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, 2021March 31, 2022
or
☐
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'sRegistrant’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, 2021March 31, 2022 was 7,792,185.


U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 
June 30,
2021
(Unaudited)
  
December 31,
2020
  
March 31,
2022
(Unaudited)
  
December 31,
2021
 
           
ASSETS           
Current assets:           
Cash and cash equivalents $2,820,000 $2,030,000  $1,658,000  $2,178,000 
Accounts receivable 0 346,000 
Investment in sales-type sublease - current 0 532,000 
Other current assets  89,000  99,000   47,000   65,000 
Total current assets  2,909,000  3,007,000   1,705,000   2,243,000 
             
Other assets:             
Due from related parties 923,000 912,000   965,000   930,000 
Investments in unconsolidated entities  164,000  160,000   146,000   141,000 
Goodwill  315,000   315,000 
Total other assets  1,087,000  1,072,000   1,426,000   1,386,000 
             
Property and equipment:             
Operating lease right-of-use asset  77,000  94,000   49,000   59,000 
Total property and equipment  77,000  94,000   49,000   59,000 
             
TOTAL ASSETS $4,073,000 $4,173,000  $3,180,000  $3,688,000 
             
LIABILITIES             
Current liabilities:             
Obligations under finance lease - current portion $0 $89,000 
Operating lease right-of-use liability - current portion 41,000 40,000  $
44,000  $43,000 
Accounts payable and accrued expenses 135,000 170,000   177,000   170,000 
Income taxes payable  190,000  111,000   403,000   114,000 
Total current liabilities 366,000 410,000   624,000   327,000 
             
Operating lease right-of-use liability - net of current portion 45,000 66,000   12,000   23,000 
Guarantee liability  11,000  11,000   11,000   11,000 
Total liabilities  422,000  487,000   647,000   361,000 
             
STOCKHOLDERS’ EQUITY     
Common stock - par value $0.01; 25,000,000 shares authorized;     
7,792,185 shares issued and outstanding at June 30, 2021 and December 31, 2020.
       
 78,000 78,000 
EQUITY        
Common stock - par value $0.01; 25,000,000 shares authorized; 7,792,185 shares issued and outstanding at March 31, 2022 and December 31, 2021.
  78,000   78,000 
        
Additional paid-in capital 3,100,000 3,100,000   2,871,000   2,871,000 
Retained earnings  473,000  508,000 
Total stockholders' equity  3,651,000  3,686,000 
     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,073,000 $4,173,000 
Accumulated deficit
  (794,000)  (119,000)
U.S. NeuroSurgical Holdings Inc. stockholders’ equity
  2,155,000   2,830,000 
Noncontrolling interests  378,000   497,000 
Total equity  2,533,000   3,327,000 
TOTAL LIABILITIES AND EQUITY $3,180,000  $3,688,000 

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

3
U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 
Three Months Ended
June 30,
  
Three Months Ended
March 31,
 
 2021
  2020
  2022
  2021
 
           (As Restated)
 
Revenue $0  $596,000  $0  $1,061,000 
                
Costs and expenses:                
Patient expenses  0   116,000   0   86,000 
Selling, general and administrative  249,000   342,000   360,000   298,000 
                
Total  249,000   458,000   360,000   384,000 
                
Operating (deficit) income  (249,000)  138,000 
Operating (loss) income  (360,000)  677,000 
                
Total other (expense) income        
Interest expense  (1,000)  (7,000)  0   (2,000)
Interest income - sales-type sublease  0   20,000   0   8,000 
Loss from investments in unconsolidated entities, net  (135,000)  (91,000)  (133,000)  (139,000)
Total other expense
  (133,000)  (133,000)
                
(Loss) income before income taxes  (385,000)  60,000   (493,000)  544,000 
                
Provision for income taxes  (189,000)  (15,000)  2,000   252,000 
                
Net (loss) income $(574,000) $45,000  
(495,000) 
292,000 
Net loss attributable to noncontrolling interests  74,000   0 
Net (loss) income attributable to U.S. Neurosurgical Holdings, Inc. $(421,000) $
292,000 
                
Basic and diluted net (loss) income per share $(0.07) $0.01 
Basic and diluted net (loss) income per share attributable to U.S. NeuroSurgical Holdings, Inc. $(0.05) $0.04 
                
Weighted average common shares outstanding  7,792,185   7,792,185 
Weighted average common shares outstanding, basic and diluted
  7,792,185   7,792,185 

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

4
U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCASH FLOWS
(UNAUDITED)

  
Six Months Ended
June 30,
 
  2021
  2020
 
       
Revenue $1,061,000  $1,343,000 
         
Costs and expenses:        
Patient expenses  86,000   195,000 
Selling, general and administrative  547,000   644,000 
         
Total  633,000   839,000 
         
Operating income  428,000   504,000 
         
Interest expense  (3,000)  (19,000)
Interest income - sales-type sublease  8,000   44,000 
Loss from investments in unconsolidated entities, net  (274,000)  (236,000)
         
Income before income taxes  159,000   293,000 
         
Provision for income taxes  (194,000)  (73,000)
         
Net (loss) income $(35,000) $220,000 
         
Basic and diluted net (loss) income per share $(0.00)
 $0.03 
         
Weighted average common shares outstanding  7,792,185   7,792,185 
  
Three Months Ended
March 31,
 
  2022
  2021
 
      (As Restated)
 
Cash flows from operating activities:    
Net (loss) income $(495,000) $292,000 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:        
Amortization of operating lease right-of-use asset  10,000   8,000 
Loss from investments in unconsolidated entities, net  133,000   139,000 
Distributed earnings from unconsolidated entities  11,000   0 
Deferred income taxes  0   0 
Changes in:        
Accounts receivable  0   (482,000)
Income taxes receivable/payable
  (11,000)   252,000 
Other current assets  18,000   19,000 
Accounts payable and accrued expenses  8,000   (4,000)
Operating lease right-of-use liability  (10,000)  (10,000)
Net cash (used in) provided by operating activities  (336,000)  214,000 
         
Cash flows from investing activities:     
Advances to unconsolidated entities  (182,000)  (144,000)
Captial contributions to unconsolidated entities  (2,000)  0 
Principal payments received under sales-type sublease  0   532,000 
Net cash (used in) provided by  investing activities  (184,000)  388,000 
         
Cash flows from financing activities:     
Repayment of finance lease obligations  0   (89,000)
Net cash used in financing activities  0   (89,000)
         
Net change in cash and cash equivalents  (520,000)  513,000 
Cash and cash equivalents - beginning of period  2,178,000   2,030,000 
Cash and cash equivalents - end of period $1,658,000  $2,543,000 
         
Supplemental disclosures of cash flow information: 
Cash paid for:        
Interest $0  $2,000 

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

5
U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

  
Six Months Ended
June 30,
 
  2021
  2020
 
       
Cash flows from operating activities:    
Net (loss) income $(35,000) $220,000 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:        
Amortization of operating lease right-of-use asset  17,000   16,000 
Loss from investments in unconsolidated entities, net  274,000   236,000 
Distributed earnings from unconsolidated entities  0   63,000 
Deferred income taxes  79,000   (186,000)
Changes in:        
Accounts receivable  346,000   123,000 
Income taxes payable  0   215,000 
Other current assets  10,000   4,000 
Accounts payable and accrued expenses  (36,000)  (19,000)
Deferred revenue  0   328,000 
Operating lease right-of-use liability  (20,000)  (17,000)
Net cash provided by operating activities  635,000   983,000 
         
Cash flows from investing activities:     
Advances to unconsolidated entities  (288,000)  (232,000)
Repayments from loans to unconsolidated entities  0   170,000 
Captial contributions to unconsolidated entities  0   (36,000)
Principal payments received under sales-type sublease  532,000   436,000 
Net cash provided by  investing activities  244,000   338,000 
         
Cash flows from financing activities:     
Repayment of finance lease obligations  (89,000)  (667,000)
Net cash used in financing activities  (89,000)  (667,000)
         
Net change in cash and cash equivalents  790,000   654,000 
Cash and cash equivalents - beginning of period  2,030,000   1,335,000 
Cash and cash equivalents - end of period $2,820,000  $1,989,000 
         
Supplemental disclosures of cash flow information: 
Cash paid for:        
Interest $3,000  $18,000 
       Income taxes
 $158,000
  $47,000
 

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,March 31, 2021, and 2020, 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, 20202021, has been derived from the audited Consolidated Financial Statements at that date appearing in the Company'sCompany’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 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'sCompany’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 sixthree months ended June 30,March 31, 2022, and 2021 and 2020 was net (loss) income or loss for the periods.


In May 2014,The Company applies the provisions of Financial Accounting Standards Board (the “FASB”(“FASB”) issued ASU 2014-09, RevenueAccounting 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 Contractsthe 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 Customers (“Topic 606”), amending existingany gain or loss recognized in net (loss) income.



The Company recognizes revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contractsin accordance with customers.two different accounting standards: 1) Topic 606 defines a five-step process to accomplish this objective, including identifying the contract with the customer and the performance obligations within the contract, determining the transaction price including estimates of any variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue as the company satisfies the performance obligation. We adopted the provisions of2) Accounting Standards Codification (“ASC”) Topic 606 as of January 1, 2018, on a modified retrospective basis and applied it to the Company's sole contract at the date of adoption. We concluded that the impact to the manner in which we recognize revenue is immaterial. Our revenue is842, Leases.



The Company primarily generated revenue, in 2021, from a leasing arrangement with New York University, (“NYU”), which is not within the scope of Topic 606,Revenue from Contracts with Customers (Topic 606), and from the sale of maintenance, servicesunder the same agreement, with a single performance obligation, under which revenue is recognizedobligation. The NYU agreement ended in a similar manner as compared to the method under the prior revenue standards. The Company recognizes maintenance income ratably over time as patient procedures are performed.


Prior to October 2018, the Company’s agreement with NYU primarily consisted of an operating lease, and the associated patient revenue from the use of the gamma knife was primarily operating lease income. In October 2018, the agreement was reevaluated to be a sales-type sublease between the Company, the lessor, and NYU, the lessee. The present value of all fixed future minimum lease payments payable by NYU to the Company were recorded as an investment in sublease effective October 1, 2018.  The patient revenue under the tiered schedule was considered contingent income and had been recognized on a systematic basis using an average fee per procedure.


7
Table of Contents
March 2021.


The tables below present financial information associated with our leases.





Classification June 30, 2021
  June 30, 2020
 Classification March 31, 2022
  March 31, 2021
 
Assets              
Current       
Finance lease assetsInvestment in sales-type sublease - current $0  $984,000 
         
Long-term                  
Finance lease assetsInvestment in sales-type sublease - net of current portion  0   0 
Operating lease assetsOperating lease right-of-use asset  77,000   112,000 Operating lease right-of-use asset $49,000  $
86,000 
Total leased assets   $77,000  $1,096,000    $49,000  $86,000 
                  
Liabilities                  
Current                  
Finance lease liabilitiesObligations under finance lease - current portion $0  $323,000 
Operating lease liabilitiesOperating lease right-of-use liability - current portion  41,000   38,000 Operating lease right-of-use liability - current portion $
44,000  $
40,000 
                  
Long-term                  
Finance lease liabilitiesObligations under finance lease - net of current portion  0   0 
Operating lease liabilitiesOperating lease right-of-use liability - net of current portion  45,000   87,000 Operating lease right-of-use liability - net of current portion $
12,000  $
56,000 
Total lease liabilities   $86,000  $448,000    $56,000  $96,000 
                  
Lease Cost                  
Operating lease costSelling, general and administrative $20,000  $21,000 Selling, general and administrative $10,000  $11,000 
                  
Finance lease cost                  
Interest on lease liabilitiesInterest expense  2,000   16,000 Interest expense  0   2,000 
                  
Sublease incomeInterest income - sales-type sublease  8,000   44,000 Interest income - sales-type sublease  0   8,000 
Net lease expense (income)  $14,000  $(7,000)
Net lease expense  $10,000  $5,000

Maturity of lease liabilities (as of June 30, 2021) Operating lease 
2021  22,000 
Maturity of lease liabilities (as of March 31, 2022)
 Operating lease 
2022  46,000   33,000 
2023  24,000   25,000 
Total $92,000  $58,000 
Less amount representing interest  6,000   2,000 
Present value of lease liabilities $86,000  $56,000 
Discount rate  5.850%  5.850%

87
Note B – Gamma Knife at NYU Medical Center


U.S. NeuroSurgical, Inc. (“USN”), a wholly-owned subsidiary of U.S. NeuroSurgical Holdings, Inc., opened a New York gamma knife treatment center in July 1997 on the campus of New York University (“NYU”) Medical Center.   The Company’s contract with NYU, its only customer, ended in March 2021.  Upon termination of the NYU contract, the Company recognized a gain of $100,000 relating to previously accrued expenses.  This gain was included as a reduction in selling, general and administrative expense in the quarter ended March 31, 2021.  The Company is actively seeking new business ventures and believes that its cash reserves, which are in excess of $2.8$1.6 million at June 30, 2021,March 31, 2022, will allow the Company the opportunity do so.  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.  In addition to these activities, the Company has been exploring possible combinations with other existing businesses that would create a larger operating entity that would better justify the expenses involved in continuing as an independent publicly traded company.


Note C – 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.


USNC was a 20% guarantor on NeuroPartners LLC’s seven-year lease with respect to the gamma knife equipment and certain leasehold improvements at SARH.  In February 2016, NeuroPartners LLC negotiated a new five-year lease to fund the reloading of cobalt and related construction services.  The new lease of $1,663,000 included a balance of $668,000 from the prior lease obligations.  This new lease was payable over 60 months.  The first payment of $31,000 was paid in April 2016 and the final payment was paid in March 2021.2021, removing USNC’s guarantee obligation.



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, 2021March 31, 2022 and December 31, 2020,2021, the Company’s combined recorded investment (loss) of NeuroPartners LLC and CGK was $19,000$0 and $26,000,($10,000), respectively. For the sixthree months ended June 30, 2021,March 31, 2022, the Company’s combined equity in lossincome of NeuroPartners LLC and CGK was $7,000$10,000 and compared to combined equity in earningsloss of $114,000($2,000) for the sixthree months ended June 30, 2020.March 31, 2021.  At June 30, 2021March 31, 2022, and December 31, 2020,2021, amounts due from related parties was $14,000$19,000 and $9,000,$6,000, respectively.


98

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,
 
  2021
  2020
 
       
Patient Revenue $336,000  $670,000 
         
Net income $27,000  $332,000 
         
USNC's equity in (loss) earnings of NeuroPartners LLC and CGK
 $(7,000) $114,000 
  
Three Months Ended
March 31,
 
  2022
  2021
 
       
Patient revenue $122,000  $166,000 
         
Net (loss) income $(30,000) $19,000 
         
USNC’s equity in income (loss) of NeuroPartners LLC and CGK
 $10,000  $(2,000)

  
Three Months Ended
June 30,
 
  2021
  2020
 
       
Patient Revenue $170,000  $354,000 
         
Net income $8,000  $176,000 
         
USNC's equity in (loss) earnings of NeuroPartners LLC and CGK
 $(5,000) $61,000 

NeuroPartners LLC and CGK Condensed Combined Balance Sheet Information

  
June 30,
2021
  
December 31,
2020
 
       
Current assets $265,000  $121,000 
         
Noncurrent assets  422,000   551,000 
         
Total assets $687,000  $672,000 
         
Current liabilities $622,000  $634,000 
         
Equity  65,000   38,000 
         
Total liabilities and equity $687,000  $672,000 
  
March 31,
2022
  
December 31,
2021
 
       
Current assets $368,000  $299,000 
         
Noncurrent assets  230,000   294,000 
         
Total assets $598,000  $593,000 
         
Current liabilities $598,000  $564,000 
         
Noncurrent liabilities  
0   
0 
         
Equity  0   29,000 
         
Total liabilities and equity $598,000  $593,000 


109

Note D – Florida Oncology Partners


During 2010, through the formation of a joint venture, in which it has a noncontrolling interest, the Company expanded its market strategy to include opportunities to develop cancer centers featuring radiation therapy. These centers utilize linear accelerators with Intensity Modulated Radiation Therapy (“IMRT”) and Image Guided Radiation Therapy (“IGRT”) capabilities.  In 2010, the Company formed Florida Oncology Partners, LLC  (“FOP”)FOP in partnership with local physicians and other investors.  USNC ownsowned a 24% interest in the venture. FOP’s first center was located in Miami, Florida and opened in the second quarter of 2011.
 

During 2011, FOP entered into a seven-year capital lease with Key Bank for $5,800,000.  Under the terms of the capital lease, USN agreed to guarantee a maximum of $1,433,000, approximately 25% of the original lease obligation in the event of default.  USN was a guarantor jointly with most of the other members of FOP.   The guarantee was eliminated upon repayment of the outstanding lease balance in May 2018.

In December 2015, FOP entered into an agreement with 21st Century Oncology for the sale of FOP’s Varian Rapid Arc linear accelerator and other medical equipment at the FOP location.  21st Century Oncology paid FOP $1,000,000 as a down payment for the equipment and agreed to make monthly payments of $172,000 for the equipment and all monthly payments due under the equipment lease with Key Bank.  As of this date, 21st Century Oncology has not satisfied all of the terms of the agreement.  In May 2017, 21st Century Oncology filed for Chapter 11 bankruptcy protection and FOP was listed as an unsecured creditor. As a result, since June 2017, FOP has not received the agreed rental payments beyond the monthly payments for the equipment lease.  As noted above, the equipment lease was repaid in May 2018 and title to the equipment was transferred to 21st Century Oncology. In December 2018, FOP was awarded 10,820 shares of 21st Century Oncology Holdings Inc. common stock as part of the bankruptcy proceedings. The title to these shares was transferred to USNC during 2020. The market value of these shares is unclear at this time as there is no readily available market for them, and accordingly, no value has been recorded for these shares at June 30, 2021 by USNC. During the year ended December 31, 2020, FOP received a payment of approximately $158,000 from 21st Century Oncology. FOP used these funds to repay $155,000 of previous advances from USNC.  FOP will continue to monitor the impact of 21st Century Oncology’s bankruptcy and pursue amounts that it is owed.  However, there can be no assurance that FOP will be successful in these efforts.

Late in 2016, FOP took initial steps toward the development of a new radiation therapy center in Homestead, Florida.   In December 2016, FOP entered into a ten-year lease agreement for office space located at 20405 Old Cutler Towne Center.  FOP had to deliver an $88,000 letter of credit in conjunction with this office lease which collateral is being held in a restricted certificate of deposit. FOP began incurring architecture costs for planning/refitting the new space.  During the first half of 2017, a financing agreement with BB&T Bank for the medical equipment and leasehold improvements was negotiated and then signed on August 31, 2017.  In November 2017, the amounts for the equipment and leasehold improvements costs were finalized and paid under this financing agreement for a total loan of $4,106,000 to be paid over seven years.  Under the terms of the financing agreement, USN agreed to guarantee the amount initially borrowed. USN is the guarantor with several other members of FOP. The outstanding balance on the financing facility was $2,914,000 at June 30, 2021 and $3,066,000 at December 31, 2020. Effective November 15, 2019, FOP transferred this loan, along with the equipment acquired with the loan proceeds, to CB Oncology Partners, LLC (“CBOP”.) The Company expects any potential liability from this guarantee to be reduced by the recoveries of the respective collateral. Late in the third quarter of 2017, it was determined that the business opportunity at this new location should be pursued by a different investor group, and FOP arranged to sell the opportunity to this group. CBOP was organized on September 1, 2017, to acquire the assets and rights in this new center from FOP.


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In June 2017, FOP entered into an agreement with a third-party owner of a radiation therapy center located in Miami, Florida, whereby FOP took over the operation of the center effective September 22, 2017, for a ten-year initial term, and up to 3 additional terms of five years each. This agreement was accounted for as a capital lease and, accordingly, FOP recorded assets and capital lease liabilities totaling $14,321,000 at September 22, 2017. The lease required monthly payments in the first year of $160,000, increasing by 2% each year; currently the payment is $170,000.  FOP abandoned its operations at this radiation center on June 28, 2019, due to continued losses at the site and lack of success in good faith efforts to renegotiate the agreement after several months of discussion. FOP could be considered in default of the agreement and the third-party owner could pursue action against FOP.  Due to the circumstances, FOP derecognized the associated assets and liabilities and calculated a contingent liability equal to the net liabilities derecognized. FOP has not, however, been released from its contractual obligation toOn November 24, 2021, the third-party owner.  At June 30,owner filed a Voluntary Motion to Dismiss their lawsuit against FOP, and on December 11, 2021, FOPit was obligated to make a further $17.6 million of lease payments foraccepted and recorded by the period from July 2019 to September 2027, with 0 payments made since June 2019.  Due to abandoningcourt. There can be no guarantee the operations of the Miami center as well as continued working capital deficits, FOP’s ability to continue as a going concernthird-party owner will require FOP to restructure debt, raise new capital, and successfully settle the agreement at the center in Miami, Florida. Since these plans are preliminary and have not been approved at this date, there is substantial doubt about FOP’s ability to continue as a going concern within the next twelve months from the date these Condensed Consolidated Financial Statements are available to be issued.reinstitute any future claims against FOP.


The Company’s recorded investment in FOP at June 30, 2021 and December 31, 2020 hasprior to dissolution had been reduced to 0 due to losses incurred in prior years. NaN equity in earnings hashad been recorded by the Company for the six months ended June 30, 2021 and 2020, due to FOP’s deficit at June 30, 2021, and June 30, 2020.equity.

During the year ended December 31, 2020, the Company wrote off all amounts due from FOP and accrued interest thereon. The Company recorded amounts written off and increases in the allowances as a component of loss from investments in unconsolidated entities and as a deduction in interest income for interest earned.

BecauseOn September 21, 2021, FOP filed Articles of loans made to FOP,Dissolution with the Florida Department of State that were recorded on September 22, 2021. FOP is considered a variable interest entity of the Company.  However, as the Company is not deemed to be the primary beneficiary of FOP, since it does not have the power to direct the operating activities that most significantly affect FOP’s economic performance, the entity is not consolidated, but certain disclosures are provided herein.fully dissolved.


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The following tables present the summarized financial information of FOP:

FOP Condensed Income Statement Information
  
Six Months Ended
June 30,
 
  2021
  2020
 
       
Income $0  $0 
         
Net (loss) income
 $(89,000) $37,000 
         
USNC's equity in (loss) earnings of FOP $(21,000) $9,000 


  
Three Months Ended
June 30,
 
  2021
  2020
 
       
Income $0  $0 
         
Net loss $(48,000) $89,000 
         
USNC's equity in (loss) earnings of FOP $(11,000) $22,000 


FOP Condensed Balance Sheet Information

  
June 30,
2021
  
December 31,
2020
 
       
Current assets $7,000  $7,000 
         
Noncurrent assets  1,064,000   1,091,000 
         
Total assets $1,071,000  $1,098,000 
         
Current liabilities $4,157,000  $4,068,000 
         
Noncurrent liabilities  942,000   969,000 
         
Deficit  (4,028,000)  (3,939,000)
         
Total liabilities and deficit $1,071,000  $1,098,000 



Note E – 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, Boca Oncology Partners RE, LLC (“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.


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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 its ownership to USNC. As a result, the Company now holds a 21.22%24.36% ownership interest in BOPRE, which it accounts for under the equity method. The Company’s recorded investment in BOPRE is $145,000 and $134,000$151,000 at June 30, 2021March 31, 2022 and December 31, 2020, respectively2021, respectively.

USNC was a 10% guarantor
10

The following tables present the summarized financial information of BOPRE:



BOPRE Condensed Income Statement Information


 
Six Months Ended
June 30,
 
 2021
 2020
 
     
Rental income $0  $0 
         
Net income $56,000  $7,000 
         
USNC's equity in earnings of BOPRE $12,000  $1,000 
 
Three Months Ended
March 31,
 
 2022
 2021
 
     
Rental Income $0  $0 
         
Net income $17,000  $18,000 
         
USNC’s equity in earnings of BOPRE $4,000  $3,000 

 
Three Months Ended
June 30,
 
 2021
 2020
 
     
Rental income $0  $0 
         
Net income $38,000  $0 
         
USNC's equity in earnings of BOPRE $9,000  $0 

BOPRE Condensed Balance Sheet Information


  
June 30,
2021
  
December 31,
2020
 
       
Current assets $82,000  $27,000 
         
Noncurrent assets  758,000   757,000 
         
Total assets $840,000  $784,000 
         
Current liabilities $0  $0 
         
Noncurrent liabilities  0   0 
         
Equity  840,000   784,000 
         
Total liabilities and equity $840,000  $784,000 
  
March 31,
2022
  
December 31,
2021
 
       
Current assets $80,000  $112,000 
         
Noncurrent assets  757,000   757,000 
         
Total assets $837,000  $869,000 
         
Current liabilities $0  $0 
         
Noncurrent liabilities  0   0 
         
Equity  837,000   869,000 
         
Total liabilities and equity $837,000  $869,000 

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Note F - Medical Oncology Partners


In April 2015, Medical Oncology Partners, LLC (“MOP”,)MOP, was formed in partnership with local physicians and other investors. MOP was established to acquire a 100% equity interest in United Oncology Medical Associates of Florida, LLC (“UOMA”.)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.


Due to increasing costs, continued net losses since April 2015, and reliance on related party and other debt for operating cash flows, the fair value of UOMA is less than its carrying amount. The Company tested its investment for impairment at December 31, 2016 and determined that the investment was impaired, and an impairment loss was recorded against the entire equity balance in MOP, as well as loans from USN and USNC to MOP and UOMA. For the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, the Company’s equity in loss of MOP was $34,000$39,000 and $249,000,$60,000, respectively, but was not recorded due to prior losses.


During the year ended December 31, 2020, the Company wrote off all remaining amounts due from MOP and UOMA and accrued interest thereon, resulting in a $686,000 loss. Increases in allowances and amounts written off have been recorded as losses from investments in unconsolidated entities. During the sixthree months ended June 30,March 31, 2022 and 2021, the Company advanced an additional $277,000,$99,600 and $141,000, all of which has been fully impaired. These allowances and write offs were recorded as losses from investments in unconsolidated entities.



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


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The following table presents the summarized financial information of MOP:



MOP Condensed Consolidated Income Statement Information


  
Six Months Ended
June 30,
 
  2021
  2020
 
       
Patient revenue $1,068,000  $932,000 
         
Net loss $(95,000) $(696,000)
         
USNC's equity in loss in MOP
 $(34,000) $(249,000)
 
  
Three Months Ended
March 31,
 
  2022
  2021
 
       
Patient revenue $533,000  $537,000 
         
Net loss $(188,000) $(168,000)
         
USNC’s equity in loss of MOP
 $(39,000) $(60,000)
  
Three Months Ended
June 30,
 
  2021
  2020
 
       
Patient revenue $531,000  $417,000 
         
Net income (loss) $73,000  $(462,000)
         
USNC's equity in earnings (loss) of MOP
 $26,000  $(165,000)



MOP Condensed Consolidated Balance Sheet Information


  
June 30,
2021
  
December 31,
2020
 
       
       
Current assets $192,000  $204,000 
         
Noncurrent assets  546,000   701,000 
         
Total assets $738,000  $905,000 
         
Current liabilities $2,867,000  $2,736,000 
         
Noncurrent liabilities  207,000   410,000 
         
Deficit  (2,336,000)  (2,241,000)
         
Total liabilities and deficit $738,000  $905,000 
  
March 31,
2022
  
December 31,
2021
 
       
       
Current assets $277,000  $201,000 
         
Noncurrent assets  300,000   384,000 
         
Total assets $577,000  $585,000 
         
Current liabilities $3,229,000  $3,109,000 
         
Noncurrent liabilities  78,000   92,000 
         
Deficit  (2,730,000)  (2,616,000)
         
Total liabilities and deficit $577,000  $585,000 




Note G - 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. 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 into 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.

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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 are not expected to be met and, accordingly, the Company’s equity interest in CBOP increased to 28.58% in June 2020.

13

Amounts due from CBOP at June 30, 2021,March 31, 2022, total $2,159,000$2,208,000 of outstanding principal, less $1,251,000$1,289,000 of allowances, for a net receivable of $908,000$919,000 all of which is included in due from related parties on the accompanying Condensed Consolidated Balance Sheet.  AtSheets. Amounts due from CBOP at December 31, 2020, CBOP owed the Company $2,154,0002021, total $2,174,000 of whichoutstanding principal, less $1,251,000 had been reservedof allowances, for a net receivable of $903,000$923,000 all of which is included in due from related parties on the accompanying Condensed Consolidated Balance Sheet.Sheets. These balances accrue interest at 6% per annum. Interest earned by the Company from the amounts owed by CBOP totaled $62,000$29,000 and $63,000$31,000 for the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, respectively. At June 30, 2021March 31, 2022 and December 31, 2020,2021, total accrued interest was $335,000$427,000 and $273,000,$398,000, respectively, all of which has been fully reserved for. The Company recordsrecorded increases in the allowance when applicable, as a component of loss from investments in unconsolidated entities and as a deduction in interest income for interest earned.


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,
 
  2021
  2020
 
       
Patient revenue $1,041,000  $894,000 
         
Net income (loss) $92,000  $(400,000)
         
USNC's equity in earnings (loss) of CBOP
 $26,000  $(100,000)

  
Three Months Ended
March 31,
 
  2022
  2021
 
       
Patient revenue $582,000  $471,000 
         
Net (loss) income $(46,000) $62,000 
         
USNC’s equity in (loss) income of CBOP
 $(13,000) $18,000 

  
Three Months Ended
June 30,
 
  2021
  2020
 
       
Patient revenue $570,000  $427,000 
         
Net income (loss) $30,000  $(184,000)
         
USNC's equity in earnings (loss) of CBOP
 $8,000  $(48,000)


CBOP Condensed Balance Sheet Information
  June 30,  December 31,
 
  2021
  2020
 
       
Current assets $680,000  $385,000 
         
Noncurrent assets  3,970,000   4,271,000 
         
Total assets $4,650,000  $4,656,000 
         
Current liabilities $3,347,000  $3,181,000 
         
Noncurrent liabilities  3,407,000   3,684,000 
         
Deficit  (2,104,000))  (2,209,000))
         
Total liabilities and deficit $4,650,000  $4,656,000 

  
March 31,
2022
  
December 31,
2021
 
       
Current assets $582,000  $400,000 
         
Noncurrent assets  3,515,000   3,667,000 
         
Total assets $4,097,000  $4,067,000 
         
Current liabilities $3,533,000  $3,472,000 
         
Noncurrent liabilities  3,125,000   3,121,000 
         
Deficit  (2,561,000)  (2,526,000)
         
Total liabilities and deficit $4,097,000  $4,067,000 

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Note H – Income TaxesElite 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 I – Income Taxes


The Company’s income tax rate, which includes federal and state income taxes, was approximately 122%1%, for the sixthree months ended June 30, 2021,March 31, 2022, and 25% for the six months ended June 30, 2020.2021. The Company recorded a tax chargeprovision of $194,000$2,000 and $73,000$252,000 (restated) for the sixthree months ended June 30,March 31, 2022, and 2021, and 2020, respectively. The higher income tax expense in 2021 is primarily due to

15
Note J - Restatement of Previously Issued Financial Statements


During the annualized effect ofquarter ended March 31, 2022, the NYU contract endingCompany determined that in March 2021, includingpursuant to an agreement with New York University ("NYU"), ownership of all of the catch-up tax effectsgamma knife equipment at the NYU Medical Center transferred from the Company to NYU, resulting in the recognition of a cash basis tax payer with no operations,gain on the sale and the tax effect of a valuation allowance expected to be necessary for any deferred tax asset at the endtransfer of the gamma knife property on the Company's December 31, 2021 income tax returns. The Company previously received insurance proceeds with the Gamma Knife facility, which was destroyed as a result of flooding from Hurricane Sandy. For tax purposes, the resulting gain becomes taxable when the replacement property is sold or disposed of, which occurred in 2021. As a result, the Company recorded this tax liability and restated its consolidated financial statements as of and for the year. ended December 31, 2021 and each of the quarters during the year ended December 31, 2021 on Form 10-K/A for the year ended December 31, 2021.


The restatement tables below present a reconciliation from the previously reported to the restated values as of and for the three months ended March 31, 2020. The values as previously reported were derived from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed on May 17, 2021.

CONDENSED CONSOLIDATD STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2020

  As previously  Restatement    
  Reported  Impacts  As Restated 
Income tax provision $5,000  $247,000  $252,000 
Net income $539,000  $(247,000) $292,000 
Basic and diluted net income per share $0.07  $(0.03) $0.04 

CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
For the Three Months Ended March 31, 2020

Net income $539,000  $(247,000) $292,000 
Change in: Income taxes receivable/payable $5,000  $247,000  $252,000 
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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 20202021 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.

We adopted the provisions15
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

The recent outbreak of the novel coronavirus COVID-19 has spread across the globe and has been declared a public health emergency by the World Health Organization and a National Emergency by the President of the United States.  Most states and municipalities in the U.S., including California, and Florida, have taken aggressive measures to reduce the spread of the disease, including limiting non-essential gatherings of people, ceasing all non-essential travel, ordering certain businesses and government agencies to cease non-essential operations at physical locations and issuing “shelter-in-place” orders, which direct individuals to shelter at their places of residence (subject to limited exceptions).  Across the healthcare industry, resources are being prioritized for the treatment and management of the outbreak.  Consequently, there are delays in delivering radiation therapy treatments.  In addition, the COVID-19 pandemic poses the risk that the Company and its employees, contractors, customers, government and third party payors and others may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that have been and may continue to be requested or mandated by governmental authorities.

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While the healthcare treatments that are provided by the Company are generally critical to the well-being of the patients it serves, a  sustained COVID-19 pandemic, and continued measures by the government and industry to contain the pandemic, could negatively impact results for the following reasons: (i) operations at medical facilities, including those operated by the Company, could be subject to reduced operation or prolonged closure; (ii) medical facilities may defer Gamma Knife and other cancer therapy treatments for non-urgent patient cases in order to allocate resources to the care of patients with COVID-19; (iii) patients may defer or cancel treatments due to real or perceived concerns about the potential spread of COVID-19 in a medical facility setting; (iv) the outbreak could materially impact operations for a sustained period of time due to the current travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns; and/or (v) members of the Company’s workforce may become ill or have family members who are ill and are absent as a result, or they may elect not to come to work due to the illness affecting others in our office or facilities.

16
The occurrence of any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations. The COVID-19 outbreak and mitigation measures have had and may continue to have an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition.  The extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Although the Company’s contract with its only customer ended in March 2021, the Company is actively seeking new business ventures and believes that its cash reserves, which are in excess of $2.8$1.6 million at June 30, 2021,March 31, 2022, will allow the Company the opportunity do so.  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.  In addition to these activities, the Company has been exploring possible combinations with other existing businesses that would create a larger operating entity that would better justify the expenses involved in continuing as an independent publicly traded company.

Results of Operations

Three Months Ended June 30, 2021,March 31, 2022, Compared to Three Months Ended June 30, 2020March 31, 2021

Patient revenue for the three months ended June 30,March 31, 2022, and 2021 was $0 and 2020 was $0 and $596,000,$1,061,000, respectively. Prior to the termination of the Company’s contract with NYU in March 2021, the Company’s Gamma Knife facility at NYU Medical Center represented all of the Company’s patient revenue.

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Patient expenses for the three months ended June 30, 2021,March 31, 2022, were $0 as compared to $116,000$86,000 reported for the comparable period in the previous year, primarily due to the annualized effects of the NYU contract ending in March 2021.

Selling, general and administrative expense of $249,000$360,000 for the secondfirst quarter of 20212022 was 27% lower19% higher than the $342,000$298,000 incurred during the comparable period in 2020,2021, due mostly to mostly timing differenceslower accounting fees in 2022 offset by a $100,000 gain on termination of the audit and audit-related feesNYU contract during the three months ended June 30, 2021 and 2020.March 31, 2021.

The Company incurred $1,000no interest expense in the secondfirst quarter of 20212022 and $7,000$2,000 in the comparable period in 20202021 related to finance leases. Interest expense decreased due to repayment of principal balances on the gamma knife, ICON unit, and Cobalt reload leases prior to April 1, 2021.

The Company earned $0 and $20,000$8,000 of interest income from its investment in a sales-type sublease for the three months ended June 30,March 31, 2022, and 2021, and 2020, respectively.

During the three months ended June 30, 2021,March 31, 2022, the Company recognized a $135,000$133,000 loss from its investment in unconsolidated entities compared to a $91,000$139,000 loss during the same period in 2020.2021. The higherlower current quarter loss is primarily due to an increasea decrease of advances made to its unconsolidated entities and associated allowances.

During the three months ended June 30,March 31, 2021, the Company recognized an income tax provision of $189,000$2,000 compared to an income tax provision of $15,000$252,000 (restated) during the same period in 2020. The higher tax expense in 2021 is primarily due to the annualized effects of the NYU contract ending in March 2021, forecasted taxable losses for the rest of the year, and the tax effect of a valuation allowance expected to be necessary for any deferred tax asset at the end of the year.2021.

For the three months ended June 30, 2021,March 31, 2022, the Company reported a net loss of $574,000$421,000 as compared to $292,000 (restated) net income of $45,000 for the same period a year earlier. The lower net income was primarily due to the lack of revenues due to the sale of the NYU gamma knife in 2021, and higher income tax expense.

Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020

Patient revenue for the six months ended June 30, 2021, and 2020 was $1,061,000 and $1,343,000, respectively. Prior to the termination of the Company’s contract with NYU in March 2021, the Company’s Gamma Knife facility at NYU Medical Center represented all of the Company’s patient revenue

Patient expenses for the six months ended June 30, 2021, were $86,000 as compared to $195,000 reported for the comparable period in the previous year, primarily due to the annualized effects of the NYU contract ending in March 2021.

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Selling, general and administrative expense of $547,000 for the first six months of 2021 was 15% lower than the $644,000 incurred during the comparable period in 2020, offset by a $100,000 gain on termination of the NYU contract and the cancellation of the flood insurance policy for the NYU facility at March 31, 2021.

The Company incurred $3,000 of interest expense in the first six months of 2021 and $19,000 in the comparable period in 2020 related to finance leases. Interest expense decreased due to lower principal balances on the gamma knife, ICON unit, and Cobalt reload leases.

The Company earned $8,000 and $44,000 of interest income from its investment in a sales-type sublease for the six months ended June 30, 2021, and 2020, respectively.

During the six months ended June 30, 2021, the Company recognized a $274,000 loss from its investment in unconsolidated entities compared to a $236,000 loss during the same period in 2020. The higher current year loss is primarily due to an increase of advances made to its unconsolidated entities and associated allowances.

During the six months ended June 30, 2021, the Company recognized an income tax provision of $194,000 compared to an income tax provision of $73,000 during the same period in 2020. The higher tax expense in 2021 is primarily due to the annualized effects of the NYU contract ending in March 2021, forecasted taxable losses for the rest of the year, and the tax effect of a valuation allowance expected to be necessary for any deferred tax asset at the end of the year.

For the six months ended June 30, 2021, the Company reported a net loss of $35,000 as compared to net income of $220,000 for the same period a year earlier. The lower net incomeloss was primarily due to the lack of revenues due to the saletermination of the NYU gamma knife in 2021, and higher income tax expense.contract.

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Liquidity and Capital Resources

At June 30,March 31, 2021, the Company had working capital of $2,543,000$1,128,000 as compared to $2,597,000$1,918,000 at December 31, 2020.2021. Cash and cash equivalents at June 30, 2021March 31, 2022 were $2,820,000$1,658,000 as compared to $2,030,000$2,178,000 at December 31, 2020.2021.

Net cash used in operating activities for the three months ended March 31, 2022, was $336,000 as compared to $214,000 provided by operating activities for the six months ended June 30, 2021, was $635,000 as compared to $983,000 in the same period a year earlier. The $348,000 lower net cash inflow in 2021 wasThis change is primarily due to the termination of the NYU contract endingand the Company using cash reserves for day to day expenses. During the first quarter of 2022, the Company received $11,000 of distributed earnings from, unconsolidated entities with no corresponding cash receipts in Marchthe first quarter of 2021.

With respect to investing activities, the Company made $288,000$182,000 of advances to unconsolidated entities during the sixthree months ended June 30, 2021,March 31, 2022, compared with $232,000$144,000 of loans and advances in the same period a year earlier to FOP,NP, CGK, CBOP, and MOP to assist with business operations and working capital requirements.During the first six months of 2020, the Company made $36,000 of capital contributions to unconsolidated entities with no corresponding payments in the first six months of 2021. The Company also received $532,000 in principal payments under the NYU sales-type sublease in 2021, compared to $436,000$0 during the first six monthsquarter of 2020.2022.

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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 had been receiving fixed monthly payments of $50,000 through February 2021, and $30,000 throughpaid $89,000 towards its finance lease obligations during the three months ended March 2021, as well as a final payment of $350,000 in March 2021.  The31, 2021.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 following factors, as well as the factors listed under the caption “Risk Factors” in Annual Report on our Form 10-K for the fiscal year ended December 31, 2020, 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.

Termination of Business Activity at the New York University Gamma Knife Center.  While it is the Company’s objective to expand activities to additional cancer centers that rely on a broad range of diagnostic and radiation treatments, the Company had relied on the NYU gamma knife for substantially all of its revenue.  In recent periods, services provided at NYU have represented over 90% of the Company’s revenues. The Company’s lease with NYU ended in March 2021, and it has transferred ownership of its gamma knife to NYU.  The future of the Company will depend on whether it is able to achieve success with other existing and new operations, and this will depend to a significant degree on whether it is able to identify and secure new business opportunities and achieve profitable operations at those businesses in the near term.

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 or other types of cancer treatment centers.

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'scompany’s future prospects and make informed investment decisions.  This document contains such "forward-looking statements"“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“anticipates,” “estimates,” “expects,” “projects,” “targets,” “intends,” “plans,” “believes,” “will be," "will” “will continue," "will” “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'smanagement’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'sCompany’s actual results could differ materially from management'smanagement’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'sCompany’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'sCompany’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'sCompany’s reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC'sSEC’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”).

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Our management evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report.  Based upon that evaluation, 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.

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Our management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2021.March 31, 2022. 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, 2021:March 31, 2022: 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, andlease 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, 2021,March 31, 2022, 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.

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Item 5.Other Information

Not applicable.

Item 6.Exhibits

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.
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.
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Interactive Data Files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,31.1Certification 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.

32.1Certification 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 March 31, 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 11, 2021June 24, 2022
By:
/s/ Alan Gold
  
Alan Gold
  
Director, President and
Chief Executive Officer
  
and
  
Principal Financial Officer
of the Registrant


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