US NeuroSurgical Holdings Inc

Note A – Organization and Business

U.S. NeuroSurgical Holdings, Inc. through its wholly-owned subsidiaries, holds interests in radiological treatment facilities and, more recently, has been developing a business to provide Medicare Advantage plans, concentrating initially in Nevada and California . 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., USN Corona, Inc., Elite Health Plan, Inc. and Elite Health Plan of Nevada, Inc.

Organizational Background

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 affected 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.

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.

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.

Until January 2024, the Company’s executive offices were located at 2400 Research Boulevard, Suite 325, Rockville, Maryland 20850. The Company’s headquarters are now located at 1131 W 6th Street, Ontario, CA 91762, Suite 225, and its telephone number is (949) 249-1170.

Note B - The Company and its Significant Accounting Policies

The consolidated financial statements include the accounts of Holdings and its wholly-owned subsidiaries, USN, USNC and U.S. NeuroSurgical Physics, Inc., and Elite Health through from the date of acquisition. All significant intercompany balances and transactions have been eliminated in consolidation.

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

All amounts are shown in nearest thousands in the Consolidated Financial Statements and accompanying notes therein.

Liquidity and Going Concern

In fiscal year 2023, the Company incurred a net loss of $816,000 compared to $1,572,000 in fiscal year 2022. As of December 31, 2023, the Company had a deficit in stockholders’ equity of $2,390,000, cash and cash equivalents of $466,000 and a working capital deficit of $80,000. In addition, the Company currently does not have access to capital through a line of credit nor other readily available sources of capital. Together, these factors raised substantial doubt regarding the Company’s ability to continue as a going concern at December 31, 2023.

However, management has considered its plans to continue the Company as a going concern, concentrating on the establishment and operation of managed health care plans. The Company raised gross proceeds of approximately $2 million in support of this business opportunity through the sale of its Common Stock in a private placement and believes it has access to additional capital through 2024. Additionally, the Company believes that these activities and resulting expenses can be managed to the level of cash resources on hand and expected to be raised. Management believes its plan alleviates the substantial doubt and that it will be successful in its planned business initiatives and will be able to continue as a going concern through at least the next twelve months. However, there can be no assurance that sources of capital will be available to the Company at that time or, if available, can be obtained on terms favorable to the Company.

The Company generatedno revenue in 2023 or 2022.

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

Accounts receivable only included amounts owed to the Company from the NYU Agreement. There wasno accounts receivable at December 31, 2023 or 2022 as the agreement ended with the sale of the equipment to NYU on March 31, 2021,

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 Statements of Operations as “Loss from investments in unconsolidated entities, net”. 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 MOP and CBOP have been taken tozero.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which in part requires entities to assess whether distributions of cash from unconsolidated entities represent a return on the investment or a return of the investment, to appropriately classify the distributions in the statement of cash flows. Although the ASU is effective in the first quarter of 2018, we early adopted the guidance in the first quarter of 2017 due to the ongoing applicability of the new standard to the Company’s consolidated financial statements. We made an accounting policy election to use the cumulative earnings approach to determine that the distributions were returns on the investment and accordingly classified them as operating cash flows. Under the cumulative earnings approach, distributions received from the unconsolidated entity are presumed to be a return on the investment unless the distributions received by the investor, less distributions received in prior periods that were deemed to be returns of investment, exceed cumulative equity in earnings recognized by the investor.

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a business acquisition. Goodwill is tested for impairment on an annual basis, at the anniversary of the acquisition, and between annual tests in certain circumstances, and written down when impaired.

Evaluating goodwill for impairment involves the determination of the fair value of each reporting unit in which goodwill is recorded using a qualitative or quantitative analysis. A reporting unit is an operating segment or a component of an operating segment for which discrete financial information is available and reviewed by segment management on a regular basis. The qualitative impairment test includes considering various factors, including macroeconomic conditions, industry and market conditions, cost factors, a sustained share price or market capitalization decrease, and any reporting unit specific events.

Goodwill was evaluated on a qualitative basis and concluded that no adjustment to the carrying value of goodwill was necessary. In addition, no qualitative indicators of impairment were identified during the fourth quarter of fiscal year ended December 31, 2021, and therefore, no interim quantitative goodwill impairment evaluation was performed. If the fair value of a reporting unit exceeds the carrying value, goodwill impairment is not indicated. If the carrying amount of a reporting unit is determined to be higher than its estimated fair value, the excess is recognized as an impairment expense.

In accordance with the authoritative guidance over fair value measurements, the fair value of a reporting unit is defined as the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. The Company primarily uses the income approach methodology, which includes the discounted cash flow method and an enterprise value method, and the market approach methodology, which considers the values of comparable businesses, to estimate the fair value of the reporting unit.

Management believes the methodology used to review impairment of goodwill, which includes a significant amount of judgment and estimates, provides a reasonable basis to determine whether impairment has occurred. However, many of the factors employed in determining whether goodwill is impaired are outside of the Company’s control and it is reasonably likely that assumptions and estimates will change in future periods. These changes could result in future impairments.

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.

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.

Effective January 1, 2019, the Company adopted ASU 2016-02, Leases, and the Company’s leases previously classified as capital leases, were determined to be finance leases.

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.

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 applied the accounting provisions for Accounting for Uncertainty in Income Taxes. (Topic 740) 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 returns. 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, 2023 and 2022. Tax years from January 1, 2019 to the current year remain open for examination by federal and state tax authorities.

Earnings per share are computed by dividing earnings available to common stockholders by the weighted average shares outstanding for the period. There wereno common stock equivalents during 2023 and 2022, and therefore, no potential dilution for the periods presented.

The Company follows the policy of charging the costs of advertising to expense as incurred. There wereno advertising costs in 2023 or 2022.

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.

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, 2023 and 2022 because of the short maturity of these financial instruments. The carrying values of the notes receivable and the obligations under finance leases, approximate fair value because the interest rates on these instruments approximate the market rates at December 31, 2023 and 2022.

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 consisted of amounts due from the medical centers. Historically, credit losses on accounts receivable have not been significant. At December 31, 2020, substantially all of the Company’s accounts receivable were due from one customer, NYU.

In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”) to increase transparency and comparability among organizations by requiring (1) recognition of lease assets and lease liabilities on the balance sheet and (2) disclosure of key information about leasing arrangements. Some changes to the lessor accounting guidance were made to align both of the following: (1) the lessor accounting guidance with certain changes made to the lessee accounting guidance and (2) key aspects of the lessor accounting model with revenue recognition guidance. Topic 842 was effective for fiscal years and interim periods beginning after December 15, 2018. A modified retrospective approach is required for adoption for all leases that exist at or commence after the date of initial application with an option to use certain practical expedients.

The Company adopted the provisions of Topic 842, as amended, as of January 1, 2019. The adoption of Topic 842 had a material impact on the Company’s Consolidated Balance Sheets due to the recognition of certain right-of-use (“ROU”) assets and lease liabilities. Although a significant amount of revenue was accounted for under Topic 842, this guidance did not have a material impact on our Consolidated Statements of Operations or Cash Flows.

The Company determines if an arrangement is a lease at its inception. The Company’s current operating lease relates to office space used for Elite Health and is discussed in Note F.

Under Topic 842, operating leases result in the recognition of ROU assets and lease liabilities on the consolidated balance sheets. ROU assets represent the right to use the leased asset for the lease term and lease liabilities represent the obligation to make lease payments. Under Topic 842, operating lease ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s operating lease does not provide an implicit rate; therefore, upon adoption of Topic 842, the Company used its estimated incremental borrowing rate at the commencement date to determine the present value of lease payments. The ROU assets include any initial lease payments made and exclude lease incentives received. The lease terms may include options to extend or terminate the lease that are reasonably certain to be exercised. Lease expense under Topic 842 is recognized on a straight-line basis over the lease term.

The tables below present financial information associated with our leases as of and for the years ended December 31, 2023, and 2022.

Note C - Investments in Unconsolidated Entities

During 2007, the Company, through a noncontrolling interest in joint ventures, managed the formation of the Southern California Regional Gamma Knife Center at San Antonio Regional Hospital in Upland, California (“SARH”). Corona Gamma Knife, LLC (“CGK”) was 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. The center ceased operations on May 31,2023 and the Company completed the removal of the equipment in February of 2024.

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

At December 31, 2023 and 2022, the Company’s recorded loss in investment of NeuroPartners LLC and CGK was $0. During the year ended December 31, 2023, and 2022, the Company’s equity in loss earnings of NeuroPartners LLC and CGK was $89,000 and $133,000, respectively. At December 31, 2023 and 2022, amounts due from these related parties was $0 and $7,000, respectively.

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

Neuro Partners LLC and CGK Combined Condensed Income Statement Information

Neuro Partners LLC and CGK Combined Condensed Balance Sheet Information

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

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

During the years ended December 31, 2018 and 2017, several investors relinquished part of their ownership interest in BOPRE, and those interests were distributed among the remaining investors in relationship to their percentages owned. During 2021 an additional member relinquished its ownership to USNC. As a result, the Company now holds a 23.1% ownership interest in BOPRE, which it accounts for under the equity method. The Company’s recorded investment in BOPRE is $189,000 and $157,000 , at December 31, 2023 and 2022, respectively.

USNC was a 10% guarantor of 50% of the outstanding balance of Boca West IMP’sten-year mortgage. This mortgage had an original balance of $3,000,000 and is secured by the medical office building in which BOP operates. In April 2020, the partners of Boca West IMP refinanced the mortgage in order to recover some of the cash that was invested before the building was completely occupied and removed USNC as a guarantor.

The following tables present the summarized financial information of BOPRE:

BOPRE Condensed Income Statement Information

BOPRE Condensed Balance Sheet Information

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

Due to increasing costs, continued net losses since April 2015, and reliance on related party and other debt for operating cash flows, the fair value of UOMA is less than it’s carrying amount. The Company tested its investment for impairment at December 31, 2016 and determined that the investment was impaired, and an impairment loss was recorded against the entire equity balance in MOP, as well as loans from USN and USNC to MOP and UOMA. During the year ended December 31, 2021, the Company’s equity in loss of MOP was $231,000 but was not recorded due to prior losses.

On December 31, 2022 MOP/UOMA sold their assets to One Care Oncology Partners, LLC for $2,060,000. USN Corona netted approximately $1.3 million from the proceeds for management fees to date. Because the 31st occurred on a Saturday, the funds were not received until 1/3/2023. Some funds were held in escrow until post-closing adjustments were made. During the year ended December 31, 2023, the Company paid additional expenses totaling $47,000 related to the sale of MOP/UOMA. These expenses were recorded as an advance to MOP and fully impaired.

The following table presents the summarized financial information of MOP:

MOP Condensed Consolidated Income Statement Information

MOP Condensed Consolidated Balance Sheet Information

CBOP was organized September 1, 2017, to acquire the rights of a new center in Cutler Bay, FL from Florida Oncology Partners, LLC (“FOP”) . USNC originally had a 24% equity interest in CBOP. Beginning in October of 2017, CBOP began paying the remainder of the costs associated with opening the center. CBOP had no assets at the end of 2017. The medical center opened and treated its first patient in January of 2018. In 2010, the Company formed FOP in partnership with local physicians and other investors. USNC owned a 24% interest in FOP. FOP is no longer operational and is fully dissolved.

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

In June 2020, CBOP made a $500,000 capital call to its members. UNSC converted previously-made advances totaling $121,000 into equity in CBOP to meet its capital requirement, and other members contributed $212,000 in cash. The remaining capital contributions were not met and, as a result, the Company’s equity interest in CBOP was increased to 28.58% in June 2020.

During the year ended December 31, 2023, the Company advanced $535,000, less $21,000 which was repaid by CBOP for a net receivable of $519,000. In addition, CBOP made a $200,000 capital call to its members resulting in an equity contribution from the Company of $57,000. This equity investment was fully impaired due to Equity Method accounting. During the second quarter of 2022 the Company wrote off all amounts due and accrued interest thereon, from CBOP resulting in a $919,000 loss. During the remainder of the year ended December 31, 2022, the Company advanced an additional $163,000, less $156,000 of allowances, for a net receivable of $6,000. These allowances and write-offs were recorded as losses from investments in unconsolidated entities. For the years ended December 31, 2023 and 2022, the Company’s equity in loss of CBOP was $444,000 and $191,000, respectively, but was not recorded due to prior losses.

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

The following table presents the summarized financial information of CBOP:

CBOP Condensed Income Statement Information

CBOP Condensed Balance Sheet Information

Note D – Elite Health Plan, Inc.

Several of the Company’s businesses have been sold or wound down, and the Company has been actively exploring opportunities to expand to other businesses that could benefit its current operations and relationships. Effective October 1, 2021, USN, the Company’s wholly-owned subsidiary, acquired all of the outstanding shares of capital stock of Elite Health Plan, Inc. and, in exchange therefor, the former holders of Elite Health Plan, Inc. were issued newly-issued shares of USN, which following the transaction represent 15% of the outstanding shares of USN. Effective November 27, 2023, the Company entered into a Share Exchange Agreement with the holders of these minority interests in USN, which resulted in making USN a wholly-owned subsidiary of the Company and the former minority holders of USN 15% owners of the Company immediately following the exchange. As a result of the November 27, 2023 transaction,1,392,739 shares of the Company’s Common Stock were issued, but pending certification, bringing the total outstanding to 9,284,924 shares as of that date, and as of December 31, 2023.

The Company has determined that its best opportunity for long term success is to concentrate its efforts and resources on establishing a managed care organization that will develop and operate Medicare Advantage plans for seniors in Nevada, California and other areas in the U.S. and to pursue other opportunities related to this activity.

In furtherance of this plan, USN recently formed Elite Health Plan of Nevada, Inc. to apply for a license to operate a Medicare Advantage plan in Nevada and Elite Health Plan, Inc. is taking steps to submit documentation for a Knox-Keene license to offer managed health care plans in California. Elite Heath Plan, Inc. and Elite health Plan of Nevada, Inc., both 100% owned by USN and managed and operated in a similar manner, are collectively referred to herein as “Elite Health.” In each of Neveda and California, Elite Health has taken preliminary steps toward identifying a network of providers who are well-versed in Medicare Advantage plans and addressing the healthcare needs of seniors in the communities in which they practice. Elite Health currently has no revenue and will not be able to generate revenue for an indefinite period while it seeks to obtain a license to operate a Medicare Advantage plan in Neveda and then California. The success of Elite Health will depend, in part, on timely obtaining all necessary approvals and gaining access to a competent network of providers and enrolling a critical level of subscribers. There can be no assurance that the Company and Elite Health will be successful in obtaining the necessary licenses to operate Medicare Advantage plans in any jurisdiction or be effective in establishing the network of providers and developing the systems required to operate a managed care business.

Note E – Taxes

The components of the provision for income taxes are as follows:

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

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

The Company files income tax returns in the U.S. federal jurisdiction, the State of Maryland, the State of Florida , the State of California, and the State of New York. With few possible exceptions, the Company is no longer subject to U.S. or state income tax examinations by tax authorities for years before 2018.

Note F – Commitments and Contingencies

The Company leases office space under an operating lease which was renewed in February 2018 and expires June 2023. The terms of the lease include an escalation clause for a portion of certain operating expenses.

As discussed in Note B, the Company adopted Topic 842 as of January 1, 2019. Upon adoption of Topic 842, the Company’s office lease remained an operating lease and a lease liability in the amount of $85,000 was recognized based on the present value of the remaining minimum lease payments, discounted using the Company’s incremental borrowing rate. The related lease ROU asset was recorded in the amount of $85,000, reflecting the present value of future minimum lease payments, adjusted for deferred rent. As of December 31, 2023, the operating lease right-of-use liability and asset amounted to $85,000 and $85,000, respectively. As of December 31, 2022 operating lease right-of-use liability and asset amounted to $23,000 and $20,000, respectively. Total operating lease expense for the years ended December 31, 2023 and 2022, was $35,000 and $41,000, respectively.

Holdings is a guarantor of the full amount of the outstanding CBOP loan with BB&T Bank entered into in 2017, as described In Note C[2]. The outstanding balance on this loan was $1,835,000 and $2,287,000 at December 31, 2023 and 2022, respectively.

The Company expected any potential obligations from these guarantees to be reduced by the recoveries of the respective collateral and had recorded a liability of $11,000 at December 31, 2023 and 2022.

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 G - 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.

Note H – Subsequent Events

Private Placement Financing. On January 16, 2024, the Company held an initial closing of a private placement of shares of the Company’s common stock to raise gross proceeds of not less than $1,000,000, and up to $2,000,000, at a price of $0.50 per share. Since the initial closing, the Company amended the terms of the private placement to raise up to $3,000,000 maximum and, as of March 22, 2024, raised proceeds of an aggregate of $2,010,000. As a result of these issuances, as of March 22, 2024, there were outstanding 13,304,924 shares of the Company’s Common Stock. Certain subscribers in the private placement advanced an aggregate of $355,000 prior to the end of 2023 fiscal year, pending acceptance by the Company. Such amounts are included in cash and cash equivalents and carried as a current liability under share application money pending allotment.

For this sale of securities in connection with private placement, no general solicitation was used, no commissions were paid, all participants in the private placement were accredited investors, and the Company relied on the exemption from registration available under Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated under the Securities Act with respect to transactions by an issuer not involving any public offering.

The Company presently intends to use the net proceeds from the private placement principally to execute the plan of Elite Health to establish a managed care organization that will operate as a Medicare Advantage plan for seniors. Elite Health is applying to operate initially in Neveda, and later in California, with the objective of addressing the growing number of Medicare eligible seniors in those markets.

The amounts raised in the private placement will not be sufficient to fund operations and complete the planned development the Company’s planned health care organization, so the Company is planning on raising additional funding late in 2024 or early 2025. There can be no assurance that sources of capital will be available to the Company at that time or, if available, can be obtained on terms favorable to the Company.