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x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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California
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94-2918118
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(State
or other jurisdiction of
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(IRS
Employer
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Incorporation
or organization)
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Identification
No.)
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Four
Embarcadero Center, Suite 3700, San Francisco, California
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94111
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(unaudited)
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(audited)
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ASSETS
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September 30, 2010
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December 31, 2009
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||||||
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Current
assets:
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Cash
and cash equivalents
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$ | 1,091,000 | $ | 833,000 | ||||
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Restricted
cash
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50,000 | 50,000 | ||||||
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Certificate
of deposit
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9,000,000 | 9,000,000 | ||||||
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Accounts
receivable, net of allowance for doubtful accounts of $100,000 in 2010 and
2009
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4,085,000 | 3,817,000 | ||||||
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Other
receivables
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119,000 | 60,000 | ||||||
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Prepaid
expenses and other assets
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540,000 | 495,000 | ||||||
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Current
deferred tax assets
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219,000 | 219,000 | ||||||
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Total
current assets
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15,104,000 | 14,474,000 | ||||||
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Property
and equipment:
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Medical
equipment and facilities
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74,338,000 | 73,643,000 | ||||||
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Office
equipment
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676,000 | 692,000 | ||||||
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Deposits
and construction in progress
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6,041,000 | 5,852,000 | ||||||
| 81,055,000 | 80,187,000 | |||||||
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Accumulated
depreciation and amortization
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(35,215,000 | ) | (36,898,000 | ) | ||||
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Net
property and equipment
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45,840,000 | 43,289,000 | ||||||
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Investment
in preferred stock
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2,617,000 | 2,617,000 | ||||||
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Other
assets
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201,000 | 241,000 | ||||||
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Total
assets
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$ | 63,762,000 | $ | 60,621,000 | ||||
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LIABILITIES AND
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(unaudited)
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(audited)
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SHAREHOLDERS' EQUITY
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September 30, 2010
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December 31, 2009
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Current
liabilities:
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Accounts
payable
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$ | 243,000 | $ | 318,000 | ||||
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Employee
compensation and benefits
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235,000 | 199,000 | ||||||
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Other
accrued liabilities
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712,000 | 755,000 | ||||||
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Current
portion of long-term debt
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3,457,000 | 4,894,000 | ||||||
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Current
portion of obligations under capital leases
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2,969,000 | 1,811,000 | ||||||
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Total
current liabilities
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7,616,000 | 7,977,000 | ||||||
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Long-term
debt, less current portion
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9,696,000 | 11,836,000 | ||||||
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Long-term
capital leases, less current portion
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12,072,000 | 7,233,000 | ||||||
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Advances
on line of credit
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8,500,000 | 7,900,000 | ||||||
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Deferred
income taxes
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2,920,000 | 2,920,000 | ||||||
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Shareholders'
equity:
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Common
stock (4,597,000 shares at September 30, 2010 and 4,595,000 shares at
December 31, 2009)
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8,606,000 | 8,606,000 | ||||||
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Additional
paid-in capital
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4,678,000 | 4,593,000 | ||||||
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Retained
earnings
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6,222,000 | 6,205,000 | ||||||
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Total
equity-American Shared Hospital Services
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19,506,000 | 19,404,000 | ||||||
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Non-controlling
interest in subsidiary
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3,452,000 | 3,351,000 | ||||||
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Total
shareholders' equity
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22,958,000 | 22,755,000 | ||||||
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Total
liabilities and shareholders' equity
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$ | 63,762,000 | $ | 60,621,000 | ||||
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Three months ended September 30,
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Nine months ended September 30,
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2010
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2009
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2010
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2009
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Medical
services revenue
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$ | 4,280,000 | $ | 3,926,000 | $ | 12,523,000 | $ | 12,676,000 | ||||||||
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Costs
of revenue:
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Maintenance
and supplies
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441,000 | 350,000 | 1,256,000 | 1,143,000 | ||||||||||||
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Depreciation
and amortization
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1,494,000 | 1,637,000 | 4,455,000 | 4,888,000 | ||||||||||||
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Other
direct operating costs
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500,000 | 356,000 | 1,518,000 | 1,547,000 | ||||||||||||
| 2,435,000 | 2,343,000 | 7,229,000 | 7,578,000 | |||||||||||||
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Gross
Margin
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1,845,000 | 1,583,000 | 5,294,000 | 5,098,000 | ||||||||||||
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Selling
and administrative expense
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1,091,000 | 875,000 | 3,235,000 | 2,870,000 | ||||||||||||
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Transaction
costs
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- | 22,000 | - | 342,000 | ||||||||||||
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Interest
expense
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558,000 | 514,000 | 1,542,000 | 1,526,000 | ||||||||||||
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Operating
income
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196,000 | 172,000 | 517,000 | 360,000 | ||||||||||||
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Other
income - net
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27,000 | - | 89,000 | 16,000 | ||||||||||||
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Income
before income taxes
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223,000 | 172,000 | 606,000 | 376,000 | ||||||||||||
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Income
tax expense (benefit)
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19,000 | 16,000 | 51,000 | (49,000 | ) | |||||||||||
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Net
income
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204,000 | 156,000 | 555,000 | 425,000 | ||||||||||||
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Less:
Net income attributable to non-controlling interest
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(198,000 | ) | (139,000 | ) | (538,000 | ) | (476,000 | ) | ||||||||
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Net
income (loss) attributable to American Shared Hospital
Services
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$ | 6,000 | $ | 17,000 | $ | 17,000 | $ | (51,000 | ) | |||||||
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Net
income (loss) per share:
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Earnings
per common share - basic
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$ | - | $ | - | $ | - | $ | (0.01 | ) | |||||||
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Earnings
per common share - assuming dilution
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$ | - | $ | - | $ | - | $ | (0.01 | ) | |||||||
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PERIODS ENDED DECEMBER 31, 2008 AND 2009 AND SEPTEMBER 30, 2010
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Additional
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Non-controlling
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Common
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Common
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Paid-in
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Retained
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Sub-Total
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Interest in
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Shares
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Stock
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Capital
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Earnings
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ASHS
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Subsidiary
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Total
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Balances
at January 1, 2008 (audited)
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5,026,000 | $ | 9,320,000 | $ | 4,304,000 | $ | 5,916,000 | $ | 19,540,000 | $ | 3,153,000 | $ | 22,693,000 | |||||||||||||||
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Repurchase
of common stock
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(316,000 | ) | (443,000 | ) | - | - | (443,000 | ) | - | (443,000 | ) | |||||||||||||||||
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Stock
based compensation expense
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2,000 | - | 137,000 | - | 137,000 | - | 137,000 | |||||||||||||||||||||
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True-up
tax benefit from share-based payment arrangements
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- | - | 17,000 | - | 17,000 | - | 17,000 | |||||||||||||||||||||
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Cash
distributions to non-controlling interest
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- | - | - | - | - | (798,000 | ) | (798,000 | ) | |||||||||||||||||||
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Net
income
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- | - | - | 477,000 | 477,000 | 855,000 | 1,332,000 | |||||||||||||||||||||
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Balances
at December 31, 2008 (audited)
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4,712,000 | 8,877,000 | 4,458,000 | 6,393,000 | 19,728,000 | 3,210,000 | 22,938,000 | |||||||||||||||||||||
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Repurchase
of common stock
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(119,000 | ) | (271,000 | ) | - | - | (271,000 | ) | - | (271,000 | ) | |||||||||||||||||
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Stock
based compensation expense
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2,000 | - | 135,000 | - | 135,000 | - | 135,000 | |||||||||||||||||||||
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Cash
distributions to non-controlling interest
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- | - | - | - | - | (513,000 | ) | (513,000 | ) | |||||||||||||||||||
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Net
income (loss)
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- | - | - | (188,000 | ) | (188,000 | ) | 654,000 | 466,000 | |||||||||||||||||||
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Balances
at December 31, 2009 (audited)
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4,595,000 | 8,606,000 | 4,593,000 | 6,205,000 | 19,404,000 | 3,351,000 | 22,755,000 | |||||||||||||||||||||
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Stock
based compensation expense
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2,000 | - | 85,000 | - | 85,000 | - | 85,000 | |||||||||||||||||||||
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Cash
distributions to non-controlling interest
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- | - | - | - | - | (437,000 | ) | (437,000 | ) | |||||||||||||||||||
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Net
income
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- | - | - | 17,000 | 17,000 | 538,000 | 555,000 | |||||||||||||||||||||
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Balances
at September 30, 2010 (unaudited)
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4,597,000 | $ | 8,606,000 | $ | 4,678,000 | $ | 6,222,000 | $ | 19,506,000 | $ | 3,452,000 | $ | 22,958,000 | |||||||||||||||
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Nine months ended September 30,
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2010
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2009
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Operating
activities:
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Net
income
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$ | 555,000 | $ | 425,000 | ||||
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Adjustments
to reconcile net income to net cash from operating
activities:
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Depreciation
and amortization
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4,541,000 | 4,970,000 | ||||||
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Stock
based compensation expense
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85,000 | 101,000 | ||||||
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Changes
in operating assets and liabilities:
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Receivables
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(327,000 | ) | 578,000 | |||||
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Prepaid
expenses and other assets
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(45,000 | ) | (71,000 | ) | ||||
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Accounts
payable and accrued liabilities
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(82,000 | ) | (326,000 | ) | ||||
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Net
cash from operating activities
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4,727,000 | 5,677,000 | ||||||
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Investing
activities:
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Payment
for purchase of property and equipment
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(451,000 | ) | (880,000 | ) | ||||
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Investment
in certificate of deposit
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- | (9,000,000 | ) | |||||
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Net
cash from investing activities
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(451,000 | ) | (9,880,000 | ) | ||||
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Financing
activities:
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Cash
distribution to non-controlling interest
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(437,000 | ) | (417,000 | ) | ||||
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Advances
on line of credit
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600,000 | 1,700,000 | ||||||
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Payments
on line of credit
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- | (700,000 | ) | |||||
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Long
term financing on purchase of property and equipment
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928,000 | 811,000 | ||||||
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Capital
lease financing on property and equipment
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1,000,000 | - | ||||||
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Stock
repurchase
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- | (271,000 | ) | |||||
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Principal
payments on capital leases
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(1,604,000 | ) | (1,200,000 | ) | ||||
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Principal
payments on long-term debt
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(4,505,000 | ) | (5,537,000 | ) | ||||
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Net
cash from financing activities
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(4,018,000 | ) | (5,614,000 | ) | ||||
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Net
change in cash and cash equivalents
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258,000 | (9,817,000 | ) | |||||
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Cash
and cash equivalents at beginning of period
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833,000 | 10,286,000 | ||||||
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Cash
and cash equivalents at end of period
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$ | 1,091,000 | $ | 469,000 | ||||
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Supplemental
cash flow disclosure:
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Cash
paid during the period for:
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Interest
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$ | 1,838,000 | $ | 1,647,000 | ||||
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Income
taxes
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$ | 67,000 | $ | 51,000 | ||||
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Schedule
of non-cash investing and financing activities
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Acquisition
of equipment with capital lease financing
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$ | 6,601,000 | $ | 4,716,000 | ||||
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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·
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Still
River’s single room PBRT concept and design, although a departure from the
large scale three and four room PBRT systems on the market, is based on
the existing principle of generating protons from a cyclotron. Still
River, through design innovations and advances in magnet technology, has
made the cyclotron more compact such that it can be mounted on the
gantry.
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·
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A
gantry mounted cyclotron, although appearing to be revolutionary, has in
fact been done previously. A neutron generating gantry mounted
cyclotron has successfully treated patients for over ten years at one
medical center in the United
States.
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·
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Still
River’s development approach for the Monarch250 has been to integrate as
many commercially existing components as possible into the
Monarch250. The patient couch, CT imaging and treatment
planning software are all commercially available and will be integrated
into the Monarch250.
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·
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Still
River has hired engineers and staff with many years of accelerator and
proton beam experience, including personnel with prior experience at MIT’s
Plasma Fusion Lab and one of Still River’s proton beam
competitors.
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·
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Still
River has built the first three units of the magnet and other cyclotron
subsystems, has completed the manufacture/assembly of the gantry system,
and demonstrated integrated software control of all cyclotron operations
on the prototype unit.
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·
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Still
River completed and passed the cold mass test on the prototype unit in
2009 and completed the beam extraction test during second quarter
2010. Both the cold mass test and beam extraction test are
considered major milestones and an integral part of the process towards
gaining FDA approval.
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·
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Although
there were some minor problems during some of the tests that were quickly
rectified, they caused delays in the scheduled delivery of the first
unit. As a result, the Company’s expected delivery of its two
units has also been delayed. However, minor problems such as
these are expected in a new technology, and do not affect the Company’s
position on the viability of Still River
technology.
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·
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Installation
of the system is performed in three phases: Phase 1 consists of
rigging and mounting the gantry; Phase 2 includes assembling and
installing the clinical environment and the clinical software interfaces;
Phase 3 consists of the installation of the accelerator
module. The first two installation phases have been completed
at the first site, and Still River has begun work on the final phase, with
installation at the site expected in May
2011.
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·
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A
respected physicist was hired by the Company as a third party consultant
to perform a technical review of this project, and continues to make
periodic reviews of Still River’s progress at the request of the
Company. His discussions with Still River’s chief technology
officer indicated that the delays encountered have at times resulted in
modifications being required, but the modifications were not significant,
and he believes that development of the PBRT machine will be completed
according to Still River’s timeline. The consultant was not
engaged to analyze Still River’s financial
condition.
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·
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In
spite of the uncertain economic climate and a limited number of potential
investors, with the Series D offering, Still River was still able to raise
the cash required to continue its operations, and was able to add two new
major investors. Still River also raised additional funding
under the Series D offering in second quarter 2010. The Company
chose not to invest in this additional
funding.
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·
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Based
on ongoing discussions with Still River management and regular review of
their financial statements and cash flow projections, the Company believes
that Still River will have adequate cash flow to continue development of
the system. Still River, as a development stage company
manufacturing its first product, continuously analyzes its cash
requirements. Due to the high level of interest in more compact
and lower cost proton beam radiation therapy devices, Still River has been
able to attract funding from financially significant and highly
sophisticated investors, such as Caxton Health and Life Sciences, Venrock
Associates and CHL Medical Partners. Still River is prepared,
as required, to raise additional funds as its needs
dictates.
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·
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In
recent months Still River added a new CEO, strengthening its management
depth, and with the new investors, increased its board strength as
well. Independent board members consist of the
following: Robert Wilson, Former Vice Chairman of Johnson and
Johnson; Peter P. D’Angelo, President, Caxton Associates; Dr. Anders Hove,
MD, Partner, Venrock Associates; Dr. Myles D. Greenberg, MD, General
Partner, CHL Medical Partners; Dr. Jay Rao, MD, JD, Portfolio Manager,
Green Arrow Capital Management; and Mr. Paul Volcker, Former Chairman,
United States Federal Reserve.
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·
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Still
River currently has deposits from 15 sites to install the Monarch250
system.
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10.18b
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Second
Amendment to Lease Agreement for a Gamma Knife unit effective as of
December 23, 2009 between GK Financing, LLC and Methodist Healthcare
System of San Antonio, Ltd., d/b/a Southwest Texas Methodist Hospital
(Confidential material appearing in this document has been omitted and
filed separately with the Securities and Exchange Commission in accordance
with Rule 24b-2, promulgated under the Securities and Exchange Act of
1934, as amended. Omitted information has been replaced with
asterisks.)
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31.1
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Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
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31.2
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Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
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32.1
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Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
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Date:
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November
15, 2010
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/s/ Ernest A. Bates, M.D.
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Ernest
A. Bates, M.D.
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Chairman
of the Board and Chief Executive Officer
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Date:
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November
15, 2010
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/s/ Craig K. Tagawa
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Craig
K. Tagawa
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Senior
Vice President
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Chief
Operating and Financial Officer
|