UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2022 or
| ☐ | 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 001-08789
American Shared Hospital Services
(Exact name of registrant as specified in its charter)
| California | 94-2918118 |
| (State or other jurisdiction of | (IRS Employer |
| 601 Montgomery Street | Suite 1112 | San Francisco, | California | 94111-2619 |
| (Address of principal executive offices) | (Zip code) | |||
(415) 788-5300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| American Shared Hospital Services Common Stock, No Par Value | AMS | NYSEAMER |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ | Non-Accelerated Filer ☒ | Smaller reporting company ☒ |
| Emerging Growth Company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 10, 2022, there were outstanding 6,112,000 shares of the registrant’s common stock.
Explanatory Note
The purpose of this Amendment No. 1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2022, filed with the Securities and Exchange Commission on August 15, 2022 (the “Original Filing”), is solely to correct signature dates on Exhibits 31.1, 31.2, and 32.
This Amendment is limited in scope to the items identified above. This Amendment does not reflect events occurring after the filing of the Original Filing and no revisions are being made to the Company’s financial statements or disclosures pursuant to this Amendment.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| ASSETS | June 30, 2022 | December 31, 2021 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 11,849,000 | $ | 8,145,000 | ||||
| Restricted cash | 118,000 | 118,000 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $ at June 30, 2022 and $ at December 31, 2021 | 3,363,000 | 4,211,000 | ||||||
| Other receivables | 743,000 | 613,000 | ||||||
| Prepaid maintenance | 347,000 | 1,174,000 | ||||||
| Prepaid expenses and other current assets | 420,000 | 826,000 | ||||||
| Total current assets | 16,840,000 | 15,087,000 | ||||||
| Property and equipment, net | 25,767,000 | 28,254,000 | ||||||
| Land | 19,000 | 19,000 | ||||||
| Goodwill | 1,265,000 | 1,265,000 | ||||||
| Right of use assets | 486,000 | 654,000 | ||||||
| Intangible asset | 78,000 | 78,000 | ||||||
| Other assets | 70,000 | 73,000 | ||||||
| Total assets | $ | 44,525,000 | $ | 45,430,000 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | June 30, 2022 | December 31, 2021 | ||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 145,000 | $ | 318,000 | ||||
| Employee compensation and benefits | 367,000 | 423,000 | ||||||
| Other accrued liabilities | 1,140,000 | 1,505,000 | ||||||
| Related party liabilities | 550,000 | 1,342,000 | ||||||
| Asset retirement obligations, related party (includes $ non-related party at December 31, 2021) | 300,000 | 757,000 | ||||||
| Income taxes payable | 96,000 | 96,000 | ||||||
| Current portion of lease liabilities | 391,000 | 369,000 | ||||||
| Current portion of long-term debt, net | 1,641,000 | 1,081,000 | ||||||
| Total current liabilities | 4,630,000 | 5,891,000 | ||||||
| Long-term lease liabilities, less current portion | 153,000 | 359,000 | ||||||
| Long-term debt, net, less current portion | 13,503,000 | 14,323,000 | ||||||
| Deferred revenue, less current portion | 105,000 | 140,000 | ||||||
| Deferred income taxes | 797,000 | 478,000 | ||||||
| Total liabilities | 19,188,000 | 21,191,000 | ||||||
| Shareholders' equity: | ||||||||
| Common stock, par value ( shares authorized; and shares issued and outstanding at June 30, 2022 and at December 31, 2021) | 10,763,000 | 10,758,000 | ||||||
| Additional paid-in capital | 7,603,000 | 7,444,000 | ||||||
| Retained earnings | 2,457,000 | 1,691,000 | ||||||
| Total equity-American Shared Hospital Services | 20,823,000 | 19,893,000 | ||||||
| Non-controlling interests in subsidiaries | 4,514,000 | 4,346,000 | ||||||
| Total shareholders' equity | 25,337,000 | 24,239,000 | ||||||
| Total liabilities and shareholders' equity | $ | 44,525,000 | $ | 45,430,000 | ||||
See accompanying notes
AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues: | ||||||||||||||||
| Rental income from medical services | $ | 4,140,000 | $ | 3,716,000 | $ | 8,281,000 | $ | 7,415,000 | ||||||||
| Patient income | 894,000 | 760,000 | 1,600,000 | 1,425,000 | ||||||||||||
| 5,034,000 | 4,476,000 | 9,881,000 | 8,840,000 | |||||||||||||
| Costs of revenue: | ||||||||||||||||
| Maintenance and supplies | 462,000 | 431,000 | 902,000 | 855,000 | ||||||||||||
| Depreciation and amortization | 1,156,000 | 1,244,000 | 2,343,000 | 2,442,000 | ||||||||||||
| Other direct operating costs | 1,049,000 | 974,000 | 1,933,000 | 2,034,000 | ||||||||||||
| Other direct operating costs, related party | 279,000 | 220,000 | 548,000 | 468,000 | ||||||||||||
| 2,946,000 | 2,869,000 | 5,726,000 | 5,799,000 | |||||||||||||
| Gross margin | 2,088,000 | 1,607,000 | 4,155,000 | 3,041,000 | ||||||||||||
| Selling and administrative expense | 1,146,000 | 1,090,000 | 2,465,000 | 2,174,000 | ||||||||||||
| Interest expense | 149,000 | 165,000 | 297,000 | 425,000 | ||||||||||||
| Operating income | 793,000 | 352,000 | 1,393,000 | 442,000 | ||||||||||||
| (Loss) on extinguishment of debt | - | (401,000 | ) | - | (401,000 | ) | ||||||||||
| Interest and other (loss) income | (5,000 | ) | (2,000 | ) | (5,000 | ) | 1,000 | |||||||||
| Income (loss) before income taxes | 788,000 | (51,000 | ) | 1,388,000 | 42,000 | |||||||||||
| Income tax expense (benefit) | 248,000 | (24,000 | ) | 454,000 | (18,000 | ) | ||||||||||
| Net income (loss) | 540,000 | (27,000 | ) | 934,000 | 60,000 | |||||||||||
| Less: Net income attributable to non-controlling interest | (43,000 | ) | (60,000 | ) | (168,000 | ) | (118,000 | ) | ||||||||
| Net income (loss) attributable to American Shared Hospital Services | $ | 497,000 | $ | (87,000 | ) | $ | 766,000 | $ | (58,000 | ) | ||||||
| Net income (loss) per share: | ||||||||||||||||
| Income (loss) per common share - basic | $ | 0.08 | $ | (0.01 | ) | $ | 0.12 | $ | (0.01 | ) | ||||||
| Income (loss) per common share - diluted | $ | 0.08 | $ | (0.01 | ) | $ | 0.12 | $ | (0.01 | ) | ||||||
See accompanying notes
AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
| FOR THE THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2022 AND 2021 | ||||||||||||||||||||||||||||
| Common Shares | Common Stock | Additional Paid-in Capital | Retained Earnings | Sub-Total ASHS | Non-controlling Interests in 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 | |||||||||||||||||||||
| 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 | 62,000 | - | 96,000 | - | 96,000 | - | 96,000 | |||||||||||||||||||||
| Options exercised | 5,000 | 5,000 | - | 5,000 | - | 5,000 | ||||||||||||||||||||||
| Cash distributions to non-controlling interests | - | - | - | - | - | (204,000 | ) | (204,000 | ) | |||||||||||||||||||
| Net (loss) income | - | - | - | (87,000 | ) | (87,000 | ) | 60,000 | (27,000 | ) | ||||||||||||||||||
| Balances at June 30, 2021 | 5,868,000 | $ | 10,758,000 | $ | 7,227,000 | $ | 1,439,000 | $ | 19,424,000 | $ | 4,290,000 | $ | 23,714,000 | |||||||||||||||
| Balances at January 1, 2022 | 6,049,000 | $ | 10,758,000 | $ | 7,444,000 | $ | 1,691,000 | $ | 19,893,000 | $ | 4,346,000 | $ | 24,239,000 | |||||||||||||||
| Stock-based compensation expense | 30,000 | - | 87,000 | - | 87,000 | - | 87,000 | |||||||||||||||||||||
| Net income | - | - | - | 269,000 | 269,000 | 125,000 | 394,000 | |||||||||||||||||||||
| Balances at March 31, 2022 | 6,079,000 | 10,758,000 | 7,531,000 | 1,960,000 | 20,249,000 | 4,471,000 | 24,720,000 | |||||||||||||||||||||
| Stock-based compensation expense | 31,000 | - | 72,000 | - | 72,000 | - | 72,000 | |||||||||||||||||||||
| Options exercised | 2,000 | 5,000 | - | - | 5,000 | - | 5,000 | |||||||||||||||||||||
| Net income | - | - | - | 497,000 | 497,000 | 43,000 | 540,000 | |||||||||||||||||||||
| Balances at June 30, 2022 | 6,112,000 | $ | 10,763,000 | $ | 7,603,000 | $ | 2,457,000 | $ | 20,823,000 | $ | 4,514,000 | $ | 25,337,000 | |||||||||||||||
See accompanying notes
AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 934,000 | $ | 60,000 | ||||
| Adjustments to reconcile net income to net cash from operating activities: | ||||||||
| Depreciation, amortization, and other | 2,375,000 | 2,509,000 | ||||||
| Amortization of debt issuance costs | 37,000 | 14,000 | ||||||
| Loss on extinguishment of debt | - | 401,000 | ||||||
| Non cash lease expense | 168,000 | 149,000 | ||||||
| Deferred income taxes | 319,000 | (64,000 | ) | |||||
| Stock-based compensation expense | 159,000 | 203,000 | ||||||
| Interest expense associated with lease liabilities | 18,000 | 22,000 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | 718,000 | 335,000 | ||||||
| Prepaid expenses and other assets | 1,261,000 | 1,086,000 | ||||||
| Asset retirement obligations, related party | (457,000 | ) | (562,000 | ) | ||||
| Related party liabilities | (792,000 | ) | 670,000 | |||||
| Accounts payable, accrued liabilities, and deferred revenue | (446,000 | ) | (573,000 | ) | ||||
| Income taxes | - | (252,000 | ) | |||||
| Lease liabilities | (202,000 | ) | (171,000 | ) | ||||
| Net cash provided by operating activities | 4,092,000 | 3,827,000 | ||||||
| Investing activities: | ||||||||
| Payment for purchase of property and equipment | (96,000 | ) | (229,000 | ) | ||||
| Net cash used in investing activities | (96,000 | ) | (229,000 | ) | ||||
| Financing activities: | ||||||||
| Principal payments on long-term debt | (297,000 | ) | (3,254,000 | ) | ||||
| Principal payments on finance leases | - | (8,919,000 | ) | |||||
| Principal payments on short-term financing | - | (294,000 | ) | |||||
| Distributions to non-controlling interests | - | (204,000 | ) | |||||
| Proceeds from long-term debt financing, net of property and equipment acquired | - | 13,897,000 | ||||||
| Prepayment penalties | - | (401,000 | ) | |||||
| Debt issuance costs long-term debt | - | (316,000 | ) | |||||
| Proceeds from options exercised | 5,000 | 5,000 | ||||||
| Net cash used in financing activities | (292,000 | ) | 514,000 | |||||
| Net change in cash, cash equivalents, and restricted cash | 3,704,000 | 4,112,000 | ||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 8,263,000 | 4,325,000 | ||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 11,967,000 | $ | 8,437,000 | ||||
| Supplemental cash flow disclosure | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 260,000 | $ | 425,000 | ||||
| Income taxes paid | $ | 156,000 | $ | 557,000 | ||||
| Schedule of non-cash investing and financing activities | ||||||||
| Acquisition of equipment with long-term debt financing | $ | - | $ | 1,103,000 | ||||
| Detail of cash, cash equivalents and restricted cash at end of period | ||||||||
| Cash and cash equivalents | $ | 11,849,000 | $ | 8,319,000 | ||||
| Restricted cash | 118,000 | 118,000 | ||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 11,967,000 | $ | 8,437,000 | ||||
See accompanying notes
AMERICAN SHARED HOSPITAL SERVICES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. 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 June 30, 2022, the results of its operations for the three and six-month periods ended June 30, 2022 and 2021, and the cash flows for the three and six-month periods ended June 30, 2022 and 2021. The results of operations for the three and six-months ended June 30, 2022 are not necessarily indicative of results on an annualized basis. Consolidated balance sheet amounts as of December 31, 2021 have been derived from audited consolidated financial statements.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021 included in American Shared Hospital Services’ Annual Report on Form 10-K filed with the Securities and Exchange Commission.
These condensed consolidated financial statements include the accounts of American Shared Hospital Services (“ASHS”) and its subsidiaries (the “Company”) as follows: ASHS wholly-owns the subsidiaries American Shared Radiosurgery Services (“ASRS”), PBRT Orlando, LLC (“Orlando”), OR21, Inc., and MedLeader.com, Inc. (“MedLeader”); ASHS is the majority owner of Long Beach Equipment, LLC (“LBE”); ASRS is the majority-owner of GK Financing, LLC (“GKF”) which wholly-owns the subsidiary Instituto de Gamma Knife del Pacifico S.A.C. (“GKPeru”) and HoldCo GKC S.A. (“HoldCo”). HoldCo wholly owns the subsidiary Gamma Knife Center Ecuador S.A. (“GKCE”). GKF is the majority owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”).
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 June 30, 2022, GKF provides Gamma Knife units to twelve medical centers in the United States in the states of California, Florida, Illinois, Indiana, Mississippi, Nebraska, New Mexico, New York, Ohio, Oregon, and Texas. GKF also owns and operates two 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 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. LBE is not expected to generate revenue within the next two years.
On April 27, 2022, the Company signed a Joint Venture agreement (the “Agreement”) with the principal owners of Guadalupe Amor Y Bien (“Guadalupe”) to establish a Mexican company (“Newco”) to treat public and private cancer patients. The Company and Guadalupe will hold 85% and 15% ownership interests, respectively, in Newco. Under the Agreement, the Company will be responsible for providing a linear accelerator upgrade to an Elekta Versa HD, and Guadalupe will be accountable for all site modification costs.
The Company continues to develop its design and business model for The Operating Room for the 21st CenturySM through its 50% owned OR21, LLC (“OR21 LLC”). The remaining 50% is owned by an architectural design company. OR21 LLC is not expected to generate significant revenue for at least the next two years.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Impact of the COVID-19 pandemic - In 2021, following the dissemination of the vaccine for the COVID-19 virus in the United States, there was a scale back of the safety measures put into place throughout 2020. Some of the Company’s customers still experienced some delays and restrictions in providing service, but not to the same degree that occurred during 2020. Procedure volumes for the Company’s domestic Gamma Knife business for the year ended December 31, 2021, began to rebound to pre-pandemic levels. The Company’s PBRT business was impacted by COVID-19, and other factors, during 2021 as treatment volumes continued to lag from pre-pandemic levels. The Company’s business has been impacted differently at each of the Company’s various locations as a result of the COVID-19 pandemic and related governmental actions. However, as the COVID-19 pandemic evolves and new strains of the virus develop, additional impacts may arise which may have a material impact on the Company’s business.
For the three and six-month periods ended June 30, 2022, Gamma Knife volumes continued to rebound to pre-pandemic levels. Excluding the two customer contracts that expired in the first and fourth quarters of 2021, procedure volumes decreased 6% and 2% for the three and six-month periods ended June 30, 2022 compared to the same periods in the prior year, respectively. This decrease was due to normal, cyclical fluctuations and the Company does not anticipate a significant impact on domestic Gamma Knife volumes from the COVID-19 pandemic going forward. The Company’s PBRT business was impacted by COVID-19, and other factors, during 2021 as treatment volumes continued to lag from pre-pandemic levels. However, for the three and six-month periods ended June 30, 2022, the Company’s PBRT site also returned to pre-pandemic levels. The Company’s stand-alone facilities in Peru and Ecuador have also begun to return to pre-pandemic levels for the three and six-month periods ended June 30, 2022 and the Company expects this trend to continue through 2022.
Accounting pronouncements issued and not yet adopted - In January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) (2021-01 Reference Rate Reform (Topic 848) (“ASU 2021-01”) which provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2021-01 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2021-01 is effective any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications. The Company is currently evaluating ASU 2021-01 to determine the impact it may have on its consolidated financial statements. See Note 3 - Long-term debt for additional discussion on transition from LIBOR.
Revenue recognition - The Company recognizes revenues under ASC 842 Leases (“ASC 842”) and ASC 606 Revenue from Contracts with Customers (“ASC 606”).
Rental income from medical services – The Company recognizes revenues under ASC 842 when services have been rendered and collectability is reasonably assured, on either a fee per use or revenue sharing basis. The terms of the contracts do not contain any guaranteed minimum payments. The Company’s contracts are typically for a ten-year term and are classified as either fee per use or retail. Retail arrangements are further classified as either turn-key or revenue sharing. Revenues from fee per use contracts is determined by each hospital’s contracted rate. Revenues are recognized at the time the procedures are performed, based on each hospital’s contracted rate and the number of procedures performed. Under revenue sharing arrangements, the Company receives a contracted percentage of the reimbursement received by the hospital. The amount the Company expects to receive is recorded as revenue and estimated based on historical experience. Revenue estimates are reviewed periodically and adjusted as necessary. Under turn-key arrangements, the Company receives payment from the hospital at an agreed upon percentage share of the hospital’s reimbursement from third party payors, and the Company is responsible for paying all the operating costs of the equipment. Operating costs are determined primarily based on historical treatment protocols and cost schedules with the hospital. The Company records an estimate of operating costs which are reviewed on a regular basis and adjusted as necessary to more accurately reflect the actual operating costs. For turn-key sites, the Company also shares a percentage of net operating profit. The Company records an estimate of net operating profit based on estimated revenues, less estimated operating costs. The operating costs and estimated net operating profit are recorded as other direct operating costs in the condensed consolidated statements of operations.
Patient income – The Company has stand-alone facilities in Lima, Peru and Guayaquil, Ecuador, where a contract exists between the Company’s facilities and the individual patient treated at the facility. Under ASC 606, the Company acts as the principal in this transaction and provides, at a point in time, a single performance obligation, in the form of a Gamma Knife treatment. Revenue related to a Gamma Knife treatment is recognized on a gross basis at the time when the patient receives treatment. There is no variable consideration present in the Company’s performance obligation and the transaction price is agreed upon per the stated contractual rate. GKPeru’s payment terms are typically prepaid for self-pay patients and insurance provider payments are paid net 30 days. GKCE’s patient population is primarily covered by a government payor and payments are paid approximately 30 to 60 days upon invoice. The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts.
Business segment information - 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 thirteen hospitals in the United States and owns and operates two single-unit facilities in Lima, Peru and Guayaquil, Ecuador as of June 30, 2022. 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.
The revenues and profit or loss, allocations for the Company's two reportable segments as of June 30, 2022 consists of the following:
| June 30, 2022 | June 30, 2021 | |||||||
| Revenues | ||||||||
| Domestic | $ | 8,281,000 | $ | 7,415,000 | ||||
| Foreign | 1,600,000 | 1,425,000 | ||||||
| Total | $ | 9,881,000 | $ | 8,840,000 | ||||
| Net income (loss) attributable to American Shared Hospital Services | ||||||||
| Domestic | $ | 809,000 | $ | (35,000 | ) | |||
| Foreign | (43,000 | ) | (23,000 | ) | ||||
| Total | $ | 766,000 | $ | (58,000 | ) | |||
Reclassification - Certain comparative balances as of and for the three and six-month periods ended June 30, 2021 and the year ended December 31, 2021 have been reclassified to make them consistent with the current year presentation.
Note 2. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. 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. As of April 1, 2021, the Company reduced its estimate for salvage value for nine of its Gamma Knife units. The net effect of this change in estimate for the three and six-month periods ended June 30, 2022, was a decrease in net income of approximately $114,000 or $0.02 per diluted share and $228,000 or $0.04 per diluted share, respectively. The net effect of this change in estimate for the three and six-month periods ended June 30, 2021, was a decrease in net income of approximately $114,000 or $0.02 per diluted share. Salvage value is based on the estimated fair value of the equipment at the end of its useful life. This change in estimate will also impact future periods. The Company determines salvage value based on the estimated fair value of the equipment at the end of its useful life.
Depreciation for PBRT equipment is determined using the modified units of production method, which is a function of both time and usage of the equipment. This depreciation method allocates costs considering the projected volume of usage through the useful life of the PBRT unit, which has been estimated at 20 years. 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 June 30, 2022 and December 31, 2021:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Medical equipment and facilities | $ | 73,445,000 | $ | 73,388,000 | ||||
| Office equipment | 442,000 | 472,000 | ||||||
| Construction in progress | 90,000 | 91,000 | ||||||
| 73,977,000 | 73,951,000 | |||||||
| Accumulated depreciation | (48,210,000 | ) | (45,697,000 | ) | ||||
| Net property and equipment | $ | 25,767,000 | $ | 28,254,000 | ||||
As of June 30, 2022, approximately $2,448,000 of the net property and equipment balance is outside of the United States.
Note 3. Long-Term Debt Financing
On April 9, 2021 the Company along with certain of its domestic subsidiaries (collectively, the “Loan Parties”) entered into a year $22,000,000 credit agreement with Fifth Third Bank, N.A. (the “Credit Agreement”). The Credit Agreement includes loan facilities. The first loan facility is a $9,500,000 term loan (the “Term Loan”) of which $6,774,000 was used to refinance the domestic Gamma Knife debt and finance leases, and associated closing costs, $1,665,000 was used to finance two Gamma Knife reloads and to pay for the unload costs for two customer contracts in the second quarter of 2021, with the remaining $1,061,000 available for future projects. The second loan facility of $5,500,000 delayed draw term loan (the “DDTL”) of which $5,026,000 was used to refinance the Company's PBRT finance leases and associated closing costs as well as to provide additional working capital. The third loan facility provides for a $7,000,000 revolving line of credit (the “Revolving Line”) available for future projects and general corporate purposes. The facilities have a -year maturity and carry a floating interest of LIBOR plus 3.0% and are secured by a lien on substantially all of the assets of the Loan Parties and guaranteed by American Shared Hospital Services. The long-term debt on the condensed consolidated balance sheets related to the Term Loan and DDTL was $14,250,000 and $14,437,000 as of June 30, 2022 and December 31, 2021, respectively.
As of December 31, 2021, LIBOR will no longer be used to price new loans, but 1-month, 3-month, 6-month and 12-month maturities will continue to be published through 2023. At that time, the Company will work with Fifth Third Bank to determine an alternative base rate. The Revolving Line is charged an unused line fee of 0.25% per annum. The Term Loan and DDTL have interest and principal payments due quarterly. Principal amortization on an annual basis for the Term Loan and DDTL equates to 48% of the original principal loan commitments in years one through five and an end of term payment of the remaining principal balance.
The loan entered into with United States International Development Finance Corporation (“DFC”) in connection with the acquisition of GKCE in June 2020 (the “DFC Loan”) was obtained through the Company’s wholly-owned subsidiary, HoldCo and is guaranteed by GKF. The DFC Loan is secured by a lien on GKCE’s assets. The amount outstanding under the DFC Loan is payable in 29 quarterly installments with a fixed interest rate of 3.67%. The Company’s loan with DFC also contains customary covenants and representations which the Company is in compliance with as of June 30, 2022. The long-term debt on the condensed consolidated balance sheets related to the DFC loan was $1,151,000 and $1,261,000 as of June 30, 2022 and December 31, 2021, respectively.
As of June 30, 2022, long-term debt on the condensed consolidated balance sheets was $15,144,000. The following are contractual maturities of long-term debt as of June 30, 2022 excluding deferred issuance costs of $257,000:
| Year ending December 31, | Principal | |||
| 2022 (excluding the six-months ended June 30, 2022) | $ | 861,000 | ||
| 2023 | 1,719,000 | |||
| 2024 | 2,094,000 | |||
| 2025 | 2,469,000 | |||
| 2026 | 8,094,000 | |||
| Thereafter | 164,000 | |||
| $ | 15,401,000 | |||
Note 4. Other Accrued Liabilities
Other accrued liabilities consist of the following as of June 30, 2022 and December 31, 2021:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Equipment maintenance and upgrades | $ | 6,000 | $ | 367,000 | ||||
| Insurance | 105,000 | 340,000 | ||||||
| Professional services | 194,000 | 90,000 | ||||||
| Operating costs | 552,000 | 397,000 | ||||||
| Other | 283,000 | 311,000 | ||||||
| Total other accrued liabilities | $ | 1,140,000 | $ | 1,505,000 | ||||
Note 5. Leases
The Company determines if a contract is a lease at inception. Under ASC 842, the Company is a lessor of equipment to various customers. 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 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. Some of these lease terms have an option to extend the lease after the initial term, but do not contain the option to terminate early or purchase the asset at the end of the term.
The Company’s Gamma Knife and PBRT contracts with hospitals are classified as operating leases under ASC 842. The related equipment is included in medical equipment and facilities on the Company’s condensed consolidated balance sheets. As all income from the Company’s lessor arrangements is solely based on procedure volume, all income is considered variable payments not dependent on an index or a rate. As such, the Company does not measure future operating lease receivables.
On November 3, 2021, the Company entered into an agreement to sublease (the “Sublease”) its corporate office located at Two Embarcadero Center, Suite 410, San Francisco, California, where it leases approximately 3,253 square feet for $21,370 per month with a lease expiration date in August 2023. The Sublease is for $15,723 per month through the existing contract expiration date. The Company also entered into a lease (the “Lease”) agreement for new corporate office space at 601 Montgomery, Suite 1112, San Francisco, CA for approximately 900 square feet for $4,425 per month with a lease expiration date in November 2024. The Company assessed the Lease under ASC 842 and concluded the Lease should be classified as an operating lease. The Company recorded $151,000 right-of-use (“ROU”) asset, other current liabilities and lease liabilities on the condensed consolidated balance sheets related to the Lease as of December 1, 2021, the effective date of the Lease. The Company assessed the Sublease under ASC 842 and ASC 360 Property and Equipment (“ASC 360”) and concluded the ROU asset for the corporate offices at Two Embarcadero Center was impaired. The Company recorded an impairment loss on the Sublease of $77,000 as of December 1, 2021.
The Company’s lessee operating leases are accounted for as right-of-use (“ROU”) assets, other current liabilities, and lease liabilities on the condensed consolidated balance sheets. Operating lease ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company’s operating lease contracts do not provide an implicit rate for calculating the present value of future lease payments. The Company determined its incremental borrowing rate, to be in the range of approximately 4.0% and 6.0%, by using available market rates and expected lease terms. The operating lease ROU assets and liabilities also include any lease payments made and excludes lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company’s lessee operating lease agreements are for administrative office space and related equipment, and the agreement to lease clinic space for its stand-alone facility in Lima, Peru. These leases have remaining lease terms between 2 and 3 years, some of which include options to renew or extend the lease. As of June 30, 2022, operating ROU assets, net of impairment were $486,000, and lease liabilities were $544,000.
The following table summarizes maturities of lessee operating lease liabilities as of June 30, 2022:
| Year ending December 31, | Operating Leases | |||
| 2022 (excluding the six-months ended June 30, 2022) | $ | 205,000 | ||
| 2023 | 302,000 | |||
| 2024 | 58,000 | |||
| Total lease payments | 565,000 | |||
| Less imputed interest | (21,000 | ) | ||
| Total | $ | 544,000 | ||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Lease cost | ||||||||||||||||
| Operating lease cost, net of impairment | $ | 101,000 | $ | 86,000 | $ | 202,000 | $ | 171,000 | ||||||||
| Sublease income | (43,000 | ) | - | (86,000 | ) | - | ||||||||||
| Total lease cost | $ | 58,000 | $ | 86,000 | $ | 116,000 | $ | 171,000 | ||||||||
| Other information | ||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities - Operating leases | $ | 58,000 | $ | 86,000 | $ | 116,000 | $ | 171,000 | ||||||||
| Weighted-average remaining lease term - Operating leases in years | 1.52 | 2.24 | 1.52 | 2.24 | ||||||||||||
| Weighted-average discount rate - Operating leases | 5.75 | % | 6.15 | % | 5.75 | % | 6.15 | % | ||||||||
Note 6. Per Share Amounts
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 six-month periods ended June 30, 2021, the potentially dilutive effects of approximately 48,000 and 42,000, of the Company’s stock options and 21,000 and 21,000, respectively, of the Company's unvested restricted stock awards were not considered for the reporting periods. The computation for the three and six-month periods ended June 30, 2022 excluded approximately 41,000 and 41,000, respectively, of the Company’s stock options because the exercise price of the options was higher than the average market price during the period. The weighted average common shares outstanding for basic earnings per share for the three and six-month periods ended June 30, 2022 included approximately 124,000 and 138,000 of the Company's restricted stock awards that are deferred for issuance or were issued during the periods, respectively. The weighted average common shares outstanding for basic earnings per share for the three and six-month periods ended June 30, 2021 included approximately 1,000 and 10,000 of the Company's restricted stock awards that were issued during the periods, respectively.
The following table sets forth the computation of basic and diluted earnings per share for the three and six-month periods ended June 30, 2022 and 2021:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net income (loss) attributable to American Shared Hospital Services | $ | 497,000 | $ | (87,000 | ) | $ | 766,000 | $ | (58,000 | ) | ||||||
| Weighted average common shares for basic earnings (loss) per share | 6,203,000 | 5,802,000 | 6,187,000 | 5,801,000 | ||||||||||||
| Diluted effect of stock options and restricted stock awards | 78,000 | - | 79,000 | - | ||||||||||||
| Weighted average common shares for diluted earnings (loss) per share | 6,281,000 | 5,802,000 | 6,266,000 | 5,801,000 | ||||||||||||
| Basic earnings (loss) per share | $ | 0.08 | $ | (0.01 | ) | $ | 0.12 | $ | (0.01 | ) | ||||||
| Diluted earnings (loss) per share | $ | 0.08 | $ | (0.01 | ) | $ | 0.12 | $ | (0.01 | ) | ||||||
Note 7. Stock-based Compensation
In June 2021, the Company’s shareholders approved an amendment and restatement of the Company’s Incentive Compensation Plan (the “Plan”), that among other things, increased the number of shares of the Company’s common stock reserved for issuance under the Plan to 2,580,000 and extended the term of the Plan by five years to February 22, 2027. The Plan provides that the shares reserved under the Plan are available for issuance to officers of the Company, other key employees, non-employee directors, and advisors. No further grants or share issuances will be made under the previous plans.
Stock-based compensation expense associated with the Company’s stock options to employees is calculated using the Black-Scholes valuation model. The Company’s stock awards have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimates. The estimated fair value of the Company’s option grants is estimated using assumptions for expected life, volatility, dividend yield, and risk-free interest rate which are specific to each award. 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 $72,000 and $159,000 for the three and six-month periods ended June 30, 2022, respectively, and $96,000 and $203,000 in the same periods of the prior year, respectively, is reflected in selling and administrative expense in the condensed consolidated statements of operations. At June 30, 2022, 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 years.
The following table summarizes stock option activity for the six-month periods ended June 30, 2022 and 2021:
| Stock Options | Grant Date Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (in Years) | Intrinsic Value | |||||||||||||
| Outstanding at January 1, 2022 | 67,000 | $ | 2.72 | 3.33 | $ | - | ||||||||||
| Exercised | (2,000 | ) | $ | 2.70 | - | $ | - | |||||||||
| Forfeited | (7,000 | ) | $ | 2.58 | - | $ | - | |||||||||
| Outstanding at June 30, 2022 | 58,000 | $ | 2.74 | 3.29 | $ | 3,000 | ||||||||||
| Exercisable at June 30, 2022 | 50,000 | $ | 2.74 | 2.99 | $ | - | ||||||||||
| Outstanding at January 1, 2021 | 417,000 | $ | 2.79 | 1.61 | $ | 2,000 | ||||||||||
| Granted | 6,000 | $ | 2.92 | 7.00 | $ | - | ||||||||||
| Exercised | (22,000 | ) | $ | 2.65 | - | $ | - | |||||||||
| Forfeited | (7,000 | ) | $ | 2.51 | - | $ | - | |||||||||
| Outstanding at June 30, 2021 | 394,000 | $ | 2.80 | 1.16 | $ | 15,000 | ||||||||||
| Exercisable at June 30, 2021 | 383,000 | $ | 2.80 | 1.02 | $ | - | ||||||||||
Note 8. 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 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 six-month periods ended June 30, 2022 and 2021 by applying the actual effective tax rates to income or reported within the condensed consolidated financial statements through those periods.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This quarterly report to the Securities and Exchange Commission may be deemed to contain certain forward-looking statements with respect to the financial condition, results of operations and future plans of American Shared Hospital Services (including statements regarding the expected continued treatment growth of the Company’s MEVION S250 system, the expansion of the Company’s PBRT business, the timing and expansion of treatments by new Gamma Knife systems, the Company's expansion into new markets and the Company’s acquisitions and potential market segments for its services, which involve risks and uncertainties including, but not limited to, the risks of economic and market conditions, the risks of variability of financial results between quarters, the risks of the Gamma Knife and radiation therapy businesses, the risks of developing The Operating Room for the 21st Century program, the risks of changes to CMS reimbursement rates or reimbursement methodology, the risks of the timing, financing, and operations of the Company’s PBRT business, the risks of the COVID-19 pandemic and its effect on the Company’s business operations and financial condition, the risk of expanding within or into new markets, and the risk that the integration or continued operation of acquired businesses could adversely affect financial results and the risk that current and future acquisitions may negatively affect the Company's financial position. Further information on potential factors that could affect the financial condition, results of operations and future plans of American Shared Hospital Services is included in the filings of the Company with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and the definitive Proxy Statement for the Annual Meeting of Shareholders held on June 21, 2022.
Overview
American Shared Hospital Services is a leading provider of turnkey technology solutions for stereotactic radiosurgery and advanced radiation therapy equipment and services. The Company’s domestic Gamma Knife business operates by fee-per-use contracts or retail contracts where the Company shares in the revenue and operating costs of the equipment. The Company, through GKF, also owns and operates two single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador. These units economically function similar to the Company’s turn-key retail arrangements. The Company’s PBRT system at Orlando Health Cancer Institute (“Orlando Health”), is also considered a retail arrangement. The main drivers of the Company’s revenue are numbers of sites, procedure volume and reimbursement.
Impact of the COVID-19 Pandemic
In 2021, following the dissemination of the vaccine for the COVID-19 virus in the United States, there was a scale back of the safety measures put into place throughout 2020. Some of the Company’s customers still experienced some delays and restrictions in providing service, but not to the same degree that occurred during 2020. Procedure volumes for the Company’s domestic Gamma Knife business for the twelve-month period ended December 31, 2021, began to rebound to pre-pandemic levels. The Company’s PBRT business was impacted by COVID-19, and other factors, during 2021 as treatment volumes continued to lag from pre-pandemic levels. The Company’s business has been impacted differently at each of the Company’s various locations as a result of the COVID-19 pandemic and related governmental actions. However, as the COVID-19 pandemic evolves and new strains of the virus develop, additional impacts may arise which may have a material impact on the Company’s business.
For the three and six-month periods ended June 30, 2022, Gamma Knife volumes continued to rebound to pre-pandemic levels. Excluding the two customer contracts that expired in the first and fourth quarters of 2021, procedure volumes decreased 6% and 2% for the three and six-month periods ended June 30, 2022 compared to the same periods in the prior year, respectively. This decrease was due to normal, cyclical fluctuations and the Company does not anticipate a significant impact on domestic Gamma Knife volumes from the COVID-19 pandemic going forward. The Company’s PBRT business was impacted by COVID-19, and other factors, during 2021 as treatment volumes continued to lag from pre-pandemic levels. However, for the three and six-month periods ended June 30, 2022, the Company’s PBRT site also returned to pre-pandemic levels. The Company’s stand-alone facilities in Peru and Ecuador have also begun to return to pre-pandemic levels for the three and six-month periods ended June 30, 2022 and the Company expects this trend to continue through 2022.
Reimbursement
The Centers for Medicare and Medicaid (“CMS”) have established a 2022 delivery code reimbursement rate of approximately $7,943 ($7,773 in 2021) for a Medicare Gamma Knife treatment. The approximate CMS reimbursement rates for delivery of PBRT for a simple treatment without compensation for 2022 is $554 ($543 in 2021) and $1,321 ($1,298 in 2021) for simple with compensation, intermediate and complex treatments, respectively.
On September 18, 2020, CMS issued the final rule that would implement a new mandatory payment model for radiation oncology services: the RO APM. The RO APM, that was to be in effect for a five year period, has been delayed indefinitely. The RO APM significantly alters CMS’ payment methodology from a fee for service paradigm to a set reimbursement by cancer type methodology for radiation services provided within a 90 day episode of care. Under the RO APM, hospital based and free-standing radiation therapy providers are mandatorily required to participate in the model based on whether the radiation therapy provider is located within a randomly selected CBSA. CMS projects that providers treating approximately 30% of radiation oncology patients have been selected to participate in the RO APM. The remaining providers not included in the RO APM will continue to receive reimbursement based on a fee-for-service methodology. The RO APM includes but is not limited to PBRT and Gamma Knife services. Three of the Company's Gamma Knife centers are included in the RO APM. It is not anticipated that inclusion in the RO APM will have a significant impact on the Company's Gamma Knife revenues. The Company's PBRT center was not selected for inclusion in the RO APM. Medicare reimbursement in 2022 for the most commonly used PBRT delivery codes increased by approximately 1.8% and increased by approximately 2.2% for Gamma Knife.
Application of Critical Accounting Policies
The Company’s condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles and follow general practices within the industry in which it operates. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the condensed consolidated financial statements; accordingly, as this information changes, the condensed consolidated financial statements could reflect different estimates, assumptions and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported.
The most significant accounting policies followed by the Company are presented in Note 2 to the consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2021. These policies along with the disclosures presented in the other condensed consolidated financial statement notes and, in this discussion, and analysis, provide information on how significant assets and liabilities are valued in the condensed consolidated financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts, and the methods, assumptions and estimates underlying those amounts, management has identified revenue recognition and costs of sales for turn-key and revenue sharing arrangements, and the carrying value of property and equipment and useful lives, and as such the aforementioned could be most subject to revision as new information becomes available. The following are our critical accounting policies in which management’s estimates, assumptions and judgments most directly and materially affect the condensed consolidated financial statements:
Revenue Recognition
The Company recognizes revenues under ASC 842 and ASC 606. The Company had twelve domestic Gamma Knife units, two international Gamma Knife units, and one PBRT system, and thirteen domestic Gamma Knife units, two international Gamma Knife units, and one PBRT system in operation in the United States as of June 30, 2022 and 2021, respectively. Six of the Company’s twelve domestic Gamma Knife customers are under fee-per-use contracts, and six customers are under retail arrangements. The Company, through GKF, also owns and operates two single-unit, international Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador. These two units economically function similarly to the Company’s turn-key retail arrangements. The Company’s PBRT system at Orlando Health is also considered a retail arrangement.
Rental income from medical services – The Company recognizes revenues under ASC 842 when services have been rendered and collectability is reasonably assured, on either a fee per use or revenue sharing basis. The terms of the contracts do not contain any guaranteed minimum payments. The Company’s contracts are typically for a ten-year term and are classified as either fee per use or retail. Retail arrangements are further classified as either turn-key or revenue sharing. Revenues from fee per use contracts is determined by each hospital’s contracted rate. Revenues are recognized at the time the procedures are performed, based on each hospital’s contracted rate and the number of procedures performed. Under revenue sharing arrangements, the Company receives a contracted percentage of the reimbursement received by the hospital. The amount the Company expects to receive is recorded as revenue and estimated based on historical experience. Revenue estimates are reviewed periodically and adjusted as necessary. Under turn-key arrangements, the Company receives payment from the hospital at an agreed upon percentage share of the hospital’s reimbursement from third party payors, and the Company is responsible for paying all the operating costs of the equipment. Operating costs are determined primarily based on historical treatment protocols and cost schedules with the hospital. The Company records an estimate of operating costs which are reviewed on a regular basis and adjusted as necessary to more accurately reflect the actual operating costs. For turn-key sites, the Company also shares a percentage of net operating profit. The Company records an estimate of net operating profit based on estimated revenues, less estimated operating costs. The operating costs and estimated net operating profit are recorded as other direct operating costs in the condensed consolidated statement of operations. For the three and six-month periods ended June 30, 2022 the Company recognized revenues of approximately $4,140,000 and $8,281,000 compared to $3,716,000 and $7,415,000 for the same periods in the prior year, respectively, under ASC 842.
Patient income – The Company has stand-alone facilities in Lima, Peru and Guayaquil, Ecuador, where a contract exists between the Company’s facilities and the individual patient treated at the facility. Under ASC 606, the Company acts as the principal in this transaction and provides, at a point in time, a single performance obligation, in the form of a Gamma Knife treatment. Revenue related to a Gamma Knife treatment is recognized on a gross basis at the time when the patient receives treatment. There is no variable consideration present in the Company’s performance obligation and the transaction price is agreed upon per the stated contractual rate. GKPeru’s payment terms are typically prepaid for self-pay patients and insurance provider payments are paid net 30 days. GKCE’s patient population is primarily covered by a government payor and payments are paid approximately 30 to 60 days upon invoice. The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts. Accounts receivable earned by GKPeru were not significant as of June 30, 2022 and 2021. GKCE’s accounts receivable were $881,000 as of June 30, 2022 and not significant as of June 30, 2021. For the three and six-month periods ended June 30, 2022 the Company recognized revenues of approximately $894,000 and $1,600,000 compared to $760,000 and $1,425,000 for the same periods in the prior year, respectively, under ASC 606.
Salvage Value on Equipment
Salvage value is based on the estimated fair value of the equipment at the end of its useful life. The Company determines salvage value based on the estimated fair value of the equipment at the end of its useful life. There is no active resale market of Gamma Knife or PBRT equipment, but the Company believes its salvage value estimates were a reasonable assessment of the economic value of the equipment when the contract ends. There is no salvage value assigned to the two Gamma Knife units in Peru or Ecuador because these are Model 4(C) units. The Company has not assigned salvage value to its PBRT equipment.
As of April 1, 2021, the Company reduced its estimate for salvage value for nine of its domestic Gamma Knife Perfexion units. The net effect of this change in estimate for the three and six-month periods ended June 30, 2022, was a decrease in net income of approximately $114,000 or $0.02 per diluted share and $228,000 or $0.04 per diluted share, respectively. The net effect of this change in estimate for the three and six-month periods ended June 30, 2021, was a decrease in net income of approximately $114,000 or $0.02 per diluted share. This change in estimate will also impact future periods. See Note 2 - Property and Equipment to the condensed consolidated financial statements for further discussion on salvage value.
Second Quarter 2022 Results
Revenues increased by $558,000 and $1,041,000 to$5,034,000 and $9,881,000 for the three and six-month periods ended June 30, 2022 compared to $4,476,000 and $8,840,000 for the same periods in the prior year, respectively.
Revenues generated from the Company’s PBRT system increased by $759,000 and $1,267,000 to $2,308,000 and $4,347,000 for the three and six-month periods ended June 30, 2022 compared to $1,549,000 and $3,080,000 for the same periods in the prior year, respectively. The increase in PBRT revenues for the three and six-month periods ended June 30, 2022 was due to increased volumes and higher average reimbursement for the periods.
The number of PBRT fractions increased by 215 and 612 to 1,324 and 2,952 for the three and six-month periods ended June 30, 2022 compared to 1,109 and 2,340 for the same periods in the prior year, respectively. The increase in PBRT volume for the three and six-month periods ended June 30, 2022 was primarily due to the impact from the COVID-19 pandemic and down-time for repair of system components in the prior year.
Gamma Knife revenues decreased $201,000 and $285,000 to $2,726,000 and $5,534,000 for the three and six-month periods ended June 30, 2022 compared to $2,927,000 and $5,819,000 for the same periods in the prior year, respectively. For the three and six-month periods ended June 30, 2022, the decrease in Gamma Knife revenue was due to a decrease in procedures, offset by an increase in average reimbursement. The increase in average reimbursement was driven by an increase in the average rate at the Company’s retail sites caused by a favorable shift in payor mix to more commercial payors.
The number of Gamma Knife procedures decreased by 41 and 67 to 335 and 664 for the three and six-month periods ended June 30, 2022 compared to 376 and 731 for the same periods in the prior year, respectively. The decrease in Gamma Knife procedures for the three and six-month periods ended June 30, 2022 was partially due to the expiration of one contract in each of the first and fourth quarters of 2021. Excluding the two Gamma Knife contracts that expired, Gamma Knife procedures for existing customer sites decreased by 20 and 14 for the three and six-month periods ended June 30, 2022 compared to the same periods of the prior year, respectively. The decrease in Gamma Knife procedures for existing customer sites for the three and six-month periods ended June 30, 2022 was due to normal, cyclical fluctuations.
Total costs of revenue increased by $77,000 and decreased by $73,000 to $2,946,000 and $5,726,000 for the three and six-month periods ended June 30, 2022 compared to $2,869,000 and $5,799,000 for the same periods in the prior year, respectively.
Maintenance and supplies and other direct operating costs, related party, increased by $90,000 and $127,000 to $741,000 and $1,450,000 for the three and six-month periods ended June 30, 2022 compared to $651,000 and $1,323,000 for the same periods in the prior year, respectively. The increase in maintenance and supplies and other direct operating costs, related party, for the three and six-month periods ended June 30, 2022 was primarily due to a maintenance contract for one of the Company’s Gamma Knife Icon upgrades which commenced in the fourth quarter of 2021 and maintenance contracts for existing domestic customers which commenced in January 2022.
Depreciation and amortization decreased by $88,000 and $99,000 to $1,156,000 and $2,343,000 for the three and six-month periods ended June 30, 2022 compared to $1,244,000 and $2,442,000 for the same periods in the prior year, respectively. The decrease in depreciation and amortization for the three and six-month periods ended June 30, 2022 was due to the expiration of one contract in each of the first and fourth quarters of 2021. As of April 1, 2021, the Company reduced its estimate for salvage value for nine of its Gamma Knife units. The net effect of this change in estimate for the three and six-month periods ended June 30, 2022, was a decrease in net income of approximately $114,000 or $0.02 per diluted share and $228,000 or $0.04 per diluted share, respectively. The net effect of this change in estimate for the three and six-month periods ended June 30, 2021, was a decrease in net income of approximately $114,000 or $0.02 per diluted share. Salvage value is based on the estimated fair value of the equipment at the end of its useful life. This change in estimate will also impact future periods. The Company determines salvage value based on the estimated fair value of the equipment at the end of its useful life.
Other direct operating costs increased by $75,000 and decreased by $101,000 to $1,049,000 and $1,933,000 for the three and six-month periods ended June 30, 2022 compared to $974,000 and $2,034,000 for the same periods in the prior year, respectively. The increase for the three-month period ended June 30, 2022 was due to higher operating costs at the Company’s international sites driven by increased volumes. The decrease in other direct operating costs for the six-month period ended June 30, 2022 was primarily due to the expiration of one Gamma Knife contract in each of the first and fourth quarters of 2021.
Selling and administrative costs increased by $56,000 and $291,000 to $1,146,000 and $2,465,000 for the three and six-month periods ended June 30, 2022 compared to $1,090,000 and $2,174,000 for the same periods in the prior year, respectively. The increase for three and six-month periods ended June 30, 2022 was due to higher sales, legal and related fees associated with new business opportunities.
Interest expense decreased by $16,000 and $128,000 to $149,000 and $297,000 for the three and six-month periods ended June 30, 2022 compared to $165,000 and $425,000 for the same periods in the prior year, respectively. On April 9, 2021, the Company refinanced predominantly all of its existing debt and finance lease portfolio at a lower effective interest rate compared to the Company’s historic portfolio rate, reducing interest expense.
The Company recorded a loss on the extinguishment of debt of $401,000 for the three and six-month periods ended June 30, 2021. On April 9, 2021, the Company refinanced the majority of its existing debt and finance lease portfolio with a new lender. The prepayment penalties charged by the existing lenders of $401,000 was recorded as a loss on extinguishment during the three-month period ended June 30, 2021.
Income tax expense increased by $272,000 and $472,000 to $248,000 and $454,000 for the three and six-month periods ended June 30, 2022 compared to an income tax benefit of $24,000 and $18,000 for the same periods in the prior year, respectively. The increase in income tax expense for the three and six-month periods ended June 30, 2022 was due to higher earnings during the current period, return-to-provision adjustments arising from foreign tax returns filed during the current period, as well as permanent domestic tax differences expected to continue through year-end.
Net income attributable to non-controlling interest decreased by $17,000 and increased by $50,000 to net income of $43,000 and $168,000 for the three and six-month periods ended June 30, 2022 compared to $60,000 and $118,000 for the same periods in the prior year, respectively. Net income attributable to non-controlling interests represents net income earned by the 19% non-controlling interest in GKF, and net income of the non-controlling interests in various subsidiaries controlled by GKF. The decrease or increase in net income attributable to non-controlling interests reflects the relative profitability of GKF.
Net income increased by $584,000 and $824,000 to net income of $497,000, or $0.08 per diluted shared and net income of $766,000, or $0.12 per diluted share for the three and six-month periods ended June 30, 2022 compared to a net loss of $87,000, or $0.01 per diluted share and a net loss of $58,000 or $0.01 per diluted share for the same periods in the prior year. Net income increased for the three and six-month periods ended June 30, 2022 primarily due to increased revenues and the loss on extinguishment of debt recorded in the prior year.
Based on the guidance provided in accordance with ASC 280, the Company determined it has two reportable segments, domestic and international. See Note 1 - Basis of Presentation to the condensed consolidated financial statements for additional information. The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects activity for both segments and specifically addresses a segment when appropriate to the discussion.
Liquidity and Capital Resources
The Company’s primary liquidity needs are to fund capital expenditures as well as support working capital requirements. In general, the Company’s principal sources of liquidity are cash and cash equivalents on hand and a $7,000,000 revolving line of credit. As of June 30, 2022, the Company has not drawn on its line of credit. The Company had cash, cash equivalents and restricted cash of $11,967,000 at June 30, 2022 compared to $8,263,000 at December 31, 2021. The Company’s cash position increased by $3,704,000 due to cash from operating activities of $4,092,000 and cash from options exercised of $5,000, offset by payment for the purchase of property and equipment of $96,000 and payments on long-term debt of $297,000. The Company’s expected primary cash needs on both a short and long-term basis are for capital expenditures, business expansion, working capital, and other general corporate purposes. The Company has scheduled interest and principal payments under its debt obligations of approximately $2,235,000 during the next 12 months.
Working Capital
The Company had working capital at June 30, 2022 of $12,210,000 compared to $9,196,000 at December 31, 2021. The $3,014,000 increase in net working capital was primarily due an increase in cash and a decrease in current liabilities. The Company believes that its cash on hand, cash flow from operations, and other cash resources are adequate to meet its scheduled debt obligations and working capital requirements during the next 12 months. See additional discussion below related to commitments.
The Company, in the past, has secured financing for its Gamma Knife and radiation therapy units. The Company has secured financing for its projects from several lenders and anticipates that it will be able to secure financing on future projects from these or other lending sources, but there can be no assurance that financing will continue to be available on acceptable terms.
Long-Term Debt
Prior to April 2021, GKF generally financed its U.S. Gamma Knife units, upgrades and additions with loans or finance leases from various finance companies for typically 100% of the cost of each Gamma Knife, plus any sales tax, customs, and duties. On April 9, 2021, the Company and certain of its domestic subsidiaries entered into a five year $22,000,000 credit agreement with Fifth Third Bank, N.A., which refinanced its existing domestic Gamma Knife portfolio. The lease financing previously obtained by Orlando was also refinanced as long-term debt by the Credit Agreement. The Credit Agreement includes a $7,000,000 revolving line of credit that the Company has not drawn on as of June 30, 2022. The Credit Agreement is 48% amortized over a 58-month period with a balloon payment upon maturity and is secured by a lien on substantially all of the assets of the Company and certain of its domestic subsidiaries. The Company’s Gamma Knife unit in Ecuador is financed with DFC.
As of December 31, 2021, LIBOR will no longer be used to price new loans, but 1-month, 3-month, 6-month and 12-month maturities will continue to be published through 2023. At that time, the Company will work with Fifth Third Bank to determine an alternative base rate. The Revolving Line is charged an unused line fee of 0.25% per annum. The Term Loan and DDTL have interest and principal payments due quarterly. Principal amortization on an annual basis for the Term Loan and DDTL equates to 48% of the original principal loan commitments in years one through five and an end of term payment of the remaining principal balance. See Note 3 - Long Term Debt Financing to the condensed consolidated financial statements for additional information.
Commitments
On December 20, 2018, the Company signed Second Amendments to two System Build Agreements for the Company’s second and third Mevion PBRT units. The Company and Mevion have agreed to upgrade the second and third PBRT units for which the Company has purchase commitments. The Company is actively seeking sites for these units but, to date, has not entered into agreements with any party for either placement of a PBRT unit or the related financing. The Company projects that it will be required to commence delivery of the second and third PBRT units no later than 2023. In the event the Company is unable to enter into customer agreements within the requisite time frame or receive an extension from Mevion, the Company could forfeit its deposits. As of June 30, 2022, the Company had commitments, after deposits, to purchase two MEVION S250i PBRT systems for $34,000,000.
As of June 30, 2022, the Company had commitments to install four Leksell Gamma Knife Icon Systems (“Icon”) and four Gamma Plan workstations at existing customer sites, and purchase three Linear Accelerator (“LINAC”) systems. Two LINACS will be placed at existing customer sites and one LINAC system will be placed at the Company’s new site in Puebla, Mexico, which is expected to begin operations in late 2022 or early 2023. The Company also has a commitment to upgrade the Gamma Knife unit at its stand-alone facility in Ecuador to an Icon. The remaining Icon upgrades and LINAC purchases are scheduled to occur between 2023 and 2024. The Company expects to upgrade the equipment in Ecuador in the latter part of 2022. The Company has a commitment from DFC to finance this upgrade. Total Gamma Knife and LINAC commitments as of June 30, 2022 were $14,288,000. It is the Company’s intent to finance these commitments. There are no significant cash requirements, pending financing, for these commitments in the next 12 months. There can be no assurance that financing will be available for the Company’s current or future projects, or at terms that are acceptable to the Company. However, the Company currently has cash on hand of $11,967,000 and a line of credit of $7,000,000 to fund these projects.
On July 21, 2017, the Company entered into a Maintenance and Support Agreement (the “Mevion Service Agreement”) with Mevion, which provides for maintenance and support of the Company’s PBRT unit at Orlando Health. The Mevion Service Agreement began September 5, 2017, was amended in 2018, and renews annually over a five year period. The agreement requires an annual prepayment of $1,649,000 for the current contractual period. This payment portion was recorded as a prepaid contract and will be amortized over the one-year service period.
As of June 30, 2022, the Company had commitments to service and maintain its Gamma Knife and PBRT equipment. The service commitments are carried out via contracts with Mevion, Elekta and Mobius Imaging, LLC. In addition, in April 2019, the Company signed agreements to service the Icon upgrades which will be installed at various dates between 2023 and 2024. The Company’s commitments to purchase two LINAC systems also include a 9-year and 5-year agreement to service the equipment, respectively. Total service commitments as of June 30, 2022 were $9,138,000. The Gamma Knife and certain other service contracts are paid monthly, as service is performed. The Company believes that cash flow from cash on hand and operations will be sufficient to cover these payments.
Related Party Transactions
The Company’s Gamma Knife business is operated through its 81% indirect interest in its GKF subsidiary. The remaining 19% of GKF is owned by a wholly owned U.S. subsidiary of Elekta, which is the manufacturer of the Gamma Knife. Since the Company purchases its Gamma Knife units from Elekta, there are significant related party transactions with Elekta such as equipment purchases, commitments to purchase and service equipment, and costs to maintain the equipment. For the three and six-month periods ended June 30, 2022, related party transactions for equipment purchases and de-install costs were $131,000 and $1,363,000, respectively, and costs incurred to maintain equipment were $279,000 and $548,000, respectively. For the three and six-month periods ended June 30, 2021, related party transactions for equipment purchases and de-install costs were $0 and $1,519,000, respectively, and costs incurred to maintain equipment were $220,000 and $468,000, respectively. The Company also had commitments to purchase one Icon, install four Icon upgrades, purchase 4 Gamma Plan workstations and service the related equipment of $7,759,000 as of June 30, 2022 and commitments to purchase one Icon, install four Icon upgrades and service the related equipment of $6,624,000 as of December 31, 2021. At June 30, 2022, the Company owed Elekta approximately $850,000 for software, contract maintenance, and de-install costs. At December 31, 2021, the Company owed Elekta approximately $1,992,000 for the Cobalt-60 reload completed in the fourth quarter, software, contract maintenance, and de-install costs. The Company believes that all its transactions with Elekta are arm’s-length transactions.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company does not hold or issue derivative instruments for trading purposes and is not a party to any instruments with leverage or prepayment features. The Company does not have affiliation with partnerships, trusts or other entities whose purpose is to facilitate off-balance sheet financial transactions or similar arrangements, and therefore has no exposure to the financing, liquidity, market or credit risks associated with such entities. At June 30, 2022, the Company had no significant long-term, market-sensitive investments.
Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and our president and chief operating and financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934. These controls and procedures are designed to ensure that material information relating to the company and its subsidiaries is communicated to the chief executive officer and the chief financial officer. Based on that evaluation, our chief executive officer and our chief financial officer concluded that, as of June 30, 2022, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to the chief executive officer and the chief financial officer, and recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting during the six-month period ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors
There were no material changes during the period covered in this report to the risk factors previously disclosed in Part 1, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibit Index
| Incorporated by reference herein |
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| Exhibit Number |
Description |
Form |
Exhibit |
Date |
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| 3.2 | * | Amended and Restated Bylaws as amended to date | ||||||||||||||||||||||||
| * |
Certification of Chief Executive Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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| * |
Certification of Chief Financial Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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| ǂ |
Certifications 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 2002 |
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| 101.INS |
* |
Inline XBRL Instance Document |
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| 101.SCH |
* |
Inline XBRL Taxonomy Extension Schema Document |
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| 101.CAL |
* |
Inline XBRL Taxonomy Calculation Linkbase Document |
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| 101.DEF |
* |
Inline XBRL Taxonomy Definition Linkbase Document |
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| 101.LAB |
* |
Inline XBRL Taxonomy Label Linkbase Document |
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| 101.PRE |
* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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| 104 |
* |
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline Instance XBRL contained in Exhibit 101 |
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| * |
Filed herewith. |
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| ǂ |
Furnished herewith. |
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| # |
Portions of this exhibit (indicated therein by asterisks) have been omitted for confidential treatment. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN SHARED HOSPITAL SERVICES
Registrant
| Date: |
August 15, 2022 |
/s/ Raymond C. Stachowiak |
||||||
| Raymond C. Stachowiak |
||||||||
| Chief Executive Officer |
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| Date: |
August 15, 2022 |
/s/ Craig K. Tagawa |
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| Craig K. Tagawa |
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| President, Chief Operating and Financial Officer |
Exhibit 3.2
BYLAWS
OF
AMERICAN SHARED HOSPITAL SERVICES
(a California for-profit corporation)
Amended and Restated
as of June 21, 2022
TABLE OF CONTENTS
|
ARTICLE I Applicability |
4 | |
|
Section 1. |
Applicability of Bylaws |
4 |
|
ARTICLE II Offices |
4 | |
|
Section 1. |
Principal Offices |
4 |
|
Section 2. |
Change in Location or Number of Offices |
4 |
|
ARTICLE III Meetings of Shareholders |
4 | |
|
Section 1. |
Place of Meetings |
4 |
|
Section 2. |
Annual Meetings |
4 |
|
Section 3. |
Special Meetings |
5 |
|
Section 4. |
Notice of Annual, Special or Adjourned Meetings |
6 |
|
Section 5. |
Record Date |
7 |
|
Section 6. |
Quorum |
8 |
|
Section 7. |
Adjournment |
8 |
|
Section 8. |
Validation of Actions Taken at Defectively Called, Noticed or Held Meetings |
8 |
|
Section 9. |
Voting for Election of Directors |
8 |
|
Section 10. |
Proxies |
9 |
|
Section 11. |
Inspectors of Election |
9 |
|
Section 12. |
Action by Written Consent |
10 |
|
ARTICLE IV Directors |
11 | |
|
Section 1. |
Number of Directors |
11 |
|
Section 2. |
Election of Directors |
11 |
|
Section 3. |
Term of Office |
11 |
|
Section 4. |
Vacancies |
11 |
|
Section 5. |
Removal |
12 |
|
Section 6. |
Resignation |
12 |
|
Section 7. |
Fees and Compensation |
12 |
|
ARTICLE V Committees of the Board of Directors |
12 | |
|
Section 1. |
Designation of Committees |
12 |
|
Section 2. |
Powers of Committees |
12 |
|
ARTICLE VI Meetings of the Board of Directors and Committees Thereof |
13 | |
|
Section 1. |
Place and Meetings |
13 |
|
Section 2. |
Organization Meeting |
13 |
|
Section 3. |
Other Regular Meetings |
13 |
|
Section 4. |
Special Meetings |
13 |
|
Section 5. |
Notice of Special Meetings |
13 |
|
Section 6. |
Waivers, Consents and Approvals |
13 |
|
Section 7. |
Quorum; Action at Meetings; Telephone Meetings |
14 |
|
Section 8. |
Adjournment |
14 |
|
Section 9. |
Action Without a Meeting |
14 |
|
Section 10. |
Meetings of and Action by Committees |
14 |
|
ARTICLE VII Officers |
14 | |
|
Section 1. |
Officers |
14 |
|
Section 2. |
Election of Officers |
14 |
|
Section 3. |
Subordinate Officers, Etc |
15 |
|
Section 4. |
Removal and Resignation |
15 |
|
Section 5. |
Vacancies |
15 |
|
Section 6. |
Chairman of the Board |
15 |
|
Section 7. |
Chief Executive Officer |
15 |
|
Section 8. |
President |
15 |
|
Section 9. |
Chief Financial Officer |
15 |
|
Section 10. |
Vice President |
16 |
|
Section 11. |
Secretary |
16 |
|
ARTICLE VIII Records and Reports |
16 | |
|
Section 1. |
Minute Book |
16 |
|
Section 2. |
Share Register |
16 |
|
Section 3. |
Books and Records of Account |
17 |
|
Section 4. |
Bylaws |
17 |
|
Section 5. |
Inspection of Records |
17 |
|
Section 6. |
Annual Report to Shareholders |
17 |
|
ARTICLE IX Miscellaneous |
17 | |
|
Section 1. |
Checks, Drafts, Etc |
17 |
|
Section 2. |
Contracts, Etc |
17 |
|
Section 3. |
Certificates of Stock |
17 |
|
Section 4. |
Lost Certificates |
18 |
|
Section 5. |
Representation of Shares of Other Corporations |
18 |
|
Section 6. |
Construction and Definitions |
18 |
|
Section 7. |
Mandatory Indemnification of Directors |
18 |
|
Section 8. |
Mandatory Indemnification of Agents |
18 |
|
Section 9. |
Permissive Indemnification |
19 |
|
Section 10. |
Payment of Expenses in Advance |
19 |
|
Section 11. |
Indemnity Not Exclusive |
19 |
|
Section 12. |
Insurance Indemnification |
19 |
|
Section 13. |
Conflicts |
19 |
|
Section 14. |
Fiscal Year |
19 |
|
ARTICLE X Amendments |
20 | |
|
Section 1. |
Amendments |
20 |
BYLAWS
OF
AMERICAN SHARED HOSPITAL SERVICES
(a California corporation)
ARTICLE I
Applicability
Section 1. Applicability of Bylaws. These Bylaws govern, except as otherwise provided by statute or its Articles of Incorporation, the management of the business and the conduct of the affairs of the Corporation.
ARTICLE II
Offices
Section 1. Principal Offices. The Board of Directors shall fix the location of the principal executive office of the Corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the Corporation has one or more business offices in this state, the Board of Directors shall designate a principal business office in the State of California.
Section 2. Change in Location or Number of Offices. The Board of Directors may change any office from one location to another or eliminate any office or offices.
ARTICLE III
Meetings of Shareholders
Section 1. Place of Meetings. Meetings of the shareholders shall be held at any place within or without the State of California designated by the Board of Directors, or, in the absence of such designation, at the principal executive office of the Corporation. The Board of Directors may, in its discretion and subject to any guidelines and procedures it may adopt, authorize shareholders not physically present, in person or proxy, at a meeting of shareholders, whether held at a designated place or held solely by electronic transmission by and to the Corporation or by electronic video screen communication, to participate in and vote at the meeting by electronic transmission by and to the Corporation or by electronic video screen communication and such shareholders shall be considered present in person or by proxy.
Section 2. Annual Meetings. (a) An annual meeting of the shareholders shall be held within 180 days following the end of the fiscal year of the Corporation at a date and time designated by the Board of Directors. Directors shall be elected at each annual meeting and any other proper business may be transacted thereat.
(b) Only persons who are nominated in accordance with the procedures set forth in this paragraph (b) shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors may be made at a meeting of shareholders by the Board of Directors or by any stockholder of the Corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (b). Any nomination by a stockholder must be made by written notice to the Secretary delivered or mailed to and received at the principal executive offices of the Corporation (i) not less than 60 days nor more than 90 days prior to the meeting, or (ii) if less than 70 days' notice of the meeting or prior public disclosure of the date of the meeting is given or made to shareholders, not later than the close of business on the tenth day following the day on which the notice of the meeting was mailed, or, if earlier, the day on which such public disclosure was made. A shareholders' notice to the Secretary shall set forth (x) as to each person whom the stockholder proposes to nominate for election or re-election as a director: (a) the name, age, business address and residence address of such person, (2) the principal occupation or employment of such person, (3) the class and number of shares of stock of the Corporation which are beneficially owned by such person (for the purposes of the regulations under Sections 13 and 14 of the Securities Exchange Act of 1934, as amended), and (4) any other information relating to such person that would be required to be disclosed in solicitations of proxies for the election of such person as a director of the Corporation pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended, and such person's written consent to being named in any proxy statement as a nominee and to serving as a director if elected; and (y) as to the stockholder giving notice (5) the name and address, as they appear on the Corporation's records, of such stockholder and (6) the class and number of shares of stock of the Corporation which are beneficially owned by such stockholder (determined as provided in clause (x) (3) above). At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. The chairman of the meeting at which a stockholder nomination is presented shall, if the facts warrant, determine and declare to the meeting that such nomination was not made in accordance with the procedures prescribed by this paragraph (b), and, in such event, the defective nomination shall be disregarded.
Section 3. Special Meetings. (a) Special meetings of the shareholders may be called by the Board of Directors, the Chairman of the Board and the President, or by the shareholders upon the request of the holders of shares entitled to cast not less than 10 percent of the votes at such meeting.
(b) Any request for the calling of a special meeting of the shareholders shall (1) be in writing, (2) specify the date and time thereof, which date shall be not less than 35 nor more than 60 days after receipt of the request, (3) specify the general nature of the business to be transacted thereat in accordance with Section 4(f) below and (4) be given either personally or by first class mail, postage prepaid, or other means of written communication to the Chairman of the Board, President, any Vice President or Secretary of the Corporation. The officer receiving a proper request to call a special meeting of the shareholders shall cause notice to be given, pursuant to the provisions of Section 4 of this article, to the shareholders entitled to vote thereat, that a meeting will be held at the date and time specified by the person or persons calling the meeting. If notice is not given within 20 days of the receipt of the request, the shareholders making the request may give notice of such meeting so long as the notice given complies with the other provisions of this subsection.
(c) No business may be transacted at a special meeting unless the general nature thereof was stated in the notice of such meeting.
Section 4. Notice of Annual, Special or Adjourned Meetings. (a) Whenever any meeting of the shareholders is to be held, a written notice of such meeting shall be given in the manner described in subdivision (d) of this section not less than 10 nor more than 60 days before the date thereof, to each shareholder entitled to vote thereat. The notice shall state the place, date and hour of the meeting and (1) in the case of a special meeting, the general nature of the business to be transacted or (2) in the case of the annual meeting, those matters which the Board of Directors, at the time of the giving of the notice, intends to present for action by the shareholders, in each case in accordance with Section 4(f) below. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, management intends to present for election. The notice of any meeting at which remote participation in the meeting is authorized by the Board of Directors shall state the means of electronic transmission by and to the Corporation or electronic video screen communication by which shareholders may participate.
(b) Any proper matter may be presented at an annual meeting for action. However, any action to approve (1) a contract or transaction in which a director has a direct or indirect financial interest under Section 310 of the Corporations Code of California, (2) an amendment of the articles of incorporation under Section 902 of that code, (3) a reorganization of the corporation, under Section 1201 of that code, (4) a voluntary dissolution of the corporation under Section 1900 of that code, or (5) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares under Section 2007 of that code may be taken only if the notice of the meeting states the general nature of the matter to be approved.
(c) Notice need not be given of an adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, except that if the adjournment is for more than 45 days or if after the adjournment a new record date is provided for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at that meeting.
(d) Notice of any meeting of the shareholders shall be given personally, by first class mail, by electronic mail or transmission, or by other written communication, addressed to the shareholder at his address appearing on the books of the Corporation or given by him to the Corporation for the purpose of notice; or if no such address appears or is given, at the place where the principal executive office of the Corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. Notice shall be deemed to have been given at the time when delivered personally to the recipient, deposited in the mail, delivered to a common carrier for transmission to the recipient or sent by other means of written communication. An affidavit of the mailing or other means of giving notice may be executed by the Secretary, assistant secretary or any transfer agent of the Corporation giving the notice and shall be prima facie evidence of the giving of the notice. Such affidavits shall be filed and maintained in the minute books of the Corporation.
(e) If any notice or report addressed to the shareholder at his address appearing on the books of the Corporation is returned to the Corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice or report to the shareholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon his written demand at the principal executive office of the Corporation for a period of one year from the date of the giving of the notice or report to all other shareholders.
(f) Only such business shall be conducted at an annual or special meeting of shareholders as shall have been properly brought before the meeting. For business to be properly brought before the meeting, it must be: (i) authorized by the Board of Directors and specified in the notice, or a supplemental notice, of the meeting, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors or the chairman of the meeting, or (iii) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before an annual or special meeting by a shareholder, the shareholder must have given written notice thereof to the Secretary, delivered or mailed to and received at the principal executive offices of the Corporation (A) in the case of an annual meeting (x) not less than 60 days nor more than 90 days prior to the meeting, or (y) if less than 70 days' notice of the meeting or prior public disclosure of the date of the meeting is given or made to shareholders, not later than the close of business on the tenth day following the day on which the notice of the meeting was mailed or, if earlier, the day on which such public disclosure was made and (B) in the case of a special meeting, as required by Section 3(b) above. A shareholder's notice to the Secretary shall set forth as to each item of business the shareholder proposes to bring before the meeting (1) a brief description of such item and the reasons for conducting such business at the meeting, (2) the name and address, as they appear on the Corporation's records, of shareholder proposing such business, (3) the class and number of shares of stock of the Corporation which are beneficially owned by the shareholder (for purposes of the regulations under Sections 13 and 14 of the Securities Exchange Act of 1934, as amended), and (4) any material interest of the shareholder in such business. No business shall be conducted at any annual or special meeting, except in accordance with the procedures set forth in this paragraph (f). The Chairman of the meeting at which any business proposed by a shareholder shall, if the facts warrant, determine and declare to the meeting that such business was not properly brought before the meeting and shall not be transacted.
Section 5. Record Date. (a) The Board of Directors may fix a time in the future as a record date for determination of the shareholders (1) entitled to notice of any meeting or to vote thereat, (2) entitled to give written consent to any corporate action without a meeting, (3) entitled to receive payment of any dividend or other distribution or allotment of any rights or (4) entitled to exercise any rights in respect of any other lawful action. The record date so fixed shall be not more than 60 nor less than 10 days prior to the date of any meeting of the shareholders nor more than 60 days prior to any other action.
(b) In the event no record date is fixed:
(1) The record date for determining the shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.
(2) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board of Directors has been taken, shall be the day on which the first written consent is given.
(3) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto, or the 60t11 day prior to the date of such other action, whichever is later.
(c) Only shareholders of record on the close of business on the record date are entitled to notice and to vote, to give written consent or to receive a dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date.
(d) A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than 45 days from the date set for the original meeting.
Section 6. Quorum. (a) A majority of the shares entitled to vote at a meeting of the shareholders, represented in person or by proxy, shall constitute a quorum for the transaction of business thereat.
(b) The shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
Section 7. Adjournment. Any meeting of the shareholders may be adjourned from time to time whether or not a quorum is present by the vote of a majority of the shares represented thereat either in person or by proxy. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting.
Section 8. Validation of Actions Taken at Defectively Called, Noticed or Held Meetings. (a) The transactions of any meeting of the shareholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote thereat, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. Any written waiver of notice shall comply with subdivision (f) of Section 601 of the Corporations Code of the State of California. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
(b) Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except (1) when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and (2) that attendance at a meeting is not a waiver of any right to object to the consideration of any matter required by the General Corporation Law of the State of California to be included in the notice but not so included, if such objection is expressly made at the meeting.
Section 9. Voting for Election of Directors. (a) Except as provided in subdivision (c) of this section, the affirmative vote of the majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number is required by law or the Articles of Incorporation.
(b) Every shareholder complying with subdivision (c) of this section and entitled to vote at any election of directors may cumulate his votes and give one candidate a number of votes equal to the number of directors to be elected, multiplied by the number of votes to which his shares are normally entitled, or distribute his votes on the same principle among as many candidates as he thinks fit.
(c) No shareholder shall be entitled to cumulate his votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast) unless the candidate's or candidates' names for which he desires to cumulate his votes have been placed in nomination prior to the voting and the shareholder has given notice at the meeting prior to the voting of his intention to cumulate his votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination.
(d) Elections for directors may be by voice vote or by ballot unless any shareholder entitled to vote demands election by ballot at the meeting prior to the voting, in which case the vote shall be by ballot.
(e) In any election of directors, the candidates receiving the highest number of affirmative votes of the shares entitled to be voted for them, up to the number of directors to be elected by such shares, are elected as directors.
Section 10. Proxies. (a) Every person entitled to vote shares may authorize another person or persons to act with respect to such shares by a written proxy signed by him or his attorney-in-fact and filed with the Secretary of the Corporation. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by him or his attorney-in-fact.
(b) Any validly executed proxy, except a proxy which is irrevocable pursuant to subdivision (c) of this section, shall continue in full force and effect until the expiration of the term specified therein or upon its earlier revocation by the person executing it prior to the vote pursuant thereto (1) by a writing delivered to the Corporation stating that it is revoked, (2) by written notice of death of the person executing the proxy, delivered to the Corporation, (3) by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting or (4) as to any meeting by attendance at such meeting and voting in person by the person executing the proxy. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. The date contained on the form of proxy shall be deemed to be the date of its execution.
(c) A proxy which states that it is irrevocable is irrevocable for the period specified therein subject to the provisions of subdivisions (e) and (f) of Section 705 of the Corporations Code of the State of California.
Section 11. Inspectors of Election. (a) In advance of any meeting of the shareholders, the Board of Directors may appoint either one or three persons (other than nominees for the office of director) as inspectors of election to act at such meeting or any adjournments thereof. If inspectors of election are not so appointed, or if any person so appointed fails to appear or refuses to act, the chairman of any such meeting may, and on the request of any shareholder or his proxy shall, appoint inspectors of election (or persons to replace those who so fail or refuse to act) at the meeting. If appointed at a meeting on the request of one or more shareholders or the proxies thereof, the majority of shares represented in person or by proxy shall determine whether one or three inspectors are to be appointed.
(b) The duties of inspectors of election and the manner of performance thereof shall be as prescribed in subdivisions (b) and (c) of Section 707 of the Corporations Code of the State of California.
Section 12. Action by Written Consent. (a) Subject to subdivisions (b) and (c) of this section, any action which may be taken at any annual or special meeting of the shareholders may be taken without a meeting, without a vote and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the Secretary of the Corporation and maintained with the corporate records.
(b) Except for the election of a director by written consent to fill a vacancy (other than a vacancy created by removal), directors may be elected by written consent only by the unanimous written consent of all shares entitled to vote for the election of directors. In the case of an election of a director by written consent to fill a vacancy (other than a vacancy created by removal), any such election requires the consent of a majority of the outstanding shares entitled to vote for the election of directors.
(c) Unless the consents of all shareholders entitled to vote have been solicited in writing, the Secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. This notice shall be given in the manner specified in subdivision (d) of Section 4 of this Article III. In the case of approval of (1) contracts or transactions in which a director has a direct or indirect financial interest under Section 310 of the Corporations Code of California, (2) indemnification of agents of the corporation, under Section 317 of that code, (3) a reorganization of the corporation, under Section 1201 of that code, or (4) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, under Section 2007 of that code, notice of such approval shall be given at least ten (10) days before the consummation of any action authorized by that approval.
(d) Any shareholder giving a written consent, or his proxyholders, or a transferee of the shares or a personal representative of the shareholder or their respective proxyholders, may revoke the consent by a writing received by the Corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the Corporation, but may not do so thereafter. Such revocation is effective upon its receipt by the Secretary of the Corporation.
ARTICLE IV
Directors
Section 1. Number of Directors. (a) The authorized number of directors shall be no less than four nor more than seven directors. The exact number of directors shall be fixed from time to time, within the limits specified in this subdivision, by resolution of the Board of Directors.
(b) The maximum or minimum authorized number of directors may only be changed by an amendment of this section approved by the vote or written consent of a majority of the shareholders; provided, however, that an amendment reducing the minimum number to a number less than four shall not be adopted if the votes cast against its adoption at a meeting (or the shares not consenting in the case of action by written consent) exceed 16-2/3% of such outstanding shares; and provided, further, that in no case shall the stated maximum authorized number of directors exceed two times the stated minimum number of authorized directors minus one.
Section 2. Election of Directors. Directors shall be elected at each annual meeting of the shareholders.
Section 3. Term of Office. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which he is elected and until a successor has been elected, and qualified.
Section 4. Vacancies. (a) A vacancy in the Board of Directors exists whenever any authorized position of director is not then filled by a duly elected director, whether caused by death, resignation, removal, change in the authorized number of directors or otherwise.
(b) Except for a vacancy created by the removal of a director, vacancies on the Board of Directors may be filled by a majority of the directors then in office, whether or not less than a quorum, or by a sole remaining director. A vacancy created by the removal of a director shall be filled only by a person elected by a majority of the shareholders entitled to vote at a duly held meeting at which there is a quorum present or by the unanimous written consent of the holders of the outstanding shares entitled to vote at such a meeting.
(c) The shareholders may elect a director at anytime to fill any vacancy not filled by the directors. Any such nomination shall comply with the requirements of Article III, Section 2(b) of these Bylaws.
Section 5. Removal. (a) The Board of Directors may declare vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony.
(b) Any or all of the directors may be removed without cause if such removal is approved by a majority of the outstanding shares entitled to vote; provided, however that no director may be removed (unless the entire Board of Directors is removed) if whenever the votes cast against his removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively at an-election at which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of his most recent election were then being elected.
(c) Any reduction of the authorized number of directors does not remove any director prior to the expiration of his term of office.
Section 6. Resignation. Any director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.
Section 7. Fees and Compensation. Directors may be paid for their services in such capacity a sum in such amounts, at such times and upon such conditions as may be determined from time to time by resolution of the Board of Directors and may be reimbursed for their expenses, if any, for attendance at each meeting of the Board. No such payments shall preclude any director from serving the Corporation in any other capacity and receiving compensation in any manner therefor.
ARTICLE V
Committees of the Board of Directors
Section 1. Designation of Committees. The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate (1) one or more committees, each consisting of two or more directors and (2) one or more directors as alternate members of any committee, who may replace any absent member at any meeting thereof. Any member or alternate member of a committee shall serve at the pleasure of the Board.
Section 2. Powers of Committees. Any committee, to the extent provided in the resolution of the Board of Directors designating such committee, shall have all the authority of the Board, except with respect to:
(a) The approval of any action for which the Corporation Law of the State of California also requires any action by the shareholders;
(b) The filling of vacancies on the Board or in any committee thereof;
(c) The fixing of compensation of the directors for serving on the Board or on any committee thereof;
(d) The amendment or repeal of these Bylaws or the adoption of new Bylaws;
(e) The amendment or repeal of any resolution of the Board which by its express terms is not so amendable or repealable;
(f) A distribution to the shareholders of the Corporation, except at a rate or in a periodic amount or within a price range determined by the Board of Directors; or
(g) The designation of other committees of the Board or the appointment of members or alternate members thereof.
ARTICLE VI
Meetings of the Board of Directors and Committees Thereof
Section 1. Place and Meetings. Regular meetings of the Board of Directors shall be held at any place within or without the State of California which has been designated from time to time by the Board or, in the absence of such designation, at the principal executive office of the Corporation. Special meetings of the Board shall be held either at any place within or without the State of California which has been designated in the notice of meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the Corporation.
Section 2. Organization Meeting. Immediately following each annual meeting of the shareholders the Board of Directors shall hold a regular meeting for the purpose of organization and the transaction of other business. Notice of any such meeting is not required.
Section 3. Other Regular Meetings. Other regular meetings of the Board of Directors shall be held without call at such time as shall be designated from time to time by the Board. Notice of any such meeting is not required.
Section 4. Special Meetings. Special meetings of the Board of Directors may be called at any time for any purpose or purposes by the Chairman of the Board or the President or any vice president or the Secretary or any two directors. Notice shall be given of any special meeting of the Board.
Section 5. Notice of Special Meetings. Notice of the time and place of special meetings of the Board of Directors shall be delivered personally, by telephone or electronically to each director or sent to each director by first-class mail , charges prepaid, addressed to each director at that director's address as shown on the records of the Corporation. Such notice shall be given four days prior to the holding of the special meeting if sent by mail or 48 hours prior to the holding thereof if delivered personally or given by telephone or electronically. The notice or report shall be deemed to have been given at the time when delivered personally to the recipient or deposited in the mail or sent by other means of written communication. Notice of any special meeting of the Board of Directors need not specify the purpose thereof.
Section 6. Waivers, Consents and Approvals. Notice of any meeting of the Board of Directors need not be given to any director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Section 7. Quorum; Action at Meetings; Telephone Meetings; Electronic Participation. (a) A majority of the authorized number of directors shall constitute a quorum for the transaction of business. Every act or decision done or made by a majority of the directors present is the act of the Board of Directors, unless action by a greater proportion of the directors is required by law or the Articles of Incorporation.
(b) A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.
(c) Members of the Board of Directors may participate in a meeting through use of conference telephone, electronic video screen communication, or similar communications equipment so long as all members participating in such meeting can hear one another and can communicate concurrently with all other participating directors and each director has the means to participate in all matters before the Board.
Section 8. Adjournment. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than 24 hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment.
Section 9. Action Without a Meeting. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors.
Section 10. Meetings of and Action by Committees. The provisions of this Article apply to committees of the Board of Directors and action by such committees with such changes in the language of those provisions as are necessary to substitute the committee and its members for the Board and its members.
ARTICLE VII
Officers
Section 1. Officers. The Corporation shall have as officers, a Chief Executive Officer, a President, a Chief Financial Officer, and a Secretary.. The Corporation may also have, at the discretion of the Board, a Chairman of the Board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article. One person may hold two or more offices.
Section 2. Election of Officers. The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article, shall be chosen by the Board of Directors.
Section 3. Subordinate Officers, Etc. The Board of Directors may appoint by resolution, and may empower the Chairman of the Board, if there be such an officer, or the Chief Executive Officer, to appoint such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are determined from time to time by resolution of the Board or, in the absence of any such determination, as are provided in these Bylaws. Any appointment of an officer shall be evidenced by a written instrument filed with the Secretary of the Corporation and maintained with the corporate records.
Section 4. Removal and Resignation. (a) Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board of Directors or, except in case of any officer chosen by the Board, by any officer upon whom such power of removal may be conferred by resolution of the Board.
(b) Subject to the rights, if any, of the Corporation under any contract of employment, any officer may resign at any time effective upon giving written notice to the Chairman of the Board, President, any vice president or Secretary of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation.
Section 5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to such office.
Section 6. Chairman of the Board. If there is a Chairman of the Board, he or she shall, if present, preside at all meetings of the Board of Directors, exercise and perform such other powers and duties as may be from time to time assigned to him or her by resolution of the Board or prescribed by these Bylaws and, if there is no Chief Executive Officer, the Chairman of the Board shall be the chief executive officer of the Corporation and have the power and duties set forth in Section 7 of this Article.
Section 7. Chief Executive Officer. Subject to such supervisory powers, if any, as may be given by these Bylaws or the Board of Directors to the Chairman of the Board, if there be such an officer, the Chief Executive Officer shall be the chief executive officer and general manager of the Corporation and shall, subject to the control of the Board, have general supervision, direction and control of the business and affairs of the Corporation. He or she shall preside at all meetings of the shareholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board. He or she shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation, and shall have such other powers and duties as may be prescribed from time to time by resolution of the Board.
Section 8. President. The President shall report and be responsible to the Chief Executive Office. The President shall have such powers and perform such duties as from time to time may be assigned or delegated to the President by the Board of Directors or the Chief Executive Officer or that are incident to the office of president.
Section 9. Chief Financial Officer. (a) The Chief Financial Officer shall keep, or cause to be kept, the books and records of account of the Corporation.
(b) The Chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositories as may be designated from time to time by resolution of the Board of Directors. He or she shall disburse the funds of the Corporation as may be ordered by the Board of Directors or the Chief Executive Officer, shall render to the Chief Executive Officer and the Board, whenever they request it, an account of all of his transactions as Chief Financial Officer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed from time to time by the Board or as the Chief Executive Officer may from time to time delegate.
Section 10. Vice President. In the absence or disability of the President, the vice presidents in order of their rank as fixed by the Board of Directors, or, if not ranked, the Vice President designated by the Board, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board or as the Chief Executive Officer may from time to time delegate.
Section 11. Secretary. (a) The Secretary shall keep or cause to be kept (1) the minute book, (2) the share register and (3) the seal, if any, of the Corporation.
(b) The Secretary, an assistant secretary, or, if they are absent or unable to act, any other officer shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by these Bylaws or bylaw to be given, and shall have such other powers and perform such other duties as may be prescribed from time to time by the Board of Directors or any committee of the Board of Directors.
ARTICLE VIII
Records and Reports
Section 1. Minute Book. The Corporation shall keep or cause to be kept in written form at its principal executive office or such other place as the Board of Directors may order, a minute book which shall contain a record of all actions by its shareholders, Board or committees of the Board including the time, date and place of each meeting; whether a meeting is regular or special and, if special, how called; the manner of giving notice of each meeting and a copy thereof; the names of those present at each meeting of the Board or committees thereof; the number of shares present or represented at each meeting of the shareholders; the proceedings of all meetings; any written waivers of notice, consents to the holding of a meeting or approvals of the minutes thereof; and written consents for action without a meeting.
Section 2. Share Register. The Corporation shall keep or cause to be kept at its principal executive office or, if so provided by resolution of the Board of Directors, at the Corporation's transfer agent or registrar, a share register, or a duplicate share register, which shall contain the names of the shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation.
Section 3. Books and Records of Account. The Corporation shall keep or cause to be kept at its principal executive office or such other place as the Board of Directors may order, adequate and correct books and records of account.
Section 4. Bylaws. The Corporation shall keep at its principal executive office or, in the absence of such office in the State of California, at its principal business office in the state, the original or a copy of the Bylaws as amended to date.
Section 5. Inspection of Records. The shareholders and directors of the Corporation shall have all of the rights to inspect the books and records of the Corporation that are specified in Section 213 and 1600 through 1602 of the Corporations Code of the State of California.
Section 6. Annual Report to Shareholders. The Board of Directors shall cause an annual report to be sent to the shareholders not later than 120 days after the close of the fiscal year of the Corporation. Such report shall comply with the provisions of Section 1501 of the Corporations Code of the State of California and shall be sent in the manner specified in Section 4 (d) of Article III at least 15 days prior to the annual meeting of shareholders to be held during the next fiscal year.
ARTICLE IX
Miscellaneous
Section 1. Checks, Drafts, Etc. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, and any assignment or endorsement thereof, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors.
Section 2. Contracts, Etc. How Executed. The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and, unless so authorized or ratified by the Board, no officer, employee or other agent shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount.
Section 3. Certificates of Stock. A certificate or certificates for shares of the capital stock of the Corporation shall be issued to each shareholder when the shares are fully paid or the Board of Directors may authorize the issuance of certificates for shares as partly paid provided that these certificates shall conspicuously state the amount of the consideration to be paid for them and the amount already paid. All certificates shall be signed in the name of the Corporation by the Chairman of the Board or the President or a vice president and by the Chief Financial Officer or an assistant treasurer or the Secretary or an assistant secretary, certifying the number of shares and the class or series thereof owned by the shareholder. Any or all of the signatures on a certificate may be by facsimile signature. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.
Section 4. Lost Certificates. Except as provided in this section, no new certificate for shares shall be issued in lieu of an, old certificate unless the latter is surrendered to the Corporation and canceled at the same time. The Board of Directors may in case any share certificate or certificate for any other security is lost, stolen or destroyed-, authorize the issuance of a new certificate in lieu thereof, upon such terms and conditions as the Board may require, including provision for indemnification of the Corporation secured by a bond or other adequate security sufficient to protect the Corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate.
Section 5. Representation of Shares of Other Corporations. Any person designated by resolution of the Board of Directors or, in the absence of such designation, the Chairman of the Board, the President or any vice president or the Secretary, or any other person authorized by any of the foregoing, is authorized to vote on behalf of the Corporation any and all shares of any other corporation or corporations, foreign or domestic, owned by the Corporation.
Section 6. Construction and Definitions. Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the Corporations Code of the State of California shall govern the construction of these Bylaws. These Bylaws are adopted subject to any applicable law and the Articles of Incorporation. Whenever these Bylaws may conflict with any applicable law or the Articles of Incorporation, such conflict shall be resolved in favor of such law or the Articles of Incorporation.
Section 7. Mandatory Indemnification of Directors. The Corporation shall, to the maximum extent and in the manner permitted by the California Corporations Code ("Code"), indemnify each of its directors against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317 (a) of the Code), arising by reason of the fact that such person is or was an agent of the Corporation. For purposes of this Article IX, a "director" of the Corporation includes any person (i) who is or was a director of the Corporation, (ii) who is or was serving at the request of the Corporation as a director of another Corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director of a corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation.
Section 8. Mandatory Indemnification of Agents. The Corporation shall, to the maximum extent and in the manner permitted by the Code, indemnify each of its agents against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317 (a) of the Code), arising by reason of the fact that such person is or was an agent of the Corporation, to the extent that the agent was successful on the merits in the defense of such proceeding. For purposes of this Article IX, an "agent" of the Corporation includes any person (i) who is or was an, officer, employee, or other agent of the Corporation, or (ii) who is or was serving at the request of the Corporation as an officer, employee, or agent of another corporation, partnership, joint venture trust or other enterprise, or (iii) who was an, officer, employee, or agent of a corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation.
Section 9. Permissive Indemnification. The Corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its officers, employees and agents against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonable incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the Corporation.
Section 10. Payment of Expenses in Advance. Expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Sections 7 and 8 or for which indemnification is permitted pursuant to Section 9 following authorization thereof by the Board of Directors, in the case of directors shall and in the case of other agents of the corporation entitled to indemnification may, be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified as authorized in this Article IX.
Section 11. Indemnity Not Exclusive. The indemnification provided by this Article IX shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the Articles of Incorporation.
Section 12. Insurance Indemnification. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was an agent of the Corporation against any liability asserted against or incurred by such person in such capacity or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article IX.
Section 13. Conflicts. No indemnification or advance shall be made under this Article IX, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:
(1) That it would be inconsistent with a provision of the Articles of Incorporation, these Bylaws, a resolution of the shareholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
Section 14. Fiscal Year. The fiscal year of the Corporation shall be as determined by the Board of Directors.
ARTICLE X
Amendments
Section 1. Amendments. New Bylaws may be adopted or these Bylaws may be amended or repealed by the affirmative vote or written consent of a majority of the outstanding shares entitled to vote. Subject to the next preceding sentence, Bylaws (other than a bylaw or amendment thereof specifying or changing a fixed number of directors or the maximum or minimum number, or changing from fixed to a variable board or vice versa) may be adopted, amended or repealed by the Board of Directors.
AMENDMENT, DATED JUNE 21, 2022 TO
BYLAWS OF AMERICAN SHARED HOSPITAL SERVICES
(As Amended and Restated as of January 27, 2021)
ARTICLE IV
Directors
Section 1. Number of Directors. (a) The authorized number of directors shall be no less than four nor more than seven directors. The exact number of directors shall be fixed from time to time, within the limits specified in this subdivision, by resolution of the Board of Directors.
(b) The maximum or minimum authorized number of directors may only be changed by an amendment of this section approved by the vote or written consent of a majority of the shareholders; provided, however, that an amendment reducing the minimum number to a number less than four shall not be adopted if the votes cast against its adoption at a meeting (or the shares not consenting in the case of action by written consent) exceed 16-2/3% of such outstanding shares; and provided, further, that in no case shall the stated maximum authorized number of directors exceed two times the stated minimum number of authorized directors minus one.
Exhibit 31.1
CERTIFICATION
I, Raymond C. Stachowiak, as chief executive officer of American Shared Hospital Services, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of American Shared Hospital Services;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
August 15, 2022
/s/ Raymond C. Stachowiak
Raymond C. Stachowiak
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Craig K. Tagawa., as president, chief operating and financial officer of American Shared Hospital Services, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of American Shared Hospital Services;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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August 15, 2022 |
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/s/ Craig K. Tagawa |
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Craig K. Tagawa |
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President, Chief Operating and Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The certification set forth below is being submitted in connection with the Quarterly Report on Form 10-Q/A of American Shared Hospital Services for the quarterly period ended June 30, 2022 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
Ray Stachowiak, the Chief Executive Officer and Craig K. Tagawa, the President, Chief Operating and Financial Officer of American Shared Hospital Services, each certifies that, to the best of his knowledge:
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1. |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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2. |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of American Shared Hospital Services. |
August 15, 2022
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/s/ Raymond C. Stachowiak |
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Raymond C. Stachowiak |
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Chief Executive Officer |
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/s/ Craig K. Tagawa |
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Craig K. Tagawa |
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President, Chief Operating and Financial Officer |