Note A - Basis of Preparation The accompanying Condensed Consolidated Financial Statements of U.S. NeuroSurgical Holdings, Inc. and Subsidiaries (the Company) as of March 31, 2020 and 2019, are unaudited. However, in the opinion of management, such statements include all adjustments necessary for a fair statement of the information presented therein. The Consolidated Balance Sheet at December 31, 2019 has been derived from the audited Consolidated Financial Statements at that date appearing in the Companys Annual Report on Form 10-K. Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying Condensed Consolidated Financial Statements and notes do not include all disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Accordingly, these statements should be read in conjunction with the Companys most recent annual Consolidated Financial Statements. Consolidated results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. In May 2014, the Financial Accounting Standards Board (the FASB) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), amending existing revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Topic 606 defines a five-step process to accomplish this objective, including identifying the contract with the customer and the performance obligations within the contract, determining the transaction price including estimates of any variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue as the company satisfies the performance obligation. We adopted the provisions of Topic 606 as of January 1, 2018 on a modified retrospective basis and applied it to the Companys sole contract at the date of adoption. We concluded that the impact to the manner in which we recognize revenue is immaterial. Our revenue is primarily generated from a leasing arrangement with New York University (NYU), which is not within the scope of Topic 606, and from the sale of maintenance services with a single performance obligation, under which revenue is recognized in a similar manner as compared to the method under the prior revenue standards. The Company recognizes maintenance income ratably over time as patient procedures are performed. Prior to October 2018, the Companys agreement with NYU primarily consisted of an operating lease, and the associated patient revenue from the use of the gamma knife was primarily operating lease income. In October 2018, the agreement was reevaluated to be a sales-type sublease between the Company, the lessor, and NYU, the lessee. The present value of all fixed future minimum lease payments payable by NYU to the Company were recorded as an investment in sublease effective October 1, 2018. The patient revenue under the tiered schedule (Note B) continues to be considered contingent income and is recognized on a systematic basis using an average fee per procedure. We adopted the provisions of ASU 2016-02, Leases (Topic 842), as amended, as of January 1, 2019. The adoption of Topic 842 had a material impact on the Companys Consolidated Balance Sheets due to the recognition of certain right-of-use (ROU) assets and lease liabilities. Although a significant amount of our revenue is now accounted for under Topic 842, this guidance did not have a material impact on our Consolidated Statements of Operations or Cash Flows. Because of the transition method we used to adopt Topic 842, Topic 842 will not be applied to periods prior to adoption and the adoption of Topic 842 had no impact on our previously reported results, or on opening equity at January 1, 2019. The tables below present financial information associated with our leases. Classification March 31, 2020 March 31, 2019 Assets Current Finance lease assets Investment in sales-type sublease - current $ 1,204,000 $ 843,000 Long-term Finance lease assets Investment in sales-type sublease - net of current portion - 1,204,000 Operating lease assets Operating lease right-of-use asset 120,000 152,000 Total leased assets $ 1,324,000 $ 2,199,000 Liabilities Current Finance lease liabilities Obligations under finance lease - current portion $ 620,000 $ 1,449,000 Operating lease liabilities Operating lease right-of-use liability - current portion 37,000 33,000 Long-term Finance lease liabilities Obligations under finance lease - net of current portion - 620,000 Operating lease liabilities Operating lease right-of-use liability - net of current portion 97,000 134,000 Total lease liabilities $ 754,000 $ 2,236,000 Lease Cost Operating lease cost Selling, general and administrative $ 11,000 $ 10,000 Finance lease cost Interest on lease liabilities Interest expense 11,000 28,000 Sublease income Interest income - sales-type sublease 24,000 38,000 Net lease (income) $ (2,000 ) $ - Maturity of lease liabilities (as of March 31, 2020) Operating lease Finance lease 2020 33,000 543,000 2021 45,000 90,000 2022 46,000 2023 24,000 - Total $ 148,000 $ 633,000 Less amount representing interest 14,000 13,000 Present value of lease liabilities $ 134,000 $ 620,000 Discount rate 5.850 % 4.555 % Reclassifications: Certain balances for the three months ended March 31, 2019 have been reclassified to conform with the 2020 presentation. These reclassifications had no effect on previously reported net income or cash flows.