##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549
________________________


FORM 10-Q

(Mark One)



|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|--- |  | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2001 or



|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|----- |  | ----------------------------------------------------------------------------------------

For the transition period from _______________ to _______________.

Commission file number 1-8789
________________________

American Shared Hospital Services

(Exact name of registrant as specified in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|California                                                     |  | 94-2918118                       
|(State or other jurisdiction of
Incorporation or organization) |  | (IRS Employer
Identification No.)
|                                                              
|Two Embarcadero Center, Suite 2370, San Francisco, California  |  | 94111                            
|(Address of Principal Executive Offices)                       |  | (Zip Code)                       

Registrants telephone number, including area code: (415) 788-5300

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.     Yes [X]     No [   ]

As of July 19, 2001, there are outstanding 3,554,125 shares of the Registrants
common stock.





---

TABLE OF CONTENTS



|                                                  |                                                                |                                                      |  |  |  |  |  | 
|------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                   
|                                                  | ITEM 1. FINANCIAL STATEMENTS                                  
|                                                  |                                                                | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                                                  |                                                                | CONDENSED CONSOLIDATED STATEMENTS OF INCOME         
|                                                  |                                                                | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                  |                                                                | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|PART II  OTHER INFORMATION                      
|                                                  | Item 1. Legal Proceedings.                                    
|                                                  | Item 2. Changes in Securities.                                
|                                                  | Item 3. Defaults upon Senior Securities.                      
|                                                  | Item 4. Submission of Matters to a Vote of Securities Holders.
|                                                  | Item 5. Other Information.                                    
|                                                  | Item 6. Exhibits and Reports on Form 8-K.                     
|SIGNATURES                                       
|Lease Agreement for a Gamma Knife Unit 11/01/1999
|Addendum to 11/01/99 Gamma Knife Lease Agreement 
|Lease Agreement for a Gamma Knife Unit 02/18/2000



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##### Table of Contents









PART I  FINANCIAL INFORMATION







ITEM 1. FINANCIAL STATEMENTS

AMERICAN SHARED HOSPITAL SERVICES







CONDENSED CONSOLIDATED BALANCE SHEETS


|                                           |                                                                                               |                                                                                                        |            |               |           |               |            |            |           | 
|------------------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ---------- | ------------- | --------- | ------------- | ---------- | ---------- | --------- | 
|                                           |                                                                                               |                                                                                                        |            | June 30, 2001 |           | Dec. 31, 2000
|                                           |                                                                                               |                                                                                                        |            |               |           |              
|                                           |                                                                                               |                                                                                                        |            | (unaudited)   |           | (audited)    
|ASSETS                                    
|                                          
|                                          
|                                          
|                                          
|Current assets:                            |                                                                                               |                                                                                                        |            |               |           |               |            |           
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                                                                     |                                                                                                        | $          | 11,781,000    |           |               | $          | 12,421,000 |          
|                                          
|                                          
|                                          
|                                          
|                                           | Restricted cash                                                                               |                                                                                                        |            | 50,000        |           |               |            | 50,000     |          
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts receivable, net of allowance for
doubtful accounts of $70,000 in 2001
and $0 in 2000 |                                                                                                        |            | 2,335,000     |           |               |            | 2,207,000  |          
|                                          
|                                          
|                                          
|                                          
|                                           | Prepaid expenses and other assets                                                             |                                                                                                        |            | 468,000       |           |               |            | 573,000    |          
|                                           |                                                                                               |                                                                                                        |            |               |           |               |            |           
|Total current assets                       |                                                                                               |                                                                                                        | 14,634,000 |               |           |               | 15,251,000 |           
|                                          
|                                          
|                                          
|                                          
|Property and equipment:                    |                                                                                               |                                                                                                        |            |               |           |               |            |           
|                                          
|                                          
|                                          
|                                          
|                                           | Medical equipment and facilities                                                              |                                                                                                        |            | 34,539,000    |           |               |            | 29,942,000 |          
|                                          
|                                          
|                                          
|                                          
|                                           | Office equipment                                                                              |                                                                                                        |            | 232,000       |           |               |            | 225,000    |          
|                                          
|                                          
|                                          
|                                          
|                                           | Deposits and construction in progress                                                         |                                                                                                        |            | 952,000       |           |               |            | 1,819,000  |          
|                                           |                                                                                               |                                                                                                        |            |               |           |               |            |           
|                                           |                                                                                               |                                                                                                        | 35,723,000 |               |           |               | 31,986,000 |           
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated depreciation and
amortization                                                     |                                                                                                        |            | (8,626,000    | )         |               |            | (7,237,000 | )        
|                                           |                                                                                               |                                                                                                        |            |               |           |               |            |           
|Net property and equipment                 |                                                                                               |                                                                                                        | 27,097,000 |               |           |               | 24,749,000 |           
|                                          
|                                          
|                                          
|                                          
|Other assets                               |                                                                                               |                                                                                                        | 191,000    |               |           |               | 209,000    |           
|                                           |                                                                                               |                                                                                                        |            |               |           |               |            |           
|Total assets                               |                                                                                               | $                                                                                                      | 41,922,000 |               |           | $             | 40,209,000 |           
|                                           |                                                                                               |                                                                                                        |            |               |           |               |            |           
|                                          
|LIABILITIES AND SHAREHOLDERS EQUITY      
|                                          
|                                          
|                                          
|                                          
|Current liabilities:                       |                                                                                               |                                                                                                        |            |               |           |               |            |           
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                                              |                                                                                                        | $          | 169,000       |           |               | $          | 81,000     |          
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued interest                                                                              |                                                                                                        |            | 212,000       |           |               |            | 153,000    |          
|                                          
|                                          
|                                          
|                                          
|                                           | Employee compensation and benefits                                                            |                                                                                                        |            | 158,000       |           |               |            | 190,000    |          
|                                          
|                                          
|                                          
|                                          
|                                           | Other accrued liabilities                                                                     |                                                                                                        |            | 616,000       |           |               |            | 546,000    |          
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of long-term debt                                                             |                                                                                                        |            | 4,784,000     |           |               |            | 4,126,000  |          
|                                           |                                                                                               |                                                                                                        |            |               |           |               |            |           
|Total current liabilities                  |                                                                                               |                                                                                                        | 5,939,000  |               |           |               | 5,096,000  |           
|                                          
|                                          
|                                          
|                                          
|Long-term debt, less current portion       |                                                                                               |                                                                                                        | 21,377,000 |               |           |               | 20,300,000 |           
|                                          
|                                          
|                                          
|                                          
|Deferred income taxes                      |                                                                                               |                                                                                                        | 124,000    |               |           |               | 0          |           
|                                          
|                                          
|                                          
|                                          
|Minority interest                          |                                                                                               |                                                                                                        | 1,057,000  |               |           |               | 1,155,000  |           
|                                          
|                                          
|                                          
|                                          
|Shareholders equity:                      |                                                                                               |                                                                                                        |            |               |           |               |            |           
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock, without par value:                                                              |                                                                                                        |            |               |           |               |            |            |          
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                               | authorized shares - 10,000,000; issued
and outstanding shares, 3,556,000 in
2001 and 3,711,000 in 2000 |            |               | 9,345,000 |               |            |            | 9,746,000 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock options issued to officer                                                        |                                                                                                        |            | 2,414,000     |           |               |            | 2,414,000  |          
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid-in capital                                                                    |                                                                                                        |            | 740,000       |           |               |            | 814,000    |          
|                                          
|                                          
|                                          
|                                          
|                                           | Retained earnings                                                                             |                                                                                                        |            | 926,000       |           |               |            | 684,000    |          
|                                           |                                                                                               |                                                                                                        |            |               |           |               |            |           
|Total shareholders equity                 |                                                                                               |                                                                                                        | 13,425,000 |               |           |               | 13,658,000 |           
|                                           |                                                                                               |                                                                                                        |            |               |           |               |            |           
|Total liabilities and shareholders equity |                                                                                               | $                                                                                                      | 41,922,000 |               |           | $             | 40,209,000 |           
|                                           |                                                                                               |                                                                                                        |            |               |           |               |            |           

See accompanying notes

2



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AMERICAN SHARED HOSPITAL SERVICES







CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


|                           |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |           |           | 
|-------------------------- | --------------------------------------------- | ----------------------------- | --------- | --------------------------- | ------- | ------------------------- | --------- | --------- | ------- | ---- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                           |                                               |                               |           | Three Months ended June 30, |         | Six Months ended June 30,
|                           |                                               |                               |           |                             |         |                          
|                           |                                               |                               |           | 2001                        |         | 2000                      |           | 2001      |         | 2000
|                           |                                               |                               |           |                             |         |                           |           |           |         |     
|Revenues:                  |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          
|                          
|                          
|                          
|                          
|                           | Medical services                              |                               | $         | 2,819,000                   |         |                           | $         | 2,073,000 |         |      | $         | 5,679,000 |           |   | $         | 4,171,000 |          
|                          
|                          
|                          
|                          
|Costs and expenses:        |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          
|                          
|                          
|                          
|                          
|                           | Costs of operations:                          |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |           |          
|                          
|                          
|                          
|                          
|                           |                                               | Maintenance and supplies      |           |                             | 87,000  |                           |           |           | 34,000  |      |           |           | 167,000   |   |           |           | 64,000    | 
|                          
|                          
|                          
|                          
|                           |                                               | Depreciation and amortization |           |                             | 728,000 |                           |           |           | 563,000 |      |           |           | 1,372,000 |   |           |           | 1,077,000 | 
|                          
|                          
|                          
|                          
|                           |                                               | Other                         |           |                             | 244,000 |                           |           |           | 196,000 |      |           |           | 539,000   |   |           |           | 366,000   | 
|                           |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          
|                           |                                               |                               | 1,059,000 |                             |         |                           | 793,000   |           |         |      | 2,078,000 |           |           |   | 1,507,000 |          
|                          
|                          
|                          
|                          
|                           | Selling and administrative                    |                               |           | 772,000                     |         |                           |           | 711,000   |         |      |           | 1,581,000 |           |   |           | 1,259,000 |          
|                          
|                          
|                          
|                          
|                           | Interest                                      |                               |           | 637,000                     |         |                           |           | 543,000   |         |      |           | 1,223,000 |           |   |           | 1,044,000 |          
|                           |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          
|Total costs and expenses   |                                               |                               | 2,468,000 |                             |         |                           | 2,047,000 |           |         |      | 4,882,000 |           |           |   | 3,810,000 |          
|                           |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          
|                           |                                               |                               | 351,000   |                             |         |                           | 26,000    |           |         |      | 797,000   |           |           |   | 361,000   |          
|                          
|                          
|                          
|                          
|Interest and other income  |                                               |                               | 122,000   |                             |         |                           | 230,000   |           |         |      | 288,000   |           |           |   | 434,000   |          
|                          
|                          
|                          
|                          
|Minority interest          |                                               |                               | (163,000  | )                           |         |                           | (120,000  | )         |         |      | (358,000  | )         |           |   | (268,000  | )        
|                           |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          
|Income before income taxes |                                               |                               | 310,000   |                             |         |                           | 136,000   |           |         |      | 727,000   |           |           |   | 527,000   |          
|                          
|                          
|                          
|                          
|Income tax expense         |                                               |                               | 124,000   |                             |         |                           | 0         |           |         |      | 124,000   |           |           |   | 0         |          
|                           |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          
|Net income                 |                                               | $                             | 186,000   |                             |         | $                         | 136,000   |           |         | $    | 603,000   |           |           | $ | 527,000   |          
|                           |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          
|Net income per share:      |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          
|                          
|                          
|                          
|                          
|                           | Earnings per common share  basic             |                               | $         | 0.05                        |         |                           | $         | 0.04      |         |      | $         | 0.17      |           |   | $         | 0.14      |          
|                           |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          
|                           | Earnings per common share  assuming
dilution |                               | $         | 0.04                        |         |                           | $         | 0.02      |         |      | $         | 0.12      |           |   | $         | 0.10      |          
|                           |                                               |                               |           |                             |         |                           |           |           |         |      |           |           |           |   |           |          

See accompanying notes

3



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##### Table of Contents



AMERICAN SHARED HOSPITAL SERVICES







CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


|                                                                    |                                                             |                                              |                                                      |            |                           |          |         |            |           |            |  
|------------------------------------------------------------------- | ----------------------------------------------------------- | -------------------------------------------- | ---------------------------------------------------- | ---------- | ------------------------- | -------- | ------- | ---------- | --------- | ---------- | -
|                                                                    |                                                             |                                              |                                                      |            | Six Months ended June 30,
|                                                                    |                                                             |                                              |                                                      |            |                          
|                                                                    |                                                             |                                              |                                                      |            | 2001                      |          | 2001   
|                                                                    |                                                             |                                              |                                                      |            |                           |          |        
|Operating activities:                                               |                                                             |                                              |                                                      |            |                           |          |         |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Net income                                                          |                                                             | $                                            | 603,000                                              |            |                           | $        | 527,000 |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Adjustments to reconcile net cash provided by operating activities: |                                                             |                                              |                                                      |            |                           |          |         |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                             | Depreciation and amortization                |                                                      |            | 1,407,000                 |          |         |            | 1,109,000 |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                             | Deferred income taxes                        |                                                      |            | 124,000                   |          |         |            | 0         |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                             | Changes in operating assets and liabilities: |                                                      |            |                           |          |         |            |           |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                             |                                              | (Increase) decrease in accounts receivable           |            |                           | (128,000 | )       |            |           | (1,040,000 | )
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                             |                                              | Decrease in prepaid expenses and other assets        |            |                           | 104,000  |         |            |           | 32,000     |  
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                             |                                              | Increase in accounts payable and accrued liabilities |            |                           | 185,000  |         |            |           | 15,000     |  
|                                                                    |                                                             |                                              |                                                      |            |                           |          |         |           
|Net cash from operating activities                                  |                                                             |                                              | 2,295,000                                            |            |                           |          | 643,000 |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Investing activities:                                               |                                                             |                                              |                                                      |            |                           |          |         |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Purchase of property and equipment (net of financing)       |                                              |                                                      | (548,000   | )                         |          |         | (180,000   | )        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | (Decrease) increase in minority interest                    |                                              |                                                      | (98,000    | )                         |          |         | 78,000     |          
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Net cash from investing activities                          |                                              |                                                      | (646,000   | )                         |          |         | (102,000   | )        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Financing activities:                                               |                                                             |                                              |                                                      |            |                           |          |         |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Payment of dividends                                        |                                              |                                                      | (361,000   | )                         |          |         | 0          |          
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Payment received for exercise of stock options              |                                              |                                                      | 15,000     |                           |          |         | 45,000     |          
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Repurchase of options/warrants                              |                                              |                                                      | (74,000    | )                         |          |         | 0          |          
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Repurchase of common stock                                  |                                              |                                                      | (416,000   | )                         |          |         | (26,000    | )        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Principal payments on long-term debt and capitalized leases |                                              |                                                      | (1,453,000 | )                         |          |         | (1,200,000 | )        
|                                                                    |                                                             |                                              |                                                      |            |                           |          |         |           
|                                                                    | Net cash from financing activities                          |                                              |                                                      | (2,289,000 | )                         |          |         | (1,181,000 | )        
|                                                                    |                                                             |                                              |                                                      |            |                           |          |         |           
|                                                                    | Net (decrease) in cash and cash equivalents                 |                                              |                                                      | (640,000   | )                         |          |         | (640,000   | )        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Cash and cash equivalents at beginning of period            |                                              |                                                      | 12,421,000 |                           |          |         | 12,903,000 |          
|                                                                    |                                                             |                                              |                                                      |            |                           |          |         |           
|                                                                    | Cash and cash equivalents at end of period                  |                                              | $                                                    | 11,781,000 |                           |          | $       | 12,263,000 |          
|                                                                    |                                                             |                                              |                                                      |            |                           |          |         |           
|Supplemental cash flow disclosure:                                  |                                                             |                                              |                                                      |            |                           |          |         |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Cash paid during the period for:                            |                                              |                                                      |            |                           |          |         |            |          
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                             | Interest paid                                |                                                      | $          | 1,164,000                 |          |         | $          | 1,128,000 |           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    |                                                             | Income taxes paid                            |                                                      | $          | 21,000                    |          |         | $          | 10,000    |           

See accompanying notes

4



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##### Table of Contents



AMERICAN SHARED HOSPITAL SERVICES







NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1. Basis of Presentation

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 consolidated financial position as of June 30, 2001 and the results
of its operations for the three and six month periods ended June 30, 2001 and
2000, which results are not necessarily indicative of results on an annualized
basis. Consolidated balance sheet amounts as of December 31, 2000 have been
derived from audited financial statements.

These financial statements include the accounts of American Shared
Hospital Services (the Company) and its wholly-owned subsidiaries: MMRI,
Inc.; European Shared Medical Services Ltd.; American Shared Radiosurgery
Services; OR21, Inc. (OR21); MedLeader.com, Inc. (MedLeader); and the
Companys majority-owned subsidiary, GK Financing, LLC (GK Financing).
European Shared Medical Services, Ltd. was dissolved on April 28, 2000.

The Company through its majority-owned subsidiary, GK Financing, provided
Gamma Knife units to twelve medical centers as of June 30, 2001 in Arkansas,
California, Connecticut, Illinois, Massachusetts, Mississippi, Nevada, New
Jersey, Ohio, Texas and Wisconsin.

All significant intercompany accounts and transactions have been
eliminated in consolidation.

Note 2. Per Share Amounts

Per share information has been computed based on the weighted average
number of common shares and dilutive common share equivalents outstanding. For
the three and six months ended June 30, 2001 basic earnings per share was
computed using 3,584,000 and 3,598,000 common shares, and diluted earnings per
share was computed using 5,145,000 and 5,160,000 common shares and equivalents,
respectively. For the three and six months ended June 30, 2000 basic earnings
per share was computed using 3,813,000 common shares and diluted earnings per
share was computed using 5,473,000 and 5,489,000 common shares and equivalents,
respectively.

Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations

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

5



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##### Table of Contents



Knife units in operation at June 30, 2001 compared to nine at June 30,
2000. For the six months ended June 30, 2001, the increase is due to three new
Gamma Knife units and an increase in revenue at Gamma Knife centers in
operation more than one year of 13%. Ten of the Companys customers are under
fee-per-use contracts, and two customers are under revenue sharing agreements
(retail). For retail units, the Company receives all or a percentage of the
reimbursement (exclusive of physician fees) received by the customer, and is
responsible for all or a percentage of the operating expenses of the Gamma
Knife.

Total costs of operations increased $266,000 and $571,000 for the three
and six month periods ended June 30, 2001 from $793,000 and $1,507,000 for the
three and six month periods ended June 30, 2000. Maintenance and supplies
increased $53,000 and $103,000 for the three and six month periods ended June
30, 2001 compared to the same period in the prior year due to additional Gamma
Knife units that started contract maintenance after the expiration of each
units warranty period. There were nine Gamma Knife units covered under
contract maintenance as of June 30, 2001 compared to four as of June 30, 2000.
Depreciation and amortization increased $165,000 and $295,000 for the three and
six month periods ended June 30, 2001 compared to the same period in the prior
year due to the increase of three additional Gamma Knife units. Other
operating costs increased $48,000 and $173,000 for the three and six month
periods ended June 30, 2001 compared to the same period in the prior year due
to an increase in insurance, marketing and personal property tax expenses
related to the increase in Gamma Knife units. In addition certain operating
expenses of one of the retail Gamma Knife units increased because of a
corresponding increase in revenue.

Selling and administrative costs increased $61,000 and $322,000 for the
three and six month periods ended June 30, 2001 from $711,000 and $1,259,000
for the three and six month periods ended June 30, 2000. For the three and six
month periods this increase is primarily due to increased investor relations
costs and increased sales, business development and marketing costs. For the
three month period ended June 30, 2000 there was $120,000 of one time charges
relating to a restructuring of operations. For the six month period ended June
30, 2001 there was $154,000 of development costs for the Companys two startup
businesses, OR21 and MedLeader, compared to $54,000 in the prior year.

Interest expense increased $94,000 and $179,000 for the three and six
month periods ended June 30, 2001 from $543,000 and $1,044,000 for the three
and six month periods ended June 30, 2000. This is due to the addition of two
Gamma Knife units during the quarter (three for the six month period), all of
which were financed with long-term debt which results in additional interest
expense. In addition, the newer Gamma Knife units have higher interest expense
at the beginning of their loan term than more mature units because interest
expense decreases as the outstanding balance of each loan is reduced.

Interest and other income decreased $108,000 and $146,000 for the three
and six month periods ended June 30, 2001 from $230,000 and $434,000 for the
three and six month periods ended June 30, 2000 due to lower interest rates on
invested cash balances. In addition, there was a decrease of approximately
$51,000 and $73,000 of other income for the three and six month periods ended
June 30, 2001 respectively, compared to the same period last year. Other
income in the prior year consisted primarily of state income tax refunds.

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Minority interest increased $43,000 and $90,000 for the three and six
month periods ended June 30, 2001 from $120,000 and $268,000 for the three and
six month periods ended June 30, 2000 due to increased profitability of GK
Financing. Minority interest represents the 19% interest of GK Financing owned
by a third party.

The Company recorded $124,000 of income tax expense for the three and six
month periods ended June 30, 2001 compared to no expense for the three and six
month periods ended June 30, 2000. The Company did not record any income tax
expense during 2000 or the first three months of 2001 due to net operating loss
carryforwards available for tax purposes. The Company expects that it will
continue to record an estimated 40% income tax provision for the remainder of
the year.

The Company had net income of $186,000 ($0.05 per basic share) and
$603,000 ($0.17 per basic share) for the three and six month periods ended June
30, 2001 compared to net income of $136,000 ($0.04 per basic share) and
$527,000 ($0.14 per basic share) in the same period in the prior year. The
increase for both the three and six month periods ended June 30, 2001 is
primarily a result of a 36% increase in revenue due to three additional Gamma
Knife units as well as increased revenue generated by Gamma Knife units in
operation more than one year. For the six month period, this increase in net
income was reduced because of an increase of $100,000 in costs associated with
MedLeader and OR21. For both the three and six month periods, net income was
also reduced because the Company began recording a 40% income tax provision in
the second quarter, 2001.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $11,781,000 at June 30, 2001
compared to $12,421,000 at December 31, 2000. The Companys cash position
decreased by $640,000 because the Company made deposits of $500,000 on future
Gamma Knife purchases, paid its first annual dividend of $0.10 per share
($361,000) to shareholders of record on March 15, 2001, and repurchased 165,000
shares and 69,000 options to purchase shares of Company stock ($490,000).

The Company as of June 30, 2001 had shareholders equity of $13,425,000,
working capital of $8,695,000 and total assets of approximately $41,922,000.

The Company has scheduled interest and principal payments under its debt
obligations of approximately $7,305,000 during the next 12 months. The Company
believes that its cash flow from operations and cash resources is adequate to
meet its scheduled debt obligations during the next 12 months.

The Company is investing its cash in overnight repurchase agreements and
commercial paper pending use in the Companys operations.

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##### Table of Contents









PART II  OTHER INFORMATION







Item 1. Legal Proceedings.

None.







Item 2. Changes in Securities.

None.







Item 3. Defaults upon Senior Securities.

None.







Item 4. Submission of Matters to a Vote of Securities Holders.



| |  |  | The Companys Annual Meeting of Shareholders was held on May 17,
2001. There were present in person or by proxy at said Meeting
shareholders holding 3,440,471 shares which represented 95.3% of
the 3,607,225 shares outstanding and entitled to vote at the
Meeting, which represented a quorum. At the Meeting, the
shareholders:
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 1) |  | Voted on the Election of Directors as follows:
| | -- |  | ----------------------------------------------

|                        |  |  |           |  |  |          |        | 
|----------------------- |  |  | --------- |  |  | -------- | ------ | 
|Nominee                 |  |  | For       |  |  | Withhold
|                        |  |  |           |  |  |         
|Ernest A. Bates, M.D.   |  |  | 3,422,910 |  |  |          | 17,561 | 
|                       
|                       
|                       
|                       
|Willie R. Barnes        |  |  | 3,423,160 |  |  |          | 17,311 | 
|                       
|                       
|                       
|                       
|John F. Ruffle          |  |  | 3,423,310 |  |  |          | 17,161 | 
|                       
|                       
|                       
|                       
|Stanley S. Trotman, Jr. |  |  | 3,423,310 |  |  |          | 17,161 | 
|                       
|                       
|                       
|                       
|Charles B. Wilson, M.D. |  |  | 3,423,310 |  |  |          | 17,161 | 



| |    |  | Dr. Bates, Mr. Barnes, Mr. Ruffle, Mr. Trotman and Dr. Wilson
were elected to the Board of Directors.
| | -- |  | -----------------------------------------------------------------------------------------------------
|
| | 2) |  | Voted on 2001 Stock Option Plan                                                                      

|          |  |  |         |  |  |         |        |  |                  |  |           | 
|--------- |  |  | ------- |  |  | ------- | ------ |  | ---------------- |  | --------- | 
|For       |  |  | Against |  |  | Abstain |        |  | Broker Non-Votes
|          |  |  |         |  |  |         |        |  |                 
|1,804,846 |  |  | 204,704 |  |  |         | 30,145 |  |                  |  | 1,400,776 | 



| |    |  | The 2001 Stock Option Plan was approved.                                                                                                                                                                  
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3) |  | Voted on the ratification of Moss Adams, LLP as
the Companys independent accountants for the year ended
December 31, 2001. There were 3,433,960 votes for, 2,411
votes against and 4,100 votes abstained.
|
| |    |  | Moss Adams, LLP was ratified as the Companys independent
accountants for the year ended December 31, 2001.                                                                                               







Item 5. Other Information.

None.

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##### Table of Contents









Item 6. Exhibits and Reports on Form 8-K.



| | (a) |  | Exhibits                                
| | --- |  | ----------------------------------------
|
| |     |  | The following exhibit is filed herewith:

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.33          |  | Lease Agreement for a Gamma Knife
Unit dated as of November 1, 1999 between GK Financing,
LLC and Jackson HMA, Inc. dba Central Mississippi
Medical Center. (Confidential material appearing in
this document has been omitted and filed separately with
the Securities and Exchange Commission in accordance
with Rule 24b-2, promulgated under the Securities and
Exchange Act of 1934, as amended. Omitted information
has been replaced with asterisks.)            
|              
|              
|              
|              
|10.34          |  | Addendum to Lease Agreement for a
Gamma Knife Unit dated as of November 1, 1999 between GK
Financing, LLC and Jackson HMA, Inc. dba Central
Mississippi Medical Center. (Confidential material
appearing in this document has been omitted and filed
separately with the Securities and Exchange Commission
in accordance with Rule 24b-2, promulgated under the
Securities and Exchange Act of 1934, as amended.
Omitted information has been replaced with asterisks.)
|              
|              
|              
|              
|10.35          |  | Lease Agreement for a Gamma Knife
Unit dated as of February 18, 2000 between GK Financing,
LLC and OSF HealthCare System. (Confidential material
appearing in this document has been omitted and filed
separately with the Securities and Exchange Commission
in accordance with Rule 24b-2, promulgated under the
Securities and Exchange Act of 1934, as amended.
Omitted information has been replaced with asterisks.)                                              

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SIGNATURES

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.

AMERICAN SHARED HOSPITAL SERVICES
Registrant



|      |                 |                                                                                                  
|----- | --------------- | -------------------------------------------------------------------------------------------------
|Date: | August 10, 2001 | /s/   Ernest A. Bates
Ernest A. Bates, M.D.
Chairman of the Board and
Chief Executive Officer    
|     
|Date: | August 10, 2001 | /s/   Craig K. Tagawa
Craig K. Tagawa
Senior Vice President
Chief Operating and Financial Officer

10