<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

                                       OR

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

FOR THE TRANSITION PERIOD FROM ___________________ TO ____________________

COMMISSION FILE NUMBER 1-8789

                        AMERICAN SHARED HOSPITAL SERVICES
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          CALIFORNIA                                            94-2918118
(STATE OR OTHER JURISDICTION OF                              (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                              IDENTIFICATION NO.)

FOUR EMBARCADERO CENTER, SUITE 3620, SAN FRANCISCO, CALIFORNIA          94111
--------------------------------------------------------------        ----------
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                    (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 788-5300

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES   X    NO
                                       -----     -----

AS OF JULY 23, 1999, THERE ARE OUTSTANDING 3,834,205 SHARES OF THE REGISTRANT'S
COMMON STOCK.


<PAGE>   2



                        AMERICAN SHARED HOSPITAL SERVICES

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                        (unaudited)          (audited)
ASSETS                                                 June 30, 1999       Dec. 31, 1998
                                                       ------------        ------------
<S>                                                    <C>                 <C>
Current assets:
     Cash and cash equivalents                         $ 10,430,000        $ 11,114,000
     Restricted cash                                         50,000           2,226,000
     Receivables, less allowance for
          uncollectible accounts of
          $0 in 1999 and 1998
               Trade accounts receivable                  1,094,000           1,228,000
               Other                                        157,000             104,000
                                                       ------------        ------------
                                                          1,251,000           1,332,000

     Prepaid expenses, inventories and
          other current assets                              227,000             285,000
                                                       ------------        ------------
TOTAL CURRENT ASSETS                                     11,958,000          14,957,000

Property and equipment:

     Land, buildings & improvements                         247,000             247,000
     Medical and transportation equipment                18,538,000          15,447,000
     Capitalized leased equipment                            83,000              83,000
     Deposits and construction in progress                3,554,000           1,079,000
                                                       ------------        ------------
                                                         22,422,000          16,856,000
     Accumulated depreciation and
          amortization                                   (5,856,000)         (5,097,000)
                                                       ------------        ------------
Net property & equipment                                 16,566,000          11,759,000

Other assets                                                214,000             183,000
Deferred taxes, net of allowance                             80,000                   0
Intangible assets, less accumulated
     amortization                                            16,000              20,000
                                                       ------------        ------------

TOTAL ASSETS                                           $ 28,834,000        $ 26,919,000
                                                       ============        ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                  $    321,000        $    338,000
     Interest payable                                       127,000              54,000
     Employee compensation                                  163,000             814,000
     Other accrued liabilities                              512,000             519,000
     Accrued exit costs                                     184,000             595,000
     Income taxes payable                                   490,000           1,664,000

     Current portion of long-term debt                    1,355,000           1,873,000
     Current portion of obligations
          under capital leases                               13,000              12,000
                                                       ------------        ------------

TOTAL CURRENT LIABILITIES                                 3,165,000           5,869,000

Long-term debt, less current portion                     13,466,000           8,792,000
Obligations under capital leases,
     less current portion                                    26,000              31,000
Accrued exit costs, less current portion                    350,000             400,000
Minority interest                                           717,000             731,000

Shareholders' equity:
     Common stock, without par value:
          authorized shares - 10,000,000; issued
          & outstanding shares, 3,838,000 in
          1999 and 4,544,000 in 1998                     10,231,000          11,087,000
     Common stock options issued to officer               2,414,000           2,414,000
     Additional paid-in capital                             817,000             930,000
     Accumulated deficit                                 (2,352,000)         (3,335,000)
                                                       ------------        ------------

TOTAL SHAREHOLDERS' EQUITY                               11,110,000          11,096,000
                                                       ------------        ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             $ 28,834,000        $ 26,919,000
                                                       ============        ============
</TABLE>


                             See accompanying notes


                                       2
<PAGE>   3


                        AMERICAN SHARED HOSPITAL SERVICES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                Three Months ended June 30,           Six Months ended June 30,
                                                  1999              1998               1999               1998
                                                  ----              ----               ----               ----
<S>                                            <C>               <C>               <C>                <C>
REVENUES:

     Medical services                          $ 1,712,000       $ 9,857,000       $  3,278,000       $ 19,179,000

COSTS AND EXPENSES:
     Costs of operations:

          Medical services payroll                       0         2,067,000              4,000          4,018,000

          Maintenance and supplies                  40,000         1,482,000             68,000          2,907,000

          Depreciation and amortization            381,000         1,500,000            762,000          2,954,000

          Equipment rental                               0         1,164,000                  0          2,102,000

          Other                                     63,000         1,084,000            121,000          2,235,000
                                               -----------       -----------       ------------       ------------
                                                   484,000         7,297,000            955,000         14,216,000

     Selling and administrative                    514,000         1,464,000            940,000          2,821,000

     Interest                                      249,000           891,000            504,000          1,727,000
                                               -----------       -----------       ------------       ------------

Total costs and expenses                         1,247,000         9,652,000          2,399,000         18,764,000
                                               -----------       -----------       ------------       ------------
                                                   465,000           205,000            879,000            415,000

Gain on sale of assets and
     early termination of capital leases             5,000           102,000              5,000             96,000

Interest and other income                          149,000            17,000            268,000             28,000

Minority interest                                 (124,000)          (23,000)          (214,000)           (33,000)
                                               -----------       -----------       ------------       ------------

Income before income taxes                         495,000           301,000            938,000            506,000

Income tax benefit (expense)                             0            (1,000)            45,000             (1,000)
                                               -----------       -----------       ------------       ------------

Net income                                     $   495,000       $   300,000       $    983,000       $    505,000
                                               ===========       ===========       ============       ============

Net income per share:

     Earnings per common share - basic         $      0.13       $      0.06       $       0.24       $       0.11
                                               ===========       ===========       ============       ============

     Earnings per common share - assuming
          dilution                             $      0.09       $      0.05       $       0.17       $       0.08
                                               ===========       ===========       ============       ============
</TABLE>


                             See accompanying notes


                                       3
<PAGE>   4


                        AMERICAN SHARED HOSPITAL SERVICES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                               Six Months ended June 30,
                                                                                 1999              1998
                                                                                 ----              ----
<S>                                                                          <C>                <C>
OPERATING ACTIVITIES:

Net income                                                                   $    983,000       $   505,000

Adjustments to reconcile net cash
     provided by (used in) operating activities:

          Disposal of property and equipment                                       (5,000)            6,000

          Gain on early termination of capital leases                                   0          (102,000)

          Depreciation and amortization                                           764,000         3,115,000

          Changes in operating assets and liabilities:

               Decrease in restricted cash                                      2,176,000            45,000

               Decrease in accounts receivable                                     81,000           594,000

               (Increase) decrease in prepaid expenses, inventories and
                    other assets                                                  (58,000)            3,000

               (Decrease) increase in accounts payable and accrued
                    liabilities                                                (2,237,000)        2,323,000
                                                                             ------------       -----------

Net cash provided by operating activities                                       1,704,000         6,489,000

INVESTING ACTIVITIES:

     Purchase of property and equipment (net of financing)                       (201,000)         (268,000)

     Proceeds from sale of property and equipment                                   5,000             1,000

     (Decrease) increase in minority interest                                     (14,000)           34,000

     Other                                                                          8,000          (697,000)
                                                                             ------------       -----------

     Net cash (used in) investing activities                                     (202,000)         (930,000)

FINANCING ACTIVITIES:

     Payment for repurchase of stock                                             (969,000)                0

     Net (payments) on revolving line of credit                                         0          (998,000)

     Principal payments on long-term debt and capitalized leases               (1,217,000)       (4,504,000)
                                                                             ------------       -----------

     Net cash (used in) financing activities                                   (2,186,000)       (5,502,000)
                                                                             ------------       -----------

     Net (decrease) increase in cash and cash equivalents                        (684,000)           57,000

     Cash and cash equivalents at beginning of period                          11,114,000            17,000
                                                                             ------------       -----------

     Cash and cash equivalents at end of period                              $ 10,430,000       $    74,000
                                                                             ============       ===========

SUPPLEMENTAL CASH FLOW DISCLOSURE:
     Cash paid during the period for:

          Interest                                                           $    431,000       $ 1,637,000

          Income taxes                                                       $  1,210,000       $    25,000
</TABLE>


                             See accompanying notes


                                       4
<PAGE>   5

                        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' (the "Company") consolidated financial position as of June 30, 1999
and the results of its operations for the three and six month periods ended June
30, 1999 and 1998, which results are not necessarily indicative of results on an
annualized basis. Consolidated balance sheet amounts as of December 31, 1998
have been derived from audited financial statements. These financial statements
include the accounts of the Company and its wholly-owned subsidiaries: CuraCare,
Inc. (included through November 12, 1998); MMRI, Inc.; European Shared Medical
Services Limited; American Shared Radiosurgery Services; African American Church
Health and Economic Services, Inc.; ACHES Insurance Services, Inc.; and the
Company's majority-owned subsidiary, GK Financing, LLC ("GKF").

The Company, through GKF, provides Gamma Knife units to six medical centers in
California, Connecticut, Ohio and Texas. The Company provided shared diagnostic
imaging and respiratory therapy services to health care providers located in
various geographic regions of the United States through November 1998. The
diagnostic imaging services provided by the Company were Magnetic Resonance
Imaging (MRI), Computed Axial Tomography Scanning (CT), Ultrasound, Nuclear
Medicine, and Cardiac Catheterization Laboratory services. On November 13, 1998,
the stock of Curacare, Inc. and the assets of the diagnostic imaging services
product line were sold to a third party ("Sale").

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

Note 2. Per Share Amounts

Per share information has been computed based on the weighted average number of
common shares and dilutive common share equivalents outstanding.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

Medical services revenues decreased $8,145,000 and $15,901,000 for the three and
six month periods ended June 30, 1999 from $9,857,000 and $19,179,000 for the
three and six month periods ended June 30,1998. Revenues from Gamma Knife
services increased $903,000 and $1,840,000 for the three and six month periods
ended June 30, 1999 compared to the same periods in the prior year. The
increases reflect increased utilization at centers in operation for longer than
one year (41%) and the addition of three new Gamma Knife units. The Company's
sixth and newest Gamma Knife unit commenced operation in mid-June 1999. The
Company's



                                       5
<PAGE>   6

second Gamma Knife unit's contract terminates in third quarter 1999. The Company
is negotiating with the customer to sell them the unit, extend the contract or
remove the unit. Diagnostic imaging and respiratory therapy services revenues
decreased $9,045,000 and $17,731,000 for the three and six month periods ended
June 30, 1999 compared to the same periods in the prior year, due to the Sale.
The Company has transferred its ownership in the revenue stream from ACHES
Insurance Services, Inc. ("AIS") to unrelated third parties. Revenues from AIS
were immaterial to the Company.

Total Costs of operations decreased $6,813,000 and $13,261,000 for the three and
six month periods ended June 30, 1999 compared to the same periods in the prior
year. Medical services payroll decreased $2,067,000 and $4,014,000 for the three
and six month periods ended June 30, 1999 compared to the same periods in the
prior year. The decreases are attributable to the Sale and the fact that the
Company does not currently provide labor as a component of its Gamma Knife
services. Maintenance and supplies decreased $1,442,000 and $2,839,000 for the
three and six month periods ended June 30, 1999 compared to the same period in
the prior year due to the Sale. Maintenance and supplies for Gamma Knife
services increased $13,000 and $22,000 for the three and six month periods ended
June 30, 1999 compared to the same periods in the prior year primarily due to
the expiration of the warranty period of two units. Depreciation and
amortization decreased $1,119,000 and $2,192,000 for the three and six month
periods ended June 30, 1999 compared to the same periods in the prior year due
to the Sale. Depreciation and amortization for Gamma Knife services increased
$190,000 and $409,000 for the three and six month periods ended June 30, 1999
compared to the same periods in the prior year primarily due to two additional
units. Equipment rental decreased $1,164,000 and $2,102,000 for the three and
six month periods ended June 30, 1999 compared to the same period in the prior
year due to the Sale. Gamma Knife services had zero Equipment rental expenses.
Other operating costs decreased $1,021,000 and $2,114,000 for the three and six
month periods ended June 30, 1999 compared to the same periods in the prior year
due to the Sale. Other operating costs for Gamma Knife services increased
approximately $50,000 and $60,000 for the three and six month periods ended June
30, 1999 primarily due to an increase in insurance and personal property tax
expenses because of more units in service.

Selling and administrative costs decreased $950,000 and $1,881,000 for the three
and six month periods ended June 30, 1999 compared to the same periods in the
prior year primarily due to personnel reductions in the areas of sales and
marketing, accounting and finance, administration, and the other expenses
related to those functions.

Interest expense decreased $642,000 and $1,223,000 for the three and six month
periods ending June 30, 1999 compared to the same periods in the prior year due
to the assumption of debt by the purchaser in the Sale. Interest expense for
Gamma Knife services increased $79,000 and $236,000 for the three and six month
periods ending June 30, 1999 primarily due to two additional units.

Interest and other income increased $132,000 and $240,000 for the three and six
month periods ending June 30, 1999 compared to



                                       6
<PAGE>   7

the same periods in the prior year. Minority interest increased $101,000 and
$181,000 for the three and six month periods ending June 30, 1999 compared to
the same periods in the prior year. Minority interest represents the pre-tax
income earned by the minority member's 19% interest in GKF. The increase in
minority interest reflects the increased profitability of GKF.

The Company recorded $0 Income tax expense for the three-month period ended June
30, 1999 and a $45,000 Income tax benefit for the six month period ended June
30, 1999 due to a reduction in the valuation allowance against deferred tax
assets. The valuation allowance was reduced based on the Company's assessment of
the reliability of its deferred tax assets given its income through June 30,
1999 and its expectation of future profitability.

The Company had Net income of $495,000 ($0.13 per basic share) and $983,000
($0.24 per basic share) for the three and six month periods ended June 30, 1999
compared to Net income of $300,000 ($0.06 per basic share) and $505,000 ($0.11
per basic share) in the same periods in the prior year. The increases were
primarily due to increased operating margins. The Company's Gross margin
(Medical services revenues less Costs of operations) as a percentage of Medical
services revenues increased to 72% in second quarter 1999 from 26% in second
quarter 1998.

Liquidity and Capital Resources

The Company had Cash and cash equivalents and Restricted cash of $10,480,000 at
June 30, 1999 compared to $13,340,000 at December 31, 1998. The Company's cash
position decreased $2,860,000 due primarily to the payment of federal and state
income taxes ($1,210,000) primarily related to the Sale, the Company's
repurchase of common stock ($969,000), payment of exit and other Sale related
costs ($1,062,000), and the pay-off of a Gamma Knife loan ($347,000).

Restricted cash of $50,000 at June 30, 1999 reflects the minimum cash balance
that must be maintained for the operations of GKF. $1,000,000 previously
restricted under terms of the Sale was released from restriction on April 16,
1999. GKF has distributed $972,000 to the Company and $228,000 to the minority
member of GKF from Restricted cash in 1999.

The Company as of June 30, 1999 had Shareholders' equity of $11,110,000, working
capital of $8,793,000 and Total assets of $28,834,000.

The Company is investing its cash in overnight repurchase agreements and
commercial paper pending use in the Company's operations. The Company believes
its cash position combined with its working capital is adequate to service the
Company's cash requirements in 1999.

The Year 2000 ("Y2K") issue results from programs written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognizes a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar normal business activities.



                                       7
<PAGE>   8

Due to the Sale, the Company is restructuring its computer operations by
replacing and upgrading most of its computer hardware and programs with
equipment and programs with more flexibility and that are Y2K compatible. This
replacement and upgrade process is expected to be completed in the third quarter
of 1999 and the cost is not expected to exceed $80,000.

The Company's current revenue source, the Gamma Knife, is Y2K compliant. The
Company's six current operational customers, which are large urban medical
centers, all have disbursement systems that reportedly are or will be Y2K
compliant during 1999.

Should the disbursement systems of the Company's operating customers not be Y2K
compliant, the Company would be materially impacted. The Company would exercise
its contractual rights due to nonpayment, if necessary.

The Company believes that the Y2K issue, except for any customer disbursement
systems which are not Y2K compliant on January 1, 2000, and for which the
customer cannot produce manual checks, will not materially affect the Company's
business, results of operations, or financial condition.

                           PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings.

        None.

ITEM 2. Changes in Securities.

        None.

ITEM 3. Defaults upon Senior Securities.

        None.

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

        The Company's Annual Meeting of Shareholders was held on May 21, 1999.
        There were present in person or by proxy at said Meeting shareholders
        holding 3,612,848 shares which represented 90.9% of the 3,972,372 shares
        outstanding and entitled to vote at the Meeting, and which represented a
        quorum. At the Meeting, the shareholders:

        1.  Approved an amendment to Article IV, Section 1 of the Company's
            By-laws to provide that the number of Directors constituting the
            Board shall be no less than five and no more than nine, by the
            following vote:

<TABLE>
<CAPTION>
            For                      Against                   Abstain
            ---                      -------                   -------
<S>                                  <C>                       <C>
            2,068,989                820                       830
</TABLE>




                                       8
<PAGE>   9

        2.  Voted on the Election of Directors as follows:

<TABLE>
<CAPTION>
            Nominee                           In Favor             Withheld
            -------                           --------             --------
<S>                                           <C>                  <C>
            Ernest A. Bates, M.D.             3,611,147            1,701
            Willie R. Barnes                  3,610,747            2,101
            John F. Ruffle                    3,611,147            1,701
            Stanley S. Trotman, Jr.           3,611,147            1,701
            Charles B. Wilson, M.D.           3,611,147            1,701
</TABLE>

            Dr. Bates, Mr. Barnes, Mr. Ruffle, Mr. Trotman and Dr. Wilson were
            elected to the Board of Directors

ITEM 5. Other Information. None.

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

        (a)  Exhibits

             The following exhibit is filed herewith:

<TABLE>
<CAPTION>
             Exhibit Number            Description
             --------------            -----------
<S>                                    <C>
             27                        Financial Data Schedule
</TABLE>

        (b)  Reports on Form 8-K.

             The Company filed a Report on Form 8-K during the quarter ended
             June 30, 1999 reporting adoption on March 22, 1999 by the Company's
             Board of Directors of a Shareholder Rights Plan.










                                       9
<PAGE>   10


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                        AMERICAN SHARED HOSPITAL SERVICES
                                   Registrant


Date:  August 5, 1999                     /s/  Ernest A. Bates, M.D.
                                          -------------------------------------
                                          Ernest A. Bates, M.D.
                                          Chairman of the Board and
                                          Chief Executive Officer



Date:  August 5, 1999                     /s/ Craig K. Tagawa
                                          -------------------------------------
                                          Craig K. Tagawa
                                          Senior Vice President
                                          Chief Operating and Financial Officer










                                       10