Note E – Florida Oncology Partners

During the quarter ended September 30, 2010, the Company participated in the formation of Florida Oncology Partners, LLC (“FOP”) and Florida Oncology Partners RE, LLC (“FOPRE”), which operates a cancer center located in West Kendall (Miami), Florida. The center diagnoses and treats patients utilizing a Varian Rapid Arc linear accelerator and a GE CT scanner. USNC originally invested $200,000 for 20% ownership interest in FOP and FOPRE. The remaining 80% was owned by other outside investors. In January of 2015, one of the investors was removed from the entities, and his ownership interest was distributed among the remaining members in relationship to the percentage they owned. This distribution resulted in an increase of ownership interest for the Company of 4% in each entity. As of January 1, 2015, the Company has a 24% ownership in both FOP and FOPRE.

The center opened and treated its first patient in May 2011. During 2012 and 2013, FOP made several distributions that reduced the Company’s investment significantly. The Company’s recorded investment in FOP and FOPRE is $236,000 and $225,000 at June 30, 2016 and December 31, 2015, respectively. Amounts due from FOP and FOPRE included in due from related parties total $0 and $21,000 at June 30, 2016 and December 31, 2015 respectively.

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. It is a guarantor jointly with most of the other members (except USNC who is not a named guarantor) of FOP. The outstanding balance on the lease obligation was $2,026,000 at June 30, 2016. The Company expects any potential obligations from this guarantee would be reduced by the recoveries of the respective collateral and has recorded a liability of $11,000 associated with this guarantee at June 30, 2016.

In June 2012, FOPRE completed the financing agreement to purchase the building that is 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.

In December of 2015, FOP entered into an agreement with 21^st Century Oncology for the purchase of FOP’s Varian machine and other medical equipment. 21^st Century Oncology paid FOP $1,000,000 as a down payment for the machine and other medical equipment and is currently making monthly payments of $172,000 for the machine, and making all monthly payments due under the capital lease, until such time as the sale is finalized. 21^st Century has not to date satisfied all of the terms of the rental agreement and since May 1, 2016 has been paying an additional $30,000 in penalties each month. These payments have been recorded as rental income under an operating lease.

The following tables present the aggregation of summarized financial information of FOP and FOPRE:

FOP and FOPRE Condensed Income Statement Information

	Six Months Ended June 30,
	2016		2015

Patient revenue	$	-	$	1,263,000

Rental Income	$	2,087,000	$	-

Net income	$	1,314,000	$	153,000

USNC's equity in income of FOP and FOPRE	$	318,000	$	38,000

	Three Months Ended June 30,
	2016		2015

Patient revenue	$	-	$	679,000

Rental Income	$	1,073,000	$	-

Net income	$	680,000	$	191,000

USNC's equity in income of FOP and FOPRE	$	163,000	$	46,000

FOP and FOPRE Condensed Balance Sheet Information

	June 30, 2016		December 31, 2015

Current assets	$	774,000	$	1,024,000

Noncurrent assets		2,435,000		3,066,000

Total assets	$	3,209,000	$	4,090,000

Current liabilities	$	1,385,000	$	1,848,000

Noncurrent liabilities		1,009,000		1,529,000

Equity		815,000		713,000

Total liabilities and equity	$	3,209,000	$	4,090,000