EHSI 10-K Annual Report Dec. 31, 2015

ELITE HEALTH SYSTEMS INC.

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PROXIES

DEF 14A

Filed on Oct. 31, 2025

10-K 1 form10k.htm U.S. NEUROSURGICAL HOLDINGS, INC. 10-K 12-31-2015

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended December 31, 2015

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

For the transition period from to .

Commission file number: 0-15586

U.S. NeuroSurgical Holdings, Inc.

(Name of small business issuer in its charter)

Delaware		47-5370333
(State of 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)		(Zip Code)

Issuer's telephone number:

(301) 208-8998

Securities registered under Section 12(b) of the Act:		None

Securities registered under Section 12(g) of the Act:		Common Stock, par value $.01 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Yes ☐ No ☒

Indicate by check mark whether the issuer (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 if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of June 30, 2015, the aggregate market value of issuer's Common Stock held by non-affiliates was approximately $771,000, based upon the closing price as reported on the OTCQB marketplace for that day.

As of March 27, 2016, there were outstanding 7,797,185 shares of the issuer’s Common Stock. $.01 par value.

Documents incorporated by reference: None

FORM 10-K

U.S. NeuroSurgical Holdings, Inc.

Form 10-K for the Fiscal Year Ended December 31, 2015

Table of Contents

PART I		3
Item 1.	Business.	3
Item 1A.	Risk Factors.	10
Item 1B.	Unresolved Staff Comments.	14
Item 2.	Properties.	14
Item 3.	Legal Proceedings.	14
Item 4.	Mine Safety Disclosures.	14
PART II		15
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	15
Item 6.	Selected Financial Data.	16
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	16
Item 7A.	Qualitative and Quantitative Disclosures About Market Risk.	18
Item 8.	Financial Statements and Supplementary Data.	18
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	18
Item 9A.	Controls and Procedures.	18
Item 9B.	Other Information.	20
PART III		21
Item 10.	Directors, Executive Officers and Corporate Governance.	21
Item 11.	Executive Compensation.	22
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	23
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	24
Item 14.	Principal Accounting Fees and Services.	24
PART IV		25
Item 15.	Exhibits, Financial Statement Schedules.	25

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PART I

Item 1.

Business.

U.S. NeuroSurgical Holdings, Inc. owns and operates, through its wholly-owned subsidiaries, stereotactic radiosurgery centers, utilizing gamma knife technology, and holds other interests in radiological treatment facilities. As used herein, unless the context indicates otherwise, the term "Company", "Registrant" and "Holdings" means U.S. NeuroSurgical Holdings, Inc. and its wholly-owned subsidiary, U.S. NeuroSurgical, Inc. (“USN”), and the wholly-owned subsidiaries of USN, U.S. NeuroSurgical Physics, Inc. and USN Corona, Inc.

USN, a Delaware corporation, was formed in July 1993. Until September 1999, USN was a wholly owned subsidiary of GHS, Inc. (“GHS”). Effective September 17, 1999, GHS distributed its shares of USN to the stockholders of GHS.

On September 3, 2015, pursuant to the Agreement and Plan of Reorganization (the “ Merger Agreement ”), dated as of September 3, 2015, by and among USN, Holdings and U.S. NeuroSurgical Merger Sub, Inc. (“ Merger Sub ”), the Company adopted a new holding company organizational structure whereby USN is now a wholly owned subsidiary of Holdings. This structure did not result in any changes to the assets or operations of the Company, but management believes that it will create a more flexible framework for possible future transactions and organizational and operational adjustments.

The holding company organizational structure was effected by a merger (the “ Merger ”) conducted pursuant to Section 251(g) of the Delaware General Corporation Law (the “ DGCL ”), which provides for the formation of a holding company structure without a vote of the stockholders of the constituent corporations. Because the holding company organizational structure occurred at the parent company level, the remainder of the Company’s subsidiaries, operations and customers were not be affected by this transaction.

In order to effect the Merger, USN formed Holdings as its wholly owned subsidiary and Holdings formed Merger Sub as its wholly owned subsidiary. Under the terms of the Merger Agreement, Merger Sub merged with and into USN, with USN surviving the merger and becoming a direct, wholly owned subsidiary of Holdings. Immediately prior to the Merger, Holdings had no assets, liabilities or operations.

Pursuant to the Merger Agreement, all of the outstanding capital stock of USN was converted, on a share for share basis, into capital stock of Holdings. As a result, each former stockholder of USN became the owner of an identical number of shares of capital stock of Holdings, evidencing the same proportional interests in Holdings and having the same designations, rights, powers and preferences, qualifications, limitations and restrictions, as those that the stockholder held in USN.

Following the Merger, Holdings’ common stock continued to trade on the over-the-counter market and continued to be quoted on the OTC Pink marketplace under the same symbol, “USNU.” The conversion of shares of capital stock under the Merger Agreement occurred without an exchange of physical certificates. Accordingly, physical certificates formerly representing shares of outstanding capital stock of USN are deemed to represent the same number of shares of capital stock of Holdings.

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Pursuant to Section 251(g) of the DGCL, the provisions of the certificate of incorporation and bylaws of Holdings are substantially identical to those of USN prior to the date on which the Merger Agreement took effect. The authorized capital stock of Holdings, the designations, rights, powers and preferences of such capital stock, and the qualifications, limitations and restrictions thereof are also substantially identical to those of the capital stock of USN immediately prior to the date of the Merger. Further, the directors and executive officers of Holdings are the same individuals who were directors and executive officers, respectively, of USN immediately prior to the date of the Merger.

The Company's executive offices are located at 2400 Research Boulevard, Suite 325, Rockville, Maryland 20850, and its telephone number is (301) 208-8998.

Disclosure Regarding Forward Looking Statements

Statements contained in this Annual Report on Form 10-K that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. Actual performance and results may differ materially from that projected or suggested herein due to certain risks and uncertainties including, without limitation, the timing and ultimate collectability of accounts receivable for gamma knife procedures from different payor groups such as Medicare and private payors; competition; technological obsolescence; government regulation and malpractice liability. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested are included in Item 1A, Risk Factors, and may also be identified from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”) and the Company’s public announcements, copies of which are available from the SEC or from the Company upon request.

General

The Company and its predecessors have owned and operated stereotactic radiosurgery centers, utilizing gamma knife technology since 1993. The Company currently owns and operates one gamma knife center on the premises of New York University Medical Center (“NYU”) in New York, New York. In January 2009, the Company opened a new center, the Southern California Regional Gamma Knife Center, at the San Antonio Regional Hospital (“SARH”) in Upland, California.

Management continues to explore opportunities to organize and participate in additional gamma knife centers. The Company's business strategy is to provide cost-effective approaches that allow hospitals, physicians, and patients access to gamma knife treatment capability, a high capital cost item. The Company provides the gamma knife to medical facilities on a "cost per treatment" basis. The Company’s business model is to own, or hold an interest in, the gamma knife units, and charge the medical facility, where the unit is housed and maintained, based on utilization.

During the fourth quarter of 2007, the Company formed a new wholly owned subsidiary, USN Corona, Inc. (“USNC”), to carry investments in Corona Gamma Knife, LLC and NeuroPartners, LLC. Those business units were formed to develop and manage the gamma knife center at SARH.

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The Company's principal target market is medical centers in major health care catchment areas that have physicians experienced with and dedicated to the use of the gamma knife. As it has with its NYU and SARH gamma knife centers, if circumstances support the opening of additional centers, the Company would seek cooperative ventures with these facilities.

In October 2012, the Company’s facility at NYU was totally destroyed as a result of flooding from Hurricane Sandy. The Company finalized arrangements with NYU regarding the restoration of the gamma knife center and the Company’s long term contract with NYU. The location of the restored center, with the new Leksell PERFEXION gamma knife, is in the Tisch Hospital of NYU Langone Medical Center. The center reopened and the first patient was treated on April, 29, 2014.

The Company estimates that, as of December 31, 2015, there were approximately 120 gamma knife treatment centers in the U.S.

During 2010, the Company expanded its market strategy to include opportunities to develop cancer centers featuring radiation therapy. These centers utilize linear accelerators with IMRT (Intensity Modulated Radiation Therapy) and IGRT (Image Guided Radiation Therapy) capabilities. In 2010, the Company formed Florida Oncology Partners, LLC in partnership with local physicians and other investors. USNC owns a 24% interest in the venture. The center is located in Miami, Florida and opened in the second quarter of 2011. The Company invested $200,000 in connection with its interest.

In 2011, the Company formed Boca Oncology Partners LLC, in partnership with local physicians and other investors. USNC, owned an 11.25% interest in the venture. The center, located in Boca Raton, Florida, opened in the third quarter of 2012. In February of 2014, the Company and the other partners sold their interest in Boca Oncology Partners, LLC to SFRO Holdings.

In January 2013, the Company formed Broward Oncology Partners, LLC with other outside investors to operate a radiation oncology center in Fort Lauderdale, Florida. USNC owned a 12.5% interest in the venture. The center opened in February 2013. In May 2014, the Company and other members sold their interests in Broward Oncology Partners, LLC.

The Company is currently exploring other opportunities for the establishment of cancer centers using IMRT and/or IGRT in Florida and other parts of the U.S.

Gamma Knife Technology

The gamma knife is a unique stereotactic radiosurgical device used to treat brain tumors and other malformations of the brain without invasive surgery. The gamma knife delivers a single, high dose of ionizing radiation emanating from 201 cobalt-60 sources positioned about a hemispherical, precision machined cavity. The lesion is first targeted with precision accuracy using advanced imaging and three dimensional treatment planning techniques such as CT Scans, MR Scans, conventional X-rays, or angiography. Each individual beam is focused on a common target producing an intense concentration of radiation at the target site, destroying the lesion while spreading the entry radiation dose uniformly and harmlessly over the patient's skull. The mechanical precision at the target site is +/- 0.1mm (1/10 of 1 millimeter). Because of the steep fall-off in the radiation intensity surrounding the target, the lesion can be destroyed, while sparing the surrounding tissue.

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The procedure, performed in a single treatment, sharply reduces hospital stay times and eliminates post-surgical bleeding and infection. When compared with conventional neurosurgery, gamma knife treatment is less expensive. However, not all patients are candidates for radiosurgery since the decision to use the gamma knife depends on the type, size, and location of the lesion.

Linear Accelerators

A linear particle accelerator (LINAC) is a type of particle accelerator that greatly increases the velocity of charged subatomic particles or ions by subjecting the charged particles to a series of oscillating electric potentials along a linear beamline. LINACs accelerate electrons using a tuned-cavity waveguide, in which the RF (radio frequency) power creates a standing wave. Some LINACs have short, vertically mounted waveguides, while higher energy machines tend to have a horizontal, longer waveguide and a bending magnet to turn the beam vertically towards the patient. Medical LINACs use monoenergetic electron beams between 4 and 25 MeV, giving an X-ray output with a spectrum of energies up to and including the electron energy when the electrons are directed at a high-density (such as tungsten) target. The electrons or X-rays can be used to treat both benign and malignant disease.

The intensity of the radiation in IMRT can be changed during treatment to spare more adjoining normal tissue than is spared during conventional radiation therapy. Because of this an increased dose of radiation can be delivered to the tumor using IMRT. IMRT is a type of conformal radiation, which shapes radiation beams to closely approximate the shape of the tumor.

IGRT is used to help better deliver radiation therapy to cancerous tumors. This is very useful since tumors can move between treatments due to differences in organ filling or movements while breathing. IGRT involves conformal radiation treatment guided by specialized imaging tests, such as CT scans, ultrasound or X-rays. These tests are done in the treatment room just before the patient is to receive his or her daily radiation therapy treatment.

New York Gamma Knife Center

The Company’s New York gamma knife treatment center was opened in July 1997 on the campus of NYU Medical Center. The Company installed a new Leksell gamma knife, the PERFEXION model, at the NYU Medical Center in March 2009 in replacement of the older gamma knife equipment. In connection with this upgrade, the Company modified its arrangement with NYU to extend the term for 12 years from March 2009.

In October 2012, the Company’s facility at NYU was totally destroyed as a result of flooding from Hurricane Sandy. The gamma knife had to be removed to prevent any cobalt leakage that might occur due to rusting of the equipment. The removal cost was $525,000. The Company paid a lease settlement of the outstanding principal balance only and received from insurance coverage $930,000 above the lease principal payments and emergency removal costs.

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The Company finalized arrangements with NYU regarding the restoration of the gamma knife center and the Company’s long term contract with NYU. The NYU facility was rebuilt and reopened in the Tisch Hospital of NYU Langone Medical Center. The first patient was treated on April, 29, 2014. The Company expects to generate revenue from the restored gamma knife center under the NYU contract until March 2021.

The Company entered into a six year lease in the amount of $4.7 million for the purchase of the replacement equipment and associated leasehold improvements. The first payment of $78,000 was made on September 1, 2014, including $18,000 of interest, and the final payment is due on May 1, 2020. The Company entered into a second two year lease in the amount of $250,000 for the cost of the construction required at the relocated site. The first payment of $12,000 was made on November 1, 2014, and the final payment is due on July 1, 2016.

The major terms of the agreement with NYU continue in effect, terminating at the end of March 2021. The Company is responsible for the maintenance and insurance for the gamma knife equipment at the NYU facility and is reimbursed for use of the gamma knife based on a fee per procedure performed with the equipment. NYU provides the medical and technical staff to operate the facility. At the end of the contract term, costs associated with closing and restoring the NYU facility to its original condition are the responsibility of the Company.

NYU pays the Company a scheduled fee based on the number of patient procedures performed. There were 474 patients treated during the year ended December 31, 2015, whereas in the prior year, while the center was only open from April to December, there were 326 patients treated at the facility. Total revenue in 2015 was $2,944,000 as opposed to total revenue of $2,607,000 in 2014.

The Southern California Regional Gamma Knife Center

During 2007, the Company managed the formation of the Southern California Regional Gamma Knife center at SARH in Upland, California. The Company participates in the ownership and operation of the center through its wholly-owned subsidiary, USNC. 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 is a 20% guarantor on NeuroPartners, LLC’s seven-year lease with respect to the gamma knife equipment and certain leasehold improvements at SARH. The outstanding balance on the lease obligations was $970,000 at December 31, 2015. In February 2016, NeuroPartners, negotiated a new lease to fund the reloading of cobalt and the necessary construction to do so. The new lease of $1,663,000 includes the balance of the lease obligations. This loan will be paid over 60 months. The first payment is due on April 1, 2016.

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The Company expects any potential obligations from this guarantee would be reduced by the recovery of the related collateral and expects any amounts arising from this guarantee to be insignificant.

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 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.

The Company’s share of cumulative losses associated with its investment in NeuroPartners LLC and CGK has exceeded its investment. Due to the outstanding loans made to NeuroPartners, LLC and CGK, NeuroPartners, LLC and CGK are considered to be variable interest entities of the Company. However, as the Company is not deemed to be the primary beneficiary of NeuroPartners, LLC and CGK, since it does not have the power to direct the operating activities that most significantly affect NeuroPartners, LLC’s and CGK’s economic performance, certain disclosures are required rather than consolidation.

During 2015 the Company absorbed losses against the total outstanding receivables of $62,000 from NeuroPartners LLC and CGK. For the year ended December 31, 2015, the Company’s equity in loss of NeuroPartners, LLC and CGK was $84,000. The Company’s portion of the total accumulated deficit is $412,000.

Future Gamma Knife Centers

The Company is currently exploring other opportunities for gamma knife centers and centers that provide related healthcare services located near hospitals throughout the United States. Discussions regarding such centers is preliminary and there can be no assurance that any such discussions will result in the opening of new centers.

Florida Oncology Partners

During the quarter ended September 30, 2010, the Company participated in the formation of Florida Oncology Partners, LLC (“FOP”) and Florida Oncology Partners RE, LLC (“FOPRE”) (collectively referred to as “Florida Oncology Partners”), which operates a cancer center located in West Kendall (Miami), Florida. The center diagnoses and treats patients utilizing a Varian Rapid Arc linear accelerator and a GE CT scanner. USNC originally invested $200,000 for a 20% interest in Florida Oncology Partners. The remaining 80% was owned by other outside investors. The center opened and treated its first patient in May 2011. During 2012 and 2013, FOP made several distributions that reduced the Company’s investment significantly. In January of 2015, one of the investors was removed from the entities, and his ownership interest was distributed among the remaining members in relationship to the percentage they owned. This distribution resulted in an increase of ownership interest for the Company of 4% in each entity. As of January 1, 2015, the Company has a 24% ownership in both FOP and FOPRE.

During 2011, FOP entered into a seven year capital lease with Key Bank for approximately $5,800,000. Under the terms of the capital lease, USNC agreed to guarantee a maximum of $1,433,000, approximately 25% of the original lease obligation in the event of default. In June 2012, FOPRE completed the financing agreement to purchase the building that is occupied by FOP. The amount of the loan was $1,534,000 to be paid at a monthly rate of approximately $8,500 for 120 months with the final payment due on June 15, 2022. In December 2015, FOPRE sold the building, for a gain on sale of $577,000. The Company’s share of the gain was $139,000. The related mortgage was repaid upon closing of the sale.

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In December of 2015, FOP entered into an agreement with 21 ^st Century Oncology for the purchase of FOP’s Varian machine and other medical equipment. 21 ^st Century Oncology paid FOP $1,000,000 as a down payment for the machine and other medical equipment and is currently making monthly payments of $171,000 for the machine until such time as the sale is finalized.

Boca Oncology Partners

During the quarter ended June 30, 2011, the Company 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, LLC (“Boca West IMP”), owner of a medical office building in West Boca, Florida in which BOP operates. BOP occupies approximately 6,000 square feet of the 32,000 square foot building. The Company’s wholly-owned subsidiary, USNC, invested $225,000 initially and had a 22.5% interest in BOP and BOPRE.

In January 2012, an additional investor purchased 50% of the partnership reducing the Company’s ownership to 11.25%. The Company loaned the proceeds of $56,250 back to BOP as a 5 year note at 7% interest. The remaining 88.75% was owned by other outside investors. 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. Then the members of BOPRE sold 31.5% of BOPRE to a new investor. The proceeds of $28,000 were loaned to BOP and USNC’s investment in BOPRE was reduced to 15.4%.

Although the Company reduced its investment to 11.25% of BOP and 15.4% of BOPRE, the Company continues to account for these investments under the equity method due to its participation in the management of the administration and accounting functions of BOP and BOPRE. Due to the outstanding loans made to BOP, BOP was considered to be a variable interest entity of the Company. However, as the Company was not deemed to be the primary beneficiary of BOP, since it did not have the power to direct the operating activities that most significantly affect BOP’s economic performance; certain disclosures are required rather than consolidation.

The center opened and the first patient was treated in August 2012. In February 2014, the Company and other members sold their interests in BOP. Three members provided short-term loans to the Company of $462,000 from their sales proceeds. During 2014, the Company had incurred $26,000 in interest expense related to these loans. During the year ended December 31, 2014, the Company repaid all of the loan balance and associated interest.

The Company’s recorded investment in BOPRE is $139,000 at December 31, 2015.

USNC is a 10% guarantor on 50% of the outstanding balance of Boca West IMP’s ten-year mortgage. This mortgage had an original balance of $3,000,000 and is secured by the medical office building in which BOP operates. The outstanding balance on the mortgage is $2,632,000 at December 31, 2015. The Company expects any potential obligations from this guarantee would be fully satisfied out of the proceeds of the liquidation of the real estate and thus believes that as a practical matter its exposure in connections with the guarantee is not material.

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USNC was a 14.06% guarantor on BOP’s five-year lease with respect to the oncology equipment at the Boca Raton, Florida cancer center. Upon the sale of BOP, which occurred in 2014, USNC was indemnified by the buyer from any losses arising from the guarantee.

Broward Oncology Partners

In January 2013, the Company formed Broward Oncology Partners, LLC (“BROP”) with other outside investors. The Company invested $50,000 in late April 2013 for a 12.5% ownership interest in BROP. BROP operates a radiation oncology center in Fort Lauderdale, Florida under a lease from Tenet Health Services. BROP began operations in February 2013.

In May 2014, the Company and other members sold their interests in BROP.

Strategy for Participation in Cancer Treatment

As a result of the Company’s experiences over the past few years, the Company has expanded its focus to the broader based cancer treatment market. In order to reduce the risk and broaden its opportunities for profitable growth, the Company, where possible, has been pursuing partnerships with local investors/providers to develop and operate oncology centers that utilize linear accelerators (LINACs) to treat cancers in the whole body. The Company also continues to evaluate opportunities to develop additional gamma knife facilities. FOP, BOP and the Southern California Regional Gamma Knife Center typify this new strategy.

Employees

U.S. NeuroSurgical, Inc. has three full-time employees and relies on consultants for certain services as required from time-to-time. All of its full-time employees are engaged in sales, marketing and administration.

Item 1A.

Risk Factors.

Regulatory Environment

The levels of revenues and profitability of companies involved in the health services industry, such as the Company, may be affected by the continuing efforts of governmental and third party payors to contain or reduce the costs of health care through various means. Although the Company does not believe that its business activities will be materially affected in the foreseeable future, it is not possible to predict the long term effect of recent and future changes in the regulatory environment, or the responses of federal, state or private payors for healthcare goods and services in response to healthcare proposals or legislation.

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In March 2010, significant reforms to the healthcare system were adopted in the form of the Patient Protection and Affordable Care Act (the “PPACA”). The PPACA includes provisions that, among other things, reduce and/or limit Medicare reimbursement to certain providers, require all individuals to have health insurance (with limited exceptions) and impose new and/or increased taxes. The Company cannot predict the effects these changes may have on its business, and no assurance can be given that any such changes will not have a material adverse effect on the Company.

In addition, the provision of medical services in the United States is dependent on the availability of reimbursement to consumers from third party payors, such as government and private insurance companies. Although patients are ultimately responsible for services rendered, the Company expects that the majority of its revenues will be derived from reimbursements by third party payors. Medicare has authorized reimbursement for gamma knife and other forms of cancer treatment. Over the last several years, such third party payors are increasingly challenging the cost effectiveness of medical products and services and taking other cost containment measures. Therefore, although treatment costs using the gamma knife compare favorably to traditional invasive brain surgery, it is unclear how this trend among third party payors and future regulatory reforms affecting governmental reimbursement will affect procedures in the higher end of the cost scale.

In the future, the Company may establish additional gamma knife or other types of cancer treatment centers. Completion of future centers would require approvals and arrangements with hospitals, health care organizations, or other third parties, including certain regulatory authorities. The Food and Drug Administration has issued the requisite pre-market approval for the gamma knife utilized by the Company. In addition, many states require hospitals to obtain a Certificate of Need (“CON”) before they can acquire a significant piece of medical equipment. Should the Company enter into future ventures such "need" will be demonstrable, but it can have no assurance that CONs will be granted. In addition, the Nuclear Regulatory Commission (the “NRC”) must issue a permit to the Company to permit loading the cobalt at each gamma knife site. While the Company believes that it can obtain a NRC permit for each gamma knife unit, there is no assurance that it will.

Liability Insurance

Although the Company does not directly provide medical services, it has obtained professional medical liability insurance, and has general liability insurance as well. THE COMPANY’s professional medical liability and general liability policies have limits of $3 million each. The Company believes that its insurance is adequate for providing treatment facilities and non-medical services, although there can be no assurance that the coverage limits of such insurance will be adequate or that coverage will not be reduced or become unavailable in the future.

Competition

The health care industry, in general, is highly competitive and the Company expects to have substantial competition from other independent organizations, as well as from hospitals in establishing future gamma knife or other types of cancer treatment centers. There are other companies that provide gamma knife or other types of cancer treatment on a "cost per treatment basis". In addition, larger hospitals may be expected to maintain a gamma knife as well as competing technologies as part of their regular inpatient services, which could have the effect of reducing the number of gamma knife procedures performed at such facility. Principal competitive factors include quality and timeliness of test results, ability to develop and maintain relationships with referring physicians, facility location, convenience of scheduling and availability of patient appointment times. The Company believes that cost containment measures will encourage hospitals to seek companies that are providing the technology, instead of incurring the capital cost of establishing their own treatment centers.

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Gamma Knife Financing

The gamma knife is an expensive piece of equipment, presently costing from $3.0 to $4.5 million, depending on features. Therefore, the Company's development of new gamma knife centers is dependent on its ability to secure favorable financing. In addition, after a number of years of use, the radioactive cobalt contained in the gamma knife requires replacement. This is also an expensive process. For example, the cobalt for the previous gamma knife in the NYU facility was reloaded in August 2003 and the costs were approximately $800,000.

Gamma Knife Supply and Servicing

To date, the Company has purchased all of its gamma knife equipment from Elekta Instruments, Inc., a subsidiary of AB Elekta of Stockholm, Sweden. Elekta is responsible for the installation and testing of the equipment and the training of the hospital staff in the operation of the equipment. the Company arranges for maintenance services for its gamma knife units, including the necessary services related to cobalt replacement, through Elekta. Any interruption in the supply of equipment or services from Elekta would adversely affect the Companys ability to maintain its gamma knife treatment centers.

Also, should restrictions be imposed on the operations of Elekta, such as restrictions relating to the handling and disposal of radioactive materials, necessary support services could become more costly and more difficult to obtain.

New Technology/Possible Obsolescence

Gamma knife technology may be subject to technological change. Consequently, the Company will have to rely on the leading gamma knife's manufacturer, Elekta, to introduce improvements or upgrades in order to keep pace with technological change. Any such improvements or upgrades which the Company may be required to introduce will require additional financing. In addition, newly developed techniques and devices for performing brain surgery may render the gamma knife less competitive or obsolete.

Dependence on Hospital, Healthcare Organizations and Others

In establishing new gamma knife centers, the Company must reach an arrangement with a hospital or other medical center for the installation and operation of a gamma knife facility and then to purchase the gamma knife equipment and construct and operate the facility. Before entering into such an agreement, the Company must make an assessment of the economic feasibility of operating the gamma knife at that location. The Company retains no control or influence over the medical staff or decisions regarding the treatment of patients. In that regard, the Company’s economic success is highly dependent on its initial determinations of the viability of the gamma knife’s location. Should the medical center or the physicians at that medical center ultimately use the gamma knife facility for significantly fewer patients than initially projected, the Company could be required to operate the gamma knife center at a loss for an extended period of time.

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With respect to other cancer centers in which the Company has an interest, the Company participates with other physician groups and other investors in planning and constructing the facility and purchasing the necessary equipment, such as an IMRT or IGRT. The Company plays a lead role in the initial planning and establishment of those centers, but does not control the day-to-day operations thereafter. The long term success of those centers depends to a significant degree on the operating decisions made by the physicians and administrators at those centers.

Reliance on Business of the New York University Gamma Knife Center; Recent Destruction of Equipment and Discontinuation of Business at NYU

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 has 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. Unless and until the Company is successful in building its activities at other centers and at new locations, disruptions at NYU could have a materially adverse effect on the Company.

In October 2012, the Company’s facility at NYU was totally destroyed as a result of flooding from Hurricane Sandy. The gamma knife had to be removed to prevent cobalt leakage that might occur due to rusting of the equipment.

In addition, the cost of the removal of the damaged equipment was $525,000. The Company paid a lease settlement of the outstanding principal of the loan balance only and received from insurance coverage $930,000 above the lease principal payments and emergency removal costs.

The Company has finalized arrangements with NYU regarding the restored gamma knife center and the Company’s long term contract with NYU. The location of the restored facility, with the new Leksell PERFEXION gamma knife, is in the Tisch Hospital of NYU Langone Medical Center. The center reopened and the first patient was treated on April, 29, 2014. Substantially all of the Company’s revenue for 2015 and 2014 resulted from patients treated at this facility.

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. If the Company experiences operating losses in the future, 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.

Stock Price Volatility; Illiquid Trading Market

The Company’s common stock is thinly traded. At present, trades are reported on the OTC market only several days a month. This thin trading and relatively small non-affiliate float lead to a high level of volatility in reported sale prices. Investors in the Company’s Common Stock will have a limited ability to trade shares on the open market and, even if able to sell shares, could suffer significant market losses due to large swings in the prices of the shares.

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Item 1B.

Unresolved Staff Comments.

None

Item 2.

Properties.

The Company's base facility, from which it conducts substantially all of its administrative operations, is located in Rockville, Maryland and occupies approximately 1,300 square feet. The rent is approximately $42,000 per year. the Company occupies about 3,800 square feet at the NYU Medical Center in New York, New York. Pursuant to the facility agreements with NYU, the Company is not required to pay separate rent for the premises occupied by its gamma knife center. Overhead, including rent, was negotiated in determining the fee paid to the Company for the use of the gamma knife. the Company’s agreement with NYU was extended in 2008 and now expires in 2021.

Item 3.

Legal Proceedings.

The Company is subject to lawsuits, investigations and potential claims arising out of the ordinary conduct of its business. The Company is not currently involved in any material litigation.

Item 4.

Mine Safety Disclosures.

Not applicable

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PART II

Item 5.

Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Company's Common Stock is traded on the over-the-counter market and quoted on the OTCQB marketplace. OTCQB is the middle tier of the Pink OTC Market, Inc.

The following table displays the range of high and low closing prices for the Company’s Common Stock for the period from January 1, 2014 through December 31, 2015.

Period	High Close	Low Close

January 1 – March 31, 2014	.28	.10
April 1 - June 30, 2014	.19	.14
July 1 – September 30, 2014	.35	.11
October 1 – December 31, 2014	.55	.22

January 1 – March 31, 2015	.71	.41
April 1 - June 30, 2015	.60	.30
July 1 – September 30, 2015	.60	.22
October 1 – December 31, 2015	.27	.08

The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.

As of March 27, 2016, there were approximately 76 holders of record of the Company's Common Stock.

To date the Company declared no dividends on its Common Stock and does not anticipate declaring dividends in the foreseeable future.

During the year ended December 31, 2015, the Company did not purchase any of its own equity securities.

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Item 6.

Selected Financial Data.

Not required for smaller reporting companies.

Item 7.

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

Results of operations

2015 Compared to 2014

Patient revenue in 2015 was $2,971,000 as compared to $2,607,000 in 2014. This increase in patient revenue was due to the partial year the facility was opened in 2014, after the destruction of the gamma knife at the NYU center following Hurricane Sandy in October of 2012.

Patient expenses in 2015 were $1,195,000 as compared to $692,000 in 2014. Patient expenses do not vary materially with the number of procedures performed, but are tied to depreciation, maintenance and other fixed expenses. The increase experienced in 2015 over 2014 was due to the fact that the gamma knife was not in service during part of 2014 and, as a result, there was less depreciation, maintenance and other fixed expenses during the year. SG&A increased 4% from $1,179,000 in 2014 to $1,232,000 in 2015. This increase in SG&A resulted from higher insurance costs and professional fees realized in 2015. There was interest expense of $181,000 in 2015 down from $184,000 in 2014. The Company reported net income of $396,000 as compared to $561,000 in the prior year. This decrease in income was due largely to the maintenance contract for the gamma knife at NYU, which began April 2015, additional depreciation, and due to lower rates per procedure performed as a result of the revised operating agreement with NYU. As a result, the Company incurred a deferred income tax charge of $252,000 in 2015 as compared to $242,000 in 2014.

The Company finalized arrangements with NYU regarding the restoration of the gamma knife center and the Company’s long term contract with NYU. The location of the new facility, with the new Leksell PERFEXION gamma knife, is in the Tisch Hospital of NYU Langone Medical Center. The center opened and the first patient was treated on April, 29, 2014. The Company expects to generate revenue from the restored gamma knife center under the NYU contract until March 2021.

Liquidity and capital resources

At December 31, 2015 the Company had working capital of $549,000 as compared to $455,000 at December 31, 2014. This increase was due mostly to increase of revenue received from procedures. Total assets decreased by $65,000 from 2014 to 2015 principally as a result of additional accumulated depreciation offset by an increase in accounts receivable at the end of the period. Cash and cash equivalents at December 31, 2015 were $1,068,000 as compared to $1,053,000 at December 31, 2014.

Net cash provided by operating activities was $1,158,000 in 2015 as compared to $951,000 in 2014. Net cash used in financing activities was $803,000 in 2015 as compared to $340,000 in 2014. Depreciation and amortization was $935,000 in 2015 as compared to $672,000 in 2014

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For the year ended December 31, 2015, net cash used in investing activities was $340,000 as compared to $972,000 in 2014. The 2014 amount included the amount paid for leasehold improvements related to the new gamma knife.

Off-balance sheet arrangements

None

Critical accounting policies

Estimates and assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company’s agreement with NYU is an operating lease, and patient revenue from the use of the gamma knife is lease income. There are no minimum lease payments from NYU. The NYU agreement provides for contingent rental income based on a tiered fee schedule related to the number of patient procedures and associated thresholds. The Company recognizes the contingent rental income on a systematic basis using an average fee per procedure calculated by estimating the expected number of procedures per contract year, which runs from November 1, to the following October 31. Any amounts received in excess of the average fee are considered deferred revenue. At the end of each reporting period, the Company reviews its estimated revenue for the contract year and adjusts revenue for any material changes in the estimate. At the end of the contract year, the revenue is adjusted to the actual amount received.

Asset retirement obligations

The Company records liabilities for legal obligations associated with the retirement of tangible long-lived assets based on the estimated future cost of asset retirement obligations discounted to present value, and records a corresponding asset and liability on its consolidated balance sheets. The values ultimately derived are based on many significant estimates, including future decommissioning costs, inflation, cost of capital, and market risk premiums. The nature of these estimates requires the Company to make judgments based on historical experience and future expectations. Revisions to the estimates may be required based on such things as changes to cost estimates or the timing of future cash outlays. Any such changes that result in upward or downward revisions in the estimated obligation will result in an adjustment to the related capitalized asset and corresponding liability on a prospective basis. In 2014 the Company estimated that the cost to remove the gamma knife at the end of the agreement to be approximately $620,000, The estimated costs of these obligations are capitalized as costs of the assets subject to the retirement obligations and amortized over the lives of the assets. The estimated present value of the asset retirement obligation is $466,000.

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Investments in unconsolidated entities

The Company accounts for its investments in unconsolidated entities by the equity method. The Company records its share of such earnings (losses) in the consolidated statements of operations as “Income (loss) from investments in unconsolidated entities”. The carrying value of the Company’s investments in unconsolidated entities is recorded in the consolidated balance sheets. The Company records losses of the unconsolidated entities only to the extent of the Company’s interest in and advances to the entities.

Item 7A.

Qualitative and Quantitative Disclosures About Market Risk.

Not required for smaller reporting companies.

Item 8.

Financial Statements and Supplementary Data.

The financial statements and supplementary data required by this item are set forth in this Annual Report on Form 10-K beginning at page F-1.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None

Item 9A.

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 President 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 President 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.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles 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 generally accepted accounting principles 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.

All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

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Our management, including our President, and assisted by our Lead Director, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. 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 has identified the following material weakness as of December 31, 2015: 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 requirement. 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 and income taxes. The Company is in the process of developing efficient approaches to remediate this material weakness.

Changes in Internal Control over Financial Reporting

Management is in the process of reviewing and developing plans to remediate the material weakness identified above. Otherwise, there have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.

Other Information.

Not applicable.

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PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

The directors and executive officers of the Company are as follows:

Name	Age	Position

Alan Gold	71	President & Chairman of the Board

William F. Leimkuhler	64	Director

Charles H. Merriman, III	81	Director

Susan Greenwald	70	Vice President and Secretary

Alan Gold has served as President and Chairman of the Board of the Company since 1996. Mr. Gold has also been a director of the Company since its formation in 1993. Mr. Gold served as President of GHS from 1983 through May 1999 and director of GHS since its formation through November 1999. Mr. Gold was one of the founders of Global Health Systems, the predecessor of GHS, serving as its President since its formation in July 1983. From 1981 to 1983, he served as Executive Vice President of Libra Group, a company located in Rockville, Maryland, engaged in health care automation, where he was President of Global Health Foundation and Libra Research and Executive Vice President of Libra Technology. From July 1997 through March 1998 Mr. Gold was also an employee of Health Management Systems.

William F. Leimkuhler has served as director of the Company since May 1999. He currently serves as Lead Director of the Company’s Board of Directors. He also served as a director of GHS since its inception in 1984 through November 1999. Mr. Leimkuhler is currently General Counsel & Director of Business Development for Paice Corporation, the developer of an advanced hybrid electric powertrain for passenger vehicles, a position he has held since October 1999. He also acts as a consultant on corporate and business development matters to several emerging growth companies. From January 1994 until October 1999, he served as Vice President and General Counsel of Allen & Company Incorporated, an investment banking firm. Mr. Leimkuhler also serves as a director of Argan, Inc. and Northern Power Systems Corp.

Charles H. Merriman, III has served as a director of the Company since May 1999. He also served as a director of GHS from October 1997 to November 1999. Mr. Merriman retired at the close of the year 2001 from service as Senior Vice President and Managing Director of BB&T Capital Markets ("BB&T"), an investment banking enterprise, where he was employed in various capacities since 1972 by BB&T and its predecessor. Mr. Merriman has extensive knowledge of the Company’s primary focus on healthcare and technology.

Susan Greenwald has served as Vice President of Marketing Communications and as Secretary of the Company since May 1999. She performed services for GHS in the same capacity from its inception in 1983 through May 1999. Ms. Greenwald was one of the founders of Global Health Systems, the predecessor of GHS, and served as its Vice President of Marketing Communications since 1983. From 1981 through 1983 she was the Proposal Manager for Libra Technology and Global Health Foundation, sister companies engaged in federal contracting and private enterprise, respectively, in the healthcare information technology business. From July 1997 through February 1998, Ms. Greenwald was an employee of Health Management Systems.

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Mr. Gold and Ms. Greenwald are married.

Pursuant to the Company’s bylaws, the Company’s Board of Directors is elected by the stockholders at each annual meeting to serve until the next annual meeting or until their successors are elected and qualified. In the case of a vacancy, a director will be appointed by a majority of the remaining directors then in office to serve the remainder of the term left vacant. Directors do not receive any fees for attending board meetings. Directors are entitled to receive reimbursement for traveling costs and other out-of-pocket expenses incurred in attending board meetings. During the year ended December 31, 2014, the Board of Directors held one meeting, which was attended by all incumbent directors. In view of the small size of the Company’s Board, it does not operate through committees. Instead, the full Board of Directors performs the functions typically performed by the audit, compensation and nominating committees.

Pursuant to the Company’s bylaws, officers of the Company hold office until the first meeting of directors following the next annual meeting of stockholders and until their successors are chosen and qualified.

Section 16 (a) Beneficial Ownership Reporting Compliance

Based solely upon a review of the copies of the forms furnished to the Company, or written representations from certain reporting persons, the Company believes that during the year ended December 31, 2015, all filing requirements applicable to its officers and directors were complied with by such individuals.

Item 11.

Executive Compensation.

The information below sets forth the compensation for the years ended December 31, 2015, 2014, and 2013 for the President of the Company.

Summary Compensation Table
Name and	Annual Compensation
Principal Position	Year	Salary
Alan Gold	2015	$	300,000
President & Chairman	2014	$	300,000
of the Board	2013	$	300,000

Employee Benefits; Employment Agreement

Mr. Gold is also entitled to reimbursement of up to $1,000 per month for automobile expenses. In addition, as with other full-time employees, Mr. Gold is entitled to participate in Company health and life insurance program. The Company also pays the premiums for an additional policy of life insurance in the amount of $500,000, naming Mr. Gold’s wife as beneficiary.

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The Company and Mr. Gold are parties to an employment agreement giving either party the option to terminate employment by giving the other party six-months written notice.

Director Compensation

During 2015, our directors who are not officers or employees were entitled to an annual retainer of $3,000. Mr. Leimkuhler, the Lead Director, received a retainer of $3,000 per month in view of the higher level of activity required of him. Our directors of the Company who are officers or employees do not receive any additional compensation for serving on the Board.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth, as of March 27, 2016, certain information with respect to each beneficial owner of more than 5% of the Company's Common Stock and each director and executive officer of the Company:

Name and Address of Beneficial Owner	Number of Shares Beneficially Owned (1)	Percent of Class

Alan Gold (2) 2400 Research Blvd. Rockville, MD 20850	1,140,246	14.6%

William F. Leimkuhler 43 Salem Straits Road Darien, CT 06820	100,000	1.3%

Charles H. Merriman III 5507 Cary St. Road Richmond, VA 23226	130,672	1.7%

Stanley S. Shuman (3) 711 Fifth Avenue New York, NY 10022	2,367,734	30.4%

Allen & Company Incorporated 711 Fifth Avenue New York, NY 10022	1,578,489	20.2%

All Directors and officers of the Company as a group (2) (four persons)	1,370,918	17.6%

(1)	Unless otherwise indicated, all shares are beneficially owned and sole voting and investment power is held by the person named above.

(2)	Includes 1,140,246 shares held jointly by Mr. Gold and his wife, Susan Greenwald, as joint tenants with right of survivorship.

(3)	Includes 1,578,489 shares owned by Allen & Company Incorporated, Mr. Shuman disclaims beneficial ownership in such shares, except to the extent of his pecuniary interest therein.

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Item 13.

Certain Relationships and Related Transactions, and Director Independence.

None

Item 14.

Principal Accounting Fees and Services.

Audit Fees . Audit Fees represent fees for services rendered in connection with the annual audit and quarterly reviews of the Company’s financial statements. For the years ended December 31, 2015, and 2014, the Company paid $128,000 and $140,000, respectively, for Audit Fees. For 2015, the fees to Dixon Hughes Goodman LLP were $13,000 and to Aronson, LLC were $115,000. For 2014, the fees to Dixon Hughes Goodman LLP were $16,000 and to Aronson, LLC were $124,000.

Audit-Related Fees . Audit-Related Fees represent fees for services rendered in connection with assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and are not reported as Audit Fees. For the years ended December 31, 2015 and 2014, the Company did not pay or accrue any amounts for Audit Related Fees.

Tax Fees . Tax Fees represent fees for services rendered in connection with tax compliance, tax advice and tax planning. For the years ended December 31, 2015 and 2014, the Company paid $16,000 and $21,000 for Tax Fees to Dixon Hughes Goodman LLP.

All Other Fees . All Other Fees represent fees for services rendered by the Company’s principal accountants other than those described above. For the years ended December 31, 2015 and 2014, the Company did not pay or accrue any amounts for these services.

The Board of Directors has established a policy requiring pre-approval by the Board of Directors of all audit and non-audit services provided by its registered independent public accounting firm. The policy requires the general pre-approval of annual audit services and all other permitted services. All of the audit and non-audit services described above were approved by the Board.

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PART IV

Item 15.

Exhibits, Financial Statement Schedules.

(a) (1) Financial Statements and Financial Statement Schedules . The following are filed as part of this report:

	Page No.
Consolidated Financial Statements of the Company	F-1
Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2015 and 2014	F-3
Consolidated Statements of Operations for the years ended December 31, 2015 and 2014	F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2015 and 2014	F-5
Consolidated Statements of Cash Flows for the year ended December 31, 2015 and 2014	F-6
Notes to Consolidated Financial Statements	F-7

(2) Financial Statement Schedules . All financial statement schedules as required by Item 8 and Item 15 of Form 10-K have been omitted because the information requested is not required, not applicable, or is shown in the Consolidated Financial Statements or Notes thereto.

(b)

Exhibits:

3.1

Form of Amended and Restated Certificate of Incorporation of U.S. NeuroSurgical, Inc. (“USN”) (incorporated herein by reference to Exhibit 3.1 to our Form 10 Registration Statement as filed July 1, 1999)

3.2

Form of Amended and Restated Bylaws of USN (incorporated herein by reference to Exhibit 3.2 to our Form 10 Registration Statement as filed July 1, 1999)

4.1

Form of Stock Certificate of Common Stock (incorporated herein by reference to Exhibit 4.1 to our Form 10 Registration Statement as filed July 1, 1999)

10.1

Distribution Agreement dated May 27, 1999 between GHS, Inc. (“GHS”) and USN (incorporated herein by reference to Exhibit 10.1 to our Form 10 Registration Statement as filed July 1, 1999)

10.2

Tax Matters Agreement dated May 27, 1999 between GHS and USN (incorporated herein by reference to Exhibit 10.2 to our Form 10 Registration Statement as filed July 1, 1999)

10.3

Assignment and Assumption Agreement dated May 27, 1999 between GHS and USN (incorporated herein by reference to Exhibit 10.3 to our Form 10 Registration Statement as filed July 1, 1999)

10.4

Employment Agreement dated December 14, 1984 between USN and Alan Gold, as amended March 7, 1986 (incorporated by reference to Exhibit 10.3 of GHS’s Registration Statement No. 33-4532-W on form S-18)

10.5

Agreement dated December 29, 1993 between USN and Elekta Instruments, Inc. (incorporated by reference to 10o to GHS’s 1994 Annual Report on Form 10-K)

10.6

Agreement dated August 1, 1996 between USN and DVI, Inc. (incorporated by reference 10j to GHS’s 1997 Annual Report on Form 10-K)

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10.7

Gamma Knife Neuroradiosurgery Equipment dated as of November 26, 1996 between New York University on behalf of New York University Medical Center and USN (incorporated herein by reference to Exhibit 10.10 to our Form 10 Registration Statement as filed July 1, 1999)

21.1

List of Subsidiaries (incorporated herein by reference to Exhibit 21.1 to our Form 10 Registration Statement as filed July 1, 1999)

31.1*

Certifications of CEO and CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certifications of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith

(c)	Financial Statement Schedules . None

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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

	By	/s/ Alan Gold
		Alan Gold
		President & Chairman of the Board
		and Principal Financial Officer

	Dated:	March 30, 2016

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

March 30, 2016	/s/ Alan Gold
	Alan Gold
	President & Chairman of the Board

March 30, 2016	/s/ William F. Leimkuhler
	William F. Leimkuhler
	Director

March 30, 2016	/s/ Charles H. Merriman III
	Charles H. Merriman III
	Director

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

Contents

	Page

Consolidated Financial Statements	F-1

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, 2015 and 2014	F-3

Consolidated Statements of Operations for the years ended December 31, 2015 and 2014	F-4

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2015 and 2014	F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014	F-6

Notes to Consolidated Financial Statements	F-7

See accompanying notes to the consolidated financial statements

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

U.S. NeuroSurgical Holdings, Inc.

Rockville, Maryland

We have audited the accompanying consolidated balance sheets of U.S. NeuroSurgical Holdings, Inc. and Subsidiaries (the “Company”) as of December 31, 2015 and 2014 , and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2015. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of U.S. NeuroSurgical Holdings, Inc. and Subsidiaries as of December 31, 2015 and 2014 , and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

Aronson LLC

Rockville, Maryland

March 30, 2016

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	1,068,000		$	1,053,000
Accounts receivable		626,000			277,000
Due from related parties		21,000			8,000
Elekta refund due		-			115,000
Short term loan receivable		35,000			-
Other current assets		98,000			72,000
Total current assets		1,848,000			1,525,000

Other assets:
Notes receivable		210,000			-
Investments in unconsolidated entities		364,000			323,000
Total other assets		574,000			323,000

Property and equipment:
Gamma knife (net of accumulated depreciation of $1,097,000 in 2015 and $475,000 in 2014)		3,294,000			3,960,000
Leasehold improvements (net of accumulated amortization of $510,000 in 2015 and $197,000 in 2014)		1,670,000			1,643,000

Total property and equipment		4,964,000			5,603,000

TOTAL ASSETS	$	7,386,000		$	7,451,000

LIABILITIES
Current liabilities:
Obligations under capital lease - current portion	$	866,000		$	821,000
Deferred tax liability- current portion		191,000			92,000
Accounts payable and accrued expenses		80,000			96,000
Deferred revenue		149,000			48,000
Due to related parties		13,000			13,000
Total current liabilities		1,299,000			1,070,000

Obligations under capital lease - net of current portion		2,945,000			3,838,000
Deferred tax liability - net of current portion		303,000			150,000
Guarantee liability		15,000			-
Asset retirement obligations		466,000			431,000
Total liabilities		5,028,000			5,489,000

STOCKHOLDERS’ EQUITY
Common stock - par value $.01; 25,000,000 shares authorized; 7,797,185 shares issued and outstanding at December 31, 2015 and 2014.		78,000			78,000
Additional paid-in capital		3,100,000			3,100,000
Accumulated deficit		(820,000	)		(1,216,000	)
Total stockholders' equity		2,358,000			1,962,000

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	7,386,000		$	7,451,000

See accompanying notes to the consolidated financial statements

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2015			2014

Revenue	$	2,971,000		$	2,607,000

Costs and expenses:
Patient expenses		1,195,000			692,000
Selling, general and administrative		1,232,000			1,179,000

Total		2,427,000			1,871,000

Operating income		544,000			736,000

Interest expense		(181,000	)		(184,000	)
Gain from sales of investments in unconsolidated entites		-			237,000
Income from investments in unconsolidated entities		285,000			14,000

Income before income taxes		648,000			803,000

Provision for income tax expense		(252,000	)		(242,000	)

Net income	$	396,000		$	561,000

Basic and diluted net income per share	$	0.05		$	0.07

Weighted average common shares outstanding		7,797,185			7,797,185

See accompanying notes to the consolidated financial statements

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

	Common Stock
	Number of Shares		Amount		Additional Paid-In Capital		Accumulated Deficit			Total
Balance - December 31, 2013		7,797,185	$	78,000	$	3,100,000	$	(1,777,000	)	$	1,401,000

Net income for the year ended December 31, 2014		-		-		-		561,000			561,000

Balance - December 31, 2014		7,797,185	$	78,000	$	3,100,000	$	(1,216,000	)	$	1,962,000

Net income for the year ended December 31, 2015		-		-		-		396,000			396,000

Balance - December 31, 2015		7,797,185	$	78,000	$	3,100,000	$	(820,000	)	$	2,358,000

See accompanying notes to the consolidated financial statements

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2015			2014

Cash flows from operating activities:
Net income	$	396,000		$	561,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		935,000			672,000
Income from investment in unconsolidated entities, net		(285,000	)		(14,000	)
Gain from sales of investments in unconsolidated entities		-			(237,000	)
Accretion of asset retirement obligations		35,000			-
Accrued interest from capital lease obligations		(42,000	)		56,000
Deferred income taxes		252,000			242,000
Changes in:
Accounts receivable		(349,000	)		(277,000	)
Elekta refund due		115,000
Other current assets		(26,000	)		(42,000	)
Accounts payable and accrued expenses		26,000			(58,000	)
Deferred revenue		101,000			48,000
Net cash provided by operating activities		1,158,000			951,000

Cash flows from investing activities:
Distributions from unconsolidated entities		312,000			-
Proceeds from sale of investments		-			256,000
Advances- short term receivable and note receivable		(245,000	)		-
Purchase of leasehold improvements		(341,000	)		(1,541,000	)
Investments in unconsolidated entities		(6,000	)		-
(Increase in) decrease of due from related parties		(60,000	)		313,000
Net cash used in investing activities		(340,000	)		(972,000	)

Cash flows from financing activities:
Repayment of capital lease obligations		(803,000	)		(340,000	)
Repayment of short-term loans		-			(462,000	)
Proceeds from short-term loans		-			462,000
Net cash used in financing activities		(803,000	)		(340,000	)

Net change in cash and cash equivalents		15,000			(361,000	)
Cash and cash equivalents - beginning of year		1,053,000			1,414,000
Cash and cash equivalents - end of year	$	1,068,000		$	1,053,000

Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	189,000		$	128,000

Supplemental disclosure of of noncash investing and financing activities:

Increase in guarantee liability recorded	$	15,000		$	-
Purchase of gamma knife and related leasehold improvements through capital lease obligation	$	-		$	1,354,000
Increase in fixed assets due to capitalization of asset retirement obligation	$	-		$	431,000
Elekta refund due financed by capital lease obligation	$	-		$	115,000

See accompanying notes to the consolidated financial statements

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note A – Organization and Business

U.S. NeuroSurgical, Inc. a Delaware corporation, was organized in July 1993 for the purpose of owning and operating stereotactic radiosurgery centers, utilizing the gamma knife technology. USN owns one gamma knife center on the premises of New York University Medical Center (“NYU”) in New York, New York. Management continues to explore opportunities to organize and participate in additional gamma knife centers. USN's business strategy is to provide a mechanism whereby hospitals, physicians, and patients can have access to gamma knife treatment capability, a high capital cost item. USN provides the gamma knife to medical facilities on a "cost per treatment" basis. USN holds an interest in the gamma knife unit, and is reimbursed by the facility where it is housed, based on utilization.

During the fourth quarter of 2007, USN formed a wholly-owned subsidiary, USN Corona, Inc. (“USNC”), to carry investments in Corona Gamma Knife, LLC and NeuroPartners, LLC. Those investments were formed to develop and manage a gamma knife center at San Antonio Regional Hospital in Upland, California. (See Note C[1])

During 2010, USN expanded its market strategy to include opportunities to develop cancer centers featuring radiation therapy. These centers utilize linear accelerators with IMRT (Intensity Modulated Radiation Therapy) and IGRT (Image Guided Radiation Therapy) capabilities. In 2010, the Company formed Florida Oncology Partners, LLC in partnership with local physicians and other investors. USNC owns a 24% interest in the venture. The center is located in Miami and opened in the second quarter of 2011. (See Note C[2])

In 2011, the Company formed Boca Oncology Partners, LLC in partnership with local physicians and other investors. USNC initially owned a 22.5% interest in the venture. Following a sale of 50% of the Company’s interest in 2012 the Company’s interest in Boca Oncology Partners decreased to 11.25%. The center is located in Boca Raton, Florida, and was opened in the third quarter of 2012. In February 2014, the Company and other members sold their interests in Boca Oncology Partners, LLC. (See Note C[3])

In early 2013, the Company formed Broward Oncology Partners, LLC (“BROP”) with other outside investors. The Company invested $50,000 for a 12.5% ownership interest in BROP. BROP operates a radiation oncology center in Fort Lauderdale, Florida under a lease from Tenet Health Services. BROP began operations in February 2013. In May 2014, the Company and other members sold their interests in BROP. (See Note C[4])

On October 29, 2012, the Company’s facility at NYU was totally destroyed as a result of flooding from Hurricane Sandy. During 2014, the Company finalized arrangements with NYU regarding the restoration of the gamma knife center and the Company’s long term contract with NYU. The location of the restored facility, with the new Leksell PERFEXION gamma knife, is in the Tisch Hospital of NYU Langone Medical Center. The center reopened, and the first patient was treated on April, 29, 2014. (See Note D)

On September 3, 2015, pursuant to the Agreement and Plan of Reorganization (the “Merger Agreement”), dated as of September 3, 2015, by and among U.S. NeuroSurgical, Inc., U.S. NeuroSurgical Holdings, Inc. (“Holdings”) and U.S. NeuroSurgical Merger Sub, Inc. (“Merger Sub”), the Company adopted a new holding company organizational structure whereby USN is now a wholly owned subsidiary of Holdings. This structure did not result in any changes to the assets or operations of the Company, but management believes that it will create a more flexible framework for possible future transactions and organizational and operational adjustments.

The holding company organizational structure was effected by a merger (the “Merger”) conducted pursuant to Section 251(g) of the Delaware General Corporation Law (the “DGCL”), which provides for the formation of a holding company structure without a vote of the stockholders of the constituent corporations. Because the holding company organizational structure occurred at the parent company level, the remainder of the Company’s subsidiaries, operations and customers were not affected by this transaction.

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

Following the Merger, Holdings’ common stock continued to trade on the over-the-counter market and continued to be quoted on the OTCQB marketplace under the same symbol, “USNU.” The conversion of shares of capital stock under the Merger Agreement occurred without an exchange of physical certificates. Accordingly, physical certificates formerly representing shares of outstanding capital stock of USN are deemed to represent the same number of shares of capital stock of Holdings.

Note B - The Company and its Significant Accounting Policies

[1]	Basis of presentation and consolidation:

The consolidated financial statements include the accounts of Holdings and its wholly-owned subsidiaries, USN, USNC and US NeuroSurgical Physics, Inc.. All significant intercompany balances and transactions have been eliminated in consolidation.

[2]	Cash and cash equivalents:

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

[3]	Investments in unconsolidated entities:

The Company accounts for its investments in unconsolidated entities by the equity method. The Company records its share of such earnings (loss) in the Consolidated Statement of Operations as “Income (loss) from investments in unconsolidated entities”. The carrying value of the Company’s investments in unconsolidated entities is recorded in the Consolidated Balance Sheets. The Company records losses of the unconsolidated entities only to the extent of the Company’s interest in and advances to the entities. As such, the recorded balance of Corona Gamma Knife, LLC and NeuroPartners, LLC have been taken to zero.

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[4]	Revenue recognition:

The Company’s agreement with NYU is an operating lease, and patient revenue from the use of the gamma knife is lease income. There are no minimum lease payments from NYU. The NYU agreement provides for contingent rental income based on a tiered fee schedule related to the number of patient procedures and associated thresholds. The Company recognizes the contingent rental income on a systematic basis using an average fee per procedure calculated by estimating the expected number of procedures per contract year which runs from November 1, to the following October 31. Any amounts received in excess of the average fee are considered deferred revenue. At the end of each reporting period, the Company reviews its estimated revenue for the contract year and adjusts revenue for any material changes in the estimate. At the end of the contract year, the revenue is adjusted to the actual amount received.

[5]	Long-lived assets:

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

[6]	Depreciation and amortization:

The gamma knife is being depreciated on the straight-line method over an estimated useful life of 7 years. Leasehold improvements are being amortized on the straight-line method over 7 years, the shorter of useful life, or the life of the NYU Agreement. Office furniture and computers are being depreciated on the straight-line method over their estimated useful lives ranging from 3 to 7 years. Depreciation expense for 2015 and 2014 was $622,000 and $475,000 respectively. Amortization expense for 2015 and 2014 was $313,000 and $197,000 respectively.

[7]	Capital leases:

Capital lease obligations are amortized ratably over the original term of the lease agreement, beginning with the earlier of the date the leased assets are placed in service or the effective date of the lease as defined in the lease agreement.

[8]	Guarantees:

The Company recognizes a liability at the fair value of the obligation at the inception of a financial guarantee contract. The initial liability is subsequently reduced as the Company is released from exposure under the guarantee. If it becomes probable that the Company will have to perform on a guarantee, a separate liability is accrued if it is reasonably estimable, based on the facts and circumstances at that time. The Company reverses the fair value liability only when there is no further exposure under the guarantee.

[9]	Income taxes:

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets or liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce tax assets to amounts more likely than not to be realized.

The Company has adopted the accounting provisions for Accounting for Uncertainty in Income Taxes . This accounting provision provides a comprehensive model for how the Company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on its tax return. If applicable, the Company records interest and penalties as a component of income tax expense, The Company had no uncertain material tax positions at December 31, 2015 and 2014. Tax years from January 1, 2012 to the current year remain open for examination by federal and state tax authorities.

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[10]	Earnings per share:

Earnings per share are computed by dividing earnings available to common stockholders by the weighted average shares outstanding for the period. There were no common stock equivalents during 2015 and 2014, and therefore, no potential dilution for the periods presented.

[11]	Advertising costs:

The Company follows the policy of charging the costs of advertising to expense as incurred. There were no advertising costs in 2015 and 2014.

[12]	Allowance for doubtful accounts:

The Company evaluates each of its accounts receivable individually and provides a charge to income that is appropriate, in the opinion of management, to absorb probable credit losses. The Company considers all accounts receivable to be collectible at December 31, 2015 and 2014.

[13]	Estimates and assumptions:

[14]	Fair values of financial instruments:

The estimated fair value of financial instruments has been determined based on available market information and appropriate valuation methodologies. The carrying amounts of cash and cash equivalents, accounts receivable, other current assets, due from or to related parties, and accounts payable approximate fair value at December 31, 2015 and 2014 because of the short maturity of these financial instruments. The carrying values of the notes receivable and the obligations under capital leases, approximate fair value because the interest rates on these instruments approximate the market rates at December 31, 2015 and 2014.

[15]	Credit risk:

At times, the Company may have cash and cash equivalents at a financial institution in excess of insured limits. The Company places its cash and cash equivalents with high credit quality financial institutions whose credit ratings are monitored by management to minimize credit risk. Accounts receivable consist primarily of amounts due from the medical centers. Historically, credit losses on accounts receivable have not been significant. At December 31, 2015 and 2014, substantially all of the Company’s accounts receivable were due from one customer, NYU.

[16]	Asset retirement obligations:

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U.S. NEUROSURGICAL HOLDINGS, INC. AND SUBSIDIARIES

Note C - Investment in Unconsolidated Entities

[1]	The Southern California Regional Gamma Knife Center

During 2007, the Company managed the formation of the Southern California Regional Gamma Knife Center at San Antonio Regional Hospital (“SARH”) in Upland, California. The Company participates in the ownership and operation of the center through USNC. 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 leased 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. USNC also owned initially 27% of CGK, but increased its ownership to 44% during 2011 to accommodate a member who desired to transfer his interest. Subsequently, in the first quarter of 2012, USNC sold a portion of its ownership to a new member, resulting in a decrease in its ownership in CGK to 39%.

The Company’s share of cumulative losses associated with its investment in NeuroPartners LLC and CGK has exceeded its investment. Due to the outstanding loans made to NeuroPartners LLC and CGK, NeuroPartners LLC and CGK are considered to be variable interest entities of the Company. However, as the Company is not deemed to be the primary beneficiary of NeuroPartners LLC and CGK, since it does not have the power to direct the operating activities that most significantly affect NeuroPartners LLC’s and CGK’s economic performance; certain disclosures are required rather than consolidation.

During 2015 and 2014, the Company absorbed losses against the total outstanding receivables from NeuroPartners LLC and CGK of $62,000 and $45,000, respectively, due to these losses.

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

Neuro Partners LLC and CGK Combined Condensed Income Statement Information

	Year Ended
	December 31,
	2015			2014

Patient revenue	$	912,000		$	1,223,000

Net (loss) income	$	(184,000	)	$	74,000

USNC's equity in (loss) income of Neuro Partners LLC and CGK	$	(84,000	)	$	14,000

Neuro Partners LLC and CGK Combined Condensed Balance Sheet Information

	December 31,
		2015			2014

Current assets	$	66,000		$	92,000

Noncurrent assets		394,000			991,000

Total assets	$	460,000		$	1,083,000

Current liabilities	$	1,359,000		$	829,000

Noncurrent liabilities		-			969,000

Equity		(899,000	)		(715,000	)

Total liabilities and equity	$	460,000		$	1,083,000

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[2]	Florida Oncology Partners

During the quarter ended September 30, 2010, the Company participated in the formation of Florida Oncology Partners, LLC (“FOP”) and Florida Oncology Partners RE, LLC (“FOPRE”), which operates a cancer center located in West Kendall (Miami), Florida. The center diagnoses and treats patients utilizing a Varian Rapid Arc linear accelerator and a GE CT scanner. USNC originally invested $200,000 for 20% ownership interest in FOP and FOPRE, increasing its investment to 24% in January of 2015 when another investor’s shares were diluted. The remaining 76% is owned by other outside investors. The center opened and treated its first patient in May 2011. During 2013, FOP made several distributions that reduced the Company’s investment significantly. The Company’s investment in FOP and FOPRE is $225,000 and $190,000 at December 31, 2015 and 2014. Amounts due from FOP and FOPRE included in due from related parties total $21,000 and $8,000 at December 31, 2015 and 2014, respectively. During 2015, FOPRE sold the building it owned and recognized a gain of $577,000.

The following tables present the aggregation of summarized financial information of FOP and FOPRE:

FOP and FOPRE Combined Condensed Income Statement Information

	Year Ended December 31,
	2015		2014

Revenue	$	3,157,000	$	2,631,000

Net income	$	1,344,000	$	197,000

USNC's equity in income of FOP and FOPRE	$	323,000	$	39,000


FOP and FOPRE Combined Condensed Balance Sheet Information

	December 31,
		2015		2014

Current assets	$	1,024,000	$	606,000

Noncurrent assets		3,066,000		5,070,000

Total assets	$	4,090,000	$	5,676,000

Current liabilities	$	1,848,000	$	858,000

Noncurrent liabilities		1,529,000		3,947,000

Equity		713,000		871,000

Total liabilities and equity	$	4,090,000	$	5,676,000

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[3]	Boca Oncology Partners

During the quarter ended June 30, 2011, the Company 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, LLC (“Boca West IMP”), owner of a medical office building in West Boca, Florida in which BOP operates. BOP occupies approximately 6,000 square feet of the 32,000 square foot building. The Company’s wholly-owned subsidiary, USNC invested $225,000 initially and had a 22.5% interest in BOP and BOPRE.

In January 2012, an additional investor purchased 50% of the partnership reducing the Company’s ownership to 11.25%. The Company loaned the proceeds of $56,250 back to BOP as a 5 year note at 7% interest. The remaining 88.75% was owned by other outside investors. 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. Then the members of BOPRE sold 31.5% of their interests in BOPRE to a new investor. The proceeds of $28,000 were loaned to BOP and USNC’s investment in BOPRE was reduced to 15.4%.

Since June 2012, the Company’s share of cumulative losses associated with its investment in BOP has exceeded its investment. The Company’s recorded investment in BOPRE is $139,000 and $134,000 at December 31, 2015 and 2014.

In February 2014, the Company and other members sold their interests in BOP, resulting in a gain of $204,000. Three members provided short-term loans to the Company of $462,000 from their sales proceeds. The Company had accrued $26,000 in interest expense related to these loans. During the year ended December 31, 2014, the Company repaid all of the loan balance and related interest.

The following tables present the summarized financial information of BOP and BOPRE:

BOP Condensed Income Statement Information

	Year Ended December 31,
	2014

Patient revenue	$	115,000

Net loss	$	(108,000	)

USNC's equity in loss in BOP	$	(12,000	)

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BOPRE Condensed Income Statement Information

	Years Ended December 31,
	2015		2014

Rental Income	$	3,000	$	-

Net income (loss)	$	3,000	$	(4,000	)

USNC's equity in loss in BOPRE	$	-	$	-

BOPRE Condensed Balance Sheet Information

	December 31,
		2015		2014

Current assets	$	40,000	$	61,000

Noncurrent assets		837,000		786,000

Total assets	$	877,000	$	847,000

Current liabilities	$	-	$	-

Noncurrent liabilities		-		-

Equity		877,000		847,000

Total liabilities and equity	$	877,000	$	847,000

[4]	Broward Oncology Partners

Broward Oncology Partners, LLC Condensed Income Statement Information

	Year Ended December 31, 2014

Patient revenue	$	505,000

Net income (loss)	$	255,000

USNC's equity in income (loss) of Broward Oncology Partners	$	32,000

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Note D - Agreement with New York University on Behalf of New York University Medical Center (NYU)

During November 1996, USN entered into a neuroradiosurgery equipment agreement (the “NYU agreement”) with NYU for a period of seven years (the “term”), with an option for NYU to extend the term for successive three-year periods or to purchase the gamma knife equipment at an appraised market value price. USN had the ability to negotiate the purchase price and upon failure of the parties to agree could request that the facility be closed. All costs associated with closing and restoring the facility to its original condition are the responsibility of USN. The NYU agreement, among other matters, required USN to provide (i) the use of the gamma knife equipment to NYU, (ii) training necessary for the proper operation of the gamma knife equipment, (iii) sufficient supplies for the equipment, (iv) the repair and maintenance of the equipment, (v) all basic hardware and software upgrades to the equipment and, (vi) an uptime guarantee. In return, NYU paid USN a scheduled fee based on the number of patient procedures performed. The Company derived patient revenue from the NYU center of $2,944,000 and $2,607,000, for 2015 and 2014 respectively. The NYU agreement is accounted for as an operating lease.

In 2004, the NYU agreement was extended through March 2009. In 2008, the NYU agreement was extended for an additional 12 years through March 2021. To secure this extension, USN agreed to install a new gamma knife PERFEXION model. The new equipment and certain space improvements, costing approximately $3,742,000 in total, was financed through a seven-year lease arrangement. The amendment provides for a payment to USN of a flat fee for each patient procedure performed.

The Company finalized arrangements with NYU regarding the restored gamma knife center and the Company’s long term contract with NYU. The Company’s new facility, with the Leksell PERFEXION gamma knife, is located in the Tisch Hospital of NYU Langone Medical Center. The facility reopened and began receiving patients at the end of April 2014.

Note E - Obligation Under Capital Lease

In March 2009, the Company installed a PERFEXION model gamma knife at the NYU center with a seven year lease from Elekta Capital. The amount financed, covering the cost of the new gamma knife equipment and certain space improvements, was approximately $3,742,000 in total. The monthly payment was $63,000 per month, at an implicit interest rate of approximately 11%. This lease became payable as a result of the damage at the NYU facility in October 2012, and the remainder of the balance due was paid in January 2013. In 2013, the Company entered into a modification of the above capital lease agreement to finance the new gamma knife installation and related construction costs and the removal costs of the old equipment for approximately $4.7 million to be repaid over 72 months with no payments for the first three months. The remaining removal costs of the old equipment of $525,000 were reclassified to the capital lease obligation at December 31, 2013 since they were paid by Elekta Capital (Note F). The Company entered into another capital lease in 2014 to finance a further $250,000 of installation and construction costs. The balance is being repaid over 24 months with the final payment due April 2016.

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The obligations under the capital leases are as follows:

	December 31,
	2015			2014

Capital leases - Gamma Knife	$	3,811,000		$	4,659,000

Less current portion		(866,000	)		(821,000	)

	$	2,945,000		$	3,838,000

The following is an analysis of the leased assets included in property and equipment:

	December 31,
	2015			2014

Capitalized costs	$	4,303,000		$	4,303,000

Less - accumulated depreciation		(1,076,000	)		(461,000	)

Capitalized lease equipment and improvements- reported as property and equipment - net	$	3,227,000		$	3,842,000

Depreciation expense for assets under capital leases totaled $615,000 and $461,000 for the years ended December 31, 2015 and 2014. During the year ended December 31, 2014, $51,000 of interest was capitalized.

Future payments as of December 31, 2015 on the equipment leases and loans are as follows:

Year Ending

December 31,

2016	$	1,019,000
2017		931,000
2018		931,000
2019		931,000
2020		388,000
		4,200,000
Less interest		(389,000	)
Present value of net minimum obligation	$	3,811,000

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Note F – Asset Retirement Obligations

When the NYU agreement was finalized, the Company estimated the cost to remove the gamma knife at the end of the agreement to be approximately $620,000. The estimated present value of this liability is $466,000 at December 31, 2015 and $431,000 at December 31, 2014.

	2015		2014

Asset retirement obligations, start of year	$	431,000	$	-

Asset retirement obligation for new gamma knife				431,000

Accretion of liability		35,000		-

Asset retirement of obligations, end of the year	$	466,000	$	431,000

Note G - Concentrations

The Company derives substantially all of its revenue from NYU. Due to the destruction of the gamma knife at NYU the Company received no revenue from January 1, 2014 through April 28, 2014. The new location, of the Leksell PERFEXION gamma knife in the Tisch Hospital of NYU Langone Medical Center, opened and treated its first patient on April, 29, 2014. (See Note D)

Note H – Taxes

A reconciliation of the tax provision calculated at the statutory federal income tax rate with amounts reported follows:

	Year Ended December 31,
	2015			2014

Income tax at the federal statutory rate	$	220,000		$	273,000
State income tax, net of federal taxes		21,000			26,000
Permanent differences		14,000			11,000
Other		(3,000	)		(16,000	)
Change in valuation allowance		-			(52,000	)

Income tax (benefit) provision	$	252,000		$	242,000

Items which give rise to deferred tax assets and liabilities are as follows:

	December 31,
	2015			2014
Deferred tax asset:
Net operating loss	$	463,000		$	667,000
Basis difference in unconsolidated entities		32,000			-
		495,000			667,000

Deferred tax liability:
Basis difference in unconsolidated entities		-			(61,000	)
Deferred gain on disposal of gamma knife		(716,000	)		(716,000	)
Excess of depreciation over book depreciation		(82,000	)		(40,000	)
Net effect of conversion from the accrual basis of accounting to the cash basis of accounting for tax purposes primarily related to accounts receivable, prepaid expense, deferred revenue, and accounts payable		(191,000	)		(92,000	)
Net deferred tax liability	$	(494,000	)	$	(242,000	)

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At December 31, 2015, the Company had loss carryforwards of $1,239,000, which may be offset against future taxable income. If not used, the carryforwards will begin to expire in 2025.

The Company files income tax returns in the U.S. federal jurisdiction and the State of Maryland. With few possible exceptions, the Company is no longer subject to U.S. or state income tax examinations by tax authorities for years before 2012.

Note I– Commitments and Contingencies

[1]

Leases:

The Company leases office space under an operating lease which was renewed in March 2013, and expires March 2018. The terms of the lease include an escalation clause for a portion of certain operating expenses. At December 31, 2015, the annual future minimum rental payments under operating leases are as follows:

Year Ending December 31,

2016	$	42,000
2017		43,000
2018		11,000
	$	96,000

Rent expense was approximately $41,000 and $43,000 for 2015 and 2014, respectively.

[2]	Gamma Knives:

In 2009, the Company installed a new gamma knife PERFEXION model at the NYU Medical Center. This new equipment and certain space improvements, costing approximately $3,742,000 in total, were financed through a seven-year lease arrangement. This PERFEXION equipment was recorded as a total loss as a result of flooding from Hurricane Sandy. See Notes D and E.

In early 2014, the Company entered into a six year lease in the amount of $4.7 million for the purchase of the replacement equipment and associated leasehold improvements. The first payment of $78,000 was made on September 1, 2014, including $18,000 of interest, and the final payment is due on May 1, 2020.

The Company entered into a second capital lease in 2014 to finance an additional $250,000 of installation and construction costs. The first payment of $12,468 was made November 1, 2014. The final payment is due on July 1, 2016.

To maintain efficient operation, the Company is required to reload cobalt for each gamma knife every 5 to 10 years.

[3]	Maintenance Contract:

The new gamma knife installed in April 2014 includes a one year warranty. The new maintenance agreement began in April of 2015. The monthly payment has remained at $20,000 and is in effect for 5 years.

[4]	Guarantee of Lease Obligations:

USNC is a 20% guarantor on NeuroPartners, LLC’s seven-year lease with respect to the gamma knife equipment and certain leasehold improvements at the Southern California Regional Gamma Knife Center at SARH in Upland, California, where the equipment is located. The outstanding balance on the lease obligations was $970,000 and $1,660,000 at December 31, 2015 and 2014, respectively. In February of 2016, NeuroPartners negotiated a new lease to fund the reloading of cobalt and the necessary construction to do so. The new lease of $1,663,000 includes the balance of the lease obligations. This lease will be paid over 60 months. The first payment is due on April 1, 2016.

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USNC is also a guarantor for a maximum of $1,433,000, approximately 25% of the original lease amount, on FOP’s LLC’s seven-year lease. It is a guarantor jointly with most of the other members (except USNC who is not a named guarantor) of FOP. The outstanding balance on the lease obligation was $2,502,000 and $3,398,000 at December 31, 2015 and 2014, respectively.

The Company expects any potential obligations from these guarantees to be reduced by the recoveries of the respective collateral and expects any liabilities arising from these guarantees to be insignificant.

[5]	Guarantee of Mortgages:

USN was a 20% guarantor on FOPRE’s ten-year mortgage. This mortgage had an original balance of $1,534,000 and was secured by the commercial condominiums in which FOP operates. In December of 2015, FOPRE sold the building and repaid the mortgage with the sales proceeds.

USNC is a 10% guarantor on 50% of the outstanding balance of Boca West IMP’s ten-year mortgage. This mortgage had an original balance of $3,000,000 and is secured by the medical office building in which BOP operates. The outstanding balance on the mortgage is $2,632,000 and $2,730,000 at December 31, 2015 and 2014, respectively. The Company expects any potential obligations from this guarantee to be reduced by the recovery of the real estate collateral and expects any amounts arising from this guarantee to be insignificant.

[6]	Product liability:

Although USN does not directly provide medical services, it has obtained professional medical liability insurance, and has general liability insurance as well. USN’s professional medical liability and general liability policies have limits of $3 million each. The Company believes that its insurance is adequate for providing treatment facilities and non-medical services, although there can be no assurance that the coverage limits of such insurance will be adequate or that coverage will not be reduced or become unavailable in the future.

Note J - Employees' IRA Plans

The Company has established a Company IRA covering all employees. The plan allows participants to make pre-tax contributions and the Company may, at its discretion, match certain percentages of the employee contribution. Amounts contributed to the plan are deposited into a trust fund administered by independent trustees. The Company made a discretionary matching IRA contribution of $14,000 for both 2015 and 2014.

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Part I Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Mine Safety Disclosures Part II Item 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis Of Financial Condition and Results Of Operations Item 7A. Qualitative and Quantitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information Part III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services Part IV Item 15. Exhibits, Financial Statement Schedules

Exhibits

31.1* Certifications of CEO and CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certifications of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EHSI 10-K Fiscal year ended Dec. 31, 2015

Exhibits