U.S. NeuroSurgical Holdings, Inc. - Quarter Report: 2010 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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T
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2010
or
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£
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
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For the transition period from to .
Commission file number: 0-15586
U.S. Neurosurgical, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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52-1842411
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(State of other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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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.
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Large accelerated filer £
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Accelerated filer £
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Non-accelerated filer £
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Smaller reporting company T
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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, 2010 was 7,747,185.
TABLE OF CONTENTS
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3
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Item 1.
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3
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Item 2.
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9
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Item 3.
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13
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Item 4T.
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13
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15
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Item 1.
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15
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Item 2.
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15
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Item 3.
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15
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Item 4.
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15
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Item 5.
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15
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Item 6.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
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September 30,
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December 31,
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2010
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2009
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | 784,000 | $ | 673,000 | ||||
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Accounts receivable (net of allowance for doubtful accounts of $36,000 in 2010 and 2009)
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376,000 | 280,000 | ||||||
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Other current assets
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90,000 | 57,000 | ||||||
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Total current assets
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$ | 1,250,000 | $ | 1,010,000 | ||||
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Investment in unconsolidated entities
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240,000 | - | ||||||
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Gamma Knife (net of accumulated depreciation of $2,729,000 in 2010 and $2,108,000 in 2009)
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3,072,000 | 3,693,000 | ||||||
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Leasehold improvements (net of accumulated amortization of $789,000 in 2010 and $730,000 in 2009)
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383,000 | 293,000 | ||||||
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Total property and equipment
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3,455,000 | 3,986,000 | ||||||
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Cash held in escrow
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51,000 | 52,000 | ||||||
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TOTAL
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$ | 4,996,000 | $ | 5,048,000 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable and accrued expenses
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$ | 145,000 | $ | 67,000 | ||||
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Obligations under capital lease and loans payable- current portion
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744,000 | 894,000 | ||||||
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Total current liabilities
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889,000 | 961,000 | ||||||
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Obligations under capital lease and loans payable-net of current portion
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2,685,000 | 3,048,000 | ||||||
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Asset retirement obligations
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200,000 | 200,000 | ||||||
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Total liabilities
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3,774,000 | 4,209,000 | ||||||
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Stockholders’ equity:
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Common stock
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77,000 | 77,000 | ||||||
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Additional paid-in capital
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3,099,000 | 3,099,000 | ||||||
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Accumulated deficit
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(1,954,000 | ) | (2,337,000 | ) | ||||
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Total stockholders’ equity
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$ | 1,222,000 | $ | 839,000 | ||||
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TOTAL
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$ | 4,996,000 | $ | 5,048,000 | ||||
The accompanying notes to financial statements are an integral part hereof.
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
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Three Months Ended
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September 30,
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2010
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2009
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Revenue:
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Patient revenue
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$ | 734,000 | $ | 657,000 | ||||
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Expenses:
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Patient expenses
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299,000 | 261,000 | ||||||
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Selling, general and administrative
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280,000 | 239,000 | ||||||
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Total
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579,000 | 500,000 | ||||||
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Operating income
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155,000 | 157,000 | ||||||
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Interest expense
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(101,000 | ) | (117,000 | ) | ||||
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Interest income
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1,000 | - | ||||||
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Net income
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$ | 55,000 | $ | 40,000 | ||||
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Proforma basic and diluted income per share
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$ | 0.01 | $ | 0.01 | ||||
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Proforma weighted average shares outstanding
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7,747,185 | 7,697,185 | ||||||
The accompanying notes to financial statements are an integral part hereof.
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
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Nine Months Ended
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September 30,
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2010
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2009
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Revenue:
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Patient revenue
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$ | 1,807,000 | $ | 1,715,000 | ||||
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Expenses:
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Patient expenses
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798,000 | 651,000 | ||||||
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Selling, general and administrative
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779,000 | 713,000 | ||||||
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Total
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1,577,000 | 1,364,000 | ||||||
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Operating income
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230,000 | 351,000 | ||||||
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Revenue from litigation activity
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459,000 | - | ||||||
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Interest expense
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(310,000 | ) | (260,000 | ) | ||||
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Interest income
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4,000 | 5,000 | ||||||
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Net income
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$ | 383,000 | $ | 96,000 | ||||
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Proforma basic and diluted income per share
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$ | 0.05 | $ | 0.01 | ||||
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Proforma weighted average shares outstanding
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7,747,185 | 7,697,185 | ||||||
The accompanying notes to financial statements are an integral part hereof.
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Nine Months Ended
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September 30,
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2010
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2009
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Cash flows from operating activities:
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Income (loss) from continuing operations
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$ | 383,000 | $ | 96,000 | ||||
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Adjustments to reconcile net income to net cash (used in) provided by operating activities:
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Depreciation and amortization
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682,000 | 559,000 | ||||||
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Changes in:
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Accounts receivable
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(96,000 | ) | (401,000 | ) | ||||
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Other current assets
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(73,000 | ) | (2,000 | ) | ||||
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Cash held in escrow
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1,000 | |||||||
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Accounts payable and accrued expenses
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78,000 | 49,000 | ||||||
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Net cash provided by operating activities
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975,000 | 301,000 | ||||||
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Cash flows from investing activities:
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Investment in unconsolidated entities
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(200,000 | ) | - | |||||
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Cash flows from financing activities:
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Repayment of capital lease obligations
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(664,000 | ) | (343,000 | ) | ||||
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Net increase in cash and cash equivalents
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111,000 | (42,000 | ) | |||||
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Cash and cash equivalents - beginning of period
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$ | 673,000 | $ | 605,000 | ||||
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CASH AND CASH EQUIVALENTS - END OF PERIOD
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$ | 784,000 | $ | 563,000 | ||||
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Supplemental disclosures of cash flow information:
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Cash paid for
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Interest
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$ | 310,000 | $ | 260,000 | ||||
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Supplemental disclosure of noncash investing and financing activities
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Equipment acquired through a capital lease
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$ | - | $ | 3,315,000 | ||||
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Leasehold improvements financed by a capital lease
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$ | 150,000 | $ | - | ||||
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Investment in an unconsolidated entity through a reduction of receivable from an unconsolidated entity
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$ | 40,000 | $ | - | ||||
The accompanying notes to financial statements are an integral part hereof.
U.S. NEUROSURGICAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note A - Basis of Preparation
The accompanying financial statements at September 30, 2010, and for the three and nine month periods ended September 30, 2010 and 2009, 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, 2009 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.
Certain reclassifications have been made to the prior year financial statements in order for them to be in conformity with the current year presentation. Such reclassifications had no effect on net income or total stockholders’ equity as previously reported.
Note B – Uncertainties
During 2007, U.S. Neurosurgical, Inc. (“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. On March 2, 2010, the decision in favor of USN was affirmed on appeal, but the award of damages was reduced substantially. The result was a net payment to USN, after costs of litigation, of $459,000.
Although patients continue to be treated in Kansas City, it is not clear how the outcome of the lawsuit will impact the Company’s working relationship with RMC in the longer term. 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.
Due largely to decreased patient procedures in recent periods at the Kansas City center, the Company has experienced operating losses at that center.
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 working capital of $601,000 at September 30, 2010, as compared to $49,000 at December 31, 2009. Overall, the Company reported net income of $55,000 for the third quarter of 2010. With the efficiencies introduced, and new equipment installed at the New York University center, the Company hopes that profitability will improve. However, future losses are still possible, particularly in view of uncertainties at the Kansas City location.
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. While USN has led the effort in organizing the business and overseeing the development and operation of the SACH center, its investment to date in the SACH center has been minimal.
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 $265,000 in connection with the installation of the equipment and the upgrades to the facility. 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. In addition, lease payments of $2,379 per month began in July 2010 and continue through June 2017 to cover construction costs.
Note E – Florida Oncology Partners
During the quarter ended September 30, 2010, the Company participated in the formation of Florida Oncology Partners, LLC (“FOP”). The Company’s wholly owned subsidiary, USN Corona, Inc owns a 20% interest in FOP and invested $200,000. The remaining 80% is owned by local Florida and other investors. FOP will own and operate a cancer center in West Kendall, Florida. The center will utilize a Varian Rapid Arc linear accelerator and a GE CT scanner. Plans are for the center to open during the first half of 2011.
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 the Notes to the Financial Statements, Note B, in our 2009 Annual Report on Form 10-K. 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, 2010 Compared to Three Months Ended September 30, 2009
Patient revenue increased 12% to $ 734,000 in the quarter ended September 30, 2010 from $ 657,000 for the quarter ended September 30, 2009. This increase in patient revenue was largely due to an increase in activity at the New York center. Patient expenses increased 15% to $299,000 for the third quarter of 2010 compared to $261,000 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 in patient expenses for the third quarter of 2010 was due to an increase in Gamma Knife maintenance at the New York center (due to the expiration in August of the warranty period for the new equipment) and an increase in depreciation.
Selling, general and administrative expense of $280,000 was 17% higher than the $239,000 incurred during the comparable period in 2009. The increase in SG&A expenses was partly due to an increase in audit fees and certain marketing expenses over the comparable period in 2009. For the quarter ended September 30, 2010, the Company reported net income of $55,000 as compared to net income of $40,000 for the same period a year earlier.
Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009
Patient revenue increased 5% to $1,807,000 in the nine months ended September 30, 2010 from $1,715,000 for the nine months ended September 30, 2009. This increase in patient revenue was due to increased volume at the New York center. This increase was offset to a significant degree due to the fact that the Kansas City center treated no patients during the months of January or May. Patient expenses increased 23% to $798,000 for the first nine months of 2010 compared to $651,000 in the same period a year ago. This increase is due to the depreciation of the New York Center’s new Gamma Knife. 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 increased 9% to $779,000 for the nine months ended September 30, 2010 from $713,000 in the comparable period in 2009. Interest expense increased 19% to $310,000 from $260,000 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 of operations for the first time in the second quarter of 2009. 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, 2010, the Company reported net income of $383,000 as compared to a net income of $96,000 for the same period a year earlier. This improvement resulted primarily from the damages award from the Kansas City litigation. See “Part II – Item 1. Legal Proceedings”. If not for that payment the Company would have realized a net loss of $76,000 for the first nine months of 2010 due largely to the fact that the Kansas City Center saw no patients for the months of January and May.
Liquidity and Capital Resources
At September 30, 2010, the Company had working capital of $601,000 as compared to $49,000 at December 31, 2009. This increase in working capital was the direct result of the Kansas City settlement payment. With the increased obligations in connection with the capital lease financing established during 2009 for the new Gamma Knife at the New York center, the Company must now operate at a higher level of revenues to maintain positive net income. Cash and cash equivalents at September 30, 2010 were $784,000 as compared with $673,000 at December 31, 2009.
Net cash provided by operating activities for the nine months ended September 30, 2010 was $975,000 as compared to the $301,000 that was used in operating activities for the same period a year earlier. Depreciation and amortization was $682,000 for the nine months ended September 30, 2010, as compared with $559,000 the first nine months of 2009.
Cash flow from investing activities (all representing investments in the Company’s unconsolidated entities) totaled $200,000 during the nine months ended September 30, 2010. During the third quarter, the Company participated the formation of Florida Oncology Partners, LLC (“FOP”). The Company’s wholly owned subsidiary, USN Corona, Inc owns a 20% interest in FOP and invested $200,000.
The Company paid $664,000 towards its capital lease obligations during the nine months ended September 30, 2010 as compared to $343,000 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, 2009, 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 profit of $72,000 for the year ended December 31, 2009, and a profit of $383,000 for the first nine months of 2010. This increase in profits in 2010 is solely due to the settlement payment from the lawsuit in Kansas City. Due to the reduced patients being seen at the Kansas City center, the Company would have incurred a loss of $76,000 during the first nine months of 2010 without that settlement payment. Moreover, with the increased obligations in connection with the capital lease financing established during 2009 for the new Gamma Knife at the New York center, the Company must now operate at a higher level of revenues to maintain positive net income.
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 that we will be able to raise such additional capital as and when required and on terms that will be acceptable.
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 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”).
Our management evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation (including an evaluation of the updated procedures described above) the Company’s Chief Executive Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report for the information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended, to be recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Changes in Internal Control over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
During 2007, USN instituted a lawsuit against Midwest Division – RMC LLC, in the Circuit Court of Jackson County, Missouri seeking damages against the defendant as successor to USN’s agreement with RMC relating to the Kansas City Gamma Knife center. 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. On March 2, 2010, the decision in favor of USN was affirmed on appeal, but the award of damages was reduced substantially. The result was a net payment to USN, after costs of litigation, of $459,000.
Although patients continue to be treated in Kansas City, it is not clear how the outcome of the lawsuit will impact the Company’s working relationship with RMC in the longer term. 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
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Rule 13a-14(a)/15d-14(a) Certification
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Section 1350 Certifications
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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.
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U.S. Neurosurgical, Inc.
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(Registrant)
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Date: November 15, 2010
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By :
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/s/ Alan Gold
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Alan Gold
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Director, President and
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Chief Executive Officer
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and
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Principal Financial Officer
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of the Registrant
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