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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0000950149-01-501163.txt : 20010813
<SEC-HEADER>0000950149-01-501163.hdr.sgml : 20010813
ACCESSION NUMBER:		0000950149-01-501163
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20010630
FILED AS OF DATE:		20010810

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN SHARED HOSPITAL SERVICES
		CENTRAL INDEX KEY:			0000744825
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-MEDICAL LABORATORIES [8071]
		IRS NUMBER:				942918118
		STATE OF INCORPORATION:			CA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08789
		FILM NUMBER:		1703099

	BUSINESS ADDRESS:	
		STREET 1:		TWO EMBARCADERO CENTER
		STREET 2:		SUITE 2370
		CITY:			SAN FRANCISCO
		STATE:			CA
		ZIP:			94111-3823
		BUSINESS PHONE:		4157885300

	MAIL ADDRESS:	
		STREET 1:		TWO EMBARCADERO CENTER
		STREET 2:		SUITE 2370
		CITY:			SAN FRANCISCO
		STATE:			CA
		ZIP:			94111
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>f74683e10-q.htm
<DESCRIPTION>AMERICAN SHARED HOSPITAL SERVICES FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10-q</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="3"><B>SECURITIES AND EXCHANGE COMMISSION</B></FONT>
<DIV align="center"><FONT size="2"><B>WASHINGTON, DC 20549<BR>
________________________</B></FONT></DIV>

<P align="center"><FONT size="3"><B>FORM 10-Q</B></FONT>

<P><FONT size="2"><B>(Mark One)</B>
</FONT>
<P>
<TABLE align="center" width="93%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>&#091;X&#093;</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>For the quarterly period ended June&nbsp;30, 2001 or</B></FONT>

<P>
<TABLE width="93%" border="0" cellpadding="0" cellspacing="0" align="center">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>&#091;&nbsp;&nbsp;&nbsp;&#093;</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B> TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>For the transition period from _______________ to _______________.</B></FONT>

<P align="center"><FONT size="2"><B>Commission file number 1-8789<BR>
________________________</B></FONT>

<P align="center"><FONT size="3"><B>American Shared Hospital Services</B></FONT>
<DIV align="center"><FONT size="2"><B>(Exact name of registrant as specified in its charter)</B></FONT></DIV>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
        <TD width="50%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="45%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align="center" valign="top"><FONT size="2"><B>California</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top"><FONT size="2">
<B>94-2918118</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD align="center" valign="top"><FONT size="2"><B>(State or other jurisdiction of<BR>
Incorporation or organization)</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top"><FONT size="2">
<B>(IRS Employer<BR>
Identification No.)</B></FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align="center" valign="top" nowrap><FONT size="2"><B>Two Embarcadero Center, Suite&nbsp;2370, San Francisco, California</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top"><FONT size="2">
<B>94111</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD align="center" valign="top"><FONT size="2"><B>(Address of Principal Executive Offices)</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top"><FONT size="2">
<B>(Zip Code)</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2"><B>Registrant&#146;s telephone number, including area code: (415)&nbsp;788-5300</B></FONT>

<P><FONT size="2">Indicate by check mark whether the registrant: (1)&nbsp;has filed all reports
required to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12&nbsp;months (or for such shorter period that the
Registrant was required to file such reports), and (2)&nbsp;has been subject to such
filing requirements for the past 90&nbsp;days.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes &#091;X&#093;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No &#091;&nbsp;&nbsp;&nbsp;&#093;
</FONT>
<P><FONT size="2">As of July&nbsp;19, 2001, there are outstanding 3,554,125 shares of the Registrant&#146;s
common stock.
</FONT>
<P align="center"><FONT size="2">&nbsp;
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<!-- TOC -->
<A name="toc"><DIV align="CENTER"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">PART I &#151; FINANCIAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">ITEM 1. FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#002"> CONDENSED CONSOLIDATED BALANCE SHEETS</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#003"> CONDENSED CONSOLIDATED STATEMENTS OF INCOME</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#004"> CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#005"> NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">PART II &#151; OTHER INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">Item&nbsp;1. Legal Proceedings.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Item&nbsp;2. Changes in Securities.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">Item&nbsp;3. Defaults upon Senior Securities.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">Item&nbsp;4. Submission of Matters to a Vote of Securities Holders.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">Item&nbsp;5. Other Information.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">Item&nbsp;6. Exhibits and Reports on Form&nbsp;8-K.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#013">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="f74683ex10-33.txt">Lease Agreement for a Gamma Knife Unit 11/01/1999</A></TD></TR>
<TR><TD colspan="9"><A HREF="f74683ex10-34.txt">Addendum to 11/01/99 Gamma Knife Lease Agreement</A></TD></TR>
<TR><TD colspan="9"><A HREF="f74683ex10-35.txt">Lease Agreement for a Gamma Knife Unit 02/18/2000</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>




<!-- link1 "PART I &#151; FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="000"></A></DIV>
<DIV align="left"><A name="a000"></A></DIV>
<P align="center"><FONT size="2">PART I &#151; FINANCIAL INFORMATION</FONT>

<!-- link2 "ITEM 1. FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="001"></A></DIV>
<DIV align="left"><A name="a001"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 1. FINANCIAL STATEMENTS</B></FONT>

<P align="center"><FONT size="2"><B>AMERICAN SHARED HOSPITAL SERVICES</B></FONT>

<!-- link3 " CONDENSED CONSOLIDATED BALANCE SHEETS" -->
<DIV align="left"><A NAME="002"></A></DIV>
<DIV align="left"><A name="a002"></A></DIV>

<DIV align="center"><FONT size="2">CONDENSED CONSOLIDATED BALANCE SHEETS</FONT></DIV>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="52%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">June 30, 2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Dec. 31, 2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">(unaudited)</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">(audited)</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="11" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>ASSETS</B></FONT></DIV></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current assets:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">11,781,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,421,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restricted cash</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">50,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">50,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable, net of allowance for
doubtful accounts of $70,000 in 2001
and $0 in 2000</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,335,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,207,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses and other assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">468,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">573,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total current assets</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2"><B>14,634,000</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2"><B>15,251,000</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and equipment:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Medical equipment and facilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">34,539,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">29,942,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Office equipment</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">232,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">225,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deposits and construction in progress</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">952,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,819,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">35,723,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">31,986,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated depreciation and
amortization</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(8,626,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(7,237,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net property and equipment</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">27,097,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">24,749,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">191,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">209,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total assets</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2"><B>$</B></FONT></TD>
        <TD align="right"><FONT size="2"><B>41,922,000</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2"><B>$</B></FONT></TD>
        <TD align="right"><FONT size="2"><B>40,209,000</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD colspan="11" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></FONT></DIV></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current liabilities:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">169,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">81,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued interest</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">212,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">153,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Employee compensation and benefits</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">158,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">190,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other accrued liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">616,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">546,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current portion of long-term debt</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,784,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,126,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total current liabilities</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2"><B>5,939,000</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2"><B>5,096,000</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term debt, less current portion</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">21,377,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">20,300,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred income taxes</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">124,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">0</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interest</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,057,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,155,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Common stock, without par value:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">authorized shares - 10,000,000; issued
and outstanding shares, 3,556,000 in
2001 and 3,711,000 in 2000</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,345,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,746,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Common stock options issued to officer</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,414,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,414,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additional paid-in capital</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">740,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">814,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Retained earnings</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">926,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">684,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total shareholders&#146; equity</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13,425,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13,658,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Total liabilities and shareholders&#146; equity</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2"><B>$</B></FONT></TD>
        <TD align="right"><FONT size="2"><B>41,922,000</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2"><B>$</B></FONT></TD>
        <TD align="right"><FONT size="2"><B>40,209,000</B></FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">See accompanying notes
</FONT>
<P align="center"><FONT size="2">2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>AMERICAN SHARED HOSPITAL SERVICES</B></FONT>

<!-- link3 " CONDENSED CONSOLIDATED STATEMENTS OF INCOME" -->
<DIV align="left"><A NAME="003"></A></DIV>
<DIV align="left"><A name="a003"></A></DIV>

<DIV align="center"><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF INCOME<BR>
(Unaudited)</FONT></DIV>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="38%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">Three Months ended June 30,</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">Six Months ended June 30,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Revenues:</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Medical services</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,819,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,073,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">5,679,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">4,171,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Costs and expenses:</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Costs of operations:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Maintenance and supplies</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">87,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">34,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">167,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">64,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">728,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">563,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,372,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,077,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">244,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">196,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">539,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">366,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,059,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">793,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,078,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,507,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling and administrative</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">772,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">711,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,581,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,259,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">637,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">543,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,223,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,044,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total costs and expenses</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,468,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,047,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,882,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,810,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">351,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">26,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">797,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">361,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest and other income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">122,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">230,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">288,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">434,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interest</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(163,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(120,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(358,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(268,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income before income taxes</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">310,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">136,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">727,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">527,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income tax expense</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">124,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">0</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">124,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">0</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">186,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">136,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">603,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">527,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income per share:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Earnings per common share &#151; basic</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.05</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.04</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.17</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.14</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Earnings per common share &#151; assuming
dilution</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.04</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.02</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.12</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.10</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">See accompanying notes
</FONT>
<P align="center"><FONT size="2">3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>AMERICAN SHARED HOSPITAL SERVICES</B></FONT>

<!-- link3 " CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS" -->
<DIV align="left"><A NAME="004"></A></DIV>
<DIV align="left"><A name="a004"></A></DIV>

<DIV align="center"><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
(Unaudited)</FONT></DIV>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="63%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">Six Months ended June 30,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Operating activities:</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">603,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">527,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments to reconcile net cash provided by operating activities:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,407,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,109,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred income taxes</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">124,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">0</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Changes in operating assets and liabilities:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Increase) decrease in accounts receivable</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(128,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,040,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Decrease in prepaid expenses and other assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">104,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">32,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in accounts payable and accrued liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">185,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash from operating activities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,295,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">643,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Investing activities:</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of property and equipment (net of financing)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(548,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(180,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Decrease) increase in minority interest</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(98,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">78,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash from investing activities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(646,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(102,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Financing activities:</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payment of dividends</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(361,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">0</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payment received for exercise of stock options</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">45,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repurchase of options/warrants</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(74,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">0</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repurchase of common stock</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(416,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(26,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Principal payments on long-term debt and capitalized leases</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,453,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,200,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash from financing activities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,289,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,181,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net (decrease)&nbsp;in cash and cash equivalents</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(640,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(640,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents at beginning of period</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,421,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,903,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents at end of period</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">11,781,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,263,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Supplemental cash flow disclosure:</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash paid during the period for:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest paid</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,164,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,128,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income taxes paid</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">21,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">See accompanying notes
</FONT>
<P align="center"><FONT size="2">4
</FONT>

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2">AMERICAN SHARED HOSPITAL SERVICES</FONT>

<!-- link3 " NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="005"></A></DIV>
<DIV align="left"><A name="a005"></A></DIV>

<DIV align="center"><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</FONT></DIV>


<P><FONT size="2"><B>Note 1. Basis of Presentation</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly American Shared Hospital
Services&#146; consolidated financial position as of June&nbsp;30, 2001 and the results
of its operations for the three and six month periods ended June&nbsp;30, 2001 and
2000, which results are not necessarily indicative of results on an annualized
basis. Consolidated balance sheet amounts as of December&nbsp;31, 2000 have been
derived from audited financial statements.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These financial statements include the accounts of American Shared
Hospital Services (the &#147;Company&#148;) and its wholly-owned subsidiaries: MMRI,
Inc.; European Shared Medical Services Ltd.; American Shared Radiosurgery
Services; OR21, Inc. (&#147;OR21&#148;); MedLeader.com, Inc. (&#147;MedLeader&#148;); and the
Company&#146;s majority-owned subsidiary, GK Financing, LLC (&#147;GK Financing&#148;).
European Shared Medical Services, Ltd. was dissolved on April&nbsp;28, 2000.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company through its majority-owned subsidiary, GK Financing, provided
Gamma Knife units to twelve medical centers as of June&nbsp;30, 2001 in Arkansas,
California, Connecticut, Illinois, Massachusetts, Mississippi, Nevada, New
Jersey, Ohio, Texas and Wisconsin.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All significant intercompany accounts and transactions have been
eliminated in consolidation.
</FONT>

<P><FONT size="2"><B>Note 2. Per Share Amounts</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Per share information has been computed based on the weighted average
number of common shares and dilutive common share equivalents outstanding. For
the three and six months ended June&nbsp;30, 2001 basic earnings per share was
computed using 3,584,000 and 3,598,000 common shares, and diluted earnings per
share was computed using 5,145,000 and 5,160,000 common shares and equivalents,
respectively. For the three and six months ended June&nbsp;30, 2000 basic earnings
per share was computed using 3,813,000 common shares and diluted earnings per
share was computed using 5,473,000 and 5,489,000 common shares and equivalents,
respectively.
</FONT>

<P><FONT size="2"><B>Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Medical services revenues increased $746,000 and $1,508,000 for the three
and six month periods ended June&nbsp;30, 2001 from $2,073,000 and $4,171,000 for
the three and six month periods ended June&nbsp;30, 2000. The increase in second
quarter 2001 compared to second quarter 2000 reflects increased utilization at
Gamma Knife centers in operation for longer than one year (9%) and the addition
of three new Gamma Knife units. The Company had twelve Gamma
</FONT>
<P align="center"><FONT size="2">5
</FONT>

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>

<P><FONT size="2">Knife units in operation at June&nbsp;30, 2001 compared to nine at June&nbsp;30,
2000. For the six months ended June&nbsp;30, 2001, the increase is due to three new
Gamma Knife units and an increase in revenue at Gamma Knife centers in
operation more than one year of 13%. Ten of the Company&#146;s customers are under
fee-per-use contracts, and two customers are under revenue sharing agreements
(&#147;retail&#148;). For retail units, the Company receives all or a percentage of the
reimbursement (exclusive of physician fees) received by the customer, and is
responsible for all or a percentage of the operating expenses of the Gamma
Knife.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total costs of operations increased $266,000 and $571,000 for the three
and six month periods ended June&nbsp;30, 2001 from $793,000 and $1,507,000 for the
three and six month periods ended June&nbsp;30, 2000. Maintenance and supplies
increased $53,000 and $103,000 for the three and six month periods ended June
30, 2001 compared to the same period in the prior year due to additional Gamma
Knife units that started contract maintenance after the expiration of each
unit&#146;s warranty period. There were nine Gamma Knife units covered under
contract maintenance as of June&nbsp;30, 2001 compared to four as of June&nbsp;30, 2000.
Depreciation and amortization increased $165,000 and $295,000 for the three and
six month periods ended June&nbsp;30, 2001 compared to the same period in the prior
year due to the increase of three additional Gamma Knife units. Other
operating costs increased $48,000 and $173,000 for the three and six month
periods ended June&nbsp;30, 2001 compared to the same period in the prior year due
to an increase in insurance, marketing and personal property tax expenses
related to the increase in Gamma Knife units. In addition certain operating
expenses of one of the retail Gamma Knife units increased because of a
corresponding increase in revenue.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling and administrative costs increased $61,000 and $322,000 for the
three and six month periods ended June&nbsp;30, 2001 from $711,000 and $1,259,000
for the three and six month periods ended June&nbsp;30, 2000. For the three and six
month periods this increase is primarily due to increased investor relations
costs and increased sales, business development and marketing costs. For the
three month period ended June&nbsp;30, 2000 there was $120,000 of one time charges
relating to a restructuring of operations. For the six month period ended June
30, 2001 there was $154,000 of development costs for the Company&#146;s two startup
businesses, OR21 and MedLeader, compared to $54,000 in the prior year.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense increased $94,000 and $179,000 for the three and six
month periods ended June&nbsp;30, 2001 from $543,000 and $1,044,000 for the three
and six month periods ended June&nbsp;30, 2000. This is due to the addition of two
Gamma Knife units during the quarter (three for the six month period), all of
which were financed with long-term debt which results in additional interest
expense. In addition, the newer Gamma Knife units have higher interest expense
at the beginning of their loan term than more mature units because interest
expense decreases as the outstanding balance of each loan is reduced.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest and other income decreased $108,000 and $146,000 for the three
and six month periods ended June&nbsp;30, 2001 from $230,000 and $434,000 for the
three and six month periods ended June&nbsp;30, 2000 due to lower interest rates on
invested cash balances. In addition, there was a decrease of approximately
$51,000 and $73,000 of other income for the three and six month periods ended
June&nbsp;30, 2001 respectively, compared to the same period last year. Other
income in the prior year consisted primarily of state income tax refunds.
</FONT>
<P align="center"><FONT size="2">6
</FONT>

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<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minority interest increased $43,000 and $90,000 for the three and six
month periods ended June&nbsp;30, 2001 from $120,000 and $268,000 for the three and
six month periods ended June&nbsp;30, 2000 due to increased profitability of GK
Financing. Minority interest represents the 19% interest of GK Financing owned
by a third party.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company recorded $124,000 of income tax expense for the three and six
month periods ended June&nbsp;30, 2001 compared to no expense for the three and six
month periods ended June&nbsp;30, 2000. The Company did not record any income tax
expense during 2000 or the first three months of 2001 due to net operating loss
carryforwards available for tax purposes. The Company expects that it will
continue to record an estimated 40% income tax provision for the remainder of
the year.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had net income of $186,000 ($0.05 per basic share) and
$603,000 ($0.17 per basic share) for the three and six month periods ended June
30, 2001 compared to net income of $136,000 ($0.04 per basic share) and
$527,000 ($0.14 per basic share) in the same period in the prior year. The
increase for both the three and six month periods ended June&nbsp;30, 2001 is
primarily a result of a 36% increase in revenue due to three additional Gamma
Knife units as well as increased revenue generated by Gamma Knife units in
operation more than one year. For the six month period, this increase in net
income was reduced because of an increase of $100,000 in costs associated with
MedLeader and OR21. For both the three and six month periods, net income was
also reduced because the Company began recording a 40% income tax provision in
the second quarter, 2001.
</FONT>
<P align="left"><FONT size="2"><B>Liquidity and Capital Resources</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had cash and cash equivalents of $11,781,000 at June&nbsp;30, 2001
compared to $12,421,000 at December&nbsp;31, 2000. The Company&#146;s cash position
decreased by $640,000 because the Company made deposits of $500,000 on future
Gamma Knife purchases, paid its first annual dividend of $0.10 per share
($361,000) to shareholders of record on March&nbsp;15, 2001, and repurchased 165,000
shares and 69,000 options to purchase shares of Company stock ($490,000).
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company as of June&nbsp;30, 2001 had shareholders&#146; equity of $13,425,000,
working capital of $8,695,000 and total assets of approximately $41,922,000.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has scheduled interest and principal payments under its debt
obligations of approximately $7,305,000 during the next 12&nbsp;months. The Company
believes that its cash flow from operations and cash resources is adequate to
meet its scheduled debt obligations during the next 12&nbsp;months.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is investing its cash in overnight repurchase agreements and
commercial paper pending use in the Company&#146;s operations.
</FONT>
<P align="center"><FONT size="2">7
</FONT>

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<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "PART II &#151; OTHER INFORMATION" -->
<DIV align="left"><A NAME="006"></A></DIV>
<DIV align="left"><A name="a006"></A></DIV>
<P align="center"><FONT size="2"><B>PART II &#151; OTHER INFORMATION</B></FONT>

<!-- link2 "Item&nbsp;1. Legal Proceedings." -->
<DIV align="left"><A NAME="007"></A></DIV>
<DIV align="left"><A name="a007"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;1. Legal Proceedings.</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</FONT>
<!-- link2 "Item&nbsp;2. Changes in Securities." -->
<DIV align="left"><A NAME="008"></A></DIV>
<DIV align="left"><A name="a008"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;2. Changes in Securities.</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</FONT>
<!-- link2 "Item&nbsp;3. Defaults upon Senior Securities." -->
<DIV align="left"><A NAME="009"></A></DIV>
<DIV align="left"><A name="a009"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;3. Defaults upon Senior Securities.</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</FONT>
<!-- link2 "Item&nbsp;4. Submission of Matters to a Vote of Securities Holders." -->
<DIV align="left"><A NAME="010"></A></DIV>
<DIV align="left"><A name="a010"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;4. Submission of Matters to a Vote of Securities Holders.</B></FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="97%"><FONT size="2">The Company&#146;s Annual Meeting of Shareholders was held on May&nbsp;17,
2001. There were present in person or by proxy at said Meeting
shareholders holding 3,440,471 shares which represented 95.3% of
the 3,607,225 shares outstanding and entitled to vote at the
Meeting, which represented a quorum. At the Meeting, the
shareholders:</FONT></TD>
</TR>
</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">1)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="93%"><FONT size="2">Voted on the Election of Directors as follows:</FONT></TD>
</TR>
</TABLE>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="57%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="left"><FONT size="1">Nominee</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="left" colspan="2"><FONT size="1">For</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="left" colspan="2"><FONT size="1">Withhold</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="left"><HR size="1" noshade width="22%"></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="2"><HR size="1" noshade width="22%" align="left"></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="2"><HR size="1" noshade width="60%" align="left"></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Ernest A. Bates, M.D.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left"><FONT size="2">3,422,910</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left"><FONT size="2">17,561</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Willie R. Barnes</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left"><FONT size="2">3,423,160</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left"><FONT size="2">17,311</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">John F. Ruffle</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left"><FONT size="2">3,423,310</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left"><FONT size="2">17,161</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Stanley S. Trotman, Jr.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left"><FONT size="2">3,423,310</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left"><FONT size="2">17,161</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Charles B. Wilson, M.D.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left"><FONT size="2">3,423,310</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left"><FONT size="2">17,161</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="93%"><FONT size="2">Dr.&nbsp;Bates, Mr.&nbsp;Barnes, Mr.&nbsp;Ruffle, Mr.&nbsp;Trotman and Dr.&nbsp;Wilson
were elected to the Board of Directors.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">2)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="93%"><FONT size="2">Voted on 2001 Stock Option Plan</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="30%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="11%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="left"><FONT size="1">For</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="left" colspan="2"><FONT size="1">Against</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="left" colspan="2"><FONT size="1">Abstain</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="left" nowrap colspan="2"><FONT size="1">Broker Non-Votes</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade align="left" width="22%"></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="2"><HR size="1" noshade width="62%" align="left"></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="2"><HR size="1" noshade align="left" width="72%"></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="2"><HR size="1" noshade align="left" width="68%"></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1,804,846</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">204,704</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">30,145</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,400,776</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="93%"><FONT size="2">The 2001 Stock Option Plan was approved.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">3)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="93%"><FONT size="2">Voted on the ratification of Moss Adams, LLP as
the Company&#146;s independent accountants for the year ended
December&nbsp;31, 2001. There were 3,433,960 votes for, 2,411
votes against and 4,100 votes abstained.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="93%"><FONT size="2">Moss Adams, LLP was ratified as the Company&#146;s independent
accountants for the year ended December&nbsp;31, 2001.</FONT></TD>
</TR>
</TABLE>
<!-- link2 "Item&nbsp;5. Other Information." -->
<DIV align="left"><A NAME="011"></A></DIV>
<DIV align="left"><A name="a011"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;5. Other Information.</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</FONT>
<P align="center"><FONT size="2">8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "Item&nbsp;6. Exhibits and Reports on Form&nbsp;8-K." -->
<DIV align="left"><A NAME="012"></A></DIV>
<DIV align="left"><A name="a012"></A></DIV>
<P align="left"><FONT size="2"><B>Item&nbsp;6. Exhibits and Reports on Form&nbsp;8-K.</B></FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="93%"><FONT size="2">Exhibits</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="93%"><FONT size="2">The following exhibit is filed herewith:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%">
<TR valign="bottom">
        <TD width="9%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="86%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Exhibit Number</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Description</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.33</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Lease Agreement for a Gamma Knife
Unit dated as of November&nbsp;1, 1999 between GK Financing,
LLC and Jackson HMA, Inc. dba Central Mississippi
Medical Center. (Confidential material appearing in
this document has been omitted and filed separately with
the Securities and Exchange Commission in accordance
with Rule&nbsp;24b-2, promulgated under the Securities and
Exchange Act of 1934, as amended. Omitted information
has been replaced with asterisks.)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.34</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Addendum to Lease Agreement for a
Gamma Knife Unit dated as of November&nbsp;1, 1999 between GK
Financing, LLC and Jackson HMA, Inc. dba Central
Mississippi Medical Center. (Confidential material
appearing in this document has been omitted and filed
separately with the Securities and Exchange Commission
in accordance with Rule&nbsp;24b-2, promulgated under the
Securities and Exchange Act of 1934, as amended.
Omitted information has been replaced with asterisks.)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.35</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Lease Agreement for a Gamma Knife
Unit dated as of February&nbsp;18, 2000 between GK Financing,
LLC and OSF HealthCare System. (Confidential material
appearing in this document has been omitted and filed
separately with the Securities and Exchange Commission
in accordance with Rule&nbsp;24b-2, promulgated under the
Securities and Exchange Act of 1934, as amended.
Omitted information has been replaced with asterisks.)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="013"></A></DIV>
<DIV align="left"><A name="a013"></A></DIV>
<P align="center"><FONT size="2">SIGNATURES</FONT>

<P><FONT size="2">Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
</FONT>
<P align="center"><FONT size="2">AMERICAN SHARED HOSPITAL SERVICES<BR>
Registrant</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
        <TD width="15%">&nbsp;</TD>
        <TD width="35%">&nbsp;</TD>
        <TD width="50%">&nbsp;</TD>
</TR>

<TR>
        <TD><FONT size="2">Date:</FONT></TD>
        <TD><FONT size="2">August&nbsp;10, 2001</FONT></TD>
        <TD><FONT size="2">  /s/&nbsp;&nbsp;&nbsp;Ernest A. Bates<BR>
<HR noshade size="1" align="left" width="60%">
Ernest A. Bates, M.D.<BR>
Chairman of the Board and<BR>
Chief Executive Officer</FONT></TD>
</TR>

<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
        <TD><FONT size="2">Date:</FONT></TD>
        <TD><FONT size="2">August&nbsp;10, 2001</FONT></TD>
        <TD width="50%"><FONT size="2">/s/&nbsp;&nbsp;&nbsp;Craig K. Tagawa<BR>
<HR noshade size="1" align="left" width="60%">
Craig K. Tagawa<BR>
Senior Vice President<BR>
Chief Operating and Financial Officer</FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">10</FONT>
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.33
<SEQUENCE>3
<FILENAME>f74683ex10-33.txt
<DESCRIPTION>LEASE AGREEMENT FOR A GAMMA KNIFE UNIT 11/01/1999
<TEXT>
<PAGE>   1

                                                                   Exhibit 10.33

                     LEASE AGREEMENT FOR A GAMMA KNIFE UNIT

       THIS AGREEMENT FOR A GAMMA KNIFE UNIT on November 1, 1999, (hereinafter,
referred to as the "Agreement") is entered into between GK Financing, LLC, a
California Limited Liability Company, (hereinafter referred to as "GKF"), and
Jackson HMA, Inc. d/b/a Central Mississippi Medical Center, a for profit
Mississippi corporation, (hereinafter referred to as "Medical Center").

                                 R E C I T A L S

       WHEREAS, Medical Center wants to lease a Leksell Stereotactic Gamma Unit
Manufactured by Elekta Instruments, Inc., (hereinafter referred to as the
"Equipment"); and

       WHEREAS, GKF is willing to lease the Equipment which GKF has acquired
from Elekta Instruments, Inc., a Georgia corporation (hereinafter referred to as
"Elekta"), to Medical Center, pursuant to the terms and conditions of this
Agreement.

       NOW, therefore, in consideration of the foregoing premises and the
promises contained herein, the parties hereto hereby agree as follows:

       1. Execution of LGK Agreement by and between Medical Center and Elekta.
Medical Center agrees that simultaneously with the execution of this Agreement
it shall execute that certain LGK Agreement with Elekta, (hereinafter referred
to as the "LGK Agreement"), a copy of which is attached hereto as Exhibit A and
incorporated herein by this reference. Medical Center agrees to fulfill all of
its obligations under the LGK Agreement and acknowledges that GKF is a third
party beneficiary of the LGK Agreement. Medical Center shall fully indemnify and
hold harmless GKF in the event that GKF suffers any loss, damage, claim or
expense (including attorneys' fees) solely as a result of Medical Center's
breach or alleged breach of the LGK Agreement.

       2. Certificate of Need (CON). If Medical Center requires a CON to install
and operate the Equipment, Medical Center will work diligently toward receipt of
a CON for the Equipment and the provision of services related thereto. This
Agreement shall become null and void in the event Medical Center does not
receive a CON, if required, for the Equipment and the provision of services
related thereto after using its best efforts to do so.

       3. Delivery of the Equipment and Site preparation. GKF shall arrange to
have the Equipment delivered to Medical Center, at 1850 Chadwick Drive, Jackson,
Mississippi (the "Site") in coordination with Elekta. GKF shall exert its best
faith efforts to expedite the delivery of the Equipment in accordance with the
terms and conditions of the Purchase Agreement for the Equipment by and between
GKF and Elekta. Notwithstanding the preceding sentence, it is understood and
agreed that GKF has made no representations and warranties to Medical Center
concerning actual delivery dates or schedules for the Equipment at the Site.


<PAGE>   2

       Medical Center shall provide a safe, convenient and properly prepared
Site, at its own expense, in accordance with all of the Equipment manufacturer's
(Elekta's) guidelines, specifications, technical instruments and Site Planning
Criteria (which Site Planning Criteria are attached hereto as Exhibit B and
incorporated herein by this reference), which criteria shall include Elekta's
estimated delivery schedule when and as received by GKF, on Medical Center
controlled property (The "Site") for the proper performance of Gamma Knife
procedures. Site location shall be mutually acceptable to both parties. Medical
Center shall prepare at its sole cost and expense the requisite site plans and
specifications and shall submit them to Elekta and GKF for approval. Medical
Center shall obtain, in a timely manner, a User License from the Nuclear
Regulatory Commission and/or appropriate state agency authorizing it to take
possession of the Cobalt Supply and shall obtain such other licenses, permits,
approvals, consents and authorizations, which may be required by local
governmental or other regulatory agencies for the Site, its preparation, the
charging of the Equipment with its Cobalt Supply, the conduct of Acceptance
tests, and the use of the Equipment all as more fully set forth in Article 2.1
of the LGK Agreement.

       4. Commencement of Term. The Term (hereinafter defined) of this Agreement
shall commence upon the performance of the first clinical Gamma Knife procedure
at the Site (the "Commencement Date"). Medical Center shall become liable to GKF
for the payments referred to in Paragraph 7 hereinbelow upon the Commencement
Date.

       5. Costs of Site Preparation; Costs of Installation. Medical Center's
obligations shall include preparation of plans and specifications for the
construction and preparation of the Site in such form as will result in the
Site, when constructed in accordance with such plans and specifications, being
in full compliance with Elekta's Site Planning Criteria. Medical Center shall at
its own expense and risk, prepare, construct and make ready the Site as
necessary, for the installation of the Equipment, including, but not limited to,
providing any temporary and/or permanent shielding for the charging of the
equipment and its use, selecting and preparing a proper foundation for the
Equipment and for such shielding and walls, as well as proper alignment of the
Site and wiring. Medical Center shall be financially responsible for the
positioning of the Equipment on its foundation at the Site.

       Medical Center shall also at its own expense select, purchase and install
all radiation monitoring equipment and devices, safety circuits and radiation
warning signs needed for the Equipment at the Site, according to all applicable
federal, state and local laws, regulations, recommendations or custom.

       Upon completion of the Site, Medical Center shall warrant that the Site
will be safe and suitable for its use of the Equipment. Medical Center shall
fully indemnify and hold harmless GKF from any and all loss, liability, damage,
expense or claim (including attorneys' fees) which GKF may suffer and incur and
which relate to the Site and the Equipment's positioning thereon.

       Medical Center shall be liable to GKF for any damage to the Equipment
caused by (a) defects in construction of the Site or defects in the positioning
of the Equipment at the Site; (b) defects arising out of materials or parts
provided, modified or designed by Medical Center with respect to the Site; or
(c) negligent or intentional acts of omission or commission by Medical Center or
any of


<PAGE>   3

its officers, agents, physicians, and employees in connection with the Site
preparation or operation of the Equipment at the Site.

       Medical Center warrants that it shall utilize its best efforts to fulfill
on an expeditious basis its obligations under this Paragraph 5. Medical Center
further warrants that it shall on a regular basis keep GKF informed of Medical
Center's progress in fulfilling its obligations pursuant to this Paragraph 5.
Should Medical Center not have all site preparations completed by the delivery
date specified by a separate agreement plus a sixty (60) day grace period such
that the site is acceptable for positioning and installation of the equipment,
Medical Center shall reimburse GKF at an interest rate of Bank of America's
prime rate plus 2% on GKF's equipment cost until the site is prepared to allow
positioning and installation of the equipment.

       6. Term of the Equipment. GKF agrees to provide to Medical Center the
Equipment pursuant to the terms of this Agreement, for a term of ten (10) years
from the Commencement Date as described in Paragraph 4 hereinabove (the "Term"),
unless terminated earlier as provided herein.

       7. Per Procedure Payments. Medical Center shall pay to GKF a per
procedure payment of * for the use of the Equipment. A procedure shall be
defined as a single patient treatment session that may include one or more
isocenters during that session. Medical Center shall be billed monthly for the
actual number of procedures performed during the first and second half of the
month, respectively. Medical Center shall pay the procedures invoiced within
thirty (30) days after being invoiced. Interest shall begin to accrue at the
rate of 1-1/2% per month on all invoices remaining unpaid after 45 days.

       8. Use of the Equipment. The Equipment may be used by Medical Center only
at the location stated above and shall not be removed therefrom. Medical Center
shall not assign or sublease the Equipment or its rights hereunder without the
prior written consent of GKF. No permitted assignment or sublease shall relieve
Medical Center of any of its obligations hereunder. Medical Center shall not use
nor permit the Equipment to be used in any manner nor for any purpose for which,
in the opinion of Elekta or GKF, the Equipment is not designed or reasonably
suitable. Medical Center shall not permit any liens, whether voluntary or
involuntary, to attach to the Equipment, without the prior written consent of
GKF. Medical Center shall have no interest in the Equipment other than the
rights acquired as a lessee hereunder and the Equipment shall remain the
property of GKF regardless of the manner in which it may be installed or
attached at the Site. Medical Center shall, at GKF's request, affix to the
Equipment tags, decals, or plates furnished by GKF, indicating GKF's ownership
of the Equipment.

       9. Additional Covenants of Medical Center. In addition to the other
covenants made by Medical Center, Medical Center shall at its own cost and
expense:

       (a) Provide properly trained professional, technical and support
personnel and supplies required for the proper performance of medical procedures
utilizing the Equipment.

       (b) Assume all medical and financial responsibility for the overseers'
monitoring of all patients' medical condition and treatment.


<PAGE>   4

       (c) Fully comply with all of its obligations under the LGK Agreement.

       (d) Indemnify GKF as herein provided: (i) Medical Center hereby agrees to
fully indemnify and/or reimburse (including attorneys' fees) GKF on a prompt
basis for any and all damage to the Equipment (including any violations by
Medical Center, its agents, officers, physicians, employees, successors and
assigns of the Service Agreement described in Paragraph 16 hereof) to the extent
such damages are caused by the negligent or wrongful acts or omissions of
Medical Center, its agents, officers, physicians and employees. In the event the
Equipment is destroyed or rendered unusable, this indemnification shall extend
up to (but not exceed) the full replacement value of the Equipment at the time
of its destruction less salvage value, if any. (ii) Medical Center hereby
further agrees to indemnify and hold GKF, its agents, officers, employees,
successors and assigns, harmless from and against any and all claims,
liabilities, obligations, losses, damages, injuries, penalties, actions, costs
and expenses (including attorneys' fees) for all events and/or occurrences
described in Article 7.3 of the LGK Agreement to the same extent that Medical
Center agrees to indemnify Elekta thereunder. Medical Center further agrees to
fully indemnify and hold harmless GKF for any loss, damage, claim, or expense
(including attorneys' fees) GKF may suffer or incur as a result of Medical
Center's breach or breach alleged in litigation with regard to the LGK
Agreement.

       (e) Provide reasonable and customary marketing materials (i.e. brochures,
announcements, etc.) and marketing support from an administrative and physician
(i.e. seminars by neurosurgeons and radiation therapists to referring
physicians, etc.) commitment standpoint for this clinical service.

       10. Additional Covenants, Representations and Warranties of GKF. In
addition to the other covenants, representations and warranties, made by GKF in
this Agreement:

       (a) GKF represents and warrants that GKF has full power and authority to
enter into this Agreement, and that this Agreement does not and will not violate
any agreement, contract or instrument binding upon GKF.

       (b) GKF represents and warrants to Medical Center that, upon delivery of
the Equipment to Medical Center, GKF shall use its best faith efforts to require
that Elekta meets its contractual obligations to GKF and in putting the
Equipment, as soon as possible, into good, safe and serviceable condition and
fit for its intended use in accordance with the manufacturer's specifications,
guidelines and field modification instructions.

       (c) GKF represents and warrants that throughout the term of this
Agreement, Medical Center shall enjoy the use of the Equipment, free of the
rights of any other persons except for those rights reserved by GKF or granted
to Elekta under the LGK Agreement or under Elekta's Purchase Agreement with GKF.


<PAGE>   5

       (d) During the entire term of this agreement and subsequent extension
thereof, GKF shall maintain in full force and effect: (i) the Service Agreement
referenced in Paragraph 16 hereof; and (ii) any other service or other
agreements required to fulfill GKF's obligations to Medical Center pursuant to
this Paragraph 10(d). GKF represents and warrants that during the entire term of
this agreement and any subsequent extensions thereof, that it will fully pursue
any and all remedies it may have against Elekta under the Service Agreement to
insure that the Equipment will be in conformity with Elekta's warranties so that
it is free from defects in design, materials, and workmanship which result in
noncompliance with the specifications and/or Elekta's warranties to GKF. In no
event, however, shall the warranty obligations of GKF to Medical Center with
respect to the Equipment be greater or more extensive than Elekta's warranty
obligations to GKF with respect to the Equipment.

       11. Ownership/Title. It is expressly understood that Medical Center shall
acquire no right, title or interest in or to the Equipment, other than the right
to the possession and use of the same in accordance with the terms of this
Agreement.

       GKF may at its sole discretion finance the Equipment. Financing may be in
the form of an installment loan or a capitalized lease or other commercially
available debt instrument. Should GKF finance the Equipment through an
installment loan, GKF shall be required to provide the Equipment as collateral
against the loan. Should GKF finance the Equipment through a capitalized lease
title shall vest with the lessor until GKF exercises its buy-out option. In
addition, should GKF finance the Equipment, said agreement may be used as
collateral against the loan.

       12. Cost of Use of the Equipment. Except as is otherwise provided herein,
Medical Center shall bear the entire cost of using the Equipment during the Term
of this Agreement. This shall include, but not be limited to, providing trained
professionals, technical and support personnel and supplies to properly operate
the Equipment. Medical Center shall be fully responsible and liable for all acts
and/or omissions of such professional, technical and support personnel.

       13. Taxes. GKF shall pay any personal property taxes levied against the
Equipment and any other taxes or governmental fees or assessments, however
denoted, whether of the federal government, any state government or any local
government, levied or based on this Agreement or the use of the Equipment except
for those taxes, if any, pertaining to the gross income or gross receipts of
Medical Center.

       14. Maintenance and Inspections. GKF agrees to exercise due and proper
care in the maintenance of the Equipment and to keep the Equipment in a good
state of repair, reasonable wear and tear excepted. Medical Center shall be
liable to GKF for all damage to the Equipment caused by the misuse, negligence,
improper use or other intentional or negligent acts or omissions of Medical
Center's employees, officers, agents, and physicians.

       GKF (and Elekta) shall have the right of access to the Equipment for the
purpose of inspecting same at all reasonable times and upon reasonable notice
and with a minimum of


<PAGE>   6

interference to Medical Center's operations. In the event the Equipment is
improperly used by Medical Center or its employees, agents, officers, and
physicians, GKF may service or repair the same as needed and such expense shall
be paid by Medical Center, unless the repair is covered by the Service Agreement
described in Paragraph 15 hereof.

       Any work so performed by or in the service or maintenance of the
Equipment as a result of Medical Center's failure or neglect to do so shall not
deprive GKF of any of its rights, remedies or actions against Medical Center for
damages caused by such failure or neglect.

       15. Equipment Modifications/Additions/Upgrades. The parties agree that
the necessity and financial responsibility for modifications/additions/upgrades
to the Equipment, including the reloading of the Cobalt-60 source, shall be
discussed and mutually decided by GKF and Medical Center.

       16. Service Agreement. GKF warrants that it shall simultaneously with the
execution of this Agreement enter into a Service Agreement with Elekta.

       16. Termination If, after the initial twenty-four (24) month period of
service, and subsequent 12 month periods of service, Medical Center does not
provide GKF with a reasonable economic justification to continue providing Gamma
Knife services hereunder, then and in that event, GKF shall have the option of
terminating this Agreement upon the giving of written notice to Medical Center
of said termination not less than ninety (90) days prior to GKF's designated
termination date.


       17. Options to Extend Agreement.

       (a) Medical Center shall have the option at the end of the ten (10) year
initial Term to:

              (i) Extend this Agreement for a five (5) year renewal term.

              (ii) Terminate this Agreement. If Medical Center terminates this
Agreement at the end of the initial term, GKF at its cost shall remove the Gamma
Knife within an agreed upon period of time after the expiration of the ten (10)
year initial Term.

              Medical Center shall exercise one (1) of the two (2) options
referred to above, by mailing an irrevocable written notice thereof to GKF at
Four Embarcadero Center, Suite 3620, San Francisco, California, 94111, by
registered mail, postmarked on or before the end of the ninth (9th) year of the
ten (10) year initial Term of this Agreement. Any such notice shall be
sufficient if it states in substance that Medical Center elects to exercise its
option and states which of the two (2) options referred to above Medical Center
is exercising.


<PAGE>   7

       18. No Warranties by GKF. Medical Center warrants that as of the
Commencement Date, it shall have (a) thoroughly inspected the Equipment; (b)
determined for itself that all items of the Equipment are of a size, design,
capacity and manufacture selected by it; and (c) satisfied itself that to the
best of its knowledge the Equipment is suitable for Medical Center's stated
purposes. GKF SUPPLIES THE EQUIPMENT "AS IS" AND NOT BEING THE MANUFACTURER OF
THE EQUIPMENT OR THE MANUFACTURER'S AGENT, MAKES NO WARRANTY OR REPRESENTATION,
EITHER EXPRESSED OR IMPLIED, AS TO THE EQUIPMENT'S MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, DESIGN, CONDITION, DURABILITY, CAPACITY, MATERIAL OR
WORKMANSHIP OR AS TO PATENT INFRINGEMENT OR THE LIKE, it being agreed that all
such risks as between GKF and Medical Center, shall be borne by Medical Center.
Medical Center agrees to look solely to the manufacturer (Elekta) or to
suppliers of the Equipment (and its software) for any and all warranty claims.
Any and all warranties made by Elekta will be in its good faith best efforts
enforced by GKF on behalf of Medical Center during the ten (10) year initial
Term hereof. Medical Center agrees that GKF shall not be responsible for the
delivery, installation, or operation of the Equipment or for any delay or
inadequacy of any or all of the foregoing. GKF shall not be responsible for any
direct or indirect consequential loss or damage resulting from the installation,
operation or use of the Equipment or otherwise. Medical Center expressly waives
any right to hold GKF liable hereunder for any claims, demands and liabilities
arising out of or in connection with the design, manufacture, possession or
operation of the Equipment.

       19. Events of Default and Remedies. The occurrence of any one of the
following shall constitute an Event of Default hereunder:

       (a) Medical Center fails to pay any installment of semi-monthly procedure
payments when due when such default continues for a period of thirty (30) days
after notice thereof from GKF or its assignee is given to Medical Center.

       (b) Medical Center attempts to remove, sell, transfer, encumber, sublet
or part with possession of the Equipment or any items thereof, except as
expressly permitted herein;

       (c) Medical Center shall fail to observe or perform any of the other
obligations required to be observed or performed by Medical Center hereunder and
such failure shall continue uncured for twenty (20) days after written notice
thereof to Medical Center by GKF;

       (d) Medical Center ceases doing business as a going concern, makes an
assignment for the benefit of creditors, admits in writing its inability to pay
its debts as they become due, files a voluntary petition in bankruptcy, is
adjudicated a bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of a petition filed against
it in any such proceeding, consents to or acquiesces in the appointment of a
trustee, receiver, or liquidator of it or of all or any substantial part


<PAGE>   8

of its assets or properties, or it or its shareholders shall take any action
looking to its dissolution or liquidation.

       (e) Within sixty (60) days after the commencement of any proceedings
against Medical Center seeking reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceedings shall not have been dismissed, or if within
thirty (30) days after the appointment without Medical Center's consent or
acquiescence of any trustee, receiver or liquidator of it or of all or any
substantial part of its assets and properties, such appointment shall not be
vacated.

       Upon the occurrence of an Event of Default, GKF may at its option do any
or all of the following: (i) by notice to Medical Center, terminate this
Agreement as to the Equipment in default, wherever situated, and for such
purposes, enter upon the Site without liability for so doing or GKF may cause
Medical Center and Medical Center hereby agrees to return the Equipment to GKF
at Medical Center's sole cost and expense; (ii) recover from, as liquidated
damages for the loss of the bargain and not as a penalty, an amount equal to the
present value of the unpaid estimated future lease payments by Medical Center to
GKF through the end of the Agreement term discounted at the rate of nine percent
(9%), which payment shall become immediately due and payable. Unpaid estimated
future lease payments shall be based on the prior 12 months lease payments with
an annual five (5%) percent increase; (iii) sell, dispose of, hold, use or lease
the Equipment in default, as GKF in its sole discretion may determine (and GKF
shall not be obligated to give preference to the sale, lease or other
disposition of the Equipment over the sale, lease or other disposition of
similar Equipment owned or leased by GKF). In any event, Medical Center shall,
without further demand, pay to GKF an amount equal to all sums due and payable
for all periods up to and including the date on which GKF had declared this
Agreement to be in default.

       In the event, that Medical Center shall have paid to GKF the liquidated
damages referred to in (iii) above, GKF hereby agrees to pay to Medical Center
promptly after receipt thereof, all rentals or proceeds received from the
reletting or sale of the Equipment during the balance of the ten (10) year
initial Term (after deduction of all expenses incurred by GKF; said amount never
to exceed the amount of the liquidated damages paid by Medical Center). Medical
Center agrees that GKF shall have no obligation to sell the Equipment. Medical
Center shall in any event remain fully liable for reasonable damages as provided
by law for all costs and expenses incurred by GKF on account of such default,
including but not limited to, all court costs and reasonable attorneys' fees.
Medical Center hereby agrees that, in any event, it shall be liable for any
deficiency after any sale, lease or other disposition of the Equipment by GKF.
The rights afforded GKF hereunder shall not be deemed to be exclusive, but shall
be in addition to any other rights or remedies provided by law.


<PAGE>   9

       20. Events of Default by GKF and Remedies.

              20.1 The occurrence of any one of the following shall constitute
an Event of Default hereunder:

                     20.1.1 GKF shall fail to observe or perform any of its
covenants, duties or obligations arising under this Agreement and such failure
shall continue for a period of thirty (30) days after written notice thereof is
given by Medical Center to GKF; however, if GKF cures the default within the
applicable thirty (30) day period or if the default reasonably requires more
than thirty (30) days to cure, GKF commences to cure the default during the
initial thirty (30) day period and GKF diligently completes the cure as soon as
reasonably possible following the end of the thirty (30) day period, such
default shall not constitute an Event of Default.

                     20.1.2 GKF ceases doing business as a going concern, makes
an assignment for the benefit of creditors, admits in writing its inability to
pay its debts as they become due, files a voluntary petition in bankruptcy, is
adjudicated a bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of a petition filed against
it in any such proceeding, consents to or acquiesces in the appointment of a
trustee, receiver, or liquidator of it or of all or any substantial part of its
assets or properties, or it or its shareholders shall take any action looking to
its dissolution or liquidation.

                     20.1.3 Within sixty (60) days after the commencement of any
proceedings against GKF seeking reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceedings shall not have been dismissed, or if within
thirty (30) days after the appointment without GKF's consent or acquiescence of
any trustee, receiver or liquidator of it or of all or any substantial part of
its assets and properties, such appointment shall not be vacated.

              20.2 Upon the occurrence of an Event of Default involving GKF,
Medical Center may at its option do any or all of the following:

                     20.2.1 By written notice to GKF, immediately terminate this
Agreement as to the Equipment and, in such event, GKF shall remove the Equipment
at GKF's sole cost and expense or, in the absence of removal by GKF within a
reasonable period of time after a written request therefor, Medical Center may
remove the Equipment with all due care and store the Equipment at GKF's sole
cost and expense.

                     20.2.2 Seek to recover from GKF such loss as may be
realized by Medical Center in the ordinary course of events as a result of the
Event of Default.


<PAGE>   10

              20.3 GKF shall in any event remain fully liable for reasonable
damages as provided by law and for all costs and expenses incurred by Medical
Center on account of such default, including but not limited to, all court costs
and reasonable attorneys' fees. However, notwithstanding anything to the
contrary set forth in this Agreement, GKF shall not in any manner be or become
liable to Medical Center for any consequential or incidental damages that may be
suffered by Medical Center which arise out of or result from the Event of
Default or any breach by GKF of this Agreement. The rights and remedies afforded
Medical Center under this Agreement shall be deemed cumulative and not exclusive
and shall be in addition to any other rights or remedies to GKF provided by law
or in equity.

              20.4 Notwithstanding the occurrence of an Event of Default with
respect to GKF (including any claim which would otherwise be in the nature of a
set-off), Medical Center shall fully perform and pay its obligations hereunder
(including payment of all rent). Upon termination of this Agreement or the
exercise of any other rights or remedies under this Agreement or applicable law
following an Event of Default, Medical Center shall, without further request or
demand, pay to GKF all rent payments and other sums owing under this Agreement
when and as due.

       21. Indemnification.

              21.1 Medical Center's Indemnity Agreement. Subject to provisions
of this Agreement, Medical Center, for itself and its successors and assigns,
hereby indemnifies and holds GKF harless from and against any loss, cost or
expense (including reasonable attorneys' fees) arising out of or relating in any
manner to the failure of Hospital to properly perform any of its obligations to
be performed under the terms of this Agreement.

              21.2 GKF's Indemnity Agreement. Subject to provisions of this
agreement, GKF, for itself and its successors and assigns, hereby indemnifies
and holds Hospital harmless from and against any loss, cost or expense
(including reasonable attorneys' fees) arising out of or relating in any manner
to the failure of GKF to properly perform any of its obligations to be performed
under the terms of this Agreement.

       22. Insurance.

       (a) During the ten (10) year initial Term of this Agreement (and any
successive terms) GKF shall, at its own cost and expense, keep in effect an all
risk and hazard insurance policy covering the Equipment. The all risk and hazard
insurance policy shall be for an amount not less than the replacement cost of
the Equipment. During the ten (10) year initial Term of this Agreement, Medical
Center shall, at its own cost and expense keep in effect public liability and
professional liability insurance policies concerning the operation of the
Equipment by Medical Center. Said policies shall be in the amounts of not less
than $1,000,000 per occurrence and $5,000,000 in aggregate per year. University
and GKF, their successors and assigns, shall be named as additional


<PAGE>   11

insureds and/or loss payees on the insurance policies maintained hereunder by
the other party. Evidence of such insurance coverages shall be furnished by both
parties to the other party upon written request, by no later than the
Commencement Date.

       (b) If the Equipment is rendered unusable as a result of any physical
damage to, or destruction of, the Equipment, Medical Center shall give to GKF
immediate notice. GKF shall determine, within thirty (30) days after the date of
occurrence of such damage or destruction, whether the Equipment can be repaired.
In the event GKF determines that the Equipment cannot be repaired, GKF at its
sole cost and expense shall promptly replace the Equipment. This Agreement shall
continue in full force and effect as though such damage or destruction had not
occurred. In the event GKF determines that the Equipment can be repaired, GKF
shall cause the Equipment to be promptly repaired.

       23. Notices. Any notices required under this Agreement shall be sent in
writing and shall be deemed to have been duly given if delivered by hand or
mailed by certified or registered mail to the following addresses:

               To GKF:             Chief Executive Officer
                                   GKF Financing, LLC
                                   Four Embarcadero Center, Suite 3620
                                   San Francisco, CA 94111

               To Medical Center:  Chief Executive Officer
                                   Central Mississippi Medical Center
                                   1850 Chadwick Drive
                                   Jackson, Mississippi 39204-3479

Or to such other addresses as either party may specify for the reception of
notice from time to time in writing to the other party. Any such notice shall be
effective only when actually received by the party to whom addressed.

       24. Integration/Supersedure. This Agreement contains the full and entire
Agreement between the parties hereto, and no oral or written understanding is of
any force or effect whatsoever unless expressly contained in a writing executed
subsequent to the date of this Agreement.

       25. Waivers. To the extent that GKF fails or chooses not to pursue any of
its remedies under this Agreement or pursuant to applicable law, such shall not
prejudice GKF's rights to pursue any of those remedies at any future time and
shall not constitute a waiver of GKF's rights.

       26. Assignments. This Agreement is binding upon and shall inure to the
benefit of the permitted successors or assigns of the respective parties hereto,
except that neither party may assign its rights or obligations under this
Agreement without the express written consent of the other (which consent shall
not be unreasonably withheld).


<PAGE>   12

       27. Amendments. This Agreement shall not be amended or altered in any
manner unless such amendment or alteration is in a writing signed by both
parties.

       28. Record-Keeping Requirements. To the extent required by the
regulations promulgated by the Health Care Financing Administration pursuant to
Section 952 of the Omnibus Reconciliation Act of 1980, GKF shall:

       (a) Until the expiration of four (4) years following the furnishing of
services pursuant to this Agreement, GKF agrees to make available upon written
request of the Secretary of Health and Human Services or the U.S. Comptroller
General or any of their duly authorized representatives, this Agreement, any
books, documents and records necessary to verify the nature and extent of costs
incurred by Medical Center by reason of the activities of GKF under this
Agreement; and

       (b) If GKF elects to delegate any of its duties under this Agreement
(which have a cost or value of Ten Thousand Dollars ($10,000.00) or more over a
twelve (12) month period) to a related organization, GKF may do so only through
a subcontractor which is consented to by Medical Center, it being understood
that, inasmuch as Medical Center is entering into this Agreement in reliance on
GKF's reputation and expertise, that Medical Center shall be the sole judge of
the reputation and expertise of the proposed delegee, and only through a
subcontractor which provides that, until the expiration of four (4) years
following the furnishing of services under such subcontract, the related
organization shall make available, on request of the Secretary of Health and
Human Services or the U.S. Comptroller General or any of their authorized
representatives, the subcontract, and books, documents and records of the nature
and extent of costs incurred by Medical Center by reason of activities of such
related organization under such subcontract. No delegation by GKF of its duties
hereunder shall relieve GKF from liability hereunder.

       29. Miscellaneous Provisions.

       (a) The invalidity or unenforceability of any portion or provision of
this Agreement shall not effect the validity or enforceability of any other
portion, nor shall either party's implied or express consent to the breach or
waiver of any provision of this Agreement constitute a waiver of such provision
as to any subsequent breach.

       (b) In the event of any claim or controversy arising hereunder, the
prevailing party in such claim or controversy shall be entitled to a reasonable
attorneys' fee in addition to whatever other relief said party would be
otherwise entitled.

       (c) Force Majeure. Failure to perform by either party will be excused in
the event of any delay or inability to perform its duties under this Agreement
directly or indirectly caused by conditions beyond its reasonable control
including without limitation, fires, floods, earthquakes, snow, ice, disasters,
Acts of God, accidents, riots, wars, operation of law, strikes, governmental


<PAGE>   13

action or regulations, shortages of labor, fuel, power, materials, manufacturer
delays or transportation problems.


                                      -13-
<PAGE>   14

       IN WITNESS WHEREOF, the parties have signed this Agreement on the day and
year first above written.



Medical Center                                   GK Financing, LLC


By:   /s/ Joseph Mullany                         By:  /s/ Craig K. Tagawa
      -------------------------------------           -------------------
      Joseph Mullany                                  Craig K. Tagawa
      Vice President, Mississippi Division            Chief Executive Officer


By:   /s/ Timothy R. Parry
      --------------------
      Timothy R. Parry
      Vice President & General Counsel



By:   /s/ Earl P. Holland
      -------------------
      Earl P. Holland
      Vice Chairman & Chief Operating Officer


                                      -14-


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.34
<SEQUENCE>4
<FILENAME>f74683ex10-34.txt
<DESCRIPTION>ADDENDUM TO 11/01/99 GAMMA KNIFE LEASE AGREEMENT
<TEXT>
<PAGE>   1

                                                                   Exhibit 10.34

                                    ADDENDUM

                    TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT


       This ADDENDUM TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (this "Addendum")
is effective November 1, 1999 between Jackson HMA, Inc. dba Central Mississippi
Medical Center, a for profit Mississippi Corporation ("Medical Center"), and GK
Financing, LLC, a California limited liability company ("GKF").

                                    RECITALS

       WHEREAS, on November 1, 1999, GKF and Medical Center executed a Lease
Agreement for a Gamma Knife Unit (the "Original Lease");

       WHEREAS, the parties desire to amend the terms and provisions of the
Original Lease as set forth herein.

       NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

                                    AGREEMENT

       1. DEFINED TERMS. Unless otherwise defined herein, the capitalized terms
used herein shall have the same meaning set forth in the Original Lease.

       2. PREVIOUS MODIFICATIONS TO THE ORIGINAL LEASE. The manual
insertions/deletions/cross-outs made prior to this date on the Original Lease
and not counter-signed by GKF are null and void and non-binding on the Medical
Center and GKF. Said insertions/deletions/cross-outs, which are non-binding, are
in Sections 1, 5, 9 and 19.

       3. EVENTS OF DEFAULT BY GKF.

              3.1 The following Sections are added to the Original Lease:

                     3.1.1 GKF shall fail to observe or perform any of its
covenants, duties or obligations arising under this Agreement and such failure
shall continue for a period of thirty (30) days after written notice thereof is
given by Medical Center to GKF; however, if GKF cures the default within the
applicable thirty (30) day period or if the default reasonably requires more
than thirty (30) days to cure, GKF commences to cure the default during the
initial thirty (30) day period and GKF diligently completes the cure as soon as
reasonably possible following the end of the thirty (30) day period, such
default shall not constitute an Event of Default.


<PAGE>   2

                     3.1.2 GKF ceases doing business as a going concern, makes
an assignment for the benefit of creditors, admits in writing its inability to
pay its debts as they become due, files a voluntary petition in bankruptcy, is
adjudicated a bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of a petition filed against
it in any such proceeding, consents to or acquiesces in the appointment of a
trustee, receiver, or liquidator of it or of all or any substantial part of its
assets or properties, or it or its shareholders shall take any action looking to
its dissolution or liquidation.

                     3.1.3 Within sixty (60) days after the commencement of any
proceedings against GKF seeking reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceedings shall not have been dismissed, or if within
thirty (30) days after the appointment without GKF's consent or acquiescence of
any trustee, receiver or liquidator of it or of all or any substantial part of
its assets and properties, such appointment shall not be vacated.

              3.2 Upon the occurrence of an Event of Default involving GKF,
Medical Center may at its option do any or all of the following:

                     3.2.1 By written notice to GKF, immediately terminate this
Agreement as to the Equipment and, in such event, GKF shall remove the Equipment
at GKF's sole cost and expense or, in the absence of removal by GKF within a
reasonable period of time after a written request therefor, Medical Center may
remove the Equipment with all due care and store the Equipment at GKF's sole
cost and expense.

                     3.2.2 Seek to recover from GKF such loss as may be realized
by Medical Center in the ordinary course of events as a result of the Event of
Default.

              3.3 GKF shall in any event remain fully liable for reasonable
damages as provided by law and for all costs and expenses incurred by Medical
Center on account of such default, including but not limited to, all court costs
and reasonable attorneys' fees. However, notwithstanding anything to the
contrary set forth in this Agreement, GKF shall not in any manner be or become
liable to Medical Center for any consequential or incidental damages that may be
suffered by Medical Center which arise out of or result from the Event of
Default or any breach by GKF of this Agreement. The rights and remedies afforded
Medical Center under this Agreement shall be deemed cumulative and not exclusive
and shall be in addition to any other rights or remedies to GKF provided by law
or in equity.

              3.4 Notwithstanding the occurrence of an Event of Default with
respect to GKF (including any claim which would otherwise be in the nature of a
set-off), Medical Center shall fully perform and pay its obligations hereunder
(including payment of all rent). Upon termination of this Agreement or the
exercise of any other rights or remedies under this Agreement or applicable law
following an Event of Default, Medical Center shall, without


<PAGE>   3

further request or demand, pay to GKF all rent payments and other sums owing
under this Agreement when and as due.

       4. INDEMNIFICATION.

              4.1 Medical Center's Indemnity Agreement. Subject to provisions of
this Agreement, Medical Center, for itself and its successors and assigns,
hereby indemnifies and holds GKF harmless from and against any loss, cost or
expense (including reasonable attorneys' fees) arising out of or relating in any
manner to the failure of Medical Center to properly perform any of its
obligations to be performed under the terms of this Agreement.

              4.2 GKF's Indemnity Agreement. Subject to provisions of this
agreement, GKF, for itself and its successors and assigns, hereby indemnifies
and holds Medical Center harmless from and against any loss, cost or expense
(including reasonable attorneys' fees) arising out of or relating in any manner
to the failure of GKF to properly perform any of its obligations to be performed
under the terms of this Agreement.

       5. FULL FORCE AND EFFECT. Except as otherwise amended hereby or provided
herein, all of the terms and provisions of the Original Lease shall remain in
full force and effect.


<PAGE>   4

       IN WITNESS WHEREOF, the parties have executed this Addendum effective as
of the date first written above.

               "MEDICAL CENTER"     Jackson HMA, Inc. dba
                                    Central Mississippi Medical Center



               BY:                  /s/ Jay R. Finnegan
                                    -------------------



               "GKF"                GK Financing, LLC



               BY:                  /s/ Craig K. Tagawa
                                    -------------------
                                    Craig K. Tagawa, Chief Executive Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.35
<SEQUENCE>5
<FILENAME>f74683ex10-35.txt
<DESCRIPTION>LEASE AGREEMENT FOR A GAMMA KNIFE UNIT 02/18/2000
<TEXT>
<PAGE>   1

                                                                   Exhibit 10.35

                     LEASE AGREEMENT FOR A GAMMA KNIFE UNIT

       THIS AGREEMENT FOR A GAMMA KNIFE UNIT on this 18th day of February, 2000,
(hereinafter, referred to as the "Agreement") is entered into between GK
Financing, LLC, a California Limited Liability Company, (hereinafter referred to
as "GKF"), and OSF HealthCare System, an Illinois not-for-profit corporation,
owner and operator of Saint Francis Medical Center (hereinafter referred to as
"Medical Center").

                                 R E C I T A L S

       WHEREAS, Medical Center wants to lease a used Model C Leksell
Stereotactic Gamma Unit Manufactured by Elekta Instruments, Inc., (hereinafter
referred to as the "Equipment"); and

       WHEREAS, GKF is willing to lease the Equipment which GKF has previously
acquired from Elekta Instruments, Inc., a Georgia corporation (hereinafter
referred to as "Elekta"), to Medical Center, pursuant to the terms and
conditions of this Agreement.

       NOW, therefore, in consideration of the foregoing premises and the
promises contained herein, the parties hereto hereby agree as follows:

       1. Execution of LGK Agreement by and between Medical Center and Elekta.
Medical Center agrees that simultaneously with the execution of this Agreement
it shall execute that certain LGK Agreement with Elekta, (hereinafter referred
to as the "LGK Agreement"), a copy of which is attached hereto as Exhibit A and
incorporated herein by this reference. Medical Center agrees to fulfill all of
its obligations under the LGK Agreement and acknowledges that GKF is a third
party beneficiary of the LGK Agreement. Medical Center shall fully indemnify and
hold harmless GKF in the event that GKF suffers any loss, damage, claim or
expense (including attorneys' fees) solely as a result of Medical Center's
breach or alleged breach of the LGK Agreement.

       2. Conditions Precedent.

              (a) This Agreement is contingent on approval by OSF's Board of
Directors.

              (b) If Medical Center requires a CON to install and operate the
Equipment, Medical Center will work diligently toward receipt of a CON for the
Equipment and the provision of services related thereto. In addition, GKF will
provide assistance and support to Medical Center in obtaining a CON. This
granting of a CON by the Illinois Health Facilities Planning Board is a
condition precedent of this Agreement. None of the terms and conditions set
forth herein shall become effective until such CON is granted and pursuant to
Section 4 herein.

       3. Delivery of the Equipment and Site preparation. GKF shall arrange to
have the Equipment delivered to Medical Center , at 530 N.E. Glen Oak Ave.,
Peoria, Illinois (the "Site") in coordination with Elekta. GKF shall exert its
best faith efforts to expedite the delivery of the


<PAGE>   2

Equipment. Notwithstanding the preceding sentence, it is understood and agreed
that GKF has made no representations and warranties to Medical Center concerning
actual delivery dates or schedules for the Equipment at the Site.

       Medical Center shall provide a safe, convenient and properly prepared
Site, at its own expense, in accordance with all of the Equipment manufacturer's
(Elekta's) guidelines, specifications, technical instruments and Site Planning
Criteria (which Site Planning Criteria are attached to the LGK Agreement as
Exhibit B and incorporated therein), which criteria shall include Elekta's
estimated delivery schedule when and as received by GKF, on Medical Center
controlled property (The "Site") for the proper performance of Gamma Knife
procedures. Site location shall be acceptable to GKF. Medical Center shall
prepare at its sole cost and expense the requisite site plans and specifications
and shall submit them to Elekta and GKF for approval. Medical Center shall
obtain, in a timely manner, a User License from the Nuclear Regulatory
Commission and/or appropriate state agency authorizing it to take possession of
the Cobalt Supply and shall obtain such other licenses, permits, approvals,
consents and authorizations, which may be required by local governmental or
other regulatory agencies for the Site, its preparation, the charging of the
Equipment with its Cobalt Supply, the conduct of Acceptance tests, and the use
of the Equipment all as more fully set forth in Article 2.1 of the LGK
Agreement.

       4. Commencement of Term. The Term (hereinafter defined) of this Agreement
shall commence upon the performance of the first clinical Gamma Knife procedure
at the Site (the "Commencement Date"). Medical Center shall become liable to GKF
for the payments referred to in Paragraph 7 hereinbelow upon the Commencement
Date.

       5. Costs of Site Preparation; Costs of Installation. Medical Center's
obligations shall include preparation of plans and specifications for the
construction and preparation of the Site in such form as will result in the
Site, when constructed in accordance with such plans and specifications, being
in full compliance with Elekta's Site Planning Criteria. Medical Center shall at
its own expense and risk, prepare, construct and make ready the Site as
necessary, for the installation of the Equipment, including, but not limited to,
providing any temporary and/or permanent shielding for the charging of the
equipment and its use, selecting and preparing a proper foundation for the
Equipment and for such shielding and walls, as well as proper alignment of the
Site and wiring. Medical Center shall be financially responsible for the
positioning of the Equipment on its foundation at the Site.

       Medical Center shall also at its own expense select, purchase and install
all radiation monitoring equipment and devices, safety circuits and radiation
warning signs needed for the Equipment at the Site, according to all applicable
federal, state and local laws, regulations, recommendations or custom.

       Upon completion of the Site, Medical Center shall warrant that the Site
will be safe and suitable for its use of the Equipment. Medical Center shall
fully indemnify and hold harmless GKF from any and all loss, liability, damage,
expense or claim (including attorneys' fees) which GKF may suffer and incur and
which relate to the Site, excluding GKF or Elekta's negligence.


<PAGE>   3

       Medical Center shall be liable to GKF for any damage to the Equipment
caused by (a) defects in construction of the Site or defects in the positioning
of the Equipment at the Site; (b) defects arising out of materials or parts
provided, modified or designed by Medical Center with respect to the Site; or
(c) negligent or intentional acts of omission or commission by Medical Center or
any of its officers, agents, physicians, and employees in connection with the
Site preparation or operation of the Equipment at the Site.

       Medical Center warrants that it shall utilize its best efforts to fulfill
on an expeditious basis its obligations under this Paragraph 5. Medical Center
further warrants that it shall on a regular basis keep GKF informed of Medical
Center's progress in fulfilling its obligations pursuant to this Paragraph 5.
Should Medical Center not have all site preparations completed by the delivery
date specified by a separate agreement plus a sixty (60) day grace period such
that the site is acceptable for positioning and installation of the equipment,
Medical Center shall reimburse GKF at an interest rate of Bank of America's
prime rate plus 2% on GKF's equipment cost until the site is prepared to allow
positioning and installation of the equipment.

       6. Term of the Equipment. GKF agrees to provide to Medical Center the
Equipment pursuant to the terms of this Agreement, for a term of ten (10) years
from the Commencement Date as described in Paragraph 4 hereinabove ( the
"Term"), unless terminated earlier as provided herein.

       7. Per Procedure Payments. Medical Center shall schedule use of the
Equipment at its sole discretion and shall be obligated to no minimum number of
procedures. Medical Center shall pay to GKF a per procedure payment of * for
procedures * performed in each year of the Agreement for the use of the
Equipment and * per procedure for procedures * and above during each year of the
Agreement for the use of the Equipment. For purposes of per procedure
calculation, procedure counts are not cumulative and the procedure count reverts
to zero on the "Reset Date" which is one (1) year after the Commencement Date
and each anniversary date thereafter. (A procedure shall be defined as a single
patient treatment session that may include one or more isocenters during that
session. Medical Center shall be billed on the fifteenth (15th) and the last day
of each month for the actual number of procedures performed during the first and
second half of the month, respectively. Medical Center shall pay the procedures
invoiced within thirty (30) days after being invoiced. Interest shall begin to
accrue at the rate of 1-1/2% per month on all invoices remaining unpaid after 45
days.

              (a) If the "Reimbursement Rate" in effect on any "Reset Date" is *
greater or less than the "Base Rate," Medical Center shall inform GKF in writing
within sixty (60) days of such increase or decrease and shall provide GKF with
the information used in calculating such Reimbursement Rate. Within thirty (30)
days after GKF's receipt of such notice, the parties shall meet to renegotiate
in good faith the per procedure payments payable by Medical Center for patients
treated under this Agreement with Medicare as their primary insurer.

              (b) In determining the renegotiated per procedure payment any
reduction or increase, only for those patients treated who have Medicare as
their primary insurer, thereto may or may not be in proportion to the reduction
or increase to the Reimbursement Rate. Furthermore, any reduction to the per
procedure payment will be calculated to provide Medical Center with Operating


<PAGE>   4

Income estimated at a break even level as a result in negative Operating Income
to GKF in accordance with subsection (c) below. Medical Center shall permit GKF
to inspect Medical Center's books and records pertaining to the Equipment in
order to verify such Operating Income.

              (c) If the per procedure payment for patients treated who have
Medicare as their primary insurer proposed by Medical Center would result in
negative "Operating Income" (as defined below) to GKF, then, GKF shall have no
recourse to arbitration as provided in this Section 7. In such event, this
Agreement shall remain unchanged and in full force and effect. GKF shall permit
Medical Center to inspect GKF's books and records pertaining to the Equipment in
order to verify such Operating Income.

              (d) If the per procedure payment proposed by Medical Center would
not result in GKF incurring negative Operating Income, but the parties are
unable to agree in good faith on a renegotiated per procedure payment, then, GKF
and Medical Center shall jointly appoint an arbitrator who shall have not less
than (10) years experience in medical equipment financing, in good standing with
the American Arbitration Association or other comparable organization, and who
shall have no prior relationship, attorney/client or otherwise, with any of the
parties. Such arbitrator shall review the information presented by both parties
and shall render a decision within thirty (30) days of his of her appointment.
In rendering a decision, the arbitrator shall be bound by the guidelines set
forth in this Section, including, without limitation, the parameters for
renegotiated per procedure payments as set forth in subsection (a), (b), (c),
above and this subsection (d). The arbitrator's decision shall be shared equally
between the parties. The foregoing arbitration procedure shall apply only to
disagreements arising from this subsection (d) and not to any other disputes or
disagreements arising from this Agreement.

              (e) If the parties mutually agree on a renegotiated per procedure
payment or if a renegotiated per procedure payment is determined by the
arbitrator as set forth above, then such renegotiated per procedure payment
shall become one (1) month after such payment rate is reached, and Section 7
hereto shall be deemed automatically amended as of such date.

              (f) Definition of terms: As used herein, (i) the "Reimbursement
Rate" shall mean the average technical component reimbursement received by
Medical Center for the Equipment from all patients treated who have Medicare as
their primary insurer in effect as of any Reset Date; (ii) the "Base Rate" shall
mean the average technical component reimbursement received by Medical Center
for the Equipment from all patients treated who have Medicare as their primary
insurer in effect on the date which is one year after the Commencement Date;
(iii) the "Reset Date" shall mean the date which is two (2) years after the date
of the first procedure and each anniversary date thereafter; and (iv) "Operating
Income" with respect to either party shall mean all technical component revenues
generated by such party from the Equipment less such party's corresponding
direct operating expenses related to the Equipment, including, without
limitation, applicable interest and depreciation expenses on the Equipment and
Site improvements, but excluding physician professional fees and direct or
indirect administrative overhead expenses.

       8. Use of the Equipment. The Equipment may be used by Medical Center only
at the location stated above and shall not be removed therefrom. Medical Center
shall not assign or


<PAGE>   5

sublease the Equipment or its rights hereunder without the prior written consent
of GKF. No permitted assignment or sublease shall relieve Medical Center of any
of its obligations hereunder. Medical Center shall not use nor permit the
Equipment to be used in any manner nor for any purpose for which, in the opinion
of Elekta or GKF, the Equipment is not designed or reasonably suitable. Medical
Center shall not permit any liens, whether voluntary or involuntary, to attach
to the Equipment, without the prior written consent of GKF. Medical Center shall
have no interest in the Equipment other than the rights acquired as a lessee
hereunder and the Equipment shall remain the property of GKF regardless of the
manner in which it may be installed or attached at the Site. Medical Center
shall, at GKF's request, affix to the Equipment tags, decals, or plates
furnished by GKF, indicating GKF's ownership of the Equipment.

       9. Additional Covenants of Medical Center. In addition to the other
covenants made by Medical Center, Medical Center shall at its own cost and
expense:

       (a) Provide properly trained professional, technical and support
personnel and supplies required for the proper performance of medical procedures
utilizing the Equipment.

       (b) Assume all medical and financial responsibility for the overseers'
monitoring of all patients' medical condition and treatment.

       (c) Fully comply with all of its obligations under the LGK Agreement.

       (d) Indemnify GKF as herein provided: (i) Medical Center hereby agrees to
fully indemnify and/or reimburse (including attorneys' fees) GKF on a prompt
basis for any and all damage to the Equipment (including any violations by
Medical Center, its agents, officers, physicians, employees, successors and
assigns of the Service Agreement described in Paragraph 16 hereof) to the extent
such damages are caused by the negligent or wrongful acts or omissions of
Medical Center, its agents, officers, physicians and employees. In the event the
Equipment is destroyed or rendered unusable, this indemnification shall extend
up to (but not exceed) the market value of the Equipment at the time of its
destruction less salvage, if any. For the purposes of this Agreement "market
value" shall be the value a willing lessee is willing to pay to a willing lessor
for comparable Equipment; however, such value shall be no less than the higher
of GKF's net book value of the Equipment or its principal balance on any loan
for the Equipment. (ii) Medical Center hereby further agrees to indemnify and
hold GKF, its agents, officers, employees, successors and assigns, harmless from
and against any and all claims, liabilities, obligations, losses, damages,
injuries, penalties, actions, costs and expenses (including attorneys' fees) for
all events and/or occurrences described in Article 7.3 of the LGK Agreement to
the same extent that Medical Center agrees to indemnify Elekta thereunder.
Medical Center further agrees to fully indemnify and hold harmless GKF for any
loss, damage, claim, or expense (including attorneys' fees) GKF may suffer or
incur as a result of Medical Center's breach of the LGK Agreement.

       (e) Provide reasonable and customary marketing materials developed by
Medical Center (i.e. brochures, announcements, etc.) and reasonable marketing
support from an administrative and physician (i.e. seminars by neurosurgeons and
radiation oncologists to referring physicians, etc.) commitment standpoint for
this clinical service.


<PAGE>   6

       10. Additional Covenants, Representations and Warranties of GKF. In
addition to the other covenants, representations and warranties, made by GKF in
this Agreement:

       (a) GKF represents and warrants that GKF has full power and authority to
enter into this Agreement, and that this Agreement does not and will not violate
any agreement, contract or instrument binding upon GKF.

       (b) GKF represents and warrants to Medical Center that, upon delivery of
the Equipment to Medical Center, GKF shall use its best faith efforts to require
that Elekta meets its contractual obligations to GKF and in putting the
Equipment, as soon as possible, into good, safe and serviceable condition and
fit for its intended use in accordance with the manufacturer's specifications,
guidelines and field modification instructions.

       (c) GKF represents and warrants that throughout the term of this
Agreement, Medical Center shall enjoy the use of the Equipment, free of the
rights of any other persons except for those rights reserved by GKF or granted
to Elekta under the LGK Agreement or under Elekta's Purchase Agreement with GKF.

       (d) During the entire term of this agreement and subsequent extension
thereof, GKF shall maintain in full force and effect: (i) the Service Agreement
referenced in Paragraph 16 hereof; and (ii) any other service or other
agreements required to fulfill GKF's obligations to Medical Center pursuant to
this Paragraph 10(d). GKF represents and warrants that during the entire term of
this agreement and any subsequent extensions thereof, that it will fully pursue
any and all remedies it may have against Elekta under the Service Agreement to
insure that the Equipment will be in conformity with Elekta's warranties so that
it is free from defects in design, materials, and workmanship which result in
noncompliance with the specifications and/or Elekta's warranties to GKF. In no
event, however, shall the warranty obligations of GKF to Medical Center with
respect to the Equipment be greater or more extensive than Elekta's warranty
obligations to GKF with respect to the Equipment.

       (e) GKF represents and warrants that it shall pay the tuition costs of
training four (4) of Medical Center's initial core group personnel on the
Equipment. Travel and entertainment costs for such personnel are borne by
Medical Center.

       11. Ownership/Title. It is expressly understood that Medical Center shall
acquire no right, title or interest in or to the Equipment, other than the right
to the possession and use of the same in accordance with the terms of this
Agreement.

       GKF may at its sole discretion finance the Equipment. Financing may be in
the form of an installment loan or a capitalized lease or other commercially
available debt instrument. Should GKF finance the Equipment through an
installment loan, GKF shall be required to provide the Equipment as collateral
against the loan. Should GKF finance the Equipment through a capitalized lease
title shall vest with the lessor until GKF exercises its buy-out option. In
addition, should GKF finance the Equipment, said Agreement may be used as
collateral against the loan.


<PAGE>   7

       12. Cost of Use of the Equipment. Except as is otherwise provided herein,
Medical Center shall bear the entire cost of using the Equipment during the Term
of this Agreement. This shall include, but not be limited to, providing trained
professionals, technical and support personnel and supplies to properly operate
the Equipment. Medical Center shall be fully responsible and liable for all acts
and/or omissions of such professional, technical and support personnel.

       13. Taxes. GKF shall pay any personal property taxes levied against the
Equipment and any other taxes or governmental fees or assessments, however
denoted, whether of the federal government, any state government or any local
government, levied or based on this Agreement or the use of the Equipment except
for those taxes, if any, pertaining to the gross income or gross receipts of
Medical Center.

       14. Maintenance and Inspections. GKF agrees to exercise due and proper
care in the maintenance of the Equipment and to keep the Equipment in a good
state of repair, reasonable wear and tear excepted. Medical Center shall be
liable to GKF for all damage to the Equipment caused by the misuse, negligence,
improper use or other intentional or negligent acts or omissions of Medical
Center's employees, officers, agents, and physicians.

       GKF (and Elekta) shall have the right of access to the Equipment for the
purpose of inspecting same at all reasonable times and upon reasonable notice
and with a minimum of interference to Medical Center's operations. In the event
the Equipment is improperly used by Medical Center or its employees, agents,
officers, and physicians, GKF may service or repair the same as needed and such
expense shall be paid by Medical Center, unless the repair is covered by the
Service Agreement described in Paragraph 15 hereof.

       Any work so performed by or in the service or maintenance of the
Equipment as a result of Medical Center's failure or neglect to do so shall not
deprive GKF of any of its rights, remedies or actions against Medical Center for
damages caused by such failure or neglect.

       15. Equipment Modifications/Additions/Upgrades. The parties agree that
the necessity and financial responsibility for modifications/additions/upgrades
to the Equipment, including the reloading of the Cobalt-60 source, shall be the
responsibility of GKF, at its expense, as long as the transaction contemplated
herein is economically feasible to GKF.

       16. Service Agreement. GKF warrants that it shall simultaneously with the
execution of this Agreement enter into a Service Agreement with Elekta.

       17. Termination If, after the initial twenty-four (24) month period of
service, and subsequent 12 month periods of service, Medical Center does not
provide GKF with a reasonable economic justification to continue providing Gamma
Knife services hereunder, then and in that event, GKF shall have the option of
terminating this Agreement upon the giving of written notice to Medical Center
of said termination not less than ninety (90) days prior to GKF's designated
termination date.


<PAGE>   8

       18. Options to Extend Agreement.

       (a) Medical Center shall have the option at the end of the ten (10) year
initial Term to:

              (i) Renegotiate this Agreement for a five (5) year renewal term.

              (ii) Terminate this Agreement. If Medical Center terminates this
Agreement at the end of the initial term, GKF shall remove the Gamma Knife
within an agreed upon period of time after the expiration of the ten (10) year
initial Term.

              Medical Center shall exercise one (1) of the two (2) options
referred to above, by mailing an irrevocable written notice thereof to GKF at
Four Embarcadero Center, Suite 3620, San Francisco, California, 94111, by
registered mail, postmarked on or before the end of the ninth (9th) year of the
ten (10) year initial Term of this Agreement. Any such notice shall be
sufficient if it states in substance that Medical Center elects to exercise its
option and states which of the two (2) options referred to above Medical Center
is exercising.

       19. No Warranties by GKF. Medical Center warrants that as of the
Commencement Date, it shall have (a) thoroughly inspected the Equipment; (b)
determined for itself that all items of the Equipment are of a size, design,
capacity and manufacture selected by it; and (c) satisfied itself that to the
best of its knowledge the Equipment is suitable for Medical Center's stated
purposes. GKF SUPPLIES THE EQUIPMENT "AS IS" AND NOT BEING THE MANUFACTURER OF
THE EQUIPMENT OR THE MANUFACTURER'S AGENT, MAKES NO WARRANTY OR REPRESENTATION,
EITHER EXPRESSED OR IMPLIED, AS TO THE EQUIPMENT'S MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, DESIGN, CONDITION, DURABILITY, CAPACITY, MATERIAL OR
WORKMANSHIP OR AS TO PATENT INFRINGEMENT OR THE LIKE, it being agreed that all
such risks as between GKF and Medical Center, shall be borne by Medical Center.
Medical Center agrees to look solely to the manufacturer (Elekta) or to
suppliers of the Equipment (and its software) for any and all warranty claims.
Any and all warranties made by Elekta will be in its good faith best efforts
enforced by GKF on behalf of Medical Center during the ten (10) year initial
Term hereof. Medical Center agrees that GKF shall not be responsible for the
delivery, installation, or operation of the Equipment or for any delay or
inadequacy of any or all of the foregoing. GKF shall not be responsible for any
direct or indirect consequential loss or damage resulting from the installation,
operation or use of the Equipment or otherwise. Medical Center expressly waives
any right to hold GKF liable hereunder for any claims, demands and liabilities
arising out of or in connection with the design, manufacture, possession or
operation of the Equipment. Notwithstanding anything to the contrary set forth
above, GKF warrants that the Equipment meets the specifications set forth in the
LGK Agreement.

       20. Events of Default and Remedies. The occurrence of any one of the
following shall constitute an Event of Default hereunder:

              (a) Medical Center fails to pay any installment of semi-monthly
procedure payments when due when such default continues for a period of thirty
(30) days after notice thereof


<PAGE>   9

from GKF or its assignee is given to Medical Center, unless Medical Center
disputes the installment payment, such as, without limitation, an incomplete
procedure due to faulty Equipment.

              (b) Medical Center attempts to remove, sell, transfer, encumber,
sublet or part with possession of the Equipment or any items thereof, except as
expressly permitted herein;

              (c) Either party shall fail to observe or perform any of the other
obligations required to be observed or performed by such party hereunder and
such failure shall continue uncured for twenty (20) days after written notice
thereof to the defaulting party by the other party;

              (d) Either party ceases doing business as a going concern, makes
an assignment for the benefit of creditors, admits in writing its inability to
pay its debts as they become due, files a voluntary petition in bankruptcy, is
adjudicated a bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of a petition filed against
it in any such proceeding, consents to or acquiesces in the appointment of a
trustee, receiver, or liquidator of it or of all or any substantial part of its
assets or properties, or it or its shareholders shall take any action looking to
its dissolution or liquidation.

              (e) Within sixty (60) days after the commencement of any
proceedings against either party seeking reorganization, arrangement,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceedings shall not have been
dismissed, or if within thirty (30) days after the appointment without such
party's consent or acquiescence of any trustee, receiver or liquidator of it or
of all or any substantial part of its assets and properties, such appointment
shall not be vacated.

              (f) Upon the occurrence of an Event of Default by Medical Center,
GKF may at its option do any or all of the following: (i) by notice to Medical
Center, terminate this Agreement as to the Equipment in default, wherever
situated, and for such purposes, enter upon the Site without liability for so
doing or GKF may cause Medical Center and Medical Center hereby agrees to return
the Equipment to GKF at Medical Center's sole cost and expense; (ii) recover
from, as liquidated damages for the loss of the bargain and not as a penalty, an
amount equal to the present value of the unpaid estimated future lease payments
by Medical Center to GKF through the end of the Agreement term discounted at the
rate of nine percent (9%), which payment shall become immediately due and
payable. Unpaid estimated future lease payments shall be based on the prior 12
months lease payments with an annual five (5%) percent increase; (iii) sell,
dispose of, hold, use or lease the Equipment in default, as GKF in its sole
discretion may determine (and GKF shall not be obligated to give preference to
the sale, lease or other disposition of the Equipment over the sale, lease or
other disposition of similar Equipment owned or leased by GKF). In any event,
Medical Center shall, without further demand, pay to GKF an amount equal to all
sums due and payable for all periods up to and including the date on which GKF
had declared this Agreement to be in default.

              (g) In the event, that Medical Center shall have paid to GKF the
liquidated damages referred to in (iii) above, GKF hereby agrees to pay to
Medical Center promptly after


<PAGE>   10

receipt thereof, all rentals or proceeds received from the reletting or sale of
the Equipment during the balance of the ten (10) year initial Term (after
deduction of all expenses incurred by GKF; said amount never to exceed the
amount of the liquidated damages paid by Medical Center). Medical Center agrees
that GKF shall have no obligation to sell the Equipment. Medical Center shall in
any event remain fully liable for reasonable damages as provided by law for all
costs and expenses incurred by GKF on account of such default, including but not
limited to, all court costs and reasonable attorneys' fees. Medical Center
hereby agrees that, in any event, it shall be liable for any deficiency after
any sale, lease or other disposition of the Equipment by GKF. The rights
afforded GKF hereunder shall not be deemed to be exclusive, but shall be in
addition to any other rights or remedies provided by law.

              (h) Upon occurrence of an Event of Default by GKF, the Medical
Center shall be entitled to liquidated damages for losses of the bargain and not
as a penalty in an amount equal to the cost of the leasehold provided by the
Medical Center. GKF shall remain fully liable for reasonable damages as provided
by law for all costs and expenses incurred by the Medical Center on account of
such default, including but not limited, to all court costs and reasonable
attorneys' fees. The rights afforded the Medical Center hereunder shall not be
deemed to be exclusive, but shall be in addition to any other rights or remedies
provided by law.

       21. Insurance.

              (a) Medical Center shall, at its own cost and expense, require
that its Equipment moving, installation and similar contractor(s) (such as
rigger, general contractor, etc.) and any sub-contractors thereof (together
"contractor(s)"), have in effect , at all times while the Equipment is in such
contractors' care, custody and control and throughout the course of
construction, all risk and hazard insurance coverage. Such insurance coverage
shall name GKF and such additional parties as GKF shall designate as Additional
Named Insureds. Such insurance coverage shall be for an amount not less than the
replacement cost of the Equipment. Medical Center shall further require that
such contractor(s) provide a Certificate of Insurance for the coverage required
herein to GKF and its designees, if any, prior to the date any such contractor
commences activity subject to the requirements of this Section 21(a). Such
Certificate(s) of Insurance shall include a provision for thirty (30) days
advance notice prior to cancellation or termination of the coverage evidenced
thereby.

              (b) During the ten (10) year initial Term of this Agreement (and
any successive terms) GKF shall, at its own cost and expense, keep in effect an
all risk and hazard insurance policy covering the Equipment. The all risk and
hazard insurance policy shall be for an amount not less than the replacement
cost of the Equipment. During the ten (10) year initial Term of this Agreement,
Medical Center shall, at its own cost and expense keep in effect public
liability and professional liability insurance policies concerning the operation
of the Equipment by Medical Center. Said policies shall be in the amounts of not
less than $1,000,000 per occurrence and $3,000,000 in aggregate per year.
Evidence of such insurance coverages shall be furnished by both parties to the
other party upon written request, by no later than the Commencement Date.


<PAGE>   11

              (b) If the Equipment is rendered unusable as a result of any
physical damage to, or destruction of, the Equipment, Medical Center shall give
to GKF immediate notice. GKF shall determine, within thirty (30) days after the
date of occurrence of such damage or destruction, whether the Equipment can be
repaired. In the event GKF determines that the Equipment cannot be repaired, GKF
at its sole cost and expense shall promptly replace the Equipment. This
Agreement shall continue in full force and effect as though such damage or
destruction had not occurred. In the event GKF determines that the Equipment can
be repaired, GKF shall cause the Equipment to be promptly repaired.

       22. Notices. Any notices required under this Agreement shall be sent in
writing and shall be deemed to have been duly given if delivered by hand or
mailed by certified or registered mail to the following addresses:

               To GKF:              Chief Executive Officer
                                    Four Embarcadero Center, Suite 3620
                                    San Francisco, CA 94111


               To Medical Center:   Keith Steffen
                                    Administrator
                                    Saint Francis Medical Center
                                    530 N.E. Glen Oak Avenue
                                    Peoria, IL 61637

Or to such other addresses as either party may specify for the reception of
notice from time to time in writing to the other party. Any such notice shall be
effective only when actually received by the party to whom addressed.

       23. Integration. This Agreement contains the full and entire Agreement
between the parties hereto, and no oral or written understanding is of any force
or effect whatsoever unless expressly contained in a writing executed subsequent
to the date of this Agreement.

       24. Waivers. To the extent that one party fails or chooses not to pursue
any of its remedies under this Agreement or pursuant to applicable law, such
shall not prejudice such party's rights to pursue any of those remedies at any
future time and shall not constitute a waiver of such party's rights.

       25. Assignments. This Agreement is binding upon and shall inure to the
benefit of the permitted successors or assigns of the respective parties hereto,
except that neither party may assign its rights or obligations under this
Agreement without the express written consent of the other (which consent shall
not be unreasonably withheld).

       26. Amendments. This Agreement shall not be amended or altered in any
manner unless such amendment or alteration is in a writing signed by both
parties.


<PAGE>   12

       27. Record-Keeping Requirements. To the extent required by the
regulations promulgated by the Health Care Financing Administration pursuant to
Section 952 of the Omnibus Reconciliation Act of 1980, GKF shall:

              (a) Until the expiration of four (4) years following the
furnishing of services pursuant to this Agreement, GKF agrees to make available
upon written request of the Secretary of Health and Human Services or the U.S.
Comptroller General or any of their duly authorized representatives, this
Agreement, any books, documents and records necessary to verify the nature and
extent of costs incurred by Medical Center by reason of the activities of GKF
under this Agreement; and

              (b) If GKF elects to delegate any of its duties under this
Agreement (which have a cost or value of Ten Thousand Dollars ($10,000.00) or
more over a twelve (12) month period) to a related organization, GKF may do so
only through a subcontractor which is consented to by Medical Center, it being
understood that, inasmuch as Medical Center is entering into this Agreement in
reliance on GKF's reputation and expertise, that Medical Center shall be the
sole judge of the reputation and expertise of the proposed delegee, and only
through a subcontractor which provides that, until the expiration of four (4)
years following the furnishing of services under such subcontract, the related
organization shall make available, on request of the Secretary of Health and
Human Services or the U.S. Comptroller General or any of their authorized
representatives, the subcontract, and books, documents and records of the nature
and extent of costs incurred by Medical Center by reason of activities of such
related organization under such subcontract. No delegation by GKF of its duties
hereunder shall relieve GKF from liability hereunder.

       28. Miscellaneous Provisions.

              (a) The invalidity or unenforceability of any portion or provision
of this Agreement shall not effect the validity or enforceability of any other
portion, nor shall either party's implied or express consent to the breach or
waiver of any provision of this Agreement constitute a waiver of such provision
as to any subsequent breach.

              (b) In the event of any claim or controversy arising hereunder,
the prevailing party in such claim or controversy shall be entitled to a
reasonable attorneys' fee in addition to whatever other relief said party would
be otherwise entitled.

              (c) Force Majeure. Failure to perform by either party will be
excused in the event of any delay or inability to perform its duties under this
Agreement directly or indirectly caused by conditions beyond its reasonable
control including without limitation, fires, floods, earthquakes, snow, ice,
disasters, Acts of God, accidents, riots, wars, operation of law, strikes,
governmental action or regulations, shortages of labor, fuel, power, materials,
manufacturer delays or transportation problems.

       IN WITNESS WHEREOF, the parties have signed this Agreement on the day and
year first above written.


                                      -12-
<PAGE>   13

MEDICAL CENTER:                           GKF:

OSF HEALTHCARE SYSTEM,                    GK FINANCING, LLC
an Illinois not-for-profit corporation,   a California limited liability company
owner and operator of Saint Francis
Medical Center



By:    /s/ James M. Moore                 By:    /s/ Craig K. Tagawa
       ------------------                        -------------------
       James M. Moore, CEO                       Craig K. Tagawa
                                                 Chief Executive Officer

Dated:  February 4, 2000                  Dated: February 18, 2000


                                      -13-

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