10-Q

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the transition period from                     to                     .

Commission file number:  0-15586

U.S. Neurosurgical, Inc.

(Exact name of registrant as specified in its charter)

Delaware	52-1842411
(State of other jurisdiction of  incorporation or organization)	(I.R.S. Employer Identification No.)

2400 Research Blvd, Suite 325, Rockville, Maryland 20850

(Address of principal executive offices)

(301) 208-8998

(Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes  x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o No  x

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of May 15, 2014 was 7,797,185.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	3
Item 1.  Financial Statements	3
Item 2.  Management Discussion and Analysis of Financial Condition and Results of Operations.	14
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.	17
Item 4.  Controls and Procedures	17
PART II - OTHER INFORMATION	20
Item 1.  Legal Proceedings	20
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.  Defaults Upon Senior Securities	20
Item 4.  Submission of Matters to a Vote of Security Holders	20
Item 5.  Other Information	20
Item 6.  Exhibits	20
SIGNATURES	21

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

U.S. NEUROSURGICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2014			2013
	(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents	$	1,697,000		$	1,414,000
Due from related parties		117,000			316,000
Other current assets		27,000			30,000
Total current assets		1,841,000			1,760,000
Investments in unconsolidated entities		331,000			320,000
Leasehold improvements		440,000			-
	$	2,612,000		$	2,080,000
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses	$	330,000		$	154,000
Obligations under capital lease		525,000			525,000
Short-term loans		462,000			-
Total liabilities		1,317,000			679,000
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock - par value $.01; 25,000,000 shares authorized; 7,797,185 shares issued and outstanding at March 31, 2014 and December 31, 2013.		78,000			78,000
Additional paid-in capital		3,100,000			3,100,000
Accumulated deficit		(1,883,000	)		(1,777,000	)
Total stockholders' equity		1,295,000			1,401,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,612,000		$	2,080,000

The accompanying notes to condensed consolidated financial statements are an integral part hereof.

3

U.S. NEUROSURGICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended
	March 31,
	2014			2013
Revenue	$	-		$	-
Costs and expenses:
Selling, general and administrative		259,000			227,000
Total		259,000			227,000
Operating loss		(259,000	)		(227,000	)
Interest expense		(13,000	)		-
Interest income		-			9,000
Gain from sales of investments in unconsolidated entity		205,000			-
Loss from investments in unconsolidated entities		(39,000	)		(7,000	)
Loss before income taxes		(106,000	)		(225,000	)
Provision for income tax benefit		-			84,000
Net loss	$	(106,000	)	$	(141,000	)
Basic and diluted net (loss) income per share	$	(0.01	)	$	(0.02	)
Weighted average common shares outstanding		7,797,185			7,797,185

The accompanying notes to condensed consolidated financial statements are an integral part hereof.

4

U.S. NEUROSURGICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months Ended
	March 31,
	2014			2013
Cash flows from operating activities:
Net loss	$	(106,000	)	$	(141,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from investment in unconsolidated entities, net		39,000			7,000
Gain from sale of member interests in unconsolidated entities		(205,000	)		-
Deferred income taxes		-			(84,000	)
Changes in:
Other current assets		3,000			(14,000	)
Accounts payable and accrued expenses		37,000			30,000
Asset retirement obligations		-			(40,000	)
Net cash used in operating activities		(232,000	)		(242,000	)
Cash flows from investing activities:
Proceeds from insurance recoveries		-			3,265,000
Proceeds from sale of investment		156,000			-
Purchase of leasehold improvements		(301,000	)		-
Decrease (increase) in due from related parties		198,000			(298,000	)
Net cash provided by investing activities		53,000			2,967,000
Cash flows from financing activities:
Repayment of capital lease obligations		-			(2,271,000	)
Proceeds from short-term loans		462,000			-
Net cash provided by (used in) financing activities		462,000			(2,271,000	)
Net change in cash and cash equivalents		283,000			454,000
Cash and cash equivalents - beginning of period		1,414,000			1,450,000
Cash and cash equivalents - end of period	$	1,697,000		$	1,904,000
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	13,000		$	-
Supplemental disclosure of of noncash investing and financing activities:
Purchase of leasehold improvements included in accounts payable	$	139,000		$	-

The accompanying notes to condensed consolidated financial statements are an integral part hereof.

5

U.S. NEUROSURGICAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A - Basis of Preparation

The accompanying condensed consolidated financial statements of U.S. Neurosurgical and subsidiaries (“USN” or the “Company”) at March 31, 2014, and 2013, are unaudited.  However, in the opinion of management, such statements include all adjustments necessary for a fair statement of the information presented therein.  The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date appearing in the Company's Annual Report on Form 10-K.

Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying condensed consolidated financial statements and notes do not include all disclosures required by accounting principles generally accepted in the United States of America for complete financial statements.  Accordingly, these statements should be read in conjunction with the Company's most recent annual financial statements.

Consolidated results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years.

Certain amounts in the March 31, 2013 condensed consolidated financial statements have been reclassified to conform with the current period presentation. The reclassifications have no effect on the previously reported net loss.

Note B – Destruction of Gamma Knife at NYU Medical Center; Planning for Replacement and Restoration

USN opened its New York gamma knife treatment center in July 1997 on the campus of New York University (“NYU”) Medical Center.  The Company installed a new Leksell gamma knife, the PERFEXION model, at the NYU Medical Center in March 2009 in replacement of the older gamma knife equipment.  In connection with this upgrade, the Company modified its arrangement with NYU to extend the term for 12 years from March 2009.

In October 2012, the Company’s facility at NYU was totally destroyed as a result of flooding from Hurricane Sandy. The gamma knife had to be removed to prevent any cobalt leakage that might occur due to rusting of the equipment. The emergency removal cost was $525,000. The Company paid a lease settlement of the outstanding principal balance only and received from insurance coverage $930,000 above the lease principal payments and emergency removal costs.

The Company has finalized arrangements with NYU regarding the restoration of the gamma knife center and the Company’s long term contract with NYU. The new location, of the Leksell PERFECTION gamma knife in the Tisch Hospital of NYU Langone Medical Center, opened and treated its first patient on April, 29, 2014.

6

The terms of the agreement with NYU will remain the same, terminating at the end of March 2021.  The Company has obtained a commitment for lease financing in the amount of $4.6 million for the purchase of the replacement equipment as well as the cost of the construction required at the relocated site. The lease is in the process of being finalized by the Lessor and has not been signed.

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 $2,145,000 at March 31, 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 three months ended March 31, 2014, the Company absorbed losses against the total outstanding receivables of $38,000 from NeuroPartners LLC and CGK. This comprised $14,000 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 three months ended March 31, 2014.

7

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

Neuro Partners, LLC and CGK Condensed Income Statement Information

	Three Months Ended
	March 31,
	2014			2013
Patient revenue	$	264,000		$	358,000
Net loss	$	(24,000	)	$	63,000
USNC's equity in loss of Neuro Partners, LLC and CGK	$	(14,000	)	$	22,000

Neuro Partners, LLC and CGK Condensed Balance Sheet Information

	March 31,			December 31,
	2014			2013
Current assets	$	635,000		$	521,000
Noncurrent assets		1,467,000			1,626,000
Total assets	$	2,102,000		$	2,147,000
Current liabilities	$	1,323,000		$	1,272,000
Noncurrent liabilities		1,594,000			1,664,000
Equity		(815,000	)		(789,000	)
Total liabilities and equity	$	2,102,000		$	2,147,000

Note D – 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% is owned by other outside investors. 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 $130,000 and $151,000 at March 31, 2014 and December 31, 2013, respectively. Amounts due from FOP and FOP RE included in due from related parties total $50,000 and $40,000 at March 31, 2014 and December 31, 2013 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, USNC 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 $4,022,000 at March 31, 2014. The Company expects any potential obligations from this guarantee to be reduced by the recoveries of the respective collateral and expects any amounts arising from this guarantee to be insignificant.

8

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 to be paid at a monthly rate of approximately $8,500 for 120 months with the final payment due on June 15, 2022.  USNC is the guarantor of 20% of the outstanding balance of this loan, which was $1,472,000 at March 31, 2014. The Company expects any potential obligations from these guarantees to be reduced by the recovery of the real estate collateral and expects any amounts arising from this guarantee to be insignificant.

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

FOP and FOPRE Condensed Income Statement Information

	Three Months Ended March 31,
	2014			2013
Patient revenue	$	487,000		$	612,000
Net loss	$	(107,000	)	$	(35,000	)
USNC's equity in loss of FOP and FOPRE	$	(21,000	)	$	(7,000	)

FOP and FOPRE Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	642,000	$	653,000
Noncurrent assets		5,559,000		5,795,000
Total assets	$	6,201,000	$	6,448,000
Current liabilities	$	980,000	$	893,000
Noncurrent liabilities		4,655,000		4,881,000
Equity		566,000		674,000
Total liabilities and equity	$	6,201,000	$	6,448,000

9

Note E – Boca Oncology Partners

During the quarter ended June 30, 2011, the Company participated in the formation of Boca Oncology Partners, LLC (“BOP”), for the purpose of owning and operating a cancer center in Boca Raton, Florida.  In June 2011, Boca Oncology Partners RE, LLC (“BOPRE”), an affiliated entity, purchased a 20% interest in Boca West IMP, LLC (Boca West IMP), owner of a medical office building in West Boca, Florida in which BOP operates.  BOP occupies approximately 6,000 square feet of the 32,000 square foot building.  The Company’s wholly-owned subsidiary, USNC invested $225,000 initially and had a 22.5% interest in BOP and BOPRE.

In January 2012, an additional investor purchased 50% of the partnership reducing the Company’s ownership to 11.25%.  The Company loaned the proceeds of $56,250 back to BOP as a 5 year note at 7% interest. The remaining 88.75% was owned by other outside investors.  In June 2012, BOPRE purchased an additional 3.75% of Boca West IMP from another investor bringing its total interest to 23.75%. BOPRE accounts for this investment under the cost method since it does not exercise significant influence over Boca West IMP. Then the members of BOPRE sold 31.5% of their interests in BOPRE to a new investor. The proceeds of $28,000 were loaned to BOP and USNC’s investment in BOPRE was reduced to 15.4%.

Although the Company reduced its investment to 11.25% of BOP and 15.4% of BOPRE, the Company continues to account for these investments under the equity method due to its participation in the management of the administration and accounting functions of BOP and BOPRE. Due to the outstanding loans made to BOP, BOP is considered to be a variable interest entity of the Company.  However, as the Company is not deemed to be the primary beneficiary of BOP, since it does not have the power to direct the operating activities that most significantly affect BOP’s economic performance; certain disclosures are required rather than consolidation.  The center opened in August 2012.

In February 2014, the Company and other members sold their interests in BOP.  Three members provided short-term loans to the Company of $462,000 from their sales proceeds.  The Company’s proceeds from the sale of BOP were allocated as follows:

Proceeds from sale	$	407,000
Payoff of loans to BOP		202,000
Net proceeds	$	205,000
Less:  Investment in BOP		-
Gain from sale	$	205,000

The Company’s recorded investment in BOPRE is $134,000 at March 31, 2014 and December 31, 2013.

10

USNC is a 10% guarantor on 50% of the outstanding balance of Boca West IMP’s ten-year mortgage.  This mortgage had an original balance of $3,000,000 and is secured by the medical office building in which BOP operates. The outstanding balance on the mortgage is $2,800,000 at March 31, 2014.  The Company expects any potential obligations from this guarantee to be reduced by the recovery of the real estate and expects any amounts arising from this guarantee to be insignificant.

USNC was a 14.06% guarantor on BOP’s five-year lease with respect to the oncology equipment at the Boca Raton, Florida cancer center. Upon the sale of BOP, which occurred in 2014, USNC was indemnified by the buyer from any losses arising from the guarantee.

The following tables present the summarized financial information of BOP and BOPRE:

BOP Condensed Income Statement Information

	Three Months Ended March 31,
	2014			2013
Patient revenue	$	115,000		$	519,000
Net income	$	(108,000	)	$	13,000
USNC's equity in (loss) income in BOP	$	(12,000	)	$	1,000

BOP Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	-	$	640,000
Noncurrent assets		-		1,831,000
Total assets	$	-	$	2,471,000
Current liabilities	$	-	$	730,000
Noncurrent liabilities		-		2,126,000
Equity		-		(385,000	)
Total liabilities and equity	$	-	$	2,471,000

11

BOPRE Condensed Income Statement Information

	Three Months Ended March 31,
	2014		2013
Rental Income	$	-	$	-
Net income (loss)	$	-	$	-
USNC's equity in income in BOPRE	$	-	$	-

BOPRE Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	103,000	$	132,000
Noncurrent assets		736,000		707,000
Total assets	$	839,000	$	839,000
Current liabilities	$	-	$	-
Noncurrent liabilities		-		-
Equity		839,000		839,000
Total liabilities and equity	$	839,000	$	839,000

Note F – Broward Oncology Partners

In early 2013, the Company formed Broward Oncology Partners, LLC (“BROP”) with other outside investors. The Company invested $50,000 for a 12.5% ownership interest in BROP.  BROP operates a radiation oncology center in Fort Lauderdale, Florida under a lease from Tenet Health Services. BROP began operations in February 2013.  The facility is undergoing renovation and continues to operate on a limited basis during construction.

The Company’s recorded investment in BROP is $67,000 and $35,000 at March 31, 2014 and December 31, 2013 respectively. The Company accounts for this investment under the equity method since it exercises significant influence over BROP.  Amounts due from BROP included in due from related parties total $67,000 and $63,000 at March 31, 2014 and December 31, 2013 respectively.

12

In May 2014, the Company and other members sold their interests in BROP. The Company is in the process of determining any gain or loss arising on disposal.

The following tables present the summarized financial information of BROP:

BROP Condensed Income Statement Information

	Three Months Ended March 31,
	2014		2013
Patient revenue	$	505,000	$	-
Net income	$	255,000	$	-
USNC's equity in income in BROP	$	32,000	$	-

BROP Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	749,000	$	360,000
Noncurrent assets		282,000		239,000
Total assets	$	1,031,000	$	599,000
Current liabilities	$	496,000	$	319,000
Equity		535,000		280,000
Total liabilities and equity	$	1,031,000	$	599,000

Note G – Income Taxes

The Company’s income tax rate, which includes federal and state income taxes, was approximately 37% for the three months ending March 31, 2014.  The Company recorded a full valuation allowance against its estimated deferred tax benefit for the three months ended March 31, 2014.

13

Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations.

Critical Accounting Policies

The condensed consolidated financial statements of U.S. Neurosurgical, Inc. and subsidiaries (“USN” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America.  As such, some accounting policies have a significant impact on amounts reported in the condensed consolidated financial statements.  A summary of those significant accounting policies can be found in Note B to the Consolidated Financial Statements, in our 2013 Annual Report on Form 10-K.  In particular, judgment is used in areas such as determining and assessing possible asset impairments.

The following discussion and analysis provides information which the Company’s management believes is relevant to an assessment and understanding of the Company’s results of operations and financial condition. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere herein.

Results of Operation

Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

There was no patient revenue or expenses for the quarters ended March 31, 2014 and 2013 as a result of the destruction of the NYU gamma knife facility in October 2012.

Selling, general and administrative expenses of $259,000 for the first quarter of 2014 was 14% more than the $227,000 incurred during the comparable period in 2013.  The increase in SG&A expenses was primarily due to an increase in audit fees related to the change of accountants.

The Company incurred $13,000 in interest expense in the first quarter of 2014. The framework for a loan arrangement for the construction of the gamma knife suite has been secured and interest is being paid on the amounts expended to date on the Company’s behalf, mainly for the removal of the destroyed gamma knife and related equipment. Interest is also being paid on short term construction loans from outside investors.

During the first quarter of 2014, the Company recognized a gain of $168,000 and received $37,000 in settlement of past management fees from the sale of its interest in BOP.

For the three months ended March 31, 2014, the Company reported a net loss of $106,000 as compared to net loss of $141,000 for the same period a year earlier.

14

Liquidity and Capital Resources

At March 31, 2014, the Company had working capital of $524,000 as compared to $1,081,000 at December 31, 2013.  This decrease was due to additional construction and leasehold improvements recorded in connection with the reopening of the Company’s NYU gamma knife center.  Cash and cash equivalents at March 31, 2014 were $1,697,000 as compared to $1,414,000 at December 31, 2013.

Net cash used in operating activities for the three months ended March 31, 2014 was $232,000 as compared to $242,000 used in operating activities in the same period a year earlier. Accounts payable and accrued expenses increased $37,000, excluding amounts relating to leasehold improvements, during the first three months of 2014 as compared to an increase of $30,000 in the prior period.

With respect to investing activities, the Company sold its interest in BOP in the first quarter of 2014 for proceeds after allocation towards repayment of the Company’s intercompany loans to BOP and management fees of $156,000.  The Company received $3,265,000 in insurance proceeds related to the destruction of the NYU gamma knife during the first quarter of 2013.  Additionally, due from related parties of $198,000 were repaid primarily in connection with the sale of BOP compared to an increase in due from related parties of $298,000 in the comparable period in 2013.  With respect to financing activities, the Company borrowed $462,000 in short-term loans from outside investors. The Company paid $2,271,000 towards its capital lease obligations during the three months ended March 31, 2013.

Due to the disruption caused by the flooding from Hurricane Sandy, the Company has not received revenues from the NYU facility for the first quarter of 2014. The center reopened in late April and is now accepting patients for treatment.

The term of the agreement with NYU will remain the same, terminating at the end of March 2021.  The Company has obtained a commitment for lease financing in the amount of $4.6 million for the purchase of the replacement equipment as well as the cost of the construction required at the relocated site. This financing agreement is in the process of being finalized.

Risk Factors

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  The following factors, as well as the factors listed under the caption “Risk Factors” in Annual Report on our Form 10-K for the fiscal year ended December 31, 2013, have affected or could affect our actual results and could cause such results to differ materially from those expressed in any forward-looking statements made by us.  Investors should carefully consider these risks and speculative factors inherent in and affecting our business and an investment in our common stock.

Reliance on Business of the New York University Gamma Knife Center; Recent Destruction of Equipment and Discontinuation of Business at NYU.  While it is the Company’s objective to expand activities to additional cancer centers that rely on a broad range of diagnostic and radiation treatments, the Company has relied on the NYU gamma knife for substantially all of its revenue.  In recent periods, services provided at NYU have represented over 90% of the Company’s revenues.  Unless and until the Company is successful in building its activities at other centers and at new locations, disruptions at NYU could have a materially adverse effect on the Company.

15

In October 2012, the Company’s facility at NYU was totally destroyed as a result of flooding from Hurricane Sandy.  The gamma knife had to be removed to prevent cobalt leakage that might occur due to rusting of the equipment.  While the Company has reopened the facility as of this report date, the facility was closed for approximately 18 months. It may take additional time to achieve the level of patient volume that the center was handling prior to the disruption.

The Company has obtained a commitment for lease financing in the amount of $4.6 million for the purchase of the replacement equipment and for some construction and other costs associated with the damaged machine removal and new machine installation. However, the Company will incur additional costs relating to the reconstruction of the center at NYU, some of which may be substantial and will not be covered by insurance.

The Company anticipates that these factors will result in significant operating losses for the next several quarters.

Availability of Working Capital.  To date, we have earned sufficient income from operations to fund periodic operating losses and support efforts to pursue new gamma knife or other types of cancer treatment centers.  The Company expects to incur losses for the next several quarters due to the destruction of the NYU Gamma Knife.  Should losses continue for an extended period of time, or should the actual construction costs incurred materially exceed forecasts, we will be required to seek additional capital to support continued operations and the development of new centers, but we cannot assure you, however, that we will be able to raise such additional capital as and when required.

Disclosure Regarding Forward Looking Statements

The Securities and Exchange Commission encourages companies to disclose forward looking information so that investors can better understand a company's future prospects and make informed investment decisions.  This document contains such "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements anticipating future growth in revenues and cash flow.  Words such as "anticipates," "estimates," "expects," "projects," "targets," "intends," "plans," "believes," "will be," "will continue," "will likely result," and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify such forward-looking statements.  Those forward-looking statements are based on management's present expectations about future events.  As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances, and the Company is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of such changes, new information, future events or otherwise.

16

The Company operates in a highly competitive and rapidly changing environment and in businesses that are dependent on our ability to: achieve profitability; increase revenues; sustain our current level of operations; maintain satisfactory relations with business partners; attract and retain key personnel; maintain and expand our strategic alliances; and protect our intellectual property.  The Company's actual results could differ materially from management's expectations because of changes in such factors.  New risk factors can arise and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.  Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Investors should also be aware that while the Company might, from time to time, communicate with securities analysts, it is against the Company's policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, investors should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, the Company has a policy against issuing or confirming financial forecasts or projections issued by others.  Thus, to the extent that reports issued by securities analysts or others contain any projections, forecasts or opinions, such reports are not the responsibility of the Company.

In addition, the Company’s overall financial strategy, including growth in operations, maintaining financial ratios and strengthening the balance sheet, could be adversely affected by increased interest rates, construction delays or other transactions, economic slowdowns and changes in the Company’s plans, strategies and intentions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure.  Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  We do realize that we are a very small company and as a small company with only the officers and directors participating in the day to day management, with the ability to override controls, each officer and director has multiple positions and responsibilities that would normally be distributed among several employees in larger organizations with adequate segregation of duties to ensure the appropriate checks and balances.  Because the Company does not currently have a separate chief financial officer, the Chief Executive Officer performs these functions with the support of one of the Company’s outside directors who assists in the reporting and disclosure process (the “Lead Director”).

17

Our management evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report.  Based upon that evaluation the Company’s Chief Executive Officer concluded that the Company’s disclosure controls and procedures were not effective as of the end of the period covered by this report for the information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended, to be recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, due to the material weakness in internal control over financial reporting described below.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).  Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.  The Company’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

18

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. A material weakness is a control deficiency, or a combination of control deficiencies in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the assessment described above, management identified the following material weakness as of March 31, 2014: the Company did not maintain sufficient qualified personnel with the appropriate level of knowledge, experience and training in the application of accounting principles generally accepted in the United States of America and in internal controls over financial reporting commensurate with its financial reporting requirements. Specifically, effective controls were not designed and in place to ensure that the Company maintained, or had access to, appropriate resources with adequate experience and expertise in the area of financial reporting for transactions such as investments in unconsolidated entities, income taxes and guarantee obligations. The Company is in the process of developing plans to remediate this material weakness.

Changes in Internal Control over Financial Reporting

While there have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2014, management is in the process of developing plans to remediate the material weakness identified above.

19

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

31.1	Certification of President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1	Certification of President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
101	Interactive Data Files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 in XBRL (eXtensible Business Reporting Language).  Pursuant to Regulation 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability.

20

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	U.S. Neurosurgical, Inc.
	(Registrant)
Date:  May 15, 2014	By:	/s/ Alan Gold
		Alan Gold
		Director, President and
		Chief Executive Officer
		and
		Principal Financial Officer of the Registrant

21

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER

(PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER)

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alan Gold, certify that:

1. I have reviewed this Report on Form 10-Q of U.S. Neurosurgical, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures,and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and;

5. I have disclosed, based on my most recent evaluationof internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 15, 2014	/s/ Alan Gold
	Alan Gold
	President & Chairman of the Board
	(Principal Executive Officer
	and Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

Certificate pursuant to 18 U.S.C. Section 1350,

as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of U.S. Neurosurgical, Inc. on Form 10-Q for the period ending March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alan Gold, President and Chief Executive Officer of U.S. Neurosurgical, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of U.S. Neurosurgical, Inc.

/s/ Alan Gold

Alan Gold

President and Chief Executive Officer

(Principal Executive Officer

and Principal Financial Officer)

May 15, 2014

XML

Florida Oncology Partners

3 Months Ended

Mar. 31, 2014

Florida Oncology Partners [Abstract]

Florida Oncology Partners

Note D – 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% is owned by other outside investors. 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 $130,000 and $151,000 at March 31, 2014 and December 31, 2013, respectively. Amounts due from FOP and FOP RE included in due from related parties total $50,000 and $40,000 at March 31, 2014 and December 31, 2013 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, USNC 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 $4,022,000 at March 31, 2014. The Company expects any potential obligations from this guarantee to be reduced by the recoveries of the respective collateral and expects any amounts arising from this guarantee to be insignificant.

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 to be paid at a monthly rate of approximately $8,500 for 120 months with the final payment due on June 15, 2022.  USNC is the guarantor of 20% of the outstanding balance of this loan, which was $1,472,000 at March 31, 2014. The Company expects any potential obligations from these guarantees to be reduced by the recovery of the real estate collateral and expects any amounts arising from this guarantee to be insignificant.

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

FOP and FOPRE Condensed Income Statement Information

	Three Months Ended
	March 31,
	2014			2013
Patient revenue	$	487,000		$	612,000
Net loss	$	(107,000	)	$	(35,000	)
USNC's equity in loss of FOP   and FOPRE	$	(21,000	)	$	(7,000	)

FOP and FOPRE Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	642,000	$	653,000
Noncurrent assets		5,559,000		5,795,000
Total assets	$	6,201,000	$	6,448,000
Current liabilities	$	980,000	$	893,000
Noncurrent liabilities		4,655,000		4,881,000
Equity		566,000		674,000
Total liabilities and equity	$	6,201,000	$	6,448,000

XML

The Southern California Regional Gamma Knife Center

3 Months Ended

Mar. 31, 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 $2,145,000 at March 31, 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 three months ended March 31, 2014, the Company absorbed losses against the total outstanding receivables of $38,000 from NeuroPartners LLC and CGK. This comprised $14,000 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 three months ended March 31, 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

	Three Months Ended
	March 31,
	2014			2013
Patient revenue	$	264,000		$	358,000
Net loss	$	(24,000	)	$	63,000
USNC's equity in loss of Neuro Partners, LLC and CGK	$	(14,000	)	$	22,000

Neuro Partners, LLC and CGK Condensed Balance Sheet Information

	March 31,			December 31,
	2014			2013
Current assets	$	635,000		$	521,000
Noncurrent assets		1,467,000			1,626,000
Total assets	$	2,102,000		$	2,147,000
Current liabilities	$	1,323,000		$	1,272,000
Noncurrent liabilities		1,594,000			1,664,000
Equity		(815,000	)		(789,000	)
Total liabilities and equity	$	2,102,000		$	2,147,000

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 1,697,000	$ 1,414,000
Due from related parties	117,000	316,000
Other current assets	27,000	30,000
Total current assets	1,841,000	1,760,000
Investment in unconsolidated entities	331,000	320,000
Leasehold improvements	440,000	0
Total assets	2,612,000	2,080,000
Current liabilities:
Accounts payable and accrued expenses	330,000	154,000
Obligations under capital lease	525,000	525,000
Short-term loans	462,000	0
Total liabilities	1,317,000	679,000
Commitments and contingencies
STOCKHOLDERS EQUITY :
Common stock - par value $.01; 25,000,000 shares authorized ;7,797,185 shares issued and outstanding at March 31, 2014 and December 31, 2013.	78,000	78,000
Additional paid-in capital	3,100,000	3,100,000
Accumulated deficit	(1,883,000)	(1,777,000)
Total stockholders' equity	1,295,000	1,401,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 2,612,000	$ 2,080,000

XML

Basis of Preparation

3 Months Ended

Mar. 31, 2014

Basis of Preparation [Abstract]

Basis of Preparation

Note A - Basis of Preparation

The accompanying condensed consolidated financial statements of U.S. Neurosurgical and subsidiaries ("USN" or the "Company") at March 31, 2014, and 2013, are unaudited.  However, in the opinion of management, such statements include all adjustments necessary for a fair statement of the information presented therein.  The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date appearing in the Company's Annual Report on Form 10-K.

Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying condensed consolidated financial statements and notes do not include all disclosures required by accounting principles generally accepted in the United States of America for complete financial statements.  Accordingly, these statements should be read in conjunction with the Company's most recent annual financial statements.

Consolidated results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years.

Certain amounts in the March 31, 2013 condensed consolidated financial statements have been reclassified to conform with the current period presentation. The reclassifications have no effect on the previously reported net loss.

XML

Income Taxes (Details)	3 Months Ended
	Mar. 31, 2014
Income Taxes [Abstract]
Federal and state income taxes, rate (in hundredths)	37.00%

XML

Destruction of Gamma Knife at NYU Medical Center; Planning for Replacement and Restoration

3 Months Ended

Mar. 31, 2014

Destruction of Gamma Knife at NYU Medical Center; Planning for Replacement and Restoration [Abstract]

Destruction of Gamma Knife at NYU Medical Center; Planning for Replacement and Restoration

Note B – Destruction of Gamma Knife at NYU Medical Center; Planning for Replacement and Restoration

USN opened its New York gamma knife treatment center in July 1997 on the campus of New York University ("NYU") Medical Center.  The Company installed a new Leksell gamma knife, the PERFEXION model, at the NYU Medical Center in March 2009 in replacement of the older gamma knife equipment.  In connection with this upgrade, the Company modified its arrangement with NYU to extend the term for 12 years from March 2009.

In October 2012, the Company's facility at NYU was totally destroyed as a result of flooding from Hurricane Sandy. The gamma knife had to be removed to prevent any cobalt leakage that might occur due to rusting of the equipment. The emergency removal cost was $525,000. The Company paid a lease settlement of the outstanding principal balance only and received from insurance coverage $930,000 above the lease principal payments and emergency removal costs.

The Company has finalized arrangements with NYU regarding the restoration of the gamma knife center and the Company's long term contract with NYU. The new location, of the Leksell PERFECTION gamma knife in the Tisch Hospital of NYU Langone Medical Center, opened and treated its first patient on April, 29, 2014.

The terms of the agreement with NYU will remain the same, terminating at the end of March 2021.  The Company has obtained a commitment for lease financing in the amount of $4.6 million for the purchase of the replacement equipment as well as the cost of the construction required at the relocated site. The lease is in the process of being finalized by the Lessor and has not been signed.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2014	Dec. 31, 2013
STOCKHOLDERS EQUITY :
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	25,000,000	25,000,000
Common stock, shares issued (in shares)	7,797,185	7,797,185
Common stock, shares outstanding (in shares)	7,797,185	7,797,185

XML

Destruction of Gamma Knife at NYU Medical Center; Planning for Replacement and Restoration (Details) (USD $)	3 Months Ended
	Mar. 31, 2014
Destruction of Gamma Knife at NYU Medical Center; Planning for Replacement and Restoration [Abstract]
Terms of agreement with NYU	12 years
Emergency removal cost	$ 525,000
Insurance coverage	930,000
Commitment for lease financing for replacement equipment and restoration	$ 4,600,000

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 15, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	US NEUROSURGICAL INC
Entity Central Index Key	0001089815
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		7,797,185
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2014

XML

The Southern California Regional Gamma Knife Center (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Schedule of Equity Method Investments [Line Items]
Renovation installation and operation agreement period	14 years
Neuro Partners LLC and CGK Condensed Income Statement Information [Abstract]
Patient revenue	$ 0	$ 0
USNC's equity in loss of Neuro Partners, LLC and CGK	(39,000)	(7,000)
CGK [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage (in hundredths)	39.00%
Neuro Partners LLC [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage (in hundredths)	20.00%
Neuro Partners LLC and CGK [Member]
Schedule of Equity Method Investments [Line Items]
Percentage of guarantee obligations (in hundredths)	20.00%
Period of lease with respect to gamma knife equipment and certain leasehold improvements	7 years
Outstanding balance on the lease obligations	2,145,000
Option to purchase the gamma knife	490,000
Losses against outstanding receivables	38,000
Losses against aggregate outstanding receivables for the current period	14,000
Losses against aggregate outstanding receivables for the prior period	24,000
Neuro Partners LLC and CGK Condensed Income Statement Information [Abstract]
Patient revenue	264,000	358,000
Net loss	(24,000)	63,000
USNC's equity in loss of Neuro Partners, LLC and CGK	(14,000)	22,000
Equity Method Investment Summarized Financial Information Balance Sheet [Abstract]
Current assets	635,000		521,000
Noncurrent assets	1,467,000		1,626,000
Total assets	2,102,000		2,147,000
Current liabilities	1,323,000		1,272,000
Noncurrent liabilities	1,594,000		1,664,000
Equity	(815,000)		(789,000)
Total liabilities and equity	$ 2,102,000		$ 2,147,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) [Abstract]
Revenue	$ 0	$ 0
Costs and expenses:
Selling, general and administrative	259,000	227,000
Total	259,000	227,000
Operating loss	(259,000)	(227,000)
Interest expense	(13,000)	0
Interest income	0	9,000
Gain from sales of investments in unconsolidated entity	205,000	0
Loss from investments in unconsolidated entities	(39,000)	(7,000)
Loss before income taxes	(106,000)	(225,000)
Provision for income tax benefit	0	84,000
Net loss	$ (106,000)	$ (141,000)
Basic and diluted income (loss) per share (in dollars per share)	$ (0.01)	$ (0.02)
Weighted average common shares outstanding (in shares)	7,797,185	7,797,185

XML

Income Taxes

3 Months Ended

Mar. 31, 2014

Income Taxes [Abstract]

Income Taxes

Note G – Income Taxes

The Company's income tax rate, which includes federal and state income taxes, was approximately 37% for the three months ending March 31, 2014.  The Company recorded a full valuation allowance against its estimated deferred tax benefit for the three months ended March 31, 2014.

XML

Broward Oncology Partners

3 Months Ended

Mar. 31, 2014

Broward Oncology Partners [Abstract]

Broward Oncology Partners

Note F – Broward Oncology Partners

In early 2013, the Company formed Broward Oncology Partners, LLC ("BROP") with other outside investors. The Company invested $50,000 for a 12.5% ownership interest in BROP.  BROP operates a radiation oncology center in Fort Lauderdale, Florida under a lease from Tenet Health Services. BROP began operations in February 2013.  The facility is undergoing renovation and continues to operate on a limited basis during construction.

The Company's recorded investment in BROP is $67,000 and $35,000 at March 31, 2014 and December 31, 2013 respectively. The Company accounts for this investment under the equity method since it exercises significant influence over BROP.  Amounts due from BROP included in due from related parties total $67,000 and $63,000 at March 31, 2014 and December 31, 2013 respectively.

In May 2014, the Company and other members sold their interests in BROP. The Company is in the process of determining any gain or loss arising on disposal.

The following tables present the summarized financial information of BROP:

BROP Condensed Income Statement Information

	Three Months Ended
	March 31,
	2014		2013
Patient revenue	$	505,000	$	-
Net income	$	255,000	$	-
USNC's equity in income in BROP	$	32,000	$	-

BROP Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	749,000	$	360,000
Noncurrent assets		282,000		239,000
Total assets	$	1,031,000	$	599,000
Current liabilities	$	496,000	$	319,000
Equity		535,000		280,000
Total liabilities and equity	$	1,031,000	$	599,000

XML

Florida Oncology Partners (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Jun. 30, 2012	Sep. 30, 2010
Schedule of Equity Method Investments [Line Items]
Recorded investments	$ 331,000		$ 320,000
Due from related parties	117,000		316,000
Outstanding lease obligation	4,022,000
FOP and FOPRE Condensed Income Statement Information [Abstract]
Patient revenue	0	0
USNC's equity in (loss) income in BOP	(39,000)	(7,000)
FOP and FOPRE [Member]
Schedule of Equity Method Investments [Line Items]
Recorded investments	130,000		151,000		200,000
Ownership percentage (in hundredths)	20.00%
Ownership percentage by outside investors (in hundredths)	80.00%
Due from related parties	50,000		40,000
Lease term	7 years
Capital leases, amount	5,800,000
Maximum guarantee	1,433,000
Percentage of guarantee obligations (in hundredths)	25.00%
Outstanding Loan	1,472,000			1,534,000
Loan amount to be paid in monthly basis	8,500
Debt maturity period	120 months
Maturity date	Jun. 15, 2022
FOP and FOPRE Condensed Income Statement Information [Abstract]
Patient revenue	487,000	612,000
Net income	(107,000)	(35,000)
USNC's equity in (loss) income in BOP	(21,000)	(7,000)
FOP and FOPRE Condensed Balance Sheet Information [Abstract]
Current assets	642,000		653,000
Noncurrent assets	5,559,000		5,795,000
Total assets	6,201,000		6,448,000
Current liabilities	980,000		893,000
Noncurrent liabilities	4,655,000		4,881,000
Equity	566,000		674,000
Total liabilities and equity	$ 6,201,000		$ 6,448,000

XML

Boca Oncology Partners (Tables) (BOP and BOPRE [Member])

3 Months Ended

Mar. 31, 2014

BOP and BOPRE [Member]

Schedule of Equity Method Investments [Line Items]

Proceeds from the sale of BOP

The Company's proceeds from the sale of BOP were allocated as follows:

Proceeds from sale	$	407,000
Payoff of loans to BOP		202,000
Net proceeds	$	205,000
Less:  Investment in BOP		-
Gain from sale	$	205,000

Summarized Financial Information

The following tables present the summarized financial information of BOP and BOPRE:

BOP Condensed Income Statement Information

	Three Months Ended
	March 31,
	2014			2013
Patient revenue	$	115,000		$	519,000
Net income	$	(108,000	)	$	13,000
USNC's equity in (loss) income in BOP	$	(12,000	)	$	1,000

BOP Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	-	$	640,000
Noncurrent assets		-		1,831,000
Total assets	$	-	$	2,471,000
Current liabilities	$	-	$	730,000
Noncurrent liabilities		-		2,126,000
Equity		-		(385,000	)
Total liabilities and equity	$	-	$	2,471,000

BOPRE Condensed Income Statement Information

	Three Months Ended
	March 31,
	2014		2013
Rental Income	$	-	$	-
Net income (loss)	$	-	$	-
USNC's equity in income in BOPRE	$	-	$	-

BOPRE Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	103,000	$	132,000
Noncurrent assets		736,000		707,000
Total assets	$	839,000	$	839,000
Current liabilities	$	-	$	-
Noncurrent liabilities		-		-
Equity		839,000		839,000
Total liabilities and equity	$	839,000	$	839,000

XML

The Southern California Regional Gamma Knife Center (Tables) (Neuro Partners LLC and CGK [Member])

3 Months Ended

Mar. 31, 2014

Neuro Partners LLC and CGK [Member]

Schedule of Equity Method Investments [Line Items]

Summarized Financial Information

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

Neuro Partners, LLC and CGK Condensed Income Statement Information

	Three Months Ended
	March 31,
	2014			2013
Patient revenue	$	264,000		$	358,000
Net loss	$	(24,000	)	$	63,000
USNC's equity in loss of Neuro Partners, LLC and CGK	$	(14,000	)	$	22,000

Neuro Partners, LLC and CGK Condensed Balance Sheet Information

	March 31,			December 31,
	2014			2013
Current assets	$	635,000		$	521,000
Noncurrent assets		1,467,000			1,626,000
Total assets	$	2,102,000		$	2,147,000
Current liabilities	$	1,323,000		$	1,272,000
Noncurrent liabilities		1,594,000			1,664,000
Equity		(815,000	)		(789,000	)
Total liabilities and equity	$	2,102,000		$	2,147,000

XML

Florida Oncology Partners (Tables) (FOP and FOPRE [Member])

3 Months Ended

Mar. 31, 2014

FOP and FOPRE [Member]

Schedule of Equity Method Investments [Line Items]

Summarized Financial Information

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

FOP and FOPRE Condensed Income Statement Information

	Three Months Ended
	March 31,
	2014			2013
Patient revenue	$	487,000		$	612,000
Net loss	$	(107,000	)	$	(35,000	)
USNC's equity in loss of FOP   and FOPRE	$	(21,000	)	$	(7,000	)

FOP and FOPRE Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	642,000	$	653,000
Noncurrent assets		5,559,000		5,795,000
Total assets	$	6,201,000	$	6,448,000
Current liabilities	$	980,000	$	893,000
Noncurrent liabilities		4,655,000		4,881,000
Equity		566,000		674,000
Total liabilities and equity	$	6,201,000	$	6,448,000

XML

Broward Oncology Partners (Tables) (Broward Oncology Partners, LLC [Member])

3 Months Ended

Mar. 31, 2014

Broward Oncology Partners, LLC [Member]

Schedule of Equity Method Investments [Line Items]

Summarized Financial Information

BROP Condensed Income Statement Information

	Three Months Ended
	March 31,
	2014		2013
Patient revenue	$	505,000	$	-
Net income	$	255,000	$	-
USNC's equity in income in BROP	$	32,000	$	-

BROP Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	749,000	$	360,000
Noncurrent assets		282,000		239,000
Total assets	$	1,031,000	$	599,000
Current liabilities	$	496,000	$	319,000
Equity		535,000		280,000
Total liabilities and equity	$	1,031,000	$	599,000

XML

Broward Oncology Partners (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Jan. 31, 2013
Schedule of Equity Method Investments [Line Items]
Recorded investments	$ 331,000		$ 320,000
Due from related parties	117,000		316,000
Condensed Income Statement Information [Abstract]
Patient revenue	0	0
USNC's equity in (loss) income in BOP	(39,000)	(7,000)
Broward Oncology Partners, LLC [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage (in hundredths)				12.50%
Recorded investments	67,000		35,000	50,000
Due from related parties	67,000		63,000
Condensed Income Statement Information [Abstract]
Patient revenue	505,000	0
Net income	255,000	0
USNC's equity in (loss) income in BOP	32,000	0
Condensed Balance Sheet Information [Abstract]
Current assets	749,000		360,000
Noncurrent assets	282,000		239,000
Total assets	1,031,000		599,000
Current liabilities	496,000		319,000
Equity	535,000		280,000
Total liabilities and equity	$ 1,031,000		$ 599,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities:
Net loss	$ (106,000)	$ (141,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from investment in unconsolidated entities, net	39,000	7,000
Gain from sales of member interests in unconsolidated entities	(205,000)	0
Deferred income taxes	0	(84,000)
Changes in:
Other current assets	3,000	(14,000)
Accounts payable and accrued expenses	37,000	30,000
Asset retirement obligations	0	(40,000)
Net cash used in operating activities	(232,000)	(242,000)
Cash flows from investing activities:
Proceeds from insurance recoveries	0	3,265,000
Proceeds from sale of investment	156,000	0
Purchase of leasehold improvements	(301,000)	0
Decrease (increase) in due from related parties	198,000	(298,000)
Net cash provided by investing activities	53,000	2,967,000
Cash flows from financing activities:
Repayment of capital lease obligations	0	(2,271,000)
Proceeds from short-term loans	462,000	0
Net cash provided by (used in) financing activities	462,000	(2,271,000)
Net change in cash and cash equivalents	283,000	454,000
Cash and cash equivalents - beginning of period	1,414,000	1,450,000
Cash and cash equivalents - end of period	1,697,000	1,904,000
Cash paid for
Interest	13,000	0
Supplemental disclosures of noncash investing and financing activities:
Purchase of leasehold improvements included in accounts payable	$ 139,000	$ 0

XML

Boca Oncology Partners

3 Months Ended

Mar. 31, 2014

Boca Oncology Partners [Abstract]

Boca Oncology Partners

Note E – Boca Oncology Partners

During the quarter ended June 30, 2011, the Company participated in the formation of Boca Oncology Partners, LLC ("BOP"), for the purpose of owning and operating a cancer center in Boca Raton, Florida.  In June 2011, Boca Oncology Partners RE, LLC ("BOPRE"), an affiliated entity, purchased a 20% interest in Boca West IMP, LLC (Boca West IMP), owner of a medical office building in West Boca, Florida in which BOP operates.  BOP occupies approximately 6,000 square feet of the 32,000 square foot building.  The Company's wholly-owned subsidiary, USNC invested $225,000 initially and had a 22.5% interest in BOP and BOPRE.

In January 2012, an additional investor purchased 50% of the partnership reducing the Company's ownership to 11.25%.  The Company loaned the proceeds of $56,250 back to BOP as a 5 year note at 7% interest. The remaining 88.75% was owned by other outside investors.  In June 2012, BOPRE purchased an additional 3.75% of Boca West IMP from another investor bringing its total interest to 23.75%. BOPRE accounts for this investment under the cost method since it does not exercise significant influence over Boca West IMP. Then the members of BOPRE sold 31.5% of their interests in BOPRE to a new investor. The proceeds of $28,000 were loaned to BOP and USNC's investment in BOPRE was reduced to 15.4%.

Although the Company reduced its investment to 11.25% of BOP and 15.4% of BOPRE, the Company continues to account for these investments under the equity method due to its participation in the management of the administration and accounting functions of BOP and BOPRE. Due to the outstanding loans made to BOP, BOP is considered to be a variable interest entity of the Company.  However, as the Company is not deemed to be the primary beneficiary of BOP, since it does not have the power to direct the operating activities that most significantly affect BOP's economic performance; certain disclosures are required rather than consolidation.  The center opened in August 2012.

In February 2014, the Company and other members sold their interests in BOP.  Three members provided short-term loans to the Company of $462,000 from their sales proceeds.  The Company's proceeds from the sale of BOP were allocated as follows:

Proceeds from sale	$	407,000
Payoff of loans to BOP		202,000
Net proceeds	$	205,000
Less:  Investment in BOP		-
Gain from sale	$	205,000

The Company's recorded investment in BOPRE is $134,000 at March 31, 2014 and December 31, 2013.

USNC is a 10% guarantor on 50% of the outstanding balance of Boca West IMP's ten-year mortgage.  This mortgage had an original balance of $3,000,000 and is secured by the medical office building in which BOP operates. The outstanding balance on the mortgage is $2,800,000 at March 31, 2014.  The Company expects any potential obligations from this guarantee to be reduced by the recovery of the real estate and expects any amounts arising from this guarantee to be insignificant.

USNC was a 14.06% guarantor on BOP's five-year lease with respect to the oncology equipment at the Boca Raton, Florida cancer center. Upon the sale of BOP, which occurred in 2014, USNC was indemnified by the buyer from any losses arising from the guarantee.

The following tables present the summarized financial information of BOP and BOPRE:

BOP Condensed Income Statement Information

	Three Months Ended
	March 31,
	2014			2013
Patient revenue	$	115,000		$	519,000
Net income	$	(108,000	)	$	13,000
USNC's equity in (loss) income in BOP	$	(12,000	)	$	1,000

BOP Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	-	$	640,000
Noncurrent assets		-		1,831,000
Total assets	$	-	$	2,471,000
Current liabilities	$	-	$	730,000
Noncurrent liabilities		-		2,126,000
Equity		-		(385,000	)
Total liabilities and equity	$	-	$	2,471,000

BOPRE Condensed Income Statement Information

	Three Months Ended
	March 31,
	2014		2013
Rental Income	$	-	$	-
Net income (loss)	$	-	$	-
USNC's equity in income in BOPRE	$	-	$	-

BOPRE Condensed Balance Sheet Information

	March 31,		December 31,
	2014		2013
Current assets	$	103,000	$	132,000
Noncurrent assets		736,000		707,000
Total assets	$	839,000	$	839,000
Current liabilities	$	-	$	-
Noncurrent liabilities		-		-
Equity		839,000		839,000
Total liabilities and equity	$	839,000	$	839,000

XML

Boca Oncology Partners (Details) (USD $)	3 Months Ended			3 Months Ended				3 Months Ended				3 Months Ended			3 Months Ended		12 Months Ended	3 Months Ended
	Mar. 31, 2014 Member	Mar. 31, 2013	Dec. 31, 2013	Mar. 31, 2014 USNC [Member]	Mar. 31, 2014 Boca Oncology Partners, LLC [Member] sqft	Mar. 31, 2013 Boca Oncology Partners, LLC [Member]	Dec. 31, 2013 Boca Oncology Partners, LLC [Member]	Mar. 31, 2014 Boca Oncology Partners, LLC [Member] USNC [Member]	Mar. 31, 2014 Boca West IMP [Member]	Dec. 31, 2013 Boca West IMP [Member]	Jun. 30, 2012 Boca West IMP [Member]	Mar. 31, 2014 Boca Oncology Partners RE, LLC [Member]	Mar. 31, 2013 Boca Oncology Partners RE, LLC [Member]	Dec. 31, 2013 Boca Oncology Partners RE, LLC [Member]	Mar. 31, 2014 Boca Oncology Partners RE, LLC [Member] USNC [Member]	Mar. 31, 2014 BOP and BOPRE [Member] sqft	Dec. 31, 2011 BOP and BOPRE [Member]	Mar. 31, 2014 BOP and USNC's [Member] USNC [Member]
Schedule of Equity Method Investments [Line Items]
Percentage of interest in medical office building (in hundredths)															20.00%
Area of building (in square feet)					6,000											32,000
Investment in BOP and BOPRE	$ 331,000		$ 320,000									$ 134,000		$ 134,000			$ 225,000
Ownership percentage (in hundredths)										3.75%	23.75%	15.40%			11.25%		22.50%
Additional investor purchased (in hundredths)																50.00%	20.00%
Amount loaned to related parties					56,250			28,000
Debt maturity period					5 years
Company loan interest rate (in hundredths)					7.00%
Ownership percentage by outside investors (in hundredths)												31.50%				88.75%
Reduced ownership percentage (in hundredths)				11.25%														15.40%
Number of members who provided short term loans	3
Short-term loans	462,000		0
Company's proceeds from the sale of BOP [Abstract]
Proceeds from sale	(156,000)	0			407,000
Payoff of loans to BOP					202,000
Net proceeds					205,000
Less: Investment in BOP					0
Gain from sale					205,000
Share of guarantee in mortgage (in hundredths)					14.06%				10.00%
Share of guarantee in outstanding mortgage (in hundredths)									50.00%
Lease term					5 years				10 years
Original balance of mortgage									3,000,000
Outstanding balance on mortgage									2,800,000
Condensed Income Statement Information [Abstract]
Patient revenue	0	0			115,000	519,000
Rental income												0	0
Net income (loss)					(108,000)	13,000						0	0
USNC's equity in (loss) income in BOP	(39,000)	(7,000)			(12,000)	1,000						0	0
Condensed Balance Sheet Information [Abstract]
Current assets					0		640,000					103,000		132,000
Noncurrent assets					0		1,831,000					736,000		707,000
Total assets					0		2,471,000					839,000		839,000
Current liabilities					0		730,000					0		0
Noncurrent liabilities					0		2,126,000					0		0
Equity					0		(385,000)					839,000		839,000
Total liabilities and equity					$ 0		$ 2,471,000					$ 839,000		$ 839,000