Summary of US NEUROSURGICAL INC

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

Critical Accounting Policies

The condensed financial statements of U.S. Neurosurgical, Inc. ("USN" or the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America. As such, some accounting policies have a significant impact on amounts reported in the financial statements. A summary of those significant accounting policies can be found in our 2008 Annual Report on Form 10-KSB, filed, in the Notes to the Financial Statements, Note B. In particular, judgment is used in areas such as determining the allowance for doubtful accounts and asset impairments.

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

Results of Operation

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Patient revenue decreased 32% to $366,000 in the quarter ended March 31, 2009 from $535,000 for the quarter ended March 31, 2008. This decrease in patient revenue was largely due to the fact that the New York center was shut down for approximately six weeks during the quarter to allow for the installation of the new PERFEXION Gamma Knife at that location, resulting in a dramatic decrease in the number of procedures performed at the Company's New York center during the first quarter of 2009 as compared to the same period a year ago. Patient expenses decreased 21% to $142,000 for the first quarter of 2009 compared to $183,000 in the same period a year ago. Patient expenses do not vary materially with the number of procedures performed, but are tied to depreciation, maintenance and other fixed expenses. The reduction experience in this quarter over the comparable period in 2008 was due largely to the decrease in depreciation expense relating to the New York center that resulted from the changeover in the equipment.

Selling, general and administrative expense decreased 19% to $233,000 for the quarter ended March 31, 2009 from $287,000 in the comparable period in 2008. This decrease was largely due to a decrease in professional fees and marketing costs incurred during that period. Interest expense decreased 28% to $26,000 from $36,000 in the same period a year earlier. This decrease was due to the continuing reduction in capital lease obligations over time. However, with the renewed arrangements under the new Gamma Knife equipment at the New York center, interest expense in future periods is expected to increase significantly. For the quarter ended March 31, 2009, the Company reported a net loss of $33,000 as compared to net income of $31,000 for the same period a year earlier.

This resulted primarily from the temporary suspension of operations at the New York center as described above.

Liquidity and Capital Resources

At March 31, 2009 the Company had a working capital deficit of $63,000 as compared to working capital surplus of $164,000 at December 31, 2008. This reduction was primarily due to the current obligation that was generated in connection with the capital lease financing established during the first quarter of 2009 for the new Gamma Knife at the New York center. Cash and cash equivalents at March 31, 2009 were $459,000 as compared with $605,000 at December 31, 2008.

Net cash used in operating activities for the three months ended March 31, 2009 was $28,000 as compared to the $135,000 that was provided by operating activities for the same period a year earlier. Depreciation and amortization was $115,000 for the three months ended March 31, 2009, as compared with $158,000 the first three months of 2008.

The Company paid $115,000 towards its lease obligations during the three months ended March 31, 2009 as compared to $105,000 in the same period a year ago. With our current cash position, and continued collection on our accounts receivable, the Company believes that its cash position will be sufficient to support operations for at least the next twelve months.

Risk Factors

We desire to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The following factors, as well as the factors listed under the caption "Risk Factors" in our Form 10-K for the fiscal year ended December 31, 2008, have affected or could affect our actual results and could cause such results to differ materially from those expressed in any forward-looking statements made by us. Investors should carefully consider these risks and speculative factors inherent in and affecting our business and an investment in our common stock.

Operating Losses. We have experienced significant operating losses in recent periods and may continue to do so in the future. We reported a net loss of $335,000 for the year ended December 31, 2007, but did return to breakeven for the year ended 2008. The Company reported net loss of $33,000 for the first three months of 2009. This loss, however, was primarily due to the fact that the NYU Center was shut down for approximately six weeks during the first quarter to accommodate the installation of new equipment at that center.

While the Company is taking steps to improve long term profitability, it is possible that the Company will experience material losses in the future periods.

Availability of Working Capital. To date, we have earned sufficient income from operations to fund periodic operating losses and support efforts to pursue new Gamma Knife centers. If losses continue, we will be required to seek additional capital to support continued operations and the development of new centers, but we cannot assure you, however, that we will be able to raise such additional capital as and when required.

Disclosure Regarding Forward Looking Statements

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

The Company operates in a highly competitive and rapidly changing environment and in business segments that are dependent on our ability to:
achieve profitability; increase revenues; sustain our current level of operation; introduce on a timely basis new products; maintain satisfactory relations with our customers; attract and retain key personnel; maintain and expand our strategic alliances; and protect our know-how. The Company's actual results could differ materially from management's expectations because of changes in such factors. New risk factors can arise and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Investors should also be aware that while the Company might, from time to time, communicate with securities analysts, it is against the Company's policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, investors should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, the Company has a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts or others contain any projections, forecasts or opinions, such reports are not the responsibility of the Company.

In addition, the Company's overall financial strategy, including growth in operations, maintaining financial ratios and strengthening the balance sheet, could be adversely affected by increased interest rates, failure to meet earnings expectations, significant acquisitions or other transactions, economic slowdowns and changes in the Company's plans, strategies and intentions.