What changed in this filing

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Item 1. Business

2024-04-01 compared with 2023-03-31 · 169 added, 168 removed, 190 unchanged (64% of the section changed)

American Shared Hospital Services (“ASHS”

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

The Company provides Gamma Knife units to twelve medical centers in eleven states in the United States and two Gamma Knife units at stand-alone facilities in Lima, Peru and Guayaquil, Ecuador as of March 1, 2023.

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

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

The Company provides Gamma Knife units to ten medical centers in ten states in the United States and two Gamma Knife units at stand-alone facilities in Lima, Peru and Guayaquil, Ecuador as of March 1, 2024.

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

The remaining 19% of GKF is owned by GKV Investments, Inc.

(“GKV Investments”), a wholly-owned U.S.

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

Elekta is the manufacturer of the Leksell Gamma Knife®

(the “Gamma Knife”).

(“GKV Investments”), a wholly-owned U.S.

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

Elekta is the manufacturer of the Leksell Gamma Knife® (the “Gamma Knife”), which is a radiotherapy-treatment device that uses precise beams of gamma radiation to noninvasively target and remove lesions or tumors in the brain and treat various neurological disorders.

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

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

The Company wholly-owns the subsidiaries American Shared Radiosurgery Services (“ASRS”), ASHS-Mexico, S.A.

(“ASHS-Mexico”), ASHS-Rhode Island Proton Beam Radiation Therapy, LLC, ASHS-Bristol Radiation Therapy, LLC, OR21, Inc.

and MedLeader.com, Inc.

(“MedLeader”).

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

(“MedLeader”).

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

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

HoldCo owns approximately 99.3% of the total outstanding shares of Gamma Knife Center Ecuador S.A.

(“GKCE”).

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

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

HoldCo owns approximately 99.3% of the total outstanding shares of Gamma Knife Center Ecuador S.A.

ASRS is the majority-owner of GKF.

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

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

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

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

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

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

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

The Company and Guadalupe will hold 85% and 15% ownership interests, respectively, in Puebla.

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

The Company formed ASHS-Mexico, S.A.

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

Puebla was formed on December 15, 2022.

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

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

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

MedLeader was formed to provide continuing medical education online and through videos for doctors, nurses and other health care practitioners.

MedLeader is not operational at this time and is not expected to generate significant revenue within the next two years.

On April 27, 2022 , the Company signed a Joint Venture Agreement (the “Agreement”) with the principal owners of Radioterapia Guadalupe Amor y Bien S.A.

(“Guadalupe”) to establish AB Radiocirugia Y Radioterapia de Puebla, S.A.P.I.

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

The Company and Guadalupe will hold 85% and 15% ownership interests, respectively, in Puebla.

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

The Company formed ASHS-Mexico on October 3, 2022 to establish Puebla.

Puebla was formed on December 15, 2022 and the Company expects Puebla to begin treating patients in June 2024.

Operating costs incurred for the twelve-month period ended December 31, 2023 by Puebla, are included in the consolidated statement of operations.

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

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

OR21 is not expected to generate significant revenue within the next two years.

On November 10, 2023, the Company entered into an Investment Purchase Agreement (the “IPA”) with GenesisCare USA, Inc.

(the “GenesisCare”) and GenesisCare USA Holdings, Inc.

(“GC Holdings”), pursuant to which GenesisCare agreed to sell to the Company its entire equity interest in each of Southern New England Regional Cancer Center, LLC and Roger Williams Radiation Therapy, LLC, (collectively, the “RI Target Companies”) together with the assignment of certain payor contacts for a purchase price of $2,850,000 (such transaction, the “RI Acquisition”).

The equity interests to be acquired by the Company under the IPA equates to a 60% interest in each RI Target Company.

The RI Target Companies operate three functional radiation therapy cancer centers in Rhode Island.

The RI Acquisition is contingent upon certain closing conditions, including GenesisCare and the Company entering into a consent agreement with the Rhode Island Department of Health and approval of all equity holders and managers of each RI Target Company.

On March 1, 2024, the Company, GenesisCare and GC Holding entered into a First Amendment to the Investment Agreement pursuant to which the parties agreed to extend the date on which a party could terminate the IPA if the closing conditions had not been met from March 10, 2024 to April 30, 2024.

The Company anticipates that the closing conditions will be met in April 2024.

The Company was incorporated in the State of California in 1983 and its predecessor, Ernest A.

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

As of March 1, 2023, all of the Company’s twelve Gamma Knife units in the United States are Gamma Knife Perfexion units and two of these Perfexion units have the Icon upgrade. 

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

The Company expects to replace the unit in Ecuador with an Icon in mid-2023.

As of March 1, 2024, eight of the Company’s ten Gamma Knife units in the United States are Gamma Knife Perfexion units and two of these Perfexion units have the Icon upgrade.

Two of the Company’s ten Gamma Knife units were upgraded to an Esprit in October 2023 and January 2024, respectively.

The Company’s Gamma Knife unit in Ecuador was upgraded in November 2023 to a Perfexion with Icon.

The Company’s Gamma Knife unit in Peru is Model 4(C).

The Company expects to replace the unit in Peru with an Esprit in late 2024.

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

As of December 31, 2022 , there were 118 Gamma Knife sites in the United States and 360 units in operation worldwide.

Based on 2021 case mix data, an estimated percentage breakdown of Gamma Knife procedures performed in the U.S.

by indications treated is as follows:

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

The Company, as of March 1, 2023, had twelve operating Gamma Knife units located in the United States and two in South America in Lima, Peru and Guayaquil, Ecuador, respectively.

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

The Company’s Gamma Knife units performed 1,286 procedures in 2022 for a cumulative total of approximately 46,200 procedures from commencement through December 31, 2022.

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

The Company, as of March 1, 2024, had ten operating Gamma Knife units located in the United States and two in South America in Lima, Peru and Guayaquil, Ecuador, respectively.

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

The Company’s Gamma Knife units performed 1,195 procedures in 2023 for a cumulative total of approximately 47,400 procedures from commencement through December 31, 2023.

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

Total Gamma Knife

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

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

The policy committee is composed of one representative from the Company, Raymond Stachowiak , ASHS’ Executive Chairman of the Board, and one representative from Elekta.

The policy committee sets the operating policy for GKF.

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

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

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

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

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

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

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

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

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

From inception to December 31, 2023, GKF has distributed $50,410,000 to the Company and $11,825,000 to Elekta.

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

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

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

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

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

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

and “Note 1 - Business And Basis of Presentation”

of the consolidated financial statements.

Proton Beam Radiation Therapy Operations ( “

PBRT ”

The Company’s site in Puebla, Mexico will treat patients with a LINAC machine.

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

Proton Beam Radiation Therapy Operations ( “ PBRT ” )

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

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

Approximately  

280,000 p atients have been treated with protons worldwide.

Approximately 280,000 pati ents have been treated with protons worldwide.

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

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

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

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

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

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

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

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

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

The Company’s current business is the outsourcing of stereotactic radiosurgery services and radiation therapy services either through medical equipment leasing or direct patient services.

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

The Company also owns and operates two single-unit facilities where it provides radiation therapy services directly to the patient.

The Company has a third direct patient service facility in Puebla, Mexico, that the Company expects will begin treating patients in June 2024.

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

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the total cost of a Gamma Knife facility usually ranges from $3.0 million to $4.5 million, including equipment, site construction and installation;

the total cost of a single room PBRT system usually ranges from $30.0 million to $50.0 million, inclusive of equipment, site construction and installation.

the total cost of a single room PBRT system usually ranges from $30.0 million to $50.0 million, inclusive of equipment, site construction and installation.

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

The following is a listing of the Company’s sites as of March 1, 2023:

The following is a listing of the Company’s medical equipment leases as of March 1, 2024:

Original Term of

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Kisco, New York

USC University Hospital Los Angeles, California

Vincent’s Medical Center Jacksonville, Florida

Revenue Sharing

Sacred Heart Medical Center Pensacola, Florida

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Revenue Sharing

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

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

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

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

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

There are no minimum volume guarantees required of the customer.

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

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

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

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

The Company’s typical revenue sharing agreements are for a period of ten years.

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

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There are no minimum volume guarantees required of the customer.

One customer accounted for approximately 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 10% and 31% of total accounts receivable, respectively.

The Company markets financial and turnkey solutions to cancer treatment centers, hospitals, and large cancer networks worldwide. 

The Company works closely with major global Original Equipment Manufacturers (“OEM’s”) that provide leading edge clinical treatment systems and software that treat cancer using radiation therapy and radiosurgery.

The major products the Company is able to provide creative financial and turnkey services for are;

One customer accounted for approximately 48% and 45% of the Company’s total revenue in 2023 and 2022, respectively.

At December 31, 2023, two customers each individually accounted for 30% and 31% of total accounts receivable, respectively.

At December 31, 2022, four customers each individually accounted for 12%, 14%, 16% and 22% of total accounts receivable, respectively.

The Company markets financial and turn-key solutions to cancer treatment centers, hospitals, and large cancer networks worldwide.

The major products the Company is able to provide creative financial and turn-key services for are;

MR Guided Radiation Therapy Linacs, Advanced Linear Accelerators, Proton Beam Therapy systems, Brachytherapy systems, and through our GK Financing partnership with Elekta, the Leksell Gamma Knife product and services.

The Company is product agnostic and works with all major OEMs to provide financial solutions to the end users for the products and services they desire. 

 The Company has enhanced and expanded its sales and marketing team and efforts to better provide sales and customer service to the healthcare community.

The Company’s CEO manages directly the day to day operations as well as all sales, marketing, and customer service teams to ensure close contact with the Company’s customer installed base and management of the sales pipeline.

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

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

The Company is product agnostic and works with all major OEMs to provide financial solutions to the end users for the products and services they desire.

The Company has enhanced and expanded its sales and marketing team and efforts to better provide sales and customer service to the healthcare community.

The Company’s CEO manages directly the day to day operations as well as all sales, marketing, and customer service teams to ensure close contact with the Company’s customer installed base and management of the sales pipeline.

The major advantages to a health care provider in contracting with the Company for its financial and turn-key services include:

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

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

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

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

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

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

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

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

▪The Company provides planning, installation, operating and marketing assistance and support to its customers as well as providing turnkey solutions if room modifications, new vault, or even a new cancer care facility is needed by working with creditable and reputable construction companies.

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

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

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

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

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

▪The Company provides planning, installation, operating and marketing assistance and support to its customers as well as providing turn-key solutions if room modifications, new vault, or even a new cancer care facility is needed by working with credible and reputable construction companies.

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

(“Fifth Third”), which refinanced its existing domestic Gamma Knife portfolio.

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

The Credit Agreement includes a $7,000,000 revolving line of credit that the Company has not drawn on as of December 31, 2022. The Credit Agreement is 48% amortized over a 58-month  period with a balloon payment upon maturity and is 

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

The Company’s Gamma Knife unit in Ecuador is financed with United States 

Development Finance Corporation (“DFC”) .

See Note 5 - Long Term Debt to the consolidated financial statements for additional information.

The Credit Agreement includes a $7,000,000 revolving line of credit (the “Revolving Line”) available for future projects and general corporate purposes.

The Company borrowed $2,500,000 on the Revolving Line as of December 31, 2023, which was paid off in January 2024.

The Credit Agreement is 48% amortized over a 58-month period with a balloon payment upon maturity and is secured by a lien on substantially all of the assets of the Company and certain of its domestic subsidiaries.

On January 25, 2024 (the “First Amendment Effective Date”), the Company entered into a First Amendment to the Credit Agreement (the “First Amendment”) which amended the Credit Agreement to add a new term loan in the aggregate principal amount of $2,700,000 (the “Supplemental Term Loan”).

The proceeds of the Supplemental Term Loan were advanced in a single borrowing on January 25, 2024, and were used to finance capital expenditures that the Company paid cash for during 2023 towards its operations in Puebla, Mexico and other related transaction costs.

The Supplemental Term Loan will mature on January 25, 2030 (the “Maturity Date’).

Interest on the Supplemental Term Loan is payable monthly during the initial twelve-month period following the First Amendment Effective Date.

Following such twelve-month period, the Company is required to make equal monthly payments of principal and interest to fully amortize the amount outstanding under the Supplemental Term Loan by the Maturity Date.

The Supplemental Term Loan is secured by a lien on substantially all of the assets of the Company and certain of its domestic subsidiaries.

The Company’s acquisition of GKCE and the Gamma Knife Esprit in Ecuador is financed by the United States International Development Finance Corporation (“DFC”).

The loan entered into with DFC in connection with the acquisition of GKCE in June 2020 (the “DFC Loan”) is secured by a lien on GKCE’s assets.

The first tranche of the DFC Loan was funded in June 2020.

In October 2023, the second tranche of the DFC Loan was funded in the amount of $1,750,000 to finance its equipment upgrade in Ecuador.

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

The amount outstanding under the second tranche of the DFC Loan is payable in 16 quarterly installments with a fixed interest rate of 7.49%.

The maturity date for the first and second tranche of the DFC Loan is December 15, 2027.

The DFC Loan also contains customary covenants and representations which the Company’s wholly-owned subsidiary, HoldCo, was not in compliance with as of December 31, 2023.

On March 28, 2024, the Company obtained a waiver from DFC for the covenant noncompliance as of December 31, 2023.

See Note 5 - Long Term Debt to the consolidated financial statements and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Long-Term Debt for additional information.

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

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

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

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

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

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

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

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

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

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

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

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

and Mitsubishi Electric Corp.

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

The Company has purchased one MEVION S250.

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

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

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

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

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

The Company believes the business model it has developed for use in its stereotactic radiosurgery equipment and advanced radiation therapy placements can be tailored for the PBRT market segment.

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

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

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

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

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

GOVERNMENT PROGRAMS

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

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

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

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

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

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

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

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

If the RO APM had not been delayed, it would have significantly altered CMS’

payment methodology from a fee for service paradigm to a set reimbursement by cancer type methodology for radiation services provided within a 90 day episode of care.

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

On September 29, 2020, CMS published a final rule that would have implemented a new mandatory payment model for radiation oncology services delivered to certain Medicare beneficiaries:

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

On August 29, 2022, CMS published a final rule that delayed the start date of the RO APM to a date to be determined through future rulemaking and amended the definition of “model performance period” to provide that the start and end dates of the five-year model performance period will be established by CMS through future rulemaking.

If the RO APM had not been delayed, it would have significantly altered CMS’ payment methodology from a fee for service paradigm to a set reimbursement by cancer type methodology for radiation services provided within a 90 day episode of care.

Under the RO APM, hospital based and free-standing radiation therapy providers would have been required to participate in the model based on whether the radiation therapy provider is located within a randomly selected core-based statistical area.

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

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

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

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

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

The Company's PBRT center was not selected for inclusion in the RO APM.

Medicare reimbursement in 2023 for the most commonly used PBRT delivery codes increased by approximately 3.2% and 0.2% and decreased by approximately 3.2% for Gamma Knife.

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

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

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

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

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

The average Medicare reimbursement delivery rate trends from 2021 to 2023 are outlined below:

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

If a start date for the RO APM is proposed, CMS will provide at least six months’ notice in advance of the proposed start date, and the proposed start date will be subject to public comment.

The average Medicare reimbursement delivery rate trends from 2022 to 2024 are outlined below:

Average Medicare Reimbursement Delivery Rate Trends - Gamma Knife

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Affordable Care Act and Subsequent Regulation

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

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

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

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The repeal of the Affordable Care Act’s individual mandate requirement pursuant to the Tax Cuts and Jobs Act of 2017 could results in a decrease in the number of insured patients seeking Gamma Knife or radiation therapy treatment.

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

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

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

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

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

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

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

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

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

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

On June 17, 2021, the Supreme Court of the United States ruled on appeal that the plaintiffs lacked standing to challenge the individual mandate and its severability from the Affordable Care Act.

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

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

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

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

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

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

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

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

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

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

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

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

The term “designated health services”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

or “qui tam”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The licensing is obtained by the individual medical center operating the equipment.

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

The Company’s stand-alone clinic in in Puebla, Mexico is in the process of obtaining its user license through the Comisión Nacional de Seguridad Nuclear y Salvaguardias (CNSNS).

The Company believes it is in substantial compliance with the various rules and regulations that affect its businesses.

INSURANCE AND INDEMNIFICATION

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

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

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

The Company 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.

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HUMAN CAPITAL RESOURCES

At December 31, 2022, the Company had a workforce of ten people on a full-time basis and one person on a temporary basis in the United States, thirteen people on a full-time basis in Lima, Peru, a nd five people on a full-time basis in Guayaquil, Ec uador.

At December 31, 2023, the Company had a workforce of thirteen people on a full-time basis in the United States, thirteen people on a full-time basis in Lima, Peru, a nd five people on a full-time basis in Guayaquil, Ec uador.

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

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Chief Executive Officer

President and Chief Financial Officer

Stachowiak was appointed the Executive Chairman of the Board of the Company on March 7, 2023. 

Stachowiak previously served as Chief Executive Officer of the Company from October 1, 2020 to March 7, 2023 and as Interim President and Chief Executive Officer effective as of May 4, 2020 through September 30, 2020.

Chief Financial Officer

Stachowiak was appointed the Executive Chairman of the Board of the Company on March 7, 2023.

Stachowiak previously served as Chief Executive Officer of the Company from October 1, 2020 to March 7, 2023 and as Interim President and Chief Executive Officer effective as of May 4, 2020 through September 30, 2020.

Stachowiak joined the Board in 2009.

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He is a Certified Public Accountant (inactive), Certified Internal Auditor (inactive) and holds a Certification in Production and Inventory Management.

Peter Gaccione was appointed the Chief Executive Officer of the Company on March 7, 2023. 

Gaccione previously served 

as C hief Operating Officer of the Company from September 2022 through March 2023.

Peter Gaccione was appointed the Chief Executive Officer of the Company on March 7, 2023.

Gaccione previously served as C hief Operating Officer of the Company from September 2022 through March 2023.

He joined the Company in September 2022 and has over 40 years of experience in the global Radiation Oncology and Imaging business.

Most recently, Mr.

Gaccione served as President and a Member of the Executive Management Board of Myocardial Solutions Inc., a medical technology company in the cardiology and cardio-oncology field, where he led the product commercialization, sales, marketing development, and clinical teams.

Gaccione served as President and a Member of the Executive Management Board of Myocardial Solutions Inc., a medical technology company in the cardiology and cardio-oncology field, where he led the product commercialization, sales, marketing development, and clinical teams.

Prior to that, Mr.

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(Mexico), as well as Executive Vice President of Elekta North and Latin America Regions and a Member of the Elekta AB Global Executive Management team from June 2017 to February 2020.

Tagawa serves as the President and Chief Financial Officer. Mr.

Tagawa was also the Chief Operating Officer from February 1999 through September 2022.

Tagawa assumed the title of President on October 1, 2020. Mr.

Taga wa has served as Chief Financial Officer from January 1992 through October 1995 and May 1996 to the present.

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

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

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

Tagawa has served as the President of the Company since October 1, 2020.

Tagawa was also Chief Operating Officer from February 1999 through September 2022.

Taga wa also served as Chief Financial Officer from January 1992 through October 1995 and from May 1996 to April 2023.

Previously a Vice President in such capacity, Mr.

Tagawa became a Senior Vice President on February 28, 1993.

He is also the Chief Executive Officer and manager of GKF.

From September 1988 through January 1992, Mr.

Tagawa served in various positions with the Company.

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

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from Cornell University.

Robert Hiatt has served as the Chief Financial Officer of the Company since April 17, 2023.

Hiatt was previously the Chief Financial Officer of AmeriCash Loans, a consumer finance company from October 2007 to December 2022.

While at AmeriCash Loans, Mr.

Hiatt was responsible for leading the finance team including internal financial reporting, external audit and tax coordination and debt management.

From August 2003 to July 2007, Mr.

Hiatt served as the Executive Vice President and Chief Financial Officer of United Financial Mortgage Corp, a provider of residential mortgages.

Prior to that, Mr.

Hiatt was Vice President Finance and Chief Accounting Officer of Novamed, Inc., an operator of ambulatory surgery centers, from September 1997 to August 2003.

Hiatt received his Bachelor’s of Science in Accountancy from Miami University.

AVAILABLE INFORMATION

Our Internet address is www.ashs.com .

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

tab in the “Corporate”

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

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

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

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

What changed 10-K

Item 1. Business