AMERICAN SHARED HOSPITAL SERVICES

Previous wording

American Shared Hospital Services is a leading provider of turn-key technology solutions for stereotactic radiosurgery and advanced radiation therapy equipment and services. The main drivers of the Company’s revenue are numbers of sites, procedure volume, and reimbursement. The Company delivers radiation therapy through medical equipment leasing and direct patient services, its two reportable segments. The medical equipment leasing segment, which we also refer to as the Company’s leasing segment, operates by fee-per-use contracts or revenue sharing contracts where the Company shares in the revenue and operating costs of the equipment. The Company leases ten Gamma Knife systems and one PBRT system as of December 31, 2023, where a contract exists between the hospital and the Company. The Company, through GKF, also owns and operates two single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador. The Company’s facilities in Peru and Ecuador are considered direct patient services, which we also refer to as the Company’s retail segment, where a contract exists between the Company's facilities and the individual treated at the facility. A summary of the Company’s medical equipment leases and direct patient service sites is set forth in the table below:

Current wording

American Shared Hospital Services is a leading provider of turn-key technology solutions for stereotactic radiosurgery and advanced radiation therapy equipment and services. The main drivers of the Company’s revenue are numbers of sites, procedure volume, and reimbursement. The Company delivers radiation therapy through medical equipment leasing and direct patient services, its two reportable segments. The medical equipment leasing segment, which we also refer to as the Company’s leasing segment, operates by fee-per-use contracts or revenue sharing contracts where the Company shares in the revenue and operating costs of the equipment. The Company leases nine Gamma Knife systems and one PBRT system as of December 31, 2024, where a contract exists between the hospital and the Company. The Company also owns and operates two single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador, one single-unit radiation therapy facility in Puebla, Mexico, and as a result of the completion of the RI Acquisition on May 7, 2024, the Company also has an interest in and operates three single-unit radiation therapy facilities in Rhode Island. These facilities constitute the direct patient services segment, which we also refer to as the Company’s retail segment, where a contract exists between the Company's facilities and the individual treated at the facility. A summary of the Company’s medical equipment leases and direct patient service sites is set forth in the table below:

Previous wording

The Company had two contracts expire in the second and third quarters of 2023, respectively. The Company had a third contract up for renewal in 2023. This lease was extended and the equipment was upgraded to an Esprit during the fourth quarter. The Company has one customer contract that will expire in November 2024. A summary of the Company’s procedure volumes for fiscal years 2023 and 2022 are set forth in the table below.

Current wording

The Company had two contracts expire in the second and third quarters of 2023, respectively, and one in November 2024. In February 2025, the Company and one of its customer mutually agreed to terminate their lease agreement prior to the contract term, and the Company expects a fourth contract to expire in the second quarter of 2025. The Company has one customer contract that was upgraded to the Esprit in January 2025. A summary of the Company’s procedure volumes for fiscal years 2024 and 2023 are set forth in the table below.

Previous wording

The decrease in Gamma Knife volume, under medical equipment lease, during 2023 was primarily due to the expiration of two contracts in the second and third quarters of 2023, respectively. Same center procedures decreased 4% compared to 2022 due to downtime for the upgrade of two Gamma Knife systems to the Esprit during the third and fourth quarters of 2023. The increase in Gamma Knife volume, under direct patient services, during 2023 was due to improved marketing and physician outreach at the Company’s international locations, offset by downtime to upgrade the Gamma Knife equipment in Ecuador to the Icon. The increase in PBRT volume was due to normal, cyclical fluctuations.

Current wording

The decrease in Gamma Knife volume during 2024 in the leasing segment was primarily due to the expiration of two contracts in the second and third quarters of 2023 and a third contract that expired in November 2024, respectively. Same center procedures decreased 15% compared to 2023, partiallydue to downtime for the upgrade of one Gamma Knife system to the Esprit during the second quarter of 2024 and other normal, cyclical fluctuations. The Company’s PBRT unit was impacted by several hurricanes during 2024, which drove lower procedure volume at that location.

Previous wording

CMS established a 2024 delivery code reimbursement rate of approximately $7,420 ($7,691 in 2023) for a Medicare Gamma Knife treatment. The approximate CMS reimbursement rates for delivery of PBRT for a simple treatment without compensation for 2024 is $561 ($572 in 2023) and $1,362 ($1,323 in 2023) for simple with compensation, intermediate and complex treatments, respectively.

Current wording

CMS established a 2025 delivery code reimbursement rate of approximately $7,645 ($7,420 in 2024) for a Medicare Gamma Knife treatment. The approximate CMS reimbursement rates for delivery of PBRT for a simple treatment without compensation for 2025 is $578 ($561 in 2024) and $1,276 ($1,362 in 2024) for simple with compensation, intermediate and complex treatments, respectively.

Previous wording

The most significant accounting policies followed by the Company are presented in Note 2 – Accounting Policies to the consolidated financial statements. These policies along with the disclosures presented in the other consolidated financial statement notes and, in this discussion, and analysis, provide information on how significant assets and liabilities are valued in the consolidated financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of the consolidated financial statement amounts, and the methods, assumptions and estimates underlying those amounts, management has identified revenue recognition and costs of sales for revenue sharing customers, and the salvage value of equipment, and as such the aforementioned could be most subject to revision as new information becomes available. The following are our critical accounting policies in which management’s estimates, assumptions and judgments most directly and materially affect the consolidated financial statements:

Current wording

The most significant accounting policies followed by the Company are presented in Note 2 – Accounting Policies to the consolidated financial statements. These policies along with the disclosures presented in the other consolidated financial statement notes and, in this discussion, and analysis, provide information on how significant assets and liabilities are valued in the consolidated financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of the consolidated financial statement amounts, and the methods, assumptions and estimates underlying those amounts, management has identified

Previous wording

The Company recognizes revenues under Accounting Standards Codification (“ASC”) 842Leases (“ASC 842”) and ASC 606Revenue from Contracts with Customers (“ASC 606”). The Company delivers radiation therapy through medical equipment leasing (“leasing”) and direct patient services (“retail”). The Company leased ten Gamma Knife systems and one PBRT system as of December 31, 2023. The leasing business operates by fee-per-use contracts or revenue sharing, where the Company shares in the revenue and operating costs of the equipment. The Company, through GKF, also owns and operates two single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador, which provide radiation therapy services directly to the patient, or, retail.

Current wording

The Company recognizes revenues under Accounting Standards Codification (“ASC”) 842Leases (“ASC 842”) and ASC 606Revenue from Contracts with Customers (“ASC 606”). The Company delivers radiation therapy through medical equipment leasing (“leasing”) and direct patient services (“retail”). The Company leased nine Gamma Knife systems and one PBRT system as of December 31, 2024. The leasing business operates by fee-per-use contracts or revenue sharing, where the Company shares in the revenue and operating costs of the equipment. The Company also owns and operates two single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador, one single-unit radiation therapy facility in Puebla, Mexico, and following the RI Acquisition on May 7, 2024, the Company also owns a 60% interest in and operates three single-unit radiation therapy facilities in Rhode Island, collectively, the retail segment.

Previous wording

The Company recognizes leasing revenue 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 lease contracts are typically for a ten-year term and are classified as either fee per use or revenue sharing. Revenue from fee per use contracts is determined by each hospital’s lease agreement with the Company. Revenues are recognized at the time the procedures are performed, based on each hospital’s contracted rate and the number of procedures performed. Under revenue sharing arrangements, the Company receives a contracted percentage of the reimbursement received by the hospital. The amount the Company expects to receive is recorded as revenue and estimated based on historical experience. Revenue estimates are reviewed periodically and adjusted as necessary. Some of the Company’s revenue sharing arrangements also have a cost sharing component and net profit share for the operating costs of the center. The Company receives payment from the hospital at an agreed upon percentage share of the hospital’s reimbursement from third party payors, and the Company is responsible for paying operating costs of the equipment 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 and profit. The operating costs and estimated net operating profit are recorded as other direct operating costs in the consolidated statement of operations. For the years ended, December 31, 2023 and 2022, the Company recognized leasing revenue of approximately $17,772,000 and $16,655,000 under ASC 842, respectively, of which approximately $10,133,000 and $8,952,000 were for PBRT services, respectively.

Current wording

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 lease contracts typically have a ten-year term and are classified as either fee per use or revenue sharing. Fee per use revenues are recognized at the time the procedures are performed, based on each hospital’s contracted rate and the number of procedures performed. Under revenue sharing arrangements, the Company receives a contracted percentage of the reimbursement received by the hospital. The amount the Company expects to receive is recorded as revenue and estimated based on historical experience. Revenue estimates are reviewed periodically and adjusted as necessary. Some of the Company’s revenue sharing arrangements also have a cost sharing component and net profit share for the operating costs of the center. 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 and profit. The operating costs and estimated net operating profit are recorded as other direct operating costs in the consolidated statements of income. For the years ended, December 31, 2024 and 2023, the Company recognized leasing revenue of approximately $15,629,000 and $17,772,000 under ASC 842, respectively, of which approximately $9,952,000 and $10,133,000 were for PBRT services, respectively.

Previous wording

Revenue sharing arrangements amounted to approximately 70% and 67% of total revenue for the years ended December 31, 2023 and 2022, respectively. Because the revenue estimates are reviewed on a quarterly basis, any adjustments required for past revenue estimates would result in an increase or reduction in revenue during the current quarterly period. Payor mix is a significant variable in the Company’s estimate for revenue sharing revenues. Fluctuations in payor mix that may result in a 5% to 10% change in the estimate could increase or decrease revenues as of December 31, 2023, by approximately$113,000 to $226,000.

Current wording

Revenue sharing arrangements amounted to approximately 47% and 70% of total revenue for the years ended December 31, 2024 and 2023, respectively. Because the revenue estimates are reviewed on a quarterly basis, any adjustments required for past revenue estimates would result in an increase or reduction in revenue during the current quarterly period. Payor mix is a significant variable in the Company’s estimate for revenue sharing revenues. Fluctuations in payor mix that may result in a 5% to 10% change in the estimate could increase or decrease revenues as of December 31, 2024, by approximately $113,000 to $226,000.

Previous wording

The Company has stand-alone facilities in Lima, Peru and Guayaquil, Ecuador, where a contract exists between the Company’s facilities and the individual patient treated at the facility. Under ASC 606, the Company acts as the principal in this transaction and provides, at a point in time, a single performance obligation, in the form of a Gamma Knife treatment. Revenue related to a Gamma Knife treatment is recognized on a gross basis at the time when the patient receives treatment. There is no variable consideration present in the Company’s performance obligation and the transaction price is agreed upon per the stated contractual rate. GKPeru's payment terms are typically prepaid for self-pay patients and insurance provider payments are paid net 30 days. GKCE’s patient population is primarily covered by a government payor and payments are paid between three and six months, following issuance of invoice. The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts. Accounts receivable under ASC 606 at December 31, 2023 was $1,626,000. Accounts receivable under ASC 606 at January 1, 2022 and December 31, 2022 was $668,000 and $1,119,000. For the years ended December 31, 2023 and 2022, the Company recognized retail revenues of approximately $3,553,000 and $3,091,000 under ASC 606, respectively.

Current wording

The Company has stand-alone facilities in Lima, Peru and Guayaquil, Ecuador, where a contract exists between the Company’s facilities and the individual patient treated at the facility. Under ASC 606, the Company acts as the principal in this transaction and provides, at a point in time, a single performance obligation, in the form of a Gamma Knife treatment. Revenue related to a Gamma Knife treatment is recognized on a gross basis at the time when the patient receives treatment. There is no variable consideration present in the Company’s performance obligation and the transaction price is agreed upon per the stated contractual rate. GKPeru's payment terms are typically prepaid for self-pay patients and insurance provider payments are paid net 30 days. GKCE’s patient population is primarily covered by a government payor and payments are paid between six and nine months, following issuance of invoice. The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts.

Previous wording

During the year-ended December 31, 2023, the Company completed a sale of equipment to a new customer. The Company assessed this transaction under ASC 606 and concluded the Company acted as the agent in this transaction and provided, at a point in time, two performance obligations, in the form of an equipment sale of an Icon and Cobalt-60 reload. The performance obligation to sell, assign, transfer and deliver the equipment to the customer was carried out via Elekta. Revenue related to the equipment sale is recognized on a net basis when the sale is complete. The Company recognized net revenue of $200,000 on the sale of equipment for the year-ended December 31, 2023.

Current wording

During the year-ended December 31, 2024, the Company sold one of its Gamma Knife Perfexion units with an Icon upgrade to the customer it was leased to and recorded a net gain on equipment sale. During the year-ended December 31, 2023, the Company completed a sale of equipment to a new customer. The Company assessed this transaction under ASC 606 and concluded the Company acted as the agent in this transaction and provided, at a point in time, two performance obligations, in the form of an equipment sale of an Icon and Cobalt-60 reload. The performance obligation to sell, assign, transfer and deliver the equipment to the customer was carried out via Elekta. Revenue related to the equipment sale is recognized on a net basis when the sale is complete. The Company recognized net revenues of $155,000 and $200,000 on the sale of equipment for the years ended December 31, 2024 and 2023.

Previous wording

Salvage value is based on the estimated fair value of the equipment at the end of its useful life. The Company determines salvage value based on the estimated fair value of the equipment at the end of its useful life. There is no active resale market of Gamma Knife or PBRT equipment, but the Company believes its salvage value estimates were a reasonable assessment of the economic value of the equipment when the contract ends. There is no salvage value assigned to the two Gamma Knife units in Peru or Ecuador. The Company has not assigned salvage value to its PBRT equipment.

Current wording

The Company determines salvage value based on the estimated fair value of the equipment at the end of its useful life. There is no active resale market of Gamma Knife or PBRT equipment, but the Company believes its salvage value estimates are a reasonable assessment of the economic value of the equipment when the contract ends. There is no salvage value assigned to the two Gamma Knife units in Peru or Ecuador. The Company has not assigned salvage value to its PBRT equipment.

Previous wording

As of April 1, 2021, the Company reduced its estimate for salvage value for nine of its domestic Gamma Knife Perfexion units. As of October 1, 2022, the Company further reduced its estimate for salvage value for one of its domestic Gamma Knife Perfexion units. See Note 3 - Property and Equipment to the consolidated financial statements for further discussion on salvage value. As of December 31, 2023, the Company had seven domestic Gamma Knife units with salvage value ranging from $140,000 to $300,000. A further change in estimate for salvage value could have an impact on future earnings of the Company. For example, if the Company determined the salvage value of the existing seven domestic Gamma Knife units should be $0, there could be an annual increase to depreciation expense of approximately$676,000.

Current wording

See Note 3 - Property and Equipment to the consolidated financial statements for further discussion on salvage value.

Previous wording

In December 2023, the FASB issued ASU 2023-09Income Taxes (Topic 740) Improvements to Income Tax Disclosures (“ASU 2023-09”) which requires entities, on an annual basis, to disclose: specific categories in the rate reconciliation, additional information for reconciling items that meet a quantitative threshold, the amount of income taxes paid, net of refunds, disaggregated by jurisdiction, income or loss from continuing operations before income tax, income tax expense from continuing operations disaggregated between foreign and domestic, and income tax expense from continuing operations disaggregated by federal, state and foreign. ASU 2023-09 is effective for annual periods beginning after December 31, 2024. The Company is currently evaluating ASU 2023-09 to determine the impact it may have on its consolidated financial statements.

Current wording

Accounting pronouncements issued and not yet adopted - In December 2023, the FASB issued ASU 2023-09Income Taxes (Topic 740) Improvements to Income Tax Disclosures (“ASU 2023-09”) which requires entities, on an annual basis, to disclose: specific categories in the rate reconciliation, additional information for reconciling items that meet a quantitative threshold, the amount of income taxes paid, net of refunds, disaggregated by jurisdiction, income or loss from continuing operations before income tax, income tax expense from continuing operations disaggregated between foreign and domestic, and income tax expense from continuing operations disaggregated by federal, state and foreign. ASU 2023-09 is effective for annual periods beginning after December 31, 2024. The Company is currently evaluating ASU 2023-09 to determine the impact it may have on its consolidated financial statements.

Previous wording

For each of the years ended December 31, 2023 and 2022, 84% and 16% of the Company’s revenue was derived from the leasing segment versus the retail segment, respectively. For the year ended December 31, 2023, 51% of the Company’s revenue was derived from its Gamma Knife business, 48% was derived from its PBRT business and 1% was derived from equipment sales. For the year ended December 31, 2022, 55% of the Company’s revenue was derived from its Gamma Knife business and 45% was derived from its PBRT business.

Current wording

For each of the years ended December 31, 2024 and 2023, 56% and 83% of the Company’s revenue was derived from the leasing segment, respectively, and 44% and 17% from the Company’s retail segment, respectively. For the year ended December 31, 2024, 35% of the Company’s revenue was derived from its PBRT business, 34% was derived from its Gamma Knife business, 30% was derived from its LINAC business, and 1% was derived from equipment sales. For the year ended December 31, 2023, 51% of the Company’s revenue was derived from its Gamma Knife business, 48% was derived from its PBRT business and 1% was derived from equipment sales.

Previous wording

PBRT revenue for 2023 was $10,133,000 compared to $8,952,000 in 2022. The number of PBRT fractions performed in 2023 was 5,369 compared to 5,296 in 2022. Revenue per fraction in 2023 was $1,887 compared to $1,690 in 2022. The increase in PBRT volume was due to the higher utilization of the equipment by the customer. The average reimbursement increased due to a shift in payor mix from Medicare to commercial or other payors, which are reimbursed at a higher amount.

Current wording

PBRT revenue for 2024 was $9,952,000 compared to $10,133,000 in 2023. The number of PBRT fractions performed in 2024 was 5,139 compared to 5,369 in 2023. Revenue per fraction in 2024 was $1,937 compared to $1,887 in 2023. The Company’s PBRT unit in Orlando, Florida, was impacted by several hurricanes during 2024, which resulted in lower procedure volume. The average reimbursement increased due to a shift in payor mix from Medicare to commercial or other payors, which are reimbursed at a higher amount.

Previous wording

Gamma Knife revenue for 2023 was $10,992,000 compared to $10,794,000 in 2022. Gamma Knife revenue for 2023 increased $198,000 compared to 2022 due to an increase in average reimbursement, offset by lower procedure volume.

Current wording

Gamma Knife revenue for 2024 was $9,716,000 compared to $10,992,000 in 2023. Gamma Knife revenue for 2024 decreased $1,276,000 compared to 2023 due to the expiration of two contracts in the second and third quarters of 2023, and a third contract that expired in November 2024.

Previous wording

The number of Gamma Knife procedures performed in 2023 decreased by 91 compared to 2022 primarily due to the expiration of two contracts in the second and third quarters of 2023. Excluding the two Gamma Knife contracts that expired, Gamma Knife procedures for existing sites increased 1% in 2023 compared to the prior year. The increase in Gamma Knife procedures for existing customer sites was driven by a 12% increase in the Company’s retail segment, partially offset by a 4% decrease in the Company’s Gamma Knife leasing segment in 2023 compared to 2022, respectively. The increase in Gamma Knife volumes from retail sites wasdue to improved marketing and physician outreach at the Company’s international locations, partially offset by downtime due to upgrade the Gamma Knife equipment in Ecuador to the Icon.

Current wording

The number of Gamma Knife procedures performed in 2024 decreased by 111 compared to 2023 primarily due to the expiration of two contracts in the second and third quarters of 2023, and a third contract that expired in November 2024. Excluding the three Gamma Knife contracts that expired during 2023 and 2024, Gamma Knife procedures for existing sites were consistent with the prior year. Gamma Knife procedures for existing customer sites, retail segment, increased by 24%, offset by a 15% decrease in the Company’s Gamma Knife leasing segment in 2024 compared to 2023, respectively. The increase in Gamma Knife volumes from retail sites wasdue to improved marketing and physician outreach at the Company’s international locations. In addition, the Company’s Gamma Knife unit in Ecuador was upgraded to the Esprit and received a Cobalt-60 reload in November 2023, providing for faster procedure time.

Previous wording

The Company’s costs of revenue, consisting of maintenance and supplies, depreciation and amortization, and other operating expenses (such as insurance, property taxes, sales taxes, marketing costs and operating costs from the Company’s revenue sharing and international sites) increased by $617,000 in 2023 compared to 2022.

Current wording

The Company’s costs of revenue, consisting of maintenance and supplies, depreciation and amortization, and other operating expenses (such as insurance, property taxes, sales taxes, marketing costs and operating costs from the Company’s revenue sharing and international sites) increased by $7,174,000 in 2024 compared to 2023.

Previous wording

Maintenance and supplies and other direct operating costs, related party, as a percentage of total revenue were 13.5% and 15.1% in 2023 and 2022, respectively. Maintenance and supplies and other direct operating costs, related party decreased by $89,000 in 2023 compared to 2022. The decrease in 2023 compared to 2022was primarily due to maintenance for one of the Company’s Gamma Knife contracts that expired in June 2023.

Current wording

Maintenance and supplies and other direct operating costs, related party, as a percentage of total revenue were 10.7% and 13.5% in 2024 and 2023, respectively. Maintenance and supplies and other direct operating costs, related party increased by $138,000 in 2024 compared to 2023. The increase in 2024 compared to 2023was primarily due to maintenance at the Company’s radiation therapy facilities in Rhode Island, that were acquired during 2024, offset by lower maintenance expense for the Company’s Gamma Knife portfolio.

Previous wording

The Company’s selling and administrative costs increased $1,877,000 in 2023 compared to 2022. The increase in 2023 was due to increased staffing in the sales, finance and customer retention areas and approximately $919,000 in fees associated with new business opportunities, including the Company’s pending RI Acquisition.

Current wording

The Company’s selling and administrative costs increased $385,000 in 2024 compared to 2023. The increase in 2024 was due to increased staffing in the sales, finance and customer retention areas and approximately$560,000 in fees associated with new business opportunities, including those resulting from the RI Acquisition.

Previous wording

As of December 31, 2023 and 2022, the Company recognized a loss on the write down of impaired assets of $940,000 and $0, respectively. During the year ended December 31, 2023, the Company recorded an asset removal obligation (“ARO”) for one of the customer contracts that expired during 2023. An ARO for the second contract that expired during 2023 was recorded and impaired in a prior period. For the ARO recorded during 2023, the Company concluded the related increase to the underlying assets could not be supported by the cash flows of the equipment and therefore the Company recorded a loss on the write-down of the ARO during the three-month period ended June 30, 2023. The Company also reviewed its long-lived assets during the fourth quarter of 2023 and concluded events and circumstances existed that indicated additional impairment existed at a third Gamma Knife site related to the existing equipment. See Note 3 - Property and Equipment to the consolidated financial statements for further discussion on impairment.

Current wording

During the year ended December 31, 2023, the Company recorded an ARO for one of the customer contracts that expired during 2023. An ARO for the second contract that expired during 2023 was recorded and impaired in a prior period. For the ARO recorded during 2023, the Company concluded the related increase to the underlying assets could not be supported by the cash flows of the equipment and therefore the Company recorded a loss on the write-down of the ARO during the three-month period ended June 30, 2023. The Company also reviewed its long-lived assets during the fourth quarter of 2023 and concluded events and circumstances existed that indicated additional impairment existed at a third Gamma Knife site related to the existing equipment.

Previous wording

Interest and other income increased $422,000 in 2023 compared to 2022. The increases are primarily due to increases in the interest paid on the Company’s cash in 2023 compared to 2022.

Current wording

Interest and other income decreased $174,000 in 2024 compared to 2023. The decrease is primarily due to the interest received on the Company’s cash, driven by lower average cash balances, compared to the prior year.

Previous wording

The Company anticipates that it will continue to record income tax expense if it operates profitably in the future. Currently there are state income tax payments required for most states in which the Company operates. At December 31, 2022, the Company exhausted the remainder of its net operating loss carryforward for federal income tax return purposes. The Company has net operating loss carryforwards for state income tax purposes.

Current wording

The Company anticipates that it will continue to record income tax expense if it operates profitably in the future. Currently there are state income tax payments required for most states in which the Company operates.

Previous wording

NET (LOSS) INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS

Current wording

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS

Previous wording

Net income attributable to non-controlling interests decreased $572,000 in 2023 compared to 2022. Net income attributable to non-controlling interests represents the pre-tax income earned by the 19% non-controlling interest in GKF, and the pre-tax income or losses of the non-controlling interests in various subsidiaries controlled by GKF. The decrease or increase in net income attributable to non-controlling interests reflects the relative profitability of GKF. The decrease in 2023 compared to 2022 was due to lower pre-tax income for GKF stand-alone operations.

Current wording

Net loss attributable to non-controlling interests increased $309,000 in 2024 compared to 2023. Net income or loss attributable to non-controlling interests represents the pre-tax income earned by the 19% non-controlling interest in GKF, and the pre-tax income or losses of the non-controlling interests in various subsidiaries controlled by GKF, and the 40% non-controlling interests in the RI facilities and their pre-tax income or losses. The decrease or increase in net income attributable to non-controlling interests reflects the relative profitability of GKF and the RI Companies. The increase in net loss attributable to non-controlling interests in 2024 compared to 2023 was due to higher pre-tax loss for GKF stand-alone operations.

Previous wording

The Company’s primary liquidity needs are to fund capital expenditures as well as support working capital requirements. In general, the Company’s principal sources of liquidity are cash and cash equivalents on hand and a $7,000,000 revolving line of credit. As of December 31, 2023, the Company borrowed $2,500,000 on its line of credit, which was paid off in January 2024. The Company had cash and cash equivalents, including restricted cash, of $13,808,000 at December 31, 2023 compared to $12,453,000 at December 31, 2022, an increase of $1,355,000. The Company’s expected primary cash needs on both a short and long-term basis are for capital expenditures, business expansion (including the payment of the purchase price in connection with the RI acquisition), working capital, and other general corporate purposes. The Company believes that its borrowing capacity under its Revolving Line and its access to capital resources are sufficient to continue funding its present operations, to meet its commitments on its existing debt, and to meet its operating capital and funding requirements for the next 12 months from the date of this Annual Report.

Current wording

The Company’s primary liquidity needs are to fund capital expenditures as well as support working capital requirements. In general, the Company’s principal sources of liquidity are cash and cash equivalents on hand and a $7,000,000 revolving line of credit (as defined above, the “Revolving Line”). The Company had cash and cash equivalents, including restricted cash, of $11,275,000 at December 31, 2024 compared to $13,808,000 at December 31, 2023, a decrease of $2,533,000. The Company’s expected primary cash needs on both a short and long-term basis are for capital expenditures, business expansion, working capital, and other general corporate purposes. The Company believes that its revenue from operations, together with borrowing capacity under the Revolving Line and its access to capital resources are sufficient to continue funding its present operations, to meet its commitments on its existing debt, and to meet its operating capital and funding requirements for the next 12 months from the date of this Annual Report.

Previous wording

Operating activities provided $5,718,000 of cash in 2023, which was driven by net income of $265,000, non-cash charges for depreciation and amortization of $5,165,000, a loss on the write down of impaired assets of $940,000, stock-based compensation expense of $389,000, accretion of deferred issuance costs of $46,000, income taxes payable of $974,000, and changes in prepaids and other assets of $21,000. These increases were offset by net changes in Right-of-Use assets and lease liabilities of $34,000, deferred income taxes of $759,000, changes in payables and other accrued liabilities of $79,000, changes in receivables of $719,000, and changes in related party liabilities of $491,000.

Current wording

Operating activities provided $167,000 of cash in 2024, which was driven by net income of $1,532,000, non-cash charges for depreciation and amortization of $6,174,000, a loss on the write down of impaired assets of $3,084,000, gain on sale of equipment of $155,000, stock-based compensation expense of $373,000, accretion of deferred issuance costs of $95,000, changes in related party liabilities of $324,000, and changes in payables and other accrued liabilities of $2,227,000. These increases were offset by the gain on bargain purchase of $3,794,000, deferred income taxes of $359,000, accretion of unfavorable lease position of $65,000, changes in receivables of $6,939,000, changes in prepaids and other assets of $513,000, changes in ARO of $588,000, and income taxes payable of $1,229,000.

Previous wording

The Company’s trade accounts receivable increased by $542,000 to $4,343,000 at December 31, 2023 from $3,801,000 at December 31, 2022. The number of days revenue (sales) outstanding (“DSO”) in accounts receivable as of December 31, 2023 was 74 days compared to 70 days at December 31, 2022. DSO fluctuates depending on timing of customer payments received and the mix of fee per use versus revenue sharing and retail customers. The revenue sharing and retail sites generally have longer collection periods than fee per use sites.

Current wording

The Company’s trade accounts receivable increased by $7,267,000 to $11,610,000 at December 31, 2024 from $4,343,000 at December 31, 2023. The number of days revenue (sales) outstanding (“DSO”) in accounts receivable as of December 31, 2024 was 150 days compared to 74 days at December 31, 2023. DSO fluctuates depending on timing of customer payments received and the mix of fee per use versus revenue sharing and retail customers. The revenue sharing and retail sites generally have longer collection periods than fee per use sites. The Company added four retail sites during 2024, driving the increase in DSO.

Previous wording

Investing activities used $6,273,000 of cash in 2023, due to payments made towards the purchase of property and equipment. During 2023, the Company completed one Esprit upgrade and began a second Esprit upgrade at existing customer sites, and predominantly completed the installation of a LINAC at it’s new site in Puebla, Mexico. The Company amended its Credit Agreement to include financing for the LINAC equipment in in January 2024.

Current wording

Investing activities used $7,105,000 of cash in 2024, primarily due to payments made towards the purchase of property and equipment of $7,938,000, offset by cash received in excess of cash paid for the RI Acquisition of $538,000, and proceeds from equipment sales of $140,000. During 2024, the Company completed two Esprit upgrades at existing customer sites, began installation at a third site, and completed a Cobalt-60 reload and software upgrade at a fourth site.

Previous wording

Cash Flows Provided by (Used in) Financing Activities

Current wording

Cash Flows Provided by Financing Activities

Previous wording

Financing activities provided $1,910,000 of cash during 2023, which was driven by long-term debt financing from the second tranche of the DFC Loan of $1,750,000 and net borrowings on the Revolving Line of $2,500,000. These increases were offset by payments on long-term debt of $2,129,000, debt issuance costs of $9,000 and payments on short-term financing of insurance premiums of $202,000.

Current wording

Financing activities provided $4,405,000 of cash during 2024, which was driven by long-term debt financing from the Supplemental Term Loan and Second Supplemental Term Loan of $9,860,000 and capital contributions of $38,000. These increases were offset by net payments on the Revolving Line of $2,500,000, payments on long-term debt of $2,734,000, debt issuance costs of $164,000, and distributions of noncontrolling interests of $95,000. The Company amended its Credit Agreement to include financing for capital expenditures made during 2024 and for the RI Acquisition.

Previous wording

On April 9, 2021, the Company and certain of its domestic subsidiaries entered into a five year $22,000,000 credit agreement with Fifth Third Bank, N.A., which refinanced its existing domestic Gamma Knife portfolio. The lease financing previously obtained by Orlando was also refinanced as long-term debt by the Credit Agreement. The Credit Agreement includes three loan facilities: (1) a $9,500,000 term loan (the “Term Loan”), which was used to refinance the domestic Gamma Knife debt and finance leases and the associated closing costs; (2) a $5,500,000 delayed draw term loan (the “DDTL”), which was used to refinance the Company’s PBRT finance leases and associated closing costs and to provide additional working capital for the Company; and (3) a $7,000,000 revolving line of credit (the “Revolving Line”), which is available for the Company’s future projects and general corporate purposes. The Company borrowed $2,500,000 under the Revolving Line as of December 31, 2023, which the Company repaid in January 2024. The Credit Agreement is 48% amortized over a 58-month period with a balloon payment upon maturity and is secured by a lien on substantially all of the assets of the Company and certain of its domestic subsidiaries. The Revolving Loan, the Term Loan, and the DDTL will mature on April 9, 2026 unless accelerated due to the occurrence of certain events specified in the Credit Agreement. The Revolving Line is charged an unused line fee of 0.25% per annum. The Term Loan and DDTL have interest and principal payments due quarterly. Principal amortization on an annual basis for the Term Loan and DDTL equates to 48% of the original principal loan commitments in years one through five and an end of term payment of the remaining principal balance.

Current wording

On April 9, 2021, the Company along with certain of its domestic subsidiaries (collectively, the “Loan Parties”) entered into a five year $22,000,000 credit agreement with Fifth Third Bank, N.A. (“the Credit Agreement”). The Credit Agreement includes three loan facilities. The first loan facility is a $9,500,000 term loan (the “Term Loan”) which was used to refinance the domestic Gamma Knife debt and finance leases, and associated closing costs. The second loan facility is a $5,500,000 delayed draw term loan (the “DDTL”) which was used to refinance the Company’s PBRT finance leases and associated closing costs, as well as to provide additional working capital. The third loan facility provides for a $7,000,000 revolving line of credit (the “Revolving Line”) available for future projects and general corporate purposes. The facilities have a five-year maturity, carry a floating interest of SOFR plus 3.0% and are secured by a lien on substantially all of the assets of the Loan Parties and guaranteed by ASHS.

Previous wording

On January 25, 2024, the, the Company entered into a First Amendment to Credit Agreement with Fifth Third which amended the Credit Agreement to add the Supplemental Term Loan, a new term loan in the aggregate principal amount of $2,700,000. The proceeds of the Supplemental Term Loan were advanced in a single borrowing on January 25, 2024, and were used to finance capital expenditures that the Company paid cash for during 2023 for its operations in Puebla, Mexico and other related transaction costs. The Supplemental Term Loan will mature on January 25, 2030, unless accelerated due to the occurrence of certain events specified in the Credit Agreement. Interest on the Supplemental Term Loan is payable monthly during the initial twelve month period following the First Amendment Effective Date. Following such twelve month period, the Company is required to make equal monthly payments of principal and interest to fully amortize the amount outstanding under the Supplemental Term Loan by the Maturity Date. The Supplemental Term Loan is secured by a lien on substantially all of the assets of the Company and certain of its domestic subsidiaries. The First Amendment also replaces the LIBOR-based rates in the Credit Agreement with SOFR-based rates. Pursuant to the First Amendment, advances under the Credit Agreement bear interest at a floating rate per annum equal to SOFR plus 3.00%, subject to a SOFR floor of 0.00%.

Current wording

On January 25, 2024 (the “First Amendment Effective Date”), the Company and Fifth Third entered into a First Amendment to the Credit Agreement (the “First Amendment”), which amended the Credit Agreement to add a new term loan in the aggregate principal amount of $2,700,000 (the “Supplemental Term Loan”). The proceeds of the Supplemental Term Loan were advanced in a single borrowing on January 25, 2024, and were used for capital expenditures related to the Company’s operations in Puebla, Mexico and other related transaction costs. The Supplemental Term Loan will mature on January 25, 2030 (the “Maturity Date”). Interest on the Supplemental Term Loan is payable monthly during the initial twelve month period following the First Amendment Effective Date. Following such twelve month period, the Company is required to make equal monthly payments of principal and interest to fully amortize the amount outstanding under the Supplemental Term Loan by the Maturity Date. The Supplemental Term Loan is secured by a lien on substantially all of the assets of the Company and certain of its domestic subsidiaries. The First Amendment also replaces the LIBOR-based rates in the Credit Agreement with SOFR-based rates. Pursuant to the First Amendment, advances under the Credit Agreement bear interest at a floating rate per annum equal to SOFR plus 3.00%, subject to a SOFR floor of 0.00%.

Previous wording

The Company’s acquisition of GKCE and the Gamma Knife Esprit in Ecuador is financed with DFC. The loan entered into with DFC in June 2020 was obtained through the Company's wholly-owned subsidiary, HoldCo, and is guaranteed by GKF. The DFC Loan is secured by a lien on GKCE’s assets. The first tranche of the DFC Loan was funded in June 2020. In October 2023, the second tranche of the DFC Loan was funded in the amount of $1,750,000 to finance its equipment upgrade in Ecuador. The amount outstanding under the first tranche of the DFC Loan is payable in 29 quarterly installments with a fixed interest rate of 3.67%. The amount outstanding under the second tranche of the DFC Loan is payable in 16 quarterly installments with a fixed interest rate of 7.49%. The Company’s loan with DFC also contains customary covenants and representations, which, following the funding of the second Tranche, the Company was not in compliance with as of December 31, 2023. The Company obtained a waiver for the covenants for December 31, 2023.

Current wording

The loan entered into with DFC in connection with the acquisition of GKCE in June 2020*(*the “DFC Loan”) was obtained through the Company’s wholly-owned subsidiary, HoldCo, and is guaranteed by GKF. The DFC Loan is secured by a lien on GKCE’s assets. The first tranche of the DFC Loan was funded in June 2020. During the fourth quarter of 2023, the second tranche of the DFC loan was funded to finance the equipment upgrade in Ecuador. The amount outstanding under the first tranche of the DFC Loan is payable in 29 quarterly installments with a fixed interest rate of 3.67%. The amount outstanding under the second tranche of the DFC Loan is payable in 16 quarterly installments with a fixed interest rate of 7.49%. The long-term debt on the consolidated balance sheets related to the DFC loan was $1,806,000 and $2,464,000 as of December 31, 2024 and 2023, respectively. The Company capitalized debt issuance costs of $0 and $9,000 as of December 31, 2024 and 2023, respectively, related to maintenance and administrative fees on the DFC Loan.

Previous wording

The DFC Loan contains customary covenants among other covenants and obligations, requirements that the Company maintain certain financial ratios related to liquidity and cash flow as well as depository requirements. On March 28, 2024 the Company received a waiver and amendment from DFC for certain covenants as of December 31, 2023 and through December 31, 2024 and amended other covenants and definitions permanently. The Company expects to be in compliance with all debt covenants pursuant to the DFC Loan as amended and waived at March 31, 2024.

Current wording

The DFC Loan contains customary covenants among other covenants and obligations, requirements that the Company maintain certain financial ratios related to liquidity and cash flow as well as depository requirements. On March 28, 2024 the Company received a waiver and amendment from DFC for certain covenants as of December 31, 2023 and through December 31, 2024 and amended other covenants and definitions permanently. On March 3, 2025 the Company received an additional waiver from DFC for certain covenants as of December 31, 2024 and through December 31, 2025.

Previous wording

The Company’s combined long-term debt, net, totaled $13,125,000 as of December 31, 2023. See Note 5 - Long Term Debt to the consolidated financial statements for additional information.

Current wording

The Company’s combined long-term debt, net, totaled $20,182,000 as of December 31, 2024. See Note 5 - Long Term Debt to the consolidated financial statements for additional information.

Previous wording

As of December 31, 2023, the Company had commitments to purchase and install Gamma Knife and LINAC equipment totaling $15,925,000. There are no significant cash requirements, pending financing, for these commitments in the next 12 months. There can be no assurance that financing will be available for the Company’s current or future projects, or at terms that are acceptable to the Company. However, the Company currently has cash on hand of $13,808,000 and a line of credit of $7,000,000 to fund these projects.

Current wording

As of December 31, 2024, the Company had commitments to purchase and install Gamma Knife and LINAC equipment totaling $13,053,000. There are no significant cash requirements, pending financing, for these commitments in the next 12 months. There can be no assurance that financing will be available for the Company’s current or future projects, or at terms that are acceptable to the Company. However, the Company currently has cash on hand of $11,275,000 and a line of credit of $7,000,000 to fund these projects.

Previous wording

The Company also had commitments to service these various equipment commitments totaling $14,805,000. The Gamma Knife and certain other service contracts are paid monthly, as service is performed. The Company believes that cash flow from operations, cash on hand and its line of credit will be sufficient to cover these payments. See Note 10 - Commitments and Contingencies to the consolidated financial statements for further discussion on commitments.

Current wording

The Company also had commitments to service these various equipment commitments totaling $13,109,000. The Gamma Knife, PBRT, LINAC and related service contracts are paid monthly, as service is performed. The Company believes that cash flow from operations, cash on hand and its line of credit will be sufficient to cover these payments. See Note 10 - Commitments and Contingencies to the consolidated financial statements for further discussion on commitments.