UNITED STATES SECURITIES AND
EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB x
               QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
               1934 For
the quarterly period ended September 30, 2007
or o
               TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT 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) 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  o 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 As of October 26, 2007, there were
outstanding 7,697,185 shares of the registrants Common Stock. $.01 par value. Transitional Small
Business Disclosure Format (check one) Yes  o No  x     TABLE OF CONTENTS










PART I - FINANCIAL INFORMATION
     3Item 1.  Financial Statements
     3Item 2.  Management Discussion and Analysis or Plan of Operation
     9Item 3.  Controls and Procedures
     12PART II - OTHER INFORMATION
     13Item 1.  Legal Proceedings
     13Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
     13Item 3.  Defaults Upon Senior Securities
     13Item 4.  Submission of Matters to a Vote of Security Holders
     13Item 5.  Other Information
     13Item 6.  Exhibits
     14SIGNATURES
     152
 PART I 
FINANCIAL INFORMATION







Item 1. Financial
StatementsU.S.
NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS






September 30,
2007
     December 31,
2006ASSETSCurrent assets:Cash and cash equivalents
     $288,000
        
     $297,000Accounts receivable (net of allowance for doubtfulaccounts of $36,000 in 2007 and 2006)
     126,000
        
     119,000Accounts receivable - RMC
     42,000
        
     175,000Other current assets
     108,000
        
     119,000Total current assets
     564,000
        
     710,000Gamma Knife (net of accumulated depreciation of$5,058,000 in 2007 and $4,599,000 in 2006)
     1,911,000
        
     2,370,000Leasehold improvements (net of accumulated amortizationof $1,761,000 in 2007 and $1,739,000 in 2006)
     281,000
        
     303,000Office furniture and computers (net of accumulated depreciationof $107,000 in 2007 and $107,000 in 2006)
     -
        
     -Total property and equipment
     2,192,000
        
     2,673,000Due from related party
     19,000
        
     -Cash held in escrow
     51,000
        
     113,000TOTAL
     $2,826,000
        
     $3,496,000LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued expenses
     $119,000
        
     $122,000Obligations under capital leasesand loans payable - current portion
     425,000
        
     467,000Total current liabilities
     544,000
        
     589,000Obligations under capital leases and loans payable - netof current portion
     1,288,000
        
     1,611,000Asset retirement obligations
     200,000
        
     200,000Total liabilities
     2,032,000
        
     2,400,000Stockholders' equity:Common stock
     77,000
        
     77,000Additional paid-in capital
     3,097,000
        
     3,097,000Accumulated deficit
     (2,380,000
        )
     (2,078,000
        )Total stockholders' equity
     794,000
        
     1,096,000TOTAL
     $2,826,000
        
     $3,496,000The
accompanying notes to financial statements are an integral part hereof.





3
 U.S. NEUROSURGICAL, INC. AND SUBSIDIARY 
CONSOLIDATED STATEMENTS OF OPERATIONS



Three Months Ended
September 30,2007
     2006Revenue:Patient revenue
     $376,000
        
     $414,000Expenses:Patient expenses
     132,000
        
     231,000Selling, general and administrative
     182,000
        
     300,000Total
     314,000
        
     531,000Operating income (loss)
     62,000
        
     (117,000
        )Interest expense
     (41,000
        )
     (57,000
        )Interest income
     3,000
        
     5,000Other income
     3,000
        
     -Income (loss) before income taxes
     27,000
        
     (169,000
        )Provision for income tax expense
     (1,000
        )
     -Net income (loss)
     $26,000
        
     $(169,000
        )Proforma basic and diluted income (loss) per share
     $0.00
        
     $(0.02
        )Proforma weighted average shares outstanding
     7,697,185
        
     7,697,185The
accompanying notes to financial statements are an integral part hereof.


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



Nine Months Ended
September 30,2007
     2006Revenue:Patient revenue
     $1,230,000
        
     $1,448,000Expenses:Patient expenses
     597,000
        
     676,000Selling, general and administrative
     815,000
        
     981,000Total
     1,412,000
        
     1,657,000Operating loss
     (182,000
        )
     (209,000
        )Interest expense
     (130,000
        )
     (173,000
        )Interest income
     9,000
        
     14,000Other income
     3,000
        
     -Loss before income taxes
     (300,000
        )
     (368,000
        )Provision for income tax expense
     (1,000
        )
     -Net loss
     $(301,000
        )
     $(368,000
        )Proforma basic and diluted loss per share
     $(0.04
        )
     $(0.05
        )Proforma weighted average shares outstanding
     7,697,185
        
     7,697,185The accompanying notes to financial
statements are an integral part hereof.


5
 U.S.
NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS
OF CASH FLOWS



Nine Months Ended
September 30,2007
     2006Cash flows from operating activities:Loss from continuing operations
     $(301,000
        )
     $(368,000
        )Adjustments to reconcile net income to net cash (used in)provided by operating activities:Depreciation and amortization
     480,000
        
     531,000Changes in operating assets and liabilities:Decrease in receivables - net
     126,000
        
     194,000Decrease (increase) in other current assets
     11,000
        
     (4,000
        )Increase (decrease) in payables and other current liabilities
     (3,000
        )
     55,000Net cash provided by operating activities
     313,000
        
     408,000Cash flows from investing activities:Increase in due from related party
     (19,000
        )
     -Decrease (increase) in cash held in escrow
     62,000
        
     (4,000
        )Net cash used in investing activities
     43,000
        
     (4,000
        )Cash flows from financing activities:Repayment of capital lease obligations and loans payable
     (365,000
        )
     (493,000
        )Net decrease in cash and cash equivalents
     (9,000
        )
     (89,000
        )Cash and cash equivalents - beginning of period
     297,000
        
     422,000CASH AND CASH EQUIVALENTS - END OF PERIOD
     $288,000
        
     $333,000Supplemental disclosures of cash flow information:Cash paid for interest
     $130,000
        
     $173,000The accompanying notes to financial
statements are an integral part hereof.

6
 U.S. NEUROSURGICAL,
INC. AND SUBSIDIARIES 
NOTES TO FINANCIAL
STATEMENTS


Note A  Basis of Preparation


The
accompanying financial statements at September 30, 2007, and for the nine months ended
September 30, 2007 and 2006, 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, 2006 has been derived from the
audited financial statements at that date appearing in the Companys Annual Report on
Form 10-KSB.


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.


Note B 
Uncertainties


In
May of 2007, the Company filed a lawsuit against Research Medical Center (RMC)
in the Circuit Court of Jackson County, Missouri. RMC is the hospital in Kansas City where
the Companys Kansas City center is located and to which USN provides Gamma Knife
Services on a cost per treatment basis. The litigation involves the Companys claims
for additional reimbursement from RMC under the Gamma Knife Neuroradiosurgery Equipment
Agreement of December 29, 1993 between USN and RMC (the Agreement). The
litigation is in its early stages and it is not possible to say whether the outcome will
result in any additional payments to USN.


Primarily
due to decreased patient procedures in recent periods at the Kansas City center, the
Company has incurred operating losses which have contributed to a substantial reduction in
its working capital ($20,000 as of September 30, 2007). The Company experienced a net
after tax loss of $383,000 for the year ended December 31, 2006 and an after tax loss of
$301,000 for the nine month period ended September 30, 2007.


The
Companys management is taking steps to improve profitability and overcome the
negative effects of the reduction in working capital, but the final effects of such steps
cannot be assessed at this time. In addition, the Company has taken steps to reduce
maintenance expenses and has arranged for reductions in payroll expenses.

7
 The
Company believes such changes will improve its liquidity and will be sufficient to
generate adequate amounts of cash to meet the Companys needs for operating expenses
and debt (and lease) service requirements for the next year.

8
 Item 2. Management
Discussion and Analysis or Plan of Operation


Critical Accounting
Policies


The
condensed financial statements of U.S. Neurosurgical, Inc. (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 financial statements. A summary of those
significant accounting policies can be found in our 2006 Annual Report on Form 10-KSB,
filed, in the Notes to the Financial Statements, Note B. 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.


Results of Operation:
Third Quarter 2007 Compared to Third Quarter 2006 and Nine Months Ended September 30,
2007 Compared to Nine Months Ended September 30, 2006


Patient
revenue decreased 9% to $376,000 in the quarter ended September 30, 2007 from $414,000 for
the quarter ended September 30, 2006. The decrease was due primarily to reduced patient
procedures at the Kansas City center. Patient expenses decreased 43% to $132,000 for the
third quarter of 2007 compared to $231,000 in the same period a year ago. This decrease
was due largely to a restructuring of the maintenance arrangements for the Companys
Gamma Knives. Selling, general and administrative expense decreased 39% to $182,000 for
the quarter ended September 30, 2007 from $300,000 in the comparable period a year ago.
The decrease was due to decreases in amortization expense, professional fees and payroll
expenses for the period in question. Interest expense decreased 28% to $41,000 from
$57,000 in the same period a year earlier. This was due primarily to the fact that the
Gamma Knife assets at the New York center were not under a financing arrangement during
the third quarter of 2007. For the quarter ended September 30, 2007, the Company reported
net income of $26,000 as compared to a net loss of $169,000 for the same period a year
earlier. Although the Company experienced a lower level of revenues for the period,
overall profitability improved from the prior period due to the expense reductions
discussed above.


For
the nine months ended September 30, 2007, patient revenue decreased 15% to $1,230,000 from
$1,448,000 for the same period a year earlier. The decrease was due primarily to reduced
patient procedures at the Kansas City center. Patient expenses for the nine months ended
September 30, 2007 decreased 12% to $597,000 from $676,000 in the same period a year ago.
This decrease was due largely to a restructuring of the maintenance arrangements for the
Companys Gamma Knives. Selling, general and administrative expense decreased 17% to
$815,000 for the nine months ended September 30, 2007 from $981,000 in the comparable
period a year ago. The decrease was due to decreases in professional fees and lower
payroll expenses for the period in question. Interest expense decreased 25% to $130,000
from $173,000 in the same period a year earlier, due primarily to the fact that the Gamma
Knife assets at the New York center were not under a financing arrangement for the third
quarter, and most of the second quarter, of 2007. For the nine months ended September 30,
2007, the net loss was $301,000 as compared to a loss of $368,000 for the same period a
year earlier. Although the Company experienced a lower level of revenues for the period,
the net loss was lower than in the prior period due to the expense reductions discussed
above.

9
 Liquidity and Capital
Resources


At
September 30, 2007 the Company had working capital of $20,000 as compared to working
capital of $121,000 at December 31, 2006. Cash and cash equivalents at September 30, 2007
were $288,000 as compared with $297,000 at December 31, 2006.


Net
cash provided by operating activities for the nine months ended September 30, 2007 was
$313,000 as compared to $408,000 for the same period a year earlier. Depreciation and
amortization was $480,000 for the nine months ended September 30, 2007, as compared with
$531,000 the first nine months of 2006.


The
Company paid $365,000 towards its lease obligations during the nine months ended September
30, 2007 as compared to $493,000 in the same period a year ago. With our current cash
position, and continued collection on our accounts receivable, the Company believes that
its cash position will be sufficient to support operations for at least the next twelve
months.


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 our Form 10-KSB for the fiscal year
ended December 31, 2006, 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.


Operating
Losses. We have experienced significant operating losses and may continue to do so in
the future. We reported a net after tax loss of $383,000 for the year ended December 31,
2006 and $301,000 for the first nine months of 2007. While the Company is taking steps to
improve profitability, it is likely that losses will continue in the near term.


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 centers. If losses
continue, 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.

10
 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 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.

11
 Item 3. Controls and
Procedures


Management
of the Company, including the Chief Executive Officer, 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 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.


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 September 30, 2007 that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial
reporting.

12
 PART II  OTHER
INFORMATION





Item 1. Legal Proceedings


In
May of 2007, USN filed a lawsuit against Research Medical Center (RMC) in the
Circuit Court of Jackson County, Missouri. RMC is the hospital in Kansas City where
USNs Kansas City center is located and to which USN provides Gamma Knife Services on
a cost per treatment basis. The litigation involves USNs claims for
additional reimbursement from RMC under the Gamma Knife Neuroradiosurgery Equipment
Agreement of December 29, 1993 between USN and RMC (the Agreement).


The
Agreement provides for certain minimum payments, as well as other payments, to be made by
RMC to USN. In the lawsuit, USN claims that RMC substantially underpaid it for a number of
years. The litigation is in its early stages and it is not possible to say whether the
outcome will result in any additional payments to USN. In addition, it is not clear how
the presence of the lawsuit will impact RMCs willingness to perform its future
obligations under the Agreement. RMC is a unit of HCA, Inc., a very large health services
organization which has substantially greater resources than are available to USN.
Nevertheless, USN has made a substantial investment in Kansas City to build its business
and provide quality healthcare to patients in the Kansas City community in reliance on the
RMCs performance under the Agreement, and thus USN intends to pursue its rights
aggressively in an effort to protect that business.





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.


13
 Item 6. Exhibits


31.1

Rule
13a-14(a)/15d-14(a) Certification32.1

Section
1350 Certifications14
 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.















Date:  November 15, 2007

U.S. Neurosurgical, Inc.
(Registrant)By:  /s/ Alan Gold
Alan Gold
Director, President and
Chief Executive Officer
               and
Principal Financial Officer
of the Registrant15