AMERICAN SHARED HOSPITAL SERVICES 10-K

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Overview   American Shared Hospital Services is a leading provider of turnkey technology solutions for stereotactic radiosurgery and advanced radiation therapy equipment and services.  The Company’s domestic Gamma Knife business operates by fee-per-use contracts or retail contracts where the Company shares in the revenue and operating costs of the equipment.  The Company, through GKF, also owns and operates single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador. These units economically function similar to the Company’s turn-key retail arrangements. The Company’s PBRT system at Orlando Health, is also considered a retail arrangement. The main drivers of the Company’s revenue are numbers of sites, procedure volume and reimbursement.  A summary of the sites is set forth in the table below.   Number of Sites       12/31/2021     12/31/2020   Retail/Turn-key     7       8   Fee Per Use     6       6   Domestic Gamma Knife     13       14                     International Gamma Knife     2       2                     Total Gamma Knife     15       16                     PBRT     1       1     The Company had one customer contract expire in the fourth quarter of 2020 and one that expired in the first quarter of 2021. The Company removed a third Gamma Knife unit in January 2022 and a fourth unit under contract through the second quarter of 2022 is currently in negotiation. The next customer contract expirations are in the first and fourth quarters of 2023. A summary of the Company’s procedure volumes for fiscal years 2021 and 2020 are set forth in the table below.   Volume                         Increase       Increase   Gamma Knife     12/31/2021       12/31/2020       (Decrease)       (Decrease)   Total Procedures     1,436       1,530       (94 )     (6.1 )% Same Centers Procedures     1,264       1,182       82       6.9 %                                   PBRT Procedures     4,426       5,868       (1,442 )     (24.6 )%   The decrease in Gamma Knife volume during 2021 was due to the expiration of two contracts in the fourth quarter of 2020 and the first quarter of 2021. The decrease in PBRT volume was due to the continued impact from the COVID-19 pandemic and down-time for repair of system components.   Reimbursement   CMS established a 2022 delivery code reimbursement rate of approximately $7,943 ($7,773 in 2021) for a Medicare Gamma Knife treatment. The approximate CMS reimbursement rates for delivery of PBRT for a simple treatment without compensation for 2022 is $554 ($543 in 2021) and $1,321 ($1,298 in 2021) 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 RO APM. 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 CBSA. CMS projects that providers treating approximately 30% of radiation oncology patients have been selected to participate in the RO APM. The remaining providers not included in the RO APM will continue to receive reimbursement based on a fee-for-service methodology. The RO APM includes but is not limited to PBRT and Gamma Knife services. 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. 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.    Impact of the COVID-19 Pandemic   In 2020, the COVID-19 pandemic, the resulting recession in the United States and its follow-on effects impacted business activity across industries, including the Company’s. 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 were disrupted as customers turned their focus to dealing with the impact of the COVID-19 pandemic on their operations and restricted access to their sites in efforts to contain the spread of the virus. The global nature of the pandemic resulted in authorities implementing numerous measures designed to contain the virus, including travel bans and restrictions, border closures, quarantines, shelter-in-place orders, business limitations and shutdowns. The prioritization of COVID-19 treatment and containment resulted in delays in decisions by the Company’s customers and their patients, obstacles to the Company’s ability to market and deliver its services, declines in treatment volumes and adverse impacts to revenues for both Gamma Knife procedures and PBRT treatments.   In 2021, following the dissemination of the vaccine for the COVID-19 virus in the United States, there was a scale back of the safety measures put into place throughout 2020. Some of the Company’s customers still experienced some delays and restrictions in providing service, but not to the same degree that occurred during 2020. Procedure volumes for the Company’s domestic Gamma Knife business for the twelve-month period ended December 31, 2021, are rebounding to pre-pandemic lev els. The Company’s PBRT business was impacted by COVID-19, and other factors, during 2021 as treatment volumes continued to lag from pre-pandemic levels. T he Company’s business has been impacted differently at each of the Company’s various locations as a result of the pandemic and related governmental actions. However, as the COVID-19 pandemic evolves and new strains of the virus develop, additional impacts may arise which may have a material impact on the Company’s business.    17 Table of Contents   The impact of the COVID-19 pandemic for the year ended December 31, 2021 has varied by location based on the stage of containment and actions by government agencies. The impact on treatments and costs in the year ended December 31, 2021 did not appear material for the Gamma Knife. The COVID-19 pandemic appears to have had a greater impact on PBRT fractions for the years ended December 31, 2021 and 2020.   The COVID-19 pandemic has led to supply chain disruptions for many of the Company’s suppliers.  These disruptions have resulted in price increases for purchased services and capital acquisitions.  To mitigate its cost increases, the Company has in many cases aggregated its purchase of services and capital goods to minimize these price increases.   APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES   The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles and follow general practices within the industry in which it operates. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported.   The most significant accounting policies followed by the Company are presented in Note 2 to the consolidated financial statements. These policies along with the disclosures presented in the other financial statement notes and, in this discussion, and analysis, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts, and the methods, assumptions and estimates underlying those amounts, management has identified revenue recognition and costs of sales for turn-key and revenue sharing arrangements, and the carrying value of fixed assets and useful lives, and as such the aforementioned could be most subject to revision as new information becomes available. The following are our critical accounting policies in which management’s estimates, assumptions and judgments most directly and materially affect the financial statements:   Revenue Recognition   The Company recognizes revenues under Accounting Standards Codification (“ASC”) 842 Leases (“ASC 842”) and ASC 606 Revenue from Contracts with Customers (“ASC 606”). The Company had thirteen domestic Gamma Knife units, two international Gamma Knife units, and one PBRT system i n operation as of December 31, 2021. Four of the Company’s customer contracts are through subsidiaries where GKF or its subsidiary is the majority owner and managing partner. Six of the Company’s thirteen domestic 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 Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador. These units economically function similar to the Company’s turn-key retail arrangements. The Company’s PBRT system at Orlando Health is also considered a retail arrangement.   Rental Income from Medical Services   The Company recognizes revenues under ASC 842 when services have been rendered and collectability is reasonably assured, on either a fee per use or revenue sharing basis. The terms of the contracts do not contain any guaranteed minimum payments. The Company’s contracts are typically for a ten-year term and are classified as either fee per use or retail. Retail arrangements are further classified as either turn-key or revenue sharing. Revenues from fee per use contracts is determined by each hospital’s contracted rate. Revenues are recognized at the time the procedures are performed, based on each hospital’s contracted rate and the number of procedures performed. Under revenue sharing arrangements, the Company receives a contracted percentage of the reimbursement received by the hospital. The amount the Company expects to receive is recorded as revenue and estimated based on historical experience. Revenue estimates are reviewed periodically and adjusted as necessary. Under turn-key arrangements, the Company receives payment from the hospital in the amount of the hospital’s reimbursement from third party payors, and the Company is responsible for paying all the operating costs of the equipment. Operating costs are determined primarily based on historical treatment protocols and cost schedules with the hospital. The Company records an estimate of operating costs which are reviewed on a regular basis and adjusted as necessary to more accurately reflect the actual operating costs. For turn-key sites, the Company also shares a percentage of net operating profit. The Company records an estimate of net operating profit based on estimated revenues, less estimated operating costs. The operating costs and estimated net operating profit are recorded as other direct operating costs in the consolidated statement of operations. As of December 31, 2021 and 2020, the Company recognized revenues of approximately $14,719,000 and $16,204,000 under ASC 842, respectively.   Revenue from retail arrangements amounted to approximately 60% and 64% of total revenue for the years ended December 31, 2021 and 2020, respectively. Because the revenue estimates are reviewed on a quarterly basis, any adjustments required for past revenue estimates would result in an increase or reduction in revenue during the current quarterly period.   18 Table of Contents   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. Revenue related to a Gamma Knife treatment is recognized on a gross basis at the time when the patient receives treatment. There is no variable consideration present in the Company’s performance obligation and the transaction price is agreed upon per the stated contractual rate. GKPeru's payment terms are typically prepaid for self-pay patients and insurance provider payments are paid net 30 days. GKCE's patient population is primarily covered by a government payor and payments are paid 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, 2021 and 2020. GKCE's accounts receivable were $435,000 and $467,000 for the years ended December 31, 2021 and 2020. As of December 31, 2021 and 2020, the Company recognized revenues of approximately $2,909,000 and $1,633,000 under ASC 606, respectively.   Salvage Value on Equipment   Salvage value is based on the estimated fair value of the equipment at the end of its useful life. The Company determines salvage value based on the estimated fair value of the equipment at the end of its useful life. There is no active resale market of Gamma Knife or PBRT equipment, but the Company believes its salvage value estimates were a reasonable assessment of the economic value of the equipment when the contract ends. There is no salvage value assigned to the two Gamma Knife units in Peru or Ecuador because these are Model 4(C) units.  The Company has not assigned salvage value to its PBRT equipment.     As of  April 1, 2021, the Company reduced its estimate for salvage value for nine of its domestic Gamma Knife Perfexion units. The net effect of this change in estimate for the year ended December 31, 2021, was a decrease in net income of approximately $342,000 or $0.06 per diluted share. This change in estimate will also impact future periods.  See Note 3 - Property and Equipment to the consolidated financial statements for further discussion on salvage value.    2021 Results   For the year ended December 31, 2021, 66% of the Company’s revenue was derived from its Gamma Knife business and 34% was derived from the PBRT system. For the year ended December 31, 2020, 65% of the Company’s revenue was derived from its Gamma Knife business and 35% was derived from the PBRT system.   TOTAL REVENUE               Increase           (in thousands)   2021     (Decrease)     2020   Total revenue   $ 17,628       (1.2 )%   $ 17,837     Total revenue in 2021 decreased 1.2% compared to 2020 primarily due to the expiration of two Gamma Knife contracts in the fourth quarter of 2020 and the first quarter of 2021, and a decrease in PBRT fractions. The decrease in PBRT volume was primarily due to the continued impact from the COVID-19 pandemic and down-time for repair of system components.   Gamma Knife Revenue             Increase               2021     (Decrease)     2020   Revenue from Gamma Knife (in thousands)   $ 11,629       (0.4 )%   $ 11,670   Number of Gamma Knife procedures     1,436       (6.1 )%     1,530   Average revenue per procedure   $ 8,098       4.3 %   $ 7,763     Gamma Knife revenue for 2021 was $11,629,000 compared to $11,670,000 in 2020. Gamma Knife revenue for 2021 decreased $41,000 compared to 2020 due to a decrease in procedures, offset by an increase in average reimbursement.    The number of Gamma Knife procedures performed in 2021 decreased 94 compared to 2020 primarily due to the expiration of one contract in the fourth quarter of 2020 and another contract in the first quarter of 2021, offset by the acquisition of GKCE in June 2020. Excluding the two Gamma Knife contracts that expired and GKCE procedures, Gamma Knife procedures for existing sites increased 7% in 2021 compared to the prior year.   The number of Gamma Knife procedures performed by GKPeru and GKCE increased 70% and 116% in 2021 compared to 2020, respectively.  GKPeru’s procedures increased in 2021 because the Company executed a contract with Peru’s national health program, Es Salud.  These procedures are reimbursed at a lower rate than GKPeru’s historical average.  The Company acquired GKCE in June 2020, driving the increase in volume in 2021.  The COVID-19 pandemic has more strongly impacted procedure volumes in Peru and Ecuador compared to the US in 2021.    Revenue per procedure increased by $335 in 2021 compared to 2020. Excluding the two Gamma Knife contracts that expired and GKCE procedures for 2021, the average rate increased 4%. This increase was due to higher reimbursement at the Company’s retail sites, driven by several large reimbursements from commercial payors, offset by the expiration of a fee-per-use contract in the fourth quarter of 2020, which was reimbursed at a lower rate.   Proton Therapy Revenue             Increase               2021     (Decrease)     2020   Revenue from PBRT (in thousands)   $ 6,058       (1.8 )%   $ 6,167   Number of PBRT fractions     4,426       (24.6 )%     5,868   Average revenue per fraction   $ 1,369       30.2 %   $ 1,051     19 Table of Contents   PBRT revenue for 2021 was $6,058,000 compared to $6,167,000 in 2020. The number of PBRT fractions performed in 2021 was 4,426 compared to 5,868 in 2020. Revenue per fraction in 2021 was $1,369 compared to $1,051 in 2020. The decrease in PBRT volume was primarily due to the continued impact from the COVID-19 pandemic and down-time for repair of system components.  This decrease was offset by an increase in average reimbursement. The average reimbursement increased due to a shift in payor mix from Medicare to commerical or other payors, which are reimbursed at a higher amount.   IGRT Revenue               Increase           (in thousands)   2021     (Decrease)     2020   Revenue from IGRT   $ (59 )     *     $ —     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.   COSTS OF REVENUE               Increase           (In thousands)   2021     (Decrease)     2020   Total costs of revenue   $ 10,902       (18.5 )%   $ 13,371   Percentage of total revenue     61.8 %             75.0 %   The Company's costs of revenue, consisting of maintenance and supplies, depreciation and amortization, and other operating expenses (such as insurance, property taxes, sales taxes, marketing costs and operating costs from the Company’s retail sites) decreased by $2,469,000 in 2021 compared to 2020.   Maintenance and supplies costs as a percentage of total revenue were 14.1% and 13.4% in 2021 and 2020 , respectively. Maintenance and supplies costs increased by $105,000 in 2021 compared to 2020 . The increase in 2021 compared to 2020was primarily 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 costs as a percentage of total revenue were 27.5% and 38.1% in 2021 and 2020 . Depreciation and amortization costs decreased $1,933,000 in 2021 compared to 2020 . The decrease in 2021 compared to 2020was primarily due to the expiration o f one contract in t he fourth quarter of 2020 and another contract 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. Therefore, there was no depreciation expense incurred on this equipment for the twelve-month period ended December 31, 2021. These decreases were offset by a change in estimate for salvage value for nine of the Company’s Gamma Knife units effective in the second quarter of 2021. The net effect of this change in estimate for the twelve-month period ended December 31, 2021, was a decrease in net income of approximately $342,000 or $0.06 per diluted share. Salvage value is based on the estimated fair value of the equipment at the end of its useful life. This change in estimate also impacts future periods.   Other direct operating costs as a percentage of total revenue were 20.2% and 23.5% in 2021 and 2020 , respectively. Other direct operating costs decreased by $641,000 in 2021 compared to 2020 . The decrease in 2021  was  primarily due to the expiration of one retail contract in the first quarter of 2021 and a decrease in operating costs for the Company’s existing retail sites .   SELLING AND ADMINISTRATIVE EXPENSE               Increase           (In thousands)   2021     (Decrease)     2020                             Selling and administrative costs   $ 4,531       (1.7 )%   $ 4,608   Percentage of total revenue     25.7 %             25.8 %   The Company's selling and administrative costs increased $77,000 in 2021 compared to 2020. The increase in 2021 was due to legal and related fees associated with new business opportunites.   INTEREST EXPENSE               Increase           (In thousands)   2021     (Decrease)     2020                             Interest expense   $ 739       (30.1 )%   $ 1,057   Percentage of total revenue     4.2 %             5.9 %   The Company's interest expense decreased $318,000 in 2021 compared to 2020. On April 9, 2021, the Company refinanced predominantly all of its existing debt and finance lease portfolio at a lower effective interest rate compared to the Company's historic portfolio rate, reducing interest expense.   20 Table of Contents   (LOSS) ON WRITE DOWN OF IMPAIRED ASSETS AND ASSOCIATED REMOVAL COSTS               Increase           (In thousands)   2021     (Decrease)     2020                             Loss on write down of impaired assets   $ 105       (98.7 )%   $ 8,264                             Percentage of total revenue     0.6 %             46.3 %   As of December 31, 2021 and 2020, the Company recognized a loss on the write down of impaired assets of $105,000 and $8,264,000, respectively. The Company reviewed its Gamma Knife and PBRT equipment, in light of available information as of December 31, 2020, and concluded events and circumstances existed that indicated the value of these assets was more-than temporarily impaired. 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, one unit that was taken out of service in 2021, one that was taken out of service in January 2022, and a fourth that the Company anticipates will be removed later in 2022. The Company reviewed its Gamma Knife and PBRT equipment, in light of available information as of December 31, 2021 and concluded no additional impairment exists.  As of December 31, 2021, the Company recognized an additional $105,000 related to the removal costs of one of the unit that was removed in January 2022.     INCOME TAX EXPENSE               Increase           (In thousands)   2021     (Decrease)     2020                             Income tax expense (benefit)   $ 269       115.5 %   $ (1,737 ) Percentage of total revenue     1.5 %             (9.7 )% Percentage of income, after net income attributable to non-controlling interests, and before income taxes     58.1 %             19.7 %   Income tax expense increased $2,006,000 in 2021 compared to 2020. The increase in income tax expense in 2021 was due to the loss on write-down of impaired assets recorded during the year ended December 31, 2020.   The Company anticipates that it will continue to record income tax expense if it operates profitably in the future. Currently there are state income tax payments required for most states in which the Company operates. At December 31, 2020, the Company exhausted the remainder of its net operating loss carryforward for federal income tax return purposes. The Company has net operating loss carryforwards for state income tax purposes.   21 Table of Contents   NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS               Increase           (In thousands)   2021     (Decrease)     2020                             Net income (loss) attributable to non-controlling interests   $ 484       173.6 %   $ (658 )                           Percentage of total revenue     2.7 %             (3.7 )%   Net income attributable to non-controlling interests increased $1,142,000 in 2021 compared to 2020. Net income attributable to non-controlling interests represents the pre-tax income earned by the 19% non-controlling interest in GKF, and the pre-tax income or losses of the non-controlling interests in various subsidiaries controlled by GKF. The decrease or increase in net income attributable to non-controlling interests reflects the relative profitability of GKF. The increase in 2021 compared to 2020 was due to the loss on write off of impaired assets recorded during the year ended December 31, 2020.   NET INCOME ATTRIBUTABLE TO AMERICAN SHARED HOSPITAL SERVICES   (In thousands,           Increase           except per share amounts)   2021     (Decrease)     2020                             Net income (loss) attributable to ASHS   $ 194       102.7 %   $ (7,058 ) Net income (loss) per share attributable to ASHS, diluted   $ 0.03       102.6 %   $ (1.14 )   Net income (loss) attributable to American Shared Hospital Services increased $7,252,000 in 2021 compared to 2020. The increase in 2021 compared to 2020 was primarily due to the loss on write down of impaired assets recorded during the year ended December 31, 2020.   LIQUIDITY AND CAPITAL RESOURCES   The Company’s primary liquidity needs are to fund capital expenditures as well as support working capital requirements. In general, the Company’s principal sources of liquidity are cash and cash equivalents on hand and a $7,000,000 revolving line of credit.  As of December 31, 2021, the Company has not drawn on its line of credit. The Company had cash and cash equivalents of $8,263,000 at December 31, 2021 compared to $4,325,000 at December 31, 2020, an increase of $3,938,000. The Company’s expected primary cash needs on both a short and long-term basis are for capital expenditures, business expansion, working capital, and other general corporate purposes.   Operating activities provided cash of $6,267,000 in 2021, which was driven by net income of $678,000, non-cash charges for depreciation and amortization of $4,972,000, stock-based compensation expense of $420,000, amortization of deferred issuance costs of $59,000, a loss on the write-down of impaired assets of $105,000, a loss on sublease impairment of $74,000, a loss on early extinguishment of debt of $401,000, deferred income taxes of $60,000, and changes in payables and other accrued liabilities of $851,000. These were offset by changes in receivables of $519,000, changes in prepaids and other assets of $14,000, payment of asset retirement obligations of $618,000, and income taxes payable of $230,000.   The Company’s trade accounts receivable decreased by $92,000 to $4,211,000 at December 31, 2021 from $4,303,000 at December 31, 2020. The number of days revenue (sales) outstanding (“DSO”) in accounts receivable as of December 31, 2021 was 87 days compared to 88 days at December 31, 2020. DSO can and does fluctuate depending on timing of customer payments received and the mix of fee per use versus retail customers. Retail sites generally have longer collection periods than fee per use sites.   Investing activities used $1,674,000 of cash in 2021 due to payments made towards the purchase of property and equipment.   Financing activities used $655,000 of cash during 2021. On April 9, 2021, the Company refinanced certain of its existing debt and finance leases and used proceeds of $13,897,000 to pay principal payments on long-term debt and finance leases of $12,846,000. The Company also incurred prepayment penalties of $401,000, and debt issuance costs of $325,000 from this transaction. This was offset by $5,000 in proceeds from options exercised during 2021. The Company also made distributions to non-controlling interests of $514,000 and payments on short-term financing of insurance premiums of $471,000.    22 Table of Contents   Working Capital   The Company had working capital at December 31, 2021 of $9,196,000 compared to a working capital deficit of $1,530,000 at December 31, 2020. The $10,726,000 increase in net working capital was primarily due to the refinancing that occurred during the second quarter of 2021. The refinancing decreased the Company's current debt and finance obligations in addition to providing excess working capital.  The Company also secured a $7,000,000 as part of the refinancing.  The Company has not drawn on the line as of December 31, 2021. The Company believes that its cash flow from operations, cash on hand and other cash resources are adequate to meet its scheduled debt and finance lease obligations during the next 12 months. See additional discussion below related to commitments. See Note 6 - Long-Term Debt Financing to the consolidated financial statements for more information.   The Company, in the past, has secured financing for its Gamma Knife and radiation therapy units. The Company has secured financing for its projects from several lenders and anticipates that it will be able to secure financing on future projects from these or other lending sources, but there can be no assurance that financing will continue to be available on acceptable terms.   Long-Term Debt   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. On April 9, 2021, the Company and certain of its domestic subsidiaries entered into a five year $22,000,000 credit agreement with Fifth Third Bank, N.A., which refinanced its existing domestic Gamma Knife portfolio.  The lease financing previously obtained by Orlando was also refinanced as long-term debt by the Credit Agreement. The Credit Agreement includes 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.   As of December 31, 2021, LIBOR will no longer be used to price new loans, but 1-month, 3-month, 6-month and 12-month maturities will continue to be published through 2023. At that time, the Company will work with Fifth Third Bank to determine an alternative base rate.  The Revolving Line is charged an unused line fee of 0.25% per annum. The Term Loan and DDTL have interest and principal payments due quarterly. Principal amortization on an annual basis for the Term Loan and DDTL equates to 48% of the original principal loan commitments in years one through five and an end of term payment of the remaining principal balance. See Note 6 - Long Term Debt to the consolidated financial statements for additional information.   Commitments   As of December 31, 2021, the Company had commitments to purchase two MEVION S250i PBRT systems for $34,000,000, and commitments to purchase and install Gamma Knife and LINAC equipment totaling $10,760,000. There are no significant cash requirements, pending financing, for these commitments in the next 12 months. There can be no assurance that financing will be available for the Company’s current or future projects, or at terms that are acceptable to the Company.  However, the Company currently has cash on hand of $8,263,000 and a line of credit of $7,000,000 to fund these projects.   The Company also had commitments to service these various equipment commitments totaling $8,408,000. The Gamma Knife and certain other service contracts are paid monthly, as service is performed. The Company believes that cash flow from operations, cash on hand and its line of credit will be sufficient to cover these payments.  See Note 13 - Commitments and Contingencies to the consolidated financial statements for further discussion on commitments.   ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   As a smaller reporting company, as defined in Rule 10(f)(1) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is not required to provide the information required by this item.   ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   See the Index to Consolidated Financial Statements and Financial Statement Schedules included at page F-1 of this report.   ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE   None.