Note A - Basis of Preparation

Organization and Business

Elite Health Systems Inc, formerly U.S. NeuroSurgical Holdings, Inc., is focused on improving and providing access to healthcare and offering other healthcare related services through its wholly-owned subsidiaries, Elite Health Plan, Inc. and Physician Support Systems Inc. As used herein, unless the context indicates otherwise, the term "Company" and "Registrant" means Elite Health Systems Inc. and its wholly-owned subsidiaries, Elite Health Systems Holdings Inc. (“EHSH”), and the wholly-owned subsidiaries of USN, USN Corona, Inc., Elite Health Plan, Inc., Elite Health Plan of Nevada, Inc. and Physician Support Systems Inc. (“PSS”).

Company Background. 

The Company is focused on improving and providing access to healthcare and offering other healthcare related services. Through its subsidiaries the Company is developing and offering one or more Medicare Advantage plans and providing healthcare management solutions to physician and other health groups.  

In October  2021, the Company’s wholly-owned subsidiary, Elite Health Systems Holdings Inc. (“EHSH”), acquired all of the outstanding shares of capital stock of Elite Health Plan, Inc., a California corporation and, in exchange therefor, the former holders of which were issued newly-issued shares of EHSH, which at the time of the transaction represented 15% of the outstanding shares of EHSH.  In November 2023, the Company then entered into a Share Exchange Agreement with the holders of these minority interests in EHSH and as a result of this transaction EHSH became a wholly - owned subsidiary of the Company and the former minority holders of EHSH became owners in the aggregate of 15% of the Company.   

Beginning in 2021, the Company through its subsidiaries dedicated resources to exploring the regulatory requirements and timelines to apply and secure licenses to operate a Medicare Advantage plan in California and Nevada. EHSH formed Elite Health Plan of Nevada, Inc. (“Elite Nevada”) to apply for a license to operate a Medicare Advantage plan in Nevada while Elite Health Plan, Inc. pursued a plan to establish a Medicare Advantage plan in California. The Company then determined it would be more expeditious to apply and secure a license in California and then, if and when appropriate, apply for a license in Nevada. Elite Health applied for a Knox-Keene license to offer managed health care plans in California in 2024, which was approved by the State of California and CMS the Centers for Medicare and Medicaid Services “(CMS”) in 2025.  Elite Health and Elite Health Plan of Nevada, Inc. are wholly-owned subsidiaries of EHSH, are managed and operated in a similar manner.  In California, Elite Health has developed 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, and following licensure began onboarding members of its Medicare Advantage Plans in October 2025. Though it may do so in the future, Elite Health Plan of Nevada, Inc., at this time, has not taken any further steps to advance or submit an application for a Knox-Keene license to offer managed health care plans in Nevada.   Elite Health began reporting member revenue on January 1, 2026. There can be no assurance that the Company and Elite Health will be successful in maintaining 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. 

In November 2025 the Company purchased all the outstanding stock of PSS from its former shareholders and began operations as part of EHSI providing a suite of tailored healthcare management solutions to medical practices that enhance operational efficiency, compliance, and patient care.

The Company’s headquarters are now located at 1131 W 6^th Street, Suite 225, Ontario, CA  91762 and its telephone number is (949) 249-1170.  

Recent Accounting Pronouncements

FASB ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures 

The FASB issued ASU 2023-07 on November 27, 2023, which is intended to improve reportable segment disclosure requirements. Under previous guidance, while entities were required to disclose segment revenue and profit or loss, there has been limited disclosure around the reporting of segment expenses. In addition to enhanced disclosures about significant segment expenses, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company has adopted the requirements of the expanded segment disclosures as of December 31, 2025. 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, aimed at increasing transparency in income tax reporting. It requires entities to disaggregate their effective tax rate reconciliation (using percentages and amounts) and income taxes paid, breaking them down by specific categories and jurisdictions. The pronouncement is effective for fiscal periods beginning after December 15, 2024. The Company has adopted the additional disclosure as of December 31, 2025. 

In September 2025, FASB ASU 2025-06 modernizes internal-use software accounting by replacing rigid "project stage" rules with a principles-based framework aligned with agile development. It streamlines capitalization, integrates website development costs, and mandates clearer disclosures, effective for annual periods beginning after Dec. 15, 2027.  The Company is currently evaluating the impact of ASU 2025-06. 

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation to noncontrolling interests in consolidated financial statements.  The guidance requires noncontrolling interests to be reported as a component of equity separate from 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 2025, the Company incurred a net loss of $7,804,000 compared to $2,055,000 in fiscal year 2024. The Company has received state and Federal approval to operate as a Medicare Advantage plan and began operating as a Medicare Advantage plan on January 1, 2026. As a result, it recorded no revenue from its health plan in 2025 and has significant expenses. The Company has funded operations through the sale of common stock. The Company had an accumulated deficit in stockholders’ equity of $13,543,000 and $12,249,000  at March 31, 2026 and December 31, 2025, respectively; cash and cash equivalents of $2,602,000 and $3,758,000 at March 31, 2026 and December 31, 2025, respectively; and working capital of $1,910,000 and $3,144,000 at March 31, 2026 and December 31,2025, respectively. 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 March 31, 2026.

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 $14 million in support of this business opportunity through the sale of its Common Stock in private placements and will need additional capital in 2026. The Company is evaluating different approaches to raise the capital that it will require, as well as other strategic options to support operations. 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. 

Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying Condensed Consolidated Financial Statements and notes do not include all disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Accordingly, these statements should be read in conjunction with the Company’s most recent annual Consolidated Financial Statements.

Consolidated results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. The only change to the Company’s equity in the three months ended March 31, 2026 and 2025 was net loss for the periods and issuance of common stock.

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation to noncontrolling interests in consolidated financial statements. The guidance requires noncontrolling interests to be reported as a component of equity separate from 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.

The Company recognizes revenue in accordance with two different accounting standards: 1) Topic 606 and 2) Accounting Standards Codification (“ASC”) Topic 842, Leases. However, the Company is not currently generating revenue.

Basic loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. The numerator for the calculation of basic and diluted earnings per share is net loss and the denominator is the weighted-average number of common shares outstanding during the period.

The tables below present financial information associated with our leases.