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<SEC-DOCUMENT>0000950134-05-021502.txt : 20051114
<SEC-HEADER>0000950134-05-021502.hdr.sgml : 20051111
<ACCEPTANCE-DATETIME>20051114153922
ACCESSION NUMBER:		0000950134-05-021502
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20050930
FILED AS OF DATE:		20051114
DATE AS OF CHANGE:		20051114

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:		051201148

	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>f14441e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>SECURITIES AND EXCHANGE COMMISSION<BR>
WASHINGTON, DC 20549</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-Q</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(Mark One)</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>&#091;X&#093;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B> QUARTERLY REPORT PURSUANT TO SECTION 13 OR 1</B><B>5(d)</B><B> OF THE SECURITIES EXCHANGE ACT
OF 1934</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>For the quarterly period ended September&nbsp;30, 2005 or</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>&#091;</B>&nbsp;&nbsp;<B>&#093;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B> TRANSITION REPORT PURSUANT TO SECTION 13 OR 1</B><B>5(d)</B><B> OF THE SECURITIES EXCHANGE
ACT OF 1934</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>For the transition period from _______________ to ________________.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Commission file number 1-8789</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>American Shared Hospital Services<BR>
(Exact name of registrant as specified in its charter)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" 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>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>California<BR>
(State or other jurisdiction of<BR>
Incorporation or organization)</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>94-2918118<BR>
(IRS Employer<BR>
Identification No.)</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="42%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Four Embarcadero Center, Suite&nbsp;3700, San Francisco, California<BR>
(Address of Principal Executive Offices)</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>94111<BR>
(Zip Code)</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Registrant&#146;s telephone number, including area code: (415)&nbsp;788-5300</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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. <B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Yes &#091;X&#093;<B>&nbsp;</B>No &#091;<B>&nbsp;&nbsp;</B>&#093;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is an accelerated filer (as defined in Securities
Exchange Act Rule&nbsp;12b-2).<BR><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Yes &#091;<B>&nbsp;&nbsp;</B>&#093;<B>&nbsp;</B>No &#091;X&#093;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of
the Exchange Act).<BR><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Yes &#091;<B>&nbsp;&nbsp;</B>&#093;<B>&nbsp;</B>No &#091;X&#093;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of October&nbsp;1, 2005, there are outstanding 5,018,885 shares of the Registrant&#146;s common stock.
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PART I &#151; FINANCIAL INFORMATION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1. FINANCIAL STATEMENTS</B>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMERICAN SHARED HOSPITAL SERVICES</B><BR>
CONDENSED CONSOLIDATED BALANCE SHEETS
</DIV>

<DIV align="center">
<TABLE style="font-size: 9pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(audited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>LIABILITIES AND</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(audited)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>ASSETS</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">September 30, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>SHAREHOLDERS' EQUITY</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">September 30, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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 align="left" valign="top">&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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Current liabilities:</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:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,759,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,121,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">278,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">282,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee compensation<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and benefits</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">223,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,525,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">957,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued dividends</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable,<BR>net of allowance 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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other accrued liabilities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">987,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">808,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">doubtful accounts of $170,000 in
2005</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 align="left" valign="top">&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: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">and $170,000 in 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,482,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,950,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&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:30px; text-indent:-15px">Prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">429,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;long-term debt</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,240,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,562,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;long-term capital leases</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">355,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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 align="left" valign="top">&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:15px; text-indent:-15px"><B>Total current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,508,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,672,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Total current liabilities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,321,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,955,000</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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 align="left" valign="top">&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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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 align="left" valign="top">Long-term debt, less current portion</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,584,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,924,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Long-term capital leases, less current portion</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,459,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Medical equipment and facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,753,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,282,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deferred income taxes</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">671,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">366,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">538,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">492,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Minority interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,436,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,315,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deposits and construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">507,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,499,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shareholders' equity:</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 style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,798,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,273,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="background: #cceeff">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock, without par value:</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated depreciation and</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 align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;authorized shares - 10,000,000; issued</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: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,942,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,001,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#038; outstanding shares, 5,018,885 in 2005</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 style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
    <TD style="background: #cceeff">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net property &#038; equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,856,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,272,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and 4,776,173 in 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,306,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,238,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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 align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,274,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,410,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retained earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,499,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,898,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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 align="left" valign="top">&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:15px; text-indent:-15px">&nbsp;</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 align="left" valign="top"><B>Total shareholders' equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,079,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,546,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</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 nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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 align="left" valign="top">&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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>48,550,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>47,106,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Total liabilities and shareholders' equity</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>48,550,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>47,106,000</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes
</DIV>



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


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMERICAN SHARED HOSPITAL SERVICES</B><BR>
CONDENSED CONSOLIDATED INCOME STATEMENT<BR>
(Unaudited)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Three months ended Sep. 30,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Nine months ended Sep. 30,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><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:30px; text-indent:-15px">Medical services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,402,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,136,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,581,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,479,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><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:30px; text-indent:-15px">Costs of revenue:</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"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Maintenance and supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261,000</TD>
    <TD>&nbsp;</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">778,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">625,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,320,000</TD>
    <TD>&nbsp;</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">3,953,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,555,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other direct operating costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629,000</TD>
    <TD>&nbsp;</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">2,068,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,756,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,210,000</TD>
    <TD>&nbsp;</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">6,799,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,936,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,192,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,230,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,782,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,543,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling and administrative expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">794,000</TD>
    <TD>&nbsp;</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">2,648,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,345,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">531,000</TD>
    <TD>&nbsp;</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">1,577,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,727,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">867,000</TD>
    <TD>&nbsp;</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">2,557,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,471,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,000</TD>
    <TD>&nbsp;</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">129,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(263,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(267,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(824,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(764,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">633,000</TD>
    <TD>&nbsp;</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">1,862,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,771,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(226,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">574,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">502,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,288,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,599,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes
</DIV>



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


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMERICAN SHARED HOSPITAL SERVICES</B><BR>
CONDENSED CONSOLIDATED CASH FLOWS STATEMENT<BR>
(Unaudited)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Nine months ended Sep. 30,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><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:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,288,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,599,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">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:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,032,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,621,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minority interest in consolidated subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">824,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">764,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">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:60px; text-indent:-15px">Receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(532,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(614,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash from operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,528,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,513,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:15px; text-indent:-15px"><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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of property and equipment (net of financing)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment in securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,568,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash from investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,397,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:15px; text-indent:-15px"><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" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Principal payments on long-term debt and capitalized leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,613,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,634,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Distribution to minority owners</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(703,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(304,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment for stock/option repurchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(670,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment received for exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment of dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(664,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(485,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash from financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,493,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,448,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net change in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,362,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(800,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,121,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,312,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,759,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,512,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:15px; text-indent:-15px"><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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">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:45px; text-indent:-15px">Interest paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,577,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,868,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">162,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:15px; text-indent:-15px"><B>Schedule of noncash investing and financial 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: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Acquisition of equipment with lease/debt financing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,765,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,790,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">238,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">214,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income tax benefit from exercise of stock options and warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">445,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">965,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes
</DIV>



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


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">AMERICAN SHARED HOSPITAL SERVICES<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basis of Presentation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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
30, 2005 and the results of its operations for the three and nine month periods ended September&nbsp;30,
2005 and 2004, which results are not necessarily indicative of results on an annualized basis.
Consolidated balance sheet amounts as of December&nbsp;31, 2004 have been derived from audited financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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&nbsp;31, 2004 included in the Company&#146;s 10-K
filed with the Securities and Exchange Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company through its majority-owned subsidiary, GK Financing, provides Gamma Knife units to
twenty-one medical centers as of September&nbsp;30, 2005 in Arkansas, California, Connecticut, Florida,
Illinois, Maryland, Massachusetts, Mississippi, Nevada, New Jersey, New Mexico, New York, Ohio,
Oklahoma, Pennsylvania, Tennessee, Texas and Wisconsin.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All significant intercompany accounts and transactions have been eliminated in consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain reclassifications have been made to the 2004 balances to conform with the 2005
presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Per Share Amounts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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
30, 2005 basic earnings per share was computed using 5,018,000 and 4,901,000 common shares,
respectively, and diluted earnings per share was computed using 5,048,000 and 4,971,000 common
shares and equivalents, respectively. 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. The increase in common shares used in the basic earnings per share
calculation in 2005 compared to 2004 is the result of stock options exercised, primarily in third
quarter 2004.
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock-based Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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 as 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>



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


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" ><B>Three months ended Sept. 30</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" ><B>Nine Months Ended Sept. 30</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" ><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" ><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" ><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" ><B>2004</B></TD>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">502,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,288,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,599,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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 nowrap align="left">&nbsp;</TD>
    <TD align="right">($6,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">($14,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">496,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,274,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,599,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:15px; text-indent:-15px">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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic-as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic-pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted-as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted-pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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 for the year ended
December&nbsp;31, 2004 and the definitive Proxy Statement for the Annual Meeting of Shareholders held on
June&nbsp;16, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Medical services revenue increased $266,000 and $1,102,000 to $4,402,000 and $13,581,000 for
the three and nine month periods ended September&nbsp;30, 2005 from $4,136,000 and $12,479,000 for the
three and nine month periods ended September&nbsp;30, 2004, respectively. The increase for the three
and nine month periods is primarily due to the addition of three new Gamma Knife units that
commenced operation during 2005, including one that commenced operation during third quarter 2005.
The revenue increase for the nine month period was due to the inclusion of four additional Gamma
Knife units that commenced operation since second quarter 2004.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had twenty-one Gamma Knife units in operation at September&nbsp;30, 2005 compared to
eighteen at September&nbsp;30, 2004. Fifteen of the Company&#146;s customers are under fee-per-use
contracts, and six customers are under retail arrangements. Retail arrangements are further
classified as either turn-key or net revenue sharing. Revenue from fee per use contracts is
recorded on a gross basis as determined by each hospital&#146;s contracted rate. Under turn-key
arrangements, the Company receives payment from the hospital in the amount of its reimbursement
from third party payors, and is responsible for paying all the operating costs of the Gamma Knife.
Revenue is recorded on a gross basis and estimated based on historical experience and hospital
contracts with third party payors. For net revenue sharing arrangements the Company receives a
contracted percentage of the reimbursement received by the hospital less the operating expenses of
the Gamma Knife. Revenue is recorded on a net basis and estimated based on historical experience.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of Gamma Knife procedures increased by 8% to 597 and by 11% to 1,808 for the three
and nine month periods ended September&nbsp;30, 2005 from 552 and 1,628 for the three and nine month
periods ended September&nbsp;30, 2004, respectively. This increase was due to the addition of three new
Gamma Knife units that commenced operation during 2005, including one new Gamma Knife unit that
commenced operation during third quarter 2005. There were minor changes in the number of
procedures performed at Gamma Knife units in operation more than one year, for both the three month
period and the nine month period ended September&nbsp;30, 2005, compared to the same periods in the
prior year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total costs of revenue increased $304,000 and $863,000 to $2,210,000 and $6,799,000 for the
three and nine month periods ended September&nbsp;30, 2005 from $1,906,000 and $5,936,000 for the three
and nine months periods ended September&nbsp;30, 2004. Maintenance and supplies increased by $58,000
and $153,000 for the three and nine month periods ended September&nbsp;30, 2005 compared to the same
periods in the prior year, primarily due to an increase in the number of Gamma Knife units covered
under maintenance contract. There were eighteen Gamma Knife units covered under maintenance
contract as of September&nbsp;30, 2005 compared to sixteen as of September&nbsp;30, 2004. Depreciation and
amortization increased by $121,000 and $398,000 for the three and nine month periods ended
September&nbsp;30, 2005 compared to the same periods in the prior year primarily due to the addition of
three new Gamma Knife units that commenced operation during 2005, including one that began
operation during third quarter 2005. Other direct operating costs increased $125,000 and $312,000
for the three and nine month periods ended September&nbsp;30, 2005 compared to the same periods in the
prior year. For both the three and nine month periods, these increases are primarily due to
additional Gamma Knife turn-key revenue agreements where the Company is responsible for paying all
the direct operating costs, and are partially offset by lower site specific marketing and promotion
costs. There are four turn-key revenue agreements in effect at September&nbsp;30, 2005 compared to two
at September&nbsp;30, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling and administrative costs decreased by $23,000 and increased by $303,000 to $794,000
and $2,648,000 for the three and nine month periods ended September&nbsp;30, 2005 from
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">$817,000 and $2,345,000 for the three and nine month periods ended September&nbsp;30, 2004. For
the three month period the decrease is due to reduced payroll costs partially due to the
resignation of a sales person, and partially due to higher employer paid payroll taxes in third
quarter 2004 relating to option exercises. For the nine month period, the increase was primarily
due to increased marketing and business development costs, investor relations costs, contributions
and costs of the Company&#146;s second Gamma Knife User&#146;s Group meeting which was held in February&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense decreased by $22,000 and $150,000 to $531,000 and $1,577,000 for the three
and nine month periods ended September&nbsp;30, 2005 from $553,000 and $1,727,000 for the three and nine
month periods ended September&nbsp;30, 2004 primarily due to lower interest expense on the debt relating
to the more mature Gamma Knife units, partially offset by additional interest expense relating to
the financing of the four new Gamma Knife units that commenced operation after second quarter 2004.
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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest and other income increased by $8,000 and $65,000 to $29,000 and $129,000 for the
three and nine month periods ended September&nbsp;30, 2005 from $21,000 and $64,000 for the three and
nine month periods ended September&nbsp;30, 2004 primarily due to increased interest income as a result
of higher interest rates on invested cash balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minority interest decreased by $4,000 and increased by $60,000 to $263,000 and $824,000 for
the three and nine month periods ended September&nbsp;30, 2005 from $267,000 and $764,000 for the three
and nine month periods ended September&nbsp;30, 2004. Since minority interest represents the 19%
interest of GK Financing owned by a third party, the decrease in the three month period and
increase in the nine month period reflect the reduced or increased profitability respectively of GK
Financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax expense increased by $357,000 and $402,000 to $131,000 and $574,000 for the three
and nine month periods ended September&nbsp;30, 2005 compared to an income tax benefit of $226,000 for
the three month period and income tax expense of $172,000 for the nine month period ended September
30, 2004. For the three and nine month periods, the Company recorded a 40% income tax provision in
both 2005 and 2004. However, the effective income tax rate was reduced to approximately 21% and
31% for the three and nine month periods ended September&nbsp;30, 2005 compared to an income tax benefit
and a 10% effective income tax rate for the same periods in the prior year, respectively. This is
due to income tax benefits that were recognized on the exercise of previously expensed options to
purchase common stock. For the three month period ended September&nbsp;30, 2005 an income tax benefit
of $123,000 was recorded for the exercise of 189,000 previously expensed options, compared to an
income tax benefit of $472,000 on the exercise of 730,000 previously expensed options for the same
period in the prior year. For the nine month period ended September&nbsp;30, 2005 an income tax benefit
of $171,000 was recorded for the exercise of 264,000 previously expensed options, compared to an
income tax benefit of $537,000 on the exercise of 830,000 previously expensed options for the same
period in the prior year. These income tax benefits are the result of compensation expense that
was recognized when the options were granted in 1995.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had net income of $502,000 ($0.10 per diluted share) and $1,288,000 ($0.26 per
diluted share) for the three and nine month periods ended September&nbsp;30, 2005 compared to net income
of $840,000 ($0.16 per diluted share) and $1,599,000 ($0.31 per diluted share) for the same periods
in the prior year. The decrease for both the three and nine month periods was primarily due to
higher income tax expense as the result of lower income tax benefits on the exercise of stock
options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had cash and cash equivalents of $3,759,000 at September&nbsp;30, 2005 compared to
$8,121,000 at December&nbsp;31, 2004. The Company&#146;s cash position decreased by $4,362,000 primarily due
to $3,568,000 of cash invested in securities, payment of shareholder dividends of $664,000, and
$670,000 on the repurchase of the Company&#146;s common stock or options to purchase common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the nine month period ended September&nbsp;30, 2005, the Company paid quarterly dividends of
$215,000 ($0.045 per share), $218,000 ($0.045 per share), and $231,000 ($0.0475 per share) in
first, second and third quarters, respectively. On September&nbsp;23, 2005 the Company declared a
quarterly dividend of $0.0475 per share payable on October&nbsp;17 to shareholders of record on October
3, 2005, which resulted in a reduction in retained earnings of $238,000 in third quarter 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company as of September&nbsp;30, 2005 had shareholders&#146; equity of $18,079,000, working capital
of $4,187,000 and total assets of approximately $48,550,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has scheduled interest and principal payments under its debt obligations of
approximately $7,668,000 during the next 12&nbsp;months. In third quarter 2005, the Company entered
into a capital lease obligation collateralized by existing Gamma Knife equipment. This obligation
has a stated interest rate of 7.74%, is payable in 84&nbsp;monthly payments, and matures in September
2012. The company has scheduled capital lease payments of approximately $557,000 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 and capital lease obligations during the next 12&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a $6,000,000 line of credit, renewable annually, available as needed for
equipment purchases and working capital. Amounts drawn against the line of credit are secured by
the Company&#146;s cash invested with the bank. At September&nbsp;30, 2005 there were no amounts drawn
against the line of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company invests its cash primarily in money market or similar funds and high quality short
to intermediate-term fixed income securities in order to maximize current income while minimizing
the potential for principal erosion. A portion of these investments are classified as securities
on the balance sheet and are considered <I>held-to-maturity </I>investments because it is the Company&#146;s
ability and intent to hold these securities until maturity. At September&nbsp;30, 2005 these investments
were primarily AAA rated or better government and corporate bonds with maturity dates from one year
to approximately 18&nbsp;months.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Controls and Procedures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Evaluation of disclosure controls and procedures</U>. Our Chief Executive Officer and
our Chief Financial Officer, after evaluating the effectiveness of the Company&#146;s &#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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Changes in internal control over financial reporting</U>. 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&nbsp;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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PART II &#151; OTHER INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Legal Proceedings.<br></B>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in Securities and Use of Proceeds.<br></B>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Defaults Upon Senior Securities.<br></B>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Submission of Matters to a Vote of Securities Holders.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other Information.<br></B>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits and Reports on Form&nbsp;8-K.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following exhibits are filed herewith:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="92%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">

<TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Exhibit Number</u></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><u>Description</u></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.22a
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Addendum to Lease Agreement for a Gamma Knife unit effective April&nbsp;1,
2005 between GK Financing, LLC and New England Medical Center
Hospitals, Inc. (Confidential material appearing in this document has
been omitted and filed separately with the Securities and Exchange
Commission in</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

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

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="89%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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 valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.49
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease Agreement for a Gamma Knife unit dated
as of May&nbsp;28, 2004 between GK Financing, LLC and Mercy Health Center.
(Confidential material appearing in this document has been omitted and
filed separately with the Securities and Exchange Commission in
accordance with Rule&nbsp;24b-2, promulgated under the Securities and
Exchange Act of 1934, as amended. Omitted information has been
replaced with asterisks.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="89%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Exhibit Number</u></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><u>Description</u></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reports on Form&nbsp;8-K
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following report on Form 8-K was filed during the three months ended
September&nbsp;30, 2005:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form&nbsp;8-K dated and filed July&nbsp;26, 2005 relating to a press release
announcing the Company&#146;s preliminary financial results for its second
quarter of fiscal year 2005.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following reports on Form 8-K were filed after September&nbsp;30, 2005:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form&nbsp;8-K dated and filed October&nbsp;27, 2005 relating to a press release
announcing the Company&#146;s preliminary financial results for its second
quarter of fiscal year 2005.</TD>
</TR>

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">SIGNATURES
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">AMERICAN SHARED HOSPITAL SERVICES<BR>
Registrant
</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" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>

<TD align="left">Date:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;   November 14, 2005&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Ernest A. Bates, M.D.
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Ernest A. Bates, M.D.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chairman of the Board and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<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" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;   November 14, 2005&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Craig K. Tagawa
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Craig K. Tagawa&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Senior Vice President
Chief Operating and Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22A
<SEQUENCE>2
<FILENAME>f14441exv10w22a.htm
<DESCRIPTION>EXHIBIT 10.22A
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w22a</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">



<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;10.22a</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADDENDUM</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This ADDENDUM TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (the &#147;Addendum&#148;) is effective April&nbsp;1,
2005, and is entered into between NEW ENGLAND MEDICAL CENTER HOSPITALS, INC., a Massachusetts
corporation (&#147;Medical Center&#148;), and GK FINANCING, LLC, a California limited liability company
(&#147;GKF&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>RECITALS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, on October&nbsp;5, 1998, GKF and Medical Center executed a Lease Agreement for a Gamma
Knife Unit (the &#147;Lease&#148;); and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the parties desire to amend the terms and provisions of the Lease as set forth
herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<B>Defined Terms. </B>Unless otherwise defined herein, the capitalized terms used herein shall
have the same meanings set forth in the Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<B>Extension of Lease Term. </B>The Term of the Lease as set forth in Section&nbsp;6 of the Lease is
hereby extended for an additional six (6)&nbsp;years, <U>plus</U> the period of time that the Equipment
is unavailable to perform procedures due to the Equipment upgrade and cobalt reload process
described herein (collectively, the &#147;Extension&#148;). The Extension shall commence on the expiration of
the initial Term of the Lease. Notwithstanding the foregoing, if the Term (as extended by the
Extension) expires on a date that is prior to September&nbsp;30 of any calendar year, then, the Term (as
extended by the Extension) shall not expire until, and shall be further extended to, September&nbsp;30
of such calendar year. All references in the Lease to the &#147;Term&#148; shall be deemed to refer to the
Term as extended hereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<B>Upgrade and Cobalt Reload of the Equipment. </B>Section&nbsp;15 (including Sections&nbsp;15.1, 15.2 and
15.3) of the Lease are hereby deleted in their entirety and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.1 Subject to the terms and conditions set forth below, GKF, at GKF&#146;s cost and
expense, shall upgrade the Equipment to a Leksell Gamma Knife Model 4C (the &#147;Model 4C&#148;) and
reload the Equipment (as upgraded) with new cobalt-60 (the &#147;Upgrade and Reload&#148;), which
Upgrade and Reload shall be performed at the Site and shall include any required
installation and rigging. In connection with the Upgrade and
</DIV>

<P align="center" style="font-size: 10pt">1
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Reload, Medical Center, at Medical Center&#146;s cost and expense, shall provide GKF with
Medical Center personnel (including Medical Center physicists) and services upon request
and as required by GKF, among other things, to oversee, supervise and assist with
construction and compliance with local, state and federal regulatory requirements and with
nuclear regulatory compliance issues and the calibration of the Model 4C. Subject to
Medical Center&#146;s compliance with Section&nbsp;15.2 below, it is anticipated but not guaranteed
that the Upgrade and Reload will be performed in or around fourth quarter 2005 or first
quarter 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2 Notwithstanding the foregoing, the Upgrade and Reload shall be performed by GKF
only after all licenses, permits, approvals, consents and authorizations necessary and
appropriate for the Upgrade and Reload, including, without limitation, the proper handling
of the cobalt-60 (collectively, the &#147;Permits&#148;), have been obtained by Medical Center at
Medical Center&#146;s sole cost and expense (other than any filing or registration fees which
shall be paid for by GKF). The timing and procedure for such Upgrade and Reload shall be as
mutually agreed upon between the parties. All references in the Lease to (i) &#147;Installation&#148;
shall be deemed to refer to the Upgrade and Reload, and (ii) &#147;Equipment&#148; shall be deemed,
immediately following its upgrade, to mean the Model 4C. Notwithstanding the foregoing, GKF
makes no representation or warranty to Medical Center concerning the Upgrade and Reload, and
GKF shall have no obligation to pay any damages to Medical Center resulting therefrom.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.3 Unless Medical Center notifies GKF at least ninety (90)&nbsp;days prior to the
expiration of the Term (as extended) that Medical Center wishes to purchase the Model 4C in
cash at its fair market value (based upon the &#147;in use&#148; value of the Model 4C) as determined
by an appraiser mutually agreed upon between the parties, GKF shall remove the Model 4C, at
its sole expense, within ninety (90)&nbsp;days after the expiration of the Term (as extended).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<B>Per Procedure Payment. </B>In consideration for and as compensation to GKF for the Upgrade and
Reload and the additional services to be provided by GKF hereunder, effective as of the date of
this Addendum, Exhibit&nbsp;2 of the Lease shall be deleted and replaced with Exhibit&nbsp;2 attached hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<B>Services Performed by GKF. </B>In addition to GKF&#146;s responsibilities under the Lease, GKF shall
provide marketing support and research funding assistance as follows. Within ninety (90)&nbsp;days after
the date of this Addendum and each succeeding anniversary date hereof during the extended Term, GKF
and Medical Center shall jointly develop an annual marketing plan, budget and timeline, which shall
be implemented by Medical Center with the support of GKF based on the approved budget and timeline.
Medical Center&#146;s approval of such plan, budget and timeline shall not be unreasonably withheld or
delayed. If Medical Center has not approved or disapproved the same within thirty (30)
</DIV>

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

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">days following its receipt, Medical Center shall be deemed to have approved the same. GKF shall be
responsible for any actual out-of-pocket marketing expenses paid to unrelated third parties that
are included in the marketing plan budget in an approximate amount of *. This section shall not
reduce or alter Medical Center&#146;s obligations pursuant to Section&nbsp;9.5 of the Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<B>No Responsibility for Additional Upgrades or Reloading. </B>It is understood by the parties
that GKF is not responsible for any additional upgrades, hardware, cobalt reloading, software
changes and/or other modifications to the Model 4C except as expressly set forth herein or
otherwise agreed upon in writing by Medical Center and GKF.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<B>Captions. </B>The captions and paragraph headings used herein are for convenience only and
shall not be used in construing or interpreting this Addendum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<B>Full Force and Effect. </B>Except as amended by this Addendum, all of the terms and provisions
of the Lease shall remain in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties have executed this Addendum effective as of the date first
written above.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>GK FINANCING, LLC</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>NEW ENGLAND MEDICAL CENTER HOSPITALS, INC.</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Craig K. Tagawa
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Michael T. Burke</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">Name:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Craig K. Tagawa
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Michael T. Burke</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Senior Vice President and CFO</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Exhibit&nbsp;2
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">PER PROCEDURE PAYMENTS
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Annual Procedures Performed</B></TD>
    <TD  style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Fee Per Procedure</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1-4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5-10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11-16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
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</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notwithstanding anything to the contrary set forth herein, (a)&nbsp;for purposes of determining the per
procedure payment, the number of annual procedures performed shall be reset to zero (0)&nbsp;at the
commencement of each fiscal year of Medical Center <U>(i.e.,</U> on October 1 of each year); (b)
the per procedure payment shall not be affected or adjusted due to any upgrading and/or cobalt
reloading of the Equipment; and (c)&nbsp;there shall be no retroactive adjustment of the per procedure
payment irrespective of whether the number of procedures performed during any fiscal year reaches a
lower per procedure payment level. For example, if * procedures are performed during the * year,
Medical Center would pay * for each of the first * procedures, and * for each of the next *
procedures (i.e., for procedures *). The parties acknowledge that, for purposes of determining the
per procedure payment, October&nbsp;1, 2005 shall mark the commencement of year seven (7)&nbsp;of the Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Compliance with Safe Harbor.</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">GKF and Medical Center intend that the reductions to the fee per procedure set forth above shall
satisfy the requirements of the anti-kickback safe harbor applicable to discounts contained in 42
C.F.R. &#167; 1001.952(h). In furtherance of the foregoing:
</DIV>


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<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The discount shall be earned and computed based on total number of procedures performed
within a single fiscal year of Medical Center ending September&nbsp;30 of each year.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Medical Center must claim the benefit of the discount in the fiscal year in which the
discount is earned.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Medical Center must fully and accurately report the discount in its applicable cost report or
in its separate claims for payment with the Department of Health and Human Services or a State
agency.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Medical Center must provide, upon request by the Secretary of the Department of Health and
Human Services or a State agency, the information provided by GKF as specified below.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GKF shall fully and accurately report the existence of the discount on the invoices or
statements submitted to Medical Center. GKF hereby informs Medical Center of its obligation to
report such discount as stipulated in subparagraphs 3 and 4 above. When the value of the
discount becomes known for each fiscal year, GKF shall provide Medical Center with
documentation of the calculation of the discount identifying the number of procedures to which
the discount will be applied.</TD>
</TR>

</TABLE>
</DIV>


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<TYPE>EX-10.49
<SEQUENCE>3
<FILENAME>f14441exv10w49.htm
<DESCRIPTION>EXHIBIT 10.49
<TEXT>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;10.49</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EQUIPMENT LEASE AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS EQUIPMENT LEASE AGREEMENT </B>(&#147;Agreement&#148;) is made and entered into on May&nbsp;28, 2004, by and
between <B>GK FINANCING, LLC, </B>a California limited liability company (&#147;GKF&#148;), and Mercy Health Center,
an Oklahoma not for profit corporation (&#147;Hospital&#148;), with reference to the following facts:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>R E C I T A L S</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS, </B>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
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS, </B>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.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>A G R E E M E N T</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>Lease</U>. 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 latest approved
Gamma Knife technology available as of the date of this Agreement (i.e., model C with Automatic
Positioning System), including all standard hardware and software related thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>LGK Agreement</U>. 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;A. 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <U>Term of the Agreement</U>. 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
</DIV>

<P align="center" style="font-size: 10pt">1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Site. Hospital&#146;s obligation to make the payments to GKF for the Equipment described in
Section&nbsp;8 below shall commence as of the First Procedure Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<U>User License</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 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;2.1 of the LGK Agreement. GKF shall reimburse Hospital for its direct costs to
obtain a User License and any other licenses, permits, approvals, consents and authorizations
required by this Section&nbsp;4 upon presentation of invoices. In the event Hospital&#146;s application to
obtain a User License and any other licenses, permits, approvals, consents and authorizations
required to operate the Equipment is denied after Hospital has used its best efforts, this
Agreement shall automatically terminate and all parties shall be released from the further
performance of any obligations or duties arising under this Agreement. Costs under this Section&nbsp;4
shall be defined as &#147;Startup Costs&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U>Delivery of Equipment; Site</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 GKF shall coordinate with Elekta and Hospital to have the Equipment delivered to Hospital
at (the &#147;Site&#148;) on or prior to the delivery date agreed upon by Hospital and Elekta in the LGK
Agreement. GKF makes no representations or warranties concerning delivery of the Equipment to the
Site or the actual date thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 Subject to Section&nbsp;6 below, Hospital at its cost and expense, shall provide a safe,
convenient Site for the Equipment. The location of the Site shall be subject to the prior approval
of GKF.
</DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 GKF, at its cost and expense, shall prepare all plans and specifications required to
prepare, construct and improve the Site for the installation, use and operation of the Equipment
during the Term. The plans and specifications (i)&nbsp;shall be approved by Hospital, which approval
shall not be unreasonably withheld or delayed; (ii)&nbsp;shall comply in all respects with the Site
Planning Criteria attached as Exhibit&nbsp;E to the LGK Agreement (collectively the &#147;Site Planning
Criteria&#148;); and (iii)&nbsp;to the extent required by applicable law, shall be submitted to all state and
federal agencies for their review and approval. GKF, at its cost and expense, shall obtain all
permits, certifications, approvals or authorizations required by applicable federal, state
</DIV>


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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or local laws, rules or regulations necessary to prepare, construct and improve the Site as
provided above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 GKF, at its cost and expense, 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, GKF, 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. GKF shall be
responsible for the shipment, storage, placement and removal of all Cobalt and depleted Cobalt in
accordance with all State and Federal regulations. Any depleted Cobalt supply shall be properly
disposed of by GKF at such time as GKF shall deem necessary, in GKF&#146;s sole and absolute judgment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 In addition to construction and improvement of the Site, GKF, at its cost and expense,
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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 During the Term, GKF, at its cost and expense, shall maintain the Site in a good working
order, condition and repair, reasonable wear and tear excepted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<U>Marketing Support</U>. 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 jointly develop an annual marketing plan, budget and timeline, which shall be
implemented by Hospital with the support of GKF, based on the approved budget and timeline.
Hospital&#146;s approval of such plan, budget and timeline shall not be unreasonably withheld or
delayed. If Hospital has not approved or disapproved the same within thirty (30)&nbsp;days following
its receipt, Hospital shall be deemed to have approved the same. GKF shall be * responsible for
any out-of-pocket marketing expenses paid to unrelated third parties that are included in the
marketing plan budget. Any marketing efforts conducted independently by Hospital shall be at
Hospital&#146;s expense, and subject to coordination with GKF. Hospital&#146;s approval of such plan, budget
and timeline shall not unreasonably withheld or delayed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<U>Lease Payments</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 In consideration for and as compensation to GKF for (i)&nbsp;the lease of the Equipment by GKF
to Hospital pursuant to this Agreement; (ii)&nbsp;payment of Startup Costs; (iii)&nbsp;the preparation by GKF
of all plans and specifications required to prepare, construct and improve the Site for the
installation, use and operation of the Equipment; (iv)&nbsp;the preparation, construction and
improvement of the Site as necessary for the installation, use and operation of
</DIV>


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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Equipment; (v)&nbsp;the installation by GKF of the Equipment at the Site; (vi)&nbsp;the marketing of
the services to be provided using the Equipment; (vii)&nbsp;the cost of the individual referenced in
Section&nbsp;11.3 below; and (viii)&nbsp;the maintenance by GKF of the Site in a good working order,
condition and repair, on a monthly basis, Hospital shall pay the &#147;Lease Payment&#148; to GKF for each
&#147;Procedure&#148; that is performed on any and all patients admitted to Hospital, on an inpatient or
outpatient basis, irrespective of whether (a)&nbsp;the Procedure is performed on the Equipment or using
any other equipment or devices; or (b)&nbsp;the Procedure is performed by Hospital, its representatives
or affiliates or by any other person or entity.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The &#147;Lease Payment&#148; shall be equal to (a) * of the &#147;Technical Component
Collections&#148; relating to each Procedure, less (b)&nbsp;Hospital&#146;s aggregate &#147;Additional Cost
Component,&#148; if any, relating to those Procedures performed using the Equipment during the
corresponding month.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) &#147;Technical Component Collections&#148; means (a)&nbsp;the total amount actually collected by
Hospital or its representatives or affiliates during each month from any and all payor
sources, including, without limitation, patients, insurance companies, state or federal
government programs or any other third party payors, as reimbursement for the technical
component of each Procedure performed on the Equipment or using any other equipment or
devices, <U>plus</U> (b)&nbsp;any and all other amounts actually collected by Hospital or its
representatives or affiliates during such month from any and all payor sources, including,
without limitation, patients, insurance companies, state or federal government programs or
any other third party payors, which amounts are related to &#147;Extended Inpatient Days&#148; (as
defined below) following a Procedure that is performed using the Equipment or using any
other equipment or devices, including, without limitation, any outlier payments. The
technical fees to be billed for Procedures performed utilizing the Equipment during the Term
of this Agreement shall be an amount which is economically justifiable based upon GKF&#146;s
direct operating expenses and its total project costs, together with a return thereon.
Hospital shall consult and mutually agree with GKF from time to time regarding the amount of
the technical fees to be billed by Hospital for Procedures that are performed utilizing the
Equipment and any revisions thereto. Subject to compliance with the standard described in
the preceding sentence, Hospital and GKF shall mutually agree on the setting or revision of
the amount of the technical fees on no less than an annual basis, and the acceptance of the
technical fee component amounts with third party payors prior to their implementation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) An Additional Cost Component shall apply and be calculated if (a)&nbsp;unexpected
complications arise (<U>e.g.</U>, stroke, heart attack) during the performance of a
Procedure using the Equipment such that the patient remains hospitalized for Extended
Inpatient Days; and (b)&nbsp;the Extended Inpatient Days and the Procedure are included <B>as </B>part
of the same reimbursement claim. Where applicable, the &#147;Additional Cost Component&#148; relating
to a Procedure utilizing the Equipment shall be equal to (i)&nbsp;the number of <B>covered (by third
party payor) </B>Extended Inpatient Days for that Procedure, <U>multiplied by</U> (ii)&nbsp;the
&#147;Additional Cost Per Diem.&#148; Notwithstanding anything to the contrary contained herein,
there shall be no deduction from the Lease Payment for any
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Additional Cost Component incurred where the Procedure is performed using any equipment
or devices other than the Equipment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) The &#147;Additional Cost Per Diem&#148; shall be equal to the quotient of (i)&nbsp;fifty percent
(50%) of the Technical Component Collections from the subject Procedure performed on the
Equipment that results in Extended Inpatient Days, divided by (ii)&nbsp;the then-current Medicare
Geometric Mean Length of Stay for the Diagnostic Related Group (DRG)&nbsp;under which such
discharge was billed (or could have been billed to Medicare), as such Geometric Mean Length
of Stay is set forth in the Federal Register.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) &#147;Procedure&#148; shall mean any treatment, whether performed on an inpatient or
outpatient basis, 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) &#147;Extended Inpatient Days&#148; shall mean the number of days after the date of Procedure
during which the patient was properly classified as an inpatient, where all services
performed during such period are included as part of the same reimbursement claim. The date
of discharge shall not be included in the number of Extended Inpatient Days.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">No Lease Payment for any Procedure shall be payable by Hospital to GKF unless and until the
Technical Component Collections corresponding to such Procedure have been actually collected by the
Hospital and/or its representatives or affiliates. On a monthly basis and by the 25th of the
following month, Hospital shall remit GKF&#146;s aggregate Lease Payment for the preceding month<B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">It is acknowledged that the portion comprised of * of the Technical Component Collections relating
to each Procedure that is not paid as part of the Lease Payment is a good faith estimate of the
costs and expenses that will be incurred by Hospital during the corresponding month for services
and personnel associated with the performance of Procedures, including, without limitation, costs
and expenses for registered nurses, radiation technicians, recovery room, Hospital daily charges,
ventilator daily charges, MRI procedures, CT procedures, angiography procedures, the physicist,
laboratory services, pharmacy items, billing and collection services, other direct operating costs,
and physical space. Such costs and expenses shall not include (i)&nbsp;Lease Payments, (ii)&nbsp;physician
and other professional fees, and/or (iii)&nbsp;direct or indirect administrative overhead expenses.
Such percentage shall not be increased, reduced or otherwise modified regardless of whether
Hospital&#146;s actual costs and expenses are higher or lower than the amount estimated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notwithstanding the foregoing, on each anniversary date of this Agreement, the parties shall meet
to review the percentage of the Technical Component Collections that are payable as part of the
Lease Payment, and any adjustments thereto must be mutually agreed upon by the parties in writing.
Upon request by GKF, Hospital shall promptly furnish GKF with written documentation substantiating
Hospital&#146;s costs.
</DIV>


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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 Within thirty (30)&nbsp;days following the end of each month (or portion thereof) during the
term of this Agreement, Hospital shall pay the Lease Payments to GKF and shall concurrently inform
GKF in writing as to the number of Procedures performed during that month utilizing the Equipment
and any other equipment or devices. To facilitate Hospital&#146;s billing and collection for Procedures
performed, within three (3)&nbsp;business days after any Procedure using the Equipment is performed, the
administrative support individual referenced in Section&nbsp;11.3 below shall provide Hospital with
written confirmation of the names of the patients treated. Hospital shall submit claims for
reimbursement to the appropriate payors for each Procedure within thirty (30)&nbsp;days after the
patient receiving the treatment is discharged. Such claims shall be submitted under Hospital&#146;s
provider numbers and license, Hospital shall also diligently follow up any unpaid or denied claims
and re-bill and/or contest the same where appropriate so as to maximize Technical Component
Collections. All or any portion of any Lease Payment which is not paid in full within sixty (60)
days after its due date shall bear interest at the annual rate of five percent (5%) in excess of
the Federal Reserve Discount Rate then in effect as published in the Wall Street Journal or similar
publication (or the maximum monthly interest rate permitted to be charged by law between an
unrelated, commercial borrower and lender, if less) until the unpaid Lease Payment, together with
all accrued interest thereon is paid in full. If GKF shall at any time accept a Lease 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 Within thirty (30)&nbsp;days after the close of each month, Hospital shall provide GKF with a
written report indicating the status of billings and collections for each Procedure performed
during that month, including, without limitation, the amount of the claim submitted, the amount
received or denied for each such procedure, and copies of the corresponding Explanation of Benefits
(&#147;EOB&#148;). Upon request by GKF, Hospital shall furnish to GKF information regarding reimbursement
rates from any or all payor sources for Procedures (applicable to Procedures performed either on an
inpatient or outpatient basis). If such reimbursement rates should change at any time or from time
to time after the date hereof, in each instance, Hospital shall provide written notice thereof to
GKF within five (5)&nbsp;days of Hospital receiving notice thereof. Prior to entering into or renewing
any third party payor contracts for the provision of Procedures utilizing the Equipment, Hospital
shall consult with GKF regarding the terms and provisions thereof, including the technical
component reimbursement rates. GKF shall maintain the confidentiality of all information provided
to GKF by Hospital with regard to Procedure charges, billing and reimbursement rates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 The parties acknowledge that the Lease Payments payable to GKF and Hospital&#146;s Cost
Component reflect their respective fair market value and are not determined in a manner that takes
into account the volume or the value of any referral or other business generated between the
parties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 Within ten (10)&nbsp;days after Hospital&#146;s receipt of written request from GKF, GKF shall have
the right to audit Hopsital&#146;s books and records (including, without limitation, the

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</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">books and records pertaining to any other Radiosurgery equipment and devices) during normal
business hours to verify the Technical Component Collections and Hopsital&#146;s Cost Component, and
Hospital shall provide GKF with access to such books and records.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 <U>New Technology</U>. Notwithstanding anything to the contrary set forth in Section&nbsp;8
of this Agreement, if, at any time during the term of this Agreement, Hospital purchases or leases
&#147;New Technology,&#148; then, from and after the &#147;New Technology Effective Date,&#148; no Lease Payment shall
be payable by Hospital to GKF for any Procedures performed using the New Technology;
<U>provided</U> that Hospital shall continue to be responsible for making Lease Payments to GKF
for all other Procedures performed on the Equipment or using any other equipment or devices as set
forth in this Section&nbsp;8. Hospital shall provide GKF with not less than one hundred and eighty
(180)&nbsp;days prior written notice of Hospital&#146;s intention to purchase or lease New Technology, which
written notice shall include any and all documentation evidencing compliance with the definition of
New Technology, and which documentation shall be subject to the prior written approval of GKF in
its sole but reasonable judgment. As used herein:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&#147;New Technology&#148; shall mean a treatment modality for performing Procedures which (a)&nbsp;uses
medical technology not commercially available as of the date of this Agreement; (b)&nbsp;consists of a
single device and not a combination of different types of equipment; and (c)&nbsp;has been documented in
at least (3)&nbsp;articles published in peer-reviewed journals in the United States, using five-year
minimum follow-up studies, to be more medically appropriate than the Equipment to perform
Procedures in treating 65% or greater of the currently treatable Gamma Knife indications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&#147;New Technology Effective Date&#148; shall mean the later to occur of (a)&nbsp;the date that is
seven (7)&nbsp;years after the First Procedure Date, or (b)&nbsp;the date on which the first clinical
Procedure is performed using the New Technology on a patient admitted to Hospital on an inpatient
or outpatient basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;<U>Use of the Equipment</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 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 manner nor for
any purpose which, in the opinion of Elekta or GKF, the Equipment is not designed or reasonably
suitable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 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.
</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 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)
at all times keep the Equipment free from any and all liens, encumbrances, attachments, levies,
executions, burdens, charges or legal processes imposed against Hospital, and (c)&nbsp;give GKF
immediate written notice of any matter described in clause (b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;<U>Additional Covenants of Hospital</U>. In addition to the other covenants of Hospital
contained in this Agreement, Hospital shall, at its cost and expense:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1 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 two (2)&nbsp;Gamma Knife trained teams comprised
of neurosurgeons, radiation oncologists and physicists. Hospital shall be provided with six (6)
one week Elekta Gamma Knife training sessions for the training of its two (2)&nbsp;Gamma Knife teams.
GKF shall also be responsible for the reasonable travel related expenses for the physicians and/or
physicists associated with the six (6)&nbsp;Gamma Knife training sessions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2 Direct, supervise and administer the diagnosis, treatment and care of all patients who
receive Gamma Knife procedures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3 In consultation with GKF, provide reasonable and customary marketing support in terms of
administrative and physician support for the Gamma Knife service to be operated by the Hospital.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.4 Keep and maintain the Equipment and the Site fully protected, secure and free from
unauthorized access or use by any person.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;<U>Additional Covenants of GKF</U>. In addition to the other covenants of GKF contained
in this Agreement, GKF, at its cost and expense, shall:
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2 Ensure Hospital&#146;s quite enjoyment and 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3 GKF and Hospital shall mutually select an individual to be located at the Site to provide
Gamma Knife administrative and marketing support services. The individual&#146;s duties shall include
but not be limited to scheduling Gamma Knife patients and coordinating professional and technical
personnel and support services to perform said Gamma Knife treatment. This individual shall also
verify patient insurance. The individual shall also assist with marketing activities on an as
needed basis. This individual is provided by the Hospital and GKF shall reimburse Hospital for the
cost of the individual and payment made by GKF to Hospital by the end of the following month. GKF
and Hospital shall mutually agree on individual.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;<U>Maintenance of Equipment; Damage or Destruction of Equipment</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1 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, (b)&nbsp;subject to Hospital&#146;s compliance with its obligations under the LGK
Agreement and under Sections&nbsp;4, 5, 9, 10, 12, 13, and 16 hereunder, cause the equipment to be in
compliance with all applicable state and federal regulations, and (c)&nbsp;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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3 Hospital shall be liable for, and in the manner described in Section&nbsp;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

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</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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
or negligent acts or omissions of Hospital&#146;s officers, employees, agents, contractors (other than
GKF and Elekta) 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4 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. Subject to Section&nbsp;12.3 above, in the event GKF determines that the
Equipment cannot be repaired, at the election of GKF in GKF&#146;s sole and absolute discretion, (a)
GKF, at its cost and expense, may 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)&nbsp;in
such event, this Agreement shall continue in full force and effect as though such damage or
destruction had not occurred. If GKF elects not to replace the Equipment, GKF shall provide
written notice of such election to Hospital, and this Agreement shall terminate on the date that is
ninety (90)&nbsp;days following the date of such notice. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;<U>Alterations and Upgrades to Equipment</U>. 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. The parties agree that the necessity for the reloading of the
cobalt-60 source, shall be discussed and mutually decided by GKF and Hospital. If GKF reloads the
Equipment at its cost, the initial Term of the Agreement shall be extended for * years from a
duration of 10 to * years.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;<U>Financing of Equipment by GKF</U>. 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&#146;s interest under this Agreement shall be subject to the
interests of the Lender and Hospital shall execute such documentation as the Lender shall
reasonably require in furtherance of this Section&nbsp;14.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;<U>Equipment Operational Costs</U>. GKF shall be responsible for all costs and expenses
for the operation and use of the Equipment. Significant costs and expenses are enumerated in
Exhibit&nbsp;8.1. Between Hospital and GKF, Hospital shall be fully liable for all negligent,
intentional or wrongful acts or omissions of Hospital, its officers, directors, employees and
agents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;<U>Taxes</U>. 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;<U>No Warranties by GKF</U>. Hospital warrants that as of the First Procedure Date, it
shall have (a)&nbsp;thoroughly inspected the Equipment, (b)&nbsp;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&#146;s intended purposes and is 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
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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, or with the accuracy,
completeness or suitability of the Site Planning Criteria, including GKF&#146;s good faith compliance
therewith. All warranty or other similar claims with respect to the Equipment or the Site Planning
Criteria 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&#146;s 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 operation of the Equipment. However, it shall be GKF&#146;s responsibility that the
Equipment be properly maintained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.&nbsp;<U>Termination for Economic Justification</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.1 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 and other factors considered relevant by GKF in the exercise of its discretion,
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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.2 Notwithstanding the provisions of Section&nbsp;18.1, if at any time during the term of this
Agreement, Hospital is suspended or terminated from participation in the Medicare program, GKF
shall have the option to terminate this Agreement immediately by giving written notice thereof to
Hospital.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.3 As a result of any termination of this Agreement pursuant to this Section&nbsp;18, GKF may
enter upon the Site and remove the Equipment and any improvements made by GKF to the Site without
liability of any kind or nature for so doing or GKF may demand that Hospital remove and return the
Equipment and such improvements to GKF, all at GKF&#146;s sole cost and expense. GKF shall restore the
Site to a similar pre-deinstallation appearance and condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.&nbsp;<U>Options to Extend Agreement</U>. As of the end of the Term, Hospital shall have the
option either to:
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1 Extend the Term of this Agreement for a specified period of time and upon such other
terms and conditions in writing as may be agreed upon by GKF and Hospital taking into account the
use (e.g., number of Gamma Knife procedures, etc.) of the Equipment at the Site during the initial
Term and other factors deemed relevant by the parties;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2 Terminate this Agreement as of the expiration of the Term.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 two (2)&nbsp;options referred to above Hospital is exercising. If
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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.&nbsp;<U>Events of Default by Hospital and Remedies</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1 The occurrence of any one of the following shall constitute an event of default under
this Agreement (an &#147;Event of Default&#148;):
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.1 Hospital fails to pay any Lease Payment when due pursuant to Paragraph&nbsp;8 above and such
failure continues for a period of thirty (30)&nbsp;days after written notice thereof is given by GKF or
its assignee to Hospital; however, if Hospital cures the payment default within the applicable
thirty (30)&nbsp;day period, such default shall not constitute an Event of Default.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.2 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.3 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.4 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
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1.5 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 have been dismissed,
or if within thirty (30)&nbsp;days after the appointment without Hospital&#146;s consent or acquiescence of
any trustee, receiver or liquidator of it or of all or any substantial part of its assets and
properties, such appointment shall not be vacated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2 Upon the occurrence of an Event of Default with respect to Hospital, GKF may at its
option do any or all of the following:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2.1 By written notice to Hospital, immediately terminate this Agreement as to the
Equipment, wherever situated. As a result of the termination, GKF may enter upon the Site and
remove the Equipment and any improvements made by GKF to the Site without liability of any kind or
nature for so doing or GKF may demand that Hospital remove and return the Equipment and such
improvements to GKF, all at Hospital&#146;s sole cost and expense. GKF shall restore the Site to a
similar pre-deinstallation appearance and condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2.2 Recover damages from Hospital as may be awarded by a court of competent jurisdiction
for the loss of the bargain represented by this Agreement. For purposes of determining such
damages, the parties agree that the following methodology shall be used: (a)&nbsp;the amount of such
damages shall be equal to the present value of the unpaid estimated future Lease Payments to be
made by Hospital to GKF through the end of the Term discounted at the rate of nine percent (9%);
and (b)&nbsp;the unpaid estimated future Lease Payments shall be based on the historical trend of
payments made by Hospital to GKF hereunder taking into account known factors which could impact the
historical trend through the end of the Term. Hospital and GKF acknowledge that the methodology
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 under the circumstances existing as of the date of this
Agreement. GKF shall use reasonable commercial efforts to mitigate its damages by attempting to
sell or lease the Equipment; <U>provided</U> that (i)&nbsp;GKF shall not be obligated to give
preference to the sale or lease of the Equipment over the sale, lease or other disposition of
similar equipment or improvements owned or leased by GKF, (ii)&nbsp;GKF shall have no obligation to sell
or lease any improvements made by GKF to the Site, and (iii)&nbsp;GKF&#146;s inability in good faith to
mitigate damages shall not limit or otherwise affect the foregoing methodology for determining
damages as set forth in this Section.
</DIV>

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</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2.3 Sell, dispose of, hold, use or lease the Equipment or any improvements made by GKF to
the Site, 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 or improvements over
the sale, lease or other disposition of similar Equipment or improvements owned or leased by GKF).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2.4 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 or improvements, to enforce the terms
hereof or to recover damages for the breach hereof or to cancel this Agreement as to the Equipment.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to the foregoing remedies, Hospital shall be liable to GKF for all costs and expenses
incurred by GKF as a result of the Event of Default or the exercise of GKF&#146;s remedies.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.3 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 Lease Payments and other sums owing under this
Agreement. 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. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.&nbsp;<U>Events of Default by GKF and Remedies</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.1 The occurrence of any one of the following shall constitute an Event of Default
hereunder:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.1.1 GKF shall fail to observe or perform any of its covenants, duties or obligations
arising under this Agreement and such failure shall continue for a period of thirty (30)&nbsp;days after
written notice thereof is given by Hospital to GKF; however, if GKF 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, GKF commences to cure the default during the initial thirty (30)&nbsp;day period and GKF
diligently completes the cure as soon as reasonably possible following the end of the thirty (30)
day period, such default shall not constitute an Event of Default.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.1.2 GKF ceases doing business as a going concern, makes an assignment for the benefit of
creditors, admits in writing its inability to pay its debts as they become due, files a voluntary
petition in bankruptcy, is adjudicated a bankrupt or an insolvent, files a petition seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or
similar arrangement under any present or future statute, law or regulation or files an answer
admitting the material allegations of a petition filed against it in any such proceeding, consents
to or acquiesces in the appointment of a trustee, receiver, or liquidator
</DIV>


<P align="center" style="font-size: 10pt">15
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.1.3 Within sixty (60)&nbsp;days after the commencement of any proceedings against GKF seeking
reorganization, arrangement, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceedings shall not have been dismissed, or if
within thirty (30)&nbsp;days after the appointment without GKF&#146;s consent or acquiescence of any trustee,
receiver or liquidator of it or of all or any substantial part of its assets and properties, such
appointment shall not be vacated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.2 Upon the occurrence of an Event of Default involving GKF, Hospital may at its option do
any or all of the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.2.1 By written notice to GKF, immediately terminate this Agreement as to the Equipment and,
in such event, GKF shall remove the Equipment, the Cobalt and any improvements made by GKF to the
Site, at GKF&#146;s sole cost and expense or, in the absence of removal by GKF within a reasonable
period of time after a written request therefore, Hospital may remove the Equipment, the Cobalt and
such improvements with all due care and store the same at GKF&#146;s sole cost and expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.2.2 Seek to recover from GKF such loss as may be realized by Hospital in the ordinary
course of events as a result of the Event of Default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.3 GKF shall in any event remain fully liable for reasonable damages as 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 (other than attorneys&#146; fees). However, GKF shall not in any manner be or
become liable to Hospital for any consequential or incidental damages that may be suffered by
Hospital which arise out of or result from the Event of Default.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.4 Notwithstanding the occurrence of an Event of Default with respect to GKF (including any
claim which would otherwise be in the nature of a set-off), Hospital shall fully perform and pay
its obligations hereunder (including payment of all Lease Payments) without set-off or defense of
any kind. Upon termination of this Agreement or the exercise of any other rights or remedies under
this Agreement or applicable law following an Event of Default, Hospital shall, without further
request or demand, pay to GKF all Lease Payments and other sums owing under this Agreement when and
as due.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.&nbsp;<U>Removal of Equipment</U>. Upon expiration of the Term, GKF, at its cost and expense,
shall remove the Equipment from the Site not more than ninety (90)&nbsp;days following the last day of
the Term; <U>provided</U> that all of GKF&#146;s right, title and interest in and to the improvements
made by GKF to the Site pursuant to Section&nbsp;6 above shall thereupon transfer to Hospital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.&nbsp;<U>Insurance</U>.
</DIV>

<P align="center" style="font-size: 10pt">16
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.1 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. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.2 During the Term, Hospital shall, at its cost and expense, purchase and maintain in effect
general liability and professional liability insurance policies (or self-insurance coverage)
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 and professional liability insurance policies shall provide
coverage (or self-insurance 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 named as
additional insured party on the general liability and professional liability insurance policies to
be maintained hereunder by Hospital. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.3 During the construction of the Site and prior to the First Procedure Date, GKF, 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;23.2 above and which names
Hospital as an additional insured party. The policy to be maintained by GKF hereunder shall be
evidenced by a certificate of insurance or other reasonable documentation which shall be delivered
by GKF to Hospital prior to the commencement of any construction at the Site.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.4 During the Term, Hospital shall maintain all workers compensation insurance <B>as </B>required
by applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.&nbsp;<U>Indemnification</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.1 Hospital and GKF each hereby covenants and agrees that it will defend, indemnify and hold
the other party and the other party&#146;s officers, directors, members, employees and agents at all
times harmless from and against any loss, damage, and expense (including reasonable attorneys&#146; fees
and other costs of defense) caused by or arising out of: (i)&nbsp;any liability or obligation related
to the business of the indemnifying party prior to the date hereof; (ii)&nbsp;any obligation or
liability arising from services provided under this Agreement by the indemnifying party to the
extent any such liability or obligation directly results from the negligence or intentional
misconduct of the indemnifying party, it&#146;s employees or agents; or (iii)&nbsp;any obligation or
liability resulting from a breach of any provision of this Agreement by the

<P align="center" style="font-size: 10pt">17
</DIV>

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

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">indemnifying party, it&#146;s employees or agents. The obligations of the parties under this
Section shall survive the expiration or earlier termination of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.2 Any party that intends to enforce an indemnity obligation shall give the indemnifying
party notice of any claim as soon as possible, but the failure to give such notice shall not
constitute a waiver or release of the indemnifying party and shall not affect the rights of the
indemnified party to recover under this indemnity, except to the extent the indemnifying party is
materially prejudiced thereby. In connection with any claim giving rise to indemnity under this
Section resulting from or arising out of any claim or legal proceeding by a person who is not a
party to this Agreement, the indemnifying party, at its sole cost and expense, may, upon written
notice to the indemnified party, assume control of the defense of such claim or legal proceeding,
to the extent that the indemnifying party admits in writing its indemnification liability to the
indemnified party with respect to all material elements thereof. If the indemnifying party assumes
the defense of any such claim or legal proceeding, the obligation of the indemnifying party
hereunder as to such claim or legal proceeding shall be to take all steps necessary in the defense
or settlement thereof and to hold the indemnified party harmless from and against any losses,
damages, expenses or liability caused by or arising out of any settlement approved by the
indemnifying party and the indemnified party or any judgment in connection with such claim or legal
proceeding. Each indemnified party shall cooperate with the indemnifying party in the defense of
any such action, the defense of which is assumed by the indemnifying party. Except with the
consent of the indemnified party, which consent may be withheld at the indemnified party&#146;s sole
discretion, the indemnifying party shall not consent to any settlement or the entry of any judgment
arising from any such claim or legal proceeding which, in each case, does not include as an
unconditional term thereof the delivery by the claimant or the plaintiff to the indemnified party
of a release from all liability in respect thereof. If the indemnifying party does not assume the
defense of any claim or litigation, any indemnified party may defend against such claim or
litigation in such manner as it may deem appropriate, including but not limited to settling such
claim or litigation, after giving notice of the same to the indemnifying party, on such terms as
the indemnified party may deem appropriate. The indemnifying party will, promptly after any of the
same is incurred, reimburse the indemnified party in accordance with the provisions hereof for all
damages, losses, liabilities, costs and expenses incurred by the indemnified party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.3 The indemnity obligations under this Section shall survive the termination of this
Agreement with respect to events occurring during or relating to the Term.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.&nbsp;<U>Miscellaneous</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.1 <U>Binding Effect</U>. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Neither party shall assign this
Agreement nor any of its respective rights hereunder and Hospital shall not sublease the Equipment
without the prior written consent of the other party, which consent shall not be unreasonably
withheld. An assignment or sublease shall not relieve the assigning party or

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

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

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">sublessor of any liability for performance of this Agreement during the remainder of the Term.
Any purported assignment or sublease made without the other party&#146;s prior written consent shall be
null, void and of no force or effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.2 <U>Agreement to Perform Necessary Acts</U>. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.3 <U>Validity</U>. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.4 <U>Attorney&#146;s Fees and Costs</U>. In the event of any action, mediation or other
proceedings between or among the parties hereto with respect to this Agreement, each party shall
pay for their own attorneys&#146; fees and related costs and expenses, irrespective of which party is
deemed to be the prevailing party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.5 <U>Entire Agreement; Amendment</U>. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.6 <U>Number and Gender</U>. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.7 <U>Effect of Headings</U>. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.8 <U>Counterparts</U>. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.9 <U>Governing Law</U>. This Agreement shall be interpreted and enforced in accordance
with the internal laws, and not the law of conflicts, of the State of Oklahoma applicable to
agreements made and to be performed in that State.
</DIV>



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</DIV>


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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.10 <U>Exhibits</U>. All exhibits attached hereto and referred to in this Agreement
are hereby incorporated by reference herein as though fully set forth at length.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.11 <U>Ambiguities</U>. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.12 <U>Representations</U>. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.13 <U>Non-Waiver</U>. 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.14 <U>Notices</U>. 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>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="20%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD align="left" valign="top"><DIV style="margin-left:30px; text-indent:-0px">To GKF:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Craig K. Tagawa
</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GK Financing, LLC</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Four Embarcadero Center, Suite&nbsp;3700</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">San Francisco, CA 94111</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><DIV style="margin-left:30px; text-indent:-0px">To Hospital:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mark Nafziger
</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior VP &#038; CFO</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mercy Health Center</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4120 W Memorial Road</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Oklahoma City, OK 73120</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.15 <U>Special Provisions Respecting Medicare and Medicaid Patients</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.15.1 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.15.2 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 (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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.16 <U>Force Majeure</U>. 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.
</DIV>


<P align="center" style="font-size: 10pt">21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.17 <U>Independent Contractor Status</U>. With respect to the performance of the duties
and obligations arising under this Agreement, nothing in this Agreement is intended nor shall be
construed to create a partnership, an employer/employee relationship, a joint venture relationship,
or a lease or landlord/tenant relationship between GKF and Hospital.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.18 <U>Mediation</U>. Except as provided herein, no civil action with respect to any
dispute, claim or controversy arising out of or relating to this Agreement may be commenced until
the matter has been submitted for non-binding mediation to the Judicial Arbitration and Mediation
Services, Inc. (&#147;JAMS&#148;), except that if JAMS is no longer in existence or is otherwise unable to
appoint a neutral mediator, the parties shall submit the matter for non-binding mediation to the
American Arbitration Association (&#147;AAA&#148;), subject to the provisions in this section. Either party
may commence mediation by providing to the other party a written request for mediation, setting
forth the subject of the dispute and the relief requested. The parties will cooperate with one
another in selecting a mediator and in scheduling the mediation proceedings. The parties covenant
that they will participate in the mediation in good faith, and that they will share equally in its
costs. All offers, promises, conduct and statements, whether oral or written, made in the course
of the mediation by any of the parties, their agents, employees, experts and attorneys, and by the
mediator, are confidential, privileged and inadmissible for any purpose, including impeachment, in
any litigation or other proceeding involving the parties, <U>provided</U> that evidence that is
otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a
result of its use in the mediation. Either party may seek equitable relief prior to the mediation
to preserve the status quo pending the completion of that process. Except for such an action to
obtain equitable relief, neither party may commence a civil action with respect to the matters
submitted to mediation until after the completion of the initial mediation session, or 45&nbsp;days
after the date of filing the written request for mediation, whichever occurs first. Mediation may
continue after the commencement of a civil action, if the parties so desire. The provisions of
this Section may be enforced by any court of competent jurisdiction, and the party seeking
enforcement shall be entitled to an award of all costs, fees and expenses, including attorney&#146;s
fees, to be paid by the party against whom enforcement is ordered.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" colspan="3"><DIV style="margin-left:0px; text-indent:-0px"><B>&#147;GKF&#148;</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3"><B>&#147;Hospital&#148;</B></TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" colspan="3"><DIV style="margin-left:0px; text-indent:-0px"><B>GK FINANCING, LLC</B>,
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3"><B>MERCY HEALTH CENTER</B>,</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" colspan="3"><DIV style="margin-left:0px; text-indent:-0px">a California limited liability company
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3">an Oklahoma not for profit corporation</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" nowrap valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
/s/ Craig K. Tagawa
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
Craig Tagawa<BR>
Chief Executive Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Mark Nafziger
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
Mark Nafziger<BR>
Senior VP &#038; CFO
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">22
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>4
<FILENAME>f14441exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<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>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;31.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Craig K. Tagawa, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this quarterly report on Form 10-Q of American Shared Hospital Services;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">b) &#091;Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986;&#093; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">November&nbsp;14, 2005
</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" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                                                  /s/ Craig K. Tagawa
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Craig K. Tagawa&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">13
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>5
<FILENAME>f14441exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<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>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;31.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Ernest A. Bates, M.D., certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this quarterly report on Form 10-Q of American Shared Hospital Services;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">b) &#091;Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986;&#093; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">November&nbsp;14, 2005
</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" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                                                 /s/ Ernest A. Bates, M.D.
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Ernest A. Bates, M.D.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<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>
</TABLE>

<P align="center" style="font-size: 10pt">14
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>6
<FILENAME>f14441exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<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" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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
30, 2005 (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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&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
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">November&nbsp;14, 2005
</DIV>


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<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" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                                               /s/ Ernest A. Bates, M.D.
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Ernest A. Bates, M.D.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<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" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                                              /s/ Craig K. Tagawa
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Craig K. Tagawa&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">15
</DIV>


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