AMERICAN SHARED HOSPITAL SERVICES REPORTS HIGHER REVENUE AND OPERATING INCOME FOR THE THIRD QUARTER AND FIRST NINE MONTHS OF 2005 San Francisco, CA

AMERICAN SHARED HOSPITAL SERVICES

REPORTS HIGHER REVENUE AND OPERATING INCOME

FOR THE THIRD QUARTER AND FIRST NINE MONTHS OF 2005

San Francisco, CA, October 27, 2005 AMERICAN SHARED HOSPITAL SERVICES (AMEX,PCX:AMS), the

leading provider of Gamma Knife radiosurgery services, today announced higher revenue and

operating income for the third quarter and first nine months of 2005 versus the comparable periods

Third Quarter Results

For the three months ended September 30, 2005, revenue increased 6% to $4,402,000 compared to

$4,136,000 for the same period last year. This growth reflected the addition of two new Gamma

Knife units that went into service in the first half of 2005, and the Company s 21st Gamma Knife

that began treating patients in August 2005. Operating income increased for the 19th consecutive

quarter, and income before taxes for this year s third quarter rose 3% compared to the prior-year

Net income for the third quarter of 2005 was $502,000, or $0.10 per diluted share, reflecting an

effective income tax rate of 21%. This compares to net income for the third quarter of 2004 of

$840,000, or $0.16 per diluted share, reflecting an income tax benefit of $226,000. The 21% income

tax rate in the 2005 third quarter resulted from a reduction in income tax benefit related to the

exercise of previously expensed stock options, to $123,000 for this year s third quarter from

$472,000 for the same period last year. With the option exercise program of AMS Chairman and CEO

now complete, the company expects a 40% tax rate beginning in the fourth quarter of 2005.

At September 30, 2005, AMS reported working capital of $4,187,000, and cash, cash equivalents and

securities of $8,334,000. Shareholders equity increased to $18,079,000 compared to $17,546,000 at

For the nine months ended September 30, 2005, revenue increased 9% to $13,581,000 from $12,479,000

for the first nine months of 2004. Operating income increased 3% to $2,557,000 from $2,471,000 for

the same period a year ago. Income before income taxes increased 5%, to $1,862,000 from $1,771,000

for last year s first nine months. Net income for the first nine months of 2005 decreased to

$1,288,000, or $0.26 per diluted share, from $1,599,000, or $0.31 per diluted share, in 2004,

reflecting a reduction in income tax benefit for 2005 compared to 2004.

On balance, the performance of our current portfolio of 21 Gamma Knife units now in operation at

medical centers throughout the United States met our expectations for the third quarter, said

Chairman and Chief Executive Officer Ernest A. Bates, M.D. Because the market for Gamma Knife

units and other advanced therapeutic equipment is large and under-penetrated, we have an

outstanding opportunity to deliver long-term growth. During the third quarter we made substantial

progress toward this objective as we diligently worked with a number of clients through the complex

and often lengthy sales cycle characteristic of our industry. Today we are in the late stages of

negotiations for the development of several new Gamma Knife centers, and we expect that contracts

will be awarded to AMS in the near future. Additionally, we have reached agreement with two of our

current customers to upgrade their Gamma Knife units and extend the number of years of those

agreements. We also are pursuing a number of serious opportunities to augment our Gamma Knife

business with the latest Intensity Modulated Radiation Therapy (IMRT) and Image Guided Radiation

Therapy (IGRT) equipment and our Operating Room for the 21st Century concept.

Earnings Conference Call

American Shared has scheduled a conference call at 4:00 pm EDT (1:00 pm PDT) today. To

participate in the live call, dial 800-471-6718 at least 5 minutes prior to the scheduled start

time. A simultaneous WebCast of the

call may be accessed through the Company s website, www.ashs.com, or through CCBN,

www.companyboardroom.com. A replay will be available for 30 days at these same internet

addresses, or by calling 888-843-8996, pass code 13077322.

American Shared Hospital Services is building a profitable medical services company in an

underserved niche turnkey technology solutions for advanced radiosurgical procedures. The

Company s core business is supplying hospitals with the Gamma Knife a non-invasive treatment for

malignant and benign brain tumors, vascular malformations and trigeminal neuralgia (facial pain).

The Gamma Knife, the gold standard in radiosurgery, reduces surgical risk and patient discomfort,

resulting in a shorter hospital stay and lower risk of complications. In most cases, Gamma Knife

patients resume their normal activities within a few days of treatment, compared to weeks or months

for patients who undergo conventional surgery. More than 250,000 patients worldwide have already

received this treatment. American Shared Hospital Services is the world leader in providing Gamma

Knife radiosurgery services.

Safe Harbor Statement

This press release 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, 2004, its Quarterly Report on Form 10-Q

for the periods ended March 31, 2005 and June 30, 2005 and the definitive Proxy Statement for the

Annual Meeting of Shareholders held on June 16, 2005.

AMERICAN SHARED HOSPITAL SERVICES