<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
NOVEMBER 13, 1998
AMERICAN SHARED HOSPITAL SERVICES
(Exact name of registrant as specified in its charter)
CALIFORNIA 0-8789 94-2918118
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
FOUR EMBARCADERO CENTER, SUITE 3620, SAN FRANCISCO, CA 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 415-788-5300
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
This report may be deemed to contain certain forward-looking statements
with respect to the Pro Forma and historical financial condition, results of
operations and future plans of American Shared Hospital Services, which involve
risks and uncertainties including, but not limited to, the possible effect of
accounting and other closing adjustments following the consummation of the sale
transaction and the risks of the Gamma Knife business, including the Company's
limited access to capital and the need for a substantial investment, the limited
market for the Gamma Knife, the small number of Gamma Knife manufacturers,
competition from other modalities, technological obsolescence and reduced
Medicare and Medicaid reimbursement rates for Gamma Knife treatments. Further
information on potential factors that could affect the financial condition,
results of operations and future plans of American Shared Hospital Services are
included in the filings of American Shared Hospital Services with the Securities
and Exchange Commission, including the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, its quarterly reports on Form 10-Q for the
periods ended March 31, June 30 and September 30, 1998, and its definitive Proxy
Statement for the Special Meeting of Shareholders held on November 13, 1998.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 13, 1998, the shareholders of American Shared Hospital
Services (the "Company") approved the sale of its diagnostic imaging business
("Sale") pursuant to the Securities Purchase Agreement dated as of March 12,
1998 (the "Agreement") among the Company, Alliance Imaging, Inc. and two of its
subsidiaries (collectively, the "Purchaser"). Holders of 3,494,291 common shares
voted in favor of the Sale, 13,675 common shares voted against, and 3,500 shares
abstained. The shares voting in favor of the Sale represented 98.6% of the total
number of shares present in person or by proxy at the Special Meeting of
Shareholders and 73.3% of the outstanding common shares. The Sale closed
immediately following the Special Meeting.
Pursuant to the Agreement, the Purchaser acquired all of the
outstanding common stock of the Company's wholly owned subsidiary, CuraCare,
Inc., and all of the partnership interests in American Shared-CuraCare. These
entities together constituted the Company's diagnostic imaging business ("the
Imaging Business") through which it provided MRI, CT, Ultrasound, Nuclear
Medicine, Cardiac Catheterization Laboratory and Respiratory Therapy Services.
The purchase price under the Agreement consisted of $13,552,000 in
cash. The Purchaser also assumed approximately $28.5 million of debt and other
liabilities relating to the diagnostic imaging business, as well as
substantially all of the Company's medical equipment leases. In addition, as
part of the transaction, General Electric Medical Systems, the Company's primary
medical equipment lessor, sold 225,000 shares of American Shared Common Stock to
<PAGE> 3
the Company for $0.01 per share.
Following the Sale, the Company will retain its Gamma Knife business,
its plans for The Operating Room for the 21st Century (sm) and a small insurance
services business. The Company currently operates 5 Gamma Knife units including
3 in California, one in Texas and one in Connecticut. It has 5 additional units
under contract in Massachusetts, New Jersey, Ohio, Arkansas and Brazil. Most of
these additional Gamma Knife units are expected to begin operations in Spring
1999, with all operating by the end of that year.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
7(b) The following pro forma financial information is provided in accordance
with the rules of the Securities and Exchange Commission.
AMERICAN SHARED HOSPITAL SERVICES
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited Pro Forma Consolidated Balance Sheet,
Statements of Operations and accompanying notes should be read in conjunction
with the Company's historical Consolidated Financial Statements and the notes
thereto incorporated by reference herein. The unaudited Pro Forma Consolidated
Financial Information is presented for informational purposes only and does not
purport to represent what the Company's financial position or results of
operations would actually have been if the consummation of the Sale had occurred
on the dates set forth therein, or to project the Company's financial position
or results of operations at any future date or for any future period. However,
the unaudited Pro Forma Consolidated Financial Information contains, in the
opinion of management, all adjustments necessary for a fair presentation.
The unaudited Pro Forma Consolidated Balance Sheet and Statements of
Operations reflect adjustments for the exclusion of assets and liabilities, and
related revenues and expenses derived from those assets and liabilities,
associated with the Sale. The unaudited Pro Forma Financial Information presents
the Consolidated Balance Sheet as of September 30, 1998 and the Statements of
Operations for the nine-month period ended September 30, 1998 and the year ended
December 31, 1997. The unaudited Pro Forma Financial Information presents the
Consolidated Balance Sheet as if the Sale occurred as of September 30, 1998, and
the Statements of Operations as if the Sale occurred as of January 1 for each
period presented.
The unaudited Pro Forma Financial Information reflects (a) the sale of
the Imaging Business for $13,552,000 in cash and the assumption by the Purchaser
of associated debt and liabilities and (b) the sale by GE of 225,000 shares of
American Shared Hospital Services Common Stock to the
<PAGE> 4
Company for $0.01 per share. The unaudited Pro Forma Financial Information also
reflects that two Gamma Knife units were in operation throughout 1997, that a
third Gamma Knife unit commenced operations in September 1997, a fourth Gamma
Knife unit commenced operations in March 1998, and a fifth Gamma Knife unit
commenced operations in July 1998. The Unaudited Pro Forma Consolidated
Statements of Operations have been prepared eliminating revenues and expenses
derived from assets and liabilities included in the Sale. The Company intends to
downsize its selling and administrative costs going forward in recognition of
its decreased revenue base.
The accounting for the Sale will result in a one-time net gain of
approximately $20,028,000, which reflects cash from the Sale of $13,552,000,
less income taxes of approximately $2,500,000 and estimated transaction costs of
$1,000,000, plus the assumption by the Purchasers of the Imaging Business
related debt and liabilities of $28,494,000 less the assets being Sold of
approximately $18,518,000.
The pro forma effects of the Sale and related transactions on the
Consolidated Financial Statements of the Company are based on management's
estimates, which are subject to revision when actual amounts are determined. The
actual effects of the transactions will be recorded in the Consolidated
Financial Statements of the Company which will be included in its Annual Report
on Form 10-K for the year ended December 31, 1998.
<PAGE> 5
AMERICAN SHARED HOSPITAL SERVICES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Deduct Sale
Historical As of Imaging Pro forma
ASSETS Reported Services(1) Adjustments Pro forma
------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash & cash equivalents $106,000 $1,000 $10,050,000(2) $10,155,000
Restricted cash 1,028,000 0 1,028,000
Accounts receivable
Trade 8,374,000 7,513,000 861,000
Less allow. For doubtful acct. (1,465,000) (1,465,000) 0
Other 566,000 150,000 416,000
Prepaid expenses, inventories and other
current assets 639,000 301,000 338,000
----------- ----------- ---------- -----------
Total current assets 9,248,000 6,500,000 10,050,000 12,798,000
Property & equipment
Land buildings and improvements 1,622,000 1,619,000 3,000
Medical, transportation, office & leased
equip. 19,275,000 3,952,000 15,323,000
Capitalized leased medical and transportation
equip 27,011,000 26,968,000 43,000
Deposits & construction in progress 1,103,000 35,000 1,068,000
----------- ----------- -----------
Total Prop. & equip. 49,011,000 32,574,000 16,437,000
Accumulated deprec. & amort. (26,397,000) (21,627,000) (4,770,000)
----------- ----------- -----------
Net property & equipment 22,614,000 10,947,000 11,667,000
Intangible assets, less accum. Amort. 888,000 824,000 64,000
Other assets 1,497,000 248,000 (1,000,000)(3) 249,000
----------- ----------- ---------- -----------
Total Other Assets 2,385,000 1,072,000 (1,000,000) 313,000
----------- ----------- ---------- -----------
Total Assets $34,247,000 $18,519,000 $9,050,000 $24,778,000
=========== =========== ========== ===========
</TABLE>
See Accompanying Notes
<PAGE> 6
AMERICAN SHARED HOSPITAL SERVICES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Deduct Sale
LIABILITIES AND STOCKHOLDERS' Historical As of Imaging Pro forma
EQUITY (NET CAPITAL DEFICIENCY) Reported Services(1) Adjustments Pro forma
------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable $7,246,000 $5,665,000 $(1,000,000)(3) $581,000
Accrued interest 90,000 50,000 40,000
Employee compensation & benefits 1,162,000 1,004,000 158,000
Other accrued liabilities 1,067,000 660,000 407,000
Current portion of long-term debt 7,919,000 6,355,000 1,564,000
Current portion of long-term obligations
under capital leases 6,005,000 5,998,000 7,000
----------- ----------- ---------- ------------
Total Current liabilities 23,489,000 19,732,000 (1,000,000) 2,757,000
Long-term debt, less current portion 11,619,000 2,498,000 9,121,000
Obligations under capital leases, less current
portion 6,024,000 6,001,000 23,000
Deferred gain on early lease termination 263,000 263,000 0
Deferred income taxes 164,000 0 164,000
Minority interest 685,000 0 685,000
Stockholders' equity (net capital deficiency)
Common Stock 11,089,000 1,000 (2,000)(4) 11,086,000
Common stock options issued to officer 2,414,000 0 2,414,000
Additional paid in capital 930,000 0 930,000
Retained earning (accumulated deficit) (22,430,000) (9,976,000)(5) (10,052,000)(5) (2,402,000)
----------- ----------- ---------- ------------
Total stockholders' equity (net capital
deficiency) (7,997,000) (9,975,000) 10,050,000 12,028,000
----------- ----------- ---------- ------------
Total liabilities and stockholders' equity
(net capital deficiency) $34,247,000 $18,519,000 $9,050,000 $24,778,000
=========== =========== ========== ============
</TABLE>
See Accompanying Notes
<PAGE> 7
The unaudited Pro Forma Balance Sheet as of September 30, 1998 and the Unaudited
Pro Forma Consolidated Statements of Operations for the nine months ended
September 30, 1998 and for the year ended December 31, 1997 give effect to the
following adjustments:
(1) Reflects assets and liabilities included in the Sale of the Imaging
Business.
(2) Reflects cash from proposed sale of $13,552,000 less income taxes of
approximately $2,500,000, estimated transaction costs of approximately
$1,000,000, and $2,000 to repurchase GE Medical's 225,000 shares of
Common Stock for $0.01 per share.
(3) Reflects elimination of accrued transaction costs that are paid from
cash proceeds from the Sale of the Imaging Business.
(4) Reflects repurchase of its 225,000 shares of Common Stock from GE
Medical for $0.01 per share.
(5) Reflects one-time gain of $20,028,000 net of income taxes of
approximately $2,500,000 and estimated transaction costs of $1,000,000,
from the proposed sale of the Imaging Business for $13,552,000 in cash
and the assumption by the purchaser of associated liabilities.
<TABLE>
<S> <C> <C> <C>
Current income tax liability $2,500,000 Book gain $ 20,028,000
Deferred income tax liability 0 Add back taxes 2,500,000
---------- Basis differential (5,000,000)
Total $2,500,000 Net operating loss carryovers (13,000,000)
========== -----------
Tax gain $4,528,000
===========
Computed expected tax $8,000,000
Change in valuation allowance (6,800,000)
State tax net of federal benefit 1,300,000
----------
Total $2,500,000
==========
</TABLE>
The reduction in valuation allowance results because of differences
between the book and tax bases of the assets sold of approximately
$5,000,000 and utilization of approximately $13,000,000 of net
operating loss carryovers.
<PAGE> 8
AMERICAN SHARED HOSPITAL SERVICES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Deduct
Historical Sale of
As Imaging Pro Forma
Reported Services(1) Adjustments Pro Forma
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Medical Services $29,581 $26,702 $2,879
Costs and expenses:
Costs of operations:
Medical services payroll 6,098 6,087 11
Maintenance and supplies 4,489 4,423 66
Depreciation 4,604 3,910 694
Equipment rental 3,341 3,340 1
Other 3,418 3,222 196
Selling and administrative 4,095 0 4,095(3)
Interest expense 2,637 2,102 535
--------- --------- -------- ---------
Total costs and expenses 28,682 23,084 5,598
--------- --------- -------- ---------
899 3,618 (2,719)
Gain (loss) on sale of assets and early
termination of capital leases 114 114 0
Interest and other income (50) 2 (52)
--------- --------- -------- ---------
Income before income taxes and extraordinary item 963 3,734 (2,771)
Income tax expense (benefit) 7 0 7
--------- --------- -------- ---------
Income (loss) before extraordinary item $956 $3,734 $ (2,778)
==== ====== ========
Earnings per common share:
Income before extraordinary item $0.20 $0.78 $0.00 $ (0.61)
========= ========= ======== =========
Shares used in calculation 4,769,000 4,769,000 (225,000)(2) 4,544,000(2)
--------- --------- -------- ---------
Earnings (loss)per common share assuming dilution:
Income (loss) before extraordinary item $0.15 $0.58 $0.00 $ (0.45)
========= ========= ======== =========
Shares used in calculation 6,397,000 6,397,000 (225,000)(2) 6,172,000(2)
--------- --------- -------- ---------
</TABLE>
The unaudited Pro Forma Balance Sheet as of September 30, 1998 and the unaudited
Pro Forma Consolidated Statements of Operations for the nine months ended
September 30, 1998 and for the year ended December 31, 1997 give effect to the
following adjustments:
(1) Reflects revenues and expenses derived from assets and liabilities
included in the Sale of the Imaging Business as determined by amounts
directly charged to related general ledger accounts for the assets and
liabilities of the Sale.
(2) Reflects repurchase of its 225,000 shares of Common Stock from GE
Medical.
(3) The Company intends to downsize its selling and administrative costs
going forward in recognition of its decreased revenue base resulting
from the Sale of the Imaging Business. The Company estimates decreases
in (i) payroll and payroll related costs for sales, operations,
accounting and corporate personnel of $1,692,000, (ii) sales,
operations, accounting and corporate overhead costs of $421,000, (iii)
audit, legal and tax expenses of $136,000, (iv) building rent and
related costs of $103,000, (v) depreciation and amortization of $190,000
and (vi) other costs of $152,000, for a total estimated cost reduction
of $2,694,000.
<PAGE> 9
AMERICAN SHARED HOSPITAL SERVICES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Deduct
Historical Sale of
As Imaging Pro Forma
Reported Services(1) Adjustments Pro Forma
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
Revenues:
Medical Services $37,172 $34,771 $ 2,401
Costs and expenses:
Costs of operations:
Medical services payroll 7,533 7,517 16
Maintenance and supplies 5,959 5,849 110
Depreciation 6,398 5,591 807
Equipment rental 2,686 2,686 0
Other 4,468 4,336 132
Selling and administrative 5,901 0 5,901(3)
Interest expense 3,671 3,335 336
--------- --------- ---------
Total costs and expenses 36,616 29,314 7,302
--------- --------- ---------
556 5,457 (4,901)
Gain on sale of assets and early termination
of capital leases 821 820 1
Interest and other income 155 10 145
--------- --------- ---------
Income before income taxes and extraordinary item 1532 6,287 (4,755)
Income tax expense (benefit) 10 (5) 15
--------- --------- ---------
Income before extraordinary item $ 1,522 $ 6,292 $ (4,770)
========= ========= =========
Earnings per common share:
Income before extraordinary item $ 0.32 $ 1.32 $ 0.00 $ (1.05)
========= ========= ======== =========
Shares used in calculation 4,769,000 4,769,000 (225,000)(2) 4,544,000(2)
--------- --------- -------- ---------
Earnings per common share assuming dilution:
Income before extraordinary item $ 0.24 $ 0.99 $ 0.00 $ (0.78)
========= ========= ======== =========
Shares used in calculation 6,343,000 6,343,000 (225,000)(2) 6,118,000(2)
--------- --------- -------- ---------
</TABLE>
The unaudited Pro Forma Balance Sheet as of September 30, 1998 and the unaudited
Pro Forma Consolidated Statements of Operations for the nine months ended
September 30, 1998 and for the year ended December 31, 1997 give effect to the
following adjustments:
(1) Reflects revenues and expenses derived from assets and liabilities
included in the Sale of the Imaging Business as determined by amounts
directly charged to related general ledger accounts for the assets and
liabilities of the Sale.
(2) Reflects repurchase of its 225,000 shares of Common Stock from GE
Medical.
(3) The Company intends to downsize its selling and administrative costs
going forward in recognition of its decreased revenue base resulting
from the Sale of the Imaging Business. The Company estimates decreases
in (i) payroll and payroll related costs for sales, operations,
accounting and corporate personnel of $2,500,000, (ii) sales,
operations, accounting and corporate overhead costs of $630,000, (iii)
audit, legal and tax expenses of $270,000, (iv) building rent and
related costs of $160,000, (v) depreciation and amortization of $300,000
and (vi) other costs of $100,000, for a total estimated cost reduction
of $3,960,000.
Note: One time gain of $19,921,000 net of estimated transaction costs of
$1,000,000 and income tax expense of $2,500,000 from the Sale of the
Imaging Business for $13,552,000 in cash and the assumption of
associated liabilities is not included in the Pro Forma Statement of
Operations
<PAGE> 10
7(c) The following Exhibits are filed with this Report:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
2.1 Securities Purchase Agreement, dated as of March 12,
1998, by and among Alliance Imaging, Inc.; Embarcadero
Holding Corp. I; Embarcadero Holding Corp. II; American
Shared Hospital Services; and MMRI, Inc. (1)
99 Press Release dated November 13, 1998
</TABLE>
(1) This document was filed as Exhibit 2.1 to American Shared
Hospital Services' Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, and is incorporated herein by this
reference.
<PAGE> 11
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)
By: /s/ Ernest A. Bates, M.D.
-----------------------------------
Ernest A. Bates, M.D.
Chairman of the Board and
Chief Executive Officer
Dated: November 25, 1998
<PAGE> 12
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
2.1 Securities Purchase Agreement, dated as of March 12, 1998, by and
among Alliance Imaging, Inc.; Embarcadero Holding Corp. I; Embarcadero
Holding Corp. II; American Shared Hospital Services; and
MMRI, Inc. (1)
99 Press Release dated November 13, 1998 13
</TABLE>
(1) This document was filed as Exhibit 2.1 to American Shared Hospital
Services' Annual Report on Form 10-K for the fiscal year ended December
31, 1997, and is incorporated herein by this reference.
<PAGE> 1
EXHIBIT 99
P R E S S R E L E A S E
For immediate release
November 13, 1998
AMERICAN SHARED HOSPITAL SERVICES
COMPLETES SALE
OF DIAGNOSTIC IMAGING BUSINESS
San Francisco, November 13 ---
AMERICAN SHARED HOSPITAL SERVICES (AMEX,PCX: "AMS" for Common Stock) Friday said
that the previously announced sale of its diagnostic imaging business to
Alliance Imaging, Inc. was completed today.
Shareholders of the Company approved the sale at a Special Meeting held in San
Francisco on Friday, November 13, 1998. The transaction Closed later the same
day.
As part of the transaction American Shared repurchased 225,000 shares of its
Common Stock held by General Electric Medical Systems, for $0.01 per share.
After that repurchase, the Company has 4,544,384 shares of Common Stock issued
and outstanding.
American Shared received $13,552,000 in cash from the sale. After paying taxes,
costs associated with the transaction and certain other items, the Company
expects to have approximately $10 million in cash available for future
operations.
The Buyer also assumed approximately $28.5 million of debt and other liabilities
related to the business acquired, as well as substantially all of the Company's
medical equipment leases. American Shared has retained approximately $12.5
million of debt and other liabilities related to its ongoing business. After
recognizing a Gain on Sale from the transaction in its fiscal fourth quarter
1998, American Shared said its Shareholder Equity (net worth) will be
approximately $12 million.
American Shared has retained its Gamma Knife operations and its plans for The
Operating Room for the 21st Century (sm). The Company currently operates 5 Gamma
Knife units including 3 in California, one
....continued
<PAGE> 2
AMERICAN SHARED HOSPITAL SERVICES
PRESS RELEASE November 13, 1998
re: Sale of Diagnostic Imaging Business Page 2
in Texas and one in Connecticut. It has 5 additional units under contract in
Massachusetts, New Jersey, Ohio, Arkansas and Brazil. Most of those additional
Gamma Knife units are expected to begin operations in Spring 1999, with all
operating by the end of that year.
This press release 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, which involve risks and uncertainties
including, but not limited to, the possible effect of accounting and other
closing adjustments following the consummation of the sale transaction and the
risks of the Gamma Knife business, including the Company's limited access to
capital and the need for a substantial investment, the limited market for the
Gamma Knife, the small number of Gamma Knife manufacturers, competition from
other modalities, technological obsolescence and reduced Medicare and Medicaid
reimbursement rates for Gamma Knife treatments. Further information on potential
factors that could affect the financial condition, results of operations and
future plans of American Shared Hospital Services are included in the filings of
American Shared Hospital Services with the Securities and Exchange Commission,
including the Company's Annual Report on Form 10-K for the year ended December
31, 1997, its quarterly reports on Form 10-Q for the periods ended March 31,
June 30 and September 30, 1998, and its definitive Proxy Statement for the
Special Meeting of Shareholders held on November 13, 1998.
American Shared Hospital Services is a medical services company with interests
in radiosurgery services (through its 81% interest in GK Financing, LLC),
insurance services, and its program for The Operating Room for the 21st Century
(sm).
# # # # # # #
Contact: Richard Magary
415/788-5300 M-F, 8am-5pm PT
415/658-8003 after hours
415/431-2359 home
Website: www.ashs.com