UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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


For
the quarterly period ended September 30, 2009


or


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


For the
transition period
from                     to                     .





Commission
file number:  0-15586





U.S.
Neurosurgical, Inc.


(Exact
name of registrant as specified in its charter)





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








2400
Research Blvd, Suite 325, Rockville, Maryland 20850


(Address
of principal executive offices)





(301)
208-8998


(Registrant's
telephone number)





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 Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.   Yes T    No £





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


Large
      accelerated filer £
              
              Accelerated
      filer £Non-accelerated
      filer £
              
              Smaller
      reporting company T


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





The
number of shares of the registrant’s common stock, $0.01 par value, outstanding
as of September 30, 2009 was 7,697,185.




1




TABLEOF CONTENTS








PART I - FINANCIAL INFORMATION
            3Item 1.  Financial Statements
            3Item 2.  Management Discussion and Analysis of
      Financial Condition and Results of Operations.
            10Item 3.  Quantitative and Qualitative Disclosures
      About Market Risk.
            13Item 4T.  Controls and Procedures
            13PART II - OTHER INFORMATION
            16Item 1.  Legal Proceedings
            16Item 2.  Unregistered Sales of Equity Securities and
      Use of Proceeds
            16Item 3.  Defaults Upon Senior
      Securities
            16Item 4.  Submission of Matters to a Vote of Security
      Holders
            16Item 5.  Other Information
            17Item 6.  Exhibits
            17SIGNATURES
            18





2
 Table of Contents





PART I -
FINANCIAL INFORMATION





Item 1.  Financial Statements





U.S.
NEUROSURGICAL, INC. AND SUBSIDIARY


CONSOLIDATED
BALANCE SHEETS





September
      30,
            
            
            December
      31,2009
            
            
            2008ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            563,000
            
            
            $
            605,000Accounts
      receivable (net of allowance for doubtful accounts of $36,000 in 2009 and
      2008)
            
            
            398,000
            
            
            
            4,000Accounts
      receivable-stockholder
            
            
            51,000
            
            
            
            44,000Other
      current assets
            
            
            44,000
            
            
            
            42,000Total
      current assets
            
            $
            1,056,000
            
            
            $
            695,000Gamma
      Knife (net of accumulated depreciation of $1,908,000 in 2009 and
      $5,780,000 in 2008)
            
            
            3,900,000
            
            
            
            1,220,000Leasehold
      improvements (net of accumulated amortization of $716,000 in 2009 and
      $1,812,000 in 2008)
            
            
            307,000
            
            
            
            230,000Total
      property and equipment
            
            
            4,207,000
            
            
            
            1,450,000Cash
      held in escrow
            
            
            52,000
            
            
            
            52,000TOTAL
            
            $
            5,315,000
            
            
            $
            2,197,000LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
            
            $
            105,000
            
            
            $
            56,000Obligations
      under capital lease and loans payable- current portion
            
            
            872,000
            
            
            
            475,000Total
      current liabilities
            
            
            977,000
            
            
            
            531,000Obligations
      under capital lease and loans payable-net of current
    portion
            
            
            3,277,000
            
            
            
            701,000Asset
      retirement obligations
            
            
            200,000
            
            
            
            200,000Total
      liabilities
            
            
            4,454,000
            
            
            
            1,432,000Stockholders’
      equity:Common
      stock
            
            
            77,000
            
            
            
            77,000Additional
      paid-in capital
            
            
            3,097,000
            
            
            
            3,097,000Accumulated
      deficit
            
            
            (2,313,000
            )
            
            
            (2,409,000
            )Total
      stockholders’ equity
            
            $
            861,000
            
            
            $
            765,000TOTAL
            
            $
            5,315,000
            
            
            $
            2,197,000





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





3
 Table of Contents





U.S.
NEUROSURGICAL, INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF OPERATIONS





Three
      Months EndedSeptember
      30,2009
            
            
            2008Revenue:Patient
      revenue
            
            $
            657,000
            
            
            $
            497,000Expenses:Patient
      expenses
            
            
            261,000
            
            
            
            148,000Selling,
      general and administrative
            
            
            239,000
            
            
            
            239,000Total
            
            
            500,000
            
            
            
            387,000Operating
      income
            
            
            157,000
            
            
            
            110,000Interest
      expense
            
            
            (117,000
            )
            
            
            (31,000
            )Interest
      income
            
            
            -
            
            
            
            3,000Net
      income
            
            $
            40,000
            
            
            $
            82,000Basic
      and diluted income (loss) per share
            
            $
            0.01
            
            
            $
            0.01Weighted
      average shares outstanding
            
            
            7,697,185
            
            
            
            7,697,185





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





4
 Table of Contents




U.S.
NEUROSURGICAL, INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF OPERATIONS





Nine
      Months EndedSeptember
      30,2009
            
            
            2008Revenue:Patient
      revenue
            
            $
            1,715,000
            
            
            $
            1,422,000Expenses:Patient
      expenses
            
            
            651,000
            
            
            
            525,000Selling,
      general and administrative
            
            
            713,000
            
            
            
            745,000Total
            
            
            1,364,000
            
            
            
            1,270,000Operating
      income
            
            
            351,000
            
            
            
            152,000Interest
      expense
            
            
            (260,000
            )
            
            
            (99,000
            )Interest
      income
            
            
            5,000
            
            
            
            9,000Net
      income
            
            $
            96,000
            
            
            $
            62,000Basic
      and diluted (loss) income per share
            
            $
            0.01
            
            
            $
            0.01Weighted
      average shares outstanding
            
            
            7,697,185
            
            
            
            7,697,185





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





5
 Table of Contents





U.S.
NEUROSURGICAL, INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Nine
      Months EndedSeptember
      30,2009
            
            
            2008Cash
      flows from operating activities:Income
      (loss) from continuing operations
            
            $
            96,000
            
            
            $
            62,000Adjustments
      to reconcile net income to net cash (used in) provided by operating
      activities:Depreciation
      and amortization
            
            
            559,000
            
            
            
            452,000Changes
      in:Accounts
      receivable
            
            
            (401,000
            )
            
            
            29,000Other
      current assets
            
            
            (2,000
            )
            
            
            (10,000
            )Accounts
      payable and accrued expenses
            
            
            49,000
            
            
            
            11,000Net
      cash provided by operating activities
            
            
            301,000
            
            
            
            544,000Cash
      flows from financing activities:Net
      repayment of capital lease obligations and loans payable
            
            $
            (343,000
            )
            
            
            (323,000
            )Net
      cash used in financing activities
            
            
            (343,000
            )
            
            
            (323,000
            )Net
      increase (decrease) in cash and cash equivalents
            
            $
            (42,000
            )
            
            $
            221,000Cash
      and cash equivalents - beginning of period
            
            $
            605,000
            
            
            $
            372,000CASH
      AND CASH EQUIVALENTS - END OF PERIOD
            
            $
            563,000
            
            
            $
            593,000Supplemental
      disclosures of cash flow information:Cash
      paid forInterest
            
            $
            260,000
            
            
            $
            99,000Supplemental
      disclosure of noncash investing and financing activitiesEquipment
      acquired through a capital lease
            
            $
            3,315,000
            
            
            $
            -





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





6
 Table of Contents





U.S.
NEUROSURGICAL, INC. AND SUBSIDIARIES


NOTES
TO FINANCIAL STATEMENTS








Note A - Basis of
Preparation





The
accompanying financial statements at September 30, 2009, and for the three and
nine month periods ended September 30, 2009 and 2008, 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, 2008 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
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





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.  This lawsuit arose out of USN’s 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 sought to recover amounts representing such
underpayments.





On July
3, 2008, following the trial at the Circuit Court, the jury found in favor of
USN and assessed damages at $1,919,124.  The Circuit Court ordered
that judgment be entered in favor of the Company in that amount.  The
defendant’s request for a new trial was denied, and the defendant has appealed
the verdict.  With this appeal pending, the prospects for payment of
any amounts to the Company remain uncertain.





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 the extent to which USN will benefit through
this lawsuit with respect to prior periods.





7
 Table of Contents





Although
patients continue to be treated in Kansas City, it is not clear how the
presence, or the ultimate outcome, 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 RMC’s performance under
their agreement, and thus USN intends to pursue its rights aggressively in an
effort to protect that business.





Due
largely to decreased patient procedures in recent periods at the Kansas City
center, the Company recently experienced operating losses which have contributed
to a substantial reduction in its working capital.  The Company
experienced net after tax losses of $335,000 for the year ended December 31,
2007, but did return to breakeven for the year ended 2008.





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.  The Company had a working capital surplus of $79,000
at September 30, 2009, as compared to a working capital surplus of $164,000 at
December 31, 2008.  This reduction in working capital was largely due
to the increased current obligation relating to the capital lease financing that
was recently arranged for the new Gamma Knife at the New York
center.  The Company reported a net loss of $33,000 for the first
three months of 2009.  This loss, however, was primarily due to the
fact that the NYU Center was shut down for approximately six weeks during the
first quarter to accommodate the installation of new equipment at that center.
For the first nine months of 2009, the Company reported net income of
$96,000.  With the efficiencies introduced, the Company hopes that
profitability will continue to improve, but future losses are still possible,
particularly in view of uncertainties at the Kansas City location described
above.








Note C – The New Southern
California Regional Gamma Knife Center





During
2007, the Company managed the formation of the Southern California Regional
Gamma Knife center at San Antonio Community Hospital (“SACH”) in Upland,
California.  The Company will 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 SACH to renovate space in the hospital and install and operate a
Leksell Perfexion Gamma Knife.  CGK leased the Gamma Knife from
Neuropartners LLC, which purchased the Gamma Knife equipment.  USNC is
a 27% owner of CGK and a 20% owner of Neuropartners LLC.  In addition,
USNC will receive fees for management services relating to the
facility.





Construction
of the SACH Gamma Knife center was completed in December 2008 and the first
patient was treated in January of 2009 and operations are continuing as planned
and at a level sufficient to make the necessary financing payments, meet other
obligations and support the growth of the center.  The project has
been funded principally by outside investors, and USN’s investment to date in
the SACH center has been minimal.





8
 Table of Contents





Note D –New Gamma Knife at
NYU Medical Center





The
Company installed a new Leksell Gamma Knife, the PERFEXION model, at the NYU
Medical Center in March 2009 in replacement of the older Gamma Knife equipment
at that location.  The net cost to the Company of the new machine was
$3,200,000 after a credit for the trade-in of the older machine.  The
purchase price was financed through a capital lease with Elekta
Capital.  The Company incurred construction costs to date of $115,000
in connection with the installation of the equipment and the upgrades to the
facility.  The Company expects to pay $137,000 in additional
construction costs which will be capitalized into the lease.  In
connection with this upgrade, the Company modified its arrangement with NYU to
extend the term for 12 years from March 2009.  The Company is
responsible under the lease agreement with Elekta Capital for 81 months of lease
payments which began in July 2009 of approximately $61,000 per
month.





9
 Table of Contents





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





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 2008 Annual Report on Form 10-K, 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
thereto appearing elsewhere herein.








Results of
Operation





Three
Months Ended September 30, 2009 Compared to Three Months Ended September 30,
2008





Patient
revenue increased 32% to $657,000 in the quarter ended September 30, 2009 from
$497,000 for the quarter ended September 30, 2008.  This increase in
patient revenue was largely due to increased volume at the New York center
following the reopening of the center with the new PERFEXION Gamma Knife,
resulting in an increase in the number of procedures performed at the Company’s
New York center during the third quarter of 2009 as compared to the same period
a year ago.  Revenue was also higher due to the higher reimbursement
per procedure negotiated in connection with the extension of the contract with
NYU.  Patient expenses increased 76% to $261,000 for the third quarter
of 2009 compared to $148,000 in the same period a year ago.  Patient
expenses do not vary materially with the number of procedures performed, but are
tied to depreciation, maintenance and other fixed expenses.  The
increase experienced in this quarter over the comparable period in 2008 was due
largely to increased depreciation costs following the installation of the new
equipment at the New York center.





Selling,
general and administrative expense of $239,000 was equal to that in the
comparable period in 2008.  Interest expense increased 277% to
$117,000 from $31,000 in the same period a year earlier.  This
increase was due to the significant increase in capital lease obligations
resulting from the financing of the new Gamma Knife at the Company’s New York
center.  (The Company had no lease expense for the same period in
2008.)  These expenses are expected to remain at this higher level, at
least until the termination of the lease arrangement at the Kansas City
center.  For the quarter ended September 30, 2009, the Company
reported net income of $40,000 as compared to $82,000 for the same period a year
earlier.  This decrease resulted primarily from the increased
depreciation expenses at the New York center as described above.





10
 Table of Contents





Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30,
2008





Patient
revenue increased 21% to $1,715,000 in the nine months ended September 30, 2009
from $1,422,000 for the nine months ended September 30, 2008.  This
increase in patient revenue was largely due to increased volume at the New York
center following the reopening of the center with the new PERFEXION Gamma Knife,
resulting in an increase in the number of procedures performed at the Company’s
New York center during the first nine months of 2009 as compared to the same
period a year ago.  Revenue was also higher due to the higher
reimbursement per procedure negotiated in connection with the extension of the
contract with NYU.  This increase was offset to a significant degree
due to the fact that the New York center was shut down for approximately six
weeks during the first quarter of 2009 to allow for the installation of the new
Gamma Knife at that location, which resulted in reduced procedures at that
location in that period .  Patient expenses increased 24% to $651,000
for the nine months of 2009 compared to $525,000 in the same period a year
ago.  Patient expenses do not vary materially with the number of
procedures performed, but are tied to depreciation, maintenance and other fixed
expenses.





Selling,
general and administrative expense decreased 4% to $713,000 for the nine months
ended September 30, 2009 from $745,000 in the comparable period in
2008.  Interest expense increased 163% to $260,000 from $99,000 in the
same period a year earlier.  This increase was due to the significant
increase in capital lease obligations resulting from the financing of the new
Gamma Knife at the Company’s New York center that impacted results for the first
time in the second quarter of 2009.  (The Company had no lease expense
for the same period in 2008.)  These expenses are expected to remain
at this higher level, at least until the termination of the lease arrangement at
the Kansas City center.  For the nine months ended September 30, 2009,
the Company reported net income of $96,000 as compared to $62,000 for the same
period a year earlier.  This improvement resulted primarily from the
increased revenue at the New York center following its March reopening with the
new Gamma Knife as described above.








Liquidity and Capital
Resources





At
September 30, 2009 the Company had working capital of $79,000 as compared to
$164,000 at December 31, 2008.  This reduction in working capital was
primarily due to the current obligation that was generated in connection with
the capital lease financing established during the first nine months of 2009 for
the new Gamma Knife at the New York center.  Cash and cash equivalents
at September 30, 2009 were $563,000 as compared with $605,000 at December 31,
2008.





Net cash
provided by operating activities for the nine months ended September 30, 2009
was $301,000 as compared to the $544,000 that was provided by operating
activities for the same period a year earlier.  Depreciation and
amortization was $559,000 for the nine months ended September 30, 2009, as
compared with $452,000 the first nine months of 2008.





11
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The
Company paid $343,000 towards its capital lease obligations during the nine
months ended September 30, 2009 as compared to $323,000 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-K for the fiscal
year ended December 31, 2008, 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 loss of $335,000 for the year ended December 31, 2007, but did return to
breakeven for the year ended 2008.  The Company reported net loss of
$33,000 for the first three months of 2009, but was profitable for the first
nine months of 2009 with net income of $96,000.  The loss in the first
quarter was primarily due to the fact that the NYU Center was shut down for
approximately six weeks during the first quarter to accommodate the installation
of new equipment at that center.





While the
Company is taking steps to improve long term profitability, it is possible that
the Company will experience material 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 were to return, 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 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.





12
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The
Company operates in a highly competitive and rapidly changing environment and in
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.  Quantitative and Qualitative Disclosures About
Market Risk.





Not
applicable.








Item 4T.  Controls and Procedures





Evaluation of Disclosure
Controls and Procedures





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





13
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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.





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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.





Changes in Internal Control
over Financial Reporting





As
described in Item 9A(T) of our Form 10-K for the fiscal year ended December 31,
2008, management has identified the following material weakness in the Company’s
internal control over financial reporting as of December 31,
2008:  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.  This material
weakness contributed to control deficiencies, as well as audit adjustments to
the 2008 annual consolidated financial statements in the financial reporting and
close process.  As described in Item 9A(T) of our Form 10-K for the
fiscal year ended December 31, 2008, management has taken 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, 2008 that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.





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 Table of Contents





PARTII -
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.  This lawsuit arose out of USN’s 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 sought to recover amounts representing such
underpayments.





On July
3, 2008, following the trial at the Circuit Court, the jury found in favor of
USN and assessed damages at $1,919,124.  The Circuit Court ordered
that judgment be entered in favor of the Company in that amount.  The
defendant’s request for a new trial was denied, and the defendant has appealed
the verdict.  With this appeal pending, the prospects for payment of
any amounts to the Company remain uncertain.





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 the extent to which USN will benefit through
this lawsuit with respect to prior periods.





Although
patients continue to be treated in Kansas City, it is not clear how the
presence, or the ultimate outcome, 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 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.





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Item 5.  Other Information





Not
applicable.








Item 6.  Exhibits





31.1    Rule 13a-14(a)/15d-14(a)
Certification


32.1    Section 1350
Certifications





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 Table of Contents





SIGNATURES





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








U.S.
      Neurosurgical, Inc.(Registrant)Date:  November
      13, 2009
            By
      :
            /s/ Alan GoldAlan
      GoldDirector,
      President and Chief
      Executive OfficerandPrincipal
      Financial Officer of
      the Registrant




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