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$USNU U.S. NeuroSurgical Holdings, Inc...2016 Earnings
#microcap #healthcare

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

Results of operations

2016 Compared to 2015

Patient revenue in 2016 was $3,212,000 as compared to $2,971,000 in 2015. This increase in patient revenue was largely due to an increase in the number of patients being seen in 2016, and an additional $150,000 of revenue attributable to the $30,000 per month fixed fee from August 2016 onwards, following the installation of the new ICON unit.

Patient expenses in 2016 were $1,290,000 as compared to $1,195,000 in 2015. Patient expenses do not vary materially with the number of procedures performed, but are tied to depreciation, maintenance and other fixed expenses. The increase experienced in 2016 over 2015 was due to the additional depreciation of the new ICON installation and the fact that the maintenance agreement did not begin until April of 2015. SG&A increased 6% from $1,232,000 in 2015 to $1,308,000 in 2016. This increase in SG&A resulted from higher insurance costs, automobile expenses, and professional fees incurred in 2016. There was interest expense of $161,000 in 2016 down from $181,000 in 2015. The Company reported net income of $536,000 as compared to $396,000 in the prior year. This increase in income was due largely to the increased revenue received from patients treated at the NYU Center, and earnings from the Company’s unconsolidated entities. As a result, the Company incurred an income tax charge of $342,000 in 2016 as compared to a deferred income tax charge of $252,000 in 2015.

Liquidity and capital resources

At December 31, 2016 the Company had working capital of $1,419,000 as compared to $549,000 at December 31, 2015. This increase was due mostly to higher year end cash balances in turn due to higher revenues in 2016. Total assets increased by $858,000 from 2015 to 2016 principally as a result of the higher year end cash balance, the addition of the new ICON equipment and an increase in accounts receivable at the end of the period. Cash and cash equivalents at December 31, 2016 were $1,962,000 as compared to $1,068,000 at December 31, 2015.

Net cash provided by operating activities was $1,361,000 in 2016 as compared to $1,158,000 in 2015. Net cash used in financing activities was $1,000,000 in 2016 as compared to $803,000 in 2015. Depreciation and amortization was $1,006,000 in 2016 as compared to $935,000 in 2015.

For the year ended December 31, 2016, net cash provided by investing activities was $533,000 as compared to net cash used in investing activities of $340,000 in 2015. The 2016 amount included distributions received from investments in unconsolidated entities.

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Off-balance sheet arrangements

None

Critical accounting policies

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.

Revenue Recognition

The Company’s agreement with NYU is an operating lease, and patient revenue from the use of the gamma knife is lease income. Following an amendment to the Company’s lease agreement with NYU, effective August 2016, the Company receives a $30,000 minimum lease payment per month from NYU. With the exception of these fixed payments, the NYU agreement provides for contingent rental income based on a tiered fee schedule related to the number of patient procedures and associated thresholds. The Company recognizes 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 are considered deferred revenue. At the end of each reporting period, the Company reviews its estimated revenue for the contract year and adjusts revenue for any material changes in the estimate. At the end of the contract year, the revenue is adjusted to the actual amount received.

As of March 27, 2017, there were outstanding 7,792,185 shares of the issuer’s Common Stock. $.01 par value.

https://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=11969244#FORM10K_HTM_MANAGEMENTSDISCUSSIONANDA

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