AMERICAN SHARED HOSPITAL SERVICES: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Kind 10-Okay)

The COVID-19 pandemic, the ensuing recession in the US and its
follow-on results have impacted and can possible proceed to impression enterprise
exercise throughout industries, together with the Firm's. Throughout 2020, attributable to components
associated to the COVID-19 pandemic reminiscent of delays in service at medical amenities
and restrictions imposed by authorities businesses, and the Firm's prospects in
response to the unfold of COVID-19, the Firm skilled some delays in
delivering sure Gamma Knife procedures and PBRT remedies. Equally, the
Firm's capability to conduct business efforts with its prospects have been and
are prone to proceed to be disrupted as prospects have turned their focus to
coping with the impression of the COVID-19 pandemic on their operations and have
restricted entry to their websites in efforts to include the unfold of the virus.
The worldwide nature of the pandemic has resulted in authorities implementing
quite a few measures designed to include the virus, together with journey bans and
restrictions, border closures, quarantines, shelter-in-place orders, enterprise
limitations and shutdowns. The impression of the COVID-19 pandemic on the worldwide
economic system and capital markets is important, and on June 8, 2020 the Nationwide
Bureau of Financial Analysis introduced that the US was in an financial
recession. An prolonged financial recession in the US or elsewhere
may have a cloth opposed impact on the Firm's capability to conduct its
enterprise and to entry financing, in addition to on the Firm's outcomes of
operation, monetary situation, liquidity and money flows. The prioritization of
COVID-19 therapy and containment has resulted in delays in choices by the
Firm's prospects and their sufferers, obstacles to the Firm's capability to
market and ship its providers, declines in therapy volumes and opposed
impacts to revenues for each Gamma Knife procedures and PBRT remedies. As a
results of the pandemic and associated governmental actions, Gamma Knife procedures
and PBRT remedies, which presently make up the entire Firm's income, could
be impacted otherwise at every of the Firm's varied places and will take
longer to get well than different areas of the economic system, which can have a cloth
impression on the Firm's enterprise. The Firm's Gamma Knife operations in Latin
America have skilled a decline in procedures because of the COVID-19 pandemic.
Our Gamma Knife and PBRT operations in the US have additionally skilled
unfavourable impacts from the COVID-19 pandemic. Because the COVID-19 pandemic continues
to develop, extra impacts could come up that we're not conscious of presently.
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The impression of the COVID-19 pandemic for the 12 months ended December 31, 2020 has
different by location based mostly on the stage of containment and actions by authorities
businesses. The impression on remedies and prices within the three-month interval ended
March 31, 2020 didn't seem materials. The impression of the COVID-19 pandemic has
been higher for the three-month durations ended June 30, 2020, September 30,
2020, and December 31, 2020, together with declines in affected person volumes and
corresponding reductions in Gamma Knife procedures and diminished PBRT fractions
throughout the second and fourth quarters.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
The Firm's consolidated monetary statements are ready in accordance with
typically accepted accounting rules and comply with common practices inside the
business wherein it operates. Utility of those rules requires
administration to make estimates, assumptions and judgments that have an effect on the quantities
reported within the monetary statements and accompanying notes. These estimates,
assumptions and judgments are based mostly on data accessible as of the date of
the monetary statements; accordingly, as this data adjustments, the
monetary statements may replicate totally different estimates, assumptions and
judgments. Sure insurance policies inherently have a higher reliance on the usage of
estimates, assumptions and judgments and as such have a higher chance of
producing outcomes that might be materially totally different than initially reported.
Essentially the most vital accounting insurance policies adopted by the Firm are offered
in Be aware 2 to the consolidated monetary statements. These insurance policies together with
the disclosures offered within the different monetary assertion notes and, on this
dialogue, and evaluation, present data on how vital belongings and
liabilities are valued within the monetary statements and the way these values are
decided. Based mostly on the valuation methods used and the sensitivity of
monetary assertion quantities, and the strategies, assumptions and estimates
underlying these quantities, administration has recognized income recognition and
prices of gross sales for turn-key and income sharing preparations, and the carrying
worth of fastened belongings and helpful lives, and as such might be most topic to
revision as new data turns into accessible. The next are our important
accounting insurance policies wherein administration's estimates, assumptions and judgments
most immediately and materially have an effect on the monetary statements:
Income Recognition
The Firm acknowledges revenues underneath Accounting Requirements Codification ("ASC")
842 Leases ("ASC 842") and ASC 606 Income from Contracts with Clients ("ASC
606"). The Firm had sixteen (16) Gamma Knife models and one (1) PBRT system in
operation as of December 31, 2020. 4 (4) of the Firm's buyer contracts
are by subsidiaries the place GKF or its subsidiary is almost all proprietor and
managing accomplice. Six (6) of the Firm's sixteen (16) present Gamma Knife
prospects are underneath fee-per-use contracts, and eight (8) prospects are underneath
retail preparations. The Firm, by GKF, additionally owns and operates
single-unit Gamma Knife amenities in Lima, Peru and Guayaquil, Ecuador. These
models economically operate much like the Firm's turn-key retail
preparations. The Firm's PBRT system at Orlando Well being - UF Well being Most cancers
Middle ("Orlando Well being"), can also be thought of a retail association.
Rental Revenue from Medical Companies
The Firm acknowledges revenues underneath ASC 842 when providers have been rendered
and collectability in all fairness assured, on both a payment per use or income
sharing foundation. The phrases of the contracts don't include any assured minimal
funds. The Firm's contracts are usually for a ten-year time period and are
categorised as both payment per use or retail. Retail preparations are additional
categorised as both turn-key or income sharing. Revenues from payment per use
contracts is set by every hospital's contracted fee. Revenues are
acknowledged on the time the procedures are carried out, based mostly on every hospital's
contracted fee and the variety of procedures carried out. Below income sharing
preparations, the Firm receives a contracted proportion of the reimbursement
acquired by the hospital. The quantity the Firm expects to obtain is recorded
as income and estimated based mostly on historic expertise. Income estimates are
reviewed periodically and adjusted as needed. Below turn-key preparations,
the Firm receives cost from the hospital within the quantity of the hospital's
reimbursement from third celebration payors, and the Firm is answerable for paying
all of the working prices of the tools. Working prices are decided
based totally on historic therapy protocols and price schedules with the
hospital. The Firm data an estimate of working prices that are reviewed
frequently and adjusted as essential to extra precisely replicate the
precise working prices. For turn-key websites, the Firm additionally shares a proportion
of web working revenue. The Firm data an estimate of web working revenue
based mostly on estimated revenues, much less estimated working prices. The working prices
and estimated web working revenue are recorded as different direct working prices
within the consolidated assertion of operations. As of December 31, 2020 and 2019,
the Firm acknowledged revenues of roughly $16,204,000 and $19,396,000
underneath ASC 842, respectively.
Income from retail preparations amounted to roughly 64% and 64% of complete
income for the years ended December 31, 2020 and 2019, respectively. As a result of
the income estimates are reviewed on a quarterly foundation, any changes
required for previous income estimates would end in a rise or discount in
income throughout the present quarterly interval.

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Affected person’s earnings

The Firm has stand-alone amenities in Lima, Peru and Guayaquil, Ecuador,
the place a contract exists between the Firm's amenities and the person
affected person handled on the facility. Below ASC 606, the Firm acts because the
principal on this transaction and gives, at a cut-off date, a single
efficiency obligation, within the type of a Gamma Knife therapy. Income associated
to a Gamma Knife therapy is acknowledged on a gross foundation on the time when the
affected person receives therapy. There isn't any variable consideration current within the
Firm's efficiency obligation and the transaction worth is agreed upon per
the acknowledged contractual fee. GKPeru's cost phrases are usually pay as you go for
self-pay sufferers and insurance coverage supplier funds are paid web 30 days. GKCE's
affected person inhabitants is primarily lined by a authorities payor and funds are
paid roughly 30 to 60 days upon bill. The Firm didn't capitalize
any incremental prices associated to the success of its buyer contracts.
Accounts receivable earned by GKPeru weren't vital for the 12 months ended
December 31, 2020 and 2019. GKCE's accounts receivable had been $467,000 for the
12 months ended December 31, 2020. As of December 31, 2020 and 2019, the Firm
acknowledged revenues of roughly $1,633,000 and $1,209,000 underneath ASC 606,
respectively.
2020 Outcomes
For the 12 months ended December 31, 2020, 65% of the Firm's income was derived
from its Gamma Knife enterprise and 35% was derived from the PBRT system. For the
12 months ended December 31, 2019, 66% of the Firm's income was derived from its
Gamma Knife enterprise, 30% was derived from the PBRT system, and the remaining 4%
from its IGRT enterprise.
TOTAL REVENUE
                                  Enhance
 (in 1000's)      2020        (Lower)        2019
  Whole income   $ 17,837          (13.4) %    $ 20,605


Whole income in 2020 decreased 13.4% in comparison with 2019 primarily attributable to a
lower in common reimbursement for Gamma Knife procedures and a lower in
PBRT fractions. This lower in volumes was partially attributable to the
COVID-19 pandemic.
Gamma Knife Income
                                                          Enhance
                                             2020        (Lower)        2019

Gamma Knife Income (1000’s) $ 11,670 (13.9)% $ 13,551
Variety of Gamma Knife procedures

             1,530            2.1  %       1,498
Common income per process             $  7,763          (14.2) %    $  9,046


Gamma Knife income for 2020 was $11,670,000 in comparison with $13,551,000 in 2019.
Gamma Knife income for 2020 decreased $1,881,000 in comparison with 2019 attributable to a
decrease common reimbursement on the Firm's retail websites pushed by a rise
in sufferers with Medicare protection and a lower in sufferers with Business
insurance coverage.
The variety of Gamma Knife procedures carried out in 2020 elevated 32 in comparison with
2019 because of the Firm's acquisition of GKCE in June 2020. This improve was
offset by a Gamma Knife contract that terminated in October 2020 and because of the
impression of the COVID-19 pandemic.
In April 2020, an current Gamma Knife buyer contract expired. The location
operated on a month-to-month foundation by October 2020, when the shopper
notified the Firm of their intent to terminate. Two extra current Gamma
Knife prospects notified the Firm of their intent to not renew their contract
throughout the third and fourth quarters of 2020. One of many contracts terminated in
February 2021 and the second is ready to run out in December 2021.
Income per process decreased by $1,283 and in 2020 in comparison with 2019. For
2020, the lower was attributable to decrease common reimbursement on the Firm's
retail websites.
Proton Remedy Income
                                                   Enhance
                                      2020        (Lower)       2019
Income from PBRT (in 1000's)    $ 6,167           (0.8) %    $ 6,214
Variety of PBRT fractions              5,868           (2.5) %      6,018
Common income per fraction        $ 1,051            1.7  %    $ 1,033


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PBRT income for 2020 was $6,167,000 in comparison with $6,214,000 in 2019. The quantity
of PBRT fractions carried out in 2020 was 5,868 in comparison with 6,018 in 2019. Income
per fraction in 2020 was $1,051 in comparison with $1,033 in 2019. In 2020, the
Firm's PBRT income declined attributable to an impression on volumes within the second and
fourth quarter from the COVID-19 pandemic. The Firm's proton remedy system
additionally skilled some down-time for upkeep within the third quarter of 2020.
IGRT Income
                                   Enhance
(in 1000's)          2020      (Lower)      2019
Income from IGRT      $  -         (100.0) %    $ 840


IGRT income for 2020 was $0 in comparison with $840,000 in 2019. IGRT income
decreased for 2020 as the results of the winding down of the Firm's IGRT
system, which was getting used as a back-up system on the buyer web site. The
Firm's contract for its IGRT tools expired in April 2020 and the Firm
agreed to promote the tools to its current buyer for $150,000, which was
equal to the tools's salvage worth. The Firm offered the tools in July
2020.
COSTS OF REVENUE
                                                  Enhance
(In 1000's)                      2020         (Lower)        2019
Whole prices of income           $ 13,371            (2.3) %    $ 13,685
Proportion of complete income          75.0  %                        66.4  %


The Firm's prices of income, consisting of upkeep and provides,
depreciation and amortization, and different working bills (reminiscent of insurance coverage,
property taxes, gross sales taxes, advertising prices and working prices from the
Firm's retail websites) decreased by $314,000 in 2020 in comparison with 2019.
Upkeep and provides prices as a proportion of complete income had been 13.4% and
12.7% in 2020 and 2019. Upkeep and provides prices decreased by $233,000 in
2020 in comparison with 2019. The lower in 2020 in comparison with 2019 was attributable to a
lower in time and supplies prices on the Firm's current websites.
Depreciation and amortization prices as a proportion of complete income had been 38.1%
and 35.6% in 2020 and 2019. Depreciation and amortization prices decreased
$552,000 in 2020 in comparison with 2019. The lower in 2020 in comparison with 2019 was
primarily attributable to depreciation incurred on the Firm's Gamma Knife and IGRT
tools at its location in Boston, Massachusetts in 2019, offset by elevated
depreciation recognition at two of the Firm's expiring Gamma Knife websites. One
of those contracts expired in October 2020 and the second expired within the first
quarter of 2021.
Different direct working prices as a proportion of complete income had been 23.5% and
18.1% in 2020 and 2019. Different direct working prices elevated by $471,000 in
2020 in comparison with 2019. The rise in 2020 is primarily attributable to working prices
from the Firm's acquisition of GKCE in June 2020.
SELLING AND ADMINISTRATIVE EXPENSE
                                                       Enhance
(In 1000's)                            2020        (Lower)        

2019

Promoting and administrative prices       $ 4,608            13.5  %    $ 4,060
Proportion of complete income               25.8  %                       19.7  %


The Firm's promoting and administrative prices elevated $548,000 in 2020
in comparison with 2019. The rise in 2020 was attributable to authorized and different charges,
together with, however not restricted to the COVID-19 pandemic and the transition in senior
administration and tax, authorized, and consulting charges associated to the Firm's
acquisition of GKCE of roughly $162,000.
INTEREST EXPENSE
                                                   Enhance
(In 1000's)                        2020        (Lower)        2019

Curiosity expense                   $ 1,057           (19.8) %    $ 1,318
Proportion of complete income            5.9  %                        6.4  %


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The Firm's curiosity expense decreased $261,000 in 2020 in comparison with 2019. The
lower in 2020 was primarily attributable to a decrease common principal base for the
Firm's lease and debt portfolio, successfully lowering curiosity expense.
(LOSS) ON WRITE DOWN OF IMPAIRED ASSETS AND ASSOCIATED REMOVAL COSTS
                                                              Enhance
(In 1000's)                                  2020         (Lower)     

2019

(Loss) on write down of impaired belongings      $ 8,264                    *    $  0

Proportion of complete income                     46.3  %                       0.0  %


*Not significant
As of December 31, 2020, the Firm acknowledged a loss on the write down of
impaired belongings of $8,264,000. The Firm reviewed its long-lived belongings and
deposits throughout the fourth quarter of 2020 and concluded occasions and
circumstances existed that indicated the worth of those belongings was more-than
quickly impaired.
The impaired belongings included six (6) Gamma Knife models and associated elimination
prices, and two (2) deposits in direction of the acquisition of proton beam techniques and
associated capitalized curiosity. The six (6) Gamma Knife models that had been impaired
consisted of two (2) models that had been taken out of service in prior years,
one (1) unit that was taken out of service in 2020 and three (3) models which have
already been or the Firm anticipates can be taken out of service in 2021.
INTEREST AND OTHER INCOME
                                              Enhance
(In 1000's)                    2020       (Lower)      2019

Curiosity and different earnings        $ 10           (37.5) %    $ 16

Proportion of complete income       0.1  %                     0.1  %


Curiosity and different earnings decreased $6,000 in 2020 in comparison with 2019. Curiosity
and different earnings is usually comprised of curiosity expense and curiosity earned,
and will increase or decreases typically replicate fluctuations in these quantities.
INCOME TAX EXPENSE
                                                                           Enhance
(In 1000's)                                    2020                    (Lower)                    2019

Revenue tax (profit) expense                $       (1,737)                               *       $          128
Proportion of complete income                           (9.7) %                                                0.6  %
Proportion of earnings, after web
earnings attributable to
non-controlling pursuits, and earlier than
earnings taxes                                          19.7  %                                               16.3  %


*Not significant
Revenue tax expense decreased $1,865,000 in 2020 in comparison with 2019. The lower
in earnings tax profit provision in 2020 was because of the loss on write-down of
impaired belongings recorded throughout the 12 months ended December 31, 2020.
The Firm anticipates that it'll proceed to document earnings tax expense if it
operates profitably sooner or later. Presently there are state earnings tax funds
required for many states wherein the Firm operates. At December 31, 2020,
the Firm exhausted the rest of its web working loss carryforward for
federal earnings tax return functions. The Firm has web working loss
carryforwards for state earnings tax functions.




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NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS
                                                                            Enhance
(In 1000's)                                    2020                     (Lower)                     2019

Internet (loss) earnings attributable to
non-controlling pursuits                   $         (658)                         (185.3) %       $          771

Proportion of complete income                           (3.7) %                                                  3.7  %


Internet earnings attributable to non-controlling pursuits decreased $1,429,000 in
2020 in comparison with 2019. Internet earnings attributable to non-controlling pursuits
represents the pre-tax earnings earned by the 19% non-controlling curiosity in GKF,
and the pre-tax earnings or losses of the non-controlling pursuits in varied
subsidiaries managed by GKF. The lower or improve in web earnings
attributable to non-controlling pursuits displays the relative profitability of
GKF. The lower in 2020 in comparison with 2019 was because of the loss on write off of
impaired belongings.
NET INCOME ATTRIBUTABLE TO AMERICAN SHARED HOSPITAL SERVICES
(In 1000's,                                                           Enhance
besides per share quantities)                       2020                    (Lower)                    2019

Internet (loss) earnings attributable to
ASHS                                      $       (7,058)                               *       $          659
Internet (loss) earnings per share
attributable to ASHS, diluted                       $(1.14)                             *       $         0.11


*Not significant
Internet (loss) attributable to American Shared Hospital Companies was $7,058,000 in
2020 in comparison with web earnings of $659,000 in 2019. Internet loss decreased $7,717,000
in 2020 in comparison with 2019 due primarily to the loss on write down of impaired
belongings.
LIQUIDITY AND CAPITAL RESOURCES
The Firm had money and money equivalents of $4,325,000 at December 31, 2020
in comparison with $1,779,000 at December 31, 2019, a rise of $2,546,000. The
Firm's anticipated main money wants on each a brief and long-term foundation are
for capital expenditures, enterprise enlargement, working capital, and different common
company functions.
Working actions offered money of $9,745,000 in 2020, which was pushed by
non-cash fees for depreciation and amortization of $6,970,000, stock-based
compensation expense of $299,000, non-cash lease expense of $288,000, a loss on
the write-down of impaired belongings of $8,184,000, curiosity expense related
with lease liabilities of $65,000, adjustments in receivables of $2,966,000, adjustments
in pay as you go and different belongings of $762,000, and adjustments in different accrued
liabilities, earnings taxes payable of $179,000, and deferred income of $263,000.
These had been offset by a web lack of $7,716,000, an earnings tax good thing about
$2,162,000, and web lease liabilities of $353,000.
The Firm's commerce accounts receivable decreased by $2,591,000 to $4,303,000 at
December 31, 2020 from $6,894,000 at December 31, 2019, primarily attributable to an
excellent cost associated to a contractual Medicare adjustment for one of many
Firm's Gamma Knife contracts, which was collected in January 2020, and an
improve in collections from the Firm's proton remedy buyer. The quantity
of days income (gross sales) excellent ("DSO") in accounts receivable as of
December 31, 2020 decreased to 88 days in comparison with 122 days at December 31,
2019. DSO can and does fluctuate relying on timing of buyer funds
acquired and the combo of payment per use versus retail prospects. Retail websites
typically have longer assortment durations than payment per use websites.
Investing actions used $2,389,000 of money in 2020 attributable to funds made
in direction of the acquisition of property and tools of $455,000 and cost for the
Acquisition of $2,084,000, offset by proceeds from the sale of kit of
$150,000.
Financing actions used $4,810,000 of money throughout 2020, primarily attributable to
principal funds on long-term debt of $1,726,000, principal funds in direction of
finance leases of $3,199,000, principal funds on short-term financing of
$519,000, and distributions to non-controlling pursuits of $761,000. These
decreases had been offset by long-term debt financing of the Acquisition of
$1,425,000.
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The Firm had a working capital deficit at December 31, 2020 of $1,530,000
in comparison with working capital of $2,528,000 at December 31, 2019. The $4,058,000
lower in web working capital was attributable to an lower in accounts receivable
and different receivables of $2,488,000, a rise in accounts payable of
$126,000, a rise in worker compensation and advantages of $171,000, an
improve in accrued liabilities of $266,000, asset retirement obligations of
$1,270,000, a rise in earnings taxes payable of $243,000, working capital
cost due of $197,000, improve in lease liabilities of $26,000, and an
improve in finance leases of $2,236,000. This was offset by a rise in money
and restricted money of $2,546,000, will increase in pay as you go and different belongings of
$50,000, and a lower in long run debt of $369,000. The Firm believes that
its money stream from money readily available, operations, and different money assets are
satisfactory to fulfill its scheduled debt and finance lease obligations throughout the
subsequent 12 months. See extra dialogue beneath associated to commitments.
The Firm, up to now, has secured financing for its Gamma Knife and
radiation remedy models. The Firm has secured financing for its initiatives from
a number of lenders and anticipates that will probably be capable of safe financing on
future initiatives from these or different lending sources, however there may be no
assurance that financing will proceed to be accessible on acceptable phrases.

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