UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_______________________

FORM 10-Q

(Mark One)

x
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 20172019 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)

California94-2918118
California94-2918118
(State or other jurisdiction of(IRS Employer

incorporation or organization)		(IRS Employer
Identification No.)


Two Embarcadero Center, Suite 410, San Francisco, California94111

(Address of Principal Executive Offices)		94111
(Zip Code)

Registrant’s telephone number, including area code: (415) 788-5300

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 Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesxý    No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesxý   No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emergingemerging growth company”company in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer¨Accelerated Filer¨Non-Accelerated Filer¨Smaller reporting companyx
Emerging Growth Company¨

Large Accelerated Filer ¨        Accelerated Filer ¨          Non-Accelerated Filer ý        Smaller reporting company ý
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¨  Nox

ý

Title of each classTrading Symbol(s)Name of each exchange on which
registered
American Shared Hospital Services Common Stock, No Par ValueAMSNYSE AMERICAN
As of November 7, 2017,1, 2019, there arewere outstanding 5,710,0005,816,000 shares of the Registrant’sregistrant’s common stock.




PART I -– FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Item 1. Financial Statements
AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED BALANCE SHEETS

  (unaudited)    
ASSETS September 30, 2017  December 31, 2016 
       
Current assets:        
Cash and cash equivalents $1,315,000  $2,871,000 
Restricted cash  350,000   250,000 
Accounts receivable, net of allowance for doubtful accounts of $100,000 at September 30, 2017 and $100,000 at December 31, 2016  5,345,000   4,085,000 
Other receivables  221,000   290,000 
Prepaid expenses and other current assets  1,859,000   892,000 
         
Total current assets  9,090,000   8,388,000 
         
         
Property and equipment:        
Medical equipment and facilities  95,865,000   96,270,000 
Office equipment  566,000   537,000 
Deposits and construction in progress  3,682,000   8,073,000 
   100,113,000   104,880,000 
Accumulated depreciation and amortization  (50,057,000)  (53,549,000)
Net property and equipment  50,056,000   51,331,000 
         
Investment in equity securities  579,000   579,000 
Other assets  251,000   300,000 
         
Total assets $59,976,000  $60,598,000 

LIABILITIES AND (unaudited)    
SHAREHOLDERS’ EQUITY September 30, 2017  December 31, 2016 
       
Current liabilities:        
Accounts payable $261,000  $319,000 
Employee compensation and benefits  240,000   184,000 
Other accrued liabilities  1,289,000   1,100,000 
         
         
Current portion of long-term debt  2,495,000   2,205,000 
Current portion of obligations under capital leases  4,538,000   4,873,000 
         
Total current liabilities  8,823,000   8,681,000 
         
Long-term debt, less current portion  4,221,000   5,106,000 
Long-term capital leases, less current portion  13,538,000   14,852,000 
Deferred revenue, less current portion  530,000   610,000 
         
Deferred income taxes  4,676,000   4,176,000 
         
Shareholders’ equity:        
Common stock, no par value (10,000,000 authorized; 5,710,000 shares issued and outstanding at September 30, 2017 and 5,468,000 shares at December 31, 2016)  10,711,000   10,596,000 
Additional paid-in capital  6,107,000   5,949,000 
Retained earnings  5,455,000   4,950,000 
Total equity-American Shared Hospital Services  22,273,000   21,495,000 
Non-controlling interest in subsidiary  5,915,000   5,678,000 
Total shareholders’ equity  28,188,000   27,173,000 
         
Total liabilities and shareholders’ equity $59,976,000  $60,598,000 

(Unaudited)
ASSETSSeptember 30, 2019December 31, 2018
Current assets:
Cash and cash equivalents$1,297,000  $1,442,000  
Restricted cash350,000  350,000  
Accounts receivable, net of allowance for doubtful accounts of $100,000 at September 30, 2019 and $100,000 at December 31, 20186,511,000  5,502,000  
Other receivables insurance proceeds—  1,137,000  
Other receivables261,000  239,000  
Prepaid expenses and other current assets1,825,000  1,276,000  
Total current assets10,244,000  9,946,000  
Property and equipment:
Medical equipment and facilities90,672,000  94,031,000  
Office equipment578,000  589,000  
Deposits and construction in progress5,589,000  6,082,000  
96,839,000  100,702,000  
Accumulated depreciation and amortization(53,836,000) (54,008,000) 
Net property and equipment43,003,000  46,694,000  
Right of use assets1,173,000  —  
Other assets838,000  862,000  
Total assets$55,258,000  $57,502,000  
LIABILITIES AND SHAREHOLDERS' EQUITYSeptember 30, 2019December 31, 2018
Current liabilities:
Accounts payable$1,097,000  $435,000  
Employee compensation and benefits289,000  207,000  
Other accrued liabilities1,482,000  1,329,000  
Other accrued liabilities insurance payable—  977,000  
Current portion of lease liabilities272,000  —  
Current portion of long-term debt1,666,000  2,119,000  
Current portion of obligations under capital leases3,972,000  4,407,000  
Total current liabilities8,778,000  9,474,000  
Long-term lease liabilities, less current portion901,000  —  
Long-term debt, less current portion2,230,000  3,332,000  
Long-term capital leases, less current portion8,881,000  10,308,000  
Deferred revenue, less current portion302,000  382,000  
Deferred income taxes2,744,000  2,958,000  
Shareholders' equity:
Common stock, no par value (10,000,000 authorized; 5,816,000 and 5,714,000 shares issued and outstanding at September 30, 2019 and at December 31, 2018)10,752,000  10,711,000  
Additional paid-in capital6,665,000  6,495,000  
Retained earnings8,362,000  7,896,000  
Total equity-American Shared Hospital Services25,779,000  25,102,000  
Non-controlling interest in subsidiary5,643,000  5,946,000  
Total shareholders' equity31,422,000  31,048,000  
Total liabilities and shareholders' equity$55,258,000  $57,502,000  
See accompanying notes

2

1

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

  Three months ended September 30,  Nine months ended September 30, 
  2017  2016  2017  2016 
             
Rental income from medical services $4,613,000  $4,884,000  $14,472,000  $13,640,000 
                 
Costs of revenue:                
                 
Maintenance and supplies  331,000   163,000   811,000   657,000 
                 
Depreciation and amortization  1,674,000   1,687,000   5,000,000   4,898,000 
                 
Other direct operating costs  726,000   638,000   2,182,000   2,117,000 
                 
   2,731,000   2,488,000   7,993,000   7,672,000 
                 
Gross Margin  1,882,000   2,396,000   6,479,000   5,968,000 
                 
                 
Selling and administrative expense  1,026,000   999,000   3,303,000   2,911,000 
                 
Interest expense  417,000   501,000   1,314,000   1,219,000 
                 
Operating income  439,000   896,000   1,862,000   1,838,000 
                 
(Loss) on early extinguishment of debt  -   -   -   (108,000)
                 
Interest and other income (loss)  -   3,000   (1,000)  11,000 
                 
Income before income taxes  439,000   899,000   1,861,000   1,741,000 
                 
Income tax expense  164,000   267,000   600,000   424,000 
                 
Net income  275,000   632,000   1,261,000   1,317,000 
                 
Less: Net (income) attributable to non-controlling interests  (176,000)  (298,000)  (756,000)  (839,000)
                 
Net income attributable to American Shared Hospital Services $99,000  $334,000  $505,000  $478,000 
                 
Net income per share:                
                 
Earnings per common share - basic $0.02  $0.06  $0.09  $0.09 
                 
Earnings per common share - diluted $0.02  $0.06  $0.09  $0.09 

Three Months ended September 30,Nine Months ended September 30,
2019201820192018
Revenues$5,301,000  $4,470,000  $15,819,000  $14,944,000  
Costs of revenue:
Maintenance and supplies648,000  470,000  1,968,000  1,723,000  
Depreciation and amortization1,817,000  1,761,000  5,719,000  5,082,000  
Other direct operating costs1,023,000  605,000  2,653,000  2,218,000  
3,488,000  2,836,000  10,340,000  9,023,000  
Gross Margin1,813,000  1,634,000  5,479,000  5,921,000  
Selling and administrative expense1,065,000  1,050,000  3,201,000  3,067,000  
Interest expense302,000  399,000  1,015,000  1,230,000  
Operating income446,000  185,000  1,263,000  1,624,000  
Proceeds received from investment in equity securities—  —  —  22,000  
Interest and other income7,000  185,000  15,000  194,000  
Income before income taxes453,000  370,000  1,278,000  1,840,000  
Income tax expense99,000  82,000  250,000  401,000  
Net income354,000  288,000  1,028,000  1,439,000  
Less: Net income attributable to non-controlling interest(189,000) (120,000) (562,000) (594,000) 
Net income attributable to American Shared Hospital Services$165,000  $168,000  $466,000  $845,000  
Net income per share:
Earnings per common share - basic$0.03  $0.03  $0.08  $0.14  
Earnings per common share - diluted$0.03  $0.03  $0.08  $0.14  
See accompanying notes

3

1

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’SHAREHOLDERS' EQUITY

(Unaudited)

  PERIODS ENDED DECEMBER 31, 2016 AND SEPTEMBER 30, 2017 
        Additional        Non-controlling    
  Common  Common  Paid-in  Retained  Sub-Total  Interests in    
  Shares  Stock  Capital  Earnings  ASHS  Subsidiaries  Total 
                      
Balances at January 1, 2016  5,364,000  $10,376,000  $5,734,000  $4,020,000  $20,130,000  $5,050,000  $25,180,000 
                             
Stock-based compensation expense  4,000   -   215,000   -   215,000   -   215,000 
                             
Warrants exercised  100,000   220,000   -   -   220,000   -   220,000 
                             
Non-controlling interest investment in subsidiaries  -   -   -   -   -   7,000   7,000 
                             
Cash distributions to non-controlling interests  -   -   -   -   -   (699,000)  (699,000)
                             
Net income  -   -   -   930,000   930,000   1,320,000   2,250,000 
                             
Balances at December 31, 2016  5,468,000  $10,596,000  $5,949,000  $4,950,000  $21,495,000  $5,678,000  $27,173,000 
                             
Stock-based compensation expense  4,000   -   158,000   -   158,000   -   158,000 
                             
Restricted stock awards  162,000   -   -   -   -   -   - 
                             
Warrants and options exercised  76,000   115,000   -   -   115,000   -   115,000 
                             
Cash distributions to non-controlling interests  -   -   -   -   -   (519,000)  (519,000)
                             
Net income  -   -   -   505,000   505,000   756,000   1,261,000 
                             
Balances at September 30, 2017  5,710,000  $10,711,000  $6,107,000  $5,455,000  $22,273,000  $5,915,000  $28,188,000 

FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2019
Common
Shares		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Sub-Total
ASHS		Non-controlling
Interests in
Subsidiaries		Total
Balances at January 1, 20195,714,000  $10,711,000  $6,495,000  $7,896,000  $25,102,000  $5,946,000  $31,048,000  
Stock-based compensation expense—  —  55,000  —  55,000  —  55,000  
Cash distributions to non-controlling interests—  —  —  —  —  (19,000) (19,000) 
Net income—  —  —  270,000  270,000  125,000  395,000  
Balances at March 31, 20195,714,000  10,711,000  6,550,000  8,166,000  25,427,000  6,052,000  31,479,000  
Stock-based compensation expense86,000  —  53,000  —  53,000  —  53,000  
Cash distributions to non-controlling interests—  —  —  —  —  (57,000) (57,000) 
Net income—  —  —  31,000  31,000  248,000  279,000  
Balances at June 30, 20195,800,000  10,711,000  6,603,000  8,197,000  25,511,000  6,243,000  31,754,000  
Stock-based compensation expense—  —  62,000  —  62,000  —  62,000  
Options exercised1600041000—  —  41000$—  41000
Cash distributions to non-controlling interests—  —  —  —  —  (789,000) (789,000) 
Net income—  —  —  165,000  165,000  189,000  354,000  
Balances at September 30, 20195,816,000  $10,752,000  $6,665,000  $8,362,000  $25,779,000  $5,643,000  $31,422,000  
2

FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018
Common
Shares		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Sub-Total
ASHS		Non-controlling
Interests in
Subsidiaries		Total
Balances at January 1, 20185,710,000  $10,711,000  $6,272,000  $6,873,000  $23,856,000  $6,029,000  $29,885,000  
Stock-based compensation expense—  —  55,000  —  55,000  —  55,000  
Net income—  —  —  390,000  390,000  261,000  651,000  
Balances at March 31, 20185,710,000  10,711,0006,327,0007,263,00024,301,0006,290,00030,591,000
Stock-based compensation expense4,000  —  57,000  —  57,000  —  57,000  
Cash distributions to non-controlling interests—  —  —  —  —  (77,000) (77,000) 
Net income—  —  —  287,000  287,000  213,000  500,000  
Balances at June 30, 20185,714,000  10,711,000  6,384,000  7,550,000  24,645,000  6,426,000  31,071,000  
Stock-based compensation expense—  —  57,000  —  57,000  —  57,000  
Cash distributions to non-controlling interests—  —  —  —  —  (393,000) (393,000) 
Net income—  —  —  168,000  168,000  120,000  288,000  
Balances at September 30, 20185,714,000  $10,711,000  $6,441,000  $7,718,000  $24,870,000  $6,153,000  $31,023,000  
See accompanying notes

4

3

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

  Nine Months ended September 30, 
  2017  2016 
Operating activities:        
Net income $1,261,000  $1,317,000 
         
Adjustments to reconcile net income to net cash from operating activities:        
         
Depreciation and amortization  5,050,000   4,929,000 
         
Loss on sale or disposal of assets  15,000   - 
         
Loss on early extinguishment of debt  -   108,000 
         
Deferred income tax  500,000   378,000 
         
Stock based compensation expense  158,000   161,000 
         
Net accrued interest on lease financing  (79,000)  - 
         
Other non-cash items  -   4,000 
         
Changes in operating assets and liabilities:        
         
Accounts receivable and other receivables  (1,191,000)  (1,281,000)
         
Prepaid expenses and other assets  (944,000)  (226,000)
         
Deferred revenue  (84,000)  (186,000)
         
Accounts payable and accrued liabilities  290,000   490,000 
         
Net cash from operating activities  4,976,000   5,694,000 
         
Investing activities:        
Payment for purchase of property and equipment  (760,000)  (1,050,000)
         
Proceeds from sale of equipment  150,000   - 
         
Net cash (used in) investing activities  (610,000)  (1,050,000)
         
Financing activities:        
Principal payments on long-term debt  (1,595,000)  (2,383,000)
         
Principal payments on capital leases  (3,823,000)  (3,054,000)
         
Capital contributions from non-controlling interests  -   7,000 
         
Distributions to non-controlling interests  (519,000)  (514,000)
         
Proceeds from warrants and options exercised  115,000   - 
         
Reclassification of restricted cash  (100,000)  (200,000)
         
Proceeds from capital lease financing for reimbursement of payments for acquisition of equipment  -   1,137,000 
         
Net cash (used in) financing activities  (5,922,000)  (5,007,000)
         
Net change in cash and cash equivalents  (1,556,000)  (363,000)
         
Cash and cash equivalents at beginning of period  2,871,000   2,209,000 
         
Cash and cash equivalents at end of period $1,315,000  $1,846,000 
         
Supplemental cash flow disclosure:        
Cash paid during the period for:        
         
Interest $1,424,000  $1,614,000 
         
Income taxes paid $104,000  $219,000 
         
Schedule of non-cash investing and financing activities        
Acquisition of equipment with capital lease financing $2,153,000  $8,332,000 
         
Acquisition of equipment with long-term debt financing $992,000  $- 

Nine Months ended September 30,
20192018
Operating activities:
Net income$1,028,000  $1,439,000  
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization5,772,000  5,138,000  
Non cash lease expense189,000  —  
Deferred income tax(214,000) 45,000  
Stock-based compensation expense170,000  169,000  
Net accrued interest on lease financing9,000  39,000  
Interest expense associated with lease liabilities59,000  —  
Changes in operating assets and liabilities:
Receivables(896,000) (398,000) 
Prepaid expenses and other assets(559,000) (473,000) 
Customer deposits/deferred revenue(60,000) (93,000) 
Lease liability(248,000) —  
Accounts payable and accrued liabilities877,000  359,000  
Net cash provided by operating activities6,127,000  6,225,000  
Investing activities:
Payment for purchase of property and equipment(889,000) (1,187,000) 
Proceeds from insurance160,000  —  
Net cash used in investing activities(729,000) (1,187,000) 
Financing activities:
Principal payments on long-term debt(1,564,000) (1,875,000) 
Principal payments on capital leases(3,155,000) (3,006,000) 
Distributions to non-controlling interests(865,000) (470,000) 
Proceeds from options exercised41,000  —  
Net cash used in financing activities(5,543,000) (5,351,000) 
Net change in cash, cash equivalents, and restricted cash(145,000) (313,000) 
Cash, cash equivalents, and restricted cash at beginning of period1,792,000  2,502,000  
Cash, cash equivalents, and restricted cash at end of period$1,647,000  $2,189,000  
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest$1,015,000  $1,307,000  
Income taxes paid$418,000  $277,000  
Schedule of non-cash investing and financing activities
Right of use assets and lease liabilities$1,362,000  $—  
Interest capitalized to property and equipment$82,000  $77,000  
Acquisition of equipment with capital lease financing$1,293,000  $1,679,000  
See accompanying notes

5

4

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 (consistingnecessary for the fair presentation of only normal recurring accruals) necessary to present fairly American Shared Hospital Services’ consolidated financial position as of September 30, 2017 and2019, the results of its operations for the three and nine-month periods ended September 30, 20172019 and 2016, which2018, and the cash flows for the three and nine-month periods ended September 30, 2019 and 2018. The results of operations for the three and nine-months ended September 30, 2019 are not necessarily indicative of results on an annualized basis. Consolidated balance sheet amounts as of December 31, 20162018 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, 20162018 included in the Company’sAmerican Shared Hospital Services’ Annual Report on Form 10-K filed with the Securities and Exchange Commission.

These consolidated financial statements include the accounts of American Shared Hospital Services and its subsidiaries (the “Company”) as follows: the Company wholly-owns the subsidiaries American Shared Radiosurgery Services (“ASRS”), PBRT Orlando, LLC (“Orlando”), OR21, Inc. (“OR21”), and MedLeader.com, Inc. (“MedLeader”); the Company is the majority owner of Long Beach Equipment, LLC (“LBE”); ASRS is the majority-owner of GK Financing, LLC (“GKF”) which wholly-owns the subsidiariessubsidiary Instituto de Gamma Knife del Pacifico S.A.C. (“GKPeru”) and GK Financing U.K., Limited (“GKUK”); 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 September 30, 2017,2019, GKF providedprovides Gamma Knife units to sixteenfifteen medical centers in the United States in the states of Arkansas, California, Florida, Illinois, Indiana, Massachusetts, Mississippi, Nebraska, Nevada, New Jersey, New Mexico, New York, Tennessee, Ohio, Oregon, Tennessee, and Texas. GKF also owns and operates a single-unit Gamma Knife facility in Lima, Peru.

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 also directly provides radiation therapy and related equipment, including Intensity Modulated Radiation Therapy, (“IMRT”), Image Guided Radiation Therapy (“IGRT”) and a CT Simulator to the radiation therapy department at an existing Gamma Knife site in Massachusetts.

The Company formed the subsidiaries GKPeru and GKUK for the purposes of expanding its business internationally into Peru and the United Kingdom, respectively;internationally; Orlando and LBE to provide proton beam therapy equipment and services in Orlando, Florida and Long Beach, California;California, respectively; and AGKE and JGKE to provide Gamma Knife equipment and services in Albuquerque, New Mexico and Jacksonville, Florida, respectively. AGKE began operations in the second quarter of 2011 and JGKE began operations in the fourth quarter of 2011. Orlando treated its first patient in April 2016. GKPeru treated its first patient in July 2017. GKUK is inactive and LBE is not expected to generate revenue within the next two years.

6

The Company continues to develop its design and business model for “TheThe Operating Room for the 21st Century”CenturySM (“OR21”), 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 withinfor at least the next two years.

MedLeader was formed to provide continuing medical education online and through videos for doctors, nurses, and other healthcare workers. This subsidiary is not operational at this time.

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

5

Accounting Pronouncements Issued and Adopted
Based on the guidance provided in accordance with Accounting Standards Codification (“ASC”) 280Segment Reporting (“ASC 280”), the Company has analyzed its subsidiaries which are all in the business of leasing radiosurgery and radiation therapy equipment to healthcare providers, and concluded there is one1 reportable segment, Rental Income from Medical Services.Revenues. The Company provides Gamma Knife, PBRT, and IGRT equipment to seventeensixteen hospitals in the United States as of September 30, 2017. The Company, through GKF, alsoand owns and operates a single-unit Gamma Knife facility in Lima, Peru.Peru as of September 30, 2019. These eighteenseventeen locations operate under different subsidiaries of the Company but offer the same service,services: radiosurgery and radiation therapy. The operating results of the subsidiaries are reviewed by the Company’s Chief Executive Officer and Chief Financial Officer, who are also deemed the Company’s Chief Operating Decision Makers (“CODMs”) and this is done in conjunction with all of the subsidiaries and locations.


In February 2016, the Company used proceeds from the lease financing of its MEVION S250 at Orlando Health – UF Health Cancer Center (“Orlando Health”) to pay down $1,000,000 in Promissory Notes (the “Notes”) with four members of the Company’s Board of Directors. Based on the guidance provided in accordance with ASC 405Extinguishment of Liabilities(“ASC 405”) and ASC 470Debt Modifications and Extinguishments (“ASC 470”), the pay-down of the Notes is considered an extinguishment of debt and, as such, the difference between the net carrying amount of the Notes and the costs of extinguishment was recognized as a loss on the Company’s condensed consolidated statements of operations. During the year ended December 31, 2016, the Company recorded a loss on early extinguishment of debt of $108,000. The Notes were issued with common stock warrants with an estimated fair value of $145,000. The unamortized balance of the discount on the Notes, of $80,000, and deferred fees incurred from the issuance of the Note of approximately $28,000, were recorded as a loss on early extinguishment.

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As of December 31, 2016, the Company had warrants outstanding representing the right to purchase 100,000 shares of the Company’s common stock at $2.20 per share. These warrants were issued with the Notes to four members of the Company’s Board of Directors. During the nine-month period ended September 30, 2017, 100,000 of the warrants were exercised. 50,000 of the 100,000 warrants were exercised via a cashless exercise resulting in the net issuance of approximately 25,000 shares. There are no warrants outstanding as of September 30, 2017.

In April 2017, an existing customer exercised their option to purchase the Gamma Knife unit at its hospital at the end of the lease term for a predetermined purchase price, pursuant to the lease agreement. The lease terminated in April 2017, at which time, the unit was depreciated to the purchase price of the sale. Based on the guidance provided in ASC 360Property, Plant and Equipment (“ASC 360”), the Company did not classify or measure the asset as held for sale prior to the lease termination, because the Gamma Knife unit was not available for immediate sale.

On July 21, 2017, the Company entered into a Maintenance and Support Agreement (the “Mevion Service Agreement”) with Mevion Medical Systems, Inc. (“Mevion”), formerly Still River Systems, which provides for maintenance and support of the Company’s PBRT unit at Orlando Health. The Mevion Service Agreement began September 5, 2017 and required an upfront payment of $1,000,000 which was made on August 4, 2017, and further requires payments over the next 11 months. This payment portion was recorded as a prepaid contract and will be amortized over the one-year service period. The Mevion Service Agreement is for a five (5) year period.

In May 2014, the Financial Accounting Standards Board “(FASB”(“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in United States Generally Accepted Accounting Principles (“GAAP”) when it becomes effective. In December 2016, FASB issued ASU 2016-20Technical Corrections and Improvements to Topic 606,(“ASU 2016-20”), which affects some narrow aspects of ASU 2014-09. The new standard is effective for the Company for annual reporting periods beginning after December 15, 2017 and interim reporting periods therein. Early application is permitted for reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company performed an analysis to determine if its revenue agreements with customers fall under the scope of ASU No. 2016-02Leases (“ASU 2016-02”) or ASU 2014-09 and concluded that, other than with respect to the Company’s stand-alone facility in Lima, Peru, ASU 2014-09 was not applicable. The Company has a project team in place to analyze the impact of ASU 2014-09 to its revenue stream in Peru. The Company believes it is following an appropriate timeline to allow for proper recognition, presentation, and disclosure upon adoption of ASU 2014-09. The Company intends to adopt the standard at the date required for public companies, but has not yet selected a transition method. The Company does not anticipate any change to its IT control environment from the adoption of ASU 2014-09.

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In January 2016, the FASB issued ASU No. 2016-01Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income. The new guidance is effective for the Company on January 1, 2018. Early adoption is permitted. The standard permits the use of cumulative-effect transition method. The Company is evaluating the effect that ASU 2016-01 will have on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize, for all leases, at the commencement date, a lease liability, and a right-of-use asset. Under the new guidance, lessor accountingclassification criteria for direct financing and sales-type leases is largely unchanged. Themodified. In July 2018, the FASB issued ASU No. 2018-10 Leases (Topic 842) Codification Improvements to Topic 842, and ASU No. 2018-11 Leases (Topic 842) Targeted Improvements (“ASU 2018-11”), in December 2018 the FASB issued ASU No. 2018-20 Leases (Topic 842) Narrow-Scope Improvements, and in February 2019 the FASB issued ASU No. 2019-01 Leases (Topic 842) Codification Improvements. ASU 2018-11 provides a new guidancetransition method in which an entity can initially apply the new lease standards at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This standard is effective for the Company on January 1, 2019. Early adoption is permitted. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.annual periods beginning after December 15, 2018. The Company performed an analysis to determine if its revenue agreements with customers fall under the scope of ASU 2016-02 or ASU 2014-09, Revenue from Contracts with Customers (Topic 606)and concludeconcluded that, other than with respect to the Company’s stand-alone facility in Lima, Peru, ASU 2016-02 applied. The Company believes it is following an appropriate timelineadopted ASU 2016-02 and related ASUs as of January 1, 2019 using the modified retrospective transition method. The Company elected to allowinitially apply ASU 2016-02 and related ASUs beginning January 1, 2019 and elected to use the package of practical expedients upon adoption. The provisions of the package of practical expedients allowed the Company to not reassess whether any expired or existing contracts are or contain leases, the lease classification for proper recognition, presentation,expired or existing contracts, and disclosurethe Company need not reassess the initial direct costs for any existing leases. The Company also used the hindsight expedient upon adoption which allowed the Company to examine its history when assessing lease term and whether it will exercise renewal options for certain contracts. The Company recognized lease liabilities and right-of-use assets of approximately $1,362,000 for its operating leases at January 1, 2019, with no initial material impact to its consolidated statements of operations.


In July 2019, the FASB issued ASU 2016-02.

2019-07 Codification Updates to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates ("ASU 2019-07") which clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning with the SEC's regulations, thereby eliminating redundancies and making the codification easier to apply. The new guidance was effective immediately upon issuance and did not have a material impact on the Company's financial statements and related disclosures.

Accounting Pronouncements Issued and Not Yet Adopted
In March 2016,February 2018, the FASB issued ASU No. 2016-09Compensation – Stock Compensation (Topic 718)2018-03 Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-09”2018-03”), which changes fiveclarifies certain aspects of accountingASU 2016-01. These are: equity securities without a readily determinable fair value – discontinuation, equity securities without a readily determinable fair value – adjustments, forward contracts and purchased options, presentation requirements for share-based payment award transactions including 1) accountingcertain fair value option liabilities, fair value option liabilities denominated in a foreign currency, and transition guidance for income taxes; 2) classification of excess tax benefits on the statement of cash flows; 3) forfeitures; 4) minimum statutory tax withholding requirements; and 5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. The new guidance is effective for the Company for interim and annual periods beginning after December 15, 2016. The Company adopted ASU 2016-09 on January 1, 2017. The Company elected to estimate the impact of forfeitures. There was no material impact on the consolidated financial statements and related disclosures.

equity securities without a readily determinable fair value. In June 2016,August 2018, the FASB issued ASU No. 2016-13Financial Instruments2018-13 Fair Value Measurement (Topic 820): Disclosure Framework – Credit Losses (Topic 326):Changes to the Disclosure Requirements to Fair Value Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”2018-13”), which requires measurement and recognition of expected credit losses for financial assets held. The new guidance is effective for fiscal periods beginning after December 15, 2019. Early adoption is permitted for fiscal periods beginning after December 15, 2018. The Company is evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which provides guidance on eight specific cash flow issues: debt prepayment or extinguishment costs; settlement of zero-coupon or other debt instruments with coupon interest rates that are insignificant in relation toamended the effective interest ratedate and other certain measurement aspects of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the Predominance Principle. The new guidance is effective for fiscal periods beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the effect that ASU 2016-15 will have on its consolidated financial statements and related disclosures.

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In November 2016, the FASB issued ASU No. 2016-18Statement of Cash Flows (Topic 230) – Restricted Cash (“ASU 2016-18”), which requires that a statement of cash flows explain the change during the period in total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.2018-03. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.years beginning after December 15, 2019. The Company is evaluating the effect thatdoes not expect ASU 2016-18 will2018-03 or ASU 2018-13 to have a significant impact on its consolidated financial statements and related disclosures.

In May 2017,

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Note 2. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation for Gamma Knife, IGRT, and other equipment is determined using the FASB issued ASU No. 2017-09Compensationstraight-line method over the estimated useful lives of the assets, which for medical and office equipment is generally 3 – Stock Compensation (Topic 718): Scope10 years, and after accounting for salvage value on the equipment where indicated. Salvage value is based on the estimated fair value of Modification Accounting(“ASU 2017-09”),the equipment at the end of its useful life.
Depreciation for PBRT equipment is determined using the modified units of production method, which provides guidance on determiningis 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 changes tohas been estimated at 20 years. The estimated useful life of the termsPBRT unit is consistent with the estimated economic life of 20 years.

The following table summarizes property and conditionsequipment as of share-based payment awards require an entity to apply modification accounting under Topic 718. The new guidance is effective for fiscal years beginning afterSeptember 30, 2019 and December 31, 2017. Early adoption2018:
September 30,December 31,
20192018
Medical equipment and facilities$90,672,000  $94,031,000  
Office equipment578,000  589,000  
Deposits and construction in progress3,339,000  3,832,000  
Deposits towards purchase of proton beam systems2,250,000  2,250,000  
96,839,000  100,702,000  
Accumulated depreciation(53,836,000) (54,008,000) 
Net property and equipment$43,003,000  $46,694,000  
As of September 30, 2019, approximately $2,961,000 of the net property and equipment balance is permitted, including adoptionoutside of the United States. As of September 30, 2019, the Company has one idle Gamma Knife unit with a cumulative net book value of $729,000. There are currently no commitments to place into service or trade in an interim period. this unit during 2019.
Note 3. Long-Term Debt Financing
Long-term debt consists of 7 notes with three financing companies collateralized by the Gamma Knife equipment, the individual customer contracts, and related accounts receivable at September 30, 2019. As of September 30, 2019, long-term debt on the Condensed Consolidated Balance Sheets was $3,896,000. See disclosure of future payments below under the heading “Commitments”.
Note 4. Capital Lease Financing
Capital lease financing consists of 10 leases with three financing companies, collateralized by Gamma Knife and PBRT equipment, the individual customer contracts, and related accounts receivable at September 30, 2019. As of September 30, 2019, obligations under capital leases on the Condensed Consolidated Balance Sheets were $12,853,000. See disclosure of future payments below under the heading “Commitments”.





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Note 5. Leases
The Company determines if a contract is evaluatinga lease at inception. Under ASC 842 Leases (“ASC 842”), the effectCompany is a lessor of equipment to various customers. Leases that ASU 2017-09 willcommenced prior to ASC 842 adoption date were classified as operating leases under historical guidance. As the Company has elected the package of practical expedients allowing to not reassess lease classification, these leases are classified as operating leases under ASC 842 as well. 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, PBRT, and IGRT 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 (see further discussion at Note 2). 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 receivable.
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, so the Company determined its consolidated financial statementsincremental borrowing rate of approximately 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 disclosures.

equipment, and the agreement to lease clinic space for its stand-alone facility in Lima, Peru. These leases have remaining lease terms between 3 and 5 years, some of which include options to renew or extend the lease. As of September 30, 2019, operating ROU assets and liabilities were $1,173,000.
The following table summarizes maturities of lessee operating lease ROU assets and liabilities as of September 30, 2019:
Year ending December 31,Operating Leases
2019 (excluding the nine-months ended September 30, 2019)$84,000  
2020340,000  
2021347,000  
2022331,000  
2023214,000  
Thereafter6,000  
Total lease payments1,322,000  
Less imputed interest(149,000) 
Total$1,173,000  







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Note 2.6. Per Share Amounts

Per share information has been computed based on the weighted average number of common shares and dilutive common share equivalents outstanding. The computation for the three and nine-month periods ended September 30, 20172019 excluded approximately 14,000513,000 of the Company’s stock options respectively, because the exercise price of the options was higher than the average market price during those periods. The computation for the three-month periodthree and nine-month periods ended September 30, 20162018 excluded approximately 571,000176,000 and 519,000, respectively, of the Company's stock options and the nine-month period ended September 30, 2016 excluded approximately 600,000 stock options and 200,000 common stock warrants, because the exercise price of the options or warrants was higher than the average market price during those periods.

Based on the guidance provided in accordance with ASC 260 Earnings Per Share (“ASC 260”), the weighted average common shares for basic earnings per share, for the three and nine-month periods ended September 30, 2019 and 2018, excluded the weighted average impact of the unvested performance share awards, discussed below. These awards are legally outstanding but are not deemed participating securities and therefore are excluded from the calculation of basic earnings per share. The unvested shares are also excluded from the denominator for diluted earnings per share because they are considered contingent shares not deemed probable as of September 30, 2019.
The following table sets forth the computation of basic and diluted earnings per share for the three and nine-month periods ended September 30, 20172019 and 2016:

  Three Months ended September 30,  Nine Months ended September 30, 
  2017  2016  2017  2016 
Net income attributable to American Shared Hospital Services $99,000  $334,000  $505,000  $478,000 
                 
Weighted average common shares for basic earnings per share  5,947,000   5,554,000   5,745,000   5,553,000 
Diluted effect of stock options and restricted stock  94,000   39,000   167,000   11,000 
Weighted average common shares for diluted earnings per share  6,041,000   5,593,000   5,912,000   5,564,000 
                 
Basic earnings per share $0.02  $0.06  $0.09  $0.09 
Diluted earnings per share $0.02  $0.06  $0.09  $0.09 

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2018:

Three Months ended September 30,Nine Months ended September 30,
2019201820192018
Net income attributable to American Shared Hospital Services$165,000  $168,000  $466,000  $845,000  
Weighted average common shares for basic earnings per share5,889,000  5,841,000  5,899,000  5,831,000  
Diluted effect of stock options and restricted stock19,000  50,000  18,000  24,000  
Weighted average common shares for diluted earnings per share5,908,000  5,891,000  5,917,000  5,855,000  
Basic earnings per share$0.03  $0.03  $0.08  $0.14  
Diluted earnings per share$0.03  $0.03  $0.08  $0.14  

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Note 3.              7.Stock-based Compensation

In June 2010, the Company’s shareholders approved an amendment and restatement of the Company’s stock incentive plan, renaming it the Incentive Compensation Plan (the “Plan”), and among other things, increasing the number of shares of the Company’s common stock reserved for issuance under the Plan to 1,630,000. 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. The Plan is a successor to the Company’s previous plans, and any shares awarded and outstanding under those plans were transferred to the Plan. No further grants or share issuances will be made under the previous plans. On June 27, 2017,21, 2019, the Company’s shareholders approved an amendment and restatement of the Plan in order to extend the term of the Plan by two years to February 22, 2020.

2022.

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 amortized 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,units in the amount of $58,000$62,000 and $158,000$170,000 is reflected in net income for the three and nine-month periods ended September 30, 20172019 compared to $42,000$57,000 and $161,000$169,000 in the same periods of the prior year, respectively. At September 30, 2017,2019, there was approximately $330,000$94,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan, excluding the unrecognized compensation cost associated with the Award Agreements,performance share awards, discussed below. This cost is expected to be recognized over a period of approximately threefive years.

On January 4, 2017, the Company entered into a Performance Share Award Agreement with three executive officers of the Company (the “Award Agreements”) for 161,766 restricted stock awards which vest upon the achievement of certain performance metrics. The Award Agreements expire on March 31, 2020. Based on the guidance in ASC 718Stock Compensation (“ASC 718”), the Company concluded these were performance-based awards with vesting criteria tied to performance metrics. As of December 31, 2017, the Company achieved one of those certain performance metrics under the Award Agreements and that asrecognized stock compensation expense of approximately $108,000 related to these awards. As of September 30, 20172019, it is not probable that any of the remaining required metrics for vesting will be achieved. As a result, the Company has not recognized any stock-based compensation expense associated with these awards for the three and nine-month periods ended September 30, 2017. The unrecognized stock-based compensation expense for these awards was approximately $542,000$434,000 and unvested awards were approximately 129,000 shares as of September 30, 2017.2019. If and when the Company determines that the remaining performance metrics’ achievement becomes probable, the Company will record a cumulative catch-up stock-based compensation amount and the remaining unrecognized amount will be recorded over the remaining requisite service period of the awards.

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The following table summarizes restricted stock awards, consisting primarily of annual automatic grants and deferred compensation to non-employee directors, for the nine-month period ended September 30, 2017:

  Restricted
Stock
Awards		  Grant Date
Weighted-
Average
Fair Value		  Intrinsic
Value		 
Outstanding at January 1, 2017  4,000  $2.25  $- 
Granted  22,000  $3.47  $- 
Vested  (17,000) $3.16  $- 
Forfeited  -  $-  $- 
Outstanding at September 30, 2017  9,000  $3.58  $- 

The following table summarizes stock option activity for the nine-month period ended September 30, 2017:

  Stock
Options		  Grant Date
Weighted-
Average
Exercise
Price		  Weighted-
Average
Remaining
Contractual
Life (in
Years)		  Intrinsic
Value		 
Outstanding at January 1, 2017  625,000  $2.85   4.25  $- 
Granted  19,000  $3.62   6.80  $- 
Exercised  (4,000) $2.81   -  $- 
Forfeited  (23,000) $2.82   -  $- 
Outstanding at September 30, 2017  617,000  $2.87   3.63  $- 
Exercisable at September 30, 2017  300,000  $2.82   3.43  $9,000 

Note 4.              Investment in Equity Securities

As of September 30, 2017, and December 31, 2016, the Company had a $579,000 investment in the common stock of Mevion, representing an approximate 0.46% interest in Mevion. The Company accounts for this investment under the cost method. The Company carries its investment in Mevion at cost and reviews it for impairment on a quarterly basis, or as events or circumstances might indicate that the carrying value of the investment may not be recoverable.

The Company reviewed this investment at September 30, 2017 in light of both current market conditions and the current operations of Mevion as they continue to grow their PBRT business. Based on its analysis, the Company determined no additional impairment needed to be recognized as of September 30, 2017.

Note 5.              Fair Value of Financial Instruments

The Company’s disclosures of the fair value of financial instruments is based on a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. Level 1 inputs are unadjusted quoted market prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for assets or liabilities, and reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.

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The estimated fair value of the Company’s assets and liabilities as of September 30, 2017 and December 31, 2016 were as follows (in thousands):

  Level 1  Level 2  Level 3  Total  Carrying
Value		 
September 30, 2017                    
                     
Assets:                    
Cash, cash equivalents, restricted cash $1,665  $-  $-  $1,665  $1,665 
Investment in equity securities  -   -   579   579   579 
Total $1,665  $-  $579  $2,244  $2,244 
                     
Liabilities                    
Debt obligations $-  $-  $6,809  $6,809  $6,716 
Total $-  $-  $6,809  $6,809  $6,716 
                     
December 31, 2016                    
                     
Assets:                    
Cash, cash equivalents, restricted cash $3,121  $-  $-  $3,121  $3,121 
Investment in equity securities  -   -   579   579   579 
Total $3,121  $-  $579  $3,700  $3,700 
                     
Liabilities                    
Debt obligations $-  $-  $7,354  $7,354  $7,311 
Total $-  $-  $7,354  $7,354  $7,311 

Note 6.              Repurchase of Common Stock

In 1999 and 2001, the Board of Directors approved resolutions authorizing the Company to repurchase up to a total of 1,000,000 shares of its own stock on the open market, which the Board reaffirmed in 2008. There were no shares repurchased during the three and nine-month periods ended September 30, 2017 or 2016, respectively. There are approximately 72,000 shares remaining under this repurchase authorization as of September 30, 2017.

2019 and 2018:

Stock
Options		Grant Date
Weighted-
Average
Exercise
Price		Weighted-
Average
Remaining
Contractual
Life (in
Years)		Intrinsic
Value
Outstanding at January 1, 2019613,000  $2.85  3.18$—  
Granted18,000  $2.91  7.00$—  
Exercised(16,000) $2.59  —  $—  
Forfeited(12,000) $3.05  —  $—  
Outstanding at September 30, 2019603,000  $2.86  2.09$42,000  
Exercisable at September 30, 2019478,000  $2.86  1.97$—  
Outstanding at January 1, 2018615,000  $2.87  3.48$—  
Granted16,000  $2.68  6.96$—  
Forfeited(18,000) $3.15  —  $—  
Outstanding at September 30, 2018613,000  $2.85  2.93$337,000  
Exercisable at September 30, 2018389,000  $2.86  2.83$—  

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Note 7.8. 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 (loss) can produce a significant variance in the annualized effective income tax rate given the expected amount of these items. As a result, the Company has computed its provision for income taxes for the three and nine-month periods ended September 30, 2017 and 20162019 by applying the actual effective tax rates to income or (loss) reported within the condensed consolidated financial statements through those periods.

13

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 Company,expected continued expansion of the MEVION S250 systems, the expansion of the Company’s proton therapy business, and the timing of treatments by new Gamma Knife systems), which involve risks and uncertainties including, but not limited to, the risksrisk of variability of financial results between quarters, the risk of the Gamma Knife proton therapy and radiation therapy businesses, and the risks of developing The Operating Room for the 21st CenturySM program, and the risks of investing in Mevion. program. Further information on potential factors that could affect the financial condition, results of operations and future plans of the CompanyAmerican 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, 20162018 and the definitive Proxy Statement for the Annual Meeting of Shareholders held on June 27, 2017.

21, 2019.

The Company recognizes revenues under ASC 842 and ASC 606 Revenue from Contracts with Customers (“ASC 606”). The Company had seventeensixteen Gamma Knife units, one PBRT system and one IGRT unitmachine in operation onas of September 30, 2017,2019 and on September 30, 2016, respectively.2018. Three of the Company’s customer contracts are through subsidiaries where GKF or its subsidiary is the majority owner and managing partner. NineSeven of the Company’s sixteen current Gamma Knife customers are under fee-per-use contracts, and seveneight customers are under retail arrangements. The Company, through GKF, also owns and operates a single-unit Gamma Knife facility in Lima, Peru. This unit economically functions similarly to the Company’s turn-key retail arrangements. The Company’s contracts to provide radiation therapy and related equipment services to an existing Gamma Knife customer and the Company’s PBRT system at Orlando Health – UF Health Cancer Center (“Orlando Health”), are also considered retail arrangements.
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. RevenueRevenues from fee-per-usefee per use contracts is determined by each hospital’s contracted rate. Revenue isRevenues are recognized at the time the procedures are performed, based on each hospital’s contracted rate.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 in the amount 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.

14
For the three and nine-month periods ended September 30, 2019, the Company recognized revenues of approximately $5,013,000 and $15,024,000, respectively, under ASC 842.

11

Patient income – The Company has a stand-alone facility in Lima, Peru, where a contract exists between GKPeru 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. Payment terms are typically prepaid for self-pay patients and insurance provider payments are paid net 30 days. The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts. Accounts receivable earned by GKPeru were not significant for the three and nine-month periods ended September 30, 2019. For the three and nine-month periods ended September 30, 2019, the Company recognized revenues of approximately $288,000 and $795,000, respectively, under ASC 606.
Effective January 1, 2017,2015, the Centers for Medicare and Medicaid (“CMS”) established a Comprehensive Ambulatory Payment Classification for single session radiosurgery treatments. CMS has established a 20172019 total reimbursement rate of approximately $9,000$9,300 ($8,8009,100 in 2016)2018) for a Medicare Gamma Knife treatment. The approximate CMS reimbursement rates for delivery of proton therapy for a simple treatment without compensation will be $494for 2019 is $520 ($506522 in 2016)2018) and $994$1,079 ($1,1501,053 in 2016)2018) for simple treatment with compensation, intermediate and complex treatments, respectively.

Rental income from medical

On July 10, 2019, CMS issued a proposed rule that would implement a new mandatory payment model for radiation oncology services: the Radiation Oncology Alternative Payment Model (“RO APM”). The proposed RO APM would treat prospective episode payments to hospital outpatient departments and freestanding radiation therapy centers for radiation therapy as episodes of care. The RO APM would significantly alter CMS’ payment methodology for radiation oncology services. Under the RO APM, payment would be determined by the patient’s cancer type, as opposed to a traditional volume-based fee-for-service model, and would include select radiation therapy services decreased by $271,000provided within a 90-day episode. If the RO APM is finalized as proposed, radiation therapy providers and suppliers may be mandatorily required to participate in the model based on whether the radiation therapy is provided within selected geographic areas. CMS projects that approximately 40% of the radiation oncology providers within randomly selected Core Based Statistical Areas (CBSAs) will be included in the model and approximately 60% will continue to receive reimbursement based on fee-for-service methodology. The Company, along with other interested parties, submitted comments to CMS on the proposed rule as part of the notice-and-comment rulemaking process. The comment period concluded on September 16, 2019. It is uncertain whether CMS will finalize the rule as proposed. As a result, the Company cannot estimate the potential impact of adoption of the proposed rule. However, reductions in the reimbursement rates or changes in reimbursement methodology or administration for radiosurgery and radiation therapy could adversely affect the Company’s revenues and financial results.
Revenues increased by $832,000$831,000 and $875,000 to $4,613,000$5,301,000 and $14,472,000$15,819,000 for the three and nine-month periods ended September 30, 20172019 compared to $4,470,000 and $14,944,000 for the same periods in the prior year, respectively.

Revenues generated from $4,884,000the Company’s PBRT system increased by $636,000 and $13,640,000$1,106,000 to $1,677,000 and $4,728,000 for the three and nine-month periods ended September 30, 2016, respectively. The Company’s PBRT system at Orlando Health treated its first patient in April 2016. For the three and nine-month periods ended September 30, 2017, revenues generated from this system were $935,000 and $2,953,0002019 compared to $800,000$1,041,000 and $1,246,000 in$3,622,000 for the same periods in the prior year, respectively. The number ofincrease in PBRT fractions increased 71revenues was due to higher volumes for the three-month period ended September 30, 2019. For the nine-month period ended September 30, 2019, the increase in PBRT revenues was due to higher volumes and 2,038a higher average reimbursement compared to 940 and 3,349the Company's historical average. The increase in PBRT revenues for the three and nine-month periods ended September 30, 2017 compared to 869 and 1,311 in the same periods prior year, respectively. The increase is2019 was also due to the two weeks of down time the PBRT system ramping up volume in its second yearincurred during the three and nine-month periods ended September 30, 2018.

The number of operations.

Gamma Knife revenues decreased $369,000PBRT fractions increased by 371 and $869,000810 to $3,564,0001,452 and $11,150,0004,407 for the three and nine-month periods ended September 30, 20172019 compared to $3,933,0001,081 and $12,019,000 in3,597 for the same periods in the prior year, respectively. Excluding the customer site who purchased their Gamma Knife unitloss on procedures from the down-time experienced in April 2017 and the customer site whose contract expired August 31, 2017, Gamma Knife revenues increased $142,000 and decreased $51,000prior year, PBRT fractions for the three and nine-month periods ended September 30, 2017,2019 were consistent with the same periods in the prior year and increased by 440 fractions compared to the same periods in the prior year, respectively. The increase in PBRT volume for the nine-month period ended September 30, 2019 was the result of the continuing increased awareness of the benefits of proton therapy treatment.

Gamma Knife revenue increased $116,000 and decreased $156,000 to $3,310,000 and $10,320,000 for the three and nine-month periods ended September 30, 2019 compared to $3,194,000 and $10,476,000 for the same periods in the prior year, respectively. Revenue for the three-month period ended September 30, 2019, increased due to increased volumes at existing sites. Excluding a contractual adjustment related to Medicare reimbursement at one of the Company's existing sites, Gamma Knife revenue decreased $556,000 for the nine-month period ended September 30, 2019 compared to the same periods in the prior year. The decrease in Gamma Knife revenue for the nine-month period ended September 30, 2019 was due to lower volumes and a decrease in average reimbursement rate at the Company's retail sites compared to the historical average.
12

The number of Gamma Knife procedures increased by 11 and decreased 22 to 348 and 1,084 for the three and nine-month periods ended September 30, 2019 compared to 337 and 1,106 for the same periods in the prior year, respectively. The increase for the three-month period ended September 30, 2019 was driven by the Company's stand-alone facility in Lima, Peru. The decrease for the nine-month period ended September 30, 2019 was due to a contract labor dispute at one of the Company's existing sites resulting in no procedures performed during the second quarter of 2019. This issue was resolved and the site began treating patients in July 2019. One of the Company's sites was down during the third quarter for a Cobalt-60 reload and Icon upgrade. The expiration of two customer contracts in April 2018 and January 2019 also contributed to the decline in volumes for the nine-month period ended September 30, 2019.
Revenue generated from the Company’s IGRT contract increased $79,000 and decreased $75,000 to $314,000 and $771,000 for the three and nine-month periods ended September 30, 2019 compared to $235,000 and $846,000 for the same periods in the prior year, respectively. The increase or decrease in IGRT revenues was driven by changes in volumes.
Total costs of revenue increased by $652,000 and $1,317,000 to $3,488,000 and $10,340,000 for the three and nine-month periods ended September 30, 2019 compared to $2,836,000 and $9,023,000 for the same periods in the prior year, respectively.
Maintenance and supplies increased by $178,000 and $245,000 to $648,000 and $1,968,000 for the three and nine-month periods ended September 30, 2019 compared to $470,000 and $1,723,000 for the same periods in the prior year, respectively. The increase in maintenance and supplies was due to the annual increase from the renewal of the September 2017 Mevion Service Agreement. The Company's annual service payment increased by $250,000, effective for the second service year, and for each year thereafter (see further discussion below under the heading “Commitments”).
Depreciation and amortization increased by $56,000 and $637,000 to $1,817,000 and $5,719,000 for the three and nine-month periods ended September 30, 2019 compared to $1,761,000 and $5,082,000 for the same periods in the prior year, respectively. For the three-month period ended September 30, 2017,2019, the increase was due to a favorable payor mix atdepreciation incurred on the Company’s Gamma Knife retail sites.Company's IGRT equipment. For the nine-month period ended September 30, 2017,2019, the decreaseincrease was due to lower volumes atdepreciation incurred on the Company’s existing Gamma Knife sites. The Company had two new Gamma Knife sites begin operations duringsite in Merrillville, Indiana, the third quarter 2017. Both sites had minimal volume duringPBRT system, and the quarter and did not have a significant impact onCompany’s IGRT equipment, offset partially by the two Gamma Knife revenuecontracts which expired in April 2018 and January 2019. The Company also recognized additional fixed asset value in connection to the contractual adjustment related to Medicare reimbursement at an existing customer site, causing an increase in depreciation expense.
Other direct operating costs increased by $418,000 and $435,000 to $1,023,000 and $2,653,000 for the three and nine-month periods ended September 30, 2017.

2019 compared to $605,000 and $2,218,000 for the same periods in the prior year, respectively. The number of Gamma Knife procedures decreasedincrease was due to increased operating costs at the Company's retail sites and operating costs incurred at the Company’s new site in Merrillville, Indiana and the Company's stand-alone facility in Lima, Peru.

Selling and administrative costs increased by 104$15,000 and 193$134,000 to 379$1,065,000 and 1,253$3,201,000 for the three and nine-month periods ended September 30, 2017 from 4832019 compared to $1,050,000 and 1,446 in$3,067,000 for the same periods in the prior year, respectively.  Excluding the customer site who purchased their Gamma Knife unit in April 2017 and the customer site whose contract expired August 31, 2017, Gamma Knife procedures increased 5 and decreased 26 for the three and nine-month periods ended September 30, 2017. The decrease for the nine-month period is due to normal, cyclical fluctuations. The Company had two new Gamma Knife sites begin operations during the third quarter 2017. Both sites had minimal volume during the quarter and did not have a significant impact on Gamma Knife volume for the three and nine-month periods ended September 30, 2017.

15

IGRT revenues decreased $38,000 and $6,000 to $114,000 and $369,000 for the three and nine-month periods ended September 30, 2017 from $152,000 and $375,000 in the same periods prior year, respectively. The decrease for the three and nine-month periods ended September 30, 2017 is due to lower volumes at the Company’s existing IGRT site.

Total costs of revenue increased by $243,000 and $321,000 to $2,731,000 and $7,993,000 for the three and nine-month periods ended September 30, 2017 from $2,488,000 and $7,672,000 in the same periods prior year, respectively. Maintenance and supplies increased by $168,000 and $154,000 for the three and nine-month periods ended September 30, 2017, respectively, primarily due to the Mevion Service Agreement which commenced September 2017. Depreciation and amortization decreased by $13,000 and increased $102,000 for the three and nine-month periods ended September 30, 2017, respectively. The decrease for the three-month period was due to the Company’s contracts which ended in the second and third quarters of 2017, respectively, offset by depreciation expense for the Company’s two new units which began operations in same periods. The increase for the nine-month period ended September 30, 2017 is primarily due to depreciation incurred on the PBRT system and the Company’s two new units which began operations in the second and third quarters of 2017, offset by the expired contracts in the same periods. Other direct operating costs increased by $88,000 and $65,000 for the three and nine-month periods ended September 30, 2017, respectively. The increase for the three and nine-month periods ended September 30, 20172019, was primarily due to operating costs at the Company’s Gamma Knife site in Perulegal and operating costs for the PBRT system.

Sellingother consulting fees.

Interest expense decreased by $97,000 and administrative costs increased by $27,000$215,000 to $302,000 and $392,000$1,015,000 for the three and nine-month periods ended September 30, 20172019 compared to $1,026,000$399,000 and $3,303,000 from $999,000 and $2,911,000$1,230,000 for the same periods in the prior year, respectively. For the three-month period ended September 30, 2017, the increase was driven by the Company’s new site in Peru. The increase for the nine-month period ended September 30, 2017 was driven by start-up costs for the Company’s new site in Peru, legal fees, consulting fees, travel costs, severance expense, and building rent. The Company moved offices on August 13, 2016. Prior to the move, the Company subleased a portion of its existing office space. The sublease income offset total rent expense over the term of the sublease, which ended in May 2016.

Interest expense decreased by $84,000 and increased $95,000 to $417,000 and $1,314,000 for the three and nine-month periods ended September 30, 2017 from $501,000 and $1,219,000 for the same periods prior year, respectively. For the three-month period ended September 30, 2017 the decrease was due to a lower average principal base on the Gamma KnifeCompany’s debt and leases in the first half of 2019 compared to the same period in the prior year, effectively reducing interest expense. The increase for the nine-month period ended September 30, 2017 was due


Interest and other income decreased by $178,000 and $179,000 to interest incurred on the PBRT lease financing, offset by a lower average principal base on the Gamma Knife debt$7,000 and leases, compared to prior year.

16

The Company incurred a loss on early extinguishment of debt of $0$15,000 for the three and nine-month periods ended September 30, 20172019 compared to $0$185,000 and $108,000$194,000 for the same periods in the prior year, respectively. During the three and nine-month periods ended September 30, 2018, the PBRT unit at Orlando Health sustained water damage resulting from the facility’s water evacuation system. The PBRT system was down for two weeks as a result. In February 2016,the first quarter of 2019, the Company usedreceived approximately $185,000 of reimbursement from its business interruption insurance, following a portion of the proceedsfive-day waiting period. The reimbursement from the lease financing for its first MEVION S250 to pay down the $1,000,000 of Notes that were issued pursuant to the Note agreements between the Company and four members of the Company’s Board of Directors. The Notes and warrant agreements permitted for early payment without penalty to the Company. The Notes were issued with common stock warrants with an estimated fair value of $145,000. The unamortized balance of the discount on the Notes, of $80,000, and deferred fees incurred from the issuance of the Note of approximately $28,000, were recorded as a loss on early extinguishment of debt on the Company’s condensed consolidated Statement of Operations.

Interest andbusiness interruption insurance is included in other income (loss) decreased by $3,000 and $12,000 to $0 and a loss of $1,000(or loss) for the three and nine-month periods ended September 30, 2017 from $3,000 and $11,000 for the same periods prior year, respectively. Interest and other income (loss) is related to exchange rate transactions with the Company’s stand-alone facility in Lima, Peru.

2018.

Income tax expense increased by $17,000 and decreased $103,000by $151,000 to $99,000 and increased $176,000 to $164,000 and $600,000$250,000 for the three and nine-month periods ended September 30, 2017 from $267,0002019 compared to $82,000 and $424,000$401,000 for the same periods in the prior year, respectively. For
13

The increase for the three-month period ended September 30, 2017, the decrease2019 was due to lower taxablestate taxes. The decrease in income attributable to Gamma Knife operations. For the nine-month period ended September 30, 2017, the increase was due to taxable income attributable to Orlando operations. Income tax expense for the nine-month period ended September 30, 2017 was also higher, compared2019 is due to lower taxable income attributable to the same periods prior year, because the Company’s income tax expense computation could not include the losses associated with the Company’s Gamma Knife unit in Peru for financial reporting purposes.

Company.

Net income attributable to non-controlling interest increased by $69,000 and decreased $122,000by $32,000 to $189,000 and $83,000 to $176,000 and $756,000$562,000 for the three and nine-month periods ended September 30, 2017 from $298,0002019 compared to $120,000 and $839,000$594,000 for the same periods in the prior year, respectively. Non-controlling interest primarilyNet income attributable to non-controlling interests represents net income earned by the 19% non-controlling interest in GKF, and net income of GK Financing owned by a third party, as well asthe non-controlling interests in various subsidiaries of GK Financing ownedcontrolled by third parties that began operations in 2011. VariancesGKF. The decrease or increase in net income attributable to non-controlling interest representinterests reflects the relative increase or decrease in profitability of GKFGKF.
Net income decreased $3,000 and these ventures.

The Company had net income of $99,000,$379,000 to $165,000, or $0.02$0.03 per diluted share and net income of $505,000,$466,000, or $0.09$0.08 per diluted share, for the three and nine-month periods ended September 30, 20172019 compared to net income of $334,000,$168,000, or $0.06$0.03 per diluted share, and net income of $478,000,$845,000 or $0.09$0.14 per diluted share, infor the same periods in the prior year, respectively. Excluding the loss on early extinguishment of debt, net of estimated taxes,The decrease in net income decreased $37,000 for the nine-month period ended September 30, 2017. For the three and nine-month periods ended September 30, 2017, the decrease in net income2019 was primarily due to lower Gamma Knife volumes, following the expiration of two contracts, PBRT maintenance costs,increased operating expense and increased selling and administrative costs.

17

14

Liquidity and Capital Resources

The Company had cash, and cash equivalents and restricted cash of $1,665,000$1,647,000 at September 30, 20172019 compared to $3,121,000$1,792,000 at December 31, 2016.2018. The Company’s cash position decreased by $1,556,000$145,000 primarily due to the upfront payment of $1,000,000 for the Mevion Service Agreement and payments for the purchase of property and equipment of $760,000.$889,000, payments on long-term debt and capital leases of $4,719,000, and distributions to non-controlling interests of $865,000. These decreases were offset by cash from operating activities of $6,127,000, proceeds from the saleinsurance of equipment$160,000 and proceeds from options exercised of $150,000

$41,000.

The Company has scheduled interest and principal payments under its debt obligations of approximately $2,933,000$1,853,000 and scheduled capital lease payments of approximately $5,942,000$5,033,000 during the next 12 months. The Company believes that its cash flow from cash on hand, operations, and other cash resources are adequate to meet its scheduled debt and capital lease obligations during the next 12 months. See additional discussion below related to commitments.

The Company as of September 30, 20172019 had shareholders’ equity of $28,188,000,$31,422,000, working capital of $267,000$1,466,000 and total assets of $59,976,000.

$55,258,000.

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Commitments

As of September 30, 2017, the Company had commitments to purchase two MEVION S250 PBRT systems for $25,800,000 and the Company had $2,000,000 in non-refundable deposits toward the purchase of these two PBRT systems from Mevion. The non-refundable deposits are recorded in the Condensed Consolidated Balance Sheets as deposits and construction in progress.

On July 21, 2017,December 20, 2018, the Company signed FirstSecond Amendments to two System Build Agreements (the “Amendments”) for the Company’s second and third PBRT units from Mevion PBRT units.Medical Systems, Inc. (“Mevion”). The Company and Mevion have agreed on preliminary construction and delivery timetables forto upgrade the second and third PBRT units for which the Company has purchase commitments. The Company’s delivery timeframe is triggered by USFDA 510K clearance of Mevion’s recently developed treatment nozzle. 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 takecommence delivery of the second and third PBRT units no later than 2019 and 2020, respectively.

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 September 30, 2017,2019, the Company had commitments, after deposits, to purchase two MEVION S250i PBRT systems for $34,000,000 and the Company had $2,250,000 in non-refundable deposits toward the purchase of these two PBRT systems from Mevion. The non-refundable deposits are recorded in the Consolidated Balance Sheets as deposits and construction in progress.
As of September 30, 2019, the Company had commitments to perform two Cobtalt-60five Cobalt-60 reloads and install five Leksell Gamma Knife Icon Systems ("Icon") at existing Gamma Knife customer sites.sites, and purchase one LINAC system, to be placed at a new customer site. The Cobalt-60 reloads, Icon upgrades, and LINAC system purchase are scheduled to occur between 2020 and 2022. Total Gamma Knife and LINAC commitments as of September 30, 20172019 were $1,500,000. The Cobalt-60 reloads are scheduled to occur in 2018.$6,960,000. It is the Company’s intent to finance these reloads.commitments. There are no significant cash requirements, pending financing, for the Cobalt-60 reloadsthese 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.

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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 and renews annually. The agreement requires an annual prepayment of $1,562,000 which was made on September 6, 2019 for the current contractual period. This payment portion was recorded as a prepaid contract and will be amortized over the one-year service period. The Mevion Service Agreement is for a five (5) year period. On December 20, 2018, the Company signed a Second Amendment to the Mevion Service Agreement, where the Company agreed to increase the annual service payment by $250,000, effective for the second service year, and for each year thereafter. The Company paid the additional $250,000 of the annual service payment owed for the second service year on September 6, 2019.

As of September 30, 2019, the Company had commitments to service and maintain its Gamma Knife and PBRT equipment. The service commitments are carried out via contracts with Mevion and Elekta AB. In addition, in April 2019, the Company signed agreements to service the Icon upgrades which will be installed at various dates between 2020 and 2022. The Company’s commitment to purchase a LINAC system also includes a 9-year agreement to service the equipment. Total service commitments as of September 30, 2019 were $10,182,000. 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.
The Company estimates the following commitments for each of the equipment systems,commitments, service contracts, long-term debt and capital lease financing, and operating leases with expected timing of payments as follows as of September 30, 2017:

  2017  Thereafter  Total 
          
Proton Beam Units $-  $25,800,000  $25,800,000 
             
Gamma Knife Units  -   1,500,000   1,500,000 
             
Total Commitments $-  $27,300,000  $27,300,000 

2019:
Payments Due by Period
Contractual ObligationsTotal amounts
committed		as of 9/30/20192020-20222023After
5 years
Long-term debt (includes interest)$4,383,000  $611,000  $2,686,000  $334,000  $752,000  
Capital leases (includes interest)14,509,000  1,195,000  11,947,000  846,000  521,000  
Future equipment purchases40,960,000  —  40,960,000  ——
Equipment service contracts10,182,000  86,000  7,651,000  345,000  2,100,000  
Operating leases1,224,000  86,000  962,000  176,000  —
Total contractual obligations$71,258,000  $1,978,000  $64,206,000  $1,701,000  $3,373,000  

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Item 3.Quantitative and Qualitative Disclosures about Market Risk

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 September 30, 2017,2019, the Company had no significant long-term, market-sensitive investments.

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Item 4.Controls and Procedures

Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and our chief 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 September 30, 2017,2019, our disclosure controls and procedures are 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 three monthsand nine-months ended September 30, 20172019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors
There are no changes from those listed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
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.
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Item 6. Exhibit Index
Item 1.Legal Proceedings.
None.

19

Item 1A.Risk Factors.
There are no changes from those listed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
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.

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Item 6.Exhibit Index

Incorporated by reference herein
Exhibit NumberDescriptionFormExhibitDate
NumberDescriptionFormExhibitDate
#Equipment LeaseThird Amendment to Purchased Services Agreement (for a Gamma Knife Unit) dated as of February 21, 2017March 28, 2019 between Bryan Medical Center and GK Financing, LLC.LLC and Kettering Medical Center
10.2*Second Amendment to Lease Agreement for a Gamma Knife Unit dated as of June 30, 2006 between Yale - New Haven Ambulatory Services Corporation, Yale New Haven Hospital, Inc. a/k/a Yale - New Haven Hospital and GK Financing, LLC
*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
*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
ǂCertifications 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
101.INS*
101.INS*XBRL Instance Document
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Calculation Linkbase Document
101.DEF*XBRL Taxonomy Definition Linkbase Document
101.LAB*XBRL Taxonomy Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document

*Filed herewith.
ǂFurnished herewith.
#*Confidential material appearing inFiled herewith.
ǂFurnished herewith.
#Portions of this document hasexhibit (indicated therein by asterisks) have 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. 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:
Date:November 13, 20177, 2019/s/ Ernest A. Bates, M.D.
Ernest A. Bates, M.D.
Chairman of the Board and Chief Executive Officer
Date:November 13, 20177, 2019/s/ Craig K. Tagawa
Craig K. Tagawa
Senior Vice President
Chief Operating and Financial Officer

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