicpro forma
    
    $
    0.09
    
    
    $
    0.08Assuming
dilutionas reported
    
    $
    0.09
    
    
    $
    0.08Assuming
dilutionpro forma
    
    $
    0.09
    
    
    $
    0.08
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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
      held-to-maturity
 Subsequent Events
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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.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Securities Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits and Reports on Form 8-K.
   Exhibit Number
    
    Description10.19a
    
    Amendment to Lease Agreement for a Gamma Knife unit effective October
25, 2005 by and between Yale-New Haven Ambulatory Services Corporation
and GK Financing, LLC. (Confidential
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Exhibit Number
    
    Descriptionmaterial 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: May 15, 2006
    /s/ Ernest A. Bates, M.D.Ernest A. Bates, M.D.Chairman of the Board and Chief Executive OfficerDate: May 15, 2006
    /s/ Craig K. TagawaCraig K. TagawaSenior Vice President
Chief Operating and Financial Officer 12