AMERICAN SHARED HOSPITAL SERVICES (Form: 10-Q, Received: 05/15/2017 15:09:04)

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 March 31, 2017 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 001-08789

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.)

	Two Embarcadero Center, Suite 410, 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”, “smaller reporting company” and “emerging growth” company in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ¨

Accelerated Filer ¨

Non-Accelerated Filer ¨

Smaller reporting company x

Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of May 5, 2017, there are outstanding 5,707,000 shares of the Registrant’s common stock.

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(unaudited)
	March 31, 2017			December 31, 2016

ASSETS
Current assets:
Cash and cash equivalents	$	2,403,000		$	2,871,000
Restricted cash		250,000			250,000
Accounts receivable, net of allowance for doubtful accounts of $100,000 at March 31, 2017 and $100,000 at December 31, 2016		4,881,000			4,085,000

Other receivables		249,000			290,000
Prepaid expenses and other current assets		982,000			892,000

Total current assets		8,765,000			8,388,000

Property and equipment:
Medical equipment and facilities		98,490,000			96,270,000
Office equipment		537,000			537,000
Deposits and construction in progress		6,959,000			8,073,000
		105,986,000			104,880,000
Accumulated depreciation and amortization		(55,160,000	)		(53,549,000	)
Net property and equipment		50,826,000			51,331,000

Investment in equity securities		579,000			579,000
Other assets		263,000			300,000

Total assets	$	60,433,000		$	60,598,000

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	437,000		$	319,000
Employee compensation and benefits		193,000			184,000
Other accrued liabilities		1,103,000			1,100,000

Current portion of long-term debt		2,215,000			2,205,000
Current portion of obligations under capital leases		4,490,000			4,873,000

Total current liabilities		8,438,000			8,681,000

Long-term debt, less current portion		5,597,000			5,106,000
Long-term capital leases, less current portion		13,691,000			14,852,000
Deferred revenue, less current portion		583,000			610,000

Deferred income taxes		4,350,000			4,176,000

Shareholders' equity:
Common stock (10,000,000 authorized; 5,706,000 shares issued and outstanding at March 31, 2017 and 5,468,000 at December 31, 2016)		10,711,000			10,596,000
Additional paid-in capital		5,999,000			5,949,000
Retained earnings		5,243,000			4,950,000
Total equity-American Shared Hospital Services		21,953,000			21,495,000
Non-controlling interest in subsidiary		5,821,000			5,678,000
Total shareholders' equity		27,774,000			27,173,000

Total liabilities and shareholders' equity	$	60,433,000		$	60,598,000

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months ended March 31,
	2017			2016

Medical services revenue	$	4,914,000		$	4,238,000

Costs of revenue:

Maintenance and supplies		232,000			244,000

Depreciation and amortization		1,604,000			1,562,000

Other direct operating costs		732,000			699,000

		2,568,000			2,505,000

Gross Margin		2,346,000			1,733,000

Selling and administrative expense		1,139,000			949,000

Interest expense		453,000			285,000

Operating income		754,000			499,000

(Loss) on early extinguishment of debt		-			(108,000	)

Interest and other income		4,000			5,000

Income before income taxes		758,000			396,000

Income tax expense		216,000			64,000

Net income		542,000			332,000
Less: Net income attributable to non-controlling interest		(249,000	)		(281,000	)

Net income attributable to American Shared Hospital Services	$	293,000		$	51,000

Net income per share:

Earnings per common share - basic	$	0.05		$	0.01

Earnings per common share - diluted	$	0.05		$	0.01

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

	YEAR ENDED DECEMBER 31, 2016 AND THREE MONTH PERIOD MARCH 31, 2017

					Additional						Non-controlling
	Common		Common		Paid-in		Retained		Sub-Total		Interests in
	Shares		Stock		Capital		Earnings		ASHS		Subsidiaries			Total

Balances at January 1, 2016		5,364,000	$	10,376,000	$	5,734,000	$	4,020,000	$	20,130,000	$	5,050,000		$	25,180,000

Stock-based compensation expense		4,000		-		215,000		-		215,000		-			215,000

Warrants Exercised		100,000		220,000		-		-		220,000		-			220,000

Non-controlling interest investment in subsidiaries		-		-		-		-		-		7,000			7,000

Cash distributions to non-controlling interests		-		-		-		-		-		(699,000	)		(699,000	)

Net income		-		-		-		930,000		930,000		1,320,000			2,250,000

Balances at December 31, 2016		5,468,000		10,596,000		5,949,000		4,950,000		21,495,000		5,678,000			27,173,000

Stock-based compensation expense		-		-		50,000		-		50,000		-			50,000

Restricted stock		162,000		-		-		-		-		-			-

Warrants and options exercised		76,000		115,000		-		-		115,000		-			115,000

Cash distributions to non-controlling interests		-		-		-		-		-		(106,000	)		(106,000	)

Net income		-		-		-		293,000		293,000		249,000			542,000

Balances at March 31, 2017		5,706,000	$	10,711,000	$	5,999,000	$	5,243,000	$	21,953,000	$	5,821,000		$	27,774,000

See accompanying notes

AMERICAN SHARED HOSPITAL SERVICES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months ended March 31,
	2017			2016
Operating activities:
Net income	$	542,000		$	332,000

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

Depreciation and amortization		1,622,000			1,574,000

(Gain) on sale of assets		-			(1,000	)

Loss on early extinguishment of debt		-			108,000

Deferred income tax		174,000			64,000

Stock-based compensation expense		50,000			59,000

Net accrued interest on lease financing		(27,000	)		-

Other non-cash items		-			4,000

Changes in operating assets and liabilities:

Receivables		(755,000	)		(500,000	)

Prepaid expenses and other assets		(60,000	)		22,000

Customer deposits/deferred revenue		(31,000	)		(78,000	)

Accounts payable and accrued liabilities		134,000			136,000

Net cash from operating activities		1,649,000			1,720,000

Investing activities:
Payment for purchase of property and equipment		(1,106,000	)		(333,000	)

Net cash used in investing activities		(1,106,000	)		(333,000	)

Financing activities:
Principal payments on long-term debt		(495,000	)		(1,439,000	)

Principal payments on capital leases		(1,517,000	)		(1,064,000	)

Proceeds from long-term debt financing on property and equipment		992,000			-

Capital contributions from non-controlling interests		-			7,000

Distributions to non-controlling interests		(106,000	)		(97,000	)

Proceeds from warrants and options exercised		115,000			-

Proceeds from capital lease financing for reimbursement of payments for acquisition of equipment		-			1,137,000

Net cash used in financing activities		(1,011,000	)		(1,456,000	)

Net change in cash and cash equivalents		(468,000	)		(69,000	)

Cash and cash equivalents at beginning of period		2,871,000			2,209,000

Cash and cash equivalents at end of period	$	2,403,000		$	2,140,000

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

Interest	$	491,000		$	515,000

Income taxes	$	22,000		$	96,000

Schedule of non-cash investing and financing activities
Acquisition of equipment with capital lease financing	$	-		$	6,870,000

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 only normal recurring accruals) necessary to present fairly American Shared Hospital Services’ consolidated financial position as of March 31, 2017 and the results of its operations for the three month periods ended March 31, 2017 and 2016, which results are not necessarily indicative of results on an annualized basis. Consolidated balance sheet amounts as of December 31, 2016 have been derived from audited consolidated financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2016 included in the Company’s 10-K filed with the Securities and Exchange Commission.

These consolidated financial statements include the accounts of American Shared Hospital Services and its subsidiaries (the “Company”) as follows: the Company wholly-owns the subsidiaries American Shared Radiosurgery Services (“ASRS”), PBRT Orlando, LLC (“Orlando”), OR21, Inc. (“OR21”), and MedLeader.com, Inc. (“MedLeader”); the Company is the majority owner of Long Beach Equipment, LLC (“LBE”); ASRS is the majority-owner of GK Financing, LLC (“GKF”) which wholly-owns the subsidiaries Instituto de Gamma Knife del Pacifico S.A.C. (“GKPeru”) and GK Financing U.K., Limited (“GKUK”); GKF is the majority owner of the subsidiaries Albuquerque GK Equipment, LLC (“AGKE”) and Jacksonville GK Equipment, LLC (“JGKE”).

The Company (through ASRS) and Elekta AB, the manufacturer of the Gamma Knife (through its wholly-owned United States subsidiary, GKV Investments, Inc.), entered into an operating agreement and formed GK Financing, LLC. During 2017 GKF provided Gamma Knife units to seventeen medical centers in the United States in the states of Arkansas, California, Connecticut, Florida, Illinois, Massachusetts, Mississippi, Nevada, New Jersey, New Mexico, New York, Tennessee, Oklahoma, Ohio, Oregon, and Texas.

The Company through its wholly-owned subsidiary, Orlando, provided proton beam radiation therapy (“PBRT”) and related equipment to a customer in the United States. 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 Massachusetts.

The Company formed the subsidiaries GKPeru and GKUK for the purposes of expanding its business internationally into Peru and the United Kingdom, respectively; Orlando and LBE to provide proton beam therapy services in Orlando, Florida and Long Beach, California; and AGKE and JGKE to provide Gamma Knife services in Albuquerque, New Mexico and Jacksonville, Florida, respectively. AGKE began operations in the second quarter of 2011 and JGKE began operations in the fourth quarter of 2011. Orlando treated its first patient in April 2016. GKPeru is expected to begin operations in the third quarter of 2017. GKUK is inactive and LBE is not expected to generate revenue within the next two years.

The Company continues to develop its design and business model for “The Operating Room for the 21st Century” ^SM (“OR21” ^SM ), through its 50% owned OR21, LLC (“OR21 LLC”). The remaining 50% is owned by an architectural design company. OR21 is not expected to generate significant revenue within the next two years.

MedLeader was formed to provide continuing medical education online and through videos for doctors, nurses, and other healthcare workers. This subsidiary is not operational at this time.

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

Based on the guidance provided in accordance with ASC 280 Segment Reporting (“ASC 280”), the Company has analyzed its subsidiaries which are all in the business of leasing radiosurgery and radiation therapy equipment to healthcare providers, and concluded there is one reportable segment, Medical Services Revenue. The Company provides Gamma Knife, PBRT, and IGRT equipment to eighteen hospitals in the United States as of March 31, 2017. These eighteen locations operate under different subsidiaries of the Company, but offer the same service, radiosurgery, and radiation therapy. The operating results of the subsidiaries are reviewed by the Company’s Chief Executive Officer and Chief Financial Officer, who are also deemed the Company’s Chief Operating Decision Makers (“CODMs”) and this is done in conjunction with all of the subsidiaries and locations.

In February 2016, the Company used proceeds from the lease financing of its MEVION S250 at UF Health Cancer Center at Orlando Health (“Orlando Health”) to pay down $1,000,000 in Promissory Notes (the “Notes”) with four members of the Company’s Board of Directors. Based on the guidance provided in accordance with ASC 405 Extinguishment of Liabilities (“ASC 405”) and ASC 470 Debt Modifications and Extinguishments (“ASC 470”), the pay-down of the Notes is considered an extinguishment of debt and, as such, the difference between the net carrying amount of the Notes and the costs of extinguishment was recognized as a loss on the Company’s condensed consolidated statements of operations. During the year ended December 31, 2016, the Company recorded a loss on early extinguishment of debt of $108,000. The Notes were issued with common stock warrants with an estimated fair value of $145,000. The unamortized balance of the discount on the Notes, of $80,000, and deferred fees incurred from the issuance of the Note of approximately $28,000, were recorded as a loss on early extinguishment.

In July 2016, an existing customer provided notice of its intent to exercise the option to purchase the Gamma Knife unit at its hospital at the end of the lease term for a predetermined purchase price, pursuant to the lease agreement. The lease terminated in April 2017, at which time, the unit was depreciated to the purchase price of the sale. Based on the guidance provided in ASC 360 Property, Plant and Equipment (“ASC 360”), because the Gamma Knife unit was not available for immediate sale, the Company did not classify or measure the asset as held for sale prior to the lease termination.

As of December 31, 2016, the Company had warrants outstanding representing the right to purchase 100,000 shares of the Company’s common stock at $2.20 per share. These warrants were issued with the Notes to four members of the Company’s Board of Directors in a prior year. During the three month period ended March 31, 2017, 100,000 of the warrants were exercised. Of the 100,000 outstanding, 50,000 of the warrants exercised were done so through a cashless exercise issuance, totaling approximately 25,000 shares. There are no warrants outstanding as of March 31, 2017.

In May 2014, the Financial Accounting Standards Board “(FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in United States Generally Accepted Accounting Principles (“GAAP”) when it becomes effective. In December 2016, FASB issued ASU 2016-20 Technical Corrections and Improvements to Topic 606, (“ASU 2016-20”), which affects some narrow aspects of ASU 2014-09. The new standard is effective for the Company for annual reporting periods beginning after December 15, 2017 and interim reporting periods therein. Early application is permitted for reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has a project team in place to analyze the impact of ASU 2014-09 to its revenue stream. This includes performing a review of current policies to identify potential differences that would result from applying ASU 2014-09. The Company believes it is following an appropriate timeline to allow for proper recognition, presentation, and disclosure upon adoption. The Company intends to adopt the standard at the date required for public companies, but has not yet selected a transition method.

In January 2016, the FASB issued ASU No. 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) which requires equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income. The new guidance is effective for the Company on January 1, 2018. Early adoption is permitted. The standard permits the use of cumulative-effect transition method. The Company is evaluating the effect that ASU 2016-01 will have on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02 Leases (“ASU 2016-02”), which requires lessees to recognize, for all leases, at the commencement date, a lease liability, and a right-of-use asset. Under the new guidance, lessor accounting is largely unchanged. The new guidance is effective for the Company on January 1, 2019. Early adoption is permitted. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09 Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”) which changes five aspects of accounting for share-based payment award transactions including 1) accounting for income taxes; 2) classification of excess tax benefits on the statement of cash flows; 3) forfeitures; 4) minimum statutory tax withholding requirements; and 5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. The new guidance is effective for the Company for interim and annual periods beginning after December 15, 2016. The Company adopted ASU 2016-09 on January 1, 2017. The Company elected to estimate the impact of forfeitures. There was no material impact on the consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. The new guidance is effective for fiscal periods beginning after December 15, 2019. Early adoption is permitted for fiscal periods beginning after December 15, 2018. The Company is evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which provides guidance on eight specific cash flow issues: debt prepayment or extinguishment costs; settlement of zero-coupon or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the Predominance Principle. The new guidance is effective for fiscal periods beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the effect that ASU 2016-15 will have on its consolidated financial statements and related disclosures.

In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230) – Restricted Cash (“ASU 2016-18”), which requires that a statement of cash flows explain the change during the period in total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the effect that ASU 2016-18 will have on its consolidated financial statements and related disclosures.

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. The computation for the three month periods ended March 31, 2017 and 2016 excluded approximately 0 and 617,000, respectively, of the Company’s stock options because the exercise price of the options was higher than the average market price during the period.

Based on the guidance provided in accordance with ASC 260 Earnings Per Share (“ASC 260”), the weighted average common shares for basic earnings per share, for the three month period ended March 31, 2017, excluded the weighted average impact of the performance share awards, discussed below. These awards are legally outstanding but are not deemed participating securities and therefore are excluded from the calculation of basic earnings per share. These shares are also excluded from the denominator for diluted earnings per share because they are considered contingent shares as of March 31, 2017.

The following table sets forth the computation of basic and diluted earnings per share for the three month periods ended March 31, 2017 and 2016:

	Three Months ended March 31,
	2017		2016
Net income attributable to American Shared Hospital Services	$	293,000	$	51,000

Weighted average common shares for basic earnings per share		5,685,000		5,541,000
Diluted effect of stock options and restricted stock		199,000		-
Weighted average common shares for diluted earnings per share		5,884,000		5,541,000

Basic earnings per share	$	0.05	$	0.01
Diluted earnings per share	$	0.05	$	0.01

Note 3.

Stock-based Compensation

In June 2010 shareholders approved an amendment and restatement of the Company’s stock incentive plan, renaming it the Incentive Compensation Plan (the “Plan”), and among other things, increasing the number of shares of the Company’s common stock reserved for issuance under the Plan to 1,630,000. The Plan provides that the shares reserved under the Plan are available for issuance to officers of the Company, other key employees, non-employee directors, and advisors. The Plan is a successor to the Company’s previous plans, and any shares awarded and outstanding under those plans were transferred to the Plan. No further grants or share issuances will be made under the previous plans. On June 16, 2015, the Company’s shareholders approved an amendment and restatement of the Plan in order to extend the term of the Plan by two years. The Company’s shareholders will vote to approve the amendment and restatement of the Plan by an additional two years at the annual shareholder meeting to be held on June 27, 2017.

Stock-based compensation expense associated with the Company’s stock-based options 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 (requisite service period), usually the vesting period. Accordingly, stock-based compensation cost before income tax effect for the Company’s options and restricted stock units in the amount of $50,000 and $59,000 is reflected in net income for the three month periods ended March 31, 2017 and 2016, respectively. At March 31, 2017, there was approximately $356,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan, excluding unrecognized compensation cost associated with the performance share awards, discussed below. This cost is expected to be recognized over a period of approximately three years.

On January 4, 2017, the Company entered into a Performance Share Award Agreement (the “Agreements”) with three executive officers of the Company for 161,766 restricted stock awards which vest upon the achievement of certain performance metrics. The agreements expire on March 31, 2020. Based on the guidance in ASC 718 Stock Compensation (“ASC 718”), the Company concluded these were performance based awards with vesting criteria tied to performance metrics and that as of March 31, 2017 it is not probable that any of the required metrics for vesting will be achieved. As a result, the Company has not recognized any stock-based compensation expense associated with these awards for the three month period ended March 31, 2017. The unrecognized stock-based compensation expense for these awards was approximately $542,000 as of March 31, 2017. If and when the Company determines that the performance metrics’ achievement becomes probable, the Company will record a cumulative catch-up stock-based compensation amount and the remaining unrecognized amount will be recorded over the remaining requisite service period of the awards.

The following table summarizes unvested restricted stock awards, consisting primarily of annual automatic grants and deferred compensation to non-employee directors, for the three-month period ended March 31, 2017:

	Restricted Stock Units			Grant Date Weighted- Average Fair Value		Intrinsic Value
Outstanding at January 1, 2017		4,000		$	2.25	$	-
Granted		18,000		$	3.40	$	-
Vested		(4,000	)	$	3.40	$	-
Forfeited		-		$	-	$	-
Outstanding at March 31, 2017		18,000		$	3.21	$	20,000

The following table summarizes stock option activity for the three month period ended March 31, 2017:

	Stock Options			Grant Date Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)
Outstanding at January 1, 2017		625,000		$	2.85		4.25
Granted		-		$	-		-
Exercised		(2,000	)	$	2.81		-
Forfeited		-		$	-		-
Outstanding at March 31, 2017		623,000		$	2.85		4.02
Exercisable at March 31, 2017		304,000		$	2.83		3.80

Note 4.

Investment in Equity Securities

As of March 31, 2017 and December 31, 2016 the Company had a $579,000 investment in the common stock of Mevion Medical Systems, Inc. (“Mevion”) formerly Still River Systems, representing an approximate 0.46% 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 reviewed this investment at March 31, 2017 in light of both current market conditions and the current operations of Mevion as they continue to grow their PBRT business. Based on its analysis, the Company determined no impairment needed to be recognized as of March 31, 2017.

Note 5.

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 March 31, 2017 and December 31, 2016 were as follows (in thousands):

	Level 1		Level 2		Level 3		Total		Carrying Value
March 31, 2017

Assets:
Cash, cash equivalents, restricted cash	$	2,653	$	-	$	-	$	2,653	$	2,653
Investment in equity securities		-		-		579		579		579
Total	$	2,653	$	-	$	579	$	3,232	$	3,232

Liabilities
Debt obligations	$	-	$	-	$	7,040	$	7,040	$	7,812
Total	$	-	$	-	$	7,040	$	7,040	$	7,812

December 31, 2016

Assets:
Cash, cash equivalents, restricted cash	$	3,121	$	-	$	-	$	3,121	$	3,121
Investment in equity securities		-		-		579		579		579
Total	$	3,121	$	-	$	579	$	3,700	$	3,700

Liabilities
Debt obligations	$	-	$	-	$	7,354	$	7,354	$	7,311
Total	$	-	$	-	$	7,354	$	7,354	$	7,311

Note 6.

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 of Directors reaffirmed in 2008. There were no shares repurchased during the three month period ended March 31, 2017 or 2016. There are approximately 72,000 shares remaining under this repurchase authorization as of March 31, 2017.

Note 7.

Income Taxes

We generally calculate our effective income tax rate at the end of an interim period using an estimate of the annualized effective income tax rate expected to be applicable for the full fiscal year. However, when a reliable estimate of the annualized effective income tax rate cannot be made, we compute our provision for income taxes using the actual effective income tax rate for the results of operations reported within the year-to-date periods. Our effective income tax rate is highly influenced by relative income or losses reported and the amount of the nondeductible stock-based compensation associated with grants of our common stock options and historically from the results of foreign operations. A small change in estimated annual pretax income (loss) can produce a significant variance in the annualized effective income tax rate given the expected amount of these items. As a result, we have computed our provision for income taxes for the three month periods ended March 31, 2017 and 2016 by applying the actual effective tax rates to income reported within the condensed consolidated financial statements through those periods.

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 Mevion. 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, 2016 and the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 27, 2017.

The Company had seventeen Gamma Knife units, one PBRT system and one IGRT machine in operation at March 31, 2017, and seventeen Gamma Knife units and one IGRT machine in operation at March 31, 2016. Two of the Company’s customer contracts are through subsidiaries where GKF or its subsidiary is the majority owner and managing partner. Ten of the Company’s seventeen current Gamma Knife customers are under fee-per-use contracts, and seven customers are under retail arrangements. The Company’s contracts to provide radiation therapy and related equipment services to an existing Gamma Knife customer and the Company’s new PBRT system at Orlando Health are also considered retail arrangements. Retail arrangements are further classified as either turn-key or revenue sharing. Revenue from fee per use contracts is determined by each hospital’s contracted rate. Revenue is recognized at the time procedures are performed, based on each hospital’s contracted rate. Under revenue sharing arrangements, the Company receives a contracted percentage of the reimbursement received by the hospital. The amount the Company expects to receive is recorded as revenue and estimated based on historical experience. Revenue estimates are reviewed periodically and adjusted as necessary. Under turn-key arrangements, the Company receives payment from the hospital in the amount of the hospital’s reimbursement from third party payors, and the Company is responsible for paying all the operating costs of the equipment. Operating costs are determined primarily based on historical treatment protocols and cost schedules with the hospital. The Company records an estimate of operating costs which are reviewed on a regular basis and adjusted as necessary to more accurately reflect the actual operating costs. For turn-key sites, the Company also shares a percentage of net operating profit. The Company records an estimate of net operating profit based on estimated revenues, less estimated operating costs. The operating costs and estimated net operating profit are recorded as other direct operating costs in the consolidated statement of operations.

Effective January 1, 2017, the Centers for Medicare and Medicaid (“CMS”) established a Comprehensive Ambulatory Payment Classification for single session radiosurgery treatments. CMS has established a 2017 total reimbursement rate of approximately $9,000 ($8,800 in 2016) for a Medicare Gamma Knife treatment. The approximate CMS reimbursement rates for delivery of proton therapy for a simple treatment without compensation will be $494 ($506 in 2016) and $994 ($1,150 in 2016) for simple with compensation, intermediate and complex treatments, respectively.

Medical services revenue increased by $676,000 to $4,914,000 for the three month period ended March 31, 2017 from $4,238,000 for the three month period ended March 31, 2016. The Company’s PBRT system at Orlando Health treated its first patient in April 2016. For the three month period ended March 31, 2017, revenues generated from this system were $1,155,000, compared to $0 in the same period prior year. Gamma Knife revenue decreased $506,000 for the three month period ended March 31, 2017 to $3,619,000 from $4,125,000 for the three month period ended March 31, 2016. The decrease in Gamma Knife revenue was due to lower volumes and an increase in volumes at sites with a lower reimbursement rate compared to the Company’s historical average. Revenue from the Company’s radiation therapy contract increased for the three month period by $27,000, to $140,000 from $113,000 for the same period in the prior year.

The number of Gamma Knife procedures decreased by 25 to 456 for the three month period ended March 31, 2017 from 481 in the same quarter in the prior year. The decrease was primarily due to two customer sites experiencing downtime in order to perform a Cobalt-60 reload.

Total costs of revenue increased by $63,000 to $2,568,000 for the three month period ended March 31, 2017 from $2,505,000 for the three month period ended March 31, 2016. Maintenance and supplies decreased by $12,000 for the three month period ended March 31, 2017 compared to the same period in the prior year. Depreciation and amortization increased by $42,000 for the three month period ended March 31, 2017 compared to the same period in the prior year. The increase was due to depreciation incurred on the PBRT system. Other direct operating costs increased by $33,000 for the three month period ended March 31, 2017 compared to the same period in the prior year. The increase was due to marketing costs incurred for the PBRT system.

Selling and administrative costs increased by $190,000 to $1,139,000 for the three month period ended March 31, 2017 from $949,000 for the three month period ended March 31, 2016. This increase was primarily due to increased legal fees, severance expense, and building rent. The Company moved offices on August 13 ^th , 2016. Prior to the move, the Company subleased a portion of its existing office space. The sublease income offset total rent expense over the term of the sublease, which ended May 2016.

Interest expense increased by $168,000 to $453,000 for the three month period ended March 31, 2017 from $285,000 for the three month period ended March 31, 2016. The increase was due to interest incurred on PBRT lease financing. This was offset by a lower average principal base on the Company’s Gamma Knife debt in the first quarter of 2017, compared to prior year, effectively reducing interest expense.

The Company incurred a loss on early extinguishment of debt of $0 for the three month period ended March 31, 2017, compared to $108,000 in the same period prior year. In February 2016, the Company used a portion of the proceeds from the lease financing for its first MEVION S250 to pay down the $1,000,000 Notes pursuant to a note agreement with four members of the Company’s Board of Directors. The Note agreements permit for early payment without penalty to the Company. The Notes were issued with common stock warrants with an estimated fair value of $145,000. The unamortized balance of the discount on the Notes, of $80,000, and deferred fees incurred from the issuance of the Note of approximately $28,000, were recorded as a loss on early extinguishment of debt on the Company’s condensed consolidated Statement of Operations as of December 31, 2016.

Interest and other income decreased by $1,000 to $4,000 for the three month period ended March 31, 2017 from $5,000 for the three month period ended March 31, 2016. Interest and other income is generated from interest earned on the Company’s investments.

The Company had income tax expense of $216,000 for the three month period ended March 31, 2017 compared to income tax expense of $64,000 for the three month period ended March 31, 2016. The increase in income tax expense is primarily due to taxable income attributable to GKF and PBRT Orlando operations.

Net income attributable to non-controlling interest decreased by $32,000 to $249,000 for the three month period ended March 31, 2017 from $281,000 for the three month period ended March 31, 2016. Net income attributable to non-controlling interests represents net income earned by the 19% non-controlling interest in GKF, and net income of the non-controlling interests in various subsidiaries controlled by GKF. The decrease or increase in net income attributable to non-controlling interests reflects the relative profitability of GKF.

The Company had net income of $293,000, or $0.05 per basic and diluted share, for the three month period ended March 31, 2017 compared to net income of $51,000, or $0.01 per basic and diluted share, in the same period in the prior year. The increase in net income was primarily due to PBRT Orlando operations, offset by an increase in selling and administrative costs.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $2,403,000 at March 31, 2017 compared to $2,871,000 at December 31, 2016. The Company’s cash position decreased by $468,000 primarily due to an increase in accounts receivable of 755,000, offset by net cash from accounts payable of $134,000.

The Company has scheduled interest and principal payments under its debt obligations of approximately $2,696,000 and scheduled capital lease payments of approximately $6,068,000 during the next 12 months. The Company believes that its cash flow from cash on hand, operations, and other cash resources are adequate to meet its scheduled debt and capital lease obligations during the next 12 months. See additional discussion below related to commitments.

The Company as of March 31, 2017 had shareholders’ equity of $27,774,000, working capital of $327,000 and total assets of $60,433,000.

Commitments

As of March 31, 2017, the Company had commitments to purchase two MEVION S250 PBRT systems for $25,800,000 and the Company had $2,000,000 in non-refundable deposits toward the purchase of these two PBRT systems from Mevion. The non-refundable deposits are recorded in the Condensed Consolidated Balance Sheets as deposits and construction in progress.

The Company and Mevion have not agreed on construction and delivery timetables for the second and third PBRT units for which the Company has purchase commitments. The Company is actively seeking sites for these units but to date has not entered into agreements with any party for either placement of a PBRT unit or the related financing. In the past, the Company and Mevion have established construction and delivery timetables, and therefore progress payment dates, only after the Company has notified Mevion that there is a proposed site for the unit. Accordingly, the timing of the required payments for the remaining $25,800,000 of the Company’s purchase commitments remains uncertain. The Company’s position is that these payments should not commence until a site is available for a PBRT unit and the related financing is in place.

As of March 31, 2017, the Company had commitments to purchase one Gamma Knife Perfexion system and is scheduled to install one Gamma Knife Model 4C system, which the Company previously financed and owns. Total Gamma Knife commitments as of March 31, 2017 were $2,350,000. The Model 4C unit is installed at the Company’s new customer site in Peru and is expected to begin patient treatments in the third quarter of this year. There are cash requirements for the Peru commitment in the next 12 months of approximately $200,000. The Company believes that cash flow from cash on hand and operations will be sufficient to cover this payment. The Perfexion unit is for a new site the Company expects to start treating patients in the latter half of 2017. The Company has secured financing for this unit. There are no other significant cash requirements in the next 12 months. 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.

The Company estimates the following commitments for each of the equipment systems with expected timing of payments as follows as of March 31, 2017:

	2017		Thereafter		Total

Proton Beam Units	$	-	$	25,800,000	$	25,800,000

Gamma Knife Units		2,350,000		-		2,350,000

Total	$	2,350,000	$	25,800,000	$	28,150,000

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, trust 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 March 31, 2017, 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 March 31, 2017, 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 March 31, 2017 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, 2016.

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds.
		None.

Item 3.		Defaults Upon Senior Securities.
		None.

Item 4.		Mine Safety Disclosures
		Not applicable.

Item 5.		Other Information.
		None.

Item 6.		Exhibit Index

			Incorporated by reference herein
Exhibit
Number		Description	Form	Exhibit	Date

3.1	*	Articles of Incorporation of the Company, as amended.
3.2	*	By-laws of the Company, as amended and restated dated as of June 21, 2016.
10.1	*	Addendum Four to Lease Agreement for a Gamma Knife Unit dated as of April 25, 2016 between The Community Hospital Group, Inc., dba JFK Medical Center and GK Financing, LLC.
31.1	*	Certification of Chief Executive Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14a/15d-14a, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
32.1	ǂ	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	*	XBRL Instance Document
101.SCH	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Calculation Linkbase Document
101.DEF	*	XBRL Taxonomy Definition Linkbase Document
101.LAB	*	XBRL Taxonomy Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document

	*	Filed herewith.
	ǂ	Furnished herewith.

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:	May 15, 2017	/s/ Ernest A. Bates, M.D.
		Ernest A. Bates, M.D.
		Chairman of the Board and Chief Executive Officer

Date:	May 15, 2017	/s/ Craig K. Tagawa
		Craig K. Tagawa
		Senior Vice President
		Chief Operating and Financial Officer

Exhibit 3.1

ARTICLES OF INCORPORATION

AMERICAN SHARED HOSPITAL SERVICES

KNOW ALL MEN BY THESE PRESENTS:

That each of the undersigned hereby voluntarily executes these Articles of Incorporation for the purpose of forming a private corporation under the laws of the State of California:

ARTICLE FIRST : The name of said corporation shall be:

AMERICAN SHARED HOSPITAL SERVICES

ARTICLE SECOND ; The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

ARTICLE THIRD : The name and address in this state of the corporation’s initial agent for service of process is:

Ernest A. Bates, M.D.

350 Parnassus, Suite 701

San Francisco, CA 94117

ARTICLE FOURTH : This corporation is authorized to issue one class or shares, to be designated as “common shares.” The total number of shares which the corporation is authorized to issue is Ten Million (10,000,000) shares.

Dated: September 30, 1983	/s/ Ernest A. Bates, M. D.
	Ernest A. Bates, M. D.
	Incorporator

I declare that I am the person who executed the above Articles of Incorporation, and such instrument is my act and deed.

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

CERTIFICATE OF AMENDMENT

ARTICLES OF INCORPORATION

Ernest A. Bates, M.D. and Willie R. Barnes certify that:

1. They are the president and the secretary, respectively, of American Shared Hospital Services, a California corporation.

2. The Articles of Incorporation of this corporation are amended to include an ARTICLE FIFTH that reads as follows:

“Section 1. Elimination of Directors’ Liability. The liability of the directors of this corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.

Section 2 . Indemnification of Corporate Agents. This corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California General Corporation Law) through bylaw provisions, agreements with agents, vote of shareholders or disinterested directors or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the California General Corporation Law, subject only to the applicable limits set forth in Section 204 of the California General Corporation Law with respect to actions for breach of duty to the corporation and its shareholders.

Section 3. Insurance from a Subsidiary. This corporation is authorized to purchase and maintain insurance on behalf of its agents against any liability asserted against or incurred by the agent in such capacity or arising out of the agent’s status as such from a company, the shares of which are owned in whole or in part by this corporation, provided that any policy issued by such company is limited to the extent required by applicable law.

Section 4. Repeal or Modification. Any repeal or modification of the foregoing provisions of this ARTICLE FIFTH by the shareholders of this corporation shall not adversely affect any right or protection of an agent of this corporation existing at the time of that repeal or modification.”

3. The foregoing Amendment of Articles of Incorporation was duly approved by the Board of Directors at its meeting held on March 23, 1988, at which a quorum was present and acting throughout.

4. The foregoing Amendment of Articles of Incorporation has been duly approved by the required vote of shareholders in accordance with Section 902 of the California General Corporation Law, at a meeting held on June 3, 1988. The corporation has no shares of preferred stock outstanding. The total number of shares of Common Stock outstanding at the record date for determining shareholders entitled to vote was 2,124,581. The number of shares of Common Stock voting in favor of the amendment equalled or exceeded the vote required. The percentage vote required was more than 50%.

We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this Certificate are true of our own knowledge.

Executed at San Francisco, California on August 1, 1938.

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

	/s/ Willie R. Barnes
	Willie R. Barnes
	Secretary

Exhibit 3.2

BYLAWS

AMERICAN SHARED HOSPITAL SERVICES
(a California corporation)

Amended and Restated
as of June 21, 2016

TABLE OF CONTENTS

			Page
ARTICLE I - Applicability			4

	Section 1.	Applicability of By-laws.	4

ARTICLE II - Office			4

	Section 1.	Principal Offices.	4

	Section 2.	Change in Location or Number of Offices.	4

ARTICLE III- Meetings of Shareholders			4

	Section 1.	Place of Meetings.	4

	Section 2.	Annual Meetings.	4

	Section 3.	Special Meetings.	5

	Section 4.	Notice of Annual, Special or Adjourned Meetings.	5

	Section 5.	Record Date.	6

	Section 6.	Quorum.	7

	Section 7.	Adjournment.	7

	Section 8.	Validation of Action Taken at Defectively Called, Noticed or Held Meetings.	7

	Section 9.	Voting for Election of Directors.	7

	Section 10.	Proxies.	8

	Section 11.	Inspectors of Election.	8

	Section 12.	Action by Written Consent.	8

ARTICLE IV – Directors			9

	Section 1.	Number of Directors.	9

	Section 2.	Election of Directors.	9

	Section 3.	Term of Office.	9

	Section 4.	Vacancies.	9

	Section 5.	Removal.	10

	Section 6.	Resignation.	10

	Section 7.	Fees and Compensation.	10

ARTICLE V - Committees of the Board of Directors.			10

	Section 1.	Designation of Committees.	10

	Section 2.	Powers of Committees.	10

ARTICLE VI -Meetings of the Board of Directors and Committees Thereof.			11

	Section 1.	Place of Meetings.	11

	Section 2.	Organization Meeting.	11

	Section 3.	Other Regular Meetings.	11

	Section 4.	Special Meetings.	11

	Section 5.	Notice of Special Meetings.	11

	Section 6.	Waivers, Consents and Approvals.	11

	Section 7.	Quorum; Action at Meetings; Telephone Meetings	11

	Section 8.	Adjournment.	12

	Section 9.	Action Without a Meeting.	12

	Section 10.	Meetings of and Action by Committees.	12

ARTICLE VII - Officers			12

	Section I.	Officers.	12

	Section 2.	Election of Officers.	12

	Section 3.	Subordinate Officers, Etc.	12

	Section 4.	Removal and Resignation.	12

	Section 5.	Vacancies.	13

	Section 6.	Chairman of the Board.	13

	Section 7.	President.	13

	Section 8.	Vice President.	13

	Section 9.	Secretary.	13

	Section 10.	Chief Financial Officer.	13

ARTICLE VIII - Records and Reports			14

	Section 1.	Minute Book.	14

	Section 2.	Share Register.	14

	Section 3.	Books and Records of Account.	14

	Section 4.	By-laws.	14

	Section 5.	Inspection of Records.	14

	Section 6.	Annual Report to Shareholders.	14

ARTICLE IX - Miscellaneous			14

	Section 1.	Checks, Drafts, Etc.	14

	Section 2.	Contracts, Etc. - How Executed.	14

	Section 3.	Certificates of Stock.	15

	Section 4.	Lost Certificates.	15

	Section 5.	Representation of Shares of Other Corporations.	15

	Section 6.	Construction and Definitions.	15

	Section 8.	Permissive Indemnification.	15

	Section 9.	Payment of Expenses in Advance.	15

	Section 10.	Indemnity Not Exclusive.	16

	Section 11.	Insurance Indemnification.	16

	Section 12.	Conflicts.	16

ARTICLE X - Amendments			16

	Section 1.	Amendments.	16

BYLAWS

AMERICAN SHARED HOSPITAL SERVICES
(a California corporation)

ARTICLE I

Applicability

Section 1. Applicability of By-laws. These By-laws govern, except as otherwise provided by statute or its Articles of Incorporation, the management of the business and the conduct of the affairs of the Corporation.

ARTICLE II

Offices

Section 1. Principal Offices. The Board of Directors shall fix the location of the principal executive office of the Corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the Corporation has one or more business offices in this state, the Board of Directors shall designate a principal business office in the State of California.

Section 2. Change in Location or Number of Offices. The Board of Directors may change any office from one location to another or eliminate any office or offices.

ARTICLE III

Meetings of Shareholders

Section 1. Place of Meetings. Meetings of the shareholders shall be held at any place within or without the State of California designated by the Board of Directors, or, in the absence of such designation, at the principal executive office of the Corporation.

Section 2. Annual Meetings. (a) An annual meeting of the shareholders shall be held within 180 days following the end of the fiscal year of the Corporation at a date and time designated by the Board of Directors. Directors shall be elected at each annual meeting and any other proper business may be transacted thereat.

(b) Only persons who are nominated in accordance with the procedures set forth in this paragraph (b) shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors may be made at a meeting of shareholders by the Board of Directors or by any stockholder of the Corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (b). Any nomination by a stockholder must be made by written notice to the Secretary delivered or mailed to and received at the principal executive offices of the Corporation (i) not less than 60 days nor more than 90 days prior to the meeting, or (ii) if less than 70 days' notice of the meeting or prior public disclosure of the date of the meeting is given or made to shareholders, not later than the close of business on the tenth day following the day on which the notice of the meeting was mailed, or, if earlier, the day on which such public disclosure was made. A shareholders' notice to the Secretary shall set forth (x) as to each person whom the stockholder proposes to nominate for election or re-election as a director: (a) the name, age, business address and residence address of such person, (2) the principal occupation or employment of such person, (3) the class and number of shares of stock of the Corporation which are beneficially owned by such person (for the purposes of the regulations under Sections 13 and 14 of the Securities Exchange Act of 1934, as amended), and (4) any other information relating to such person that would be required to be disclosed in solicitations of proxies for the election of such person as a director of the Corporation pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended, and such person's written consent to being named in any proxy statement as a nominee and to serving as a director if elected; and (y) as to the stockholder giving notice (5) the name and address, as they appear on the Corporation's records, of such stockholder and (6) the class and number of shares of stock of the Corporation which are beneficially owned by such stockholder (determined as provided in clause (x) (3) above). At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. The chairman of the meeting at which a stockholder nomination is presented shall, if the facts warrant, determine and declare to the meeting that such nomination was not made in accordance with the procedures prescribed by this paragraph (b), and, in such event, the defective nomination shall be disregarded.

Section 3. Special Meetings. (a) Special meetings of the shareholders may be called by the Board of Directors, the Chairman of the Board and the President, or by the shareholders upon the request of the holders of shares entitled to cast not less than 10 percent of the votes at such meeting.

(b) Any request for the calling of a special meeting of the shareholders shall (1) be in writing, (2) specify the date and time thereof, which date shall be not less than 35 nor more than 60 days after receipt of the request, (3) specify the general nature of the business to be transacted thereat in accordance with Section 4(f) below and (4) be given either personally or by first class mail, postage prepaid, or other means of written communication to the Chairman of the Board, President, any Vice President or Secretary of the Corporation. The officer receiving a proper request to call a special meeting of the shareholders shall cause notice to be given, pursuant to the provisions of Section 4 of this article, to the shareholders entitled to vote thereat, that a meeting will be held at the date and time specified by the person or persons calling the meeting. If notice is not given within 20 days of the receipt of the request, the shareholders making the request may give notice of such meeting so long as the notice given complies with the other provisions of this subsection.

(c) No business may be transacted at a special meeting unless the general nature thereof was stated in the notice of such meeting.

Section 4. Notice of Annual, Special or Adjourned Meetings. (a) Whenever any meeting of the shareholders is to be held, a written notice of such meeting shall be given in the manner described in subdivision (d) of this section not less than 10 nor more than 60 days before the date thereof, to each shareholder entitled to vote thereat. The notice shall state the place, date and hour of the meeting and (1) in the case of a special meeting, the general nature of the business to be transacted or (2) in the case of the annual meeting, those matters which the Board of Directors, at the time of the giving of the notice, intends to present for action by the shareholders, in each case in accordance with Section 4(f) below. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, management intends to present for election.

(b) Any proper matter may be presented at an annual meeting for action. However, any action to approve (1) a contract or transaction in which a director has a direct or indirect financial interest under Section 310 of the Corporations Code of California, (2) an amendment of the articles of incorporation under Section 902 of that code, (3) a reorganization of the corporation, under Section 1201 of that code, (4) a voluntary dissolution of the corporation under Section 1900 of that code, or (5) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares under Section 2007 of that code may be taken only if the notice of the meeting states the general nature of the matter to be approved.

(c) Notice need not be given of an adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, except that if the adjournment is for more than 45 days or if after the adjournment a new record date is provided for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at that meeting.

(d) Notice of any meeting of the shareholders shall be given personally, by first class mail, or by telegraph or other written communication, addressed to the shareholder at his address appearing on the books of the Corporation or given by him to the Corporation for the purpose of notice; or if no such address appears or is given, at the place where the principal executive office of the Corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. Notice shall be deemed to have been given at the time when delivered personally to the recipient, deposited in the mail, delivered to a common carrier for transmission to the recipient or sent by other means of written communication. An affidavit of the mailing or other means of giving notice may be executed by the Secretary, assistant secretary or any transfer agent of the Corporation giving the notice and shall be prima facie evidence of the giving of the notice. Such affidavits shall be filed and maintained in the minute books of the Corporation.

(e) If any notice or report addressed to the shareholder at his address appearing on the books of the Corporation is returned to the Corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice or report to the shareholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon his written demand at the principal executive office of the Corporation for a period of one year from the date of the giving of the notice or report to all other shareholders.

(f) Only such business shall be conducted at an annual or special meeting of shareholders as shall have been properly brought before the meeting. For business to be properly brought before the meeting, it must be: (i) authorized by the Board of Directors and specified in the notice, or a supplemental notice, of the meeting, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors or the chairman of the meeting, or (iii) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before an annual or special meeting by a shareholder, the shareholder must have given written notice thereof to the Secretary, delivered or mailed to and received at the principal executive offices of the Corporation (A) in the case of an annual meeting (x) not less than 60 days nor more than 90 days prior to the meeting, or (y) if less than 70 days' notice of the meeting or prior public disclosure of the date of the meeting is given or made to shareholders, not later than the close of business on the tenth day following the day on which the notice of the meeting was mailed or, if earlier, the day on which such public disclosure was made and (B) in the case of a special meeting, as required by Section 3(b) above. A shareholder's notice to the Secretary shall set forth as to each item of business the shareholder proposes to bring before the meeting (1) a brief description of such item and the reasons for conducting such business at the meeting, (2) the name and address, as they appear on the Corporation's records, of shareholder proposing such business, (3) the class and number of shares of stock of the Corporation which are beneficially owned by the shareholder (for purposes of the regulations under Sections 13 and 14 of the Securities Exchange Act of 1934, as amended), and (4) any material interest of the shareholder in such business. No business shall be conducted at any annual or special meeting, except in accordance with the procedures set forth in this paragraph (f). The Chairman of the meeting at which any business proposed by a shareholder shall, if the facts warrant, determine and declare to the meeting that such business was not properly brought before the meeting and shall not be transacted.

Section 5. Record Date. (a) The Board of Directors may fix a time in the future as a record date for determination of the shareholders (1) entitled to notice of any meeting or to vote thereat, (2) entitled to give written consent to any corporate action without a meeting, (3) entitled to receive payment of any dividend or other distribution or allotment of any rights or (4) entitled to exercise any rights in respect of any other lawful action. The record date so fixed shall be not more than 60 nor less than 10 days prior to the date of any meeting of the shareholders nor more than 60 days prior to any other action.

(b) In the event no record date is fixed:

(1) The record date for determining the shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.

(2) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board of Directors has been taken, shall be the day on which the first written consent is given.

(3) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto, or the 60 ^t11 day prior to the date of such other action, whichever is later.

(c) Only shareholders of record on the close of business on the record date are entitled to notice and to vote, to give written consent or to receive a dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date.

(d) A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than 45 days from the date set for the original meeting.

Section 6. Quorum. (a) A majority of the shares entitled to vote at a meeting of the shareholders, represented in person or by proxy, shall constitute a quorum for the transaction of business thereat.

(b) The shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

Section 7. Adjournment. Any meeting of the shareholders may be adjourned from time to time whether or not a quorum is present by the vote of a majority of the shares represented thereat either in person or by proxy. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting.

Section 8. Validation of Actions Taken at Defectively Called, Noticed or Held Meetings. (a) The transactions of any meeting of the shareholders, however_called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote thereat, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. Any written waiver of notice shall comply with subdivision (f) of Section 601 of the Corporations Code of the State of California. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

(b) Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except (1) when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and (2) that attendance at a meeting is not a waiver of any right to object to the consideration of any matter required by the General Corporation Law of the State of California to be included in the notice but not so included, if such objection is expressly made at the meeting.

Section 9. Voting for Election of Directors. (a) Except as provided in subdivision (c) of this section, the affirmative vote of the majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number is required by law or the Articles of Incorporation.

(b) Every shareholder complying with subdivision (c) of this section and entitled to vote at any election of directors may cumulate his votes and give one candidate a number of votes equal to the number of directors to be elected, multiplied by the number of votes to which his shares are normally entitled, or distribute his votes on the same principle among as many candidates as he thinks fit.

(c) No shareholder shall be entitled to cumulate his votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast) unless the candidate's or candidates' names for which he desires to cumulate his votes have been placed in nomination prior to the voting and the shareholder has given notice at the meeting prior to the voting of his intention to cumulate his votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination.

(d) Elections for directors may be by voice vote or by ballot unless any shareholder entitled to vote demands election by ballot at the meeting prior to the voting, in which case the vote shall be by ballot.

(e) In any election of directors, the candidates receiving the highest number of affirmative votes of the shares entitled to be voted for them, up to the number of directors to be elected by such shares, are elected as directors.

Section 10. Proxies. (a) Every person entitled to vote shares may authorize another person or persons to act with respect to such shares by a written proxy signed by him or his attorney-in-fact and filed with the Secretary of the Corporation. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by him or his attorney-in-fact.

(b) Any validly executed proxy, except a proxy which is irrevocable pursuant to subdivision (c) of this section, shall continue in full force and effect until the expiration of the term specified therein or upon its earlier revocation by the person executing it prior to the vote pursuant thereto (1) by a writing delivered to the Corporation stating that it is revoked, (2) by written notice of death of the person executing the proxy, delivered to the Corporation, (3) by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting or (4) as to any meeting by attendance at such meeting and voting in person by the person executing the proxy. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. The date contained on the form of proxy shall be deemed to be the date of its execution.

(c) A proxy which states that it is irrevocable is irrevocable for the period specified therein subject to the provisions of subdivisions (e) and (f) of Section 705 of the Corporations Code of the State of California.

Section 11. Inspectors of Election. (a) In advance of any meeting of the shareholders, the Board of Directors may appoint either one or three persons (other than nominees for the office of director) as inspectors of election to act at such meeting or any adjournments thereof. If inspectors of election are not so appointed, or if any person so appointed fails to appear or refuses to act, the chairman of any such meeting may, and on the request of any shareholder or his proxy shall, appoint inspectors of election (or persons to replace those who so fail or refuse to act) at the meeting. If appointed at a meeting on the request of one or more shareholders or the proxies thereof, the majority of shares represented in person or by proxy shall determine whether one or three inspectors are to be appointed.

(b) The duties of inspectors of election and the manner of performance thereof shall be as prescribed in subdivisions (b) and (c) of Section 707 of the Corporations Code of the State of California.

Section 12. Action by Written Consent. (a) Subject to subdivisions (b) and (c) of this section, any action which may be taken at any annual or special meeting of the shareholders may be taken without a meeting, without a vote and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the Secretary of the Corporation and maintained with the corporate records.

(b) Except for the election of a director by written consent to fill a vacancy (other than a vacancy created by removal), directors may be elected by written consent only by the unanimous written consent of all shares entitled to vote for the election of directors. In the case of an election of a director by written consent to fill a vacancy (other than a vacancy created by removal), any such election requires the consent of a majority of the outstanding shares entitled to vote for the election of directors.

(c) Unless the consents of all shareholders entitled to vote have been solicited in writing, the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. This notice shall be given in the manner specified in subdivision (d) of Section 4 of this Article III. In the case of approval of (1) contracts or transactions in which a director has a direct or indirect financial interest under Section 310 of the Corporations Code of California, (2) indemnification of agents of the corporation, under Section 317 of that code, (3) a reorganization of the corporation, under Section 1201 of that code, or (4) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, under Section 2007 of that code, notice of such approval shall be given at least ten (10) days before the consummation of any action authorized by that approval.

(d) Any shareholder giving a written consent, or his proxyholders, or a transferee of the shares or a personal representative of the shareholder or their respective proxyholders, may revoke the consent by a writing received by the Corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the Corporation, but may not do so thereafter. Such revocation is effective upon its receipt by the Secretary of the Corporation.

ARTICLE IV

Directors

Section 1. Number of Directors. (a) The authorized number of directors shall be no less than five nor more than nine directors. The exact number of directors shall be fixed from time to time, within the limits specified in this subdivision, by resolution of the Board of Directors.

(b) [Reserved].

(c) The maximum or minimum authorized number of directors may only be changed by an amendment of this section approved by the vote or written consent of a majority of the shareholders; provided, however, that an amendment reducing the minimum number to a number less than 5 shall not be adopted if the votes cast against its adoption at a meeting (or the shares not consenting in the case of action by written consent) exceed 16-2/3% of such outstanding shares; and provided, further, that in no case shall the stated maximum authorized number of directors exceed two times the stated minimum number of authorized directors minus one.

Section 2. Election of Directors. Directors shall be elected at each annual meeting of the shareholders.

Section 3. Term of Office. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which he is elected and until a successor has been elected, and qualified.

Section 4. Vacancies. (a) A vacancy in the Board of Directors exists whenever any authorized position of director is not then filled by a duly elected director, whether caused by death, resignation, removal, change in the authorized number of directors or otherwise.

(b) Except for a vacancy created by the removal of a director, vacancies on the Board of Directors may be filled by a majority of the directors then in office, whether or not less than a quorum, or by a sole remaining director. A vacancy created by the removal of a director shall be filled only by a person elected by a majority of the shareholders entitled to vote at a duly held meeting at which there is a quorum present or by the unanimous written consent of the holders of the outstanding shares entitled to vote at such a meeting.

(c) The shareholders may elect a director at anytime to fill any vacancy not filled by the directors. Any such nomination shall comply with the requirements of Article III, Section 2(b) of these By-laws.

Section 5. Removal. (a) The Board of Directors may declare vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony.

(b) Any or all of the directors may be removed without cause if such removal is approved by a majority of the outstanding shares entitled to vote; provided, however that no director may be removed (unless the entire Board of Directors is removed) if whenever the votes cast against his removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively at an ^- election at which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of his most recent election were then being elected.

(c) Any reduction of the authorized number of directors does not remove any director prior to the expiration of his term of office.

Section 6. Resignation. Any director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

Section 7. Fees and Compensation. Directors may be paid for their services in such capacity a sum in such amounts, at such times and upon such conditions as may be determined from time to time by resolution of the Board of Directors and may be reimbursed for their expenses, if any, for attendance at each meeting of the Board. No such payments shall preclude any director from serving the Corporation in any other capacity and receiving compensation in any manner therefor.

ARTICLE V

Committees of the Board of Directors

Section 1. Designation of Committees. The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate (1) one or more committees, each consisting of two or more directors and (2) one or more directors as alternate members of any committee, who may replace any absent member at any meeting thereof. Any member or alternate member of a committee shall serve at the pleasure of the Board.

Section 2. Powers of Committees. Any committee, to the extent provided in the resolution of the Board of Directors designating such committee, shall have all the authority of the Board, except with respect to:

(a) The approval of any action for which the General Corporation Law of the State of California also requires any action by the shareholders;

(b) The filling of vacancies on the Board or in any committee thereof;

(d) The amendment or repeal of these By-laws or the adoption of new By-laws;

(e) The amendment or repeal of any resolution of the Board which by its express terms is not so amendable or repealable;

(f) A distribution to the shareholders of the Corporation, except at a rate or in a periodic amount or within a price range determined by the Board of Directors; or

(g) The designation of other committees of the Board or the appointment of members or alternate members thereof.

ARTICLE VI

Meetings of the Board of Directors and Committees Thereof

Section 1. Place and Meetings. Regular meetings of the Board of Directors shall be held at any place within or without the State of California which has been designated from time to time by the Board or, in the absence of such designation, at the principal executive office of the Corporation. Special meetings of the Board shall be held either at any place within or without the State of California which has been designated in the notice of meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the Corporation.

Section 2. Organization Meeting. Immediately following each annual meeting of the shareholders the Board of Directors shall hold a regular meeting for the purpose of organization and the transaction of other business. Notice of any such meeting is not required.

Section 3. Other Regular Meetings. Other regular meetings of the Board of Directors shall be held without call at such time as shall be designated from time to time by the Board. Notice of any such meeting is not required.

Section 4. Special Meetings. Special meetings of the Board of Directors may be called at any time for any purpose or purposes by the Chairman of the Board or the President or any vice president or the Secretary or any two directors. Notice shall be given of any special meeting of the Board.

Section 5. Notice of Special Meetings. Notice of the time and place of special meetings of the Board of Directors shall be delivered personally or by telephone to each director or sent to each director by first-class mail or telegraph, charges prepaid, addressed to each director at that director's address as shown on the records of the Corporation. Such notice shall be given four days prior to the holding of the special meeting if sent by mail or 48 hours prior to the holding thereof if delivered personally or given by telephone or telegraph. The notice or report shall be deemed to have been given at the time when delivered personally to the recipient or deposited in the mail or sent by other means of written communication. Notice of any special meeting of the Board or Directors need not specify the purpose thereof.

Section 6. Waivers, Consents and Approvals. Notice of any meeting of the Board of Directors need not be given to any director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 7. Quorum; Action at Meetings; Telephone Meetings. (a) A majority of the authorized number of directors shall constitute a quorum for the transaction of business. Every act or decision done or made by a majority of the directors present is the act of the Board of Directors, unless action by a greater proportion of the directors is required by law or the Articles of Incorporation.

(b) A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.

(c) Members of the Board of Directors may participate in a meeting through use of conference telephone or similar communications equipment so long as all members participating in such meeting can hear one another.

Section 8. Adjournment. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than 24 hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment.

Section 9. Action Without a Meeting.' Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors.

Section 10. Meetings of and Action by Committees. The provisions of this Article apply to committees of the Board of Directors and action by such committees with such changes in the language of those provisions as are necessary to substitute the committee and its members for the Board and its members.

ARTICLE VII

Officers

Section 1. Officers. The Corporation shall have as officers, a President, a Secretary and a Chief Financial Officer. The Treasurer is the chief financial officer of the Corporation unless the Board of Directors has by resolution designated a vice president or other officer to be the chief financial officer. The Corporation may also have, at the discretion of the Board, a Chairman of the Board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article. One person may hold two or more offices.

Section 2. Election of Officers. The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of-Section 3 or Section 5 of this Article, shall be chosen by the Board of Directors.

Section 3. Subordinate Officers, Etc. The Board of Directors may appoint by resolution, and may empower the Chairman of the Board, if there be such an officer, or the President, to appoint such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are determined from time to time by resolution of the Board or, in the absence of any such determination, as are provided in these By-laws. Any appointment of an officer shall be evidenced by a written instrument filed with the Secretary of the Corporation and maintained with the corporate records.

Section 4. Removal and Resignation. (a) Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board of Directors or, except in case of any officer chosen by the Board, by any officer upon whom such power of removal may be conferred by resolution of the Board.

(b) Subject to the rights, if any, of the Corporation under any contract of employment, any officer may resign at any time effective upon giving written notice to the Chairman of the Board, President, any vice president or Secretary of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation.

Section 5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these By-laws for regular appointments to such office.

Section 6. Chairman of the Board. If there is a Chairman of the Board, he shall, if present, preside at all meetings of the Board of Directors, exercise and perform such other powers and duties as may be from time to time assigned to him by resolution of the Board or prescribed by these By-laws and, if there is no President, the Chairman of the Board shall be the chief executive officer of the Corporation and have the power and duties set forth in Section 7 of this Article.

Section 7. President. Subject to such supervisory powers, if any, as may be given by these By-laws or the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the chief executive officer and general manager of the Corporation and shall, subject to the control of the Board, have general supervision, direction and control of the business and affairs of the Corporation. He shall preside at all meetings of the shareholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board. He shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed from time to time by resolution of the Board.

Section 8. Vice President. In the absence or disability of the President, the vice presidents in order of their rank as fixed by the Board of Directors, or, if not ranked, the Vice President designated by the Board, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board or as the President may from time to time delegate.

Section 9. Secretary. (a) The Secretary shall keep or cause to be kept (1) the minute book, (2) the share register and (3) the seal, if any, of the Corporation.

(b) The Secretary, an assistant secretary, or, if they are absent or unable to act, any other officer shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by these By-laws or by law to be given, and shall have such other powers and perform such other duties as may be prescribed from time to time by the Board of Directors or any committee of the Board of Directors.

Section 10. Chief Financial Officer. (a) The Chief Financial Officer shall keep, or cause to be kept, the books and records of account of the Corporation.

(b) The Chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositories as may be designated from time to time by resolution of the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and the Board, whenever they request it, an account of all of his transactions as Chief Financial Officer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed from time to time by the Board or as the President may from time to time delegate.

ARTICLE VIII

Records and Reports

Section 1. Minute Book. The Corporation shall keep or cause to be kept in written form at its principal executive office or such other place as the Board of Directors may order, a minute book which shall contain a record of all actions by its shareholders, Board or committees of the Board including the time, date and place of each meeting; whether a meeting is regular or special and, if special, how called; the manner of giving notice of each meeting and a copy thereof; the names of those present at each meeting of the Board or committees thereof; the number of shares present or represented at each meeting of the shareholders; the proceedings of all meetings; any written waivers of notice, consents to the holding of a meeting or approvals of the minutes thereof; and written consents for action without a meeting.

Section 2. Share Register. The Corporation shall keep or cause to be kept at its principal executive office or, if so provided by resolution of the Board of Directors, at the Corporation's transfer agent or registrar, a share register, or a duplicate share register, which shall contain the names of the shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation.

Section 3. Books and Records of Account. The Corporation shall keep or cause to be kept at its principal executive office or such other place as the Board of Directors may order, adequate and correct books and records of account.

Section 4. By-laws. The Corporation shall keep at its principal executive office or, in the absence of such office in the State of California, at its principal business office in the state, the original or a copy of the By-laws as amended to date.

Section 5. Inspection of Records. The shareholders and directors of the Corporation shall have all of the rights to inspect the books and records of the Corporation that are specified in Section 213 and 1600 through 1602 of the Corporations Code of the State of California.

Section 6. Annual Report to Shareholders. The Board of Directors shall cause an annual report to be sent to the shareholders not later than 120 days after the close of the fiscal year of the Corporation. Such report shall comply with the provisions of Section 1501 of the Corporations Code of the State of California and shall be sent in the manner specified in Section 4 (d) of Article III at least 15 days prior to the annual meeting of shareholders to be held during the next fiscal year.

ARITCLE IX

Miscellaneous

Section 1. Checks, Drafts, Etc.- All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, and any assignment or endorsement thereof, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors.

Section 2. Contracts, Etc. - How Executed. The Board of Directors, except as otherwise provided in these By-laws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and, unless so authorized or ratified by the Board, no officer, employee or other agent shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount.

Section 3. Certificates of Stock. A certificate or certificates for shares of the capital stock of the Corporation shall be issued to each shareholder when the shares are fully paid or the Board of Directors may authorize the issuance of certificates for shares as partly paid provided that these certificates shall conspicuously state the amount of the consideration to be paid for them and the amount already paid. All certificates shall be signed in the name of the Corporation by the Chairman of the Board or the President or a vice president and by the Chief Financial Officer or an assistant treasurer or the Secretary or an assistant secretary, certifying the number of shares and the class or series thereof owned by the shareholder. Any or all of the signatures on a certificate may be by facsimile signature. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

Section 4. Lost Certificates. Except as provided in this section, no new certificate for shares shall be issued in lieu of an, old certificate unless the latter is surrendered to the Corporation and canceled at the same time. The Board of Directors may in case any share certificate or certificate for any other security is lost, stolen or destroyed-, authorize the issuance of a new certificate in lieu thereof, upon such terms and conditions as the Board may require, including provision for indemnification of the Corporation secured by a bond or other adequate security sufficient to protect the Corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate.

Section 5. Representation of Shares of Other Corporations. Any person designated by resolution of the Board of Directors or, in the absence of such designation, the Chairman of the Board, the President or any vice president or the Secretary, or any other person authorized by any of the foregoing, is authorized to vote on behalf of the Corporation any and all shares of any other corporation or corporations, foreign or domestic, owned by the Corporation.

Section 6. Construction and Definitions. Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the Corporations Code of the State of California shall govern the construction of these By-laws.

Section 7. Mandatory Indemnification of Directors. The Corporation shall, to the maximum extent and in the manner permitted by the California Corporations Code ("Code"), indemnify each of its directors against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317 (a) of the Code), arising by reason of the fact that such person is or was an agent of the Corporation. For purposes of this Article IX, a "director" of the Corporation includes any person (i) who is or was a director of the Corporation, (ii) who is or was serving at the request of the Corporation as a director of another Corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director of a corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation.

Section 8. Permissive Indemnification. The Corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its officers, employees and agents against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonable incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the Corporation.

For purposes of this Article IX, an "employee" or "agent" of the Corporation (other than a director, includes any person (i) who is or was an employee or agent of the Corporation, (ii) who is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of the Corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation.

Section 9. Payment of Expenses in Advance. Expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Section 7 or for which indemnification is permitted pursuant to Section 8 following authorization thereof by the Board of Directors, in the case of directors shall and in the case of other agents of the corporation entitled to indemnification may, be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified as authorized in this Article IX.

Section 10. Indemnity Not Exclusive. The indemnification provided by this Article IX shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the Articles of Incorporation.

Section 11. Insurance Indemnification. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was an agent of the Corporation against any liability asserted against or incurred by such person in such capacity or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article IX.

Section 12. Conflicts. No indemnification or advance shall be made under this Article IX, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:

(1) That it would be inconsistent with a provision of the Articles of Incorporation, these By-laws, a resolution of the shareholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or

(2) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.

ARTICLE X

Amendments

Section 1. Amendments. New By-laws may be adopted or these By-laws may be amended or repealed by the affirmative vote or written consent of a majority of the outstanding shares entitled to vote. Subject to the next preceding sentence, Bylaws (other than a bylaw or amendment thereof specifying or changing a fixed number of directors or the maximum or minimum number, or changing from fixed to a variable board or vice versa) may be adopted, amended or repealed by the Board of Directors.

Exhibit 10.1

ADDENDUM FOUR

TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT

This ADDENDUM FOUR TO LEASE AGREEMENT FOR A GAMMA KNIFE UNIT (this “Addendum Four”) is dated effective as of April 25, 2016 and is entered into between The Community Hospital Group, Inc., dba JFK Medical Center, a New Jersey corporation (“JFK”), and GK Financing, LLC, a California limited liability company (“GKF”).

RECITALS

WHEREAS, on December 11, 1996, GKF and JFK executed a Lease Agreement for a Gamma Knife Unit (the “Original Lease”), which lease agreement was amended by certain Addendum One dated effective as of July 1, 2002, Addendum Two dated effective January 9, 2008 and Addendum Three dated effective as of April 25, 2015 (such Lease Agreement, as amended by such Addendum One, Addendum Two and Addendum Three is referred to herein as the “Lease”); and

WHEREAS, the parties desire to further amend the terms and provisions of the Lease as set forth herein.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for the other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree 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. Extension of Term .

a. It is acknowledged that the First Procedure Date under the Lease was April 25, 2000, and therefore, pursuant to Section 4 of the Lease and Section 2 of Addendum Three, the Lease is currently set to expire on at 11:59 p.m. on April 24, 2016.

b. The parties hereby agree to extend the Lease to 11:59 p.m. on April 24, 2017.

3. Captions . The captions and paragraph headings used herein are for convenience only and shall not be used in construing or interpreting this Addendum Four.

4. Full Force and Effect . Except as amended by this Addendum Four, all of the terms and provisions of the Lease 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 Addendum Four and that of the Lease, the terms and provisions of this Addendum Four shall prevail and control.

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IN WITNESS WHEREOF, the parties have executed this Addendum Four effective as of the date first written above.

GKF:		JFK:

GK FINANCING, LLC		THE COMMUNITY HOSPITAL GROUP, INC., dba JFK Medical Center

By:	/s/ Ernest A. Bates	By:	/s/ Amie Thornton
Name:	Ernest A. Bates, MD	Name:	Amie Thornton
Title:	Policy Committee Member	Title:	Senior VP Operations

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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, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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;

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 change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s 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; and

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 the registrant's board of directors (or persons performing the equivalent functions):

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 control over financial reporting .

May 15, 2017

/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 control over financial reporting .

May 15, 2017

/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 March 31, 2017 (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.

May 15, 2017

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

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