|SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549
      FORM 10-Q
      QUARTERLY REPORT UNDER SECTION 13 OR 15(D)OF THE SECURITIES EXCHANGE ACT OF 1934
|---------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                               

|For Quarter Ended | Commission file number
|----------------- | ----------------------
|March 31, 2005    | 0-15586               
|                  |                       

|U.S. NEUROSURGICAL, INC.(Exact name of Registrant as specified in its charter)
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|                                                                              

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

|2400 Research Blvd, Suite 325, Rockville, Maryland 20850(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (301) 208-8998
Not Applicable(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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 the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             |  |                           
|---------------------------- |  | --------------------------
|Class                        |  | Outstanding at May 3, 2005
|                             |  |                           
|Common Stock, $.01 par value |  | 7,697,185 Shares          

|
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|PART IFINANCIAL INFORMATIONU.S. NEUROSURGICAL, INC. AND SUBSIDIARYCONSOLIDATED BALANCE SHEETS
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|                                                                                                |   |            |   |  
|----------------------------------------------------------------------------------------------- | - | ---------- | - | -
|
|                                                                                                |   |            |   |  
|Current assets:                                                                                 |   |            |   |  
|Cash and cash equivalents                                                                       | $ | 566,000    |   | $
|Accounts receivable (net of allowance for doubtful
        accounts $36,000 in 2005 and 2004)   |   | 368,000    |   |  
|Accounts receivable-stockholder                                                                 |   | 28,000     |   |  
|Other current assets                                                                            |   | 154,000    |   |  
|                                                                                                |   |            |   |  
|Total current assets                                                                            | $ | 1,116,000  |   | $
|                                                                                                |   |            |   |  
|                                                                                               
|Gamma Knife (net of accumulated depreciation of
     $3,226,000 in 2005 and $7,147,000 in 2004) |   | 3,441,000  |   |  
|Leasehold improvements (net of accumulated                                                     
|amortization of $1,560,000 in 2005 and $1,545,000 in 2004)                                      |   | 482,000    |   |  
|                                                                                                |   |            |   |  
|Total property and equipment                                                                    |   | 3,923,000  |   |  
|                                                                                                |   |            |   |  
|                                                                                                |   |            |   |  
|Progree payments  RMC Gamma Knife                                                              |   |           |   |  
|Deferred tax asset                                                                              |   | 180,000    |   |  
|Cash held in escrow                                                                             |   | 106,000    |   |  
|                                                                                                |   |            |   |  
|                                                                                                |   |            |   |  
|TOTAL                                                                                           | $ | 5,325,000  |   | $
|                                                                                                |   |            |   |  
|                                                                                                |   |           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                            |   |            |   |  
|                                                                                                |   |            |   |  
|Current liabilities:                                                                            |   |            |   |  
|Accounts payable and accrued expenses                                                           | $ | 294,000    |   | $
|Obligations under capital lease
      and loans payable- current portion                        |   | 569,000    |   |  
|Due to stockholder                                                                              |   | 300,000    |   |  
|Deferred tax liability                                                                          |   | 240,000    |   |  
|Other current liabilities                                                                       |   | 39,000     |   |  
|                                                                                                |   |            |   |  
|Total current liabilities                                                                       |   | 1,442,000  |   |  
|                                                                                               
|Obligations under capital lease and loans payable-net                                          
|of current portion                                                                              |   | 2,370,000  |   |  
|Asset retirement obligations                                                                    |   | 200,000    |   |  
|                                                                                                |   |            |   |  
|                                                                                                |   | 4,012,000  |   |  
|                                                                                                |   |            |   |  
|                                                                                               
|Stockholders equity:                                                                           |   |            |   |  
|Common stock                                                                                    |   | 77,000     |   |  
|Additional paid-in capital                                                                      |   | 2,797,000  |   |  
|Accumulated deficit                                                                             |   | (1,561,000 | ) |  
|Total stockholders equity                                                                      | $ | 1,313,000  |   | $
|                                                                                                |   |            |   |  
|                                                                                                |   |            |   |  
|TOTAL                                                                                           | $ | 5,325,000  |   | $
|                                                                                                |   |            |   |  
|                                                                                                |   |            |   |  
|The accompanying notes to financial statements are an integral part hereof.                    

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|U.S. NEUROSURGICAL, INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF OPERATIONS
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|                                                   |   |          
|-------------------------------------------------- | - | ---------
|
|
|
|                                                   |   |          
|                                                   |   |          
|Revenue:                                           |   |          
|Patient Revenue                                    | $ | 476,000  
|                                                   |   |          
|                                                   |   |          
|Expenses:                                          |   |          
|Patient Expenses                                   |   | 207,000  
|Selling General and Administrative                 |   | 388,000  
|                                                   |   |          
|Total                                              |   | 595,000  
|                                                   |   |          
|                                                   |   |          
|Operating (Loss) income                            | $ | (119,000 
|                                                   |   |          
|Interest expense                                   |   | (34,000  
|Interest income                                    |   | 2,000    
|Other Income                                       |   |         
|                                                   |   |          
|                                                   |   |          
|(Loss) Income before income taxes                  |   | (151,000 
|Income tax provision                               |   |         
|                                                   |   |          
|                                                   |   |          
|Net (Loss) income                                  |   | (151,000 
|                                                   |   |          
|                                                   |   |          
|Proforma basic and diluted (loss) income per share | $ | (.02     
|                                                   |   |          
|                                                   |   |          
|Proforma weighted average shares outstanding       |   | 7,697,185

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

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|U.S. NEUROSURGICAL, INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH FLOWS
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|                                                                            

|                                                                                                              |  |                                  
|------------------------------------------------------------------------------------------------------------- |  | ---------------------------------
|                                                                                                              |  | Three Months Ended
      March 31
|                                                                                                              |  |                                  
|                                                                                                              |  | 2005                             
|                                                                                                              |  |                                  
|Cash flows from operating activities:                                                                         |  |                                  
|(Loss) income from continuing operations                                                                      |  | $                                
|Adjustments to reconcile net (loss) income to net cash (used in)
           provided by operating activities: |  |                                  
|Depreciation and amortization:                                                                                |  |                                  
|Changes in operating assets and liabilities:                                                                  |  |                                  
|Decrease (increase) in receivables                                                                            |  |                                  
|Decrease (increase) in other current assets                                                                   |  |                                  
|Increase in deferred tax asset                                                                                |  |                                  
|Increase in payables and other current liabilities
                          and deferred tax liability       |  |                                  
|                                                                                                              |  |                                  
|Net cash provided by (used in) operating activities                                                           |  |                                  
|                                                                                                              |  |                                  
|                                                                                                              |  |                                  
|Cash flows from investing activities:                                                                         |  |                                  
|RMC Gamma Knife                                                                                               |  |                                  
|Progress payments  RMC Gamma Knife                                                                           |  |                                  
|Decrease in cash held in escrow                                                                               |  |                                  
|                                                                                                              |  |                                  
|Net cash (used in) provided by investing activities                                                           |  |                                  
|                                                                                                              |  |                                  
|Cash flows from financing activities:                                                                         |  |                                  
|Cash received on financing of equipment                                                                       |  |                                  
|Payment of capital lease obligations                                                                          |  |                                  
|                                                                                                              |  |                                  
|Net cash provided by (used in) financing activities                                                           |  |                                  
|                                                                                                              |  |                                  
|Net increase (decrease) in cash and cash equivalents                                                          |  |                                  
|                                                                                                              |  |                                  
|CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                                               |  |                                  
|                                                                                                              |  |                                  
|                                                                                                              |  |                                  
|CASH AND CASH EQUIVALENTS - END OF PERIOD                                                                     |  | $                                
|                                                                                                              |  |                                  
|                                                                                                              |  |                                  
|Supplemental disclosures of cash flow information:                                                            |  |                                  
|Cash paid for                                                                                                 |  |                                  
|Interest                                                                                                      |  | $                                
|Taxes                                                                                                         |  |                                  
|                                                                                                              |  |                                  

|                                                                           
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|The accompanying notes to financial statements are an integral part hereof.
|4                                                                          



|U.S. NEUROSURGICAL, INC. AND SUBSIDIARIESNOTES TO FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Note A - Basis of Preparation
The
accompanying financial statements at March 31, 2005, and for the three months ended March 31, 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-Q, the accompanying financial statements and these 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.

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|U.S. NEUROSURGICAL, INC. AND SUBSIDIARYMANAGEMENT DISCUSSION ANDANALYSIS OF OPERATIONSAND FINANCIAL CONDITION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|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 on January 28, 2005, and March 22, 2005
with respect to Note D, 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.
First Quarter 2005 Compared to First Quarter 2004
Results of Operations
Patient revenue decreased 10% to $476,000 in the quarter ended March 31, 2005 from $529,000 for the
quarter ended March 31, 2004. The decrease was due to closure of the RMC Center in March for a Gamma
Knife upgrade. Patient expenses increased 20% to $207,000 from $172,000 in the year ago period. The
increase was due to increased depreciation. Selling, general and administrative expense increased
5% to $388,000 from $371,000 for the quarter ended March 31, 2005. Interest expense increased to
$34,000 from $9,000 in the same period a year earlier. The increase was due to increased progress
payments on the RMC Gamma Knife. For the quarter ended March 31 2005, the net loss was $151,000 as
compared to income of $33,000 for the same period a year earlier. The decrease in net income is largely
attributable to the decreased revenues from RMC.
Liquidity and Capital Resources
At March 31, 2005 the Company had a working capital deficit of $326,000 as compared to a surplus of
$86,000 at December 31, 2004. Cash and cash equivalents at March 31, 2005 were $566,000 as compared
with $511,000 at December 31, 2004.
Net cash provided by operating activities was $355,000 as compared to net cash used of $51,000 for
the same period, a year earlier. Net loss was $151,000 as compared to

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|income of $33,000 in the same period, a year earlier. Depreciation and amortization was $141,000 for
the quarter ended March 31, 2005 as compared to $121,000 in the same period, one year earlier. The
increase was a result of the increased depreciation at the RMC center. There was a decrease in receivables
of $65,000 as compared to an increase of $150,000 in the same period in 2004. The receivable due
from NYU, which can vary significantly from period to period, decreased in the most recent quarter.
Payables increased $255,000 compared to an increase of $54,000 in 2004. The increase was due to costs
associated with the new RMC Gamma Knife.
The RMC installation was completed in March 2005. The cost was $2,601,000. Net cash provided
by financing activities was $1,019,000 as compared to net cash used of $188,000 for the same period
a year earlier. This is due to the new lease that was incurred as part of the Gamma Knife installation
at RMC.
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 USN 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.
USN 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. USN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.
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|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, USN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 USNs plans, strategies and intentions.
ITEM 4. CONTROLS AND PROCEDURES
U.S. Neurosurgical management, including the President and the Chief Financial 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
the Chief Financial 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 the Chief Financial Officer completed their evaluation.
PART II                                 OTHER
INFORMATION
Item 6.    Exhibits and Reports on Form 8-K
(a) None
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|SIGNATURES
|----------

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

|     |              |                                                                                            
|---- | ------------ | -------------------------------------------------------------------------------------------
|     |              | U.S. Neurosurgical, Inc.                                                                   
|     |              |                                                                                            
|     |              |                                                                                            
|Date | May 12, 2005 | By                                                                                         
|     |              |                                                                                            
|     |              | Alan Gold
           Director and President 
           Chief Executive 
           Officer
|     |              |                                                                                            
|     |              |                                                                                            
|Date | May 12, 2005 | By                                                                                         
|     |              |                                                                                            
|     |              | Howard Grunfeld
           Vice President of Finance                                       

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