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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549




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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, 2003 or

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | 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



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American Shared Hospital Services

(Exact name of registrant as specified in its charter)


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

|                                                                                                        |  |                 
|------------------------------------------------------------------------------------------------------- |  | ----------------
|Four Embarcadero Center, Suite 3700, San Francisco, California
(Address of Principal Executive Offices) |  | 94111
(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 o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Securities Exchange Act Rule 12b-2). Yes o  No x

As of August 1, 2003, there are outstanding 3,768,203 shares of the
Registrants common stock.





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TABLE OF CONTENTS



|                               |                                                                         |  |  |  |  |  |  | 
|------------------------------ | ----------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                           
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and
|                               | Item 4. Controls and Procedures                                        
|PART II  OTHER INFORMATION   
|                               | Item 1. Legal Proceedings.                                             
|                               | Item 2. Changes in Securities and Use of Proceeds.                     
|                               | Item 3. Defaults Upon Senior Securities.                               
|                               | Item 4. Submission of Matters to a Vote of Securities Holders.         
|                               | Item 5. Other Information.                                             
|                               | Item 6. Exhibits and Reports on Form 8-K.                              
|SIGNATURES                    
|EXHIBIT INDEX                 
|Exhibit 10.43                 
|Exhibit 31.1                  
|Exhibit 31.2                  
|Exhibit 32.1                  



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PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

AMERICAN SHARED HOSPITAL SERVICES
CONDENSED CONSOLIDATED BALANCE SHEETS

|                         |                                                                                                      |               |             |               |           |   |            |             |  
|------------------------ | ---------------------------------------------------------------------------------------------------- | ------------- | ----------- | ------------- | --------- | - | ---------- | ----------- | -
|                         |                                                                                                      |               | (unaudited) |               | (audited)
|ASSETS                   |                                                                                                      | June 30, 2003 |             | Dec. 31, 2002
|                         |                                                                                                      |               |             |              
|Current assets:          |                                                                                                      |               |             |               |           |   |            |            
|                         | Cash and cash equivalents                                                                            |               | $           | 11,032,000    |           |   | $          | 9,924,000   |  
|                         | Restricted cash                                                                                      |               |             | 50,000        |           |   |            | 50,000      |  
|                         | Accounts receivable, net of allowance for
doubtful accounts of $120,000 in 2003
and $120,000 in 2002 |               |             | 2,792,000     |           |   |            | 2,571,000   |  
|                         | Prepaid expenses and other assets                                                                    |               |             | 687,000       |           |   |            | 876,000     |  
|                         |                                                                                                      |               |             |               |           |   |            |            
|Total current assets     |                                                                                                      |               | 14,561,000  |               |           |   | 13,421,000 |            
|Property and equipment:  |                                                                                                      |               |             |               |           |   |            |            
|                         | Medical equipment and facilities                                                                     |               |             | 43,099,000    |           |   |            | 37,306,000  |  
|                         | Office equipment                                                                                     |               |             | 428,000       |           |   |            | 358,000     |  
|                         | Deposits and construction in progress                                                                |               |             | 2,510,000     |           |   |            | 4,372,000   |  
|                         |                                                                                                      |               |             |               |           |   |            |            
|                         |                                                                                                      |               | 46,037,000  |               |           |   | 42,036,000 |            
|                         | Accumulated depreciation and
amortization                                                            |               |             | (12,860,000   | )         |   |            | (10,858,000 | )
|                         |                                                                                                      |               |             |               |           |   |            |            
|Net property & equipment |                                                                                                      |               | 33,177,000  |               |           |   | 31,178,000 |            
|Other assets             |                                                                                                      |               | 186,000     |               |           |   | 231,000    |            
|                         |                                                                                                      |               |             |               |           |   |            |            
|Total assets             |                                                                                                      | $             | 47,924,000  |               |           | $ | 44,830,000 |            
|                         |                                                                                                      |               |             |               |           |   |            |            

|                                           |                                                                                                                                       |               |            |               |  |   |            |           |  | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ---------- | ------------- |  | - | ---------- | --------- |  | 
|LIABILITIES AND                            |                                                                                                                                       | (unaudited)   |            | (audited)    
|SHAREHOLDERS' EQUITY                       |                                                                                                                                       | June 30, 2003 |            | Dec. 31, 2002
|                                           |                                                                                                                                       |               |            |              
|Current liabilities:                       |                                                                                                                                       |               |            |               |  |   |            |          
|                                           | Accounts payable                                                                                                                      |               | $          | 273,000       |  |   | $          | 145,000   | 
|                                           | Accrued interest                                                                                                                      |               |            | 174,000       |  |   |            | 185,000   | 
|                                           | Employee compensation and benefits                                                                                                    |               |            | 173,000       |  |   |            | 126,000   | 
|                                           | Other accrued liabilities                                                                                                             |               |            | 423,000       |  |   |            | 280,000   | 
|                                           | Income taxes payable                                                                                                                  |               |            | 0             |  |   |            | 20,000    | 
|                                           | Current portion of long-term debt                                                                                                     |               |            | 6,291,000     |  |   |            | 5,490,000 | 
|                                           |                                                                                                                                       |               |            |               |  |   |            |          
|Total current liabilities                  |                                                                                                                                       |               | 7,334,000  |               |  |   | 6,246,000  |          
|Long-term debt, less current portion       |                                                                                                                                       |               | 23,446,000 |               |  |   | 22,006,000 |          
|Deferred income taxes                      |                                                                                                                                       |               | 863,000    |               |  |   | 590,000    |          
|Minority interest                          |                                                                                                                                       |               | 1,563,000  |               |  |   | 1,448,000  |          
|Shareholders equity:                      |                                                                                                                                       |               |            |               |  |   |            |          
|                                           | Common stock, without par value: authorized shares - 10,000,000; issued
& outstanding shares, 3,768,203 in 2003
and 3,783,000 in 2002 |               |            | 9,198,000     |  |   |            | 9,173,000 | 
|                                           | Additional paid-in capital                                                                                                            |               |            | 3,404,000     |  |   |            | 3,312,000 | 
|                                           | Retained earnings                                                                                                                     |               |            | 2,116,000     |  |   |            | 2,055,000 | 
|                                           |                                                                                                                                       |               |            |               |  |   |            |          
|Total shareholders equity                 |                                                                                                                                       |               | 14,718,000 |               |  |   | 14,540,000 |          
|                                           |                                                                                                                                       |               |            |               |  |   |            |          
|Total liabilities and shareholders equity |                                                                                                                                       | $             | 47,924,000 |               |  | $ | 44,830,000 |          
|                                           |                                                                                                                                       |               |            |               |  |   |            |          

See accompanying notes

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

|                           |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |           |           | 
|-------------------------- | --------------------------------------------- | ----------------------------- | --------- | --------------------------- | --------- | ------------------------- | --------- | --------- | ------- | ---- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                           |                                               |                               |           | Three Months ended June 30, |           | Six Months ended June 30,
|                           |                                               |                               |           |                             |           |                          
|                           |                                               |                               |           | 2003                        |           | 2002                      |           | 2003      |         | 2002
|                           |                                               |                               |           |                             |           |                           |           |           |         |     
|Revenue:                   |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          
|                           | Medical services                              |                               | $         | 4,105,000                   |           |                           | $         | 3,216,000 |         |      | $         | 7,774,000 |           |   | $         | 6,461,000 |          
|Costs and expenses:        |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          
|                           | Costs of operations:                          |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |           |          
|                           |                                               | Maintenance and supplies      |           |                             | 166,000   |                           |           |           | 104,000 |      |           |           | 311,000   |   |           |           | 183,000   | 
|                           |                                               | Depreciation and amortization |           |                             | 1,036,000 |                           |           |           | 826,000 |      |           |           | 1,976,000 |   |           |           | 1,628,000 | 
|                           |                                               | Other                         |           |                             | 681,000   |                           |           |           | 367,000 |      |           |           | 1,131,000 |   |           |           | 721,000   | 
|                           |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          
|                           |                                               |                               | 1,883,000 |                             |           |                           | 1,297,000 |           |         |      | 3,418,000 |           |           |   | 2,532,000 |          
|                           | Selling and administrative                    |                               |           | 839,000                     |           |                           |           | 863,000   |         |      |           | 1,665,000 |           |   |           | 1,661,000 |          
|                           | Interest                                      |                               |           | 671,000                     |           |                           |           | 575,000   |         |      |           | 1,252,000 |           |   |           | 1,199,000 |          
|                           |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          
|Total costs and expenses   |                                               |                               | 3,393,000 |                             |           |                           | 2,735,000 |           |         |      | 6,335,000 |           |           |   | 5,392,000 |          
|                           |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          
|                           |                                               |                               | 712,000   |                             |           |                           | 481,000   |           |         |      | 1,439,000 |           |           |   | 1,069,000 |          
|Interest and other income  |                                               |                               | 28,000    |                             |           |                           | 43,000    |           |         |      | 72,000    |           |           |   | 97,000    |          
|Minority interest          |                                               |                               | (237,000  | )                           |           |                           | (178,000  | )         |         |      | (475,000  | )         |           |   | (395,000  | )        
|                           |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          
|Income before income taxes |                                               |                               | 503,000   |                             |           |                           | 346,000   |           |         |      | 1,036,000 |           |           |   | 771,000   |          
|Income tax expense         |                                               |                               | 169,000   |                             |           |                           | 35,000    |           |         |      | 366,000   |           |           |   | 140,000   |          
|                           |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          
|Net income                 |                                               | $                             | 334,000   |                             |           | $                         | 311,000   |           |         | $    | 670,000   |           |           | $ | 631,000   |          
|                           |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          
|Net income per share:      |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          
|                           | Earnings per common share  basic             |                               | $         | 0.09                        |           |                           | $         | 0.08      |         |      | $         | 0.18      |           |   | $         | 0.17      |          
|                           |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          
|                           | Earnings per common share  assuming
dilution |                               | $         | 0.07                        |           |                           | $         | 0.06      |         |      | $         | 0.13      |           |   | $         | 0.13      |          
|                           |                                               |                               |           |                             |           |                           |           |           |         |      |           |           |           |   |           |          

See accompanying notes

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

|                                                                    |                                                             |                                              |                                                                 |            |                           |          |           |            |           |          |  
|------------------------------------------------------------------- | ----------------------------------------------------------- | -------------------------------------------- | --------------------------------------------------------------- | ---------- | ------------------------- | -------- | --------- | ---------- | --------- | -------- | -
|                                                                    |                                                             |                                              |                                                                 |            | Six Months ended June 30,
|                                                                    |                                                             |                                              |                                                                 |            |                          
|                                                                    |                                                             |                                              |                                                                 |            | 2003                      |          | 2002     
|                                                                    |                                                             |                                              |                                                                 |            |                           |          |          
|Operating activities:                                               |                                                             |                                              |                                                                 |            |                           |          |           |           
|Net income                                                          |                                                             | $                                            | 670,000                                                         |            |                           | $        | 631,000   |           
|Adjustments to reconcile net cash provided by operating activities: |                                                             |                                              |                                                                 |            |                           |          |           |           
|                                                                    |                                                             | Depreciation and amortization                |                                                                 |            | 2,020,000                 |          |           |            | 1,674,000 |         
|                                                                    |                                                             | Deferred income taxes                        |                                                                 |            | 366,000                   |          |           |            | 140,000   |         
|                                                                    |                                                             | Changes in operating assets and liabilities: |                                                                 |            |                           |          |           |            |           |         
|                                                                    |                                                             |                                              | (Increase) in accounts receivable                               |            |                           | (221,000 | )         |            |           | (345,000 | )
|                                                                    |                                                             |                                              | Decrease in prepaid expenses and other assets                   |            |                           | 216,000  |           |            |           | 109,000  |  
|                                                                    |                                                             |                                              | Increase (decrease) in accounts payable and accrued liabilities |            |                           | 132,000  |           |            |           | (525,000 | )
|                                                                    |                                                             |                                              |                                                                 |            |                           |          |           |           
|Net cash from operating activities                                  |                                                             |                                              | 3,183,000                                                       |            |                           |          | 1,684,000 |           
|Investing activities:                                               |                                                             |                                              |                                                                 |            |                           |          |           |           
|                                                                    | Purchase of property and equipment (net of financing)       |                                              |                                                                 | 912,000    |                           |          |           | (567,000   | )        
|                                                                    | Increase (decrease) in minority interest                    |                                              |                                                                 | 115,000    |                           |          |           | (43,000    | )        
|                                                                    |                                                             |                                              |                                                                 |            |                           |          |           |           
|                                                                    | Net cash from investing activities                          |                                              |                                                                 | 1,027,000  |                           |          |           | (610,000   | )        
|Financing activities:                                               |                                                             |                                              |                                                                 |            |                           |          |           |           
|                                                                    | Payment of dividends                                        |                                              |                                                                 | (454,000   | )                         |          |           | (438,000   | )        
|                                                                    | Payment received for exercise of stock options              |                                              |                                                                 | 24,000     |                           |          |           | 44,000     |          
|                                                                    | Repurchase of options/warrants                              |                                              |                                                                 | 0          |                           |          |           | (135,000   | )        
|                                                                    | Repurchase of common stock                                  |                                              |                                                                 | 0          |                           |          |           | 0          |          
|                                                                    | Principal payments on long-term debt and capitalized leases |                                              |                                                                 | (2,672,000 | )                         |          |           | (2,107,000 | )        
|                                                                    |                                                             |                                              |                                                                 |            |                           |          |           |           
|                                                                    | Net cash from financing activities                          |                                              |                                                                 | (3,102,000 | )                         |          |           | (2,636,000 | )        
|                                                                    |                                                             |                                              |                                                                 |            |                           |          |           |           
|                                                                    | Net (decrease) in cash and cash equivalents                 |                                              |                                                                 | 1,108,000  |                           |          |           | (1,562,000 | )        
|                                                                    | Cash and cash equivalents at beginning of period            |                                              |                                                                 | 9,924,000  |                           |          |           | 11,580,000 |          
|                                                                    |                                                             |                                              |                                                                 |            |                           |          |           |           
|                                                                    | Cash and cash equivalents at end of period                  |                                              | $                                                               | 11,032,000 |                           |          | $         | 10,018,000 |          
|                                                                    |                                                             |                                              |                                                                 |            |                           |          |           |           
|Supplemental cash flow disclosure:                                  |                                                             |                                              |                                                                 |            |                           |          |           |           
|                                                                    | Cash paid during the period for:                            |                                              |                                                                 |            |                           |          |           |            |          
|                                                                    |                                                             | Interest paid                                |                                                                 | $          | 1,263,000                 |          |           | $          | 1,193,000 |         
|                                                                    |                                                             | Income taxes paid                            |                                                                 | $          | 39,000                    |          |           | $          | 73,000    |         

See accompanying notes

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AMERICAN SHARED HOSPITAL SERVICES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation

In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly American Shared Hospital
Services consolidated financial position as of June 30, 2003 and the results
of its operations for the three and six month periods ended June 30, 2003 and
2002, which results are not necessarily indicative of results on an annualized
basis. Consolidated balance sheet amounts as of December 31, 2002 have been
derived from audited financial statements.

These financial statements include the accounts of American Shared
Hospital Services (the Company) and its wholly-owned subsidiaries: OR21,
Inc. (OR21); MedLeader.com, Inc. (MedLeader); American Shared Radiosurgery
Services (ASRS); and ASRS majority-owned subsidiary, GK Financing, LLC (GK
Financing).

The Company through its majority-owned subsidiary, GK Financing, provided
Gamma Knife units to sixteen medical centers as of June 30, 2003 in Arkansas,
California, Connecticut, Florida, Illinois, Maryland, Massachusetts,
Mississippi, Nevada, New Jersey, New York, Ohio, Texas and Wisconsin.

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

Note 2. Per Share Amounts

Per share information has been computed based on the weighted average
number of common shares and dilutive common share equivalents outstanding. For
the three and six months ended June 30, 2003 basic earnings per share was
computed using 3,822,000 and 3,805,000 common shares, respectively, and diluted
earnings per share was computed using 5,064,000 and 5,067,000 common shares and
equivalents, respectively. For the three and six months ended June 30, 2002
basic earnings per share was computed using 3,717,000 and 3,635,000 common
shares, respectively, and diluted earnings per share was computed using
5,082,000 and 5,047,000 common shares and equivalents, respectively.

Note 3. Stock-based Compensation

The Company has two stock-based employee compensation plans, the 1995 and
2001 Stock Option Plans. The Company accounts for those plans using the
intrinsic value method prescribed by APB Opinion No. 25, Accounting for Stock
Issued to Employees, and related Interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under
those plans had an exercise price greater than or equal to the market value of
the underlying common stock on the date of grant. The following table
illustrates the effect

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on net income and earnings per share if the Company had applied the fair value
recognition provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation. For pro forma purposes,
the estimated fair value of the Companys options is amortized over the
options vesting period.

|                        |  |                                                 |  |                                                                                     |         |                            |      |                          |         |      |      |      |         |   |      |   |          |   |      | 
|----------------------- |  | ----------------------------------------------- |  | ----------------------------------------------------------------------------------- | ------- | -------------------------- | ---- | ------------------------ | ------- | ---- | ---- | ---- | ------- | - | ---- | - | -------- | - | ---- | 
|                        |  |                                                 |  |                                                                                     |         | Three months ended June 30 |      | Six Months Ended June 30
|                        |  |                                                 |  |                                                                                     |         |                            |      |                         
|                        |  |                                                 |  |                                                                                     |         | 2003                       |      | 2002                     |         | 2003 |      | 2002
|                        |  |                                                 |  |                                                                                     |         |                            |      |                          |         |      |      |     
|Net income, as reported |  |                                                 |  | $                                                                                   | 334,000 |                            |      | $                        | 311,000 |      |      | $    | 670,000 |   |      | $ | 631,000  |  
|Deduct:                 |  | Total stock-based employee compensation expense |  | $                                                                                   | 0       |                            |      |                          | ($9,000 | )    |      | $    | 0       |   |      |   | ($18,000 | )
|                        |  |                                                 |  | determined under fair value based method for all
awards, net of related tax effects |         |                            |      |                          |         |      |      |      |         |   |      |   |          |   |      | 
|Pro forma net income    |  |                                                 |  | $                                                                                   | 334,000 |                            |      | $                        | 302,000 |      |      | $    | 670,000 |   |      | $ | 613,000  |  
|Earnings per share:     |  |                                                 |  |                                                                                     |         |                            |      |                          |         |      |      |      |         |   |      |   |          |  
|                        |  |                                                 |  | Basic-as reported                                                                   |         | $                          | 0.09 |                          |         | $    | 0.08 |      |         | $ | 0.18 |   |          | $ | 0.17 | 
|                        |  |                                                 |  | Basic-pro forma                                                                     |         | $                          | 0.09 |                          |         | $    | 0.08 |      |         | $ | 0.18 |   |          | $ | 0.17 | 
|                        |  |                                                 |  | Diluted-as reported                                                                 |         | $                          | 0.07 |                          |         | $    | 0.06 |      |         | $ | 0.13 |   |          | $ | 0.13 | 
|                        |  |                                                 |  | Diluted-pro forma                                                                   |         | $                          | 0.07 |                          |         | $    | 0.06 |      |         | $ | 0.13 |   |          | $ | 0.12 | 




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 business and the risks of developing
its IMRT and The Operating Room for the 21st Century® programs. 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, 2002, the Quarterly Report on Form 10-Q for the three months
ended March 31, 2003 and the definitive Proxy Statement for the Annual Meeting
of Shareholders held on June 12, 2003.

Medical services revenue increased $889,000 and $1,313,000 to $4,105,000
and $7,774,000 for the three month and six month periods ended June 30, 2003,
from $3,216,000 and $6,461,000 for the three and six month periods ended June
30, 2002, respectively. The increase for the three month period ended June 30,
2003 reflects an 18% revenue increase at Gamma Knife centers in operation
longer than one year and an increase in revenue due to three additional Gamma
Knife units in operation compared to the same period in the prior year. For
the six month period there was a 10% revenue increase at Gamma Knife centers in
operation for longer than one year, as well as the inclusion of three
additional Gamma Knife units in operation. The Company had 16 Gamma Knife
units in operation at June 30, 2003 compared to 13 at June 30, 2002. Twelve of
the Companys customers are under fee-per-use contracts, and four customers are
under revenue sharing agreements (retail). For retail units the Company
receives all or a percentage of the reimbursement (exclusive of physician fees)
received by the customer, and is responsible for all or a percentage of the
operating expenses of the Gamma Knife.

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The number of Gamma Knife procedures increased by 42% and 30% to 560 and
1,050 for the three and six month periods ended June 30, 2003 from 395 and 805
for the three and six month periods ended June 30, 2002, respectively. The
increases were primarily the result of increases in procedures performed at
Gamma Knife units in operation more than one year of 28% and 18% for the three
and six month periods ended June 30, 2003, respectively, as well as the
addition of three new Gamma Knife units.

Total costs of operations increased $586,000 and $886,000 to $1,883,000
and $3,418,000 for the three and six month periods ended June 30, 2003, from
$1,297,000 and $2,532,000 for the three and six month periods ended June 30,
2002, respectively. Maintenance and supplies increased by $62,000 and $128,000
for the three and six month periods ended June 30, 2003 compared to the same
periods in the prior year, primarily due to an increase in the number of Gamma
Knife units covered under maintenance contract. There were 13 Gamma Knife
units covered under maintenance contract as of June 30, 2003 compared to 11 as
of June 30, 2002. Depreciation and amortization increased by $210,000 and
$348,000 for the three and six month periods ended June 30, 2003 compared to
the same periods in the prior year due to the addition of one new Gamma Knife
unit that started during second quarter 2003, one new Gamma Knife unit that
started first quarter 2003, and the inclusion of 2 new Gamma Knife units that
started during second and third quarter 2002. Other operating costs increased
$314,000 and $410,000 for the three and six month periods ended June 30, 2003
compared to the same periods in the prior year primarily due to an increase in
marketing costs, as well as startup and training costs at the Companys two
recently opened Gamma Knife centers.

Selling and administrative costs decreased by $24,000 and increased by
$4,000 to $839,000 and $1,665,000 for the three and six month periods ended
June 30, 2003 from $863,000 and $1,661,000 for the three and six month periods
ended June 30, 2002, respectively. The decrease for the quarter was primarily
due to reductions in legal and accounting fees. For the year, reductions in
business development costs, legal and accounting fees were offset by a
write-off of approximately $58,000 in previously deferred costs relating to the
future placement of a Gamma Knife unit in Brazil, which was reallocated to
another location.

Interest expense increased by $96,000 and $53,000 to $671,000 and
$1,252,000 for the three and six month periods ended June 30, 2003 from
$575,000 and $1,199,000 for the three and six month periods ended June 30,
2002, respectively. These increases are primarily due to additional interest
expense on the financing of the new Gamma Knife units during first and second
quarter 2003 and third quarter 2002, which was partially offset by lower
interest expense on the debt relating to the more mature Gamma Knife units.
The mature units have lower interest expense because interest expense decreases
as the outstanding principal balance of each loan is reduced.

Interest and other income decreased by $15,000 and $25,000 to $28,000 and
$72,000 for the three and six month periods ended June 30, 2003 from $43,000
and $97,000 for the three and six month periods ended June 30, 2002,
respectively, primarily due to lower interest rates available on invested cash
balances.

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Minority interest increased by $59,000 and $80,000 to $237,000 and
$475,000 for the three and six month periods ended June 30, 2003 from $178,000
and $395,000 for the three and six month periods ended June 30, 2002,
respectively, due to increased profitability of GK Financing. Minority
interest represents the 19% interest of GK Financing owned by a third party.

Income tax expense increased by $134,000 and $226,000 to $169,000 and
$366,000 for the three and six month periods ended June 30, 2003 compared to
$35,000 and $140,000 for the three and six month periods ended June 30, 2002,
respectively. The increase was due to increased profitability and an increase
in the effective income tax rate in 2003 compared to 2002. The Company
recorded a 40% income tax provision in the three and six month periods ended
June 30, 2003, as well as, the same periods in 2002. The effective income tax
rate in second quarter 2003 was reduced to approximately 34% due to an income
tax benefit of $32,000 that was recorded for the exercise of 50,000 previously
expensed options. In second quarter 2002, the effective income tax rate was
reduced to 10% due to an income tax benefit of $103,000 that was recorded for
the exercise of 160,000 previously expensed options. For the six month period
ended June 30, 2003, the effective tax rate was reduced to 35% compared to 18%
for the same period in the prior year. This is due to an income tax benefit on
the exercise of previously expensed options of $48,000 compared to $168,000 in
the prior year. These income tax benefits are the result of compensation
expense that was recognized when the options were granted in 1995.

The Company had net income of $334,000 ($0.07 per diluted share) and
$670,000 ($0.13 per diluted share) for the three and six month periods ended
June 30, 2003 compared to net income of $311,000 ($0.06 per diluted share) and
$631,000 ($0.13) in the same period in the prior year. The increase for both
the three and six month periods was primarily due to increased utilization of
Gamma Knife units in operation more than one year, which resulted in higher
operating income. This was partially offset by higher income tax expense,
primarily due to the higher effective income tax rates of 34% and 35% for the
three and six month periods ended June 30, 2003 compared to 10% and 18% for the
same periods in the prior year, respectively.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $11,032,000 at June 30, 2003
compared to $9,924,000 at December 31, 2002. The Companys cash position
increased by $1,108,000 primarily due to the net reimbursement of progress
payments of $1,217,000 on Gamma Knife projects financed in the first six months
of 2003.

On April 4, 2003 the Company paid an annual dividend of $0.12 per share to
shareholders of record as of March 14, 2003, which resulted in a reduction in
retained earnings in first quarter 2003 of $454,000. On June 12, 2003, The
Company declared a quarterly dividend of $0.04 per share, payable on October
15, 2003 to shareholders of record as of October 1, 2003, which resulted in a
reduction in retained earnings during second quarter 2003 of $155,000.

The Company as of June 30, 2003 had shareholders equity of $14,718,000,
working capital of $7,227,000 and total assets of approximately $47,924,000.

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The Company has scheduled interest and principal payments under its debt
obligations of approximately $8,779,000 during the next 12 months. The Company
believes that its cash flow from operations and cash resources are adequate to
meet its scheduled debt obligations during the next 12 months.

The Company is investing its cash in an institutionally priced money
market fund pending use in the Companys operations. The investment objective
of the money market fund is to maintain a stable net asset value, in order to
maximize yield while preserving principal value.




Item 4. Controls and Procedures

(a)  Our Chief Executive Officer and our Chief Financial Officer, after
evaluating the effectiveness of the Companys disclosure controls and
procedures (as defined in the Securities Exchange Act of 1934 (Exchange Act)
Exchange Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by
this quarterly report, have concluded that our disclosure controls and
procedures are effective based on their evaluation of these controls and
procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

(b)  Changes in internal control over financial reporting. There were no
changes in our internal control over financial reporting identified in
connection with the evaluation required by paragraph (d) of Exchange Act Rules
13a-15 or 15d-15 that occurred during our last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.




PART II  OTHER INFORMATION




|        |  |                   
|------- |  | ------------------
|Item 1. |  | Legal Proceedings.
|        |  | None.             




|        |  |                                           
|------- |  | ------------------------------------------
|Item 2. |  | Changes in Securities and Use of Proceeds.
|        |  | 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 (Meeting) was held
on June 12, 2003. There were present in person or by proxy at
said Meeting shareholders voting 3,640,995 shares that represented
95.3% of the 3,818,203 shares outstanding and entitled to vote at
the Meeting, which represented a quorum. At the meeting, the
shareholders:
|        |  |                                                                                                                                                                                                                                                                                                                                                
|        |  | 1) Voted on the Election of Directors as follows:                                                                                                                                                                                                                                                                                              

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|                        |  |     |           |         |  |  |       | 
|----------------------- |  | --- | --------- | ------- |  |  | ----- | 
|Nominee                 |  | For |           | Against
|                        |  |     |           |        
|Ernest A. Bates, M.D.   |  |     | 3,636,235 |         |  |  | 4,760 | 
|Willie R. Barnes        |  |     | 3,636,635 |         |  |  | 4,360 | 
|Olin C. Robison         |  |     | 3,636,635 |         |  |  | 4,360 | 
|John F. Ruffle          |  |     | 3,636,635 |         |  |  | 4,360 | 
|Stanley S. Trotman, Jr. |  |     | 3,636,635 |         |  |  | 4,360 | 



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



| |  | Voted on the ratification of Moss Adams, LLP as the Companys
independent accountants for the year ended December 31, 2003.
There were 3,606,716 votes for, 26,048 votes against and 8,230
votes abstained.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Moss Adams, LLP was ratified as the Companys independent
accountants for the year ended December 31, 2003.                                                                                                




|        |  |                   
|------- |  | ------------------
|Item 5. |  | Other Information.
|        |  | None.             




|        |  |                                   |  |                                           
|------- |  | --------------------------------- |  | ------------------------------------------
|Item 6. |  | Exhibits and Reports on Form 8-K.
|        |  | (a)                               |  | Exhibits                                  
|        |  |                                   |  | The following exhibits are filed herewith:

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.43          |  | Lease Agreement for a Gamma Knife
Unit dated as of July 11, 2002 between GK Financing, LLC
and Southern Baptist Hospital of Florida, Inc. D/B/A
Baptist Medical Center. (Confidential material
appearing in this document has been omitted and filed
separately with the Securities and Exchange Commission
in accordance with Rule 24b-2, promulgated under the
Securities and Exchange Act of 1934, as amended.
Omitted information has been replaced with asterisks.)
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|31.1           |  | Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|31.2           |  | Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|32.1           |  | Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                 

10



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| |     |  |                                                                                        
| | --- |  | ---------------------------------------------------------------------------------------
| | (b) |  | Reports on Form 8-K                                                                    
| |     |  | The following report on Form 8-K was filed during the three
months ended June 30, 2003:

|                                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Form 8-K dated and filed April 21, 2003 relating to a
press release announcing the Companys preliminary
financial results for its first quarter of fiscal year
2003.

| |  |                                                                
| |  | ---------------------------------------------------------------
| |  |                                                                
| |  | The following report on Form 8-K was filed after June 30,
2003:

|                                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Form 8-K dated and filed July 22, 2003 relating to a
press release announcing the Companys preliminary
financial results for its second quarter of fiscal year
2003.

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SIGNATURES

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

AMERICAN SHARED HOSPITAL SERVICES
Registrant

|      |  |                 |  |                                                                            
|----- |  | --------------- |  | ---------------------------------------------------------------------------
|Date: |  | August 13, 2003 |  | /s/ Ernest A. Bates                                                        
|      |  |                 |  |                                                                            
|      |  |                 |  | Ernest A. Bates, M.D.
Chairman of the Board and
Chief Executive Officer    
|      |  |                 |  |                                                                            
|Date: |  | August 13, 2003 |  | /s/ Craig K. Tagawa                                                        
|      |  |                 |  |                                                                            
|      |  |                 |  | Craig K. Tagawa
Senior Vice President
Chief Operating and Financial Officer

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EXHIBIT INDEX

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.43 |  | Lease Agreement for a Gamma Knife
Unit dated as of July 11, 2002 between GK Financing, LLC
and Southern Baptist Hospital of Florida, Inc. D/B/A
Baptist Medical Center. (Confidential material
appearing in this document has been omitted and filed
separately with the Securities and Exchange Commission
in accordance with Rule 24b-2, promulgated under the
Securities and Exchange Act of 1934, as amended.
Omitted information has been replaced with asterisks.)
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|31.1  |  | Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|31.2  |  | Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|32.1  |  | Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                 

13