American Shared Hospital Services: Form 10-Q for the period ended Jun 30, 2025

This quarterly report to the SEC may be deemed to contain certain forward-looking statements. The Private Securities Litigation Reform Act of 1995 has established that these statements qualify for safe harbors from liability. Forward-looking statements may include words like we “believe”, “anticipate”, “target”, “expect”, “pro forma”, “estimate”, “intend”, “will”, “is designed to”, “plan” and words of similar meaning. Forward-looking statements describe our future plans, objectives, expectations or goals. Such statements address future events and conditions and include, but are not limited to, such things as capital expenditures, earnings, liquidity and capital resources, financing of our business, government programs and regulations, legislation affecting the health care industry, the expansion of our proton beam radiation therapy business, accounting matters, compliance with debt covenants, completed and pending acquisitions, competition, customer concentration, contractual obligations, timing of payments, technology and interest rates. These forward-looking statements involve known and unknown risks that may cause our actual results in future periods to differ materially from those expressed in any forward-looking statement. 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 Companies with our existing business, breaches in security of our information technology, and 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, 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.

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 seven Gamma Knife systems and one PBRT system as of June 30, 2025, 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, owns and operates two single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador. The Company also owns and operates a single-unit radiation therapy center in Puebla, Mexico, which began treating patients in July 2024. The Company’s facilities in Rhode Island, Peru, Ecuador, and Mexico are considered direct patient services, 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 direct patient services. See Note 1 - Basis of Presentation to the condensed consolidated financial statements for additional information. The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects activity for both segments and specifically addresses a segment when appropriate to the discussion.

Reimbursement

The Centers for Medicare and Medicaid (“CMS”) has 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.

Application of Critical Accounting Policies and Estimates

The Company’s condensed 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 condensed consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the condensed consolidated financial statements; accordingly, as this information changes, the condensed consolidated 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 to the consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2024. 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 for revenue sharing arrangements, accounting for business combinations, salvage value on equipment, 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:

Revenue Recognition

The Company recognizes revenues under ASC 842 and ASC 606. The Company had seven domestic Gamma Knife units, two international Gamma Knife units, three domestic LINAC units, one international LINAC unit, and one PBRT system in operation in the United States as of June 30, 2025 and 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. Five of the Company’s seven domestic Gamma Knife customers are under fee-per-use contracts, and two customers are under revenue sharing arrangements. The seven domestic Gamma Knife contracts operate under the Company’s leasing segment. The Company’s PBRT system at Orlando Health is considered a revenue share contract operating under the leasing segment. The Company’s interest in three single-unit facilities, acquired in Rhode Island in May 2024, and the Company’s single-unit LINAC facility in Puebla, Mexico operate under the Company’s direct patient services segment. The Company, through GKF, also owns and operates two single-unit, international Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador. These two units economically operate under the Company’s direct patient services 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. 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. The operating costs are recorded as other direct operating costs in the condensed consolidated statements of operations. For the three and six-month periods ended June 30, 2025, the Company recognized leasing revenue of approximately $3,571,000 and $ 6,562,000 compared to $3,899,000 and $ 8,152,000 for the same periods in the prior year, respectively. For the three and six-month periods ended June 30, 2025, $1,921,000 and $3,563,000 of the ASC 842 revenues were for PBRT services compared to $2,420,000 and $5,069,000, respectively.

Direct patient services income – The Company has stand-alone facilities in Lima, Peru, Guayaquil, Ecuador, and Puebla, Mexico 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 a Gamma Knife or radiation therapy treatment. Revenue related to these treatments 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 three and six months following issuance of an invoice. The facility in Puebla currently has a contract with one local hospital to cover its eligible patient base and is also treating self-pay patients. Puebla’s payment terms are typically prepaid for self-pay patients and net 30 days for the hospital patients. 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. 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 the three radiation therapy facilities are part of its direct patient services 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, 2025 and January 1, 2025 were $6,657,000 and $6,073,000, respectively. Accounts receivable balances under ASC 606 at June 30, 2024 and January 1, 2024 were $4,558,000 and $1,626,000, respectively. For the three and six-month periods ended June 30, 2025, the Company recognized direct patient services revenues of approximately $3,500,000 and $6,621,000 compared to $3,157,000 and $4,120,000 for the same periods in the prior year, respectively.

Salvage Value on Equipment

Salvage value is based on the estimated fair value of the equipment at the end of its useful life. 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, LINAC 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. Prior to January 1, 2025, the Company had five domestic Gamma Knife units with salvage value of $1,050,000. During the year-ended December 31, 2024, the Company concluded the salvage value should be $0 and accounted for this as a change in estimate. There is no salvage value assigned to the two international Gamma Knife units as of June 30, 2025. The Company also has not assigned salvage value to its PBRT or LINAC equipment as of June 30, 2025.

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 condensed consolidated statement of operations in the period in which management determines such impairment.

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 acquired, 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. See Note 10 - Rhode Island Acquisition to the condensed consolidated financial statements for further discussion on acquisitions.

Accounting Pronouncements Issued and Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 15, 2024, and interim reporting periods beginning after December 15, 2025. The Company adopted ASU 2023-09 effective January 1, 2025. The adoption of ASU 2023-09 will modify the Company’s disclosures but will not have an impact on our financial position or results of operations.

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.

In July 2025, the FASB issued ASU 2025-05 *Measurement of Credit Losses for Accounts Receivable and Contract Assets (“*ASU 2025-05”) which provides (1) all entities with a practical expedient and (2) entities other than public business entities, with an accounting policy election when estimating credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating ASU 2025-05 to determine the impact it may have on its consolidated financial statements.

Second Quarter 2025 Results

Revenues increased by $15,000 and $911,000 to $7,071,000 and $13,183,000 for the three and six-month periods ended June 30, 2025 compared to $7,056,000 and $12,272,000 for the same periods in the prior year, respectively. Revenues from the Company’s leasing segment decreased by $328,000 and $1,590,000 to $3,571,000 and $6,562,000 for the three and six-month periods ended June 30, 2025 compared to $3,899,000 and $8,152,000 for the same periods in the prior year, respectively. The decrease in leasing revenue was driven by lower Gamma Knife volumes, due to the expiration of two customer contracts, and lower PBRT volumes. Revenues from the Company’s direct patient services segment increased by $343,000 and $2,501,000 to $3,500,000 and $6,621,000 for the three and six-month periods ended June 30, 2025 compared to $3,157,000 and $4,120,000 for the same periods in the prior year, respectively. The increase in direct patient services revenue was due to revenue generated by the RI Companies following the closing of the RI Acquisition on May 7, 2024 and the Company’s radiation therapy facility in Puebla, Mexico which began treating patients in July 2024.

The Company acquired its interests in 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, 2025. 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 $2,541,000 and $4,915,000 for the three and six-month periods ended June 30, 2025, compared to $1,892,000 and $1,892,000 for the same periods in the prior year (when the results of operations of the RI facilities were only included in the Company’s results of operations from May 7, 2024 forward), respectively. Radiation therapy procedures for the three stand-alone facilities acquired through the RI Acquisition and the radiation therapy facility in Puebla were 6,320 and 13,046 for the three and six-month periods ended June 30, 2025, compared to and 2,599 and 2,599 for the same periods in the prior year, respectively.

Revenues generated from the Company’s PBRT system decreased by $499,000 and $1,506,000 to $1,921,000 and $3,563,000 for the three and six-month periods ended June 30, 2025, compared to $2,420,000 and $5,069,000 for the same periods in the prior year, respectively. The decrease for the three and six-month periods ended June 30, 2025, was driven by lower volumes.

The number of PBRT fractions decreased by 122 and 567 to 1,114 and 1,945 for the three and six-month periods ended June 30, 2025 compared to 1,236 and 2,512 for the same periods in the prior year, respectively. The decrease in PBRT volumes for the three and six-month periods ended June 30, 2025 was due to what the Company believes are normal, cyclical fluctuations.

Gamma Knife revenue decreased by $135,000 and $606,000 to $2,609,000 and $4,705,000 for the three and six-month periods ended June 30, 2025 compared to $2,744,000 and $5,311,000 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, 2025 was due to a decrease in procedure volume from both the direct patient services and leasing segments.

The number of Gamma Knife procedures decreased by 76 and 141 to 264 and 472 for the three and six-month periods ended June 30, 2025 compared to 340 and 613 for the same periods in the prior year, respectively. Gamma Knife procedures from the Company’s leasing segment decreased 18% and 19% for the three and six-month periods ended June 30, 2025 due to the expiration of three customer contracts in December 2024, February 2025, and April 2025. The decrease for the six-month period ended June 30, 2025 was also impacted by downtime to upgrade a fourth customer to the Esprit. Gamma Knife procedures from the Company’s direct patient services segment, which are the two international Gamma Knife locations, decreased 29% and 28% for the three and six-month periods ended June 30, 2025. The patient populations in Peru and Ecuador are primarily insured by local government therefore volumes can be impacted by local legislation changes or social and economic factors. The stand-alone facility in Peru signed a new contract with social security, which delayed treatment of patients covered by this payor during the first five months of 2025. This contract was executed in May 2025 and is expected to bring additional volumes into the facility going forward.

Total costs of revenue increased by $853,000 and $2,950,000 to $5,441,000 and $10,611,000 for the three and six-month periods ended June 30, 2025 compared to $4,588,000 and $7,661,000 for the same periods in the prior year, respectively.

Maintenance and supplies and other direct operating costs, related party, increased by $141,000 and $319,000 to $856,000 and $1,717,000 for the three and six-month periods ended June 30, 2025 compared to $715,000 and $1,398,000 for the same periods in the prior year, respectively. The increase in maintenance and supplies and other direct operating costs, related party, for the three and six-month periods ended June 30, 2025, was primarily due to maintenance for two of the Gamma Knife Esprit systems that were previously under warranty.

Depreciation and amortization increased by $42,000 and $190,000 to $1,497,000 and $2,942,000 for the three and six-month periods ended June 30, 2025 compared to $1,455,000 and $2,752,000 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, 2025 was due to higher depreciation for upgraded equipment at four of the Company’s Gamma Knife locations, depreciation incurred for the equipment acquired in the RI Acquisition, and the Company’s new facility in Puebla, Mexico. As of December 31, 2024, the Company reduced its estimate of salvage value for all remaining domestic Gamma Knife units to $0. The net effect of the change in estimate, for the three and six-month periods ended June 30, 2025, was a decrease in net income of approximately$10,000 or $0.00 per diluted share and $93,000 or $0.01 per diluted share, respectively. This change in estimate will be $10,000, or $0.00 per share in future periods, following the expiration of one customer contract in April 2025. These increases were offset by lower depreciation driven by three of the Company’s contracts that expired in November 2024, February 2025, and April 2025.

Other direct operating costs increased by $670,000 and $2,441,000 to $3,088,000 and $5,952,000 for the three and six-month periods ended June 30, 2025 compared to $2,418,000 and $3,511,000 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, 2025 was due to operating costs from the acquired facilities in Rhode Island and the Company’s new facility in Puebla, Mexico, which are part of the Company’s direct patient services segment and have higher operating costs compared to facilities in the Company’s leasing segment.

Selling and administrative expense decreased by $150,000 and $221,000 to $1,746,000 and $3,554,000 for the three and six-month periods ended June 30, 2025 compared to $1,896,000 and $3,775,000 for the same periods in the prior year, respectively. The decrease for the three and six-month periods ended June 30, 2025 was primarily due to lower legal and other costs as these expenses were higher in the 2024 periods, in part, due to the costs and expenses attributable to the Company’s pursuit of new business opportunities, including the RI Acquisition, which closed in May 2024. These decreases were offset, in part, by increased staffing in the sales, finance, and customer retention areas during the 2025 periods.

Interest expense increased by $43,000 and $127,000 to $428,000 and $861,000 for the three and six-month periods ended June 30, 2025 compared to $385,000 and $734,000 for the same periods in the prior year, respectively. The increase for the three and six-month periods ended June 30, 2025 was due to an increase in borrowings, including the Second Supplemental Term Loan received in December, 2024 and the Supplemental Term Loan received in January 2024.

During the three-month period ended June 30, 2024, 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 $14,000 and $56,000 to $45,000 and $109,000 for the three and six-month periods ended June 30, 2025 compared to $59,000 and $165,000 for the same periods in the prior year, respectively. The decrease for the three and six-month periods ended June 30, 2025 was due to a decrease in the interest received on the Company’s cash, driven primarily by lower average cash balances, compared to the same periods in the prior year.

Income tax benefit decreased by $10,000 and increased by $269,000 to an income tax benefit of $21,000 and $344,000 for the three and six-month periods ended June 30, 2025 compared to an income tax benefit of $31,000 and $75,000 for the same periods in the prior year, respectively. The income tax benefit for the three and six-month periods ended June 30, 2025, included a non-recurring adjustment for unrecognized tax benefits related to foreign taxes of $71,000, which offset income tax expense for the same period, compared to $100,000 for the six-month period ended June 30, 2024. Excluding this adjustment, income tax benefit for the three and six-month periods ended June 30, 2025 increased $61,000 and $240,000. The increase in the income tax benefit for the three and six-month periods ended June 30, 2025 was primarily due to losses incurred by the Company’s leasing and direct patient services segments, driven by lower overall volume.

Net loss attributable to non-controlling interests increased by $364,000 and $597,000 to a loss of $198,000 and $485,000 for the three and six-month periods ended June 30, 2025 compared to income of $166,000 and $112,000 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 change in net income or loss attributable to non-controlling interests reflects the relative profitability of the three Rhode Island facilities and GKF and its subsidiaries.

Net loss attributable to American Shared Hospital Services increased by $3,882,000 and $4,626,000 to a loss of $280,000, or $0.04 per diluted share and a loss of $905,000 or $0.14 for the three and six-month periods ended June 30, 2025 compared to net income of $3,602,000, or $0.55 per diluted share and $3,721,000, or $0.57 per diluted share for the same periods in the prior year, respectively. Excluding the net bargain purchase gain from the RI Acquisition in the prior year of $3,679,000, net loss increased $166,000 and $910,000 for the three and six-month periods ended June 30, 2025. The Company incurred a net loss for three and six-month periods ended June 30, 2025, due to losses incurred by the leasing and direct patient services segments, driven by lower procedure volume.

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 the $7,000,000 Revolving Line. As of June 30, 2025, the Company borrowed $5,000,000 on its Revolving Line. The Company had cash, cash equivalents and restricted cash of $11,331,000 at June 30, 2025 compared to $11,275,000 at December 31, 2024. The Company’s cash position increased by $56,000 during the first six months of 2025 due to net advances on the Revolving Line of $5,000,000, cash provided by operating activities of $2,131,000, and capital contributions from non-controlling interests of $8,000. These increases were offset by payment for the purchase of property and equipment of $5,916,000 and payments on long-term debt of $1,167,000. 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 has scheduled interest and principal payments under its debt obligations of approximately $10,741,000 during the next 12 months.

Working Capital

The Company had working capital at June 30, 2025 of $3,573,000 compared to $15,853,000 at December 31, 2024. The $12,280,000 decrease in working capital was primarily due to advances on the Revolving Line and an increase in the current portion of long-term debt, net. 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. See additional discussion in the “Commitments” section below. The Company, in the past, has secured financing for its Gamma Knife and radiation therapy units. The Company has secured financing for its projects from several lenders and anticipates that it will be able to secure financing on future projects from these or other lending sources, but there can be no assurance that financing will continue to be available on acceptable terms.

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 (the “Credit Agreement”) with Fifth Third Bank, N.A. (“Fifth Third”). 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 of $5,500,000 is a 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 Company borrowed $5,000,000 on the Revolving Line as of June 30, 2025, which was repaid in July 2025. The facilities have a five-year maturity, which mature on April 9, 2026, and carry a floating interest rate based on the Secured Overnight Financing Rate (“SOFR”) plus 3.0% (7.49% as of June 30, 2025) 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”). 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 was payable monthly during the initial twelve month period following the First Amendment Effective Date. Following that 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 replaced 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. 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, DDTL, Revolving Line, Supplemental Term Loan, and Second Supplemental Term Loan was $17,675,000 and $18,462,000 as of June 30, 2025 and December 31, 2024, respectively. The Company capitalized debt issuance costs of $0 and $164,000 as of June 30, 2025 and December 31, 2024, related to the issuance of the Supplemental Term Loan and Second Supplemental Term Loan.

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), an obligation that the Company maintain $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 were not in compliance with the maximum funded debt to EBITDA ratio covenant in the Credit Agreement as of June 30, 2025, but regained compliance on July 1, 2025.

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. 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 condensed consolidated balance sheets related to the DFC Loan was $1,478,000 and $1,806,000 as of June 30, 2025 and December 31, 2024, respectively.

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. 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. HoldCo was in compliance with all debt covenants pursuant to the DFC Loan as amended and waived at June 30, 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 condensed consolidated balance sheets related to the GKCE Loans was $93,000 and $145,000 as of June 30, 2025 and December 31, 2024, respectively. 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.

As of June 30, 2025, long-term debt on the condensed consolidated balance sheets was $19,094,000. See Note 3 - Long Term Debt to the condensed consolidated financial statements for additional information.

Commitments

As of June 30, 2025, the Company had commitments to purchase and install three Leksell Gamma Knife Esprit Systems (“Esprit”) and two Linear Accelerator (“LINAC”) systems. One of the Esprit upgrades was installed at the Company’s facility in Peru in July 2025. The remaining Esprit upgrades and one LINAC installation are scheduled to occur around the fourth quarter of 2025 or later at existing customer sites. The remaining LINAC is reserved for a future customer site. Total Gamma Knife and LINAC commitments as of June 30, 2025 were $8,385,000. There are no deposits on the condensed consolidated balance sheets related to these commitments as of June 30, 2025. 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 $11,331,000 and its Revolving Line of $7,000,000 and is actively engaged with financing resources to fund these projects. The Company borrowed $5,000,000 on the Revolving Line as of June 30, 2025, which was repaid in July 2025.

On 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 April 2026. The agreement requires the Company to make an annual prepayment of $1,939,000 for the current contractual period (one year). As of June 30, 2025, half of the prepayment was recorded as a prepaid contract and is being amortized over the one-year service period.

As of June 30, 2025, the Company had commitments to service and maintain its Gamma Knife, LINAC, and PBRT equipment. The service commitments are carried out via contracts with Mevion, Elekta, Solutech and Mobius Imaging, LLC. 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, 2025 were $11,928,000. The Gamma Knife and certain other service contracts are paid monthly, as service is performed. The Company believes that cash flow from cash on hand and operations will be sufficient to cover these payments.

Related Party Transactions

The Company’s Gamma Knife business is operated through its 81% indirect interest in its GKF subsidiary. The remaining 19% of GKF is owned by a wholly owned U.S. subsidiary of Elekta, which is the manufacturer of the Gamma Knife. Since the Company purchases its Gamma Knife units from Elekta, there are significant related party transactions with Elekta, such as equipment purchases, commitments to purchase and service equipment, and costs to maintain the equipment.

The following table summarizes related party activity for the three and six-month periods ended June 30, 2025 and 2024:

The Company also had commitments to purchase and install three Esprit units, two LINACs, and service the related equipment of $13,387,000 as of June 30, 2025.

Related party liabilities on the condensed consolidated balance sheets consist of the following as of June 30, 2025 and December 31, 2024

20

The Company does not hold or issue derivative instruments for trading purposes and is not a party to any instruments with leverage or prepayment features. The Company does not have affiliation with partnerships, trusts or other entities whose purpose is to facilitate off-balance sheet financial transactions or similar arrangements, and therefore has no exposure to the financing, liquidity, market or credit risks associated with such entities. At June 30, 2025, the Company had no significant long-term, market-sensitive investments.

Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934. These controls and procedures are designed to ensure that material information relating to the Company and its subsidiaries is communicated to the principal executive officer and our principal financial officer. Based on that evaluation, our principal executive officer and our principal financial officer concluded that, as of June 30, 2025, our disclosure controls and procedures were not effective due to the material weakness in our internal controls over financial reporting described in our Annual Report on Form 10-K for the year ended December 31, 2024, with respect to the Company having an insufficient number of personnel and resources with experience to create a proper control environment.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s remediation plan related to the material weakness in our internal controls identified are to hire sufficient personnel with accounting and financial reporting experience to augment its current staff and to improve the timeliness of our overall effectiveness of the Company’s closing and financial reporting processes, including as described in this paragraph. As previously disclosed, on December 19, 2024, the Company appointed a new Chief Financial Officer who also serves as the Company’s principal financial officer and principal accounting officer. The new Chief Financial Officer has extensive experience and expertise in billing and collections for radiation therapy facilities. During 2024, the Company outsourced its billing cycle for its Rhode Island facilities and intends to hire experienced staff to manage this process internally, which is expected to provide more control and efficiency to this process overall. The Company expects to have the billing cycle managed internally around the fourth quarter of 2025. During the first and second quarters of 2025, the Company utilized resources from a staffing agency and hired an Accounting Manager on a full-time basis in late March 2025 in addition to using third party accounting consulting services. The Company will continue to assess the need for additional resources, especially in the finance and accounting areas, as the Company’s business continues to grow and expand.

The primary element of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. As management continues to evaluate and work to improve our internal control over financial reporting, management may determine it is necessary to take additional measures to address the material weakness.

Except for the continued implementation of the remediation plan described above, there were no other changes in our internal control over financial reporting during the three-month period ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no material changes during the period covered in this report to the risk factors previously disclosed in Part 1, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.