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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