AMERICAN SHARED HOSPITAL SERVICES 10-K

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview American Shared Hospital Services is a leading provider of turn-key technology solutions for stereotactic radiosurgery and advanced radiation therapy equipment and services. The main drivers of the Company’s revenue are numbers of sites, procedure volume, and reimbursement. The Company delivers radiation therapy through medical equipment leasing and direct patient services, its two reportable segments. 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 nine Gamma Knife systems and one PBRT system as of December 31, 2024, where a contract exists between the hospital and the Company. The Company also owns and operates two single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador, one single-unit radiation therapy facility in Puebla, Mexico, and as a result of the completion of the RI Acquisition on May 7, 2024, the Company also has an interest in and operates three single-unit radiation therapy facilities in Rhode Island. These facilities constitute the direct patient services segment, 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. A summary of the Company’s medical equipment leases and direct patient service sites is set forth in the table below: Number of Sites 12/31/2024 12/31/2023 Revenue Sharing 5 5 Fee Per Use 4 5 Medical Equipment Leasing ("Leasing") - Gamma Knife 9 10 Leasing - Proton Bream Radiation Therapy 1 1 Leasing - Total 10 11 Direct Patient Services ("Retail") - Gamma Knife 2 2 Direct Patient Services ("Retail") - LINAC 4 — Direct Patient Services ("Retail") - Total 6 2 The Company had two contracts expire in the second and third quarters of 2023, respectively, and one in November 2024. In February 2025, the Company and one of its customer mutually agreed to terminate their lease agreement prior to the contract term, and the Company expects a fourth contract to expire in the second quarter of 2025. The Company has one customer contract that was upgraded to the Esprit in January 2025. A summary of the Company’s procedure volumes for fiscal years 2024 and 2023 are set forth in the table below. 18 Table of Contents Volume Increase Increase Gamma Knife 12/31/2024 12/31/2023 (Decrease) (Decrease) Leasing - Gamma Knife 624 824 (200 ) (24.3 )% Retail - Gamma Knife 460 371 89 24.0 % Gamma Knife - Total 1,084 1,195 (111 ) (9.3 )% PBRT Procedures (medical equipment leasing) 5,139 5,369 (230 ) (4.3 )% LINAC Procedures (direct patient services) 14,662 — 14,662 * The decrease in Gamma Knife volume during 2024 in the leasing segment was primarily due to the expiration of two contracts in the second and third quarters of 2023 and a third contract that expired in November 2024 , respectively. Same center procedures decreased 15% compared to 2023, partially due to downtime for the upgrade of one Gamma Knife system to the Esprit during the second quarter of 2024 and other normal, cyclical fluctuations . The Company’s PBRT unit was impacted by several hurricanes during 2024, which drove lower procedure volume at that location. The increase in Gamma Knife volume during 2024 in the retail segment was due to improved marketing and physician outreach at the Company’s international locations. In addition, the Company’s Gamma Knife unit in Ecuador was upgraded to the Esprit and received a Cobalt-60 reload in November 2023, providing for faster procedure time. The LINAC procedure volume during 2024 was the result of the completion of the RI Acquisition in May 2024 and the beginning of the Company’s treatment of patients at its LINAC facility in Puebla, Mexico. 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. In July 2024, the Company began treating patients at a stand-alone LINAC facility in Puebla, Mexico. Reimbursement CMS established a 2025 delivery code reimbursement rate of approximately $7,645 ($7,420 in 2024 ) for a Medicare Gamma Knife treatment. The approximate CMS reimbursement rates for delivery of PBRT for a simple treatment without compensation for 2025 is $578 ($561 in 2024 ) and $1,276 ($1,362 in 2024 ) for simple with compensation, intermediate and complex treatments, respectively. On September 29, 2020, CMS published a final rule that would have implemented a new mandatory payment model for radiation oncology services delivered to certain Medicare beneficiaries: the RO APM. On August 29, 2022, CMS published a final rule that delayed the start date of the RO APM to a date to be determined through future rulemaking and amended the definition of “model performance period” to provide that the start and end dates of the five-year model performance period will be established by CMS through future rulemaking. If the RO APM had not been delayed, it would have significantly altered CMS’ payment methodology from a fee for service paradigm to a set reimbursement by cancer type methodology for radiation services provided within a 90 day episode of care. Under the RO APM, hospital based and free-standing radiation therapy providers would have been required to participate in the model based on whether the radiation therapy provider is located within a randomly selected core-based statistical area. At this time, it is not clear if the RO APM will be implemented and, if it is implemented, the timing for implementation and in what form it will be implemented. If a start date for the RO APM is proposed, CMS will provide at least six months’ notice in advance of the proposed start date, and the proposed start date will be subject to public comment. 19 Table of Contents APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles and follow general practices within the industry in which it operates. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the consolidated financial statements; accordingly, as this information changes, consolidated the financial statements could reflect different estimates, assumptions and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. The most significant accounting policies followed by the Company are presented in Note 2 – Accounting Policies to the consolidated financial statements. These policies along with the disclosures presented in the other consolidated financial statement notes and, in this discussion, and analysis, provide information on how significant assets and liabilities are valued in the consolidated financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of the consolidated financial statement amounts, and the methods, assumptions and estimates underlying those amounts, management has identified estimated useful lives of property and equipment and its salvage values, impairment of property and equipment, business combinations, and revenue recognition for revenue sharing customers, 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 consolidated financial statements: Revenue Recognition The Company recognizes revenues under Accounting Standards Codification (“ASC”) 842 Leases (“ASC 842”) and ASC 606 Revenue from Contracts with Customers (“ASC 606”). The Company delivers radiation therapy through medical equipment leasing (“leasing”) and direct patient services (“retail”). The Company leased nine Gamma Knife systems and one PBRT system as of December 31, 2024. The leasing business operates by fee-per-use contracts or revenue sharing, where the Company shares in the revenue and operating costs of the equipment. The Company also owns and operates two single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador, one single-unit radiation therapy facility in Puebla, Mexico, and following the RI Acquisition on May 7, 2024, the Company also owns a 60% interest in and operates three single-unit radiation therapy facilities in Rhode Island, collectively, the retail segment. Rental Revenue from Medical Equipment Leasing (“Leasing”) The Company recognizes revenues under ASC 842 when services have been rendered and collectability is reasonably assured, on either a fee per use or revenue sharing basis. The terms of the contracts do not contain any guaranteed minimum payments. The Company’s lease contracts typically have a ten-year term and are classified as either fee per use or revenue sharing. Fee per use revenues are recognized at the time the procedures are performed, based on each hospital’s contracted rate and the number of procedures performed. Under revenue sharing arrangements, the Company receives a contracted percentage of the reimbursement received by the hospital. The amount the Company expects to receive is recorded as revenue and estimated based on historical experience. Revenue estimates are reviewed periodically and adjusted as necessary. Some of the Company’s revenue sharing arrangements also have a cost sharing component and net profit share for the operating costs of the center. The Company records an estimate of operating costs which are reviewed on a regular basis and adjusted as necessary to more accurately reflect the actual operating costs and profit. The operating costs and estimated net operating profit are recorded as other direct operating costs in the consolidated statements of income. For the years ended, December 31, 2024 and 2023, the Company recognized leasing revenue of approximately $15,629,000 and $17,772,000 under ASC 842, respectively, of which approximately $9,952,000 and $10,133,000 were for PBRT services, respectively. Revenue sharing arrangements amounted to approximately 47 % and 70 % of total revenue for the years ended December 31, 2024 and 2023, respectively. Because the revenue estimates are reviewed on a quarterly basis, any adjustments required for past revenue estimates would result in an increase or reduction in revenue during the current quarterly period. Payor mix is a significant variable in the Company’s estimate for revenue sharing revenues. Fluctuations in payor mix that may result in a 5% to 10% change in the estimate could increase or decrease revenues as of December 31, 2024, by approximately $113,000 to $226,000. Direct Patient Services Revenue (“Retail”) The Company has stand-alone facilities in Lima, Peru and Guayaquil, Ecuador, where a contract exists between the Company’s facilities and the individual patient treated at the facility. Under ASC 606, the Company acts as the principal in this transaction and provides, at a point in time, a single performance obligation, in the form of a Gamma Knife treatment. Revenue related to a Gamma Knife treatment is recognized on a gross basis at the time when the patient receives treatment. There is no variable consideration present in the Company’s performance obligation and the transaction price is agreed upon per the stated contractual rate. GKPeru's payment terms are typically prepaid for self-pay patients and insurance provider payments are paid net 30 days. GKCE’s patient population is primarily covered by a government payor and payments are paid between six and nine months, following issuance of invoice. The Company did not capitalize any incremental costs related to the fulfillment of its customer contracts. 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. The Company’s stand alone radiation therapy facility in Puebla, Mexico is also accounted for under ASC 606. 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 did not capitalize any incremental costs related to the fulfillment of its customer contracts. The Company also concluded these facilities are part of its retail segment, see further discussion below. Accounts receivable under ASC 606 at December 31, 2024 and January 1, 2024 were $11,229,000 and $1,626,000. Accounts receivable under ASC 606 at December 31, 2023 and January 1, 2023 were $1,626,000 and $1,119,000. For the years ended December 31, 2024 and 2023, the Company recognized retail revenues of approximately $12,556,000 and $3,553,000 under ASC 606, respectively. Equipment Sales During the year-ended December 31, 2024, the Company sold one of its Gamma Knife Perfexion units with an Icon upgrade to the customer it was leased to and recorded a net gain on equipment sale. During the year-ended December 31, 2023, the Company completed a sale of equipment to a new customer. The Company assessed this transaction under ASC 606 and concluded the Company acted as the agent in this transaction and provided, at a point in time, two performance obligations, in the form of an equipment sale of an Icon and Cobalt-60 reload. The performance obligation to sell, assign, transfer and deliver the equipment to the customer was carried out via Elekta. Revenue related to the equipment sale is recognized on a net basis when the sale is complete. The Company recognized net revenues of $155,000 and $200,000 on the sale of equipment for the years ended December 31, 2024 and 2023. 20 Table of Contents Salvage Value on Equipment The Company determines salvage value based on the estimated fair value of the equipment at the end of its useful life. There is no active resale market of Gamma Knife or PBRT equipment, but the Company believes its salvage value estimates are a reasonable assessment of the economic value of the equipment when the contract ends. There is no salvage value assigned to the two Gamma Knife units in Peru or Ecuador. The Company has not assigned salvage value to its PBRT equipment. As of December 31, 2023, the Company had seven domestic Gamma Knife units with salvage value ranging from $140,000 to $300,000. As of December 31, 2024, the Company reduced its estimate of salvage value for the remaining five Gamma Knife units to $0. Prior to this change, the Company had five Gamma Knife units with salvage value ranging from $175,000 to $300,000. This change in estimate was made as of December 31, 2024, therefore, there was no impact for the current year, but this change in estimate will impact future periods. See Note 3 - Property and Equipment to the consolidated financial statements for further discussion on salvage value. Impairment of Long-lived Assets The Company assesses the recoverability of its long-lived assets when events or changes in circumstances indicate their carrying value may not be recoverable. Such events or changes in circumstances may include: a significant adverse change in the extent or manner in which a long-lived asset is being used, significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company assesses recoverability of a long-lived asset by determining whether the carrying value of the asset group can be recovered through projected undiscounted cash flows over their remaining lives. If the carrying value of the asset group exceeds the forecasted undiscounted cash flows, an impairment loss is recognized, measured as the amount by which the carrying amount exceeds estimated fair value. An impairment loss is charged to the consolidated statement of operations in the period in which management determines such impairment. As of December 31, 2024 and 2023 , the Company recognized a loss on the write down of impaired assets of $3,084,000 and $940,000, respectively. Fluctuations in the Company’s projections of cash flows may result in a 5% to 10% change in the impairment write-down by approximately $87,000 to $174,000, as of December 31, 2024 . See Note 3 - Property and Equipment for further discussion. 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 include, 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. Physical deterioration and asset replacement costs were significant variables in the Company’s estimate for fair value of the medical equipment acquired. Fluctuations in these variables may result in a 5% to 10% change in the estimate, which could increase or decrease the fair value of medical equipment acquired as of December 31, 2024, by approximately $120,000 to $240,000. Lease term, renewal of lease terms, square footage allocation, and market lease rates were significant variables in the Company’s estimate for fair value of the facilities acquired. Fluctuations in these variables may result in a 5% to 10% change in the estimate, which could increase or decrease the fair value of leaseholds acquired as of December 31, 2024, by approximately $235,000 to $470,000. See Note 12 - Rhode Island Acquisition to the consolidated financial statements for further discussion on acquisitions. Accounting pronouncements issued and not yet adopted - In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures (“ASU 2023-09”) which requires entities, on an annual basis, to disclose: specific categories in the rate reconciliation, additional information for reconciling items that meet a quantitative threshold, the amount of income taxes paid, net of refunds, disaggregated by jurisdiction, income or loss from continuing operations before income tax, income tax expense from continuing operations disaggregated between foreign and domestic, and income tax expense from continuing operations disaggregated by federal, state and foreign. ASU 2023-09 is effective for annual periods beginning after December 31, 2024. The Company is currently evaluating ASU 2023-09 to determine the impact it may have on its consolidated financial statements. In November 2024, the FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (“ASU 2024-03”) which requires entities to (1) disclose amounts of (a) purchase of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and, (e) depreciation, depletion, and amortization recognized as part of oil-and gas-producing activities, (2) include certain amounts that are already required to be disclosed under current Generally Accepted Accounting Principles in the same disclosures as other disaggregation requirements, (3) disclose a qualitative description of the amounts remaining in relevant expense captions that are not necessarily disaggregated quantitatively, and (4) disclose the total amount of selling expenses, in annual reporting periods, an entity’s definition of selling expense. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating ASU 2024-03 to determine the impact it may have on its consolidated financial statements. 2024 Results For each of the years ended December 31, 2024 and 2023, 56% and 83% of the Company’s revenue was derived from the leasing segment, respectively, and 44% and 17% from the Company’s retail segment, respectively. For the year ended December 31, 2024, 35% of the Company’s revenue was derived from its PBRT business, 34% was derived from its Gamma Knife business, 30% was derived from its LINAC business, and 1% was derived from equipment sales. For the year ended December 31, 2023, 51% of the Company’s revenue was derived from its Gamma Knife business, 48% was derived from its PBRT business and 1% was derived from equipment sales. TOTAL REVENUE Increase (in thousands) 2024 (Decrease) 2023 Total revenue $ 28,340 32.9 % $ 21,325 Total revenue in 2024 increased 32.9% compared to 2023 primarily due to revenue generated from the Company’s single-unit radiation therapy facility in Puebla, Mexico, which began treating patients in July 2024, and revenue generated by the three single-unit radiation therapy facilities owned by the RI Companies, which the Company acquired a 60% interest in on May 7, 2024. Revenues from the Company’s leasing segment decreased $1,988,000 in 2024 compared to 2023 due to a decrease in PBRT volumes and due to the expiration of two contracts in the second and third quarters of 2023, and a third contract that expired in November 2024. Revenues from the Company’s retail segment increased by $9,003,000 in 2024 compared to 2023 due to higher volumes at the Company’s international Gamma Knife facilities, the Company’s single-unit facility in Puebla, Mexico and the three, recently acquired, radiation therapy facilities in Rhode Island. LINAC Revenue Increase 2024 (Decrease) 2023 Revenue from LINAC (in thousands) $ 8,517 * $ — Number of LINAC sessions 14,662 * — Average revenue per session $ 581 * $ — 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 December 31, 2024. The Company’s stand-alone radiation therapy facility in Puebla, Mexico also began treating patients in July 2024. Radiation therapy revenues generated from the three stand-alone facilities acquired through the RI Acquisition and the radiation therapy facility in Puebla were $8,517,000 for the year ended December 31, 2024. Radiation therapy procedures for the three stand-alone facilities acquired through the RI Acquisition and the radiation therapy facility in Puebla were 14,507 for the year ended December 31, 2024. Proton Therapy Revenue Increase 2024 (Decrease) 2023 Revenue from PBRT (in thousands) $ 9,952 (1.8 )% $ 10,133 Number of PBRT fractions 5,139 (4.3 )% 5,369 Average revenue per fraction $ 1,937 2.6 % $ 1,887 PBRT revenue for 2024 was $9,952,000 compared to $10,133,000 in 2023. The number of PBRT fractions performed in 2024 was 5,139 compared to 5,369 in 2023. Revenue per fraction in 2024 was $1,937 compared to $1,887 in 2023. The Company’s PBRT unit in Orlando, Florida, was impacted by several hurricanes during 2024, which resulted in lower procedure volume. The average reimbursement increased due to a shift in payor mix from Medicare to commercial or other payors, which are reimbursed at a higher amount. Gamma Knife Revenue Increase 2024 (Decrease) 2023 Revenue from Gamma Knife (in thousands) $ 9,716 (11.6 )% $ 10,992 Number of Gamma Knife procedures 1,084 (9.3 )% 1,195 Average revenue per procedure $ 8,963 (2.6 )% $ 9,198 Gamma Knife revenue for 2024 was $9,716,000 compared to $10,992,000 in 2023. Gamma Knife revenue for 2024 decreased $1,276,000 compared to 2023 due to the expiration of two contracts in the second and third quarters of 2023, and a third contract that expired in November 2024. The number of Gamma Knife procedures performed in 2024 decreased by 111 compared to 2023 primarily due to the expiration of two contracts in the second and third quarters of 2023, and a third contract that expired in November 2024. Excluding the three Gamma Knife contracts that expired during 2023 and 2024, Gamma Knife procedures for existing sites were consistent with the prior year. Gamma Knife procedures for existing customer sites, retail segment, increased by 24%, offset by a 15% decrease in the Company’s Gamma Knife leasing segment in 2024 compared to 2023, respectively. The increase in Gamma Knife volumes from retail sites was due to improved marketing and physician outreach at the Company’s international locations. In addition, the Company’s Gamma Knife unit in Ecuador was upgraded to the Esprit and received a Cobalt-60 reload in November 2023, providing for faster procedure time. Revenue per procedure decreased by $235 in 2024 compared to 2023. This decrease was due to changes in reimbursement at the Company’s revenue share sites, which can fluctuate depending on payor mix and volume of procedures by site. 21 Table of Contents COSTS OF REVENUE Increase (In thousands) 2024 (Decrease) 2023 Total costs of revenue $ 19,155 59.9 % $ 11,981 Percentage of total revenue 67.6 % 56.2 % The Company’s costs of revenue, consisting of maintenance and supplies, depreciation and amortization, and other operating expenses (such as insurance, property taxes, sales taxes, marketing costs and operating costs from the Company’s revenue sharing and international sites) increased by $7,174,000 in 2024 compared to 2023. Maintenance and supplies and other direct operating costs, related party, as a percentage of total revenue were 10.7% and 13.5% in 2024 and 2023 , respectively. Maintenance and supplies and other direct operating costs, related party increased by $138,000 in 2024 compared to 2023 . The increase in 2024 compared to 2023was primarily due to maintenance at the Company’s radiation therapy facilities in Rhode Island, that were acquired during 2024, offset by lower maintenance expense for the Company’s Gamma Knife portfolio . Depreciation and amortization costs as a percentage of total revenue were 21.4% and 23.8% in 2024 and 2023 . Depreciation and amortization costs increased $996,000 in 2024 compared to 2023 . The increase in 2024 compared to 2023was due to five upgrades performed between 2023 and 2024 where the Company upgraded an existing Gamma Knife to the Esprit, installed a new Esprit, or replaced the Cobalt-60 in the related machines, and the RI Acquisition where the Company acquired three, existing, single-unit radiation therapy facilities. Other direct operating costs as a percentage of total revenue were 35.5% and 18.9% in 2024 and 2023 , respectively. Other direct operating costs increased by $6,040,000 in 2024 compared to 2023 . The increase in 2024 was primarily due to the Company’s single-unit radiation therapy facility in Puebla, Mexico, which began treating patients in July 2024, and the three single-unit radiation therapy facilities the Company acquired in Rhode Island on May 7, 2024. These facilities are part of the Company’s retail segment where the Company owns and operates the facilities, therefore, there are higher operating costs associated with them. SELLING AND ADMINISTRATIVE EXPENSE Increase (In thousands) 2024 (Decrease) 2023 Selling and administrative expense $ 7,407 5.5 % $ 7,022 Percentage of total revenue 26.1 % 32.9 % The Company’s selling and administrative costs increased $385,000 in 2024 compared to 2023. The increase in 2024 was due to increased staffing in the sales, finance and customer retention areas and approximately $560,000 in fees associated with new business opportunities, including those resulting from the RI Acquisition. INTEREST EXPENSE Increase (In thousands) 2024 (Decrease) 2023 Interest expense $ 1,499 34.8 % $ 1,112 Percentage of total revenue 5.3 % 5.2 % The Company’s interest expense increased $387,000 in 2024 compared to 2023. The increase for the year ended December 31, 2024 was due to an increase in borrowings, including the Supplemental Term Loan received in January 2024, and the second tranche of the DFC loan received in November 2023. 22 Table of Contents (LOSS) ON WRITE DOWN OF IMPAIRED ASSETS AND ASSOCIATED REMOVAL COSTS Increase (In thousands) 2024 (Decrease) 2023 Loss on write down of impaired assets $ 3,084 228.1 % $ 940 Percentage of total revenue 10.9 % 4.4 % As of December 31, 2024 and 2023, the Company recognized a loss on the write down of impaired assets of $3,084,000 and $940,000, respectively. During the year ended December 31, 2024, the Company recognized impairment on six of its domestic Gamma Knife units. The Company also increased and impaired it s ARO liability for one of the impaired units where the Company does not plan to renew the contract in early 2025 and will remove this unit at its contract term. The six sites that were impaired and ARO for one of the impaired units were recorded as write down of impaired assets for the December 31, 2024. During the year ended December 31, 2023, the Company recorded an ARO for one of the customer contracts that expired during 2023. An ARO for the second contract that expired during 2023 was recorded and impaired in a prior period. For the ARO recorded during 2023, the Company concluded the related increase to the underlying assets could not be supported by the cash flows of the equipment and therefore the Company recorded a loss on the write-down of the ARO during the three-month period ended June 30, 2023. The Company also reviewed its long-lived assets during the fourth quarter of 2023 and concluded events and circumstances existed that indicated additional impairment existed at a third Gamma Knife site related to the existing equipment. See Note 3 - Property and Equipment to the consolidated financial statements for further discussion on impairment. BARGAIN PURCHASE GAIN RI ACQUISITION Increase (In thousands) 2024 (Decrease) 2023 Bargain purchase gain RI Acquisition, net $ 3,794 * $ — Percentage of total revenue 13.39 % 0.0 % The Company recorded a $3,794,000 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 year ended December 31, 2024. See Note 12 - RI Acquisition to the consolidated financial statements for further discussion on bargain purchase. INTEREST AND OTHER INCOME Increase (In thousands) 2024 (Decrease) 2023 Interest and other income (loss) $ 248 (41.2 )% $ 422 Percentage of total revenue 0.9 % 2.0 % Interest and other income decreased $174,000 in 2024 compared to 2023. The decrease is primarily due to the interest received on the Company’s cash, driven by lower average cash balances, compared to the prior year. INCOME TAX EXPENSE Increase (In thousands) 2024 (Decrease) 2023 Income tax (benefit) expense $ (295 ) (168.4 )% $ 431 Percentage of total revenue (1.0 )% 2.0 % Percentage of income, after net income attributable to non-controlling interests, and before income taxes and bargain purchase gain 15.5 % 41.4 % Income tax expense decreased $726,000 in 2024 compared to 2023. The decrease in income tax expense in 2024 was primarily due to losses incurred by the Company’s leasing segment, driven by equipment impairment, and lower Gamma Knife volumes during 2024. The Company anticipates that it will continue to record income tax expense if it operates profitably in the future. Currently there are state income tax payments required for most states in which the Company operates. 23 Table of Contents NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS Increase (In thousands) 2024 (Decrease) 2023 Net loss attributable to non-controlling interests $ (654 ) 89.6 % $ (345 ) Percentage of total revenue (2.3 )% (1.6 )% Net loss attributable to non-controlling interests increased $309,000 in 2024 compared to 2023. Net income or loss attributable to non-controlling interests represents the pre-tax income earned by the 19% non-controlling interest in GKF, and the pre-tax income or losses of the non-controlling interests in various subsidiaries controlled by GKF, and the 40% non-controlling interests in the RI facilities and their pre-tax income or losses. The decrease or increase in net income attributable to non-controlling interests reflects the relative profitability of GKF and the RI Companies. The increase in net loss attributable to non-controlling interests in 2024 compared to 2023 was due to higher pre-tax loss for GKF stand-alone operations. NET INCOME ATTRIBUTABLE TO AMERICAN SHARED HOSPITAL SERVICES (In thousands, Increase except per share amounts) 2024 (Decrease) 2023 Net income attributable to ASHS $ 2,186 258.4 % $ 610 Net income per share attributable to ASHS, diluted $ 0.33 241.8 % $ 0.10 Net income attributable to American Shared Hospital Services increased $1,576,000 in 2024 compared to 2023. Net income for the Company’s retail segment increased $5,474,000 in 2024 compared to 2023. The increase in 2024 compared to 2023 was primarily due to the bargain purchase gain from the RI Acquisition and profitability of the three stand-alone facilities acquired, in which the Company acquired an interest. Net income for the Company’s leasing segment decreased $3,898,000 in 2024 compared to 2023. The decrease in 2024 compared to 2023 was primarily due to the impairment recognized on the Gamma Knife portfolio and related removal costs, along with operating losses at the domestic Gamma Knife leasing segment level. LIQUIDITY AND CAPITAL RESOURCES The Company’s primary liquidity needs are to fund capital expenditures as well as support working capital requirements. In general, the Company’s principal sources of liquidity are cash and cash equivalents on hand and a $7,000,000 revolving line of credit (as defined above, the “Revolving Line”). The Company had cash and cash equivalents, including restricted cash, of $11,275,000 at December 31, 2024 compared to $13,808,000 at December 31, 2023, a decrease of $2,533,000. 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. The Company believes that its revenue from operations, together with borrowing capacity under the Revolving Line and its access to capital resources are sufficient to continue funding its present operations, to meet its commitments on its existing debt, and to meet its operating capital and funding requirements for the next 12 months from the date of this Annual Report. Cash Flows Cash Flows Provided by Operating Activities Operating activities provided $167,000 of cash in 2024, which was driven by net income of $1,532,000, non-cash charges for depreciation and amortization of $6,174,000, a loss on the write down of impaired assets of $3,084,000, gain on sale of equipment of $155,000, stock-based compensation expense of $373,000, accretion of deferred issuance costs of $95,000, changes in related party liabilities of $324,000, and changes in payables and other accrued liabilities of $2,227,000. These increases were offset by the gain on bargain purchase of $3,794,000, deferred income taxes of $359,000, accretion of unfavorable lease position of $65,000, changes in receivables of $6,939,000, changes in prepaids and other assets of $513,000, changes in ARO of $588,000, and income taxes payable of $1,229,000. The Company’s trade accounts receivable increased by $7,267,000 to $11,610,000 at December 31, 2024 from $4,343,000 at December 31, 2023. The number of days revenue (sales) outstanding (“DSO”) in accounts receivable as of December 31, 2024 was 150 days compared to 74 days at December 31, 2023. DSO fluctuates depending on timing of customer payments received and the mix of fee per use versus revenue sharing and retail customers. The revenue sharing and retail sites generally have longer collection periods than fee per use sites. The Company added four retail sites during 2024, driving the increase in DSO. Cash Flows Used in Investing Activities Investing activities used $7,105,000 of cash in 2024, primarily due to payments made towards the purchase of property and equipment of $7,938,000, offset by cash received in excess of cash paid for the RI Acquisition of $538,000, and proceeds from equipment sales of $140,000. During 2024, the Company completed two Esprit upgrades at existing customer sites, began installation at a third site, and completed a Cobalt-60 reload and software upgrade at a fourth site. Cash Flows Provided by Financing Activities Financing activities provided $4,405,000 of cash during 2024, which was driven by long-term debt financing from the Supplemental Term Loan and Second Supplemental Term Loan of $9,860,000 and capital contributions of $38,000. These increases were offset by net payments on the Revolving Line of $2,500,000, payments on long-term debt of $2,734,000, debt issuance costs of $164,000, and distributions of noncontrolling interests of $95,000. The Company amended its Credit Agreement to include financing for capital expenditures made during 2024 and for the RI Acquisition. Working Capital The Company had working capital at December 31, 2024 of $15,853,000 compared to working capital of $9,677,000 at December 31, 2023. The $6,176,000 increase in net working capital was primarily due to an increase in trade, tax, and other receivables, primarily attributable to the RI Companies. 24 Table of Contents Long-Term Debt On April 9, 2021, the Company along with certain of its domestic subsidiaries (collectively, the “Loan Parties”) entered into a five year $22,000,000 credit agreement with Fifth Third Bank, N.A. (“the Credit Agreement”). The Credit Agreement includes three loan facilities. The first loan facility is a $9,500,000 term loan (the “Term Loan”) which was used to refinance the domestic Gamma Knife debt and finance leases, and associated closing costs. The second loan facility is a $5,500,000 delayed draw term loan (the “DDTL”) which was used to refinance the Company’s PBRT finance leases and associated closing costs, as well as to provide additional working capital. The third loan facility provides for a $7,000,000 revolving line of credit (the “Revolving Line”) available for future projects and general corporate purposes. The facilities have a five-year maturity, carry a floating interest of 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 the Credit Agreement (the “First Amendment”), which amended the Credit Agreement to add a new term loan in the aggregate principal amount of $2,700,000 (the “Supplemental Term Loan”). The proceeds of the Supplemental Term Loan were advanced in a single borrowing on January 25, 2024, and were used for capital expenditures related to the Company’s operations in Puebla, Mexico and other related transaction costs. The Supplemental Term Loan will mature on January 25, 2030 (the “Maturity Date”). Interest on the Supplemental Term Loan is payable monthly during the initial twelve month period following the First Amendment Effective Date. Following such twelve month period, the Company is required to make equal monthly payments of principal and interest to fully amortize the amount outstanding under the Supplemental Term Loan by the Maturity Date. The Supplemental Term Loan is secured by a lien on substantially all of the assets of the Company and certain of its domestic subsidiaries. The First Amendment also replaces the LIBOR-based rates in the Credit Agreement with SOFR-based rates. 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%. On December 18, 2024 (the “Second Amendment Effective Date”), the Company and Fifth Third entered into a Second Amendment to the Credit Agreement (the “Second Amendment”), which amended the Credit Agreement to add a new term loan in the aggregate principal amount of $7,000,000 (the “Second Supplemental Term Loan”). The proceeds of the Second Supplemental Term Loan were advanced in a single borrowing on December 18, 2024, and were used for capital expenditures related to the Company’s domestic Gamma Knife leasing operations and the RI Acquisition and related transaction costs. The Second Supplemental Term Loan will mature on December 18, 2029 (the “Second Maturity Date”). Interest on the Second Supplemental Term Loan is payable monthly during the initial twelve month period following the Second Amendment Effective Date. Following such twelve month period, the Company is required to make equal monthly payments of principal and interest to fully amortize the amount outstanding under the Second Supplemental Term Loan over a period of seven years. All unpaid principal of the Second Supplemental Term Loan and accrued and unpaid interest thereon is due and payable in full on the Second Maturity Date. The Second Supplemental Term Loan is secured by a lien on substantially all of the assets of the Company and certain of its domestic subsidiaries. The long-term debt on the consolidated balance sheets related to the Term Loan, DDTL, Supplemental Term Loan and Second Supplemental Term Loan was $18,462,000 and $10,825,000 as of December 31, 2024 and December 31, 2023, respectively. The Company capitalized debt issuance costs of $164,000 as of December 31, 2024 related to issuance of the Supplemental Term Loan and Second Supplemental Term Loan. The Revolving Line is charged an unused line fee of 0.25% per annum. The Term Loan and DDTL have interest and principal payments due quarterly. Principal amortization on an annual basis for the Term Loan and DDTL equates to 48% of the original principal loan commitments in years one through five and an end of term payment of the remaining principal balance. The Company did not draw on the Revolving Line as of December 31, 2024. The Credit Agreement contains customary covenants and representations, including without limitation, a minimum fixed charge coverage ratio of 1.25 and maximum funded debt to EBITDA ratio of 3.0 to 1.0 (tested on a trailing twelve-month basis at the end of each fiscal quarter), the Company maintain at least $5,000,000 of unrestricted cash, reporting obligations, limitations on dispositions, changes in ownership, mergers and acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and capital expenditures. The Loan Parties are in compliance with the Credit Agreement covenants as of December 31, 2024. The loan entered into with DFC in connection with the acquisition of GKCE in June 2020 ( the “DFC Loan”) was obtained through the Company’s wholly-owned subsidiary, HoldCo, and is guaranteed by GKF. The DFC Loan is secured by a lien on GKCE’s assets. The first tranche of the DFC Loan was funded in June 2020. During the fourth quarter of 2023, the second tranche of the DFC loan was funded to finance the equipment upgrade in Ecuador. The amount outstanding under the first tranche of the DFC Loan is payable in 29 quarterly installments with a fixed interest rate of 3.67%. The amount outstanding under the second tranche of the DFC Loan is payable in 16 quarterly installments with a fixed interest rate of 7.49%. The long-term debt on the consolidated balance sheets related to the DFC loan was $1,806,000 and $2,464,000 as of December 31, 2024 and 2023, respectively. The Company capitalized debt issuance costs of $0 and $9,000 as of December 31, 2024 and 2023, respectively, related to maintenance and administrative fees on the DFC Loan. The DFC Loan contains customary covenants among other covenants and obligations, requirements that the Company maintain certain financial ratios related to liquidity and cash flow as well as depository requirements. On March 28, 2024 the Company 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. On March 3, 2025 the Company received an additional waiver from DFC for certain covenants as of December 31, 2024 and through December 31, 2025. In November and December 2024, GKCE obtained two loans with banks locally in Ecuador (the “GKCE Loans”). The GKCE Loans carry interest rates of 12.60% and 12.78% and are payable in twelve and thirty-six equal monthly installments of principal and interest, respectively. Total long-term debt on the consolidated balance sheets related to the GKCE Loans was $145,000. The Company did not capitalize any debt issuance costs related to the GKCE Loans. If the Company fails to comply with the Credit Agreement Covenants or the DFC Loan Covenants, the Company’s credit commitments could be terminated and the principal of any outstanding borrowings, together with any accrued but unpaid interest, under the Credit Agreement or the DFC Loan could be declared immediately due and payable. Furthermore, The lenders under the Credit Agreement and the DFC Loan could also exercise their rights to take possession of, and to dispose of, the collateral securing the credit facilities and loans and could take any additional remedies upon default as set forth in each such agreement. The Company’s combined long-term debt, net, totaled $20,182,000 as of December 31, 2024. See Note 5 - Long Term Debt to the consolidated financial statements for additional information. Commitments As of December 31, 2024, the Company had commitments to purchase and install Gamma Knife and LINAC equipment totaling $13,053,000. There are no significant cash requirements, pending financing, for these commitments in the next 12 months. There can be no assurance that financing will be available for the Company’s current or future projects, or at terms that are acceptable to the Company. However, the Company currently has cash on hand of $11,275,000 and a line of credit of $7,000,000 to fund these projects. The Company also had commitments to service these various equipment commitments totaling $13,109,000. The Gamma Knife, PBRT, LINAC and related service contracts are paid monthly, as service is performed. The Company believes that cash flow from operations, cash on hand and its line of credit will be sufficient to cover these payments. See Note 10 - Commitments and Contingencies to the consolidated financial statements for further discussion on commitments. The Company’s commitments to purchase a second and third PBRT unit expired in January 2024. 25 Table of Contents Related Party Transactions The Company’s Gamma Knife business is operated through its 81% indirect interest in its GKF subsidiary. The remaining 19% of GKF is owned by a wholly owned U.S. subsidiary of Elekta, which is the manufacturer of the Gamma Knife. Since the Company purchases its Gamma Knife units from Elekta, there are significant related party transactions with Elekta such as equipment purchases, commitments to purchase and service equipment, and costs to de-install and maintain the equipment . The following summarizes related party activity for the years ended December 31, 2024 and 2023: December 31, 2024 2023 Equipment purchases and de-install costs $ 5,268,000 $ 6,918,000 Costs incurred to maintain equipment 678,000 851,000 Total related party transactions $ 5,946,000 $ 7,769,000 The Company had related party commitments to purchase and install four Esprit upgrades, two LINACs, and service the related equipment. Total related party commitments were $18,581,000 as of December 31, 2024. Related party liabilities on the consolidated balance sheets consist of the following as of December 31, 2024 and 2023: December 31, 2024 2023 Accounts payable, asset retirement obligations and other accrued liabilities $ 2,270,000 $ 2,361,000 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, as defined in Rule 10(f)(1) of Regulation S-K under the Exchange Act, the Company is not required to provide the information required by this item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the Index to Consolidated Financial Statements and Financial Statement Schedules included at page F-1 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.