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Item 1. Financial Statements

2024-08-14 compared with 2024-05-15 · 372 added, 201 removed, 568 unchanged (50% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2024

June 30, 2024

December 31, 2023

4 unchanged sentences

250,000 118,000

Accounts receivable, net of allowance for credit losses of $ 100,000 at March 31, 2024 and at December 31, 2023

Accounts receivable, net of allowance for credit losses of $ 100,000 at June 30, 2024 and at December 31, 2023

8,606,000 4,343,000

1 unchanged sentence

991,000 504,000

Due from expired customer contract

Prepaid maintenance

24 unchanged sentences

608,000 1,961,000

Asset retirement obligations, related party (includes $ 250,000 non-related party at March 31, 2024 and December 31, 2023)

Asset retirement obligations, related party (includes $ 271,000 and $ 250,000 non-related party at June 30, 2024 and December 31, 2023)

1,338,000 650,000

Income taxes payable

1,180,000 1,229,000

Current portion of lease liabilities

6 unchanged sentences

13,336,000 10,779,000

Long-term lease liabilities, less current portion

Long-term debt, net, less current portion

7 unchanged sentences

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

Issued and outstanding shares - 6,330,000 at March 31, 2024 and 6,300,000 at December 31, 2023)

Issued and outstanding shares - 6,360,000 at June 30, 2024 and 6,300,000 at December 31, 2023)

10,763,000 10,763,000

14 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Rental revenue from medical equipment leasing

18 unchanged sentences

385,000 277,000 734,000 548,000

Operating (loss) income

Loss on write down of impaired assets and associated removal costs, net

188,000 578,000 188,000 578,000

Operating (loss)

( 1,000 ) ( 325,000 ) ( 86,000 ) ( 227,000 )

Bargain purchase gain RI Acquisition, net of deferred income taxes of $ 1,226,000

3,679,000 - 3,679,000 -

Interest and other income, net

59,000 113,000 165,000 183,000

Income before income taxes

Income (loss) before income taxes

3,737,000 ( 212,000 ) 3,758,000 ( 44,000 )

Income tax (benefit) expense

Income tax expense (benefit)

( 31,000 ) ( 35,000 ) ( 75,000 ) 33,000

Net income (loss)

3,768,000 ( 177,000 ) 3,833,000 ( 77,000 )

Net loss attributable to non-controlling interests

net (income) loss attributable to non-controlling interests

( 166,000 ) 66,000 ( 112,000 ) 154,000

Net income attributable to American Shared Hospital Services

Net income (loss) attributable to American Shared Hospital Services

$ 3,602,000 $ ( 111,000 ) $ 3,721,000 $ 77,000

Net income per share:

Income per common share - basic

Net income (loss) per share:

Income (loss) per common share - basic

$ 0.56 $ ( 0.02 ) $ 0.58 $ 0.01

Income per common share - diluted

Income (loss) per common share - diluted

$ 0.55 $ ( 0.02 ) $ 0.57 $ 0.01

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2024 AND 2023

FOR THE THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 2024 AND 2023

Common Shares Common Stock Additional Paid-in Capital Retained Earnings

9 unchanged sentences

6,184,000 10,763,000 7,939,000 3,207,000 21,909,000 3,912,000 25,821,000

Stock-based compensation expense

- - 97,000 - 97,000 - 97,000

Vested restricted stock awards

30,000 - - - - - -

- - - ( 111,000 ) ( 111,000 ) ( 66,000 ) ( 177,000 )

Balances at June 30, 2023

6,214,000 $ 10,763,000 $ 8,036,000 $ 3,096,000 $ 21,895,000 $ 3,846,000 $ 25,741,000

Balances at January 1, 2024

12 unchanged sentences

6,330,000 10,763,000 8,330,000 3,748,000 22,841,000 3,544,000 26,385,000

Stock-based compensation expense

- - 99,000 - 99,000 - 99,000

Vested restricted stock awards

30,000 - - - - - -

RI Acquisition non-controlling interests

- - - - - 2,100,000 2,100,000

- - - 3,602,000 3,602,000 166,000 3,768,000

Balances at June 30, 2024

6,360,000 $ 10,763,000 $ 8,429,000 $ 7,350,000 $ 26,542,000 $ 5,810,000 $ 32,352,000

See accompanying notes

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities:

Net income (loss)

$ 3,833,000 $ ( 77,000 )

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

Adjustments to reconcile net income (loss) to net cash from operating activities:

Depreciation, amortization, and other

2,857,000 2,609,000

Loss on write down of impaired assets and associated removal costs, net

188,000 578,000

Accretion of debt issuance costs

58,000 37,000

Bargain purchase gain RI Acquisition, net of deferred income taxes

( 3,679,000 ) -

Non cash lease expense

7 unchanged sentences

977,000 1,230,000

Asset retirement obligations, related party

Related party liabilities

3 unchanged sentences

Income taxes payable

( 1,229,000 ) -

Lease liabilities

3 unchanged sentences

Investing activities:

Payment for RI Acquisition, net of cash received

Payment for purchases of property and equipment

10 unchanged sentences

Principal payments on short-term financing

- ( 152,000 )

Capital contribution non-controlling interests

16 unchanged sentences

$ 524,000 $ -

Non-controlling interest RI Acquisition

$ 2,100,000 $ -

Changes to asset removal obligations, net

$ 688,000 $ -

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

9 unchanged sentences

Basis of Presentation

In the opinion of the management of American Shared Hospital Services (“ASHS”), the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for the fair presentation of ASHS consolidated financial position as of March 31, 2024 , the results of its operations for the three -month periods ended March 31, 2024 and 2023 , and the cash flows for the three -month periods ended March 31, 2024 and 2023 .

The results of operations for the three -month periods ended March 31, 2024 are not necessarily indicative of results on an annualized basis.

In the opinion of the management of American Shared Hospital Services (“ASHS”), the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for the fair presentation of ASHS consolidated financial position as of June 30, 2024 , the results of its operations for the three and six -month periods ended June 30, 2024 and 2023 , and the cash flows for the six -month periods ended June 30, 2024 and 2023 .

The results of operations for the three and six -month periods ended June 30, 2024 are not necessarily indicative of results on an annualized basis.

Consolidated balance sheet amounts as of December 31, 2023 have been derived from the audited consolidated financial statements.

4 unchanged sentences

(“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.

ASHS is the majority owner of Southern New England Regional Cancer Center (“SNERCC”), Roger Williams Radiation Therapy, LLC (“RWRT”) and Long Beach Equipment, LLC (“LBE”);

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

(“GKPeru”) and HoldCo GKC S.A.

HoldCo wholly owns the subsidiary Gamma Knife Center Ecuador S.A.

ASHS-Mexico is the majority owner of AB Radiocirugia y Radioterapia de Puebla, S.A.P.I.

of Puebla (“Puebla”).

GKF is the majority owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”).

The Company (through ASRS) and Elekta AB (“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.

As of March 31, 2024 , GKF provides Gamma Knife units to ten medical centers in the United States in the states of Florida, Illinois, Indiana, Mississippi, Nebraska, New Mexico, New York, Ohio, Oregon, and Texas.

As of June 30, 2024 , GKF provides Gamma Knife units to ten medical centers in the United States in the states of 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.

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 SNERCC and RWRT, (collectively, the “RI Companies”) and to assign certain payor contacts to the Company for a purchase price of $ 2,850,000 (such transaction, the “RI Acquisition”).

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

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

The parties completed the remaining closing conditions pursuant to the IPA and closed the RI Acquisition on May 7, 2024.

Accordingly, activity from May 7, 2024 forward is included in the condensed consolidated financial statements.

See Note 11 - Rhode Island Acquisition to the condensed consolidated financial statements for further information.

On June 28, 2024, ASHS-Mexico, S.A.P.I.

signed a Joint Venture Agreement with Hospital San Javier, S.A.

(“HSJ”) to establish Newco to treat public- and private-paying cancer patients and provide radiosurgery services in Guadalajara, Mexico.

The Company and HSJ will hold 70 % and 30 % ownership interests, respectively, in Newco.

Under the agreement, the Company is responsible for upgrading HSJ’s existing Gamma Knife Perfexion system to a Gamma Knife Esprit and paying 50% of all site modification costs required to install the Esprit.

The Company does not expect that Newco will begin treating patients until the first half of 2025.

On April 27, 2022, the Company signed a Joint Venture Agreement with the principal owners of 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 and provide radiation therapy and radiosurgery services locally in Mexico.

(“Guadalupe”) to establish Puebla to treat public- and private-paying cancer patients and provide radiation therapy and radiosurgery services in Guadalupe, Mexico.

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

1 unchanged sentence

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 during the three -month period ended March 31, 2024 by Puebla, are included in the condensed consolidated statement of operations.

The Company formed the subsidiaries GKPeru and Puebla and acquired GKCE for the purposes of expanding its business internationally;

Puebla was formed on December 15, 2022 and began treating patients in July 2024.

Operating costs incurred during the three and six -month periods ended June 30, 2024 by Puebla, are included in the condensed consolidated statement of operations.

The Company formed the subsidiaries GKPeru, Puebla, 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;

6 unchanged sentences

This subsidiary is not operational at this time.

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”) and to assign certain payor contacts to the Company 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 was 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 (the “Permitted Termination Date”) from March 10, 2024 to April 30, 2024.

On April 18, 2024, the parties agreed to a Second Amendment to the Investment Agreement pursuant to which GenesisCare agreed to sell a Discovery RT OPEN OC Mid CTM to the Company for $ 175,000 , payment for which is required 5 days following the close of the acquisition.

On April 24 2024, the Company, GenesisCare and GC Holdings, entered into a Third Amendment to the Investment Agreement that further extended the Permitted Termination Date to May 31, 2024.

On May 7, 2024, the parties entered into a Fourth Amendment to the Investment Purchase Agreement, pursuant to which GenesisCare agreed to transfer certain assets and payor contracts to the RI Target Companies, rather than transferring such assets and payor contracts to the Company.

The parties completed the remaining closing conditions pursuant to the IPA and closed the RI Acquisition on May 7, 2024.

The RI acquisition will be accounted for as a business combination under ASC 805 Business Combinations, which requires, among other things, that purchase consideration, assets acquired, and liabilities assumed be measured at their fair values as of the acquisition date.

The initial purchase allocation for the business combination is incomplete at this time, subject to initial accounting.

Disclosures regarding amounts recognized for major classes of assets acquired and liabilities assumed will be provided once the initial accounting is completed.

Costs related to legal, financial and due diligence services performed in connection with the RI Acquisition recorded in selling and administrative expense in the condensed consolidated statement of operations were $ 322,000 for three -month period ended March 31, 2024 .

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

Accounting pronouncements issued and not yet adopted - In November 2023, the FASB issued ASU 2023 - 07 Segment Reporting (Topic 280 ):

Accounting pronouncements issued and not yet adopted - In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023 - 07 Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures (“ASU 2023 - 07” ) which enhances the disclosure requirements for segment reporting, primarily disclosures around significant segment expenses.

17 unchanged sentences

The operating costs and estimated net operating profit are recorded as other direct operating costs in the condensed consolidated statements of operations.

For the three -month periods ended March 31, 2024 and 2023 , the Company recognized leasing revenue of approximately $ 4,253,000 and $ 4,229,000 of which approximately $ 2,649,000 and $ 2,314,000 were for PBRT services, respectively.

For the three and six -month periods ended June 30, 2024 , the Company recognized leasing revenue of approximately $ 3,899,000 and $ 8,152,000 compared to $ 4,812,000 and $ 9,041,000 for the same periods in the prior year, respectively.

Of the ASC 842 revenue, for the three and six -month periods ended June 30, 2024 , approximately $ 2,420,000 and $ 5,069,000 were for PBRT services, compared to $ 2,545,000 and $ 4,859,000 for the same periods in the prior year, respectively.

Direct patient services income ( “ retail ”) – The Company has stand-alone facilities in Lima, Peru and Guayaquil, Ecuador, where contracts exist between the Company’s facilities and the individual patients treated at the facility.

5 unchanged sentences

The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts.

Accounts receivable balances under ASC 606 at March 31, 2024 and January 1, 2024 were $ 1,882,000 and $ 1,626,000 , respectively.

Accounts receivable balances under ASC 606 at March 31, 2023 and January 1, 2023 were $ 1,058,000 and $ 1,021,000 , respectively.

For the three -month periods ended March 31, 2024 , the Company recognized revenues of approximately $ 963,000 and $ 696,000 under ASC 606, respectively.

On May 7, 2024, the Company acquired 60 % of the interests of the RI Companies.

The RI Companies operate three, existing, stand-alone radiation therapy cancer centers in Woonsocket, Warwick and Providence, Rhode Island, where contracts exist between the Company’s facilities and the individual patients treated at the facility.

Under ASC 606, the Company acts as the principal in these transactions and provides, at a point in time, a single performance obligation, in the form of radiation therapy treatment.

Revenue related to radiation therapy is recognized at the expected amount to be received, based on insurance contracts and payor mix, 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.

Payment terms at these facilities are typically prepaid for self-pay patients and insurance providers are paid net 30 to 60 days.

The Company expects to capitalize customer acquisition costs, incremental costs related to its customer contracts.

The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts.

The Company also concluded the three facilities are part of its retail segment, see further discussion below.

Accounts receivable balances under ASC 606 at June 30, 2024 and January 1, 2024 were $ 4,558,000 and $ 1,626,000 , respectively.

Accounts receivable balances under ASC 606 at June 30, 2023 and January 1, 2023 were $ 980,000 and $ 1,118,000 , respectively.

For the three and six -month periods ended June 30, 2024 , the Company recognized retail revenues of approximately $ 3,157,000 and $ 4,120,000 compared to $ 756,000 and $ 1,452,000 for the same periods in the prior year, respectively.

Business Combinations - Business combinations are accounted for under ASC 805 Business Combinations (“ASC 805” ) using the acquisition method of accounting.

Under the acquisition method of accounting, all assets acquired, identifiable intangible assets, liabilities assumed and applicable non-controlling interests are recognized at fair value as of the acquisition date.

Costs incurred associated with the acquisition of a business are expensed as incurred.

The allocation of purchase price requires management to make significant estimates and assumptions, especially with respect to tangible assets, any intangible assets identified and non-controlling interests.

These estimates includes, but are not limited to, a market participant ’ s expectation of future cash flows from acquired customers, acquired trade names, useful lives of acquired assets, and discount rates.

See Note 11 - Rhode Island Acquisition to the condensed consolidated financial statements for further discussion on acquisitions.

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 providing radiosurgery and radiation therapy services, either through leasing to healthcare providers or directly to patients, and concluded there are two reportable segments, leasing and retail.

As of March 31, 2024 , the Company provided Gamma Knife and PBRT equipment to eleven hospitals in the United States and owns and operates two single-unit facilities in Lima, Peru and Guayaquil, Ecuador.

As of June 30, 2024 , the Company provided Gamma Knife and PBRT equipment to eleven hospitals in the United States, which constitutes the leasing segment.

As of June 30, 2024, the Company owns and operates two single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador and following the RI Acquisition on May 7, 2024, the Company also owns and operates three single-unit radiation therapy facilities in Rhode Island, which collectively constitute the retail segment.

An operating segment is defined by ASC 280 as it engages in business activities in which it may recognize revenues and incur expenses, its operating results are regularly reviewed by the Company’s Chief Operating Decision Maker (“CODM”), and its discrete financial information is available.

1 unchanged sentence

The operating results of the two reportable segments are reviewed by the Company’s Executive Chairman of the Board and Chief Executive Officer, who is also the CODM.

For the three -month period ended March 31, 2024 , the Company’s PBRT operations represented a significant majority of the net income attributable to the Company, disclosed below.

The revenues, depreciation, interest expense, interest income, tax expense and net income attributable to American Shared Hospital Services for the Company’s two reportable segments as of March 31, 2024 and 2023 consist of the following:

Three Months Ended March 31,

For the six -month period ended June 30, 2024 , the Company’s PBRT operations represented a significant majority of the net income attributable to the Company, disclosed below.

Three Months Ended June 30,

Six Months Ended June 30,

$ 3,899,000 $ 4,812,000 $ 8,152,000 $ 9,041,000

8 unchanged sentences

33,000 - 66,000 -

$ 385,000 $ 277,000 $ 734,000 $ 548,000

Interest income

12 unchanged sentences

Property and equipment are stated at cost less accumulated depreciation.

Depreciation for Gamma Knife units 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 between three and ten years, and after accounting for salvage value on the equipment where indicated.

Depreciation for Gamma Knife equipment, LINAC units 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 between three and ten years, and after accounting for salvage value on the equipment where indicated.

The Company determines salvage value based on the estimated fair value of the equipment at the end of its useful life.

2 unchanged sentences

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

The following table summarizes property and equipment as of March 31, 2024 and December 31, 2023 :

The following table summarizes property and equipment as of June 30, 2024 and December 31, 2023 :

Medical equipment and facilities

11 unchanged sentences

$ 5,760,000 $ 6,174,000

Depreciation expense in the condensed consolidated statements of operations for the three -month periods ended March 31, 2024 and 2023 is as follows:

Depreciation expense in the condensed consolidated statements of operations for the three and six -month periods ended June 30, 2024 and 2023 is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Depreciation expense

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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 Company borrowed $ 2,400,000 on the Revolving Line as of March 31, 2024 , which was paid off in April 2024.

The facilities have a five -year maturity and carry a floating interest of SOFR 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 borrowed $ 3,950,000 on the Revolving Line as of June 30, 2024 , which was paid off in July 2024.

The facilities have a five -year maturity and carry a floating interest of based on the Secured Overnight Financing Rate (“SOFR”) plus 3.0 % and are secured by a lien on substantially all of the assets of the Loan Parties and guaranteed by ASHS.

On January 25, 2024 ( the “First Amendment Effective Date”), the Company and Fifth Third entered into a First Amendment to 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”).

6 unchanged sentences

Pursuant to the First Amendment, advances under the Credit Agreement bear interest at a floating rate per annum equal to SOFR plus 3.00 %, subject to a SOFR floor of 0.00 %.

The long-term debt on the condensed consolidated balance sheets related to the Term Loan and DDTL was $ 13,525,000 and $ 10,825,000 as of March 31, 2024 and December 31, 2023 , respectively.

The Company capitalized debt issuance costs of $ 97,000 as of March 31, 2024 related to issuance of the Supplemental Term Loan.

The long-term debt on the condensed consolidated balance sheets related to the Term Loan and DDTL was $ 13,150,000 and $ 10,825,000 as of June 30, 2024 and December 31, 2023 , respectively.

The Company capitalized debt issuance costs of $ 97,000 as of June 30, 2024 related to issuance of the Supplemental Term Loan.

The Credit Agreement contains customary covenants and representations, including without limitation, a minimum fixed charge coverage ratio of

3 unchanged sentences

The Loan Parties are in compliance with the Credit Agreement covenants as of

March 31, 2024 .

June 30, 2024 .

The loan entered into with United States International Development Finance Corporation (“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.

4 unchanged sentences

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 long-term debt on the condensed consolidated balance sheets related to the DFC Loan was $ 2,299,000 and $ 2,464,000 as of March 31, 2024 and December 31, 2023 , respectively.

The Company capitalized debt issuance costs of $ 0 and $ 9,000 as of March 31, 2024 and December 31, 2023 , respectively, related to maintenance and administrative fees on the DFC Loan.

The long-term debt on the condensed consolidated balance sheets related to the DFC Loan was $ 2,135,000 and $ 2,464,000 as of June 30, 2024 and December 31, 2023 , respectively.

The Company capitalized debt issuance costs of $ 0 and $ 9,000 as of June 30, 2024 and December 31, 2023 , respectively, related to maintenance and administrative fees on the DFC Loan.

The DFC Loan contains customary covenants including without limitation, requirements that HoldCo maintain certain financial ratios related to liquidity and cash flow as well as depository requirements.

On March 28, 2024 the HoldCo received a waiver and amendment from DFC for certain covenants as of December 31, 2023 and through December 31, 2024 and amended other covenants and definitions permanently.

HoldCo was in compliance with all debt covenants pursuant to the DFC Loan as amended and waived at March 31, 2024 .

The accretion of debt issuance costs for the three -month periods ended March 31, 2024 and 2023 was $ 38,000 and $ 18,000 , respectively.

As of March 31, 2024 and December 31, 2023 , the unamortized deferred issuance costs on the consolidated balance sheet was $ 222,000 and $ 164,000 , respectively.

As of March 31, 2024 , long-term debt on the condensed consolidated balance sheets was $ 15,602,000 .

The following are contractual maturities of long-term debt as of March 31, 2024 , excluding deferred issuance costs of $ 222,000 :

HoldCo was in compliance with all debt covenants pursuant to the DFC Loan as amended and waived at June 30, 2024 .

The accretion of debt issuance costs for the three and six -month periods ended June 30, 2024 was $ 20,000 and $ 58,000 compared to $ 19,000 and $ 37,000 for the same periods in the prior year, respectively.

As of June 30, 2024 and December 31, 2023 , the unamortized deferred issuance costs on the consolidated balance sheet was $ 202,000 and $ 164,000 , respectively.

As of June 30, 2024 , long-term debt on the condensed consolidated balance sheets was $ 15,083,000 .

The following are contractual maturities of long-term debt as of June 30, 2024 , excluding deferred issuance costs of $ 202,000 :

Year ending December 31,

2024 (excluding the three-months ended March 31, 2024)

2024 (excluding the six-months ended June 30, 2024)

Other Accrued Liabilities

Other accrued liabilities consist of the following as of March 31, 2024 and December 31, 2023 :

Other accrued liabilities consist of the following as of June 30, 2024 and December 31, 2023 :

Professional services

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The Company also entered into a lease agreement (the “Lease”) 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.

On May 7, 2024, the Company completed the RI Acquisition and acquired 60 % of the equity interests of the RI Companies.

The RI Companies operate three single-unit LINAC facilities.

The Company assessed the existing lease agreements under ASC 842 and concluded two of the three facilities contained operating leases.

The Company included these leases in its presentation of the condensed consolidated financial statements for the three and six -month periods ended June 30, 2024 .

The Company’s operating lease in Woonsocket is with a related party and contains a sublease for a 1,950 square feet of the clinic space.

The sublease is also with a related party.

Sublease income, related party, for the three and six -month periods ended June 30, 2024 was $ 9,000 .

Rent payable to related parties was approximately $50,000 as of June 30, 2024 .

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

4 unchanged sentences

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 of approximately 8 months, some of which include options to renew or extend the lease.

As of March 31, 2024 , operating ROU assets and lease liabilities were $ 36,000 .

The following table summarizes the maturities of the Company's lessee operating lease liabilities as of March 31, 2024 :

The Company’s lessee operating lease agreements are for administrative office space and related equipment and two of its recently acquired stand-alone facilities in Rhode Island.

These leases have remaining lease terms of approximately 5 to 17 years, some of which include options to renew or extend the lease.

As of June 30, 2024 , operating ROU assets, net of unfavorable leasehold interests were $ 631,000 , and lease liabilities were $ 1,857,000 .

The following table summarizes the maturities of the Company's lessee operating lease liabilities as of June 30, 2024 :

Year ending December 31,

Operating Leases

2024 (excluding the three-months ended March 31, 2024)

2024 (excluding the six-months ended June 30, 2024)

Total lease payments

Less imputed interest

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease cost

$ 14,000 $ 103,000 $ 35,000 $ 206,000

Sublease income

Sublease income, related party

( 9,000 ) ( 49,000 ) ( 9,000 ) ( 99,000 )

Total lease cost

4 unchanged sentences

Weighted-average remaining lease term - Operating leases in years

8.38 0.92 8.38 0.92

Weighted-average discount rate - Operating leases

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The Company calculates diluted shares using the treasury stock method.

The computation for the three -month periods ended March 31, 2024 and 2023 excluded approximatel y 138,000 and 6 ,000, respectively, of the Company’s stock options b ecause the exercise price of the options was higher than the average market price during the period.

The weighted average common shares outstanding for basic earnings per share for the three -month periods ended March 31, 2024 and 2023 included approximately 123,000 and 123,000 , respectively, of the Company's restricted stock awards that are fully vested but are deferred for issuance.

The following table sets forth the computation of basic and diluted earnings per share for the three -month periods ended March 31, 2024 and 2023 :

Three Months Ended March 31,

Net income attributable to American Shared Hospital Services

The computation for the three and six -month periods ended June 30, 2024 excluded approximatel y 20,000 of the Company’s stock options b ecause the exercise price of the options was higher than the average market price during the periods.

The computation for the six -month period ended June 30, 2023 excluded approximately 64,000 of the Company’s stock options because the price of the options was higher than the average market price during the period.

Because the Company reported a loss for the three -month period ended June 30, 2023, the potentially dilutive effects of approximately 82,000 of the Company’s stock options and 121,000 of the Company’s unvested restricted stock awards were not considered for the reporting period.

The weighted average common shares outstanding for basic earnings per share for the three and six -month periods ended June 30, 2024 and 2023 included approximately 123,000 and 123,000 , respectively, of the Company's restricted stock awards that are fully vested but are deferred for issuance.

The following table sets forth the computation of basic and diluted earnings per share for the three and six -month periods ended June 30, 2024 and 2023 :

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss) attributable to American Shared Hospital Services

$ 3,602,000 $ ( 111,000 ) $ 3,721,000 $ 77,000

Weighted average common shares for basic earnings per share

Weighted average common shares for basic earnings (loss) per share

6,482,000 6,336,000 6,467,000 6,336,000

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101,000 - 97,000 129,000

Weighted average common shares for diluted earnings per share

Weighted average common shares for diluted earnings (loss) per share

6,583,000 6,336,000 6,564,000 6,465,000

Basic earnings per share

Basic earnings (loss) per share

$ 0.56 $ ( 0.02 ) $ 0.58 $ 0.01

Diluted earnings per share

Diluted earnings (loss) per share

$ 0.55 $ ( 0.02 ) $ 0.57 $ 0.01

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The estimated fair value of the Company’s options is expensed over the period during which an employee is required to provide service in exchange for the award (requisite service period), usually the vesting period.

Accordingly, stock-based compensation cost before income tax effect for the Company’s options and restricted stock awards in the amo unt of $ 98,000 and $ 96,000 for the three -month periods ended March 31, 2024 and 2023 , respectively, is reflected in selling and administrative expense in the condensed consolidated statements of operations.

For the three -month period ended March 31, 2024 , there was approximately $ 146,000 o f unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the Plan.

Accordingly, stock-based compensation cost before income tax effect for the Company’s options and restricted stock awards in the amo unt of $ 99,000 and $ 197,000 for the three and six -month periods ended June 30, 2024 and $ 97,000 and $ 193,000 for the three and six -month periods ended June 30, 2023 , respectively, is reflected in selling and administrative expense in the condensed consolidated statements of operations.

For the six -month period ended June 30, 2024 , there was approximately $ 28,000 o f unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the Plan.

This cost is expected to be recognized over a period of approximately four years.

The following table summarizes stock option activity for the three -month periods ended March 31, 2024 and 2023 :

The following table summarizes stock option activity for the six -month periods ended June 30, 2024 and 2023 :

Stock Options

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146,000 $ 2.83 5.44 $ -

Outstanding at March 31, 2024

( 84,000 ) $ 2.87 - $ -

Exercisable at March 31, 2024

Outstanding at June 30, 2024

62,000 $ 2.76 2.81 $ 28,000

Exercisable at June 30, 2024

42,000 $ 2.76 1.57 $ -

Outstanding at January 1, 2023

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( 19,000 ) $ 2.69 - $ -

Outstanding at March 31, 2023

Outstanding at June 30, 2023

146,000 $ 2.80 5.76 $ -

Exercisable at March 31, 2023

Exercisable at June 30, 2023

20,000 $ 2.92 2.67 $ -

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A small change in estimated annual pretax income can produce a significant variance in the annualized effective income tax rate given the expected amount of these items.

As a result, the Company has computed its provision for income taxes for the three -month periods ended March 31, 2024 and 2023 by applying the actual effective tax rates to income or reported within the condensed consolidated financial statements through those periods.

The provision for income taxes for the three -month period ended March 31, 2024 included a non-recurring adjustment for unrecognized tax benefits related to foreign taxes of $ 100,000 which offset income tax expense for the same period.

As of March 31, 2024 , the Company had commitments to purchase and install two Leksell Gamma Knife Esprit Systems (“Esprit”), one Gamma Plan workstation, one Linear Accelerator (“LINAC”) system, and one Magnetic Resonance imaging guided LINAC (“MR LINAC”).

The LINAC, MR LINAC and one Esprit will be placed at future customer sites.

The remaining Esprit upgrade is scheduled to occur during 2024 at an existing customer site.

The Company also has one commitment to de-install a Gamma Knife unit at an existing customer site.

Total Gamma Knife and LINAC commitments as of March 31, 2024 were $ 13,752,000 .

There are no deposits on the condensed consolidated balance sheets related to these commitments as of March 31, 2024 .

As a result, the Company has computed its provision for income taxes for the three and six -month periods ended June 30, 2024 and 2023 by applying the actual effective tax rates to income or reported within the condensed consolidated financial statements through those periods.

The provision for income taxes for the six -month period ended June 30, 2024 included a non-recurring adjustment for unrecognized tax benefits related to foreign taxes of $ 100,000 which offset income tax expense for the same period.

As of June 30, 2024 , the Company had commitments to purchase and install five Leksell Gamma Knife Esprit Systems (“Esprit”), one Gamma Plan workstation, and three Linear Accelerator (“LINAC”) systems.

One LINAC and one Esprit will be placed at future customer sites.

The remaining Esprit upgrades and LINACs are scheduled to occur in the later half of 2024 and 2025 at existing customer sites.

Total Gamma Knife and LINAC commitments as of June 30, 2024 were $ 15,651,000 .

There are no deposits on the condensed consolidated balance sheets related to these commitments as of June 30, 2024 .

It is the Company’s intent to finance substantially all of these commitments.

There can be no assurance that financing will be available for the Company’s current or future projects, or at terms that are acceptable to the Company.

However, the Company currently has cash on hand of $ 13,042,000 and a line of credit of $ 7,000,000 and is actively engaged with financing resources to fund these projects.

The Company borrowed $ 2,400,000 on the Revolving Line as of March 31, 2024 , which was paid off in April 2024.

September 4, 2022, the Company entered into a Maintenance and Support Agreement, which provides for maintenance and support of the Company’s PBRT unit at Orlando Health from

However, the Company currently has cash on hand of $ 14,486,000 and its Revolving Line of $ 7,000,000 and is actively engaged with financing resources to fund these projects.

The Company borrowed $ 3,950,000 on the Revolving Line as of June 30, 2024 , which was paid off in July 2024.

September 4, 2022, the Company entered into a Maintenance and Support Agreement with Mevion Medical Systems, Inc.

(“Mevion”), which provides for maintenance and support of the Company’s PBRT unit at Orlando Health from

September 2022 through

The agreement requires an annual prepayment of

The agreement requires the Company to make an annual prepayment of

$ 1,865,000 for the current contractual period (

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one -year service period.

As of March 31, 2024 , the Company had commitments to service and maintain its Gamma Knife and PBRT equipment.

As of June 30, 2024 , 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.

The Company’s commitments to purchase two LINAC systems also include a 9 -year and 5 -year agreement to service the equipment, respectively.

Total service commitments as of March 31, 2024 were $ 14,120,000 .

The Company’s commitment to purchase one LINAC system also includes a 5 -year agreement to service the equipment, respectively.

Total service commitments as of June 30, 2024 were $ 14,375,000 .

The Gamma Knife and certain other service contracts are paid monthly, as service is performed.

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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 table summarizes related party activity for the three -month periods ended March 31, 2024 and 2023 :

Three Months Ended March 31,

The Company’s operating lease in Woonsocket, Rhode Island is with a related party.

See Note 5 - Leases to the condensed consolidated financial statements for further discussion.

The following table summarizes related party activity for the three and six -month periods ended June 30, 2024 and 2023 :

Three Months Ended June 30,

Six Months Ended June 30,

Equipment purchases and de-install costs

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$ 691,000 $ 1,512,000 $ 3,277,000 $ 2,008,000

The Company also had commitments to purchase and install Gamma Knife units, purchase a LINAC and MR LINAC system and service the related equipment of $ 16,625,000 as of March 31, 2024 .

Related party liabilities on the condensed consolidated balance sheets consist of the following as of March 31, 2024 and December 31, 2023

The Company also had commitments to purchase and install five Esprit units, purchase two LINACs and service the related equipment of $ 21,479,000 as of June 30, 2024 .

Related party liabilities on the condensed consolidated balance sheets consist of the following as of June 30, 2024 and December 31, 2023

Accounts payable, asset retirement obligation and other accrued liabilities

$ 1,675,000 $ 2,361,000

Subsequent Events

On May 7, 2024, the Company completed its purchase of GenesisCare’s 60 % interest in the two RI Target Companies in accordance with the terms of the IPA.

In exchange, the Company paid a purchase price of $ 2,850,000 .

Pursuant to the Second Amendment executed on April 18, 2024, the Company paid an additional $ 175,000 to GenesisCare for a Discovery RT OPEN OC Mid CTM on May 14, 2024 .

Rhode Island Acquisition

On November 10, 2023, the Company entered into the IPA with GenesisCare and GC Holdings, pursuant to which GenesisCare agreed to sell to the Company its entire equity interest in each of the RI Companies and to assign certain payor contacts to the Company for a cash purchase price of $ 2,850,000 (such transaction, the RI Acquisition).

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

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

The Company entered into the IPA to expand its growing retail business model in the United States and continue to diversify its cancer treatment product offerings.

On March 1, 2024, the Company, GenesisCare and GC Holdings 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 (the “Permitted Termination Date”) from March 10, 2024 to April 30, 2024.

On April 18, 2024, the parties agreed to a Second Amendment to the Investment Agreement pursuant to which GenesisCare agreed to sell a GE Discovery RT CT Simulator (“CT Sim”) to the Company for $ 175,000 , payment for which was required 5 days following the close of the acquisition.

On April 24 2024, the Company, GenesisCare and GC Holdings, entered into a Third Amendment to the Investment Agreement that further extended the Permitted Termination Date to May 31, 2024.

On May 7, 2024, the parties entered into a Fourth Amendment to the Investment Purchase Agreement, pursuant to which GenesisCare agreed to transfer certain assets and payor contracts to the RI Companies, rather than transferring such assets and payor contracts to the Company.

The parties completed the remaining closing conditions pursuant to the IPA and closed the RI Acquisition on May 7, 2024 ( “the Closing Date”).

The RI acquisition has been accounted for as a business combination under ASC 805 Business Combinations (“ASC 805” ), which requires, among other things, that purchase consideration, assets acquired, liabilities assumed and non-controlling interest be measured at their fair values as of the acquisition date.

The allocation of purchase price considerations is preliminary, and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.

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

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

Thus, the provisional measurements of fair value discussed below are subject to change.

The Company expects to finalize the valuations as soon as practicable, but no later than one year from the Closing Date.

While the Company believes its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired, and the resulting amount of the bargain purchase.

The Company recorded medical equipment, facilities and non-controlling interest at fair value as of the Closing date.

Sales comparison and cost approaches were used to value the medical equipment, including assumptions of estimated direct costs associated with acquiring the equipment.

Where appropriate, adjustments were made to the direct replacement cost to reflect depreciation and obsolescence.

The sales comparison approach was also utilized to value certain assets, involving secondary market research.

The cost approach was also used to value the facilities acquired and the unfavorable leasehold interest.

The non-controlling interest was recorded at fair value based on the purchase price paid for the acquisition, after any premium or discount derived from the operating agreement with the minority owners.

The major classes of assets and liabilities to which the Company has preliminarily allocated the fair value of the purchase price consideration were as follows:

Cash and cash equivalents

Accounts receivable

Medical equipment

Unfavorable leasehold interest

( 1,227,000 )

Total assets acquired

Accounts payable

Deferred income taxes

( 1,226,000 )

Gain on bargain purchase

( 3,679,000 )

Lease liabilities

( 1,835,000 )

Base purchase consideration

Non-controlling interest

( 2,100,000 )

Cash paid by the Company

The Company recognized a bargain purchase, as defined by ASC 805, in connection with the RI Acquisition.

The Company purchased the RI Companies as part of the sale of certain of GenesisCare’s assets in its bankruptcy proceedings, resulting in a bargain purchase.

A bargain purchase gain of $ 3,679,000 , net of deferred taxes of $ 1,226,000 is reflected in other income in the condensed consolidated statements of operations for the three and six -month periods ended June 30, 2024 .

None of the purchase price was allocated to intangible assets because none were acquired as part of the transaction.

The Company recorded the unfavorable lease position received as part of the RI Acquisition as a reduction to ROU assets on the condensed consolidated balance sheet.

The preliminary value of the acquired tangible assets acquired were as follows:

Average Useful Life (in Years)

$ 4,697,000 15

Medical equipment

Total medical equipment and facilities acquired

Costs related to legal, financial and due diligence services performed in connection with the RI Acquisition recorded in selling and administrative expense in the condensed consolidated statement of operations were $ 341,000 for the six -month period ended June 30, 2024 .

The net impact of the RI Acquisition on the consolidated results of operations, since the date of acquisition, are as follows:

Three Months Ended

June 30, 2024

Operating income

Per the guidance in ASC 805, the Company determined its consolidated financial results as if the RI Acquisition occurred on January 1, 2024.

These pro forma results were based on estimates and assumptions, which the Company believes are reasonable.

They are not the results that would have been realized had the Company and the RI Companies been combined during the periods presented and are not necessarily indicative of the Company’s consolidated results of operations in future periods.

The pro forma results include adjustments related to purchase accounting.

Acquisition costs and other nonrecurring charges are included in the earlier period presented.

ASC 805 also requires presentation of proforma information for the comparable period, when the comparable period is presented.

Due to the lack of reliable financial information for the RI Companies following the protracted bankruptcy proceedings, the Company was not able to obtain financial information sufficient to make these disclosures.

Therefore, the Company has not made the comparable period proforma disclosure because it would be impracticable to do.

Following are the supplemental consolidated financial results of the Company on an unaudited, pro forma basis, as if the acquisition occurred on January 1, 2024.

The supplemental proforma disclosure excludes the non-recurring impact from the bargain purchase gain generated from the RI Acquisition.

Six Months Ended

June 30, 2024

Operating income

Diluted earnings per share

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

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Factors that could cause or contribute to such differences include, but are not limited to, such things as our level of debt, the limited market for our capital-intensive services, the impact of lowered federal reimbursement rates, the impact of U.S.

health care reform legislation, competition and alternatives to our services, technological advances and the risk of equipment obsolescence, our significant investment in the proton beam radiation therapy business, restrictions in our debt agreements that limit our flexibility to operate our business, our ability to repay our indebtedness, our ability to integrate the RI Target Companies with our existing business, breaches in security of our information technology, the small and illiquid market for our stock.

health care reform legislation, competition and alternatives to our services, technological advances and the risk of equipment obsolescence, our significant investment in the proton beam radiation therapy business, restrictions in our debt agreements that limit our flexibility to operate our business, our ability to repay our indebtedness, our ability to integrate the RI Companies with our existing business, breaches in security of our information technology, the small and illiquid market for our stock.

These lists are not all-inclusive because it is not possible to predict all factors.

Further information on potential factors that could affect the financial condition, results of operations and future plans of American Shared Hospital Services is included in the filings of the Company with the SEC, including the Annual Report on Form 10-K for the year ended December 31, 2023 and the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 25, 2024.

Any forward-looking statement speaks only as of the date such statement was made, and we are not obligated to update any forward-looking statement to reflect events or circumstances after the date on which such statement was made, except as required by applicable laws or regulations.

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The medical equipment leasing segment, which we also refer to as the Company’s leasing segment, operates by fee-per-use contracts or revenue sharing contracts where the Company shares in the revenue and operating costs of the equipment.

The Company leases ten Gamma Knife systems and one PBRT system as of March 31, 2024, where a contract exists between the hospital and the Company.

The Company leases ten Gamma Knife systems and one PBRT system as of June 30, 2024, where a contract exists between the hospital and the Company.

On May 7, 2024, the Company acquired 60% of the equity interests of the RI Companies, which operate three single-unit radiation therapy facilities in Rhode Island.

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

The Company’s facilities in Peru and Ecuador are considered direct patient services, which we also refer to as the Company’s retail segment, where a contract exists between the Company's facilities and the individual treated at the facility.

The Company’s facilities in Rhode Island, Peru, and Ecuador are considered direct patient services, which we also refer to as the Company’s retail segment, where a contract exists between the Company’s facilities and the individual treated at the facility.

Based on the guidance provided in accordance with ASC 280, the Company determined it has two reportable segments, leasing and retail.

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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.

Recent Developments

Rhode Island Acquisition

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”) and to assign certain payor contacts to the Company 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.

On April 18, 2024, the parties agreed to a Second Amendment to the Investment Agreement pursuant to which GenesisCare agreed to sell a Discovery RT OPEN OC Mid CTM to the Company for $175,000, payment for which is required 5 days following the close of the acquisition.

On April 24 2024, the Company, GenesisCare and GC Holdings, entered into a Third Amendment to the Investment Agreement that further extended the Permitted Termination Date to May 31, 2024.

On November 10, 2023, the Company entered into the IPA with GenesisCare and GC Holdings, pursuant to which GenesisCare agreed to sell to the Company its entire equity interest in each of SNERCC and RWRT, (collectively, the “RI Companies”) and to assign certain payor contacts to the Company for a purchase price of $2,850,000 (such transaction, the “RI Acquisition”).

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

The RI Companies operate three functional radiation therapy cancer centers in Rhode Island which use linear accelerators.

The parties completed the remaining closing conditions pursuant to the IPA and closed the RI Acquisition on May 7, 2024.

See Note 11 - Rhode Island Acquisition to the condensed consolidated financial statements for further information.

Joint Venture Agreement

On June 28, 2024, ASHS-Mexico, S.A.P.I.

signed a Joint Venture Agreement with Hospital San Javier, S.A.

(“HSJ”) to establish Newco to treat public- and private-paying cancer patients and provide radiosurgery services in Guadalajara, Mexico.

The Company and HSJ hold 70% and 30% ownership interests, respectively, in Newco.

The Company does not expect that Newco will begin treating patients until the first half of 2025.

Application of Critical Accounting Policies and Estimates

6 unchanged sentences

These policies along with the disclosures presented in the other condensed consolidated financial statement notes and, in this discussion, and analysis, provide information on how significant assets and liabilities are valued in the condensed consolidated financial statements and how those values are determined.

Based on the valuation techniques used and the sensitivity of financial statement amounts, and the methods, assumptions and estimates underlying those amounts, management has identified revenue recognition and costs of sales for turn-key and revenue sharing arrangements, and the carrying value of property and equipment and useful lives, and as such the aforementioned could be most subject to revision as new information becomes available.

Based on the valuation techniques used and the sensitivity of financial statement amounts, and the methods, assumptions and estimates underlying those amounts, management has identified revenue recognition and costs of sales for turn-key and revenue sharing arrangements, accounting for business combinations, and the carrying value of property and equipment and useful lives, and as such the aforementioned could be most subject to revision as new information becomes available.

The following are our critical accounting policies in which management’s estimates, assumptions and judgments most directly and materially affect the condensed consolidated financial statements:

1 unchanged sentence

The Company recognizes revenues under ASC 842 and ASC 606.

The Company had ten domestic Gamma Knife units, two international Gamma Knife units, and one PBRT system in operation in the United States as of March 31, 2024 and twelve domestic Gamma Knife units, two international Gamma Knife units, and one PBRT system in operation in the United States as of March 31, 2023.

The Company had ten domestic Gamma Knife units, two international Gamma Knife units, three domestic LINAC units, and one PBRT system in operation in the United States as of June 30, 2024 and twelve domestic Gamma Knife units, two international Gamma Knife units, and one PBRT system in operation in the United States as of June 30, 2023.

Five of the Company’s ten domestic Gamma Knife customers are under fee-per-use contracts, and five customers are under revenue sharing arrangements.

1 unchanged sentence

The Company’s PBRT system at Orlando Health is considered a revenue share contract operating under the leasing segment.

The Company’s three single-unit facilities, acquired in Rhode Island in May 2024, operate under the Company’s retail segment.

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

10 unchanged sentences

The operating costs and estimated net operating profit are recorded as other direct operating costs in the condensed consolidated statements of operations.

For the three-month periods ended March 31, 2024 and 2023, the Company recognized leasing revenue of approximately $4,253,000 and $4,229,000 of which approximately $2,649,000 and $2,314,000 were for PBRT services, respectively.

For the three and six-month periods ended June 30, 2024, the Company recognized leasing revenue of approximately $3,899,000 and $8,152,000 compared to $4,812,000 and $9,041,000 for the same periods in the prior year, respectively.

Of the ASC 842 revenue, for the three and six-month periods ended June 30, 2024, approximately $2,420,000 and $5,069,000 were for PBRT services compared to $2,545,000 and $4,859,000 for the same periods in the prior year, respectively.

5 unchanged sentences

The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts.

Accounts receivable balances under ASC 606 at March 31, 2024 and January 1, 2024 were $1,882,000 and $1,626,000, respectively.

Accounts receivable balances under ASC 606 at March 31, 2023 and January 1, 2023 were $1,058,000 and $1,021,000, respectively.

For the three-month periods ended March 31, 2024, the Company recognized revenues of approximately $963,000 and $696,000 under ASC 606, respectively.

On May 7, 2024, the Company acquired 60% of the interests of the RI Companies.

Under ASC 606, the Company acts as the principal in these transactions and provides, at a point in time, a single performance obligation, in the form of radiation therapy treatment.

Revenue related to radiation therapy is recognized at the expected amount to be received, based on insurance contracts and payor mix, 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.

Payment terms at these facilities are typically prepaid for self-pay patients and insurance providers are paid net 30 to 60 days.

The Company expects to capitalize customer acquisition costs, incremental costs related to its customer contracts.

The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts.

The Company also concluded the three radiation therapy facilities are part of its retail segment, see further discussion at Note 1 - Basis of Presentation to the condensed consolidated financial statements.

Accounts receivable balances under ASC 606 at June 30, 2024 and January 1, 2024 were $4,558,000 and $1,626,000, respectively.

Accounts receivable balances under ASC 606 at June 30, 2023 and January 1, 2023 were $980,000 and $1,118,000 , respectively.

For the three and six-month periods ended June 30, 2024, the Company recognized retail revenues of approximately $3,157,000 and $4,120,000 compared to $756,000 and $1,452,000 for the same periods in the prior year, respectively.

Salvage Value on Equipment

2 unchanged sentences

There is no active resale market of Gamma Knife or PBRT equipment, but the Company believes its salvage value estimates were a reasonable assessment of the economic value of the equipment when the contract ends.

There is no salvage value assigned to the two international Gamma Knife units as of March 31, 2024.

There is no salvage value assigned to the two international Gamma Knife units as of June 30, 2024.

The Company has not assigned salvage value to its PBRT equipment.

Business Combinations

Business combinations are accounted for under ASC 805 Business Combinations (“ASC 805”) using the acquisition method of accounting.

Costs incurred associated with the acquisition of a business are expensed as incurred.

See Note 11 - Rhode Island Acquisition to the condensed consolidated financial statements for further discussion on acquisitions.

Accounting Pronouncements Issued and N ot Y et Adopted

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The Company is currently evaluating ASU 2023-09 to determine the impact it may have on its consolidated financial statements.

First Quarter 2024 Results

Revenues increased by $291,000 to $5,216,000 for the three-month period ended March 31, 2024 compared to $4,925,000 for the same period in the prior year.

Revenues from the Company’s leasing segment increased by $24,000 to $4,253,000 for the three-month period ended March 31, 2024 compared to $4,229,000 for the same period in the prior year.

The increase in leasing revenue was driven by an increase PBRT average reimbursement, offset by lower Gamma Knife volumes.

Revenues from the Company’s retail segment increased by $267,000 to $963,000 for the three-month period ended March 31, 2024 compared to $696,000 for the same period in the prior year.

The increase in retail revenue was due to higher volumes at the Company’s international locations.

Revenues generated from the Company’s PBRT system increased by $335,000 to $2,649,000 for the three-month period ended March 31, 2024 compared to $2,314,000 for the same period in the prior year.

The increase for the three-month period ended March 31, 2024 was due to an increase in average reimbursement due to a shift in payor mix from Medicare to commercial or other payors, which are reimbursed at a higher rate.

The number of PBRT fractions decreased by 260 to 1,276 for the three-month period ended March 31, 2024 compared to 1,536 for the same period in the prior year.

The decrease in PBRT volumes for the three-month period ended March 31, 2024 was due to normal, cyclical fluctuations.

Gamma Knife revenue decreased by $44,000 to $2,567,000 for the three-month period ended March 31, 2024 compared to $2,611,000 for the same period in the prior year.

The decrease in Gamma Knife revenue for the three-month period ended March 31, 2024 was due to lower procedure volume, offset by an increase in average reimbursement at the Company’s revenue sharing locations.

The number of Gamma Knife procedures decreased by 20 to 273 for the three-month period ended March 31, 2024 compared to 293 for the same period in the prior year.

The decrease in Gamma Knife procedures for the three-month period ended March 31, 2024 was due to the expiration of two customer contracts in the second and third quarters of 2023.

Excluding the two customer contracts that expired, Gamma Knife procedures increased by 10 or 4% for the three-month period ended March 31, 2024.

Gamma Knife procedures for the Company’s leasing segment decreased by 53 for the three-month period ended March 31, 2024 due to the expiration of two customer contracts.

Gamma Knife procedures for the Company’s retail segment increased by 33 for the three-month period ended March 31, 2024 compared to the same period in the prior year, due to improved marketing and physician outreach at the Company’s international locations.

Second Quarter 2024 Results

Revenues increased by $1,488,000 and $1,779,000 to $7,056,000 and $12,272,000 for the three and six-month periods ended June 30, 2024 compared to $5,568,000 and $10,493,000 for the same periods in the prior year, respectively.

Revenues from the Company’s leasing segment decreased by $913,000 and $889,000 to $3,899,000 and $8,152,000 for the three and six-month periods ended June 30, 2024 compared to $4,812,000 and $9,041,000 for the same periods in the prior year, respectively.

The decrease in leasing revenue was driven by lower Gamma Knife and PBRT volumes.

Revenues from the Company’s retail segment increased by $2,401,000 and $2,668,000 to $3,157,000 and $4,120,000 for the three and six-month periods ended June 30, 2024 compared to $756,000 and $1,452,000 for the same periods in the prior year, respectively.

The increase in retail revenue was due to higher volumes at the Company’s international locations and the inclusion of revenue generated by the RI Companies following the closing of the RI Acquisition on May 7, 2024.

Revenues generated from the Company’s PBRT system decreased by $125,000 and increased by $210,000 to $2,420,000 and $5,069,000 for the three and six-month periods ended June 30, 2024 compared to $2,545,000 and $4,859,000 for the same periods in the prior year, respectively.

The decrease for the three-month period ended June 30, 2024, was driven by lower volumes.

The increase for the six-month period ended June 30, 2024 was due to an increase in average reimbursement due to a shift in payor mix from Medicare to commercial or other payors, which are reimbursed at a higher rate.

This increase was offset by lower volumes.

The number of PBRT fractions decreased by 134 and 394 to 1,236 and 2,512 for the three and six-month periods ended June 30, 2024 compared to 1,370 and 2,906 for the same periods in the prior year, respectively.

The decrease in PBRT volumes for the three and six-month periods ended June 30, 2024 was due to normal, cyclical fluctuations.

Gamma Knife revenue decreased by $279,000 and $323,000 to $2,744,000 and $5,311,000 for the three and six-month periods ended June 30, 2024 compared to $3,023,000 and $5,634,000 for the same periods in the prior year, respectively.

The decrease in Gamma Knife revenue for the three and six-month periods ended June 30, 2024 was due to a decrease in average reimbursement at the Company’s revenue sharing locations, offset by higher procedure volume at the Company’s international retail locations.

The number of Gamma Knife procedures increased by 31 and 11 to 340 and 613 for the three and six-month periods ended June 30, 2024 compared to 309 and 602 for the same periods in the prior year, respectively.

The increase in Gamma Knife procedures for the three and six-month periods ended June 30, 2024 was driven by the Company’s international retail locations, offset by the expiration of two leasing customer contracts in the second and third quarters of 2023.

Excluding the two customer contracts that expired, Gamma Knife procedures increased by 65 and 75 for the three and six-month periods ended June 30, 2024.

Gamma Knife procedures for the Company’s leasing segment decreased by 31 and 84 for the three and six-month periods ended June 30, 2024, compared to the same periods in the prior year, due to the expiration of two customer contracts.

Gamma Knife procedures for the Company’s retail segment increased by 62 and 95 for the three and six-month periods ended June 30, 2024, compared to the same periods in the prior year, due to improved marketing and physician outreach at the Company’s international locations.

The Company also performed a Cobalt-60 reload and upgrade of the equipment at it s site in Ecuador in the fourth quarter of 2023.

The replacement of the Cobalt-60 provides for faster treatment times.

Total costs of revenue increased by $56,000 to $3,073,000 for the three-month period ended March 31, 2024 compared to $3,017,000 for the same period in the prior year.

Maintenance and supplies and other direct operating costs, related party, decreased by $98,000 to $683,000 for the three-month period ended March 31, 2024 compared to $781,000 for the same period in the prior year.

The Company acquired the RI Companies on May 7, 2024 and included the financial results from their operations from May 7, 2024, the closing date of the transaction, through June 30, 2024.

Radiation therapy revenues generated from the three stand-alone facilities acquired through the RI Acquisition were $1,892,000 for the three and six-month periods ended June 30, 2024.

Radiation therapy procedures were 1,464 for the three and six-month periods ended June 30, 2024.

Total costs of revenue increased by $1,538,000 and $1,594,000 to $4,588,000 and $7,661,000 for the three and six-month periods ended June 30, 2024 compared to $3,050,000 and $6,067,000 for the same periods in the prior year, respectively.

Maintenance and supplies and other direct operating costs, related party, decreased by $85,000 and $183,000 to $715,000 and $1,398,000 for the three and six-month periods ended June 30, 2024 compared to $800,000 and $1,581,000 for the same periods in the prior year, respectively.

The decrease in maintenance and supplies and other direct operating costs, related party, was primarily due to the expiration of two service contracts that expired in the second and third quarters of 2023, with the related customer contracts.

Depreciation and amortization decreased by $60,000 to $1,297,000 for the three-month period ended March 31, 2024 compared to $1,357,000 for the same period in the prior year.

The decrease in depreciation and amortization for the three-month period ended March 31, 2024 was due to the Company’s contract that expired in the third quarter of 2023, offset by higher depreciation for upgraded equipment at two of the Company’s operating locations.

Other direct operating costs increased by $214,000 to $1,093,000 for the three-month period ended March 31, 2024 compared to $879,000 for the same period in the prior year.

The increase in other direct operating costs for the three-month period ended March 31, 2024 was primarily due to higher volumes and therefore higher operating costs from the Company’s retail segment.

Selling and administrative expense increased by $340,000 to $1,879,000 for the three-month period ended March 31, 2024 compared to $1,539,000 for the same period in the prior year.

The increase in selling and administrative expense for the three-month period ended March 31, 2024 was due to approximately $377,000 in fees associated with new business opportunities, including the Company’s RI Acquisition.

Interest expense increased by $78,000 to $349,000 for the three-month period ended March 31, 2024 compared to $271,000 for the same period in the prior year.

Depreciation and amortization increased by $228,000 and $168,000 to $1,455,000 and $2,752,000 for the three and six-month periods ended June 30, 2024 compared to $1,227,000 and $2,584,000 for the same periods in the prior year, respectively.

The increase in depreciation and amortization for the three and six-month periods ended June 30, 2024 was due higher depreciation for upgraded equipment at three of the Company’s operating locations and depreciation incurred for the equipment acquired in the RI Acquisition.

These increases were offset by depreciation from the Company’s contract that expired in the third quarter of 2023.

Other direct operating costs increased by $1,395,000 and $1,609,000 to $2,418,000 and $3,511,000 for the three and six-month periods ended June 30, 2024 compared to $1,023,000 and $1,902,000 for the same periods in the prior year, respectively.

The increase in other direct operating costs for the three and six-month periods ended June 30, 2024 was due to operating costs from the Company’s recently acquired facilities in Rhode Island and higher volumes, and therefore higher operating costs from the Company’s existing retail locations.

Selling and administrative expense decreased by $92,000 and increased by $248,000 to $1,896,000 and $3,775,000 for the three and six-month periods ended June 30, 2024 compared to $1,988,000 and $3,527,000 for the same periods in the prior year, respectively.

The decrease for the three-month period ended June 30, 2024 was primarily due to lower rent expense driven by the expiration of the Company’s corporate office space lease, offset by related sublease income.

The increase in selling and administrative expense for the six-month period ended June 30, 2024 was due to expenses associated with new business opportunities, including the Company’s RI Acquisition, offset by lower rent expense.

Interest expense increased by $108,000 and $186,000 to $385,000 and $734,000 for the three and six-month periods ended June 30, 2024 compared to $277,000 and $548,000 for the same periods in the prior year, respectively.

The debt under the Credit Agreement carries a floating interest rate of SOFR plus 3%.

The increase for the three-month period ended March 31, 2024 was due to an increase in SOFR and borrowings compared to the same period of the prior year.

Interest and other income increased by $36,000 to $106,000 for the three-month period ended March 31, 2024 compared to income of $70,000 for the same period in the prior year.

The increase for the three-month period ended March 31, 2024 is due to increases in the interest received on the Company’s cash compared to the same period in the prior year.

Income tax expense decreased by $112,000 to a benefit of $44,000 for the three-month period ended March 31, 2024 compared to income tax expense of $68,000 for the same period in the prior year.

The decrease in income tax benefit for the three-month period ended March 31, 2024 was due primarily to a non-recurring adjustment for unrecognized tax benefits related to foreign taxes.

Net loss attributable to non-controlling interests decreased by $34,000 to $54,000 for the three-month period ended March 31, 2024 compared to a loss of $88,000 for the same period in the prior year.

Net income or loss attributable to non-controlling interests represents net income or loss earned by the 19% non-controlling interest in GKF, and net income or loss of the non-controlling interests in various subsidiaries controlled by GKF.

The decrease or increase in net income or loss attributable to non-controlling interests reflects the relative profitability of GKF.

Net income decreased by $69,000 to net income of $119,000, or $0.02 per diluted share for the three-month period ended March 31, 2024 compared to net income of $188,000, or $0.03 per diluted share for the same period in the prior year.

Net income decreased for the three-month period ended March 31, 2024 due to higher interest expense and higher selling and administrative expense to support the Company’s pursuit of new business opportunities, including the RI Acquisition.

The increase for the six-month period ended June 30, 2024 was due to an increase in SOFR and borrowings, including the Supplemental Term Loan received in January 2024, compared to the same period of the prior year.

The Company recorded a $3,679,000 net bargain purchase gain related to the RI Acquisition that closed on May 7, 2024.

The Company acquired 60% of the equity interests of the RI Companies, which operate three radiation therapy facilities for $2,850,000.

The assets acquired exceeded the total purchase price by the bargain purchase amount and the Company recorded this difference as a gain for the three and six-month periods ended June 30, 2024 .

Interest and other income, net, decreased by $54,000 and $18,000 to $59,000 and $165,000 for the three and six-month periods ended June 30, 2024 compared to $113,000 and $183,000 for the same periods in the prior year, respectively.

The decrease for the three and six-month periods ended June 30, 2024 was due to decreases in the interest received on the Company’s cash, due to lower average cash balances, compared to the same periods in the prior year, respectively.

Income tax expense increased by $4,000 and $108,000 to an income tax benefit of $31,000 and $75,000 for the three and six-month periods ended June 30, 2024 compared to an income tax benefit of $35,000 and income tax expense of $33,000 for the same periods in the prior year, respectively.

The increase in income tax expense for the three and six-month periods ended June 30, 2024 was primarily due to higher earnings at the Company’s existing operations.

Net (income) loss attributable to non-controlling interests increased by $232,000 and $266,000 to $166,000 and $112,000 for the three and six-month periods ended June 30, 2024 compared to a loss of $66,000 and $154,000 for the same periods in the prior year, respectively.

Net income or loss attributable to non-controlling interests represents net income or loss earned by the 40% non-controlling interest in the Rhode Island facilities, the 19% non-controlling interest in GKF, and net income or loss of the non-controlling interests in various subsidiaries controlled by GKF.

The decrease or increase in net income or loss attributable to non-controlling interests reflects the relative profitability of the three Rhode Island locations and GKF.

Net income attributable to American Shared Hospital Services increased by $3,713,000 and $3,644,000 to $3,602,000, or $0.55 per diluted share and $3,721,000 or $0.57 for the three and six-month periods ended June 30, 2024 compared to a net loss of $111,000, or $0.02 per diluted share and net income of $77,000 or $0.01 per diluted share for the same periods in the prior year, respectively.

Net income increased for the three and six-month periods ended June 30, 2024 primarily due to the bargain purchase gain generated from the RI Acquisition and net income earned from the Rhode Island facilities acquired, partially offset by increased total costs of revenue.

Liquidity and Capital Resources

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In general, the Company’s principal sources of liquidity are cash and cash equivalents on hand and the $7,000,000 Revolving Line.

As of March 31, 2024, the Company borrowed $2,400,000 on its Revolving Line, which was repaid in April 2024.

The Company had cash, cash equivalents and restricted cash of $13,042,000 at March 31, 2024 compared to $13,808,000 at December 31, 2023.

The Company’s cash position decreased by $766,000 during the first three months of 2024 due to cash used in operating activities of $1,865,000, payment for the purchase of property and equipment of $1,183,000, payments on long-term debt of $164,000, net payments on the line of credit of $100,000, debt issuance costs of $97,000 and distributions to non-controlling interests of $95,000.

These decreases were offset by capital contributions of $38,000 and long-term debt financing of $2,700,000.

As of June 30, 2024, the Company borrowed $3,950,000 on its Revolving Line, which was repaid in July 2024.

The Company had cash, cash equivalents and restricted cash of $14,486,000 at June 30, 2024 compared to $13,808,000 at December 31, 2023.

The Company’s cash position increased by $678,000 during the first six months of 2024 due to net advances on the Revolving Line of $1,450,000, net cash received from the RI Acquisition of $363,000, and long-term debt financing of $2,700,000.

These increases were offset by cash use by operating activities of $579,000, payment for the purchase of property and equipment of $2,399,000, payments on long-term debt of $703,000, debt issuance costs of $97,000 and distributions to non-controlling interests of $95,000.

The Company’s expected primary cash needs on both a short and long-term basis are for capital expenditures, business expansion, working capital, and other general corporate purposes.

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Working Capital

The Company had working capital at March 31, 2024 of $10,586,000 compared to $9,677,000 at December 31, 2023.

The $909,000 increase in working capital was primarily due to increases in accounts receivable offset by decreases in cash and prepaid maintenance.

The Company had working capital at June 30, 2024 of $12,303,000 compared to $9,677,000 at December 31, 2023.

The $2,626,000 increase in working capital was primarily due to increases in accounts receivable offset by increases in advances on the Revolving Line and an increase in current portion of long-term debt.

The Company believes that its cash on hand, cash flow from operations, and other cash resources are adequate to meet its scheduled debt obligations and working capital requirements during the next 12 months.

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and (3) a $7,000,000 revolving line of credit (the “Revolving Line”), which is available for the Company’s future projects and general corporate purposes.

The Company borrowed $2,400,000 under the Revolving Line as of March 31, 2024, which the Company repaid in April 2024.

The Company borrowed $3,950,000 under the Revolving Line as of June 30, 2024, which the Company repaid in July 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.

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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 for its operations in Puebla, Mexico and other related transaction costs.

The Supplemental Term Loan will mature on January 25, 2030, unless accelerated due to the occurrence of certain events specified in the Credit Agreement.

The Supplemental Term Loan will mature on January 25, 2030 (the “Maturity Date”), unless accelerated due to the occurrence of certain events specified in the Credit Agreement.

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

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Pursuant to the First Amendment, advances under the Credit Agreement bear interest at a floating rate per annum equal to SOFR plus 3.00%, subject to a SOFR floor of 0.00%.

As of March 31, 2024, the Company was subject to customary covenants under the Credit Agreement which included, among other covenants and obligations, a minimum fixed charge coverage ratio of 1.25 to 1.0 and a total 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), along with an annual clean-up covenant that requires the Company to cause the outstanding principal balance under the Revolving Loan to be less than $3,500,000 for at least 30 consecutive days during each calendar year (the “Credit Agreement Covenants”).

The Company was in compliance with the Credit Agreement Covenants as of March 31, 2024.

As of June 30, 2024, the Company was subject to customary covenants under the Credit Agreement which included, among other covenants and obligations, a minimum fixed charge coverage ratio of 1.25 to 1.0 and a total 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), along with an annual clean-up covenant that requires the Company to cause the outstanding principal balance under the Revolving Loan to be less than $3,500,000 for at least 30 consecutive days during each calendar year (the “Credit Agreement Covenants”).

The Company was in compliance with the Credit Agreement Covenants as of June 30, 2024.

The Company’s acquisition of GKCE and the Gamma Knife Esprit in Ecuador is financed with DFC.

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On March 28, 2024, HoldCo received a waiver and amendment from DFC for certain covenants as of December 31, 2023 and through December 31, 2024 and amended other covenants and definitions permanently.

HoldCo was in compliance with all debt covenants pursuant to the DFC Loan as amended and waived at March 31, 2024.

The Company’s combined long-term debt, net of deferred issuance costs, totaled $15,602,000 as of March 31, 2024.

HoldCo was in compliance with all debt covenants pursuant to the DFC Loan as amended and waived at June 30, 2024.

The Company’s combined long-term debt, net of deferred issuance costs, totaled $15,083,000 as of June 30, 2024.

See Note 3 - Long Term Debt to the condensed consolidated financial statements for additional information.

As of March 31, 2024, the Company had commitments to purchase and install two Leksell Gamma Knife Esprit Systems (“Esprit”), one Gamma Plan workstation, one Linear Accelerator (“LINAC”) system, and one Magnetic Resonance imaging guided LINAC (“MR LINAC”).

The LINAC, MR LINAC and one Esprit will be placed at future customer sites.

The remaining Esprit upgrade is scheduled to occur during 2024 at an existing customer site.

The Company also has one commitment to de-install a Gamma Knife unit at an existing customer site.

Total Gamma Knife and LINAC commitments as of March 31, 2024 were $13,752,000.

There are no deposits on the condensed consolidated balance sheets related to these commitments as of March 31, 2024 .

As of June 30, 2024, the Company had commitments to purchase and install five Leksell Gamma Knife Esprit Systems (“Esprit”), one Gamma Plan workstation, and three Linear Accelerator (“LINAC”) systems.

One LINAC and one Esprit will be placed at future customer sites.

The remaining Esprit upgrades and LINACs are scheduled to occur in the later half of 2024 and 2025 at existing customer sites.

Total Gamma Knife and LINAC commitments as of June 30, 2024 were $15,651,000.

There are no deposits on the condensed consolidated balance sheets related to these commitments as of June 30, 2024 .

It is the Company’s intent to finance substantially all of these commitments.

There can be no assurance that financing will be available for the Company’s current or future projects, or at terms that are acceptable to the Company.

However, the Company currently has cash on hand of $13,042,000 and a line of credit of $7,000,000 and is actively engaged with financing resources to fund these projects.

The Company borrowed $2,400,000 on the Revolving Line as of March 31, 2024, which was paid off in April 2024.

On September 4, 2022, the Company entered into a Maintenance and Support 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 $1,865,000 for the current contractual period (one year).

However, the Company currently has cash on hand of $14,486,000 and its Revolving Line of $7,000,000 and is actively engaged with financing resources to fund these projects.

The Company borrowed $3,950,000 on the Revolving Line as of June 30, 2024, which was paid off in July 2024.

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

The agreement requires the Company to make an annual prepayment of $1,865,000 for the current contractual period (one year).

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

March 31, 2024, the Company had commitments to service and maintain its Gamma Knife and PBRT equipment.

As of June 30, 2024, 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.

The Company’s commitments to purchase two LINAC systems also include a 9-year and 5-year agreement to service the equipment, respectively.

Total service commitments as of

March 31, 2024 were

The Company’s commitment to purchase one LINAC system also includes a 5-year agreement to service the equipment, respectively.

Total service commitments as of June 30, 2024 were $14,375,000.

The Gamma Knife and certain other service contracts are paid monthly, as service is performed.

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The following table summarizes related party activity for the three-month periods ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table summarizes related party activity for the three and six-month periods ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

Equipment purchases and de-install costs

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Total related party transactions

The Company also had commitments to purchase and install Gamma Knife units, purchase a LINAC and MR LINAC system and service the related equipment of $16,625,000 as of March 31, 2024.

Related party liabilities on the condensed consolidated balance sheets consist of the following as of March 31, 2024 and December 31, 2023

The Company also had commitments to purchase and install five Esprit units, purchase two LINACs and service the related equipment of $21,479,000 as of June 30, 2024.

Related party liabilities on the condensed consolidated balance sheets consist of the following as of June 30, 2024 and December 31, 2023

Accounts payable, asset retirement obligation and other accrued liabilities

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-Q

Item 1. Financial Statements