AMERICAN SHARED HOSPITAL SERVICES (Form: 10-Q, Received: 08/14/2014 17:16:32)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014 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 1-08789

American Shared Hospital Services

(Exact name of registrant as specified in its charter)

California	94-2918118
(State or other jurisdiction of	(IRS Employer
Incorporation or organization)	Identification No.)

Four Embarcadero Center, Suite 3700, 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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated Filer ¨ Smaller reporting company x

As of August 1, 2014, there are outstanding 5,261,370 shares of the Registrant’s common stock.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(unaudited)
ASSETS	June 30, 2014			December 31, 2013

Current assets:
Cash and cash equivalents	$	944,000		$	1,909,000
Restricted cash		50,000			50,000
Certificate of deposit		9,000,000			0
Accounts receivable, net of allowance for doubtful accounts of $100,000 in 2014 and $100,000 in 2013		3,947,000			4,522,000
Other receivables		531,000			143,000
Prepaid expenses and other current assets		342,000			740,000
Current deferred tax assets		555,000			342,000

Total current assets		15,369,000			7,706,000

Property and equipment:
Medical equipment and facilities		82,397,000			86,712,000
Office equipment		749,000			749,000
Deposits and construction in progress		7,934,000			7,719,000
		91,080,000			95,180,000
Accumulated depreciation and amortization		(44,671,000	)		(43,799,000	)
Net property and equipment		46,409,000			51,381,000

Certificate of deposit		0			9,000,000
Investment in equity securities		2,701,000			2,701,000
Other assets		780,000			954,000

Total assets	$	65,259,000		$	71,742,000

LIABILITIES AND	(unaudited)
SHAREHOLDERS' EQUITY	June 30, 2014		December 31, 2013

Current liabilities:
Accounts payable	$	575,000	$	572,000
Employee compensation and benefits		206,000		204,000
Customer deposits/deferred revenue		684,000		709,000

Other accrued liabilities		1,451,000		1,529,000
Current portion of long-term debt		2,545,000		4,804,000
Current portion of obligations under capital leases		4,420,000		3,967,000
Advances on line of credit		7,710,000		0

Total current liabilities		17,591,000		11,785,000

Long-term debt, less current portion		6,045,000		10,740,000
Long-term capital leases, less current portion		13,064,000		12,950,000
Advances on line of credit		0		8,840,000

Deferred income taxes		3,538,000		3,372,000

Shareholders' equity:
Common stock (5,261,000 shares at June 30, 2014 and 4,609,000 shares at December 31, 2013)		10,156,000		8,578,000
Additional paid-in capital		5,036,000		4,990,000
Accumulated other comprehensive income (loss)		0		(442,000	)
Retained earnings		5,471,000		6,494,000
Total equity-American Shared Hospital Services		20,663,000		19,620,000
Non-controlling interest in subsidiary		4,358,000		4,435,000
Total shareholders' equity		25,021,000		24,055,000

Total liabilities and shareholders' equity	$	65,259,000	$	71,742,000

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013

Medical services revenue	$	3,379,000		$	4,583,000		$	7,443,000		$	9,251,000

Costs of revenue:

Maintenance and supplies		451,000			466,000			938,000			847,000

Depreciation and amortization		1,606,000			1,569,000			3,217,000			3,043,000

Other direct operating costs		477,000			655,000			1,154,000			1,350,000

		2,534,000			2,690,000			5,309,000			5,240,000

Gross Margin		845,000			1,893,000			2,134,000			4,011,000


Selling and administrative expense		937,000			1,153,000			1,859,000			2,388,000

Interest expense		510,000			456,000			980,000			927,000

Operating (loss) income		(602,000	)		284,000			(705,000	)		696,000

(Loss) on sale of subsidiary		(572,000	)		-			(572,000	)		-
Gain (loss) on foreign currency transactions		146,000			(393,000	)		161,000			(534,000	)
Interest and other income (loss)		6,000			(6,000	)		15,000			8,000

(Loss) income before income taxes		(1,022,000	)		(115,000	)		(1,101,000	)		170,000

Income tax (benefit) expense		34,000			(12,000	)		4,000			40,000

Net (loss) income		(1,056,000	)		(103,000	)		(1,105,000	)		130,000

Less: Net loss (income) attributable to non-controlling interests		129,000			(19,000	)		82,000			(227,000	)

Net (loss) attributable to American Shared Hospital Services	$	(927,000	)	$	(122,000	)	$	(1,023,000	)	$	(97,000	)

Net (loss) per share:

(Loss) per common share - basic	$	(0.20	)	$	(0.03	)	$	(0.22	)	$	(0.02	)

(Loss) per common share - assuming dilution	$	(0.20	)	$	(0.03	)	$	(0.22	)	$	(0.02	)

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Six months ended June 30,
	2014			2013

Net (loss) attributable to American Shared Hospital Services	$	(1,023,000	)	$	(97,000	)

Other comprehensive income (loss):
Foreign currency translation adjustments		779,000			(60,000	)

Less comprehensive (income) loss attributable to the non-controlling interest		(337,000	)		22,000

Comprehensive (loss) attributable to
American Shared Hospital Services, net of tax		(581,000	)		(135,000	)

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

	PERIODS ENDED DECEMBER 31, 2012 AND 2013 AND JUNE 30, 2014
									Accumulated
							Additional		Other									Non-controlling
	Common			Common			Paid-in		Comprehensive			Retained			Sub-Total			Interests in
	Shares			Stock			Capital		Income (Loss)			Earnings			ASHS			Subsidiaries			Total

Balances at January 1, 2012		4,611,000		$	8,606,000		$	4,828,000	$	-		$	6,768,000		$	20,202,000		$	4,969,000		$	25,171,000

Repurchase of commone stock		(9,000	)		(28,000	)		-		-			-			(28,000	)		-			(28,000	)
										-
Stock based compensation expense		4,000			-			74,000		-			-			74,000			-			74,000

Investment in subsidiaries by non-controlling interests		-			-			-		-			-			-			217,000			217,000

Cumulative translation adjustment		-			-			-		(357,000	)		-			(357,000	)		(280,000	)		(637,000	)

Cash distributions to non-controlling interests		-			-			-		-			-			-			(780,000	)		(780,000	)

Net income		-			-			-		-			38,000			38,000			775,000			813,000

Balances at December 31, 2012		4,606,000			8,578,000			4,902,000		(357,000	)		6,806,000			19,929,000			4,901,000			24,830,000

Stock based compensation expense		3,000			-			88,000					-			88,000			-			88,000

Investment in subsidiaries by non-controlling interests		-			-			-		-			-			-			184,000			184,000

Cumulative translation adjustment		-			-			-		(85,000	)		-			(85,000	)		(57,000	)		(142,000	)

Cash distributions to non-controlling interests		-			-			-		-			-			-			(792,000	)		(792,000	)

Net (loss) income		-			-			-		-			(312,000	)		(312,000	)		199,000			(113,000	)

Balances at December 31, 2013		4,609,000			8,578,000			4,990,000		(442,000	)		6,494,000			19,620,000			4,435,000			24,055,000

Repurchase common stock		(1,000	)		(2,000	)		-		-			-			(2,000	)		-			(2,000	)

Private placement common stock		650,000			1,580,000			-		-			-			1,580,000			-			1,580,000

Stock based compensation expense		3,000			-			46,000		-			-			46,000			-			46,000

Investment in subsidiaries by non-controlling interests		-			-			-		-			-			-			102,000			102,000

Cumulative translation adjustment		-			-			-		442,000			-			442,000			337,000			779,000

Cash distributions to non-controlling interests		-			-			-		-			-			-			(434,000	)		(434,000	)

Net (loss)		-			-			-		-			(1,023,000	)		(1,023,000	)		(82,000	)		(1,105,000	)

Balances at June 30, 2014 (unaudited)		5,261,000		$	10,156,000		$	5,036,000	$	-		$	5,471,000		$	20,663,000		$	4,358,000		$	25,021,000

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months ended June 30,
	2014			2013
Operating activities:
Net (loss) income	$	(1,105,000	)	$	130,000

Adjustments to reconcile net income to net cash from operating activities:

Depreciation and amortization		3,292,000			3,110,000

Loss on sale of subsidiary		572,000			-

Deferred income tax		(47,000	)		(6,000	)

(Gain) loss on foreign currency transactions		(161,000	)		534,000

Stock based compensation expense		46,000			57,000

Changes in operating assets and liabilities:

Receivables		(86,000	)		(1,398,000	)

Prepaid expenses and other assets		(4,000	)		162,000

Customer deposits/deferred revenue		(25,000	)		(12,000	)

Accounts payable and accrued liabilities		(90,000	)		1,014,000

Net cash from operating activities		2,392,000			3,591,000

Investing activities:
Payment for purchase of property and equipment		(296,000	)		(553,000	)

Investment in convertible preferred stock		-			(14,000	)

Proceeds from sale of subsidiary		768,000			-

Net cash from investing activities		472,000			(567,000	)

Financing activities:
Principal payments on long-term debt		(1,772,000	)		(1,499,000	)

Principal payments on capital leases		(2,165,000	)		(1,930,000	)

Long term debt financing on property and equipment		-			388,000

Advances on line of credit		70,000			229,000

Payments on line of credit		(1,200,000	)		(79,000	)

Capital contributions from non-controlling interests		102,000			33,000

Distributions to non-controlling interests		(434,000	)		(385,000	)

Repurchase common stock		(2,000	)		-

Private placement common stock		1,580,000			-

Net cash from financing activities		(3,821,000	)		(3,243,000	)

Effect of changes in foreign exchange rates on cash		(8,000	)		-

Net change in cash and cash equivalents		(965,000	)		(219,000	)

Cash and cash equivalents at beginning of period		1,909,000			1,564,000

Cash and cash equivalents at end of period	$	944,000		$	1,345,000

Supplemental cash flow disclosure:
Cash paid during the period for:

Interest	$	1,122,000		$	1,109,000

Income taxes	$	51,000		$	-

Schedule of non-cash investing and financing activities
Acquisition of equipment with capital lease financing	$	2,732,000		$	2,625,000

Equipment relieved in sale of subsidiary	$	(4,921,000	)	$	-
Other assets relieved in sale of subsidiary	$	(826,000	)	$	-
Debt relieved in sale of subsidiary	$	5,181,000		$	-
Other liabilities relieved in sale of subsidiary	$	14,000		$	-
Net equity releived in sale of subsidiary	$	1,351,000		$	-
OCI released to net income in sale of subsidiary	$	(779,000	)	$	-
Investment released to net income in sale of subsidiary	$	(1,360,000	)	$	-

See accompanying notes

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 normal recurring accruals and entries to record the sale of EWRS Tibbi Cihazlar Ticaret Ltd Sti, “EWRS Turkey”) necessary to present fairly American Shared Hospital Services’ consolidated financial position as of June 30, 2014 and the results of its operations for the three and six month periods ended June 30, 2014 and 2013, which results are not necessarily indicative of results on an annualized basis. Consolidated balance sheet amounts as of December 31, 2013 have been derived from audited financial statements.

These unaudited consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2013 included in the Company’s 10-K filed with the Securities and Exchange Commission.

These financial statements include the accounts of American Shared Hospital Services (the “Company”) and its wholly-owned subsidiaries: OR21, Inc. (“OR21”); MedLeader.com, Inc. (“MedLeader”); and American Shared Radiosurgery Services (“ASRS”); ASRS’ majority-owned subsidiary, GK Financing, LLC (“GKF”); GKF’s wholly-owned subsidiaries, GK Financing U.K., Limited (“GKUK”), Instituto de Gamma Knife del Pacifico S.A.C. (“GKPeru”), GKFDB#1, LLC (“GKFDB1”), and GKFDB#2, LLC (“GKFDB2”). GKFDB1 and GKFDB2 each own 50% of the subsidiary GKF do Brasil Equipamentos Medicos LTDA (“GKF do Brasil”); ASHS’ majority owned subsidiary, Long Beach Equipment, LLC (“LBE”), GKF’s majority owned subsidiaries, Albuquerque GK Equipment, LLC (“AGKE”), Jacksonville GK Equipment, LLC (“JGKE”) and EWRS, LLC (“EWRS”).

The Company through its majority-owned subsidiary, GKF, provided Gamma Knife units to seventeen medical centers as of June 30, 2014 in the states of Arkansas, California, Connecticut, Florida, Illinois, Massachusetts, Mississippi, Nevada, New Jersey, New Mexico, New York, Tennessee, Oklahoma, Ohio, Texas and Wisconsin.

The Company also directly provides radiation therapy and related equipment, including Intensity Modulated Radiation Therapy (“IMRT”), Image Guided Radiation Therapy (“IGRT”) and a CT Simulator to the radiation therapy department at an existing Gamma Knife site in the United States.

The Company formed the subsidiaries GKUK, GKPeru, EWRS, EWRS Turkey and GKF do Brasil for the purposes of expanding its business internationally into the United Kingdom, Peru, Turkey and Brazil; LBE to provide proton beam therapy services in Long Beach, California; and AGKE and JGKE to provide Gamma Knife services in Albuquerque, New Mexico and Jacksonville, Florida. AGKE and EWRS Turkey began operation in the second quarter 2011 and JGKE began operation in the fourth quarter 2011. GKPeru is expected to begin operation in early 2015. GKUK is inactive and LBE is not expected to generate revenue in the next two years. The Company is in the final stages of liquidating GKF do Brazil and sold EWRS Turkey on June 10, 2014.

During 2013 and 2014, the Company’s partner in its Turkey operation, and its partners in the Jacksonville Gamma Knife operations, made investments in EWRS, and JGKE, respectively. These investments are included in the line item “Non-controlling interests in subsidiaries” in the Company’s financial statements.

Based on guidance provided in accordance with ASC 830, Foreign Currency Matters (“ASC 830”), the Company analyzes its operations outside the United States to determine the functional currency of each operation. Management has determined that these operations are initially accounted for in U.S. Dollars since the primary transactions incurred are in U.S. Dollars and the Company provides significant funding towards the startup of the operation. The Company determined that effective in the third quarter 2012, the functional currency for its Turkish operation, EWRS Turkey, was the Turkish Lira. Therefore, in accordance with ASC 830, EWRS Turkey’s balance sheet accounts were translated at rates in accordance with guidance provided under ASC 830, and accumulated gains and losses and translation differences were recorded in accumulated other comprehensive income (loss), which is a separate component of equity.

As of June 10, 2014 and December 31, 2013, EWRS Turkey’s balance sheet accounts were translated at rates in effect as of those dates, respectively, and income and expense accounts were translated at the weighted average rates of exchange during those respective periods. Translation adjustments resulting from this process were also recognized under accumulated other comprehensive income (loss). Gains and losses from foreign currency transactions are broken out in the Company’s Consolidated Statements of Operations. The Company recorded a net foreign currency gain of $146,000 and $161,000 for the three and six month periods ended June 30, 2014, respectively, and a net foreign currency loss of approximately $1,174,000 for the year ended December 31, 2013.

In accordance with Accounting Standards Update No. 2013-05 Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries of Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”), the Company no longer holds a financial interest in EWRS Turkey. As such, the cumulative translation adjustments previously recognized under accumulated other comprehensive income (loss) were released into net income as a component of the loss calculation for the sale of EWRS Turkey.

The Company, through EWRS, sold its Gamma Knife and radiation therapy services business in Turkey to Euromedic Cancer Centers BV (“Euromedic”) on June 10, 2014. The Company received cash which was predominantly used to pay down debt associated with the Turkish operations. The Company is also eligible for an earn-out in fiscal years 2014 and 2015 based on future revenue derived from the units sold to Euromedic. It is not practicable to estimate the revenue from the earn-outs at this time and therefore no amounts have been recorded as of June 30, 2014.

Based on guidance provided in accordance with ASC 280 Segment Reporting (“ASC 280”), the Company has analyzed the factors that define an operating segment and determined that there is only one operating segment. The seventeen locations are aggregated into one reportable segment because, in the Company’s judgment, these operating segments have similar historical economic characteristics and are expected to have similar economic characteristics in the future. Furthermore, each operating segment utilizes the same business model and technologies, servicing the same end users (radiation therapy patients). All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company adopted Accounting Standards Update No. 2014-08 Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”) as of June 30, 2014 for the presentation of the sale of EWRS Turkey. The Company has analyzed the factors that define a discontinued operation and determined that the sale of EWRS Turkey is considered the sale of a significant component and not a discontinued operation. Per ASU 2014-08, the necessary disclosures have been made for disposal of a significant component.

Effective May 31, 2014 the Company sold EWRS Turkey for EUR 4.2 million. The proceeds were used to reduce outstanding debt and the excess was cash to the Company of $768,000. Cash transactions were recorded for the time period June 1 to June 10, 2014, the date of the sale. For the three and six month periods ended June 30, 2014, medical services revenue for EWRS Turkey was $200,000 and $531,000 compared to $406,000 and $816,000 for the same periods in the prior year. The decline in revenue is due to lower volumes on the IGRT and Gamma Knife machines in 2014, in addition to the sale of EWRS Turkey effective May 31. For the three and six month periods ended June 30, 2014, pretax income for EWRS Turkey was $22,000 and pretax loss was $19,000 compared to pretax loss of $399,000 and $526,000 in the same periods in the prior year. Pretax income and loss for the three and six month period ended June 30, 2014 includes foreign currency gains of $146,000 and $161,000, compared to foreign currency loss of $393,000 and $534,000, for the same periods in the prior year. Pretax income and loss, net of non-controlling interest, attributable to the Company for the three and six month periods ended June 30, 2014 was $12,000 and $11,000 compared to pretax loss of $226,000 and $298,000 for the same periods in the prior year. The total cumulative translation adjustment of $779,000, previously recognized under accumulated other comprehensive income (loss), was released into net income as a component of the loss calculation for the sale of EWRS Turkey.

While the Company viewed our Turkey operations as a good long term investment, the continued volatility of the Turkish Lira against the U.S. Dollar (which resulted in cumulative foreign currency transaction losses of $908,000) and the opportunity to generate approximately 768,000 in cash for the Company’s domestic operations were compelling reasons to consummate the sale.

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, 2014 basic loss per share was computed using 4,718,000 common shares. For the three and six months ended June 30, 2013 basic loss per share was computed using 4,606,000 common shares.

Pursuant to United States Generally Accepted Accounting Principles (“GAAP”), potentially dilutive common stock equivalents, such as dilutive stock options are not considered when their inclusion in reporting earnings per share would be dilutive to reported losses incurred per share. Because the Company is reporting a loss for the three and six month period ended June 30, 2014, the potentially dilutive effects of approximately 555,000 of the Company’s stock options are not considered for this reporting period. The computation for the three and six month periods ended June 30, 2014 excluded approximately 513,000 of the Company’s stock options because their strike price was in excess of market value. The computation for the three and six month periods ended June 30, 2013 excluded approximately 608,000 of the Company’s stock options because the exercise price of the options was higher than the average market price during those periods.

Note 3.

Stock-based Compensation

On June 2, 2010, the Company’s shareholders approved an amendment and restatement of the 2006 Stock Incentive Plan (the “2006 Plan”). Among other things, the amendment and restatement renamed the 2006 Plan to the Incentive Compensation Plan (the “Plan”) and increased the number of shares of the Company’s common stock reserved for issuance under the Plan by an additional 880,000 shares from 750,000 shares to 1,630,000 shares. The shares are reserved for issuance to officers of the Company, other key employees, non-employee directors, and advisors. The Plan serves as successor to the Company’s previous two stock-based employee compensation plans, the 1995 and 2001 Stock Option Plans. The shares reserved under those two plans, including the shares of common stock subject to currently outstanding options under the plans, were transferred to the Plan, and no further grants or share issuances will be made under the 1995 and 2001 Plans. Under the Plan, there have been 149,000 restricted stock units granted, consisting primarily of annual automatic grants and deferred compensation to non-employee directors, and there are 555,000 options granted, of which 530,000 options are vested as of June 30, 2014.

Compensation expense associated with the Company’s stock-based awards to employees is calculated using the Black-Scholes valuation model. The Company’s stock-based awards have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimates. The estimated fair value of the Company’s option grants is estimated using assumptions for expected life, volatility, dividend yield, and risk-free interest rate which are specific to each award. The estimated fair value of the Company’s options is amortized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period. Accordingly, stock-based compensation cost before income tax effect in the amount of $20,000 and $46,000 is reflected in net income for the three and six month periods ended June 30, 2014, compared to $20,000 and $57,000 in the same periods in the prior year, respectively. There were 12,000 options issued and no options exercised during both the three and six month periods ended June 30, 2014. There were no excess income tax benefits to report.

Note 4.

Investment in Equity Securities

As of June 30, 2014 and December 31, 2013 the Company had a $2,701,000 investment in the common stock of Mevion Medical Systems, Inc. (“Mevion”), formerly Still River Systems, Inc., representing an approximate 0.77% interest in Mevion. The Company accounts for this investment under the cost method.

The Company carries its investment in Mevion at cost and reviews it for impairment on a quarterly basis, or as events or circumstances might indicate that the carrying value of the investment may not be recoverable. The Company evaluated this investment for impairment at December 31, 2013 and reviewed it at June 30, 2014 in light of both current market conditions and the ongoing needs of Mevion to raise cash to continue its development of the first compact, single room proton beam radiation therapy (“PBRT”) system. Based on its analysis, the Company estimates that there is currently an unrealized loss (impairment) of approximately $2.4 million.

In assessing whether the impairment is other than temporary, we evaluated the length of time and extent to which market value has been below cost, the financial condition and near term prospects of Mevion and our ability and intent to retain our investment for a period sufficient to allow for an anticipated recovery in the market value. Although the investment is not without risk, and the manufacture of the first unit has taken longer than originally anticipated, the Company believes that the current market value is a temporary situation and the successful clinical operation of the first MEVION S250 system at Barnes Jewish Hospital and Mevion’s significant revenue backlog provide a significantly higher potential valuation.

Mevion’s first PBRT unit at Barnes Jewish Hospital is complete. The first treatment at Barnes Jewish Hospital was performed in mid-December 2013. Mevion is continuing the installation process at five other sites, including the Company’s site at University of Florida Cancer Center at Orlando Health (formerly the MD Anderson Cancer Center Orlando). The Company’s first site broke ground for construction in September 2012 and the accelerator is expected to be delivered in October 2014.

Note 5.

Line of Credit

The Company has a $9,000,000 renewable line of credit with the Bank of America (the “Bank”) that has been in place since June 2004. The Company’s earnings in 2013 were insufficient to satisfy the “profitability” covenant in the line of credit. The Bank waived this default on August 8, 2014 and the Company agreed to change the maturity date of the facility to December 31, 2014. The line of credit is drawn on from time to time as needed for equipment purchases and working capital. Amounts drawn against the line of credit are at an interest rate per year equal to the Bank’s prime rate minus 0.5 percentage point, or alternately, at the Company’s discretion, the LIBOR rate plus 1.0 percentage point, and are secured by the Company’s cash invested with the Bank. There have been no defaults in the payment of principal or interest. The weighted average interest rate during the first six months of 2014 was 1.44%. At June 30, 2014, $7,710,000 was borrowed against the line of credit, compared to $8,840,000 at December 31, 2013.

Note 6.

Fair Value of Financial Instruments

The Company’s disclosures of the fair value of financial instruments is based on a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. Level 1 inputs are unadjusted quoted market prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for assets or liabilities, and reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The estimated fair value of the Company’s assets and liabilities as of June 30, 2014 and December 31, 2013 were as follows (in thousands):

	Level 1		Level 2		Level 3		Total		Carrying Value
June 30, 2014

Assets:
Cash, cash equivalents, restricted cash	$	994					$	994	$	994
Receivables		3,947						3,947		3,947
Certificate of deposit		9,000						9,000		9,000
Investment in equity securities						300		300		2,701
Total	$	13,941	$	-	$	300	$	14,241	$	16,642

Liabilities
Accounts payable and other accrued liabilities	$	2,916					$	2,916	$	2,916
Advances on line of credit		7,710						7,710		7,710
Debt obligations						26,020		26,020		26,074
Total	$	10,626	$	-	$	26,020	$	36,646	$	36,700

December 31, 2013

Assets:
Cash, cash equivalents, restricted cash	$	1,959					$	1,959	$	1,959
Receivables		4,522						4,522		4,522
Certificate of deposit		9,000						9,000		9,000
Investment in equity securities						300		300		2,701
Total	$	15,481	$	-	$	300	$	15,781	$	18,182

Liabilities
Accounts payable and other accrued liabilities	$	3,014					$	3,014	$	3,014
Advances on line of credit		8,840						8,840		8,840
Debt obligations						32,418		32,418		32,461
Total	$	11,854	$	-	$	32,418	$	44,272	$	44,315

Note 7.

Repurchase of Common Stock

In 1999 and 2001, the Board of Directors approved resolutions authorizing the Company to repurchase up to a total of 1,000,000 shares of its own stock on the open market, which the Board reaffirmed in 2008. There were 1,000 shares repurchased in the first quarter and no shares repurchased in the second quarter of 2014. There were no shares repurchased in 2013. There are approximately 72,000 shares remaining under this repurchase authorization.

Note 8.

Income Taxes

We generally calculate our effective income tax rate at the end of an interim period using an estimate of the annual effective income tax rate expected to be applicable for the full fiscal year. However, when a reliable estimate of the annual effective income tax rate cannot be made, we compute our provision for income taxes using the actual effective income tax rate for the year-to-date period. Our effective income tax rate is highly influenced by the amount of the nondeductible stock-based compensation associated with grants of our common stock options and the results from foreign operations. A small change in estimated annual pretax income (loss) can produce a significant variance in the annual effective income tax rate given the expected amount of these items. Because of this variability, a reliable estimate of the annual effective income tax rate for 2014 cannot be made. As a result, we have computed our provision for income taxes for the three and six month periods ended June 30, 2014 by applying the actual effective tax rate to (loss) for the period.

Note 9.

Reclassification

Certain comparative amounts in the consolidated financial statements have been reclassified to conform to the current quarter’s presentation.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 and radiation therapy businesses, the risks of developing The Operating Room for the 21 ^st Century ^SM program, and the risks of investing in a development-stage company, Mevion, and the future operations of the Company’s proton therapy projects. 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’s Annual Report on Form 10-K for the year ended December 31, 2013 and the definitive Proxy Statement for the Annual Meeting of Shareholders held on June 10, 2014.

The Company had seventeen Gamma Knife units in operation on June 30, 2014 and nineteen units in operation on June 30, 2013. Two of the Company’s customer contracts are through subsidiaries where GKF or its subsidiary is the majority owner and managing partner. Eleven of the Company’s seventeen current Gamma Knife customers are under fee-per-use contracts, and six customers are under retail arrangements. The Company’s contract to provide radiation therapy and related equipment services to existing Gamma Knife customers is considered a retail arrangement. Retail arrangements are further classified as either turn-key or revenue sharing. Revenue from fee per use contracts is recorded on a gross basis as determined by each hospital’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 equipment. Revenue is recorded on a gross basis and estimated based on historical experience of that hospital’s contracts with third party payors. For revenue sharing arrangements the Company receives a contracted percentage of the reimbursement received by the hospital. The gross amount the Company expects to receive is recorded as revenue and estimated based on historical experience.

On January 2, 2013, Congress enacted the American Taxpayer Relief Act of 2012 which reduced Gamma Knife delivery code reimbursement from $7,910 to $3,300, effective April 1, 2013. All other Gamma Knife reimbursement codes remained unchanged. Effective January 1, 2014, the Gamma Knife delivery code reimbursement was increased approximately 9%.

Medical services revenue decreased by $1,204,000 and $1,808,000 to $3,379,000 and $7,443,000 for the three and six month periods ended June 30, 2014 from $4,583,000 and $9,251,000 for the three and six month periods ended June 30, 2013, respectively. The decrease was partially due to a decline in volume at the existing radiation therapy sites. The decrease in Gamma Knife revenue was also due to a decrease in procedures at existing sites and increased procedures at sites with lower revenue per procedure than the Company’s historical average. EWRS Turkey was a component of the decrease in revenue for the three and six month periods ended June 30, 2014, contributing $206,000 and $285,000, respectively, to the decline. For the month of July 2014, Gamma Knife revenues improved 18% and 33% compared to average revenues for the first and second quarter 2014, respectively, and improved 5% compared to July 2013 revenues.

The number of Gamma Knife procedures decreased by 185 and 213 to 480 and 1,073 for the three and six month periods ended June 30, 2014 from 665 and 1,286 in the same periods in the prior year, respectively. In the first three months of 2014, one site was off-line for five weeks in the first quarter of 2014 undergoing an upgrade. Two other sites were off-line approximately one month each due to equipment and personnel issues. A few of the Company’s other sites experienced lower volumes due to the extreme weather experienced in the Midwest and East Coast during the first three months of 2014. A third site experienced significant downtime due to personnel issues in the second quarter. The sale of EWRS Turkey, effective May 31, 2014, also contributed to the decline in volumes in the second quarter, in addition to lower volumes at several other sites.

Total costs of revenue decreased by $156,000 and increased $69,000 to $2,534,000 and $5,309,000 for the three and six month periods ended June 30, 2014 from $2,690,000 and $5,240,000 for the three and six month periods ended June 30, 2013, respectively. Maintenance and supplies decreased by $15,000 and increased $91,000 for the three and six month periods ended June 30, 2014 compared to the same periods in the prior year. Depreciation and amortization increased by $37,000 and $174,000 for the three and six month periods ended June 30, 2014 compared to the same periods in the prior year, primarily due to the addition of one new site and an upgrade performed in the second quarter of 2013, plus two reloads which were done in the fourth quarter 2013. When an upgrade or reload is performed the book value of the unit increases which increases depreciation expense. Other direct operating costs decreased by $178,000 and $196,000 for the three and six month periods ended June 30, 2014 compared to the same periods in the prior year. The decrease for the three and six month period is due to lower operating costs for the Company’s retail sites, lower marketing costs, property tax and state and county taxes.

Selling and administrative costs decreased by $216,000 and $529,000 to $937,000 and $1,859,000 for the three and six month periods ended June 30, 2014 from $1,153,000 and $2,388,000 for the same periods in the prior year, respectively. For the three month period the decrease is due to lower temporary help related to EWRS Turkey’s operations, building rent and legal fees. For the six month period the decrease was primarily due to lower payroll related costs, temporary help, building rent, legal and consultant fees. Building rent and consulting fees decreased due to accrued rent expense and commissions relating to a sublease of a portion of the Company’s office space, which was recorded in the first quarter of 2013. The rent accrual was required because the Company subleased a portion of its existing office space through the remainder of its lease term at a rate lower than its lease rate, which resulted in a cumulative loss.

Interest expense increased by $54,000 and $53,000 to $510,000 and $980,000 for the three and six month periods ended June 30, 2014 from $456,000 and $927,000 for the three and six month periods ended June 30, 2013. For the three and six month period, increased interest expense was due to the financing of one new site and the refinancing for the upgrade performed in the second quarter of 2013, plus two reloads which were refinanced in the fourth quarter 2013. The new and upgraded or reloaded units have higher interest expense because the outstanding principal balance is significantly higher at the inception of each loan.

The Company recorded a loss from sale of EWRS Turkey of $572,000 for the three and six month period ended June 30, 2014. The loss on sale represents the net book value of EWRS’s investment in EWRS Turkey at the date of the sale, after proceeds from the sale were used to pay off outstanding debt. The Company also recorded income tax expense due to the write off of a deferred tax asset of $165,000 related to losses sustained by EWRS Turkey through December 31, 2013. The deferred tax asset can no longer be utilized since EWRS Turkey was sold on June 10.

Interest and other income (loss) increased by $12,000 and $7,000 to $6,000 and $15,000 for the three and six month periods ended June 30, 2014 from a loss of $6,000 and gain of $8,000 for the three and six month periods ended June 30, 2013, respectively. Interest income is generated from interest earned on the Company’s certificate of deposit and other investments.

The gain from foreign currency transactions was $146,000 and $161,000 for the three and six month period ended June 30, 2014 compared to a loss of $393,000 and $534,000 for the same periods in the prior year, respectively. The gain or loss from foreign currency transactions is driven by fluctuations in the exchange rate between the US Dollar and Turkish Lira.

The Company had income tax expense of $34,000 and $4,000 for the three and six month period ended June 30, 2014 compared to income tax benefit of $12,000 and income tax expense of $40,000 for the three and six month periods ended June 30, 2013, respectively. For the three month period, the Company recorded an income tax benefit of $161,000 due to lower taxable income attributable to American Shared Hospital Services. The income tax benefit was offset by the deferred tax asset of $165,000 written off due to the sale of EWRS Turkey.

Net income attributable to non-controlling interest decreased by $148,000 and $309,000 to a loss of $129,000 and $82,000 for the three and six month periods ended June 30, 2014 from income of $19,000 and $227,000 for the three and six month periods ended June 30, 2013. Non-controlling interest primarily represents the 19% interest of GK Financing owned by a third party, as well as non-controlling interests in subsidiaries of GK Financing owned by third parties that began operations in 2011. Variances in net income attributable to non-controlling interest represent the relative increase or decrease in profitability of GKF and these ventures. For the three and six month periods, the loss attributable to non-controlling interest was primarily due to the loss on sale of EWRS Turkey.

The Company had a net loss of $927,000, or ($0.20) per diluted share, and $1,023,000, or ($0.22) per diluted share, for the three and six month periods ended June 30, 2014, compared to net loss of $122,000, or ($0.03) per diluted share, and $97,000, or ($0.02) per diluted share, in the same periods in the prior year, respectively. For the three and six month period, the net loss was due to the loss on sale of EWRS Turkey, lower procedure volume at existing sites and a decline in reimbursement rates due to changes in payor mix.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $944,000 at June 30, 2014 compared to $1,909,000 at December 31, 2013. The Company’s cash position decreased by $965,000 due to payments for the purchase of property and equipment of $296,000, principal payments on long term debt and capital leases of $3,937,000, distributions to non-controlling interests of $434,000, repurchase of common stock of $2,000, net payments on the Company’s line of credit with a bank of $1,130,000 and changes in cash from foreign exchange rate of $8,000. These decreases were offset by net cash from operating activities of $2,392,000, capital contributions of $102,000, proceeds from the sale of EWRS Turkey of $768,000 and private placement of common stock of $1,580,000 to three directors of the Company which closed on June 12, 2014.

As of June 30, 2014, the Company has a $9,000,000 principal investment in a certificate of deposit with a bank at an interest rate of 0.10% and a maturity date in August 2014. The Company plans to re-invest upon maturity on a short-term basis and has classified the certificate of deposit as a current asset as a result.

The Company has a $9,000,000 line of credit with a bank. Amounts drawn against the line of credit are secured by the Company’s cash invested with the bank. At June 30, 2014 there was $7,710,000 drawn against the line of credit. The Company has agreed to terminate the line of credit on December 31, 2014 and has classified the line of credits as a short term obligation as a result.

The Company has scheduled interest and principal payments under its debt obligations of approximately $3,082,000 and scheduled capital lease payments of approximately $5,641,000 during the next 12 months. The Company also has a $1,000,000 deposit due in the third quarter 2014 in order to continue the installation process for the first PBRT unit. A second deposit of $1,000,000 is due in the fourth quarter 2014, assuming the unit passes all required testing. The Company intends to finance the second PBRT deposit due in the fourth quarter 2014. The Company also continues to look at restructuring its debt to reduce payment obligations over the next 12 months and to raise additional cash as required. There are no commitments for these obligations currently in place. The Company believes that its cash flow from operations and cash resources are adequate to meet its operating requirements during the next 12 months.

The Company as of June 30, 2014 had shareholders’ equity of $25,021,000, negative working capital of $2,222,000 and total assets of $65,259,000.

Commitments

The Company has a $2,701,000 common stock investment in Mevion, which is considered a long-term investment on the balance sheet and is recorded at cost. As of June 30, 2014, the Company also has $3,000,000 in non-refundable deposits toward the purchase of three MEVION S250 PBRT systems from Mevion. The Company has entered into an agreement with a radiation oncology physician group which has contributed $400,000 towards the deposits on the third system. The Company’s first PBRT system has an anticipated delivery of October 2014.

The Company has made non-refundable deposits totaling $2,884,000 towards the purchase of a Gamma Knife model 4C system and four Gamma Knife Perfexion units. One Perfexion system was installed in the second quarter 2014 at an existing customer site, a second Perfexion system is scheduled to be installed in the fourth quarter 2014 at a new customer site in Oregon, and the third Perfexion is a reload scheduled for the 4 ^th quarter at an existing customer site. The remaining Perfexion is for a site yet to be determined. The Gamma Knife model 4C system is projected to be installed in early 2015 at the Company’s new customer site in Peru.

Including the commitments for the three MEVION S250 systems, the three Perfexion units, and the Gamma Knife model 4C system, the Company has total remaining commitments to purchase equipment in the amount of approximately $47,000,000, of which deposits of $5,884,000 have been made. Additionally, approximately $35,000,000 of these commitments is not expected to start becoming due until 2016. The Company has some latitude in the timing of the due dates of a majority of the approximately $35,000,000 in commitments. The company has some latitude in the tiIt is the Company’s intent to finance the remaining purchase commitments as needed. Financing commitments have been obtained for the Gamma Knife units to be installed in Oregon and Peru. Due to the current economic and credit market conditions it has been more difficult to obtain financing for some of the Company’s projects. The Company expects that it will be able to obtain financing on the commitments for the remaining Perfexion units. The Company also expects it will be able to obtain financing commitments from lenders for its PBRT systems. However, there can be no assurance that financing will be available for the Company’s current or future projects, or at terms that are acceptable to the Company.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

The Company does not hold or issue derivative instruments for trading purposes and is not a party to any instruments with leverage or prepayment features. The Company does not have affiliation with partnerships, trusts or other entities whose purpose is to facilitate off-balance sheet financial transactions or similar arrangements , and therefore has no exposure to the financing, liquidity, market or credit risks associated with such entities. At June 30, 2014 the Company had no significant long-term, market-sensitive investments.

Item 4.

Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934. These controls and procedures are designed to ensure that material information relating to the company and its subsidiaries is communicated to the chief executive officer and the chief financial officer. Based on that evaluation, our chief executive officer and our chief financial officer concluded that, as of June 30, 2014, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to the chief executive officer and the chief financial officer, and recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the three months ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

None.

Item 1A.

Risk Factors.

There are no changes from those listed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

See Current Report on Form 8-K filed on June 13, 2014

Item 3.

Defaults Upon Senior Securities.

The Company’s earnings in 2013 were insufficient to satisfy the “profitability” covenant in its $9 million line of credit with Bank of America. There were no defaults in payments of principal or interest, and the lender waived the defaults on August 8, 2014.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information.

None.

Item 6.

Exhibits.

(a)

Exhibits

The following exhibits are filed herewith:

	10.48a	Loan Agreement between American Shared Hospital Services and Bank of America (dated as of September 30, 2011).

	10.48b	Amendment No. 1 to Loan Agreement between American Shared Hospital Services and Bank of America (dated as of August 31, 2012).

	10.48c	Amendment No. 2 to Loan Agreement between American Shared Hospital Services and Bank of America (dated as of September 20, 2013).

	10.48d	Waiver and Amendment No. 3 to Loan Agreement between American Shared Hospital Services and Bank of America (dated August 8, 2014).

	10.57b	Second Amendment to Purchased Services Agreement dated effective as of October 1, 2013, between GK Financing, LLC and University of Southern California (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.)

	31.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	101.	The following materials from the Quarterly Report on Form 10-Q for American Shared Hospital Services for the quarter ended June 30, 2014, filed on August 14, 2014, formatted in XBRL: Condensed Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013; Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013; Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the six months ended June 30, 2014 and 2013; Condensed Consolidated Statement of Shareholder’s Equity for the periods ended December 31, 2012 and 2013 and six months ended June 30, 2014 (unaudited); Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013; and Notes to the Unaudited Condensed Consolidated Financial Statements, detail tagged.

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 14, 2014	/s/ Ernest A. Bates, M.D.
		Ernest A. Bates, M.D.
		Chairman of the Board and Chief Executive Officer

Date:	August 14, 2014	/s/ Craig K. Tagawa
		Craig K. Tagawa
		Senior Vice President
		Chief Operating and Financial Officer

Exhibit 10.48a

LOAN AGREEMENT

This Agreement dated as of September 30, 2011, is between Bank of America, N.A. (the "Bank") and American Shared Hospital Services (the "Borrower").

1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS

1.1 Line of Credit Amount.

(a)

During the availability period described below, the Bank will provide a line of credit to the Borrower. The amount of the line of credit (the10-48a "Facility No. 1 Commitment") is Nine Million Dollars ($9,000,000).

(b)

This is a revolving line of credit. During the availability period, the Borrower may repay principal amounts and reborrow them.

(c)

The Borrower agrees not to permit the principal balance outstanding to exceed the Facility No. 1 Commitment. If the Borrower exceeds this limit, the Borrower will immediately pay the excess to the Bank upon the Bank's demand.

1.2 Availability Period.

The line of credit is available between the date of this Agreement and August 1, 2013, or such earlier date as the availability may terminate as provided in this Agreement (the "Facility No. 1 Expiration Date").

The availability period for this line of credit will be considered renewed if and only if the Bank has sent to the Borrower a written notice of renewal for the line of credit (the "Renewal Notice"). If this line of credit is renewed, it will continue to be subject to all the terms and conditions set forth in this Agreement except as modified by the Renewal Notice. If this line of credit is renewed, the term "Expiration Date" shall mean the date set forth in the Renewal Notice as the Expiration Date and the same process for renewal will apply to any subsequent renewal of this line of credit. A renewal fee may be charged at the Bank's option. The amount of the renewal fee will be specified in the Renewal Notice.

1.3 Borrowing Base.

This Facility No. 1 is subject to a borrowing base in accordance with the terms and conditions of a Pledge Agreement executed by the Borrower in favor of the Bank as required under this Agreement. The terms of the borrowing base include requirements to maintain collateral with an adequate loan value and grant to the Bank the right to issue a margin call in the event such requirements are not met. Further, any failure to meet the borrowing base requirements permits the Bank to refuse to make advances or other financial accommodations and constitutes an event of default under this Agreement.

1.4 Repayment Terms.

(a)

The Borrower will pay interest on October 1, 2011, and then on the same day of each month thereafter until payment in full of any principal outstanding under this facility.

(b)

The Borrower will repay in full any principal, interest or other charges outstanding under this facility no later than the Facility No. 1 Expiration Date. Any interest period for an optional interest rate (as described below) shall expire no later than the Facility No. 1 Expiration Date.

1.5 Interest Rate.

(a)

The interest rate is a rate per year equal to the Bank's Prime Rate minus 0.5 percentage point.

- 1 -

(b)

The Prime Rate is the rate of interest publicly announced from time to time by the Bank as its Prime Rate. The Prime Rate is set by the Bank based on various factors, including the Bank's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans. The Bank may price loans to its customers at, above, or below the Prime Rate. Any change in the Prime Rate shall take effect at the opening of business on the day specified in the public announcement of a change in the Bank's Prime Rate.

1.6 Optional Interest Rates.

Instead of the interest rate based on the rate stated in the paragraph entitled "Interest Rate" above, the Borrower may elect the optional interest rates listed below for this Facility No. 1 during interest periods agreed to by the Bank and the Borrower. The optional interest rates shall be subject to the terms and conditions described later in this Agreement. Any principal amount bearing interest at an optional rate under this Agreement is referred to as a "Portion." The following optional interest rates are available:

(a) The LIBOR Rate plus 1.0 percentage point.

2. OPTIONAL INTEREST RATES

2.1 Optional Rates.

Each optional interest rate is a rate per year. Interest will be paid on October 1, 2011, and then on the same day of each month thereafter until payment in full of any principal outstanding under this Agreement. No Portion will be converted to a different interest rate during the applicable interest period. Upon the occurrence of an event of default under this Agreement, the Bank may terminate the availability of optional interest rates for interest periods commencing after the default occurs. At the end of any interest period, the interest rate will revert to the rate stated in the paragraph entitled "Interest Rate" above, unless the Borrower has designated another optional interest rate for the Portion.

2.2 LIBOR Rate.

The election of LIBOR Rates shall be subject to the following terms and requirements:

(a)

The interest period during which the LIBOR Rate will be in effect will be one, two, three, or six months. The first day of the interest period must be a day other than a Saturday or a Sunday on which banks are open for business in New York and London and dealing in offshore dollars (a "LIBOR Banking Day"). The last day of the interest period and the actual number of days during the interest period will be determined by the Bank using the practices of the London inter-bank market.

(b)

Each LIBOR Rate Portion will be for an amount not less than One Hundred Thousand Dollars ($100,000).

(c)

The "LIBOR Rate" means the interest rate determined by the following formula. (All amounts in the calculation will be determined by the Bank as of the first day of the interest period.)

LIBOR Rate = London Inter-Bank Offered Rate

(1.00 - Reserve Percentage)

Where,

(i)

"London Inter-Bank Offered Rate" means, for any applicable interest period, the rate per annum equal to the British Bankers Association LIBOR Rate ("BBA LIBOR"), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as selected by the Bank from time to time) at approximately 11:00 a.m. London time two (2) London Banking Days before the commencement of the interest period, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a term equivalent to such interest period. If such rate is not available at such time for any reason, then the rate for that interest period will be determined by such alternate method as reasonably selected by the Bank. A "London Banking Day" is a day on which banks in London are open for business and dealing in offshore dollars.

- 2 -

(ii)

"Reserve Percentage" means the total of the maximum reserve percentages for determining the reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D, rounded upward to the nearest 11100 of one percent. The percentage will be expressed as a decimal, and will include, but not be limited to, marginal, emergency, supplemental, special, and other reserve percentages.

(d)

The Borrower shall irrevocably request a LIBOR Rate Portion no later than 12:00 noon Pacific time on the LIBOR Banking Day preceding the day on which the London Inter-Bank Offered Rate will be set, as specified above. For example, if there are no intervening holidays or weekend days in any of the relevant locations, the request must be made at least three days before the LIBOR Rate takes effect.

(e)

The Bank will have no obligation to accept an election for a LIBOR Rate Portion if any of the following described events has occurred and is continuing:

(i)

Dollar deposits in the principal amount, and for periods equal to the interest period, of a LIBOR Rate Portion are not available in the London inter-bank market; or

(ii)

the LIBOR Rate does not accurately reflect the cost of a LIBOR Rate Portion.

(f)

Each prepayment of a LIBOR Rate Portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid and a prepayment fee as described below. A "prepayment" is a payment of an amount on a date earlier than the scheduled payment date for such amount as required by this Agreement.

(g)

The prepayment fee shall be in an amount sufficient to compensate the Bank for any loss, cost or expense incurred by it as a result of the prepayment, including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Portion or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by the Bank in connection with the foregoing. For purposes of this paragraph, the Bank shall be deemed to have funded each Portion by a matching deposit or other borrowing in the applicable interbank market, whether or not such Portion was in fact so funded.

3. FEES AND EXPENSES

3.1 Fees .

(a)

Unused Commitment Fee. The Borrower agrees to pay a fee on any difference between the Facility No. 1 Commitment and the amount of credit it actually uses, determined by the daily amount of credit outstanding during the specified period. The fee will be calculated at 0.20% per year. This fee is due on September 30, 2011, and on the last day of each following quarter until the expiration of the availability period.

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(b)

Waiver Fee . If the Bank, at its discretion, agrees to waive or amend any terms of this Agreement, the Borrower will, at the Bank's option, pay the Bank a fee for each waiver or amendment in an amount advised by the Bank at the time the Borrower requests the waiver or amendment. Nothing in this paragraph shall imply that the Bank is obligated to agree to any waiver or amendment requested by the Borrower. The Bank may impose additional requirements as a condition to any waiver or amendment.

(c)

Late Fee . To the extent permitted by law, the Borrower agrees to pay a late fee in an amount not to exceed four percent (4%) of any payment that is more than fifteen (15) days late. The imposition and payment of a late fee shall not constitute a waiver of the Bank's rights with respect to the default.

3.2 Expenses ,

The Borrower agrees to immediately repay the Bank for expenses that include, but are not limited to, filing, recording and search fees, appraisal fees, title report fees, and documentation fees.

3.3 Reimbursement Costs .

(a)

The Borrower agrees to reimburse the Bank for any expenses it incurs in the preparation of this Agreement and any agreement or instrument required by this Agreement. Expenses include, but are not limited to, reasonable attorneys' fees, including any allocated costs of the Bank's in-house counsel to the extent permitted by applicable law.

(b)

The Borrower agrees to reimburse the Bank for the cost of periodic appraisals of the collateral, at such intervals as the Bank may reasonably require. The actions described in this paragraph may be performed by employees of the Bank or by independent appraisers.

COLLATERAL

4.1 Personal Property .

The personal property listed below now owned or owned in the future by the parties listed below will secure the Borrower's obligations to the Bank under this Agreement. The collateral is further defined in security agreement executed by the owners of the collateral.

(a)

Securities or other investment property owned by the Borrower as described in the Pledge Agreement required by the Bank.

Regulation U of the Board of Governors of the Federal Reserve System places certain restrictions on loans secured by margin stock (as defined in the Regulation). The Bank and the Borrower shall comply with Regulation U. If any of the collateral is margin stock, the Borrower shall provide to the Bank a Form U-1 Purpose Statement.

DISBURSEMENTS, PAYMENTS AND COSTS

5.1 Disbursements and Payments .

(a)

Each payment by the Borrower will be made in U.S. Dollars and immediately available funds, without setoff or counterclaim. Payments will be made by debit to a deposit account, if direct debit is provided for in this Agreement or is otherwise authorized by the Borrower. For payments not made by direct debit, payments will be made by mail to the address shown on the Borrower's statement, or by such other method as may be permitted by the Bank.

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(b)

The Bank may honor instructions for advances or repayments given by the Borrower (if an individual), or by any one of the individuals authorized to sign loan agreements on behalf of the Borrower, or any other individual designated by any one of such authorized signers (each an "Authorized Individual").

(c)

For any payment under this Agreement made by debit to a deposit account, the Borrower will maintain sufficient immediately available funds in the deposit account to cover each debit. If there are insufficient immediately available funds in the deposit account on the date the Bank enters any such debit authorized by this Agreement, the Bank may reverse the debit.

(d)

Each disbursement by the Bank and each payment by the Borrower will be evidenced by records kept by the Bank. In addition, the Bank may, at its discretion, require the Borrower to sign one or more promissory notes.

(e)

Prior to the date each payment of principal and interest and any fees from the Borrower becomes due (the "Due Date''), the Bank will send to the Borrower a statement of the amounts that will be due on that Due Date (the "Billed Amount"). The calculations in the bill will be made on the assumption that no new extensions of credit or payments will be made between the date of the billing statement and the Due Date, and that there will be no changes in the applicable interest rate. If the Billed Amount differs from the actual amount due on the Due Date (the "Accrued Amount), the discrepancy will be treated as follows:

(i)

If the Billed Amount is less than the Accrued Amount, the Billed Amount for the following Due Date will be increased by the amount of the discrepancy. The Borrower will not be in default by reason of any such discrepancy.

(ii)

If the Billed Amount is more than the Accrued Amount, the Billed Amount for the following Due Date will be decreased by the amount of the discrepancy.

Regardless of any such discrepancy, interest will continue to accrue based on the actual amount of principal outstanding without compounding. The Bank will not pay the Borrower interest on any overpayment.

5.2 Borrower's Instructions .

(a)

The Bank may honor instructions for advances or repayments or for the designation of optional interest rates given, or purported to be given, by any one of the Authorized Individuals. Such instructions may be given in writing or by telephone, telefax or Internet and intranet websites designated by the Bank with respect to separate products or services offered by the Bank. The Bank's obligation to act on such instructions is subject to the terms, conditions and procedures stated elsewhere in this Agreement.

(b)

Except as specified elsewhere in this Agreement or as otherwise agreed between the Bank and the Borrower, advances will be deposited in and repayments will be withdrawn from account number CA-14993-14357 owned by the Borrower, or such other of the Borrower's accounts with the Bank as designated in writing by the Borrower.

(c)

The Borrower will indemnify and hold the Bank harmless from all liability, loss, and costs in connection with any act resulting from instructions the Bank reasonably believes are made by any Authorized Individual, whether such instructions are given in writing or by telephone, telefax or electronic communications (including e-mail, Internet and intranet websites). This paragraph will survive this Agreement's termination, and will benefit the Bank and its officers, employees, and agents.

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5.3 Direct Debit .

(a)

The Borrower agrees that on the Due Date the Bank will debit the Billed Amount from deposit
account number CA-14993-14357 owned by the Borrower, or such other of the Borrower's accounts with the Bank as designated in writing by the Borrower (the "Designated Account").

(b)

The Borrower may terminate this direct debit arrangement at any time by sending written notice to
the Bank at the address specified at the end of this Agreement. If the Borrower terminates this arrangement, then the principal amount outstanding under this Agreement will at the option of the Bank bear interest at a rate per annum which is 0.5 percentage point higher than the rate of interest otherwise provided under this Agreement.

5.4 Banking Days .

Unless otherwise provided in this Agreement, a banking day is a day other than a Saturday, Sunday or other day on which commercial banks are authorized to close, or are in fact closed, in the state where the Bank's lending office is located, and, if such day relates to amounts bearing interest at an offshore rate (if any), means any such day on which dealings in dollar deposits are conducted among banks in the offshore dollar interbank market. All payments and disbursements which would be due on a day which is not a banking day will be due on the next banking day. All payments received on a day which is not a banking day will be applied to the credit on the next banking day.

5.5 Interest Calculation .

Except as otherwise stated in this Agreement, all interest and fees, if any, will be computed on the basis of a 360-day year and the actual number of days elapsed. This results in more interest or a higher fee than if a 365-day year is used. Installments of principal which are not paid when due under this Agreement shall continue to bear interest until paid.

5.6 Default Rate.

Upon the occurrence of any default or after maturity or after judgment has been rendered on any obligation under this Agreement, all amounts outstanding under this Agreement, including any unpaid interest, fees, or costs, will at the option of the Bank bear interest at a rate which is 6.0 percentage points higher than the rate of interest otherwise provided under this Agreement. This may result in compounding of interest. This will not constitute a waiver of any default.

5.7 Additional Costs.

The Borrower will pay the Bank, on demand, for the Bank's costs or losses arising from any Change in Law which are allocated to this Agreement or any credit outstanding under this Agreement. The allocation will be made as determined by the Bank, using any reasonable method. The costs include, without limitation, the following:

(a)

any reserve or deposit requirements (excluding any reserve requirement already reflected in the calculation of the interest rate in this Agreement); and

(b)

any capital requirements relating to the Bank's assets and commitments for credit.

"Change in Law" means the occurrence, after the date of this Agreement, of the adoption or taking effect of any new or changed law, rule, regulation or treaty, or the issuance of any request, rule, guideline or directive (whether or not having the force of law) by any governmental authority ^. provided that (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives issued in connection with that Act, and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a "Change in Law," regardless of the date enacted, adopted or issued.

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6. CONDITIONS

Before the Bank is required to extend any credit to the Borrower under this Agreement, it must receive any documents and other items it may reasonably require, in form and content acceptable to the Bank, including any items specifically listed below.

6.1 Authorizations .

Evidence that the execution, delivery and performance by the Borrower of this Agreement and any instrument or agreement required under this Agreement have been duly authorized.

6.2 Governing Documents .

If required by the Bank, a copy of the Borrower's organizational documents.

6.3 Security Agreements .

Signed original security agreements covering the personal property collateral which the Bank requires. 6.4 Perfection and Evidence of Priority .

Evidence that the security interests and liens in favor of the Bank are valid, enforceable, properly perfected in a manner acceptable to the Bank and prior to all others' rights and interests, except those the Bank consents to in writing.

6.5 Payment of Fees .

Payment of all fees and other amounts due and owing to the Bank, including without limitation payment of all accrued and unpaid expenses incurred by the Bank as required by the paragraph entitled "Reimbursement Costs."

6.6 Good Standing .

Certificates of good standing for the Borrower from its state of formation and from any other state in which the Borrower is required to qualify to conduct its business.

6.7 Insurance .

Evidence of insurance coverage, as required in the "Covenants" section of this Agreement.

7. REPRESENTATIONS AND WARRANTIES

When the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makes the following representations and warranties. Each request for an extension of credit constitutes a renewal of these representations and warranties as of the date of the request:

7.1 Formation .

The Borrower is duly formed and existing under the laws of the state or other jurisdiction where organized.

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7.2 Authorization.

This Agreement, and any instrument or agreement required hereunder, are within the Borrower's powers, have been duly authorized, and do not conflict with any of its organizational papers.

7,3 Enforceable Agreement .

This Agreement is a legal, valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding and enforceable.

7.4 Good Standing .

In each state in which the Borrower does business, it is properly licensed, in good standing, and, where required, in compliance with fictitious name statutes.

7.5 No Conflicts .

This Agreement does not conflict with any law, agreement, or obligation by which the Borrower is bound.

7.6 Financial Information .

All financial and other information that has been or will be supplied to the Bank is sufficiently complete to give the Bank accurate knowledge of the Borrower's (and any guarantor's) financial condition, including all material contingent liabilities. Since the date of the most recent financial statement provided to the Bank, there has been no material adverse change in the business condition (financial or otherwise), operations, properties or prospects of the Borrower (or any guarantor).

7.7 Lawsuits .

There is no lawsuit, tax claim or other dispute pending or threatened against the Borrower which, if lost, would impair the Borrower's financial condition or ability to repay the loan, except as have been disclosed in writing to the Bank.

7.8 Collateral .

All collateral required in this Agreement is owned by the grantor of the security interest free of any title defects or any liens or interests of others, except those which have been approved by the Bank in writing.

7.9 Permits, Franchises .

The Borrower possesses all permits, memberships, franchises, contracts and licenses required and all trademark rights, trade name rights, patent rights, copyrights, and fictitious name rights necessary to enable it to conduct the business in which it is now engaged.

7.10 Other Obligations .

The Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation, except as have been disclosed in writing to the Bank.

7.11 Tax Matters .

The Borrower has no knowledge of any pending assessments or adjustments of its income tax for any year and all taxes due have been paid, except as have been disclosed in writing to the Bank.

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7.12 No Event of Default .

There is no event which is, or with notice or lapse of time or both would be, a default under this Agreement.

7.13 Insurance .

The Borrower has obtained, and maintained in effect, the insurance coverage required in the "Covenants" section of this Agreement.

8. COVENANTS

The Borrower agrees, so long as credit is available under this Agreement and until the Bank is repaid in full:

8.1 Use of Proceeds .

To use the proceeds of Facility No. 1 only for working capital.

8.2 Financial Information .

To provide the following financial information and statements in form and content acceptable to the Bank, and such additional information as requested by the Bank from time to time. The Bank reserves the right, upon written notice to the Borrower, to require the Borrower to deliver financial information and statements to the Bank more frequently than otherwise provided below, and to use such additional information and statements to measure any applicable financial covenants in this Agreement.

(a)

Within 120 days of the fiscal year end, the annual financial statements of the Borrower. These financial statements must be audited (with an opinion satisfactory to the Bank) by a Certified Public Accountant acceptable to the Bank. The statements shall be prepared on a consolidated basis.

(b)

Within 90 days after each period's end, semi-annual financial statements of the Borrower. These financial statements may be company-prepared. The statements shall be prepared on a consolidated basis.

(c)

Within 10 days of the end of each month, copies of the most recent statements relating to investment accounts of the Borrower, whether such investment accounts are held at a financial institution, brokerage firm or otherwise.

(d)

Promptly upon the Bank's request, such other books, records, statements, lists of property and accounts, budgets, forecasts or reports as to the Borrower and as to each guarantor of the Borrower's obligations to the Bank as the Bank may request.

8.3 Profitability .

To maintain on a consolidated basis a positive net income before taxes, extraordinary items, and minority interest for each annual accounting period.

8.4 Bank as Principal Depository .

To maintain the Bank or one of its affiliates as its principal depository bank, including for the maintenance of business, cash management, operating and administrative deposit accounts.

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8.5 Maintenance of Assets .

(a)

Not to sell, assign, lease, transfer or otherwise dispose of any part of the Borrower's business or the Borrower's assets except in the ordinary course of the Borrower's business.

(b)

Not to sell, assign, lease, transfer or otherwise dispose of any assets for less than fair market value, or enter into any agreement to do so.

(c)

Not to enter into any sale and leaseback agreement covering any of its fixed assets.

(d)

To maintain and preserve all rights, privileges, and franchises the Borrower now has.

(e)

To make any repairs, renewals, or replacements to keep the Borrower's properties in good working condition.

8.6 Notices to Bank .

To promptly notify the Bank in writing of:

(a)

Any lawsuit over One Million Dollars ($1,000,000) against the Borrower or any Obligor.

(b)

Any substantial dispute between any governmental authority and the Borrower or any Obligor.

(c)

Any event of default under this Agreement, or any event which, with notice or lapse of time or both, would constitute an event of default.

(d)

Any material adverse change in the Borrower's or any Obligor's business condition (financial or otherwise), operations, properties or prospects, or ability to repay the credit.

(e)

Any change in the Borrower's or any Obligor's name, legal structure, principal residence (for an individual), state of registration (for a registered entity), place of business, or chief executive office if the Borrower or any Obligor has more than one place of business.

(f)

Any actual contingent liabilities of the Borrower or any Obligor, and any such contingent liabilities which are reasonably foreseeable, where such liabilities are in excess of One Million Dollars ($1,000,000) in the aggregate.

(g)

Any event wherein a governmental authority, including but not limited to Medicare or the Food and Drug Administration, withdraws or fails to renew any material license, permit or certification of the Borrower or its equipment.

For purposes of this Agreement, 'Obligor" shall mean any guarantor, any party pledging collateral to the Bank, or, if the Borrower is comprised of the trustees of a trust, any trustor.

8.7 Insurance .

(a)

General Business Insurance . To maintain insurance as is usual for the business it is in.

(b)

Evidence of Insurance . Upon the request of the Bank, to deliver to the Bank a copy of each insurance policy, or, if permitted by the Bank, a certificate of insurance listing all insurance in force.

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8.8 Compliance with Laws .

To comply with the laws (including any fictitious or trade name statute), regulations, and orders of any government body with authority over the Borrower's business. The Bank shall have no obligation to make any advance to the Borrower except in compliance with all applicable laws and regulations and the Borrower shall fully cooperate with the Bank in complying with all such applicable laws and regulations.

8.9 ERISA Plans .

Promptly during each year, to pay and cause any subsidiaries to pay contributions adequate to meet at least the minimum funding standards under ERISA with respect to each and every Plan; file each annual report required to be filed pursuant to ERISA in connection with each Plan for each year; and notify the Bank within ten (10) days of the occurrence of any Reportable Event that might constitute grounds for termination of any capital Plan by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer any Plan. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. Capitalized terms in this paragraph shall have the meanings defined within ERISA.

8.10 Books and Records .

To maintain adequate books and records.

8.11 Audits .

To allow the Bank and its agents to inspect the Borrower's properties and examine, audit, and make copies of books and records at any reasonable time. If any of the Borrower's properties, books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Bank or its agents to have access to perform inspections or audits and to respond to the Bank's requests for information concerning such properties, books and records.

8.12 Perfection of Liens .

To help the Bank perfect and protect its security interests and liens, and reimburse it for related costs it incurs to protect its security interests and liens.

8.13 Cooperation .

To take any action reasonably requested by the Bank to carry out the intent of this Agreement.

9. DEFAULT AND REMEDIES

If any of the following events of default occurs, the Bank may do one or more of the following: declare the Borrower in default, stop making any additional credit available to the Borrower, and require the Borrower to repay its entire debt immediately and without prior notice. If an event which, with notice or the passage of time, will constitute an event of default has occurred and is continuing, the Bank has no obligation to

make advances or extend additional credit under this Agreement. In addition, if any event of default occurs, the Bank shall have all rights, powers and remedies available under any instruments and agreements required by or executed in connection with this Agreement, as well as all rights and remedies available at law or in equity. If an event of default occurs under the paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the entire debt outstanding under this Agreement will automatically be due immediately.

9.1 Failure to Pay .

The Borrower fails to make a payment under this Agreement when due.

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9.2 Other Bank Agreements .

Any default occurs under any other agreement the Borrower (or any Obligor) or any of the Borrowers related entities or affiliates has with the Bank or any affiliate of the Bank.

9.3 Cross-default.

Any default occurs under any agreement in connection with any credit the Borrower (or any Obligor) has obtained from anyone else or which the Borrower (or any Obligor) has guaranteed if the default consists of failing to make a payment when due and gives the other lender the right to accelerate the obligation.

9.4 False Information .

The Borrower or any Obligor has given the Bank false or misleading information or representations.

9.5 Bankruptcy .

The Borrower, any Obligor, or any general partner of the Borrower or of any Obligor files a bankruptcy petition, a bankruptcy petition is filed against any of the foregoing parties, or the Borrower, any Obligor, or any general partner of the Borrower or of any Obligor makes a general assignment for the benefit of creditors.

9.6 Receivers .

A receiver or similar official is appointed for a substantial portion of the Borrower's or any Obligors business, or the business is terminated, or, if any Obligor is anything other than a natural person, such Obligor is liquidated or dissolved.

9.7 Lien Priority .

The Bank fails to have an enforceable first lien (except for any prior liens to which the Bank has consented in writing) on or security interest in any property given as security for this Agreement (or any guaranty).

9.8 Judgments .

Any judgments or arbitration awards are entered against the Borrower or any Obligor, or the Borrower or any Obligor enters into any settlement agreements with respect to any litigation or arbitration, in an aggregate amount of One Million Dollars ($1,000,000) or more in excess of any insurance coverage.

9.9 Material Adverse Change .

A material adverse change occurs, or is reasonably likely to occur, in the Borrower's (or any Obligor's) business condition (financial or otherwise), operations, properties or prospects, or ability to repay the credit.

9.10 Government Action .

Any government authority takes action that the Bank believes materially adversely affects the Borrower's or any Obligor's financial condition or ability to repay.

9.11 Default under Related Documents .

Any default occurs under any guaranty, subordination agreement, security agreement, deed of trust, mortgage, or other document required by or delivered in connection with this Agreement or any such document is no longer in effect, or any guarantor purports to revoke or disavow the guaranty; or any representation or warranty made by any guarantor is false when made or deemed to be made.

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9.12 Borrowing Base .

If any of the credit covered by this Agreement is subject to an agreement to maintain a borrowing base, the terms of such agreement are breached and the Borrower fails to cure such breach by the expiration of any applicable cure period.

9.13 ERISA Plans .

Any one or more of the following events occurs with respect to a Plan of the Borrower subject to Title IV of ERISA, provided such event or events could reasonably be expected, in the judgment of the Bank, to subject the Borrower to any tax, penalty or liability (or any combination of the foregoing) which, in the aggregate, could have a material adverse effect on the financial condition of the Borrower:

(a)

A reportable event shall occur under Section 4043(c) of ERISA with respect to a Plan.

(b)

Any Plan termination (or commencement of proceedings to terminate a Plan) or the full or partial withdrawal from a Plan by the Borrower or any ERISA Affiliate.

9.14 Other Breach Under Agreement.

A default occurs under any other term or condition of this Agreement not specifically referred to in this Article. This includes any failure or anticipated failure by the Borrower (or any other party named in the Covenants section) to comply with any financial covenants set forth in this Agreement, whether such failure is evidenced by financial statements delivered to the Bank or is otherwise known to the Borrower or the Bank.

10. ENFORCING THIS AGREEMENT; MISCELLANEOUS

10.1 GAAP .

Except as otherwise stated in this Agreement, all financial information provided to the Bank and all financial covenants will be made under generally accepted accounting principles, consistently applied.

10.2 Governing Law .

This Agreement is governed by and shall be interpreted according to federal law and the laws of California. If state or local law and federal law are inconsistent, or if state or local law is preempted by federal law, federal law governs. If the Bank has greater rights or remedies under federal law, whether as a national bank or otherwise, this paragraph shall not be deemed to deprive the Bank of such rights and remedies as may be available under federal law.

10.3 Successors and Assigns .

This Agreement is binding on the Borrower's and the Bank's successors and assignees. The Borrower agrees that it may not assign this Agreement without the Bank's prior consent. The Bank may sell participations in or assign this loan, and may exchange information about the Borrower (including, without limitation, any information regarding any hazardous substances) with actual or potential participants or assignees. If a participation is sold or the loan is assigned, the purchaser will have the right of set-off against the Borrower.

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10.4 Dispute Resolution Provision .

This paragraph, including the subparagraphs below, is referred to as the "Dispute Resolution Provision." This Dispute Resolution Provision is a material inducement for the parties entering into this agreement.

(a)

This Dispute Resolution Provision concerns the resolution of any controversies or claims between the parties, whether arising in contract, tort or by statute, including but not limited to controversies or claims that arise out of or relate to: (i) this agreement (including any renewals, extensions or modifications); or (ii) any document related to this agreement (collectively a "Claim"). For the purposes of this Dispute Resolution Provision only, the term "parties' shall include any parent corporation, subsidiary or affiliate of the Bank involved in the servicing, management or administration of any obligation described or evidenced by this agreement.

(b)

At the request of any party to this agreement, any Claim shall be resolved by binding arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the "Act"). The Act will apply even though this agreement provides that it is governed by the law of a specified state.

(c)

Arbitration proceedings will be determined in accordance with the Act, the then-current rules and procedures for the arbitration of financial services disputes of the American Arbitration Association or any successor thereof ("AAA"), and the terms of this Dispute Resolution Provision. In the event of any inconsistency, the terms of this Dispute Resolution Provision shall control. If AAA is unwilling or unable to (i) serve as the provider of arbitration or (ii) enforce any provision of this arbitration clause, the Bank may designate another arbitration organization with similar procedures to serve as the provider of arbitration.

(d)

The arbitration shall be administered by AAA and conducted, unless otherwise required by law, in any U.S. state where real or tangible personal property collateral for this credit is located or if there is no such collateral, in the state specified in the governing law section of this agreement. All Claims shall be determined by one arbitrator; however, if Claims exceed Five Million Dollars ($5,000,000), upon the request of any party, the Claims shall be decided by three arbitrators. All arbitration hearings shall commence within ninety (90) days of the demand for arbitration and close within ninety (90) days of commencement and the award of the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing. However, the arbitrator(s), upon a showing of good cause, may extend the commencement of the hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide a concise written statement of reasons for the award. The arbitration award may be submitted to any court having jurisdiction to be confirmed and have judgment entered and enforced.

(e)

The arbitrator(s) will give effect to statutes of limitation in determining any Claim and shall dismiss the arbitration if the Claim is barred under the applicable statutes of limitation. For purposes of the application of any statutes of limitation, the service on AAA under applicable AAA rules of a notice of Claim is the equivalent of the filing of a lawsuit. Any dispute concerning this arbitration provision or whether a Claim is arbitrable shall be determined by the arbitrator(s), except as set forth at subparagraph (j) of this Dispute Resolution Provision. The arbitrator(s) shall have the power to award legal fees pursuant to the terms of this agreement.

(f)

The procedure described above will not apply if the Claim, at the time of the proposed submission to arbitration, arises from or relates to an obligation to the Bank secured by real property. In this case, all of the parties to this agreement must consent to submission of the Claim to arbitration.

(g)

To the extent any Claims are not arbitrated, to the extent permitted by law the Claims shall be resolved in court by a judge without a jury, except any Claims which are brought in California state court shall be determined by judicial reference as described below.

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(h)

Any Claim which is not arbitrated and which is brought in California state court will be resolved by a general reference to a referee (or a panel of referees) as provided in California Code of Civil Procedure Section 638. The referee (or presiding referee of the panel) shall be a retired Judge or Justice. The referee (or panel of referees) shall be selected by mutual written agreement of the parties. If the parties do not agree, the referee shall be selected by the Presiding Judge of the Court (or his or her representative) as provided in California Code of Civil Procedure Section 638 and the following related sections. The referee shall determine all issues, whether of fact or law, in accordance with existing California law and the California rules of evidence and civil procedure. The referee shall be empowered to enter equitable as well as legal relief, provide all temporary or provisional remedies, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a trial, including without limitation motions for summary judgment or summary adjudication . The award that results from the decision of the referee(s) will be entered as a judgment in the court that appointed the referee, in accordance with the provisions of California Code of Civil Procedure Sections 644(a) and 645. The parties reserve the right to seek appellate review of any judgment or order, including but not limited to, orders pertaining to class certification, to the same extent permitted in a court of law.

(i)

This Dispute Resolution Provision does not limit the right of any party to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or non-judicial foreclosure against any real or personal property collateral; (iii) exercise any judicial or power of sale rights, or (iv) act in a court of law to obtain an interim remedy, such as but not limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies. The filing of a court action is not intended to constitute a waiver of the right of any party, including the suing party, thereafter to require submittal of the Claim to arbitration or judicial reference.

(j)

Any arbitration or court trial (whether before a judge or jury or pursuant to judicial reference) of any Claim will take place on an individual basis without resort to any form of class or representative action (the "Class Action Waiver"). The Class Action Waiver precludes any party from participating in or being represented in any class or representative action regarding a Claim. Regardless of anything else in this Dispute Resolution Provision, the validity and effect of the Class Action Waiver may be determined only by a court or referee and not by an arbitrator. The parties to this agreement acknowledge that the Class Action Waiver is material and essential to the arbitration of any disputes between the parties and is nonseverable from the agreement to arbitrate Claims. If the Class Action Waiver is limited, voided or found unenforceable, then the parties' agreement to arbitrate shall be null and void with respect to such proceeding, subject to the right to appeal the limitation or invalidation of the Class Action Waiver. The Parties acknowledge and agree that under no circumstances will a class action be arbitrated.

(k)

By agreeing to binding arbitration or judicial reference, the parties irrevocably and voluntarily waive any right they may have to a trial by jury as permitted by law in respect of any Claim. Furthermore, without intending in any way to limit this Dispute Resolution Provision, to the extent any Claim is not arbitrated or submitted to judicial reference, the parties irrevocably and voluntarily waive any right they may have to a trial by jury to the extent permitted by law in respect of such Claim. This waiver of jury trial shall remain in effect even if the Class Action Waiver is limited, voided or found unenforceable. WHETHER THE CLAIM IS DECIDED BY ARBITRATION, BY JUDICIAL REFERENCE, OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW.

10.5 Severability; Waivers .

If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced. The Bank retains all rights, even if it makes a loan after default. If the Bank waives a default, it may enforce a later default. Any consent or waiver under this Agreement must be in writing.

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10.6 Attorneys' Fees .

The Borrower shall reimburse the Bank for any reasonable costs and attorneys' fees incurred by the Bank in connection with the enforcement or preservation of any rights or remedies under this Agreement and any other documents executed in connection with this Agreement, and in connection with any amendment, waiver, "workout" or restructuring under this Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is entitled to recover costs and reasonable attorneys' fees incurred in connection with the lawsuit or arbitration proceeding, as determined by the court or arbitrator. In the event that any case is commenced by or against the Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar or successor statute, the Bank is entitled to recover costs and reasonable attorneys' fees incurred by the Bank related to the preservation, protection, or enforcement of any rights of the Bank in such a case. As used in this paragraph, "attorneys' fees" includes the allocated costs of the Bank's in-house counsel.

10.7 Set-Off .

(a)

In addition to any rights and remedies of the Bank provided by law, upon the occurrence and during the continuance of any event of default under this Agreement, the Bank is authorized, at any time, to set off and apply any and all Deposits of the Borrower or any Obligor held by the Bank or its affiliates against any and all Obligations owing to the Bank. The set-off may be made irrespective of whether or not the Bank shall have made demand under this Agreement or any guaranty, and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable Deposits and without regard for the availability or adequacy of other collateral. Any Deposits may be converted, sold or otherwise liquidated at prevailing market prices in order to effect such set-off.

(b)

The set-off may be made without prior notice to the Borrower or any other party, any such notice being waived by the Borrower (on its own behalf and on behalf of each Obligor) to the fullest extent permitted by law. The Bank agrees promptly to notify the Borrower after any such set-off and application; provided , however , that the failure to give such notice shall not affect the validity of such set-off and application.

(c)

For the purposes of this paragraph, "Deposits" means any deposits (general or special, time or demand, provisional or final, individual or joint) as well as any money, instruments, securities, credits, claims, demands, income or other property, rights or interests owned by the Borrower or any Obligor which come into the possession or custody or under the control of the Bank or its affiliates. "Obligations" means all obligations, now or hereafter existing, of the Borrower to the Bank under this Agreement and under any other agreement or instrument executed in connection with this Agreement, and the obligations to the Bank of any Obligor.

10.8 One Agreement .

This Agreement and any related security or other agreements required by this Agreement, collectively:

(a)

represent the sum of the understandings and agreements between the Bank and the Borrower concerning this credit;

(b)

replace any prior oral or written agreements between the Bank and the Borrower concerning this credit; and

(c)

are intended by the Bank and the Borrower as the final, complete and exclusive statement of the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail. Any reference in any related document to a "promissory note" or a "note" executed by the Borrower and dated as of the date of this Agreement shall be deemed to refer to this Agreement, as now in effect or as hereafter amended, renewed, or restated.

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10.9 Indemnification .

The Borrower will indemnify and hold the Bank harmless from any loss, liability, damages, judgments, and costs of any kind relating to or arising directly or indirectly out of (a) this Agreement or any document required hereunder, (b) any credit extended or committed by the Bank to the Borrower hereunder, and (c) any litigation or proceeding related to or arising out of this Agreement, any such document, or any such credit. This indemnity includes but is not limited to attorneys' fees (including the allocated cost of in-house counsel). This indemnity extends to the Bank, its parent, subsidiaries, affiliates and all of their directors, officers, employees, agents, successors, attorneys, and assigns. This indemnity will survive repayment of the Borrower's obligations to the Bank. All sums due to the Bank hereunder shall be obligations of the Borrower, due and payable immediately without demand.

10.10 Notices .

Unless otherwise provided in this Agreement or in another agreement between the Bank and the Borrower, all notices required under this Agreement shall be personally delivered or sent by first class mail, postage prepaid, or by overnight courier, to the addresses on the signature page of this Agreement, or sent by facsimile to the fax numbers listed on the signature page, or to such other addresses as the Bank and the Borrower may specify from time to time in writing. Notices and other communications shall be effective (i) if mailed, upon the earlier of receipt or five (5) days after deposit in the U.S. mail, first class, postage prepaid, (ii) if telecopied, when transmitted, or (iii) if hand-delivered, by courier or otherwise (including telegram, lettergram or mailgram), when delivered.

10.11 Headings .

Article and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Agreement.

10.12 Counterparts .

This Agreement may be executed in as many counterparts as necessary or convenient, and by the different parties on separate counterparts each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same agreement. Delivery of an executed counterpart of this Agreement (or of any agreement or document required by this Agreement and any amendment to this Agreement) by telecopy or other electronic imaging means shall be as effective as delivery of a manually executed counterpart of this Agreement; provided, however, that the telecopy or other electronic image shall be promptly followed by an original if required by the Bank.

10.13 Borrower Information; Reporting to Credit Bureaus .

The Borrower authorizes the Bank at any time to verify or check any information given by the Borrower to the Bank, check the Borrower's credit references and obtain credit reports. The Borrower agrees that the Bank shall have the right at all times to disclose and report to credit reporting agencies and credit rating agencies such information pertaining to the Borrower and/or all guarantors as is consistent with the Bank's policies and practices from time to time in effect.

10.14 Amendment and Restatement of Prior Agreement .

This Agreement is an amendment and restatement, in its entirety, of the Loan Agreement entered into as of July 1, 2004, between the Bank and the Borrower, and any indebtedness outstanding thereunder shall be deemed to be outstanding under this Agreement. Nothing in this Agreement shall be deemed to be a repayment or novation of the indebtedness, or to release or otherwise adversely affect any lien, mortgage or security interest securing such indebtedness or any rights of the Bank against any guarantor, surety or other party primarily or secondarily liable for such indebtedness.

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This Agreement is executed as of the date stated at the top of the first page.

Bank of America, N.A.		American Shared Hospital Services

By	/s/ John C. Plecque	By	/s/ Ernest A. Bates, M.D.
	John C. Plecque		Ernest A. Bates, M.D.
	Senior Vice President		Chairman of the Board
	Address where notices to the Bank are to be sent:		Address where notices to the Borrower are to be sent:
	Mail Code: CA5-106-01-05
	Palo Alto Main Office, Suite 101 530 Lytton Avenue		Four Embarcadero Center, Suite 3700 San Francisco, CA 94117-4107
	Palo Alto, CA 94301-1539		Telephone:
	Facsimile:		Facsimile:

USA Patriot Act Notice; Affiliate Sharing Notice; Affiliate Marketing Notice.

Federal law requires Bank of America, N.A. (the "Bank") to provide the following notice. The notice is not part of the foregoing agreement or instrument and may not be altered. Please read the notice carefully.

(1) USA PATRIOT ACT NOTICE

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account or obtains a loan. The Bank will ask for the Borrower's legal name, address, tax ID number or social security number and other identifying information. The Bank may also ask for additional information or documentation or take other actions reasonably necessary to verify the identity of the Borrower, guarantors or other related persons.

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Exhibit 10.48b

AMENDMENT NO. 1 TO LOAN AGREEMENT

This Amendment No. 1 (the "Amendment") dated as of August 31, 2012, is between Bank of America, N.A. (the "Bank") and American Shared Hospital Services (the "Borrower").

RECITALS

A. The Bank and the Borrower entered into a certain Loan Agreement dated as of September 30, 2011 (together with any previous amendments or extension letters, the "Agreement").

The Bank and the Borrower desire to amend the Agreement.

AGREEMENT

1. Definitions . Capitalized terms used but not defined in this Amendment shall have the meaning given to them in the Agreement.

2. Amendments . The Agreement is hereby amended as follows:

2.1 In Paragraph 1.2 (Availability Period.), the date "August 1, 2014" is substituted for the date "August 1, 2013" as the new Facility No. 1 Expiration Date.

2.2 Subparagraph (g) of Paragraph 2.2 (LIBOR Rate.) is replaced with new subparagraphs (g) through (m) that read in their entirety as follows:

(g)

The prepayment fee is intended to compensate the Bank for the funding costs of the prepaid credit, if any. The prepayment fee will be determined by calculating the funding costs incurred by the Bank, based on the cost of funds at the time the interest rate was fixed, and subtracting the interest income which can be earned by the Bank by reinvesting the prepaid funds at the Reinvestment Rate. The calculation is defined more fully below.

(h)

The "Fixed Interest Rate Period" is the period during which the interest rate in effect at the time of the prepayment does not change. If the Fixed Interest Rate Period does not extend for the entire remaining life of the credit, then the following rules will apply:

(i)

For any portion of the prepaid principal for which the scheduled payment date is after the end of the Fixed Interest Rate Period, the prepayment fee for that portion shall be calculated based only on the period through the end of the Fixed Interest Rate Period, as described below.

(ii)

If a prepayment is made on a date on which the interest rate resets, then there will be no prepayment fee.

(i)

The prepayment fee calculation is made separately for each Prepaid Installment. A "Prepaid Installment" is the amount of the prepaid principal that would have been due on a particular scheduled payment date (the "Scheduled Payment Date"). However, as explained in the preceding paragraph, all amounts of the credit which would have been paid after the end of the Fixed Interest Rate Period shall be considered a single Prepaid Installment with a Scheduled Payment Date (for the purposes of this calculation) equal to the last day of the Fixed Interest Rate Period.

(j)

The prepayment fee for a particular Prepaid Installment will be calculated as follows:

(i)

Calculate the monthly interest payments that would have accrued on the Prepaid Installment through the applicable Scheduled Payment Date, if the prepayment had not been made. The interest payments will be calculated using the Original Cost of Funds Rate.

(ii)

Next, calculate the monthly interest income which could be earned on the Prepaid Installment if it were reinvested by the Bank at the Reinvestment Rate through the Scheduled Payment Date.

(iii)

Calculate the monthly differences of the amounts calculated in (i) minus the amounts calculated in (ii).

(iv)

If the remaining term of the Fixed Interest Rate Period is greater than one year, calculate the present value of the amounts calculated in (iii), using the Reinvestment Rate. The result of the present value calculation is the prepayment fee for the Prepaid Installment.

(k)

Finally, the prepayment fees for all of the Prepaid Installments are added together. The sum, if greater than zero, is the total prepayment fee due to the Bank.

(I)

The following definitions will apply to the calculation of the prepayment fee:

(i)

"Original Cost of Funds Rate" means the fixed interest rate per annum, determined solely by the Bank, at which the Bank would be able to borrow funds in the Bank Funding Markets for the duration of the Fixed Interest Rate Period in the amount of the prepaid principal and with a term, interest payment frequency, and principal repayment schedule matching the prepaid principal.

(ii)

"Bank Funding Markets" means one or more wholesale funding markets available to the Bank, including the LIBOR, Eurodollar, and SWAP markets as applicable and available, or such other appropriate money market as determined by the Bank in its sole discretion.

(iii) "Reinvestment Rate" means the fixed rate per annum, determined solely by the Bank, as the rate at which the Bank would be able to reinvest funds in the amount of the Prepaid Installment in the Bank Funding Markets on the date of prepayment for a period of time approximating the period starting on the date of prepayment and ending on the Scheduled Payment Date.

(m)

The Original Cost of Funds Rate and the Reinvestment Rate are the Bank's estimates only and the Bank is under no obligation to actually purchase or match funds for any transaction or reinvest any prepayment. The Bank may adjust the Original Cost of Funds Rate and the Reinvestment Rate to reflect the compounding, accrual basis, or other costs of the prepaid amount. The rates shall include adjustments for reserve requirements, federal deposit insurance and any other similar adjustment which the Bank deems appropriate. These rates are not fixed by or related in any way to any rate the Bank quotes or pays for deposits accepted through its branch system.

3. Representations and Warranties . When the Borrower signs this Amendment, the Borrower represents and warrants to the Bank that: (a) there is no event which is. or with notice or lapse of time or both would be, a default under the Agreement except those events, if any, that have been disclosed in writing to the Bank or waived in writing by the Bank, (b) the representations and warranties in the Agreement are true as of the date of this Amendment as if made on the date of this Amendment, (c) this Amendment does not conflict with any law, agreement, or obligation by which the Borrower is bound, and

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(d) this Amendment is within the Borrower's powers, has been duly authorized, and does not conflict with any of the Borrower's organizational papers.

4. Effect of Amendment . Except as provided in this Amendment, all of the terms and conditions of the Agreement, including but not limited to the Dispute Resolution Provision, shall remain in full force and effect.

5. Counterparts . This Amendment may be executed in counterparts, each of which when so executed shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.

6. FINAL AGREEMENT . BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THIS DOCUMENT REPRESENTS THE FINAL AGREEMENT BETWEEN PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF. (B) THIS DOCUMENT SUPERSEDES ANY COMMITMENT LETTER, TERM SHEET OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS RELATING TO THE SUBJECT MATTER HEREOF, UNLESS SUCH COMMITMENT LETTER. TERM SHEET OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS EXPRESSLY PROVIDES TO THE CONTRARY, (C) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND (D) THIS DOCUMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.

This Amendment is executed as of the date stated at the beginning of this Amendment.

Bank of America, N.A.

By: /s/ Noreen Lee

Typed Name Noreen Lee

Title Vice President

American Shared Hospital Services

By: /s/ Ernest A. Bates, M.D.

Typed Name Ernest A. Bates, M.D.

Title Chairman of the Board

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Exhibit 10.48c

AMENDMENT NO. 2 TO LOAN AGREEMENT

This Amendment No. 2 (the "Amendment") dated as of September 20, 2013, is between Bank of America, N.A. (the "Bank") and American Shared Hospital Services (the "Borrower").

RECITALS

A. The Bank and the Borrower entered into a certain Loan Agreement dated as of September 30, 2011 (together with any previous amendments or extension letters, the "Agreement").

B. The Bank and the Borrower desire to amend the Agreement. AGREEMENT

1. Definitions . Capitalized terms used but not defined in this Amendment shall have the meaning given to them in the Agreement.

2. Amendments. The Agreement is hereby amended as follows:

2.1 In Paragraph 1.2 (Availability Period.), the date "August 1, 2015" is substituted for the date "August 1, 2014" as the new Facility No. 1 Expiration Date.

2.2 Any reference in the Agreement to the "British Bankers Association LIBOR Rate" is amended to read as follows: "the British Bankers Association LIBOR Rate (or any successor thereto approved by the Bank if the British Bankers Association is no longer making a LIBOR rate available)."

3. Representations and Warranties, When the Borrower signs this Amendment, the Borrower represents and warrants to the Bank that: (a) there is no event which is, or with notice or lapse of time or both would be, a default under the Agreement except those events, if any, that have been disclosed in writing to the Bank or waived in writing by the Bank, (b) the representations and warranties in the Agreement are true as of the date of this Amendment as if made on the date of this Amendment, (c) this Amendment does not conflict with any law, agreement, or obligation by which the Borrower is bound, and (d) this Amendment is within the Borrower's powers, has been duly authorized, and does not conflict with any of the Borrower's organizational papers.

4. Effect of Amendment. Except as provided in this Amendment, all of the terms and conditions of the Agreement, including but not limited to the Dispute Resolution Provision, shall remain in full force and effect.

5. Counterparts. This Amendment may be executed in counterparts, each of which when so executed shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.

6. FINAL AGREEMENT. BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THIS DOCUMENT REPRESENTS THE FINAL AGREEMENT BETWEEN PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, (B) THIS DOCUMENT SUPERSEDES ANY COMMITMENT LETTER, TERM SHEET OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS RELATING TO THE SUBJECT MATTER HEREOF, UNLESS SUCH COMMITMENT LETTER, TERM SHEET OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS EXPRESSLY PROVIDES TO THE CONTRARY, (C) THERE ARE NO UNWRITTEN

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ORAL AGREEMENTS BETWEEN THE PARTIES, AND (D) THIS DOCUMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.

This Amendment is executed as of the date stated at the beginning of this Amendment.

Bank of America, N.A.

By /s/ Kanika Agarwal

Typed Name: Kanika Agarwal

Title: Vice President

American Shared Hospital Services

By /s/Ernest A. Bates, M.D.

Ernest A. Bates, M.D.

Chairman of the Board

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Exhibit 10.48d

WAIVER AND AMENDMENT NO. 3 TO LOAN AGREEMENT

This Waiver and Amendment No. 3 (the "Waiver and Amendment") dated as of August 8, 2014, is between Bank of America, N.A. (the "Bank") and American Shared Hospital Services (the "Borrower").

RECITALS

A. The Bank and the Borrower entered into a certain Loan Agreement dated as of September 30, 2011 (together with any previous amendments and extension letters, the "Agreement").

B. An event of default has occurred and is continuing under the Agreement. The Borrower has requested the Bank to waive that event of default.

C. The Bank is willing to waive the event of default, and in conjunction with that waiver, the Bank and the Borrower have agreed to further amend the Agreement, subject to the terms and conditions of this Waiver and Amendment.

AGREEMENT

1. Definitions . Capitalized terms used but not defined in this Waiver and Amendment shall have the meaning given to them in the Agreement.

2. Amendments . The Agreement is hereby amended as follows:

2.1 In Paragraph 1.2 (Availability Period.), the date “December 31, 2014” is substituted for the date “August 1, 2015” as the new Facility No. 1 Expiration Date.

2.2 In subparagraph (c) of Paragraph 2.2 (LIBOR Rate. ), the defined term “London Inter-Bank Offered Rate” is replaced by the defined term “LIBOR” in each instance in which the former defined term appears, and clause (i) is amended to read in its entirety as follows:

(i)

“LIBOR" means, for any applicable interest period, the rate per annum equal to the London Interbank Offered Rate (or a comparable or successor rate which is approved by the Bank), as published by Bloomberg (or other commercially available source providing quotations of such rate as selected by the Bank from time to time) at approximately 11:00 a.m. London time two (2) London Banking Days before the commencement of the interest period, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a term equivalent to such interest period. If such rate is not available at such time for any reason, then the rate for that interest period will be determined by such alternate method as reasonably selected by the Bank. A "London Banking Day" is a day on which banks in London are open for business and dealing in offshore dollars.

2.3 A new Paragraph 7.14 (Government Sanctions .) is added to the Agreement and reads in its entirety as follows:

7.14 Government Sanctions.

(a)

The Borrower represents that neither the Borrower, any Obligor, nor any of their respective affiliated entities, including subsidiaries, nor, to the knowledge of the Borrower, any owner, trustee, director, officer, employee, agent, affiliate or representative of the Borrower or any Obligor is an individual or entity (“Person”) currently the subject of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor is the Borrower or any Obligor located, organized or resident in a country or territory that is the subject of Sanctions.

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(b)

The Borrower represents and covenants that it will not, directly or indirectly, use the proceeds of the credit provided under this Agreement, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions, or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.

3. Default and Waiver .

3.1 For purposes of this Waiver and Amendment, the “Existing Default” shall mean the event of default existing for the Borrower’s annual accounting period that ended on December 31, 2013, with respect to the financial covenant set forth in Paragraph 8.3 ( Profitability .) of the Agreement.

3.2 Subject to and upon the terms and conditions hereof, the Bank hereby waives the Existing Default.

3.3 Nothing contained herein shall be deemed a waiver of (or otherwise affect the Bank’s ability to enforce) any other event of default, including without limitation (i) any event of default as may now or hereafter exist and arise from or otherwise be related to the Existing Default (including without limitation any cross-default arising under the Agreement by virtue of any matters resulting from the Existing Default), and (ii) any event of default arising at any time after the date of this Waiver and Amendment which is the same as the Existing Default.

4. Representations and Warranties. When the Borrower signs this Waiver and Amendment, the Borrower represents and warrants to the Bank that: (a) there is no event which is, or with notice or lapse of time or both would be, a default under the Agreement except those events, if any, that have been disclosed in writing to the Bank or waived in writing by the Bank, (b) the representations and warranties in the Agreement are true as of the date of this Waiver and Amendment as if made on the date of this Waiver and Amendment, (c) this Waiver and Amendment does not conflict with any law, agreement, or obligation by which the Borrower is bound, (d) this Waiver and Amendment is within the Borrower's powers, has been duly authorized, and does not conflict with any of the Borrower's organizational papers, and (e) the Borrower is entering into this Waiver and Amendment on the basis of its own investigation and for its own reasons, without reliance on the Bank or any other entity or individual.

5. Conditions. This Waiver an Amendment will be effective when the Bank receives the following items, in form and content acceptable to the Bank:

5.1 This Waiver and Amendment signed by the Borrower and the Bank.

5.2 Payment by the Borrower of all costs, expenses and attorneys' fees (including allocated costs for in-house legal services) incurred by the Bank in connection with this Waiver and Amendment.

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6. Reservation of Rights . The Borrower acknowledges and agrees that neither the Bank’s forbearance in exercising its rights and remedies in connection with the Existing Default nor the execution and delivery by the Bank of this Waiver and Amendment shall not be deemed (a) to create a course of dealing or otherwise obligate the Bank to forbear or execute similar waivers under the same or similar circumstances in the future, or (b) to waive, relinquish or impair any right of the Bank to receive any indemnity or similar payment from any person or entity as a result of any matter arising from or relating to the Existing Default.

7. Effect of Waiver and Amendment . Except as provided in this Waiver and Amendment, all of the terms and conditions of the Agreement, including but not limited to the Dispute Resolution Provision, shall remain in full force and effect.

8. Counterparts . This Waiver and Amendment may be executed in counterparts, each of which when so executed shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.

9. FINAL AGREEMENT . BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THIS DOCUMENT REPRESENTS THE FINAL AGREEMENT BETWEEN PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, (B) THIS DOCUMENT SUPERSEDES ANY COMMITMENT LETTER, TERM SHEET OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS RELATING TO THE SUBJECT MATTER HEREOF, UNLESS SUCH COMMITMENT LETTER, TERM SHEET OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS EXPRESSLY PROVIDES TO THE CONTRARY, (C) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND (D) THIS DOCUMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.

This Waiver and Amendment is executed as of the date stated at the beginning of this Waiver and Amendment.

Bank of America, N.A.

By /s/ Kanika Chakravorti

Kanika Chakravorti

Vice President

American Shared Hospital Services

By /s/ Ernest A. Bates, M.D.

Ernest A. Bates, M.D.

Chairman of the Board

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Exhibit 10.57b

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.

SECOND AMENDMENT TO PURCHASED SERVICES AGREEMENT

This SECOND AMENDMENT TO PURCHASED SERVICES AGREEMENT (this “Second Amendment”) is dated effective as of October 1, 2013 (the "Effective Date"), and is entered into by and between GK FINANCING, LLC, a California limited liability company (“GKF”), or its wholly owned subsidiary whose obligations hereunder shall be guaranteed by GKF, and UNIVERSITY OF SOUTHERN CALIFORNIA, a California nonprofit public benefit corporation (“Hospital”).

Recitals :

A. On March 5, 2008, GKF and USC University Hospital, Inc. entered into a certain Purchased Services Agreement, which Purchased Services Agreement was (i) transferred and assigned by USC University Hospital, Inc. to Hospital pursuant to a certain letter dated effective as of March 31, 2009; and (ii) amended by a certain First Amendment to Purchased Services Agreement dated effective as of April 1, 2009 (the "First Amendment"), between GKF and Hospital (as so assigned and amended, the "Agreement").

B. GKF and Hospital desire to further amend the Agreement as set forth herein.

NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereby amend the Agreement as follows:

Agreement :

1. Defined Terms . Unless otherwise defined herein, the capitalized terms used herein shall have the same meanings set forth in the Agreement.

2. New Section 11.3 . The following is hereby added as a new Section 11.3 to the Agreement:

“11.3 GKF and Hospital shall mutually select an individual to be employed or contracted by Hospital and who shall be located at the Site to provide Gamma Knife administrative and marketing support services. The individual’s duties shall include but not be limited to (i) working with and routinely obtain feedback from physicians and medical groups; (ii) assisting in outreach and business development efforts out in the community; and (iii) assisting in marketing activities on an as needed basis. GKF shall reimburse Hospital for * for the actual cost (which reimbursement by GKF to Hospital shall not exceed * annually from the date of hire) of the individual and payment shall be made by GKF to Hospital by the end of the following month. Any decision to reassign, replace or terminate this individual shall be subject to prior mutual agreement by GKF and Hospital. GKF's obligation to reimburse Hospital for the actual cost of the individual as set forth above shall be limited to a period of one (1) year following the date of the individual's hire, and any additional reimbursement by GKF shall be subject to mutual agreement of the parties.”

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3. Amendment to Exhibit 8 . Commencing as of the Effective Date, and continuing through September 30, 2016, Exhibit 8 attached to this Second Amendment shall be in effect instead of Exhibit 8 attached to the First Amendment; provided that, commencing from and after October 1, 2016, Exhibit 8 attached to this Second Amendment shall be of no further force and effect, and Exhibit 8 attached to the First Amendment shall be reinstated and shall be in effect and control.

4. Cobalt Reload of the Equipment . Subject to GKF’s determination in its sole and absolute discretion that a reload of the Equipment is financially justifiable based upon the utilization of the Equipment and other factors considered relevant by GKF and as enumerated in Section 18 of the Agreement (Termination for Economic Justification), GKF, at GKF’s cost and expense, shall reload the Equipment with new cobalt-60 that meets the manufacturer’s radioactivity level specifications (the “Reload”), subject to the following additional terms and conditions:

4.1 Scheduling and Process for the Reload . The Reload shall be performed at the Site and shall include any required installation and rigging. Subject to scheduling availability, GKF shall use its commercially reasonable efforts to perform the Reload on or around first quarter 2015; provided that the Reload shall be performed only after all necessary and appropriate licenses, permits, approvals, consents and authorizations, including, without limitation, the proper handling of the cobalt-60 (collectively, the “Permits”), have been obtained by Hospital at Hospital’s sole cost and expense (other than any filing or registration fees which shall be paid by GKF). GKF shall diligently and in good faith cooperate with Hospital’s efforts to obtain the Permits. The timing and procedure for such Reload shall be as mutually agreed upon between the parties. Notwithstanding anything to the contrary contained in this Second Amendment, GKF makes no representation or warranty to Hospital concerning the Reload, and GKF shall have no obligation or liability to pay any damages to Hospital resulting therefrom, including, without limitation, any lost revenues or profits during the period of time that the Equipment is unavailable to perform procedures due to the Reload process.

4.2 Hospital Personnel and Services . Upon request and as required by GKF, Hospital, at Hospital’s cost and expense, shall provide GKF with Hospital personnel (including Hospital’s physicists) and services in connection with the Reload, 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 Equipment. Hospital shall not be entitled to reimbursement for its respective personnel costs, internal costs or overhead.

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4.3 Extension of Lease Term . The Term of the Agreement is hereby extended to July 8, 2020, plus the period of time that the Equipment is unavailable to perform procedures due to the Reload, which Reload is estimated to take approximately three (3) weeks).

4.4 No Additional Responsibilities . It is understood by the parties that GKF is not responsible for any upgrades, hardware, cobalt reloading, software changes and/or other modifications to the Equipment, except as expressly set forth herein or otherwise agreed upon in writing by Hospital and GKF.

5. Full Force and Effect . Except as amended by this Second Amendment, all of the terms and provisions of the Agreement shall remain in full force and effect. Notwithstanding the foregoing, to the extent of any conflict or inconsistency between the terms and provisions of this Second Amendment and that of the Agreement, the terms and provisions of this Second Amendment shall prevail and control.

IN WITNESS WHEREOF, the parties have executed this Second Amendment effective as of the Effective Date.

GKF :		Hospital :
GK FINANCING, LLC		UNIVERSITY OF SOUTHERN CALIFORNIA


By:	/s/ Ernest A. Bates, M.D.	By:	/s/ Thomas Jackiewicz
	Ernest A. Bates, M.D.,	Name:	Thomas Jackiewicz
	Policy Committee Member	Title:	Senior VP and CEO, USC Health

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Exhibit 8

PER PROCEDURE PAYMENTS

[This Exhibit 8 is effective only from Effective Date through September 30, 2016.

Effective from and after October 1, 2016, this Exhibit 8 shall be of no further force and effect, and Exhibit 8 attached to the First Amendment shall be reinstated and shall be in effect and control.]

Annual Procedures Performed	Fee Per Procedure
*	*
*	*
*	*
*	*

Notwithstanding anything to the contrary set forth herein, (a) for purposes of determining the per Procedure payment, the number of annual Procedures performed shall be reset to zero (0) at the commencement of each anniversary of the First Procedure Date; and (b) there shall be no retroactive adjustment of the per Procedure payment irrespective of whether (i) the number of Procedures performed reaches a lower per Procedure payment level, or (ii) the Procedure was performed during the same annual period but under a prior Fee Per Procedure schedule. For example, if the aggregate number of Procedures during an annual period totals *, then, the per Procedure payment for each of the first * Procedures would remain at * per Procedure while the per Procedure payment for each of the next * Procedures (i.e., for Procedures * through *) would remain at * per Procedure, and the per Procedure payment for each of the next * Procedures (i.e., for Procedures * through *) would be * per Procedure. There are no minimum volume requirements.

“Charity Patients” shall be exempt from Hospital’s payment to GKF under the Fee Per Procedure Schedule and shall not be included in the counting of annual Procedures performed. As used herein, a "Charity Patient" shall mean a patient who requires a Gamma Knife procedure and who meets all of the following criteria: (1) such patient is not covered by Medicare, Medi-Cal or other governmental or private insurance programs (whether indemnity, preferred provider, health maintenance organization, etc.); (2) such patient does not have the means to pay for such procedures based on Hospital’s adopted standards of indigency; (3) the Hospital does not receive reimbursement for any Hospital services rendered to such patient; and (4) such patient is either then enrolled in N107C and/or is then receiving treatment at (i) Los Angeles County Hospital (also known as Los Angeles County+USC Medical Center or County/USC) or (ii) Keck Hospital of USC or USC Kenneth Norris Jr. Cancer Hospital; provided, however, that there shall be a limit of * patients per year for Charity Patients qualified under this subsection (ii).

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Exhibit 31.1

CERTIFICATION

I, Ernest A. Bates, M.D., as chief executive officer of American Shared Hospital Services, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Shared Hospital Services;

2. Based on my knowledge, this 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;

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;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures 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;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c) evaluated the effectiveness of the registrant’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

d) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during registrant’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’s internal control over financial reporting;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

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's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting .

August 14, 2014

/s/ Ernest A. Bates, M.D.
Ernest A. Bates, M.D.

Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Craig K. Tagawa., as chief financial officer of American Shared Hospital Services, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Shared Hospital Services;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting .

August 14, 2014

/s/ Craig K. Tagawa
Craig K. Tagawa

Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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 June 30, 2014 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

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:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of American Shared Hospital Services.

August 14, 2014

	/s/ Ernest A. Bates, M.D.
	Ernest A. Bates, M.D.
	Chief Executive Officer

	/s/ Craig K. Tagawa
	Craig K. Tagawa
	Chief Financial Officer