What changed in this filing

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Item 9A. Controls and Procedures

2023-03-31 compared with 2022-03-30 · 342 added, 576 removed, 848 unchanged (52% of the section changed)

1 unchanged sentence

Evaluation of disclosure controls and procedures.

Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures”

(as defined in the Securities Exchange Act of 1934 (“Exchange Act”) Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this annual report, have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

Our Executive Chairman and our Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures”

(as defined in Rules 13a-15(e) and 15d-15(e)) of the Exchange Act) as of the end of the period covered by this annual report, have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

Management ’

9 unchanged sentences

Changes in internal controls over financial reporting.

Our Chief Executive Officer and our Chief Financial Officer have evaluated the changes to the Company’s internal control over financial reporting that occurred during our last fiscal quarter ended December 31, 2021, as required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15, and have concluded that there were no such changes that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Our Executive Chairman and our Chief Financial Officer have evaluated the changes to the Company’s internal control over financial reporting that occurred during our last fiscal quarter ended December 31, 2022, as required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15, and have concluded that there were no such changes that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

4 unchanged sentences

Information regarding executive officers of the Company, included herein under the caption “Executive Officers of the Company”

in Part I, Item 1 above, is incorporated herein by reference.

in “Part I, Item 1.

Business”

above, is incorporated herein by reference.

Information concerning the identification of our standing audit committee required by this Item is incorporated by reference from the 2023  Proxy Statement.

24 unchanged sentences

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Income

Consolidated Statement of Shareholders' Equity

6 unchanged sentences

Certificate of Amendment to Articles of Incorporation of the Company.

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

By-laws of the Company, as amended to date.

Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

86 unchanged sentences

8-K 001-08789

Offer Letter between the Company and Peter Gaccione dated August 26, 2022.

8-K 001-08789

Credit Agreement dated as of April 9, 2021 among American Shared Hospital Services, PBRT Orlando, LLC and GK Financing, LLC as the initial co-Borrowers, and American Shared Radiosurgery Services as the initial additional Loan Party and Fifth Third Bank, National Association, as Lender.

2 unchanged sentences

Consent of Independent Registered Public Accounting Firm

Certification of Chief Executive Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.

Certification of Principal Executive Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Financial Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

16 unchanged sentences

/s/ Raymond C.

Chief Executive Officer

Executive Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

/s/ Raymond C.

Chief Executive Officer, Director

Executive Chairman of the Board (principal executive officer)

March 31, 2023

7 unchanged sentences

March 31, 2023

President, Chief Operating Officer and

President and Chief Financial Officer

March 31, 2023

Chief Financial Officer

(Principal Accounting Officer)

(principal financial officer and principal accounting officer)

AMERICAN SHARED HOSPITAL SERVICES

2 unchanged sentences

AS OF December 31, 2022 and 2021 ,

FOR THE YEARS ENDED December 31, 2021

FOR THE YEARS THEN ENDED

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

1 unchanged sentence

Balance sheets

Statements of operations

Statements of income

Statement of shareholders’ equity

6 unchanged sentences

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

(the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, shareholders’

(the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, shareholders’

equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

17 unchanged sentences

Estimates of Reimbursement Rates and Payor Mix

As discussed in Note 2 in the Company’s consolidated financial statements, retail revenue amounted to approximately $10,651,000, which was approximately 60% of total consolidated revenue, during the year ended 

December 31, 2021.

The related accounts receivable balance for total retail sites accounted for 63% of total accounts receivable at December 31, 2021.

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

As described in Note 2 in the Company’s consolidated financial statements, the Company has retail customer revenue classified as either turn-key or revenue sharing that are recognized under Accounting Standards Codification 842 Leases .

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

4 unchanged sentences

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

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

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

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

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

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

2 unchanged sentences

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

Depreciation for Gamma Knife, and other equipment is determined using the straight-line method over the estimated useful lives of the assets, which for medical and office equipment is generally 3 –

10 years, and after accounting for salvage value on the equipment where indicated.

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

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

As of December 31, 2022, the Company had seven domestic Gamma Knife units with salvage value ranging from $140,000 to $300,000.

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

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

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

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

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

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

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

The primary procedure we performed to address this critical audit matter included evaluating management’s determination of salvage values by comparing determined salvages values with historical trade-in transactions and publicly available transaction information, if available, which may include reviewing relevant purchase agreements, supplier agreements or information, and evaluating publicly available transaction information.

/s/ Moss Adams LLP

7 unchanged sentences

$ 12,335,000  

$ 3,961,000  

Restricted cash

118,000  

364,000  

Accounts receivable, net of allowance for doubtful accounts of $ 100,000 at At December 31, 2021 and December 31, 2020

4,211,000  

Accounts receivable, net of allowance for doubtful accounts of $ 100,000 At December 31, 2022 and December 31, 2021

3,801,000  

1 unchanged sentence

327,000  

272,000  

Prepaid maintenance

1,245,000  

1,169,000  

Prepaid expenses and other current assets

897,000  

781,000  

Total current assets

18,723,000  

10,850,000  

PROPERTY AND EQUIPMENT, net

2 unchanged sentences

1,265,000  

19,000  

1,265,000  

INTANGIBLE ASSETS

78,000  

RIGHT OF USE ASSETS

654,000  

886,000  

73,000  

RIGHT OF USE ASSETS, net

317,000  

5 unchanged sentences

$ 230,000  

$ 683,000  

Employee compensation and benefits

735,000  

405,000  

Other accrued liabilities

1,544,000  

2,045,000  

Asset retirement obligations

Related party liabilities

497,000  

Asset retirement obligations, related party (includes $ 107,000 non-related party at December 31, 2021)

360,000  

1 unchanged sentence

255,000  

373,000  

Working capital payment due

197,000  

Current portion of lease liabilities

292,000  

305,000  

Current portion of long-term debt, net

1,262,000  

1,157,000  

Current portion of finance leases

5,945,000  

Total current liabilities

5,175,000  

12,380,000  

LONG-TERM LEASE LIABILITIES, less current portion

59,000  

581,000  

LONG-TERM DEBT, net, less current portion

12,205,000  

3,440,000  

LONG-TERM FINANCE LEASES, less current portion

2,974,000  

DEFERRED REVENUE, less current portion

70,000  

210,000  

DEFERRED INCOME TAXES

822,000  

TOTAL LIABILITIES

18,331,000  

1 unchanged sentence

SHAREHOLDERS’

Common stock, no par value

Common stock, no par value ( 10,000,000 authorized;

2 unchanged sentences

10,763,000  

10,753,000  

Additional paid-in capital

7,843,000  

7,024,000  

Retained earnings

3,019,000  

1,497,000  

Total equity- American Shared Hospital Services

21,625,000  

19,274,000  

Non-controlling interests in subsidiaries

4,000,000  

4,376,000  

Total shareholders’

25,625,000  

23,650,000  

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$ 43,956,000  

$ 43,653,000  

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED December 31,

$ 17,628,000  

$ 17,837,000  

17,628,000  

17,837,000  

Rental income from medical services

Patient income

Costs of revenue:

Maintenance and supplies

2,490,000  

2,385,000  

Depreciation and amortization

4,856,000  

6,789,000  

Other direct operating costs

3,556,000  

4,197,000  

10,902,000  

13,371,000  

6,726,000  

4,466,000  

Other direct operating costs, related party

Selling and administrative expense

4,531,000  

4,608,000  

Interest expense

739,000  

1,057,000  

Loss on write down of impaired assets and associated removal costs

105,000  

8,264,000  

Operating income (loss)

1,351,000  

( 9,463,000 )

Operating income

(Loss) on early extinguishment of debt

( 401,000 )  

Interest and other (loss) income

( 3,000 )  

10,000  

Income (loss) before income taxes

947,000  

( 9,453,000 )

Income tax expense (benefit)

269,000  

( 1,737,000 )

Net income (loss)

678,000  

( 7,716,000 )

net (income) loss attributable to non-controlling interests

( 484,000 )  

658,000  

Net income (loss) attributable to American Shared Hospital Services

$ 194,000  

$ ( 7,058,000 )

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

Income (loss) per common share- basic

$ 0.03  

Income (loss) per common share- diluted

$ 0.03  

Income before income taxes

Income tax expense

net (income) attributable to non-controlling interests

Net income attributable to American Shared Hospital Services

Net income per share attributable to American Shared Hospital Services:

Earnings per common share - basic

Earnings per common share - diluted

Weighted average common shares for basic earnings per share

Weighted average common shares for diluted earnings per share

See accompanying notes

1 unchanged sentence

CONSOLIDATED STATEMENT OF SHAREHOLDERS ’

THREE YEARS ENDED December 31, 2021

YEARS ENDED December 31, 2022 and 2021

Common Shares

5 unchanged sentences

Stock-based compensation expense

Options exercised

Issuance of deferred restricted stock awards

Vested restricted stock awards

Cash distributions to non-controlling interests

NCI investment in acquisition

Restricted common shares returned to plan

Balances at December 31, 2021

1 unchanged sentence

Options exercised

Issuance of deferred restricted stock awards

Vested restricted stock awards

Cash distributions to non-controlling interests

5 unchanged sentences

OPERATING ACTIVITIES

Net income (loss)

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

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

Depreciation and amortization

Non cash lease expense

Amortization of deferred issuance costs

Accretion of deferred issuance costs

Loss on write down impaired assets

6 unchanged sentences

Prepaid expenses and other assets

Accounts payable, accrued liabilities and deferred revenue

Asset retirement obligations

Asset retirement obligations, related party

Related party liabilities

Lease liability

Accounts payable, accrued liabilities and deferred revenue

Income taxes payable

Net cash from operating activities

Net cash provided by operating activities

INVESTING ACTIVITIES

Payment for purchase of property and equipment

Payment for acquisition, net of cash acquired

Proceeds from sale of equipment

Payment for purchases of property and equipment

Net cash (used in) investing activities

2 unchanged sentences

Principal payments on finance leases

Proceeds from financing for acquisition

Long-term debt financing

8 unchanged sentences

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of year

S ee accompanying notes

SUPPLEMENTAL CASH FLOW DISCLOSURE

2 unchanged sentences

SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

Lease reassessment right of use assets and lease liabilities

Right of use assets and lease liabilities

Interest capitalized to property and equipment

Acquisition of equipment with finance leases

Acquisition of equipment with long-term debt financing

Acquisition of insurance with short-term financing

First working capital payment related to acquisition, withholding taxes

Subsequent working capital payment for acquisition

DETAIL OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

Cash and cash equivalents

Restricted cash

Cash, cash equivalents, and restricted cash at end of period

S ee accompanying notes

4 unchanged sentences

Business –

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

the Company wholly-owns the subsidiaries American Shared Radiosurgery Services (“ASRS”), PBRT Orlando, LLC (“Orlando”), OR21, Inc., and MedLeader.com, Inc.

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

ASHS wholly-owns the subsidiaries American Shared Radiosurgery Services (“ASRS”), PBRT Orlando, LLC (“Orlando”), OR21, Inc., and MedLeader.com, Inc.

(“MedLeader”);

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

ASHS is the majority owner of Long Beach Equipment, LLC (“LBE”);

ASRS is the majority-owner of GK Financing, LLC (“GKF”) which wholly-owns the subsidiary Instituto de Gamma Knife del Pacifico S.A.C.

5 unchanged sentences

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

During 2021 GKF provided Gamma Knife units to fourteen medical centers in the United States in the states of Arkansas, California, Florida, Illinois, Indiana, Mississippi, Nebraska, New Mexico, New York, Ohio, Oregon, Tennessee, and Texas.

During 2022 , GKF leased Gamma Knife units to twelve  medical centers in the United States in the states of California, Florida, Illinois, Indiana, Mississippi, Nebraska, New Mexico, New York, Ohio, Oregon, and Texas.

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

7 unchanged sentences

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

As of December 31, 2021 , the Company had acquired approximately 99.3 % of the total outstanding shares of GKCE and intends to acquire the remaining 0.7 % at a later date.

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

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

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.

See Note 5  - GKCE Acquisition for further discussion.

April 27, 2022 ,  the Company signed a Joint Venture Agreement (the “Agreement”) with the principal owners of Guadalupe Amor Y Bien (“Guadalupe”) to establish AB Radiocirugia Y Radioterapia de Puebla, S.A.P.I.

of Puebla (“Puebla”) to treat public- and private-paying cancer patients.

The Company and Guadalupe will hold 

85 % and 

15 % ownership interests, respectively, in Puebla.

Under the Agreement, the Company will be responsible for providing a linear accelerator upgrade to an Elekta Versa HD, and Guadalupe will be accountable for all site modification costs. 

The Company formed ASHS-Mexico, S.A.

on October 3, 2022 to establish Puebla in order to provide radiation therapy and radiosurgery services locally in Mexico. 

Puebla was formed on December 15, 2022.

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

4 unchanged sentences

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

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

The COVID- 19 pandemic has adversely impacted, and may further adversely impact, the Company’s business and markets, including its employees, operations, contractors, customers, government and third party payors and others.

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

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 –

4 unchanged sentences

Actual results could differ from those estimates.

Advertising costs –

The Company expenses advertising costs as incurre d.

Advertising costs were 

$ 211,000 and $ 237,000  during the years ended December 31, 2021 and 2020 .

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

Advertising and marketing  –

The Company expenses advertising and marketing costs as incurre d (collectively, “

marketing costs”).

Marketing costs were 

$ 233,000 and $ 211,000  during the years ended December 31, 2022 and 2021 , respectively.

Marketing costs include joint marketing with customers and corporate advertising costs. Marketing costs are recorded in other direct operating costs and sales and administrative costs in the consolidated statements of income. 

Sales and Service –

The Company markets its financial and turnkey solutions directly to cancer treatment centers, hospitals, and large cancer networks worldwide through its sales staff. 

Sales expense includes payroll and travel costs for the Company’s sales staff. The Company also typically provides the equipment, as well as planning, installation, reimbursement and marketing support services to its customers.

Cash and cash equivalents –

1 unchanged sentence

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

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted cash –

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

The minimum cash requirement in Orlando was released when the Company refinanced its debt and finance lease portfolio in the second quarter of 2021.

Restricted cash represents the minimum cash that must be maintained in GKF to fund operations, per the subsidiary’s operating agreement and the minimum cash that must be maintained by GKF per it’s financing agreement with the United States International Development Finance Corporation (“D FC”). 

See further discussion at Note 5  - Long Term Debt.

1 unchanged sentence

The Company maintains its cash balances, which exceed federally insured limits, in financial institutions.

The Company believes it is not exposed to any significant credit risk on cash, cash equivalents.

The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

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

All of the Company’s revenue was provided by seventeen and eighteen customers in 2021 and 2020 , respectively.

All of the Company’s revenue was provided by fifteen  and seventeen customers in 2022 and 2021 , respectively.

One customer accounted for approximately 45 % and 

35 % of the Company’s total revenue in 2021 and 2020 .

34 % of the Company’s total revenue in 2022 and 2021 , respectively. At December 31, 2022 , 

four  customers each individually accounted for 12 %, 14 %, 16 % and 22 % of total accounts receivable, respectively.

At December 31, 2021 , two  customers each individually accounted for 31 % and 10 % 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.

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

8 unchanged sentences

Non-controlling interests - The Company reports its non-controlling interests as a separate component of shareholders’

The Company also presents the consolidated net income and the portion of the consolidated net income allocable to the non-controlling interests and to the shareholders of the Company separately in its consolidated statements of operations.

Property and equipment –

1 unchanged sentence

Depreciation for Gamma Knife and other equipment is determined using the straight-line method over the estimated useful lives of the assets, which for medical and office equipment is generally 3 –

10 years, and after accounting for salvage value on the equipment where indicated.

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

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

10 years, and after accounting for salvage value on the equipment where applicable.

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

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

4 unchanged sentences

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.

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 –

ACCOUNTING POLICIES (CONTINUED)

As of October 1, 2022, the Company further reduced its estimate for salvage value for one of its domestic Gamma Knife Perfexion units.

The net effect of the change in estimate made October 1, 2022, for the year ended 

December 31, 2022 , was a decrease in net income of approximately $ 17,000  or $ 0.00  per diluted share.

This change in estimate will also impact future periods. As of December 31, 2022 , the Company had 

seven domestic Gamma Knife units with salvage value ranging from $ 140,000 to $ 300,000 . 

As of December 31, 2021 , the Company had seven domestic Gamma Knife units with salvage value ranging from $ 175,000 to $ 400,000 .

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

1 unchanged sentence

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

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

When a rate is not readily available, imputed interest is calculated using the Company’s incremental borrowing rate.

The interest capitalized for property and equipment is the portion of interest cost incurred during the acquisition periods that could have been avoided if expenditures for the equipment had not been made.

The Company capitalized interest of $ 0  and $ 119,000 in 2021 and 2020 , respectively, as costs of medical equipment.

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

At December 31, 2022 , the Company held equipment under operating lease contracts with customers with an original cost of $ 69,306,000 and accumulated depreciation of $ 47,992,000 .

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

At December 31, 2021 , the Company held equipment under operating lease contracts with customers with an original cost of $ 68,994,000 and accumulated depreciation of $ 43,400,000 . 

As of December 31, 2022 and 2021 , the Company recognized a loss on the write down of impaired assets of $ 0 and $ 105,000 , respectively.

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 impairment as of 

December 31, 2021  was 

related to the removal costs of one of the Gamma Knife units that was impaired during the year ended December 31, 2020 .

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

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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.

Under turn-key arrangements, the Company receives payment from the hospital at an agreed upon percentage share 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.

3 unchanged sentences

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.

As of December 31, 2022 and 2021 , the Company recognized revenues of approximately $ 16,655,000  and $ 14,719,000 under ASC 842, respectively, of which approximately $ 8,952,000  and $ 6,058,000  were for PBRT services, respectively.

Patient income –

3 unchanged sentences

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.

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 between 3 and 6 months.

Timing of payments from the government payor can fluctuate year to year based on local social or economic changes.

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 .

Accounts receivable earned by GKPeru were not significant for the years ended December 31, 2022 and 2021 .

GKCE's accounts receivable were $ 862,000  and $ 435,000  for the years ended December 31, 2022 and 2021 .

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Costs of revenue –

The Company's costs of revenue consist primarily 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).

The Company’s costs of revenue consist primarily 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).

Costs of revenues are recognized as incurred.

Sales and Marketing –

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

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

Income taxes –

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dollars and the Company provides significant funding towards the startup of the operation.

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

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

The Company analyzed it’s Gamma Knife site in Peru under ASC 830 as of December 31, 2022 and 2021 and concluded the functional currency was the U.S.

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Asset Retirement Obligations –

Based on the guidance provided in ASC 410 Asset Retirement Obligations (“ASC 410”

), the Company analyzed its existing lease agreements and determined an asset retirement obligation (“ARO”)  exists to remove the respective units at the end of the lease terms.

Based on the guidance provided in ASC 410,  

Asset Retirement Obligations (“ASC 410”

), the Company analyzed its existing lease agreements and determined whether an asset retirement obligation (“ARO”)  exists to remove the respective units at the end of the lease terms.

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

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

The Company increased its estimate for one of the AROs as of 

December 31, 2021  by $ 105,000 .

No liability has been recorded as of December 31, 2021 for the remaining Gamma Knife sites, or as of December 31, 2020 , because it is uncertain these units will be removed and the Company historically has not removed the Gamma Knife equipment at the end of the lease term.

December 31, 2022 , the Company removed three of these four units and has an ARO recorded for the remaining site.

The Company increased its estimate for one of the AROs as of December 31, 2021 

by approximately $ 105,000 .

The Company paid approximately $ 457,000 for the Gamma Knife unit that was removed in January 2022.

No liability has been recorded as of December 31, 2022 for the remaining Gamma Knife sites, because it is uncertain these units will be removed and the Company historically has not removed the Gamma Knife equipment at the end of the lease term.

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

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

The fully vested restricted stock units not issued and outstanding, are also included therein.

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

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

The fully vested restricted stock units not issued and outstanding and unvested restricted stock units, are also included therein.

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

December 31, 2022 and 2021 excluded approximately 20,000  and 31,000 , respectively, of the Company’s stock options because the exercise price of the options was higher than the average market price during the period. The weighted average common shares outstanding for the years ended 

December 31, 2022 and 2021  included approximately 

123,000  and 

123,000 , respectively, of the Company's restricted stock awards that are fully vested but are deferred for issuance. 

AMERICAN SHARED HOSPITAL SERVICES

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The following table illustrates the computations of basic and diluted earnings per share for the years ended December 31, 2022 and 2021 .

Numerator for basic and diluted earnings (loss) per share

Numerator for basic and diluted earnings per share

$ 1,328,000  

$ ( 7,058,000 )

Denominator for basic and diluted earnings per share –

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6,297,000  

6,182,000  

Effect of dilutive securities Employee stock options and restricted stock

15,000  

Denominator for diluted earnings per share –

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6,303,000  

6,182,000  

Earnings (loss) per common share- basic

Earnings per common share- basic

$ 0.21  

Earnings (loss) per common share- diluted

Earnings per common share- diluted

$ 0.21  

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

Business segment information - Based on the guidance provided in accordance with ASC 280 Segment Reporting (“ASC 280”

The Company provides Gamma Knife and PBRT equipment to fourteen hospitals in the United States and owns and operates two single-unit facilities in Lima, Peru and Guayaquil, Ecuador as of December 31, 2021 .

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

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

The revenues, profit or loss, and net property and equipment allocations for the Company's two reportable segments as of December 31, 2021  and 

), the Company analyzed its subsidiaries which are all in the business of leasing radiosurgery and radiation therapy equipment to healthcare providers, and concluded there are fifteen locations that meet the definition of an operating segment and these fifteen locations are aggregated into two reportable segments, domestic and foreign. 

The Company provides Gamma Knife and PBRT equipment to thirteen hospitals in the United States and owns and operates two single-unit facilities in Lima, Peru and Guayaquil, Ecuador as of December 31, 2022 .

An operating segment is defined by ASC 280 as it engages in business activities in which it may recognize revenues and incur expense, its operating results are regularly reviewed by the Company’s Chief Operating Decision Maker (“CODM”), and its discrete financial information is available. The Company determined two reportable segments existed due to similarities in economics of business operations and geographic location.

The operating results of the two reportable segments are reviewed by the Company’s CEO, who is also the CODM.

For the years ended 

December 31, 2022 and 2021  

, the Company’s PBRT operations represented a significant majority of the domestic profit, disclosed below.

 The revenues, profit or loss, and total asset allocations for the Company’s two reportable segments as of December 31, 2022  and 

2021 consists of the following:

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$ 19,746,000  

1,633,000  

$ 17,628,000  

$ 17,837,000  

Profit or (loss)

$ 245,000  

$ ( 7,082,000 )

( 51,000 )  

24,000  

$ 194,000  

$ ( 7,058,000 )

Property and equipment, net

Net income (loss) attributable to American Shared Hospital Services

$ 1,187,000  

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If the carrying value of the asset group exceeds the forecasted undiscounted cash flows, an impairment loss is recognized, measured as the amount by which the carrying amount exceeds estimated fair value.

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

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

As of December 31, 2021 , an additional impairment of $ 105,000 related to the removal costs of one of the Gamma Knife units that was impaired at December 31, 2020  was recorded. 

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

As of December 31, 2021, impairment of $ 105,000 related to the removal costs of one of the Gamma Knife units that was impaired in the prior year was recorded. 

No other additional impairment has been noted as of December 31, 2022 .

See Note 3 - Property and Equipment for further discussion.

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

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

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

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

Based on the guidance provided in accordance with ASC 350 Intangibles-Goodwill and Other (“ASC 350”

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As of December 31, 2022  and 2021 , there has been no change to the Company's assessment of the value of intangible assets or goodwill.

Acquisitions - The Company records acquisitions according to ASC 805 Business Combinations (“ASC 805”

) using the acquisition method of accounting.

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

See Note 5  - GKCE Acquisition for further discussion on acquisitions.

Accounting pronouncements issued and not yet adopted - In January 2021, the FASB issued ASU 2021 - 01  

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The amendments in ASU 2021 - 01  apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2021 - 01 is effective any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications. The Company is currently evaluating ASU 2021 - 01 to determine the impact it may have on its consolidated financial statements.

See Note 6  - Long-term debt for additional disussion on transition from LIBOR. 

See Note 5  - Long-term debt for additional discussion on transition from LIBOR. 

Reclassifications –

Certain comparative balances as of and for the year ended December 31, 2020 

have been reclassified to make them consistent with the current year presentation.

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Certain comparative balances as of and for the year ended December 31, 2021  have been reclassified to make them consistent with the current year presentation. 

NOTE 3 –

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$ 73,709,000  

$ 75,657,000  

Office equipment

422,000  

330,000  

Construction in progress

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74,237,000  

73,951,000  

76,157,000  

Accumulated depreciation

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$ 23,467,000  

$ 30,418,000  

As of December 31, 2021  and 2020, approximately $ 2,697,000  and $ 3,195,000 , respectively, of the net property and equipment balance is outside of the United States.

As of December 31, 2022  and 2021 , approximately $ 2,201,000  and $ 2,697,000 , respectively, of the net property and equipment balance is outside of the United States. 

Depreciation expense recorded in costs of revenue and selling and administrative expense in the consolidated statements of income for the years ended 

December 31, 2022 and 2021 , was $ 4,783,000 and $ 4,972,000 , respectively.

As of  

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nine  of its Gamma Knife 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.

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

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  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, totaling $ 3,051,000 .

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

The Company removed a second unit in 2021 and paid $ 618,000  of the ARO.

Total impairment related to the Gamma Knife business was $ 4,401,000 for the year ended December 31, 2021 .  As of December 31, 2021 , an additional impairment of $ 105,000 related to one of the AROs was recorded.

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.

As of October 1, 2022, the Company further reduced its estimate for salvage value for one of its domestic Gamma Knife Perfexion units.

The net effect of the change in estimate made October 1, 2022, for the year ended 

December 31, 2022 , was a decrease in net income of approximately $ 17,000  or $ 0.00  per diluted share.

This change in estimate will also impact future periods. Salvage value is based on the estimated fair value of the equipment at the end of its useful life.

As of December 31, 2022 and 2021 , the Company recognized a loss on the write down of impaired assets of $ 0 and $ 105,000 , respectively.

The impairment as of 

December 31, 2021  was 

related to the estimate for removal costs of one of the Gamma Knife units that was impaired during the year ended December 31, 2020 and removed in January 2022 .

The Company reviewed its Gamma Knife equipment, in light of available information as of December 31, 2022 and concluded no additional impairment exists.

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

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

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

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

The Company reviewed it's PBRT equipment, in light of available information as of December 31, 2021 and concluded no additional impairment exists.

The Company reviewed it’s PBRT equipment, in light of available information as of December 31, 2022 and 

2021  and concluded no impairment exists.

AMERICAN SHARED HOSPITAL SERVICES

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Other accrued liabilities consists of the following:

Equipment maintenance and upgrades

$ 1,281,000  

340,000  

Equipment maintenance and upgrades, non-related party

591,000  

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92,000  

211,000  

Operating costs

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322,000  

311,000  

660,000  

Total other accrued liabilities

$ 1,544,000  

$ 2,045,000  

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - GKCE ACQUISITION

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

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

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

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

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

As of December 31, 2021 , the Company acquired approximately 99.3 % of the total outstanding shares of GKCE and intends to acquire the remaining 0.7 % at a later date.

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

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

During the yea r ended 

December 31, 2021 , accounting for the Closing Date accounts receivable balances, allowance on the uncollected accounts receivable balances, and related liabilities, was completed.  

The base purchase price of $ 2,000,000 was paid with $ 575,000 of cash and $ 1,425,000 from the DFC Loan.

The DFC Loan is denominated in U.S.

dollars, which is also the currency of Ecuador.

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

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

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

As of December 31, 2021 , $ 368,000 of the contingent consideration was paid and no further payment is required.

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

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

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

The acquisition accounting was final during the year ended December 31, 2021 .

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

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

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - GKCE ACQUISITION (CONTINUED)

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

June 12, 2020

Cash and cash equivalents

$ 432,000  

Accounts receivable

854,000  

Prepaid expense and other

22,000  

385,000  

19,000  

Medical equipment

319,000  

Purchased intangible assets

78,000  

1,265,000  

Total assets acquired

$ 3,374,000  

Accounts payable

$ ( 193,000 )

Income taxes payable

Deferred income taxes

Employee compensation and benefits

Total liabilities assumed

Consideration allocated to assets acquired and liabilities assumed

$ 2,883,000  

First working capital payment

$ ( 515,000 )

Subsequent working capital payment

Base purchase consideration

$ 2,000,000  

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

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

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

The goodwill resulting from the acquisition is not tax deductible.

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

Useful Life (in Years)

$ 385,000  

19,000  

Medical equipment

302,000  

Other fixed assets

17,000  

Total tangible assets

$ 723,000  

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

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

The Company incurred costs related to the acquisition of approximately $ 162,000 for the year ended December 31, 2020.

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

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

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

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

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - LONG TERM DEBT

As of December 31, 2020 , the Company had seven  notes with three financing companies collateralized by the Gamma Knife equipment having an aggregate net book value of $ 11,023,000 , the individual customer contracts, and related accounts receivable of $ 1,718,000 .

NOTE 5  - LONG TERM DEBT

April 9, 2021 

the Company along with certain of its domestic subsidiaries (“collectively, the “Loan Parties”) entered into a 

the Company along with certain of its domestic subsidiaries (collectively, the “Loan Parties”) entered into a 

five  year $ 22,000,000  credit agreement with Fifth Third Bank, N.A.

(“the Credit Agreement”).

The Credit Agreement includes 

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2021, with the remaining $ 1,061,000  available for future projects.

second  loan facility is a $ 5,500,000 delayed draw term loan (the “DDTL”) of which $ 5,026,000  was used to refinance the Company's PBRT finance leases and associated closing costs as well as to provide additional working capital.

second  loan facility is a $ 5,500,000 delayed draw term loan (the “DDTL”) of which $ 5,026,000  was used to refinance the Company’s PBRT finance leases and associated closing costs as well as to provide additional working capital.

third  loan facility provides for a $ 7,000,000  revolving line of credit (the “Revolving Line”) available for future projects and general corporate purposes.

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five -year maturity, carry a floating interest of LIBOR plus 

3.0 % and are secured by a lien on substantially all of the assets of the Loan Parties and guaranteed by American Shared Hospital Services. The Company recorded a loss on extinguishment of debt of $ 401,000  during the 

twelve -month period ended 

December 31, 2021 , related to the prepayment penalties charged by the existing lenders.  The Company capitalized debt issuance costs of $ 310,000  related to legal and transaction fees for the Credit Agreement during the 

twelve -month period ended 

3.0 % and are secured by a lien on substantially all of the assets of the Loan Parties and guaranteed by ASHS. The Company recorded a loss on extinguishment of debt of $ 401,000  during the year ended December 31, 2021, related to the prepayment penalties charged by the existing lenders.  The Company capitalized debt issuance costs of $ 310,000  related to legal and transaction fees for the Credit Agreement during the year ended 

December 31, 2021. 

The long-term debt on the consolidated balance sheets related to the Term Loan and DDTL was $ 12,624,000  and $ 14,437,000 as of December 31, 2022 and 2021 , respectively.

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 Company is working with Fifth Third Bank to determine an alternative base rate. 

The Revolving Line is charged an unused line fee of 0.25 % per annum.

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December 31, 2022 .

The DFC Loan entered into in connection with the acquisition of GKCE was obtained through the Company’s wholly-owned subsidiary, HoldCo and is guaranteed by GKF.

The loan entered into with DFC in connection with the acquisition of GKCE in 

June 2020 ( the “DFC Loan”) was obtained through the Company’s wholly-owned subsidiary, HoldCo and is guaranteed by GKF.

The DFC Loan is secured by a lien on GKCE’s assets.

The amount outstanding under the DFC Loan is payable in 29  quarterly installments with a fixed interest rate of 3.67%.

The Company’s loan with DFC also contains customary covenants and representations which the Company is in compliance with as of 

December 31, 2021 .  

The amount outstanding under the DFC Loan is payable in 

29  quarterly installments with a fixed interest rate of 

3.67 %. The Company’s loan with DFC also contains customary covenants and representations, which the Company is in compliance with as of  

December 31, 2022 . 

The long-term debt on the consolidated balance sheets related to the DFC loan was $ 1,041,000  and $ 1,261,000  as of 

December 31, 2022 and 2021 , respectively. 

The Company capitalized debt issuance costs of $ 9,000 and $15,000  as of 

December 31, 2022 and 2021 , respectively, related to maintenance and administrative fees on the DFC Loan.  

The accretion of debt issuance costs for the years ended 

December 31, 2022 and 2021 , was $ 84,000 and $ 59,000 , respectively. As of 

December 31, 2022 and 2021 , the unamortized debt issuance costs on the consolidated balances sheets were $ 198,000  and $ 294,000 .  

The following are contractual maturities of long-term debt by year at December 31, 2022 , excluding debt issuance costs of $ 198,000 :

Year ending December 31,

$ 1,157,000  

1,719,000  

2,094,000  

2,469,000  

8,094,000  

165,000  

$ 15,698,000  

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - FINANCE LEASES

The Company's finance lease obligations were refinanced by long-term debt on 

April 9, 2021.  

See further details on the refinancing under Note 6  - Long-Term Debt.

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - LEASES

NOTE 6  - LEASES

The Company determines if a contract is a lease at inception.

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

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

Some of these lease terms have an option to extend the lease after the initial term, but do not contain the option to terminate early or purchase the asset at the end of the term. The Company has elected not to recognize ROU assets and lease liabilities that arise from short-term ( 12 months or less) leases for any class of underlying asset.

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

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

On November 3, 2021, the Company entered into an agreement to sublease (the “Sublease”) its corporate office located at Two Embarcadero Center, Suite 410, San Francisco, California, where it leases approximately 3,253 square feet for $ 21,370  per month with a lease expiration date in August 2023.

On November 3, 2021, the Company entered into an agreement to sublease (the “Sublease”) its corporate office located at Two Embarcadero Center, Suite 410, San Francisco, California, where it leases approximately 3,253 square feet for $ 22,011 per month with a lease expiration date in August 2023.

The Sublease is for $ 16,195 per month through the existing contract expiration date. The Company also entered into a lease (the “Lease”) agreement for new corporate office space at 601 Montgomery, Suite 1112, San Francisco, CA for approximately 900 square feet for $ 4,500 per month with a lease expiration date in November 2024. 

The Company assessed the Lease under ASC 842 and concluded the Lease should be classified as an operating lease.

The Company recorded $ 151,000 right-of-use (“ROU”) asset, other current liabilities and lease liabilities on the condensed consolidated balance sheets related to the Lease as of December 1, 2021, the effective date of the Lease. 

The Company recorded $ 151,000 right-of-use (“ROU”) asset, other current liabilities and lease liabilities on the consolidated balance sheets related to the Lease as of December 1, 2021, the effective date of the Lease. 

The Company assessed the Sublease under ASC 842 and ASC 360 Property and Equipment (“ASC 360”

) and concluded the ROU asset for the corporate offices at Two Embarcadero Center was impaired. 

The Company recorded an impairment loss on the Sublease of $ 77,000 as of December 1, 2021. 

The impairment loss will be amortized over the remaining lease term as an adjustment to total lease expense. 

As of December 31, 2021, the Company recognized $ 3,000 of the sublease impairment loss.  

The Company recorded an impairment loss on the Sublease of $ 77,000 as of December 1, 2021.  

The Company’s lessee operating leases are accounted for as ROU assets, other current liabilities, and lease liabilities on the consolidated balance sheets.

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The Company’s lessee operating lease agreements are for administrative office space and related equipment, and the agreement to lease clinic space for its stand-alone facility in Lima, Peru.

These leases have remaining lease terms between 2 and 3 years, some of which include options to renew or extend the lease.

These leases have remaining lease terms between 1  and 2  years, some of which include options to renew or extend the lease.

As of December 31, 2022 , operating ROU assets, net of impairment, were $ 317,000  and lease liabilities were $ 351,000 .

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

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

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

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

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

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

The following table summarizes maturities of lessee operating lease ROU assets and liabilities as of December 31, 2021 :

The following table summarizes maturities of lessee operating lease liabilities as of December 31, 2022 :

Year ending December 31,

Operating Leases

Total lease payments

Less imputed interest

Year Ended December 31,

Operating lease cost, net of impairment

$ 406,000  

Sublease income

( 174,000 )  

Total lease cost

$ 232,000  

Total lease payments

Other information

Cash paid for amounts included in the measurement of lease liabilities - Operating leases

$ 406,000  

Less imputed interest

Weighted-average remaining lease term - Operating leases in years

Weighted-average discount rate - Operating leases

5.65 %  

The Company’s corporate offices are located at

601 Montgomery Street, Suite

1112, San Francisco, California, where it leases approximately

900 square feet for

$ 4,500 per month with a lease expiration date in

November 2024. 

The Company subleased its existing corporate offices located at Two Embarcadero Center, Suite

410, San Francisco, California, where it leases approximately

3,253 square feet for

$ 22,011  per month with a lease expiration date in

The monthly lease expense is offset by sublease income of

The sublease term is consistent with the existing lease term. The Company owns and operates a stand-alone Gamma Knife facility in Lima, Peru where it leases approximately

1,600 square feet for approximately

$ 8,850  per month with a lease expiration date in

January 2024.

The Company also owns and operates a stand-alone Gamma Knife facility in Guayaquil, Ecuador where it owns

864 square feet of condominium space in an office building and approximately

10,135 of related land and parking spaces.

Net rent expense was

$ 290,000 and

$ 377,000 for the years ended

December 31, 2022 and 2021 , respectively, and includes the above operating leases as well as month-to-month rental and certain executory costs.

The sublease of the Company’s existing office space through the remainder of its lease term at a rate lower than its lease rate resulted in an impairment loss of

$ 77,000 for the year ended

December 31, 2021. 

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 –

As of December 31, 2021 and 2020 the Company recorded an income tax expense of $ 269,000  and income tax benefit of $ 1,737,000 , respectively.

The increase in the Company’s provision for income taxes as of December 31, 2021 is due to a loss on the write down of impaired assets in the prior year and decreased operating costs for the current period.

The components of the provision (benefit) for income taxes as of December 31, 2021 and 2020 consist of the following:

NOTE 7  

The components of income before income taxes for the years ended 

December 31, 2022 and 2021  are as follows:

YEARS ENDED December 31,

1 unchanged sentence

168,000  

Income before income taxes

$ 2,518,000  

For the year ended 

December 31, 2022 and 2021 , the Company recorded an income tax expense of $ 963,000  and $ 269,000 , respectively.

The increase in the Company’s provision for income taxes as of December 31, 2022 is due to higher earnings during the current period, return-to-provision adjustments arising from foreign tax returns filed during the current period, as well as permanent domestic tax differences.

The components of the provision for income taxes for the years ended 

December 31, 2022 and 2021 consists of the following:

YEARS ENDED December 31,

$ 355,000  

5 unchanged sentences

48,000  

( 1,909,000 )

( 18,000 )  

( 20,000 )  

24,000  

Total deferred

344,000  

( 2,151,000 )

$ 963,000  

$ ( 1,737,000 )

Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2022 and 2021 are as follows:

5 unchanged sentences

( 1,255,000 )  

( 1,055,000 )

Deferred tax assets:

1 unchanged sentence

139,000  

99,000  

Accruals and allowances

167,000  

43,000  

Lease liabilities

2 unchanged sentences

114,000  

50,000  

Capital loss carryover

646,000  

627,000  

Total deferred tax assets

1,130,000  

824,000  

Valuation allowance

2 unchanged sentences

433,000  

146,000  

Net deferred tax liabilities

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 –

NOTE 7  

INCOME TAXES (CONTINUED)

These amounts are presented in the financial statements as follows:

Deferred income taxes (non-current)

$ ( 478,000 )  

$ ( 418,000 )

$ ( 478,000 )  

$ ( 418,000 )

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

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

federal statutory tax rate ( 21 % in 2022 and 2021 ) to income before taxes as follows:

2 unchanged sentences

$ 477,000  

$ ( 1,844,000 )

State income taxes, net of federal benefit

4 unchanged sentences

52,000  

22,000  

Uncertain tax positions

( 17,000 )  

16,000  

Capital loss carryforward expiration

AMT tax payable adjustment

208,000  

Change in valuation allowance

19,000  

Other deferred tax adjustments

1 unchanged sentence

$ 963,000  

$ 269,000  

$ ( 1,737,000 )

December 31, 2021 , the Company has net operating loss carryforwards for federal and state income tax return purposes of approximately $ 1,100,000 and $ 3,167,000 , respectively, that begin to expire in 2029.

The Company has net operating loss carryforwards for its international subsidiaries of approximately $ 46,000 .

December 31, 2022 , the Company has net operating loss carryforwards for federal and state income tax return purposes of appr oximately $ 0 and 

$ 2,604,000  that begin to expire in 2029.

Utilization of the net operating loss and credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (the “Code”), and similar state provisions.

Any annual limitation may result in the expiration of net operating losses and credits before utilization.

At December 31, 2021 , the Company has a capital loss carryforward for federal income tax return purposes of approximately $ 2,679,000  which starts to expire in 2024.

The Company has capital loss carryforwards for state income tax purposes of approximately $ 129,000  which starts to expire in 2024.

At December 31, 2022 , the Company has a capital loss carryforward for federal income tax return purposes of approximately $ 2,679,000 ,which starts to expire in 2024.

The Company has capital loss carryforwards for state income tax purposes of approximately $ 129,000 , which starts to expire in 2024.

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

The net valuation allowance decreased by $ 465,000  and $ 243,000  for the tax years ended December 31, 2021 and 2020 , respectively.

The net valuation allowance increased by $ 0  and $ 19,000  for the tax years ended December 31, 2022 and 2021 , respectively.

The tax return years 2018  through 2021  remain open to examination by the major domestic taxing jurisdictions to which the Company is subject.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 –

NOTE 7  

INCOME TAXES (CONTINUED)

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

s income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

Additionally, these accounting standards specify that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities.

5 unchanged sentences

$ 295,000  

$ 259,000  

Additions based on tax positions of prior years

( 17,000 )  

16,000  

Balance at end of year

$ 278,000  

$ 275,000  

The Company's policy for deducting interest and penalties is to treat interest as interest expense and penalties as taxes.

The Company’s policy for deducting interest and penalties is to treat interest as interest expense and penalties as income taxes.

As of December 31, 2022 , the Company had $ 43,000  accrued for the payment of penalties and zero interest related to unrecognized tax benefits.

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

The Company believes that it is reasonably possible that a decrease of up to $ 100,000 in unrecognized tax benefits related to foreign taxes may be necessary within the coming year.

NOTE 8  

9 unchanged sentences

As of December 31, 2022 , approximately 1,219,000  shares remain available for grant under the Plan.

Under the Plan, a total of 621,000 restricted stock units have been granted, consisting o f 53,000 o f annual automatic grants to non-employee directors, 328,000 of deferred retainer fees to non-employee members of the Board, 20,000 grants issued in lieu of commission, to two employees of the Company and 220,000 restricted stock units issued to the CEO during 2021  and 2020, see further discussion below.

Under the Plan, a total of 752,000 restricted stock units have been granted, consisting o f 53,000 o f annual automatic grants to non-employee directors, 328,000 of deferred retainer fees to non-employee members of the Board, 31,000 grants issued in lieu of commission or bonus to employees of the Company, and 340,000 restricted stock units issued to the CEO, see further discussion below.

Of the total restricted stock units granted under the Plan 123,000 of them are fully vested but not yet deemed issued and outstanding, 624,000 are fully vested and outstanding, and 6,000 are outstanding as of December 31, 2022 .

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10  

STOCK-BASED COMPENSATION EXPENSE (CONTINUED)

Changes in restricted stock units, consisting primarily of annual automatic grants, deferred compensation to non-employee directors, and restricted stock units awards to the CEO, under the Incentive Compensation Plans during 2022 and 2021 are as follows:

Restricted Stock Units

Grant Date Weighted- Average Fair Value

Intrinsic Value

Restricted Stock

Outstanding at January 1, 2021

4 unchanged sentences

( 168,000 )  

$ 2.57  

Outstanding at December 31, 2021

6 unchanged sentences

( 3,000 )  

Outstanding at December 31, 2021

$ 2.92  

Outstanding at December 31, 2022

$ 2.33  

For the year ended December 31, 2021 , total compensation expense recorded in the consolidated statements of operations related to restricted stock units in lieu of retainer fees was $ 75,000 .

For the year ended December 31, 2022 , total compensation expense recorded in the consolidated statements of income for annual restricted stock units awarded was $ 6,000 , with an offsetting tax benefit of $ 1,500 , as this expense is deductible for income tax purposes.

As of December 31, 2021 , there was $ 20,000 of total unrecognized compensation cost related to annual restricted stock units which is expected to be recognized over a period of four  years. 

Certain Executive Equity Awards

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

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

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

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

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

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

Additionally, Ernest R.

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

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

For the year ended December 31, 2021, 120,000 restricted stock awards were issued to the CEO and became fully vested. 

Total compensation expense recorded in the consolidated financial statements of operations related to the executive equity awards was $ 331,000 .

On January 4, 2017, the Company entered into a Performance Share Award Agreement with three executive officers of the Company (the “Award Agreements”) for 161,766 restricted stock awards which vest upon the achievement of certain performance metrics.

The Award Agreements expired on March 31, 2020.

Based on the guidance in ASC 718 Stock Compensation (“ASC 718”

), the Company concluded these were performance-based awards with vesting criteria tied to performance metrics.

As of December 31, 2017, the Company achieved one of the certain performance metrics under the Award Agreements and recognized stock compensation expense of approximately $ 108,000 related to these awards.

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

As of December 31, 2022 , there was $ 11,000 of total unrecognized compensation cost related to annual restricted stock units which is expected to be recognized over a period of three  

For the year ended 

December 31, 2021 , 38,000 of the vested restricted stock units were deferred for issuance.

AMERICAN SHARED HOSPITAL SERVICES

2 unchanged sentences

STOCK-BASED COMPENSATION EXPENSE (CONTINUED)

As of December 31, 2021 , stock compensation expense recorded in the consolidated financial statements is summarized as follows:

Certain Executive Equity Awards

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

Stachowiak as Interim President and Chief Executive Officer.

Pursuant to his Offer Letter, Mr.

Stachowiak was granted 50,000 restricted stock awards that vested in full on August 3, 2020.

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

On October 1, 2020, Mr.

Stachowiak was appointed as the CEO.

For the year ended December 31, 2021 , 120,000 restricted stock awards were issued to the CEO and became fully vested.

Total compensation expense recorded for the year ended December 31, 2021 in the consolidated financial statements of income related to executive equity awards was $ 331,000 . 

For the year ended December 31, 2022 , 120,000 restricted stock awards were issued to Mr.

Stachowiak and became fully vested. 

Total compensation expense recorded for the year ended December 31, 2022 in the consolidated financial statements of income related to the executive equity awards was $ 288,000 .

For the year ended 

December 31, 2022 , stock compensation expense recorded in the consolidated financial statements is summarized as follows:

Awards Issued

$ 2,000  

Options Exercised

RSUs Issued in Lieu of Retainer Fees

75,000  

RSUs Issued in Lieu of Retainer Fees - vested and issued

Management Bonus Program - vested and issued

11,000  

Management Bonus Program

Annual RSU Awards

12,000  

Board RSU Awards - other

Executive Compensation

1 unchanged sentence

135,000  

258,000  

$ 420,000  

Total stock-based compensation expense before income tax effect for the Company’s options and restricted stock awards in the amount of 

$399,000 and 

$420,000 for the years ended 

December 31, 2022 and 2021 , is reflected in selling and administrative expense in the consolidated statements of income, respectively.

Stock Options

30 unchanged sentences

$ 2.79  

The weighted average grant-date fair value of the options granted during the years 2021 and 2020 was 

$ 1.10  and $ 0.78 , respectively. There were 5,000 options exercised during the year ended 

December 31, 2021 . There were no options exercised and accordingly, no intrinsic value of options exercised during the year ended 

December 31, 2020 . Total stock-based compensation expense recognized for stock options for the years ended December 

2021  and 

2020  was $ 2,000 and $ 17,000 , respectively.

The Company received approximately $ 5,000 from the exercise of 2,000 options under the share-based arrangements for the year ended December 31, 2021 .

The remaining options exercised during the year were cashless exercises. There was no cash received from options exercised under any share-based payment arrangements for the year ended 

December 31, 2020 , and as a result, there was no actual tax benefit realized for tax deductions from option exercises in that year.

AMERICAN SHARED HOSPITAL SERVICES

2 unchanged sentences

STOCK-BASED COMPENSATION EXPENSE (CONTINUED)

A summary of the status of the Company’s non-vested stock options as of December 31, 2021 and 2020 , and ch anges during the years ended December 31, 2021 and 2020 is presen ted below:

Nonvested Options

Number of Options

Weighted Average Grant-Date Fair Value

Nonvested at December 31, 2019

25,000  

$ 1.40  

10,000  

$ 0.78  

( 23,000 )  

$ 1.22  

Nonvested at December 31, 2020

12,000  

$ 1.07  

$ 1.10  

( 9,000 )  

$ 0.91  

Nonvested at December 31, 2021

$ 1.10  

The weighted average grant-date fair value of the options granted during the years 2022 and 2021 was 

$ 1.49  and $ 1.10 , respectively. There were 4,000 options exercised which resulted in 

3,000 shares issued, due to cashless exercises, during the year ended 

December 31, 2022 . There were 22,000 options exercised which resulted in 

5,000 shares issued, due to cashless exercises, during the year ended 

December 31, 2021 . Total stock-based compensation expense recognized for stock options for the years ended December 

2022  and 

2021  was $ 10,000 and $ 2,000 , respectively.

The Company received approximately $ 5,000 from the exercise of 2,000 options under the share-based arrangements in each of the years ended December 31, 2022 and 2021 .

The remaining options exercised during 2022  and 

2021  were cashless exercises. 

At December 31, 2022 , there was approximately $ 80,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan.

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Risk-free interest rate

The following summarizes the assumption inputs used for the Company’s Black-Scholes calculation:

Expected life (years):

The expected term represents the weighted average period that the Company’s stock options are expected to be outstanding.  

Expected forfeiture rate:

Forfeitures are recognized as they occur. 

Expected volatility:

The expected volatility was derived from the Company’s historical stock volatility. 

Dividend yield:

The expected dividend yield was assumed to be zero, as the Company has not previously paid dividends on common stock and has no current plans to do so.  

Risk-free interest rate: 

The risk-free interest rate is based on the interest yield in effect at the date of grant for zero coupon U.S.

Treasury notes with maturities approximately equal to the option’s expected term.

Repurchase of Common Stock, Common Stock Warrants and Stock Options

11 unchanged sentences

The Company contributed $ 41,000 to the Retirement Plan for the safe harbor match for the year ended December 31, 2021 .

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 –

OPERATING LEASES

The Company’s corporate offices are located at 601 Montgomery Street, Suite 1112, San Francisco, California, where it leases approximately 900 square feet for $ 4,425 per month with a lease expiration date in November 2024. 

The Company subleased its existing corporate offices located at Two Embarcadero Center, Suite 410, San Francisco, California, where it leases approximately 3,253 square feet for $ 21,370 per month with a lease expiration date in August 2023.

The monthly lease expense is offset by sublease income of $ 15,723 .

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

Future minimum payments under non-cancelable operating l eases, excluding expected sublease income, havin g initial terms of more than one year consisted of the following:

Year ending December 31,

$ 406,000  

302,000  

58,000  

$ 766,000  

Payments for repair and maintenance agreements incorporated in operating lease agreements are not included in the future minimum operating lease payments shown above.

Net rent expense was $ 377,000 and $ 404,000 for the years ended December 31, 2021 and 2020 , respectively, and includes the above operating leases as well as month-to-month rental and certain executory costs.

The sublease of the Company's existing office space through the remainder of its lease term at a rate lower than its lease rate resulted in an impairment loss of $ 77,000 . The impairment loss will be amortized over the remaining lease term as an adjustment to total lease expense. As of December 31, 2021, the Company recognized $ 3,000 of the sublease impairment loss.  

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 –

NOTE 10  

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

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

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

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

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

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

As of December 31, 2021 , the Company had commitments to install four Leksell Gamma Knife Icon Systems (“Icon”) at existing customer sites, and purchase two Linear Accelerator (“LINAC”) systems, one to be placed at an existing customer site and one at a new customer site.

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

The Icon upgrades and LINAC purchases are scheduled to occur between 2022 and 2023.

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

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

During the year-ended 

December 31, 2020, the Company impaired these deposits and wrote-off the deposits and related capitalized interest. As of December 31, 2022 , the Company had commitments, after deposits, to purchase two MEVION S250i PBRT systems for $ 34,000,000 .

As of December 31, 2022 , the Company had commitments to install four Leksell Gamma Knife Icon Systems (“Icon”) at existing customer sites, and purchase three  Linear Accelerator (“LINAC”) systems.

Two LINACS will be placed at future customer sites and 

one LINAC system will be placed at the Company’s new site in Puebla, Mexico, which is expected to begin operations in the second  half of 

2023, pending regulatory approval. The Company also has a commitment to upgrade the Gamma Knife unit at its stand-alone facility in Ecuador to an Icon.

The remaining Icon upgrades and LINAC purchases are scheduled to occur between 2023  and 2024.

The Company expects to upgrade the equipment in Ecuador in mid- 2023, pending regulatory approval. The Company has a commitment from DFC to finance this upgrade. 

Total Gamma Knife and LINAC commitments as of December 31, 2022 , were $ 13,243,000 .

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.

On July 21, 2017, the Company entered into a Maintenance and Support Agreement (the “Mevion Service Agreement”) with Mevion, which provides for maintenance and support of the Company’s PBRT unit at Orlando Health.

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

The agreement requires an annual prepayment of $ 1,649,000 for the current contractual period.

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

There may be cash requirements, pending financing, for the Company ’

s new site in Mexico and the upgrade in Ecuador in the next 12 months. 

However, the Company currently has cash on hand of $ 12,453,000  and a line of credit of $ 7,000,000  to fund these projects, if necessary. The Company has not placed the remaining commitments at this time. There can be no assurance that financing will be available for the Company’s future projects, or at terms that are acceptable to the Company. 

On September 4, 2022, the Company entered into a Maintenance and Support Agreement with Mevion (the “Mevion Service Agreement”), which provides for maintenance and support of the Company’s PBRT unit at Orlando Health from September 2022 through April 2026. 

The agreement requires an annual prepayment of $ 1,800,000 for the current contractual period ( one year).

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

As of December 31, 2022 , the Company had commitments to service and maintain its Gamma Knife and PBRT equipment.

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

The Company estimates the following commitments for each of the equipment systems, with expected timing of payments as follows as of December 31, 2021 :

Payments Due by Period

Contractual Obligations

Total amounts committed

2023 - 2024  

2025 - 2026  

After 5 years

Long-term debt (includes interest)

$ 17,650,000  

$ 1,651,000  

$ 4,672,000  

$ 11,156,000  

$ 171,000  

Future equipment purchases

44,760,000  

2,000,000  

42,760,000  

Equipment service contracts

8,408,000  

453,000  

2,618,000  

2,709,000  

2,628,000  

Operating leases

766,000  

406,000  

302,000  

58,000  

Total contractual obligations

$ 71,584,000  

$ 4,510,000  

$ 50,352,000  

$ 13,923,000  

$ 2,799,000  

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 at 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.

AMERICAN SHARED HOSPITAL SERVICES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 –

NOTE 11  

RELATED PARTY TRANSACTIONS

2 unchanged sentences

subsidiary of Elekta, which is the manufacturer of the Gamma Knife.

Since the Company purchases its Gamma Knife units from Elekta, there are significant related party transactions with Elekta such as equipment purchases, commitments to purchase and service equipment, and costs to maintain the equipment . During the years ended 

December 31, 2021  and 

2020 , related party transactions for equipment purchases were $ 1,906,000 and $ 1,103,000 and costs incurred to maintain equipment were $ 759,000 and $ 701,000 , respectively. 

The Company also had commitments to purchase one Icon, install four Icon upgrades and service the related equipment of $ 6,624,000 and $ 8,397,000 as of 

The following summarizes related party activity for the years ended 

December 31, 2022  and 

2020 , respectively. 

See Note 13  –

Commitments and Contingencies for further discussion on commitments.

At December 31, 2021 , the Company owed Elekta approximately $ 1,992,000 for the Cobalt- 60 reload completed in the fourth quarter, software, contract maintenance, and de-install costs. 

At December 31, 2020 , The Company owed Elekta approximately $ 1,382,000 for parts, contract maintenance and de-install costs. The Company believes that all its transactions with Elekta are arm’s-length transactions.

Equipment purchases and de-install costs

$ 1,844,000  

Costs incurred to maintain equipment

1,094,000  

Total related party transactions

$ 2,938,000  

The Company also had related party commitments to purchase 

one  Icon, install 

four  Icon upgrades, purchase 

two  Gamma Plan workstations, purchase two LINACs, and service the related equipment of $ 17,407,000  as of 

December 31, 2022 .

Related party liabilities on the consolidated balance sheets consist of the following as of December 31, 2022  and 

Accounts payable and other accrued liabilities

$ 497,000  

NOTE 12  

SUBSEQUENT EVENT

On February 15, 2023, the Company executed an equipment sales agreement with a new customer for the sale of a Gamma Knife upgrade and Cobalt- 60 reload. The Company expects to complete the sale during the second or third  quarter of 2023.

The Company will fulfill this order by exercising its purchase commitments. See Note 10 –

Commitments and Contingencies for additional information. 

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

What changed 10-K

Item 9A. Controls and Procedures