Note 1.    Basis of Presentation

In the opinion of the management of American Shared Hospital Services (“ASHS”), the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for the fair presentation of ASHS consolidated financial position as of March 31, 2026, the results of its operations for the three-month periods ended March 31, 2026 and 2025, and the cash flows for the three-month periods ended March 31, 2026 and 2025. The results of operations for the three-month periods ended March 31, 2026 are not necessarily indicative of results on an annualized basis. Consolidated balance sheet amounts as of December 31, 2025 have been derived from the audited consolidated financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2025 included in the ASHS Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2026.

These condensed consolidated financial statements include the accounts of ASHS and its subsidiaries (the “Company”) including as follows: ASHS wholly owns the subsidiaries American Shared Radiosurgery Services (“ASRS”), PBRT Orlando, LLC (“Orlando”), ASHS-Mexico, S.A. de C.V. (“ASHS-Mexico”), ASHS-Rhode Island Proton Beam Radiation Therapy, LLC (“RI-PBRT”), ASHS-Bristol Radiation Therapy, LLC (“Bristol”), and MedLeader.com, Inc. (“MedLeader”); ASHS is the majority owner of Southern New England Regional Cancer Center, LLC (“SNERCC”), Roger Williams Radiation Therapy, LLC (“RWRT”) and Long Beach Equipment, LLC (“LBE”); ASRS is the majority-owner of GK Financing, LLC (“GKF”), which wholly owns the subsidiaries Instituto de Gamma Knife del Pacifico S.A.C. (“GKPeru”) and HoldCo GKC S.A. (“HoldCo”). HoldCo wholly owns the subsidiary Gamma Knife Center Ecuador S.A. (“GKCE”). ASHS-Mexico is the majority owner of AB Radiocirugia y Radioterapia de Puebla, S.A.P.I. de C.V. of Puebla (“Puebla”) and Instituto Gamma Knife San Javier Mexico S.A.P.I. de C.V. (“San Javier”) . GKF is the majority owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”). 

The Company (through ASRS) and Elekta AB (“Elekta”), the manufacturer of the Gamma Knife (through its wholly-owned United States subsidiary, GKV Investments, Inc.), entered into an operating agreement and formed GKF. As of March 31, 2026, GKF provides Gamma Knife units to seven medical centers in the United States in the states of Illinois, Indiana, Mississippi, New Mexico, New York, Oregon, and Texas. GKF also owns and operates two single-unit Gamma Knife facilities in Lima, Peru and Guayaquil, Ecuador. The Company through its wholly-owned subsidiary, Orlando, provided proton beam radiation therapy (“PBRT”) and related equipment to a medical center in Florida.

On June 28, 2024, ASHS-Mexico, signed a Joint Venture Agreement with Hospital San Javier, S.A. de C.V. (“HSJ”) to establish San Javier to treat public- and private-paying cancer patients and provide radiosurgery services in Guadalajara, Mexico. The Company and HSJ will hold 70% and 30% ownership interests, respectively, in San Javier. Under the agreement, the Company is responsible for upgrading HSJ’s existing Gamma Knife Perfexion system to a Gamma Knife Esprit and paying 50% of all site modification costs required to install the Esprit.  The Company does not expect that San Javier will begin treating patients until late 2026 or 2027.

The Company formed the subsidiaries Puebla, GKPeru, ASHS-Mexico, and acquired GKCE for the purposes of expanding its business internationally; Orlando and LBE to provide PBRT equipment and services in Orlando, Florida and Long Beach, California, respectively; and AGKE and JGKE to provide Gamma Knife equipment and services in Albuquerque, New Mexico and Jacksonville, Florida, respectively. LBE is not expected to generate revenue within the next two years.

MedLeader was formed to provide continuing medical education online and through videos for doctors, nurses, and other healthcare workers. MedLeader is not operational at this time.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Accounting pronouncements issued and 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. The Company adopted ASU 2023-09 for the year-ended December 31, 2025, prospectively, and enhanced its disclosure requirements, accordingly.     

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 adopted ASU 2025-05 for the period-ended March 31, 2026 and concluded it did not have a material impact to its condensed consolidated financial statements.

Accounting pronouncements issued and not yet adopted - 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, including 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. 

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”). 

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-month period ended March 31, 2026, the Company recognized leasing revenue of approximately $3,020,000 compared to $2,991,000 for the same period in the prior year. For the three-month period ended March 31, 2026, $1,956,000 of the ASC 842 revenues were for PBRT services compared to $1,642,000, for the same period in the prior year.

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.

The Company holds a 60% equity interest in each of SNERCC and RWRT (collectively, the “RI Companies”) and was assigned certain payor contracts for a purchase price of $2,850,000, in May 2024 (such transaction, the “RI Acquisition”). 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 facilities are part of its direct patient services segment, see further discussion below.

Accounts receivable balances under ASC 606 at  March 31, 2026 and January 1, 2026 were $8,484,000 and $8,138,000, respectively. Accounts receivable balances under ASC 606 at  March 31, 2025 and January 1, 2025 were $6,120,000 and $6,073,000, respectively. For the three-month period ended March 31, 2026, the Company recognized direct patient services revenues of approximately $4,064,000 compared to $3,121,000 for the same period in the prior year.

Liquidity - On  April 9, 2021, ASHS, Orlando, GKF (together with ASHS and Orlando, the “Borrowers”), and ASRS (together with the Borrowers, 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 loan entered into with United States International Development Finance Corporation (“DFC”) in connection with the acquisition of GKCE in   June 2020 (the “DFC Loan”; together with the Credit Agreement, the “Credit Agreements”) was obtained through the Company’s wholly-owned subsidiary, HoldCo and is guaranteed by GKF. On   December 10, 2025, the Loan Parties received a notice from Fifth Third asserting that a specified Event of Default (as defined in the Credit Agreement) occurred under the Credit Agreement due to the Borrower's failure to maintain minimum unrestricted domestic cash of at least an aggregate of $5,000,000 (the “Minimum Cash Covenant”) as of September 30, 2025. As of December 31, 2025, the Company was not in compliance with the minimum fixed-charge coverage ratio, the maximum funded debt-to-EBITDA ratio, and the Minimum Cash Covenant required by the Credit Agreement, and the Company notified Fifth Third of such defaults. 

ASHS has also determined that the Borrowers’ defaults under the Credit Agreement could be deemed to have resulted in an Event of Default (as defined in the DFC Loan) under the DFC Loan. However, as of the date of this Quarterly Report, DFC has not delivered any notice asserting that such an Event of Default has occurred or sought to exercise any remedies it may have under the DFC Loan.

The Credit Agreement matured on  April 9, 2026 and is secured by a lien on substantially all of the assets of the Loan Parties and is guaranteed by ASHS, Orlando and ASRS.  The Loan Parties did not satisfy all outstanding obligations under the Credit Agreement on the maturity date. ASHS is currently in discussions with Fifth Third regarding a potential amendment and extension of the maturity date of the Credit Agreement. However, there can be no assurance that Fifth Third will agree to such an extension or, if obtained, as to the terms or duration of any such extension. If ASHS is unable to obtain an extension of the maturity date of the Credit Agreement, and Fifth Third were to demand payment in Full in lump-sum, the Company will not have sufficient cash on hand to repay all outstanding obligations due under the Credit Agreement at maturity. See Note 3 - “Long Term Debt” for additional information.  

As of March 31, 2026, HoldCo was not in compliance with the cash-to-debt covenant under the DFC Loan. The Company notified DFC of this non-compliance and is in discussions for an extended waiver or amendment to the DFC Loan, but there can be no assurances regarding the outcome of such discussions. Furthermore, ASHS has determined that HoldCo’s non-compliance with the DFC Loan could be deemed to have resulted in an Event of Default (as defined in the Credit Agreement) of the Credit Agreement with Fifth Third. However, as of the date of this Quarterly Report, Fifth Third has not delivered any notice to the Loan Parties asserting that such an Event of Default has occurred or sought to exercise any remedies it may have under the Credit Agreement.    

The Company reassessed its ability to continue as a going concern in light of the Events of Default discussed above. As long as the Company remains in default under the Credit Agreements, Fifth Third and DFC could accelerate all payment obligations under the Credit Agreements. If Fifth Third or DFC were to accelerate all payment obligations under the Credit Agreements as a result of the defaults thereunder, the Company would not have sufficient cash on hand to satisfy such accelerated payment obligations. As a result, these conditions raise substantial doubt about the Company’s ability to continue as a going concern.  To date, the Company has not negotiated a definitive extension and, if the Company is ultimately unable to do so, the Company’s liquidity will be adversely impacted and the Company’s ability to satisfy all of its commitments over the next twelve months in accordance with their current terms would be jeopardized. As a result of these conditions, in connection with management’s assessment of going-concern considerations in accordance with ASC 205-40 Presentation of Financial Statements - Going Concern, management has determined that the Company’s liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s condensed consolidated balance sheet as of March 31, 2026, does not contain any adjustments that might result from the uncertainty regarding the Company’s ability to continue as a going concern. 

Business segment information - Based on the guidance provided in accordance with ASC 280 Segment Reporting (“ASC 280”), the Company analyzed its subsidiaries which are all in the business of providing radiosurgery and radiation therapy services, either through leasing to healthcare providers or directly to patients, and concluded there are two reportable segments, leasing and direct patient services. As of March 31, 2026, the Company provided Gamma Knife and PBRT equipment to eight hospitals in the United States, which constitutes the leasing segment. As of March 31, 2026, the Company 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 the Company also owns a majority interest in and operates, three single-unit radiation therapy facilities in Rhode Island, which collectively constitute the direct patient services segment. 

An operating segment is defined by ASC 280 as a component of an entity that engages in business activities in which it  may recognize revenues and incur expenses, that has operating results that are regularly reviewed by the Company’s Chief Operating Decision Maker (“CODM”), and for which its discrete financial information is available. The Company determined two reportable segments existed due to similarities in economics of business operations and how the Company recognizes revenue for the patient treatment. The operating results of the two reportable segments are reviewed by the Company’s Executive Chairman of the Board, who is also the CODM.

For the three-month periods ended March 31, 2026 and 2025, the Company’s PBRT operations represented a majority of the revenue and net income of the leasing segment, which reported an overall net loss for the period. The revenues, depreciation, amortization, and other expense, interest expense, interest income, income tax expense (benefit), net (loss) income attributable to American Shared Hospital Services, and total assets for the Company’s two reportable segments as of  March 31, 2026 and 2025 consist of the following:

Reclassification - Certain comparative balances as of December 31, 2025 have been reclassified to make them consistent with the current year presentation.