UNITED
STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-QSB x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For
  the quarterly period ended March 31, 2006oro
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT For the transition
period from___________ to ___________. Commission file
number: 0-15586 U.S. Neurosurgical, Inc.(Exact name of small business issuer as specified in its
charter) Delaware

52-1842411(State of other
  jurisdiction of

(I.R.S. Employerincorporation or
  organization)

Identification No.) 2400
Research Blvd, Suite 325, Rockville, Maryland 20850(Address of principal executive offices) (301)
208-8998
(Issuers telephone number) Not
Applicable(Former name, former address and former fiscal year, if
changed since last report) Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.    Yes x 
  No o Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the ExchangeAct).
Yeso    Nox As of May 9, 2006, 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
     PART
1 - FINANCIAL INFORMATION 
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

March 31,

December
  31,2006

2005ASSETSCurrent assets:Cash and cash
  equivalents

$
428,000

$
422,000Accounts
  receivable (net of allowance for doubtful accounts of $36,000 in 2006 and
  2005)


204,000


280,000Accounts
  receivable-stockholder


97,000


79,000Other current
  assets


161,000


152,000Total current
  assets

$
890,000

$
933,000Gamma Knife (net
  of accumulated depreciation of $4,171,000 in 2006 and $3,987,000 in 2005)


2,829,000


2,982,000Leasehold
  improvements (net of accumulated amortization of $1,635,000 in 2006 and
  $1,641,000 in 2005)


376,000


400,000Total property
  and equipment


3,205,000


3,382,000Deferred tax
  asset


240,000


240,000Cash held in
  escrow


109,000


108,000TOTAL

$
4,444,000

$
4,663,000LIABILITIES
  AND STOCKHOLDERS EQUITYCurrent
  liabilities:Accounts
payable
  and accrued expenses

$
126,000

$
62,000Obligations
  under capital lease and loans payable- current portion


657,000


632,000Due to
  stockholder


300,000


300,000Deferred tax
  liability


154,000


190,000Total current
  liabilities


1,237,000


1,184,000Obligations
  under capital lease and loans payable-net of current portion


1,914,000


2,100,000Asset retirement
  obligations


200,000


200,000Total
  liabilities


3,351,000


3,484,000Stockholders
  equity:Common
stock


77,000


77,000Additional
  paid-in capital


2,797,000


2,797,000Accumulated
  deficit


(1,781,000
)

(1,695,000
)Total
  stockholders equity

$
1,093,000

$
1,179,000TOTAL

$
4,444,000

$
4,663,000The accompanying
notes to financial statements are an integral part hereof.

2

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

Three
  Months EndedMarch 31,2006

2005Revenue:Patient
revenue

$
506,000

$
476,000Expenses:Patient
expenses

$
216,000

$
207,000Selling,
general and administrative


358,000


388,000Total


574,000


595,000Loss from operations

$
(68,000
)
$
(119,000
)Interest expense

$
(59,000
)
$
(34,000
)Interest income


5,000


2,000Loss before income
taxes


(122,000
)

(151,000
)Income tax benefit


36,000


Net loss

$
(86,000
)
$
(151,000
)Proforma basic and diluted loss
per share


(0.01
)

(0.02
)Proforma weighted average
shares outstanding


7,697,185


7,697,185The
accompanying notes to financial statements are an integral part hereof.

3

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

Three Months Ended
  March 31,2006

2005Cash flows from operating
activities:Net
loss


(86,000
)
$
(151,000
)Adjustments to
reconcile net loss to net cash provided by operating
  activities:Depreciation
and amortization


177,000


141,000Deferred
income taxes


(36,000
)

Changes
in:Accounts
receivable


58,000


65,000Other current
assets


(9,000
)

45,000Accounts
payable and accrued expenses


64,000


255,000Net cash
provided by operating activities


168,000


355,000Cash flows from investing
activities:RMC Gamma
Knife





(2,601,000
)Progress
payments- RMC Gamma Knife





1,282,000Cash held in
escrow


(1,000
)

Net cash used
in investing activities


(1,000
)

(1,319,000
)Cash flows from financing
activities:Proceeds from
capital lease obligations and loans payable





1,089,000Repayment of
capital lease obligations and loans payable


(161,000
)

(70,000
)Net cash
provide by (used in) financing activities


(161,000
)

1,019,000Net increase in cash and cash
equivalents


6,000


55,000Cash and cash equivalents -
beginning of period


422,000


511,000Cash and cash equivalents -
end of period


428,000

$
566,000Supplemental disclosures of
cash flow information:Cash paid
forInterest


59,000

$
34,000The accompanying notes to financial statements are an integral part
hereof.

4

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

Note A -
Basis of Preparation

The
accompanying financial statements at March 31, 2006, and for the three months
ended March 31, 2006 and 2005, 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, 2005 has been derived from the audited financial statements at that date
appearing in the Companys Annual Report on Form 10-K.

Pursuant
to accounting requirements of the Securities and Exchange Commission applicable
to quarterly reports on Form 10-QSB, the accompanying financial statements and
notes do not include all disclosures required by accounting principles
generally accepted in the United States of America for complete financial statements.
Accordingly, these statements should be read in conjunction with the Companys
most recent annual financial statements.

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

5

Management
Discussion and Analysis of Financial Condition and Results of Operations

Critical
Accounting Policies

Our
condensed financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. As such, some
accounting policies have a significant impact on amounts reported in the
financial statements. A summary of those significant accounting policies can be
found in our 2005 Annual Report on Form 10-K, filed, in the Notes to the
Financial Statements, Note A. In particular, judgment is used in areas such as
determining the allowance for doubtful accounts, and asset impairments.

The
following discussion and analysis provides information which the Companys
management believes is relevant to an assessment and understanding of the
Companys results of operations and financial condition. This discussion should
be read in conjunction with the consolidated financial statements and notes
there to appearing elsewhere herein.

First Quarter 2006
Compared to First Quarter 2005

Patient
revenue increased 6% to $506,000 in the quarter ended March 31, 2006 from
$476,000 for the quarter ended March 31, 2005. The increase was due principally
to the fact that the RMC Gamma Knife was fully operational in the first quarter
of 2006, but was closed during a portion of the first quarter of 2005 in order
to accommodate the replacement of the Gamma Knife equipment at that time. Patient
expenses increased 4% to $216,000 for the quarter compared to $207,000 in the
same period a year ago. The increase was due to increased depreciation on the
gamma knives. Selling, general and administrative expense decreased 8% to
$358,000 for the quarter ended March 31, 2006 from $388,000 in the comparable
period a year ago. The decrease was due to decreases in professional fees for
the period in question. Interest expense increased to $59,000 from $34,000 in
the same period a year earlier. This was due to the new lease arrangements for
the RMC Gamma Knife. For the quarter ended March 31, 2006, the net loss was
$86,000 as compared to a loss of 151,000 for the same period a year earlier. This
decreased loss was due primarily to increased revenues and a decrease in
related costs of operations.

Liquidity and Capital
Resources

At
March 31, 2006 the Company had a working capital deficit of $347,000 as
compared to a working capital deficit of $251,000 at December 31, 2005. Cash
and cash equivalents at March 31, 2006 were $428,000 as compared with $422,000
at December 31, 2005.

Net
cash provided by operating activities for the three months ended March 31, 2006
was $168,000 as compared to $355,000 for the same period a year earlier. Depreciation
and amortization was $177,000 for the three months ended March 31, 2006 as
compared to $141,000 in the same period a year earlier.

6

During
the first quarter of 2005, the Company completed a replacement to the RMC Gamma
Knife. The cost was $2,601,000. The lease has payments of $46,600 for 72 months
at 8.8 percent. The $211,000 that was held in escrow at December 31, 2003 was
paid to US Bank Corp. and Elekta Instruments in March 2004. The reason for the
escrow was a lease that had been underfunded by DVI in August 2003. DVI filed
for protection under Chapter 11 of the U.S. Bankruptcy Code in August 2003. The
Company began making all lease payments into an escrow account and continued to
negotiate with the successor. The Company secured new financing from SMT
Leasing to pay off the obligations. The lease has payments of $23,000 for 36
months at 8.8 percent.

Net
cash used in financing activities for the three months ended March 31, 2006 was
$161,000 as compared to net cash provided by financing activities of $1,019,000
for the same period a year earlier. The Company paid $161,000 towards its lease
obligations as compared to $70,000 in the same period a year ago. We anticipate
that with our current cash position, and collection on our accounts receivable,
the Company believes that the cash position is sufficient for the next twelve
months.

Disclosure Regarding
Forward Looking Statements

The
Securities and Exchange Commission encourages companies to disclose
forward-looking information so that investors can better understand a companys
future prospects and make informed investment decisions. This document contains
such forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, particularly statements anticipating future
growth in revenues and cash flow. Words such as anticipates, estimates, expects,
projects, intends, plans, believes, will be, will continue,
will
likely result, and words and terms of similar substance used in connection
with any discussion of future operating or financial performance identify such
forward-looking statements. Those forward-looking statements are based on
managements present expectations about future events. As with any projection
or forecast, they are inherently susceptible to uncertainty and changes in
circumstances, and the Company is under no obligation to (and expressly
disclaims any 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.

7

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.

Market
risk represents the risk of loss that may impact the Companys financial
position due to adverse changes in financial market prices and rates. Market
risk exposure is primarily a result of fluctuations in interest rates. The
Company does not hold or issue financial instruments for trading purposes.

The
Company has exposure to market rate risk for changes in interest rates related
to the interest income on our cash, cash equivalents, and short-term
investments, but we believe that the impact of these fluctuations does not have
a material effect on our financial position due to the short-term nature of any
such investments. The obligations under the Companys capital lease and its
loans payable are based on fixed interest rates and thus the amounts due under
these instruments do not fluctuate with changes in market prices and rates.

8

Item 4. Controls
and Procedures

Management
of the Company, including the Chief Executive Officer, evaluated the
effectiveness of the design and operation of the Companys disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934) as of the end of the period covered by
this report. Based upon that evaluation, the Companys Chief Executive Officer
concluded that the Companys disclosure controls and procedures were effective
as of the end of the period covered by this report for the information required
to be disclosed by the Company in the reports it files or submits under the
Securities Exchange Act of 1934, as amended, to be recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms.

There
have not been any changes in the Companys internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter ended December 31, 2004 that have
materially affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting.

9

PART II
- OTHER INFORMATION

Item 6. Exhibits

31.1
Rule 13a-14(a)/15d-14(a) Certification32.1
Section 1350 Certifications10

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, 2006

By:
/s/ Alan GoldAlan
  GoldDirector,
  President andChief
  Executive OfficerandPrincipal
  Financial Officerof
  the Registrant11