Results of operations
2022 Compared to 2021
There was no patient revenue in 2022 compared to $1,061,000 in 2021. 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.
There were no patient expenses in 2022 as compared to $86,000 in 2021 due to the
annualized effects of the NYU contract ending in March 2021.
SG&A increased by $323,000 or 30% from $1,063,000 in 2021 to $1,386,000 in 2022,
mostly due to the impairment of Goodwill. Interest expense decreased to $0 in
2022 from $3,000 in 2021, due to the equipment loan being paid off in March of
2021. Loss from investments in unconsolidated entities decreased from $451,000
in 2021 to $163,000 in 2022, primarily due to the repayment of loans from MOP on
the sale of UOMA. Gain from investments in unconsolidated entities increased
$35,000 to $16,000 in 2022, from a loss from investments in unconsolidated
entities in 2021 of $19,000. The Company reported a net loss of $1,572,000 in
2022, as compared to $973,000 in the prior year, primarily due to the full
impairment of the CBOP and Goodwill, offset by the repayment of loans from MOP
on the sale of UOMA . The Company incurred an income tax charge of $39,000 in
2022, compared with $420,000 in 2021.
Liquidity and capital resources
At December 31, 2022, the Company had working capital of $1,275,000 as compared
to $1,617,000 at December 31, 2021. Total assets decreased by $1,941,000 from
2022 to 2021 principally due to the Company having to use its reserves, since
the closure of the NYU Gamma Knife Center. Cash and cash equivalents at December
31, 2022 were $1,537,000 as compared to $2,178,000 at December 31, 2021.
Net cash used by operating activities was $1,529,000 in 2022, as compared to
$296,000 used by operating activities in 2021. Net cash used in financing
activities was $0 in 2022 as compared to $89,000 in 2021.
For the year ended December 31, 2022, net cash provided by investing activities
was $888,000 as compared to $533,000 in 2021.
Off-balance sheet arrangements
None
Critical accounting policies
Estimates and assumptions
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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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