What changed in this filing

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Item 1. Business

2022-03-30 compared with 2021-04-06 · 166 added, 139 removed, 188 unchanged (62% of the section changed)

American Shared Hospital Services (“ASHS” and, together with its subsidiaries, the “Company”) provides stereotactic radiosurgery equipment and advanced radiation therapy and related equipment.

The Company currently provides Gamma Knife units to thirteen 13 medical centers in twelve (12) states in the United States and Gamma Knife units at stand-alone facilities in Lima, Peru and Guayaquil, Ecuador as of March 1, 2021.

The Company provides Gamma Knife services through its 81% indirect interest in GK Financing, LLC, a California limited liability company (“GKF”).

American Shared Hospital Services (“ASHS”

and, together with its subsidiaries, the “Company”) provides stereotactic radiosurgery equipment and advanced radiation therapy and related equipment.

The Company provides Gamma Knife units to twelve medical centers in eleven states in the United States and two Gamma Knife units at stand-alone facilities in Lima, Peru and Guayaquil, Ecuador as of March 1, 2022.

The Company provides Gamma Knife services through its 81% indirect interest in GK Financing, LLC, a California limited liability company (“GKF”).

The remaining 19% of GKF is owned by GKV Investments, Inc., a wholly-owned U.S.

subsidiary of Elekta AG, a Swedish company (“Elekta”).

Elekta is the manufacturer of the Leksell Gamma Knife® (the “Gamma Knife”).

subsidiary of Elekta AG, a Swedish company (“Elekta”).

Elekta is the manufacturer of the Leksell Gamma Knife®

(the “Gamma Knife”).

GKF is a non-exclusive provider of alternative financing services for Leksell Gamma Knife units.

The Company wholly-owns the subsidiaries American Shared Radiosurgery Services (“ASRS”), OR21, Inc.

and MedLeader.com, Inc.

(“MedLeader”).

ASRS is the majority-owner of GKF.

(“MedLeader”).

ASRS is the majority-owner of GKF. MedLeader is not expected to generate significant revenue within the next two years. 

GKF has established the wholly-owned subsidiaries Instituto de Gamma Knife del Pacifico S.A.C.

(“GKPeru”) and HoldCo GKC S.A (“HoldCo”) for the purpose of providing similar Gamma Knife services in Peru and Ecuador, respectively.

GKF also owns a 51% interest in Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”).

(“GKPeru”) and HoldCo GKC S.A (“HoldCo”) for the purpose of providing similar Gamma Knife services in Peru and Ecuador, respectively.

GKF also owns a 51% interest in Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”).

The remaining 49% in each of these two companies is owned by radiation oncologists.

The Company is also the sole owner of PBRT Orlando, LLC (“Orlando”) and the majority owner of Long Beach Equipment, LLC (“LBE”) which were formed to provide proton beam radiation therapy services in Orlando, Florida and Long Beach, California.

A 40% minority ownership in LBE is owned by radiation oncologists.

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

On June 12, 2020, GKF, through HoldCo, purchased approximately 98% of the total outstanding shares of Gamma Knife Center Ecuador S.A.

(“GKCE”), from GKCE’s majority shareholders (the “Acquisition”).

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

(“GKCE”), from GKCE’s majority shareholders (the “Acquisition”).

Subsequent to the Acquisition, the Company acquired additional shares that increased its ownership to 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.

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

The purchase price was 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.

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

dollars, which is also the currency of Ecuador. 

See Note 5 - GKCE Acquisition for additional information regarding the Acquisition.

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”).

The remaining 50% of OR21 is owned by an architectural design company.

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In 2015, Elekta introduced an upgrade to the Gamma Knife Perfexion unit called Icon.

As of March 1, 2021, all of the Company’s thirteen (13) Gamma Knife units in the United States are Gamma Knife Perfexion units and two (2) of these Perfexion units have the Icon upgrade.

As of March 1, 2022, all of the Company’s twelve Gamma Knife units in the United States are Gamma Knife Perfexion units and two of these Perfexion units have the Icon upgrade. 

The Company’s Gamma Knife units in Peru and Ecuador are Model 4(C)s. 

The Company expects to replace the unit in Ecuador with an Icon in the third quarter of 2022.

The Gamma Knife treats selected malignant and benign brain tumors, arteriovenous malformations, and functional disorders including trigeminal neuralgia (facial pain).

Research is being conducted to determine whether the Gamma Knife can be effective in the treatment of epilepsy, tremors, and other functional disorders.

As of December 31, 2020, there were approximately 116 Gamma Knife sites in the United States and 345 units in operation worldwide.

As of December 31, 2021, there were approximately 115  Gamma Knife sites in the United States and 352  units in operation worldwide.

Based on 2019 case mix data, an estimated percentage breakdown of Gamma Knife procedures performed in the U.S.

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malignant (63%) and benign (22%) brain tumors, vascular disorders (4%), and functional disorders (11%).

The Company, as of March 1, 2021, had thirteen (13) operating Gamma Knife units located in the United States and two (2) in South America in Lima, Peru and Guayaquil, Ecuador, respectively.

The Company’s first Gamma Knife commenced operation in September 1991.

The Company’s Gamma Knife units performed 1,530 procedures in 2020 for a cumulative total of approximately 43,500 procedures from commencement through December 31, 2020.

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, 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, as of March 1, 2022, had twelve operating Gamma Knife units located in the United States and two in South America in Lima, Peru and Guayaquil, Ecuador, respectively.

The Company’s first Gamma Knife commenced operation in September 1991.

The Company’s Gamma Knife units performed 1,436 procedures in 2021 for a cumulative total of approximately 44,900 procedures from commencement through December 31, 2021.

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.

Gamma Knife treatment was included in the Radiation Oncology Alternative Payment Model (“RO APM”).

However, for the Company's customers included in the RO APM, there does not appear to be a significant reimbursement impact.

Revenue from Gamma Knife services for the Company during each of the last two (2) years ended December 31, and the percentage of total revenue of the Company represented by the Gamma Knife for each of the last two years, are set forth below:

The Company has reviewed its Gamma Knife equipment, in light of available information as of December 31, 2021 and concluded no impairment exists. 

As of December 31, 2020, 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 six Gamma Knife units were more-than temporarily impaired.

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 Gamma Knife units and related removal costs, and two deposits towards the purchase of proton beam systems and related capitalized interest.

The six Gamma Knife units that were impaired consisted of two units that had been taken out of service in prior years, one unit that was taken out of service in 2020 and three units that have already, or the Company anticipated would 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, which constitute an 

asset retirement obligation (“ARO”), of four of the Gamma Knife units of $1,350,000 (of which, the Company 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. As of December 31, 2021, the Company recognized an additional impairment loss of $105,000 related to the ARO costs of one of the Gamma Knife units that was removed in January 2022. 

Revenue from Gamma Knife services for the Company during each of the last two years ended December 31, and the percentage of total revenue of the Company represented by the Gamma Knife for each of the last two years, are set forth below:

Total Gamma Knife

Revenue (in thousands)

Gamma Knife % of

Revenue (in thousands)

Total Revenue

2020 $ 11,670 65.4 %

2019 $ 13,551 65.8 %

The Company conducts its Gamma Knife business through its 81% indirect interest in GKF.

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GKF, formed in October 1995, is managed by its policy committee.

The policy committee is composed of one representative from the Company, Craig Tagawa, ASHS’s President, Chief Operating and Financial Officer, and one representative from Elekta.

The policy committee sets the operating policy for GKF.

The policy committee may act only with the unanimous approval of both of its members.

The policy committee selects a manager to handle GKF’s daily operations.

Tagawa, Chief Executive Officer of GKF and President, Chief Operating and Financial Officer of ASHS, serves as GKF’s manager.

GKF’s profits and/or losses and any cash distributions are allocated based on membership interests.

GKF’s operating agreement requires that it have a cash reserve of at least $50,000 before cash distributions are made to its members.

The policy committee selects a manager to handle GKF’s daily operations.

Tagawa, Chief Executive Officer of GKF and President, Chief Operating and Financial Officer of ASHS, serves as GKF’s manager.

GKF’s profits and/or losses and any cash distributions are allocated based on membership interests.

GKF’s operating agreement requires that it have a cash reserve of at least $50,000 before cash distributions are made to its members.

From inception to December 31, 2021, GKF has distributed $50,410,000 to the Company and $11,825,000 to Elekta.

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The Company is continuing its efforts to contract new radiation therapy customers both domestically and internationally.

The Company has increased its product offerings from standard linear accelerators to more advanced linear accelerators that incorporate Magnetic Resonance Imaging (“MRI”) and potentially Positron Emission Tomography (“PET”) imaging technologies.

The Company believes that these more advanced technologies, with a higher capital cost component, may be potentially a more receptive market segment for its business model.

The Company’s radiation therapy business consisted of one Image Guided Radiation Therapy (“IGRT”) system that began operation in September 2007 at an existing Gamma Knife customer site.

This contract terminated in July 2020 and did not generate any revenue in 2020.

Additional information on our operations can be found in Item 7– “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1 of our consolidated financial statements.

Proton Beam Radiation Therapy Operations (“PBRT”)

The Company’s radiation therapy business consisted of one Image Guided Radiation Therapy (“IGRT”) system that began operation in September 2007 at an existing Gamma Knife customer site.

This contract terminated in July 2020 and did not generate any revenue in 2020 or 2021.

Additional information on our operations can be found in Item 7 –

“Management’s Discussion and Analysis of Financial Condition and Results of Operations”

and Note 1 - Business And Basis of Presentation of the consolidated financial statements.

Proton Beam Radiation Therapy Operations ( “

PBRT ”

PBRT is an alternative to traditional external beam, photon-based radiation delivered by linear accelerators.

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PBRT currently treats prostate, brain, spine, head and neck, lung, breast, gastrointestinal tract and pediatric tumors.

More than 200,000 patients have been treated with protons worldwide.

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

More than 200,000 p atients have been treated with protons worldwide.

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 of and other charges of $1,613,000 were other-than temporarily impaired.

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

The Company 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 of and other charges of $1,613,000 were other-than temporarily impaired.

Total impairment related to the proton therapy business was $3,863,000 as of December 31, 2020. 

There was no PBRT impairment recognized as of December 31, 2021.

Introduction of PBRT in the United States, until recently, has been limited due to the high capital costs of these projects.

The Company believes that the current development of one and two treatment room PBRT systems at lower capital costs and the level of reimbursement for PBRT from the Centers for Medicare & Medicaid Services (“CMS”) will help make this technology available to a larger segment of the market.

However, the introduction of the RO APM and the inclusion of PBRT in this model potentially limits the adoption of PBRT by medical centers.

Additional information on our operations can be found in Item 6– “Selected Financial Data”, Item 7– “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1 of our consolidated financial statements.

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

However, the introduction of the Radiation Oncology Alternative Payment Model (“RO APM”) and the inclusion of PBRT in this model may potentially limit the adoption of PBRT by medical centers.

Additional information on our operations can be found in Item 7 –

“Management’s Discussion and Analysis of Financial Condition and Results of Operations”

and Note 1 - Business And Basis of Presentation of the consolidated financial statements.

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

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

The majority of the Company’s customers pay the Company on a revenue sharing basis.

The market for these services primarily consists of large and medium sized medical centers.

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The Company pays for the equipment and the medical center generally pays for site and installation costs.

The following is a listing of the Company’s sites as of March 1, 2021:

Customers (Gamma Knife except as noted) Original Term of

The following is a listing of the Company’s sites as of March 1, 2022:

Original Term of

Year Contract

Customers (Gamma Knife except as noted)

Contract (in years)

Basis of Payment

Southwest Texas Methodist Hospital San Antonio, Texas 10 years 1998 Fee per use

Kettering Medical Center Kettering, Ohio 10 years 1999 Revenue sharing

University of Arkansas for Medical Sciences Little Rock, Arkansas 15 years 1999 Revenue sharing

Central Mississippi Medical Center Jackson, Mississippi 10 years 2001 Fee per use

OSF Saint Francis Medical Center Peoria, Illinois 10 years 2001 Fee per use

Albuquerque Regional Medical Center Albuquerque, New Mexico 10 years 2003 Fee per use

Southwest Texas Methodist Hospital San Antonio, Texas

Kettering Medical Center Kettering, Ohio

Revenue sharing

Central Mississippi Medical Center Jackson, Mississippi

OSF Saint Francis Medical Center Peoria, Illinois

Albuquerque Regional Medical Center Albuquerque, New Mexico

Northern Westchester Hospital Mt.

Kisco, New York 10 years 2005 Fee per use

USC University Hospital Los Angeles, California 10 years 2008 Fee per use

Vincent’s Medical Center Jacksonville, Florida 10 years 2011 Revenue Sharing

Sacred Heart Medical Center Pensacola, Florida 10 years 2013 Revenue Sharing

PeaceHealth Sacred Heart Medical Center at RiverBend Eugene, Oregon 10 years 2014 Revenue Sharing

Orlando Health – UF Health Cancer Center Orlando, Florida (PBRT) 10 years 2016 Revenue Sharing

Bryan Medical Center Lincoln, Nebraska 10 years 2017 Revenue Sharing

Methodist Hospital Merrillville, Indiana 10 years 2019 Revenue Sharing

The Company’s typical fee per use agreement is for a ten-year term.

The fixed fee per use reimbursement amount that the Company receives from the customer is based on the Company’s cost to provide the service and the anticipated volume of the customer.

The Gamma Knife contracts signed by the Company typically call for a fee ranging from $6,000 to $9,300 per procedure.

Kisco, New York

USC University Hospital Los Angeles, California

Vincent’s Medical Center Jacksonville, Florida

Revenue Sharing

Sacred Heart Medical Center Pensacola, Florida

Revenue Sharing

PeaceHealth Sacred Heart Medical Center at RiverBend Eugene, Oregon

Revenue Sharing

Orlando Health Cancer Institute Orlando, Florida (PBRT)

Revenue Sharing

Bryan Medical Center Lincoln, Nebraska

Revenue Sharing

Methodist Hospital Merrillville, Indiana

Revenue Sharing

The Company’s typical fee per use agreement is for a ten-year term.

The fixed fee per use reimbursement amount that the Company receives from the customer is based on the Company’s cost to provide the service and the anticipated volume of the customer.

The Gamma Knife contracts signed by the Company typically call for a fee ranging from $5,000 t o $9,000 p er procedure.

There are no minimum volume guarantees required of the customer.

In most cases, GKF is responsible for providing the Gamma Knife and related ongoing Gamma Knife equipment expenses (i.e., personal property taxes, insurance, and equipment maintenance) and helps fund the customer’s Gamma Knife marketing.

The customer generally is obligated to pay site and installation costs and the costs of operating the Gamma Knife.

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If the customer chooses to terminate the agreement, then GKF removes the equipment from the medical center for possible placement at another site.

The Company’s typical revenue sharing agreements (“retail”) are for a period of ten years.

Instead of receiving a fixed fee, the Company receives all or a percentage of the reimbursement (exclusive of physician fees) received by the customer.

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There are no minimum volume guarantees required of the customer.

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

One customer accounted for approximately 34% and 35% of the Company’s total revenue in 2021 and 2020, respectively.

At December 31, 2021, two customers each individually accounted for 10% and 31% of total accounts receivable, respectively.

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 markets its Gamma Knife services through its preferred provider status with Elekta and a direct sales effort led by its Senior Vice President, its President, Chief Operating and Financial Officer, and its Chief Executive Officer.

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The major advantages to a health care provider in contracting with the Company for its services include:

▪ The medical center avoids the high cost of owning the equipment.

▪The medical center avoids the high cost of owning the equipment.

By not acquiring the equipment supplied by the Company, the medical center is able to allocate the funds otherwise required to purchase and/or finance the equipment to other projects.

▪ The Company does not have minimum volume requirements, so the medical center avoids the risk of equipment under-utilization.

▪The Company does not have minimum volume requirements, so the medical center avoids the risk of equipment under-utilization.

The medical center pays the Company only for each procedure performed on a patient.

▪ For contracts under revenue sharing arrangements, the Company assumes all or a portion of the risk of reimbursement rate changes.

▪For contracts under revenue sharing arrangements, the Company assumes all or a portion of the risk of reimbursement rate changes.

The medical center pays the Company only the contracted portion of revenue received from each procedure.

▪ The medical center transfers the risk of technological obsolescence to the Company.

▪The medical center transfers the risk of technological obsolescence to the Company.

The medical center and its physicians are not under any obligation to utilize technologically obsolete equipment.

▪ The Company provides planning, installation, operating and marketing assistance and support to its customers.

The Company’s Gamma Knife business is operated through GKF.

GKF generally finances its U.S.

▪The Company provides planning, installation, operating and marketing assistance and support to its customers.

The Company’s Gamma Knife business is operated through GKF.

Prior to April 2021, GKF generally financed its U.S.

Gamma Knife units, upgrades and additions with loans or finance leases from various finance companies for typically 100% of the cost of each Gamma Knife, plus any sales tax, customs, and duties.

The financing is predominantly fully amortized over an 84-month period and is collateralized by the equipment, customer contracts and accounts receivable, and is generally without recourse to the Company and Elekta.

The lease financing obtained by Orlando is guaranteed by the Company and collateralized by the equipment, customer contract and accounts receivable related to this project.

On April 9, 2021, the Company and certain of its domestic subsidiaries entered into a five year $22,000,000 credit agreement with Fifth Third Bank, N.A.

(the “Credit Agreement”), which refinanced its existing domestic Gamma Knife portfolio. 

The lease financing previously obtained by Orlando was also refinanced as long-term debt by the Credit Agreement.

The Credit Agreement includes a $7,000,000 revolving line of credit that the Company has not drawn on as of December 31, 2021. The Credit Agreement is 48% amortized over a 58-month  period and is 

secured by a lien on substantially all of the assets of the Company and certain of its domestic subsidiaries. 

The Company’s Gamma Knife unit in Ecuador is financed with DFC.

See Note 6 - Long Term Debt to the consolidated financial statements for additional information.

Conventional neurosurgery, radiation therapy and other radiosurgery devices are the primary competitors of Gamma Knife radiosurgery.

Gamma Knife radiosurgery has gained acceptance as an alternative and/or adjunct to conventional surgery due to its more favorable morbidity outcomes for certain procedures as well as its non-invasiveness.

Utilization of the Company’s Gamma Knife units is contingent on the acceptance of Gamma Knife radiosurgery by the customer’s neurosurgeons, radiation oncologists and referring physicians.

In addition, the utilization of the Company’s Gamma Knife units is impacted by the proximity of competing Gamma Knife centers and providers using other radiosurgery devices.

Conventional linear accelerator-based radiation therapy is the primary competitor of the Company’s proton therapy system at Orlando Health.

Utilization of the Company’s Gamma Knife units is contingent on the acceptance of Gamma Knife radiosurgery by the customer’s neurosurgeons, radiation oncologists and referring physicians.

In addition, the utilization of the Company’s Gamma Knife units is impacted by the proximity of competing Gamma Knife centers and providers using other radiosurgery devices.

Conventional linear accelerator-based radiation therapy is the primary competitor of the Company’s proton therapy system at Orlando Health Cancer Institute (“Orlando Health”).

Although proton beam radiation therapy has been available for many years, it is only recently emerging as a more clinically beneficial alternative to conventional linear accelerators for certain tumors.

Utilization of the Company’s proton therapy system is dependent on the acceptance of this technology by Orlando Health’s radiation oncologists and referring physicians, as well as patient self-referrals.

There are currently no competing proton therapy facilities near the Company’s site.

There are several competing manufacturers of PBRT systems, including Mevion, IBA Particle Therapy Inc., Varian Medical Systems, Inc., Hitachi Ltd., ProNova Solutions, LLC, Sumitomo Heavy Industries, ProTom International, Inc.

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The Company has purchased one MEVION S250 and has made deposits towards the purchase of two additional MEVION S250i systems.

The Mevion system, as well as single room proton therapy systems from other manufacturers, potentially provides cancer centers the opportunity to introduce single treatment room PBRT services with a cost in the range of approximately $30 to $40 million versus four and five PBRT treatment room programs costing in excess of $120 million.

The Mevion system, as well as single room proton therapy systems from other manufacturers, potentially provides cancer centers the opportunity to introduce single treatment room PBRT services with a cost in the range of approximately $30 to $50 million versus four and five PBRT treatment room programs costing in excess of $120 million including facility costs.

The MEVION S250 system received FDA approval in the second quarter of 2012 and the first clinical treatment occurred in December 2013 at Barnes-Jewish Hospital.

The MEVION S250i (Hyperscan) unit, which includes pencil beam scanning, was FDA approved in December 2017.

The Company’s first MEVION S250 system in operation at Orlando Health treated its first patient in April 2016.

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

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The Company is targeting large, hospital-based cancer programs.

The Company’s ability to develop a successful PBRT financing entity depends on the decision of cancer centers to self-fund or to fund the PBRT through conventional financing vehicles, the Company’s ability to capture market share from competing alternative PBRT financing entities, and the Company’s ability to raise capital to fund PBRT projects.

The Company’s ability to secure additional customers for stereotactic radiosurgery equipment, advanced radiation therapy equipment and services and other proton beam radiation therapy services, or other equipment, is dependent on its ability to effectively compete against the manufacturers of these systems selling directly to potential customers and other companies that outsource these services.

The Company’s ability to develop a successful PBRT financing entity depends on the decision of cancer centers to self-fund or to fund the PBRT through conventional financing vehicles rather than the Company, the Company’s ability to capture market share from competing alternative PBRT financing entities, and the Company’s ability to raise capital to fund PBRT projects.

The Company does not have an exclusive relationship with any manufacturer and has previously lost sales to customers that chose to purchase equipment directly from manufacturers.

The Company may continue to lose future sales to such customers and to the Company’s competitors.

GOVERNMENT PROGRAMS

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The Medicare program is subject to statutory and regulatory changes, administrative rulings, interpretations and determinations, requirements for utilization review, and federal and state funding restrictions, all of which could materially increase or decrease payments from these government programs in the future, as well as affect the cost of providing services to patients and the timing of payments to our client hospitals.

The Company’s Gamma Knife and PBRT customers receive payments for patient care from federal government and private insurer reimbursement programs.

Currently in the United States, Gamma Knife and proton therapy services are performed primarily on an out-patient basis.

Gamma Knife patients with Medicare as their primary insurer, treated on either an in-patient or out-patient basis, comprise an estimated 35%-45% of the total Gamma Knife patients treated nationwide.

Gamma Knife patients with Medicare as their primary insurer, treated on either an in-patient or out-patient basis, comprise an estimat ed 35%-45% of the total Gamma Knife patients treated nationwide.

PBRT patients with Medicare as their primary insurer are treated primarily on an out-patient basis and comprise an estimated 45% to 50% of the total radiation therapy patients treated.

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

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

The RO APM is scheduled to commence January 1, 2023 and will be in effect for a five 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.

Under the RO APM, hospital based and free-standing radiation therapy providers are mandatorily required to participate in the model based on whether the radiation therapy provider is located within a randomly selected Core Based Statistical Area ("CBSA").

CMS projects that providers treating approximately 30% of radiation oncology patients have been selected to participate in the RO APM.

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The RO APM includes but is not limited to PBRT and Gamma Knife services.

Four (4) of the Company's Gamma Knife centers are scheduled to be included in the RO APM.

Three of the Company's Gamma Knife centers are included in the RO APM.

It is not anticipated that inclusion in the RO APM will have a significant impact on the Company's Gamma Knife revenues.

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 increases by approximately 4.1% and decreases by approximately 1.7% for Gamma Knife.

See additional discussion under “Item 1A Risk Factors.”

The average Medicare reimbursement rate trends from 2019 to 2021 are outlined below:

Medicare reimbursement in 2022 for the most commonly used PBRT delivery codes increased by approximately 1.8% and increased by approximately 2.2% for Gamma Knife.

See additional discussion under “Item 1A Risk Factors.”

The average Medicare reimbursement rate trends from 2020 to 2022 are outlined below:

Average Medicare Reimbursement Rate Trends - Gamma Knife

2019 2020 2021

$ 9,300 $ 9,600 $ 9,600

The average Medicare reimbursement rate trends for PBRT from 2020 to 2022 are outlined below.

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Average Medicare Reimbursement Rate Trends - PBRT

2019 2020 2021

Simple without Compensation

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Affordable Care Act and Subsequent Regulation

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, (“Affordable Care Act”), which has resulted in significant changes to the health care industry.

The primary goal of the legislation was to extend health care coverage to uninsured legal U.S.

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An increase in the number of insured residents could potentially increase the number of patients seeking Gamma Knife or radiation therapy treatment.

• The Company’s retail contracts are subject to reimbursement rate changes for radiosurgery or radiation therapy services by the government or other third-party payors.

The Company’s retail contracts are subject to reimbursement rate changes for radiosurgery or radiation therapy services by the government or other third-party payors.

Any changes to Medicare or Medicaid reimbursement through the repeal or modification of the Affordable Care Act could affect revenue generated from these sites.

Some of the provisions of the Affordable Care Act have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges.

While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the Affordable Care Act such as removing penalties, starting January 1, 2019, for not complying with the Affordable Care Act’s individual mandate to carry health insurance and delaying the implementation of certain Affordable Care Act-mandated fees.

Several states sought the repeal of the Affordable Care Act, arguing in part that the individual mandate is not severable from the Affordable Care Act, and that the removal of the individual mandate should invalidate the Affordable Care Act entirely.

On December 14, 2018, a U.S.

District Court Judge in the Northern District of Texas, or Texas District Court Judge, ruled that the individual mandate is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the Affordable Care Act are invalid as well.

While the Texas District Court Judge and CMS, have stated that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the Affordable Care Act will impact the Affordable Care Act.

The Supreme Court of the United States ruled on appeal that the plaintiffs lacked standing to challenge the individual mandate and its severability from the Affordable Care Act.

Notably, the Supreme Court’s ruling addressed standing and did not discuss the constitutionality of the individual mandate or its severability.

The focus of the Supreme Court’s ruling on standing leaves open the opportunity for additional challenges on the same issues which may yet affect the validity of the Affordable Care Act.

In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted.

On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress.

A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.

This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, started in April 2013, and, due to subsequent legislative amendments, will stay in effect through 2027 unless additional Congressional action is taken.

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The payment of remuneration to induce the referral of health care business has been a subject of increasing governmental and regulatory focus in recent years.

Section 1128B(b) of the Social Security Act (sometimes referred to as the “federal anti-kickback statute”) provides criminal penalties for individuals or entities that offer, pay, solicit or receive remuneration in order to induce referrals for items or services for which payment may be made under the Medicare and Medicaid programs and certain other government funded programs.

The Affordable Care Act amended the anti-kickback statute to eliminate the requirement of actual knowledge, or specific intent to commit a violation, of the anti-kickback statute.

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Additionally, the majority of states also have anti-kickback laws, which establish similar prohibitions and, in some cases, may apply to items or services reimbursed by any third-party payor, including commercial insurers.

Additionally, the Omnibus Budget Reconciliation Act of 1993, often referred to as “Stark II”, bans physician self-referrals to providers of designated health services with which the physician has a financial relationship.

On September 5, 2007, the third and final phase of the Stark regulations (Phase III) was published.

The term “designated health services” includes, among others, radiation therapy services and in-patient and out-patient hospital services.

The term “designated health services”

includes, among others, radiation therapy services and in-patient and out-patient hospital services.

On January 1, 1995, the Physician Ownership and Referral Act of 1993 became effective in California.

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The Company believes that it is in compliance with these rules and regulations.

On August 19, 2008, the CMS published a final rule relating to inpatient hospital services paid under the Inpatient Prospective Payment System for discharges in the Fiscal Year 2009 (the “Final Rule”).

Among other things, the Final Rule prohibits “per-click payments” to certain physician lessors for services rendered to patients who were referred by the physician lessor.

Among other things, the Final Rule prohibits “per-click payments”

to certain physician lessors for services rendered to patients who were referred by the physician lessor.

This prohibition on per-click payments for leased equipment used in the treatment of a patient referred to a hospital lessee by a physician lessor applies regardless of whether the physician himself or herself is the lessor or whether the lessor is an entity in which the referring physician has an ownership or investment interest.

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However, referrals made by a radiation oncologist for radiation therapy or ancillary services necessary for, and integral to, the provision of radiation therapy (such as Gamma Knife services) are not subject to this prohibition so long as certain conditions are met.

GK Financing’s majority owned subsidiaries, AGKE and JGKE have minority ownership interests that are held solely by radiation oncologists, who are otherwise exempt from the referral prohibition under the Final Rule.

The Company believes it is in compliance with the Final Rule.

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In recent years, the federal government has launched several initiatives aimed at uncovering practices which violate false claims or fraudulent billing laws.

Claims under these laws may be brought either by the government or by private individuals on behalf of the government, through a “whistleblower” or “qui tam” action.

Claims under these laws may be brought either by the government or by private individuals on behalf of the government, through a “whistleblower”

or “qui tam”

The Company believes that it is in compliance with the Federal False Claims Act;

however, because such actions are filed under seal and may remain secret for years, there can be no assurance that the Company or one of its affiliates is not named in a material qui tam action.

Legislation in various jurisdictions requires that health facilities obtain a Certificate of Need (“CON”) prior to making expenditures for medical technology in excess of specified amounts.

Four of the Company’s existing customers were required to obtain a CON or its equivalent.

Legislation in various jurisdictions requires that health facilities obtain a Certificate of Need (“CON”) prior to making expenditures for medical technology in excess of specified amounts.

Four of the Company’s existing customers were required to obtain a CON or its equivalent.

The CON procedure can be expensive and time consuming and may impact the length of time before Gamma Knife services commence.

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The Company is unable to predict if any jurisdiction will eliminate or alter its CON requirements in a manner that will increase competition and, thereby, affect the Company's competitive position.

The Company's Gamma Knife units contain Cobalt 60 radioactive sources.

The Company’s Gamma Knife units contain Cobalt 60 radioactive sources.

The medical centers that house the Company's Gamma Knife units are responsible for obtaining possession and user's licenses for the Cobalt 60 source from the Nuclear Regulatory Commission.

The Company’s Gamma Knife center in Peru was responsible for obtaining possession and user’s licenses for the Cobalt-60 sources from the Peruvian Regulatory Agencies.

The Company’s Gamma Knife center in Ecuador was responsible for obtaining possession and user’s licenses for the Cobalt-60 sources from the Subsecretaría de Control y Aplicaciones Nucleares (SCAN).

Standard linear accelerator equipment utilized to treat patients is regulated by the FDA.

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INSURANCE AND INDEMNIFICATION

The Company's contracts with equipment vendors generally do not contain indemnification provisions.

The Company’s contracts with equipment vendors generally do not contain indemnification provisions.

The Company maintains a comprehensive insurance program covering the value of its property and equipment, subject to deductibles, which the Company believes are reasonable.

The Company's customer contracts generally contain mutual indemnification provisions.

The Company’s customer contracts generally contain mutual indemnification provisions.

The Company maintains general and professional liability insurance in the United States.

The Company is not involved in the practice of medicine and therefore believes its present insurance coverage and indemnification agreements are adequate for its business.

The Company’s Peruvian and Ecuadorian Gamma Knife centers are free-standing facilities operated by GKPeru and GKCE, respectively.

The treating physicians and clinical staff are these facilities are independent contractors.

The Company maintains general and professional liability insurance consistent with the operations of these facilities and believes its present coverage is adequate for its business.

At December 31, 2020, the Company employed ten (10) people on a full-time basis in the United States, five (5) people on a full-time basis in Lima, Peru, and six (6) people on a full-time basis in Guayaquil, Ecuador.

At December 31, 2021, the Company employed eight people on a full-time basis and 1 person on a temporary basis in the United States, five people on a full-time basis in Lima, Peru, a nd six people on a full-time basis in Guayaquil, Ec uador.

None of these employees are subject to a collective bargaining agreement and there is no union representation within the Company.

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The executive officers were appointed by the Board of Directors and serve at the discretion of the Board of Directors.

Stachowiak 62 Chief Executive Officer

Tagawa 67 President, Chief Operating and Financial Officer

Bates 54 Senior Vice President

Chief Executive Officer

President, Chief Operating and Financial Officer

Senior Vice President

Stachowiak has served as Chief Executive Officer of the Company since October 1, 2020.

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Tagawa also served as Chief Financial Officer from January 1992 through October 1995.

Previously a Vice President in such capacity, Mr.

Tagawa became a Senior Vice President on February 28, 1993 and President on September 16, 2020.

Previously a Vice President in such capacity, Mr. Tagawa became a Senior Vice President on February 28, 1993.

He is also the Chief Executive Officer and policy committee member of GKF.

From September 1988 through January 1992, Mr.

Tagawa served in various positions with the Company.

Tagawa currently serves as Chief Financial Officer and Secretary of the Ernest Bates Foundation.

From September 1988 through January 1992, Mr. Tagawa served in various positions with the Company.

Tagawa currently serves as Chief Financial Officer and Secretary of the Ernest A.

Bates Foundation.

He received his undergraduate degree from the University of California at Berkeley and his M.B.A.

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degree from The Wharton Business School.

Bates is the son of Chairman of the Board Dr.

Bates, founder of the Company.

Bates is the son of Dr.

Bates, founder and past Chairman of the Board of the Company.

AVAILABLE INFORMATION

Our Internet address is www.ashs.com .

We make available free of charge, through our Internet website under the “Investor Center” tab in the “Corporate” section, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, annual proxy reports, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

We make available free of charge, through our Internet website under the “Investor Center”

tab in the “Corporate”

section, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, annual proxy reports, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

The information contained on our Internet website is not part of this document.

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 1. Business