AMS

Business Context and Reporting Period

Company: American Shared Hospital Services (ASHS)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: ASHS provides turn-key technology solutions for stereotactic radiosurgery (Gamma Knife) and advanced radiation therapy (Proton Beam Radiation Therapy - PBRT). Operations are divided into two segments: Medical Equipment Leasing (fee-per-use or revenue-sharing contracts with hospitals) and Direct Patient Services (stand-alone facilities in the U.S., Peru, Ecuador, and Mexico).
Recent Developments: In May 2024, the Company acquired a 60% interest in three Rhode Island radiation therapy centers (RI Acquisition). In July 2024, it began treating patients at a new facility in Puebla, Mexico. The Company is currently in discussions with lenders regarding debt covenant waivers and maturity extensions.

Key Financial Metrics

Margins: Gross margin percentage declined to 18.0% in 2025 from 32.4% in 2024. Costs of revenue increased to 82.0% of total revenue in 2025, driven by higher operating costs at new direct patient service facilities.

Material Changes vs. Prior Period

• Revenue Mix Shift: The Direct Patient Services segment grew to 55% of total revenue (from 44% in 2024), while the Leasing segment declined to 45% (from 56%). This shift was driven by the full-year impact of the RI Acquisition and the Puebla, Mexico facility.
• Procedure Volumes:
  • Gamma Knife: Total procedures decreased 13.6% to 937 (from 1,084), due to contract expirations and downtime for equipment upgrades in Peru.
  • PBRT: Procedures decreased 21.1% to 4,056 (from 5,139), attributed to cyclical fluctuations.
  • LINAC (Direct Patient): Procedures increased 92.0% to 28,147 (from 14,662), reflecting the addition of RI and Mexico facilities.
• Profitability: The Company reported a net loss of $1.55 million in 2025, compared to net income of $2.19 million in 2024. The 2024 income included a $3.79 million bargain purchase gain from the RI Acquisition, which did not recur in 2025.
• Liquidity: Cash and cash equivalents decreased by $7.56 million to $3.46 million. The Company moved from a working capital surplus of $15.85 million to a deficit of $5.72 million, primarily due to cash depletion and the reclassification of debt to current liabilities following covenant defaults.

Guidance, Risks, and Contingencies

Going Concern and Debt Covenants

The filing raises substantial doubt about the Company's ability to continue as a going concern. As of December 31, 2025, ASHS is in default of its Credit Agreement with Fifth Third Bank due to failures to meet:

• Minimum Fixed-Charge Coverage Ratio (1.25 required).
• Maximum Funded Debt-to-EBITDA Ratio (3.0 required).
• Minimum Unrestricted Domestic Cash Covenant ($5.0 million required).

Fifth Third has asserted an Event of Default and suspended the Revolving Loan Commitment. The Company is negotiating waivers and maturity extensions. If lenders accelerate payment obligations, the Company does not have sufficient cash to satisfy them. A similar potential Event of Default exists under the DFC Loan due to cross-default provisions.

Internal Controls

Management concluded that disclosure controls and procedures were not effective as of December 31, 2025, due to a material weakness in the internal control environment. This weakness stems from insufficient accounting personnel and resources to maintain effective monitoring and financial reporting processes.

Regulatory and Operational Risks

• Reimbursement: Potential implementation of the Radiation Oncology Case Rate Value Based Program Act (ROCR Act) could alter Medicare reimbursement models for Gamma Knife services.
• Customer Concentration: Two customers accounted for approximately 26% and 31% of total revenue in 2025.
• Capital Intensity: Significant commitments remain for equipment purchases ($7.88 million) and service contracts ($7.11 million).

Investor Verification Checklist

• Debt Resolution Status: Verify the outcome of negotiations with Fifth Third Bank regarding covenant waivers and the extension of the April 2026 maturity date.
• Liquidity Runway: Assess the sufficiency of current cash ($3.46 million) to cover operating expenses and debt service without accelerated repayment.
• Remediation of Material Weakness: Monitor progress in hiring accounting staff and implementing new financial reporting controls to address the internal control deficiency.
• Contract Renewals: Track the renewal status of expiring Gamma Knife contracts, which contributed to volume declines in 2025.
• Direct Patient Service Performance: Evaluate the profitability trajectory of the newly acquired Rhode Island facilities and the Puebla, Mexico site, which now constitute the majority of revenue.