AMERICAN SHARED HOSPITAL SERVICES 10-K

ITEM 9A. CONTROLS AND PROCEDURES   (a) Evaluation of disclosure controls and procedures.       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.     (b) Management ’ s report on internal control over financial reporting.       The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to its management and Board of Directors regarding the preparation and fair presentation of published financial statements.       All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.       Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this assessment management believes that, as of December 31, 2022, the Company’s internal control over financial reporting is effective based on those criteria.   23 Table of Contents   (c) Changes in internal controls 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.   ITEM 9B. OTHER INFORMATION   None.   ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS   Not applicable.   PART III   ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   Information regarding directors is incorporated herein by reference from the Company’s definitive Proxy Statement for the 2023 Annual Meeting of Shareholders (the “2023 Proxy Statement”). Information regarding executive officers of the Company, included herein under the caption “Executive Officers of the Company” 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.   Information concerning our audit committee financial experts required by this Item is incorporated by reference from the 2023  Proxy Statement .   Information concerning compliance with Section 16(a) of the Exchange Act required by this Item is incorporated by reference from the 2023 Proxy Statement.   We have adopted a Code of Ethics that is available on our website at www.ashs.com . The information on our website is not part of this report. You may also request a copy of this document free of charge by writing our Corporate Secretary.   ITEM 11. EXECUTIVE COMPENSATION   Information required by this Item is incorporated herein by reference from the 2023 Proxy Statement.   ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS   Information required by this Item is incorporated herein by reference from the 2023 Proxy Statement.   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE   Information required by this Item is incorporated herein by reference from the 2023 Proxy Statement.     ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES   The information required by this item is incorporated by reference to the section entitled “Ratification of the Appointment of Our Independent Registered Public Accounting Firm” in our Proxy Statement for the 2023 Annual Meeting of Stockholders.   Auditor Firm Id: 659 Auditor Name: Moss Adams LLP Auditor Location: Seattle, WA United States         PART IV   ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES   (a) Financial Statements and Schedules.       The following Financial Statements and Schedules are filed with this Report:     Report of Independent Registered Public Accounting Firm     Audited Consolidated Financial Statements     Consolidated Balance Sheets     Consolidated Statements of Income     Consolidated Statement of Shareholders' Equity     Consolidated Statements of Cash Flows     Notes to Consolidated Financial Statements     Financial Statement Schedules- no schedules are included since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto.   24 Table of Contents   (b) Exhibits.       The following Exhibits are filed with this Report.   Exhibit       Incorporated by reference herein Number   Description   Form   Exhibit   Date 3.1   Articles of Incorporation of the Company.   10-Q 001-08789   3.1   5/15/2017                   3.1a   Certificate of Amendment to Articles of Incorporation of the Company.   10-K 001-08789   3.1   3/27/2017                   3.2   By-laws of the Company, as amended to date.   10-Q 001-08789   3.2   8/15/2022                   4.1   Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934   10-K 001-08789   4.1   4/6/2021                   10.1   Operating Agreement for GK Financing, LLC dated as of October 17, 1995 between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   S-1 033-63721   10.12   10/26/1995                   10.1a   Amendment Agreement dated as of October 26, 1995 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   S-1/A 033-63721   10.13   3/29/1996                   10.1b   Second Amendment Agreement dated as of December 20, 1995 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   S-1/A 033-63721   10.13   3/29/1996                   10.1c   Third Amendment Agreement dated as of October 16, 1996 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   10-K 001-08789   10.13b   3/31/1998                   10.1d   Amendment Four Agreement dated as of March 31, 1998 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   10-K 001-08789   10.8   3/31/1999                   10.1e   Fifth Amendment Agreement dated as of March 31, 1998 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   10-K 001-08789   10.9   3/31/1999                   10.1f   Sixth Amendment Agreement dated as of June 5, 1998 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   10-K 001-08789   10.10   3/31/1999                   10.1g   Seventh Amendment Agreement dated as of October 18, 2006 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   10-K 001-08789   10.52   4/2/2007                   10.1h   Eighth Amendment Agreement dated as of April 28, 2010 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   10-K 001-08789   10.1h   3/30/2016                   10.1i   Ninth Amendment Agreement dated as of May 16, 2011 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   10-K 001-08789   10.1i   3/30/2016                   10.1j   Tenth Amendment Agreement dated as of March 25, 2021 to the GK Financing, LLC Operating Agreement between American Shared Radiosurgery Services, Inc. and GKV Investments, Inc.   10-K 001-08789   10.1j   3/30/2022   25 Table of Contents   10.2   Lease Agreement for a Gamma Knife Unit dated as of October 29, 1996 between GK Financing, LLC and Methodist Healthcare Systems of San Antonio, Ltd., dba Southwest Texas Methodist Hospital.   10-K 001-08789   10.2   3/30/2016                   10.2a   Addendum to Lease Agreement for a Gamma Knife Unit dated as of October 31, 1996 between GK Financing, LLC and Methodist Healthcare System of San Antonio, Ltd., dba Southwest Texas Methodist Hospital.     10-K 001-08789   10.2a   3/30/2016                   10.2b   Addendum Two to Lease Agreement for a Gamma Knife Unit dated as of October 16, 1997 between Methodist Healthcare System of San Antonio, Ltd., d.b.a. Southwest Texas Methodist Hospital and GK Financing, LLC.   10-K 001-08789   10.2b   3/30/2016                   10.2c   Amendment to Lease Agreement for a Gamma Knife Unit dated as of December 13, 2003 between Methodist Healthcare Systems of San Antonio, Ltd., d/b/a Southwest Texas Methodist Hospital and GK Financing, LLC.   10-K 001-08789   10.2c   3/30/2016                   10.2d # Second Amendment to Lease Agreement for a Gamma Knife Unit (Perfexion Upgrade) dated as of December 23, 2009 between GK Financing, LLC and Methodist Healthcare Systems of San Antonio, Ltd., d/b/a Southwest Texas Methodist Hospital.     10-Q 001-08789   10.18b   11/15/2010                   10.4   Purchased Services Agreement (for a Gamma Knife Unit) dated as of November 19, 2008 between GK Financing, LLC and Kettering Medical Center.   10-Q 001-08789   10.1   8/11/2016                   10.4a   First Amendment to Purchased Services Agreement (for a Gamma Knife Unit) dated as of June 11, 2009 between GK Financing, LLC and Kettering Medical Center.     10-Q 001-08789   10.1a   8/11/2016                   10.4b # Second Amendment to Purchased Services Agreement (for a Gamma Knife Unit) dated as of February 27, 2014 between GK Financing, LLC and Kettering Medical Center.   10-K 001-08789   10.21c   4/1/2015                   10.4c # Third Amendment to Purchased Services Agreement (for a Gamma Knife Unit) dated as of March 28, 2019 between GK Financing, LLC and Kettering Medical Center   10-Q 001-08789   10.1   11/7/2019                   10.5 # Lease Agreement for a Gamma Knife Unit (Perfexion Upgrade) dated as of July 30, 2013 between Tufts Medical Center, Inc. (FKA New England Medical Center Hospitals, Inc.) and GK Financing, LLC.   10-K 001-08789   10.22b   3/31/2014                   10.5a # First Amendment to Lease Agreement for a Gamma Knife Unit (Perfexion Upgrade) dated as of April 23, 2020 between Tufts Medical Center, Inc. (FKA New England Medical Center Hospitals, Inc.) and GK Financing, LLC.   10-Q 001-08789   10.1   8/14/2020                   10.6 # Amended and Restated Equipment Lease Agreement (for a Gamma Knife Unit) dated as of December 12, 2014, between GK Financing, LLC and the Board of Trustees of the University of Arkansas on behalf of the University of Arkansas for Medical Sciences.   10-Q 001-08789   10.4   8/19/2015                   10.10   Lease Agreement for a Gamma Knife Unit dated as of November 1, 1999 between GK Financing, LLC and Jackson HMA, Inc. d/b/a Central Mississippi Medical Center.     10-K 001-08789   10.10   3/30/2016                   10.10a   Addendum to Lease Agreement for a Gamma Knife Unit dated as of November 1, 1999 between Jackson HMA, Inc. dba Central Mississippi Medical Center and GK Financing, LLC.   10-Q 001-08789   10.34   8/10/2001                   10.10b # Addendum Two to Lease Agreement for a Gamma Knife Unit dated as of November 6, 2006 between GK Financing, LLC and Jackson HMA, Inc. d/b/a Central Mississippi Medical Center.   10-K 001-08789   10.51   4/2/2007   26 Table of Contents   10.10c   Amendment Three to Lease Agreement for a Gamma Knife Unit dated as of February 23, 2010 between GK Financing, LLC and Jackson HMA, LLC d/b/a Central Mississippi Medical Center.   10-K 001-08789   10.10c   3/30/2016                   10.10d   Amendment Four to Lease Agreement for a Gamma Knife Unit dated as of May 1, 2019 between GK Financing, LLC and Jackson HMA, LLC d/b/a Central Mississippi Medical Center.   10-Q 001-08789   10.1   5/11/2020                   10.11   Lease Agreement for a Gamma Knife Unit dated as of February 18, 2000 between GK Financing, LLC and OSF HealthCare System.   10-K 001-08789   10.11   3/30/2016                   10.11a   Addendum to Lease Agreement for a Gamma Knife Unit dated as of April 13, 2007, between GK Financing, LLC and OSF Healthcare System.   10-Q 001-08789   10.2   8/11/2016                   10.11b   Addendum Two to Lease Agreement for a Gamma Knife Unit dated as of October 31, 2012 between GK Financing, LLC and OSF Healthcare System.   10-Q 001-08789   10.2a   8/11/2016                   10.11c # Addendum Three to Lease Agreement for a Gamma Knife Unit dated as of June 7, 2016 between GK Financing, LLC and OSF Healthcare System.   10-Q 001-08789   10.2b   8/11/2016                   10.11d   Addendum Four to Lease Agreement for a Gamma Knife Unit dated as of February 6, 2020 between GK Financing, LLC and OSF Healthcare System.   10-K 001-08789   10.11d   4/6/2021                   10.11e # Addendum Five to Lease Agreement for a Gamma Knife Unit dated as of  April 28, 2021 between GK Financing, LLC and OSF Healthcare System.   10-K 001-08789   10.11e   3/30/2022                   10.13   Equipment Lease Agreement (for a Gamma Knife Unit) dated as of February 13, 2003 between GK Financing, LLC and AHS Albuquerque Regional Medical Center, LLC.   10-K 001-08789   10.13   3/30/2016                   10.13a # Amendment to Equipment Lease Agreement (Perfexion Upgrade) dated as of April 8, 2011 between GK Financing, LLC and Lovelace Health System, Inc., d/b/a Lovelace Medical Center.     10-Q 001-08789   10.62   8/15/2011                   10.13b   Assignment and Assumption of Purchase and License Agreement dated as of February 2, 2011 between Elekta, Inc., GK Financing, LLC and Albuquerque GK Equipment, LLC.   10-Q 001-08789   10.62a   8/15/2011                   10.13c # Icon Upgrade and Amendment Two to Equipment Lease Agreement for a Gamma Knife Unit dated as of October 15, 2019 between GK Financing, LLC and Lovelace Health System, Inc., d/b/a Lovelace Medical Center.     10-Q 001-08789   10.1   11/13/2020                   10.14   Equipment Lease Agreement (for a Gamma Knife Unit) dated as of March 21, 2003 between GK Financing, LLC and Northern Westchester Hospital Center.   10-K 001-08789   10.14   3/30/2016                   10.14a # Amendment to Equipment Lease Agreement (Perfexion Upgrade) dated as of June 8, 2012 between GK Financing, LLC and Northern Westchester Hospital Center.   10-Q 001-08789   10.46a   8/14/2013                   10.14b # Amendment Two to Equipment Lease Agreement (Reload) dated as of October 7, 2020 between GK Financing, LLC and Northern Westchester Hospital Association.   10-Q 001-08789   10.1   5/13/2021                   10.16 # Purchased Services Agreement (for a Gamma Knife Unit) dated as of March 5, 2008 between GK Financing, LLC and USC University Hospital, Inc.   10-Q 001-08789   10.57   5/14/2008                   10.16a # First Amendment to Purchased Services Agreement (for a Gamma Knife Unit) dated as of April 1, 2009 between GK Financing, LLC and University of Southern California.   10-Q 001-08789   10.57a   8/14/2009                   10.16b # Second Amendment to Purchased Services Agreement (for a Gamma Knife Unit) dated as of October 1, 2013 between GK Financing, LLC and University of Southern California.   10-Q 001-08789   10.57b   8/14/2014   27 Table of Contents   10.16c   Third Amendment to Purchased Services Agreement dated as June 30, 2020 between GK Financing, LLC and University of Southern California.   10-Q 001-08789   10.2   11/13/2020                   10.16d   Fourth Amendment to Purchased Services Agreement dated as of July 28, 2021 between GK Financing, LLC and University of Southern California.   10-Q 001-08789   10.1   11/10/2021                   10.17 # Equipment Lease Agreement (for a Gamma Knife Unit) dated as of May 1, 2010 between GK Financing, LLC and Fort Sanders Regional Medical Center.     10-Q 001-08789   10.60   5/16/2011                   10.17a   Amendment to Lease Agreement (for a Gamma Knife Unit) dated as of January 3, 2012 between GK Financing, LLC and Fort Sanders Regional Medical Center.   10-K 001-08789   10.17a   3/30/2016                   10.17b   Second Amendment to Equipment Lease Agreement (for a Gamma Knife Unit) dated as of June 1, 2017 between GK Financing, LLC and Fort Sanders Regional Medical Center.   10-Q 001-08789   10.2   8/10/2017                   10.18 # Leksell Gamma Knife Perfexion Purchased Services Agreement dated as of August 5, 2011 between Jacksonville GK Equipment, LLC and St. Vincent’s Medical Center, Inc.   10-K 001-08789   10.63   3/30/2012                   10.18a # First Amendment to the Leksell Gamma Knife Perfexion Purchased Services Agreement dated as of October 10, 2011 between Jacksonville GK Equipment, LLC and St. Vincent’s Medical Center, Inc.   10-K 001-08789   10.63a   3/30/2012                   10.19 # Leksell Gamma Knife Perfexion Purchased Services Agreement dated as of January 19, 2012 between GK Financing, LLC and Sacred Heart Health System, Inc.   10-Q 001-08789   10.65   5/15/2013                   10.20 # Leksell Gamma Knife Perfexion Purchased Services Agreement dated as of March 27, 2014 between GK Financing, LLC and PeaceHealth doing business through its operating division PeaceHealth Sacred Heart Medical Center at RiverBend.   10-K 001-08789   10.67   4/1/2015                   10.20a   Amendment One to Leksell Gamma Knife Perfexion Purchased Services Agreement dated as of March 27, 2014 between GKF Financing, LLC and PeaceHealth Sacred Heart Medical Center at Riverbend.   10-Q 001-08789   10.2   5/13/2021                   10.21 # Equipment Lease Agreement (for a Gamma Knife Unit) dated as of February 21, 2017 between Bryan Medical Center, and GK Financing, LLC.   10-Q 001-08789   10.1   11/13/2017                   10.21a # First Amendment to Equipment Lease Agreement (for a Gamma Knife unit) dated as of February 14, 2018 between Bryan Medical Center and GK Financing, LLC   10-Q 001-08789   10.1   5/10/2018                   10.22 # Proton Beam Radiation Therapy Lease Agreement dated as of October 18, 2006 between American Shared Hospital Services and Orlando Regional Healthcare System, Inc.   10-Q 001-08789   10.3   8/11/2016                   10.22a # Amendment One to Proton Beam Radiation Therapy Lease Agreement dated as of August 12, 2012 between American Shared Hospital Services and Orlando Health, Inc., formerly known as Orlando Regional Healthcare System, Inc.   10-Q 001-08789   10.3a   8/11/2016                   10.23 # Equipment Lease Agreement (for a Gamma Knife Unit) dated as of May 8, 2018 between The Methodist Hospitals, Inc. and GK Financing, LLC   10-Q 001-08789   10.1   5/13/2019                   10.24 • American Shared Hospital Services Incentive Compensation Plan as Amended and Restated effective June 25, 2021   8-K 001-08789   10.1   7/1/2021                   10.25 • Form of Indemnification Agreement between American Shared Hospital Services and members of its Board of Directors.   10-K 001-08789   10.26   3/30/2016                   10.26 • Form of American Shared Hospital Services Incentive Compensation Plan Performance Share Award Agreement.   10-K 001-08789   10.25   3/27/2017                   10.27 • Offer Letter between the Company and Mr. Raymond C. Stachowiak dated April 22, 2020   8-K 001-08789   99.1   4/22/2020                   10.28 • Offer Letter between the Company and Peter Gaccione dated August 26, 2022.   8-K 001-08789   10.1   9/1/2022                   1 0.2 9   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.   8-K 001-08789   10.1   4/15/2021                   21.1 * Subsidiaries of American Shared Hospital Services                               23.1 * Consent of Independent Registered Public Accounting Firm               28 Table of Contents   31.1 * 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                               31.2 * 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                               32.1 ǂ 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                               101.INS * Inline XBRL Instance Document             101.SCH * Inline XBRL Taxonomy Extension Schema Document             101.CAL * Inline XBRL Taxonomy Calculation Linkbase Document             101.DEF * Inline XBRL Taxonomy Definition Linkbase Document             101.LAB * Inline XBRL Taxonomy Label Linkbase Document             101.PRE * Inline XBRL Taxonomy Extension Presentation Linkbase Document             104 * Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline Instance XBRL contained in Exhibit 101                                 * Filed herewith.               ǂ Furnished herewith.               # Confidential material appearing in this document has been omitted and filed separately with the Securities and Exchange Commission in accordance with Rule 24b-2, promulgated under the Securities and Exchange Act of 1934, as amended.  Omitted information has been replaced with asterisks.   • Indicates management compensatory plan, contract, or arrangement.   ITEM 16. FORM 10-K SUMMARY   The optional summary in Item 16 has not been included in this Form 10-K.   29 Table of Contents   SIGNATURES   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.     AMERICAN SHARED HOSPITAL SERVICES   (Registrant)       March 31, 2023 By: /s/ Raymond C. Stachowiak     Raymond C. Stachowiak     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.   Signature   Title   Date           /s/ Raymond C. Stachowiak   Executive Chairman of the Board (principal executive officer)   March 31, 2023 Raymond C. Stachowiak                   /s/ Daniel G. Kelly Jr.   Director   March 31, 2023 Daniel G. Kelly JR.                   /s/ Ernest A. Bates   Director   March 31, 2023 Ernest A. Bates, M.D.                   /s/ Kathleen Miles   Director   March 31, 2023 Kathleen Miles                   /s/ Vicki L. Wilson   Director   March 31, 2023 Vicki Wilson                   /s/ Craig K. Tagawa   President and Chief Financial Officer   March 31, 2023 Craig K. Tagawa   (principal financial officer and principal accounting officer)       30 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM and CONSOLIDATED FINANCIAL STATEMENTS   AS OF December 31, 2022 and 2021 , and FOR THE YEARS THEN ENDED     CONTENTS         PAGE     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F- 1     CONSOLIDATED FINANCIAL STATEMENTS   Balance sheets F- 3 Statements of income F- 4 Statement of shareholders’ equity F- 5 Statements of cash flows F- 6 Notes to financial statements F- 8   31 Table of Contents       Report of Independent Registered Public Accounting Firm   To the Shareholders and the Board of Directors of American Shared Hospital Services, Inc.   Opinion on the Financial Statements   We have audited the accompanying consolidated balance sheets of American Shared Hospital Services, Inc. (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, 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   These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.   Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.   Critical Audit Matters   The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.   Retail Revenue Recognition – Estimates of Reimbursement Rates and Payor Mix   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. Under turn-key arrangements, the Company receives payment from the hospital based on the amount of the hospital’s reimbursement from third party payors.   We identified management’s estimates of reimbursement rates and payor mix to record retail revenue and related accounts receivable, as a critical audit matter.  Retail revenue and related accounts receivable involves significant judgment and estimation, including measurement uncertainty, by management based on the estimates and assumptions used and are subject to adjustments based on actual reimbursements received by the Company. In turn, auditing management’s judgments and estimates related to retail revenue and related accounts receivable involved a high degree of subjectivity, as they are based on estimates of reimbursement rates and payor mix.   The primary procedures we performed to address this critical audit matter included:     • 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.   F- 1 Table of Contents     • 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.     • Developing an independent expectation of reimbursement rates per procedure based on historical trends, procedures, and payment amounts received through confirmation directly with the hospital and comparing to management’s estimates.   Property and Equipment - Salvage Value on Equipment   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 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 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, if available, which may include reviewing relevant purchase agreements, supplier agreements or information, and evaluating publicly available transaction information.   /s/ Moss Adams LLP   San Francisco, California March 31, 2023   We have served as the Company’s auditor since 2000.   F- 2 Table of Contents      AMERICAN SHARED HOSPITAL SERVICES CONSOLIDATED BALANCE SHEETS       December 31,     2022   2021 ASSETS                 CURRENT ASSETS                 Cash and cash equivalents   $ 12,335,000   $ 8,145,000 Restricted cash   118,000   118,000 Accounts receivable, net of allowance for doubtful accounts of $ 100,000 At December 31, 2022 and December 31, 2021   3,801,000   4,211,000 Other receivables   327,000   613,000 Prepaid maintenance   1,245,000   1,174,000 Prepaid expenses and other current assets   897,000   826,000                   Total current assets   18,723,000   15,087,000                   PROPERTY AND EQUIPMENT, net   23,467,000   28,254,000 LAND   19,000   19,000 GOODWILL   1,265,000   1,265,000 INTANGIBLE ASSETS   78,000   78,000 RIGHT OF USE ASSETS, net   317,000   654,000 OTHER ASSETS   87,000   73,000 TOTAL ASSETS   $ 43,956,000   $ 45,430,000 LIABILITIES AND SHAREHOLDERS’ EQUITY                 CURRENT LIABILITIES                 Accounts payable   $ 230,000   $ 318,000 Employee compensation and benefits   735,000   423,000 Other accrued liabilities   1,544,000   1,505,000 Related party liabilities   497,000   1,342,000 Asset retirement obligations, related party (includes $ 107,000 non-related party at December 31, 2021)   360,000   757,000 Income taxes payable   255,000   96,000 Current portion of lease liabilities   292,000   369,000 Current portion of long-term debt, net   1,262,000   1,081,000                   Total current liabilities   5,175,000   5,891,000                   LONG-TERM LEASE LIABILITIES, less current portion   59,000   359,000 LONG-TERM DEBT, net, less current portion   12,205,000   14,323,000 DEFERRED REVENUE, less current portion   70,000   140,000 DEFERRED INCOME TAXES   822,000   478,000                   TOTAL LIABILITIES   18,331,000   21,191,000 COMMITMENTS AND CONTINGENCIES (See Note 10)                     SHAREHOLDERS’ EQUITY                 Common stock                 Common stock, no par value ( 10,000,000 authorized; Issued and outstanding shares – 6,184,000 at December 31, 2022 and 6,049,000 at December 31, 2021   10,763,000   10,758,000 Additional paid-in capital   7,843,000   7,444,000 Retained earnings   3,019,000   1,691,000 Total equity- American Shared Hospital Services   21,625,000   19,893,000 Non-controlling interests in subsidiaries   4,000,000   4,346,000 Total shareholders’ equity   25,625,000   24,239,000                   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 43,956,000   $ 45,430,000   See accompanying notes   F- 3 Table of Contents     AMERICAN SHARED HOSPITAL SERVICES CONSOLIDATED STATEMENTS OF INCOME       YEARS ENDED December 31,     2022   2021                   Revenues:                 Rental income from medical services   $ 16,655,000   $ 14,719,000 Patient income   3,091,000   2,909,000     19,746,000   17,628,000 Costs of revenue:                 Maintenance and supplies   1,878,000   1,731,000 Depreciation and amortization   4,726,000   4,856,000 Other direct operating costs   3,666,000   3,556,000 Other direct operating costs, related party   1,094,000   759,000     11,364,000   10,902,000 Gross margin   8,382,000   6,726,000                   Selling and administrative expense   5,145,000   4,531,000 Interest expense   806,000   739,000 Loss on write down of impaired assets and associated removal costs   —   105,000                   Operating income   2,431,000   1,351,000                   (Loss) on early extinguishment of debt   —   ( 401,000 ) Interest and other (loss) income   87,000   ( 3,000 ) Income before income taxes   2,518,000   947,000 Income tax expense   963,000   269,000                   Net income   1,555,000   678,000                   Less: net (income) attributable to non-controlling interests   ( 227,000 )   ( 484,000 ) Net income attributable to American Shared Hospital Services   $ 1,328,000   $ 194,000                   Net income per share attributable to American Shared Hospital Services:                 Earnings per common share - basic   $ 0.21   $ 0.03 Earnings per common share - diluted   $ 0.21   $ 0.03                   Weighted average common shares for basic earnings per share   6,297,000   6,044,000 Weighted average common shares for diluted earnings per share   6,303,000   6,059,000   See accompanying notes   F- 4 Table of Contents     AMERICAN SHARED HOSPITAL SERVICES CONSOLIDATED STATEMENT OF SHAREHOLDERS ’  EQUITY       YEARS ENDED December 31, 2022 and 2021     Common Shares   Common Stock   Additional Paid-in Capital   Retained Earnings   Sub-Total ASHS   Non-controlling Interests in Subsidiaries   Total Balances at December 31, 2020   5,791,000   $ 10,753,000   $ 7,024,000   $ 1,497,000   $ 19,274,000   $ 4,376,000   $ 23,650,000 Stock-based compensation expense   —   —   420,000   —   420,000   —   420,000 Options exercised   5,000   5,000   —   —   5,000   —   5,000 Issuance of deferred restricted stock awards   123,000   —   —   —   —   —   — Vested restricted stock awards   130,000   —   —   —   —   —   — Cash distributions to non-controlling interests   —   —   —   —   —   ( 514,000 )   ( 514,000 ) Net income   —   —   —   194,000   194,000   484,000   678,000 Balances at December 31, 2021   6,049,000   10,758,000   7,444,000   1,691,000   19,893,000   4,346,000   24,239,000 Stock-based compensation expense   —   —   399,000   —   399,000   —   399,000 Options exercised   3,000   5,000   —   —   5,000   —   5,000 Vested restricted stock awards   132,000   —   —   —   —   —   — Cash distributions to non-controlling interests   —   —   —   —   —   ( 573,000 )   ( 573,000 ) Net income   —   —   —   1,328,000   1,328,000   227,000   1,555,000 Balances at December 31, 2022   6,184,000   $ 10,763,000   $ 7,843,000   $ 3,019,000   $ 21,625,000   $ 4,000,000   $ 25,625,000   S ee accompanying notes   F- 5 Table of Contents     AMERICAN SHARED HOSPITAL SERVICES CONSOLIDATED STATEMENTS OF CASH FLOWS       YEARS ENDED December 31,     2022   2021 OPERATING ACTIVITIES                 Net income   $ 1,555,000   $ 678,000 Adjustments to reconcile net income to net cash from operating activities:                 Depreciation and amortization   4,783,000   4,972,000 Non cash lease expense   337,000   309,000 Accretion of deferred issuance costs   84,000   59,000 Loss on write down impaired assets   —   105,000 Loss on sublease impairment, net   —   74,000 Loss on extinguishment of debt   —   401,000 Deferred income taxes   344,000   60,000 Stock-based compensation expense   399,000   420,000 Interest expense associated with lease liabilities   29,000   42,000 Changes in operating assets and liabilities:                 Receivables   696,000   ( 519,000 ) Prepaid expenses and other assets   ( 111,000 )   14,000 Asset retirement obligations, related party   ( 397,000 )   ( 618,000 ) Related party liabilities   ( 845,000 )   775,000 Lease liability   ( 406,000 )   ( 351,000 ) Accounts payable, accrued liabilities and deferred revenue   608,000   76,000 Income taxes payable   159,000   ( 230,000 ) Net cash provided by operating activities   7,235,000   6,267,000 INVESTING ACTIVITIES                 Payment for purchases of property and equipment   ( 388,000 )   ( 1,674,000 ) Net cash (used in) investing activities   ( 388,000 )   ( 1,674,000 ) FINANCING ACTIVITIES                 Principal payments on long-term debt   ( 2,032,000 )   ( 3,927,000 ) Principal payments on finance leases   —   ( 8,919,000 ) Long-term debt financing   —   13,897,000 Prepayment penalties   —   ( 401,000 ) Distributions to non-controlling interests   ( 573,000 )   ( 514,000 ) Debt issuance costs long-term debt   ( 9,000 )   ( 325,000 ) Proceeds from options exercised   5,000   5,000 Principal payments on short-term financing prepaid insurance   ( 48,000 )   ( 471,000 ) Net cash (used in) financing activities   ( 2,657,000 )   ( 655,000 ) Net change in cash and cash equivalents   4,190,000   3,938,000 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of year   8,263,000   4,325,000 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of year   $ 12,453,000   $ 8,263,000   S ee accompanying notes   F- 6 Table of Contents   SUPPLEMENTAL CASH FLOW DISCLOSURE                 Cash paid for interest   $ 722,000   $ 680,000 Cash paid for income taxes   $ 169,000   $ 712,000                   SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES                 Right of use assets and lease liabilities   $ —   $ 151,000 Acquisition of equipment with long-term debt financing   $ —   $ 1,103,000                   DETAIL OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD                 Cash and cash equivalents   $ 12,335,000   $ 8,145,000 Restricted cash   118,000   118,000 Cash, cash equivalents, and restricted cash at end of period   $ 12,453,000   $ 8,263,000     S ee accompanying notes   F- 7 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   NOTE 1 – BUSINESS AND BASIS OF PRESENTATION   Business – 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”); 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. (“GKPeru”). GKF is the majority owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”). GKF formed HoldCo GKC S.A. (“HoldCo”) to acquire Gamma Knife Center Ecuador S.A. (“GKCE”).   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 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. The Company through its wholly-owned subsidiary, Orlando, provided proton beam radiation therapy (“PBRT”) and related equipment to a customer in the United States.   The Company formed the subsidiary GKPeru and acquired GKCE for the purposes of expanding its business internationally; Orlando and LBE to provide PBRT equipment and services in Orlando, Florida and Long Beach, California, respectively; and AGKE and JGKE to provide Gamma Knife equipment and services in Albuquerque, New Mexico and Jacksonville, Florida, respectively. AGKE began operations in the second quarter of 2011 and JGKE began operations in the fourth quarter of 2011. Orlando treated its first patient in April 2016. GKPeru treated its first patient in July 2017. LBE is not expected to generate revenue within the next two years.   On  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. de C.V. 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. de C.V. 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” ). The remaining 50 % of OR21 is owned by an architectural design company. OR21 is not expected to generate significant revenue within the next two years.   MedLeader was formed to provide continuing medical education online and through videos for doctors, nurses, and other healthcare workers. This subsidiary is not operational at this time.   All significant intercompany accounts and transactions have been eliminated in consolidation.     NOTE 2 – ACCOUNTING POLICIES   Use of estimates in the preparation of financial statements – In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the Company’s consolidated financial statements include the estimated useful lives of fixed assets and its salvage values, revenues and costs of sales for turn-key and revenue sharing arrangements.  Actual results could differ from those estimates.   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 – The Company considers all liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Restricted cash is not considered a cash equivalent for purposes of the consolidated statements of cash flows.   F- 8 Table of Contents   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 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.   Business and credit risk – 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 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 fifteen  and seventeen customers in 2022 and 2021 , respectively. One customer accounted for approximately 45 % and  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. The Company performs credit evaluations of its customers and generally does not require collateral. The Company has not experienced significant losses related to receivables from individual customers or groups of customers in any particular geographic area.   All of the Company’s radiosurgery devices have been purchased through Elekta, to date. However, there are other manufacturers that also make radiosurgery devices.   Accounts receivable and doubtful accounts – Accounts receivable are recorded at net realizable value. An allowance for doubtful accounts is estimated based on historical collections plus an allowance for probable losses. Receivables are considered past due based on contractual terms and are charged off in the period that they are deemed uncollectible. Recoveries of receivables previously charged off are offset against bad debt expense when received.   Non-controlling interests - The Company reports its non-controlling interests as a separate component of shareholders’ equity. 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 income.   Property and equipment – 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 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. The Company determines salvage value based on the estimated fair value of the equipment at the end of its useful life. As of   April 1, 2021,  the Company reduced its estimate for salvage value for  nine  of its domestic Gamma Knife Perfexion units. 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. This depreciation method allocates costs considering the projected volume of usage through the useful life of the PBRT unit, which has been estimated at 20 years. The estimated useful life of the PBRT unit is consistent with the estimated economic life of 20 years.   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, 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 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.   F- 9 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   NOTE 2 – ACCOUNTING POLICIES (CONTINUED)   Revenue recognition - The Company recognizes revenues under ASC 842 Leases (“ASC 842” ) and ASC 606 Revenue from Contracts with Customers (“ASC 606” ).   Rental income from medical services – The Company recognizes revenues under ASC 842 when services have been rendered and collectability is reasonably assured, on either a fee per use or revenue sharing basis. The terms of the contracts do not contain any guaranteed minimum payments. The Company’s contracts are typically for a 10 -year term and are classified as either fee per use or retail. Retail arrangements are further classified as either turn-key or revenue sharing. Revenues from fee per use contracts is determined by each hospital’s contracted rate. Revenues are recognized at the time the procedures are performed, based on each hospital’s contracted rate and the number of procedures performed. Under revenue sharing arrangements, the Company receives a contracted percentage of the reimbursement received by the hospital. The amount the Company expects to receive is recorded as revenue and estimated based on historical experience. Revenue estimates are reviewed periodically and adjusted as necessary. Under turn-key arrangements, the Company receives payment from the hospital 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. The Company records an estimate of operating costs which are reviewed on a regular basis and adjusted as necessary to more accurately reflect the actual operating costs. For turn-key sites, the Company also shares a percentage of net operating profit. The Company records an estimate of net operating profit based on estimated revenues, less estimated operating costs. The operating costs and estimated net operating profit are recorded as other direct operating costs in the consolidated statement of operations . As of December 31, 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 – The Company has stand-alone facilities in Lima, Peru and Guayaquil, Ecuador, where a contract exists between the Company’s facilities and the individual patient treated at the facility. Under ASC 606, the Company acts as the principal in this transaction and provides, at a point in time, a single performance obligation, in the form of a Gamma Knife treatment. Revenue related to a Gamma Knife treatment is recognized on a gross basis at the time when the patient receives treatment. There is no variable consideration present in the Company’s performance obligation and the transaction price is agreed upon per the stated contractual rate. GKPeru’s payment terms are typically prepaid for self-pay patients and insurance provider payments are paid net 30 days. GKCE’s patient population is primarily covered by a government payor and payments are paid 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 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 . As of December 31, 2022 and 2021 , the Company recognized revenues of approximately $ 3,091,000 and $ 2,909,000  under ASC 606, respectively.   Stock-based compensation – The Company measures all stock-based compensation awards at fair value and records such expense in its consolidated financial statements over the requisite service period of the related award. See Note 8  - Stock-Based Compensation Expense for additional information on the Company’s stock-based compensation programs.   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). Costs of revenues are recognized as incurred.   Income taxes – The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.   F- 10 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   NOTE 2 – ACCOUNTING POLICIES (CONTINUED)   The Company accounts for uncertainty in income taxes as required by the provisions of ASC 740 Income taxes (“ASC 740” ), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires the Company to determine the probability of various possible outcomes. The Company considers many factors when evaluating and estimating the Company’s tax positions and tax benefits, which may require periodic adjustments and may not accurately anticipate actual outcomes.   See Note 7  - Income Taxes for further discussion on income taxes.   Functional currency – Based on guidance provided in accordance with ASC 830, Foreign Currency Matters (“ASC 830” ), the Company analyzes its operations outside the United States to determine the functional currency of each operation. Management has determined that these operations are initially accounted for in U.S. dollars since the primary transactions incurred are in U.S. 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 reassess its accounting for the operation to the local currency from the U.S. dollar. 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. dollar. As facts and circumstances change, the Company will revisit this conclusion.  The functional currency of the Company’s Gamma Knife site in Ecuador is the U.S. dollar because that is the local currency of Ecuador.    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 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. As of  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.   Earnings per share – 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 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.      F- 11 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   NOTE 2 – ACCOUNTING POLICIES (CONTINUED)   The following table illustrates the computations of basic and diluted earnings per share for the years ended December 31, 2022 and 2021 .       2022   2021 Numerator for basic and diluted earnings per share   $ 1,328,000   $ 194,000 Denominator:                 Denominator for basic and diluted earnings per share – weighted-average shares   6,297,000   6,044,000 Effect of dilutive securities Employee stock options and restricted stock   6,000   15,000 Denominator for diluted earnings per share – adjusted weighted-average shares   6,303,000   6,059,000 Earnings per common share- basic   $ 0.21   $ 0.03 Earnings per common share- diluted   $ 0.21   $ 0.03   Business segment information - Based on the guidance provided in accordance with ASC 280 Segment Reporting (“ASC 280” ), 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:       2022   2021 Revenues                 Domestic   $ 16,655,000   $ 14,719,000 Foreign   3,091,000   2,909,000 Total   $ 19,746,000   $ 17,628,000       2022   2021 Net income (loss) attributable to American Shared Hospital Services                 Domestic   $ 1,187,000   $ 245,000 Foreign   141,000   ( 51,000 ) Total   $ 1,328,000   $ 194,000       2022   2021 Total assets                 Domestic   $ 37,575,000   $ 39,322,000 Foreign   6,381,000   6,108,000 Total   $ 43,956,000   $ 45,430,000   F- 12 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   NOTE 2 – ACCOUNTING POLICIES (CONTINUED)   Long lived asset impairment – The Company assesses the recoverability of its long-lived assets when events or changes in circumstances indicate their carrying value may not be recoverable. Such events or changes in circumstances may include: a significant adverse change in the extent or manner in which a long-lived asset is being used, significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company assesses recoverability of a long-lived asset by determining whether the carrying value of the asset group can be recovered through projected undiscounted cash flows over their remaining lives. 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 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 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” ), the Company does not amortize the intangible asset because it has an indefinite life. The Company assesses goodwill at the reporting unit level, which has been determined to be GKCE. Each reporting period, the Company assesses whether events or circumstances continue to support an indefinite useful life for the intangible asset. Per ASC 350, the Company tests goodwill and intangibles for impairment annually or as events or circumstances change that indicate the fair value may be below the carrying amount. 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.   Accounting pronouncements issued and not yet adopted - In January 2021, the FASB issued ASU 2021 - 01   Reference Rate Reform (Topic 848 )  (“ASU 2021 - 01” ) which provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. 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 5  - Long-term debt for additional discussion on transition from LIBOR.    Reclassifications – 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 – PROPERTY AND EQUIPMENT   Property and equipment consists of the following:       December 31,     2022   2021 Medical equipment and facilities   $ 73,709,000   $ 73,388,000 Office equipment   422,000   472,000 Construction in progress   106,000   91,000     74,237,000   73,951,000 Accumulated depreciation   ( 50,770,000 )   ( 45,697,000 ) Net property and equipment   $ 23,467,000   $ 28,254,000   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   April 1, 2021,  the Company reduced its estimate for salvage value for  nine  of its Gamma Knife units. 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. The Company reviewed it’s PBRT equipment, in light of available information as of December 31, 2022 and  2021  and concluded no impairment exists.   F- 13 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE 4 - OTHER ACCRUED LIABILITIES   Other accrued liabilities consists of the following:       December 31,     2022   2021 Equipment maintenance and upgrades, non-related party   $ —   $ 367,000 Insurance   591,000   340,000 Professional services   92,000   90,000 Operating costs   539,000   397,000 Other   322,000   311,000 Total other accrued liabilities   $ 1,544,000   $ 1,505,000     NOTE 5  - LONG TERM DEBT   On  April 9, 2021  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  three  loan facilities. The  first loan facility is a $ 9,500,000  term loan (the “Term Loan”) of which $ 6,774,000  was used to refinance the domestic Gamma Knife debt and finance leases, and associated closing costs, $ 1,665,000  was used to finance  two  Gamma Knife reloads and to pay for the unload costs for  two  customer contracts in the  first  quarter of  2021, with the remaining $ 1,061,000  available for future projects. The  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. The  third  loan facility provides for a $ 7,000,000  revolving line of credit (the “Revolving Line”) available for future projects and general corporate purposes. The facilities have a  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 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.   As of  December 31, 2021,  LIBOR will no longer be used to price new loans, but 1 -month, 3 -month, 6 -month and 12 -month maturities will continue to be published through 2023. 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. The Term Loan and DDTL have interest and principal payments due quarterly. Principal amortization on an annual basis for the Term Loan and DDTL equates to 48 % of the original principal loan commitments in years one through five and an end of term payment of the remaining principal balance.   The Credit Agreement contains customary covenants and representations, including without limitation, a minimum fixed charge coverage ratio of  1.25  and maximum funded debt to EBITDA ratio of  3.0  to  1.0  (tested on a trailing  twelve -month basis at the end of each fiscal quarter), reporting obligations, limitations on dispositions, changes in ownership, mergers and acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and capital expenditures.  The Loan Parties are in compliance with the Credit Agreement covenants as of  December 31, 2022 .   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, 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,   Principal 2023   $ 1,344,000 2024   2,094,000 2025   2,469,000 2026   7,594,000 2027   164,000     $ 13,665,000   F- 14 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE 6  - LEASES   The Company determines if a contract is a lease at inception. Under ASC 842, the Company is a lessor of equipment to various customers. Leases that commenced prior to ASC 842 adoption date were classified as operating leases under historical guidance. As the Company has elected the package of practical expedients allowing it to not reassess lease classification, these leases are classified as operating leases under ASC 842 as well. 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. 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. The related equipment is included in medical equipment and facilities on the Company’s consolidated balance sheets (see further discussion at Note 2 ). As all income from the Company’s lessor arrangements is solely based on procedure volume, all income is considered variable payments not dependent on an index or a rate. 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 $ 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 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 Company’s lessee operating leases are accounted for as ROU assets, other current liabilities, and lease liabilities on the consolidated balance sheets. Operating lease ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company’s operating lease contracts do not provide an implicit rate for calculating the present value of future lease payments, so the Company determined its incremental borrowing rate to be in the range of approximately 4.0 % and 6.0 % by using available market rates and expected lease terms. The operating lease ROU assets and liabilities also include any lease payments made and excludes lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. 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 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 .   The following table summarizes maturities of lessee operating lease liabilities as of December 31, 2022 :   Year ending December 31,   Operating Leases           2023   $ 301,000 2024   59,000 Total lease payments   360,000 Less imputed interest   ( 9,000 ) Total   $ 351,000       Year Ended December 31,     2022   2021 Lease cost                 Operating lease cost, net of impairment   $ 406,000   $ 351,000 Sublease income   ( 174,000 )   ( 14,000 ) Total lease cost   $ 232,000   $ 337,000                   Other information                 Cash paid for amounts included in the measurement of lease liabilities - Operating leases   $ 406,000   $ 351,000 Weighted-average remaining lease term - Operating leases in years   1.11   1.39 Weighted-average discount rate - Operating leases   5.65 %   5.80 %   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 August 2023. The monthly lease expense is offset by sublease income of $ 16,195 . 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.    F- 15 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE 7   – INCOME TAXES   The components of income before income taxes for the years ended  December 31, 2022 and 2021  are as follows:       YEARS ENDED December 31,     2022   2021                   Domestic   $ 2,350,000   $ 831,000 Foreign   168,000   116,000 Income before income taxes   $ 2,518,000   $ 947,000   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,     2022   2021 Current:                 Federal   $ 355,000   $ 9,000 State   60,000   93,000 Foreign   204,000   107,000 Total current   619,000   209,000                   Deferred:                 Federal   290,000   98,000 State   48,000   ( 18,000 ) Foreign   6,000   ( 20,000 ) Total deferred   344,000   60,000     $ 963,000   $ 269,000   Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2022 and 2021 are as follows:       December 31,     2022   2021 Deferred tax liabilities:                 Property and equipment   $ ( 1,255,000 )   $ ( 1,055,000 )                   Total deferred tax liabilities   ( 1,255,000 )   ( 1,055,000 )                   Deferred tax assets:                 Net operating loss carryforwards   139,000   360,000 Accruals and allowances   167,000   41,000 Lease liabilities   61,000   136,000 Tax credits   3,000   4,000 Other – net   114,000   87,000 Capital loss carryover   646,000   646,000                   Total deferred tax assets   1,130,000   1,274,000                   Valuation allowance   ( 697,000 )   ( 697,000 )                   Deferred tax assets net of valuation allowance   433,000   577,000                   Net deferred tax liabilities   $ ( 822,000 )   $ ( 478,000 )   F- 16 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   NOTE 7   – INCOME TAXES (CONTINUED)   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:       YEARS ENDED December 31,     2022   2021 Computed expected federal income tax   $ 477,000   $ 79,000 State income taxes, net of federal benefit   100,000   69,000 Non-deductible expenses   ( 25,000 )   28,000 Return to provision true-up   52,000   19,000 Uncertain tax positions   ( 17,000 )   14,000 AMT tax payable adjustment   208,000   — Change in valuation allowance   —   19,000 Other deferred tax adjustments   168,000   41,000                       $ 963,000   $ 269,000   As of  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, 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 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. Net operating losses generated on a tax return basis by the Company for calendar years 1999 through 2004, 2009, 2010, 2012, 2014, 2015, 2016, 2017 and 2018 remain open to examination by the major domestic taxing jurisdictions.   F- 17 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   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. 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. The Company has made no reclassifications between current taxes payable and long term taxes payable under this guidance.   As of December 31, 2022 , the unrecognized tax benefit was $ 278,000  which, if recognized, will not affect the annual effective tax rate as these unrecognized tax benefits would increase deferred tax assets, which would be subject to a full valuation allowance. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:       YEARS ENDED December 31,     2022   2021 Balance at beginning of year   $ 295,000   $ 275,000 Additions based on tax positions of prior years   ( 17,000 )   20,000                   Balance at end of year   $ 278,000   $ 295,000   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   – STOCK-BASED COMPENSATION EXPENSE   Incentive Compensation Plan   In  June 2021,  the Company’s shareholders approved an amendment and restatement of the Company’s Incentive Compensation Plan (the “Plan”), that among other things, increases the number of shares of the Company’s common stock reserved for issuance under the Plan to  2,580,000  and extends the term of the Plan by  five  years to  February 22, 2027.  The Plan provides that the shares reserved under the Plan are available for issuance to officers of the Company, other key employees, non-employee directors, and advisors.  No  further grants or share issuances will be made under the previous plans. As of December 31, 2022 , approximately 1,219,000  shares remain available for grant under the Plan.   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 .   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   Outstanding at January 1, 2021     13,000     $ 1.97   Granted     165,000     $ 2.61   Vested     ( 168,000 )   $ 2.57                     Outstanding at December 31, 2021     10,000     $ 2.57   Granted     131,000     $ 2.40   Vested     ( 132,000 )   $ 2.40   Forfeited     ( 3,000 )   $ 2.92   Outstanding at December 31, 2022     6,000     $ 2.33     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, 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   years.  For the year ended  December 31, 2021 , 38,000 of the vested restricted stock units were deferred for issuance.   F- 18 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   NOTE 8   – STOCK-BASED COMPENSATION EXPENSE (CONTINUED)   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:               Stock-Based     Awards Issued   Compensation     and Vested   Expense Options   —   $ 10,000 Options Exercised   3,000   — Management Bonus Program - vested and issued   11,000   — Management Bonus Program   —   92,000 Annual RSU Awards   1,000   6,000 Board RSU Awards - other   —   3,000 Executive Compensation   120,000   288,000     135,000   $ 399,000   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   Changes in stock options outstanding under the Incentive Compensation Plans during 2022 and 2021 are as follows:   Options   Number of Options   Weighted Average Exercise Price   Weighted Average Remaining Contractual Term (Years)   Aggregate Intrinsic Value Balance at December 31, 2020   417,000   $ 2.79   1.61   $ 2,000 Granted   6,000   $ 2.92   7.00   $ — Exercised   ( 22,000 )   $ 2.65   —   $ — Forfeited   ( 334,000 )   $ 2.81   —   $ —                                   Balance at December 31, 2021   67,000   $ 2.72   3.33   $ — Granted   50,000   $ 2.72   7.00   $ — Exercised   ( 4,000 )   $ 2.29   —   $ — Forfeited   ( 18,000 )   $ 2.64   —   $ —                                   Balance at December 31, 2022   95,000   $ 2.76   4.83   $ 25,000                                   Exercisable at December 31, 2021   58,000   $ 2.72   2.96   $ —                                   Exercisable at December 31, 2022   38,000   $ 2.79   2.38   $ —   F- 19 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   NOTE 8   – STOCK-BASED COMPENSATION EXPENSE (CONTINUED)   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. This cost is expected to be recognized over a period of approximately four  years.   The Company’s stock-based awards to employees are calculated using the Black-Scholes options valuation model. The Black-Scholes model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, the Black-Scholes model requires the input of highly subjective assumptions including the expected stock price volatility. The Company’s stock-based awards have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the present value estimates. For these reasons, management believes that the existing models do not necessarily provide a reliable single measure of the fair value of its stock-based awards to employees.   The fair value of the Company’s option grants issued during 2022 and 2021 were estimated using assumptions for expected life, volatility, dividend yield, forfeiture rate, and risk-free interest rate which are specific to each award as summarized in the following table. The estimated fair value of the Company’s options is amortized over the period during which the optionee is required to provide service in exchange for the award, usually the vesting period.   The fair value of the Compan y’s option grants under the Plan in 2022 and 2021 was estimated using the following assumptions:     2022   2021 Expected life (years)   7.0   7.0 Expected forfeiture rate   0.0 %   0.0 % Expected volatility   50 %   40 % Dividend yield   0 %   0 % Risk-free interest rate   3.3 %   1.2 %   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   In 1999 and 2001, the Board of Directors approved resolutions authorizing the Company to repurchase up to a total of 1,000,000 shares of its own stock on the open market, which the Board reaffirmed in 2008. There were no shares of the Company repurchased during 2022 or 2021 . There are approximately 72,000 shares remaining under this repurchase authorization.   F- 20 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE 9   – RETIREMENT PLAN   The Company has a defined-contribution retirement plan (the “Retirement Plan”) that allows for a matching safe harbor contribution. For 2022 , the Board of Directors elected to match participant deferred salary contributions up to a maximum of 4 % of the participant’s annual compensation. Discretionary profit sharing contributions are allowed under the Retirement Plan in years that the Board does not elect a safe harbor match. The Company has accrued approximately $ 36,000 for the estimated safe harbor matching contribution for the year ended December 31, 2022 . The Company contributed $ 41,000 to the Retirement Plan for the safe harbor match for the year ended December 31, 2021 .     NOTE 10   – COMMITMENTS AND CONTINGENCIES   On December 20, 2018, the Company signed Second Amendments to two System Build Agreements for the Company’s second and third Mevion PBRT units. The Company and Mevion have agreed to upgrade the second and third PBRT units for which the Company has purchase commitments. The Company is actively seeking sites for these units but, to date, has not entered into agreements with any party for either placement of a PBRT unit or the related financing. The Company projects that it will be required to commence delivery of the second and third PBRT units no later than 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. 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 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. The service commitments are carried out via contracts with Mevion, Elekta and Mobius Imaging, LLC. In addition, in April 2019, the Company signed agreements to service the Icon upgrades which will be installed at various dates between 2023  and 2024. The Company’s commitments to purchase t wo LINAC systems also include a 9 -year and 5 -year agreement to service the equipment, respectively. Total service commitments as of December 31, 2022 were $ 15,374,000 . The Gamma Knife and certain other service contracts are paid monthly, as service is performed. The Company believes that cash flow from cash on hand and operations will be sufficient to cover these payments.   The Company’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.   F- 21 Table of Contents   AMERICAN SHARED HOSPITAL SERVICES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     NOTE 11   – RELATED PARTY TRANSACTIONS   The Company’s Gamma Knife business is operated through its 81 % indirect interest in its GKF subsidiary. The remaining 19 % of GKF is owned by a wholly owned U.S. 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 .    The following summarizes related party activity for the years ended  December 31, 2022  and  2021 :       December 31,     2022   2021 Equipment purchases and de-install costs   $ 1,844,000   $ 1,906,000 Costs incurred to maintain equipment   1,094,000   759,000 Total related party transactions   $ 2,938,000   $ 2,665,000   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  2021 :       December 31,     2022   2021 Accounts payable and other accrued liabilities   $ 497,000   $ 1,992,000     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.    F- 22