Results of operations

2021 Compared to 2020

Patient revenue in 2021 was $1,061,000 as compared to $3,173,000 in 2020. Prior to the termination of the Company's contract with NYU in March 2021, the Company's Gamma Knife facility at NYU Medical Center represented all of the Company's patient revenue.

Patient expenses in 2021 were $86,000 as compared to $361,000 in 2020, primarily due to the annualized effects of the NYU contract ending in March 2021.

SG&A decreased by $133,000 or approximately 11% from $1,197,000 in 2020 to $1,064,000 in 2021. This decrease is primarily due to a decrease in insurance and other costs related to maintaining the NYU Gamma Knife Center. Interest expense decreased to $3,000 in 2021 from $25,000 in 2020, due mainly to the equipment loan being paid off in March of 2021. Loss from investments in unconsolidated entities decreased from $809,000 in 2020 to $470,000 in 2021, primarily due to lower impairments of amounts advanced to MOP and CBOP, in turn due to lower advances to those entities in 2021. The Company reported a net loss of $674,000 in 2021, as compared to a net income of $533,000 in the prior year, primarily due to the closing of the NYU Gamma Knife Center. The Company incurred an income tax charge of $120,000 in 2021, compared with $323,000 in 2020.

Liquidity and capital resources

At December 31, 2021, the Company had working capital of $1,918,000 as compared to $2,597,000 at December 31, 2020. Total assets decreased by $485,000 from 2020 to 2021 principally due to Company having to use its reserves, since the closure of the NYU Gamma Knife Center. Cash and cash equivalents at December 31, 2021 were $2,178,000 as compared to $2,030,000 at December 31, 2020.

Net cash provided by operating activities was $174,000 in 2021, as compared to $1,117,000 in 2020. Net cash used in financing activities was $89,000 in 2021 as compared to $901,000 in 2020 mainly due to lower finance lease principal payments.

For the year ended December 31, 2021, net cash provided by investing activities was $63,000 in 2021 as compared to $479,000 used in 2020, primarily due to $356,000 lower principal payments received under the sales-type sublease from the NYU Gamma Knife Center.


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Off-balance sheet arrangements

None

Critical accounting policies

Estimates and assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Revenue Recognition

Prior to October 2018, the Company's NYU Agreement primarily consisted of an operating lease, and the associated patient revenue from the use of the gamma knife was primarily operating lease income. Following an amendment to the Company's lease agreement with NYU, effective August 2016, the Company received a $30,000 minimum lease payment from NYU each month. With the exception of these fixed payments, the NYU agreement provided only for contingent rental income based on a tiered fee schedule related to the number of patient procedures and associated thresholds, with the rate per procedure decreasing as more procedures are performed. The Company recognized the contingent rental income and the fixed monthly payments on a systematic basis using an average fee per procedure calculated by estimating the expected number of procedures per contract year which runs from November 1, to the following October 31. Any amounts received in excess of the average fee were considered deferred revenue. At the end of each reporting period, the Company reviewed its estimated revenue for the contract year and adjusted revenue for any material changes in the estimate. At the end of the contract year, the revenue was adjusted to the actual amount received.

In September 2017, USN and NYU entered into an additional amendment to the NYU Agreement, whereby NYU committed to purchase all of the gamma knife equipment at NYU for a purchase price of $2,400,000, consisting of 41 monthly installments of $50,000 commencing at the end of October 2017 and continuing through the end of February 2021, with a final payment of $350,000 on March 31, 2021. Upon receipt of final payment, title to all the equipment at the center passed to NYU.

In October 2018, USN satisfied its obligation to reload the cobalt, and the NYU agreement was reevaluated to be a sales-type sublease between USN, the lessor, and NYU, the lessee. At the inception of a sales-type sublease, the lessor recognizes its gross investment in the sublease, unearned income and sales price. The cost or carrying amount, if different, of the leased property plus any initial direct costs minus the present value of the unguaranteed residual value accruing to the benefit of the lessor, is charged by the lessor against income in the current period. Management has concluded that all fixed future minimum lease payments ("MLPs") payable by NYU to USN should be included in the investment in sublease. The MLPs included fixed monthly payments of $50,000 through February 2021, and $30,000 through March 2021, as well as a final payment of $350,000 in March 2021. The present value of the MLPs was estimated to be approximately $2,447,000 and was recorded as an investment in sublease effective October 1, 2018. Until the contract renewal in October of 2020, the patient revenue under the tiered schedule had been considered contingent income under the sales type lease was recognized on a systematic basis using an average fee per procedure, until October 2020, when the Company recorded patient revenue based on procedures performed at the applicable billing rate for each procedure since the Company did not exceed the threshold at which billing rates decreased before the completed sale of the equipment on March 31, 2021.


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NYU Maintenance Revenue

The NYU agreement, which ended in March 2021, specified that USN was obligated to maintain the gamma knife equipment in good operating condition. This maintenance obligation was incurred through the term of the agreement while patient procedures were performed. Usage of the gamma knife machine was directly linked to the maintenance of the machine. USN billed NYU monthly for the maintenance and gamma knife services provided. The portion of the total contract consideration allocated to the maintenance services was $79,000 for 2021 and $316,000 for 2020 and was recognized ratably over each year.

Investments in unconsolidated entities

The Company accounts for its investments in unconsolidated entities by the equity method. The Company records its share of such earnings (losses) in the consolidated statements of operations as "Income (loss) from investments in unconsolidated entities". The carrying value of the Company's investments in unconsolidated entities is recorded in the consolidated balance sheets. The Company records losses of the unconsolidated entities only to the extent of the Company's interest in, and advances to, the entities.

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