UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-QSB  [ X ]
        QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIESEXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2005 or [     ]
        TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGEACT  For the transition period from                     to                     .  Commission file number:  0-15586  U.S. Neurosurgical, Inc. (Exact name of small business issuer as specified in its charter)  Delaware
        52-1842411(State of other jurisdiction of
        (I.R.S. Employerincorporation or organization)
        Identification No.)  2400 Research Blvd, Suite 325, Rockville, Maryland 20850 (Address of principal executive offices)  (301) 208-8998 (Issuers telephone number, including area code)  Not Applicable (Former name, former address and former fiscal year, if changed since last report)  Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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  [     ]  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes  [     ]No  [ X ]  As of November 4, 2005, there were outstanding 7,697,185 shares of the registrants Common Stock. $.01 par value.     PART I - FINANCIAL
INFORMATION               U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
                    CONSOLIDATED BALANCE SHEETS
September
      30,
      2005
    
    December 31,
      2004**ASSETS**Current assets:Cash
      and cash equivalents
    
    
    $
    496,000
    
    $
    511,000Accounts
      receivable (net of allowance for doubtfulaccounts
      of $36,000 in 2005 and 2004)
    
    
    
    376,000
    
    
    404,000Accounts
      receivable-stockholder
    
    
    
    92,000
    
    
    57,000Other
      current assets
    
    
    
    165,000
    
    
    199,000Total
      current assets
    
    
    $
    1,129,000
    
    $
    1,171,000Gamma Knife
      (net of accumulated depreciation of$3,3850,000
      in 2005 and $7,147,000 in 2004)
    
    
    
    3,120,000
    
    
    965,000Leasehold
      improvements (net of accumulatedamortization
      of $1,576,000 in 2005 and $1,545,000 in 2004)
    
    
    
    465,000
    
    
    497,000Total
      property and equipment
    
    
    
    3,585,000
    
    
    1,462,000Progress
      payments - RMC Gamma Knife
    
    
    
    
    
    
    1,282,000Deferred
      tax asset
    
    
    
    180,000
    
    
    180,000Cash held
      in escrow
    
    
    
    108,000
    
    
    106,000**TOTAL**
    ****
    ****
    **$**
    **5,002,000**
    ****
    **$**
    **4,201,000****LIABILITIES
      AND STOCKHOLDERS EQUITY**Current liabilities:Accounts
      payable and accrued expenses
    
    
    $
    90,000
    
    $
    39,000Obligations
      under capital leaseand
      loans payable- current portion
    
    
    
    647,000
    
    
    467,000Due
      to stockholder
    
    
    
    300,000
    
    
    300,000Deferred
      tax liability
    
    
    
    200,000
    
    
    240,000Other
      current liabilities
    
    
    
    39,000
    
    
    39,000Total
      current liabilities
    
    
    
    1,276,000
    
    
    1,085,000Obligations
      under capital lease and loans payable-netof
      current portion
    
    
    
    2,257,000
    
    
    1,452,000Asset retirement
      obligations
    
    
    
    200,000
    
    
    200,000Total
      liabilities
    
    
    
    3,733,000
    
    
    2,737,000Stockholders
      equity:Common
      stock
    
    
    
    77,000
    
    
    77,000Additional
      paid-in capital
    
    
    
    2,797,000
    
    
    2,797,000Accumulated
      deficit
    
    
    
    (1,605,000
    )
    
    (1,410,000
    )Total
      stockholders equity
    
    
    $
    1,269,000
    
    $
    1,464,000**TOTAL**
    ****
    ****
    **$**
    **5,002,000**
    ****
    **$**
    **4,201,000**
    ****The accompanying notes to
financial statements are an integral part hereof.





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U.S. NEUROSURGICAL,
INC. AND SUBSIDIARY                 CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months
      Ended
      September 30,2005
    
    2004Revenue:Patient
      revenue
    
    
    $
    546,000
    
    $
    637,000Expenses:Patient
      expenses
    
    
    $
    201,000
    
    $
    151,000Selling,
      general and administrative
    
    
    
    307,000
    
    
    401,000Total
    
    
    
    508,000
    
    
    552,000Operating
      income
    
    
    $
    38,000
    
    $
    85,000Interest
      expense
    
    
    
    (84,000
    )
    
    (17,000
    )Other income
    
    
    
    
    
    
    1,000Interest
      Income
    
    
    
    3,000
    
    
    Income (loss)
      before income taxes
    
    
    
    (43,000
    )
    
    69,000Income tax
      benefit (provision)
    
    
    
    40,000
    
    
    (25,000
    )Net income
      (loss)
    
    
    $
    (3,000
    )
    $
    44,000Proforma
      basic and diluted (loss) income per share
    
    
    $
    (0.00
    )
    $
    0.01Proforma
      weighted average shares outstanding
    
    
    
    7,697,185
    
    
    7,776,606The accompanying notes
to financial statements are an integral part hereof.




3
U.S. NEUROSURGICAL,
INC. AND SUBSIDIARY                 CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months
      Ended 
      September 30,2005
    
    2004Revenue:Patient
      revenue
    
    
    $
    1,686,000
    
    $
    1,940,000Expenses:Patient
      expenses
    
    
    $
    617,000
    
    $
    484,000Selling,
      general and administrative
    
    
    
    1,109,000
    
    
    1,085,000Total
    
    
    
    1,726,000
    
    
    1,569,000Operating
      income (loss)
    
    
    $
    (40,000
    )
    $
    371,000Interest
      expense
    
    
    
    (203,000
    )
    
    (50,000
    )Other income
    
    
    
    
    
    
    25,000Interest
      Income
    
    
    
    8,000
    
    
    Income (loss)
      before income taxes
    
    
    
    (235,000
    )
    
    346,000Income tax
      benefit (provision)
    
    
    
    40,000
    
    
    (138,000
    )Net income
      (loss)
    
    
    $
    (195,000
    )
    $
    208,000Proforma
      basic and diluted (loss) income per share
    
    
    $
    (0.03
    )
    $
    0.03Proforma
      weighted average shares outstanding
    
    
    
    7,697,185
    
    
    7,806,137The accompanying notes
to financial statements are an integral part hereof.



4
U.S. NEUROSURGICAL,
INC. AND SUBSIDIARY                 CONSOLIDATED STATEMENTS OF CASH FLOWS








Nine Months
      Ended
      September 30,2005
    
    2004Cash
      flows from operating activities:Net
      income (loss) from continuing operations
    
    
    $
    (195,000
    )
    $
    208,000Adjustments
      to reconcile net income to net cash provided byoperating
      activities:Depreciation
      and amortization
    
    
    
    478,000
    
    
    364,000Changes
      in:Decrease
      (increase) in receivables
    
    
    
    (7,000
    )
    
    (102,000
    )Decrease
      (increase) in other current assets
    
    
    
    34,000
    
    
    (139,000
    )Increase
      (decrease) in deferred tax asset
    
    
    
    
    
    
    (62,000
    )Increase
      (decrease) in payables and other current liabilitiesand
      deferred tax liability
    
    
    
    11,000
    
    
    124,000Net
      cash provided by operating activities
    
    
    
    321,000
    
    
    393,000Cash flows
      from investing activities:RMC
      Gamma Knife
    
    
    
    (2,606,000
    )
    
    Progress
      payments- RMC Gamma Knife
    
    
    
    1,282,000
    
    
    (Increase)
      decrease in cash held in escrow
    
    
    
    (2,000
    )
    
    211,000Net
      cash (used in) provided by investing activities
    
    
    
    (1,326,000
    )
    
    211,000Cash flows
      from financing activities:Proceeds
      from capital lease obligations and loans payable
    
    
    
    1,319,000
    
    
    625,000Repayment
      of capital lease obligations and loans payable
    
    
    
    (329,000
    )
    
    (844,000
    )Net
      cash provided by (used in) financing activities
    
    
    
    990,000
    
    
    (219,000
    )Net (decrease)
      increase in cash and cash equivalents
    
    
    
    (15,000
    )
    
    385,000Cash and
      cash equivalents - beginning of period
    
    
    
    511,000
    
    
    89,000**CASH
      AND CASH EQUIVALENTS - END OF PERIOD**
    ****
    ****
    **$**
    **496,000**
    ****
    **$**
    **474,000**
    ****Non-cash
      investing and financing activities:Payment
      of $100,000 directly from SMT Leasing toElecta
      Instruments in 2004Supplemental
      disclosures of cash flow information:Cash
      paid for:Interest
    
    
    $
    203,000
    
    $
    50,000Taxes
    
    
    
    
    
    
    44,000The accompanying notes
to financial statements are an integral part hereof.


5
U.S. NEUROSURGICAL, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS



Note A - Basis of Preparation



The accompanying financial statements at September 30, 2005, and for the three and nine months ended September 30, 2005 and 2004, 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, 2004 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-QSB, the accompanying 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.



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



6


Management Discussion and Analysis of Financial Condition and Results of Operations



Critical Accounting Policies



Our condensed financial statements 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 financial statements. A summary of those significant accounting policies can be found in our 2004 Annual Report on Form 10-K, filed, in the Notes to the Financial Statements, Note A. In particular, judgment is used in areas such as determining the allowance for doubtful accounts, and 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 consolidated financial statements and notes there to appearing elsewhere herein.



Third Quarter 2005 Compared to Third Quarter 2004 and Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004



Patient revenue decreased 14% to $546,000 in the quarter ended September 30, 2005 from $637,000 for the quarter ended September 30, 2004. The decrease was due to decreased revenues at both centers. Patient expenses increased 33% to $201,000 for the quarter compared to $151,000 in the same period a year ago. The increase was due to increased depreciation on the gamma knives. Selling, general and administrative expense decreased 23% to $309,000 for the quarter ended September 30, 2005 from $401,000 in the comparable period a year ago. The decrease was due to decreases in professional fees for the period in question. Interest expense increased to $84,000 from $17,000 in the same period a year earlier. This was due to the new lease on the RMC Gamma Knife. For the quarter ended September 30, 2005, the net loss was $3,000 as compared to income of 44,000 for the same period a year earlier. The
loss was due primarily to decreased revenues and the related costs of the new RMC Gamma Knife.



For the nine months ended September 30, 2005 revenue decreased 13% to $1,686,000 compared to $1,940,000 for the same period a year earlier. The decrease was due to decreased revenues at both facilities. Patient expenses for the nine months ended September 30, 2005 increased 27% to $617,000 from $484,000 in the same period in 2004. The increase was due to increased depreciation on the gamma knives. Selling, general and administrative expense increased 2% to $1,109,000 as compared to $1,085,000 in the same period a year earlier. The reason for the increase was due to overall increases in insurance and professional fees. Interest expense increased to $203,000 from $50,000 in the same period a year ago. The reason for the increase was due to the lease on the new RMC Gamma Knife. As a result, the net loss was $195,000 for the nine months ended September 30, 2005 as compared to income of
$208,000 for the nine months ended September 30, 2004. This loss was due primarily to decreased revenues and the related costs of the new RMC Gamma Knife.



7
Liquidity and Capital Resources



At September 30, 2005 the Company had a working capital deficit of $147,000 as compared to a working capital surplus of $86,000 at December 31, 2004. Cash and cash equivalents at September 30, 2005 were $496,000 as compared with $511,000 at December 31, 2004.



Net cash provided by operating activities for the nine months ended September 30, 2005 was $321,000 as compared to $393,000 for the same period a year earlier. Depreciation and amortization was $478,000 for the nine months ended September 30, 2005 as compared to $364,000 in the same period a year earlier. Net changes in operating assets and liabilities contributed $78,000 to cash flow from operations in the nine months ended September 30, 2005 as compared to the same period in 2004, in which there was a reduction of $179,000 as a result of net changes in such items.



During the first quarter the Company completed a replacement to the RMC Gamma Knife. The cost was $2,601,000. The lease has payments of $46,600 for 72 months at 8.8 percent. The $211,000 that was held in escrow at December 31, 2003 was paid to US Bank Corp. and Elekta Instruments in March 2004. The reason for the escrow was a lease that had been underfunded by DVI in August 2003. DVI filed for protection under Chapter 11 of the U.S. Bankruptcy Code in August 2003. The Company began making all lease payments into an escrow account and continued to negotiate with the successor. The Company secured new financing from SMT Leasing to pay off the obligations. The lease has payments of $23,000 for 36 months at 8.8 percent.



Net cash provided by financing activities for the nine months ended September 30, 2005 was $990,000 as compared to net cash used of $219,000 for the same period a year earlier. The new Gamma Knife lease was $2,601,000 and in the nine months ended September 30, 2005 the Company paid $329,000 towards its lease obligations as compared to $844,000 in the same period a year ago. We anticipate that with our current cash position, and collection on our accounts receivable, the Company believes that the cash position is sufficient for the next twelve months.



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, 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



8
such obligation to) update or alter its forward-looking statements whether as a result of such changes, new information, future events or otherwise.



The Company operates in a highly competitive and rapidly changing environment and business segments that are dependent on our ability to: achieve profitability; increase revenues; sustain our current level of operation; introduce on a timely basis new products; maintain satisfactory relations with our customers; attract and retain key personnel; maintain and expand our strategic alliances; and protect our know-how. 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, failure to meet earnings expectations, significant acquisitions or other transactions, economic slowdowns and changes in the Companys plans, strategies and intentions.



Item 3. Controls and Procedures



Management of U.S. Neurosurgical, Inc., including the President and Chief Executive Officer, conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-15e within 90 days of the filing of this report. Based on that evaluation, the President and Chief Executive Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the President and Chief Executive Officer completed such evaluation.



9

PART II - OTHER INFORMATION



Item 6. Exhibits




31.1
        Rule 13a-14(a)/15d-14(a) Certification32.1
        Section 1350 Certifications

10

SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.






U.S. Neurosurgical, Inc.(Registrant)Date:November 11, 2005
        By :/s/ Alan Gold                  .Alan GoldDirector, President andChief Executive Officer andPrincipal Financial Officerof the Registrant

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