UNITED
STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-QSB x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For
  the quarterly period ended March 31, 2008oro
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THEEXCHANGE 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 May 2, 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
8Item
  3. Controls and Procedures
10PART 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
14Item
  6. Exhibits
14SIGNATURES
152



PART I - FINANCIAL
INFORMATION

Item 1.
Financial Statements

U.S.
NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

March
  31,
  2008

December
  31,
  2007ASSETSCurrent assets:Cash and cash
  equivalents

$
401,000

$
372,000Accounts
  receivable (net of allowance for doubtful accounts of $36,000 in 2008 and
  2007)


197,000


96,000Accounts
  receivable-stockholder


42,000


45,000Other current
  assets


49,000


52,000Total current
  assets

$
689,000

$
565,000Gamma Knife (net
  of accumulated depreciation of $5,395,000 in 2008 and $5,242,000 in 2007)


1,605,000


1,758,000Leasehold improvements
  (net of accumulated amortization of $1,776,000 in 2008 and $1,771,000 in
  2007)


261,000


266,000Total property
  and equipment


1,866,000


2,024,000Cash held in
  escrow


52,000


52,000TOTAL

$
2,607,000

$
2,641,000LIABILITIES
  AND STOCKHOLDERS EQUITYCurrent
  liabilities:Accounts
payable
  and accrued expenses

$
109,000

$
69,000Obligations
  under capital lease and loans payable- current portion


445,000


434,000Total current
  liabilities


554,000


503,000Obligations
  under capital lease and loans payable-net of current portion


1,061,000


1,177,000Asset retirement
  obligations


200,000


200,000Total
liabilities


1,815,000


1,880,000Stockholders
  equity:Common
stock


77,000


77,000Additional
  paid-in capital


3,097,000


3,097,000Accumulated
  deficit


(2,382,000
)

(2,413,000
)Total
  stockholders equity

$
792,000

$
761,000TOTAL

$
2,607,000

$
2,641,000The accompanying notes to financial
statements are an integral
part hereof.

3

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

Three
  Months Ended
  March 31,2008

2007Revenue:Patient
revenue

$
535,000

$
462,000Expenses:Patient
expenses

$
183,000

$
232,000Selling,
general
  and administrative


287,000


317,000Total

$
470,000

$
549,000Operating income (loss)

$
65,000

$
(87,000
)Interest expense

$
(36,000
)
$
(47,000
)Interest income


2,000


3,000Income (loss) before income taxes

$
31,000

$
(131,000
)Income tax benefit (provision)





Net income (loss)

$
31,000

$
(131,000
)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 CASH FLOWS

Three Months Ended
  March 31,2008

2007Cash flows from operating
  activities:(Loss) income
from continuing operations

$
31,000

$
(131,000
)Adjustments to
reconcile net income to net cash (used in) provided by
  operating activities:Depreciation
and amortization


158,000


177,000Deferred
income taxesChanges
in:Accounts
receivable


(98,000
)

5,000Other current
assets


4,000


(8,000
)Accounts
payable and accrued expenses


40,000


38,000Net cash
provided by operating activities

$
135,000

$
81,000Cash flows from investing
  activities:Investment in
unconsolidated entities

$
(1,000
)
$
Net cash (used
in) provided by investing activities

$
(1,000
)
$
Cash flows from financing
  activities:Repayment of
capital lease obligations and loans payable

$
(105,000
)
$
(165,000
)Net cash used
in financing activities

$
(105,000
)
$
(165,000
)Net (decrease) increase in
  cash and cash equivalents

$
29,000

$
(84,000
)Cash and cash equivalents -
  beginning of period

$
372,000

$
297,000CASH AND
  CASH EQUIVALENTS - END OF PERIOD

$
401,000

$
213,000Supplemental disclosures of
  cash flow information:Cash paid
forInterest

$
36,000

$
47,000The 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 March 31, 2008, and for the three months
ended March 31, 2008 and 2007, 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, 2007 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. It is not possible to say whether the lawsuit 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 ($62,000 as of December 31, 2007).
The Company experienced net after tax losses of $335,000 for the year ended
December 31, 2007 and $383,000 for the year ended December 31, 2006.

The
Companys management is taking steps to improve profitability and overcome the
negative effects of recent reductions in working capital. In recent quarters,
the Company has been successful in reducing maintenance expenses and insurance
costs.

While
the Company can not be certain of the effects of these and other measures on
long term profitability, management believes such changes will improve its
liquidity

6

and will be sufficient to preserve adequate amounts of
cash to meet the Companys needs for operating expenses and debt (and lease)
service requirements for the next year.

Note C  New Gamma Knife
Center

During
2007, the Company took initial steps toward the formation of a new Gamma Knife
center at San Antonio Community Hospital in Upland, California. The Company
would participate 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 the San Antonio Community Hospital
to renovate space in the hospital and install and operate a Leksell PerfexionT
Gamma Knife. CGK will lease the Gamma Knife from Neuropartners LLC. USNC is a
27% owner of CGK and a 20% owner of Neuropartners LLC. The project is subject
to certain conditions, including financing.

7

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 2007
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: First Quarter 2008 Compared to First Quarter
2007

Patient
revenue increased 16% to $535,000 in the quarter ended March 31, 2008 from
$462,000 for the quarter ended March 31, 2007. The increase was due to
increased patient procedures at both the New York and Kansas City centers.
Patient expenses decreased 21% to $183,000 for the first quarter of 2008
compared to $232,000 in the same period a year ago. Even though patient
procedures were up significantly, the cost of owning, operating and maintaining
the Gamma Knives are generally fixed, and this period-over-period decrease was
due largely to a restructuring of the maintenance arrangements for the
Companys Gamma Knives which took place in mid-2007. Selling, general and
administrative expense decreased 9% to $287,000 for the quarter ended March 31,
2008 from $317,000 in the comparable period a year ago. This decrease was due
to decreases in amortization expense and insurance costs for the period in question.
Interest expense decreased 23% to $36,000 from $47,000 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 first
quarter of 2008. For the quarter ended March 31, 2008, the Company reported net
income of $31,000 as compared to a net loss of $131,000 for the same period a
year earlier. This improvement in profitability resulted from the increase in
revenue in the first quarter of 2008 as compared to the prior period, as well
as the expense reductions discussed above.

Liquidity and Capital Resources

At
March 31, 2008 the Company had working capital of $135,000 as compared to
working capital of $62,000 at December 31, 2007. Cash and cash equivalents at
March 31, 2008 were $401,000 as compared with $372,000 at December 31, 2007.

8

Net
cash provided by operating activities for the three months ended March 31, 2008
was $135,000 as compared to $81,000 for the same period a year earlier.
Depreciation and amortization was $158,000 for the three months ended March 31,
2008, as compared with $177,000 the first three months of 2007.

The
Company paid $105,000 towards its lease obligations during the three months
ended March 31, 2008 as compared to $165,000 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, 2007, 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 in recent periods and may continue to do so in the future. We reported a
net after tax loss of $335,000 for the year ended December 31, 2007. While the
Company is taking steps to improve profitability, and did report a profit in
the current quarter, it is possible that the Company will experience losses in
the future periods.

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.

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

9

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.

Item 3. 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

10

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).

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 (including
an evaluation of the updated procedures described above) 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.

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 generally
accepted accounting principles. 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 U.S. generally
  accepted accounting principles, 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.

11

Changes in Internal Control over Financial Reporting

As
described in Item 8A(T) of our Form 10-KSB for the fiscal year ended December
31, 2007, management has identified the following material weaknesses in the
Companys internal control over financial reporting as of December 31, 2007:
(1) the Company did not maintain a sufficient complement of personnel with the
appropriate level of knowledge, experience and training in the application of
GAAP and in internal controls over financial reporting commensurate with its
financial reporting requirements, (2) the Company did not maintain effective
controls over the determination and reporting of its income tax payable,
deferred income tax assets and liabilities, the related valuation allowances
and income tax expenses. Specifically, effective controls were not designed and
in place to ensure that management maintained the appropriate level of
personnel resources with an adequate experience and expertise in the area of
GAAP accounting for income taxes. These material weaknesses contributed to
control deficiencies, as well as audit adjustments to the 2007 annual
consolidated financial statements in the financial reporting and close process.
As described in Item 8A(T) of our Form 10-KSB for the fiscal year ended
December 31, 2007, management has begun to take steps to remediate the control
deficiencies noted above through the use of additional outside contractors with
the requisite experience and expertise in GAAP accounting.

Other
than as described above, 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
December 31, 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

During
2007, USN instituted a lawsuit against Midwest Division  RMC LLC, in the
Circuit Court of Jackson County, Missouri seeking damages against the defendant
as successor to USNs agreement with RMC relating to the Kansas City Gamma
Knife center. USN is seeking damages arising out of the agreement with RMC,
executed in December 1993. In the course of an audit, USN discovered that the
defendant had failed to make proper payments to USN under that agreement. USN
is now seeking damages for underpayments.

Management
is aggressively seeking the payments that it believes the Company is due under
the agreement with RMC. However, the Company is unable to assess the prospects
for recovery. There has been no counterclaim by the defendant, so if there is
an unfavorable outcome, at the present time it appears that USN would not
suffer material damages. Patients continue to receive treatment at the Kansas
City center, but payments for those treatments are being calculated by RMC
according to the method that USN has contested, and which is the subject of the
lawsuit. Management believes that the only issue is whether USN will benefit from
any recovery through this lawsuit with respect to prior periods.

Although
patients continue to be treated in Kansas City, it is not clear how the
presence of the lawsuit will impact the Companys working relationship with
RMC. 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 their 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.

13

Item 5. Other Information

Not
applicable.

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.

U.S.
  Neurosurgical, Inc.(Registrant)Date: May
  12, 2008
By :
/s/ Alan
  GoldAlan GoldDirector,
  President andChief
  Executive OfficerandPrincipal
  Financial Officerof the
  Registrant15