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<SEC-DOCUMENT>0000950134-04-017340.txt : 20041112
<SEC-HEADER>0000950134-04-017340.hdr.sgml : 20041111
<ACCEPTANCE-DATETIME>20041112123529
ACCESSION NUMBER:		0000950134-04-017340
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20040930
FILED AS OF DATE:		20041112
DATE AS OF CHANGE:		20041112

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:		041137370

	BUSINESS ADDRESS:	
		STREET 1:		FOUR EMBARCADERO CENTER
		STREET 2:		SUITE 3700
		CITY:			SAN FRANCISCO
		STATE:			CA
		ZIP:			94111-4107
		BUSINESS PHONE:		415-788-5300

	MAIL ADDRESS:	
		STREET 1:		FOUR EMBARCADERO CENTER
		STREET 2:		SUITE 3700
		CITY:			SAN FRANCISCO
		STATE:			CA
		ZIP:			94111-4107
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>f03271e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<HR size="4" noshade color="#000000" style="margin-top: -5px">
<HR size="1" noshade color="#000000" style="margin-top: -10px">





<P align="center" style="font-size: 14pt"><B>SECURITIES AND EXCHANGE COMMISSION</B>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, DC 20549</B>
</DIV>


<P align="center" style="font-size: 10pt"><B>________________________</B>


<P align="center" style="font-size: 18pt"><B>FORM 10-Q</B>


<P align="left" style="font-size: 10pt"><B>(Mark One)</B>


<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%" style="font-size: 12pt">
<TR>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><B>For the quarterly period ended September&nbsp;30, 2004 or</B>


<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%" style="font-size: 12pt">
<TR>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><B>For the transition period from _______________ to _______________.</B>



<P align="center" style="font-size: 10pt"><B>Commission file number 1-8789<BR>
________________________</B>


<P align="center" style="font-size: 24pt"><B>American Shared Hospital Services</B>

<DIV align="center" style="font-size: 10pt"><B>(Exact name of registrant as specified in its charter)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="80%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center"><B>California</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>94-2918118</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>(State or other jurisdiction of<BR>
Incorporation or organization)</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>(IRS Employer<BR>
Identification No.)</B></TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center"><B>Four Embarcadero Center, Suite 3700, San Francisco, California</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>94111</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>(Address of Principal Executive Offices)</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>(Zip Code)</B></TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><B>Registrant&#146;s telephone number, including area code: (415)&nbsp;788-5300</B>


<P align="left" style="font-size: 10pt">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. Yes
<FONT face="wingdings">&#254;</FONT> No <FONT face="wingdings">&#111;
</FONT>


<P align="left" style="font-size: 10pt">Indicate by check mark whether the registrant is an accelerated filer (as
defined in Securities Exchange Act Rule&nbsp;12b-2). Yes <FONT face="wingdings">&#111;
</FONT> No <FONT face="wingdings">&#254;</FONT>


<P align="left" style="font-size: 10pt">As of October&nbsp;29, 2004, there are outstanding 4,755,173 shares of the
Registrant&#146;s common stock.



<P>
<HR size="1" noshade color="#000000" style="margin-top: -2px">
<HR size="4" noshade color="#000000" style="margin-top: -10px">






<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- 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>
	<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 colspan="8"><A HREF="#002">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and<BR> Results of Operations</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">Item&nbsp;4.&nbsp;&nbsp; Controls and Procedures</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">PART II &#151; OTHER INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">Item&nbsp;1. Legal Proceedings.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">Item&nbsp;2. &nbsp;&nbsp;Unrestricted Sales of Equity Securities and Use of Proceeds.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">Item&nbsp;3. Defaults Upon Senior Securities.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Item&nbsp;4. Submission of Matters to a Vote of Securities Holders.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">Item&nbsp;5. Other Information.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">Item&nbsp;6. Exhibits.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="f03271exv10w45.htm">EXHIBIT 10.45</A></TD></TR>
<TR><TD colspan="9"><A HREF="f03271exv31w1.htm">EXHIBIT 31.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="f03271exv31w2.htm">EXHIBIT 31.2</A></TD></TR>
<TR><TD colspan="9"><A HREF="f03271exv32w1.htm">EXHIBIT 32.1</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<!-- link1 "PART I &#151; FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="left" style="font-size: 10pt">PART I &#151; FINANCIAL INFORMATION


<!-- link2 "ITEM 1. FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="left" style="font-size: 10pt"><B>ITEM 1. FINANCIAL STATEMENTS</B>



<P align="center" style="font-size: 10pt"><B>AMERICAN SHARED HOSPITAL SERVICES</B><BR>
CONDENSED CONSOLIDATED BALANCE SHEETS


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(audited)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>ASSETS</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>9/30/2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>12/31/2003</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,512,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,312,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Restricted cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts receivable, net of allowance for
for doubtful accounts of $170,000 in
2004 and $170,000 in 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,081,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,467,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">463,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Total current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,106,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,302,000</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property and equipment:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Medical equipment and facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,221,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,072,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">492,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">430,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deposits and construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,907,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,463,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,620,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,965,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated depreciation and
amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,737,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,137,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net property &#038; equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,883,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,828,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Total assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>46,158,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>46,304,000</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="62%">&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 style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>LIABILITIES AND</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(audited)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>SHAREHOLDERS' EQUITY</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>9/30/2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>12/31/2003</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">170,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">371,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Employee compensation and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">927,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">539,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current portion of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,775,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,803,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Total current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,154,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,034,000</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term debt, less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,298,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,114,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,096,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,191,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,731,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shareholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Common stock, without par value:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">authorized shares - 10,000,000; issued
&#038; outstanding shares, 4,755,173 in 2004
and 3,918,203 in 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,218,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,198,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,381,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,461,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,727,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,670,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Total shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,326,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,329,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Total liabilities and shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>46,158,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>46,304,000</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">See accompanying notes



<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>AMERICAN SHARED HOSPITAL SERVICES</B><BR>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME<BR>
(Unaudited)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="42%">&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="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months ended Sept. 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months ended Sept. 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Revenue:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Medical services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,136,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,011,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,479,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,785,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Costs and expenses:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Costs of operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Maintenance and supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">625,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,199,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,085,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,555,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,061,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">504,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">588,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,756,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,719,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total costs of operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,906,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,895,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,936,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,313,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">817,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">702,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,345,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,367,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">553,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">656,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,727,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,908,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total costs and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,276,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,253,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,008,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,588,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">860,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">758,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,471,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,197,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(267,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(224,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(764,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(699,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">614,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">561,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,771,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,597,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax (benefit)&nbsp;expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(226,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">369,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,599,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,039,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Earnings per common share &#151; basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Earnings per common share &#151; assuming
dilution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">See accompanying notes



<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>AMERICAN SHARED HOSPITAL SERVICES</B><BR>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME<BR>
(Unaudited)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="72%">&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 style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months ended Sept. 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,599,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,039,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Adjustments to reconcile net cash provided by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,621,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,130,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">559,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Minority interest in consolidated subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">764,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">699,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(614,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(297,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">423,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net cash from operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,513,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,641,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchase of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,655,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,510,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net cash from investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,655,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,510,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Payment of dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(485,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(454,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Payment received for exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Distribution to minority owners</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(304,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(455,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Payment for repurchase of stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(45,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Financing on purchase of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,790,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,913,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Principal payments on long-term debt and capitalized leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,634,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,188,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net cash from financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,658,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(173,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net change in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(800,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,312,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,924,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,512,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,882,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Supplemental cash flow disclosure:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash paid during the period for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Interest paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,868,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,938,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Income taxes paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">81,000</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">See accompanying notes



<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt">AMERICAN SHARED HOSPITAL SERVICES<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)



<P align="left" style="font-size: 10pt"><B>Note 1.&nbsp;&nbsp; Basis of Presentation</B>


<P align="left" style="font-size: 10pt">&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 September&nbsp;30, 2004 and the
results of its operations for the three and nine month periods ended September
30, 2004 and 2003, which results are not necessarily indicative of results on
an annualized basis. Consolidated balance sheet amounts as of December&nbsp;31,
2003 have been derived from audited financial statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These unaudited consolidated financial statements should be read in
conjunction with the audited financial statements for the year ended December
31, 2003 included in the Company&#146;s 10-K and 10-KA filed with the Securities and
Exchange Commission.


<P align="left" style="font-size: 10pt">&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: OR21,
Inc. (&#147;OR21&#148;); MedLeader.com, Inc. (&#147;MedLeader&#148;); American Shared Radiosurgery
Services (&#147;ASRS&#148;); and ASRS majority-owned subsidiary, GK Financing, LLC (&#147;GK
Financing&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company through its majority-owned subsidiary, GK Financing, provided
Gamma Knife units to eighteen medical centers as of September&nbsp;30, 2004 in
Arkansas, California, Connecticut, Florida, Illinois, Maryland, Massachusetts,
Mississippi, Nevada, New Jersey, New Mexico, New York, Ohio, Pennsylvania,
Texas and Wisconsin.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All significant intercompany accounts and transactions have been
eliminated in consolidation.


<P align="left" style="font-size: 10pt"><B>Note 2.&nbsp;&nbsp; Per Share Amounts</B>


<P align="left" style="font-size: 10pt">&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 nine months ended September&nbsp;30, 2004 basic earnings per share was
computed using 4,755,000 and 4,214,000 common shares, respectively, and diluted
earnings per share was computed using 5,119,000 and 5,097,000 common shares and
equivalents, respectively. For the three and nine months ended September&nbsp;30,
2003 basic earnings per share was computed using 3,871,000 and 3,827,000 common
shares, respectively, and diluted earnings per share was computed using
5,081,000 and 5,072,000 common shares and equivalents, respectively. The
increase in common shares used in the basic earnings per share calculation
during 2004 is the result of stock options exercised, primarily in third
quarter 2004. This is explained in more detail in Item&nbsp;2, Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations.


<P align="left" style="font-size: 10pt"><B>Note 3.&nbsp;&nbsp; Stock-based Compensation</B>


<P align="center" style="font-size: 10pt">5
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has two stock-based employee compensation plans, the 1995 and
2001 Stock Option Plans. The Company accounts for those plans using the
intrinsic value method prescribed by APB Opinion No.&nbsp;25, <I>Accounting for Stock
Issued to Employees</I>, and related Interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under
those plans had an exercise price greater than or equal to the market value of
the underlying common stock on the date of grant. The following table
illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of FASB Statement No.&nbsp;123,
<I>Accounting for Stock-Based Compensation</I>, to stock-based employee compensation.
For pro forma purposes, the estimated fair value of the Company&#146;s options is
amortized over the options&#146; vesting period.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three months ended Sept. 30</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended Sept. 30</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">369,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,599,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,039,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">($1,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">($1,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size="1"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size="1"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size="1"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size="1"></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Pro forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">368,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,599,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,038,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size="4"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size="4"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size="4"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR noshade size="4"></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic-as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic-pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted-as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted-pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.20</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>


<!-- link2 "Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and<BR> Results of Operations" -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;2.&nbsp;&nbsp; Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This quarterly report to the Securities and Exchange Commission may be
deemed to contain certain forward-looking statements with respect to the
financial condition, results of operations and future plans of American Shared
Hospital Services, which involve risks and uncertainties including, but not
limited to, the risks of the Gamma Knife business. Further information on
potential factors that could affect the financial condition, results of
operations and future plans of American Shared Hospital Services is included in
the filings of the Company with the Securities and Exchange Commission,
including the Company&#146;s Annual Report on Form 10-K and 10-KA for the year ended
December&nbsp;31, 2003, the Quarterly Report on Form 10-Q for the periods ended
March&nbsp;31, 2004 and June&nbsp;30, 2004 and the definitive Proxy Statement for the
Annual Meeting of Shareholders held on June&nbsp;17, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Medical services revenue increased $125,000 and $694,000 to $4,136,000 and
$12,479,000 for the three month and nine month periods ended September&nbsp;30,
2004, from $4,011,000 and $11,785,000 for the three and nine month periods
ended September&nbsp;30, 2003, respectively. The increase in revenue for the three
month period ended September&nbsp;30, 2004 was due to the addition of one new Gamma
Knife unit that began operating during third quarter 2004, and one Gamma Knife
center that began operating during late third quarter 2003, which was offset
during third quarter 2004 by a 10% decrease in revenue at Gamma Knife centers
in operation more than one year. The revenue increase for the nine month
period was due to the inclusion of one new Gamma Knife unit that began
operating during 2004 and three Gamma


<P align="center" style="font-size: 10pt">6
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Knife units that began operation during
2003, and was partially offset by a 13% revenue decrease
at Gamma Knife centers in operation for longer than one year. The
Company had 18 Gamma Knife units in operation at September&nbsp;30, 2004 compared to
17 at September&nbsp;30, 2003. Fourteen of the Company&#146;s customers are under
fee-per-use contracts, and four 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.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of Gamma Knife procedures increased by 8% to 552 and by 4% to
1,628 for the three and nine month periods ended September&nbsp;30, 2004 from 510
and 1561 for the three and nine month periods ended September&nbsp;30, 2003,
respectively. The addition of one new Gamma Knife unit in 2004 and increases
in procedures from three new Gamma Knife units that began operation during 2003
were offset during third quarter 2004 by decreases in procedures performed at
Gamma Knife units in operation more than one year of 4% and 9% for the three
and nine month periods ended September&nbsp;30, 2004, respectively. The Company
believes that the decrease in procedures performed at Gamma Knife units in
operation more than one year is primarily due to personnel staffing issues at
certain Gamma Knife sites and normal fluctuations in disease incidence and
related factors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total costs of operations increased $11,000 and $623,000 to $1,906,000 and
$5,936,000 for the three and nine month periods ended September&nbsp;30, 2004, from
$1,895,000 and $5,313,000 for the three and nine month periods ended September
30, 2003, respectively. Maintenance and supplies decreased by $19,000 and
increased by $92,000 for the three and nine month periods ended September&nbsp;30,
2004 compared to the same periods in the prior year. The decrease for the
three month period is primarily due to credits associated with the renewal of
maintenance contracts on certain Gamma Knife units. The increase for the nine
month period is primarily due to an increase in the number of Gamma Knife
contracts covered under maintenance contract. There were 16 Gamma Knife units
covered under maintenance contract as of September&nbsp;30, 2004 compared to 14 as
of September&nbsp;30, 2003. Depreciation and amortization increased by $114,000 and
$494,000 for the three and nine month periods ended September&nbsp;30, 2004 compared
to the same periods in the prior year due to the inclusion of one new Gamma
Knife unit that started operating during third quarter 2004 and three new Gamma
Knife units that started operating during 2003. Other operating costs
decreased $84,000 and increased $37,000 for the three and nine month periods
ended September&nbsp;30, 2004 compared to the same periods in the prior year. For
the three month period the decrease is due to a reduction in operating expenses
in connection with the Company&#146;s retail Gamma Knife units, primarily due to a
reduced number of retail procedures performed. For the nine month period, the
increase is primarily due to an increase in marketing related costs and
property taxes, partially offset by a reduction in operating expenses related
to the Company&#146;s retail units.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling and administrative costs increased by $115,000 and decreased by
$22,000 to $817,000 and $2,345,000 for the three and nine month periods ended
September&nbsp;30, 2004 from $702,000 and $2,367,000 for the three and nine month
periods ended September&nbsp;30, 2003, respectively. The increase for the quarter
was primarily due to increased payroll related costs and business development
costs partially due to the addition of a Director of Sales during 2004. In
addition, approximately $46,000 in employer paid payroll taxes were expensed
during third


<P align="center" style="font-size: 10pt">7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">quarter 2004 due to income earned by the Company&#146;s Chairman and
Chief Executive Officer
upon his exercise of 730,000 options to purchase Company stock. For the
year the decrease was primarily due to the write-off in second quarter 2003 of
Brazil development costs and a reduction in contributions during 2004, and was
partially offset by an increase in business development costs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense decreased by $103,000 and $181,000 to $553,000 and
$1,727,000 for the three and nine month periods ended September&nbsp;30, 2004 from
$656,000 and $1,908,000 for the three and nine month periods ended September
30, 2003, respectively. These decreases are primarily due to lower interest
expense on the debt relating to the more mature Gamma Knife units, partially
offset by additional interest expense on the financing of one new Gamma Knife
unit that began operation during third quarter 2004 and three new Gamma Knife
units that began operation during 2003. The mature units have lower interest
expense because interest expense decreases as the outstanding principal balance
of each loan is reduced. In addition, the financing on the more recent Gamma
Knife units is at lower interest rates than the older loans.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest and other income decreased by $6,000 and $35,000 to $21,000 and
$64,000 for the three and nine month periods ended September&nbsp;30, 2004 from
$27,000 and $99,000 for the three and nine month periods ended September&nbsp;30,
2003, respectively, primarily due to lower invested cash balances. For the
nine month period, the reduction is also due to interest income of
approximately $17,000 in first quarter 2003 relating to a state sales/use tax
refund.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minority interest increased by $43,000 and $65,000 to $267,000 and
$764,000 for the three and nine month periods ended September&nbsp;30, 2004 from
$224,000 and $699,000 for the three and nine month periods ended September&nbsp;30,
2003, respectively, due to increased profitability of GK Financing. Minority
interest represents the 19% interest of GK Financing owned by a third party.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax expense decreased by $418,000 and $386,000 to a benefit of
$226,000 and an expense of $172,000 for the three and nine month periods ended
September&nbsp;30, 2004 compared to expense of $192,000 and $558,000 for the three
and nine month periods ended September&nbsp;30, 2003, respectively. The Company
recorded a 40% income tax provision in the three and nine month periods ended
September&nbsp;30, in both 2004 and 2003, and the provision for both the three and
nine month periods increased due to greater profitability. The decrease for
the three month period was due to an income tax benefit of $472,000 that was
recorded for the exercise of 730,000 previously expensed options, which offset
the income tax provision. In third quarter 2003, the effective income tax rate
was reduced to 34% due to an income tax benefit of $33,000 that was recorded
for the exercise of 50,000 previously expensed options. For the nine month
period ended September&nbsp;30, 2004, the effective income tax rate was reduced to
10% compared to 35% for the same period in the prior year. This is due to an
income tax benefit on the exercise of previously expensed options of $537,000
(830,000 shares) compared to $81,000 (125,000 shares) in the prior year. These
income tax benefits are the result of compensation expense that was recognized
when the options were granted in 1995.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had net income of $840,000 ($0.16 per diluted share) and
$1,599,000 ($0.31 per diluted share) for the three and nine month periods ended
September&nbsp;30, 2004


<P align="center" style="font-size: 10pt">8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">compared to net income of $369,000 ($0.07 per diluted share)
and $1,039,000 ($0.20 per diluted
share) in the same period in the prior year. The increase for both the
three and nine month periods was primarily due to an income tax benefit as a
result of the exercise of stock options, the addition of one new Gamma Knife
unit that began operation during 2004 and three new Gamma Knife units that
began operation during 2003, and lower interest expense.


<P align="left" style="font-size: 10pt"><B>Liquidity and Capital Resources</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had cash and cash equivalents of $9,512,000 at September&nbsp;30,
2004 compared to $10,312,000 at December&nbsp;31, 2003. The Company&#146;s cash position
decreased by $800,000 primarily due to the payment of dividends of $485,000 and
an increase in accounts receivable of $614,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first three quarters of 2004 the Company paid quarterly
dividends totaling $485,000. In September&nbsp;2004, the Company declared a
quarterly dividend of $0.045 per share to shareholders of record on October&nbsp;1,
2004, which resulted in a reduction in retained earnings of $214,000 in third
quarter 2004. The dividends were paid to shareholders of record on October&nbsp;15,
2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company as of September&nbsp;30, 2004 had shareholders&#146; equity of
$17,326,000, working capital of $4,952,000 and total assets of $46,158,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has scheduled interest and principal payments under its debt
obligations of approximately $8,670,000 during the next 12&nbsp;months. The Company
believes that its cash flow from operations and cash resources are adequate to
meet its scheduled debt obligations during the next 12&nbsp;months.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s primary lender for its Gamma Knife projects, DVI Financial
Services Inc. (&#147;DVI&#148;), filed for Chapter&nbsp;11 bankruptcy protection in August
2003. This will not materially affect the financing that has been committed to
existing projects. The Company has secured alternative financing for its
pending projects and continues to seek other financing options for future
projects. Financing has been secured at lower interest rates than had
historically been obtained from DVI, however certain debt covenants are more
restrictive than required by DVI. In addition, DVI did not require a parent
company guarantee, but one alternative financing lender has required a parent
guarantee on leasehold improvements only.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through June&nbsp;30, 2004 the Company invested its cash in an institutionally
priced money market fund pending use in the Company&#146;s operations. During July
2004 the Company converted its invested cash primarily to short to
intermediate-term fixed income securities. The objective of the fixed income
investments is to maximize current income while preserving principal value.


<!-- link2 "Item&nbsp;4.&nbsp;&nbsp; Controls and Procedures" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;4.&nbsp;&nbsp; Controls and Procedures</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;<B>Evaluation of disclosure controls and procedures. </B>Our Chief Executive
Officer and our Chief Financial Officer, after evaluating the effectiveness of
the Company&#146;s


<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">&#147;disclosure controls and procedures&#148; (as defined in the
Securities Exchange Act of 1934
(&#147;Exchange Act&#148;) Exchange Rules&nbsp;13a-15(e) and 15d-15(e)) as of the end of
the period covered by this quarterly report, have concluded that our disclosure
controls and procedures are effective based on their evaluation of these
controls and procedures required by paragraph (b)&nbsp;of Exchange Act Rules&nbsp;13a-15
or 15d-15.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;<B>Changes in internal control over financial reporting</B>.&nbsp;&nbsp; There were no
changes in our internal control over financial reporting identified in
connection with the evaluation required by paragraph (d)&nbsp;of Exchange Act Rules
13a-15 or 15d-15 that occurred during our last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.


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<P align="left" style="font-size: 10pt"><B>PART II &#151; OTHER INFORMATION</B>

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<P align="left" style="font-size: 10pt"><B>Item&nbsp;1.&nbsp;&nbsp; Legal Proceedings.</B>



<P align="left" style="font-size: 10pt; margin-left: 32px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.


<!-- link2 "Item&nbsp;2. &nbsp;&nbsp;Unrestricted Sales of Equity Securities and Use of Proceeds." -->
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<P align="left" style="font-size: 10pt"><B>Item&nbsp;2. &nbsp;&nbsp;Unrestricted Sales of Equity Securities and Use of Proceeds.</B>


<P align="left" style="font-size: 10pt; margin-left: 32px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.

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<P align="left" style="font-size: 10pt"><B>Item&nbsp;3. &nbsp;&nbsp;Defaults Upon Senior Securities.</B>


<P align="left" style="font-size: 10pt; margin-left: 32px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.

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<DIV align="left"><A NAME="008"></A></DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;4. &nbsp;&nbsp;Submission of Matters to a Vote of Securities Holders.</B>


<P align="left" style="font-size: 10pt; margin-left: 32px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.

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<P align="left" style="font-size: 10pt"><B>Item&nbsp;5. &nbsp;Other Information.</B>


<P align="left" style="font-size: 10pt; margin-left: 32px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.

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<P align="left" style="font-size: 10pt"><B>Item&nbsp;6. &nbsp;&nbsp;Exhibits.</B>

<P align="left" style="font-size: 10pt; margin-left: 32px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following exhibits are filed herewith:

<DIV align="right">
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<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description</B><HR size="1" noshade></TD>
</TR>


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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.45
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease Agreement for a Gamma Knife
Unit dated as of May&nbsp;28, 2003 between GK Financing, LLC
and Lehigh Valley Hospital. (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.)</TD>
</TR>

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

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to 18 U.S.C.
Section&nbsp;1350, as Adopted Pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002.</TD>
</TR>


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</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">10
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">

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    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to 18 U.S.C.
Section&nbsp;1350, as Adopted Pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002.</TD>
</TR>

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

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to 18 U.S.C.
Section&nbsp;1350, as Adopted Pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002.</TD>
</TR>


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</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="center" style="font-size: 10pt">SIGNATURES


<P align="left" style="font-size: 10pt">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.



<P align="center" style="font-size: 10pt">AMERICAN SHARED HOSPITAL SERVICES<BR>
Registrant



<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>Date: November 12, 2004&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000">/s/ Ernest A. Bates
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD colspan="3">Ernest A. Bates, M.D.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD colspan="3">Chairman of the Board and<br>
Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>Date: November 12, 2004&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000">/s/ Craig K. Tagawa
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD colspan="3">Craig K. Tagawa&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD colspan="3">Senior Vice President<br>
Chief Operating and Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">12
</DIV>


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<DESCRIPTION>EXHIBIT 10.45
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<P align="right" style="font-size: 10pt"><B>Exhibit&nbsp;10.45</B>


<P align="center" style="font-size: 10pt"><B>EQUIPMENT LEASE AGREEMENT</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS EQUIPMENT LEASE AGREEMENT </B>(&#147;Agreement&#148;) is made and entered into on
May&nbsp;28, 2003, by and between <B>GK FINANCING, LLC, </B>a California limited liability
company (&#147;GKF&#148;), and Lehigh Valley Hospital (&#147;Hospital&#148;), a not for profit
Pennsylvania corporation, with reference to the following facts:


<P align="center" style="font-size: 10pt"><B>R&nbsp;E&nbsp;C&nbsp;I&nbsp;T&nbsp;A&nbsp;L&nbsp;S</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Hospital wants to lease a Leksell Stereotactic Gamma Unit, model
C with Automatic Positioning System, manufactured by Elekta Instruments, Inc.,
as specified in Exhibit&nbsp;A of the LGK Agreement (hereinafter referred to as the
&#147;Equipment&#148;); and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, GKF is willing to lease the Equipment which GKF has acquired from
Elekta Instruments, Inc., a Georgia corporation (hereinafter referred to as
&#147;Elekta&#148;), to Hospital, pursuant to the terms and conditions of this Agreement.


<P align="center" style="font-size: 10pt"><B>A&nbsp;G&nbsp;R&nbsp;E&nbsp;E&nbsp;M&nbsp;E&nbsp;N&nbsp;T</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>NOW, THEREFORE, </B>in consideration of the mutual covenants, conditions and
agreements set forth herein, and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;Lease.&nbsp;&nbsp;Subject to and in accordance with the covenants and conditions
set forth in this Agreement, GKF hereby leases to Hospital, and Hospital hereby
leases from GKF, the Equipment. The Equipment to be leased to Hospital
pursuant to this Agreement shall include the Gamma Knife technology as
specified in Exhibit&nbsp;1, including all hardware and software related thereto.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;LGK
Agreement.&nbsp;&nbsp;Simultaneously with the execution of this Agreement,
Hospital and Elekta shall enter into that certain LGK Agreement (the &#147;LGK
Agreement&#148;), a copy of which is attached hereto as Exhibit&nbsp;1. Hospital shall
perform, satisfy and fulfill all of its obligations arising under the LGK
Agreement when and as required thereunder. Hospital acknowledges that GKF is a
third party beneficiary of the LGK Agreement and, in that capacity, GKF shall
be entitled to enforce Hospital&#146;s performance, satisfaction and fulfillment of
its obligations thereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;Term
of the Agreement.&nbsp;&nbsp;The initial term of this Agreement (the &#147;Term&#148;)
shall commence as of the date hereof and, unless earlier terminated or extended
in accordance with the provisions of this Agreement, shall continue for a
period of ten (10)&nbsp;years following the date of the performance of the first
clinical Gamma Knife procedure (the &#147;First Procedure Date&#148;) at the


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Site. Hospital&#146;s obligation to make the rental payments to GKF for the
Equipment described in Section&nbsp;8 below shall commence as of the First Procedure
Date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;User License.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1&nbsp;&nbsp;Hospital shall apply for and obtain in a timely manner a User License
from the Nuclear Regulatory Commission and, if necessary, from the applicable
state agency authorizing it to take possession of and maintain the Cobalt
supply required in connection with the use of the Equipment during the term of
this Agreement. Hospital also shall apply for and obtain in a timely manner
all other licenses, permits, approvals, consents and authorizations which may
be required by state or local governmental or other regulatory agencies for the
development, construction and preparation of the Site, the charging of the
Equipment with its Cobalt supply, the conduct of acceptance tests with respect
to the Equipment, and the use of the Equipment during the Term, as more fully
set forth in Article&nbsp;2.2 of the LGK Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;Delivery of Equipment; Site.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1&nbsp;&nbsp;GKF shall coordinate with Elekta and Hospital to have the Equipment
delivered to Hospital at Lehigh Valley Hospital-Muhlenberg (the &#147;Site&#148;) on or
prior to the delivery date agreed upon by Hospital, GKF and Elekta in writing.
GKF makes no representations or warranties concerning delivery of the Equipment
to the Site or the actual date thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Equipment is not delivered by the scheduled delivery date specified
in a separate written agreement plus a sixty (60)&nbsp;day grace period (other than
by reasons of force majeure as provided in Paragraph&nbsp;23.16 below) (the &#147;Late
Delivery Date&#148;), GKF shall reimburse Hospital upon written request for
Hospital&#146;s actual financing costs (which financing costs shall not exceed
interest at the prime interest rate of Bank of America plus 2%) based upon
Hospital&#146;s cost to install the Equipment (cost is estimated at approximately
$500,000) for the period between the Late Delivery Date and the date that the
Equipment is delivered to the Site.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2&nbsp;&nbsp;Hospital, at its cost and expense, shall provide a safe, convenient
and properly prepared Site for the Equipment in accordance with Elekta&#146;s
guidelines, specifications, technical instructions and site planning criteria
(which site planning criteria are attached as Exhibit&nbsp;B to the LGK Agreement)
(collectively the &#147;Site Planning Criteria&#148;). The location of the Site shall be
subject to the prior approval of GKF.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;Site Preparation and Installation of Equipment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1&nbsp;&nbsp;Hospital, at its cost, expense and risk, shall prepare all plans and
specifications required to construct and improve the Site for the installation,
use and operation of the Equipment during the Term. The plans and
specifications shall comply in all respects with


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">the Site Planning Criteria and with all applicable federal, state and
local laws, rules and regulations. All plans and specifications prepared by or
on behalf of Hospital (and all material changes thereto following approval by
GKF and Elekta) shall be subject to the written approval of GKF and Elekta
prior to commencement of construction at the Site. Hospital shall provide GKF
and Elekta with a reasonable period of time for the review and consideration of
all plans and specifications following the submission thereof for approval.
Following approval of the plans and specifications by GKF and Elekta, Hospital,
at its cost and expense, shall obtain all permits, certifications, approvals or
authorizations required by applicable federal, state or local laws, rules or
regulations necessary to construct and improve the Site for the installation,
use and operation of the Equipment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2&nbsp;&nbsp;Based upon the plans and specifications approved by GKF and Elekta,
Hospital, at its cost, expense and risk, shall prepare, construct and improve
the Site as necessary for the installation, use and operation of the Equipment
during the Term, including, without limitation, providing all temporary or
permanent shielding required for the charging of the Equipment with the Cobalt
supply and for its subsequent use, selecting and constructing a proper
foundation for the Equipment and the temporary or permanent shielding, aligning
the Site for the Equipment, and installing all electrical systems and other
wiring required for the Equipment. In connection with the construction of the
Site, Hospital, at its cost and expense, shall select, purchase and install all
radiation monitoring equipment, devices, safety circuits and radiation warning
signs required at the Site in connection with the use and operation of the
Equipment, all in accordance with applicable federal, state and local laws,
rules, regulations or custom.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3&nbsp;&nbsp;In addition to construction and improvement of the Site, Hospital, at
its cost, expense and risk, shall be responsible for the installation of the
Equipment at the Site, including the positioning of the Equipment on its
foundation at the Site in compliance with the Site Planning Criteria.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4&nbsp;&nbsp;Upon completion of construction, the Site shall (a)&nbsp;comply in all
respects with the Site Planning Criteria and all applicable federal, state and
local laws, rules and regulations, and (b)&nbsp;be safe and suitable for the ongoing
use and operation of the Equipment during the Term.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5&nbsp;&nbsp;Hospital shall use its reasonable efforts to satisfy its obligations
under this Section&nbsp;6 in a timely manner. Hospital shall keep GKF informed in a
timely manner of its progress in the design of the Site, the preparation of
plans and specifications, the construction and improvement of the Site, and the
satisfaction of its other obligations under this Section&nbsp;6. In all events,
Hospital shall complete all construction and improvement of the Site required
for the installation, positioning and testing of the Equipment on or prior to
the delivery date described in Section&nbsp;5.1 above. If the Site is not complete
as of the delivery date described in Section&nbsp;5.1 above plus a sixty (60)&nbsp;day
grace period (other than by reasons of force majeure as provided in Section&nbsp;23
below) (the &#147;late completion date&#148;), Hospital shall reimburse GKF for its
out-of-pocket financing costs incurred with respect the Equipment at the Bank
of America prime


<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="font-size: 10pt">interest rate (which rate is sometimes referred to by the Bank as its
&#147;reference rate&#148;) plus 2% based upon GKF&#146;s cost of the Equipment for the period
between the late completion date and the date that the Site is completed to the
extent necessary to allow for the installation, positioning and testing of the
Equipment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Equipment is not delivered by the scheduled delivery date specified
in a separate written agreement plus a sixty (60)&nbsp;day grace period (other than
by reasons of force majeure as provided in Paragraph&nbsp;23.16 below) (the &#147;Late
Delivery Date&#148;), GKF shall reimburse Hospital upon written request for
Hospital&#146;s actual financing costs (which financing costs shall not exceed
interest at the prime interest rate of Bank of America plus 2%) based upon
Hospital&#146;s direct costs incurred to prepare and construct the Site for the
Equipment for the period between the Late Delivery Date and the date the
Equipment is actually delivered to the Site.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6&nbsp;&nbsp;During the Term, Hospital, at its cost and expense, shall maintain the
Site in a good working order, condition and repair, reasonable wear and tear
excepted.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7&nbsp;&nbsp;Hospital shall be liable for, and shall indemnify GKF in the manner
described in Section&nbsp;22 below from and against, all damage to the Equipment
caused by (a)&nbsp;defects in construction of the Site or in installation or
positioning the Equipment at the Site; (b)&nbsp;defects arising out of materials or
parts provided, modified or designed by Hospital for or with respect to the
Site; (c)&nbsp;negligent, intentional or wrongful acts or omissions by Hospital or
any of its officers, directors, agents, contractors (or their subcontractors),
or employees in connection with the construction and preparation of the Site;
and (d)&nbsp;negligent or intentional and wrongful operation of the Equipment at the
Site. Further, neither the review and approval of Site plans, specifications
and/or positioning plans by GKF and/or Elekta, nor the construction of any
other Site preparation, shall relieve Hospital for liability for damages to the
Equipment caused by the failure to comply with applicable federal, state or
local laws or regulations, including building codes, or those portions of the
Site Planning Criteria relating to the load bearing capacity of the floor of
the treatment room and to radiation protection.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;Marketing
Support.&nbsp;&nbsp;GKF, in coordination with Hospital, shall provide
marketing support for the Gamma Knife service to be provided by Hospital. Not
less than ninety (90)&nbsp;days prior to the First Procedure Date and the
commencement of each succeeding twelve (12)&nbsp;month period during the Term, GKF
and Hospital shall develop a mutually agreed upon marketing budget and plan for
the clinical service to be supported by the Equipment for the succeeding twelve
(12)&nbsp;month period of the Term. Once approved, the marketing budget and plan
shall be implemented by Hospital in accordance with its terms. As funds are
expended by Hospital in accordance with the marketing budget and plan, Hospital
shall submit invoices (together with documentary evidence supporting the
invoices) for its expenditures and, promptly following the receipt of such
invoices, GKF shall reimburse Hospital for * of the expenditures up to an
annual maximum of *. It is acknowledged by the parties that such expenses to
be reimbursed by GKF as provided in this Section&nbsp;7 have been included in GKF&#146;s
calculation of Hospital&#146;s Lease Payments so as to allow GKF to recover such GKF
reimbursed expenses during the Term of this Agreement.


<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;Per
Procedure Payments.&nbsp;&nbsp;As rent for the lease of the Equipment to
Hospital pursuant to this Agreement, Hospital shall pay to GKF the sum of *
for each Procedure. Hospital shall pay GKF this amount (the &#147;Lease Payment&#148;)
for each &#147;Procedure&#148; that is performed by Hospital or its representatives or
its employees or affiliated health care entities, irrespective of whether the
Procedure is performed on the Equipment or using any other equipment or
devices. It is acknowledged that a physician that is not employed by Hospital
shall not be deemed to be a representative or affiliated health care entity of
Hospital. As used herein, a &#147;Procedure&#148; means any treatment that involves
stereotactic, external, single fraction, conformal radiation, commonly called
radiosurgery, that may include one or more isocenters during the patient
treatment session, delivered to any site(s) superior to the foramen magnum.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within ten (10)&nbsp;days following the end of each month (or portion thereof)
during the term of this Agreement, Hospital shall inform GKF in writing as to
the number of Procedures performed during that month utilizing the Equipment
and any other devices. If no Procedures are performed by Hospital or any other
person utilizing the Equipment or any other equipment or devices, no Lease
Payments shall be owing by Hospital to GKF. GKF shall submit a rent invoice to
Hospital on the last day of each calendar month (or portion thereof) for the
actual number of Procedures performed during the calendar month. Hospital
shall pay the rent invoice within forty five (45)&nbsp;days after submission by GKF
to Hospital. All or any portion of a rent invoice which is not paid in full
within sixty (60)&nbsp;days after submission shall bear interest at the rate of one
and one-half percent (1.50%) per month (or the maximum monthly interest rate
permitted to be charged by law between an unrelated, commercial borrower and
lender, if less) until the unpaid rent invoice together with all accrued
interest thereon is paid in full. If GKF shall at any time accept a rent
payment from Hospital after it shall become due, such acceptance shall not
constitute or be construed as a waiver of any or all of GKF&#146;s rights under this
Agreement, including the rights of GKF set forth in Section&nbsp;20 hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event the Equipment cannot perform Gamma Knife procedures for
fourteen (14)&nbsp;consecutive days due to Equipment malfunction, the Hospital will
not be required to pay Lease Payments for Procedures performed on alternative
Equipment during the period subsequent to the 14th day until the Equipment
malfunction is repaired by GKF.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within ten (10)&nbsp;days after Hospital&#146;s receipt of written request by GKF,
GKF shall have the right to audit Hospital&#146;s books and records (including,
without limitation, the books and records pertaining to any other radiosurgery
equipment or devices) to verify the number of Procedures that have been
performed by Hospital, and Hospital shall provide GKF with access to such books
and records; provided that any patient names or identifiers shall not be
disclosed.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;Use of the Equipment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1&nbsp;&nbsp;The Equipment shall be used by Hospital only at the Site and shall not
be removed therefrom. Hospital shall use the Equipment only in the regular and
ordinary course of Hospital&#146;s business operations and only within the capacity
of the Equipment as determined by Elekta&#146;s specifications. Hospital shall not
use nor permit the Equipment to be used in any


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<P align="left" style="font-size: 10pt">manner nor for any purpose which, in the opinion of Elekta or GKF, the
Equipment is not designed or reasonably suitable.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2&nbsp;&nbsp;This is an agreement of lease only. Nothing herein shall be construed
as conveying to Hospital any right, title or interest in or to the Equipment,
except for the express leasehold interest granted to Hospital for the Term.
All Equipment shall remain personal property (even though said Equipment may
hereafter become attached or affixed to real property) and the title thereto
shall at all times remain exclusively in GKF.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3&nbsp;&nbsp;During the Term, upon the request of GKF, Hospital shall promptly
affix to the Equipment in a prominent place, or as otherwise directed by GKF,
labels, plates, insignia, lettering or other markings supplied by GKF
indicating GKF&#146;s ownership of the Equipment, and shall keep the same affixed
for the entire Term. Hospital hereby authorizes GKF to cause this Lease or any
statement or other instrument showing the interest of GKF in the Equipment to
be filed or recorded, or refiled or re-recorded, with all governmental agencies
considered appropriate by GKF, at GKF&#146;s cost and expense. Hospital also shall
promptly execute and deliver, or cause to be executed and delivered, to GKF any
statement or instrument requested by GKF for the purpose of evidencing GKF&#146;s
interest in the Equipment, including financing statements and waivers with
respect to rights in the Equipment from any owners or mortgagees of any real
estate where the Equipment may be located.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4&nbsp;&nbsp;At Hospital&#146;s cost and expense, Hospital shall (a)&nbsp;protect and defend
GKF&#146;s ownership of and title to the Equipment from and against all persons
claiming against or through Hospital, (b)&nbsp;at all times keep the Equipment free
from any and all liens, encumbrances, attachments, levies, executions, burdens,
charges or legal processes imposed against Hospital, (c)&nbsp;give GKF immediate
written notice of any matter described in clause (b), and (d)&nbsp;in the manner
described in Section&nbsp;22 below indemnify GKF harmless from and against any loss,
cost or expense (including reasonable attorneys&#146; fees) with respect to any of
the foregoing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;Additional Covenants of Hospital. In addition to the other covenants
of Hospital contained in this Agreement, Hospital shall, at its cost and
expense:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1&nbsp;&nbsp;Provide properly trained professional, technical and support
personnel and supplies required for the proper performance of Gamma Knife
procedures utilizing the Equipment. In this regard, Hospital shall maintain on
staff a minimum of one (1)&nbsp;Gamma Knife trained team comprised of a
neurosurgeon, radiation oncologist and physicist. Hospital will use its best
efforts to have two (2)&nbsp;Gamma Knife trained teams during the term of the
Agreement. The Gamma Knife shall be available for use by all credentialed
neurosurgeons and radiation oncologists.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2&nbsp;&nbsp;Direct, supervise and administer the diagnosis, treatment and care of
all patients who receive Gamma Knife procedures.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3&nbsp;&nbsp;Provide reasonable and customary marketing materials (i.e. brochures,
announcements, etc.) together with administrative and physician support (e.g.,
seminars for physicians by neurosurgeons and radiation therapists, etc.) for
the Gamma Knife service to be operated by the Hospital.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.4&nbsp;&nbsp;Keep and maintain the Equipment and the Site fully protected, secure
and free from unauthorized access or use by any person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;Additional Covenants of GKF. In addition to the other covenants of
GKF contained in this Agreement, GKF, at its cost and expense, shall:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1&nbsp;&nbsp;Use its best efforts to require Elekta to meets its contractual
obligations to GKF and Hospital upon delivery of the Equipment and put the
Equipment, as soon as reasonably possible, into good, safe and serviceable
condition and fit for its intended use in accordance with the manufacturer&#146;s
specifications, guidelines and field modification instructions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2&nbsp;&nbsp;Cause Hospital to 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 the Purchase Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;&nbsp;Maintenance of Equipment; Damage or Destruction of Equipment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1&nbsp;&nbsp;During the Term and except as otherwise provided in this Agreement,
GKF, at its cost and expense, shall (a)&nbsp;maintain the Equipment in good
operating condition and repair, reasonable wear and tear excepted, and (b)
maintain in full force and effect a Service Agreement with Elekta and any other
service or other agreements required to fulfill GKF&#146;s obligation to repair and
maintain the Equipment under this Section&nbsp;12. Hospital shall promptly notify
GKF in the event of any damage or destruction to the Equipment or of any
required maintenance or repairs to the Equipment, regardless of whether such
repairs or maintenance are covered or not covered by the Service Agreement.
GKF shall pursue all remedies available to it under the Service Agreement and
under any warranties made by Elekta with respect to the Equipment so that the
Equipment will be free from defects in design, materials and workmanship and
will conform to Elekta&#146;s technical specifications concerning the Equipment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2&nbsp;&nbsp;GKF and Elekta shall have the right to access the Equipment for the
purpose of inspection and the performance of repairs at all reasonable times,
upon reasonable advance notice and with a minimum of interference or
disruptions to Hospital&#146;s regular business operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3&nbsp;&nbsp;Hospital shall be liable for, and in the manner described in Section
22 below shall indemnify GKF from and against, any damage to or destruction of
the Equipment caused by the misuse, improper use, or other intentional and
wrongful or negligent acts or omissions of Hospital&#146;s officers, employees,
agents, contractors and physicians. In the event the Equipment is damaged as a
result of the misuse, improper use, or other intentional and wrongful


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<P align="left" style="font-size: 10pt">or negligent acts or omissions of Hospital officers, employees, agents,
contractors and physicians, to the extent such damage is not covered by the
Service Agreement or any warranties or insurance, GKF may service or repair the
Equipment as needed and the cost thereof shall be paid by Hospital to GKF
immediately upon written request together with interest thereon at the rate of
one and one-half percent (1.50%) per month (or the maximum monthly interest
rate permitted to be charged by law between an unrelated, commercial borrower
and lender, if less) and reasonable attorneys&#146; fees and costs incurred by GKF
in collecting such amount from Hospital. Any work so performed by GKF shall
not deprive GKF of any of its rights, remedies or actions against Hospital for
such damages.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4&nbsp;&nbsp;If the Equipment is rendered unusable as a result of any physical
damage to or destruction of the Equipment, Hospital shall give GKF written
notice thereof. GKF shall determine, within thirty (30)&nbsp;days after it is given
written notice of such damage or destruction, whether the Equipment can be
repaired. In the event GKF determines that the Equipment cannot be repaired
(a)&nbsp;GKF, at its cost and expense, shall replace the Equipment as soon as
reasonably possible taking into account the availability of replacement
equipment from Elekta, Elekta&#146;s other then existing orders for equipment, and
the then existing limitations on Elekta&#146;s manufacturing capabilities, and (b)
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 repaired as soon as
reasonably possible thereafter. Hospital shall fully cooperate with GKF to
effect the replacement of the Equipment or the repair of the Equipment
(including, without limitation, providing full access to the Site) following
the damage or destruction thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;&nbsp;Alterations and Upgrades to Equipment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1&nbsp;&nbsp;Hospital shall not make any modifications, alterations or additions
to the Equipment (other than normal operating accessories or controls) without
the prior written consent of GKF. Hospital shall not, and shall not permit any
person other than representatives of Elekta or any other person authorized by
GKF to, effect any inspection, adjustment, preventative or remedial
maintenance, or repair to the Equipment without the prior written consent of
GKF. All modifications, alterations, additions, accessories or operating
controls incorporated in or affixed to the Equipment (herein collectively
called &#147;additions&#148; and included in the definition of &#147;Equipment&#148;) shall become
the property of the GKF upon termination of this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2&nbsp;&nbsp;The necessity and financial responsibility for modifications,
additions or upgrades to the Equipment, including the reloading of the
Cobalt-60 source, shall be mutually agreed upon by GKF and Hospital. In the
event GKF and Hospital agree to reload the Cobalt-60 source (i.e., in
approximately the seventh (7th) year of the Term), and GKF pays certain costs
associated therewith, notwithstanding any provisions to the contrary herein,
the initial Term shall be automatically extended for a period of two (2)&nbsp;years.
It is the intent of the parties that GKF shall be responsible for Equipment
related costs and expenses and that Hospital shall be responsible for Site
related costs and expenses for modifications, additions or upgrades to the


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<P align="left" style="font-size: 10pt">Equipment, including the reloading of the Cobalt-60 source that are
mutually agreed upon by GKF and Hospital.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;&nbsp;Financing of Equipment by GKF. GKF, in its sole discretion, may
finance the Equipment. Financing may be in the form of an installment loan, a
capitalized lease or other commercially available debt or financing instrument.
If GKF finances the Equipment through an installment loan, GKF shall be
required to provide the Equipment as collateral for the loan. If GKF finances
the Equipment through a capitalized lease, title shall vest with the lessor
until such time as GKF exercises its buy-out option under the lease, if any.
If required by the lender, lessor or other financing entity (the &#147;Lender&#148;), GKF
may assign its interest under this Agreement as security for the financing.
Hospital interest under this Agreement shall be subject to the interests of the
Lender.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;&nbsp;Equipment Operational Costs. Except as otherwise expressly provided
in this Agreement, Hospital shall be responsible and liable for all costs and
expenses incurred, directly or indirectly, in connection with the operation and
use of the Equipment during the Term, including, without limitation, the costs
and expenses required to provide trained physicians, professionals, and
technical and support personnel, supplies and other items required to properly
operate the Equipment and perform Gamma Knife procedures. Between Hospital and
GKF, Hospital shall be fully liable for, and in the manner described in Section
22 below shall indemnify and hold GKF harmless from and against, all negligent,
intentional or wrongful acts or omissions of such physicians, professional,
technical and support personnel.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;&nbsp;Taxes. GKF shall pay all sales or use taxes imposed or assessed in
connection with the purchase of the Equipment and all personal property taxes
imposed, levied or assessed on the ownership and possession of the Equipment
during the Term. All other taxes, assessments, licenses or other charges
imposed, levied or assessed on the Equipment during the Term shall be paid by
Hospital before the same shall become delinquent, whether such taxes are
assessed or would ordinarily be assessed against GKF or Hospital; provided,
however, Hospital shall not be required to pay any federal, state or local
income, franchise, corporation or excise taxes imposed upon GKF&#146;s net income
realized from the lease of the Equipment. In case of a failure by Hospital to
pay any taxes, assessments, licenses or other charges when and as required
under this Section, GKF may pay all or any part of such taxes, in which event
the amount paid by GKF shall be immediately payable by Hospital to GKF upon
written request together with interest thereon at the rate of at the rate of
one and one-half percent (1.50%) per month (or the maximum monthly interest
rate permitted to be charged by law between an unrelated, commercial borrower
and lender, if less) and reasonable attorneys&#146; fees and costs incurred by GKF
in collecting such amount from Hospital.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;&nbsp;No Warranties by GKF. Hospital warrants that as of the First
Procedure Date, it shall have (a)&nbsp;thoroughly inspected the Equipment, (b)
determined that the Equipment is consistent with the size, design, capacity and
manufacture selected by it, and (c)&nbsp;satisfied itself that to the best of its
knowledge the Equipment is suitable for Hospital intended purposes and is


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<P align="left" style="font-size: 10pt">good working order, condition and repair. GKF SUPPLIES THE EQUIPMENT
UNDER THIS AGREEMENT IN ITS &#147;AS IS&#148; CONDITION. GKF, NOT BEING THE MANUFACTURER
OF THE EQUIPMENT OR THE MANUFACTURER&#146;S AGENT, MAKES NO WARRANTY OR
REPRESENTATION, EITHER EXPRESSED OR IMPLIED, AS TO THE EQUIPMENT&#146;S
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR USE, DESIGN, CONDITION,
DURABILITY, CAPACITY, MATERIAL OR WORKMANSHIP OR AS TO PATENT INFRINGEMENT OR
THE LIKE. As between GKF and Hospital, Hospital shall bear all risks with
respect to the foregoing warranties. GKF shall not be liable for any direct,
indirect and consequential losses or damages suffered by Hospital or by any
other person, and Hospital 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, including injury to persons or property resulting from the failure
of, defective or faulty design, operation, condition, suitability or use of the
Equipment. All warranty or other similar claims with respect to the Equipment
shall be made by Hospital solely and exclusively against persons other than
GKF, including Elekta or any other manufacturers or suppliers. In this regard
and with prior written approval of GKF, Hospital may, in GKF&#146;s name, but at
Hospital sole cost and expense, enforce all warranties, agreements or
representations, if any, which may have been made by Elekta or manufacturers,
suppliers or other third parties regarding the Equipment to GKF or Hospital.
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.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.&nbsp;&nbsp;Termination for Economic Justification. If, following the initial
twenty four (24)&nbsp;months after the First Procedure Date and following each
subsequent 12&nbsp;month period thereafter during the Term, based upon the
utilization of the Equipment, within a reasonable period of time after GKF&#146;s
written request, Hospital does not provide GKF with a reasonable economic
justification to continue this Agreement and the provision of Gamma Knife
services at the Hospital, then and in that event, GKF shall have the option to
terminate this Agreement by giving a written notice thereof to Hospital not
less than ninety (90)&nbsp;days prior to the effective date of the termination
designated in GKF&#146;s written notice. Such termination shall take place without
penalty to Hospital.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.&nbsp;&nbsp;Options to Extend Agreement. As of the end of the Term, Hospital
shall have the option either to:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1&nbsp;&nbsp;Extend the Term of this Agreement for a specified period of time and
upon such other terms and conditions as may be agreed upon by GKF and Hospital;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2&nbsp;&nbsp;Terminate this Agreement as of the expiration of the Term.


<P align="left" style="font-size: 10pt">Hospital shall exercise one (1)&nbsp;of the two (2)&nbsp;options referred to above by
giving an irrevocable written notice thereof to GKF at least nine (9)&nbsp;months
prior to the expiration of the initial Term. Any such notice shall be
sufficient if it states in substance that Hospital elects to exercise its
option and states which of the three (2)&nbsp;options referred to above Hospital is
exercising. If


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<P align="left" style="font-size: 10pt">Hospital fails to exercise the option granted herein at least nine (9)&nbsp;months
prior to the expiration of the initial Term, the option shall lapse and this
Agreement shall expire as of the end of the initial Term. Further, if Hospital
exercises the option specified in Section&nbsp;19.1 above and the parties are unable
to mutually agree upon the length of the extension of the Term or any other
terms or conditions applicable to such extension prior to the expiration of the
Term, this Agreement shall expire as of the end of the initial Term.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.&nbsp;&nbsp;Events of Default by Hospital and Remedies.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1&nbsp;&nbsp;The occurrence of any one of the following shall constitute an event
of default under this Agreement (an &#147;Event of Default&#148;):


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.1&nbsp;&nbsp;Hospital fails to pay any rent payment when due pursuant to
Paragraph&nbsp;8 above and such failure continues for a period of fifteen (15)&nbsp;days
after written notice thereof is given by GKF or its assignee to Hospital;
however, if Hospital cures the rent payment default within the applicable
fifteen (15)&nbsp;day period, such default shall not constitute an Event of Default.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.2&nbsp;&nbsp;Hospital attempts to remove, sell, transfer, encumber, assign,
sublet or part with possession of the Equipment or any items thereof, except as
expressly permitted herein.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.3&nbsp;&nbsp;Hospital fails to observe or perform any of its covenants, duties
or obligations arising under this Agreement or the LGK Agreement and such
failure continues for a period of thirty (30)&nbsp;days after written notice thereof
by GKF to Hospital; however, if Hospital cures the default within the
applicable thirty (30)&nbsp;day period or if the default reasonably requires more
than thirty (30)&nbsp;days to cure, Hospital commences to cure the default during
the initial thirty (30)&nbsp;day period and Hospital diligently completes the cure
as soon as reasonably possible following the end of the thirty (30)&nbsp;day period,
such default shall not constitute an Event of Default.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.4&nbsp;&nbsp;Hospital 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.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.5&nbsp;&nbsp;Within sixty (60)&nbsp;days after the commencement of any proceedings
against Hospital seeking reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceedings shall not


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<P align="left" style="font-size: 10pt">have been dismissed, or if within thirty (30)&nbsp;days after the appointment
without Hospital 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.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.6&nbsp;&nbsp;Hospital is suspended or terminated from participation in the
Medicare program.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2&nbsp;&nbsp;Upon the occurrence of an Event of Default with respect to Hospital
as defined in Sections&nbsp;20.1.1, 20.1.2 and 20.1.3, GKF may at its option do any
or all of the actions described in Section&nbsp;20.2.1, 20.2.2, 20.2.3, 20.2.4 and
20.2.5. Upon the occurrence of an Event of Default with respect to the
Hospital as defined in Sections&nbsp;20.1.4, 20.1.5 and 20.1.6, GKF may at its
option exercise any or all of the actions described in Sections&nbsp;20.2.1, 20.2.3,
20.2.4 and 20.2.5.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2.1&nbsp;&nbsp;By written notice to Hospital, immediately terminate this Agreement
as to the Equipment, wherever situated. As a result of the termination, at
Hospital&#146;s sole cost and expense, GKF may enter upon the Site and remove the
Equipment or GKF may demand that Hospital remove and return the Equipment to
GKF. Other than for GKF&#146;s negligence or willful misconduct, GKF shall have no
liability of any kind or nature in connection with any such removal or
restoration.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2.2&nbsp;&nbsp;Recover from Hospital as liquidated damages for the loss of the
bargain represented by this Agreement and not as a penalty an amount equal to
the present value of the unpaid estimated future rent payments to be made by
Hospital to GKF through the end of the Term discounted at the rate of nine
percent (9%), which liquidated damages shall become immediately due and
payable. The unpaid estimated future lease payments shall be based on the
prior twelve (12)&nbsp;months rent payments made by Hospital to GKF hereunder with
an annual five (5%) percent increase thereof through the end of the Term.
Hospital and GKF acknowledge that the liquidated damages formula set forth in
this Section&nbsp;20.2.2 constitutes a reasonable method to calculate GKF&#146;s damages
resulting from an Event of Default arising under Section&nbsp;20.1.1, 20.1.2 and
20.1.3 under the circumstances existing as of the date of this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2.3&nbsp;&nbsp;Sell, dispose of, hold, use or lease the Equipment, as GKF in its
sole and absolute 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).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2.4&nbsp;&nbsp;Exercise any other right or remedy which may be available to GKF
under the Uniform Commercial Code or any other applicable law or proceed by
appropriate court action, without affecting GKF&#146;s title or right to possession
of the Equipment, to enforce the terms hereof or to recover damages for the
breach hereof or to cancel this Agreement as to the Equipment.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2.5&nbsp;&nbsp;In addition to the foregoing remedies, Hospital shall be liable to
GKF for all reasonable attorneys fees, costs and expenses incurred by GKF as a
result of the Event of Default or the exercise of GKF&#146;s remedies.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.3&nbsp;&nbsp;Upon termination of this Agreement or the exercise of any other
rights or remedies under this Agreement or available under applicable law
following an Event of Default, Hospital shall, without further request or
demand, pay to GKF all rent payments and other sums owing under this Agreement.
In the event that Hospital shall pay the liquidated damages referred to in
Section&nbsp;20.2.2 above to GKF, GKF shall pay to Hospital within thirty (30)&nbsp;days
after receipt thereof all rentals or proceeds received from the reletting or
sale of the Equipment during the balance of the initial Term (after deduction
of all costs and expenses, including reasonable attorneys fees and costs,
incurred by GKF as a result of the Event of Default), said amount never to
exceed the amount of the liquidated damages paid by Hospital. However,
Hospital acknowledges that GKF shall have no obligation to sell the Equipment.
Hospital shall in any event remain fully liable for all damages as may be
provided by law and for all costs and expenses incurred by GKF on account of
such default, including but not limited to, all court costs and reasonable
attorneys&#146; fees. The rights and remedies afforded GKF 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.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.&nbsp;&nbsp;Insurance.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.1&nbsp;&nbsp;During the Term, GKF shall, at its cost and expense, purchase and
maintain in effect an all risk property and casualty insurance policy covering
the Equipment. The all risk property and casualty insurance policy shall be
for an amount not less than the replacement cost of the Equipment. Hospital
shall be named as an additional insured party on the all risk property and
casualty insurance policy to the extent of its interest in the Equipment
arising under this Agreement. The all risk property and casualty insurance
policy maintained by GKF shall be evidenced by a certificate of insurance or
other reasonable documentation which shall be delivered by GKF to Hospital upon
request following the commencement of this Agreement and as of each annual
renewal of such policy during the Term.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.2&nbsp;&nbsp;During the Term, Hospital shall, at its cost and expense, purchase
and maintain in effect general liability and professional liability insurance
policies covering the Site (together with all premises where the Site is
located) and the use or operation of the Equipment by Hospital or its officers,
directors, agents, employees, contractors or physicians. The general liability
insurance policy shall provide coverage in amounts not less than One Million
Dollars ($1,000,000.00) per occurrence and Five Million Dollars ($5,000,000.00)
annual aggregate. GKF shall be a certificate holder for general liability
insurance. Professional liability insurance shall be as required by
Pennsylvania Law Act 111 as amended by Act 135. Currently the limits are
$500,000 per occurrence and $2,500,000 in the aggregate for institutional
liability which covers those employees such as nurses, physicists, etc. and the
physician individual limits are $500,000 per occurrence and $1,500,000 in the
aggregate. In addition, coverage is provided by


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<P align="left" style="font-size: 10pt">the MCARE Fund with limits for each of these provides in the amount of
$500,000 per occurrence and $2,100,000 in the aggregate. Evidence of current
insurance is required by the Medical Staff Bylaws. The policies to be
maintained by Hospital hereunder shall be evidenced by a certificate of
insurance or other reasonable documentation which shall be delivered by
Hospital to GKF no later than the First Procedure Date and as of each annual
renewal of such policies during the Term.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.3&nbsp;&nbsp;During the construction of the Site and prior to the First Procedure
Date, Hospital, at its cost and expense, shall purchase and maintain a general
liability insurance policy which conforms with the coverage amounts and other
requirements described in Section&nbsp;21.2 above and which names GKF as an
additional insured party. The policy to be maintained by Hospital hereunder
shall be evidenced by a certificate of insurance or other reasonable
documentation which shall be delivered by Hospital to GKF prior to the
commencement of any construction at the Site.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.4&nbsp;&nbsp;During the Term, Hospital shall purchase and maintain all workers
compensation insurance to the maximum extent required by applicable law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.&nbsp;&nbsp;Indemnification.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.1&nbsp;&nbsp;Hospital shall indemnify, defend, protect and hold GKF and its
members, managers, officers, employees, agents and contractors (collectively
&#147;GKF&#148;) harmless from and against all losses, claims, damages, liabilities,
assessments, deficiencies, actions, proceedings, orders, judgments, liens,
costs and other expenses (including reasonable attorney&#146;s fees) of any nature
or kind whatsoever asserted against or incurred by GKF (collectively &#147;Damages&#148;)
which in any manner arise out of or relate to (a)&nbsp;the failure by Hospital to
fully perform, observe or satisfy its covenants, duties or obligations
contained in this Agreement or in the LGK Agreement; (b)&nbsp;the use and operation
of the Equipment resulting from the negligence or willful misconduct of
Hospital and its employees, contractors, agents, or representatives and or
affiliates during the Term; (c)&nbsp;the design, construction and preparation of the
Site by Hospital or the maintenance of the Site during the Term by Hospital;
(d)&nbsp;Damages to the Equipment from the defective, faulty or improper design,
construction or preparation of the Site or the installation and positioning of
the Equipment; (e)&nbsp;Damages to the Equipment (including any Damages arising out
of or related to violations by Hospital, its agents, officers, physicians,
employees or contractors of the Service Agreement) caused by the negligent or
wrongful acts or omissions of Hospital, its agents, officers, physicians,
employees or contractors (in the event the Equipment is destroyed or rendered
unusable, subject to Section&nbsp;22.6 below, this indemnity 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); (f)&nbsp;the events or occurrences
described in Article&nbsp;7.3 of the LGK Agreement to the same extent that Hospital
agrees to indemnify Elekta thereunder; and (g)&nbsp;any other matters for which
Hospital has specifically agreed to indemnify GKF pursuant to this Agreement.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.2&nbsp;&nbsp;Upon the occurrence of an event for which GKF is entitled to
indemnification under this Agreement, GKF shall give written notice thereof to
Hospital setting forth the type and amount of Damages. If the indemnity
relates to a Third Party Claim (as defined in Section&nbsp;22.3 below), the matter
shall be subject to Section&nbsp;22.3 below. If the indemnity relates to any
Damages other than a Third Party Claim, not more than thirty (30)&nbsp;days after
GKF&#146;s written notice is given, Hospital either shall acknowledge in writing to
GKF its obligation to indemnify hereunder and pay the Damages in full to GKF or
dispute its obligation to indemnify in a written notice delivered to GKF. If
Hospital disputes the obligation to indemnify, the parties shall meet and
negotiate in good faith to mutually resolve the disagreement regarding
indemnification.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.3&nbsp;&nbsp;GKF shall give written notice to Hospital as soon as reasonably
possible after it has knowledge of any third party claim or legal proceedings
(&#147;Third Party Claim&#148;) for which GKF is entitled to indemnification under this
Section&nbsp;22. Hospital shall (a)&nbsp;immediately assume, at its sole cost and
expense, the defense of the Third Party Claim with legal counsel approved by
GKF (which approval will not be unreasonably withheld, delayed or conditioned),
and (b)&nbsp;as soon as reasonably possible after GKF&#146;s written notice is given to
Hospital, acknowledge in writing to GKF its obligation to indemnify GKF in
accordance with the terms of this Agreement. If Hospital fails to assume the
defense of a Third Party Claim or fails to timely acknowledge in writing its
obligation to indemnify GKF, GKF may assume the defense of the Third Party
Claim in the manner described in Section&nbsp;22.4 below. GKF shall cooperate with
Hospital in the defense of any Third Party Claim. Any settlement or compromise
of a Third Party Claim to which GKF is a party shall be subject to the express
written approval of GKF, which approval shall not be unreasonably withheld,
delayed or conditioned as long as an unconditional term of the settlement or
compromise is the full and absolute release of GKF from all Damages arising out
of the Third Party Claim. GKF, at its own cost and expense, may participate on
its own behalf with legal counsel of its own selection in the defense of any
Third Party Claim which may have a material impact on GKF.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.4&nbsp;&nbsp;If Hospital fails to promptly assume the defense of any Third Party
Claim, GKF may assume the defense of the Third Party Claim with legal counsel
selected by GKF, all at Hospital cost and expense. The defense of an action by
GKF under this Section&nbsp;22.4 shall not impair, limit or otherwise restrict
Hospital indemnification obligations arising under this Section&nbsp;22 or GKF&#146;s
right to enforce such obligations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.5&nbsp;&nbsp;The indemnity obligations under this Section&nbsp;22 shall survive the
termination of this Lease with respect to events occurring during or relating
to the Term.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.6&nbsp;&nbsp;The indemnification obligations set forth in this Agreement are
intended to supplement, and not supersede, supplant or replace, any coverage
for Damages which may be available under any insurance policies that may be
maintained by GKF or Hospital. In the event any Damages may be covered by
insurance policies, the parties shall exercise good faith and use their best
efforts to obtain the benefits of and apply the available insurance coverage to the


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<P align="left" style="font-size: 10pt">Damages subject to indemnification under this Agreement. In the event
that an insurer provides coverage under an insurance policy on the basis of a
&#147;reservation of rights&#148;, the indemnification obligations under this Agreement
shall apply to all Damages which are finally determined as not being covered
under the insurance policy.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.&nbsp;&nbsp;Miscellaneous.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.1&nbsp;&nbsp;Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
Hospital shall not assign this Agreement or any of its rights hereunder or
sublease the Equipment without the prior written consent of GKF, which consent
shall not be unreasonably withheld. An assignment or sublease shall not
relieve Hospital of any liability for performance of this Agreement during the
remainder of the Term. Any purported assignment or sublease made without GKF&#146;s
prior written consent shall be null, void and of no force or effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.2&nbsp;&nbsp;Agreement to Perform Necessary Acts. Each party agrees to perform
any further acts and execute and deliver any further documents which may be
reasonably necessary or otherwise reasonably required to carry out the
provisions of this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.3&nbsp;&nbsp;Validity. If for any reason any clause or provision of this
Agreement, or the application of any such clause or provision in a particular
context or to a particular situation, circumstance or person, should be held
unenforceable, invalid or in violation of law by any court or other tribunal of
competent jurisdiction, then the application of such clause or provision in
contexts or to situations, circumstances or persons other than that in or to
which it is held unenforceable, invalid or in violation of law shall not be
affected thereby, and the remaining clauses and provisions hereof shall
nevertheless remain in full force and effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.4&nbsp;&nbsp;Attorney&#146;s Fees and Costs. In the event of any action, arbitration
or other proceedings between or among the parties hereto with respect to this
Agreement, the non-prevailing party or parties to such action, arbitration or
proceedings shall pay to the prevailing party or parties all costs and
expenses, including reasonable attorneys&#146; fees, incurred in the defense or
prosecution thereof by the prevailing party or parties. The party which is a
&#147;prevailing party&#148; shall be determined by the arbitrator(s) or judge(s) hearing
the matter and shall be the party who is entitled to recover his, her or its
costs of suit, whether or not the matter proceeds to a final judgment, decree
or determination. A party not entitled to recover his, her or its costs of
suit shall not recover attorneys&#146; fees. If a prevailing party or parties shall
recover a decision, decree or judgment in any action, arbitration or
proceeding, the costs and expenses awarded to such party may be included in and
as part of such decision, decree or judgment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.5&nbsp;&nbsp;Entire Agreement; Amendment. This Agreement together with the
Exhibits attached hereto constitutes the full and complete agreement and
understanding between the parties hereto concerning the subject matter hereof
and shall supersede any and all prior written and oral agreements with regard
to such subject matter. This Agreement may be modified or amended only by a
written instrument executed by all of the parties hereto.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.6&nbsp;&nbsp;Number and Gender. Words in the singular shall include the plural,
and words in a particular gender shall include either or both additional
genders, when the context in which such words are used indicates that such is
the intent.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.7&nbsp;&nbsp;Effect of Headings. The titles or headings of the various paragraphs
hereof are intended solely for convenience or reference and are not intended
and shall not be deemed to modify, explain or place any construction upon any
of the provisions of this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.8&nbsp;&nbsp;Counterparts. This Agreement may be executed in one or more
counterparts by the parties hereto. All counterparts shall be construed
together and shall constitute one agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.9&nbsp;&nbsp;Governing Law. This Agreement shall be interpreted and enforced in
accordance with the internal laws, and not the law of conflicts, of the State
of Pennsylvania applicable to agreements made and to be performed in that
State.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.10&nbsp;&nbsp;Exhibits. All exhibits attached hereto and referred to in this
Agreement are hereby incorporated by reference herein as though fully set forth
at length.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.11&nbsp;&nbsp;Ambiguities. The general rule that ambiguities are to be construed
against the drafter shall not apply to this Agreement. In the event that any
provision of this Agreement is found to be ambiguous, each party shall have an
opportunity to present evidence as to the actual intent of the parties with
respect to such ambiguous provision.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.12&nbsp;&nbsp;Representations. Each of the parties hereto represents (a)&nbsp;that no
representation or promise not expressly contained in this Agreement has been
made by any other party hereto or by any of its agents, employees,
representatives or attorneys; (b)&nbsp;that this Agreement is not being entered into
on the basis of, or in reliance on, any promise or representation, expressed or
implied, other than such as are set forth expressly in this Agreement; (c)&nbsp;that
it has been represented by counsel of its own choice in this matter or has
affirmatively elected not to be represented by counsel; (d)&nbsp;it is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (e)&nbsp;it has full power and authority to
execute, deliver and perform this Agreement, and (f)&nbsp;the execution, delivery
and performance of this Agreement has been duly authorized by all necessary
corporate or other similar action.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.13&nbsp;Non-Waiver. No failure or delay by a party to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement, or to exercise any right, power or remedy hereunder or under law or
consequent upon a breach hereof or thereof shall constitute a waiver of any
such term, condition, covenant, agreement, right, power or remedy or of any
such breach or preclude such party from exercising any such right, power or
remedy at any later time or times.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.14&nbsp;&nbsp;Notices. All notices, requests, demands or other communications
required or permitted to be given under this Agreement shall be in writing and
shall be delivered to the party to whom notice is to be given either (a)&nbsp;by
personal delivery (in which case such notice shall be deemed to have been duly
given on the date of delivery), (b)&nbsp;by next business day air courier service
(e.g., Federal Express or other similar service) (in which case such notice
shall be deemed given on the business day following deposit with the air
courier service), or (c)&nbsp;by United States mail, first class, postage prepaid,
registered or certified, return receipt requested (in which case such notice
shall be deemed given on the third (3rd) day following the date of mailing),
and properly addressed as follows:

<DIV align="center">
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">To GKF:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Craig K. Tagawa</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GK Financing, LLC</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Four Embarcadero Center, Suite&nbsp;3700</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">San Francisco, CA 94111</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">To Hospital:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Teri Guidi</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lehigh Valley Hospital</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President Cancer Services</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1200 South Cedar Crest Blvd.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Allentown, PA 18103</TD>
</TR>


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<P align="left" style="font-size: 10pt">A party to this Agreement may change his, her or its address for purposes of
this Section by giving written notice to the other parties in the manner
specified herein.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.15&nbsp;&nbsp;Special Provisions Respecting Medicare and Medicaid Patients


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.15.1&nbsp;&nbsp;Hospital and GKF shall generate such records and make such
disclosures as may be required, from time to time, by the Medicare, Medicaid
and other third party payment programs with respect to this Agreement in order
to meet all requirements for participation and payment associated with such
programs, including but not limited to the matters covered by Section
1861(v)(1)(I) of the Social Security Act.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.15.2&nbsp;&nbsp;For the purpose of compliance with Section&nbsp;1861(v)(1)(I) of the
Social Security Act, as amended, and any regulations promulgated pursuant
thereto, both parties agree to comply with the following statutory requirements
(a)&nbsp;Until the expiration of four (4)&nbsp;years after the termination of this
Agreement, both parties shall make available, upon written request to the
Secretary of Health and Human Services or, upon request, to the Comptroller
General of the United States, or any of their duly authorized representatives,
the contract, and books, documents and records of such party that are necessary
to certify the nature and extent of such costs, and (b)&nbsp;if either party carries
out any of the duties of the contract through a subcontract with a value or
cost of $10,000 or more over a twelve month period, with a related
organization, such subcontract shall contain a clause to the effect that until
the expiration of four


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<P align="left" style="font-size: 10pt">(4)&nbsp;years after the furnishing of such services pursuant to such
subcontract, the related organization shall make available, upon written
request to the Secretary, or upon request to the Comptroller General, or any of
their duly authorized representatives the subcontract, and books, documents and
records of such organization that are necessary to verify the nature and extent
of such costs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.16&nbsp;&nbsp;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. Notwithstanding the foregoing,
all parties shall make good faith efforts to perform under this Agreement in
the event of any such circumstance. Further, once such an event is resolved,
the parties shall again perform their respective obligations under this
Agreement.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF</B>, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.

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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>&#147;GKF&#148;</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>GK Financing, LLC</B>,</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">a California limited liability company</TD>
</TR>


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</TABLE>
</DIV>



<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">                   /s/ Craig K. Tagawa
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Craig K. Tagawa,&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>&#147;Hospital&#148;</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Lehigh Valley Hospital,</B></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">a not for profit Pennsylvania corporation</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">                   /s/ Teri U. Guidi
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Teri U. Guidi,&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Vice President, Cancer Services&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">                   /s/ Louis L. Liebhaber
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Louis L. Liebhaber,&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Chief Operating Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>f03271exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="right" style="font-size: 10pt"><B>Exhibit&nbsp;31.1</B>


<P align="center" style="font-size: 10pt">CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


<P align="left" style="font-size: 10pt">I, Craig K. Tagawa, certify that:


<P align="left" style="font-size: 10pt">1. I have reviewed this quarterly report on Form 10-Q of American Shared
Hospital Services;


<P align="left" style="font-size: 10pt">2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;


<P align="left" style="font-size: 10pt">3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;


<P align="left" style="font-size: 10pt">4. The registrant&#146;s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) for the registrant and have:


<P align="left" style="font-size: 10pt">a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; and


<P align="left" style="font-size: 10pt">b) &#091;Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986;&#093; and


<P align="left" style="font-size: 10pt">c) Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and


<P align="left" style="font-size: 10pt">d) Disclosed in this report any changes in the registrant&#146;s internal control
over financial reporting that occurred during registrant&#146;s most recent fiscal
quarter (or the fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant&#146;s internal control over financial reporting;


<P align="left" style="font-size: 10pt">5. The registrant&#146;s other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant&#146;s auditors and the audit committee of registrant&#146;s board of
directors (or persons performing the equivalent function):


<P align="left" style="font-size: 10pt">a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant&#146;s ability to record, process,
summarize and report financial information; and


<P align="left" style="font-size: 10pt">b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant&#146;s internal controls
over financial reporting.



<P align="left" style="font-size: 10pt">November&nbsp;12, 2004


<P align="left" style="font-size: 10pt; margin-left: 50%"><u>/s/ Craig K. Tagawa</u>


<P align="left" style="font-size: 10pt; margin-left: 50%">Craig K. Tagawa


<P align="left" style="font-size: 10pt; margin-left: 50%">Chief Financial Officer



<P align="center" style="font-size: 10pt">
</DIV>


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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>f03271exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="right" style="font-size: 10pt"><B>Exhibit&nbsp;31.2</B>


<P align="center" style="font-size: 10pt">CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


<P align="left" style="font-size: 10pt">I, Ernest A. Bates, M.D., certify that:


<P align="left" style="font-size: 10pt">1. I have reviewed this quarterly report on Form 10-Q of American Shared
Hospital Services;


<P align="left" style="font-size: 10pt">2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;


<P align="left" style="font-size: 10pt">3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;


<P align="left" style="font-size: 10pt">4. The registrant&#146;s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) for the registrant and have:


<P align="left" style="font-size: 10pt">a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; and


<P align="left" style="font-size: 10pt">b) &#091;Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986;&#093; and


<P align="left" style="font-size: 10pt">c) Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and


<P align="left" style="font-size: 10pt">d) Disclosed in this report any changes in the registrant&#146;s internal control
over financial reporting that occurred during registrant&#146;s most recent fiscal
quarter (or the fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant&#146;s internal control over financial reporting;


<P align="left" style="font-size: 10pt">5. The registrant&#146;s other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant&#146;s auditors and the audit committee of registrant&#146;s board of
directors (or persons performing the equivalent function):


<P align="left" style="font-size: 10pt">a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant&#146;s ability to record, process,
summarize and report financial information; and


<P align="left" style="font-size: 10pt">b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant&#146;s internal controls
over financial reporting.



<P align="left" style="font-size: 10pt">November&nbsp;12, 2004


<P align="left" style="font-size: 10pt; margin-left: 50%"><u>/s/ Ernest A. Bates, M.D.</u>


<P align="left" style="font-size: 10pt; margin-left: 50%">Ernest A. Bates, M.D.


<P align="left" style="font-size: 10pt; margin-left: 50%">Chief Executive Officer



<P align="center" style="font-size: 10pt">
</DIV>


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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>f03271exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="right" style="font-size: 10pt"><B>Exhibit&nbsp;32.1</B>


<P align="center" style="font-size: 10pt">CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The certification set forth below is being submitted in connection with
the Quarterly Report on Form 10-Q of American Shared Hospital Services for the
quarterly period ended September&nbsp;30, 2004 (the &#147;Report&#148;) for the purpose of
complying with Rule&nbsp;13a-14(b) or Rule&nbsp;15d-14(b) of the Securities Exchange Act
of 1934 (the &#147;Exchange Act&#148;) and Section&nbsp;1350 of Chapter&nbsp;63 of Title 18 of the
United States Code.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ernest A. Bates, M.D., the Chief Executive Officer and Craig K. Tagawa,
the Chief Financial Officer of American Shared Hospital Services, each
certifies that, to the best of his knowledge:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
American Shared Hospital Services.


<P align="left" style="font-size: 10pt">November&nbsp;12, 2004


<P align="left" style="font-size: 10pt; margin-left: 50%"><u>/s/ Ernest A. Bates, M.D.</u><BR>
Ernest A. Bates, M.D.<BR>
Chief Executive Officer


<P align="left" style="font-size: 10pt; margin-left: 50%"><u>/s/ Craig K. Tagawa</u><BR>
Craig K. Tagawa<BR>
Chief Financial Officer



<P align="center" style="font-size: 10pt">
</DIV>


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