For the quarterly period ended           September 30, 1999              

OR

For the transition period from                 to             

Commission file number 0-16079

Registrant's Telephone Number, Including Area Code (303) 792-7400

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

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 number of shares of Common Stock, par value $.06, outstanding as of October 29, 1999, was 8,201,737.

(Continued)

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

The following discussion of the results of operations and financial condition should be read in conjunction with the Company's consolidated financial statements and notes thereto included in Item 1 of this report. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For this purpose, statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes", "expects", "anticipates", "plans", "estimates", and similar words and expressions are intended to identify such statements. These forward-looking statements include statements concerning the size, structure and growth of the Company's flight services and products markets, the continuation and/or renewal of flight service contracts, the acquisition of new and profitable Products Division contracts, flight volume for Mercy's operations, Year 2000 compliance issues, and other matters. The actual results that the Company achieves may differ materially from those discussed in such forward-looking statements due to the risks and uncertainties described below, as well as in the Company's annual report on Form 10-K.

The Company reported net income of $1,310,000 and $2,791,000 for the three and nine months ended September 30, 1999, respectively, compared to a net loss of $188,000 and net income of $1,012,000 for the three and nine months ended September 30, 1998, respectively. The improvement in operating results in 1999 is primarily attributable to increased flight volume for the Company's Flight Services Division and subsidiary Mercy Air Service and to cost containment of operating expenses.

Flight revenue increased $2,162,000, or 18.9%, and $5,072,000, or 15.7%, for the three and nine months ended September 30, 1999, respectively, compared to 1998. Flight revenue for the Flight Services Division increased 11.7% and 9.0% for the three and nine months ended September 30, 1999, respectively, primarily due to revenue of $660,000 and $1,887,000, respectively, from 3 new or expanded contracts and to annual price increases in contracts with hospital clients. Flight revenue for Mercy increased 31.4% and 28.5% in the three and nine months ended September 30, 1999, respectively, compared to 1998 due to the addition of a new bases in San Diego and Las Vegas and to the purchase of the business operations of another air ambulance service provider in San Diego in March 1999. Transport volume also increased 13.0% and 10.0%, excluding the effect of the new bases, for the three and nine months ended September 30, 1999, respectively, as Mercy achieved all-time record high patient transports in July and August 1999.

Sales of medical interiors and products decreased $157,000, or 16.6%, for the quarter ended September 30, 1999, but increased $1,100,000, or 43.7%, for the nine-month period. Significant projects in 1999 included design and manufacture of a Spinal Cord Injury Transport System (SCITS) for the U.S. Air Force and manufacture of multi-functional interiors for six Bell helicopters and one MD902 helicopter. The Company also began production of six Multi-Mission Medevac Systems for the U.S. Army UH-60Q helicopter in the third quarter of 1999. Revenue by product line for the quarter and nine months ended September 30, 1999, respectively, was as follows:

• $291,000 and $2,329,000 - manufacture and installation of modular, multi-functional interiors
• $112,000 and $112,000 - design and manufacture of multi-mission interiors
• $387,000 and $1,176,000 - design and manufacture of other aerospace products

Significant projects in 1998 included production of electrical system components for the U. S. Air Force HH-60G helicopter, manufacture of multi-functional interiors for three Bell helicopters, and design and integration of avionics and communications systems for a special-use police helicopter. Revenue recognized in the three and nine months ended September 30, 1998, respectively, consisted of the following:

• $590,000 and $1,155,000 - manufacture and installation of modular, multi-functional interiors
• $0 and $90,000 - design and manufacture of multi-mission interiors
• $357,000 and $1,272,000 - design and manufacture of other aerospace products

Cost of medical interiors and products increased by 26.8% and 30.0% for the three and nine months ended September 30, 1999, as compared to the previous year. The increase for the nine-month period is consistent with the increase in related product revenue over the same period. The increase during the third quarter of 1999 despite a decrease in related revenue was driven primarily by two factors. Cost of medical interiors and products includes fixed overhead expenses for the Products Division which do not decrease with a decrease in sales. In addition, the average net margin earned on projects during the third quarter of 1999 was 10% compared to 35% in the third quarter of 1998.

Parts and maintenance sales and services increased 73.6% and 28.7% for the three and nine months ended September 30, 1999, compared to the same periods in 1998. Aircraft parts sold to the Company's Brazilian franchisee totaled approximately $150,000 in 1999 compared to $67,000 in 1998. The increases in cost of parts and maintenance sales and services for the three and nine months reflect the greater volume of sales.

In the nine months ended September 30, 1998, the Company recognized net gains totaling $878,000 on the disposition of assets, including $870,000 from an insurance settlement for one of the Company's helicopters destroyed in an accident in January 1998.

Flight center costs, consisting primarily of pilot and mechanics salaries and fringe benefits, increased 17.6% and 17.2% for the three and nine months ended September 30, 1999, respectively, compared to 1998. Flight center costs for the Flight Services Division increased 15.5% and 9.5% for the three and nine months, respectively, primarily due to the addition of 2 new hospital contracts and increases in salaries for merit pay raises. Flight center costs related to Mercy's operations increased 21.8% and 35.1% in the three and nine months ended September 30, 1999, respectively, primarily due to costs of approximately $128,000 and $850,000, respectively, for new bases of operation established in 1998.

Aircraft operating expenses decreased 18.2% and 4.1% for the quarter and nine months ended September 30, 1999, respectively, in comparison to the three and nine months ended September 30, 1998. 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. The impact of adding of five helicopters and two airplanes to the fleet was more than offset by lower aircraft maintenance costs for both the Flight Services Division and Mercy during the three and nine months ended September 30, 1999.

Aircraft rental expense increased 7.8% and 9.5% for the three and nine months ended September 30, 1999, compared to the previous year. For the nine months ended September 30, 1999, lease expense related to four new aircraft for the Flight Services Division totaled $508,000. The impact of adding these aircraft was offset in part during the quarter and nine months by refinance or expiration of four lease agreements subsequent to September 30, 1998.

Depreciation and amortization expense increased 23.0% and 20.3% for the three and nine months ended September 30, 1999, respectively, reflecting the addition of a Bell 222 helicopter, as well as three new medical interiors, to the Flight Services Division's fleet of owned aircraft. The Company also completed the renovation of its corporate headquarters facility in Colorado and Mercy's headquarters in California in early 1999, increasing depreciable leasehold improvements by approximately $635,000.

Bad debt expense is estimated during the period the related services are performed based on historical experience for Mercy's operations. The provision is adjusted as required based on actual collections in subsequent periods. The increases of 26.3% and 46.8% for the three and nine months ended September 30, 1999, respectively, compared to 1998 reflect increases in flight revenue for Mercy. In addition, the Company achieved better than anticipated collection rates during the first six months of 1998. Bad debt expense for the three and nine months ended September 30, 1999, was approximately 21% and 19%, respectively, of Mercy's net flight revenue, consistent with historical levels.

General and administrative expenses remained relatively constant for the three and nine months ended September 30, 1999, compared to 1998, despite the revenue growth over the same period. Most of the general and administrative costs are fixed in nature and do not vary with revenue volume.

In the nine months ended September 30, 1999, the Company recognized an income tax benefit of $96,000 from the recognition of a portion of its deferred tax asset as a result of current period taxable losses. A deferred tax liability was generated by a change in tax accounting method for Mercy's trade receivables from cash to accrual basis when the Company acquired Mercy in 1997. The taxable income created by this change was unable to be offset by the Company's net operating loss carryforwards but could be offset by current period taxable losses.

Cash and cash equivalents increased from $2,407,000 at December 31, 1998, to $2,554,000 at September 30, 1999. Net working capital improved from $962,000 to $3,786,000 over the same period. The increase in cash flows from operations resulted primarily from the Company's revenue growth and the completion of the Company's investment activities for expansion of operations in each operating segment. The change in the working capital position is primarily due to increased trade receivables. Mercy's trade receivables grew 32.0% from December 31, 1998, to September 30, 1999, driven mainly by the expansion of operations in San Diego in March 1999. The increase in receivables also mirrors the 15.0% increase in the Company's total revenue for the nine-month period ended September 30, 1999.

The statements contained in this Outlook are based on current expectations. These statements are forward looking, and actual results may differ materially.

The Flight Services Division began operations for a new hospital customer in Nebraska in September 1999, expanding its operations to 17 states. The Company does not expect additional significant start up costs associated with the new contract in the fourth quarter. The Company expects 1999 flight activity for current hospital contracts to remain consistent with historical levels. No contracts are due for renewal during the fourth quarter of 1999.

The Company expects flight volume for Mercy's operations to be consistent with historical levels during the remainder of 1999 with increases resulting from a full year of operations at its new location in San Diego and from the acquisition of another air ambulance provider, also in San Diego.

In the fourth quarter of 1999, the Products Division expects to complete the manufacture of a multi-functional interior for one of the Company's hospital customers and to continue production of four SCITS test units for developmental testing and evaluation for the U.S. Air Force. Static, vibration, and environmental testing of these units is expected to be complete by the second quarter of 2000. The Company is also under contract to produce 10 additional units for operational testing and evaluation in the year 2000. The long-range Air Force plan includes between 75 and 250 SCITS units over the next 5 years. The production contract for SCITS has not yet been awarded and there is no assurance that the contract will be awarded in 1999 or in future periods.

In October 1999 the Products Division was awarded a contract for six UH-60Q Multi-Mission Medevac Systems, with an option for five additional systems, from Sikorsky Aircraft Company, the prime contractor with the Department of Defense. Production of the units will continue throughout the fourth quarter of 1999 and the first half of 2000, with delivery scheduled in the second quarter of 2000. The option for the additional five units has not yet been exercised, and there is no assurance that it will be exercised in 1999 or future periods.

There can be no assurance that the Company will continue to renew operating agreements for the Flight Services Division, generate new profitable contracts for the Products Division, or expand flight volume for Mercy. However, based on the anticipated level of flight activity for its hospital customers and Mercy and the backlog of projects for the Products Division, the Company expects to generate sufficient cash flow to meet its operational needs throughout 1999.

The Year 2000 issue ("Y2K") results from computer programs being written using two digits rather than four to designate a year. Date-sensitive systems may fail to process dates correctly after December 31, 1999, possibly resulting in major system failure or miscalculations.

The Company initiated assessment of computer systems in 1996 and anticipates minimal need for new equipment beyond the routine system upgrade schedule. The Company has formed a corporate-wide Y2K project team led by the information services manager and supervised by the Chief Financial Officer to ensure an uninterrupted transition to the year 2000 by assessing, modifying, and testing information technology (IT) and non-IT systems. IT systems include the Company's software and hardware; non-IT systems include embedded chip technology in various manufacturing equipment, avionics systems, utilities, and communication systems. The team has categorized the Company's systems into mission critical and non-critical systems based on the expected impact of failure or malfunction on the Company's operations. A comprehensive inventory and testing of IT systems identified workstations which required upgrades or replacement to become Y2K compliant. Replacement or upgrade of all mission critical workstations has been completed. All other workstations are expected to be replaced by November 1999.

The Company uses primarily software programs written and updated by outside firms, and Y2K upgrades are covered under standard maintenance contracts. Vendor representations of Y2K compliance have been received for all mission-critical software except one system as of September 30, 1999. The vendor is expected to complete modifications to that system before the end of November 1999.

The Company has been in contact with the primary manufacturers of its airframe and avionics equipment to determine the impact of imbedded chip technology on the Company's flight systems. The airframe manufacturer has conducted tests of its products and has not identified significant Y2K issues. The avionics manufacturer has identified potential problems with certain communications equipment and the expected dates those problems may be experienced in its equipment. Because none of the potential problems reported by the manufacturer relate to models of equipment currently used by the Company, these communications indicate that imbedded chip technology will not cause the Company's fleet to be grounded as a result of Y2K issues. As a precautionary measure, the Company may limit Instrument Flight Rules (IFR) operations on the dates identified by the manufacturer. Although the Company has evaluated its airframe and avionics equipment based on vendor communications, there can be no assurance that all Y2K issues have been identified or that the equipment will perform without interruption in the year 2000.

Because most of the software updates related to Y2K compliance have been covered by the Company's existing maintenance contracts, the amounts expensed in the first nine months of 1999 were immaterial. Total capitalized costs associated with hardware and software upgrades were approximately $92,000 for the nine months ended September 30, 1999, including costs associated with new systems which will be Year 2000 compliant even though such compliance was not the primary reason for installation. The Company has not used and does not plan to employ independent contractors to assess or test Y2K compliance. The process for tracking internal costs, primarily salaries and benefits for employees dedicating time to Y2K compliance issues, does not capture all of the costs of Y2K compliance. The Company estimates the cost of replacing or upgrading remaining non-compliant systems to range from $50,000 to $75,000. Management expects, but makes no assurance, that changes required for Y2K will not have a material adverse effect on its financial position or results of operations. The Company expects to fund the cost of Y2K compliance through operating cash flows or equipment financing. The estimates given above are subject to change.

The Company presently believes that planned hardware and software upgrades will prevent significant operational problems for information systems resulting from Year 2000 issues. However, if such upgrades are not timely or properly implemented, the Year 2000 problem could affect the ability of the Company to maintain its fleet, manufacture products, procure materials, manage patient billings and collections, or perform other functions, which may have a material adverse effect on the Company's financial condition and results of operations.

Additionally, failure of third party suppliers or customers to become Year 2000 compliant on a timely basis could create a need to change suppliers or otherwise impair the Company's ability to procure spare parts, materials, or services or to receive timely payment of accounts receivable, any of which could have a material adverse effect on the Company's financial condition and results of operations.

In management's opinion, the most reasonably likely worst case scenario for failure to achieve Year 2000 compliance is that a limited number of avionics systems may unexpectedly fail, requiring the Company to operate under only Visual Flight Rules (VFR) for a short time. The Company does not believe that malfunction of these avionics systems will result in mechanical failure of the aircraft or grounding of the fleet. Failure by the Company or certain of its vendors to resolve Y2K compliance issues in advance could result in disruption of operations. However, while no assurance can be given, management believes that efforts to test and address Y2K compliance issues will likely be successful and that the worst case scenario discussed above is unlikely to significantly disrupt operations.

In the event of the most reasonably likely worst case scenario described above, the Company plans to operate its fleet of aircraft under Visual Flight Rules until the issues have been resolved. In addition, the Company has established back-up and recovery procedures for computer systems and data, independent of Y2K concerns.

The Company can give no assurance that it can identify and correct all Year 2000 issues which may affect operations. In addition, the Company can give no assurance that vendors, customers, public utilities, governmental agencies, or other service providers will not experience Year 2000 problems which may have a material adverse impact on the Company's operations. Forward-looking statements contained in the Year 2000 Update should be read in conjunction with the Company's cautionary statement regarding forward-looking statements contained on page 7 of this report, which is provided under the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995.

Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. The Company does not use financial instruments to any degree to manage these risks and does not hold or issue financial instruments for trading purposes. All of the Company's product sales, international franchise revenue, and related receivables are payable in U.S. dollars. The Company is subject to interest rate risk on its debt obligations and notes receivable, most of which have fixed interest rates. Interest rates on these instruments approximate current market rates as of September 30, 1999.

     Not Applicable

     Not Applicable

     Not Applicable

      The 1999 Annual Meeting of Stockholders was held on August 11, 1999. At the meeting, Messrs. Samuel H. Gray, Roy L. Morgan, and Morad Tahbaz were elected to Class II directorships. Voting results were as follows:

  (a)    Exhibits

       27.1    Financial Data Schedule

  (b)    Reports on Form 8-K

           None

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

Date: November 9, 1999