##### Table of Contents



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 September 30, 2003 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



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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 [  ]

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

As of November 3, 2003, there are outstanding 3,918,203 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 Results of Operations
|                               | 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 10.44                 
|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)    
|                                           |                                                                                                      |                                                                                                        |            | Sept. 30, 2003 |           | Dec. 31, 2002
|                                           |                                                                                                      |                                                                                                        |            |                |           |              
|ASSETS                                     |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|Current assets:                            |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|                                           | Cash and cash equivalents                                                                            |                                                                                                        | $          | 10,882,000     |           |               | $          | 9,924,000   |          
|                                           | Restricted cash                                                                                      |                                                                                                        |            | 50,000         |           |               |            | 50,000      |          
|                                           | Accounts receivable, net of allowance for
doubtful accounts of $170,000 in 2003
and $120,000 in 2002 |                                                                                                        |            | 2,868,000      |           |               |            | 2,571,000   |          
|                                           | Prepaid expenses and other assets                                                                    |                                                                                                        |            | 480,000        |           |               |            | 876,000     |          
|                                           |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|Total current assets                       |                                                                                                      |                                                                                                        | 14,280,000 |                |           |               | 13,421,000 |            
|Property and equipment:                    |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|                                           | Medical equipment and facilities                                                                     |                                                                                                        |            | 45,343,000     |           |               |            | 37,306,000  |          
|                                           | Office equipment                                                                                     |                                                                                                        |            | 428,000        |           |               |            | 358,000     |          
|                                           | Deposits and construction in progress                                                                |                                                                                                        |            | 775,000        |           |               |            | 4,372,000   |          
|                                           |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|                                           |                                                                                                      |                                                                                                        | 46,546,000 |                |           |               | 42,036,000 |            
|                                           | Accumulated depreciation and
amortization                                                            |                                                                                                        |            | (13,961,000    | )         |               |            | (10,858,000 | )        
|                                           |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|Net property and equipment                 |                                                                                                      |                                                                                                        | 32,585,000 |                |           |               | 31,178,000 |            
|Other assets                               |                                                                                                      |                                                                                                        | 177,000    |                |           |               | 231,000    |            
|                                           |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|Total assets                               |                                                                                                      | $                                                                                                      | 47,042,000 |                |           | $             | 44,830,000 |            
|                                           |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|LIABILITIES AND SHAREHOLDERS EQUITY       |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|Current liabilities:                       |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|                                           | Accounts payable                                                                                     |                                                                                                        | $          | 226,000        |           |               | $          | 145,000     |          
|                                           | Accrued interest                                                                                     |                                                                                                        |            | 155,000        |           |               |            | 185,000     |          
|                                           | Employee compensation and benefits                                                                   |                                                                                                        |            | 197,000        |           |               |            | 126,000     |          
|                                           | Other accrued liabilities                                                                            |                                                                                                        |            | 423,000        |           |               |            | 280,000     |          
|                                           | Income taxes payable                                                                                 |                                                                                                        |            | 0              |           |               |            | 20,000      |          
|                                           | Current portion of long-term debt                                                                    |                                                                                                        |            | 6,559,000      |           |               |            | 5,490,000   |          
|                                           |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|Total current liabilities                  |                                                                                                      |                                                                                                        | 7,560,000  |                |           |               | 6,246,000  |            
|Long-term debt, less current portion       |                                                                                                      |                                                                                                        | 21,662,000 |                |           |               | 22,006,000 |            
|Deferred income taxes                      |                                                                                                      |                                                                                                        | 985,000    |                |           |               | 590,000    |            
|Minority interest                          |                                                                                                      |                                                                                                        | 1,692,000  |                |           |               | 1,448,000  |            
|Shareholders equity:                      |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|                                           | Common stock, without par value:                                                                     |                                                                                                        |            |                |           |               |            |             |          
|                                           |                                                                                                      | authorized shares - 10,000,000; issued
and outstanding shares, 3,918,000 in
2003 and 3,783,000 in 2002 |            |                | 9,198,000 |               |            |             | 9,173,000 | 
|                                           | Additional paid-in capital                                                                           |                                                                                                        |            | 3,461,000      |           |               |            | 3,312,000   |          
|                                           | Retained earnings                                                                                    |                                                                                                        |            | 2,484,000      |           |               |            | 2,055,000   |          
|                                           |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|Total shareholders equity                 |                                                                                                      |                                                                                                        | 15,143,000 |                |           |               | 14,540,000 |            
|                                           |                                                                                                      |                                                                                                        |            |                |           |               |            |            
|Total liabilities and shareholders equity |                                                                                                      | $                                                                                                      | 47,042,000 |                |           | $             | 44,830,000 |            
|                                           |                                                                                                      |                                                                                                        |            |                |           |               |            |            

See accompanying notes

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

|                           |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |            |           | 
|-------------------------- | --------------------------------------------- | ----------------------------- | --------- | ---------------------------- | --------- | --------------------------- | --------- | --------- | ------- | ---- | --------- | ---------- | --------- | - | --------- | ---------- | --------- | 
|                           |                                               |                               |           | Three Months ended Sept. 30, |           | Nine Months ended Sept. 30,
|                           |                                               |                               |           |                              |           |                            
|                           |                                               |                               |           | 2003                         |           | 2002                        |           | 2003      |         | 2002
|                           |                                               |                               |           |                              |           |                             |           |           |         |     
|Revenue:                   |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           
|                           | Medical services                              |                               | $         | 4,011,000                    |           |                             | $         | 3,563,000 |         |      | $         | 11,785,000 |           |   | $         | 10,024,000 |          
|Costs and expenses:        |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           
|                           | Costs of operations:                          |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |            |          
|                           |                                               | Maintenance and supplies      |           |                              | 222,000   |                             |           |           | 141,000 |      |           |            | 533,000   |   |           |            | 324,000   | 
|                           |                                               | Depreciation and amortization |           |                              | 1,085,000 |                             |           |           | 911,000 |      |           |            | 3,061,000 |   |           |            | 2,539,000 | 
|                           |                                               | Other                         |           |                              | 588,000   |                             |           |           | 290,000 |      |           |            | 1,719,000 |   |           |            | 1,011,000 | 
|                           |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           
|                           |                                               |                               | 1,895,000 |                              |           |                             | 1,342,000 |           |         |      | 5,313,000 |            |           |   | 3,874,000 |           
|                           | Selling and administrative                    |                               |           | 702,000                      |           |                             |           | 899,000   |         |      |           | 2,367,000  |           |   |           | 2,560,000  |          
|                           | Interest                                      |                               |           | 656,000                      |           |                             |           | 626,000   |         |      |           | 1,908,000  |           |   |           | 1,825,000  |          
|                           |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           
|Total costs and expenses   |                                               |                               | 3,253,000 |                              |           |                             | 2,867,000 |           |         |      | 9,588,000 |            |           |   | 8,259,000 |           
|                           |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           
|Operating income           |                                               |                               | 758,000   |                              |           |                             | 696,000   |           |         |      | 2,197,000 |            |           |   | 1,765,000 |           
|Interest and other income  |                                               |                               | 27,000    |                              |           |                             | 41,000    |           |         |      | 99,000    |            |           |   | 138,000   |           
|Minority interest          |                                               |                               | (224,000  | )                            |           |                             | (264,000  | )         |         |      | (699,000  | )          |           |   | (659,000  | )         
|                           |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           
|Income before income taxes |                                               |                               | 561,000   |                              |           |                             | 473,000   |           |         |      | 1,597,000 |            |           |   | 1,244,000 |           
|Income tax expense         |                                               |                               | (192,000  | )                            |           |                             | (190,000  | )         |         |      | (558,000  | )          |           |   | (330,000  | )         
|                           |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           
|Net income                 |                                               | $                             | 369,000   |                              |           | $                           | 283,000   |           |         | $    | 1,039,000 |            |           | $ | 914,000   |           
|                           |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           
|Net income per share:      |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           
|                           | Earnings per common share - basic             |                               | $         | 0.10                         |           |                             | $         | 0.08      |         |      | $         | 0.27       |           |   | $         | 0.25       |          
|                           |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           
|                           | Earnings per common share - assuming
dilution |                               | $         | 0.07                         |           |                             | $         | 0.06      |         |      | $         | 0.20       |           |   | $         | 0.18       |          
|                           |                                               |                               |           |                              |           |                             |           |           |         |      |           |            |           |   |           |           

See accompanying notes

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

|                                                                    |                                                             |                                              |                                                                 |            |                             |          |           |            |           |          |  
|------------------------------------------------------------------- | ----------------------------------------------------------- | -------------------------------------------- | --------------------------------------------------------------- | ---------- | --------------------------- | -------- | --------- | ---------- | --------- | -------- | -
|                                                                    |                                                             |                                              |                                                                 |            | Nine Months ended Sept. 30,
|                                                                    |                                                             |                                              |                                                                 |            |                            
|                                                                    |                                                             |                                              |                                                                 |            | 2003                        |          | 2002     
|                                                                    |                                                             |                                              |                                                                 |            |                             |          |          
|Operating activities:                                               |                                                             |                                              |                                                                 |            |                             |          |           |           
|Net income                                                          |                                                             | $                                            | 1,039,000                                                       |            |                             | $        | 914,000   |           
|Adjustments to reconcile net cash provided by operating activities: |                                                             |                                              |                                                                 |            |                             |          |           |           
|                                                                    |                                                             | Depreciation and amortization                |                                                                 |            | 3,130,000                   |          |           |            | 2,611,000 |         
|                                                                    |                                                             | Deferred income taxes                        |                                                                 |            | 559,000                     |          |           |            | 330,000   |         
|                                                                    |                                                             | Changes in operating assets and liabilities: |                                                                 |            |                             |          |           |            |           |         
|                                                                    |                                                             |                                              | Increase in accounts receivable                                 |            |                             | (297,000 | )         |            |           | (802,000 | )
|                                                                    |                                                             |                                              | Decrease in prepaid expenses and other assets                   |            |                             | 423,000  |           |            |           | 222,000  |  
|                                                                    |                                                             |                                              | Increase (decrease) in accounts payable and accrued liabilities |            |                             | 88,000   |           |            |           | (259,000 | )
|                                                                    |                                                             |                                              |                                                                 |            |                             |          |           |           
|Net cash from operating activities                                  |                                                             |                                              | 4,942,000                                                       |            |                             |          | 3,016,000 |           
|Investing activities:                                               |                                                             |                                              |                                                                 |            |                             |          |           |           
|                                                                    | Purchase of property and equipment                          |                                              |                                                                 | (4,510,000 | )                           |          |           | (4,981,000 | )        
|                                                                    | Increase in minority interest                               |                                              |                                                                 | 244,000    |                             |          |           | 221,000    |          
|                                                                    |                                                             |                                              |                                                                 |            |                             |          |           |           
|                                                                    | Net cash from investing activities                          |                                              |                                                                 | (4,266,000 | )                           |          |           | (4,760,000 | )        
|Financing activities:                                               |                                                             |                                              |                                                                 |            |                             |          |           |           
|                                                                    | Payment of dividends                                        |                                              |                                                                 | (454,000   | )                           |          |           | (438,000   | )        
|                                                                    | Payment received for exercise of stock options              |                                              |                                                                 | 25,000     |                             |          |           | 68,000     |          
|                                                                    | Repurchase of options/warrants                              |                                              |                                                                 | (14,000    | )                           |          |           | 0          |          
|                                                                    | Repurchase of common stock                                  |                                              |                                                                 | 0          |                             |          |           | (135,000   | )        
|                                                                    | Financing on purchase of property and equipment             |                                              |                                                                 | 4,913,000  |                             |          |           | 4,354,000  |          
|                                                                    | Principal payments on long-term debt and capitalized leases |                                              |                                                                 | (4,188,000 | )                           |          |           | (3,228,000 | )        
|                                                                    |                                                             |                                              |                                                                 |            |                             |          |           |           
|                                                                    | Net cash from financing activities                          |                                              |                                                                 | 282,000    |                             |          |           | 621,000    |          
|                                                                    |                                                             |                                              |                                                                 |            |                             |          |           |           
|                                                                    | Net increase (decrease) in cash and cash equivalents        |                                              |                                                                 | 958,000    |                             |          |           | (1,123,000 | )        
|                                                                    | Cash and cash equivalents at beginning of period            |                                              |                                                                 | 9,924,000  |                             |          |           | 11,580,000 |          
|                                                                    |                                                             |                                              |                                                                 |            |                             |          |           |           
|                                                                    | Cash and cash equivalents at end of period                  |                                              | $                                                               | 10,882,000 |                             |          | $         | 10,457,000 |          
|                                                                    |                                                             |                                              |                                                                 |            |                             |          |           |           
|Supplemental cash flow disclosure:                                  |                                                             |                                              |                                                                 |            |                             |          |           |           
|                                                                    | Cash paid during the period for:                            |                                              |                                                                 |            |                             |          |           |            |          
|                                                                    |                                                             | Interest paid                                |                                                                 | $          | 1,938,000                   |          |           | $          | 1,808,000 |         
|                                                                    |                                                             | Income taxes paid                            |                                                                 | $          | 81,000                      |          |           | $          | 85,000    |         

See accompanying notes

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AMERICAN SHARED HOSPITAL SERVICES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 September 30, 2003 and the
results of its operations for the three and nine month periods ended September
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s majority-owned subsidiary, GK Financing, LLC (GK
Financing).

The Company through its majority-owned subsidiary, GK Financing, provided
Gamma Knife units to seventeen medical centers as of September 30, 2003 in
Arkansas, California, Connecticut, Florida, Illinois, Maryland, Massachusetts,
Mississippi, Nevada, New Jersey, New Mexico, 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 nine months ended September 30, 2003 basic earnings per share was
computed using 3,871,000 and 3,827,000 common shares, respectively, and diluted
earnings per share was computed using 5,081,000 and 5,072,000 common shares and
equivalents, respectively. For the three and nine months ended September 30,
2002 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.

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 Sep 30 |      | Nine Months Ended Sep 30
|                                                                                                                                            |                     |   | 2003                      |      | 2002                     |    | 2003    |      | 2002
|                                                                                                                                            |                     |   |                           |      |                          |    |         |      |     
|Net income, as reported                                                                                                                     |                     | $ | 369,000                   |      |                          | $  | 283,000 |      |      | $ | 1,039,000 |      |  | $  | 914,000 |     
|Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects |                     | $ | 0                         |      |                          | ($ | 18,000  | )    |      | $ | 0         |      |  | ($ | 27,000  | )   
|Pro forma net income                                                                                                                        |                     | $ | 369,000                   |      |                          | $  | 265,000 |      |      | $ | 1,039,000 |      |  | $  | 887,000 |     
|Earnings per share:                                                                                                                         |                     |   |                           |      |                          |    |         |      |      |   |           |      |  |    |         |     
|                                                                                                                                            | Basic-as reported   |   | $                         | 0.10 |                          |    | $       | 0.08 |      |   | $         | 0.27 |  |    | $       | 0.25 | 
|                                                                                                                                            | Basic-pro forma     |   | $                         | 0.10 |                          |    | $       | 0.07 |      |   | $         | 0.27 |  |    | $       | 0.24 | 
|                                                                                                                                            | Diluted-as reported |   | $                         | 0.07 |                          |    | $       | 0.06 |      |   | $         | 0.20 |  |    | $       | 0.18 | 
|                                                                                                                                            | Diluted-pro forma   |   | $                         | 0.07 |                          |    | $       | 0.05 |      |   | $         | 0.20 |  |    | $       | 0.17 | 




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. 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 periods ended March 31,
2003 and June 30, 2003, and the definitive Proxy Statement for the Annual
Meeting of Shareholders held on June 12, 2003.

Medical services revenue increased $448,000 and $1,761,000 to $4,011,000
and $11,785,000 for the three month and nine month periods ended September 30,
2003, from $3,563,000 and $10,024,000 for the three and nine month periods
ended September 30, 2002, respectively. The increase in revenue for the three
month period was due to three additional Gamma Knife units in operation
compared to the same period in the prior year, which offset a decline of 6% in
revenue at Gamma Knife centers in operation longer than one year. Two
of the three new Gamma Knife units that opened during 2003 were
retail units. For the nine
month period there was a 5% 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 17 Gamma Knife
units in operation at September 30, 2003 compared to 14 at September 30, 2002.
Thirteen 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 8% and 22% to 510 and
1,561 for the three and nine month periods ended September 30, 2003 from 473
and 1,278 for the three and nine month periods ended September 30, 2002,
respectively. The increase for the three month period ended September 30, 2003
was due to the addition of three new Gamma Knife units compared to the same
period in the prior year, which offset a decrease of 4% in procedures performed
at Gamma Knife units in operation more than one year. The increase for the
nine month period ended September 30, 2003 was primarily the result of
increases in procedures performed at Gamma Knife units in operation more than
one year of 10%, as well as the addition of three new Gamma Knife units.

Total costs of operations increased $553,000 and $1,439,000 to $1,895,000
and $5,313,000 for the three and nine month periods ended September 30, 2003,
from $1,342,000 and $3,874,000 for the three and nine month periods ended
September 30, 2002, respectively. Maintenance and supplies increased by
$81,000 and $209,000 for the three and nine month periods ended September 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 14 Gamma Knife units covered under maintenance contract as of
September 30, 2003 compared to 11 as of September 30, 2002. Depreciation and
amortization increased by $174,000 and $522,000 for the three and nine month
periods ended September 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 $298,000 and $708,000 for the
three and nine month periods ended September 30, 2003 compared to the same
periods in the prior year primarily due to an increase in marketing costs and
the addition of a new retail Gamma Knife unit where the Company is responsible
for all of the operating costs, offset by sales/use and property tax credits of
approximately $110,000 in the third quarter 2002 with no comparable credits
during 2003. Additionally for the nine month period ended September 30, 2003,
there were startup and training costs at the Companys two most recently opened
retail Gamma Knife centers.

Selling and administrative costs decreased by $197,000 and $193,000 to
$702,000 and $2,367,000 for the three and nine month periods ended September
30, 2003 from $899,000 and $2,560,000 for the three and nine month periods
ended September 30, 2002, respectively. The decrease for both the three month
and nine month periods was primarily due to reduced payroll and business
development expenses, as well as reductions in legal and accounting fees. For
the year, these reductions were partially 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 $30,000 and $83,000 to $656,000 and
$1,908,000 for the three and nine month periods ended September 30, 2003 from
$626,000 and $1,825,000 for the three and nine month periods ended September
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 second and third
quarter 2002, which was partially offset by lower interest expense on the debt
relating to the more mature Gamma Knife units. The

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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 $14,000 and $39,000 to $27,000 and
$99,000 for the three and nine month periods ended September 30, 2003 from
$41,000 and $138,000 for the three and nine month periods ended September 30,
2002, respectively, primarily due to lower interest rates available on invested
cash balances.

Minority interest decreased by $40,000 and increased by $40,000 to
$224,000 and $699,000 for the three and nine month periods ended September 30,
2003 from $264,000 and $659,000 for the three and nine month periods ended
September 30, 2002, respectively. Minority interest represents the 19%
interest of GK Financing owned by a third party. The decrease for the three
month period is primarily due to increased marketing, income taxes and other
operating costs at GK Financing during the three month period ended September
30, 2003 compared to the prior year. The increase for the nine month period is
due to increased profitability of GK Financing.

Income tax expense increased by $2,000 and $228,000 to $192,000 and
$558,000 for the three and nine month periods ended September 30, 2003 compared
to $190,000 and $330,000 for the three and nine month periods ended September
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 nine month periods
ended September 30, 2003, as well as in the same periods in 2002. The
effective income tax rate in third quarter 2003 was reduced to approximately
34% due to an income tax benefit of $33,000 that was recorded for the exercise
of 50,000 previously expensed options. No such options were exercised in third
quarter 2002, which caused the effective income tax rate to remain at 40%. For
the nine month period ended September 30, 2003, the effective tax rate was
reduced to 35% compared to 27% for the same period in the prior year. This is
due to an income tax benefit on the exercise of previously expensed options of
$81,000 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 $369,000 ($0.07 per diluted share) and
$1,039,000 ($0.20 per diluted share) for the three and nine month periods ended
September 30, 2003 compared to net income of $283,000 ($0.06 per diluted share)
and $914,000 ($0.18 per diluted share) in the same period in the prior year.
The increase for the three month period was primarily due to lower selling and
administrative costs compared to the same period in the prior year. The
increase for the nine month period is primarily due to increased utilization of
Gamma Knife units in operation more than one year, which resulted in higher
operating income, and lower selling and administrative costs. This was
partially offset by higher income tax expense due to the higher effective
income tax rate of 35% for the nine month period ended September 30, 2003
compared to 27% for the same period in the prior year.

Liquidity and Capital Resources

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The Company had cash and cash equivalents of $10,882,000 at September 30,
2003 compared to $9,924,000 at December 31, 2002. The Companys cash position
increased by $958,000 primarily due to the net reimbursement of progress
payments of $977,000 on Gamma Knife projects financed in the first nine 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.

The Company as of September 30, 2003 had shareholders equity of
$15,143,000, working capital of $6,720,000 and total assets of approximately
$47,042,000.

The Company has scheduled interest and principal payments under its debt
obligations of approximately $9,102,000 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s primary lender for its Gamma Knife projects, DVI Financial
Services Inc. (DVI) filed for Chapter 11 bankruptcy protection in August
2003. This will not materially affect the financing that has been committed to
existing projects. The Company is currently in the process of seeking other
financing options for future projects. There can be no assurance that the
Company will secure financing in amounts and/or terms as favorable as that
historically provided by DVI.

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)     Evaluation of disclosure controls and procedures. 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

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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.

None.




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                                                                                                                                                                                                                                                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.44          |  | Lease Agreement for a Gamma Knife
Unit dated as of February 13, 2003 between GK Financing,
LLC and AHS Albuquerque Regional Medical Center LLC.
(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.                                                                                                                                                                                                                                                                                                                         

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| | (b) |  | Reports on Form 8-K                                                                         
| | --- |  | --------------------------------------------------------------------------------------------
|
| |     |  | The following report on Form 8-K was filed during the three
months ended September 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.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | Form 8-K dated and filed October 22, 2003 relating to a
press release announcing the Companys preliminary
financial results for its third 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: November 14, 2003 |  | /s/ Ernest A. Bates                                                        
|                        |  |                                                                            
|                        |  | Ernest A. Bates, M.D.
Chairman of the Board and
Chief Executive Officer    
|                        |  |                                                                            
|Date: November 14, 2003 |  | /s/ Craig K. Tagawa                                                        
|                        |  |                                                                            
|                        |  | Craig K. Tagawa
Senior Vice President
Chief Operating and Financial Officer

12