UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

For the fiscal year ended December 31, 2022

or

For the transition period from                     to                     .

Commission file number:  0-15586

U.S. NeuroSurgical Holdings, Inc.

(Name of small business issuer in its charter)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐     No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Yes ☐     No ☒

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐    No  ☒

As of June 30, 2022 the aggregate market value of issuer’s Common Stock held by non-affiliates was approximately $811,000, based upon the closing price as reported on the OTC Pink marketplace for that day.

As of March 28, 2023, there were outstanding 7,842,185 shares of the issuer’s Common Stock. $.01 par value.

Documents incorporated by reference:  None

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PART I			3
	Item 1.	Business.	3
	Item 1A.	Risk Factors.	12
	Item 1B.	Unresolved Staff Comments.	16
	Item 2.	Properties.	16
	Item 3.	Legal Proceedings.	16
	Item 4.	Mine Safety Disclosures.	16
PART II			17
	Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	17
	Item 6.	Selected Financial Data	17
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	18
	Item 7A.	Qualitative and Quantitative Disclosures About Market Risk.	20
	Item 8.	Financial Statements and Supplementary Data.	20
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	47
	Item 9A.	Controls and Procedures.	47
	Item 9B.	Other Information.	49
PART III			49
	Item 10.	Directors, Executive Officers and Corporate Governance.	49
	Item 11.	Executive Compensation.	51
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	52
	Item 13.	Certain Relationships and Related Transactions, and Director Independence.	53
	Item 14.	Principal Accounting Fees and Services.	53
PART IV			53
	Item 15.	Exhibits, Financial Statement Schedules.	53

Item 1B.

Unresolved Staff Comments.

Item 2.

Properties.

Item 3.

Legal Proceedings.

Item 4.

Mine Safety Disclosures.

Item 5.

Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Period	High Close	Low Close
January 1 – March 31, 2021	.38	.25
April 1 - June 30, 2021	.44	.26
July 1 – September 30, 2021	.31	.25
October 1 – December 31, 2021	.31	.23
January 1 – March 31, 2022	.25	.16
April 1 - June 30, 2022	.20	.13
July 1 – September 30, 2022	.20	.13
October 1 – December 31, 2022	.20	.06

Item 6.

Selected Financial Data

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A.

Qualitative and Quantitative Disclosures About Market Risk.

Item 8.

Financial Statements and Supplementary Data.

Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

/s/ ARONSON LLC 

Rockville, Maryland

		December 31,
		2022				2021
ASSETS
Current assets:
Cash and cash equivalents		$	1,537,000			$	2,178,000
Other current assets			18,000				65,000
Total current assets			1,555,000				2,243,000
Other assets:
Due from related parties			15,000				930,000
Investments in unconsolidated entities			157,000				141,000
Goodwill			-				315,000
Total other assets			172,000				1,386,000
Property and equipment:
Operating lease right-of-use asset			20,000				59,000
Total property and equipment			20,000				59,000
TOTAL ASSETS		$	1,747,000			$	3,688,000
LIABILITIES
Current liabilities:
Operating lease right-of-use liability - current portion			23,000				43,000
Accounts payable and accrued expenses			86,000				169,000
Income taxes payable			171,000				414,000
Total current liabilities			280,000				626,000
Operating lease right-of-use liability - net of current portion			-				23,000
Guarantee liability			11,000				11,000
Total liabilities			291,000				660,000
EQUITY
Common stock - par value $0.01; 25,000,000 shares authorized; 7,842,185 and 7,792,185 shares issued and outstanding  at December 31, 2022 and 2021, respectively.			78,000				78,000
Additional paid-in capital			2,871,000				2,871,000
Accumulated deficit			(1,710,000	)			(373,000	)
U.S. Neurosurgical Holdings, Inc. stockholders’ equity			1,239,000				2,576,000
Noncontrolling interests			217,000				452,000
Total stockholders’ equity			1,456,000				3,028,000
TOTAL LIABILITIES AND EQUITY		$	1,747,000			$	3,688,000

		Years Ended December 31,
		2022				2021
Revenue		$	-			$	1,061,000
Costs and expenses:
Patient expenses			-				86,000
Selling, general and administrative			1,386,000				1,063,000
Total			1,386,000				1,149,000
Operating loss			(1,386,000	)			(88,000	)
Total other (expense) income
Interest expense			-				(3,000	)
Interest income - sales-type sublease			-				8,000
Loss from loans to unconsolidated entities			(163,000	)			(451,000	)
Gain (loss) from investments in unconsolidated entities, net			16,000				(19,000	)
Total other expense			(147,000	)			(465,000	)
Loss before income taxes			(1,533,000	)			(553,000	)
Income tax provision			(39,000	)			(420,000	)
Net loss			(1,572,000	)			(973,000	)
Net loss attributable to noncontrolling interests			235,000				92,000
Net loss attributable to U.S. Neurosurgical Holdings, Inc.		$	(1,337,000	)		$	(881,000	)
Basic and diluted net loss per share attributable to U.S. Neurosurgical Holdings, Inc.		$	(0.17	)		$	(0.11	)
Weighted average common shares outstanding, basic and diluted			7,842,185				7,792,185

		Years Ended December 31,
		2022				2021
Cash flows from operating activities:
Net loss		$	(1,572,000	)		$	(973,000	)
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of operating lease right-of-use asset			39,000				35,000
Loss from investments in unconsolidated entities			116,000				470,000
Distributed earnings from unconsolidated entities			11,000				-
Accrued interest from notes receivable			-				-
Immpairment of Goodwill			315,000				-
Deferred income taxes			-				-
Changes in:
Accounts receivable			-				346,000
Income taxes receivable/payable			(243,000	)			303,000
Other current assets			47,000				34,000
Accounts payable and accrued expenses			(83,000	)			(1,000	)
Deferred revenue			-				-
Operating lease right-of-use liability			(43,000	)			(40,000	)
Net cash used in operating activities			(1,413,000	)			174,000
Cash flows from investing activities:
Advances to unconsolidated entities			(744,000	)			(491,000	)
Repayments from loans to unconsolidated entities			274,000				22,000
Capital contributions to unconsolidated entities			(2,000	)			-
Gain from investments in unconsolidated entities			1,244,000				-
Principal payments received under sales-type sublease			-				532,000
Net cash provided by investing activities			772,000				63,000
Cash flows from financing activities:
Repayment of finance lease obligations			-				(89,000	)
Net cash used in financing activities			-				(89,000	)
Net change in cash and cash equivalents			(641,000	)			148,000
Cash and cash equivalents - beginning of year			2,178,000				2,030,000
Cash and cash equivalents - end of year		$	1,537,000			$	2,178,000
Supplemental disclosures of cash flow information:
Cash paid for:
Interest		$	-			$	3,000
Income taxes		$	211,000			$	213,000
Supplemental disclosure of noncash investing and financing activities:
Issuance of subsidiary shares in exchange for a controlling interest in Elite Health Plan, Inc.		$	-			$	315,000

Note A – Organization and Business

U.S. NeuroSurgical Holdings, Inc. owns and operates, through its wholly-owned subsidiaries, stereotactic radiosurgery centers, utilizing gamma knife technology, and holds other interests in radiological treatment facilities.  As used herein, unless the context indicates otherwise, the term “Company”, “Registrant” and “Holdings” means U.S. NeuroSurgical Holdings, Inc. and its wholly-owned subsidiary, U.S. NeuroSurgical, Inc. (“USN”), and the wholly-owned subsidiaries of USN, U.S. NeuroSurgical Physics, Inc., and USN Corona, Inc., and majority-owned subsidiary of USN, Elite Health Plan, Inc.

USN, a Delaware corporation, was organized in July 1993 for the purpose of owning and operating stereotactic radiosurgery centers and utilizing the gamma knife technology.  USN held an interest in one gamma knife center on the premises of New York University Medical Center (“NYU”) in New York, New York, in a contractual relationship which expired on March 31, 2021. Through that date, USN held an interest in a gamma knife unit and was reimbursed by the facility where it is housed, based on utilization. USN has recognized no patient revenue since March 2021.

During the fourth quarter of 2007, USN formed a wholly-owned subsidiary, USN Corona, Inc. (“USNC”), to carry investments in Corona Gamma Knife, LLC and NeuroPartners, LLC. Those investments were formed to develop and manage a gamma knife center at San Antonio Regional Hospital in Upland, California. USNC currently owns 39% of Corona Gamma Knife, LLC and 20% of NeuroPartners, LLC. (See Note C[1])

During 2010, through the formation of a joint venture, in which it has a noncontrolling interest, 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 owned a 24% interest in FOP. FOP’s first center was located in Miami, Florida and opened in the second quarter of 2011.

During 2011, the Company participated in the formation of Boca Oncology Partners RE, LLC (“BOPRE”), for the purpose of acquiring an interest in Boca West, IMP, LLC, (“Boca West, IMP”) which owns a medical office building. USNC currently owns 22.51% of BOPRE. (See Note C[3]).

In 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 its formation, as it was not able to participate in MOP’s formation due to the fact that USNC was not a physician. An application was filed for a waiver and on December 22, 2016, USNC was cleared to become a part owner of MOP.On December 31, 2022, MOP/UOMA sold their assets to One Care Oncology Partners, LLC for $2,060,000. USN Corona netted approximately $1.3 million from the proceeds for management fees to date. Because the 31st occurred on a Saturday, the funds were not received until 1/3/2023. Some funds were held in escrow until post-closing adjustments were made. (See Note C[4])

On September 3, 2015, pursuant to the Agreement and Plan of Reorganization (the “Merger Agreement”), dated as of September 3, 2015, by and among USN, Holdings and U.S. NeuroSurgical Merger Sub, Inc. (“Merger Sub”), the Company adopted a new holding company organizational structure whereby USN is now a wholly owned subsidiary of Holdings. This structure did not result in any changes to the assets or operations of the Company, but management believes that it will create a more flexible framework for possible future transactions and organizational and operational adjustments.

The holding company organizational structure was effected by a merger (the “Merger”) conducted pursuant to Section 251(g) of the Delaware General Corporation Law (the “DGCL”), which provides for the formation of a holding company structure without a vote of the stockholders of the constituent corporations. Because the holding company organizational structure occurred at the parent company level, the remainder of the Company’s subsidiaries, operations and customers were not affected by this transaction.

In order to effect the Merger, USN formed Holdings as its wholly owned subsidiary and Holdings formed Merger Sub as its wholly owned subsidiary. Under the terms of the Merger Agreement, Merger Sub merged with and into USN, with USN surviving the merger and becoming a direct, wholly owned subsidiary of Holdings. Immediately prior to the Merger, Holdings had no assets, liabilities or operations.

Pursuant to the Merger Agreement, all of the outstanding capital stock of USN was converted, on a share for share basis, into capital stock of Holdings. As a result, each former stockholder of USN became the owner of an identical number of shares of capital stock of Holdings, evidencing the same proportional interests in Holdings and having the same designations, rights, powers and preferences, qualifications, limitations and restrictions, as those that the stockholder held in USN.

Following the Merger, Holdings’ common stock continued to trade on the over-the-counter market and continued to be quoted on the OTC Markets under the same symbol, “USNU.” The conversion of shares of capital stock under the Merger Agreement occurred without an exchange of physical certificates. Accordingly, physical certificates formerly representing shares of outstanding capital stock of USN are deemed to represent the same number of shares of capital stock of Holdings.

Pursuant to Section 251(g) of the DGCL, the provisions of the certificate of incorporation and bylaws of Holdings are substantially identical to those of USN prior to the date on which the Merger Agreement took effect. The authorized capital stock of Holdings, the designations, rights, powers and preferences of such capital stock, and the qualifications, limitations and restrictions thereof are also substantially identical to those of the capital stock of USN immediately prior to the date of the Merger. Further, the directors and executive officers of Holdings are the same individuals who were directors and executive officers, respectively, of USN immediately prior to the date of the Merger.

Late in 2016, FOP took initial steps toward the development of a new radiation therapy center in Homestead, Florida. However, 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 (“CBOP”) was organized on September 1, 2017 to acquire the assets and rights in this new center from FOP. USNC owns a 28.58% interest in CBOP. (See Note C[5]).

The Company has been exploring opportunities to expand to other businesses that could benefit its current operations and relationships. Effective October 1, 2021, USN, acquired all of the outstanding shares of capital stock of Elite Health Plan, Inc., a California corporation (“Elite Health”). The transaction with Elite Health was structured as an investment by Elite Health shareholders in USN, and as such did not have an immediate effect on the percentage ownership of the shareholders of the Company. However, the Company’s interest in USN, which currently holds substantially all of the interest in the Company’s businesses and operations, was effectively diluted by 15% as a result of the issuance of the new USN shares to the former holders of Elite Health. (See Note F).

The Company, through the formation of noncontrolling interests in unconsolidated joint ventures, is currently exploring other opportunities for the establishment of cancer centers using IMRT and/or IGRT in Florida and other parts of the U.S.

The recent outbreak of the novel coronavirus COVID-19 has spread across the globe and has been declared a public health emergency by the World Health Organization and a National Emergency by the President of the United States. Most states and municipalities in the U.S., including New York, California, and Florida, have taken aggressive measures to reduce the spread of the disease, including limiting non-essential gatherings of people, ceasing all non-essential travel, ordering certain businesses and government agencies to cease non-essential operations at physical locations and issuing “shelter-in-place” orders, which direct individuals to shelter at their places of residence (subject to limited exceptions). Across the healthcare industry, resources are being prioritized for the treatment and management of the outbreak. Consequently, there are delays in delivering Gamma Knife and other radiation therapy treatments. In addition, the COVID-19 pandemic poses the risk that the Company and its employees, contractors, customers, government and third party payors and others may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that have been and may continue to be requested or mandated by governmental authorities.

While the healthcare treatments that are provided by the Company are generally critical to the well-being of the patients it serves, a  sustained COVID-19 pandemic, and continued measures by the government and industry to contain the pandemic, could negatively impact results for the following reasons: (i) operations at medical facilities, including those operated by the Company, could be subject to reduced operation or prolonged closure; (ii) medical facilities may defer Gamma Knife and other cancer therapy treatments for non-urgent patient cases in order to allocate resources to the care of patients with COVID-19; (iii) patients may defer or cancel treatments due to real or perceived concerns about the potential spread of COVID-19 in a medical facility setting; (iv) the outbreak could materially impact operations for a sustained period of time due to the current travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns; and/or (v) members of the Company’s workforce may become ill or have family members who are ill and are absent as a result, or they may elect not to come to work due to the illness affecting others in our office or facilities.

The occurrence of any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations. The COVID-19 outbreak and mitigation measures have had and may continue to have an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition. The extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

Although the Company’s contract with its only customer ended in March 2021, the Company is actively seeking new business ventures and believes that its cash reserves, which are in excess of $1.5 million at December 31, 2022, will allow the Company the opportunity do so. Such plans include possible new operations or extensions of its activities in Florida and California, where it has established working relationships with physician groups, hospitals and other organizations. In addition to these activities, the Company has been exploring possible combinations with other existing businesses that would create a larger operating entity that would better justify the expenses involved in continuing as an independent publicly traded company.

Note B - The Company and its Significant Accounting Policies

[1]	Basis of presentation and consolidation:

The consolidated financial statements include the accounts of Holdings and its wholly-owned subsidiaries, USN, USNC and U.S. NeuroSurgical Physics, Inc., and Elite Health through from the date of acquisition. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation to noncontrolling interests in consolidated financial statements.  The guidance requires noncontrolling interests to be reported as a component of equity separate from the parent’s equity and purchases and sales of equity interests, that do not result in a change in control, to be accounted for as equity transactions.  In addition, net (loss) income attributable to noncontrolling interests are to be included in net (loss) income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value, with any gain or loss recognized in net (loss) income.

All amounts are shown in nearest thousands in the Consolidated Financial Statements and accompanying notes therein.

[2]	Revenue recognition:

The Company primarily generated revenue from a leasing arrangement with New York University, which is not within the scope of Revenue from Contracts with Customers (Topic 606), and from the sale of maintenance services with a single performance obligation.

The Company recognizes revenue in accordance with two different accounting standards: 1) Topic 606 and 2) Accounting Standards Codification (“ASC”) Topic 842, Leases.

Under Topic 606, the core principle is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. 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 each performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account under Topic 606. The Company recognizes revenue when a performance obligation is satisfied by transferring control over a product or service to a customer.

The discussion below addresses our primary types of revenue as categorized by the applicable accounting standards.

NYU Lease revenue:

Prior to October 2018, the Company’s Gamma Knife Neuroradiosurgery Equipment Agreement with NYU (“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 or receivable.

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 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 passed to NYU.

In October 2018, USN satisfied its obligation to reload the cobalt, and the NYU agreement was re-evaluated 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 and were included in the investment in sublease. These MLPs include 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 and was recognized on a systematic basis using an average fee per procedure. In October 2020, 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 decrease before the completed sale of the equipment on March 31, 2021.

Upon termination of the NYU contract, the Company recognized a gain of $100,000 related to previously accrued expenses. The gain was included as a reduction in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations in the year ended December 31, 2021.

[3]	Cash and cash equivalents:

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

[4]	Accounts receivable:

Accounts receivable only included amounts owed to the Company from the NYU Agreement. There was no accounts receivable at December 31, 2022 or 2021 as the agreement ended with the sale of the equipment to NYU on March 31, 2021.

[5]	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 (loss) in the Consolidated Statements of Operations as “Loss from investments in unconsolidated entities, net”. 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. As such, the recorded balance of MOP and CBOP have been taken to zero.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which in part requires entities to assess whether distributions of cash from unconsolidated entities represent a return on the investment or a return of the investment, to appropriately classify the distributions in the statement of cash flows. Although the ASU is effective in the first quarter of 2018, we early adopted the guidance in the first quarter of 2017 due to the ongoing applicability of the new standard to the Company’s consolidated financial statements. We made an accounting policy election to use the cumulative earnings approach to determine that the distributions were returns on the investment and accordingly classified them as operating cash flows. Under the cumulative earnings approach, distributions received from the unconsolidated entity are presumed to be a return on the investment unless the distributions received by the investor, less distributions received in prior periods that were deemed to be returns of investment, exceed cumulative equity in earnings recognized by the investor.

Certain prior period amounts may have been reclassified for consistency with the current period presentation. These reclassifications would have no material effect on the reported financial results.

[7]	Long-lived assets:

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

[8]	Asset retirement obligations:

The Company records liabilities for legal obligations associated with the retirement of tangible long-lived assets based on the estimated future cost of asset retirement obligations discounted to present value and records a corresponding asset and liability on its consolidated balance sheets. The values ultimately derived are based on many significant estimates, including future decommissioning costs, inflation, cost of capital, and market risk premiums. The nature of these estimates requires the Company to make judgments based on historical experience and future expectations. Revisions to the estimates may be required based on such things as changes to cost estimates or the timing of future cash outlays. Any such changes that result in upward or downward revisions in the estimated obligation will result in an adjustment to the related capitalized asset and corresponding liability on a prospective basis.

[9]	Capital lease obligations:

Effective January 1, 2019, the Company adopted ASU 2016-02, Leases, and the Company’s leases previously classified as capital leases, were determined to be finance leases.

[10]	Guarantees:

The Company recognizes a liability at the fair value of the obligation at the inception of a financial guarantee contract. The initial liability is subsequently reduced as the Company is released from exposure under the guarantee. If it becomes probable that the Company will have to perform on a guarantee, a separate liability is accrued if it is reasonably estimable, based on the facts and circumstances at that time. The Company reverses the fair value liability only when there is no further exposure under the guarantee.

[11]	Income taxes:

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets or liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce tax assets to amounts more likely than not to be realized.

The Company has applied the accounting provisions for Accounting for Uncertainty in Income Taxes. (Topic 740) This accounting provision provides a comprehensive model for how the Company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on its tax returns. If applicable, the Company records interest and penalties as a component of income tax expense. The Company had no uncertain material tax positions at December 31, 2022 and 2021. Tax years from January 1, 2019 to the current year remain open for examination by federal and state tax authorities.

[12]	Earnings per share:

Earnings per share are computed by dividing earnings available to common stockholders by the weighted average shares outstanding for the period. There were no common stock equivalents during 2022 and 2021, and therefore, no potential dilution for the periods presented.

[13]	Advertising costs:

The Company follows the policy of charging the costs of advertising to expense as incurred. There were no advertising costs in 2022 or 2021.

[14]	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 from those estimates.

[15]	Fair values of financial instruments:

The estimated fair value of financial instruments has been determined based on available market information and appropriate valuation methodologies. The carrying amounts of cash and cash equivalents, accounts receivable, other current assets, due from or to related parties, and accounts payable approximate fair value at December 31, 2022 and 2021 because of the short maturity of these financial instruments. The carrying values of the notes receivable and the obligations under finance leases, approximate fair value because the interest rates on these instruments approximate the market rates at December 31, 2022 and 2021.

[16]	Credit risk:

At times, the Company may have cash and cash equivalents at a financial institution in excess of insured limits. The Company places its cash and cash equivalents with high credit quality financial institutions whose credit ratings are monitored by management to minimize credit risk. Accounts receivable consisted of amounts due from the medical centers. Historically, credit losses on accounts receivable have not been significant.

[17]

Leases:

In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”) to increase transparency and comparability among organizations by requiring (1) recognition of lease assets and lease liabilities on the balance sheet and (2) disclosure of key information about leasing arrangements. Some changes to the lessor accounting guidance were made to align both of the following: (1) the lessor accounting guidance with certain changes made to the lessee accounting guidance and (2) key aspects of the lessor accounting model with revenue recognition guidance. Topic 842 was effective for fiscal years and interim periods beginning after December 15, 2018. A modified retrospective approach is required for adoption for all leases that exist at or commence after the date of initial application with an option to use certain practical expedients.

The Company adopted the provisions of Topic 842, as amended, as of January 1, 2019. The adoption of Topic 842 had a material impact on the Company’s Consolidated Balance Sheets due to the recognition of certain right-of-use (“ROU”) assets and lease liabilities. Although a significant amount of revenue was accounted for under Topic 842, this guidance did not have a material impact on our Consolidated Statements of Operations or Cash Flows.

The Company determines if an arrangement is a lease at its inception. The Company’s current operating lease relates to office space and is discussed in Note G. The Company’s finance lease obligations and sales-type sublease were related to the NYU gamma knife. The Company’s previously-recorded capital lease obligations addressed in Note E to the consolidated financial statements were accounted for as finance lease obligations upon adoption of Topic 842. The sales-type sublease is discussed in Note D.

Under Topic 842, operating leases result in the recognition of ROU assets and lease liabilities on the consolidated balance sheets. ROU assets represent the right to use the leased asset for the lease term and lease liabilities represent the obligation to make lease payments. Under Topic 842, operating lease ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s operating lease does not provide an implicit rate; therefore, upon adoption of Topic 842, the Company used its estimated incremental borrowing rate at the commencement date to determine the present value of lease payments. The ROU assets include any initial lease payments made and exclude lease incentives received. The lease terms may include options to extend or terminate the lease that are reasonably certain to be exercised. Lease expense under Topic 842 is recognized on a straight-line basis over the lease term.

The tables below present financial information associated with our leases as of and for the years ended December 31, 2022, and 2021.

	Classification		December 31,
Assets			2022				2021
Current
Operating lease assets	Operating lease right-of-use asset		$	20,000			$	59,000
Total leased assets			$	20,000			$	59,000
Operating lease liabilities	Operating lease right-of-use liability - current portion		$	23,000			$	43,000
Long-term
Operating lease liabilities	Operating lease right-of-use liability - net of current portion			-				23,000
Total lease liabilities			$	23,000			$	66,000
Lease Cost
Operating lease cost	Selling, general and administrative		$	41,000			$	41,000
Finance lease cost
Interest on lease liabilities	Interest expense			-				1,000
Sublease income	Interest income - sales-type sublease			-				8,000
Net lease cost			$	41,000			$	34,000

Maturity of lease liabilities (as of December 31, 2022)		Operating lease
2023		$	24,000
Total		$	24,000
Less amount representing interest			-
Present value of lease liabilities		$	24,000
Discount rate			5.850	%

Note C - Investments in Unconsolidated Entities

[1]	The Southern California Regional Gamma Knife Center

During 2007, the Company, through a noncontrolling interest in joint ventures, managed the formation of the Southern California Regional Gamma Knife Center at San Antonio Regional Hospital (“SARH”) in Upland, California. 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 included a balance of $668,000 from the prior lease obligations. This new lease was payable over 60 months.  The first payment of $31,000 was paid on April 1, 2016, and the final payment was paid in March  2021, removing USNC’s guarantee obligation.

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, through its joint ventures, 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.

At December 31, 2022 and 2021, the Company’s recorded investment (loss) of NeuroPartners LLC and CGK was $0 and $(10,000), respectively.  During the years ended December 31, 2022, and 2021, the Company’s equity in loss of NeuroPartners LLC and CGK was $133,000 and $36,000, respectively.  At December 31, 2022 and 2021, amounts due from these related parties was $7,000 and $6,000, respectively.

The following tables present the aggregation of summarized combined financial information of NeuroPartners LLC and CGK:

Neuro Partners LLC and CGK Combined Condensed Income Statement Information

		Years Ended
		December 31,
		2022				2021
Patient revenue		$	356,000			$	606,000
Net (loss) income		$	(252,000	)		$	(9,000	)
USNC’s equity in (loss) income of Neuro Partners LLC and CGK		$	(133,000	)		$	(36,000	)

Neuro Partners LLC and CGK Combined Condensed Balance Sheet Information

		December 31,
		2022				2021
Current assets		$	375,000			$	299,000
Noncurrent assets			42,000				294,000
Total assets		$	417,000			$	593,000
Current liabilities		$	632,000			$	564,000
Noncurrent liabilities			-				-
Equity			(215,000	)			29,000
Total liabilities and equity		$	417,000			$	593,000

[2]	Florida Oncology Partners

During 2010, through the formation of a joint venture, in which it had a noncontrolling interest, the Company expanded its market strategy to include opportunities to develop cancer centers featuring radiation therapy.  In 2010, the Company formed FOP in partnership with local physicians and other investors.  USNC owned a 24% interest in the venture.  FOP abandoned its operations on June 28, 2019, due to continued losses at the site of operations and lack of success in good faith efforts to renegotiate an agreement with the party from whom FOP leased a facility and equipment, after several months of discussion.  Due to the circumstances, FOP derecognized the associated assets and liabilities and calculated a contingent liability equal to the net liabilities derecognized. On November 24, 2021, the lessor filed a Voluntary Motion to Dismiss its lawsuit against FOP, and on December 11, 2021, it was accepted and recorded by the court. There can be no guarantee the lessor will not reinstitute any future claims against FOP.

The Company's recorded investment in FOP prior to dissolution had been reduced to zero due to losses incurred in prior years. No equity in earnings had been recorded by the Company due to FOP's deficit equity.

On September 21, 2021, FOP filed Articles of Dissolution with the Florida Department of State that were recorded on September 22, 2021.  FOP is now fully dissolved.