Note 5.    Leases

The Company determines if a contract is a lease at inception. Under ASC 842, the Company is a lessor of equipment to various customers. Leases that commenced prior to the ASC 842 adoption date were classified as operating leases under historical guidance. As the Company has elected the package of practical expedients allowing it to not reassess lease classification, these leases are classified as operating leases under ASC 842 as well, as applicable. All of the Company’s lessor arrangements entered into or modified after ASC 842 adoption are also classified as operating leases. Some of these lease terms have an option to extend the lease after the initial term, but do not contain the option to terminate early or purchase the asset at the end of the term. The Company has elected not to recognize right-of-use (“ROU”) assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset.

The Company’s Gamma Knife and PBRT contracts with health systems are classified as operating leases under ASC 842. The related equipment is included in medical equipment and facilities on the Company’s condensed consolidated balance sheets. As all income from the Company’s lessor arrangements is solely based on procedure volume, all income is considered variable payments not dependent on an index or a rate. As such, the Company does not measure future operating lease receivables.

On  March 13, 2026, the Company and Orlando Health, Inc. (“Orlando Health”) entered into Amendment Two to Proton Beam Radiation Therapy Lease Agreement (the “Amendment”).  The Amendment extends the term of the Proton Beam Radiation Therapy Lease Agreement dated  October 18, 2006 between the Company and Orlando Health, as amended by Amendment One to Proton Beam Radiation Therapy Lease Agreement dated effective as of  August 12, 2012 (the “Lease”) for an additional seven years commencing  April 6, 2026 through  April 5, 2033 (the “Extended Term”), and sets the lease payment terms during the Extended Term based on a technical component collection percentage with that percentage decreasing during certain of the twelve month periods of the Extended Term.  The Amendment amends certain other terms of the Lease and sets forth certain agreements between the parties with respect to the leased equipment, including (i) an option granted to Orlando Health whereby it  may elect to purchase the leased equipment at the end of the lease term, including setting the purchase price and the period in which Orlando Health  may exercise its option, (ii) matters related to the Company’s obligation to remove, at its expense, the leased equipment from Orlando Health at the end of the Extended Term in the event Orlando Health does not exercise its purchase option, and certain financial understandings of the parties related to that obligation, and (iii) maintenance and insurance coverage obligations of the parties.   

The Company has two sublease agreements for small, corporate office spaces in San Francisco, California and Downers Grove, Illinois. The sublease in San Francisco is for 80 square feet for $1,003 per month located at 601 Montgomery Street, Suite 850.  The sublease in Downers Grove was signed in  February 2025 and is for two offices and three cubicle spaces for $2,300 per month located at 3041 Woodcreek Drive. Total ROU assets and lease liabilities for the Downers Grove sublease were $26,000. The sublease for Downers Grove expired in  January 2026 and was not renewed.

The RI Companies operate three single-unit radiation therapy facilities.  The Company assessed the existing lease agreements under ASC  842 and concluded two of the three facilities contained operating leases. The facility in Woonsocket, RI has a ground lease with a sublease for 1,950 square feet of the clinic space, which is leased back to the lessor.  The facility in Warwick, RI has a lease for 10,236 square feet for $32,790 per month. The facility in Providence, RI also has a ground lease, which was contributed by one of the minority partners.

On January 1, 2025, the Company entered into the Amended and Restated Lease Agreement (the “Amended Lease”) for the facility lease in Warwick, Rhode Island.  The Amended Lease includes a lease extension to December 31, 2039 and modified the monthly lease payment to $26,443. The Company assessed the Amended Lease under ASC  842 and concluded it was a lease modification. On January 1, 2025, the effective date of the Amended Lease, the Company recorded additional ROU asset and lease liability in the amount of $1,922,000.

The Company owns and operates a stand-alone Gamma Knife facility in Lima, Peru where it leased approximately 1,600 square feet for approximately $8,850 per month through  June 2025. In May 2024, the Company executed a new lease agreement for approximately 7,704 square feet for $9,000 per month.  The Company renovated this space during the first half of 2025 to accommodate its Gamma Knife Esprit and administrative offices and moved into the leased space in June 2025.  The current lease expires in May 2034. Total ROU asset and lease liability for the Peru lease was $771,000.

The Company also owns and operates a stand-alone Gamma Knife facility in Guayaquil, Ecuador where it owns 864 square feet of condominium space in an office building and approximately 10,135 of related land and parking spaces.  The Company’s stand-alone radiation therapy facility in Puebla, Mexico also has a lease for approximately 536 square meters for $1,800 per month with a lease expiration in  July 2034. The lease in Puebla is with a related party. Total ROU assets and lease liabilities for the Puebla lease were $149,000. 

Sublease income for the three-month period ended March 31, 2026 was $15,000 compared to $15,000 for the same period in the prior year.  

The Company’s lessee operating leases are accounted for as ROU assets, current portion of lease liabilities, and lease liabilities on the condensed consolidated balance sheets. Operating lease ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company’s operating lease contracts do not provide an implicit rate for calculating the present value of future lease payments. The Company determined its incremental borrowing rate to be approximately 8% by using available market rates and expected lease terms. The operating lease ROU assets and liabilities include any lease payments made and there were no lease incentives or initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company’s lessee operating lease agreements are for administrative office space and related equipment and for its direct patient service facilities in Lima, Peru, Puebla, Mexico and two stand-alone facilities in Rhode Island in which the Company acquired an interest in the RI Acquisition. These leases have remaining lease terms of approximately 8 to 15 years, some of which include options to renew or extend the lease. As of March 31, 2026, operating ROU assets, net of unfavorable leasehold interests, were $3,610,000, and lease liabilities were $4,343,000. 

The following table summarizes the maturities of the Company's lessee operating lease liabilities as of March 31, 2026: