The Southern California Regional Gamma Knife Center

6 Months Ended

Jun. 30, 2014

The Southern California Regional Gamma Knife Center [Abstract]

The Southern California Regional Gamma Knife Center

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 Community Hospital (“SACH”) in Upland, California.  The Company participates in the ownership and operation of the center through its wholly-owned subsidiary USN Corona, Inc. (“USNC”).  Corona Gamma Knife, LLC (“CGK”) is party to a 14-year agreement with SACH to renovate space in the hospital and install and operate a Leksell PERFEXION gamma knife.  CGK leased 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 is a 20% guarantor on NeuroPartners LLC’s seven-year lease with respect to the gamma knife equipment and certain leasehold improvements at SACH.  The outstanding balance on the lease obligations was $1,987,000 at June 30, 2014.  In 2016, NeuroPartners LLC has the option to purchase the gamma knife for $490,000. The Company expects any potential obligations from these guarantees to be reduced by the recoveries of the respective collateral and expects any amounts arising from this guarantee to be insignificant.

Construction of the SACH 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 SACH center, its investment to date in the SACH 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 the outstanding 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; certain disclosures are required rather than consolidation.  During the six months ended June 30, 2014, the Company absorbed losses against the total outstanding receivables of $42,000 from NeuroPartners LLC and CGK. This comprised $18,000 of losses incurred during the period and $24,000 of losses from prior periods applied to new advances made by the Company to CGK and NeuroPartners LLC during the six months ended June 30, 2014.

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

Neuro Partners, LLC and CGK Condensed Income Statement Information

	Six Months Ended
	June 30,
	2014			2013
Patient revenue	$	562,000		$	603,000
Net loss	$	(25,000	)	$	(3,000	)
USNC's equity in loss of Neuro Partners, LLC and CGK	$	(18,000	)	$	(6,000	)

	Three Months Ended
	June 30,
	2014			2013
Patient revenue	$	298,000		$	245,000
Net loss	$	(1,000	)	$	(66,000	)
USNC's equity in loss of Neuro Partners, LLC and CGK	$	(4,000	)	$	(28,000	)

Neuro Partners, LLC and CGK Condensed Balance Sheet Information

	June 30,			December 31,
	2014			2013
Current assets	$	670,000		$	521,000
Noncurrent assets		1,308,000			1,626,000
Total assets	$	1,978,000		$	2,147,000
Current liabilities	$	1,477,000		$	1,272,000
Noncurrent liabilities		1,315,000			1,664,000
Equity		(814,000	)		(789,000	)
Total liabilities and equity	$	1,978,000		$	2,147,000