What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-13 compared with 2020-11-13 · 65 added, 89 removed, 68 unchanged (69% of the section changed)

1 unchanged sentence

This quarterly report to the Securities and Exchange Commission may be deemed to contain certain forward-looking statements with respect to the financial condition, results of operations and future plans of American Shared Hospital Services (including statements regarding the expected continued treatment growth of the Company's MEVION S250 system, the expansion of the Company’s PBRT business, the timing and expansion of treatments by new Gamma Knife systems, the Company's expansion into new markets and the Company's acquisitions and potential market segments for its services, which involve risks and uncertainties including, but not limited to, the risks of economic and market conditions, the risks of variability of financial results between quarters, the risks of the Gamma Knife and radiation therapy businesses, the risks of developing The Operating Room for the 21st Century program, the risks of changes to CMS reimbursement rates or reimbursement methodology, the risks of the timing, financing, and operations of the Company’s PBRT business, the risks of the COVID-19 pandemic and its effect on the Company’s business operations and financial condition, the risk of expanding within or into new markets, and the risk that the integration or continued operation of acquired businesses could adversely affect financial results and the risk that current and future acquisitions may negatively affect the Company's financial position.

Further information on potential factors that could affect the financial condition, results of operations and future plans of American Shared Hospital Services is included in the filings of the Company with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and the definitive Proxy Statement for the Annual Meeting of Shareholders held on June 26, 2020.

Further information on potential factors that could affect the financial condition, results of operations and future plans of American Shared Hospital Services is included in the filings of the Company with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 25, 2021.

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

The Company had seventeen (17) Gamma Knife units and one (1) PBRT system, and sixteen (16) Gamma Knife units, one (1) PBRT system and one (1) IGRT machine in operation as of September 30, 2020 and 2019, respectively.

The Company had thirteen Gamma Knife units and one PBRT system, and fifteen Gamma Knife units, one PBRT system and one IGRT machine in operation in the United States as of March 31, 2021 and 2020, respectively.

Three of the Company’s customer contracts are through subsidiaries where GKF or its subsidiary is the majority owner and managing partner.

Seven (7) of the Company’s seventeen (17) current Gamma Knife customers are under fee-per-use contracts, and eight (8) customers are under retail arrangements.

Six of the Company’s fifteen current Gamma Knife customers are under fee-per-use contracts, and seven customers are under retail arrangements.

The Company, through GKF, also owns and operates two single-unit, international Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador.

17 unchanged sentences

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

For the three and nine-month periods ended September 30, 2020, the Company recognized revenues of approximately $4,215,000 and $12,319,000, respectively, under ASC 842.

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

For the three-month periods ended March 31, 2021 and 2020, the Company recognized revenues of approximately $3,699,000 and $4,339,000, respectively, under ASC 842.

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.

4 unchanged sentences

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

Accounts receivable earned by GKPeru and GKCE were not significant for the three and nine-month periods ended September 30, 2020 and 2019.

For the three and nine-month periods ended September 30, 2020, the Company recognized revenues of approximately $455,000 and $910,000, respectively, under ASC 606.

Effective January 1, 2015, the Centers for Medicare and Medicaid (“CMS”) established a Comprehensive Ambulatory Payment Classification for single session radiosurgery treatments.

CMS has established a 2020 total reimbursement rate of approximately $9,600 ($9,300 in 2019) for a Medicare Gamma Knife treatment.

Accounts receivable earned by GKPeru were not significant for the three-month periods ended March 31, 2021 and 2020.

GKCE’s accounts receivable were $478,000 for the three-month period ended March 31, 2021.

For the three-month periods ended March 31, 2021 and 2020, the Company recognized revenues of approximately $665,000 and $229,000, respectively, under ASC 606.

The Centers for Medicare and Medicaid (“CMS”) have established a 2021 total reimbursement rate of approximately $9,600 ($9,600 in 2020) for a Medicare Gamma Knife treatment.

The approximate CMS reimbursement rates for delivery of PBRT for a simple treatment without compensation for 2021 is $543 ($539 in 2020) and $1,298 ($1,246 in 2020) for simple with compensation, intermediate and complex treatments, respectively.

On September 18, 2020, CMS issued the final rule that would implement a new mandatory payment model for radiation oncology services:

the Radiation Oncology Alternative Payment Model (“RO APM”).

The RO APM is scheduled to commence July 1, 2021 and will be in effect for a five (5) year period.

The RO APM is scheduled to commence January 1, 2022 and will be in effect for a five (5) year period.

The RO APM significantly alters CMS' payment methodology from a fee for service paradigm to a set reimbursement by cancer type methodology for radiation services provided within a 90 day episode of care.

6 unchanged sentences

The Company's PBRT center was not selected for inclusion in the RO APM.

For centers not included in the RO APM proposed model, Medicare reimbursement in 2021 for the most commonly used PBRT delivery codes is proposed (pending final determination) to increase by approximately 4.9% and to decrease by approximately 0.1% for Gamma Knife.

For centers not included in the RO APM proposed model, Medicare reimbursement in 2021 for the most commonly used PBRT delivery codes increases by approximately 4.1% and decreases by approximately 1.7% for Gamma Knife.

The COVID-19 pandemic, the resulting recession in the United States and its follow-on effects have impacted and will likely continue to impact business activity across industries, including the Company’s.

Due to factors related to the COVID-19 pandemic such as delays in service at medical facilities and restrictions imposed by government agencies, and the Company’s customers in response to the spread of COVID-19, the Company has experienced some delays in delivering certain Gamma Knife procedures and PBRT treatments.

During 2020, due to factors related to the COVID-19 pandemic such as delays in service at medical facilities and restrictions imposed by government agencies, and the Company’s customers in response to the spread of COVID-19, the Company experienced some delays in delivering certain Gamma Knife procedures and PBRT treatments.

Similarly, the Company’s ability to conduct commercial efforts with its customers have been and are likely to continue to be disrupted as customers have turned their focus to dealing with the impact of the COVID-19 pandemic on their operations and have restricted access to their sites in efforts to contain the spread of the virus.

7 unchanged sentences

As the COVID-19 pandemic continues to develop, additional impacts may arise that we are not aware of currently.

The impact of the COVID-19 pandemic for the three and nine-month periods ended September 30, 2020 has varied by location based on the stage of containment and actions by government agencies.

The impact on treatments and costs in the three-month period ended March 31, 2020 did not appear material.

The impact of the COVID-19 pandemic has been greater for the three-month periods ended June 30, 2020 and September 30, 2020, including declines in patient volumes and corresponding reductions in Gamma Knife procedures during both periods and reduced PBRT fractions during the second quarter.

Revenues decreased by $631,000 and $2,590,000 to $4,670,000 and $13,229,000 for the three and nine-month periods ended September 30, 2020 compared to $5,301,000 and $15,819,000 for the same periods in the prior year, respectively.

Revenues generated from the Company’s PBRT system increased by $10,000 and $36,000 to $1,687,000 and $4,764,000 for the three and nine-month periods ended September 30, 2020 compared to $1,677,000 and $4,728,000 for the same periods in the prior year, respectively.

The increase in PBRT revenues for the three and nine-month periods ended September 30, 2020 was due to higher volumes, offset by a lower average reimbursement per fraction.

The number of PBRT fractions increased by 180 and 252 to 1,632 and 4,659 for the three and nine-month periods ended September 30, 2020 compared to 1,452 and 4,407 for the same periods in the prior year, respectively.

The increase in PBRT volume for the three and nine-month periods ended September 30, 2020 was the result of the continuing increased awareness of the benefits of PBRT treatment.

This increase was offset by the impact of the COVID-19 pandemic during the second quarter of 2020.

Gamma Knife revenues decreased by $327,000 and $1,855,000 to $2,983,000 and $8,465,000 for the three and nine-month periods ended September 30, 2020 compared to $3,310,000 and $10,320,000 for the same periods in the prior year, respectively.

Excluding the Company's recently acquired site in Ecuador, and a positive contractual adjustment related to Medicare reimbursement at one of the Company's existing sites recognized in the prior year, Gamma Knife revenue decreased $115,000.

The decrease in Gamma Knife revenues for the three and nine-month periods ended September 30, 2020, was due to a lower average reimbursement at the Company’s retail sites.

The number of Gamma Knife procedures increased by 29 and 19 to 377 and 1,103 for the three and nine-month periods ended September 30, 2020 compared to 348 and 1,084 for the same periods in the prior year, respectively.

Excluding the Company's recently acquired site in Ecuador and the Company's customer site with an Icon upgrade, Gamma Knife procedures decreased by 10 and 59 for the three and nine-month periods ended September 30, 2020, respectively.

The decrease in Gamma Knife procedures for the three month period ended September 30, 2020 was driven by cyclical variances.

The decrease in Gamma Knife procedures for the nine-month period ended September 30, 2020 was primarily due to the impact from the COVID-19 pandemic.

In April 2020, an existing Gamma Knife customer contract expired.

The site operated on a month-to-month basis through October 2020, when the customer notified the Company in writing of their intent to terminate.

During the three-month period ended September 30, 2020, a second existing Gamma Knife customer notified the Company of their intent to not renew their contract.

This customer contract is expected to expire at the end of February 2021.

Revenues generated from the Company’s IGRT contract decreased by $314,000 and $771,000 to $0 for the three and nine-month periods ended September 30, 2020 compared to $314,000 and $771,000 for the same periods in the prior year, respectively.

The decrease in IGRT revenues for the three and nine periods ended September 30, 2020 was the result of the winding down of the Company’s IGRT system, which was being used as a back-up system at the customer site.

The Company’s contract for its IGRT equipment expired in April 2020 and the Company agreed to sell the equipment to its existing customer for $150,000, which was equal to the equipment's salvage value.

The Company sold the equipment in July 2020.

Total costs of revenue increased by $44,000 and decreased by $550,000 to $3,532,000 and $9,790,000 for the three and nine-month periods ended September 30, 2020 compared to $3,488,000 and $10,340,000 for the same periods in the prior year, respectively.

Maintenance and supplies decreased by $86,000 and $220,000 to $562,000 and $1,748,000 for the three and nine-month periods ended September 30, 2020 compared to $648,000 and $1,968,000 for the same periods in the prior year, respectively.

The decrease in maintenance and supplies for the three and nine-month periods ended September 30, 2020 was due to a decrease in time and materials costs at the Company’s existing customer sites.

Depreciation and amortization increased by $2,000 and decreased by $616,000 to $1,819,000 and $5,103,000 for the three and nine-month periods ended September 30, 2020 compared to $1,817,000 and $5,719,000 for the same periods in the prior year, respectively.

The increase in depreciation and amortization for the three-month period ended September 30, 2020 was due to increased depreciation recognition at two of the Company's expiring Gamma Knife sites.

This increase was offset by a decrease in depreciation from the expiration of the Company's IGRT contract and depreciation of the related equipment.

The decrease in depreciation and amortization for the nine-month period ended September 30, 2020 was primarily due to depreciation recognized on the Company’s IGRT equipment of $838,000 for the same periods in the prior year, respectively.

The related equipment became fully depreciated in the fourth quarter of 2019.

Other direct operating costs increased by $128,000 and $286,000 to $1,151,000 and $2,939,000 for the three and nine-month periods ended September 30, 2020 compared to $1,023,000 and $2,653,000 for the same periods in the prior year, respectively.

The increase in other direct operating costs for the three and nine-month periods ended September 30, 2020 was driven by operating costs at the Company's recently acquired Gamma Knife center in Ecuador.

Selling and administrative costs increased by $70,000 and $355,00 to $1,135,000 and $3,556,000 for the three and nine-month periods ended September 30, 2020 compared to $1,065,000 and $3,201,000 for the same periods in the prior year, respectively.

The increase for the three-month period ended September 30, 2020, was due to tax, legal, and consulting fees related to the Company's acquisition of GKCE of approximately $69,000.

The increase for the nine-month period was primarily due to legal and other fees, including, but not limited to the COVID-19 pandemic and the transition in senior management and tax, legal, and consulting fees related to the Company's acquisition of GKCE of approximately $162,000.

Interest expense decreased by $48,000 and $212,000 to $254,000 and $803,000 for the three and nine-month periods ended September 30, 2020 compared to $302,000 and $1,015,000 for the same periods in the prior year, respectively.

The decrease for the three and nine-month periods ended September 30, 2020 was due to a lower average principal base on the Company’s debt and leases compared to the same periods in the prior year, respectively, effectively reducing interest expense.

Interest and other income decreased by $4,000 and $8,000 to $3,000 and $7,000 for the three and nine-month periods ended September 30, 2020 compared to $7,000 and $15,000 for the same periods in the prior year, respectively.

The impact of the COVID-19 pandemic for the three-month periods ended March 31, 2021 and 2020 has varied by location based on the stage of containment and actions by government agencies.

The impact on treatments and costs in the three-month periods ended March 31, 2021 and 2020 did not appear material for the Gamma Knife.

The COVID-19 pandemic appears to have had a greater impact on PBRT fractions for the three-month period ended March 31, 2021.

Revenues decreased by $204,000 to $4,364,000 for the three-month period ended March 31, 2021 compared to $4,568,000 for the same period in the prior year.

Revenues generated from the Company’s PBRT system decreased by $145,000 to $1,531,000 for the three-month period ended March 31, 2021 compared to $1,676,000 for the same period in the prior year.

The decrease in PBRT revenues for the three-month period ended March 31, 2021 was due to lower fractions primarily due to the continued impact of the COVID-19 pandemic, offset by a higher average reimbursement for the period.

The number of PBRT fractions decreased by 445 to 1,231 for the three-month period ended March 31, 2021 compared to 1,676 for the same period in the prior year.

The decrease in PBRT volume for the three-month period ended March 31, 2021 was primarily due to the continued impact from the COVID-19 pandemic.

The Company's PBRT system also experienced some down-time for maintenance during the three-month period ended March 31, 2021.

Gamma Knife revenues were $2,892,000 for the three-month periods ended March 31, 2021 and 2020.

For the three-month period ended March 31, 2021, Gamma Knife procedures decreased, but this decrease was offset by an increase in average reimbursement.

The increase in average reimbursement was partially driven by the Company’s contract that expired in the fourth quarter of 2020, which was reimbursed at a lower rate, and an increase in the average rate at the Company’s retail sites.

The number of Gamma Knife procedures decreased by 21 to 355 for the three-month period ended March 31, 2021 compared to 376 for the same period in the prior year.

The decrease in Gamma Knife procedures for the three-month period ended March 31, 2021 was primarily due to the expiration of a contract in the fourth quarter of 2020 and in the first quarter of 2021.

This decrease was offset by the Company’s acquisition of GKCE in the second quarter of 2020.

The Company’s contract for IGRT equipment and related equipment services expired in April 2020.

As of March 31, 2021, the Company reviewed its estimate of related revenues and accounts receivable and determined the amount should be $0 and wrote off the balance of $59,000.

Total costs of revenue decreased by $244,000 to $2,930,000 for the three-month period ended March 31, 2021 compared to $3,174,000 for the same period in the prior year.

Maintenance and supplies increased by $39,000 to $672,000 for the three-month period ended March 31, 2021 compared to $633,000 for the same period in the prior year.

The increase in maintenance and supplies for the three-month period ended March 31, 2021 was due to a maintenance contract for one of the Company's Gamma Knife Icon upgrades which commenced in the fourth quarter of 2020.

Depreciation and amortization decreased by $449,000 to $1,198,000 for the three-month period ended March 31, 2021 compared to $1,647,000 for the same period in the prior year.

The decrease in depreciation and amortization for the three-month period ended March 31, 2021 was primarily due to the expiration of a contract in the fourth quarter of 2020 and in the first quarter of 2021.

In addition, the Company determined some of its Gamma Knife equipment was impaired as of December, 31, 2020 and the related equipment values were written off for the year-ended, therefore, there was no depreciation expense incurred on this equipment for the three-month period ended March 31, 2021.

Other direct operating costs increased by $166,000 to $1,060,000 for the three-month period ended March 31, 2021 compared to $894,000 for the same period in the prior year.

The increase in other direct operating costs for the three-month period ended March 31, 2021 was driven by the operating costs of GKCE which was acquired in June 2020.

Selling and administrative costs decreased by $127,000 to $1,084,000 for the three-month period ended March 31, 2021 compared to $1,211,000 for the same period in the prior year.

The decrease for the three-month period ended March 31, 2021, was due to lower legal and other fees.

Interest expense decreased by $22,000 to $260,000 for the three-month period ended March 31, 2021 compared to $282,000 for the same period in the prior year.

The decrease for the three-month period ended March 31, 2021 was due to a lower average principal base on the Company’s debt and leases compared to the same periods in the prior year, respectively, effectively reducing interest expense.

Interest and other income was $3,000 for the three-month period ended March 31, 2021 compared to $3,000 for the same period in the prior year.

Interest and other income is comprised of interest expense and interest earned.

Income tax expense decreased by $133,000 and $442,000 to a benefit of $34,000 and $192,000 for the three and nine-month periods ended September 30, 2020 compared to expense of $99,000 and $250,000 for the same periods in the prior year, respectively.

The decrease in income tax expense for the three-month period ended September 30, 2020 was due to lower taxable income attributable to GKF and its subsidiaries.

Net income attributable to non-controlling interest decreased by $194,000 and $456,000 to a loss of $5,000 and income of $106,000 for the three and nine-month periods ended September 30, 2020 compared to income $189,000 and $562,000 for the same periods in the prior year, respectively.

Income tax expense increased by $34,000 to $6,000 for the three-month period ended March 31, 2021 compared to an income tax benefit of $28,000 for the same period in the prior year.

The increase in income tax expense for the three-month period ended March 31, 2021 was due to higher taxable income attributable to GKF and the acquisition of GKCE.

Net income attributable to non-controlling interest decreased by $9,000 to $58,000 for the three-month period ended March 31, 2021 compared to $67,000 for the same period in the prior year.

Net income attributable to non-controlling interests represents net income earned by the 19% non-controlling interest in GKF, and net income of the non-controlling interests in various subsidiaries controlled by GKF.

The decrease or increase in net income attributable to non-controlling interests reflects the relative profitability of GKF.

Net income decreased by $374,000 and $1,293,000 to a loss of $209,000, or $0.03 per diluted share and a loss of $827,000 or $0.14 per diluted share for the three and nine-month periods ended September 30, 2020 compared to net income of $165,000, or $0.03 per diluted share and net income of $466,000 or $0.08 per diluted share for the same periods in the prior year, respectively.

The decrease in net income for the three-month period ended September 30, 2020 was due to legal and other professional fees incurred and a decrease in Gamma Knife revenue due to a decrease in the Company's average reimbursement rate.

The decrease in net income for the nine-month period ended September 30, 2020 was due to legal and other professional fees incurred, a decrease in Gamma Knife revenue due to a decrease in the Company's average reimbursement rate, and a decrease in Gamma Knife procedures due to the COVID-19 pandemic.

Net income increased by $164,000 to $29,000, or $0.00 per diluted share for the three-month period ended March 31, 2021 compared to a net loss of $135,000, or $0.02 per diluted share for the same period in the prior year.

The increase in net income for the three-month period ended March 31, 2021 was due to a decrease in depreciation expense and selling and administrative costs.

Liquidity and Capital Resources

The Company had cash, cash equivalents and restricted cash of $3,983,000 at September 30, 2020 compared to $1,779,000 at December 31, 2019.

The Company’s cash position increased by $2,204,000 primarily due to cash from operating activities of $8,057,000, proceeds from the sale of equipment of $150,000, and long-term debt financing of the Acquisition of $1,425,000.

This increase was offset by payment for the purchase of property and equipment of $328,000, payment for the Acquisition of $2,084,000, payments on long-term debt and finance leases of $3,945,000, payments on short-term financing of $459,000, debt issuance costs of $30,000 and distributions to non-controlling interests of $582,000.

The Company has scheduled interest and principal payments under its debt obligations of approximately $1,418,000 and scheduled finance lease payments of approximately $3,224,000 during the next 12 months.

The Company believes that its cash flow from cash on hand, operations, and other cash resources are adequate to meet its scheduled debt and finance lease obligations during the next 12 months.

The Company had cash, cash equivalents and restricted cash of $5,013,000 at March 31, 2021 compared to $4,325,000 at December 31, 2020.

The Company’s cash position increased by $688,000 primarily due to cash from operating activities of $2,783,000.

This increase was offset by payment for the purchase of property and equipment of $1,065,000, payments on long-term debt and finance leases of $914,000 and payments on short-term financing of $116,000.

The Company has scheduled interest and principal payments under its debt obligations of approximately $1,209,000 during the next 12 months.

The Company believes that its cash on hand, cash flow from operations, and other cash resources are adequate to meet its scheduled debt obligations and working capital requirements during the next 12 months.

See additional discussion below related to commitments.

The Company as of September 30, 2020 had shareholders’ equity of $30,714,000, working capital of $2,933,000 and total assets of $52,340,000.

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.

The Company and Mevion Medical Systems, Inc.

(“Mevion”) have agreed to upgrade the second and third PBRT units for which the Company has purchase commitments.

The Company as of March 31, 2021 had shareholders’ equity of $23,844,000, working capital of $4,163,000 and total assets of $44,047,000.

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.

The Company is actively seeking sites for these units but, to date, has not entered into agreements with any party for either placement of a PBRT unit or the related financing.

The Company projects that it will be required to commence delivery of the second and third PBRT units no later than 2023.

In the event the Company is unable to enter into customer agreements within the requisite time frame or receive an extension from Mevion, the Company could forfeit its deposits, which are described below.

As of September 30, 2020, 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 Condensed Consolidated Balance Sheets as deposits and construction in progress.

As of September 30, 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.

In the event the Company is unable to enter into customer agreements within the requisite time frame or receive an extension from Mevion, the Company could forfeit its deposits.

As of March 31, 2021, the Company had commitments, after deposits, to purchase two MEVION S250i PBRT systems for $34,000,000.

As of March 31, 2021, the Company had commitments to perform one Cobalt-60 reload and install four Leksell Gamma Knife Icon Systems (“Icon”) at existing customer sites, and purchase two 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 it's 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 first quarter of 2021.

Total Gamma Knife and LINAC commitments as of September 30, 2020 were $12,210,000.

The Cobalt-60 reload, Icon upgrades, and LINAC purchases are scheduled to occur between 2022 and 2023.

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

The Company has a commitment from DFC to finance this upgrade.

Total Gamma Knife and LINAC commitments as of March 31, 2021 were $10,860,000.

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

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

The agreement requires an annual prepayment of $1,572,000 of which the Company has paid $1,380,000 for the current contractual 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.

As of September 30, 2020, the Company had commitments to service and maintain its Gamma Knife and PBRT equipment.

As of March 31, 2021, the Company had commitments to service and maintain its Gamma Knife and PBRT equipment.

The service commitments are carried out via contracts with Mevion, Elekta and Mobius Imaging, LLC.

1 unchanged sentence

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 September 30, 2020 were $10,619,000.

Total service commitments as of March 31, 2021 were $10,272,000.

The Gamma Knife and certain other service contracts are paid monthly, as service is performed.

The Company believes that cash flow from cash on hand and operations will be sufficient to cover these payments.

The Company estimates the following commitments for each of the equipment purchases, service contracts, long-term debt, finance lease obligations, and operating leases with expected timing of payments as follows as of September 30, 2020:

Payments Due by Period

Contractual Obligations Total amounts

committed 2020 2021-2022 2023-2024 After

Long-term debt (includes interest) $ 5,645,000 $ 406,000 $ 2,292,000 $ 1,838,000 $ 1,109,000

Finance leases (includes interest) 10,481,000 1,085,000 7,940,000 1,456,000 —

Future equipment purchases 46,210,000 — 12,210,000 34,000,000 —

Equipment service contracts 10,619,000 270,000 3,402,000 3,884,000 3,063,000

Acquisition working capital payments 397,000 43,000 354,000 — —

Operating leases 1,046,000 74,000 706,000 266,000 —

Total contractual obligations $ 74,398,000 $ 1,878,000 $ 26,904,000 $ 41,444,000 $ 4,172,000

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-Q

Item 2. Management’s Discussion and Analysis