What changed in this filing

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Item 1. Financial Statements

2021-05-13 compared with 2020-11-13 · 119 added, 199 removed, 221 unchanged (59% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS September 30, 2020 December 31, 2019

ASSETS March 31, 2021 December 31, 2020

Current assets:

1 unchanged sentence

Restricted cash 118,000 364,000

Accounts receivable, net of allowance for doubtful accounts of $ 100,000 at September 30, 2020 and $ 100,000 at December 31, 2019

Accounts receivable, net of allowance for doubtful accounts of $ 100,000 at March 31, 2021 and $ 100,000 at December 31, 2020

4,792,000 4,303,000

5 unchanged sentences

Office equipment 394,000 330,000

Deposits and construction in progress 4,661,000 4,215,000

Construction in progress 1,178,000 170,000

72,290,000 76,157,000

1 unchanged sentence

Net property and equipment 30,346,000 30,418,000

Land 19,000 19,000

Goodwill 1,265,000 1,265,000

3 unchanged sentences

Total assets $ 44,047,000 $ 43,653,000

LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2020 December 31, 2019

LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2021 December 31, 2020

Current liabilities:

2 unchanged sentences

Other accrued liabilities 2,712,000 1,574,000

Asset retirement obligations 1,214,000 1,270,000

Income taxes payable 399,000 373,000

Working capital payment due 197,000 197,000

Short term financing 355,000 471,000

Current portion of lease liabilities 310,000 305,000

9 unchanged sentences

Common stock, no par value ( 10,000,000 authorized;

5,751,000 and 5,817,000 shares issued and outstanding at September 30, 2020 and at December 31, 2019, respectively)

5,801,000 and 5,791,000 shares issued and outstanding at March 31, 2021 and at December 31, 2020, respectively)

10,753,000 10,753,000

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months ended September 30, Nine Months ended September 30,

2020 2019 2020 2019

Three Months ended March 31,

Revenues $ 4,364,000 $ 4,568,000

7 unchanged sentences

Interest expense 260,000 282,000

Operating (loss) income ( 251,000 ) 446,000 ( 920,000 ) 1,263,000

Operating income (loss) 90,000 ( 99,000 )

Interest and other income 3,000 3,000

(Loss) income before income taxes ( 248,000 ) 453,000 ( 913,000 ) 1,278,000

Income tax (benefit) expense ( 34,000 ) 99,000 ( 192,000 ) 250,000

Net (loss) income ( 214,000 ) 354,000 ( 721,000 ) 1,028,000

Net loss (income) attributable to non-controlling interest 5,000 ( 189,000 ) ( 106,000 ) ( 562,000 )

Net (loss) income attributable to American Shared Hospital Services $ ( 209,000 ) $ 165,000 $ ( 827,000 ) $ 466,000

Net (loss) income per share:

(Loss) earnings per common share - basic $ ( 0.03 ) $ 0.03 $ ( 0.14 ) $ 0.08

(Loss) earnings per common share - diluted $ ( 0.03 ) $ 0.03 $ ( 0.14 ) $ 0.08

Income (loss) before income taxes 93,000 ( 96,000 )

Income tax expense (benefit) 6,000 ( 28,000 )

Net income (loss) 87,000 ( 68,000 )

Net (income) attributable to non-controlling interest ( 58,000 ) ( 67,000 )

Net income (loss) attributable to American Shared Hospital Services $ 29,000 $ ( 135,000 )

Net income (loss) per share:

Earnings (loss) per common share - basic $ 0.00 $ ( 0.02 )

Earnings (loss) per common share - diluted $ 0.00 $ ( 0.02 )

See accompanying notes

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2019

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2021 AND 2020

Shares Common

6 unchanged sentences

Stock-based compensation expense — — 56,000 — 56,000 — 56,000

Restricted common shares returned to the plan ( 129,000 ) — — — — — —

Cash distributions to non-controlling interests — — — — — ( 326,000 ) ( 326,000 )

Net income — — — 270,000 270,000 125,000 395,000

Net (loss) income — — — ( 135,000 ) ( 135,000 ) 67,000 ( 68,000 )

Balances at March 31, 2020 5,688,000 $ 10,753,000 $ 6,781,000 $ 8,420,000 $ 25,954,000 $ 5,519,000 $ 31,473,000

Stock-based compensation expense 86,000 — 53,000 — 53,000 — 53,000

Cash distributions to non-controlling interests — — — — — ( 57,000 ) ( 57,000 )

Net income — — — 31,000 31,000 248,000 279,000

Balances at June 30, 2019 5,800,000 10,711,000 6,603,000 8,197,000 25,511,000 6,243,000 31,754,000

Stock-based compensation expense — — 62,000 — 62,000 — 62,000

Options exercised 16,000 41,000 — — 41,000 — 41,000

Cash distributions to non-controlling interests — — — — — ( 789,000 ) ( 789,000 )

Net income — — — 165,000 165,000 189,000 354,000

September 30, 2019 5,816,000 $ 10,752,000 $ 6,665,000 $ 8,362,000 $ 25,779,000 $ 5,643,000 $ 31,422,000

FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020

Shares Common

Stock Additional

Capital Retained

Earnings Sub-Total

ASHS Non-controlling

Subsidiaries Total

Balances at January 1, 2021 5,791,000 $ 10,753,000 $ 7,024,000 $ 1,497,000 $ 19,274,000 $ 4,376,000 $ 23,650,000

Stock-based compensation expense 10,000 — 107,000 — 107,000 — 107,000

Restricted common shares returned to plan ( 129,000 ) — — — — — —

Cash distributions to non-controlling interests — — — — — ( 326,000 ) ( 326,000 )

Net (loss) income — — — ( 135,000 ) ( 135,000 ) 67,000 ( 68,000 )

Net income — — — 29,000 29,000 58,000 87,000

Balances at March 31, 2021 5,801,000 $ 10,753,000 $ 7,131,000 $ 1,526,000 $ 19,410,000 $ 4,434,000 $ 23,844,000

Stock-based compensation expense 3,000 — 53,000 — 53,000 — 53,000

Cash distributions to non-controlling interests — — — — — ( 114,000 ) ( 114,000 )

Net (loss) income — — — ( 483,000 ) ( 483,000 ) 44,000 ( 439,000 )

Balances at June 30, 2020 5,691,000 10,753,000 6,834,000 7,937,000 25,524,000 5,449,000 30,973,000

Stock-based compensation expense 60,000 — 80,000 — 80,000 — 80,000

Cash distributions to non-controlling interests — — — — — ( 142,000 ) ( 142,000 )

NCI investment in Acquisition — — — — — 17,000 17,000

Net (loss) income — — — ( 209,000 ) ( 209,000 ) ( 5,000 ) ( 214,000 )

Balances at September 30, 2020 5,751,000 $ 10,753,000 $ 6,914,000 $ 7,728,000 $ 25,395,000 $ 5,319,000 $ 30,714,000

See accompanying notes

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months ended September 30,

Three Months ended March 31,

Operating activities:

Net (loss) income $ ( 721,000 ) $ 1,028,000

Adjustments to reconcile net (loss) income to net cash from operating activities (excluding assets acquired and liabilities assumed):

Net income (loss) $ 87,000 $ ( 68,000 )

Adjustments to reconcile net income (loss) to net cash from operating activities

Depreciation and amortization 1,231,000 1,676,000

2 unchanged sentences

Stock-based compensation expense 107,000 56,000

Accrued interest on lease financing — 9,000

Interest expense associated with lease liabilities 12,000 17,000

3 unchanged sentences

Accounts payable, accrued liabilities and deferred revenue 1,294,000 383,000

Income taxes payable ( 141,000 ) —

Lease liability ( 267,000 ) ( 248,000 )

Net insurance proceeds receivable — 160,000

Income taxes payable (receivable) 26,000 ( 35,000 )

Lease liabilities ( 86,000 ) ( 84,000 )

Net cash provided by operating activities 2,783,000 3,389,000

1 unchanged sentence

Payment for purchase of property and equipment ( 1,065,000 ) ( 195,000 )

Payment for acquisition, net of cash acquired ( 2,084,000 ) —

Proceeds from sale of equipment 150,000 —

Net cash used in investing activities ( 1,065,000 ) ( 195,000 )

4 unchanged sentences

Distributions to non-controlling interests — ( 326,000 )

Proceeds from options exercised — 41,000

Proceeds from financing for acquisition 1,425,000 —

Debt issuance costs long-term debt ( 30,000 ) —

Net cash used in financing activities ( 1,030,000 ) ( 1,950,000 )

5 unchanged sentences

Interest $ 260,000 $ 282,000

Income taxes paid $ 335,000 $ 418,000

Income taxes (refunded) paid $ ( 4,000 ) $ 34,000

Schedule of non-cash investing and financing activities

Lease reassessment right of use assets and lease liabilities $ — $ 67,000

Right of use assets and lease liabilities $ 135,000 $ 1,362,000

Interest capitalized to property and equipment $ — $ 32,000

Acquisition of equipment with finance leases $ 369,000 $ 1,293,000

Acquisition of equipment with long-term debt financing $ — $ 1,184,000

Acquisition of insurance with short-term financing $ 45,000 $ —

First working capital payment related to acquisition, witholding taxes $ 43,000 $ —

Estimated subsequent working capital payment for acquisition $ 354,000 $ —

See accompanying notes

2 unchanged sentences

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for the fair presentation of American Shared Hospital Services’ consolidated financial position as of September 30, 2020, the results of its operations for the three and nine-month periods ended September 30, 2020 and September 30, 2019, and the cash flows for the three and nine-month periods ended September 30, 2020 and September 30, 2019.

The results of operations for the three and nine-months ended September 30, 2020 are not necessarily indicative of results on an annualized basis.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for the fair presentation of American Shared Hospital Services’ consolidated financial position as of March 31, 2021, the results of its operations for the three-month periods ended March 31, 2021 and 2020, and the cash flows for the three-month periods ended March 31, 2021 and 2020.

The results of operations for the three-months ended March 31, 2021 are not necessarily indicative of results on an annualized basis.

Consolidated balance sheet amounts as of December 31, 2020 have been derived from audited consolidated financial statements.

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(“GKPeru”) and HoldCo GKC S.A.

GKF is the majority owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”), Jacksonville GK Equipment, LLC (“JGKE”) and Gamma Knife Center Ecuador S.A.

GKF is the majority owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”).

GKF acquired Gamma Knife Center Ecuador S.A.

(“GKCE”) through HoldCo in June 2020.

The Company (through ASRS) and Elekta AB, the manufacturer of the Gamma Knife (through its wholly-owned United States subsidiary, GKV Investments, Inc.), entered into an operating agreement and formed GKF.

As of September 30, 2020, GKF provides Gamma Knife units to fifteen medical centers in the United States in the states of Arkansas, California, Florida, Illinois, Indiana, Massachusetts, Mississippi, Nebraska, New Mexico, New York, Ohio, Oregon, Tennessee, and Texas.

As of March 31, 2021, GKF provides Gamma Knife units to thirteen medical centers in the United States in the states of Arkansas, California, Florida, Illinois, Indiana, Mississippi, Nebraska, New Mexico, New York, Ohio, Oregon, and Texas.

GKF also owns and operates single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador.

The Company through its wholly-owned subsidiary, Orlando, provided proton beam radiation therapy (“PBRT”) and related equipment to a customer in the United States.

The Company formed the subsidiaries GKPeru for the purposes of expanding its business internationally;

The Company formed the subsidiaries GKPeru and acquired GKCE for the purposes of expanding its business internationally;

Orlando and LBE to provide PBRT equipment and services in Orlando, Florida and Long Beach, California, respectively;

and AGKE and JGKE to provide Gamma Knife equipment and services in Albuquerque, New Mexico and Jacksonville, Florida, respectively.

AGKE began operations in the second quarter of 2011 and JGKE began operations in the fourth quarter of 2011.

Orlando treated its first patient in April 2016.

GKPeru treated its first patient in July 2017.

LBE is not expected to generate revenue within the next two years.

On June 12, 2020, GKF purchased approximately 98 % of the total outstanding shares of GKCE, from GKCE’s majority shareholders (the “Acquisition”).

As of September 30, 2020, the Company acquired approximately 99.3 % of the total outstanding shares of GKCE and intends to acquire the remaining 0.7 % at a later date.

As of March 31, 2021, the Company had acquired approximately 99.3 % of the total outstanding shares of GKCE.

The base purchase price for the Acquisition, including acquisition of the minority shares was approximately $ 2,000,000 .

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All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic and the extent and duration of the future impact on the Company's business is highly uncertain and difficult to predict.

The COVID-19 pandemic has adversely impacted, and is likely to further adversely impact, nearly all aspects of the Company’s business and markets, including its employees, operations, contractors, customers, government and third party payors and others.

The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition will depend on future developments that are highly uncertain and difficult to predict.

The COVID-19 pandemic, the resulting recession in the United States and its follow-on effects have impacted and will likely continue to impact business activity across industries, including the Company’s.

During 2020, due to factors related to the COVID-19 pandemic such as delays in service at medical facilities and restrictions imposed by government agencies, and the Company’s customers in response to the spread of COVID-19, the Company experienced some delays in delivering certain Gamma Knife procedures and PBRT treatments.

Similarly, the Company’s ability to conduct commercial efforts with its customers have been and are likely to continue to be disrupted as customers have turned their focus to dealing with the impact of the COVID-19 pandemic on their operations and have restricted access to their sites in efforts to contain the spread of the virus.

The global nature of the pandemic has resulted in authorities implementing numerous measures designed to contain the virus, including travel bans and restrictions, border closures, quarantines, shelter-in-place orders, business limitations and shutdowns.

The impact of the COVID-19 pandemic on the global economy and capital markets is significant, and on June 8, 2020 the National Bureau of Economic Research announced that the United States was in an economic recession.

An extended economic recession in the United States or elsewhere could have a material adverse effect on the Company’s ability to conduct its business and to access financing, as well as on the Company’s results of operation, financial condition, liquidity and cash flows.

The prioritization of COVID-19 treatment and containment has resulted in delays in decisions by the Company’s customers and their patients, obstacles to the Company’s ability to market and deliver its services, declines in treatment volumes and adverse impacts to revenues for both Gamma Knife procedures and PBRT treatments.

As a result of the pandemic and related governmental actions, Gamma Knife procedures and PBRT treatments, which currently make up all of the Company’s revenue, may be impacted differently at each of the Company’s various locations and may take longer to recover than other areas of the economy, which may have a material impact on the Company's business.

The Company’s Gamma Knife operations in Latin America have experienced a decline in procedures due to the COVID-19 pandemic.

Our Gamma Knife and PBRT operations in the United States have also experienced negative impacts from the COVID-19 pandemic.

As the COVID-19 pandemic continues to develop, additional impacts may arise that we are not aware of currently.

Based on the guidance provided in accordance with ASC 280 Segment Reporting (“ASC 280”), the Company analyzed its subsidiaries which are all in the business of leasing radiosurgery and radiation therapy equipment to healthcare providers, and concluded there are two reportable segments, domestic and foreign.

The Company provides Gamma Knife and PBRT equipment to fourteen hospitals in the United States and owns and operates two single-unit facilities in Lima, Peru and Guayaquil, Ecuador as of March 31, 2021.

The Company determined two reportable segments existed due to similarities in economics of business operations and geographic location.

The operating results of the two reportable segments are reviewed by the Company’s CEO and President, Chief Operating and Financial Officer, who are also deemed the Company’s Chief Operating Decision Makers (“CODMs”).

As of March 31, 2020, the Company had one reportable segment.

Following the Company's acquisition of GKCE in June 2020, the Company concluded it had two reportable segments.

The revenues and profit or loss, allocations for the Company's two reportable segments as of March 31, 2021 consists of the following:

Domestic $ 3,699,000

Foreign 665,000

Total $ 4,364,000

Profit or (loss)

Domestic $ 73,000

Foreign ( 44,000 )

Total $ 29,000

Accounting Pronouncements Issued and Adopted

In February 2018, the FASB issued ASU No.

2018-03 Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2018-03”), which clarifies certain aspects of ASU 2016-1.

equity securities without a readily determinable fair value – discontinuation, equity securities without a readily determinable fair value – adjustments, forward contracts and purchased options, presentation requirements for certain fair value option liabilities, fair value option liabilities denominated in a foreign currency, and transition guidance for equity securities without a readily determinable fair value.

In August 2018, the FASB issued ASU No.

2018-13 Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements to Fair Value Measurement (“ASU 2018-13”), which amended the effective date and other certain measurement aspects of ASU 2018-03.

The new guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019.

The Company adopted ASU 2018-03 and ASU 2018-13 on January 1, 2020.

There was no significant impact on its condensed consolidated financial statements and related disclosures.

Accounting Pronouncements Issued and Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740):

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The new guidance is effective for fiscal years and interim periods beginning after December 15, 2020.

The Company is currently evaluating ASU 2019-12 to determine the impact it may have on its consolidated financial statements.

The Company adopted ASU 2019-12 on January 1, 2021.

There was no significant impact on its condensed consolidated financial statements and related disclosures.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.

Depreciation for Gamma Knife units, Image Guided Radiation Therapy (“IGRT”) equipment, and other equipment is determined using the straight-line method over the estimated useful lives of the assets, which for medical and office equipment is generally 3 – 10 years, and after accounting for salvage value on the equipment where indicated.

Depreciation for Gamma Knife units and other equipment is determined using the straight-line method over the estimated useful lives of the assets, which for medical and office equipment is generally 3 – 10 years, and after accounting for salvage value on the equipment where indicated.

Salvage value is based on the estimated fair value of the equipment at the end of its useful life.

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The estimated useful life of the PBRT unit is consistent with the estimated economic life of 20 years.

The following table summarizes property and equipment as of September 30, 2020 and December 31, 2019:

September 30, December 31,

The following table summarizes property and equipment as of March 31, 2021 and December 31, 2020:

March 31, December 31,

Medical equipment and facilities $ 70,718,000 $ 75,657,000

Office equipment 394,000 330,000

Deposits and construction in progress 2,411,000 1,965,000

Deposits towards purchase of proton beam systems 2,250,000 2,250,000

Construction in progress 1,178,000 170,000

72,290,000 76,157,000

1 unchanged sentence

Net property and equipment $ 30,346,000 $ 30,418,000

As of September 30, 2020, approximately $ 3,343,000 of the net property and equipment balance is outside of the United States.

As of September 30, 2020, the Company has two idle Gamma Knife units with a cumulative net book value of $ 943,000 .

There are currently no commitments to place into service or trade in these units during 2020.

As of March 31, 2021, approximately $ 3,064,000 of the net property and equipment balance is outside of the United States.

Long-Term Debt Financing

Long-term debt consists of seven notes with three financing companies collateralized by the Gamma Knife units, the individual customer contracts, and related accounts receivable at September 30, 2020.

Long-term debt consisted of five notes with three financing companies collateralized by the Gamma Knife units, the individual customer contracts, and related accounts receivable at March 31, 2021.

The Company’s loan with DFC for the Acquisition was obtained through the Company’s wholly-owned subsidiary, HoldCo and is guaranteed by GKF.

As of September 30, 2020, long-term debt on the Condensed Consolidated Balance Sheets was $ 4,937,000 .

See disclosure of future payments below under the heading “Commitments”.

As of March 31, 2021, long-term debt on the Condensed Consolidated Balance Sheets, before the refinancing, was $ 4,321,000 .

On April 9, 2021, the Company refinanced its existing debt and finance lease obligations, with the exception of its loan with DFC.

A total of $ 8,281,000 of the Company’s finance leases were refinanced by long-term debt.

Total long-term debt following this transaction was $ 12,602,000 .

The classification on the Condensed Consolidated Balance Sheets as of March 31, 2021 reflect the terms of the refinancing.

See further details on the refinancing under Note 10 - Subsequent Event.

Finance Leases

Finance lease obligations consist of seven leases with two financing companies, collateralized by Gamma Knife units and PBRT equipment, the individual customer contracts, and related accounts receivable at September 30, 2020.

As of September 30, 2020, obligations under finance leases on the Condensed Consolidated Balance Sheets were $ 9,432,000 .

See disclosure of future payments below under the heading “Commitments”.

Finance lease obligations, before the refinancing, of $ 8,281,000 consisted of six leases with two financing companies, collateralized by Gamma Knife units and PBRT equipment, the individual customer contracts, and related accounts receivable at March 31, 2021.

On April 9, 2021, the Company's finance lease obligations were refinanced by long-term debt.

The classification on the Condensed Consolidated Balance Sheets as of March 31, 2021 reflect the terms of the refinancing.

See further details on the refinancing under Note 10 - Subsequent Event.

The Company determines if a contract is a lease at inception.

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Leases that commenced prior to ASC 842 adoption date were classified as operating leases under historical guidance.

As the Company has elected the package of practical expedients allowing to not reassess lease classification, these leases are classified as operating leases under ASC 842 as well.

As the Company has elected the package of practical expedients allowing it to not reassess lease classification, these leases are classified as operating leases under ASC 842 as well.

All of the Company’s lessor arrangements entered into after ASC 842 adoption are also classified as operating leases.

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These leases have remaining lease terms between 2 and 3 years, some of which include options to renew or extend the lease.

As of September 30, 2020, operating ROU assets and liabilities were $ 959,000 .

During the nine-month period ended September 30, 2020, the Company elected to not renew its lease for a satellite office in Fairfield, California.

The Company previously included the renewal term in its assessment of the lease term for the ROU asset and liability.

The Company accounted for this change as a lease reassessment under ASC 842.

At the reassessment date, the remaining lease balance was not material to the Company's condensed consolidated balance sheets and the Company wrote off the related ROU assets and liabilities of $ 67,000 .

During the nine-month period ended September 30, 2020, the Company agreed to a rent increase for its clinic space for its stand-alone facility in Lima, Peru.

The rent increase was effective as of January 1, 2020 and the Company increased the related ROU assets and liabilities by $ 135,000 .

The following table summarizes maturities of lessee operating lease liabilities as of September 30, 2020:

As of March 31, 2021, operating ROU assets and liabilities were $ 812,000 .

The following table summarizes maturities of lessee operating lease liabilities as of March 31, 2021:

Year ending December 31, Operating Leases

2020 (excluding the nine-months ended September 30, 2020) $ 86,000

2021 (excluding the three-months ended March 31, 2021) $ 261,000

Total lease payments 870,000

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Per share information has been computed based on the weighted average number of common shares and dilutive common share equivalents outstanding.

Based on the guidance provided in accordance with ASC 260 Earnings Per Share (“ASC 260”), potentially dilutive common stock equivalents, such as diluted stock options, are not considered when their inclusion in reporting earnings per share would be dilutive to reported losses incurred per share.

Because the Company reported a loss for the three and nine-month periods ended September 30, 2020, the potentially dilutive effects of approximately 10,000 , of the Company’s stock options and 31,000 of the Company's unvested restricted stock awards were not considered for the reporting periods.

The computation for the three and nine-month periods ended September 30, 2019 excluded approximately 513,000 , of the Company's stock options because the exercise price of the options was higher than the average market price during those periods.

During the three-month period ended June 30, 2020, the Company appointed Raymond C.

Stachowiak as Interim President and Chief Executive Officer (“Interim CEO”).

As part of his Offer Letter, the Interim CEO was granted 50,000 restricted stock awards that vested in full on August 3, 2020.

In addition, since the Interim CEO continued to serve the Company after August 3, 2020, he was granted additional restricted stock awards totaling 10,000 common shares, which vest in full at the end of each 30-day period after August 3, 2020.

On October 1, 2020 the Interim CEO was appointed the Chief Executive Officer (“CEO”).

For the three and nine-month periods ended September 30, 2020, 60,000 restricted stock awards were issued to the CEO and fully vested.

During the three-month period ended September 30, 2020, Ernest R.

Bates, Senior Vice President, Sales and Business Development, International Operations, was awarded 10,000 restricted stock awards, which will vest on December 31, 2020.

The computation for the three-month periods ended March 31, 2021 and 2020 excluded approximately 370,000 and 430,000 , respectively, of the Company's stock options because the exercise price of the options was higher than the average market price during those periods.

On March 31, 2020, the Company’s Award Agreements (as defined below) expired and the unvested performance share awards were returned to the Company’s stock incentive plan - see Note 7 for further discussion.

Based on the guidance provided in accordance with ASC 260, the weighted average common shares for basic earnings per share, for the three and nine-month periods ended September 30, 2019, excluded the weighted average impact of the unvested performance share awards.

Based on the guidance provided in accordance with ASC 260 Earnings Per Share (“ASC 260”), the weighted average common shares for basic earnings per share, for the three-month period ended March 31, 2020, excluded the weighted average impact of the unvested performance share awards.

These awards were legally outstanding but not deemed participating securities and therefore were excluded from the calculation of basic earnings per share.

The unvested shares were also excluded from the denominator for diluted earnings per share because they were considered contingent shares not deemed probable as of September 30, 2019.

The following table sets forth the computation of basic and diluted earnings per share for the three and nine-month periods ended September 30, 2020 and 2019:

Three Months ended September 30, Nine Months ended September 30,

2020 2019 2020 2019

Net (loss) income attributable to American Shared Hospital Services $ ( 209,000 ) $ 165,000 $ ( 827,000 ) $ 466,000

The unvested shares were also excluded from the denominator for diluted earnings per share because they were considered contingent shares not deemed probable as of March 31, 2020.

The following table sets forth the computation of basic and diluted earnings per share for the three-month periods ended March 31, 2021 and 2020:

Three Months ended March 31,

Net income (loss) attributable to American Shared Hospital Services $ 29,000 $ ( 135,000 )

Weighted average common shares for basic earnings per share 6,254,000 6,126,000

1 unchanged sentence

Weighted average common shares for diluted earnings per share 6,322,000 6,153,000

Basic (loss) earnings per share $ ( 0.03 ) $ 0.03 $ ( 0.14 ) $ 0.08

Diluted (loss) earnings per share $ ( 0.03 ) $ 0.03 $ ( 0.14 ) $ 0.08

Basic earnings (loss) per share $ 0.00 $ ( 0.02 )

Diluted earnings (loss) per share $ 0.00 $ ( 0.02 )

Stock-based Compensation

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The estimated fair value of the Company’s options is expensed over the period during which an employee is required to provide service in exchange for the award (requisite service period), usually the vesting period.

Accordingly, stock-based compensation cost before income tax effect for the Company’s options and restricted stock awards in the amount of $ 80,000 and $ 189,000 is reflected in net loss for the three and nine-month periods ended September 30, 2020 compared to $ 62,000 and $ 170,000 in the same periods of the prior year, respectively.

At September 30, 2020, there was approximately $ 16,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan, excluding unrecognized compensation cost associated with the performance share awards, discussed below.

Accordingly, stock-based compensation cost before income tax effect for the Company’s options and restricted stock awards in the amount of $ 107,000 and $ 56,000 is reflected in net income (loss) for the three-month periods ended March 31, 2021 and 2020, respectively.

At March 31, 2021, there was approximately $ 10,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan.

This cost is expected to be recognized over a period of approximately three years .

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The unrecognized stock-based compensation expense for these awards was approximately $ 434,000 and the unvested awards of approximately 129,000 shares were returned to the Plan as of March 31, 2020.

The following table summarizes stock option activity for the nine-month periods ended September 30, 2020 and 2019:

The following table summarizes stock option activity for the three-month periods ended March 31, 2021 and 2020:

Options Grant Date

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Outstanding at January 1, 2020 450,000 $ 2.78 2.44 $ 27,000

Granted 10,000 $ 1.88 7.00 $ —

Forfeited ( 40,000 ) $ 2.58 — $ —

Outstanding at September 30, 2020 420,000 $ 2.78 1.86 $ —

Exercisable at September 30, 2020 403,000 $ 2.80 1.69 $ —

Outstanding at March 31, 2020 450,000 $ 2.78 2.20 $ —

Exercisable at March 31, 2020 425,000 $ 2.79 2.00 $ —

Outstanding at January 1, 2021 417,000 $ 2.79 1.61 $ 2,000

Granted 18,000 $ 2.91 7.00 $ —

Exercised ( 16,000 ) $ 2.59 — $ —

Forfeited ( 12,000 ) $ 3.05 — $ —

Outstanding at September 30, 2019 603,000 $ 2.86 2.09 $ 42,000

Exercisable at September 30, 2019 478,000 $ 2.86 1.97 $ —

Outstanding at March 31, 2021 417,000 $ 2.79 1.36 $ 19,000

Exercisable at March 31, 2021 407,000 $ 2.80 1.27 $ —

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.

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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, 2020 by applying the actual effective tax rates to income or (loss) reported within the condensed consolidated financial statements through those periods.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

Under ASC 740 Income Taxes , the effects of new legislation are recognized upon enactment.

Accordingly, the effects of the CARES Act were effective for the Company for the three-month reporting period ended March 31, 2020, and for subsequent reporting periods.

The CARES Act did not have a material impact on the Company's financial statements.

As a result, the Company has computed its provision for income taxes for the three-month periods ended March 31, 2021 and 2020 by applying the actual effective tax rates to income or (loss) reported within the condensed consolidated financial statements through those periods.

GKCE Acquisition

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The Company acquired GKCE for the continued expansion of its business internationally.

On June 12, 2020 (the “Closing Date”), the Company acquired approximately 98 % of the total outstanding shares of GKCE.

As of September 30, 2020, the Company acquired approximately 99.3 % of the total outstanding shares of GKCE and intends to acquire the remaining 0.7 % at a later date.

The fair value of the non-controlling interests (“NCI”) on the Closing Date was approximately $ 58,000 , which was consistent with the purchase price in the executed NCI agreements.

The total purchase consideration for 100 % of the outstanding shares of GKCE was $ 2,869,000 , including $ 2,000,000 of base purchase price, subject to certain price adjustments for current assets and liabilities and tax withholding.

The base purchase price of $ 2,000,000 was paid with $ 575,000 of cash and a $ 1,425,000 loan from the United States International Development Finance Corporation (“DFC”).

The DFC loan is denominated in U.S.

dollars, which is also the currency of Ecuador.

The price adjustments will be paid by the Company in the post-closing period with the adjustments related to the amount of working capital that GKCE had as of the Closing Date.

The first price adjustment for working capital as of the Closing Date was approximately $ 515,000 , which was paid by the Company in August 2020.

As of September 30, 2020, the Company owes the withholding taxes related to this payment totaling approximately $ 43,000 .

The Company estimates an additional contingent consideration of approximately $ 354,000 will be remitted to the seller based on the collection of Closing Date accounts receivable balances, net of related costs, during the three-month, six-month and twelve-month periods after the Closing Date.

The Company reviewed historical patient treatments, invoice, and collection data from GKCE to determine an appropriate estimate of the contingent consideration at the Closing Date.

The acquisition has been accounted for according to ASC 805 Business Combinations using the acquisition method.

Under the acquisition method of accounting, all assets acquired, including goodwill and other intangible assets, should be stated on the financial statements at fair value.

The Acquisition has been accounted for according to ASC 805 Business Combinations (“ASC 805”) using the acquisition method of accounting.

Under the acquisition method of accounting, all assets acquired, including goodwill and other intangible assets, should be stated at fair value at the time of acquisition.

The allocation of purchase price consideration is preliminary, pending the completion of the fair value of certain tangible, intangible assets, and residual goodwill.

During the measurement period, which can be no more than one year from the Closing Date, the Company expects to continue to obtain information to assist in determining the final fair value of assets acquired.

During the measurement period, which can be no more than one year from June 12, 2020 (the “Closing Date”), the Company expects to continue to obtain information to assist in determining the final fair value of assets acquired.

The assets acquired were recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company.

Thus, the provisional measurements of fair value discussed below are subject to change.

As of March 31, 2021, accounting for the Closing Date accounts receivable balances, allowance on the uncollected accounts receivable balances, and related liabilities, was not complete.

The accounting for these amounts will be complete following the twelve-month period after the Closing Date, per the terms of the Agreement.

The Company expects to finalize the valuation as soon as practicable, but no later than one year from the Closing Date.

While the Company believes its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired, and the resulting amount of goodwill.

The major classes of assets and liabilities to which the Company has preliminarily allocated the fair value of purchase price consideration were as follows:

June 12, 2020

Cash and cash equivalents $ 432,000

Accounts receivable 827,000

Prepaid expense and other 22,000

Building 404,000

Medical equipment 319,000

Purchased intangible assets 78,000

Goodwill 1,265,000

Total assets acquired $ 3,347,000

Accounts payable ( 193,000 )

Income taxes payable ( 136,000 )

Deferred income taxes ( 66,000 )

Employee compensation and benefits ( 83,000 )

Total liabilities assumed $ ( 478,000 )

Consideration allocated to assets acquired and liabilities assumed $ 2,869,000

First working capital payment $ ( 515,000 )

Estimated subsequent working capital payment ( 354,000 )

Base purchase consideration $ 2,000,000

The Company has allocated the purchase price of GKCE to the tangible assets, liabilities, and intangible asset acquired, based on their estimated fair values.

Goodwill of $ 1,265,000 represents the excess of the purchase price consideration over the fair value of the identifiable tangible and intangible assets assumed of $ 801,000 .

The Company believes the amount of goodwill resulting from the acquisition is primarily attributable to expected synergies from an assembled and trained workforce and enhanced opportunities for growth and innovation.

The goodwill resulting from the acquisition is not tax deductible.

The preliminary value of the acquired tangible assets acquired are as follows:

Fair Value Useful Life (in Years)

Building $ 404,000 20

Medical equipment 302,000 2

Other fixed assets 17,000 2

Total tangible assets $ 723,000

The Company also acquired intangible assets with a fair value of $ 78,000 .

The intangible asset identified was GKCE's trade name and the Company assigned an indefinite useful life to the asset.

The Company incurred costs related to the acquisition of approximately $ 93,000 for the three-month period ended June 30, 2020 and $ 69,000 for the three-month period ended September 30, 2020.

All acquisition related costs were expensed as incurred and have been recorded in selling and administrative expense in the Company's condensed consolidated statement of operations.

The revenue and earnings of GKCE have been included in the Company’s condensed consolidated results since the Closing Date and are not material to the Company’s consolidated financial results.

Historical financial statements and pro forma results of the operations of GKCE as if the Acquisition occurred earlier than the Closing Date have not been presented, as the applicable significance thresholds are not exceeded by the Acquisition and the corresponding requirements to provide historical financial statements and corresponding pro forma financial information are not applicable to the Acquisition.

In addition, the Company believes that the financial impact of the Acquisition to the Company’s condensed consolidated financial statements is not material and such historical financial information and pro forma financial information would not be meaningful for investors and financial statement users.

After the Closing Date, the Company received additional information regarding the amounts recorded as accounts receivable as of June 12, 2020.

After reviewing the information obtained, the Company booked an additional $ 27,000 of accounts receivable as of December 31, 2020.

As a result, related liabilities were increased by $ 13,000 and the contingent consideration increased by $ 14,000 .

There was no impact to goodwill or net loss as of December 31, 2020.

Subsequent Event

On April 9, 2021 the Company entered into a five year $ 22.0 million credit agreement with Fifth Third Bank, N.A.

(the “Credit Agreement”).

The Credit Agreement includes three loan facilities.

The first facility is a $ 9.5 million term loan of which $ 6.8 million was used to refinance the domestic Gamma Knife debt and finance leases, and associated closing costs, $ 1.6 million was used to finance two Gamma Knife reloads in the first quarter of 2021, with the remaining $ 1.1 million available for future projects.

The second loan facility of $ 5.5 million was used to refinance the Company's PBRT finance leases, as well as to provide additional working capital.

The third loan facility provides for a $ 7.0 million revolving line of credit available for future projects and general corporate purposes.

The facilities carry a floating interest of LIBOR plus 3.0 % and are collateralized by a blanket lien on substantially all of the Company's assets.

The Credit Agreement contains customary covenants and representations, including without limitation, a minimum fixed charge coverage ratio of 1.25 and maximum funded debt to EBITDA ratio of 3.0 to 1.0 (tested on a trailing twelve-month basis at the end of each fiscal quarter), reporting obligations, limitations on dispositions, changes in ownership, mergers and acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and capital expenditures

As of March 31, 2021, the Company's short-term debt and finance lease obligations were $ 6,669,000 .

Following the completion of the Credit Agreement, these short-term obligations were refinanced and reduced to $ 782,000 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements