<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-K /A-2
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1994
--------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
--------------- ---------------
COMMISSION FILE NUMBER 0-16079
-----------
AIR METHODS CORPORATION
- ----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-0915893
- ----------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
7301 SOUTH PEORIA, ENGLEWOOD, COLORADO 80112
- ----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (303) 792-7400
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Not Applicable
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.06 PAR VALUE PER SHARE (the "Common Stock")
- ---------------------------------------------------------------
(Title of Class)
NASDAQ STOCK MARKET/1/
- ---------------------------------------------------------------
(Name of each exchange on which registered)
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
--- ---
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of May 19, 1995 was
approximately $18,021,324 ./2/ The number of outstanding
shares of Common Stock as of May 19, 1995 , was
8,075,023 .
DOCUMENTS INCORPORATED BY REFERENCE: None.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
- --------------------
/1/ Effective August 6, 1993, the Company's common stock was
transferred for trading to the National Market System of the
NASDAQ.
/2/ Excludes approximately 1,521,814 shares of Common
Stock held by directors, officers, and shareholders whose
ownership exceeds five percent of the shares outstanding at
May 19, 1995 . Exclusion of shares held by any person
should not be construed to indicate that such person
possesses the power, direct or indirect, to direct or cause
the direction of the management of policies of the
Registrant, or that such person is controlled by or under
common control with the Registrant.
<PAGE>
TABLE OF CONTENTS
-----------------
To Form 10-K /A-2
Page
----
PART I
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . 1
General. . . . . . . . . . . . . . . . . . . . . . . 1
Operations . . . . . . . . . . . . . . . . . . . . . 2
Engineering, Maintenance, Testing, Repair
Completion Services . . . . . . . . . . . . . . 5
Hazards and Insurance. . . . . . . . . . . . . . . . 6
Marketing and Sales Strategy . . . . . . . . . . . . 6
Competition. . . . . . . . . . . . . . . . . . . . . 7
Employees. . . . . . . . . . . . . . . . . . . . . . 7
Government Regulation. . . . . . . . . . . . . . . . 8
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . 8
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS. . . . . . . . . . . . . . . . . . . . . . . 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . 11
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . 14
Business Restructuring . . . . . . . . . . . . . . . 14
Results of Operations. . . . . . . . . . . . . . . . 14
Liquidity and Capital Resources. . . . . . . . . . . 18
Outlook for 1995 . . . . . . . . . . . . . . . . . . 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . 20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . 20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . 20
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . 26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . 32
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . 34
i<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K. . . . . . . . . . . . . . . . IV-1
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . IV-5
ii
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Air Methods Corporation, a Delaware corporation ("Air
Methods" or the "Company"), was established in Colorado in 1982
and now serves the nation's hospitals as the largest exclusive
provider of aeromedical emergency services and systems throughout
North America. As of September 15, 1994, the Company operates a
fleet of 39 aircraft consisting of 28 helicopters and 11
airplanes. The Company provides its services to 54 hospitals
located in 14 states under 21 operating agreements with terms
ranging from 3 to 7 years.
The Company's larger competitors initiated their operations
serving the energy production and exploration industry, unlike
Air Methods which began and has remained exclusively in the
aeromedical field. In addition, the Company is the largest
aeromedical carrier in the United States which uses only pilots
and equipment certified by the Federal Aviation Administration
(the "FAA") for flight under instrument flight rules ("IFR")
conditions. Air Methods has one of the lowest operating
interruption ratios in the aeromedical transportation industry.
The Company's headquarters in metropolitan Denver, Colorado
include a technologically advanced helicopter repair,
maintenance, and testing shop, as well as an aircraft interior
completion facility. In addition, the Company designs, services
and installs proprietary medical interiors for third parties
which allow each aircraft to operate as an airborne intensive
care unit (ICU). The Company also has provided medical interiors
and equipment for helicopters in Germany and for airplanes in
France, Canada and the United Kingdom.
On November 12, 1991, the Company, then a research and
development company doing business as Cell Technology, completed
the acquisition of Air Methods Corporation, a Colorado
corporation ("Air Methods-Colorado") incorporated in 1980. The
Company issued approximately 600,000 restricted shares of common
stock for all of Air Methods-Colorado's outstanding common stock.
Air Methods-Colorado was then merged into the Company, and the
Company changed its name to "Air Methods Corporation." From its
inception in 1982 until the completion of this transaction, the
Company had been engaged in the development of biologic response
modifiers ("BRMs"), naturally occurring substances designed to
alter the body's immune system and its reaction to cancer and
other diseases. At the time of its notification by the United
States Food and Drug Administration (the "FDA") in late 1990 of
the required construction of a full-scale commercial production
plant prior to initiating Phase III clinical trials, the Company
had completed various multicenter Phase II clinical trials of its
BRMs in primary adult brain cancer. Following this notification,
the Company discontinued the internal development of its BRMs and
out-licensed these development responsibilities to other
pharmaceutical and biotechnology companies with the capability to
further the development of its BRMs.
References herein to Air Methods and the Company refer to
Air Methods Corporation, a Delaware corporation formerly known as
Cell Technology, Inc., including its predecessor corporation, Air
Methods Corporation, a Colorado corporation, unless otherwise
indicated by the context. Air Methods Corporation is located at
7301 South Peoria, Englewood, Colorado 80112; the telephone
number is 303-792-7400.
OPERATIONS
The Company has played a significant role in pioneering the
integrated use of helicopters and airplanes equipped with patient
life support systems to transport persons requiring intensive
medical care from either the scene of an accident or general care
hospitals to highly skilled trauma centers, tertiary care centers
or university teaching hospitals. Since opening its first
hospital-based aeromedical program in 1980, the Company has grown
to become one of the largest providers of aeromedical emergency
services and systems in the United States.
The Company provides its hospital clients with dedicated
helicopters and airplanes equipped with FAA-approved,
sophisticated medical aircraft interiors which serve as airborne
intensive care units for the patients
1<PAGE>
being transported. The Company also supplies similarly
configured backup helicopters and airplanes to its client
hospitals for reserve operating purposes.
The Company conducts its operations exclusively using IFR-
certified equipment and IFR-rated pilots, permitting a higher
degree of operational flexibility, flight safety and navigational
accuracy than is customarily available using more limited Visual
Flight Rules ("VFR")-certified equipment and pilots without
instrument ratings, which are used by many of the Company's
competitors. In August, 1993, the Company announced that it had
been awarded its second pilot training contract from the FAA.
Pursuant to this contract, the Company has agreed to provide Bell
222 training for FAA personnel. The Company also supplies its
client hospitals with pilots and certified airframe and
powerplant mechanics employed by the Company who are based at the
client hospitals where the specific aircraft are assigned.
Client hospitals administer and manage their individual
aeromedical programs, provide all necessary medical personnel and
equipment and are responsible for all medically-related
operations. However, the Company in all instances retains the
ultimate authority regarding the operation and flight safety of
its hospital-based and backup aircraft.
The Company's aeromedical healthcare services are generally
furnished to the contracting hospital under three- to seven-year
contracts, which typically provide that the Company receives a
fixed monthly fee and a variable flight usage fee from the
hospital, regardless of when, or if, the hospital is reimbursed
for these services by its patients, their insurers, or the
federal government. The Company's aeromedical contracts
generally provide for an annual adjustment of the monthly service
fee and variable flight usage fee in accordance with fluctuations
of the cost of living index for all city urban customers and the
pass-through to certain of the Company's client hospitals of
increases in the Company's hull and operator liability insurance
premiums. Any additional contractual adjustments are generally
subject to prior approval by the client hospital. The majority
of the Company's aeromedical contracts require that client
hospitals pay for fuel utilized by the Company in providing
aeromedical transport services to the hospital. The aeromedical
contracts typically provide that the client hospital may
terminate the contract if a material default by the Company
occurs.
Aeromedical contracts are generally awarded following a
comprehensive Request for Proposal ("RFP") process initiated by
the prospective client hospital. Normally, hospitals evaluate
various features of the competitive bidder including price,
industry experience and reputation, maintenance and support
capabilities, quality of pilots, and availability of specified
aircraft equipment and medical interior configurations.
The following table sets forth the name and location of each
of the Company's aeromedical programs and the respective
hospitals served thereby as of the date of this report:
<TABLE>
<CAPTION>
Operating Program City and State Hospitals Served
- --------------------------- ----------------- -------------------------------------------------------
<S> <C> <C>
Air Life Texarkana, AR St. Michael's Hospital
Wadley Hospital
Life Flight Stanford, CA Stanford University Hospital
Santa Clara Valley Medical Center
Lucille Salter Packard Children's Hospital at Stanford
P/SL AirLife, a division Aurora, CO P/SL Aurora Presbyterian Hospital
of HealthONE Presbyterian/St. Luke's Medical Center
Swedish Medical Center
St. Mary's Air Life Grand Junction, CO St. Mary's Hospital - The Regional Medical Center
Air Life of Greeley Greeley, CO North Colorado Medical Center
Lifeline Rockford, IL St. Anthony Medical Center
Mercy Air Life Des Moines, IA Mercy Hospital Medical Center
2<PAGE>
St. Luke's Life Link III Duluth, MN St. Luke's Hospital of Duluth
Life Link III St. Paul, MN Abbot Northwestern Hospital
St. Paul - Ramsey Medical Center
University of Minnesota Hospital & Clinic
The Minneapolis Children's Medical Center
Deacare Advanced Life Billings, MT Deaconess Medical Center
Support Services
Air Care 1 Farmington, NM San Juan Regional Medical Center
MedCenter Air Charlotte, NC Carolinas Medical Center
Air Care Winston Salem, NC North Carolina Baptist Hospitals, Inc.
Bowman Gray School of Medicine
Wake Forest University
Air Life of Oregon Bend, OR St. Charles Medical Center
Baptist Air Life San Antonio, TX Baptist Medical Center
Southeast Baptist Hospital
Northeast Baptist Hospital
North Central Baptist Hospital
University Hospital
Air Med Salt Lake City, UT University of Utah Hospital
Inova Medical AirCare Falls Church, VA Fairfax Hospital
Fair Oaks Hospital
Mt. Vernon Hospital
Jefferson Hospital
Life-Guard 10 Roanoke, VA Roanoke Memorial Hospital
Community Hospital
Bedford Memorial Hospital
Franklin Memorial Hospital
Giles Memorial Hospital
Gill Memorial Hospital
Lonesome Pine Hospital
Wythe Community Hospital
Radford Community Hospital
Southside Community Hospital
Tazewell Community Hospital
Spirit of Marshfield Marshfield, WI Saint Joseph's Hospital
Holy Family Hospital
Mercy Medical Center
Sacred Heart Hospital
Sacred Heart/Saint Mary's Hospital, Inc.
Saint Elizabeth's Hospital
Saint Jude Hospital
Saint Michael's Hospital
Diversified Health Services
</TABLE>
In September 1993, in a tax-free reorganization, the Company
acquired Golden Eagle Aviation, Inc., an executive air charter
service, in exchange for 55,617 shares of the Company's common
stock and the
3<PAGE>
assumption of approximately $2 million of debt. The Company
operated the air charter service until the third quarter of 1994
when management decided to discontinue substantially all of the
charter operations as part of the Company's restructuring plan.
See further discussion of the restructuring plan in Item 7
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
ENGINEERING, MAINTENANCE, TESTING, REPAIR COMPLETION SERVICES AND
BACKLOG
The Company's engineering, maintenance, testing, repair and
aircraft completion facility in Denver is the largest medically
dedicated facility for Bell helicopters in the United States. At
this facility the Company is able to conduct in-house, non-
destructive dynamic component testing, engine repair and
component overhaul, as well as substantial aircraft
modifications, including engineering design and installation of
custom avionics and medical interior configurations. The Company
maintains a sophisticated avionics engineering department, which
is licensed and approved by the FAA, as well as a design
engineering department using computer-aided design capabilities,
an upholstery shop, an equipment fabrication department, a
machine shop, a welding shop and an equipment research and
development department.
In addition to serving as one of the largest integrated
helicopter completion and service centers in North America for
Bell Helicopter, the Company's principal airframe manufacturer,
the Company operates a repair station for turbine-jet engines
manufactured by Allison, Pratt & Whitney, and Lycoming. On
April 7, 1993 the Company received from American Eurocopter a
Certificate of Designation as a Eurocopter BK-117 service center,
commensurate with its offering of BK-117 helicopters in addition
to Bell Helicopters. The Company is also an approved
installation and service center for Bendix-King, its primary
avionics manufacturer. The Company is an FAA-certified repair
station with airframe, accessory, radio, instrument and
powerplant ratings, which give it the capacity to provide
specialized services on the significant brands of equipment used
in its operations or sent to the Company for servicing by third
parties.
The Company designs, produces and installs interior
configurations according to the requirements and specifications
of its hospital clients as well as other helicopter and airplane
operators and manufacturers. The Company employs an FAA
Designated Engineering Representative ("DER") who is authorized
to approve various aircraft modifications which the Company may
choose to manufacture from time to time as part of its ongoing
business. The Company has the FAA authorization and capability
to engineer, design and install all of the components necessary
to transform an aircraft hull into an airborne extension of a
hospital ICU or emergency trauma center. The Company is
authorized to make these aircraft modifications pursuant to
various FAA-issued Supplemental Type Certificates ("STCs") and
Parts Manufacturer Approvals ("PMAs"). The Company believes that
its in-house repair, maintenance, testing and completion
capabilities provide cost savings and decrease aircraft down time
by avoiding the expense and operating risk of having maintenance
and repair work performed by nonaffiliated vendors. The Company
maintains a constant inventory of certain critical aircraft parts
at each of its hospital bases.
While most of the activities of the Company's headquarters
are devoted to the support and expansion of the Company's
aeromedical operations, the center also provides medical
completion and specialty configuration services directly to
aviation equipment manufacturers, as well as other helicopter
operators in the United States and overseas. In the year ended
June 30, 1994, the Company manufactured five medical interiors
for HDM Flugservice, a German company, through Bell Helicopters
Textron Corporation for a total of $2,279,000 in revenues. As of
June 30, 1994, the Company was nearing completion of a medical
interior for one of its hospital clients but had no additional
backlog of orders for medical interiors. Orders for aircraft
medical interiors are subject to general market fluctuations.
HAZARDS AND INSURANCE
The operation of helicopters and airplanes involves a
substantial level of risk. Hazards, such as aircraft accidents,
collisions and fire, are inherent in the furnishing of aviation
services and may result in losses of life, equipment and
revenues. The Company's safety record compares favorably with
other operators.
4<PAGE>
The Company maintains aircraft liability, aviation
spares/equipment, all risks, hull, product/completed operations,
hangar keeper's liability, property and casualty, automobile, and
contractor's equipment insurance coverage. The Company has not
experienced significant difficulty in obtaining insurance and has
not incurred any losses in excess of its property and liability
coverage. While the Company believes that its insurance coverage
is adequate for its operations, there can be no assurance that
such insurance coverage is now, or will be, adequate to cover any
claims to which it may be subject.
MARKETING AND SALES STRATEGY
For hospital providers, the demand for quality care
continues while the nature of reimbursement moves increasingly
from retrospective to prospective. The corresponding cost
pressures are leading to mergers and affiliations in the hospital
delivery community and to increased consolidations of previously
competing air medical transport programs. Within this
environment, the Company intends to continue aggressively
pursuing bid and contract negotiation opportunities in air
medical services for individual hospitals and newly forming
consortiums, competing primarily on the basis of safety, service,
reputation and to a lesser degree, price. In addition, the
Company believes that increasingly important synergies with
providers of airplane air medical services can be achieved to
afford a more integrated offering of air medical services to its
customers, as well as to increase its penetration in the
marketplace. The Company believes that providing both
helicopters and airplanes to hospital consortiums will drive
further market expansion. Air Methods continues, on a world-wide
basis, to actively pursue sales of its highly regarded state-of-
the-art medical interiors and avionics packages. Lastly, efforts
continue on the development of joint venture partnerships in
foreign countries for the provision of air medical transport
services.
The Company believes increased healthcare cost regulation
will continue to result in the closing of hospitals which are
experiencing declining in-patient revenues and decreasing
profitability. As a result, greater emphasis will be placed upon
hospitals offering the highest level of care, such as Level I
trauma centers, tertiary care centers and university teaching
hospitals. The Company believes that this trend will give
further impetus to implementation of hospital-based aeromedical
emergency services and systems throughout the United States. In
particular, the Company believes the market for airborne
emergency medical services ("EMS") is growing and will continue
to grow, as a result of a number of factors, including, but not
limited to: (1) the closing of urban and rural hospitals and the
subsequent concentration of various hospital specialization
centers (e.g., trauma; cardio-thoracic; burn; neonatology, and
organ transplantation) into regional centers; (2) the further
concentration of major university teaching hospitals allowing for
the possible accelerated development of specialized medicine and
health care therapies in various regions throughout the country;
and (3) the vertical integration of airplane and helicopter
provider services designed to meet the increasingly sophisticated
demands of those hospitals desiring to operate an integrated
aeromedical program. There can be no assurance that these trends
will continue or that a positive effect will result for
aeromedical emergency services or the Company.
COMPETITION
The aeromedical services industry is competitive and is
currently served by a variety of operators. The Company believes
that, of the existing operators, there are only five companies
which serve eight or more aeromedical programs: Rocky Mountain
Helicopters, Inc.; OmniFlight, Inc.; Corporate Jets, Inc.;
Petroleum Helicopters, Inc.; and the Company. Some of the
Company's competitors have somewhat greater financial, technical
and marketing resources than the Company. Competition in the
aeromedical service industry is focused primarily on safety,
pricing, quality of service and availability of aircraft
equipment. Although the Company is the third largest provider of
aeromedical transportation services in the United States, based
on the number of EMS programs served and the revenues generated
by these programs, it is the largest medically dedicated and
exclusively IFR-certified aeromedical services provider in this
industry in the U.S.
EMPLOYEES
As of the date of this report, the Company retained 237 full
time and 14 part time employees, comprised of 124 pilots; 102
aviation machinists; A&P engineers and other manufacturing/
maintenance positions; and 25 business and administrative
personnel. All of the Company's pilots are IFR-rated and have
5<PAGE>
completed an extensive ground school and flight training program
at the commencement of their employment with the Company, as well
as local area orientation and annual recurrency training provided
by the Company. All of the Company's operating aircraft
mechanics must possess FAA airframe and powerplant licenses.
The Company's employees are not covered by any collective
bargaining agreements and management believes that its relations
with employees are satisfactory. The Company believes that the
compensation arrangements offered to its employees are
competitive with those of other providers of aviation services
based on the individual qualifications of employees and are
sufficient to attract and keep qualified personnel.
GOVERNMENT REGULATION
The Company is subject to the Federal Aviation Act of 1958,
as amended. All flight and maintenance operations of the Company
are regulated and actively supervised by the U.S. Department of
Transportation through the FAA. The Company holds a Part 135 Air
Carrier Certificate from the FAA.
In August 1994, representatives of the FAA completed an
inspection of the Company's random drug testing program. The
Company's program was found to be in compliance and prior
regulatory discrepancies noted in previous routine inspections
were resolved with no penalties charged to the Company.
The Company cannot predict the impact of new or changed laws
or regulations on the demand for aeromedical services in the
future or the costs of complying with such laws and regulations.
ITEM 2. PROPERTIES
FACILITIES
The Company leases its headquarters facilities, consisting
of approximately 60,000 square feet of administrative and repair,
maintenance and completion space in metropolitan Denver, Colorado
at the Centennial Airport. The Company's lease expires in
December 1997 and its approximate annual rental cost is $361,000.
The Company has an option to extend the lease for an additional
ten years upon six months' advance written notice. Ancillary
Denver office and hangar facilities comprising approximately
2,500 square feet are occupied under a short-term lease which
expires November 30, 1994. The monthly rental costs on this
ancillary space is $2,800 per month. The Company has an option
to extend this lease for an additional six months. The Company
believes that these facilities are in good condition and suitable
for the Company's requirements.
EQUIPMENT, FUEL AND PARTS
As of June 30, 1994, the Company managed a fleet of 39
aircraft, consisting of 28 helicopters and 11 airplanes. Of
these aircraft, the Company owns 19 helicopters and 4 airplanes
and leases 6 helicopters and 3 airplanes. The Company operates 3
additional helicopters and 4 airplanes owned by client hospitals
and other third parties in connection with existing aeromedical
contracts. One helicopter owned by the Company has not yet been
placed in service pending completion of its medical interior and
avionics installations. One helicopter owned and 3 airplanes
leased by the Company are held for sale or sublease and are not
currently used in the Company's operations. The composition of
the Company's helicopter and airplane fleets as of June 30, 1994
is as follows:
6<PAGE>
COMPANY OWNED AIRCRAFT/1/
Aggregate
(Amounts in thousands)
--------------------
Net Book
Type Number Cost Value
---- ------ ---- --------
Helicopters:
Bell 206 L-1 1 $ 663 $ 586
Bell 206 L-3 5 4,335 3,829
Bell 222A 1 1,883 1,704
Bell 222UT 8 13,878 12,869
Bell 412 2 5,208 4,545
BK 117 1 6,552 6,479
--- ------- -------
18 $32,519 $30,012
Airplanes:
Cessna 421B 1 $ 251 $ 184
Held for Sale:
Bell 412 1 4,766 4,118
Beech 55 1 57 34
Cessna 500 1 792 506
King Air 90 1 838 414
--- ------ ------
4 6,453 5,072
--- ------ ------
TOTALS: 23 $39,223 $35,268
=== ====== ======
____________________
/1/ Includes aircraft acquired under capital leases.
COMPANY LEASED AIRCRAFT
Aggregate
(Dollar amounts in thousands)
---------------------------
Remaining Total Remaining
Term Rents Over Lease
Type Number in Years Lease Life Payments
---- ------ --------- ---------- ---------
Helicopters:
Bell 206 L-3 1 1 $ 1,402 $ 82
Bell 412 3 7 15,602 11,842
BK 117 (month-to-month) 1 0 418 -0-
Sikorsky S-76 1 4 2,100 875
-- ------ ------
6 19,522 12,799
-- ------ ------
Held for Sale or Sublease:
Lear Jet 25 1 4 1,044 449
King Air 200 2 10 5,280 5,000
-- ------ ------
3 6,324 5,449
-- ------ ------
TOTALS 9 $25,846 $18,248
== ====== ======
With respect to the Company's leased aircraft, the Company
generally pays all insurance, taxes, and maintenance expenses.
In the ordinary course of business, the Company may from time to
time purchase and sell helicopters in order to best match its
specific needs with its fleet. Helicopters are insured at
replacement cost, which generally exceeds book value. Helicopter
accidents reimbursable by insurance generally result in full
reimbursement of any damages sustained.
7<PAGE>
The Company also maintains an inventory of various spare
parts and components for use in repair and maintenance of the
Company's fleet of aircraft. The inventory had a book value of
$1,329,000 on June 30, 1994.
The Company has experienced no significant difficulties in
obtaining required parts for its helicopters. Sourcing of repair
and replacement components occurs primarily through Bell
Helicopter, since Bell aircraft make up the majority of the
Company's aircraft fleet. Bell Helicopter is a major helicopter
manufacturer with extensive links to the defense industry, and
the Company does not anticipate any interruption in Bell's
manufacturing of replacement parts and components in the near
future. Any termination of production by Bell Helicopter would
require the Company to obtain spare parts from other suppliers,
which are not currently in place. Raw materials for aeromedical
interiors are widely available, and the same materials are
routinely purchased from more than one supplier.
ITEM 3. LEGAL PROCEEDINGS
In November 1992, a former employee brought a lawsuit
against the Company which is pending in the United States
District Court for the District of Minnesota. This suit alleges
that the Company wrongfully discharged the employee and seeks
recovery of unspecified monetary damages for lost compensation,
emotional distress and other losses, costs, attorneys' fees and
related penalties. The Company intends to vigorously defend this
action and believes that it has strong defenses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of fiscal year 1994.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Since August 6, 1993, the Company's common stock has traded
on the NASDAQ National Market System under the trading symbol
"AIRM". From June 2, 1992 to August 5, 1993, the Company's
common stock traded on the American Stock Exchange Emerging
Company Marketplace under the symbol "ARF.EC". Prior to June 2,
1992, the Company's common stock was traded on the NASDAQ over-
the-counter system.
The following table shows, for the periods indicated, the
high and low closing prices for the Company's common stock. The
quotations for the common stock, except for July 1, 1992 through
August 5, 1993, represent prices between dealers and do not
reflect adjustments for retail mark-ups, mark-downs or
commissions, and may not represent actual transactions.
FISCAL 1994 (Year Ended June 30, 1994)
--------------------------------------
Common Stock High Low
------------ ---- ---
First Quarter. . . . . . . . . $ 9 1/2 $ 2 1/2
Second Quarter . . . . . . . . 14 1/8 8 1/4
Third Quarter. . . . . . . . . 12 3/4 5 3/8
Fourth Quarter . . . . . . . . 6 1 7/8
8<PAGE>
FISCAL 1993 (Year Ended June 30, 1993)
--------------------------------------
Common Stock High Low
------------ ---- ---
First Quarter. . . . . . . . . $ 6 1/2 $ 2 3/4
Second Quarter . . . . . . . . 4 1/2 2 1/8
Third Quarter. . . . . . . . . 6 3 7/8
Fourth Quarter . . . . . . . . 6 1/8 3 5/8
As of September 15, 1994, there were approximately 609
holders of record of the Company's common stock.
The Company has not paid any cash dividends since its
inception and intends to retain any future earnings to finance
the growth of the Company's business rather than to pay
dividends. Neither the declaration nor payment of future cash
dividends is restricted by the Company's credit or financing
agreements.
9<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following tables present selected financial information
of the Company which has been derived from the Company's audited
financial statements. Prior to June 30, 1992, the statements
reflected the Company's operations as a development stage
biotechnology company. This selected financial data should be
read in conjunction with the financial statements of the Company
and notes thereto appearing in Item 8 of this report.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA OF THE COMPANY
BALANCE SHEET DATA
(In Thousands)
As of June 30, As of April 30,
-------------------- ------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Working capital (deficit)<F1> $(1,753) $ 3,989 $(1,952) $6,498 $11,744
Total assets 51,900 43,312 27,835 8,480 13,901
Long-term liabilities<F2> 18,688 23,279 14,845 153 462
Stockholders' equity 19,818 14,181 5,893 6,605 12,840
____________________
<FN>
<F1>Current assets less current liabilities.
<F2>Includes capital lease obligations other than current installments.
</FN>
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA<F1>
(Dollar Amounts in Thousands)
Two Months Year Ended
Year Ended June 30, Ended June 30, April 30,
-------------------------------- -------------- --------------------
1994 1993 1992<F2> 1991 1991 1990
------ ------ -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenue $29,749 $25,340 $12,747 $ -- $ -- $ --
Operating expenses:
Operating 24,524 20,319 12,066 -- -- --
Research and development -- -- -- -- 2,315 3,605
General and administrative 5,761 4,479 3,984 642 2,325 2,405
Restructuring and other non-recurring 5,651 -- -- 338 1,915 --
Other income (expense), net (888) (976) 704 87 857 1,269
Extraordinary gain (loss) (182) 173 -- -- -- --
-------- -------- -------- ------- -------- --------
Net loss $(7,257) $ (261) $(2,599) $ (893) $(5,698) $(4,741)
======== ======== ======== ======= ======== ========
Loss per common share $ (1.03) $ (.08) $ (1.42) $ (.63) $ (4.03) $ (3.36)
======== ======== ======== ======= ======== ========
Weighted average number of shares
of Common Stock outstanding 7,056,445 3,453,111 1,829,456 1,420,148 1,413,775 1,409,504
========= ========= ========= ========= ========= =========
____________________
<FN>
<F1>The Company has never paid any dividends on its common stock and does not anticipate paying cash dividends in the
foreseeable future.
<F2>Includes results of the aeromedical operations for only the 8 month period from the completion of the Acquisition,
i.e., November 1, 1991, through June 30, 1992.
</FN>
</TABLE>
10<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BUSINESS RESTRUCTURING
In the fourth quarter of 1994 the Company completed a
restructuring plan for the Company's continuing air medical
flight and manufacturing operations designed to reduce costs and
improve operating efficiencies. The restructuring plan included
the discontinuation of substantially all of the airplane charter
operations of Golden Eagle, an 18% overall reduction in
personnel, a reduction in officers' salaries, and the disposal of
selected under-utilized aircraft. In addition, the Company
canceled a proposed debt refinancing and public preferred stock
offering. The reductions in personnel were primarily in the
manufacturing and administrative functions and did not
significantly affect the Company's maintenance and air medical
flight capabilities. Losses from Golden Eagle's charter
operations from the date of acquisition (September 10, 1993)
through June 30, 1994 totaled $677,000. As part of the
restructuring plan, the Company decided to discontinue its
unprofitable charter operations and to concentrate instead on its
core air medical business. Restructuring charges totaled
$3,010,000 for the year ended June 30, 1994 and, with the
exception of approximately $614,000 in severance pay and
$149,000 for certain placement fees for the proposed preferred
stock offering , consisted of the write-off of previously
recorded assets and other non-cash charges.
The Company does not expect to incur additional expenses
associated with the restructuring in fiscal 1995. However, the
Company projects future net cash outflows of approximately
$890,000 as assets designated for disposal are sold and the
related indebtedness is paid over the next fiscal year. The net
effect of the personnel reductions and other cost control
measures taken is expected to decrease net cash outflow and
operating expenses by approximately $215,000 per month as
compared to cash outflow and expense levels prior to the
implementation of the restructuring plan.
RESULTS OF OPERATIONS
1994 compared to 1993
The Company reported a loss of $7,257,000 for the year ended
June 30, 1994, as compared to a loss of $261,000 for the year
ended June 30, 1993. The operating results for fiscal 1994
included a net loss on the disposition of assets
of $790,000 , restructuring charges of $3,010,000 ,
and other non-recurring charges and a loss on the early
retirement of debt of $1,061,000. The net loss for the year,
excluding the effect of these transactions, was $2,396,000.
Flight revenue increased $3,878,000 or 18.1% from
$21,468,000 for the year ended June 30, 199 3 to
$25,346,000 for the year ended June 30, 199 4 ,
primarily as a result of the addition of three new hospital
contracts which contributed revenues of $1,517,000 in
fiscal 1994. In addition, revenue increased by $883,000 in
fiscal 1994 under three contracts which had been added during the
year ended June 30, 1993. Flight revenue was not significantly
affected by changes in either pricing or volume of flight hours
under established hospital contracts . The majority of the
Company's contracts with its hospital customers is also subject
to an annual increase based on the consumer price index. Flight
center expenses, which include pilot and mechanic salaries,
benefits, and training, also increased by 22.9% in 1994, and were
affected by the same factors as flight revenue. These expenses
generally vary with the number of customer bases and, to a lesser
degree, with the number of aircraft operated by the Company.
Aircraft operating expenses increased by 49.3% from 1993 to
1994 primarily because of the addition of 4 helicopters and 6
airplanes to the Company's fleet since the end of fiscal 1993 and
the operation of 2 airplanes in the executive air charter service
from September 1993 to April 1994, as well as an approximately
30% increase in hull and liability insurance rates. The increase
in insurance rates is related to overall increases experienced by
the aviation industry as a whole. Aircraft operating expenses
consist of fuel, insurance, and maintenance costs and generally
are a function of the size of the fleet, the type of aircraft
flown, and the number of hours flown by the fleet.
11<PAGE>
Depreciation and amortization expense also fluctuates with
the size of the Company's fleet, as reflected by the 52.7%
increase in 1994. The Company placed aircraft and related
medical interiors totaling $10 million into service in the
current fiscal year.
Historically, the Company's flight operations have been
seasonal. In the winter months the company's hospital customers
have customarily experienced reduced acute and trauma in-patient
hospital populations requiring emergency aeromedical transport.
To a lesser extent, poorer weather reduces the level of flight
operations from the hospitals served by the Company.
Sales of medical interiors decreased by $1,320,000 or
34.1% from $3,872,000 in fiscal year 199 3 to
$2,552,000 in fiscal 199 4 . In 1994 the Company
sold five medical interiors to Bell Helicopter Textron, Inc.
("Bell") for aircraft for use outside the United States. In 1993
sales consisted of three medical interiors for Bell and one for
the U.S. Army. The decrease in the cost of medical interiors
over the same period mirrored the decrease in sales. The cost of
medical interiors for fiscal year 1994 also included $653,000 of
payments for work on a medical interior that the Company
subcontracted to an outside vendor. The medical interior was
for the Company's internal use, and therefore no corresponding
revenue was recognized. The work done by the subcontractor
was subsequently determined to be unsatisfactory and was
reperformed by the Company.
Operating expenses in the year ended June 30, 1995, also
included net losses of $790,000 on the disposition of assets.
Gains of $1,851,000 recognized on the disposition of four of the
Company's aircraft were offset by valuation allowances of
$2,641,000 established for seven aircraft designated for disposal
as part of the Company's restructuring plan. There were no
comparable gains or losses in fiscal 1993.
The 28.6% increase in general and administrative expenses in
1994 reflected the additional support necessary for the Company's
expanded operations as well as increased legal and professional
fees incurred as the Company aggressively pursued new business
opportunities including the acquisition of Golden Eagle Aviation
and the proposed joint venture with Medica Movil, S.A. de C.V.
In the first quarter of 1993, the Company began negotiations
with Medica Movil, S.A. de C.V., the largest ground ambulance
provider in Mexico, to form a joint venture to provide air
medical services in Mexico under a membership capitation program.
In the third quarter of 1994, concurrent with the previously
mentioned restructuring plan, the Company initiated discussions
concerning alternative financing arrangements for the joint
venture. Though continued involvement in the joint venture is
not assured, the Company does not expect any impact on its
operations related to restructuring or termination of the joint
venture.
1993 compared to 1992
Prior to the acquisition of Air Methods-Colorado by the
Company in November 1991, the Company operated as a development-
stage biotechnology research and development company engaged
primarily in the development of anti-cancer products. Since the
acquisition, the Company's operations have consisted
predominantly of providing aeromedical emergency services and
systems to hospitals throughout the United States and the related
manufacture and sale of aircraft medical interiors and equipment
to third parties. Due to this fundamental change in the
Company's business, the Company does not believe that comparison
of its operating results for the year ended June 30, 1993 with
the year ended June 30, 1992, is meaningful. Accordingly, the
following discussion compares the Company's results of operations
for the year ended June 30, 1993 with the results of Air
Methods-Colorado for the four months ended October 31, 1991, plus
the results of the Company for the eight months ended June 30,
1992.
The following table combines the various revenue, operating
expenses and other income (expense) categories of the Company for
the 8 months ended June 30, 1992 with that of Air Methods-
Colorado for the 4 months ended October 31, 1991, which will
facilitate management's discussion and analysis. All references
to the year ended June 30, 1992, in this section of Management's
Discussion & Analysis are to the combined balances shown on this
schedule.
12<PAGE>
<TABLE>
<CAPTION>
Company Air Methods-Colorado
------------------ --------------------
Eight Months Ended Four Months Ended
June 30, 1992 October 31, 1991 Combined
------------------ -------------------- ------------
<S> <C> <C> <C>
Revenue $12,747 $6,446 $19,193
Operating Expenses:
Flight center 3,819 1,958 5,777
Aircraft operations 4,520 1,520 6,040
Aircraft rental 1,978 797 2,775
Depreciation and amortization 908 291 1,199
General and administrative 3,406 1,145 4,551
Cost of medical interiors and
products sold 841 643 1,484
Other income (expense):
Interest expense (588) (378) (966)
Interest income 169 -- 169
Other, net 962 -- 962
</TABLE>
Operating revenues increased 32.0% for the year ended
June 30, 1993 compared to the year ended June 30, 1992. The
increase was primarily attributable to revenues of
$2,672,000 generated from the initiation of three new
hospital contracts correspondingly utilizing three new aircraft
which were added in fiscal 1993. In addition, the Company
realized an increase of $2,980,000 in revenues from the sale of
medical interiors in 1993, principally due to the sale of three
interiors to Bell Helicopter, Inc. and the sale of one interior
to a subsidiary of E-Systems, Inc. pursuant to a proof of
principle retrofit agreement on behalf of the U.S. Army regarding
the UH-60Q Blackhawk helicopter.
Flight center expenses increased 21.5% for the year ended
June 30, 1993, compared to the year ended June 30, 1992. The
increase was virtually the same as the revenue increase between
the two years, and was primarily due to start-up and on-going
expenses related to the initiation of the three new aeromedical
programs discussed above.
Aircraft operating expenses decreased 9.2% from 1992 to
1993. This decrease was primarily due to the comparatively high
overhaul and replacement parts costs in the prior 1992 twelve
month period.
The cost of medical interiors and parts sold increased
117.5% from 1992 to 1993. These increases were primarily due to
an increase in the number of airborne emergency medical interiors
sold to third parties and to the sale of a correspondingly
greater amount of medical interior parts and components to such
parties.
General and administrative expenses decreased 1.6% in 1993
as compared to 1992. The lack of increase even given the
increase in revenues and overall operations, was primarily
attributable to reductions in services and related costs
resulting from utilization of services provided by third parties
as well as other administrative cost cutting measures implemented
by the Company during the fiscal year.
Interest expense increased 12.0% in 1993 primarily because
of new debt incurred to finance additional aircraft. The
increase was mitigated substantially by the reduction in interest
rates on the Company's long term debt to Textron Financial
Services, Inc., an affiliate of the Company's principal aircraft
supplier, Bell Helicopter ("Textron"), for the remaining life of
the notes.
13<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1994 the Company's cash, cash equivalents, and
short-term investments totaled $3,441,000, down from $5,152,000
at June 30, 1993. Working capital also declined from $3,989,000
to a deficit of $1,753,000 from June 30, 1993 to June 30, 1994.
The decline is due to the Company's continued investment in
aircraft and other equipment, the retirement of $3.2 million in
long-term debt and capital leases, and the repayment of $3
million in operating leases. In addition, at June 30, 1994,
$4,911,000 of debt associated with assets held for sale was
classified as current; each such note will be paid in full when
the related asset is sold.
During 1993 and 1992 the Company used cash of $1,551,000 and
$4,588,000, respectively, to fund its operations, while in 1994,
operations generated a positive cash flow of $1,039,000. The
improvement in cash flow from operations is principally due to
the decrease of $2,043,000 in outstanding receivables from the
Company's customers.
In addition to cash flow from operations, the Company
realized $6,825,000 from the issuance of common stock upon the
exercise of warrants and options and $5,730,000 from a private
placement of stock with institutions outside the United States
during fiscal 1994.
The Company's usual arrangements with its hospital clients
have involved substantial capital commitments by the Company for
the aircraft and related equipment required to furnish the
emergency air medical transport services to the hospitals. To
the extent that the Company expands its operations in this
manner, it will continue to require extensive and increasing
capital investments and long-term borrowing will be necessary to
continue financing such capital acquisitions. The Company
believes, however, that it may be advantageous to
both its client hospitals and the Company from time to time for
aircraft to be purchased by the hospitals, thus permitting
reduced capital commitments by the Company as contracts are added
in the future. The Company has pursued and intends to continue
to pursue this type of contracting arrangement whenever it
appears beneficial to the parties to the arrangement.
As of June 30, 1994 the Company has a purchase commitment to
acquire four helicopters from American Eurocopter Corporation
("AEC") prior to December 1995. In a related agreement AEC
extended to the Company a $2 million line of credit; as of
June 30, 1994, the Company has drawn $500,000 against the line.
The Company currently has a note payable of $3,819,000 which
matures on October 1, 1994 and which is collateralized by a
helicopter listed for sale. The Company has successfully
negotiated extensions of the maturity of this note in the past
and believes that further extensions will be negotiated until the
asset is sold. Therefore, the Company does not expect a
significant adverse effect on its working capital position
related to the retirement of this note.
The Company holds unencumbered notes receivable of
$2,670,000 and aircraft of approximately $6.9 million as of
June 30, 1994. The Company believes that it could utilize a
portion of these unencumbered assets as collateral for borrowing
funds as an additional source of working capital if necessary.
As the full effect of the restructuring actions taken in 1994 is
felt, the Company also expects continued improvement in cash
flows from operations in fiscal 1995. The Company believes that
these borrowing resources coupled with the expected improvement
in operations will allow the Company to meet its obligations in
the coming year without additional external financing.
OUTLOOK FOR 1995
In the first quarter of fiscal 1995 the Company began
discussions with the management of Rocky Mountain Helicopters,
Inc. ("RMHI") to analyze the feasibility of a possible business
combination. RMHI is presently operating as debtor-in-possession
under Chapter 11 of the United States Bankruptcy Code. The
Company believes that a combination of the two entities could
potentially result in cost savings and improved results of
operations. Funding options for the acquisition are being
discussed with an investment group led by
14<PAGE>
Americas Partners, the Company's largest shareholder. Several
other entities have expressed interest in acquiring the air
medical business of RMHI, and the final decision rests with the
committee of creditors appointed by the Bankruptcy Court.
As of June 30, 1994, the Company was nearing completion of a
medical interior for one of its hospital customers but had no
additional backlog of orders for medical interiors. The Company
has initiated an aggressive marketing effort to improve the
demand for its medical products.
The Company does not expect significant increases
in revenues under existing hospital contracts due to its
inability to substantially affect either pricing or volume. The
pricing for the majority of the Company's air medical service
contracts, which range from three to ten years in duration, is
fixed for the term of the contract, subject to periodic increases
indexed to the consumer price index ("CPI"). The volume of
flight hours flown is dependent upon hospital demand and to a
lesser degree upon weather conditions, and has historically not
fluctuated significantly under individual contracts from year to
year. The increase in flight revenues for the years ended
June 30, 1994 and June 30, 1993, discussed previously, was due
primarily to the addition of new contracts with hospitals during
this period, and to a lesser extent, to the CPI-indexed increases
mentioned above. By way of illustration, approximately 64% of
flight revenue for the year ended June 30, 1994 was generated
from fixed monthly charges, compared to 66% for the previous
year. The balance of air medical revenue was earned on a flight
hour basis. Under the Company's current cost structuring,
increases in flight hours under existing contracts would increase
the revenue net of direct expenses at an average of $167.00 per
flight hour. Revenue flight hours for the year ended June 30,
1994 totalled approximately 13,900, constituting 8.1% of flight
hour capacity for the year, as compared with approximately 12,400
at 7.6% of capacity for the year ended June 30, 1993. Based upon
the average flight hour charges described above, it would have
been necessary to increase the utilization level to approximately
16.6% in order to attain profitable operations for the year ended
June 30, 1994. Management believes that a 10% utilization level
is the maximum level of sustained operations that the Company
would likely experience under existing contracts, given the
restraints of weather conditions and hospital demand, both of
which directly impact utilization.
The Company began operations under three new hospital flight
contracts during the year ended June 30, 1994, resulting in
revenues net of direct expenses of approximately $314,000. At
this revenue rate, a minimum of nine additional contracts would
have been required for the Company to reach the break-even point
before the effect of the restructuring charges and other
transactions delineated above under "Results of Operations."
Alternatively, the Company would have attained profitability,
exclusive of the same transactions, for the year ended June 30,
1994, with an additional $7.8 million in gross revenue from the
Products Division, assuming all new contracts were priced at the
average contribution rate currently earned by the Division on its
projects.
Management is confident that its greatest prospects for
profitability lie in increased marketing efforts, the acquisition
of new business, and decreases in the cost of administrative
overhead. The Company expects continued decreases in its
administrative costs as a result of the restructuring plan
completed in the fourth quarter of fiscal 1994. Management
believes that significant growth in the future can be
accomplished with only a moderate increase in general and
administrative expenses.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Consolidated Financial Statements attached hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
15<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Summary information concering the Company's current
directors and officers is set forth below:
<TABLE>
<CAPTION>
Name and Age of Director Director Term as Director
Director/Officer Since Class expires in Position
- -------------------------- -------- -------- ---------------- -------------------------------------------------
<S> <C> <C> <C> <C>
George W. Belsey, 55 1992 II 1995 Chairman of the Board and Chief Executive Officer
Roy L. Morgan, 59 1991 II 1995 President, Co-Founder, and a Director
Marius Burke, Jr., 57 Vice President, Director of Operations
Maurice L. Martin, Jr., 46 Vice President, Air Medical Services
Michael J. Prieto, 40 Vice President, Products Division
Kevin D. Andrew, 35 Secretary and Treasurer Director of Finance and
Accounting
Joseph E. Bernstein, 45 1994 III 1996 Director
Ralph J. Bernstein, 36 1994 III 1996 Director
Samuel H. Gray, 57 1991 II 1995 Director
Lowell D. Miller, Ph.D., 61 1990 III 1996 Director
Steven B. Sands, 35 1992 I 1994 Director
Donald R. Segner, 68 1992 I 1994 Vice-Chairman of the Board
Morad Tahbaz, 39 1994 II 1995 Director
</TABLE>
Mr. George W. Belsey was elected Chief Executive Officer
effective June 1, 1994, and has served as Chairman of the
Company's Board of Directors since April 1994, having been
appointed a director of the Company in December 1992. From
February 1992 to June 1994, Mr. Belsey served as Executive Vice
President, Professional Affairs, and the Chief Operating Officer
of the American Hospital Association, a large national trade
association and advocacy group for hospitals and healthcare
organizations, where he was responsible for the Association's
activities relating to hospital operations, including medical
staff affairs, nursing, health manpower, quality of care programs
and hospital governance. Prior to joining the American Hospital
Association, Mr. Belsey served as Chief Executive Officer and
Executive Director of the University of Utah Hospital and
Clinics, Salt Lake City, Utah (one of the Company's hospital
customers) from March 1989 to February 1992 and was Chief
Operating Officer from December 1983 to March 1989. He is a
former Vice President of Northwestern Memorial Hospital, Chicago,
and has held administrative positions at Rush-Presbyterian-St.
Luke's Medical Center, Chicago, and MacNeal Memorial Hospital,
Berwyn, IL. He received his Bachelor's Degree in Economics from
DePauw University in Greencastle, Indiana, and holds a Master's
Degree in Business Administration from George Washington
University, Washington, D.C.
Mr. Roy L. Morgan is one of the three founders of Air
Methods-Colorado, and was the President, Chief Executive Officer
and a director from the inception of Air Methods-Colorado in July
1980 until November 1991. In November 1991, he became President
and a director of the Company. Prior to his service with Air
Methods-Colorado, Mr. Morgan was employed as a helicopter pilot
for Public Service Company of Colorado (1969-80), as director of
operations and chief pilot for Key Aviation (1964-69), and as
quality control supervisor on the Atlas missile program for
Convair Astronautics (1960-64). Mr. Morgan began his career at
Boeing Airplane Company, involved in B-52 experimental
development (1957-60). Mr. Morgan holds a number of pilot
certificates including Airline Transport Pilot for Airplane
Multi-Engine Land, Commercial Helicopter - Instrument Rated,
Commercial Airplane for Land and Sea, and Glider, as well as
Flight Instructor for all of the above. He has more than 18,850
flight hours, 12,000 of them in helicopters. Mr. Morgan has a
Bachelor of Science Degree in Aviation Management from
Metropolitan State College in Denver, Colorado.
Mr. Marius Burke, Jr. was elected Vice President and
Director of Operations of the Company in November 1989. Prior to
that time he served in various managerial positions with Air
Methods-Colorado, including Director of Operations (September
1988 through November 1991) and Area Manager (August 1985 through
August 1988). He was formerly a pilot for Key Airlines (1982-
85), an area manager for the Air Med program at the University of
Utah (1985-88), President of Estate Builders, Inc., a real estate
investment and development corporation (1975 to present), Manager
of Flying and Chief Pilot for Air America (1963-75), and a flight
officer for the United States Marine Corps in jets and
helicopters (1958-63). Mr. Burke holds Airline Transport Pilot
certificates for both airplanes and helicopters and is a
Certified Flight Instructor for airplanes, helicopters, and
instruments. He has for many years been a designated FAA Flight
Examiner and has a total of 20,250 flight hours, 12,950 of them
in helicopters. Mr. Burke has an M.B.A. and a B.S. in
Engineering and Aeronautical Operations from San Jose State
University.
16<PAGE>
Mr. Maurice L. Martin, Jr. currently serves the Company as
Vice President of the Air Medical Services Division. He served
previously in several executive positions with Air Methods-
Colorado including Director of Operations (August 1985 through
August 1988), Area Manager (June 1984 through August 1985) and
pilot (June 1982 to June 1984). Mr. Martin has 16 years of
aviation management experience and eight years' experience in
medical aircraft transport management. Prior to joining Air
Methods-Colorado, Mr. Martin was a commercial helicopter pilot
(1979-82), an instructor pilot and standardization officer of the
102nd Air Rescue and Recovery Squadron in New York (1975-79), and
an aircraft commander in the United States Air Force (1971-75).
Mr. Martin holds pilot certificates including Airline Transport
Pilot for Helicopters and Certified Flight Instructor for
Helicopters. He has served as a designated FAA Flight Examiner
and has over 4,100 flight hours, mostly in helicopters.
Mr. Martin has a Bachelor of Science Degree in International
Affairs from the United States Air Force Academy (1970) and a
Master's Degree in Theology from Covenant Theological Seminary in
St. Louis, Missouri (1982).
Mr. Michael J. Prieto was named Vice President of
Engineering & Manufacturing of the Company in January 1994 and
subsequently Vice President of the Products Division in June
1994. From 1988 to 1994, Mr. Prieto served in various roles with
General Dynamics/Lockheed Corp but primarily as Manager of
Manufacturing Engineering for the F-16 Fighter program. From
1977 to 1988, he was employed by John Deere Co. with management
roles in Engineering, Manufacturing, and Marketing. Mr. Prieto
attended the University of Missouri and received a Bachelor of
Science degree in 1977. Mr. Prieto is a member of the American
Society of Mechanical Engineers, the Society of Manufacturing
Engineers, the American Production and Inventory Control Society,
the American Management Association, and the National Management
Association.
Mr. Kevin D. Andrew joined the Company as Corporate
Controller in March of 1992 and was appointed Secretary and
Treasurer in May, 1994. From 1989 to 1991, Mr. Andrew served as
vice-president and controller of NaTec Resources, an
environmental services company, where he was responsible for all
financial and administrative aspects of the Company. From 1983
to 1989, Mr. Andrew was employed by CRSS, Inc., a diversified
company primarily involved in design, engineering and
construction. While at CRSS, Mr. Andrew held several positions,
including analyst/chief accountant, Director of General
Accounting and Director of Internal Audit. Prior to 1983, Mr.
Andrew was employed as a senior auditor at KPMG Peat Marwick in
Houston, Texas and participated in the audit of various
industries and was certified as a computer processing specialist.
Mr. Andrew holds a Bachelor of Science Degree in Business
Administration from Arizona State University and has earned
certifications as a public accountant and as an internal auditor.
Mr. Joseph E. Bernstein became a Director of the Company in
February, 1994. Mr. Bernstein is a co-founder and General
Partner of Americas Partners, an investment and venture capital
firm, and a Managing Director of Americas Tower Partners, the
developer of Americas Tower, a one million square foot, 50-story
office tower in New York City. Since 1981, he has been a
principal of The New York Land Company, working on real estate
development and acquisitions. Previously, he worked on corporate
and international tax matters at Cahill/Gordon & Reindel (1975-
1978) and Rosenman & Colin (1978-1981). He started his own
international tax practice, Bernstein & Carter, in 1981 and has
published a number of articles on corporate and international tax
law. He holds a Bachelor of Arts Degree in Economics and a
Bachelor of Science Degree in Agricultural Business Management
from the University of California at Davis, a Juris Doctor from
the University of California at Davis School of Law, a Master's
Degree in Finance from the University of California at Los
Angeles Graduate School of Management, and a Master of Laws'
Degree in Taxation from the New York University Graduate School
of Law.
Mr. Ralph J. Bernstein became a Director of the Company in
February, 1994. Mr. Bernstein is a co-founder and General
Partner of Americas Partners, an investment and venture capital
firm, and a Managing Director of Americas Tower Partners, a real
estate development firm, where he was primarily responsible for
the development of Americas Tower, a one million square foot, 50-
story office tower in New York City. Mr. Bernstein is co-founder
of The New York Land Company and, since 1981, was responsible for
the acquisition, renovation, development and financing of several
million square feet of commercial space. From 1979 to 1982, Mr.
Bernstein was employed by Agricor, Inc. and Noga Realty, Inc.,
both subsidiaries of Compagnie Noga S.A., a large multinational
trading firm. He holds a Bachelor of Arts Degree in Economics
from the University of California at Davis.
Mr. Samuel H. Gray was appointed as a director of the
Company in March 1991. Since 1989, he has been Chief Executive
Officer of The Morris Consulting Group, Inc., a healthcare
industry consulting firm. From 1983 to 1989, Mr. Gray served as
President and Chief Executive Officer of Kalipharma, Inc., a
multisource pharmaceutical company. From 1975 to 1983, Mr. Gray
served as Executive Vice President of Sales and Marketing for
G.D. Searle and Company, Inc. ("Searle") where he was responsible
for pharmaceutical marketing, the consumer products division of
Searle, and Searle-Canada, Ltd. In addition, his
responsibilities included distribution, customer service,
clinical research management, licensing and acquisitions, public
relations and worldwide strategic marketing planning. He has
served on the boards of directors of Searle; Searle Canada, Ltd.;
Kalipharma; Kali-Duphar, Inc.; and the National Association of
Pharmaceutical
17<PAGE>
Manufacturers. He is a past member of the National Wholesale
Druggist Association's Industry Advisory Committee and has served
on the Advisory Board of Pharmaceutical Executive magazine. In
1959, Mr. Gray received a Bachelor of Science Degree from the
University of Florida.
Dr. Lowell D. Miller was named a director of the Company in
June 1990. Since 1989, Dr. Miller has been involved with various
scientific endeavors including a pharmaceutical consulting
business. From 1973 to 1989, Dr. Miller was employed by Marion
Laboratories, Inc. ("Marion"), serving as Senior Vice President -
Research and Development (1987-1989), Vice President - Research
and Development (1977-1987), and Director of Scientific Affairs
(1973-1977). Until his retirement in late 1989, Dr. Miller was
responsible for all research, development and process development
functions, new product opportunities and management of clinical
trials and regulatory affairs, and served as Marion's Chief
Scientist. He also served as a member of Marion's Board of
Directors from November 1981 to November 1982 and as an Advisory
Director from November 1982 to November 1983. The University of
Missouri has awarded Dr. Miller a Bachelor of Science degree in
1957 as well as a Master's Degree in Biochemistry in 1958 and
Biochemistry Doctorate Degree in 1960.
Mr. Steven B. Sands was appointed a director of the Company
in December of 1992. Since November 1990, Mr. Sands has been
Chairman of the Board and Chief Executive Officer of Sands
Brothers & Co., Ltd., an investment banking and brokerage firm.
From 1987 to 1989, Mr. Sands served as the Managing Director of
Rodman & Renshaw, a New York Stock Exchange member firm engaged
in corporate finance activities. From 1984 to 1986, Mr. Sands
served as Managing Director of Laidlaw, Adams & Peck, investment
bankers. Mr. Sands currently serves as a director of The
National Registry, Inc., The Village Green Book Store, Inc. and
SPM Corporation, as well as Sands Brothers & Co., Ltd. Mr. Sands
attended Hamilton College in New York and received a Bachelor of
Arts Degree in 1980.
Mr. Donald R. Segner was appointed a director of the Company
in February, 1992 and since April, 1994, has served the Board as
Vice Chairman. He currently heads his own aviation advisory and
consultant service company specializing in all aspects of
aviation including airports, airplanes, aircraft certification
and the Federal Aviation Administration. He has served as a pilot
in the U.S. Marine Corps, a test pilot for Lockheed Aircraft, and
a manager of several departments for Lockheed Aircraft. From
1981 through 1986, he was a government appointee by President
Reagan in the FAA. Following the destruction of Korean Airlines
Flight 007, Mr. Segner was assigned by the White House to head
the investigation and acted as Chief Delegate for the United
States at the CIAO Council (United Nations) on this matter. He
headed the U.S. Delegation to negotiate an agreement to improve
and implement safety along the North Pacific air routes among the
governments of the U.S., Japan and the U.S.S.R. He has received
numerous awards for his contributions to aviation, including the
FAA Administrator's Award, the FAA Superior Achievement Medal and
the Distinguished Flying Cross for valor in combat in the Korean
war. Mr. Segner attended the University of Pacific in Stockton,
California and the U.S. Naval Test Pilot School in Patuxent
River, Maryland, as an undergraduate. His graduate education
includes attendance at the U.S. Naval Post Graduate School,
Monterey, California, as well as University of Southern
California's Graduate School of Business (Lockheed Management
Institute).
Mr. Morad Tahbaz was elected to the Board of Directors in
February, 1994. He is a co-founder and General Partner of
Americas Partners, an investment and venture capital firm. Mr.
Tahbaz serves as a Managing Director of Americas Tower Partners,
the developer of Americas Tower, a one million square foot, 50-
story office tower in New York City. Since 1983, Mr. Tahbaz has
also served as Senior Vice President of The New York Land
Company, a real estate acquisitions and development firm. From
1980 to 1982, he was the Project Manager for Colonial Seaboard,
Inc., a residential development company in New Jersey. Mr.
Tahbaz received his Bachelor's Degree in Philosophy and Fine Arts
from Colgate University and attended the Institute for
Architecture and Urban Studies in New York City. He holds a
Master's Degree in Business Administration from Columbia
University Graduate School of Business. Mr. Tahbaz lectured on
real estate development and finance at the Columbia Graduate
School of Business from 1984 to 1988.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934
The following executive officers or directors of the Company
filed reports or reported transactions under Section 16(a) under
the Exchange Act of 1934 on an other-than-timely basis:
W. Terrance Schreier, one exempt transaction; William H.
Critchfield, one report reflecting one exempt transaction;
George W. Belsey, one exempt transaction; Samuel Gray, two
transactions; and Marilyn Pauley, one transaction.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by
the Company to the persons serving as Chief Executive Officer of
the Company during fiscal year 1994, the other executive officers
of the Company other than the Chief Executive Officer whose
annual salary and bonus exceeded $100,000, and one individual who
served as Chief Financial
18<PAGE>
Officer during fiscal year 1994 but resigned his position prior
to the end of the fiscal year. The table shows compensation
received during the fiscal years ended 1992, 1993 and 1994.<F1>
<TABLE>
<CAPTION>
Long Term
Compensation Awards
Annual Compensation Other -------------------------
-------------------------- Annual Restricted<F3> Options/ All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)<F2> Stock SARs(#)<F4> Compensation($)<F5>
- --------------------------- ---- --------- -------- ------------------- ------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
George W. Belsey 1994 12,205<F6> -- 13,322<F7> 8,601<F8> 250,000 --
Chairman and Chief 1993 -- 12,938<F7> -- 6,666<F7> --
Executive Officer
Roy L. Morgan 1994 160,038 -- -- -- 240,000 1,589
President, Director and 1993 163,156 -- -- 48,122 11,666 4,176
Co-Founder 1992 175,436 -- -- -- -- 1,939
Maurice L. Martin, Jr. 1994 131,441 -- -- -- 150,000 1,342
Vice-President 16,666<F9>
Air Medical Services 1993 120,663 -- -- 25,781 6,250 2,308
1992 105,667 -- -- -- -- 6,325
W. Terrance Schreier 1994 141,862 -- -- -- 320,000 288,918<F10>
Prior Chairman and Chief 1993 163,183 -- -- 48,122 11,666 2,431
Executive Officer 1992 178,858 --<F11> 38,750<F12> -- 73,958<F13> 1,604
William H. Critchfield 1994 110,669 -- -- -- 30,000 133,599<F10>
Prior Executive 1993 122,089 -- -- 20,625 5,000 2,609
Vice President, Chief 1992 120,809 --<F11> 21,538<F12> -- 42,057<F14> 1,146
Financial Officer, Secretary
and Treasurer
____________________
<FN>
<F1> In 1992, the Company changed its fiscal year end from April 30 to June 30. Amounts
reported for the first four months of fiscal year 1992 are based upon compensation paid by
Cell Technology Inc., the Company's predecessor, to Messrs. Schreier and Critchfield, and
compensation paid by Air Methods-Colorado, merged into Cell Technology, Inc. (the "Merger")
on November 13, 1991, to Messrs. Morgan and Martin.
<F2> Personal automobile or other transportation benefits provided to each of the named
executive officers during the reporting periods do not exceed the disclosure thresholds
established by the SEC and are thus not reported.
<F3> Reflects shares of restricted Common Stock issued to the named executive officers under the
Company's Restricted Stock Plan, except as otherwise noted, valued at the closing market
price of such shares on the date they were issued. As of June 30, 1994, the employees and
officers of the Company held no shares of restricted stock issued under the Restricted
Stock Plan. The Company issued a total of 102,907 shares of Common Stock under the
Restricted Stock Plan, all of which vested or were forfeited on the one year anniversary of
the January 9, 1993 grant date. No dividends were paid on these restricted shares.
<F4> Consists only of options to purchase the common stock of the Company.
<F5> Consists of employer matching contributions for the named executive officers under the
Company's 401(k) Plan, except as otherwise noted. Matching amounts have been contributed
for Messrs. Schreier and Critchfield only since November 13, 1991, effective with the
Merger.
<F6> Mr. Belsey was a nonemployee director of the Company until June 1, 1994 when he was elected
Chief Executive Officer of the Company. Mr. Belsey's annual salary as Chief Executive
Officer is $165,000.
<F7> Stock or stock option compensation to Mr. Belsey as a nonemployee director of the Company
pursuant to the Company's Nonemployee Director Equity Compensation and Stock Option Plans.
<F8> Reflects 1,464 shares issued to Mr. Belsey on July 1, 1993 in his capacity as nonemployee
director, in payment of annual retainer fees pursuant to the Company's Equity Compensation
Plan for Nonemployee Directors ("Director Equity Plan"). These shares vested on June 30,
1994 pursuant to the Director Equity Plan. As of June 30, 1994, all restricted shares
issued pursuant to the Director Equity Plan had vested, and no restricted shares were
outstanding. No dividends were paid on restricted stock issued under the Director Equity
Plan.
<F9> These options are deemed to have been regranted in early fiscal year 1994 by virtue of the
Stock Option Committee's action on July 29, 1993 to reprice these, and other out-of-the-
money options previously issued to employees and officers of the Company under the Employee
Option Plan, to $5.50 per share, the fair market value of the Company's Common Stock on
July 29, 1993.
19<PAGE>
<F10> Includes severance payments, pursuant to contractual obligations of the Company, upon the
resignations of Messrs. Schreier ($287,500) and Critchfield ($132,500) in late fiscal year
1994.
<F11> See footnote 12 and accompanying figures.
<F12> Reflects compensation consisting of salary restoration payments for salary compensation
foregone in earlier years and bonus payments by Cell Technology, Inc. for the completion of
the merger with Air Methods-Colorado.
<F13> Consists of options granted prior to fiscal year 1992, but repriced by the Stock Option
Committee on October 4, 1991, as discussed below at footnote 14.
<F14> Consists of options granted prior to fiscal year 1992, but repriced by the Stock Option
Committee on October 4, 1991. On October 4, 1991, the Stock Option Committee repriced all
options granted before that date under the Employee Option Plan to then-current employees
and officers of the Company, to $6.00 per share, the fair market value of the Company's
Common Stock on October 4, 1991.
</FN>
</TABLE>
STOCK OPTIONS
The following tables present for fiscal year 1994 certain
information regarding stock options granted to or held by the
named executive officers.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year<F1>
-----------------------------------------
Individual Grants
-------------------------- Potential Realized Value at
% of Total Assumed Annual Rates of
Options/SARs Stock Price Appreciation for
Granted to Exercise or Market Price Option Term<F2>
Options/SARs Employees in Base Price on Grant Expiration -----------------------------
Name Granted (#) Fiscal Year ($/Sh) Date ($/Sh) Date 5% ($) 10% ($)
- -------------------- ------------ ------------ ----------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
George W. Belsey 250,000<F2> 21.5% 3.00 3.00 6/3/99 207,211 457,883
Roy L. Morgan 240,000<F3> 20.6% 5.50 5.50 7/29/98 364,692 805,873
Maurice L. Martin, Jr. 120,000<F3> 10.3% 5.50 5.50 7/29/98 182,346 402,937
30,000<F4> 2.6% 7.00 7.00 8/24/98 28,019 128,207
16,666<F5> 0.7% 5.50 5.50 11/12/96 16,202 34,407
W. Terrance Schreier 320,000<F3> 27.5% 5.50 5.50 5/12/94 -0- -0-
William H. Critchfield 30,000<F3> 2.6% 5.50 5.50 5/26/94 -0- -0-
8,333<F6> 1.4% 5.50 5.50 5/26/94 -0- -0-
____________________
<FN>
<F1> Calculated based upon the closing market price of the Common Stock on the Option grant date.
<F2> Exercisable as to 1/5 of the option shares on the 6/3/94 grant date, and an additional 1/5 on each subsequent
anniversary of the grant date until fully vested.
<F3> Exercisable as to 1/3 of the option shares on the 7/29/93 grant date, and an additional 1/3 on each subsequent
anniversary of the grant date until fully vested.
<F4> Exercisable as to 1/3 of the option shares on the 8/24/93 grant date, and an additional 1/3 on each subsequent
anniversary of the grant date until fully vested.
<F5> Exercisable on the repricing date as to 11,111 shares. The remaining 5,555 shares vest 11/12/94.
<F6> Exercisable on the repricing date as to all but 2,778 shares, which would have vested 11/12/94.
</FN>
</TABLE>
20<PAGE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Options/SAR Values
---------------------------------------------------------------------------------
Value of<F1> Unexercised
Number of<F1> Unexercised In-the-Money Options/SARs
Shares Acquired Options/SARs at FY-End (#) at FY-End ($) Exercisable/
Name on Exercise (#) Value Realized ($) Exercisable/Unexercisable Unexercisable
- ------------------------ --------------- ------------------ -------------------------- --------------------------
<S> <C> <C> <C> <C>
George Belsey 2,222 7,499 52,222/202,222 -0-/-0-
Roy L. Morgan -- -- 163,888/ 87,778 -0-/-0-
Maurice L. Martin, Jr. -- -- 118,749/ 54,167 -0-/-0-
W. Terrance Schreier<F2> 15,453 74,138 -0-/-0- -0-/-0-
William H. Critchfield 40,945 106,151 -0-/-0- -0-/-0-
____________________
<FN>
<F1> Consists of options only.
<F2> Reported option exercises include options for 2,645 shares exercised by Mr. Schreier's wife as to which
options and shares Mr. Schreier disclaims beneficial ownership.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
In June 1994, the Company entered into an Employment
Agreement with Mr. Belsey for an initial term of five years,
subject to successive one-year extensions by written agreement of
both parties. The Agreement may be terminated by either party
without cause upon 30 days' written notice and provides for a
severance payment equal to one year's base salary in the event of
termination by the Company without cause. For a period of one
year following the termination of employment with the Company,
Mr. Belsey may not engage in any business which competes with the
Company anywhere in the United States.
In November 1991, the Company entered into an Employment
Agreement with Mr. Morgan for an initial term of three years.
Because the Agreement is subject to a continuous renewal clause,
the remaining term on any date is three years. The Agreement may
be terminated by either party without cause upon six months'
written notice and provides for a severance payment equal to
three years' base salary in the event of termination by the
Company without cause. For a period of three years following the
termination of employment with the Company, Mr. Morgan may not
engage in any business which competes with the Company anywhere
in the United States.
In November 1991, the Company entered into an
Employment Agreement with Mr. Martin for an initial term
of two years. Because the Agreement is subject to a continuous
renewal clause, the remaining term on any date for the Agreement
is two years. The Agreement may be terminated by either party
without cause upon 90 days' written notice and provides for a
severance payment equal to two years' base salary in the event of
termination by the Company without cause. For a period of two
years following the termination of employment with the Company,
Mr. Martin may not engage in any business which competes with the
Company anywhere in the United States.
The Employment Agreements between the Company and Messrs.
Schreier and Critchfield terminated on May 12, 1994 and May 26,
1994, respectively, upon the resignation of each of these
officers from their positions at the Company.
DIRECTOR COMPENSATION
It is the Company's policy to pay its nonemployee directors
an annual retainer of $8,000, plus $800 per Board meeting
attended and $500 per Board committee meeting attended ($750, if
Chairman of the committee). Effective July 1, 1993, each
nonemployee director may elect to receive shares of Common Stock
in lieu of cash payments pursuant to the Company's Equity
Compensation Plan for Nonemployee Directors, discussed below.
The Company also reimburses its nonemployee directors for their
reasonable expenses incurred in attending Board and committee
meetings.
21<PAGE>
Messrs. Joseph Bernstein, Ralph Bernstein and Morad Tahbaz
have voluntarily waived all director fees to date and have
received no compensation for their services as directors apart
from customary reimbursement of out-of-pocket expenses.
Nonemployee Director Stock Option Plan. The Company has
adopted compensation and incentive benefit plans to enhance its
ability to continue to attract, retain and motivate qualified
persons to serve as nonemployee directors of the Company. On
March 12, 1993 shareholders approved an amendment to the
Nonemployee Director Stock Option Plan (the "Director Option
Plan") authorizing the number of shares issued under that Plan to
be increased from 125,000 to 300,000 shares, to modify the
formula by which grants to directors were to be determined, to
provide that options will be exercisable in full upon issue, and
to provide that the five-year term of options granted under the
Director Option Plan will not terminate prematurely three months
after an Option recipient ceases to be a director of the Company.
Pursuant to the Director Option Plan, on June 30 of each year
each Nonemployee Director in office on such date who has served
on the Board for the entire preceding fiscal year will receive a
five-year option to purchase 5,000 shares of Common Stock,
exercisable at the then-current fair market value of the
Company's Common Stock.
Equity Compensation Plan for Nonemployee Directors. In
February and March 1993, respectively, the Company's Board of
Directors and stockholders approved the Air Methods Corporation
Equity Compensation Plan for Nonemployee Directors (the "Director
Equity Plan"). The Director Equity Plan authorizes the issuance
of up to 150,000 shares of Common Stock to Nonemployee Directors
of the Company. The Director Equity Plan enables the Company to
conserve cash with respect to Nonemployee Directors who have
elected to participate.
The Director Equity Plan is administered by the Board of
Directors, and provides that each Nonemployee Director may elect
to receive his annual retainer for a particular fiscal year of
the Company in Common Stock rather than cash. The number of
shares of Common Stock issued to a Nonemployee Director making
such election is equal to the then-current annual director
retainer paid by the Company (currently $8,000) divided by 95% of
the fair market value of the Company's Common Stock on the first
day of the fiscal year. The Common Stock will be forfeited and
returned to the Company, however, if the Nonemployee Director
does not remain a director of the Company through the end of the
fiscal year or fails to attend at least 75% of all Board meetings
and applicable Board committee meetings held during such year.
Common Stock issued under the Director Equity Plan in lieu of the
annual retainer is not transferable until after the forfeiture
provisions lapse, other than by will or the laws of descent and
distribution in the event of the director's death or pursuant to
a qualified domestic relations order as defined by the Code,
Title I of ERISA or the rules thereunder.
In addition, Nonemployee Directors also may elect to receive
their meeting fees in Common Stock rather than cash. The number
of shares issued to a Nonemployee Director making such an
election is equal to the then-current meeting fee -- currently
$800 per Board meeting attended and $500 per Board committee
meeting attended ($750 if Chairman of the committee) -- divided
by 95% of the fair market value of the Company's Common Stock on
the date of the meeting in question. Common Stock issued in lieu
of meeting fees is not forfeitable.
Board members who are also officers do not receive any
separate compensation or fees for attending Board or committee
meetings, although they may receive option grants under the
Employee Stock Option Plan.
During fiscal year 1994, the Company paid approximately
$24,000 to Donald R. Segner in consideration of aviation
consulting services provided by Mr. Segner to the Company during
the fiscal year, independent of his service to the Company as a
director. Mr. Segner initially provided these consulting
services on retainer, pursuant to a Consulting Agreement entered
into with the Company in October 1993. Effective October 1994,
and in connection with the Company's recent restructuring, Mr.
Segner and the Company have terminated the Consulting Agreement
and have agreed that payment for consulting services provided by
Mr. Segner during the remainder of fiscal year 1995 will be
calculated solely on an hourly basis.
22<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the
Company during most of fiscal year 1994 consisted of Messrs.
Miller (Chairman), Gray, Schreier (then Chief Executive Officer
of the Company) and Belsey. Following Mr. Schreier's resignation
from the Company, the membership of the Compensation Committee
was revised so that it now consists of Messrs. Miller (Chairman),
Belsey and Segner.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of October 3, 1994, the
beneficial ownership of the Company's issued and outstanding
Common Stock: (i) by each person who owns of record (or is known
by the Company to own beneficially) more than 5% of the Common
Stock or as to which he has the right to acquire within 60 days
of October 3, 1994, (ii) by each director of the Company and
certain executive officers of the Company; and (iii) by all
directors and officers as a group (fifteen persons).
Percentage of
Name and Address No. of Shares Common Stock/1/
- ------------------------ ---------------- ---------------
Americas Tower Partners 1,155,000/2/ 14.4
520 Madison Avenue
New York, NY 10022
George W. Belsey 60,101/3/ /*/
7301 South Peoria
Englewood, CO 80112
Joseph E. Bernstein 1,385,000/4/ 16.8
520 Madison Avenue
New York, NY 10022
Ralph J. Bernstein 1,355,000/5/ 16.5
520 Madison Avenue
New York, NY 10022
William H. Critchfield 0 /*/
c/o 7301 South Peoria
Englewood, CO 80112
Samuel H. Gray 38,901/6/ /*/
95 Madison Avenue
Morristown, NJ 07960
Maurice L. Martin, Jr. 123,951/7/ 1.5
7301 South Peoria
Englewood, CO 80112
Lowell D. Miller, Ph.D. 54,488/8/ /*/
16940 Stonehaven
Belton, MO 64012
Roy L. Morgan 364,998/9/ 4.5
7301 South Peoria
Englewood, CO 80112
Steven B. Sands 57,970/10/ /*/
101 Park Avenue
New York, NY 10178
23<PAGE>
W. Terrance Schreier 175 /*/
c/o 7301 South Peoria
Englewood, CO 80112
Donald R. Segner 14,694/11/ /*/
290 Arch Street
Laguna Beach, CA 92651
Morad Tahbaz 200,000/12/ 2.4
520 Madison Avenue
New York, NY 10022
All Directors and Officers 2,206,420/13/ 25.2
as a group (fifteen persons)
____________________
/*/ Less than one percent (1%) of the 8,026,159 shares of
Common Stock outstanding on October 3, 1994.
/1/ Does not give effect to the potential exercise of
outstanding options and warrants except as described in
the notes below.
/2/ These shares are beneficially owned by Americas Tower
Partners, Joseph Bernstein, Ralph Bernstein and a
number of corporations and partnerships controlled by
Joseph and Ralph Bernstein.
/3/ Includes 52,222 shares which may be purchased within 60
days upon the exercise of stock options at $3.00 and
$3.50 per share.
/4/ Includes 1,155,000 shares held by Americas Tower
Partners, a partnership controlled by Mr. J. Bernstein,
200,000 shares issuable upon the exercise of warrants
at an exercise price of $6.00 per share, owned by
Americas Partners, of which Mr. J. Bernstein is a
general partner, and 30,000 shares owned of record by
Mr. J. Bernstein's mother as to which shares
Mr. Bernstein exercises shared investment control.
/5/ Includes 1,155,000 shares held by Americas Tower
Partners, a partnership controlled by Mr. R. Bernstein,
and 200,000 shares issuable upon the exercise of
warrants at an exercise price of $6.00 per share, owned
by Americas Partners, of which Mr. R. Bernstein is a
general partner.
/6/ Includes 3,229 shares and options exercisable within 60
days to purchase 6,667 shares at $6.25 per share owned
by The Morris Consulting Group, Inc., of which Mr. Gray
is Chief Executive Officer and a 50% stockholder, and
options to purchase 21,666 shares at prices ranging
from $3.00 to $9.375 per share.
/7/ Includes 120,833 shares which may be purchased within
60 days upon the exercise of stock options at prices
ranging from $3.00 to $7.00 per share.
/8/ Includes 500 shares owned by Mr. Miller's wife, as to
which he disclaims beneficial ownership, and 45,832
shares which may be purchased within 60 days upon the
exercise of stock options at various prices ranging
from $3.00 to $13.50 per share.
/9/ Includes 95,548 shares owned by Mr. Morgan's wife, as
to which he disclaims beneficial ownership, and 167,777
shares which may be purchased within 60 days upon the
exercise of stock options at prices ranging from $3.00
to $5.50 per share.
/10/ Includes 4,444 shares which may be purchased within 60
days issuable upon the exercise of stock options
exercisable at $3.50 per share.
/11/ Includes 14,444 shares which may be purchased within 60
days upon the exercise of stock options at $3.00 and
$9.00 per share, and 250 shares held in trust as to
which Mr. Segner holds shared voting and investment
power.
/12/ Consists of warrants to purchase 200,000 shares at an
exercise price of $6.00 per share, owned by Americas
Partners, of which Mr. Tahbaz is a general partner.
/13/ Includes 729,540 shares which may be purchased within
60 days upon the exercise of outstanding stock options.
24<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From December 1992 through February 1993 the Company sold
2,386,839 units in a private placement financing at a price of
$3.00 per unit, with each unit consisting of one share of Common
Stock and one five-year warrant to purchase one-half of one share
of Common Stock. Each two warrants entitle the holder to
purchase one share of Common Stock for $4.00. Sands Brothers
acted as placement agent for the Company in this offering, for
which it received a placement fee of $572,841, a non-accountable
expense allowance of $143,210 and five-year warrants to purchase
238,684 units at a price of $3.00 per unit. Sands Brothers
subsequently allocated the five-year warrants to various
associates, including 60,017 warrants to Mr. Steven B. Sands.
Mr. Sands, a director of the Company, is the Chairman and a 50%
owner of Sands Brothers. Mr. Martin Sands, a brother of Steven
Sands, also is a 50% owner of Sands Brothers.
The Company also granted Sands Brothers a two-year right of
first refusal in connection with future financings. Pursuant to
a termination of services agreement reached in August, 1993
between the Company and Sands Brothers, Sands Brothers has waived
this right of first refusal in return for the payment to Sands
Brothers by the Company of $300,000. As a result there are no
continuing obligations by the Company to retain Sands Brothers in
connection with future financings.
In December 1993, Americas Partners, a New York general
partnership composed of Joseph Bernstein, Ralph Bernstein and
Morad Tahbaz, each currently a director of the Company, co-
guaranteed a $2,500,000 short-term credit extended to the Company
by Swiss Bank Corporation, New York branch. In consideration of
this co-guaranty, the Company granted Americas Partners warrants
to purchase 50,000 shares of Common Stock at an exercise price of
$10.625 per share (later reduced to $6.00 per share), exercisable
for a term of five years from the warrant issuance date.
In February 1994, Americas Partners agreed to make a bridge
loan of $250,000, convertible at any time into ten percent of the
post-conversion outstanding shares of Air Medica Movil, S.A. de
C.V., an air medical transportation joint venture in Mexico City,
Mexico to which the Company is a party. The loan is non-recourse
as to the Company. Americas Partners will have an option to
provide or arrange for the balance of up to $2,000,000 of third
party financing for the venture on terms satisfactory to the
venture and to the partnership. In consideration of this loan,
the Company granted Americas Partners five-year warrants to
purchase 150,000 shares of Common Stock at an exercise price of
$6.00 per share, and reduced the exercise price of the 50,000
warrants issued in December 1993 from $10.625 to $6.00.
Ralph Bernstein and Morad Tahbaz were elected directors of the
Company in connection with the establishment of a Finance
Committee and a Marketing and New Business Committee of the
Company's Board of Directors, and the approval of this financing
commitment for Air Medica Movil. Mr. Tahbaz has also been
designated to serve as director of Air Medica Movil.
In September 1994, the Company announced that it was engaged
in discussions with the management of Rocky Mountain Helicopters,
Inc. ("RMHI"), currently operating as debtor-in-possession under
Chapter 11 of the United States Bankruptcy Code, regarding the
feasibility and possible cost savings of a business combination
of the emergency air medical businesses of the Company and RMHI.
Other companies in the air medical transportation business and
several merchant banking firms are also pursuing the acquisition
of these and other assets of RMHI, and there can be no assurance
that the Company will be successful in completing any transaction
with RMHI. In connection with its discussions with RMHI, the
Company is discussing financing options with an investment group
led by Americas Partners, which is controlled by Messers. J.
Bernstein, R. Bernstein and M. Tahbaz.
25<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Documents filed as part of the report:
1. Financial Statements included in Item 8 of this report:
Independent Auditors' Report.
Consolidated Balance Sheets, June 30, 1994 and 1993.
Consolidated Statements of Operations for the years
ended June 30, 1994, 1993 and 1992.
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the years
ended June 30, 1994, 1993 and 1992.
Notes to Financial Statements.
2. Financial Statement Schedules included in Item 8 of
this report:
Schedule V - Property and Equipment.
Schedule VI - Accumulated Depreciation and Amortization
of Property and Equipment.
Schedule X - Supplementary Statement of Operations
Information.
All schedules, except those set forth above, have been
omitted because the information required is included in
the financial statements or notes or have been omitted
as not applicable or not required.
3. Exhibits:
Exhibit
Number Description of Exhibits
- ------- -----------------------
3.1 Certificate of Incorporation/1/
3.2 Amendments to Certificate of Incorporation/2/
3.3 By-Laws as Amended /13/
4.1 Specimen Stock Certificate/2/
4.2 Warrant Agreement, and First and Second Amendment to
Warrant Agreement, and form of Warrant Certificate/3/
4.3 Third Amendment to Warrant Agreement/10/
4.4 Warrant Agreement, dated February 2, 1993, between the
Company and Sands Brothers & Co., Ltd. ("Sands
Brothers") covering Warrants issued to Sands
Brothers/3/
4.5 Form of Sands Brothers Warrant/3/
4.6 Warrant Agreement, dated April 6, 1993, between the
Company and C.C.R.I. Corporation/10/
IV-1<PAGE>
4.7 Warrant Agreement dated February 14, 1994, between the
Company and CCRI Corporation/12/
4.8 Form of Reissued Warrant Agreement, dated February 21,
1994 between the Company and Americas Partners,
concerning warrants originally issued December 28,
1993/11/
4.9 Form of Reissued Warrant Agreement, dated February 21,
1994 between the Company and Americas Partners/11/
10.1 Air Methods Corporation Employee Stock Option Plan, as
amended /14/
10.2 Nonemployee Director Stock Option Plan, as amended/10/
10.3 Restricted Stock Bonus Plan, as amended/10/
10.4 Equity Compensation Plan for Nonemployee Directors,
adopted March 12, 1993/4/
10.5 Amended and Restated Warrant Agreement, dated as of
October 10, 1990, by and between the Company and
Fritzsche Pambianchi & Associates, Inc./7/
10.6 Option Agreement, dated June 12, 1989, between the
Company and F. Duwaine Townsen/8/
10.7 Option Agreement, dated June 12, 1990, between the
Company and Lowell D. Miller/8/
10.8 Option Agreement, dated December 28, 1990, between the
Company and Lowell D. Miller/8/
10.9 Option Agreement, dated December 28, 1990, between the
Company and F. Duwaine Townsen/8/
10.10 Option Agreement, dated July 18, 1991, between the
Company and Lowell D. Miller/10/
10.11 Form of Option Agreement between the Company and Alfred
Bjorseth/10/
10.12 Form of Option Agreement between the Company and
Marlis E. Smith/10/
10.13 Warrant Agreements, dated April 29, 1993, between the
Company and Bart Gutekunst/10/
10.14 Warrant Agreement, dated April 28, 1993, between the
Company and Gerald Grayson/10/
10.15 Exchange Agreement and Plan of Reorganization, dated
November 12, 1991, by and among the Company and the
shareholders of Air Methods-Colorado (excluding
schedules)/9/
10.16 Employment Agreement, dated November 12, 1991, between
the Company and Roy L. Morgan/2/
10.17 Employment Agreement, dated November 12, 1991, between
the Company and Maurice L. Martin, Jr./2/
10.18 Employment Agreement, dated June 1, 1994, between the
Company and George Belsey /13/
10.19 Employment Agreement, dated November 12, 1991, between
the Company and Steven R. Weinert/2/
10.20 Employment Agreement, dated November 30, 1993, between
the Company and Michael Prieto /13/
IV-2<PAGE>
10.21 Employment Agreement, dated November 12, 1991, between
the Company and Marius Burke, Jr./2/
10.22 Research, Clinical Development and Option Agreement,
dated February 12, 1992, between the Company and
Oncotech, Inc./2/
10.23 Research and Licensing Agreement, dated December 6,
1993, between the Company and Phylomed /13/
10.24 Equipment Leases, and Warrant Agreements, dated
July 25, 1992, between the Company and Ventana Leasing,
Inc. or Praktikerfinans AB/2/
10.25 Exchange Agreement, dated September 10, 1993 by and
among the Company and the shareholders of Golden Eagle
Aviation, Inc./5/
21 Subsidiary of the Registrant /13/
23 Consent of KPMG Peat Marwick, LLP
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the
fourth quarter of fiscal year 1994.
____________________
/1/ Filed as an exhibit to the Company's Registration Statement
on Form S-1 (Registration No. 33-15007), as declared
effective on August 27, 1987, and incorporated herein by
reference.
/2/ Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1992, and
incorporated herein by reference.
/3/ Filed as an exhibit to the Company's Registration Statement
on Form S-3 (Registration No. 33-59690), as declared
effective on April 23, 1993, and incorporated herein by
reference.
/4/ Filed as an exhibit to the Company's Registration Statement
on Form S-8 (Registration No. 33-65370), filed with the
Commission on July 1, 1993, and incorporated herein by
reference.
/5/ Filed as an exhibit to the Company's current Report on Form
8-K dated September 10, 1993, and incorporated herein by
reference.
/6/ Filed as an exhibit to the Company's Registration Statement
on Form S-1 (Registration No. 33-27883), as declared
effective on June 13, 1989, and incorporated herein by
reference.
/7/ Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended April 30, 1991, and
incorporated herein by reference.
/8/ Filed as an exhibit to Post-Effective Amendment No. 4 to the
Company's Registration Statement on Form S-1 (Registration
No. 33-27883) filed with the Commission on August 12, 1991,
and incorporated herein by reference.
/9/ Filed as an exhibit to the Company's Current Report on
Form 8-K dated November 12, 1991, and incorporated herein by
reference.
/10/ Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993, and
incorporated herein by reference.
IV-3<PAGE>
/11/ Filed as an exhibit to the Company's Registration Statement
on Form S-3 (Registration No. 33-75744) filed with the
Commission on February 25, 1994 and incorporated herein by
reference.
/12/ Filed as an exhibit to the Company's Registration Statement
on Form S-2 (Registration No. 33-76016) filed with the
Commission on March 2, 1994, and incorporated herein by
reference.
/13/ Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1994, and
incorporated herein by reference.
/14/ Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995, and
incorporated herein by reference.
IV-4<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Amendment No. 2 to its Annual Report on
Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized.
AIR METHODS CORPORATION
Date: June 6, 1995 By: GEORGE W. BELSEY
--------------------------------
George W. Belsey
Chairman of the Board, Chief
Executive Officer and Director
IV-5<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
TABLE OF CONTENTS
- -----------------------------------------------------------------
Independent Auditors' Report . . . . . . . . . . . . . . . . .F-1
CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------
CONSOLIDATED BALANCE SHEETS, June 30, 1994 and 1993 . . F-2
CONSOLIDATED STATEMENTS OF OPERATIONS,
Years Ended June 30, 1994, 1993, and 1992 . . . . . . . F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY,
Years Ended June 30, 1994, 1993, and 1992 . . . . . . . F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS,
Years Ended June 30, 1994, 1993, and 1992 . . . . . . . F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
June 30, 1994 and 1993 . . . . . . . . . . . . . . . . F-8
SCHEDULES
- ---------
V PROPERTY AND EQUIPMENT . . . . . . . . . . . . . . F-22
VI ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT . . . . . . . . . . . . F-23
X SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION F-24
All other supporting schedules are omitted because they are
inapplicable, not required, or the information is presented in
the consolidated financial statements or notes thereto included
in Item 8.
<PAGE>
Independent Auditors' Report
----------------------------
BOARD OF DIRECTORS AND STOCKHOLDERS
AIR METHODS CORPORATION
We have audited the accompanying consolidated financial
statements of Air Methods Corporation and subsidiary as listed in
the accompanying table of contents. In connection with our
audits of the consolidated financial statements, we also have
audited the financial statements schedules as listed in the
accompanying table of contents. These consolidated financial
statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Air Methods Corporation and subsidiary as of June 30,
1994 and 1993, and the results of their operations and their cash
flows for each of the years in the three-year period ended
June 30, 1994, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in Notes 1 and 9 to the consolidated financial
statements, the Company changed its method of accounting for
income taxes effective July 1, 1993 to adopt the provisions of
the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
KPMG PEAT MARWICK LLP
Denver, Colorado
August 12, 1994
F-1<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND 1993
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
Assets 1994 1993
- ------ ------ ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,421 4,628
Short-term investments 20 524
Current installments of notes receivable 309 --
Receivables (note 5):
Trade 978 1,134
Vendor -- 851
Insurance proceeds -- 342
Employees and other 72 120
------ ------
1,050 2,447
------ ------
Inventories (note 5) 1,329 1,794
Work-in-process on medical interior contracts 174 168
Assets held for sale (notes 3, 4, and 5) 5,065 --
Prepaid expenses and other 273 280
------ ------
Total current assets 11,641 9,841
------ ------
Equipment and leasehold improvements (notes 2, 5, and 6):
Flight and ground support equipment 36,232 30,756
Furniture and office equipment 1,145 923
------ ------
37,377 31,679
Less accumulated depreciation and amortization (3,484) (1,894)
------ ------
Net property and equipment 33,893 29,785
------ ------
Excess of cost over the fair value of net assets acquired, net of
accumulated amortization of $259 and $157 in 1994
and 1993, respectively (notes 2, 3, and 4) 2,168 2,265
Notes receivable, less current installments 2,361 --
Patent application costs and other assets, net of accumulated
amortization of $383 and $296 in 1994 and 1993, respectively
(note 5) 1,837 1,421
------ ------
Total assets $51,900 $43,312
====== ======
(Continued)
</TABLE>
F-2<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, CONTINUED
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1994 1993
- ------------------------------------ ------ ------
<S> <C> <C>
Current liabilities:
Notes payable (note 5) $ 1,054 543
Current installments of long-term debt (note 5) 5,921 1,414
Current installments of obligations under capital leases (note 6) 706 777
Accounts payable 915 1,274
Accrued overhaul and parts replacement costs 809 432
Deferred revenue 1,011 493
Accrued restructuring expenses (note 4) 291 --
Other accrued liabilities 2,687 919
-------- --------
Total current liabilities 13,394 5,852
-------- --------
Long-term debt, less current installments (note 5) 8,110 11,263
Obligations under capital leases, less current installments (note 6) 5,672 7,284
Accrued overhaul and parts replacement costs 3,961 3,833
Other liabilities 945 899
-------- --------
Total liabilities 32,082 29,131
-------- --------
Stockholders' equity (notes 2, 3, and 7):
Preferred stock, $1 par value. Authorized 5,000,000 shares,
none outstanding -- --
Common stock, $.06 par value. Authorized 16,000,000 shares;
issued 8,041,518 and 5,262,130 shares in 1994 and 1993,
respectively 482 316
Additional paid-in capital 49,504 36,781
Accumulated deficit (30,167) (22,910)
-------- --------
19,819 14,187
Treasury stock, 25,606 and 93,843 common shares in 1994 and
1993, respectively (1) (6)
-------- --------
Total stockholders' equity 19,818 14,181
-------- --------
Commitments and contingencies (notes 6 and 13)
Total liabilities and stockholders' equity $51,900 $43,312
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
F-3<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Revenue:
Flight revenue (note 8) $25,346 21,468 11,855
Sales of medical interiors and products 2,552 3,872 892
------- ------- -------
27,898 25,340 12,747
------- ------- -------
Operating expenses:
Flight centers 8,626 7,017 3,819
Aircraft operations 8,188 5,483 4,520
Aircraft rental (note 6) 2,915 3,153 1,978
Cost of medical interiors and products sold 2,599 3,228 841
Loss on disposition of aircraft, net 790 -- --
Depreciation and amortization 2,196 1,438 908
General and administrative 5,761 4,479 3,984
Restructuring and other non-recurring expenses
(note 4) 3,010 -- --
------- ------- -------
34,085 24,798 16,050
------- ------- -------
Operating income (loss) (6,187) 542 (3,303)
Other income (expense):
Interest expense (1,246) (1,082) (613)
Interest and dividend income 188 121 355
Merger termination expense (note 11) -- (272) --
Other, net (note 11) 170 257 962
-------- -------- --------
Loss before extraordinary item (7,075) (434) (2,599)
Extraordinary item -- gain (loss) on early
extinguishment of debt (notes 5 and 6) (182) 173 --
-------- -------- --------
Net loss $(7,257) (261) (2,599)
======== ======== ========
Loss per common share before extraordinary item $ (1.00) (.13) (1.42)
Gain (loss) on early extinguishment of debt per
common share (.03) .05 --
-------- -------- --------
Loss per common share $(1.03) (.08) (1.42)
====== ====== ======
Weighted average number of common shares outstanding 7,056,445 3,453,111 1,829,456
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
F-4<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Treasury Stock Additional Total stock-
----------------- ----------------- paid-in Accumulated holders'
Shares Amount Shares Amount capital deficit equity
------ ------ ------ ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1991 1,420,149 $ 85 -- $ -- 26,570 (20,050) 6,605
Issuance of common shares for options
exercised and services rendered 20,937 1 -- -- 124 -- 125
Amortization of deferred compensation
expense (note 7) -- -- -- -- 26 -- 26
Payment for fractional shares resulting
from reverse stock split (840) -- -- -- (2) -- (2)
Issuance of common shares in business
combination (note 2) 692,730 42 93,843 (6) 1,702 -- 1,738
Net loss -- -- -- -- -- (2,599) (2,599)
---------- ----- ------- ----- ------- -------- -------
Balances at June 30, 1992 2,132,976 128 93,843 (6) 28,420 (22,649) 5,893
Issuance of common shares for options
exercised and services rendered 5,030 -- -- -- 53 -- 53
Issuance of common shares in private
offering, net of syndication costs of
$1,470 (note 7) 2,386,839 144 -- -- 5,547 -- 5,691
Issuance of common shares under the
Restricted Stock Plan (note 7) 102,907 6 -- -- (6) -- --
Amortization of deferred compensation
expense (note 7) -- -- -- -- 191 -- 191
Retirement of unvested shares and
options forfeited under the Restricted
Stock Plan (note 7) (1,770) -- -- -- (1) -- (1)
Issuance of common shares for
warrants exercised, net of solicitation
costs of $250 (note 7) 636,148 38 -- -- 2,577 -- 2,615
Net loss -- -- -- -- -- (261) (261)
---------- ----- ------- ----- ------- -------- -------
Balances at June 30, 1993 5,262,130 316 93,843 (6) 36,781 (22,910) 14,181
Issuance of common shares for options
exercised and services rendered 533,798 18 -- -- 1,306 -- 1,324
Issuance of common shares for
warrants exercised, net of solicitation
costs of $429 (note 7) 1,272,626 90 -- -- 5,411 -- 5,501
Issuance of common shares in private
offering (note 7) 1,011,190 61 -- -- 5,669 -- 5,730
Issuance of common shares in
acquisition (note 3) 55,617 3 -- -- 437 -- 440
Amortization of deferred compensation
expense (note 7) -- -- -- -- 218 -- 218
Retirement of unvested shares and
options forfeited under the Restricted
Stock Plan (note 7) -- -- -- -- (8) -- (8)
In-kind tax withholding elected by
employees under the Restricted Stock
Plan (note 7) -- -- 25,606 (1) (310) -- (311)
Cancellation of treasury shares (93,843) (6) (93,843) 6 -- -- --
Net loss -- -- -- -- -- (7,257) (7,257)
---------- ----- ------- ----- ------- -------- -------
Balances at June 30, 1994 8,041,518 $ 482 25,606 $ (1) 49,504 (30,167) 19,818
========== ===== ======= ===== ======= ======== =======
See accompanying notes to consolidated financial statements.
</TABLE>
F-5<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (7,257) (261) (2,599)
Adjustments to reconcile net loss to net cash provided (used)
by operating activities:
Provision for restructuring and other non-recurring expenses 2,218 -- --
Depreciation and amortization expense 2,196 1,438 908
Common stock and options issued for services and in
connection with employee stock compensation agreements,
net of forfeitures (94) 243 149
Loss (gain) on retirement and sale of equipment (790) (12) (321)
Loss (gain) on early extinguishment of debt 182 (173) --
Changes in operating assets and liabilities, net of
acquisitions:
Decrease (increase) in receivables 2,043 (1,121) (678)
Increase in inventories (53) (1,166) (182)
Decrease (increase) in prepaid expenses and other current
assets (180) 295 (360)
Increase in work-in-process on medical interior contracts (153) (81) (87)
Decrease in accounts payable, other accrued liabilities, and
accrued restructuring expenses (189) (376) (2,069)
Increase (decrease) in accrued overhaul and parts
replacement costs 860 (432) 237
Increase in deferred revenue and other liabilities 676 95 414
------- ------ -------
Net cash provided (used) by operating activities 1,039 (1,551) (4,588)
------- ------ -------
Cash flows from investing activities:
Net cash used in acquisition of Golden Eagle Aviation, Inc. (451) -- --
Acquisition of equipment and leasehold improvements (16,101) (6,561) (3,104)
Proceeds from retirement and sale of equipment 618 2,093 725
Increase in notes receivable, patent application costs, and other
assets (307) (654) (190)
Proceeds from sale or maturity of short-term investments 504 1,378 4,129
Purchase of short-term investments -- (472) (3,991)
Payments for acquisition costs -- -- (482)
-------- ------- -------
Net cash used by investing activities (15,737) (4,216) (2,913)
-------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock 12,898 10,026 591
Payments for syndication and solicitation costs (1,252) (1,720) --
Net borrowings (repayments) under short-term notes payable (117) (268) 486
Proceeds from long-term debt 7,851 4,049 1,876
Payments of long-term debt (4,007) (2,318) (357)
Payments of capital lease obligations (1,882) (473) (488)
-------- ------- -------
Net cash provided by financing activities 13,491 9,296 2,108
-------- ------- -------
Increase (decrease) in cash and cash equivalents (1,207) 3,529 (5,393)
-------- ------- -------
Cash and cash equivalents at beginning of year 4,628 1,099 6,492
-------- ------- -------
Cash and cash equivalents at end of year $ 3,421 4,628 1,099
======== ======= =======
Interest paid in cash during the year $ 1,243 1,158 645
======== ======= =======
(Continued)
</TABLE>
F-6<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
- -----------------------------------------------------------------
Noncash investing and financing transactions:
On November 12, 1991, the Company issued 598,887 restricted
shares of its common stock for all the outstanding common shares
of Air Methods Corporation, a Colorado corporation. The
transaction consisted of the following:
Year ended
June 30, 1992
-------------
(Amounts in
thousands)
Issuance of stock in exchange for net assets of
Air Methods $ 2,220
========
Net assets acquired:
Equipment and leasehold improvements $15,762
Receivables 648
Inventories 446
Goodwill 2,422
Accounts payable and accrued liabilities (3,173)
Accrued overhaul and parts replacement costs (4,459)
Debt (9,600)
Other, net 174
--------
Net assets acquired $ 2,220
========
On September 10, 1993, the Company issued 25,908 restricted
shares of its common stock for all the outstanding common shares
of Golden Eagle Charters, Inc. ("Golden Eagle"). On the same
date, in a related transaction, the Company issued 29,709
restricted shares of its common stock for the transfer to the
Company of an interest in a jet airplane. The transaction
consisted of the following:
Year ended
June 30, 1994
-------------
(Amounts in
thousands)
Issuance of stock in exchange for net assets of
Golden Eagle $ 440
=======
Net assets acquired:
Equipment and leasehold improvements $1,923
Receivables 105
Goodwill 1,193
Accounts payable and other liabilities (2,781)
-------
Net assets acquired $ 440
=======
Capital lease obligations of $19,000, $7,085,000, and $1,479,000
were assumed to acquire equipment during the years ended June 30,
1994, 1993 and 1992, respectively.
Notes receivable of $2,790,000 were received as partial
consideration for the sale of two aircraft during the year ended
June 30, 1994.
See accompanying notes to consolidated financial statements.
F-7<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
- -----------------------------------------------------------------
(1) Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
The accompanying consolidated financial statements include
the accounts of Air Methods Corporation (formerly Cell
Technology, Inc.), a Delaware corporation and its wholly
owned subsidiary Golden Eagle Charters, Inc. (collectively
Air Methods or the Company). All significant intercompany
balances and transactions have been eliminated in
consolidation. During fiscal year 1993, Cell Technology
Biosciences, Inc., another wholly owned subsidiary, was
dissolved.
As discussed more fully in note 2, on November 12, 1991,
Cell Technology, Inc. acquired all of the outstanding common
shares of Air Methods Corporation, a Colorado corporation
(AMC). On November 13, 1991, AMC was merged into the
Company and the Company changed its name to Air Methods
Corporation.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows,
the Company considers all highly liquid instruments with
original maturities of three months or less to be cash
equivalents. Cash equivalents of $2,427,000 and $4,570,000
at June 30, 1994 and 1993, respectively, consist of short-
term money market funds.
Short-Term Investments
Short-term investments, which consist of certificates of
deposit, generally have maturities of greater than 90 days
but less than one year and are recorded at cost, which
approximates market value.
Inventories
Inventories are comprised primarily of expendable aircraft
parts which are recorded at the lower of cost (average cost)
or market.
Work-in-Process on Medical Interior Contracts
Work-in-process on medical interior contracts relates to the
installation of medical equipment and modification of
aircraft for third parties. Revenue relating to fixed fee
contracts is recognized using the completed contract method
of accounting. A contract is considered complete when all
costs except insignificant items have been incurred and the
installation is operating according to specification. If
the modified
F-8<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
aircraft is leased by the Company in its operations, the
revenue is deferred and recognized over the term of the
lease.
Certain medical interior contracts provide for reimbursement
of all costs plus an incremental amount. Revenue on these
contracts is recorded as costs are incurred. In addition,
when the total cost to complete a medical interior under a
fixed fee contract can be reasonably estimated, revenue is
recorded as costs are incurred.
Assets Held for Sale
Assets held for sale consist primarily of aircraft
designated for disposal within one year and are valued at
the lower of cost or estimated net realizable value. Net
realizable value is determined primarily by individual
market studies. Depreciation is suspended when an asset is
designated for disposal. Debt collateralized by assets held
for sale is classified in the financial statements as
current.
Equipment and Leasehold Improvements
Hangar, equipment, and leasehold improvements are recorded
at cost. Maintenance and repairs are expensed when
incurred. Major modifications and costs incurred to place
aircraft in service are capitalized. Improvements to
helicopters and airplanes leased under operating leases are
included in flight and ground support equipment in the
accompanying financial statements. Depreciation is computed
using the straight-line method over the following useful
lives:
Residual
Description Lives value
---------------------------------------- ---------- --------
Hangar 40 years 10%
Helicopters, including medical equipment 8-25 years 25%
Airplanes, including medical equipment 8-20 years 0-10%
Ground support equipment 5-10 years 0-10%
Furniture and office equipment 3-10 years --
Leasehold improvements to hangar and office space are
amortized using the straight-line method over the terms of
the leases.
Excess of Costs Over the Fair Value of Net Assets Acquired
Excess of cost over the fair value of net assets acquired is
being amortized using the straight-line method over 25
years.
F-9<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
Fleet Integration Costs
Costs related to the integration of new types of aircraft
into the Company's fleet are deferred and amortized over a
period of five years. Such costs are included in other
assets in the accompanying financial statements.
Patent Application Costs
The Company capitalizes legal costs associated with patent
applications. At such time as patents are granted, these
costs will be amortized over the estimated useful economic
life of the patents. Costs relating to unsuccessful patent
applications are charged to operations.
Engine and Airframe Overhaul Costs
The Company uses the accrual method of accounting for major
engine and airframe overhauls whereby the cost of the next
overhaul is estimated and accrued based on usage of the
aircraft over the period between overhauls.
Revenue Recognition and Uncollectible Receivables
Fixed fee revenue under the Company's operating agreements
with hospitals is recognized monthly over the term of the
agreements. Revenue relating to emergency flights is
recognized upon completion of the services.
Uncollectible trade receivables are charged to operations
using the allowance method. The allowance for uncollectible
receivables was not significant at June 30, 1994 and 1993.
Income Taxes
The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standard No. 109,
Accounting for Income Taxes (Statement 109). Under the
asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future income
tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred income
tax assets and liabilities of a change in rates is
recognized in income in the period that includes the
enactment date.
F-10<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
Effective July 1, 1993, the Company adopted Statement 109.
There was no effect on the financial statements as a result
of adopting Statement 109. The Company has previously used
the asset and liability method under Statement 96.
Loss Per Share
Loss per common share is calculated using the weighted
average number of common shares outstanding for each period.
Outstanding common stock options and common stock purchase
warrants have not been included in the calculations since
the effect would be antidilutive. Share and per share
amounts for all periods presented reflect a one-for-six
reverse stock split completed in fiscal 1992.
Reclassifications
Certain prior year amounts have been reclassified for
comparative purposes with the 1994 presentation.
(2) Business Combination
On November 12, 1991, the Company issued 598,887 restricted
shares of its common stock in exchange for all of the
outstanding common shares of AMC. The combination was
accounted for using the purchase method of accounting. The
restricted shares of the Company's common stock were valued
at $2,220,000 by the Company's Board of Directors, and such
amount was allocated to the assets acquired net of
liabilities assumed based on their respective estimated fair
values. Such amount was based on the market value of the
shares, as determined by an independent appraisal, which was
discounted to reflect the restricted nature of the stock.
The application of the purchase price was as follows
(amounts in thousands):
Composition of purchase price:
Stockholders' deficit of AMC at date of
acquisition $(5,492)
Adjustments to record the net assets of AMC
at fair value:
Flight equipment 5,290
Excess of cost over the fair value of net
assets acquired 2,422
-------
7,712
-------
Total purchase price $ 2,220
=======
F-11<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
(3) Acquisition
On September 10, 1993, the Company entered into an Exchange
Agreement (the "Agreement") with Golden Eagle and Golden
Eagle's shareholders (the "Shareholders") whereby the
Company issued an aggregate of 25,908 shares of its Common
Stock valued at approximately $188,000 to the Shareholders
in exchange for all of the issued and outstanding shares of
Golden Eagle. On the same date, in a related transaction
contemplated by the Agreement, the Company issued an
aggregate of 29,709 shares of its restricted common stock,
valued at approximately $252,000 to shareholders and related
parties of Golden Eagle, in exchange for the transfer to the
Company of an interest in a jet airplane. In connection
with the agreement, the Company assumed approximately
$2,781,000 in debt and other liabilities of Golden Eagle and
the Shareholders for an aggregate consideration of
$3,221,000.
The application of the purchase price was as follows
(amounts in thousands):
Composition of purchase price:
Stockholders' deficit of Golden Eagle at
date of acquisition $ (753)
Excess of cost over the fair value of net
assets acquired 1,193
-------
Total purchase price $ 440
=======
The transactions have been accounted for using the purchase
method of accounting. Accordingly, the results of
operations of Golden Eagle have been included with those of
the Company since the effective date of the Agreement.
The unaudited pro forma revenue, net loss, and loss per
common share for each of the years in the two-year period
ended June 30, 1994, assuming the purchase had occurred at
the beginning of the periods presented, are as follows
(amounts in thousands expect per share amounts):
Year ended June 30
------------------
1994 1993
------ ------
Revenue $30,188 26,822
======== =======
Net loss $(7,333) (826)
======== =======
Loss per common share $ (1.03) (0.27)
======== =======
As discussed more fully in note 4, in the third quarter of
fiscal 1994, the Company discontinued substantially all of
the airplane charter operations of Golden Eagle and
F-12<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
wrote off the balance of goodwill related to the purchase of
Golden Eagle as part of the restructuring. The aircraft
acquired with Golden Eagle are included in assets held for
sale.
(4) Business Restructuring
During the third and fourth quarters of fiscal 1994, the
Company implemented a restructuring plan for the Company's
continuing air medical flight and manufacturing operations
designed to reduce costs and improve operating efficiencies.
The restructuring plan included the discontinuation of
substantially all of the airplane charter operations of
Golden Eagle, a reduction in the Company's work force, and
the disposal of selected assets. Also included in the
restructuring was the cancellation of a proposed debt
refinancing and public preferred stock offering in the third
quarter of 1994. With the exception of severance pay
related to the reduction in the work force and certain
placement fees for the proposed preferred stock
offering , the restructuring expenses consisted of non-
cash charges including the write-off of previously recorded
assets.
The restructuring and other non-recurring charges for the
year ended June 30, 1994, consist of the following
(amounts in thousands):
Write-off of costs associated with proposed debt
refinancing $ 335
Write-off of costs associated with proposed public
preferred stock offering 571
Write-off of goodwill related to the acquisition of
Golden Eagle 1,459
Severance pay 614
Other 31
------
$3,010
======
The accrued restructuring expenses as of June 30, 1994,
consist of the following (amounts in thousands):
Accrued costs associated with proposed public
preferred stock offering $ 118
Severance pay 173
-----
$ 291
F-13<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
(5) Notes Payable and Long-Term Debt
Notes payable consist of the following at June 30, 1994 and
1993 (amounts in thousands):
1994 1993
------ ------
Borrowings under a note with a company
with interest at prime rate (6% at
June 30, 1994), due upon delivery of
four helicopters $ 534 534
Borrowings under a $2 million line of credit
with interest at prime rate (7.25% at
June 30, 1994), collateralized by certain
receivables and inventories 505 --
Other 15 9
------ ---
$1,054 543
====== ===
The timing of subsequent draws against the $2 million line
of credit is dependent upon the delivery of certain
helicopters under a purchase agreement signed by the
Company. See further discussion of the purchase agreement
in note 13.
F-14
<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
Long-term debt consists of the following at June 30, 1994
and 1993 (amounts in thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Notes payable to one lender with interest at 9.94%,
due in monthly payments of principal and interest
through August 2001, collateralized by equipment,
receivables, inventories, and other intangible assets $ 5,145 7,698
Notes payable to one lender with interest at 8.5%, due
in monthly payments of principal and interest through
September 2000, collateralized by flight equipment 3,770 --
Note payable to a company with interest at 9.25%, due
in monthly payments of principal and interest through
December 2001, collateralized by a hangar 266 --
Note payable to a company with monthly interest
payments at prime rate plus 1% (8.25% at June 30,
1994), due in full on October 1, 1994 3,819 3,819
Note payable to a company with interest at 11%, due in
monthly payments of principal and interest through
February 29, 2002, collateralized by equipment,
receivables and inventories 620 669
Note payable to a company with interest at 10%, due in
monthly payments of principal and interest through
May 2000, collateralized by flight equipment 357 399
Unsecured 13% note payable to a stockholder, due in
monthly payments of principal and interest through
December 1996 17 22
Other 37 70
------- -------
14,031 12,677
Less current installments (5,921) (1,414)
------- -------
$ 8,110 11,263
======= =======
</TABLE>
All debt collateralized by assets held for sale is
classified as current.
F-15<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
Aggregate maturities of long-term debt are as follows
(amounts in thousands):
Year ending June 30:
1995 $ 5,921
1996 1,101
1997 1,211
1998 1,350
1999 1,456
Thereafter 2,992
-------
$14,031
=======
In 1994, the Company retired debt totaling $2,056,000 prior
to the scheduled maturities. In 1993, the Company retired
debt totaling $642,000 prior to the scheduled maturities and
recognized gains of $173,000 on the early extinguishment of
the debt.
(6) Leases
The Company leases hangar and office space under
noncancelable operating leases and leases certain equipment
and aircraft under operating and capital leases. As of
June 30, 1994, future minimum lease payments under capital
and operating leases are as follows (amounts in thousands):
Capital Operating
leases leases
------- --------
Year ending June 30:
1995 $ 1,172 2,739
1996 1,128 2,643
1997 1,119 2,595
1998 1,119 2,456
1999 1,007 2,091
Thereafter 2,902 6,824
------ -------
Total minimum lease payments 8,447 $19,348
=======
Less amounts representing interest (2,069)
-------
Present value of minimum capital lease
payments 6,378
Less current installments (706)
-------
$ 5,672
=======
F-16<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
Rent expense relating to operating leases totaled
$3,434,000, $3,462,000, and $2,195,000 for the years ended
June 30, 1994, 1993 and 1992, respectively.
On July 25, 1992, the Company entered into two equipment
leases with Ventana Leasing, Inc. ("Ventana") for the lease
of two helicopters. A director of the Company is a 50%
owner of Ventana. In December 1993 the Company retired one
the Ventana capital lease obligations for a total of
$1,167,000 and recorded a loss of $182,000 on the early
extinguishment of this obligation.
The remaining capital lease is for a term of seven years at
an annual cost to the Company of approximately $301,000.
Lease payments are fixed for the first five years of the
lease term, after which Ventana may increase the lease
payments within certain limits to account for any increases
in Ventana's debt servicing costs on the leased aircraft.
The lease provides that the Company will pay Ventana
$337,500 upon termination of the lease to purchase the
aircraft. In September 1992, the Company entered into an
additional equipment lease with Ventana covering certain
telephone and computer equipment. The lease has a three-
year term at an annual cost to the Company of approximately
$50,000, and provides that the Company will purchase the
leased equipment at the end of the lease term.
At June 30, 1994 and 1993, capitalized leased property
included in equipment, net of accumulated depreciation,
totaled $11,237,000 and $8,568,000, respectively.
(7) Stockholders' Equity
(a) Warrants
In connection with various offerings of common stock
and other transactions by the Company, the following
warrants to purchase the Company's common stock were
issued and are outstanding as of June 30, 1994:
F-17<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
Number of Exercise price
warrants per share Expiration Date
--------- -------------- -------------------
6,250 $ 10.50 March 13, 1995
30,000 4.00 March 12, 1996
67,938 5.10 Various, 1997
4,000 3.00 February 2, 1998
126,592 4.00 February 2, 1998
20,000 4.13 March 12, 1998
75,000 4.50 April 6, 1998
50,000 6.00 December 29, 1998
150,000 6.88 February 14, 1999
150,000 6.00 February 21, 1999
-------
679,780
=======
In June 1993, 840,368 warrants were exercised at $3.41
per warrant to purchase 636,148 common shares for total
proceeds of $2,865,000.
(b) Stock Option Plans
The Company has a Stock Option Plan (the Plan) which,
as amended in March 1993, provides for the granting of
incentive stock options (ISOs) and nonincentive stock
options (non-ISOs), stock appreciation rights, and
supplemental stock bonuses. Under the Plan, 750,000
shares of common stock are reserved for options. The
Company also grants non-ISOs outside of the Plan.
Generally, the options granted under the Plan have an
exercise price equal to the fair market value on the
date of grant, become exercisable in three equal
installments beginning one year from the date of grant,
and expire five years from the date of grant.
The Nonemployee Director Stock Option Plan was adopted
by the Board of Directors in May 1991 and approved by
the shareholders in October 1991. The Plan authorizes
the grant of nonstatutory stock options to purchase an
aggregate of 300,000 shares of common stock to
nonemployee directors of the Company. Each nonemployee
director completing one fiscal year of service will
receive a five-year option to purchase 5,000 shares,
exercisable at the then current fair market value of
the Company's common stock.
At June 30, 1994, options issued to a consulting group
to purchase 6,667 shares of common stock at an exercise
price of $6.25 per share were
F-18<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
outstanding. A director of the Company is the chief
executive officer and a 50% owner of the consulting
group.
The following is a summary of option activity,
including options granted and outstanding outside of
the Plan, during the years ended June 30, 1994, 1993
and 1992:
<TABLE>
<CAPTION>
ISOs Non-ISOs Total
-------- ---------- ---------
<S> <C> <C> <C>
Outstanding at June 30, 1991 120,885 153,751 274,636
Granted 118,613 93,333 211,946
Canceled (35,864) -- (35,864)
Exercised (4,708) -- (4,708)
--------- --------- ---------
Outstanding at June 30, 1992 198,926 247,084 446,010
Granted 113,474 90,864 204,338
Canceled (11,702) (2,916) (14,618)
--------- --------- ---------
Outstanding at June 30, 1993 300,698 335,032 635,730
Granted 812,884 87,666 900,550
Canceled (413,879) (72,496) (486,375)
Exercised (62,093) -- (62,093)
--------- --------- ---------
Outstanding at June 30, 1994 637,610 350,202 987,812
========= ========= =========
Exercise prices $2.88 to 10.14 3.50 to 38.25
============= =============
</TABLE>
(c) Restricted Stock Plan
Effective December 3, 1992, the Company established a
restricted stock plan authorizing the issuance of up to
300,000 shares of common stock to employees. Under
this plan, participating employees elected to reduce
their compensation by 2% to 20% for the period from
January 9, 1993 to January 8, 1994. For each $3 by
which employees reduced their compensation, the Company
issued one share of stock and one option to purchase
one share of stock for $3. The Company issued 101,137
shares under this plan to employees and recorded
deferred compensation for the value of the options
issued and for the excess of the market value of the
shares issued on the effective date over the face value
of $3 per share. The shares
F-19<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
issued under the plan vest over one year; the
associated options vest over three years. The Company
recorded $218,000 and $191,000 of compensation expense
under the plan for the years ended June 30, 1994 and
1993, respectively. Remaining unamortized deferred
compensation was $12,000 and $216,000 as of June 30,
1994 and 1993, respectively.
In January 1994 employees who received shares under
this compensation plan were allowed to elect for the
Company to retain sufficient shares to provide for the
payment of their withholding taxes. The Company
withheld a number of shares equivalent in value to the
taxes owed from the shares issued to employees and
placed these shares in treasury stock.
(d) Nonemployee Compensation Plan
In February 1993, the Board of Directors adopted the
Air Methods Corporation Equity Compensation Plan for
Nonemployee Directors which was subsequently approved
by the Company's stockholders on March 12, 1993. At
June 30, 1994, 150,000 shares of common stock were
reserved for issuance under this compensation plan.
(e) Private Placement
In February 1993, the Company completed a private
placement of 2,386,839 shares of common stock at $3 per
share. In the year ended June 30, 1994, 1,176,086 of
the warrants issued in tandem with the shares of common
stock in this private offering were exercised to
purchase 1,272,626 shares of common stock.
In February 1994, the Company completed a private
placement of 1,011,190 shares of common stock at $5.66
per share with institutions outside of the United
States.
(f) Stock Repurchase Plan
On August 5, 1994, the Board of Directors approved a
stock repurchase plan authorizing the repurchase of up
to 10% of the outstanding shares of the Company's
common stock to be used to meet the Company's common
stock requirements for its employee benefits plans and
other purposes. Repurchases will be made from time to
time in the open market or in privately negotiated
transactions. The plan authorizes, but does not
require, the Company to repurchase shares. Actual
repurchases in any period are subject to approval
F-20<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
by the Board of Directors and will depend on market
conditions and other factors.
(8) Revenue
The Company has operating agreements and leases with various
hospitals and hospital systems to provide services and
aircraft for periods ranging from 1 to 7 years. The
agreements provide for revenue from monthly fixed fees and
flight fees based upon the utilization of aircraft in
providing emergency medical services. The fixed-fee portion
of the agreements and leases provide for the following
revenue for years subsequent to June 30, 1994 (amounts in
thousands):
Year ending June 30:
1995 $15,161
1996 8,264
1997 3,401
1998 2,211
1999 1,079
Thereafter 597
-------
$30,713
=======
(9) Income Taxes
For income tax purposes, the Company has net operating loss
carryforwards at June 30, 1994 of approximately $30,000,000
which will expire in varying amounts through the year 2008.
Alternative minimum tax (AMT) loss carryforwards available
to offset future AMT taxable income approximate net
operating loss carryforwards for regular federal income tax
purposes.
As a result of the acquisition of AMC and other issuances of
stock, the utilization of a portion the aforementioned net
operating loss carryforwards will be limited annually by the
provisions of Section 382 of the Internal Revenue Code. Any
future tax benefits recognized through utilization of AMC's
net operating loss carryforwards as of the acquisition date
will be applied to reduce the excess of cost over the fair
value of net assets acquired.
F-21<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred
tax liabilities at June 30, 1994 are as follows (amounts in
thousands):
Deferred tax assets:
Overhaul and parts replacement cost,
principally due to the accrual method $ 1,669
Assets held for sale, principally due to
differences in bases 424
Restructuring accrual 612
Net operating loss carryforwards 10,457
Other 220
-------
Total gross deferred tax assets 13,382
Less valuation allowance (9,280)
-------
Net deferred tax assets 4,102
-------
Deferred tax liabilities:
Property and equipment, principally due to
differences in bases and depreciation methods (3,983)
Other (119)
-------
Total deferred tax liability (4,102)
-------
Net deferred tax liability $ --
=======
(10) Retirement Plan
The Company has a defined contribution retirement plan
whereby qualified employees may contribute up to 12% of
their annual salaries. The Company contributes an amount
equal to 1% of the employees' annual salary and will match
20% of the employees' contributions up to 6% of their annual
salaries. Company contributions totaled approximately
$156,000, $126,000, and $41,000 for each of the years in the
three-year period ended June 30, 1994, respectively.
(11) Proposed Business Combinations
In January 1991, the Company entered into a definitive
agreement to purchase all of the outstanding stock of
Pioneer Pharmaceuticals, Inc. (PPI) from Essex Chemical
Corporation (a subsidiary of Dow Chemical) (Essex). On
July 1, 1991, the Company notified Essex of its termination
of the agreement to purchase PPI. During the year ended
June 30, 1992, the Company received $576,000 from Essex as a
settlement of certain disputes arising out of the purchase
agreement, which amount is included in other income in the
accompanying consolidated financial statements.
F-22<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
In April 1992, the Company agreed in principle to acquire
American Air Ambulance, Inc. (AAA). In October 1992, the
agreement was allowed to expire. Costs totaling $272,000
relating to the proposed acquisition were charged to other
expense in the third quarter of 1993.
(12) Related Party Transactions
During the year ended June 30, 1993, the Company contracted
with a placement agent, which is partially owned by one of
the Company's directors, to provide services relating to the
solicitation for the exercise of public warrants. Fees paid
to this agent were $917,000 for the fiscal year ended
June 30, 1993.
During the year ended June 30, 1994, the Company issued
five-year warrants to purchase 50,000 shares of common stock
to Americas Partners in connection with the guarantee of a
$2,500,000 note. The general partners of Americas Partners
are directors of the company. The note was paid in full in
the third quarter of 1994.
In February 1994 warrants to purchase an additional 150,000
shares were issued to Americas Partners in connection with a
commitment from Americas Partners to contribute funds to
cover start-up costs for a Joint Venture in Mexico. The
commitment was paid to the Company in full subsequent to
June 30, 1994. The exercise price of all of the Americas
Partners warrants is $6 per share.
(13) Commitments and Contingencies
The Company has outstanding letters of credit totaling
$50,000 which secure the payment of capital lease
obligations.
In November 1992, a former employee brought a lawsuit
against the Company which is pending in the U.S. District
Court for the District of Minnesota. This suit alleges that
the Company wrongfully discharged the employee and seeks
recovery of unspecified monetary damages for lost
compensation, emotional distress and other losses, costs,
attorneys' fees and related penalties. The Company intends
to vigorously defend this action and believes that it has
strong defenses. Management of the Company believes the
ultimate outcome of this action will not have a material
adverse impact on the Company's financial position or
results of operations.
As of June 30, 1994, the Company had entered into contracts
to acquire four helicopters from a single supplier prior to
December 1995.
F-23<PAGE>
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
(14) Subsequent Event (Unaudited)
On September 21, 1994, the Company entered into an agreement
to sell all of the outstanding shares of common stock of
Golden Eagle Charters, Inc. ("Golden Eagle"), the Company's
subsidiary, to a company in exchange for $10,000 and the
assumption of certain liabilities of Golden Eagle.
Losses from Golden Eagle's charter operations from the
date of acquisition (September 10, 1993) through June 30,
1994 totaled $677,000. As part of the restructuring plan,
the Company decided to discontinue its unprofitable charter
operations and to concentrate instead on its core air
medical business.
F-24<PAGE>
Schedule V
----------
AIR METHODS CORPORATION
AND SUBSIDIARY
PROPERTY AND EQUIPMENT
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
Balance at Other Balance
beginning Additions changes-add at end
Classification of period at cost Retirements (deduct)<F1> of period
- --------------------------------------- ------------ --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1992:
Flight and ground support equipment $ -- 19,951 (333) -- 19,618
Furniture and office equipment 395 394 (241) 32 580
Laboratory equipment 1,402 -- (1,370) (32) --
Leasehold improvements 311 -- (311) -- --
------ ------ ------- ------- ------
$ 2,108 20,345 (2,255) -- 20,198
====== ====== ======= ======= ======
Year ended June 30, 1993:
Flight and ground support equipment $19,618 13,303 (2,165) -- 30,756
Furniture and office equipment 580 343 -- -- 923
------ ------ ------- ------- ------
$20,198 13,646 (2,165) -- 31,679
====== ====== ======= ======= ======
Year ended June 30, 1994:
Flight and ground support equipment $30,756 13,061 (1,397) (6,188) 36,232
Furniture and office equipment 923 385 (140) (23) 1,145
------ ------ ------- ------- ------
$31,679 13,446 (1,537) (6,211) 37,377
====== ====== ======= ======= =======
____________________
<FN>
<F1> Amounts represent transfers between equipment classifications or the reclassification of an asset to assets held
for sale.
</FN>
See accompanying independent auditors' report.
</TABLE>
F-25<PAGE>
Schedule VI
-----------
AIR METHODS CORPORATION
AND SUBSIDIARY
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
Balance at Other Balance
beginning Additions changes-add at end
Description of period at cost Retirements (deduct)<F1> of period
- --------------------------------------- ------------ --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1992:
Flight and ground support equipment $ -- 620 (2) -- 618
Furniture and office equipment 225 84 (165) 20 164
Laboratory equipment 777 115 (872) (20) --
Leasehold improvements 302 5 (307) -- --
Allowance for restructuring expenses 686 -- (653) -- 33
----- ----- ------ ------ -----
$1,990 824 (1,999) -- 815
===== ===== ======= ====== =====
Year ended June 30, 1993:
Flight and ground support equipment $ 618 1,041 (51) -- 1,608
Furniture and office equipment 164 122 -- -- 286
Allowance for restructuring expenses 33 -- (33) -- --
----- ----- ------- ------ -----
$ 815 1,163 (84) -- 1,894
===== ===== ======= ====== =====
Year ended June 30, 1994:
Flight and ground support equipment $1,608 1,721 (106) (72) 3,151
Furniture and office equipment 286 166 (117) (2) 333
----- ----- ------- ------ -----
$1,894 1,887 (223) (74) 3,484
===== ===== ======= ====== =====
____________________
<FN>
<F1> Amounts represent transfers between equipment classifications or the reclassification of an asset to assets held
for sale.
</FN>
See accompanying independent auditors' report.
</TABLE>
F-26<PAGE>
Schedule X
----------
AIR METHODS CORPORATION
AND SUBSIDIARY
SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
JUNE 30, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs $6,203 $3,482 $2,313
====== ====== ======
Amortization of intangible assets and pre-operating
costs:
Excess of cost over the fair value of net assets
acquired $ 124 $ 92 $ 65
====== ====== ======
Pre-operating costs $ 127 $ 99 $ 99
====== ====== ======
Patent application costs and other $ 43 $ 84 $ 68
====== ====== ======
Advertising $ 24 $ 218 $ 311
====== ====== ======
Other captions have been omitted because the required information
is included in the consolidated financial statements or the
required caption is less than 1% of operating revenue.
See accompanying independent auditors' report.
</TABLE>
F-27
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors
Air Methods Corporation:
We consent to incorporation by reference in the registration
statements on Form S-8 (No. 33-24980, No. 33-46691, No. 33-55750,
No. 33-65370 and No. 33-75742) and Form S-3 (No. 33-59690 and
No. 33-75744) of Air Methods Corporations of our report dated
August 12, 1994 relating to the consolidated balance sheets of
Air Methods Corporation and subsidiary as of June 30, 1994 and
1993, and the related consolidated statements of operations,
stockholders' equity, and cash flows and related schedules for
each of the years in the three-year period ended June 30, 1994,
which report appears in the June 30, 1994 annual report on
Form 10-K/A-2 of Air Methods Corporation.
KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
June 5, 1995
