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.

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.

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.

The NYU agreement, which ended in March 2021, specified that USN was obligated to maintain the gamma knife equipment in good operating condition. This maintenance obligation was incurred through the term of the agreement while patient procedures were performed. Usage of the gamma knife machine was directly linked to the maintenance of the machine. USN billed NYU monthly for the maintenance and gamma knife services provided. The portion of the total contract consideration allocated to the maintenance services was $79,000 for 2021 and $316,000 for 2020, and was recognized ratably over each year.

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.

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a business acquisition. Goodwill is tested for impairment on an annual basis, at the anniversary of the acquisition, and between annual tests in certain circumstances, and written down when impaired.

Evaluating goodwill for impairment involves the determination of the fair value of each reporting unit in which goodwill is recorded using a qualitative or quantitative analysis. A reporting unit is an operating segment or a component of an operating segment for which discrete financial information is available and reviewed by segment management on a regular basis. The qualitative impairment test includes considering various factors, including macroeconomic conditions, industry and market conditions, cost factors, a sustained share price or market capitalization decrease, and any reporting unit specific events.

Goodwill was evaluated on a qualitative basis and concluded that no adjustment to the carrying value of goodwill was necessary. In addition, no qualitative indicators of impairment were identified during the fourth quarter of fiscal year ended December 31, 2021, and therefore, no interim quantitative goodwill impairment evaluation was performed. If the fair value of a reporting unit exceeds the carrying value, goodwill impairment is not indicated. If the carrying amount of a reporting unit is determined to be higher than its estimated fair value, the excess is recognized as an impairment expense.

In accordance with the authoritative guidance over fair value measurements, the fair value of a reporting unit is defined as the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. The Company primarily uses the income approach methodology, which includes the discounted cash flow method and an enterprise value method, and the market approach methodology, which considers the values of comparable businesses, to estimate the fair value of the reporting unit.

Management believes the methodology used to review impairment of goodwill, which includes a significant amount of judgment and estimates, provides a reasonable basis to determine whether impairment has occurred. However, many of the factors employed in determining whether goodwill is impaired are outside of the Company’s control and it is reasonably likely that assumptions and estimates will change in future periods. These changes could result in future impairments.

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.

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.

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, 2021 and 2020. Tax years from January 1, 2018 to the current year remain open for examination by federal and state tax authorities.

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.

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, 2021 and 2020 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, 2021 and 2020.

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. At December 31, 2020, substantially all of the Company’s accounts receivable were due from one customer, NYU.

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 I. 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 F 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 E.

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.