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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950149-02-000383.txt : 20020414
<SEC-HEADER>0000950149-02-000383.hdr.sgml : 20020414
ACCESSION NUMBER:		0000950149-02-000383
CONFORMED SUBMISSION TYPE:	424B3
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20020227

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:		424B3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-12879
		FILM NUMBER:		02559352

	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>424B3
<SEQUENCE>1
<FILENAME>f79470e424b3.htm
<DESCRIPTION>PROSPECTUS
<TEXT>
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<TITLE>e424b3</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV align="right"><FONT size="2">Filed Pursuant to
Rule&nbsp;424(b)(3)</FONT></DIV>

<DIV align="right"><FONT size="2">Registration
No.&nbsp;333-12879</FONT></DIV>

<P align="left"><FONT size="3"><B><I>PROSPECTUS</I></B></FONT>

<P align="center"><FONT size="2"><B>2,249,761</B> <B><I>Common Shares</I></B></FONT>

<P align="center"><FONT size="5"><B><I>AMERICAN SHARED HOSPITAL SERVICES</I></B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The common shares covered by this prospectus may be sold from time to time
by the securityholders specified in this prospectus. See &#147;Selling
Securityholders.&#148;
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common shares are listed on the American Stock Exchange under the
trading symbol &#147;AMS.&#148; Our shares are also listed on The Pacific Exchange. The
last reported sale price of our common shares on February&nbsp;22, 2002 on the
American Stock Exchange was $3.40 per share.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will not receive any of the proceeds from the sale of the common shares
being offered pursuant to this prospectus. The securityholders selling common
shares pursuant to this prospectus may, from time to time, sell the common
shares at market prices prevailing on the American Stock Exchange or the
Pacific Exchange at the time of sale, or sell the common shares under other
terms. See &#147;Plan of Distribution.&#148;
</FONT>
<P>
<HR width="26%" align="center" size="1" noshade>
<P>


<P align="center"><FONT size="2"><B>INVESTING IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. SEE &#147;RISK<BR>
FACTORS&#148; BEGINNING AT PAGE 3 OF THIS PROSPECTUS.</B></FONT>

<P align="center"><FONT size="2"><B>NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES<BR>
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF<BR>
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY<BR>
IS A CRIMINAL OFFENSE.</B></FONT>


<P align="center"><FONT size="2"><B>The date of this Prospectus is February&nbsp;27, 2002</B></FONT>

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<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><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>
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	<TD width="3%"></TD>
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	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">WHERE CAN YOU FIND MORE INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">DOCUMENTS INCORPORATED BY REFERENCE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">RISK FACTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">THE COMPANY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">USE OF PROCEEDS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">DETERMINATION OF OFFERING PRICE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">SELLING SECURITYHOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">PLAN OF DISTRIBUTION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">DESCRIPTION OF THE COMMON SHARES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">LEGAL MATTERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">EXPERTS</A></TD></TR>
</TABLE>
</CENTER>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>






<!-- link1 "WHERE CAN YOU FIND MORE INFORMATION" -->
<DIV align="left"><A NAME="000"></A></DIV>
<P align="center"><FONT size="2"><B>WHERE CAN YOU FIND MORE INFORMATION</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file annual, quarterly and special reports, as well as registration and
proxy statements and other information, with the Securities and Exchange
Commission. You may read and copy these reports, proxy statements and other
information at the public reference facilities maintained by the SEC at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain
copies of those materials at prescribed rates from the public reference section
of the SEC at 450 Fifth Street, Washington, D.C. 20549. The public may obtain
information on the operation of the public reference room by calling the SEC at
(800)&nbsp;SEC-0330. In addition, we are required to file electronic versions of
those materials with the SEC through the SEC&#146;s EDGAR system. The SEC maintains
a Web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus is part of a registration statement on Form&nbsp;S-3 filed by
us with the SEC under the Securities Act of 1933. This prospectus does not
contain all of the information in the registration statement, parts of which we
have omitted, as allowed under the rules and regulations of the SEC. You
should refer to the registration statement for further information with respect
to us and our securities. Statements contained in this prospectus about the
contents of any contract or other document are not necessarily complete. If we
have filed any contract or other document as an exhibit to the registration
statement or any other document is incorporated by reference in the
registration statement, you should read the exhibit for a more complete
understanding of the document or matter involved. Each statement regarding a
contract or other document is qualified in its entirety by reference to the
actual document.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will furnish without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the
information that has been incorporated by reference into this prospectus
(except exhibits, unless they are specifically incorporated by reference into
this prospectus). You should direct any requests for copies to: American
Shared Hospital Services, Four Embarcadero Center, Suite&nbsp;3700, San Francisco,
California 94111-4107, Attention: Secretary, Telephone (415)&nbsp;788-5300.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the context otherwise requires, the terms &#147;we&#148;, &#147;our&#148;, &#147;us&#148; and
&#147;the company&#148; refer to American Shared Hospital Services, a California
corporation.
</FONT>
<!-- link1 "DOCUMENTS INCORPORATED BY REFERENCE" -->
<DIV align="left"><A NAME="001"></A></DIV>
<P align="center"><FONT size="2"><B>DOCUMENTS INCORPORATED BY REFERENCE</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC allows us to incorporate by reference the information we file with
it, which means that we can disclose important information to you by referring
you to those documents. We incorporate by reference in this prospectus the
information contained in the following documents:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
   <TD width="1%" nowrap><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
   <TD width="1%" align="left"><FONT size="2">&#149;</FONT></TD>
   <TD width="1%" nowrap><FONT size="2">&nbsp;&nbsp;</FONT></TD>
   <TD width="97%"><FONT size="2">our annual report on Form&nbsp;10-K for the fiscal year ended December
31, 2000 filed with the SEC on April&nbsp;2, 2001;</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
   <TD width="1%" nowrap><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
   <TD width="1%" align="left"><FONT size="2">&#149;</FONT></TD>
   <TD width="1%" nowrap><FONT size="2">&nbsp;&nbsp;</FONT></TD>
   <TD width="97%"><FONT size="2">our quarterly reports on Form&nbsp;10-Q for the fiscal quarters ended
March&nbsp;31, 2001, June&nbsp;30, 2001 and September&nbsp;30, 2001, filed with the
SEC on May&nbsp;15, 2001, August&nbsp;10, 2001 and November&nbsp;13, 2001,
respectively;</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
   <TD width="1%" nowrap><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
   <TD width="1%" align="left"><FONT size="2">&#149;</FONT></TD>
   <TD width="1%" nowrap><FONT size="2">&nbsp;&nbsp;</FONT></TD>
   <TD width="97%"><FONT size="2">the description of our common shares contained in our registration
statement on Form&nbsp;8-A (Registration No.&nbsp;1-8789) filed with the SEC on
September&nbsp;21, 1984 under Section&nbsp;12(g) of the Securities Exchange Act
of 1934, including any amendment or report filed for the purpose of
updating such description; and</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
   <TD width="1%" nowrap><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
   <TD width="1%" align="left"><FONT size="2">&#149;</FONT></TD>
   <TD width="1%" nowrap><FONT size="2">&nbsp;&nbsp;</FONT></TD>
   <TD width="97%"><FONT size="2">all documents that we file with the SEC under Sections&nbsp;13(a),
13(c), 14 or 15 of the Securities Exchange Act until all of the
securities that we may offer with this prospectus are sold.</FONT></TD>
</TR>
</TABLE>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may obtain copies of those documents from us, free of cost, by
contacting us at the address or telephone number provided in &#147;Where You Can
Find More Information&#148; immediately above.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information that we file later with the SEC and that is incorporated by
reference in this prospectus will automatically update information contained in
this prospectus or that was previously incorporated by reference into this
prospectus. You will be deemed to have notice of all information incorporated
by reference in this prospectus as if that information was included in this
prospectus.
</FONT>
<P align="center"><FONT size="2">2
</FONT>

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<!-- link1 "RISK FACTORS" -->
<DIV align="left"><A NAME="002"></A></DIV>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>In addition to the other information set forth in this prospectus and the
documents incorporated by reference into this prospectus, you should carefully
consider the following risks and uncertainties in evaluating our company and
its business, before purchasing any of the common shares.</I>
</FONT>
<P align="left"><FONT size="2"><B>Each Gamma Knife is Very Expensive</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Gamma Knife unit requires a substantial capital investment.
Historically our cost for a Gamma Knife unit has been approximately $2,710,000.
In some cases, we contribute additional funds for capital costs and/or annual
operating costs such as marketing. Due to the structure of our contracts with
medical centers, there can be no assurance that these costs will be fully
recovered or that we will earn a satisfactory return on our investment.
</FONT>
<P align="left"><FONT size="2"><B>There is a Limited Market for Gamma Knife Services</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is a limited market for the Gamma Knife. Due to the substantial
costs of acquiring a Gamma Knife unit, we must identify medical centers that
possess neurosurgery and oncology departments capable of performing a large
number of Gamma Knife procedures. We have identified approximately 200 such
medical centers in the United States as potential future sites. There
currently are approximately 66 operating Gamma Knife units in the United
States, 12 of which are units owned by us, and approximately 156 units in
operation worldwide. There can be no assurance that we will be successful in
placing additional units at a significant number of sites in the future.
</FONT>
<P align="left"><FONT size="2"><B>We Need Continuing Access to Financing</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is capital intensive and we have traditionally financed each
Gamma Knife with debt. Our long term debt totals $25,920,000 and is
collateralized by the Gamma Knife units and other assets, including our
accounts receivable and future proceeds from any contract between us and any
end user of the financed equipment. This high level of debt may adversely
affect our ability to secure additional credit in the future, and as a result
may affect our operations and profitability. If default occurs in the future,
our creditors would have the ability to accelerate the defaulted loan, to seize
the Gamma Knife unit with respect to which default has occurred, and to apply
any collateral they may have at the time to cure the default.
</FONT>
<P align="left"><FONT size="2"><B>We Have Competitors in Providing the Gamma Knife</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There currently are four companies (in addition to our company) that
supply the Gamma Knife to potential customers. There are no competitor
companies that currently have more than four Gamma Knife units in operation.
Our relationship with Elekta AG, the manufacturer of the Lekesell Gamma Knife
units, is non-exclusive, and in the past we have lost sales to customers that
chose to purchase a Gamma Knife unit directly from Elekta AG. In addition, in
the future, we may continue to lose sales to such customers and may also lose
sales to our competitors. There can be no assurance that in the future we will
be able to successfully compete against others in placing units.
</FONT>
<P align="left"><FONT size="2"><B>Patients Have Alternatives to Treatment with the Gamma Knife</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are several methods of radiosurgery (including the modified linear
accelerator) as well as conventional neurosurgery that compete against the
Gamma Knife. Currently, there are approximately 300-350 medical centers in the
United States with modified linear accelerators. Each of the medical centers
targeted by us could decide to acquire another radiosurgery modality instead of
a Gamma Knife. In addition, neurosurgeons who are primarily responsible for
referring patients for Gamma Knife surgery may not be willing to make such
referrals for various reasons, instead opting for invasive surgery. There can
be no assurance that we will be able to secure a sufficient number of sites or
Gamma Knife procedures to sustain its profitability and growth.
</FONT>
<P align="left"><FONT size="2"><B>Reduction of Reimbursement Rate May Reduce the Amount We Can Charge for our
Services</B>
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amount reimbursed to medical centers for each Gamma Knife treatment
may decline in the future. The reimbursement decrease may come from federally
mandated programs (<I>i.e.</I>, Medicare and Medicaid) or other third party payor
groups. Ten of our existing contracts are reimbursed by the medical center to
us on a fee-for-service basis. The primary risk to us under this type of
contract is that actual volumes of procedures could be less than projected.
However, a significant reimbursement rate reduction may result in the company
restructuring certain of the existing contracts. We also have two contracts
where we receive revenues based directly on the amount of reimbursement
received for procedures performed. Revenues under those contracts and any
future contracts with revenues based directly on reimbursement amounts will be
impacted by any reimbursement rate change. Some of our future contracts for
Gamma Knife services may have revenues based on such reimbursement rates
instead of a fee-for-service basis. There can be no assurance that future
changes in healthcare regulations and reimbursement rates will not directly or
indirectly adversely affect our Gamma Knife revenues.
</FONT>
<P align="center"><FONT size="2">3
</FONT>

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<P align="left"><FONT size="2"><B>We May Be Unable to Acquire Advanced Technology in the Future</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As with other highly sophisticated medical equipment, there is constant
change and innovation in the market. New and improved medical equipment can be
introduced that could make the Gamma Knife technology obsolete and that would
make its operation uneconomic. During 2000, Elekta AG introduced an upgraded
Gamma Knife which costs approximately $3.4&nbsp;million plus applicable tax and
duties. This upgrade includes an Automated Patient Positioning system, or APS,
and therefore involves less health care provider intervention. Ten of our
existing Gamma Knife units are upgradeable and one Gamma Knife unit has already
been upgraded. The cost to upgrade existing units to the new model C Gamma
Knife with APS is estimated to be approximately $950,000. The failure to
acquire or use new technology and products could have a material adverse effect
on our business and results of operations.
</FONT>
<P align="left"><FONT size="2"><B>Provisions that Might Deter a Company from Acquiring Us</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1999 our board of directors adopted a shareholders&#146; rights plan, which
would permit certain holders of our common shares to acquire our common shares
or the common shares of an acquiror at a discount, in certain events. These
provisions could make it more difficult for a third-party to acquire us, unless
the acquisition is approved by our board of directors.
</FONT>
<P align="left"><FONT size="2"><B>We are Highly Dependent on Key Personnel</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations and business are dependent to a significant extent upon the
continued active participation of our founder, Chairman of the Board and Chief
Executive Officer, Ernest A. Bates, M.D. Should Dr.&nbsp;Bates become unavailable
to the company for any reason, it could have a material adverse effect on our
business, results of operations, financial condition and prospects.
</FONT>
<P align="left"><FONT size="2"><B>The Interests of our Major Shareholder May Conflict with the Interests of Other
Shareholders</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of February&nbsp;4, 2002, Ernest A. Bates, M.D., our Chairman and Chief
Executive Officer, owned (directly or through immediately exercisable options)
2,081,288 shares, which represents approximately 39.8% of our outstanding
common shares and common shares issuable pursuant to immediately exercisable
options. Dr.&nbsp;Bates may have the power to determine the outcome of a
shareholder vote with respect to any fundamental corporate transaction,
including mergers and the sale of all or substantially all of our assets. This
could have the effect of blocking transactions that a majority of the other
shareholders would otherwise find attractive, or conversely, permitting Dr.
Bates to adopt transactions that a majority of the other shareholders vote to
reject. Accordingly, owners of common shares other than Dr.&nbsp;Bates should
recognize that their interests may conflict and, as a result of the size of his
shareholdings, Dr.&nbsp;Bates will be able effectively to determine the course of
action to be taken by the company.
</FONT>
<P align="left"><FONT size="2"><B>Non-Affiliates May Be Unable to Sell Their Common Shares</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At February&nbsp;4, 2002 there were 3,536,853 common shares outstanding and an
additional 1,697,592 shares issuable under immediately exercisable warrants and
options. Approximately 939,394 of these shares and an additional 1,622,667
shares underlying immediately exercisable options or warrants that are owned by
&#147;affiliates&#148; would normally be subject to limitations on resale; however, all
of these shares, options and warrants are currently eligible for sale pursuant
to effective registration statements. The trading market for our common shares
is thin. The average weekly trading volume of the common shares on the AMEX
since January&nbsp;1, 2001 is approximately 44,625 shares. Accordingly,
non-&#147;affiliate&#148; holders may find it extremely difficult to sell their common
shares, and the price may be depressed for an indefinite period by the number
of &#147;affiliate&#148; shares available for resale pursuant to effective registration
statements.
</FONT>
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<DIV align="left"><A NAME="003"></A></DIV>
<P align="center"><FONT size="2"><B>THE COMPANY</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;American Shared Hospital Services provides Gamma Knife stereotactic
radiosurgery services to twelve medical centers in eleven states. We provide
these services through our 81% indirect interest in GK Financing, LLC. The
remaining interest in GK Financing is owned by a subsidiary of Elekta AG, a
Swedish company that manufactures the Leksell Gamma Knife. We typically
provide the Gamma Knife equipment, as well as planning, installation and
marketing support services. Our customers, which are primarily major urban
medical centers, usually pay us on a fee-per-use basis.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The address of our principal executive offices is Four Embarcadero
Center, Suite&nbsp;3700, San Francisco, California 94111-4107 and our telephone
number is (415)&nbsp;788-5300.
</FONT>
<P align="center"><FONT size="2">4
</FONT>

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<P align="left"><FONT size="2">CAPITALIZATION</FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the capitalization of the company at
December&nbsp;31, 2001:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="71%">&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"><B>December 31, 2001</B></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>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><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 align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">4,305,000</FONT></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">Total current obligations</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,305,000</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>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <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">21,615,000</FONT></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">Total long-term obligations</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">21,615,000</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>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <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">Total obligations</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">25,920,000</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>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholder&#146;s 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>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Common
shares, no par value: authorized shares &#151;
10,000,000, 3,537,000 shares issued and outstanding</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,240,000</FONT></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">Common shares 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>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
        <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>
</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">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">1,391,000</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>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <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">Total shareholders&#146; equity</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13,785,000</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>
</TR>
<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">Total Capitalization</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">39,705,000</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>
</TR>
</TABLE>
</CENTER>
<!-- link1 "USE OF PROCEEDS" -->
<DIV align="left"><A NAME="004"></A></DIV>
<P align="center"><FONT size="2"><B>USE OF PROCEEDS</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will not receive any of the proceeds from the sale of the common shares
covered by this prospectus. All of the proceeds will be received by the
selling securityholders. See &#147;Selling Securityholders.&#148;
</FONT>
<!-- link1 "DETERMINATION OF OFFERING PRICE" -->
<DIV align="left"><A NAME="005"></A></DIV>
<P align="center"><FONT size="2"><B>DETERMINATION OF OFFERING PRICE</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The offering price of the common shares will be determined by the selling
securityholders in transactions entered into by them. See &#147;Plan of
Distribution.&#148;
</FONT>
<P align="center"><FONT size="2">5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "SELLING SECURITYHOLDERS" -->
<DIV align="left"><A NAME="006"></A></DIV>
<P align="center"><FONT size="2"><B>SELLING SECURITYHOLDERS</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus relates to the offer and sale by the selling
securityholders of common shares that were acquired by them in private
transactions prior to the date of this prospectus and, in the case of Dr.
Bates, common shares underlying an immediately exercisable stock option, all as
specified in the table below. We intend to keep the registration statement to
which this prospectus relates continuously effective until all of the common
shares have been disposed of in accordance with the registration statement or
Rule&nbsp;144 under the Securities Act or when the restrictions on transfer by the
selling securityholders under the Securities Act are no longer applicable.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The common shares offered by this prospectus are offered for the account
of the selling securityholders. The following table sets forth, as of February
4, 2002, the names of the selling securityholders, their positions and the
number of common shares owned by them and offered pursuant to this prospectus.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="48%">&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="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&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><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Common Shares</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="left" colspan="2"><FONT size="1"><B>Name/Position</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Common Shares Owned</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Offered</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><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="2"><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 nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,081,288</FONT></TD>
        <TD nowrap><FONT size="2">(1)</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">2,081,288</FONT></TD>
        <TD nowrap><FONT size="2">(1)</FONT></TD>
</TR>

<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Chairman and Chief Executive Officer</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 valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">John F. Ruffle, Director</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">200,411</FONT></TD>
        <TD nowrap><FONT size="2">(2)(3)</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">55,511</FONT></TD>
        <TD nowrap><FONT size="2">(2)(3)</FONT></TD>
</TR>

<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Craig K. Tagawa,</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">137,600</FONT></TD>
        <TD nowrap><FONT size="2">(3)(4)(5)</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">10,000</FONT></TD>
        <TD nowrap><FONT size="2">(3)(5)</FONT></TD>
</TR>

<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Senior Vice President and Chief
Operating and Financial Officer</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 valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Stanley S. Trotman, Jr., Director</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">142,762</FONT></TD>
        <TD nowrap><FONT size="2">(2)(3)(4)</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">102,962</FONT></TD>
        <TD nowrap><FONT size="2">(2)(3)</FONT></TD>
</TR>

<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><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>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Includes 1,495,000 Common Shares underlying an immediately
exercisable stock option.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Represents or includes Common Shares issued in lieu of cash
Directors&#146; fees.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Represents Common Shares acquired in a private transaction from an
&#147;affiliate&#148; of the company.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Includes Common Shares underlying currently exercisable options
issued pursuant to the 1984 Stock Option Plan and/or 1995 Stock Option
Plan.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(5)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Includes 10,000 Common Shares beneficially owned by Craig K. Tagawa
and Helen H. Tagawa, as joint tenants.</FONT></TD>
</TR>
</TABLE>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because the selling securityholders may sell all or a part of their common
shares, no estimate can be given as to the number of common shares to be held
by any selling securityholder upon termination of the offering. The common
shares owned by the selling securityholders directly or pursuant to immediately
exercisable options represent approximately 48.9% of the issued and outstanding
common shares and common shares underlying immediately exercisable options as
of February&nbsp;4, 2002.
</FONT>
<P align="center"><FONT size="2">6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "PLAN OF DISTRIBUTION" -->
<DIV align="left"><A NAME="007"></A></DIV>
<P align="center"><FONT size="2"><B>PLAN OF DISTRIBUTION</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling securityholders may sell the common shares (i)&nbsp;in an
underwritten offering or offerings, (ii)&nbsp;through brokers and dealers, (iii) &#147;at
the market&#148; to or through a market maker or into an existing trading market, on
an exchange or otherwise, for such shares, (iv)&nbsp;in other ways not involving
market makers or established trading markets, including direct sales to
purchasers, and (v)&nbsp;to the extent not prohibited by applicable securities law,
in ways other than pursuant to the distribution plan presented in the
prospectus. We intend to maintain the effectiveness of the registration
statement until all of the common shares have been sold, or until the earlier
of (x)&nbsp;such time as the selling securityholders receive an opinion of counsel
that registration is no longer required to effect public distribution of the
common shares, and (y)&nbsp;the first date that all common shares are disposed of in
accordance with the registration statement or Rule&nbsp;144 under the Securities
Act.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The distribution of common shares may be effected from time to time in one
or more underwritten transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Any such
underwritten offering may be on a &#147;best efforts&#148; or a &#147;firm commitment&#148; basis.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with any underwritten offering, underwriters or agents may
receive compensation from the selling securityholders for whom they may act as
agents in the form of discounts, concessions or commissions. Underwriters may
sell common shares to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At any time a particular offer of common shares is made, if required, a
prospectus supplement will be distributed that will set forth the names of the
selling securityholder(s) offering such common shares, the aggregate amount of
such common shares being offered and the terms of the offering, including the
name or names of any underwriters, dealers or agents, any discounts,
commissions and other items constituting compensation from the selling
securityholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers. Such prospectus supplement and, if necessary, a
post-effective amendment to the registration statement of which this prospectus
is a part, will be filed with the SEC to reflect the disclosure of additional
information with respect to the distribution of such common shares.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling securityholders and any underwriters, dealers or agents that
participate in the distribution of common shares may be deemed to be
underwriters, and any profit on the sale of common shares by the selling
securityholders and any discounts, commissions or concessions received by any
such underwriters, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under an agreement that may be entered into by us, underwriters, dealers,
and agents who participate in the distribution of common shares may be entitled
to indemnification by American Shared Hospital Services against certain
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such underwriters, dealers or agents may be
required to make in respect thereof.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The sale of the common shares by the selling securityholders may also be
effected from time to time by selling securities directly to purchasers or to
or through certain broker-dealers. In connection with any such sale, any such
broker-dealer may act as agent for the selling securityholders or may purchase
from the selling securityholders all or a portion of the common shares as
principal and thereafter may resell any common shares so purchased. Sales by
any such broker-dealer, acting as agent or as principal, may be made pursuant
to any of the methods described below. Such sales may be made on the American
Stock Exchange or The Pacific Exchange or other exchanges on which the common
shares are then traded, in the over-the-counter market, in negotiated
transactions or otherwise at prices and at terms then prevailing or at prices
related to the then-current market prices or at prices otherwise negotiated.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The common shares may also be sold in one or more of the following
transactions: (a)&nbsp;block transactions (which may involve crosses) in which a
broker-dealer may sell all or a portion of such shares as agent but may
position and resell all or a portion of the block as principal to facilitate
the transaction, (b)&nbsp;purchases by any such broker-dealer as principal and
resale by such broker-dealer for its own account pursuant to this prospectus,
(c)&nbsp;a special offering, an exchange distribution or a secondary distribution in
accordance with applicable stock exchange rules, and (d)&nbsp;ordinary brokerage
transactions and transactions in which any such broker-dealer solicits
purchasers. In effecting sales, broker-dealers engaged by the selling
securityholders may arrange for other broker-dealers to participate.
Broker-dealers will receive commissions or other compensation from the selling
securityholders in
</FONT>
<P align="center"><FONT size="2">7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P><FONT size="2">amounts to be negotiated immediately prior to the sale that
will not exceed those customary in the types of transaction involved.
Broker-dealers may also receive compensation from purchasers of the shares
which is not expected to exceed that customary in the types of transactions
involved.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of our directors, officers or agents is expected to be involved in
soliciting offers to purchase the common shares offered hereby, and no such
person will be compensated by us for the sale of any of such common shares.
Certain officers of the company may assist representatives of the selling
securityholders in such efforts but will not be compensated therefor.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;American Shared Hospital Services will pay all of the expenses incident to
the offering and sale of the common shares, other than commissions, discounts
and fees of underwriters, dealers or agents.
</FONT>

<!-- link1 "DESCRIPTION OF THE COMMON SHARES" -->
<DIV align="left"><A NAME="008"></A></DIV>
<P align="center"><FONT size="2"><B>DESCRIPTION OF THE COMMON SHARES</B></FONT>

<P align="left"><FONT size="2"><B>Common Shares</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The authorized capital stock of the company consists of 10,000,000 common
shares, no par value. At February&nbsp;4, 2002, 3,536,853 common shares were issued
and outstanding and were held of record by approximately 321 persons. We
estimate that there were approximately 1,200 beneficial holders of our common
shares as of February&nbsp;4, 2002. The common shares are listed on the American
Stock Exchange and The Pacific Exchange under the symbol &#147;AMS.&#148;
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each common share has the same rights, privileges and preferences as every
other share and will share equally in the company&#146;s net assets upon liquidation
or dissolution. The common shares have no conversion or redemption rights or
sinking fund provisions. All common shares outstanding are, and all common
shares issued upon exercise of outstanding warrants and options will be,
validly issued, fully paid and non-assessable. The common shares have no
preemptive rights. Shareholders are entitled to one vote for each share owned
on all matters submitted to the shareholders and have the right, subject to
certain conditions, to elect to cumulate their votes in the election of
directors. Shareholders are entitled to receive such dividends as may be
declared by the board of directors out of funds legally available therefor.
</FONT>
<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for the common shares is American Stock
Transfer &#038; Trust Company, New York, New York.
</FONT>
<!-- link1 "LEGAL MATTERS" -->
<DIV align="left"><A NAME="009"></A></DIV>
<P align="center"><FONT size="2"><B>LEGAL MATTERS</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain legal matters with respect to the validity of the common shares
offered in this prospectus will be passed upon for the company by Davis Polk &#038;
Wardwell, Menlo Park, California.
</FONT>
<!-- link1 "EXPERTS" -->
<DIV align="left"><A NAME="010"></A></DIV>
<P align="center"><FONT size="2"><B>EXPERTS</B></FONT>

<P><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form&nbsp;10-K for the year ended December&nbsp;31,
2000 of American Shared Hospital Services, have so been incorporated in
reliance on the reports of Moss Adams LLP, for years ended December&nbsp;31, 2000
and December&nbsp;31 1999 and in reliance on the report of Grant Thornton LLP for
the year ended December&nbsp;31, 1998, and upon the authority of such firms as
experts in accounting and auditing.
</FONT>
<P align="center"><FONT size="2">8
</FONT>

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<P align="center"><FONT size="2">9
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<P><FONT size="2"><B>No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference into this prospectus, and, if given or made, such
information or representations must not be relied upon as having been
authorized by the company or any other person. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
common shares offered hereby by anyone in any jurisdiction in which such offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that the information contained herein is correct as of any time
subsequent to the date of this prospectus.</B>
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<P align="center"><FONT size="2"><B>TABLE OF CONTENTS</B></FONT>

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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Where you can find more information</FONT></DIV></TD>
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        <TD align="right"><FONT size="2">2</FONT></TD>
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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Documents incorporated by reference</FONT></DIV></TD>
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        <TD align="right"><FONT size="2">2</FONT></TD>
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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Risk factors</FONT></DIV></TD>
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        <TD align="right"><FONT size="2">3</FONT></TD>
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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">The company</FONT></DIV></TD>
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        <TD align="right"><FONT size="2">4</FONT></TD>
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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Use of proceeds</FONT></DIV></TD>
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        <TD align="right"><FONT size="2">5</FONT></TD>
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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Determination of offering price</FONT></DIV></TD>
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        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5</FONT></TD>
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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling securityholders</FONT></DIV></TD>
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        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6</FONT></TD>
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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Plan of distribution</FONT></DIV></TD>
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        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">7</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Description of common shares</FONT></DIV></TD>
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        <TD align="right"><FONT size="2">8</FONT></TD>
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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Legal matters</FONT></DIV></TD>
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        <TD align="right"><FONT size="2">8</FONT></TD>
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        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Experts</FONT></DIV></TD>
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        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">8</FONT></TD>
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<P align="center"><FONT size="2"><B>AMERICAN SHARED<BR>
HOSPITAL SERVICES</B></FONT>

<P align="center"><FONT size="2"><B>2,249,761<BR>
Common Shares</B></FONT>

<P align="center"><FONT size="2"><B>PROSPECTUS</B></FONT>

<P align="center"><FONT size="2"><B>FEBRUARY 27, 2002</B></FONT>


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


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