U.S. NeuroSurgical Holdings, Inc. - Quarter Report: 2023 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2023

☐	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 Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware		47-5370333
(State or 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)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes ☒ No ☐

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
(do not check if a smaller reporting company)	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of June 30, 2023, was 7,892,185.

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PART I - FINANCIAL INFORMATION			3
	Item 1.	Financial Statements	3
	Item 2.	Management Discussion and Analysis of Financial Condition and Results of Operations.	16
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	18
	Item 4.	Controls and Procedures	19
PART II – OTHER INFORMATION			20
	Item 1.	Legal Proceedings	20
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
	Item 3.	Defaults Upon Senior Securities	20
	Item 4.	Submission of Matters to a Vote of Security Holders	21
	Item 5.	Other Information	21
	Item 6.	Exhibits	21
SIGNATURES			22

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2023			2022
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	776,000		$	1,537,000
Other current assets		30,000			18,000
Total current assets		806,000			1,555,000

Other assets:
Due from related parties		16,000			15,000
Investments in unconsolidated entities		185,000			157,000
Total other assets		201,000			172,000

Property and equipment:
Operating lease right-of-use asset		-			20,000
Total property and equipment		-			20,000

TOTAL ASSETS	$	1,007,000		$	1,747,000

LIABILITIES
Current liabilities:
Operating lease right-of-use liability - current portion	$	-		$	23,000
Accounts payable and accrued expenses		7,000			86,000
Income taxes payable		170,000			171,000
Total current liabilities		177,000			280,000

Guarantee liability		11,000			11,000
Total liabilities		188,000			291,000

EQUITY
Common stock - par value $0.01; 25,000,000 shares authorized; 7,892,185 and 7,842,185 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively.		79,000			78,000
Additional paid-in capital		2,871,000			2,871,000
Accumulated deficit		(2,252,000	)		(1,710,000	)
U.S. Neurosurgical Holdings, Inc. stockholders’ equity		698,000			1,239,000
Noncontrolling interests		121,000			217,000
Total stockholders’ equity		819,000			1,456,000

TOTAL LIABILITIES AND EQUITY	$	1,007,000		$	1,747,000

See accompanying notes to the consolidated financial statements

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended
	June 30,
	2023			2022


Revenue	$	-		$	-

Costs and expenses:
Selling, general and administrative		242,000			292,000

Total		242,000			292,000

Operating loss		(242,000	)		(292,000	)

Total other expense
Loss from investments in unconsolidated entities, net		(269,000	)		(998,000	)
Total other expense		(269,000	)		(998,000	)

Loss before income taxes		(511,000	)		(1,290,000	)

Provision for income taxes		-			1,000

Net (loss) income		(511,000	)		(1,291,000	)
Net loss attributable to noncontrolling interests		77,000			194,000
Net (loss) income attributable to U.S. Neurosurgical Holdings, Inc.	$	(434,000	)	$	(1,097,000	)

Basic and diluted net (loss) income per share attributable to U.S. NeuroSurgical Holdings, Inc.	$	(0.05	)	$	(0.14	)

Weighted average common shares outstanding, basic and diluted		7,892,185			7,792,185

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

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Six Months Ended
	June 30,
	2023			2022

Revenue	$	-		$	-

Costs and expenses:
Selling, general and administrative		371,000			652,000

Total		371,000			652,000

Operating loss		(371,000	)		(652,000	)

Total other expense
Loss from investments in unconsolidated entities, net		(267,000	)		(1,131,000	)
Total other expense		(267,000	)		(1,131,000	)

(Loss) income before income taxes		(638,000	)		(1,783,000	)

Provision for income taxes		-			3,000

Net (loss) income		(638,000	)		(1,786,000	)
Net loss attributable to noncontrolling interests		96,000			268,000
Net (loss) income attributable to U.S. Neurosurgical Holdings, Inc.	$	(542,000	)	$	(1,518,000	)

Basic and diluted net (loss) income per share attributable to U.S. NeuroSurgical Holdings, Inc.	$	(0.07	)	$	(0.19	)

Weighted average common shares outstanding, basic and diluted		7,892,185			7,792,185

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

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

	Common Stock									U.S.
	Number of				Additional Paid-In		(Accumulated Deficit)			Neurosurgical Holdings, Inc.			Noncontrolling			Total
	Shares		Amount		Capital		Retained Earnings			Equity			Interests			Equity

Balance - December 31, 2021		7,792,185	$	78,000	$	2,871,000	$	(373,000	)	$	2,576,000		$	452,000		$	3,028,000

Issuance of common stock as compensation		50,000		-		-		-			-			-			-

Net loss for the year ended ‘December 31, 2022		-		-		-		(1,337,000	)		(1,337,000	)		(235,000	)		(1,572,000	)
Balance - December 31, 2022		7,842,185	$	78,000	$	2,871,000	$	(1,710,000	)	$	1,239,000		$	217,000		$	1,456,000

Issuance of common stock as compensation		50,000	$	1,000		-		-			1,000			-			1,000

Net loss for the period ended June 30, 2023		-		-		-		(542,000	)		(542,000	)		(96,000	)		(638,000	)
Balance - June 30, 2023		7,892,185	$	79,000	$	2,871,000	$	(2,252,000	)	$	698,000		$	121,000		$	819,000

See accompanying notes to the consolidated financial statements

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	June 30, 2023
	2023			2022

Cash flows from operating activities:
Net loss	$	(638,000	)	$	(1,786,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of operating lease right-of-use asset		20,000			19,000
Loss from investments in unconsolidated entities, net		266,000			1,131,000
Distributed earnings from unconsolidated entities		23,000			11,000
Deferred income taxes		-			-
Changes in:
Income taxes payable		(1,000	)		(183,000	)
Other current assets		(12,000	)		8,000
Accounts payable and accrued expenses		(79,000	)		(86,000	)
Operating lease right-of-use liability		(22,000	)		(21,000	)
Net cash used in operating activities		(443,000	)		(907,000	)

Cash flows from investing activities:
Advances to unconsolidated entities		(305,000	)		(175,000	)
Repayments from loans to unconsolidated entities		44,000			-
Capital contributions to unconsolidated entities		(57,000	)		-
Net cash used in investing activities		(318,000	)		(175,000	)

Cash flows from financing activities:
Repayment of finance lease obligations		-			-
Net cash used in financing activities		-			-

Net change in cash and cash equivalents		(761,000	)		(1,082,000	)
Cash and cash equivalents - beginning of period		1,537,000			2,178,000
Cash and cash equivalents - end of period	$	776,000		$	1,096,000

Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	1,000		$	-
Income taxes	$	-		$	183,000

The accompanying notes to condensed consolidated financial statements are an integral part hereof

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A - Basis of Preparation

The accompanying Condensed Consolidated Financial Statements of U.S. NeuroSurgical Holdings, Inc. and Subsidiaries (the “Company”) as of June 30, 2023, and 2022, are unaudited. However, in the opinion of management, such statements include all adjustments necessary for a fair statement of the information presented therein. The Consolidated Balance Sheet at December 31, 2022, has been derived from the audited Consolidated Financial Statements at that date appearing in the Company’s Annual Report on Form 10-K. All amounts are shown in nearest thousands in the Consolidated Financial Statements and accompanying notes therein.

Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying Condensed Consolidated 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 Consolidated Financial Statements.

Consolidated results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. The only change to the Company’s equity in the six months ended June 30, 2023, and 2022 was net loss for the periods. The Company issued 50,000 shares of stock to a new Board Member in April 2023.

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation to noncontrolling interests in consolidated financial statements. The guidance requires noncontrolling interests to be reported as a component of equity separate from the parent’s equity and purchases and sales of equity interests, that do not result in a change in control, to be accounted for as equity transactions. In addition, net (loss) income attributable to noncontrolling interests are to be included in net (loss) income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value, with any gain or loss recognized in net (loss) income.

The Company recognizes revenue in accordance with two different accounting standards: 1) Topic 606 and 2) Accounting Standards Codification (“ASC”) Topic 842, Leases. However, the Company generated no revenue in 2022 or in the first six months of 2023.

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The tables below present financial information associated with our leases.

	Classification	June 30, 2023		June 30, 2022
Assets
Long-term
Operating lease assets	Operating lease right-of-use asset	$	-	$	40,000
Total leased assets		$	-	$	4,000

Liabilities
Current
Operating lease liabilities	Operating lease right-of-use liability - current portion	$	-	$	45,000

Long-term
Operating lease liabilities	Operating lease right-of-use liability - net of current portion	$	-	$	-
Total lease liabilities		$	-	$	45,000

Lease Cost
Operating lease cost	Selling, general and administrative	$	10,000	$	21,000

Finance lease cost
Interest on lease liabilities	Interest expense		-		-

Sublease income	Interest income - sales-type sublease		-		-
Net lease expense		$	10,000	$	21,000

Maturity of lease liabilities (as of June 30, 2023)	Operating lease
2023		-
Total	$	-
Less amount representing interest		-
Present value of lease liabilities	$	-
Discount rate		5.850	%

Note B – The Southern California Regional Gamma Knife Center

During 2007, the Company, through a noncontrolling interest in joint ventures, managed the formation of the Southern California Regional Gamma Knife Center at San Antonio Regional Hospital (“SARH”) in Upland, California. Corona Gamma Knife, LLC (“CGK”) is party to a 14-year agreement with SARH to renovate space in the hospital and install and operate a Leksell PERFEXION gamma knife. CGK leases the gamma knife from NeuroPartners LLC, which holds the gamma knife equipment. In addition to returns on its ownership interests, USNC expects to receive fees for management services relating to the facility.

USNC is a 20% owner of NeuroPartners LLC and owns 39% of CGK.

Construction of the SARH gamma knife center was completed in December 2008 and the first patient was treated in January 2009. The project has been funded principally by outside investors. While the Company, through its joint ventures, has led the effort in organizing the business and overseeing the development and operation of the SARH center, its investment to date in the SARH center has been minimal.

At June 30, 2023, and December 31, 2022, the Company had no recorded investment of NeuroPartners LLC and CGK. For the six months ended June 30, 2023, and 2022, the Company’s equity in loss of NeuroPartners LLC and CGK was $63,000 and $5,000, respectively, but was not recorded due to prior losses, resulting in no recorded investment at June 30, 2023, and December 31, 2022. At June 30, 2023, and December 31, 2022, amounts due from related parties was $0 and $47,000, respectively.

The SARH gamma knife center treated its last patients during the second quarter of 2023, and the Company is currently in negotiations with the hospital center and a removal company for the removal of the equipment from the SARH center. It is estimated it will cost approximately $600,000.

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The following tables present the aggregation of summarized financial information of NeuroPartners LLC and CGK:

NeuroPartners LLC and CGK Condensed Combined Income Statement Information

	Six Months Ended
	June 30,
	2023			2022

Patient revenue	$	136,000		$	170,000

Net loss	$	(75,000	)	$	8,000

USNC’s equity in (loss) earnings of NeuroPartners LLC and CGK	$	(63,000	)	$	(5,000	)

	Three Months Ended
	June 30,
	2023			2022

Patient Revenue	$	40,000		$	277,000

Net loss	$	(38,000	)	$	(27,000	)

USNC’s equity in earnings of NeuroPartners, LLC and CGK	$	(37,000	)	$	(28,000	)

NeuroPartners LLC and CGK Condensed Combined Balance Sheet Information

	June 30,			December 31,
	2023			2022

Current assets	$	363,000		$	375,000

Noncurrent assets		-			42,000

Total assets	$	363,000		$	417,000

Current liabilities	$	653,000		$	632,000

Noncurrent liabilities		-			-

Equity		(290,000	)		(215,000	)

Total liabilities and equity	$	363,000		$	417,000

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Note C – Boca Oncology Partners

During the quarter ended June 30, 2011, the Company, through the formation of a joint venture, in which it had a noncontrolling interest, participated in the formation of Boca Oncology Partners, LLC (“BOP”), for the purpose of owning and operating a cancer center in Boca Raton, Florida. In June 2011, BOPRE, an affiliated entity, purchased a 20% interest in Boca West IMP, owner of a medical office building in West Boca, Florida in which BOP operates. BOP occupies 6,000 square feet of the 32,000 square foot building. The Company invested $225,000 initially and had a 22.5% interest in BOP and BOPRE. In February 2014, the Company and other members sold their interests in BOP.

In June 2012, BOPRE purchased an additional 3.75% of Boca West IMP from another investor bringing its total interest to 23.75%. BOPRE accounts for this investment under the cost method since it does not exercise significant influence over Boca West, IMP.

During the years ended December 31, 2018, and 2017, several investors relinquished part of their ownership interest in BOPRE, and those interests were distributed among the remaining investors in relationship to their percentages owned. During 2021 and 2022, additional members relinquished their ownership to USNC. As a result, the Company now holds a 23.10% ownership interest in BOPRE, which it accounts for under the equity method. The Company’s recorded investment in BOPRE is $185,000 and $157,000 at June 30, 2023, and December 31, 2022, respectively

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The following tables present the summarized financial information of BOPRE:

BOPRE Condensed Income Statement Information

	Six Months Ended
	June 30,
	2023		2022

Rental Income	$	-	$	-

Net income	$	18,000	$	31,000

USNC’s equity in earnings of BOPRE	$	4,000	$	8,000

	Three Months Ended
	June 30,
	2023		2022

Rental Income	$	-	$	-

Net income	$	7,000	$	14,000

USNC’s equity in earnings of BOPRE	$	2,000	$	4,000

BOPRE Condensed Balance Sheet Information

	June 30,		December 31,
	2023		2022

Current assets	$	41,000	$	123,000

Noncurrent assets		757,000		757,000

Total assets	$	798,000	$	880,000

Current liabilities	$	-	$	-

Noncurrent liabilities		-		-

Equity		798,000		880,000

Total liabilities and equity	$	798,000	$	880,000

Note D - Medical Oncology Partners

In April 2015, MOP, was formed in partnership with local physicians and other investors. MOP was established to acquire a 100% equity interest in UOMA. USNC was not a member of MOP at the time of formation as it was not able to participate due to the fact that USNC was not a physician. Nevertheless, USNC wished to eventually obtain an equity interest in MOP and loaned Dr. Jaime Lozano, the principal investor in MOP and a co-investor in FOP, $173,000. Dr. Lozano used these funds, along with an equal amount of his own funds (a total of $345,000), to purchase a 76.67% interest in MOP. Other investors paid a further $105,000 for the remaining equity in MOP. MOP used the $450,000 of financing to acquire a 100% equity interest in UOMA. An application was filed for a waiver to allow USNC to hold an equity interest notwithstanding the physician requirement and on December 22, 2016, USNC was cleared to become a part owner of MOP. Dr. Lozano agreed to exchange half of his membership interest to USNC in settlement of the note to USNC. USNC and Dr. Lozano also agreed to share equally in providing a 5% equity interest in MOP to an additional investor as a consulting fee for services rendered in the administration of MOP and UOMA. At December 22, 2016, USNC owned 35.83% of MOP with an initial carrying value of $161,000. The Company recorded its share of losses of $12,000 for the period from December 22, 2016 to December 31, 2016, against its investment which resulted in a reduction of its equity investment to $149,000.

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On December 31, 2022, MOP/UOMA sold their assets to One Care Oncology Partners, LLC for $2,060,000. USN Corona netted approximately $1.3 million from the proceeds for management fees to date. Some funds were held in escrow until post-closing adjustments were made, which has not been finalized as of June 30, 2023.

Note E - CB Oncology Partners

CBOP was organized September 1, 2017, to acquire the rights of the new center from FOP. USNC originally had a 24% equity interest in CBOP. Beginning in October of 2017, CBOP began paying the remainder of the costs associated with opening the center. CBOP had no assets at the end of 2017. The medical center opened and treated its first patient in January of 2018.

Effective November 15, 2019, FOP transferred to, and CBOP assumed, a loan with BB&T bank, that it had entered in order to finance the purchase of equipment and build out of the new center, as well as the associated property and equipment. In addition, CBOP and BB&T agreed to reduce the monthly loan repayments for the next nine months, and to extend the term of the loan from November 2024 to July 2025. In July 2020 CBOP and BB&T further agreed to reduce the monthly payments for the life of the loan and extended the loan to July of 2027.

In June 2020, CBOP made a $500,000 capital call to its members. UNSC converted previously made advances totaling $121,000 into equity in CBOP to meet its capital requirement, and other members contributed $212,000 in cash. The remaining capital contributions were not met and, accordingly, the Company’s equity interest in CBOP increased to 28.58% in June 2020. In May 2023, CBOP made an additional $200,000 capital call to its members. The Company met its call of $57,000 and other members contributed $76,000. As was the case with the previous capital call, the remaining contributions are not expected to be met and accordingly, the Company’s equity interest in CBOP increased to 30.23% in May 2023.

Amounts due from CBOP at June 30, 2023, total $565,000 of outstanding principal, less $550,000 of allowances, for a net receivable of $15,000 as compared to $163,000 of outstanding principal, less $156,000 of allowances, for a net receivable of $6,000 at December 31,2022. The Company records increases in the allowance, when applicable, as a component of loss from investments in unconsolidated. For the six months ended June 30, 2023 and 2022, the Company’s equity in loss of CBOP was $173,000 and $68,000, respectively, but was not recorded due to prior losses.

Due to loans made to CBOP, CBOP is considered to be a variable interest entity of the Company. However, as the Company is not deemed to be the primary beneficiary of CBOP, since it does not have the power to direct the operating activities that most significantly affect CBOP’s economic performance, the entity is not consolidated, but certain disclosures are provided herein.

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The following table presents the summarized financial information of CBOP:

CBOP Condensed Income Statement Information

	Six Months Ended
	June 30,
	2023				2022

Patient revenue		$	761,000			$	1,026,000

Net (loss) income		$	(607,000	)		$	(237,000	)

USNC’s equity in (loss) income of CBOP		$	(173,000	)		$	(68,000	)

	Three Months Ended
	June 30,
	2023				2022

Patient revenue		$	443,000			$	44,000

Net (loss) income		$	(320,000	)		$	(191,000	)

USNC’s equity in (loss) income of CBOP		$	(91,000	)		$	(55,000	)

CBOP Condensed Balance Sheet Information

	June 30,			December 31,
	2023			2022

Current assets	$	347,000		$	405,000

Noncurrent assets		2,763,000			3,056,000

Total assets	$	3,110,000		$	3,461,000

Current liabilities	$	3,909,000		$	975,000

Noncurrent liabilities		2,868,000			5,680,000

Deficit		(3,667,000	)		(3,194,000	)

Total liabilities and deficit	$	3,110,000		$	3,461,000

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Note F – Elite Health

Effective October 1, 2021, U.S. NeuroSurgical, Inc. (“USN”), acquired all of the outstanding shares of capital stock of Elite Health Plan, Inc., a California corporation (“Elite Health”). The transaction with Elite Health was structured as an investment by Elite Health shareholders in USN, and as such did not have an immediate effect on the percentage ownership of the shareholders of the Company. However, the Company’s interest in USN, which currently holds substantially all of the interest in the Company’s businesses and operations, was effectively diluted by 15% as a result of the issuance of the new USN shares to the former holders of Elite Health. In addition, pursuant to the terms of this transaction, the former shareholders of Elite Health may request that the Company take steps that would give such holders access to the public trading market. If this is requested by the Elite Health holders, it could be accomplished at the Company’s election through an exchange of such holders’ shares in USN for common stock of the Company.

Elite Health is a private company with a limited operating history. It was formed in 2017 with the purpose of establishing a managed care organization that will operate as a Medicare Advantage plan for seniors. It is expected that Elite Health will operate in California, initially San Bernadino, Riverside, and Orange Counties, with the objective of addressing the growing number of Medicare eligible seniors in those markets.

Elite Health is in the process of applying for a Knox Keene license to operate a Medicare Advantage plan in California and has taken preliminary steps toward identifying a network of providers who are well-versed in the healthcare needs of seniors in the communities in which they practice. If Elite Health is successful in obtaining the license, establishing Elite Health as an operating entity will require significant investment not currently available to the Company. The Company is currently exploring opportunities to provide the necessary funding to proceed with activities required to launch Elite Health.

Note G – Income Taxes

The Company’s income tax rate, which includes federal and state income taxes, was 0% for the six months ended June 30, 2023, and 2022.

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Item 2.

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

Critical Accounting Policies

The Condensed Consolidated Financial Statements of U.S. NeuroSurgical Holdings, Inc. and subsidiaries (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 Condensed Consolidated Financial Statements. A summary of those significant accounting policies can be found in Note B to the Consolidated Financial Statements, in our 2022 Annual Report on Form 10-K. In particular, judgment is used in areas such as determining and assessing possible asset impairments, including investments in, and advances, to unconsolidated entities.

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 Condensed Consolidated Financial Statements and notes thereto appearing elsewhere herein.

Recent events

None

Results of Operations

Three Months Ended June 30, 2023, Compared to Three Months Ended June 30, 2022

Selling, general and administrative expense of $242,000 for the first quarter of 2023 was 17% lower than the $292,000 incurred during the comparable period in 2022, due mostly to lower salaries in 2023.

During the three months ended June 30, 2023, the Company recognized a $269,000 loss from its investment in unconsolidated entities compared to a $998,000 loss during the same period in 2022. The lower current quarter loss is primarily due to a decrease of advances made to its unconsolidated entities and associated allowances.

During the three months ended June 30, 2023, the Company recorded no income tax benefit or provision compared to a provision of $3,000 during the same period in 2022.

For the three months ended June 30, 2023, the Company reported a net loss of $511,000 as compared to $1,291,000 for the same period a year earlier. The net loss during the current quarter was primarily due to the lack of monthly income, whereas the prior year was a combination of lack of monthly income and advances and associated allowances made to unconsolidated entities.

Six Months Ended June 30, 2023, Compared to Six Months Ended June 30, 2022

Selling, general and administrative expense of $371,000 for the first six months of 2023 was 43% lower than the $652,000 incurred during the comparable period in 2022, due mostly to lower salaries in 2023.

During the six months ended June 30, 2023, the Company recognized a $267,000 loss from its investment in unconsolidated entities compared to a $1,131,000 loss during the same period in 2022. The lower current quarter loss is primarily due to a decrease of advances made to its unconsolidated entities and associated allowances.

During the six months ended June 30, 2023, the Company recorded no income tax benefit or provision compared to a provision of $3,000 during the same period in 2022.

For the six months ended June 30, 2023, the Company reported a net loss of $638,000 as compared to $1,786,000 for the same period a year earlier. The net loss during the current year was primarily due to no income, whereas the prior year was a combination of no income and higher advances and associated allowances made to unconsolidated entities.

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Liquidity and Capital Resources

At June 30, 2023, the Company had working capital of $628,000 as compared to $1,275,000 at December 31, 2022. Cash and cash equivalents at June 30, 2023 were $776,000 as compared to $1,537,000 at December 31, 2022.

Net cash used in operating activities for the six months ended June 30, 2023, was $443,000 as compared to $907,000 for the same period a year earlier. This change is primarily due to the Company using cash reserves for day to day expenses. During the first six months of 2023, the Company received $51,000 of distributed earnings from, unconsolidated entities as compared to $11,000 in the first quarter of 2022.

With respect to investing activities, the Company made $305,000 of advances to unconsolidated entities during the six months ended June 30, 2023, compared with $175,000 of loans and advances in the same period a year earlier to NP, CGK, CBOP, and MOP to assist with business operations and working capital requirements.

With respect to financing activities, the Company’s contract with the NYU Medical Center ended in March 2021 along with all related lease arrangements. The Company is actively seeking new business ventures that could require investment beyond its current cash reserves. Such plans include possible new operations or extensions of its activities in Florida and California, where it has established working relationships with physician groups, hospitals and other organizations.

Risk Factors

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The factors listed under the caption “Risk Factors” in Annual Report on our Form 10-K for the fiscal year ended December 31, 2022, 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.

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," "targets," "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.

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The Company operates in a highly competitive and rapidly changing environment and in businesses that are dependent on our ability to: achieve profitability; increase revenues; sustain our current level of operations; maintain satisfactory relations with business partners; attract and retain key personnel; maintain and expand our strategic alliances; and protect our intellectual property. 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, construction delays 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.

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Item 4.

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, the Company’s Chief Executive Officer concluded that the Company’s disclosure controls and procedures were not 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, due to the material weakness in internal control over financial reporting described below.

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 accounting principles generally accepted in the United States of America. 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 accounting principles generally accepted in the United States of America, 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.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2023. A material weakness is a control deficiency, or a combination of control deficiencies in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the assessment described above, management identified the following material weakness as of June 30, 2023: The Company did not maintain sufficient qualified personnel with the appropriate level of knowledge, experience and training in the application of accounting principles generally accepted in the United States of America and in internal controls over financial reporting commensurate with its financial reporting requirements. Specifically, effective controls were not designed and in place to ensure that the Company maintained, or had access to, appropriate resources with adequate experience and expertise in the area of financial reporting for transactions such as investments in unconsolidated entities, related party receivables, impairments, lease accounting, accounting for business combinations, income taxes, and to properly assess the application of new accounting pronouncements. The Company is in the process of developing efficient approaches to remediate this material weakness. To do this in a cost-effective manner, considering the current extent of the Company’s operations, management is making arrangements with consultants and advisors to assist on an as-needed basis.

Changes in Internal Control over Financial Reporting

While 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 June 30, 2023, management is in the process of developing plans to remediate the material weakness identified above.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

None

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.

Defaults Upon Senior Securities

Not applicable.

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Item 4.

Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5.

Other Information

Not applicable.

Item 6.

Exhibits

31.1 Certification of President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1 Certification of President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

101 Interactive Data Files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 in XBRL (eXtensible Business Reporting Language). Pursuant to Regulation 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability.

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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.

	U.S. NeuroSurgical Holdings, Inc.
	(Registrant)

Date: August 14, 2023	By:	/s/ Alan Gold
		Alan Gold
		Director, President and
		Chief Executive Officer
		and
		Principal Financial Officer
		of the Registrant