What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-04-06 compared with 2020-04-03 · 374 added, 408 removed, 771 unchanged (50% of the section changed)

10 unchanged sentences

Based on this assessment management believes that, as of December 31, 2020, the Company’s internal control over financial reporting is effective based on those criteria.

In June 2020, the Company acquired Gamma Knife Center Ecuador S.A.

Management excluded GKCE from its report on internal controls over financial reporting as of December 31, 2020.

GKCE's financial statements constitute 3.8% and 3.6% of the Company’s consolidated total assets (excluding $1,343,000 of goodwill and intangible assets and $19,000 of land, which were integrated into the Company’s control environment), and revenues, respectively.

The Company will include GKCE in its assessment of the effectiveness of internal controls over financial reporting in fiscal year 2021 annual management report, the annual management report following the first anniversary of the acquisition.

35 unchanged sentences

3.1 5/15/2017

Articles of Incorporation of the Company, as amended.

Certificate of Amendment to Articles of Incorporation of the Company.

3.1 3/27/2017

By-laws of the Company, as amended and restated dated as of June 21, 2016.

By-laws of the Company, as amended and restated dated as of January 27, 2021.

001-08789 3.1 2/2/2021

Rights Agreement dated as of March 22, 1999 between American Shared Hospital Services and American Stock Transfer & Trust Company, as Rights Agent.

First Amendment to Rights Agreement dated as of March 12, 2009 between American Shared Hospital Services and American Stock Transfer & Trust Company, as Rights Agent.

* Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 10-K

001-08789 4.1 4/6/2021

11 unchanged sentences

10.13b 3/31/1998

10.1d Fourth Amendment Agreement dated as of March 31, 1998 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc.

10.1d Amendment Four Agreement dated as of March 31, 1998 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc.

and GKV Investments, Inc.

26 unchanged sentences

10.18b 11/15/2010

Lease Agreement for a Gamma Knife Unit dated as of April 10, 1997 between GK Financing, LLC and Yale-New Haven Ambulatory Services Corporation.

10.3 3/30/2016

Addendum to Lease Agreement for a Gamma Knife Unit dated as of October 25, 2005 between Yale-New Haven Ambulatory Services Corporation and GK Financing, LLC.

10.3a 3/30/2016

Assignment, Assumption, and 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.

10.3b 3/30/2016

Second Amendment to Lease Agreement for a Gamma Knife Unit (Perfexion Upgrade) dated as of May 15, 2009 between Yale-New Haven Hospital, Inc.

a/k/a Yale-New Haven Hospital and GK Financing, LLC.

10.2 11/13/2017

Third Amendment to Lease Agreement for a Gamma Knife Unit dated as of July 1, 2014 between Yale-New Haven Hospital, Inc.

a/k/a Yale-New Haven Hospital and GK Financing, LLC.

10.19c 11/14/2014

Purchased Services Agreement (for a Gamma Knife Unit) dated as of November 19, 2008 between GK Financing, LLC and Kettering Medical Center.

9 unchanged sentences

10.22b 3/31/2014

# Amended and Restated Equipment Lease Agreement (for a Gamma Knife Unit) dated as of December 12, 2014, between GK Financing, LLC and the Board of Trustees of the University of Arkansas on behalf of the University of Arkansas for Medical Sciences.

10.4 8/19/2015

Lease Agreement for a Gamma Knife Unit dated as of May 28, 1999 between GK Financing, LLC and Froedtert Memorial Lutheran Hospital.

10.7 3/30/2016

10.7a Addendum dated as of June 24, 1999 to Lease Agreement for a Gamma Knife Unit between GK Financing, LLC and Froedtert Memorial Lutheran Hospital.

10.27 3/29/2000

10.7b Amendment dated as of July 12, 1999 to Lease Agreement for a Gamma Knife Unit between GK Financing, LLC and Froedtert Memorial Lutheran Hospital.

10.28 3/29/2000

10.7c Amendment dated as of August 24, 1999 to Lease Agreement for a Gamma Knife Unit between GK Financing, LLC and Froedtert Memorial Lutheran Hospital.

10.29 3/29/2000

First Amendment to Lease Agreement for a Gamma Knife Unit dated as of December 29, 2008 between GK Financing, LLC and Froedtert Memorial Lutheran Hospital.

10.7d 3/30/2016

Second Amendment to Lease Agreement for a Gamma Knife Unit dated as of May 16, 2013 between GK Financing, LLC and Froedtert Memorial Lutheran Hospital, Inc.

10.7e 3/30/2016

10.7f Third Amendment to Lease Agreement for a Gamma Knife Unit dated as of December 15, 2014 between GK Financing, LLC and Froedtert Memorial Lutheran Hospital, Inc.

10.26c 4/1/2015

Lease Agreement for a Gamma Knife Unit dated as of December 11, 1996 between GK Financing, LLC and The Community Hospital Group, Inc., dba JFK Medical Center.

10.8 3/30/2016

Addendum One to Lease Agreement for a Gamma Knife Unit dated on January 9, 2008 and effective as of July 1, 2002 between The Community Hospital Group, Inc., dba JFK Medical Center and GK Financing, LLC.

10.8a 3/30/2016

Addendum Two to Lease Agreement for a Gamma Knife Unit dated as of January 9, 2008 between The Community Hospital Group, Inc., dba JFK Medical Center and GK Financing, LLC.

10.8b 3/30/2016

Addendum Three to Lease Agreement for a Gamma Knife Unit dated as of April 25, 2015, between The Community Hospital Group, Inc., dba JFK Medical Center and GK Financing, LLC.

10.5 8/19/2015

Addendum Four to Lease Agreement for a Gamma Knife Unit dated as of April 25, 2016 between The Community Hospital Group, Inc., dba JFK Medical Center and GK Financing, LLC.

10.1 5/15/2017

Addendum Five to Lease Agreement for a Gamma Knife Unit dated as of April 25, 2017 between The Community Hospital Group, Inc., dba JFK Medical Center and GK Financing, LLC 10-Q

10.1 8/9/2018

Lease Agreement for a Gamma Knife Unit dated as of June 3, 1999 between GK Financing, LLC and Sunrise Hospital and Medical Center, LLC d/b/a Sunrise Hospital and Medical Center.

# First Amendment to Lease Agreement for a Gamma Knife Unit (Perfexion Upgrade) dated as of April 23, 2020 between Tufts Medical Center, Inc.

(FKA New England Medical Center Hospitals, Inc.) and GK Financing, LLC.

10.1 8/14/2020

Addendum to Lease Agreement for a Gamma Knife Unit dated as of December 1, 1998 between Sunrise Hospital and Medical Center, LLC d/b/a Sunrise Hospital and Medical Center and GK Financing, LLC.

10.9a 3/30/2016

Addendum Two to Lease Agreement for a Gamma Knife Unit dated as of January 17, 2007 between GK Financing, LLC and Sunrise Hospital Medical Center, LLC d/b/a Sunrise Hospital Medical Center.

10.9b 3/30/2016

Addendum Three to Lease Agreement for a Gamma Knife Unit dated as of June 20, 2007 between GK Financing, LLC and Sunrise Hospital and Medical Center, LLC d/b/a Sunrise Hospital and Medical Center.

10.9c 3/30/2016

Addendum Four to Lease Agreement for a Gamma Knife Unit dated as of February 8, 2010 between GK Financing, LLC and Sunrise Hospital and Medical Center, LLC d/b/a Sunrise Hospital and Medical Center.

10.9d 3/30/2016

# Addendum Five to Lease Agreement for a Gamma Knife Unit dated as of May 18, 2012 between GK Financing, LLC and Sunrise Hospital and Medical Center, LLC d/b/a Sunrise Hospital and Medical Center.

10.4 8/19/2015

10 unchanged sentences

10.10c 3/30/2016

Amendment Four to Lease Agreement for a Gamma Knife Unit dated as of May 1, 2019 between GK Financing, LLC and Jackson HMA, LLC d/b/a Central Mississippi Medical Center.

10.1 5/11/2020

Lease Agreement for a Gamma Knife Unit dated as of February 18, 2000 between GK Financing, LLC and OSF HealthCare System.

4 unchanged sentences

10.2a 8/11/2016

# Addendum Three to Lease Agreement for a Gamma Knife Unit dates as of June 7, 2016 between GK Financing, LLC and OSF Healthcare System.

# Addendum Three to Lease Agreement for a Gamma Knife Unit dated as of June 7, 2016 between GK Financing, LLC and OSF Healthcare System.

10.2b 8/11/2016

Equipment Lease Agreement (for a Gamma Knife Unit) dated as of September 13, 2001 between GK Financing, LLC and Mercy Medical Center.

10.12 3/30/2016

Amendment Number One to Equipment Lease Agreement (for a Gamma Knife Unit) dated as of September 13, 2001 between GK Financing, LLC and Mercy Medical Center.

10.41 11/14/2002

* Addendum Four to Lease Agreement for a Gamma Knife Unit dated as of February 6, 2020 between GK Financing, LLC and OSF Healthcare System.

001-08789 10.11d 4/6/2021

Equipment Lease Agreement (for a Gamma Knife Unit) dated as of February 13, 2003 between GK Financing, LLC and AHS Albuquerque Regional Medical Center, LLC.

4 unchanged sentences

10.62a 8/15/2011

# Icon Upgrade and Amendment Two to Equipment Lease Agreement for a Gamma Knife Unit dated as of October 15, 2019 between GK Financing, LLC and Lovelace Health System, Inc., d/b/a Lovelace Medical Center.

10.1 11/13/2020

Equipment Lease Agreement (for a Gamma Knife Unit) dated as of March 21, 2003 between GK Financing, LLC and Northern Westchester Hospital Center.

2 unchanged sentences

10.46a 8/14/2013

Equipment Lease Agreement (for a Gamma Knife Unit) dated as of May 28, 2004 between GK Financing, LLC and Mercy Health Center.

10.15 3/30/2016

Addendum One to Equipment Lease Agreement (for a Gamma Knife Unit) dated as of December 23, 2011 between Mercy Health Center and GK Financing, LLC.

10.15a 3/30/2016

Addendum Two to Equipment Lease Agreement (for a Gamma Knife Unit) dated as of July 31, 2015, between Mercy Hospital Oklahoma City, Inc.

and GK Financing, LLC.

10.1 11/12/2015

Addendum Three to Equipment Lease Agreement (for a Gamma Knife Unit) dated as of September 3, 2016, between Mercy Hospital Oklahoma City, Inc.

and GK Financing, LLC.

10.15c 3/27/2017

Addendum Four to Equipment Lease Agreement (for a Gamma Knife Unite) dated as of May 1, 2017 between Mercy Hospital Oklahoma City, Inc.

and GK Financing, LLC.

10.1 8/10/2017

# Purchased Services Agreement (for a Gamma Knife Unit) dated as of March 5, 2008 between GK Financing, LLC and USC University Hospital, Inc.

4 unchanged sentences

10.57b 8/14/2014

Third Amendment to Purchased Services Agreement dated as June 30, 2020 between GK Financing, LLC and University of Southern California.

10.2 11/13/2020

# Equipment Lease Agreement (for a Gamma Knife Unit) dated as of May 1, 2010 between GK Financing, LLC and Fort Sanders Regional Medical Center.

31 unchanged sentences

10.25 3/27/2017

• Offer Letter between the Company and Mr.

Stachowiak dated April 22, 2020 8-K 001-08789 10.27 4/22/2020

* Subsidiaries of American Shared Hospital Services

21 unchanged sentences

April 6, 2021 By:

/s/ Ernest A.

Chairman of the Board and

/s/ Raymond C.

Chief Executive Officer

1 unchanged sentence

Signature Title Date

/s/ Raymond C.

Stachowiak Chief Executive Officer April 6, 2021

/s/ Ernest A.

Bates Chairman of the Board and

Chief Executive Officer

(Principal Executive Officer)

Bates Chairman of the Board

April 6, 2021

5 unchanged sentences

Mert Ozyurek Director April 6, 2021

/s/ Raymond C.

Stachowiak Director April 3, 2020

Tagawa Chief Operating Officer and

Tagawa President, Chief Operating Officer and

Chief Financial Officer

(Principal Accounting Officer)

April 3, 2020

(Principal Accounting Officer) April 6, 2021

AMERICAN SHARED HOSPITAL SERVICES

2 unchanged sentences

AS OF December 31, 2020 and 2019,

FOR THE THREE YEARS ENDED DECEMBER 31, 2019

FOR THE YEARS ENDED DECEMBER 31, 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

6 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

To the Shareholders and the Board of Directors of

American Shared Hospital Services, Inc.

1 unchanged sentence

We have audited the accompanying consolidated balance sheets of American Shared Hospital Services, Inc.

(the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’ equity and cash flows for the three years ended December 31, 2019.

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2019 and 2018, and the consolidated results of its operations and its cash flows for the three years ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, shareholders’ equity and cash flows for the years then ended, and the related notes.

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

6 unchanged sentences

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

3 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Emphasis of Matter

As disclosed in Note 2 to the consolidated financial statements, in 2019 the Company changed its method of accounting for leases due to the adoption of Accounting Standards Codification Topic No.

The adoption has been applied on a prospective basis.

Our opinion is not modified with respect to this matter.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Retail Revenue Recognition – Estimates of Reimbursement Rates and Payor Mix

As discussed in Note 2 in the Company’s consolidated financial statements, retail revenue amounted to approximately $11,418,000, which was approximately 64% of total consolidated revenue, during the year ended December 31, 2020.

The related accounts receivable balance for total retail sites accounted for 68% of total accounts receivable at December 31, 2020.

The Company has retail customer revenue classified as either turn-key or revenue sharing that are recognized under Accounting Standards Codification (“ASC”) 842 Leases (“ASC 842”).

Under revenue sharing arrangements, the Company receives a contracted percentage of the reimbursement received by the hospital.

Under turn-key arrangements, the Company receives payment from the hospital based on the amount of the hospital’s reimbursement from third party payors.

We identified management’s estimates of reimbursement rates and payor mix to record retail revenue and related accounts receivable, as a critical audit matter.

Retail revenue and related accounts receivable involves significant judgment and estimation, including measurement uncertainty, by management based on the estimates and assumptions used and are subject to adjustments based on actual reimbursements received by the Company.

In turn, auditing management’s judgments and estimates related to retail revenue and related accounts receivable involved a high degree of subjectivity, as they are based on estimates of reimbursement rates and payor mix.

The primary procedures we performed to address this critical audit matter included:

Obtaining management’s reconciliation of retail revenue and accounts receivable by site agreeing to supporting documentation related to the estimated reimbursement rates and payor mix used in the calculation.

Obtaining third party confirmations, confirming number of procedures, payment dates and amounts paid, and reconciling confirmed amounts to management’s reconciliation, in order to validate approximate rate per procedure.

Testing subsequent cash receipts and evaluating the reasonableness of the estimates through a look-back analysis over retail revenue as compared to accounts receivable balances previously recognized.

Developing an independent expectation of reimbursement rates per procedure based on historical trends, procedures, and payment amounts received through confirmation directly with the hospital, and comparing to management’s estimates.

Property and Equipment - Salvage Value on Equipment

As described in Note 2 to the consolidated financial statements, property and equipment are stated at cost less accumulated depreciation.

Depreciation for Gamma Knife, and other equipment is determined using the straight-line method over the estimated useful lives of the assets, which for medical and office equipment is generally 3 – 10 years, and after accounting for salvage value on the equipment where indicated.

Salvage value is based on the estimated fair value of the equipment at the end of its useful life.

We identified management’s estimates of salvage value including qualitative assessments of certain equipment as a critical audit matter.

Determination of salvage values involves significant judgment and estimation, involving measurement uncertainty, as there is no active resale market for the Gamma Knife units due to limited sellers and buyers and trade-ins for the equipment are not guaranteed.

Trade-ins are highly dependent on future demand, values and the Company’s relationship with supplier, a related party of the Company.

In turn, auditing management’s judgments and estimates related to salvage value of certain equipment, involved a high degree of subjectivity.

The primary procedure we performed to address this critical audit matter included:

Evaluating management’s determination of salvage values by comparing determined salvages values with historical trade-in transactions and publicly available transaction information, which included reviewing relevant purchase agreements, supplier agreements and evaluating publicly available transaction information.

Valuation of Certain Tangible and Intangible Assets Acquired Through Business Combination

As described in Note 4 to the consolidated financial statements, the Company completed the acquisition of Gamma Knife Center Ecuador S.A.

(“GKCE”) from GKCE’s selling majority shareholders in June 2020.

The Company subsequently executed agreements to acquire 1.3% of the total outstanding shares in July 2020 and intends to acquire the remaining 0.7% at later date.

The total purchase consideration for 100% of the outstanding shares of GKCE was approximately $2,869,000, including a base purchase price of $2,000,000, subject to certain price adjustments for current assets and liabilities and tax withholding.

The transaction was accounted for as a business combination using the acquisition method, whereby the total consideration transferred, identifiable assets acquired, and liabilities assumed are based on the respective acquisition-date fair values.

As part of the acquisition, the Company acquired tangible assets, including building, equipment and other property and equipment with a fair value of approximately $723,000 and intangible assets, consisting of the acquired entity’s trade name, with a fair value of approximately $78,000.

We identified the judgment and estimation of the methodologies and assumptions used in the valuation by management, in the determination of the fair value of these assets, as a critical audit matter.

Significant assumptions used to estimate the fair value of these tangible and intangible assets included discount rates, useful lives, expected future cash flows, internal rate of return, revenue forecast and growth rates.

Given these factors, the related audit effort in evaluating management’s estimates required a high degree of auditor judgment.

The primary procedures we performed to address this critical audit matter included:

Evaluating the appropriateness of the methodologies and assumptions used to estimate the fair value of certain tangible (real property and equipment) and intangible (trade name) assets, including involving valuation specialists, where specialized skill or knowledge was needed, to assist with our evaluation.

Our valuation specialist assisted primarily in the evaluation of the qualification of the appraiser and valuation specialist used by management, consideration of methodologies used in the appraisal of real property, including review of market information utilized to determine fair value, and in relation to the valuation of trade name, review of the methodology, discount rate, royalty rate, useful life (indefinite), and internal rate of return.

Evaluating assumptions and inputs used in projected financial information of the acquired entity, which primarily related to revenue growth rates, including testing the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

Specifically, when evaluating the assumptions related to the revenue growth rates and changes in the business that would drive these forecasted growth rates, we compared the assumptions to industry trends and subsequent interim period results to evaluate management’s estimates as of the date of the transaction.

/s/ Moss Adams LLP

San Francisco, CA

San Francisco, California

April 6, 2021

9 unchanged sentences

4,303,000 6,894,000

Other receivables insurance proceeds

Other receivables

6 unchanged sentences

30,418,000 41,480,000

LAND 19,000 —

GOODWILL 1,265,000 —

INTANGIBLE ASSETS 78,000 —

RIGHT OF USE ASSETS 886,000 1,106,000

4 unchanged sentences

Accounts payable $ 683,000 $ 557,000

$ 557,000 $ 435,000

Employee compensation and benefits 405,000 234,000

234,000 207,000

Other accrued liabilities 2,045,000 1,779,000

1,304,000 1,329,000

Other accrued liabilities insurance payable

Asset retirement obligations 1,270,000 —

Income taxes payable 373,000 130,000

Short term financing 475,000 —

Working capital payment due 197,000 —

Current portion of lease liabilities 305,000 279,000

Current portion of long-term debt 1,157,000 1,526,000

1,526,000 2,119,000

Current portion of finance leases 5,945,000 3,709,000

3,709,000 4,407,000

Total current liabilities 12,380,000 8,214,000

8,214,000 9,474,000

LONG-TERM LEASE LIABILITIES, less current portion 581,000 827,000

29 unchanged sentences

YEARS ENDED DECEMBER 31,

2019 2018 2017

$ 20,605,000 $ 19,714,000 $ 19,556,000

Revenues $ 17,837,000 $ 20,605,000

17,837,000 20,605,000

1 unchanged sentence

Maintenance and supplies 2,385,000 2,618,000

2,618,000 2,399,000 1,359,000

Depreciation and amortization 6,789,000 7,341,000

7,341,000 6,745,000 6,601,000

Other direct operating costs 4,197,000 3,726,000

13,371,000 13,685,000

13,685,000 12,228,000 10,893,000

6,920,000 7,486,000 8,663,000

Gross margin 4,466,000 6,920,000

Selling and administrative expense 4,608,000 4,060,000

4,060,000 3,994,000 4,323,000

Interest expense 1,057,000 1,318,000

1,318,000 1,631,000 1,927,000

Operating income

1,542,000 1,861,000 2,413,000

Proceeds received from investment in equity securities

(Loss) on write down of investment in equity securities

— — ( 579,000 )

Loss on write down of impaired assets and associated removal costs 8,264,000 —

Operating (loss) income ( 9,463,000 ) 1,542,000

Interest and other income 10,000 16,000

16,000 198,000 3,000

Income before income taxes

1,558,000 2,081,000 1,837,000

Income tax expense (benefit)

128,000 451,000 ( 1,103,000 )

1,430,000 1,630,000 2,940,000

net income attributable to non-controlling interests

( 771,000 ) ( 607,000 ) ( 1,017,000 )

Net income attributable to American Shared Hospital Services

$ 659,000 $ 1,023,000 $ 1,923,000

Net income per share attributable to American Shared Hospital Services:

Income per common share- basic

$ 0.11 $ 0.18 $ 0.33

Income per common share- diluted

$ 0.11 $ 0.17 $ 0.33

(Loss) income before income taxes ( 9,453,000 ) 1,558,000

Income tax (benefit) expense ( 1,737,000 ) 128,000

Net (loss) income ( 7,716,000 ) 1,430,000

net loss (income) attributable to non-controlling interests 658,000 ( 771,000 )

Net (loss) income attributable to American Shared Hospital Services $ ( 7,058,000 ) $ 659,000

Net (loss) income per share attributable to American Shared Hospital Services:

(Loss) income per common share- basic $ ( 1.14 ) $ 0.11

(Loss) income per common share- diluted $ ( 1.14 ) $ 0.11

S ee accompanying notes

1 unchanged sentence

C ONSOLIDATED S TATEMENT O F S HAREHOLDERS ’ E QUITY

THREE YEARS ENDED DECEMBER 31, 2019

YEARS ENDED DECEMBER 31, 2020 AND 2019

Non-controlling

Balances at January 1, 2017 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 — 323,000 — 323,000 — 323,000

Restricted stock awards 162,000 — — — — — —

Warrants and options exercised 76,000 115,000 — — 115,000 — 115,000

Cash distributions to non-controlling interests — — — — — ( 666,000 ) ( 666,000 )

Net income — — — 1,923,000 1,923,000 1,017,000 2,940,000

Balances at December 31, 2018 5,714,000 $ 10,711,000 $ 6,495,000 $ 7,896,000 $ 25,102,000 $ 5,946,000 $ 31,048,000

Stock-based compensation expense 4,000 — 230,000 — 230,000 — 230,000

Options exercised 16,000 42,000 — — 42,000 — 42,000

Issuance of restricted stock awards 83,000 — — — — — —

Cash distributions to non-controlling interests — — — — — ( 939,000 ) ( 939,000 )

2 unchanged sentences

Stock-based compensation expense 103,000 — 299,000 — 299,000 — 299,000

Options exercised 16,000 42,000 — — 42,000 — 42,000

Issuance of restricted stock awards 83,000 — — — — — —

Cash distributions to non-controlling interests — — — — — ( 761,000 ) ( 761,000 )

Net income — — — 659,000 659,000 771,000 1,430,000

NCI investment in acquisition — — — — — 17,000 17,000

Restricted common shares returned to plan ( 129,000 ) — — — — — —

Net (loss) income — — — ( 7,058,000 ) ( 7,058,000 ) ( 658,000 ) ( 7,716,000 )

Balances at December 31, 2020 5,791,000 $ 10,753,000 $ 7,024,000 $ 1,497,000 $ 19,274,000 $ 4,376,000 $ 23,650,000

3 unchanged sentences

YEARS ENDED DECEMBER 31,

2019 2018 2017

OPERATING ACTIVITIES

Net (loss) income

$ ( 7,716,000 ) $ 1,430,000

Adjustments to reconcile net income to net cash from operating activities:

Adjustments to reconcile net income to net cash from operating activities (excluding assets acquired and liabilities assumed):

Depreciation and amortization

6,970,000 7,411,000

Loss on disposal of assets

Non cash lease expense

Loss on write down investment in equity securities

Amortization of accrued interest on lease financing

288,000 256,000

Loss on write down impaired assets

Deferred income taxes

1 unchanged sentence

Accrued interest on lease financing

29,000 39,000 33,000

Stock-based compensation expense

1 unchanged sentence

Interest expense associated with lease liabilities

65,000 76,000

Changes in operating assets and liabilities:

4 unchanged sentences

263,000 28,000

Lease liability ( 332,000 ) — —

Lease liabilities ( 353,000 ) ( 332,000 )

Income taxes payable 179,000 130,000

Net insurance proceeds receivable

160,000 ( 160,000 ) —

Net cash from operating activities

3 unchanged sentences

( 455,000 ) ( 990,000 )

Proceeds from insurance

Payment for acquisition, net of cash acquired

( 2,084,000 ) —

Proceeds from sale of equipment

6 unchanged sentences

( 3,199,000 ) ( 4,142,000 )

Proceeds from financing from acquisition

Distributions to non-controlling interests

( 761,000 ) ( 939,000 )

Debt issuance costs

Proceeds from warrants and options exercised

42,000 — 115,000

Principal payments on short-term financing

2 unchanged sentences

( 4,810,000 ) ( 7,070,000 )

Net change in cash and cash equivalents

Net change in cash, cash equivalents and restricted cash

2,546,000 ( 13,000 )

9 unchanged sentences

SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

Acquisition of equipment with lease financing

Lease reassessment right of use assets and lease liabilities $ 67,000 $ —

Right of use assets and lease liabilities $ 135,000 $ 1,362,000

Interest capitalized to property and equipment $ 119,000 $ 110,000

Acquisition of equipment with finance leases

$ 496,000 $ 1,293,000

2 unchanged sentences

Acquisition of insurance with short-term financing $ 634,000 $ 526,000

Interest capitalized to property and equipment $ 110,000 $ 115,000 $ 138,000

Insurance proceeds receivable and due

$ — $ 977,000 $ —

Right of use assets and lease liabilities $ 1,362,000 $ — $ —

First working capital payment related to acquisition, withholding taxes $ 43,000 $ —

Estimated subsequent working capital payment for acquisition $ 154,000 $ —

S ee accompanying notes

2 unchanged sentences

N OTE 1 – B USINESS AND B ASIS OF P RESENTATION

Business – These consolidated financial statements include the accounts of American Shared Hospital Services (the “Company”) and its subsidiaries as follows:

Business – 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., and MedLeader.com, Inc.

(“MedLeader”);

The Company is also the majority owner of Long Beach Equipment, LLC (“LBE”).

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 subsidiary Instituto de Gamma Knife del Pacifico S.A.C.

GKF is also the majority-owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”), and Jacksonville GK Equipment, LLC (“JGKE”).

GKF is the majority owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”).

GKF formed HoldCo GKC S.A.

(“HoldCo”) to acquire Gamma Knife Center Ecuador S.A.

The Company (through ASRS) and Elekta AG (“Elekta”), the manufacturer of the Gamma Knife (through its wholly-owned United States subsidiary, GKV Investments, Inc.), entered into an operating agreement and formed GKF.

During 2020 GKF provided Gamma Knife units to fifteen medical centers in the United States in the states of Arkansas, California, Florida, Illinois, Indiana, Massachusetts, Mississippi, Nebraska, New Mexico, New York, Ohio, Oregon, Tennessee, and Texas.

GKF also owns and operates a single-unit Gamma Knife facility in Lima, Peru.

GKF also owns and operates single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador.

The Company through its wholly-owned subsidiary, Orlando, provided proton beam radiation therapy (“PBRT”) and related equipment to a customer in the United States.

The Company 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 GK Financing U.K.

Limited (“GKUK”) for the purposes of expanding its business internationally;

Orlando and LBE to provide proton beam therapy equipment and services in Orlando, Florida and Long Beach, California;

The Company formed the subsidiary GKPeru and acquired GKCE for the purposes of expanding its business internationally;

Orlando and LBE to provide PBRT equipment and services in Orlando, Florida and Long Beach, California, respectively;

and AGKE and JGKE to provide Gamma Knife equipment and services in Albuquerque, New Mexico and Jacksonville, Florida, respectively.

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LBE is not expected to generate revenue within the next two years.

GKUK was dissolved in November 2018.

On June 12, 2020, GKF, through HoldCo, purchased approximately 98 % of the total outstanding shares of GKCE, from GKCE’s majority shareholders (the “Acquisition”).

As of December 31, 2020, the Company had acquired approximately 99.3 % of the total outstanding shares of GKCE and intends to acquire the remaining 0.7 % at a later date.

The base purchase price for the Acquisition, including acquisition of the minority shares was approximately $ 2,000,000 .

This purchase price was paid with $ 575,000 in cash and a $ 1,425,000 loan from the United States International Development Finance Corporation (“DFC”).

The purchase price is subject to certain post-closing adjustments, including adjustment for GKCE's working capital and excess cash.

The DFC loan is denominated in U.S.

dollars, which is also the currency of Ecuador.

GKCE Acquisition” for further discussion.

The Company continues to develop its design and business model for The Operating Room for the 21st Century SM through its 50 % owned OR21, LLC (“OR21”).

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

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic and the extent and duration of the future impact on the Company's business is highly uncertain and difficult to predict.

The COVID-19 pandemic has adversely impacted, and is likely to further adversely impact, nearly all aspects of the Company’s business and markets, including its employees, operations, contractors, customers, government and third party payors and others.

The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition will depend on future developments that are highly uncertain and difficult to predict.

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Advertising costs – The Company expenses advertising costs as incurred.

Advertising costs were $ 144,000 , $ 113,000 , and $ 140,000 during the years ended December 31, 2019, 2018 and 2017, respectively.

Advertising costs were $ 237,000 and $ 144,000 during the years ended December 31, 2020 and 2019.

Advertising costs are recorded in other direct operating costs and sales and administrative costs in the consolidated statements of operations.

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Restricted cash is not considered a cash equivalent for purposes of the consolidated statements of cash flows.

Restricted cash – Restricted cash represents the minimum cash that must be maintained in GKF to fund operations, per the subsidiary’s operating agreement, and the minimum cash that must be maintained in Orlando per the subsidiary’s financing agreement.

Restricted cash – Restricted cash represents the minimum cash that must be maintained in GKF to fund operations, per the subsidiary’s operating agreement, the minimum cash that must be maintained by GKF per it’s financing agreement with DFC, and the minimum cash that must be maintained in Orlando per the subsidiary’s financing agreement.

Business and credit risk – The Company maintains its cash balances, which exceed federally insured limits, in financial institutions.

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The Company monitors the financial condition of the financial institutions it uses on a regular basis.

All of the Company’s revenue was provided by seventeen, eighteen, and twenty customers in 2019, 2018, and, 2017, respectively.

One customer accounted for approximately 30 %, 26 %, and 21 % of the Company’s total revenue in 2019, 2018, and, 2017, respectively.

At December 31, 2019 and 2018, three customers each individually accounted for more than 10 % of total accounts receivable, respectively.

All of the Company’s revenue was provided by eighteen and seventeen customers in 2020 and 2019.

One customer accounted for approximately 35 % and 30 % of the Company’s total revenue in 2020 and 2019.

At December 31, 2020, four customers each individually accounted for 11 %, 11 %, 11 % and 20 % of total accounts receivable, respectively.

At December 31, 2019, three customers each individually accounted for 12 %, 15 % and 30 % of total accounts receivable, respectively.

The Company performs credit evaluations of its customers and generally does not require collateral.

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Salvage value is based on the estimated fair value of the equipment at the end of its useful life.

Depreciation for PBRT and related equipment is determined using the modified units of production method, which is a function of both time and usage of the equipment.

This depreciation method allocates costs considering the projected volume of usage through the useful life of the PBRT unit, which has been estimated at 20 years.

The estimated useful life of the PBRT unit is consistent with the estimated economic life of 20 years.

The Company acquired a building as part of the Acquisition in June 2020.

Depreciation for buildings is determined using the straight-line method over 20 years.

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Depreciation for PBRT and related equipment is determined using the modified units of production method, which is a function of both time and usage of the equipment.

This depreciation method allocates costs considering the projected volume of usage through the useful life of the PBRT unit, which has been estimated at 20 years.

The estimated useful life of the PBRT unit is consistent with the estimated economic life of 20 years.

The Company capitalizes interest incurred on property and equipment that is under construction, for which deposits or progress payments have been made.

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The Company capitalized interest of $ 119,000 and $ 110,000 in 2020 and 2019, respectively, as costs of medical equipment.

The Company leases Gamma Knife and radiation therapy equipment to its customers under arrangements typically accounted for as operating leases.

The Company leases Gamma Knife and radiation therapy equipment to its customers under arrangements accounted for as operating leases.

At December 31, 2020, the Company held equipment under operating lease contracts with customers with an original cost of $ 75,241,000 and accumulated depreciation of $ 45,416,000 .

At December 31, 2019, the Company held equipment under operating lease contracts with customers with an original cost of $ 92,135,000 and accumulated depreciation of $ 55,148,000 .

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 Accounting Standards Codification (“ASC”) 360 Property, 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.

During the year ended December 31, 2018, the Company recorded a receivable of $ 1,137,000 for insurance coverage related to damage that was incurred on the Company’s PBRT unit.

The Company contracted with Mevion Medical Systems, Inc.

(“Mevion”), formerly Still River Systems, to repair the damaged unit and incurred repair costs of approximately $ 977,000 , which is included in the Company’s consolidated balance sheet for the year ended December 31, 2018.

The Company recorded $ 185,000 of income from its business interruption insurance for the period the PBRT unit was down undergoing repair.

All insurance proceeds and related costs were received and paid during the year ended December 31, 2019.

As of December 31, 2020, the Company recognized a loss on the write down of impaired assets of $ 8,264,000 .

The impaired assets included six ( 6 ) Gamma Knife units and the Company's deposits towards purchase of proton beam systems and related capitalized interest.

See further discussion under Note 2 - Long-lived asset impairment and Note 3 - Property and Equipment for further discussion.

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.

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The estimated fair value of the Company’s assets and liabilities as of December 31, 2020 and 2019 were as follows (in thousands):

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Level 1 Level 2 Level 3 Total Carrying Value

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Total $ — $ — $ 3,075 $ 3,075 $ 3,480

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Revenue recognition - The Company recognizes revenues under ASC 842 Leases (“ASC 842”) and ASC 606 Revenue from Contracts with Customers (“ASC 606”).

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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.

The Company’s contracts are typically for a 10 -year term and are classified as either fee per use or retail.

Retail arrangements are further classified as either turn-key or revenue sharing.

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The operating costs and estimated net operating profit are recorded as other direct operating costs in the consolidated statement of operations .

For the year ended December 31, 2019, the Company recognized revenues of approximately $ 19,396,000 under ASC 842.

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.

As of December 31, 2020 and 2019, the Company recognized revenues of approximately $ 16,204,000 and $ 19,396,000 under ASC 842, respectively.

Patient income – The Company has stand-alone facilities in Lima, Peru and Guayaquil, Ecuador, where a contract exists between the Company’s facilities and the individual patient treated at the facility.

Under ASC 606, the Company acts as the principal in this transaction and provides, at a point in time, a single performance obligation, in the form of a Gamma Knife treatment.

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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.

GKPeru's payment terms are typically prepaid for self-pay patients and insurance provider payments are paid net 30 days.

GKCE's patient population is primarily covered by a government payor and payments are paid approximately 30 to 60 days upon invoice.

The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts.

Accounts receivable earned by GKPeru were not significant for the year ended December 31, 2019.

For the year ended December 31, 2019, the Company recognized revenues of approximately $ 1,209,000 under ASC 606.

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Accounts receivable earned by GKPeru were not significant for the year ended December 31, 2020 and 2019.

GKCE's accounts receivable were $ 467,000 for the year ended December 31, 2020.

As of December 31, 2020 and 2019, the Company recognized revenues of approximately $ 1,633,000 and $ 1,209,000 under ASC 606, respectively.

Stock-based compensation – The Company measures all stock-based compensation awards at fair value and records such expense in its consolidated financial statements over the requisite service period of the related award.

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Costs of revenues are recognized as incurred.

Sales and Marketing – The Company markets its services through its preferred provider status with Elekta and a direct sales effort led by its Vice President of Sales and Business Development and its Chief Operating Officer.

The Company’s current business is the outsourcing of stereotactic radiosurgery services and radiation therapy services.

Sales and Marketing – The Company markets its services through its preferred provider status with Elekta and a direct sales effort led by its Senior Vice President of Sales and Business Development, its President and Chief Financial and Operating Officer and its Chief Executive Officer (“CEO”).

The Company typically provides the equipment, as well as planning, installation, reimbursement and marketing support services.

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Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

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The Company accounts for uncertainty in income taxes as required by the provisions of ASC 740 Income taxes (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.

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When Management determines that an operation has become predominantly self-sufficient, the Company will change its accounting for the operation to the local currency from the U.S.

The Company analyzed it’s Gamma Knife site in Peru under ASC 830 as of December 31, 2019 and concluded the functional currency was the U.S.

The Company analyzed it’s Gamma Knife site in Peru under ASC 830 as of December 31, 2020 and 2019 and concluded the functional currency was the U.S.

As facts and circumstances change, the Company will revisit this conclusion.

Asset Retirement Obligations – Based on the guidance provided in ASC 410 Asset Retirement Obligations (“ASC 410”), the Company analyzed its existing lease agreements and determined an asset retirement obligation (“ARO”) exists to remove the respective units at the end of the lease terms.

The fair value of the ARO liability is not reasonable to estimate at this time, due to uncertainties about timing, cost and, outcome of the ARO, therefore no liability has been recorded as of December 31, 2019.

The Company will re-evaluate this position on a periodic basis when facts and circumstances change that could affect this conclusion.

As of December 31, 2020, four ( 4 ) of the Company's Gamma Knife customers notified the Company of their intent to terminate their contracts at the contract lease term.

The Company recorded an ARO liability for these four ( 4 ) sites, using estimates from Elekta.

No liability has been recorded as of December 31, 2020 for the remaining Gamma Knife sites, or as of December 31, 2019, because it is uncertain these units will be removed and the Company historically has not removed the Gamma Knife equipment at the end of the lease term.

The Company will re-evaluate the need to record additional ARO liabilities on a periodic basis when facts and circumstances change that could affect this conclusion.

Earnings per share – Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the year.

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Diluted earnings per share reflect the potential dilution that could occur if common shares were issued pursuant to the exercise of options or warrants.

Because the Company reported a loss for the year ended December 31, 2020, the potentially dilutive effects of approximately 13,000 , of the Company's unvested restricted stock awards were not considered for the reporting periods.

On March 31, 2020, the Company’s Award Agreements (as defined below) expired and the unvested performance share awards were returned to the Company’s stock incentive plan - see Note 9 for further discussion.

Based on the guidance provided in accordance with ASC 260, the weighted average common shares for basic earnings per share, for the year ended December 31, 2019 excluded the weighted average impact of the unvested performance share awards.

These awards were legally outstanding but not deemed participating securities and therefore were excluded from the calculation of basic earnings per share.

The unvested shares were also excluded from the denominator for diluted earnings per share because they were considered contingent shares not deemed probable as of December 31, 2019.

The following table illustrates the computations of basic and diluted earnings per share for the years ended December 31, 2020 and 2019.

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2019 2018 2017

Numerator for basic and diluted earnings per share

Numerator for basic and diluted (loss) earnings per share

$ ( 7,058,000 ) $ 659,000

Denominator for basic and diluted earnings per share – weighted-average shares

Denominator for basic and diluted (loss) earnings per share – weighted-average shares

6,182,000 5,919,000

Effect of dilutive securities Employee stock options and restricted stock

11,000 17,000 130,000

Denominator for diluted earnings per share – adjusted weighted-average shares

Denominator for diluted (loss) earnings per share – adjusted weighted-average shares

6,182,000 5,930,000

Earnings per common share- basic

(Loss) earnings per common share- basic

$ ( 1.14 ) $ 0.11

Earnings per common share- diluted

(Loss) earnings per common share- diluted

$ ( 1.14 ) $ 0.11

In 2020, options outstanding to purchase 406,000 shares of common stock at an exercise price range of $ 2.25 - $ 3.90 per share and 13,000 restricted stock units were not included in the calculation of diluted earnings per share because they would be anti-dilutive.

In 2018, options outstanding to purchase 519,000 shares of common stock at an exercise price range of of $ 2.82 - $ 3.90 per share and 4,000 restricted stock units were not included in the calculation of diluted earnings per share because they would be anti-dilutive.

In 2017, options outstanding to purchase 14,000 shares of common stock at an exercise price of $ 3.90 per share and 4,000 restricted stock units were not included in the calculation of diluted earnings per share because they would be anti-dilutive.

Business segment information - Based on the guidance provided in accordance with ASC 280 Segment 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 one reportable segment.

The Company provides Gamma Knife, PBRT, and IGRT equipment to sixteen hospitals in the United States and owns and operates a single-unit facility in Lima, Peru as of December 31, 2019.

These seventeen locations operate under different subsidiaries of the Company, but offer the same service, 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.

Geographical information – The Company’s single-unit facility in Peru treated its first patient in July 2017.

The following table provides a break out of domestic and foreign allocations of revenues and net property and equipment:

2019 2018 2017

In 2019, options outstanding to purchase 387,000 shares of common stock at an exercise price range of $ 2.68 - $ 3.90 per share and 3,000 restricted stock units were not included in the calculation of diluted earnings per share because they would be anti-dilutive.

Business segment information - Based on the guidance provided in accordance with ASC 280 Segment Reporting (“ASC 280”), the Company analyzed its subsidiaries which are all in the business of leasing radiosurgery and radiation therapy equipment to healthcare providers, and concluded there are two reportable segments, domestic and foreign.

The Company provides Gamma Knife and PBRT equipment to fifteen hospitals in the United States and owns and operates two single-unit facilities in Lima, Peru and Guayaquil, Ecuador as of December 31, 2020.

The Company determined two reportable segments existed due to similarities in economics of business operations and geographic location.

The operating results of the two reportable segments are reviewed by the Company’s CEO and President, Chief Operating and Financial Officer, who are also deemed the Company’s Chief Operating Decision Makers (“CODMs”).

As of December 31, 2019, the Company had one reportable segment.

Following the Company's acquisition of GKCE in June 2020, the Company concluded it had two reportable segments.

The revenues, profit or loss, and net property and equipment allocations for the Company's two reportable segments as of December 31, 2020 consists of the following:

Domestic $ 16,204,000 $ 19,396,000

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Total $ 17,837,000 $ 20,605,000

2019 2018 2017

Profit or (loss)

Domestic $ ( 7,082,000 ) $ 769,000

Foreign 24,000 ( 110,000 )

Total $ ( 7,058,000 ) $ 659,000

Property and equipment, net

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An impairment loss is charged to the consolidated statement of operations in the period in which management determines such impairment.

No such impairment has been noted as of December 31, 2019 and 2018.

Accounting pronouncement issued and adopted – In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02 Leases (“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 classification criteria for direct financing and sales-type leases is modified.

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 transition 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 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 concluded that, other than with respect to the Company’s stand-alone facility in Lima, Peru, ASU 2016-02 applied.

The Company adopted ASU 2016-02 and related ASUs as of January 1, 2019 using the modified retrospective transition method.

The Company elected to initially 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 expired or existing contracts, and the 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 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 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 pronouncement issued and not yet adopted – In February 2018, the FASB issued ASU No.

As of December 31, 2020, the Company determined circumstances existed indicating its assets could be impaired, concluded an impairment existed, and recognized a loss on the write down of impaired assets of $ 8,264,000 .

No such impairment has been noted as of December 31, 2019.

See Note 3 - Property and Equipment for further discussion.

Goodwill and intangible assets - The Company recorded goodwill of $ 1,265,000 and an intangible asset with a fair value of $ 78,000 as part of the Acquisition in June 2020.

The intangible asset identified was GKCE's trade name and the Company assigned an indefinite useful life to the asset.

Based on the guidance provided in accordance with ASC 350 Intangibles-Goodwill and Other (“ASC 350”), the Company does not amortize the intangible asset because it has an indefinite life.

The Company assesses goodwill at the reporting unit level, which has been determined to be GKCE.

Each reporting period, the Company assesses whether events or circumstances continue to support an indefinite useful life for the intangible asset.

Per ASC 350, the Company tests goodwill and intangibles for impairment annually or as events or circumstances change that indicate the fair value may be below the carrying amount.

As of December 31, 2020, there has been no change to the Company's assessment of the value of intangible assets or goodwill.

Acquisitions - The Company records acquisitions according to ASC 805 Business Combinations (“ASC 805”) using the acquisition method of accounting.

Under the acquisition method of accounting, all assets acquired, including goodwill and other intangible assets, should be stated at fair value at the time of acquisition.

The allocation of purchase price consideration is preliminary, pending the completion of the fair value of certain tangible, intangible assets, and residual goodwill.

During the measurement period, which can be no more than one year from the Closing Date, the Company expects to continue to obtain information to assist in determining the final fair value of assets acquired.

See Note 4 - GKCE Acquisition for further discussion on acquisitions.

Accounting pronouncement issued and adopted – In February 2018, the FASB issued ASU No.

2018-03 Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2018-03”), which clarifies certain aspects of ASU 2016-1.

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The new guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019.

The Company does not expect ASU 2018-03 or ASU 2018-13 to have a significant impact on its consolidated financial statements and related disclosures.

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In December 2019, the FASB issued ASU 2019-12 Income taxes (Topic 740):

The Company adopted ASU 2018-03 and ASU 2018-13 on January 1, 2020.

There was no significant impact on its consolidated financial statements and related disclosures.

Accounting pronouncement issued and not yet adopted – In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”) which removes specific exceptions to the general principles in Topic 740 and eliminates the need for an organization to analyze whether the following apply in a given period:

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Office equipment 330,000 594,000

Deposits and construction in progress 1,965,000 3,832,000

Construction in progress 170,000 1,965,000

Deposits towards purchase of proton beam systems — 2,250,000

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Net property and equipment $ 30,418,000 $ 41,480,000

The Company has equipment that is secured under finance leases, which is included in Medical equipment and facilities, with a total cost of $ 46,642,000 and associated accumulated depreciation of $ 23,782,000 as of December 31, 2019 and a total cost of $ 46,559,000 and associated accumulated depreciation of $ 20,292,000 as of December 31, 2018.

As of December 31, 2019, the Company has two idle Gamma Knife units with a cumulative net book value of $ 943,000 .

There are currently no commitments to place into service or trade in these units during 2020.

As of December 31, 2019, the Company has $ 1,965,000 in construction in progress.

The construction in progress consists of deposits payments made for two Cobalt-60 reloads, capitalized and imputed interest, and other costs associated with on-going projects of the Company.

As of December 31, 2019, the Company has $ 2,250,000 in deposits toward the purchase of two MEVION S250i PBRT systems from Mevion.

The Company has a commitment for the remaining balance for each system.

The Company’s first MEVION S250 treated its first patient in April 2016.

The Company has entered into a partnership agreement (LBE) with a radiation oncology physician group, which has contributed $ 400,000 towards the deposits on the third machine.

The Company currently does not have customer contracts for the second and third units.

The Company reviews the carrying value of these deposits for impairment on a quarterly basis, or as events or circumstances might indicate that the carrying value may not be recoverable.

The Company has reviewed the deposits, in light of available information, as of December 31, 2019 and has not identified any impairment.

See Note 12 - Commitments and Contingencies for additional discussion on purchase commitments.

As of December 31, 2020, approximately $ 3,195,000 of the net property and equipment balance is outside of the United States.

As December 31, 2020, the Company recognized a loss on the write down of impaired assets of $ 8,264,000 .

The impaired assets included six ( 6 ) Gamma Knife units and related removal costs, and two ( 2 ) deposits towards the purchase of proton beam systems and related capitalized interest.

The six ( 6 ) Gamma Knife units that were impaired consisted of two ( 2 ) units that had been taken out of service in prior years, one ( 1 ) unit that was taken out of service in 2020 and three ( 3 ) units that have already been, or the Company anticipates will be, taken out of service in 2021 , totaling $ 3,051,000 .

In addition to this impairment write-off of $ 3,051,000 were estimated costs of de-install and removal (ARO) of four ( 4 ) of the Gamma Knife units of $ 1,350,000 (of which, the Company has paid $ 80,000 ) as of December 31, 2020.

Total impairment related to the Gamma Knife business was $ 4,401,000 for the year ended December 31, 2020.

The Company reviews the carrying value of its long-lived assets for impairment on a quarterly basis, or as events or circumstances might indicate that the carrying value may not be recoverable.

The Company has reviewed its Gamma Knife equipment, in light of available information as of December 31, 2020 and based on current customer prospects, the probability of future contract extensions or renewals, and the high turnover rate in contract terminations compared to the Company's historical contract termination rate, the Company determined that these six ( 6 ) Gamma Knife units were more-than temporarily impaired.

Prior to December 31, 2020, the Company had $ 2,250,000 in deposits toward the purchase of two MEVION S250i PBRT systems from Mevion.

The Company reviews the carrying value of its deposits for impairment on a quarterly basis, or as events or circumstances might indicate that the carrying value may not be recoverable.

The Company has reviewed the deposits, in light of available information, as of December 31, 2020 and based on its current customer prospects, the impact that the COVID-19 pandemic has had on medical centers undertaking large capital expenditure projects for a limited patient base, and the length of time required to negotiate and implement a proton therapy project, the Company determined that its deposits of $ 2,250,000 , related capitalized interest and other charges of $ 1,613,000 were other-than temporarily impaired.

Total impairment related to the proton therapy business was $ 3,863,000 .

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As of December 31, 2019 and 2018 the Company had a $ 0 investment in the common stock of Mevion.

The Company previously accounted for this investment under the cost method.

The Company previously carried its investment in Mevion at cost and reviewed it for impairment on a quarterly basis, or as events or circumstances might have indicated that the carrying value of the investment may not be recoverable.

Based on guidance provided in ASC 320 Investments–Debt and Equity Securities (“ASC 320”) and Staff Accounting Bulletins (“SAB”) Topic 5M Other Than Temporary Impairment (“OTTI”) of Certain Investments in Equity Securities (“SAB Topic 5M”), the Company analyzed the related events of Mevion, that occurred in the second and third quarters of 2015 and its impact on the Company’s investment.

The Company determined that these circumstances indicated a decline in value of its Mevion investment that was other-than-temporary and concluded that a write-down of the carrying value should be recognized.

As of June 30, 2015, the Company adjusted its investment in Mevion to the estimated fair value of $ 600,000 and recorded a $ 2,114,000 impairment loss.

The $ 2,114,000 other than temporary impairment of its investment in Mevion is recorded in other income (loss) on the Company’s Consolidated Statement of Operations.

During the period ended December 31, 2015, the Company engaged a third-party expert to review and corroborate its assessment of the fair value of the Mevion investment.

Based on the third-party analysis, an additional impairment loss of $ 26,000 was recognized by the Company during the three months ended December 31, 2015.

The fair value of the Company’s investment in Mevion, as of December 31, 2015 was approximately $ 579,000 .

The impairment loss for the year ended December 31, 2015 was $ 2,140,000 .

During the year ended December 31, 2017, the Company reviewed its investment in Mevion and determined the fair value of its investment was $ 0 .

Based on the Company’s assessment of its investment in Mevion, the Company recognized an impairment loss for the year then ended December 31, 2017 of $ 579,000 .

During 2018, Mevion entered into a merger transaction with Mevion Medical Technology Group Limited, and the Company’s common shares in Mevion were cancelled.

N OTE 4 - GKCE ACQUISITION

On June 18, 2019, the Company entered into a Stock Purchase Agreement to acquire Gamma Knife Center Ecuador S.A.

(“GKCE”) from GKCE’s selling majority shareholders.

GKCE is a well-established Gamma Knife operation founded in 2009 as a private clinic to introduce advanced stereotactic radiosurgery into Ecuador and continues to operate the only Gamma Knife unit in the country.

The Company acquired GKCE for the continued expansion of its business internationally.

On June 12, 2020 (the “Closing Date”), the Company acquired approximately 98 % of the total outstanding shares of GKCE.

As of December 31, 2020, the Company acquired approximately 99.3 % of the total outstanding shares of GKCE and intends to acquire the remaining 0.7 % at a later date.

The fair value of the non-controlling interests (“NCI”) on the Closing Date was approximately $ 58,000 , which was consistent with the purchase price in the executed NCI agreements.

The total purchase consideration for 100 % of the outstanding shares of GKCE was $ 2,883,000 , including $ 2,000,000 of base purchase price, subject to certain price adjustments for current assets and liabilities and tax withholding.

The base purchase price of $ 2,000,000 was paid with $ 575,000 of cash and a $ 1,425,000 loan from the United States International Development Finance Corporation (“DFC”).

The DFC loan is denominated in U.S.

dollars, which is also the currency of Ecuador.

The price adjustments will be paid by the Company in the post-closing period with the adjustments related to the amount of working capital that GKCE had as of the Closing Date.

The first price adjustment for working capital as of the Closing Date was approximately $ 515,000 , which was paid by the Company in August 2020.

As of December 31, 2020, the Company owed the withholding taxes related to this payment totaling approximately $ 43,000 .

The Company estimates an additional contingent consideration of approximately $ 368,000 will be remitted to the seller based on the collection of Closing Date accounts receivable balances, net of related costs, during the three-month, six-month and twelve-month periods after the Closing Date.

As of December 31, 2020, $ 214,000 of the contingent considerations had been paid and $ 154,000 is estimated to be paid for the twelve-month period after the Closing Date.

The Company reviewed historical patient treatments, invoice, and collection data from GKCE to determine an appropriate estimate of the contingent consideration at the Closing Date.

The acquisition has been accounted for according to ASC 805 using the acquisition method of accounting.

Under the acquisition method of accounting, all assets acquired, including goodwill and other intangible assets, should be stated at fair value at the time of acquisition.

The allocation of purchase price consideration is preliminary, pending the completion of the fair value of certain tangible, intangible assets, and residual goodwill.

The assets acquired were recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company.

Thus, the provisional measurements of fair value discussed below are subject to change.

As of December 31, 2020, accounting for the Closing Date accounts receivable balances, allowance on the uncollected accounts receivable balances, and related liabilities, was not complete.

The accounting for these amounts will be complete following the twelve-month period after the Closing Date, per the terms of the Stock Purchase Agreement.

The Company expects to finalize the valuation as soon as practicable, but no later than one year from the Closing Date.

While the Company believes its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired, and the resulting amount of goodwill.

After the Acquisition date, the Company received additional information regarding the amounts recorded as accounts receivable as of June 12, 2020.

After reviewing the information obtained, the Company booked an additional $ 27,000 of accounts receivable as of December 31, 2020.

As a result, related liabilities were increased by $ 13,000 and the contingent consideration increased by $ 14,000 .

There was no impact to goodwill or net loss as of December 31, 2020.

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N OTE 4 - GKCE ACQUISITION (CONTINUED)

The fair value of assets acquired and liabilities assumed were as follows:

June 12, 2020

Cash and cash equivalents $ 432,000

Accounts receivable 854,000

Prepaid expense and other 22,000

Building 385,000

Medical equipment 319,000

Purchased intangible assets 78,000

Goodwill 1,265,000

Total assets acquired $ 3,374,000

Accounts payable $ ( 193,000 )

Income taxes payable ( 141,000 )

Deferred income taxes ( 66,000 )

Employee compensation and benefits ( 91,000 )

Total liabilities assumed ( 491,000 )

Consideration allocated to assets acquired and liabilities assumed $ 2,883,000

First working capital payment $ ( 515,000 )

Estimated subsequent working capital payment ( 368,000 )

Base purchase consideration $ 2,000,000

The Company has allocated the purchase price of GKCE to the tangible assets, liabilities, and intangible asset acquired, based on their estimated fair values.

Goodwill represents the excess of the purchase price consideration over the fair value of the identifiable tangible and intangible assets assumed.

The Company believes the amount of goodwill resulting from the acquisition is primarily attributable to expected synergies from an assembled and trained workforce and enhanced opportunities for growth and innovation.

The goodwill resulting from the acquisition is not tax deductible.

The preliminary value of the acquired tangible assets acquired are as follows:

Fair Value Useful Life (in Years)

Building $ 385,000 20

Medical equipment 302,000 2

Other fixed assets 17,000 2

Total tangible assets $ 723,000

The Company also acquired intangible assets with a fair value of $ 78,000 .

The intangible asset identified was GKCE's trade name and the Company assigned an indefinite useful life to the asset.

The Company incurred costs related to the acquisition of approximately $ 93,000 for the three-month period ended June 30, 2020 and $ 69,000 for the three-month period ended September 30, 2020.

All acquisition related costs were expensed as incurred and have been recorded in selling and administrative expense in the Company's consolidated statement of operations.

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N OTE 4 - GKCE ACQUISITION (CONTINUED)

The revenue and earnings of GKCE have been included in the Company’s consolidated results since the Closing Date and are not material to the Company’s consolidated financial results.

Historical financial statements and pro forma results of the operations of GKCE as if the Acquisition occurred earlier than the Closing Date have not been presented, as the applicable significance thresholds are not exceeded by the Acquisition and the corresponding requirements to provide historical financial statements and corresponding pro forma financial information are not applicable to the Acquisition.

In addition, the Company believes that the financial impact of the Acquisition to the Company’s consolidated financial statements is not material and such historical financial information and pro forma financial information would not be meaningful for investors and financial statement users.

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N OTE 5 - LONG TERM DEBT

Long-term debt consists primarily of six notes with two financing companies collateralized by the Gamma Knife equipment having an aggregate net book value of $ 13,130,000 , the individual customer contracts and related accounts receivable of $ 1,848,000 at December 31, 2019.

These notes are payable in 36 to 84 fully amortizing monthly installments, mature between April 2020 and March 2026, and are collateralized by the respective Gamma Knife units.

Long-term debt consists primarily of seven notes with three financing companies collateralized by the Gamma Knife equipment having an aggregate net book value of $ 11,023,000 , the individual customer contracts, and related accounts receivable of $ 1,718,000 at December 31, 2020.

These notes are predominantly payable in 36 to 84 fully amortizing monthly installments, mature between January 2021 and September 2027.

The notes accrue interest at fixed annual rates between 3.67 % and 6.90 %.

As of December 31, 2018, the Company had seven notes with three financing companies collateralized by the Gamma Knife equipment, the individual customer contracts and related accounts receivable, having an aggregate net book value of $ 13,016,000 .

The following are contractual maturities of long-term debt by year at December 31, 2019:

Year ending December 31, Principal Interest

2020 $ 1,526,000 $ 163,000

2021 711,000 101,000

2022 263,000 71,000

2023 280,000 54,000

As of December 31, 2019, the Company had six notes with two financing companies collateralized by the Gamma Knife equipment having an aggregate net book value of $ 13,130,000 , the individual customer contracts, and related accounts receivable of $ 1,848,000 .

The following are contractual maturities of long-term debt by year at December 31, 2020, excluding debt issuance costs of $ 27,000 :

Year ending December 31, Principal

2021 $ 1,157,000

Thereafter 466,000

$ 3,480,000 $ 442,000

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1 unchanged sentence

N OTE 6 - FINANCE LEASES

The Company has ten finance lease obligations with three financing companies, collateralized by Gamma Knife and PBRT equipment having an aggregate net book value of $ 22,860,000 , the individual customer contracts and related accounts receivable of $ 4,600,000 at December 31, 2019.

These obligations have imputed interest rates ranging between 4.73 % and 13.00 %, are payable in 44 to 81 monthly installments, and mature between May 2020 and September 2024.

As of December 31, 2018, the Company had eleven finance lease obligations with three financing companies, collateralized by Gamma Knife and PBRT equipment, the individual customer contracts and related accounts receivable, having an aggregate net book value of $ 26,267,000 .

The Company has six finance lease obligations with two financing companies, collateralized by Gamma Knife and PBRT equipment having an aggregate net book value of $ 18,093,000 , the individual customer contracts, and related accounts receivable of $ 1,892,000 at December 31, 2020.

These obligations have imputed interest rates ranging between 4.73 % and 13.00 %, are predominantly payable in 36 to 84 monthly installments, and mature between November 2021 and September 2024.

As of December 31, 2019, the Company had ten finance lease obligations with three financing companies, collateralized by Gamma Knife and PBRT equipment, having an aggregate net book value of $ 22,860,000 , the individual customer contracts, and related accounts receivable of $ 4,600,000 .

At the end of each lease term, the Company has a bargain purchase option to purchase the equipment.

15 unchanged sentences

Leases that commenced prior to ASC 842 adoption date were classified as operating leases under historical guidance.

As the Company has elected the package of practical expedients allowing to not reassess lease classification, these leases are classified as operating leases under ASC 842 as well.

As the Company has elected the package of practical expedients allowing it to not reassess lease classification, these leases are classified as operating leases under ASC 842 as well.

All of the Company’s lessor arrangements entered into after ASC 842 adoption are also classified as operating leases.

Some of these lease terms have an option to extend the lease after the initial term, but do not contain the option to terminate early or purchase the asset at the end of the term.

The Company’s Gamma Knife, PBRT, and IGRT contracts with hospitals are classified as operating leases under ASC 842.

The Company’s Gamma Knife and PBRT contracts with hospitals are classified as operating leases under ASC 842.

The related equipment is included in medical equipment and facilities on the Company’s 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.

As such, the Company does not measure future operating lease receivables.

The Company’s lessee operating leases are accounted for as right-of-use (“ROU”) assets, other current liabilities, and lease liabilities on the 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 incremental borrowing rate of approximately 6.0 % by using available market rates and expected lease terms.

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 incremental borrowing rate to be in the range of approximately 4.0 % and 6.0 % by using available market rates and expected lease terms.

The operating lease ROU assets and liabilities also include any lease payments made and excludes lease incentives and initial direct costs incurred.

3 unchanged sentences

As of December 31, 2020, operating ROU assets and liabilities were $ 886,000 .

During the year ended December 31, 2020, the Company elected to not renew its lease for a satellite office in Fairfield, California.

The Company previously included the renewal term in its assessment of the lease term for the ROU asset and liability.

The Company accounted for this change as a lease reassessment under ASC 842.

At the reassessment date, the remaining lease balance was not material to the Company's consolidated balance sheets and the Company wrote off the related ROU assets and liabilities of $ 67,000 .

Also during the year ended December 31, 2020, the Company agreed to a rent increase for its clinic space for its stand-alone facility in Lima, Peru.

The rent increase was effective as of January 1, 2020 and the Company increased the related ROU assets and liabilities by $ 135,000 .

The following table summarizes maturities of lessee operating lease ROU assets and liabilities as of December 31, 2020:

Year ending December 31, Operating Leases

Thereafter 5,000

Total lease payments 955,000

4 unchanged sentences

N OTE 8 – I NCOME T AXES

As of December 31, 2019, 2018 and 2017 the Company recorded income tax provision expense of $ 128,000 , $ 451,000 , and an income tax provision benefit of $ 1,103,000 , respectively.

The decrease in the Company’s provision for income taxes as of December 31, 2019 is due to a decrease in income from the Company's Gamma Knife operations and the release of a valuation allowance related to the Company's Gamma Knife operations in Peru.

The increase in the Company's provision for income taxes as of December 31, 2018 is due to income from the PBRT system and operations of the Company’s subsidiaries.

The income tax provision benefit recognized as of December 31, 2017 was due to the Tax Act.

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).

The Tax Act makes broad and complex changes to the U.S.

tax code that affect fiscal 2018, including, but not limited to requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years.

The Tax Act also establishes new tax laws that will affect 2018 and later years, including, but not limited to, a reduction of the U.S.

federal corporate tax rate from 34% to 21%, a general elimination of U.S.

federal income taxes on dividends from foreign subsidiaries, net operating loss deduction limitations, a base erosion, anti-tax abuse tax and a deduction for foreign-derived intangible income and a new provision designed to tax global intangible low-taxed income.

As a result of the Tax Act, the Company revalued its federal and state deferred tax liabilities based on a 21 % tax rate as opposed to a 34 % tax rate.

The net effect of this change on the Company’s income tax provision for the year ended December 31, 2017 was a tax benefit of $ 1,546,000 .

As of December 31, 2020 and 2019 the Company recorded an income tax benefit of $ 1,737,000 and income tax expense of $ 128,000 , respectively.

The decrease in the Company’s provision for income taxes as of December 31, 2020 is due to a loss on the write down of impaired assets.

The components of the provision (benefit) for income taxes as of December 31, 2020 and 2019 consist of the following:

YEARS ENDED DECEMBER 31,

2019 2018 2017

Federal $ 209,000 $ 443,000

7 unchanged sentences

$ ( 1,737,000 ) $ 128,000

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N OTE 8 – I NCOME T AXES (CONTINUED)

Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2020 and 2019 are as follows:

12 unchanged sentences

Net deferred tax liabilities $ ( 418,000 ) $ ( 2,514,000 )

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N OTE 8 – I NCOME T AXES (CONTINUED)

These amounts are presented in the financial statements as follows:

2 unchanged sentences

The (benefit) provision for income taxes differs from the amount computed by applying the U.S.

federal statutory tax rate ( 21 % in 2019 and 2018, and 34 % in 2017) to income before taxes as follows:

federal statutory tax rate ( 21 % in 2020 and 2019) to income before taxes as follows:

YEARS ENDED DECEMBER 31,

2019 2018 2017

Computed expected federal income tax $ ( 1,844,000 ) $ 167,000

1 unchanged sentence

Non-deductible expenses 6,000 29,000

Impact of US Tax Reform — — ( 1,546,000 )

Return to Provision True-up 22,000 39,000

Uncertain Tax Positions 16,000 80,000

Capital loss carryforward expiration 246,000 —

Change in valuation allowance ( 243,000 ) ( 175,000 )

Other 68,000 ( 9,000 ) ( 85,000 )

Other deferred tax adjustments 259,000 68,000

$ ( 1,737,000 ) $ 128,000

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N OTE 8 – I NCOME T AXES (CONTINUED)

On December 22, 2017, the U.S.

government enacted the Tax Act.

The Tax Act makes broad and complex changes to the U.S.

tax code including, but not limited to, requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years (the “Transition Tax”), a reduction of the U.S.

federal corporate tax rate from 34% to 21%, a general elimination of U.S.

federal income taxes on dividends from foreign subsidiaries, net operating loss deduction limitations, a base erosion, anti-tax abuse tax (“BEAT”) and a deduction for foreign-derived intangible income (“FDII”) and a new provision designed to tax global intangible low-taxed income (“GILTI”).

In December 31, 2017, the SEC staff issued SAB No.

118 (“SAB 118”) which provides guidance on accounting for the tax effects of the Tax Act.

SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740 Income taxes (“ASC 740”).

In accordance with SAB 118 a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

Additional work is necessary for a more detailed analysis of our deferred tax assets and liabilities.

Any subsequent adjustment to these amounts would be recorded to current tax expense in the quarter of 2018 when the analysis was complete.

We included a provisional estimate in the financial statements for the period ended December 31, 2017, as our accounting for the Tax Act under ASC 740 was not completed.

As of December 31, 2018, the Company completed its analysis of the income tax effects of the Tax Act and there was no material impact to the Company’s consolidated financial statements.

Beginning in 2018, the GILTI provisions in the Tax Act require us to include, in our U.S.

income tax return, foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets.

Per guidance issued by the FASB, companies can either account for deferred taxes related to GILTI or treat tax arising from GILTI as a period cost.

Both are acceptable methods subject to an accounting policy election.

On December 31, 2018, we finalized our policy and have elected to use the period cost method for GILTI.

In 2019, the Company did not have any material adjustments for GILTI.

The BEAT provisions in the Tax Act eliminate the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum base erosion anti-abuse tax if greater than regular tax.

In 2019, our Company was not subject to BEAT as it did not meet the requirements to be subject to BEAT.

At December 31, 2020, the Company exhausted the remainder of its net operating loss carryforward for federal income tax return purposes.

6 unchanged sentences

Due to uncertainty surrounding the realization of impairment losses, capital losses and foreign operating losses in future years, the Company has placed a valuation allowance against a portion of its net domestic and foreign deferred tax assets.

The net valuation allowance decreased by $ 175,000 , increased by $ 34,000 , and decreased by $ 303,000 for the tax years ended December 31, 2019, 2018, and 2017, respectively.

The net valuation allowance decreased by $ 243,000 and $ 175,000 for the tax years ended December 31, 2020 and 2019, respectively.

During the year ended December 31, 2019, the Company released the valuation allowance related to GKPeru deferred tax assets, which resulted in an income tax benefit of $ 104,000 .

2 unchanged sentences

If there are unfavorable changes to actual operating results or to projections of future income, the Company may determine that it is more likely than not such deferred tax assets may not be realizable.

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N OTE 8 – I NCOME T AXES (CONTINUED)

The tax return years 2016 through 2019 remain open to examination by the major domestic taxing jurisdictions to which the Company is subject.

1 unchanged sentence

Net operating losses generated on a tax return basis by the Company for calendar years 1999 through 2004, 2009, 2010, 2012, 2014, 2015, 2016, 2017 and 2018 remain open to examination by the major domestic taxing jurisdictions.

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N OTE 8 – I NCOME T AXES (CONTINUED)

The Company has adopted accounting standards which prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company's income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

4 unchanged sentences

YEARS ENDED DECEMBER 31,

2019 2018 2017

Balance at beginning of year $ 259,000 $ 87,000

4 unchanged sentences

The Company does not expect any material changes to our uncertain tax positions within the next 12 months.

N OTE 9 – S HAREHOLDERS ’ E QUITY

N OTE 9 – S TOCK-BASED COMPENSATION EXPENSE

Incentive Compensation Plan

5 unchanged sentences

As of December 31, 2020, approximately 437,000 shares remain available for grant under the Plan.

The Plan provides for nonqualified stock options, qualified (or incentive) stock options and stock grants (the “awards”).

The Plan has a provision to reduce the number of shares reserved for award and issuance under the Plan by a ratio of 1.59 shares of common stock for each share of common stock that is issued pursuant to a Full Value Award (stock grant).

The Plan also provides for an Incentive Bonus Program with incentive bonus opportunities through performance unit awards and special cash incentive programs tied to the attainment of pre-established performance milestones.

Under the Plan, a total of 456,000 restricted stock units have been granted, consisting of 43,000 of annual automatic grants to non-employee directors and the corporate secretary, 293,000 of deferred retainer fees to non-employee members of the Board, 20,000 grants issued in lieu of commission, to two ( 2 ) employees of the Company and 100,000 restricted stock units issued to the CEO during 2020, see further discussion below.

Of the total restricted stock units granted under the Plan 210,000 of them are fully vested but not yet deemed issued and outstanding, 233,000 are fully vested and outstanding, and 13,000 are outstanding as of December 31, 2020.

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N OTE 9 – S HAREHOLDERS ’ E QUITY (CONTINUED)

Provisions of the Plan include an automatic annual grant to each non-employee director of options to purchase up to 2,000 shares on the date of the Company’s Annual Shareholder Meeting, at an exercise price equal to the market price of the Company’s common shares on that date, an automatic annual grant of 500 restricted stock units of the Company’s common shares and an annual cash retainer fee for Board or Board Committee service, which may be converted to restricted stock unit awards (“restricted stock units” or “RSUs”).

Options and restricted stock units awarded under the automatic annual grant program for non-employee directors vest after one year.

Restricted stock units awarded in lieu of retainer fees vest quarterly, over a one year period.

These awards become outstanding upon the conclusion of the individual Board members service on the Company’s Board of Directors.

During the year ended December 31, 2019, 83,000 awards issued in lieu of retainer fees became outstanding.

Other options may vest fully and immediately, or over periods of time as determined by the Plan Administrator, but no longer than seven years from the grant date.

Discretionary options currently awarded under the Plan vest over a period of 5 years.

Under the Plan, a total of 312,000 restricted stock units have been granted, consisting of 41,000 of annual automatic grants to non-employee directors and the corporate secretary, 261,000 of deferred retainer fees to non-employee members of the Board, and 10,000 grants issued in lieu of commission, to one employee of the Company.

Of the total restricted stock units granted under the Plan 309,000 of them are fully vested but not yet deemed issued and outstanding as of December 31, 2019.

Changes in restricted stock units, consisting primarily of annual automatic grants and deferred compensation to non-employee directors, under the Incentive Compensation Plans during 2019 and 2018 are as follows:

N OTE 9 – S TOCK-BASED COMPENSATION EXPENSE (CONTINUED)

Changes in restricted stock units, consisting primarily of annual automatic grants, deferred compensation to non-employee directors, and restricted stock units awards to the CEO, under the Incentive Compensation Plans during 2020 and 2019 are as follows:

Restricted Stock

3 unchanged sentences

Outstanding at December 31, 2019 3,000 $ 3.03 $ —

Outstanding at January 1, 2019 4,000 $ 2.68 $ —

Granted 144,000 $ 1.96 $ —

4 unchanged sentences

As of December 31, 2020, there was $ 2,000 of total unrecognized compensation cost related to annual restricted stock units which is expected to be recognized over a period of 0.5 years.

During 2019, 2018, and 2017 shares of restricted stock units totaling 4,000 each, respectively, with a fair value of approximately $ 11,000 , $ 11,000 and $ 15,000 , respectively, vested and became unrestricted.

During 2020 and 2019, shares of restricted stock units totaling 3,000 and 4,000 each, respectively, with a fair value of approximately $ 9,000 and $ 11,000 , respectively, vested and became unrestricted.

Certain Executive Equity Awards

Effective May 4, 2020, the Company appointed Raymond C.

Stachowiak as Interim President and Chief Executive Officer (“Interim CEO”).

As part of his Offer Letter, the Interim CEO was granted 50,000 restricted stock awards that vested in full on August 3, 2020.

The Interim CEO was granted additional restricted stock awards totaling 10,000 common shares per month, which vest in full at the end of each 30 -day period following issuance.

On October 1, 2020 the Interim CEO was appointed the CEO.

For the year ended December 31, 2020, 100,000 restricted stock awards were issued to the CEO and 90,000 became fully vested.

Additionally, Ernest R.

Bates, Senior Vice President, Sales and Business Development, International Operations, was awarded 10,000 restricted stock awards, which vested in full on December 31, 2020.

For the year ended December 31, 2020, total compensation expense recorded in the consolidated financial statements of operations related to executive equity awards was $ 195,000 .

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.

The Award Agreements expired on March 31, 2020.

Based on the guidance in ASC 718 Stock 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 the certain performance metrics under the Award Agreements and recognized stock compensation expense of approximately $ 108,000 related to these awards.

As of December 31, 2019 it is not probable that any of the remaining required metrics for vesting will be achieved.

The unrecognized stock-based compensation expense for these awards was approximately $ 434,000 and unvested restricted stock awards were approximately 129,000 as of December 31, 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.

The unrecognized stock-based compensation expense for these awards was approximately $ 421,000 and unvested restricted stock awards of approximately 129,000 were returned to the plan as of March 31, 2020.

As of December 31, 2020, stock compensation expense recorded in the consolidated financial statements is summarized as follows:

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N OTE 9 – S HAREHOLDERS ’ E QUITY (CONTINUED)

N OTE 9 – S TOCK-BASED COMPENSATION EXPENSE (CONTINUED)

Awards Issued Compensation

Award Type and Vested Expense

Options — $ 17,000

RSUs Issued in Lieu of Retainer Fees — 80,000

Annual RSU Awards 3,000 7,000

Executive Compensation 100,000 195,000

Balance at of December 31, 2020 103,000 $ 299,000

Stock Options

Changes in stock options outstanding under the Incentive Compensation Plans during 2020 and 2019 are as follows:

2 unchanged sentences

Granted 18,000 $ 2.87 7.00 $ —

Exercised ( 16,000 ) $ 2.59 — $ —

Forfeited ( 165,000 ) $ 3.07 — $ —

1 unchanged sentence

Granted 10,000 $ 1.88 7.00 $ —

Exercised ( 16,000 ) $ 2.59 — $ —

Forfeited ( 43,000 ) $ 2.54 — $ —

3 unchanged sentences

The weighted average grant-date fair value of the options granted during the years 2020 and 2019 was $ 0.78 and $ 1.54 , respectively.

There were 16,000 options exercised during the year ended December 31, 2019.

There were no options exercised and accordingly, no total intrinsic value of options exercised during the year ended December 31, 2018.

There were no options exercised and accordingly, no intrinsic value of options exercised during the year ended December 31, 2020.

There were 16,000 options exercised during the year ended December 31, 2019.

Total stock-based compensation expense recognized for stock options for the years ended December 2020 and 2019 was $ 17,000 and $ 141,000 , respectively.

There was no cash received from options exercised under any share-based payment arrangements for the year ended December 31, 2020, and as a result, there was no actual tax benefit realized for tax deductions from option exercises in that year.

The Company received approximately $ 42,000 from the exercise of 16,000 options under the share-based arrangements for the year ended December 31, 2019.

There was no cash received from options exercised under any share-based payment arrangements for the years ended December 31, 2018, and as a result, there was no actual tax benefit realized for tax deductions from option exercises in that year.

The Company received approximately $ 6,000 from the exercise of 2,000 options under share-based payment arrangements for the year ended December 31, 2017.

A MERICAN S HARED H OSPITAL S ERVICES

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 9 – S HAREHOLDERS ’ E QUITY (CONTINUED)

N OTE 9 – S TOCK-BASED COMPENSATION EXPENSE (CONTINUED)

A summary of the status of the Company’s non-vested stock options as of December 31, 2020 and 2019, and changes during the years ended December 31, 2020 and 2019 is presented below:

8 unchanged sentences

At December 31, 2020, there was approximately $ 12,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan.

This cost is expected to be recognized over a period of approximately two years .

This cost is expected to be recognized over a period of approximately three years .

The Company’s stock-based awards to employees are calculated using the Black-Scholes options valuation model.

6 unchanged sentences

The fair value of the Company’s option grants under the Plan in 2020 and 2019 was estimated using the following assumptions:

2019 2018 2017

Expected life (years) 7.0 7.0

14 unchanged sentences

The Company has accrued approximately $ 37,000 for the estimated safe harbor matching contribution for the year ended December 31, 2020.

The Company contributed $ 27,000 and $ 29,000 to the Retirement Plan for the safe harbor match for the years ended December 31, 2018 and December 31, 2017.

The Company contributed $ 38,000 to the Retirement Plan for the safe harbor match for the year ended December 31, 2019.

A MERICAN S HARED H OSPITAL S ERVICES

3 unchanged sentences

On August 13, 2016, the Company entered into a 7 year operating lease for an office space located in San Francisco, CA.

The Company has a satellite office in Fairfield, CA with a lease expiration date in April 2020.

The Company also owns and operates a stand-alone Gamma Knife facility in Lima, Peru where it leases approximately 1,600 for approximately $ 5,000 per month with a lease expiration date in January 2024.

Future minimum payments under non-cancelable operating leases, net of expected sublease income, having initial terms of more than one year consisted of the following:

The Company also owns and operates a stand-alone Gamma Knife facility in Lima, Peru where it leases approximately 1,600 square feet for approximately $ 7,800 per month with a lease expiration date in January 2024.

Future minimum payments under non-cancelable operating leases having initial terms of more than one year consisted of the following:

Year ending December 31,

5 unchanged sentences

N OTE 12 – C OMMITMENTS AND C ONTINGENCIES

On December 20, 2018, the Company signed Second Amendments to two System Build Agreements (the “Amendments”) for the Company’s second and third Mevion PBRT units.

On December 20, 2018, the Company signed Second Amendments to two System Build Agreements for the Company’s second and third Mevion PBRT units.

The Company and Mevion have agreed to upgrade the second and third PBRT units for which the Company has purchase commitments.

2 unchanged sentences

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, which are described below.

As of December 31, 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 December 31, 2019, the Company had commitments to perform five Cobalt-60 reloads and install five Leksell Gamma Knife Icon Systems ("Icon") at existing customer sites, and purchase one LINAC system, to be placed at a new customer site.

The Cobalt-60 reloads, Icon upgrades, and LINAC purchase are scheduled to occur between 2020 and 2022.

As of December 31, 2020, the Company had commitments to perform three ( 3 ) Cobalt-60 reloads and install four ( 4 ) Leksell Gamma Knife Icon Systems (“Icon”) at existing customer sites, and purchase two ( 2 ) Linear Accelerator ("LINAC") systems, one to be placed at an existing customer site and one at a new customer site.

The Company also has a commitment to upgrade the Gamma Knife unit at its stand-alone facility in Ecuador to a Perfexion.

The Cobalt-60 reloads, Icon upgrades, and LINAC purchases are scheduled to occur between 2021 and 2022.

The Company expects to upgrade the equipment in Ecuador in the second quarter of 2021.

Total Gamma Knife and LINAC commitments as of December 31, 2020 were $ 12,210,000 .

Two of the five Cobalt-60 reloads were completed and financed during the first quarter of 2020.

It is the Company’s intent to finance the remaining commitments.

There are no significant cash requirements, pending financing, for these commitments in the next 12 months.

1 unchanged sentence

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.

The Mevion Service Agreement began September 5, 2017, was amended in 2018, and renews annually over a five ( 5 ) year period.

The agreement requires an annual prepayment of $ 1,572,000 for the current contractual period.

This payment portion was recorded as a prepaid contract and will be amortized over the one -year service period.

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 December 31, 2020, the Company had commitments to service and maintain its Gamma Knife and PBRT equipment.

1 unchanged sentence

In addition, in April 2019, the Company signed agreements to service the Icon upgrades which will be installed at various dates between 2021 and 2022.

The Company’s commitment to purchase a LINAC system also includes a 9 -year agreement to service the equipment.

The Company’s commitments to purchase two LINAC systems also include a 9 -year and 5 -year agreement to service the equipment, respectively.

Total service commitments as of December 31, 2020 were $ 10,493,000 .

4 unchanged sentences

Long-term debt (includes interest) $ 5,251,000 $ 1,373,000 $ 1,854,000 $ 1,543,000 $ 481,000

$ 3,922,000 $ 1,689,000 $ 1,480,000 $ 335,000 $ 418,000

Finance leases (includes interest) 9,771,000 6,590,000 2,659,000 522,000 —

1 unchanged sentence

Equipment service contracts 10,493,000 2,030,000 2,585,000 2,999,000 2,879,000

Acquisition working capital payments 197,000 197,000 — — —

Operating leases 972,000 350,000 614,000 8,000 —

8 unchanged sentences

The Company believes that all its transactions with Elekta are arm’s-length transactions.

At December 31, 2019, the Company had commitments to purchase five Cobalt-60 reloads, install five Icon upgrades and service the related equipment, as discussed in Note 12 – Commitments and Contingencies.

The Company purchased one MEVION S250 PBRT machine from Mevion, and has $ 2,250,000 in non-refundable deposits towards the purchase of two additional MEVION S250i machines.

The Company also contracted with Mevion to repair the damaged PBRT unit and incurred repair costs of approximately $ 977,000 , which is included in the Company’s consolidated balance sheet for the year ended December 31, 2018.

The Company believes all of its transactions with Mevion were arm’s-length transactions.

See Note 4 – Investment in Equity Securities for additional information.

A MERICAN S HARED H OSPITAL S ERVICES

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS

N OTE 14 – S UBSEQUENT E VENTS

The recent outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the U.S.

and global economies and created uncertainty regarding potential impacts on the Company’s operations.

The pandemic has impacted and could further impact the Company’s operations and the operations of its customers as a result of quarantines, facility closures, and travel and logistics restrictions.

While the disruption caused by the pandemic is currently expected to be temporary, there is uncertainty regarding its duration.

Therefore, while the COVID-19 outbreak is expected to impact the Company’s results of operations, financial position, and liquidity, the duration and intensity of the impact of the COVID-19 outbreak and resulting disruption to the Company’s operations is uncertain.

The Company will continue to monitor the situation closely and assess the impact on its operations and financial results for the remainder of the year.

Subsequent to year end, the Company financed two Cobalt-60 reload commitments, as discussed in Note 12 – Commitments and Contingencies, totaling approximately $ 1,180,000 .

The Cobalt-60 reloads were performed at existing Gamma Knife customer sites.

At December 31, 2020, the Company had commitments to purchase three ( 3 ) Cobalt-60 reloads, one ( 1 ) Perfexion upgrade, and install four ( 4 ) Leksell Gamma Knife Icon Systems (“Icon”) and service the related equipment, as discussed in Note 12 – Commitments and Contingencies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures