What changed in this filing

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Item 1A. Risk Factors

2023-03-31 compared with 2022-03-30 · 34 added, 41 removed, 88 unchanged (46% of the section changed)

1 unchanged sentence

Company, Industry and Economic Risk

The impact of the COVID-19 pandemic and associated economic disruptions may continue to adversely affect the company ’

s business operations and financial condition.

The ongoing novel coronavirus COVID-19 has spread across the globe, has been declared a national emergency in the United States, Peru and Ecuador, and, during 2020, shut down many business operations around the globe.

Many states and municipalities in the United States, Peru and Ecuador, have recommended or mandated aggressive and unprecedented actions to reduce the spread of the disease, including limiting non-essential gatherings of people, ceasing all non-essential travel, ordering certain businesses and government agencies to cease non-essential operations at physical locations and issuing shelter-in-place”

orders, which direct individuals to shelter at their places of residence (subject to limited exceptions).

Across our operations, although most governmental restrictions on certain medical procedures have been lifted, the pandemic adversely impacted our business, as healthcare resources were being prioritized for the treatment and management of the outbreak in some cases.

Consequently, there may continue to be delays in delivering certain Gamma Knife and PBRT treatments and significant volatility or reductions in demand for such treatments may continue.

The COVID-19 pandemic poses the risk that the Company or its employees, contractors, customers, government and third party payors and others may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that have been and may continue to be recommended or mandated by governmental authorities.

A broad, sustained continuation of the COVID-19 pandemic could continue to negatively impact the Company for the following reasons:

operations at certain medical facilities, including medical professionals and other medical facility employees, may be subject to prolonged closure or shut down and may impact our ability to market and deliver Gamma Knife and PBRT treatments;

medical facilities may defer certain Gamma Knife and PBRT treatments for non-urgent patient cases in order to allocate resources to the care of patients with COVID-19;

patients may continue to defer certain Gamma Knife and PBRT treatments due to real or perceived concerns about the potential spread of COVID-19 in a medical facility setting;

certain deferred Gamma Knife and PBRT treatments may not be rescheduled for a later date;

there may be significant volatility or continued reductions in demand for Gamma Knife and PBRT treatments due to limitations on operations at medical facilities, including in geographies that continue to experience severe impacts of the pandemic;

there may be continued disruptions to the supply chain of the Company’s suppliers, resulting in price increases for purchased services and capital acquisitions by the Company; 

the pandemic may materially impact the Company’s operations for a sustained period of time due to the current travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns;

and/or members of the board, management or employee team, some of whom are particularly at risk for the severe symptoms of COVID-19, or of our small number of other employees, may become ill or have family members who are ill and are absent as a result, or they may elect not to come to work due to the illness affecting others in our office or facilities.

The occurrence of any of the foregoing events could have a material adverse effect on our business, results of operations, financial condition, liquidity and cash flows.

The COVID-19 pandemic and mitigation measures have had and may continue to have an adverse impact on global economic conditions and healthcare activity, which could have an adverse effect on the Company’s business and financial condition.

The full impact of the COVID-19 pandemic remains unknown, including the impact on the global economy and the healthcare industry.

The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and its variants, the effectiveness and implementation of vaccinations to counter the virus, actions to contain its impact, the efficacy of the current governmental orders in slowing down the pandemic, the governments’

changing calculations on the economic impact and the health implications of maintaining these orders, the progress in the healthcare industry’s ability to effectively combat the virus, and potential increase or decrease in healthcare demand, volatility and uncertainty resulting from COVID-19 responses, all of which are highly unpredictable.

Likewise, the financial market as a whole has experienced extreme volatility as a result of the global economic impact of the COVID-19 pandemic, which has impacted, and may continue to impact, the Company’s stock price.

We refer you to “Management’s Discussion and Analysis of Financial Position and Results of Operations”

for a more detailed discussions of the potential impact of the COVID-19 pandemic and associated economic disruptions, and the actual operational and financial impacts that we have experienced to date.

If the Company is not successful at diversifying its business model, its revenues and profitability may decline.

The Company has historically relied on Gamma Knife unit placement and a PBRT system to provide its revenues.

Currently, there is a limited market for Gamma Knife equipment and there are few prospects for PBRT systems.

Currently, there is a limited market for Gamma Knife equipment and PBRT systems.

As a result, we plan to adapt our business model to place other types of stereotactic radiosurgery and advanced radiation therapy equipment in addition to Gamma Knife units and PBRT systems.

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Introduction of the RO APM reimbursement model could negatively impact the Company's revenue and financial results.

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, 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 domestic revenues.

The Company’s PBRT center was not initially selected for inclusion in the RO APM, but it could be included at a later date.

If the Company’s PBRT center is included at a later date, the episodic payment methodology is estimated to result in lower reimbursement than the current fee-per-service reimbursement. 

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

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

The RO APM, which was to be in effect for a five year period, has been delayed indefinitely.

If the RO APM had not been delayed, it would have significantly altered 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 would have been required to participate in the model based on whether the radiation therapy provider is located within a randomly selected core-based statistical area.

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

The remaining providers not included in the RO APM would have continued to receive reimbursement based on a fee-for-service methodology.

The RO APM would have included but would not have been limited to PBRT and Gamma Knife services.

Three of the Company's Gamma Knife centers were expected to be included in the RO APM.

It was not anticipated that inclusion in the RO APM would 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 2023 for the most commonly used PBRT delivery codes increased by approximately 3.2% and 0.2% and decreased by approximately 3.2% for Gamma Knife.

On August 29, 2022, CMS published a final rule that delayed the start date of the RO APM to a date to be determined through future rulemaking and amended the definition of “model performance period”

to provide that the start and end dates of the five-year model performance period will be established by CMS through future rulemaking.

At this time, it is not clear if the RO APM will be implemented and, if it is implemented, the timing for implementation and in what form it will be implemented. 

If a start date for the RO APM is proposed, CMS will provide at least six months’

notice in advance of the proposed start date, and the proposed start date will be subject to public comment.

The impact of the COVID-19 pandemic and associated economic disruptions may continue to adversely affect the Company ’

s business operations and financial condition.

Our operations and those of our suppliers and customers were negatively impacted by the COVID-19 pandemic.

While the progressive lifting of COVID-related restrictions led to a rebound in procedure volumes for our Gamma Knife business and our PBRT business, the secondary and tertiary effects of the COVID-19 pandemic could continue to present challenges for our business and industry.

Such effects may include lingering disruptions in the global supply chain, delays in the manufacturing, delivery, and repair of the equipment we provide, increases in the prices for purchased services and capital acquisition, potential volatility or timing in the demand for Gamma Knife and PBRT treatments, slow recovery in workforce participation, constraints on access to capital, general economic volatility, and pandemic-related inflationary pricing.

The magnitude of the continued impact of COVID-19 on our business and operations are largely dependent on external factors and future developments that are beyond our control, such as the extent and duration of any COVID-19 resurgence, the spread of new variants, the occurrence of other severe health events or similar unprecedented outbreaks, the response to any such resurgence, new variant, or outbreak by government and regulatory agencies, such as the potential reinstatement of “shelter-in-place”

lockdown orders, the efficacy and implementation of vaccinations and boosters to counter the virus, the availability of Gamma Knife and PBRT treatments, patients’

assessment of the risks of prioritizing rather than delaying such treatments in the event of any COVID-19 resurgence, new variant, or outbreak, the worsening of current economic conditions, and the severity of ongoing supply-chain disruptions.

If there are regressions in our global progress to combat the COVID-19 pandemic or if any similar global public-health events develop, the scope and nature of the impact on our business, results of operations, financial condition, liquidity and cash flows would be uncertain and potentially materially adverse.

We refer you to “Management’s Discussion and Analysis of Financial Position and Results of Operations”

The Company's retail revenue is subject to payor mix variability which could negatively impact the Company's revenue and financial results.

13 unchanged sentences

Due to the substantial costs of acquiring a Gamma Knife unit, we must identify medical centers that possess neurosurgery and radiation oncology departments capable of performing a large number of Gamma Knife procedures.

As of December 31, 2021, there were approximately 115  operating Gamma Knife units in the United States, of which thirteen units were owned by the Company.

As of December 31, 2022, there were 118  operating Gamma Knife units in the United States, of which twelve units were owned by the Company.

There can be no assurance that we will be successful in placing additional units at any sites in the future.

14 unchanged sentences

A limited number of customers have historically accounted for a substantial portion of the Company’s total revenue, and the Company expects such customer concentration to continue for the foreseeable future.

For example, in 2021, three customers in total accounted for approximately 50% of the Company’s revenue.

For example, in 2022, one customer in total accounted for approximately 45% of the Company’s revenue .

The loss of a significant customer or a significant decline in the business from the Company’s largest customers could have a material adverse effect on the Company’s business and results of operations.

11 unchanged sentences

In addition, neurosurgeons who are responsible for referring patients for Gamma Knife surgery may not be willing to make such referrals for various reasons, instead opting for invasive surgery.

Because of these competing technologies, there can be no assurance that the Company will be able to secure a sufficient number of future sites or Gamma Knife procedures to sustain its profitability and growth and accordingly there may be a material negative impact on the business and results of operations of the Company.

Because of these competing alternatives, there can be no assurance that the Company will be able to secure a sufficient number of future sites or Gamma Knife procedures to sustain its profitability and growth and accordingly there may be a material negative impact on the business and results of operations of the Company.

International operations make the Company vulnerable to risks associated with doing business in foreign countries that can affect its business, financial condition, results of operations and cash flows.

9 unchanged sentences

The Perfexion is upgradeable to the Icon platforms which has enhanced imaging capabilities allowing for treatment without a head frame and the treatment of larger tumors.

In 2022, Elekta introduced an upgrade to the Icon, called the Esprit.

Existing model 4(C)s of the Gamma Knife are not upgradeable to the Perfexion model.

11 unchanged sentences

There can be no assurance that we will be able to obtain additional customers or be able to finance the two additional systems.

If we are unable to obtain additional customers or are unable to finance the two additional systems, the Company will lose its deposits and there may be a negative impact on the Company’s business and re sults of operations.

If we are unable to obtain additional customers or are unable to finance the two additional systems, the Company will lose its deposits .

Stock Ownership Risk

6 unchanged sentences

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 1A. Risk Factors