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