The accompanying notes to condensed consolidated financial statements are an integral part hereof
The accompanying notes to condensed consolidated financial statements are an integral part hereof.
The accompanying notes to condensed consolidated financial statements are an integral part hereof
U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Preparation
The accompanying condensed consolidated financial statements of U.S. NeuroSurgical Holdings, Inc. and subsidiaries (the “Company”) as of March 31, 2018 and 2017, are unaudited. However, in the opinion of management, such statements include all adjustments necessary for a fair statement of the information presented therein. The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date appearing in the Company’s Annual Report on Form 10-K.
Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying condensed consolidated financial statements and notes do not include all disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Accordingly, these statements should be read in conjunction with the Company’s most recent annual financial statements.
Consolidated results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), amending existing revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Topic 606 defines a five-step process to accomplish this objective, including identifying the contract with the customer and the performance obligations within the contract, determining the transaction price including estimates of any variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue as the company satisfies the performance obligation. We adopted the provisions of Topic 606 as of January 1, 2018 on a modified retrospective basis to the Company's sole contract at the date of adoption. We concluded that the impact to the manner in which we recognize revenue is immaterial. Our revenue is primarily generated from a leasing arrangement with New York University, which is not within the scope of Topic 606, or from the sale of maintenance services with a single performance obligation, under which revenue is recognized in a similar manner to the prior revenue standard. The Company recognizes maintenance income ratably over time as patient procedures are performed.
We plan to adopt the provisions of ASU 2016-02, Leases ("Topic 842"), as amended, as of January 1, 2019. We are evaluating the standard in accordance with our adoption plan, which will include performing a completeness assessment over the lease population, reviewing all forms of leases and analyzing the practical expedients in order to determine the best implementation strategy. We will then determine the impact of adoption on our condensed consolidated financial statements, as well as disclosures, accounting policies, business processes and internal controls. While our evaluation is ongoing, we expect to adopt the standard on a modified prospective basis and recognize additional lease liabilities and right of use assets. The extent of the increase to assets and liabilities associated with these amounts remains to be determined, and we are currently unable to estimate if there will be a material impact to our consolidated financial statements.
Note B – Gamma Knife at NYU Medical Center
U.S. NeuroSurgical, Inc. (“USN”), a wholly-owned subsidiary of U.S. NeuroSurgical Holdings, Inc., opened its New York gamma knife treatment center in July 1997 on the campus of New York University (“NYU”) Medical Center. USN installed a new Leksell gamma knife, the PERFEXION model, at the NYU Medical Center in March 2009 in replacement of the older gamma knife equipment. In connection with this upgrade, USN modified its arrangement with NYU to extend the term for 12 years from March 2009.
In October 2012, the Company’s facility at NYU was totally destroyed as a result of flooding from Hurricane Sandy. The gamma knife had to be removed to prevent any cobalt leakage that might occur due to rusting of the equipment. The removal cost was $525,000. The Company paid a lease settlement of the outstanding principal balance only and received from insurance coverage $930,000 above the lease principal payments and emergency removal costs.
The Company finalized arrangements with NYU regarding the restored gamma knife center and entered into an amendment to the Gamma Knife Neuroradiosurgery Equipment Agreement. The Company’s new facility, with the Leksell PERFEXION gamma knife, is located in the Tisch Hospital of NYU Langone Medical Center. The facility reopened and began receiving patients at the end of April 2014.
The Company entered into a six-year lease in the amount of $4.7 million for the purchase of the replacement equipment and associated leasehold improvements. The first payment of $78,000 was made on September 1, 2014, including $18,000 of interest, and the final payment is due on May 1, 2020. The Company entered into a second two-year lease in the amount of $250,000 for the cost of the construction required at the relocated site. The first payment of $12,000 was made on November 1, 2014, and the final payment was made in July 2016.
In April 2016 USN entered into an agreement with Elekta for the installation of new ICON imaging technology for the NYU Gamma Knife equipment with a total cost, including sales taxes, of approximately $816,000. This ICON technology was installed during the month of July 2016 and the gamma knife center reopened on August 5, 2016. The Company has obtained lease financing of approximately $879,000 at an interest rate of approximately 4.45% to finance the acquisition of the ICON technology and associated installation costs totaling approximately $63,000. The monthly lease payment is approximately $20,000 which commenced October 2016, with the final payment scheduled for September 2020. A monthly maintenance agreement commenced a year after the installation date at a cost of about $6,000 per month.
In July 2016, USN and NYU entered into an amendment to the Gamma Knife Neuroradiosurgery Equipment Agreement relating to the newly installed ICON imaging technology, increasing the monthly payment due to the Company by $30,000 for the remaining term of the agreement.
In September 2017, USN and NYU entered into an additional amendment to the Gamma Knife Neuroradiosurgery Equipment Agreement, whereby NYU committed to purchase all of the gamma knife equipment at the NYU Medical Center 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 will pass to NYU. Payments received before USN can pass title to the gamma knife equipment to NYU, or before USN has satisfied substantially all of its obligations under the agreement, will be recorded as deferred revenue.
Previously, the agreement with NYU ended on March 17, 2021 and NYU had an option to purchase the gamma knife equipment at the appraised value of the equipment at that time. In June 2017, the Company obtained an independent estimate of $2,570,000 for the fair value of the equipment in March 2021. The Company believes that the accelerated payments amounting to $2,400,000 represent fair consideration considering all aspects of the transaction.
The Company will continue to be responsible for the maintenance and insurance for the gamma knife equipment at the NYU facility through the contract period and will continue to be reimbursed for use of the gamma knife and associated maintenance based on a fee per procedure performed with the equipment. NYU provides the medical and technical staff to operate the facility.
USN retains the obligation to reload the cobalt for the gamma knife at its expense, the cost of which is estimated to be $1,100,000 and is expected to be performed by mid-July 2018. The Company will also bear the cost of site work involved in reloading the cobalt, up to a maximum of $1,088,000, although management believes that the actual cost will be approximately $300,000 less than this amount. The Company believes that it will be able to finance these costs through Elekta, the same entity through which the Company is leasing the gamma knife equipment. With NYU’s commitment to purchase the equipment, provided that the Company fulfills its obligation to reload the cobalt as required under the new arrangement, the Company will be relieved of its obligation to close and restore the NYU facility to its original condition at the end of the contract period. In recent years, services provided at NYU have represented over 90% of all the Company’s revenues.
Note C – The Southern California Regional Gamma Knife Center
During 2007, the Company managed the formation of the Southern California Regional Gamma Knife Center at San Antonio Regional Hospital (“SARH”) in Upland, California. The Company participates in the ownership and operation of the center through USNC. Corona Gamma Knife, LLC (“CGK”) is party to a 14-year agreement with SARH to renovate space in the hospital and install and operate a Leksell PERFEXION gamma knife. CGK leases the gamma knife from NeuroPartners LLC, which holds the gamma knife equipment. In addition to returns on its ownership interests, USNC expects to receive fees for management services relating to the facility.
USNC is a 20% owner of NeuroPartners LLC and owns 39% of CGK.
USNC was a 20% guarantor on NeuroPartners LLC’s seven-year lease with respect to the gamma knife equipment and certain leasehold improvements at SARH. In February 2016, NeuroPartners LLC negotiated a new five- year lease to fund the reloading of cobalt and related construction services. The new lease of $1,663,000 includes a balance of $668,000 from the prior lease obligations. This new lease will be paid over 60 months. The first payment of $31,000 was paid on April 1, 2016 and the final payment will be due on March 1, 2021. The Company continues to be a 20% guarantor on the new lease and expects any potential obligations from this guarantee would be reduced by the recovery of the related collateral, and thus expects any exposure from this guarantee to be remote.
Construction of the SARH gamma knife center was completed in December 2008 and the first patient was treated in January 2009. The project has been funded principally by outside investors. While the Company has led the effort in organizing the business and overseeing the development and operation of the SARH center, its investment to date in the SARH center has been minimal.
The Company’s share of cumulative losses associated with its investment in NeuroPartners LLC and CGK has exceeded its investment. Due to loans made to NeuroPartners LLC and CGK, NeuroPartners LLC and CGK are considered to be variable interest entities of the Company. However, as the Company is not deemed to be the primary beneficiary of NeuroPartners LLC and CGK, since it does not have the power to direct the operating activities that most significantly affect NeuroPartners LLC’s and CGK’s economic performance, these entities are not consolidated, but certain disclosures are provided herein.
During the year ended December 31, 2017, the Company received $65,000 in repayments of amounts previously advanced to NeuroPartners LLC and CGK and $24,000 in distributions. Those repayments and distributions reduced the amount of losses incurred on prior advances to NeuroPartners LLC and CGK. At December 31, 2017, NeuroPartners LLC and CGK had repaid all of the outstanding advances. During the quarter ended March 31, 2018, the Company advanced an additional $6,000 to CGK. For the three months ended March 31, 2018 and 2017, the Company’s equity in earnings of NeuroPartners LLC and CGK was $13,000 and $38,000, respectively, but was not recorded due to prior losses.
The following tables present the aggregation of summarized financial information of NeuroPartners LLC and CGK:
NeuroPartners, LLC and CGK Condensed Income Statement Information
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Patient Revenue
|
|
$
|
211,000
|
|
|
$
|
276,000
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
57,000
|
|
|
$
|
124,000
|
|
|
|
|
|
|
|
|
|
|
USNC’s equity in earnings of NeuroPartners, LLC and CGK
|
|
$
|
13,000
|
|
|
$
|
38,000
|
|
NeuroPartners, LLC and CGK Condensed Balance Sheet Information
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
199,000
|
|
|
$
|
165,000
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets
|
|
|
691,000
|
|
|
|
745,000
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
890,000
|
|
|
$
|
910,000
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
347,000
|
|
|
$
|
641,000
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities
|
|
|
681,000
|
|
|
|
464,000
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
(138,000
|
)
|
|
|
(195,000
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
890,000
|
|
|
$
|
910,000
|
|
Note D – Florida Oncology Partners
During 2010, the Company expanded its market strategy to include opportunities to develop cancer centers featuring radiation therapy. These centers utilize linear accelerators with IMRT (Intensity Modulated Radiation Therapy) and IGRT (Image Guided Radiation Therapy) capabilities. In 2010, the Company formed Florida Oncology Partners, LLC (“FOP”) in partnership with local physicians and other investors. USNC owns a 24% interest in the venture. FOP’s first center was located in Miami, Florida and opened in the second quarter of 2011. During the quarter ended September 30, 2010, the Company participated in the formation of Florida Oncology Partners RE, LLC (“FOPRE”), which owned a building previously occupied by FOP. The center diagnoses and treats patients utilizing a Varian Rapid Arc linear accelerator and a GE CT scanner. USNC originally invested $200,000 for a 20% ownership interest in FOP and FOPRE. The remaining 80% was owned by other outside investors. In January of 2015 one of the investors relinquished its ownership interest in both FOP and FOPRE, and that interest was distributed among the remaining members in relationship to their percentages owned. This distribution resulted in an increase of ownership interest for the Company of 4% in each of FOP and FOPRE. As of January 1, 2015, the Company holds a 24% ownership in both FOP and FOPRE.
During 2011, Florida Oncology Partners, LLC entered into a seven-year capital lease with Key Bank for approximately $5,800,000. Under the terms of the capital lease, USN agreed to guarantee a maximum of $1,433,000, approximately 25% of the original lease obligation in the event of default. USN is a guarantor jointly with most of the other members of FOP (except USNC, which is not a named guarantor). The outstanding balance on the lease obligation was $189,000 at March 31, 2018, and $468,000 at December 31, 2017. The Company expects any potential liability from this guarantee to be reduced by the recoveries of the respective collateral but has recorded a liability of $11,000 associated with this guarantee at March 31, 2018.
In June 2012, FOPRE financed the purchase of the building that was occupied by FOP. The amount of the loan was $1,534,000 and was to be paid at a monthly rate of approximately $8,500 for 120 months with the final payment due on June 15, 2022. In December 2015, FOPRE sold the building, for a gain on sale of $577,000. The Company’s share of the gain was $139,000. The related mortgage was repaid upon closing of the sale and FOPRE has ceased operations. In May 2017, FOPRE was dissolved.
In December of 2015, FOP entered into an agreement with 21
st
Century Oncology for the sale of FOP’s Varian Rapid Arc linear accelerator and other medical equipment at the FOP location. 21
st
Century Oncology paid FOP $1,000,000 as a down payment for the equipment and agreed to make monthly payments of $172,000 for the equipment and all monthly payments due under the equipment lease with Key Bank. As of this date, 21
st
Century Oncology has not satisfied all of the terms of the agreement. In late May 2017, 21
st
Century Oncology filed for Chapter 11 bankruptcy protection and FOP was listed as an unsecured creditor. As a result, since June 2017, FOP has not received the agreed rental payments beyond the monthly payments for the equipment lease. FOP will continue to monitor the impact of 21
st
Century’s bankruptcy and pursue amounts that it is owed. However, there can be no assurance that FOP be successful in these efforts.
Late in 2016, FOP took initial steps toward the development of a new radiation therapy center in Homestead, Florida. In December 2016, FOP entered into a ten-year lease agreement for office space located at 20405 Old Cutler Towne Center. FOP had to deliver an $88,000 letter of credit in conjunction with this office lease which collateral is being held in a restricted certificate of deposit. FOP began incurring architecture costs for planning/refitting the new space. During the first half of 2017, a financing agreement with BB&T Bank for the medical equipment and leasehold improvements was negotiated and then signed on August 31, 2017. In November 2017, the amounts for the equipment and leasehold improvements costs were finalized and paid under this financing agreement for a total loan of $4,106,000 to be paid over 7 years.
Late in the third quarter of 2017, it was determined that the business opportunity at this new location should be pursued by a different investor group, and FOP arranged to sell the opportunity to this group. CB Oncology Partners, LLC, was organized on September 1, 2017, to acquire the assets and rights in this new center from FOP.
In June 2017, FOP entered into an agreement with a third-party owner of a radiation therapy center located in Miami, Florida, whereby FOP took over the operation of the center effective September 22, 2017, for a ten-year initial term, and up to three additional terms of five years each. This agreement has been accounted for as a capital lease and, accordingly, FOP recorded assets and capital lease liabilities totaling $14,321,000 at September 22, 2017. The lease requires monthly payments in the first year of $160,000, increasing by 2% each year.
The Company’s recorded investment in FOP at March 31, 2018 and December 31, 2017 has been reduced to zero due to FOP recording distributions of $950,000 in the fourth quarter of 2017. Amounts due from FOP included in due from related parties total $410,000 and $169,000 at March 31, 2018 and December 31, 2017 respectively. The Company made additional advances of $241,000 to FOP during the three months ended March 31, 2018, to assist with the funding of operations of the radiation therapy center in Miami. In addition, FOP owes $301,000 of principal and accrued interest to the Company under a promissory note bearing interest at 6% per anum entered into in October 2017.
Due to loans made to FOP, FOP is considered to be a variable interest entity of the Company. However, as the Company is not deemed to be the primary beneficiary of FOP, since it does not have the power to direct the operating activities that most significantly affect FOP’s economic performance, the entity is not consolidated, but certain disclosures are provided herein.
The following tables present the summarized financial information of FOP
FOP Condensed Income Statement Information
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Patient Revenue
|
|
$
|
600,000
|
|
|
$
|
-
|
|
Rental Income
|
|
|
482,000
|
|
|
|
1,013,000
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(468,000
|
)
|
|
$
|
619,000
|
|
|
|
|
|
|
|
|
|
|
USNC’s equity in (loss) earnings
of FOP
|
|
$
|
(113,000
|
)
|
|
$
|
150,000
|
|
FOP Condensed Balance Sheet Information
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
692,000
|
|
|
$
|
664,000
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets
|
|
|
18,208,000
|
|
|
|
18,961,000
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
18,900,000
|
|
|
$
|
19,625,000
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
3,318,000
|
|
|
$
|
3,228,000
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities
|
|
|
16,481,000
|
|
|
|
16,842,000
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
(899,000
|
)
|
|
|
(445,000
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
18,900,000
|
|
|
$
|
19,625,000
|
|
FOPRE had no significant assets or liabilities at December 31, 2017 and no significant income and expenses for the three months ended March 31, 2017.
Note E – Boca Oncology Partners
During the quarter ended June 30, 2011, the Company participated in the formation of Boca Oncology Partners, LLC (“BOP”), for the purpose of owning and operating a cancer center in Boca Raton, Florida. In June 2011, Boca Oncology Partners RE, LLC (“BOPRE”), an affiliated entity, purchased a 20% interest in Boca West IMP, LLC (“Boca West IMP”), owner of a medical office building in West Boca, Florida in which
BOP operates. BOP occupies approximately 6,000 square feet of the 32,000 square foot building. The Company’s wholly-owned subsidiary, USNC invested $225,000 initially and had a 22.5% interest in BOP and BOPRE.
In January 2012, an additional investor purchased 50% of the partnership reducing the Company’s ownership to 11.25%. The remaining 88.75% was owned by other outside investors. In June 2012, BOPRE purchased an additional 3.75% of Boca West IMP from another investor bringing its total interest to 23.75%. BOPRE accounts for this investment under the cost method since it does not exercise significant influence over Boca West, IMP. Then the members of BOPRE sold 31.5% of their interests in BOPRE to a new investor, and USNC’s investment in BOPRE was reduced to 15.4%.
During the years ended December 31, 2017 and 2016, several investors relinquished part of their ownership interest in BOPRE, and those interests were distributed among the remaining investors in relationship to their percentages owned. As a result, the Company holds a 21.05% ownership interest in BOPRE, which it accounts for under the equity method, at December 31, 2017. The center operated by BOP opened in August 2012.
The Company’s recorded investment in BOPRE is $164,000 at March 31, 2018 and December 31, 2017.
USNC is a 10% guarantor of 50% of the outstanding balance of Boca West IMP’s ten-year mortgage. This mortgage had an original balance of $3,000,000 and is secured by the medical office building in which BOP operates. The outstanding balance on the mortgage is $2,389,000 at March 31, 2018 and $2,417,000 at December 31, 2017. Any liability from this guarantee would be mitigated by the recovery from the underlying real estate, and the Company expects its potential exposure from this guarantee to be remote.
The following tables present the summarized financial information of BOPRE:
BOPRE Condensed Income Statement Information
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Rental Income
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
USNC’s equity in loss
of BOPRE
|
|
$
|
-
|
|
|
$
|
-
|
|
BOPRE Condensed Balance Sheet Information
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
12,000
|
|
|
$
|
17,000
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets
|
|
|
925,000
|
|
|
|
920,000
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
937,000
|
|
|
$
|
937,000
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
937,000
|
|
|
|
937,000
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
937,000
|
|
|
$
|
937,000
|
|
Note F - Medical Oncology Partners
In April 2015 Medical Oncology Partners, LLC (“MOP”), was formed in partnership with local physicians and other investors. MOP was established to acquire a 100% equity interest in United Oncology Medical Associates of Florida, LLC (“UOMA”). USNC was not a member of MOP at the time of formation as it was not able to participate due to the fact that USNC was not a physician. Nevertheless, USNC wished to eventually obtain an equity interest in MOP and loaned Dr. Jaime Lozano, the principal investor in MOP and a co-investor in FOP, $173,000. Dr. Lozano used these funds, along with an equal amount of his own funds (a total of $345,000), to purchase a 76.67% interest in MOP. Other investors paid a further $105,000 for the remaining equity in MOP. MOP used the $450,000 of financing to acquire a 100% equity interest in UOMA. An application was filed for a waiver to allow USNC to hold an equity interest notwithstanding the physician requirement and on December 22, 2016, USNC was cleared to become a part owner of MOP. Dr. Lozano agreed to exchange half of his membership interest to USNC in settlement of the note to USNC. USNC and Dr. Lozano also agreed to share equally in providing a 5% equity interest in MOP to an additional investor as a consulting fee for services rendered in the administration of MOP and UOMA. At December 22, 2016, USNC owned 35.83% of MOP with an initial carrying value of $161,000. The Company recorded its share of losses of $12,000 for the period from December 22, 2016 to December 31, 2016, against its investment which resulted in a reduction of its equity investment to $149,000.
Due to increasing costs, continued net losses since April 2015, and reliance on related party and other debt for operating cash flows, the fair value of UOMA is less than its carrying amount. The Company tested its investment for impairment at December 31, 2016 and determined that the investment was impaired and an impairment loss was recorded against the entire equity balance in MOP, as well as loans from USN and USNC to MOP and UOMA. For the three months ended March 31, 2018 the Company’s equity in loss of MOP was $6,000 but was not recorded due to prior losses.
Due to loans made to MOP, MOP is considered to be a variable interest entity of the Company. However, as the Company is not deemed to be the primary beneficiary of MOP, since it does not have the power to direct the operating activities that most significantly affect MOP’s economic performance, the entity is not consolidated, but certain disclosures are provided herein.
The following table present the summarized financial information of MOP:
MOP Condensed Consolidated Income Statement Information
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Patient revenue
|
|
$
|
520,000
|
|
|
$
|
230,000
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(17,000
|
)
|
|
$
|
(45,000
|
)
|
|
|
|
|
|
|
|
|
|
USNC’s equity in loss
in MOP
|
|
$
|
(6,000
|
)
|
|
$
|
(16,000
|
)
|
MOP Condensed Consolidated Balance Sheet Information
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
34,000
|
|
|
$
|
41,000
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets
|
|
|
143,000
|
|
|
|
108,000
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
177,000
|
|
|
$
|
149,000
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
738,000
|
|
|
$
|
693,000
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
(561,000
|
)
|
|
|
(544,000
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
177,000
|
|
|
$
|
149,000
|
|
Note G - CB Oncology Partners
CB Oncology Partners, LLC, (“CBOP”) was organized September 1, 2017 to acquire the rights of the new center from FOP. The Company has a 24% equity interest in CBOP. Beginning in October of 2017, CBOP began paying the remainder of the costs associated with opening the center. CBOP had no assets at the end of 2017. The medical center opened and treated its first patient in January of 2018.
The Company has not yet contributed equity to CBOP and, accordingly has not recorded an investment in the entity. The Company advanced $143,000 to CBOP during the year ended December 31, 2017, and a further $543,000 during the three months ended March 31, 2018, to assist with the funding of the build out and initial operations of the entity. The Company has absorbed its share of equity in losses of CBOP through March 31, 2018, totaling $143,000 against these advances and the remaining advances have a carrying value of $543,000 at March 31, 2018.
Due to loans made to CBOP, CBOP is considered to be a variable interest entity of the Company. However, as the Company is not deemed to be the primary beneficiary of CBOP, since it does not have the power to direct the operating activities that most significantly affect CBOP’s economic performance, the entity is not consolidated, but certain disclosures are provided herein.
The following table presents the summarized financial information of CBOP:
CBOP Condensed Consolidated Income Statement Information
|
|
Three Months Ended
March 31, 2018
|
|
|
|
|
|
Patient revenue
|
|
$
|
112,000
|
|
|
|
|
|
|
Net loss
|
|
$
|
(341,000
|
)
|
|
|
|
|
|
USNC’s equity in loss
in CBOP
|
|
$
|
(83,000
|
)
|
CBOP Condensed Consolidated Balance Sheet Information
|
|
March 31,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
107,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
107,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
696,000
|
|
|
$
|
248,000
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
(589,000
|
)
|
|
|
(248,000
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
107,000
|
|
|
$
|
-
|
|
Note H – Income Taxes
The Company’s income tax rate, which includes federal and state income taxes, was approximately 58%, for the three months ended March 31, 2018 and 38% for the three months ended March 31, 2017. The 2018 tax charge includes a $33,000 adjustment to the estimated effective state tax rate. The Company recorded a tax charge of $86,000 for the three months ended March 31, 2018.