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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-------------------

FORM 10-Q


(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002
---------------------------------

OR



[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
-------------- ---------------

Commission file number 0-16079
-------


AIR METHODS CORPORATION
-------------------------
(Exact name of Registrant as Specified in Its Charter)


Delaware 84-0915893
-------- -------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)



7301 South Peoria, Englewood, Colorado 80112
- ------------------------------------------ ----------
(Address of Principal Executive Offices) (Zip Code)


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 November
8, 2002, was 9,462,179.





TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated Balance Sheets - September 30, 2002 and December 31, 2001 1

Consolidated Statements of Operations for the three and nine months ended September 30,
2002 and 2001 3

Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and
2001 4

Notes to Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 11

Item 3. Quantitative and Qualitative Disclosures about Market Risk 18

Item 4. Controls and Procedures 18


PART II. OTHER INFORMATION

Item 1. Legal Proceedings 19

Item 2. Changes in Securities 19

Item 3. Defaults upon Senior Securities 19

Item 4. Submission of Matters to a Vote of Security Holders 19

Item 5. Other Information 19

Item 6. Exhibits and Reports on Form 8-K 19


SIGNATURES 20






PART I: FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

AIR METHODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)


SEPTEMBER 30, DECEMBER 31,
2002 2001
------------------------------

Assets
- ------

Current assets:
Cash and cash equivalents $ 3,606 2,838
Current installments of notes receivable 40 120
Receivables:
Trade 34,669 22,555
Less allowance for doubtful accounts (10,398) (5,673)
------------------------------
24,271 16,882

Insurance proceeds 266 471
Other 904 851
------------------------------
Total receivables 25,441 18,204
------------------------------
Inventories 4,165 3,427
Work-in-process on medical interiors and products contracts 42 253
Costs and estimated earnings in excess of billings on
uncompleted contracts 866 797
Deferred tax asset 5,537 3,397
Assets held for sale 416 --
Prepaid expenses and other 1,532 1,083
------------------------------

Total current assets 41,645 30,119
------------------------------
Equipment and leasehold improvements:
Flight and ground support equipment 74,936 71,392
Furniture and office equipment 6,337 5,841
------------------------------
81,273 77,233
Less accumulated depreciation and amortization (34,229) (30,561)
------------------------------

Net equipment and leasehold improvements 47,044 46,672
------------------------------

Excess of cost over the fair value of net assets acquired 2,974 2,974
Notes receivable, less current installments 113 472
Other assets, net of accumulated amortization of $585 and $447 at
September 30, 2002 and December 31, 2001, respectively 6,214 5,320
------------------------------

Total assets $ 97,990 85,557
==============================


See accompanying notes to consolidated financial statements. (Continued)


1



AIR METHODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)


SEPTEMBER 30, DECEMBER 31,
2002 2001
------------------------------

Liabilities and Stockholders' Equity
- ------------------------------------

Current liabilities:
Current installments of long-term debt $ 3,384 3,737
Current installments of obligations under capital leases 379 351
Accounts payable 3,190 1,925
Accrued overhaul and parts replacement costs 3,963 3,407
Deferred revenue 1,442 1,158
Accrued wages and compensated absences 1,541 2,037
Other accrued liabilities 1,388 2,189
------------------------------
Total current liabilities 15,287 14,804

Long-term debt, less current installments 15,893 17,335
Obligations under capital leases, less current installments 2,646 2,882
Accrued overhaul and parts replacement costs 13,010 10,377
Deferred income taxes 6,631 2,178
Other liabilities 1,917 1,438
------------------------------

Total liabilities 55,384 49,014
------------------------------
Stockholders' equity (note 3):
Preferred stock, $1 par value. Authorized 5,000,000 shares, none
issued -- --
Common stock, $.06 par value. Authorized 16,000,000 shares;
issued 9,469,379 and 8,619,026 shares at September 30, 2002 and
December 31, 2001, respectively 568 517
Additional paid-in capital 52,617 50,665
Accumulated deficit (10,578) (14,637)
Treasury stock at par, 10,000 and 37,005 common shares at
September 30, 2002 and December 31, 2001, respectively (1) (2)
------------------------------
Total stockholders' equity 42,606 36,543
------------------------------
Total liabilities and stockholders' equity $ 97,990 85,557
==============================


See accompanying notes to consolidated financial statements.


2



AIR METHODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)


THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-----------------------------------------------
2002 2001 2002 2001
-----------------------------------------------

Revenue:
Flight revenue $ 26,577 21,734 76,892 60,479
Sales of medical interiors and products 1,775 1,623 5,002 5,609
Parts and maintenance sales and services 556 588 1,093 1,291
Gain on disposition of assets, net -- -- -- 110
-----------------------------------------------
28,908 23,945 82,987 67,489
-----------------------------------------------
Operating expenses:
Flight centers 9,132 7,355 25,586 20,818
Aircraft operations 6,780 5,227 18,931 14,958
Aircraft rental 1,294 951 3,652 2,892
Medical interiors and products sold 1,267 1,163 3,444 4,042
Cost of parts and maintenance sales and services 512 533 1,005 1,148
Depreciation and amortization 1,436 1,291 4,221 3,936
Bad debt expense 3,865 2,493 10,588 6,913
Loss on disposition of assets, net 65 -- 51 --
General and administrative 2,609 2,265 7,685 6,999
-----------------------------------------------
26,960 21,278 75,163 61,706
-----------------------------------------------
Operating income 1,948 2,667 7,824 5,783

Other income (expense):
Interest expense (425) (475) (1,287) (1,498)
Interest income 10 11 26 93
Other, net 32 19 89 56
-----------------------------------------------
Income before income taxes 1,565 2,222 6,652 4,434

Income tax expense 610 -- 2,593 --
-----------------------------------------------
Net income $ 955 2,222 4,059 4,434
===============================================
Basic income per common share $ .10 .26 .45 .53
===============================================
Diluted income per common share $ .10 .26 .44 .52
===============================================
Weighted average number of common shares outstanding
- - basic 9,440,442 8,409,297 9,090,782 8,391,852
===============================================
Weighted average number of common shares outstanding
- - diluted 9,564,604 8,693,832 9,250,558 8,605,986
===============================================


See accompanying notes to consolidated financial statements.


3



AIR METHODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)


NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------
2002 2001
------------------------------------

Cash flows from operating activities:
Net income $ 4,059 4,434
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization expense 4,221 3,936
Vesting of common stock options issued for services 40 45
Bad debt expense 10,588 6,913
Deferred income tax expense 2,313 --
Loss (gain) on retirement and sale of equipment, net 51 (110)
Changes in assets and liabilities:
Increase in prepaid expenses and other current assets (449) (1,413)
Increase in receivables (17,825) (7,538)
Increase in parts inventories (738) (184)
Decrease (increase) in work-in-process on medical interiors and costs in
excess of billings 142 (1,114)
Decrease in accounts payable and other accrued liabilities (32) (1,376)
Increase (decrease) in deferred revenue and other liabilities 763 (875)
Increase in accrued overhaul and parts replacement costs 2,193 276
------------------------------------
Net cash provided by operating activities 5,326 2,994
------------------------------------
Cash flows from investing activities:
Acquisition of equipment and leasehold improvements (2,782) (2,960)
Proceeds from disposition and sale of equipment 818 207
Increase in notes receivable and other assets (1,198) (354)
------------------------------------
Net cash used by investing activities (3,162) (3,107)
------------------------------------


See accompanying notes to consolidated financial statements. (Continued)


4



AIR METHODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(AMOUNTS IN THOUSANDS)
(UNAUDITED)


NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2002 2001
-------------------------------

Cash flows from financing activities:
Proceeds from issuance of common stock, net $ 3,035 371
Payments for purchases of common stock (1,071) (292)
Net payments under short-term notes payable -- (636)
Payments of long-term debt (3,085) (2,653)
Payments of capital lease obligations (275) (257)
-------------------------------
Net cash used by financing activities (1,396) (3,467)
-------------------------------

Increase (decrease) in cash and cash equivalents 768 (3,580)

Cash and cash equivalents at beginning of period 2,838 4,107
-------------------------------
Cash and cash equivalents at end of period $ 3,606 527
===============================


Non-cash investing and financing activities:

In the nine months ended September 30, 2002, the Company entered into a note
payable totaling $1,290 to finance the buyout of a helicopter previously under
an operating lease and into a capital lease obligation of $67 to finance the
acquisition of communications equipment.

In the nine months ended September 30, 2002, the Company repossessed an aircraft
previously sold to a former franchisee in Brazil. The $418 balance of the
Company's investment in the aircraft, consisting primarily of a note receivable
from the franchisee, was reclassified in the consolidated financial statements
as an asset held for sale.

In the nine months ended September 30, 2001, the Company recognized a total
liability of $1,500 as additional consideration for the purchase of ARCH Air
Medical Service, Inc. (ARCH). During the second quarter of 2001, the Company
determined that the payment of this consideration, which was based on the cash
flows of post-acquisition ARCH operations, was reasonably assured based on
receivable collection trends to date.


See accompanying notes to consolidated financial statements.


5

AIR METHODS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION
---------------------

In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the consolidated financial
statements for the respective periods. Interim results are not necessarily
indicative of results for a full year. The consolidated financial
statements should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto for the year ended
December 31, 2001.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. The Company
considers its critical accounting policies involving more significant
judgments and estimates to be those related to revenue recognition,
uncollectible receivables, deferred income taxes, and aircraft overhaul
costs. Actual results could differ from those estimates.

(2) INCOME PER SHARE
------------------

Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing net income by all common shares
and dilutive potential common shares outstanding during the period.

The reconciliation of basic to diluted weighted average common shares
outstanding is as follows:



2002 2001
--------------------

FOR QUARTER ENDED SEPTEMBER 30:
Weighted average number of common shares outstanding - basic 9,440,442 8,409,297
Dilutive effect of:
Common stock options 110,662 249,397
Common stock warrants 13,500 35,138
--------------------
Weighted average number of common shares outstanding - diluted 9,564,604 8,693,832
====================

FOR NINE MONTHS ENDED SEPTEMBER 30:
Weighted average number of common shares outstanding - basic 9,090,782 8,391,852
Dilutive effect of:
Common stock options 145,673 187,666
Common stock warrants 14,103 26,468
--------------------
Weighted average number of common shares outstanding - diluted 9,250,558 8,605,986
====================


Common stock options totaling 330,000 and 14,987 were not included in the
diluted income per share calculation for the quarters ended September 30,
2002 and 2001, respectively, because their effect would have been
anti-dilutive. Common stock options totaling 280,000 and 49,987 were not
included in the diluted income per share calculation for the nine months
ended September 30, 2002 and 2001, respectively, because their effect would
have been anti-dilutive.


6

(3) STOCKHOLDERS' EQUITY
--------------------

Changes in stockholders' equity for the nine months ended September 30,
2002, consisted of the following (amounts in thousands, except share
amounts):



Shares
Outstanding Amount
----------------------

Balances at January 1, 2002 8,582,021 $36,543

Issuance of common shares for options exercised 1,022,452 3,035
Purchase of treasury shares (145,094) (1,071)
Vesting of common stock options for services rendered -- 40
Net income -- 4,059
----------------------

Balances at September 30, 2002 9,459,379 $42,606
======================


(4) INCOME TAXES
-------------

The Company recorded income tax expense of $2,593,000 at an effective rate
of 39% in the nine months ended September 30, 2002, and no tax provision in
the nine months ended September 30, 2001. During 2001, income tax expense,
as calculated at the statutory rate including estimated state income tax
effect, was offset by recognition of deferred tax assets for which a
valuation allowance had previously been provided.

(5) NEW ACCOUNTING PRONOUNCEMENTS
-------------------------------

In June 2001 the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 142, Accounting for Goodwill and Intangible Assets (Statement
142). Under Statement 142, goodwill and certain identifiable intangible
assets are not amortized, but instead are reviewed for impairment at least
annually in accordance with the provisions of the statement. The Company
adopted Statement 142 effective January 1, 2002. As required by Statement
142, the standard has not been retroactively applied to the results for the
period prior to adoption. The following table reconciles net income for the
three and nine months ended September 30, 2001, to pro forma net income
excluding the amortization of excess of cost over the fair value of net
assets acquired (amounts in thousands, except share and per share amounts).



Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001

Reported net income $ 2,222 4,434
Amortization of excess of costs over
net assets acquired 70 165
------------------- ------------------
Adjusted net income $ 2,292 4,599
=================== ==================

Basic income per common share $ .27 .55
=================== ==================
Diluted income per common share $ .26 .53
=================== ==================

Weighted average number of common
shares outstanding - basic 8,409,297 8,391,852
=================== ==================
Weighted average number of common
shares outstanding - diluted 8,693,832 8,605,986
=================== ==================



7

(5) NEW ACCOUNTING PRONOUNCEMENTS, CONTINUED
-------------------------------------------

In April 2002 the FASB issued FASB Statement No. 145 (Statement 145),
Rescission of FASB Statements No. 4, 44, and 64, amendment of FASB
Statement No. 13, and Technical Corrections. Statement 145 updates,
clarifies and simplifies existing accounting pronouncements, including the
rescission of Statement 4, which required all gains and losses from
extinguishments of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. As a result the
criteria in Opinion 30 will now be used to classify those gains and losses.
The Company does not anticipate a material impact on its financial
condition or results of operations as a result of implementing this
standard.

In June 2002 the FASB issued FASB Statement No. 146 (Statement 146),
Accounting for Costs Associated with Exit or Disposal Activities. Statement
146 addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force Issue
No. 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The principal difference between Statement 146 and Issue
No. 94-3 relates to the requirements for recognition of a liability for a
cost associated with an exit or disposal activity. Statement 146 requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under Issue No. 94-3, a
liability for an exit cost (as defined in the issue) was recognized at the
date of an entity's commitment to an exit plan. Statement 146 also
establishes that fair value is the objective for initial measurement of the
liability. Statement 146 is effective for exit or disposal activities that
are initiated after December 31, 2002, and the Company does not expect the
adoption to have a material impact on its results of operations or
financial position.

(6) SUBSEQUENT EVENT
-----------------

On October 16, 2002, the Company acquired 100% of the membership interest
of Rocky Mountain Holdings, L.L.C. (RMH), a Delaware limited liability
company, from Rocky Mountain Holdings, Inc. and AMC Helicopters, Inc., for
$33.6 million. RMH's long-term debt and outstanding balances on RMH's line
of credit totaled $36.2 million as of September 30, 2002. Except for
approximately $1.6 million of RMH debt that was repaid in connection with
the acquisition, the long-term debt remains outstanding, either as debt of
RMH or as debt assumed or replaced by the Company. The $5 million
outstanding balance on the RMH line of credit was rolled into the new
revolving credit facility described below. The purchase price is subject to
changes in net equity from September 30, 2002, until the date of closing,
to be determined by independent audit within 60 days of the closing date.

The purchase price was negotiated by the Company and the sellers, and
includes an earn-out provision under which the sellers may receive up to
$2.6 million of additional consideration over the next nine years based on
actual collections against certain receivables. The Company incurred costs
and fees of approximately $3.6 million in connection with the acquisition
and related financing arrangements.

The purchase price was financed in part through the issuance of $23 million
in subordinated notes to Prudential Capital Partners, L.P. (PCP) and an
affiliate of PCP. The notes are unsecured and provide for quarterly payment
of interest only at 12%, with all principal due in October 2007. As
additional interest on the notes, the Company also issued transferable
warrants to PCP to purchase 443,224 shares of Air Methods Common Stock with
an exercise price of $.06 per share, exercisable through October 2008.


8

(6) SUBSEQUENT EVENT, CONTINUED
-----------------------------

To finance the remainder of the purchase price and related closing costs
and to provide working capital and letter of credit availability for the
combined entities, the Company entered into a $35 million revolving credit
facility with certain lenders, with PNC Bank, National Association (PNC)
acting as agent. Borrowings under the credit facility are secured by
substantially all of the Company's non-aircraft assets, including accounts
receivable, inventory, equipment and general intangibles. The facility
matures in October 2006. Indebtedness under the credit facility will bear
interest, at the Company's option, at either (i) the higher of the federal
funds rate plus 0.50% or the prime rate as announced by PNC plus an
applicable margin ranging from 0 to 0.75% or (ii) at a rate equal to LIBOR
plus an applicable margin ranging from 1.75% to 3.00%. The applicable
margin in each case is based upon the ratio of senior debt (as defined in
the credit facility) to EBITDA (as defined in the credit facility) for the
four most recently completed fiscal quarters. The subordinated notes and
revolving credit facility into which the Company entered to finance the
acquisition both contain certain financial ratios and various other
covenants.

(7) BUSINESS SEGMENT INFORMATION
------------------------------

Summarized financial information for the Company's operating segments is
shown in the following table (amounts in thousands). Amounts in the
"Corporate Activities" column represent corporate headquarters expenses,
income tax provision, and results of insignificant operations. The Company
does not allocate assets between HBM, Products, and Corporate Activities
for internal reporting and performance evaluation purposes. Operating
segments and their principal products or services are as follows:

- Community-Based Model (CBM) - provides air medical transportation
services to the general population as an independent service in
southern California, Nevada, Missouri, and Illinois. Services include
aircraft operation and maintenance, medical care, dispatch and
communications, and medical billing and collection.
- Hospital-Based Model (HBM) - provides air medical transportation
services to hospitals throughout the U.S. under exclusive operating
agreements. Services include aircraft operation and maintenance.
- Products Division - designs, manufactures, and installs aircraft
medical interiors and other aerospace products for domestic and
international customers.


9



Products Corporate Intersegment
FOR QUARTER ENDED SEPTEMBER 30: CBM HBM Division Activities Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------

2002
External revenue $15,957 11,176 1,775 -- -- 28,908
Intersegment revenue -- -- 148 -- (148) --
----------------------------------------------------------------------
Total revenue 15,957 11,176 1,923 -- (148) 28,908
----------------------------------------------------------------------
Operating expenses 9,967 9,333 1,426 1,028 (127) 21,627
Depreciation & amortization 638 734 30 34 -- 1,436
Bad debt expense 3,865 -- -- -- -- 3,865
Interest expense 240 185 -- -- -- 425
Interest income (1) (4) -- (5) -- (10)
Income tax expense -- -- -- 610 -- 610
----------------------------------------------------------------------
Segment net income (loss) $ 1,248 928 467 (1,667) (21) 955
======================================================================

Total assets $42,338 N/A N/A 57,816 (2,164) 97,990
======================================================================
2001
External revenue $12,303 10,078 1,564 -- -- 23,945
Intersegment revenue -- 3 780 -- (783) --
----------------------------------------------------------------------
Total revenue 12,303 10,081 2,344 -- (783) 23,945
----------------------------------------------------------------------

Operating expenses 7,253 8,341 1,849 723 (691) 17,475
Depreciation & amortization 453 709 50 79 -- 1,291
Bad debt expense 2,493 -- -- -- -- 2,493
Interest expense 275 196 -- 4 -- 475
Interest income -- (4) -- (7) -- (11)
----------------------------------------------------------------------
Segment net income (loss) $ 1,829 839 445 (799) (92) 2,222
=====================================================================

Total assets $31,146 N/A N/A 47,481 (2,164) 76,463
=====================================================================

FOR NINE MONTHS ENDED SEPTEMBER 30:
2002
External revenue $46,070 31,915 5,002 -- -- 82,987
Intersegment revenue -- -- 438 -- (438) --
----------------------------------------------------------------------
Total revenue 46,070 31,915 5,440 -- (438) 82,987
----------------------------------------------------------------------

Operating expenses 27,423 26,381 4,053 2,806 (398) 60,265
Depreciation & amortization 1,843 2,150 104 124 -- 4,221
Bad debt expense 10,588 -- -- -- -- 10,588
Interest expense 736 551 -- -- -- 1,287
Interest income (2) (9) -- (15) -- (26)
Income tax expense -- -- -- 2,593 -- 2,593
----------------------------------------------------------------------
Segment net income (loss) $ 5,482 2,842 1,283 (5,508) (40) 4,059
=====================================================================
Total assets $42,338 N/A N/A 57,816 (2,164) 97,990
=====================================================================

2001
External revenue $34,002 28,494 4,993 -- -- 67,489
Intersegment revenue -- 16 2,165 -- (2,181) --
----------------------------------------------------------------------
Total revenue 34,002 28,510 7,158 -- (2,181) 67,489
----------------------------------------------------------------------

Operating expenses 21,284 23,460 5,603 2,343 (1,889) 50,801
Depreciation & amortization 1,370 2,185 148 233 -- 3,936
Bad debt expense 6,913 -- -- -- -- 6,913
Interest expense 852 637 -- 9 -- 1,498
Interest income (3) (41) -- (49) -- (93)
----------------------------------------------------------------------
Segment net income (loss) $ 3,586 2,269 1,407 (2,536) (292) 4,434
=====================================================================

Total assets $31,146 N/A N/A 47,481 (2,164) 76,463
=====================================================================



10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

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,
including the information incorporated by reference herein, 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 air medical services and
products markets, the integration of RMH, the continuation and/or renewal of HBM
contracts, the acquisition of new and profitable Products Division contracts,
the volume of CBM operations, 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 undertakes
no obligation to update any forward-looking statements.

RESULTS OF OPERATIONS

The Company reported net income of $955,000 and $4,059,000 for the three and
nine months ended September 30, 2002, respectively, compared to net income of
$2,222,000 and $4,434,000 for the three and nine months ended September 30,
2001, respectively. Net income for the quarter and nine months ended September
30, 2002, reflected income tax expense at an effective rate of 39%. For the
quarter and nine months ended September 30, 2001, income tax expense, as
calculated at the statutory rate including estimated state income tax effect,
was offset by recognition of deferred tax assets for which a valuation allowance
had previously been provided.

Flight revenue increased $4,843,000, or 22.3%, and $16,413,000, or 27.1%, for
the three and nine months ended September 30, 2002, respectively, compared to
2001. Flight revenue is generated by both CBM and HBM operations and is recorded
net of contractual allowances under agreements with third-party payers and
Medicare/Medicaid discounts.

- - CBM - Flight revenue increased 28.1% and 35.4% in the three and nine months
ended September 30, 2002, respectively, compared to 2001, for the following
reasons:
- Purchase of the operating rights of another air ambulance service
provider in the Las Vegas metropolitan area in December 2001,
resulting in the expansion of operations to a third base in the
region. Transport volume for all CBM operations in the Las Vegas
region increased 91.1% and 141.7% in the quarter and nine months ended
September 30, 2002, compared to 2001. Flight volume for the region in
the third quarter of 2002 was adversely impacted as the result of an
accident which destroyed one of the Company's aircraft in September
2002. Determination of the cause of the accident is still pending
review by the National Transportation Safety Board. Following the
accident, all three of the Las Vegas bases were temporarily closed. By
the end of the third quarter, two of the three bases were back in
operation, with the third base expected to be back in service in
December 2002.
- Increase of 2.6% and 10.7% in transport volume for CBM operations in
California for the quarter and nine months ended September 30, 2002,
attributable primarily to favorable weather conditions in 2002 and to
the expansion of operations to a fifth base within the Los Angeles
metropolitan area in March 2002.
- Increase of 5.2% and 8.1% in transport volume for CBM operations in
the St. Louis metropolitan area for the three and nine months ended
September 30, 2002. The Company opened operations during the second
quarter of 2002 at an additional base in the St. Louis region.
- Total volume for all CBM operations increased from approximately 2,500
patient transports in the third quarter of 2001 to 2,800 in the third
quarter of 2002 and from 6,800 in the nine months ended September 30,
2001, to 8,200 in the nine-month period ended September 30, 2002.
- Price increase for CBM operations in California and Nevada effective
October 1, 2001.

- Price increase for CBM operations in the St. Louis region effective
January 1, 2002.


11

- - HBM - Flight revenue increased 15.1% and 17.0% for the three and nine
months ended September 30, 2002, respectively, for the following reasons:
- Revenue of approximately $1,509,000 and $3,765,000 for the three and
nine months ended September 30, 2002, respectively, generated by the
addition of two new contracts in the last half of 2001 and two new
contracts in 2002.
- Annual price increases in the majority of contracts with hospital
clients based on changes in hull insurance rates and in the Consumer
Price Index.
- Increases of 5.9% and 6.9% in flight volume, excluding the impact of
new contracts, in the three and nine months ended September 30, 2002,
compared to the same periods in 2001.

Sales of medical interiors and products increased $152,000, or 9.4%, for the
third quarter of 2002 but decreased $607,000, or 10.8%, for the nine months
ended September 30, 2002, compared to 2001. Significant projects in 2002
included the completion of five HH-60L Multi-Mission Medevac Systems for the
U.S. Army and manufacture of medical interiors or multi-functional interior
components for six commercial customers. In the first quarter of 2002, the
Company began development of a litter system for the U.S. Army's Medical
Evacuation Vehicle (MEV). Production of 42 MEV units began in the second
quarter. Revenue by product line for the quarter and nine months ended September
30, 2002, respectively, was as follows:
- - $30,000 and $808,000 - design and manufacture of multi-mission interiors
- - $633,000 and $2,248,000 - manufacture and installation of modular,
multi-functional interiors
- - $1,112,000 and $1,946,000 - design and manufacture of other aerospace
products

Significant projects in 2001 included manufacture of two Multi-Mission Medevac
Systems for a public service customer and manufacture of medical interiors or
multi-functional interior components for ten commercial customers. In the third
quarter of 2001, the Company also began production of five HH-60L Multi-Mission
Medevac Systems for the U.S. Army. Revenue by product line for the quarter and
nine months ended September 30, 2001, respectively, was as follows:
- - $962,000 and $2,641,000 - design and manufacture of multi-mission interiors
- - $620,000 and $2,688,000 - manufacture and installation of modular,
multi-functional interiors
- - $41,000 and $280,000 - design and manufacture of other aerospace products

Cost of medical interiors and products increased 8.9% for the third quarter of
2002 but decreased 14.8% for the nine months ended September 30, 2002, as
compared to the previous year. The changes are consistent with the changes in
related product revenue over the same periods.

Parts and maintenance sales and services decreased 5.4% and 15.3% for the
quarter and nine months ended September 30, 2002, respectively, compared to
2001. Parts sales in the nine months ended September 30, 2001 included $183,000
for the sale of an autopilot system to an HBM customer. Cost of parts and
maintenance sales and services for the quarter and nine months also decreased
accordingly.

In the nine months ended September 30, 2002, the Company recognized net losses
totaling $51,000 on the disposition of assets, including a loss of $65,000 on a
Bell 222 helicopter damaged in an accident. In the nine months ended September
30, 2001, the Company recognized a gain of $110,000 on the sale of a fixed wing
aircraft which was no longer utilized in the fleet.

Flight center costs (consisting primarily of pilot, mechanic, and medical staff
salaries and benefits) increased 24.2% and 22.9% for the quarter and nine months
ended September 30, 2002, respectively, compared to 2001. Changes by business
segment are as follows:
- - CBM - Flight center costs increased 26.5% and 26.7% for the three and nine
months ended September 30, 2002, for the following reasons:
- Approximately $697,000 and $1,628,000 for the quarter and nine months
ended September 30, 2002, for the addition of personnel to staff new
base locations described above.
- Increase in the cost of employee health insurance coverage paid by the
Company.
- Increases in salaries for merit pay raises.


12

- - HBM - Flight center costs increased 21.7% and 19.1% for the three and nine
months ended September 30, 2002, primarily due to the following:
- Approximately $429,000 and $1,479,000 for the quarter and nine months
ended September 30, 2002, for the addition of personnel to staff new
base locations described above.
- Increases in salaries for merit pay raises.

Aircraft operating expenses increased 29.7% and 26.6% for the three and nine
months ended September 30, 2002, respectively, in comparison to the three and
nine months ended September 30, 2001. 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
increase in costs is due to the following:

- - Addition of three helicopters for CBM operations at the beginning of 2002.
Resulting increases in maintenance and insurance costs were approximately
$235,000 and $557,000 for the three and nine months ended September 30,
2002, respectively.
- - Addition of four fixed wing aircraft for HBM operations during the third
quarter of 2001 and four helicopters and two fixed wing aircraft during
2002. Resulting increases in maintenance and insurance costs were
approximately $430,000 and $1,164,000 for the three and nine months ended
September 30, 2002, respectively.
- - Increase in the standard cost for overhaul of BK117 helicopter
transmissions by the equipment manufacturer.
- - Hull and liability insurance rate increases of approximately 8% effective
July 2001 and 20% effective July 2002, due to overall insurance market
conditions.
- - Increase of approximately $26,000 per month in insurance premiums for war
risk coverage effective October 1, 2001, through June 30, 2002, as a result
of the events surrounding September 11, 2001. Subsequent to June 30, 2002,
war risk coverage was included in the composite hull insurance rate.

Aircraft rental expense increased 36.1% and 26.3% for the three and nine months
ended September 30, 2002, respectively, in comparison to the three and nine
months ended September 30, 2001. Rental expense related to seven leased aircraft
added to the Company's fleet during 2002 totaled $356,000 and $1,152,000 for the
three and nine months ended September 30, 2002, respectively. The increase for
new aircraft was offset in part during the third quarter and nine-month period
by the discontinuation of a short-term lease for an aircraft used in the
Company's backup fleet during 2001 and by the purchase of an aircraft previously
included in the Company's HBM fleet under an operating lease.

Depreciation and amortization expense increased 11.2% and 7.2% for the three and
nine months ended September 30, 2002, respectively, compared to 2001. The
quarter and nine months ended September 30, 2002, included $126,000 and
$376,000, respectively, of amortization on a non-compete agreement related to
the purchase of the operating rights of another air ambulance provider in the
Las Vegas region in December 2001. The Company also recorded depreciation
expense on a previously leased aircraft which was acquired in the third quarter
of 2002. Expenses in 2001 included two months of amortization of a non-compete
agreement related to the buyout of another air ambulance service provider in San
Diego. Amortization of this agreement was completed in February 2001. In
addition, expenses in the quarter and nine months ended September 30, 2001,
included $70,000 and $165,000 of goodwill amortization compared to none in 2002,
as a result of the adoption of Statement 142 effective January 1, 2002.

Bad debt expense is estimated during the period the related services are
performed based on historical experience for CBM operations. The provision is
adjusted as required based on actual collections in subsequent periods. The
Company responds to calls for air medical transports without pre-screening the
creditworthiness of the patient. Bad debt expense increased 55.0% and 53.2% for
the quarter and nine months ended September 30, 2002, respectively, compared to
2001, due primarily to the increase in flight revenue for CBM operations and
lower collection rates. Bad debt as a percentage of related net flight revenue
also increased from 20.8% in 2001 to 23.5% in 2002, for the nine-month periods.
The Company believes the decrease in the collection rate for CBM operations is
due to general recessionary trends in the economy and to changes in previous
collectibility estimates. Bad debt expense related to HBM operations and
Products Division was not significant in either 2002 or 2001.

General and administrative expenses increased 15.2% and 9.8% for the quarter and
nine months ended September 30, 2002, respectively, compared to 2001. The change
for the nine-month period reflects an expanded marketing effort for CBM
operations in both the Los Angeles and St. Louis metropolitan areas designed to
increase transport volume. Other factors contributing to the growth in general
and administrative expenses for the three- and nine-month periods are merit pay
and incentive compensation increases and increases in administrative staffing in
anticipation of the acquisition of RMH and to manage the expanded employee base
with the addition of new bases.


13

The Company recorded income tax expense of $2,593,000 at an effective rate of
39% in the nine months ended September 30, 2002, and no tax provision in the
nine months ended September 30, 2001. During 2001, income tax expense, as
calculated at the statutory rate including estimated state income tax effect,
was offset by recognition of deferred tax assets for which a valuation allowance
had previously been provided.


FINANCIAL CONDITION

Net working capital increased from $15,315,000 at December 31, 2001, to
$26,358,000 at September 30, 2002, primarily due to an increase in receivables
consistent with increased revenue for all operating divisions. Cash and cash
equivalents increased $768,000 from $2,838,000 to $3,606,000 over the same
period, for the reasons discussed below.

Cash generated by operations in the nine months ended September 30, 2002,
totaled $5,326,000 compared to $2,994,000 in 2001. Significant uses of cash in
2002 consisted primarily of an increase of $7,237,000 in receivables, net of bad
debt expense, described above. Other liabilities increased as the Company
received advance funding for the installation of a medical interior and avionics
equipment in an aircraft leased for CBM operations. The balance of accrued
overhaul and parts replacement costs also grew during the nine months ended
September 30, 2002, due to the increased level of flight volume for both CBM and
HBM operations. The accrual increases with each hour flown by the fleet and is
offset when life-limited aircraft components are actually replaced or
overhauled.

Cash used by investing activities totaled $3,162,000 in 2002 compared to
$3,107,000 in 2001. Equipment acquisitions in 2002 consisted primarily of
medical interior and avionics installations or upgrades for existing equipment.
During the first quarter of 2002, the Company also received proceeds from a
sale-leaseback transaction for a BK117 helicopter. Equipment acquisitions in
2001 consisted primarily of rotable equipment purchases and upgrades to existing
equipment. The cost of equipment acquisitions was offset in part in 2001 by
proceeds from the sale of one of the Company's airplanes.

Financing activities used $1,396,000 in 2002 compared with $3,467,000 in 2001.
The primary uses of cash in 2002 were regularly scheduled payments of long-term
debt and purchases of Company common stock into treasury. These payments were
offset in part by proceeds from the issuance of common stock for options
exercised during the nine months. The primary uses of cash in 2001 were
regularly scheduled payments of long-term debt and repayment of draws against
the Company's line of credit.


OUTLOOK 2002

The statements contained in this Outlook are based on current expectations.
These statements are forward looking, and actual results may differ materially.
The Company undertakes no obligation to update any forward-looking statements.

As described in note 6 to the financial statements included in Item 1 of this
document, on October 16, 2002, the Company acquired 100% of the membership
interest of RMH. RMH provides air medical transportation services throughout the
United States under both the community-based and hospital-based models,
utilizing a fleet of over 80 helicopters and fixed-wing aircraft. RMH has also
manufactured and installed aircraft medical interiors for its own fleet as well
as for third parties. The Company expects growth in revenue and in net income as
a result of the acquisition in future years upon completion of the transition
plan to integrate RMH into its three operating divisions.

Community-Based Model

In September 2002, one of the Company's aircraft based in the Las Vegas region
was destroyed in an accident. Determination of the cause of the accident is
still pending review by the National Transportation Safety Board. Following the
accident, all three of the Las Vegas bases were temporarily closed. By the end
of the third quarter, two of the three bases were back in operation, with the
third base expected to be back in service in December 2002. The Company expects
the resulting decrease in flight volume to offset the additional flight volume
which would otherwise have been generated by the acquisition of the operating
rights of another air ambulance service provider in the Las Vegas area in
December 2001.


14

In the second quarter of 2002, the Company opened one new location in the Los
Angeles metropolitan area and one in the St. Louis region. The Company expects
to open a new base of operation in central Illinois at the end of the fourth
quarter of 2002 or early in 2003. CBM flight volume at all other locations is
expected to be consistent with historical levels during 2002, subject to
seasonal, weather-related fluctuations. The Company continues to explore other
opportunities to expand the CBM model in communities surrounding its hubs in Los
Angeles and St. Louis.

Hospital-Based Model

Six hospital contracts were due for renewal in 2002. Four of these contracts
have been renewed and two have been extended into the first quarter of 2003.
Late in the first quarter of 2002, the Company expanded its operations for a
fixed wing customer in Oregon with the addition of a third aircraft. The Company
began operations under a new helicopter contract in Florida during the second
quarter and under a new fixed wing contract in New Mexico in August 2002. The
Company expects 2002 flight activity for all other hospital contracts to remain
consistent with historical levels.

Products Division

Early in 2002 the Company was awarded a contract for the development and
production of a litter system for the U.S. Army's Medical Evacuation Vehicle
(MEV). The contract calls for the development and production of 42 units in 2002
and includes options for 76 additional units to be delivered from 2003 to 2007.
The total contract value, including all options, is approximately $5,000,000.
Work on the initial lot of production units is expected to continue into the
fourth quarter of 2002. There is no assurance that the contract options will be
exercised or orders for additional units received in 2002 or in future periods.

During the second quarter of 2002, the Company completed the production of five
HH60L Multi-Mission Medevac Systems. The Company expects to be awarded a
contract for five to eight additional HH-60L units during the first half of
2003. Production will commence immediately upon award. The current U.S. Army
Aviation Modernization Plan continues to define a requirement for 357 units in
total over the next 20 years. The U.S. Army Program Objective Memorandum (POM)
anticipates funding for this requirement with eight units per year scheduled in
fiscal year 2003 and fifteen units per year scheduled from fiscal year 2004
through the end of the program. There is no assurance that the current contract
option will be exercised or orders for additional units received in 2002 or in
future periods.

All Segments

There can be no assurance that the Company will successfully integrate RMH
operations into its three divisions or continue to renew operating agreements
for its HBM operations, generate new profitable contracts for the Products
Division, or maintain flight volume for CBM operations. Based on the anticipated
level of HBM and CBM flight activity and the projects in process for the
Products Division, the Company expects to generate sufficient cash flow to meet
its operational needs throughout the remainder of 2002. The Company also has
approximately $20 million in borrowing capacity available under the PNC
revolving credit facility following the acquisition of RMH.

RISK FACTORS

Actual results achieved by the Company may differ materially from those
described in forward-looking statements as a result of various factors,
including but not limited to, those discussed above in "Outlook for 2002" and
those described below.

- - Flight volume - All CBM revenue and approximately 35% of HBM revenue is
dependent upon flight volume. Approximately 20% of the Company's operating
expenses also vary with number of hours flown. Poor visibility, high winds,
and heavy precipitation can affect the safe operation of aircraft and
therefore result in a reduced number of flight hours due to the inability
to fly during these conditions. Prolonged periods of adverse weather
conditions could have an adverse impact on the Company's operating results.
The months from November through February tend to have lower flight volume
due to weather conditions and other factors, resulting in lower CBM
operating revenue during these months. Flight volume for CBM operations can
also be affected by the distribution of calls among competitors by local
government agencies and the entrance of new competitors into a market.


15

- - Collection rates -The Company's CBM division invoices patients and their
insurers directly for services rendered and recognizes revenue net of
estimated contractual allowances. The level of bad debt expense is driven
by collection rates on these accounts. The Company responds to calls for
air medical transports without pre-screening the creditworthiness of the
patients. Collectibility is affected by the number of uninsured or indigent
patients transported and is, therefore, primarily dependent upon the health
of the U.S. economy. Changes in estimated contractual allowances and bad
debts are recognized based on actual collections in subsequent periods. A
significant or sustained downturn in the U.S. economy could have an adverse
impact on the Company's bad debt expense.

- - Dependence on third party suppliers - The Company currently obtains a
substantial portion of its helicopter spare parts and components from Bell
Helicopter, Inc. (Bell) and American Eurocopter Corporation (AEC), because
its fleet is composed primarily of Bell and Eurocopter aircraft, and
maintains supply arrangements with other parties for its engine and related
dynamic components. Based upon the manufacturing capabilities and industry
contacts of Bell, AEC, and other suppliers, the Company believes it will
not be subject to material interruptions or delays in obtaining aircraft
parts and components but does not have an alternative source of supply for
Bell, AEC, and certain other aircraft parts. Failure or significant delay
by these vendors in providing necessary parts could, in the absence of
alternative sources of supply, have a material adverse effect on the
Company. Because of its dependence upon Bell and AEC for helicopter parts,
the Company may also be subject to adverse impacts from unusually high
price increases which are greater than overall inflationary trends.
Increases in the Company's flight fees billed to its HBM customers are
generally limited to changes in the consumer price index.

- - Department of Defense funding - One of the significant projects
historically for the Products Division, the HH-60L program, is dependent
upon Department of Defense funding. Failure of the U.S. Congress to approve
funding for the production of additional HH-60L units could have a material
adverse impact on Products Division revenue.

- - Governmental regulation - The air medical transportation services and
products industry is subject to extensive regulation by governmental
agencies, including the Federal Aviation Administration, which imposes
significant compliance costs on the Company. In addition, reimbursement
rates for air ambulance services established by governmental programs such
as Medicare directly affect CBM revenue and indirectly affect HBM revenue
from hospital customers. Changes in laws or regulations or reimbursement
rates could have a material adverse impact on the Company's cost of
operations or revenue from flight operations.

- - Competition - HBM operations face significant competition from several
national and regional air medical transportation providers for contracts
with hospitals and other healthcare institutions. CBM operations also face
competition from smaller regional carriers and alternative air ambulance
providers such as sheriff departments. Operators generally compete on the
basis of price, safety record, accident prevention and training, and
medical capability of the aircraft. The Company's competition in the
aircraft interior design and manufacturing industry comes primarily from
two companies based in the United States and one in Europe. Competition is
based mainly on product features, performance, price, and weight. There can
be no assurance that the Company will be able to continue to compete
successfully for new or renewing contracts in the future.

- - Insurance - Hazards are inherent in the aviation industry and may result in
loss of life and property, thereby exposing the Company to potentially
substantial liability claims arising out of the operation of aircraft. The
Company may also be sued in connection with medical malpractice claims
arising from events occurring during a medical flight. Under HBM operating
agreements, hospitals customers have agreed to indemnify the Company
against liability arising out of medical malpractice claims and to maintain
insurance covering such liability, but there can be no assurance that a
hospital will not challenge the indemnification rights or will have
sufficient assets or insurance coverage for full indemnity. In CBM
operations, Company personnel perform medical procedures on transported
patients, which may expose the Company to significant direct legal exposure
to medical malpractice claims. The Company maintains general liability
aviation insurance, aviation product liability coverage, and medical
malpractice insurance, and believes that the level of coverage is customary
in the industry and adequate to protect against claims. However, there can
be no assurance that it will be sufficient to cover potential claims or
that present levels of coverage will be available in the future at
reasonable cost. A limited number of hull and liability insurance
underwriters provide coverage for air medical operators. A significant
downturn in insurance market conditions could have a material adverse
effect on the Company's cost of operations. Approximately 40% of any
increases in hull and liability insurance may be passed through to the
Company's customers according to contract terms. In addition, the loss of
any aircraft as a result of an accident could cause both significant
adverse publicity and significant interruptions of air medical services to
client hospitals, which could adversely affect the relationship with such
hospitals.


16

- - Loan covenants and events of default - The subordinated notes and revolving
credit facility into which the Company entered to finance the acquisition
of RMH both contain certain financial ratios and various other covenants.
Events of default include a change of control which is defined as (i) any
person's becoming the beneficial owner of 40% or more of the Company's
stock, (ii) directors of the Company at October 16, 2002, or directors
approved by them, ceasing to comprise a majority of the Company's board of
directors, (iii) foreign persons in the aggregate owning or controlling 20%
or more of the Company's voting stock, or (iv) the Company or any
subsidiary that holds an air carrier certificate ceasing to be a citizen of
the United States. Failure to perform these covenants or to maintain the
required financial ratios could result in an event of default and
accelerate payment of the principal balances due under the notes and credit
revolver.

CRITICAL ACCOUNTING POLICIES

The Company's consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period.

On an on-going basis, management evaluates its estimates and judgments,
including those related to revenue recognition, uncollectible receivables,
deferred income taxes, and aircraft overhaul costs. Management bases its
estimates and judgments on historical experience and on various other factors
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
Management believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.

Revenue Recognition

Fixed flight fee revenue under the Company's operating agreements with hospitals
is recognized monthly over the terms of the agreements. Flight revenue relating
to patient transports is recognized upon completion of the services. Revenue and
accounts receivable are recorded net of estimated contractual allowances under
agreements with third-party payers. Estimates of contractual allowances are
initially determined based on historical discount percentages for Medicare and
Medicaid patients and adjusted periodically based on actual discounts. If actual
future discounts are less favorable than those projected by management,
additional contractual allowances may be required.

Revenue related to fixed fee medical interior and products contracts is recorded
as costs are incurred using the percentage of completion method of accounting.
The Company estimates the percentage of completion based on costs incurred to
date as a percentage of an estimate of the total costs to complete the project.
Losses on contracts in process are recognized when determined. If total costs to
complete a project are greater than estimated, the gross margin on the project
may be less than originally recorded under the percentage of completion method.

Uncollectible Receivables

The Company responds to calls for air medical transports without pre-screening
the creditworthiness of the patients. Uncollectible trade receivables are
charged to operations using the allowance method. Estimates of uncollectible
receivables are determined monthly based on historical collection rates and
adjusted monthly thereafter based on actual collections. If actual future
collections are less favorable than those projected by management, additional
allowances for uncollectible accounts may be required. While bad debt expenses
have historically been within expectations and the allowances established, there
can be no guarantee that the Company will continue to experience the same
collection rates that it has in the past.


17

Deferred Income Taxes

In preparation of the consolidated financial statements, the Company is required
to estimate income taxes in each of the jurisdictions in which it operates. This
process involves estimating actual current tax exposure together with assessing
temporary differences resulting from differing treatment of items, such as
depreciable assets and maintenance reserves, for tax and accounting purposes.
These differences result in deferred tax assets and liabilities, which are
included in the consolidated balance sheets. The Company then assesses the
likelihood that deferred tax assets will be recoverable from future taxable
income and records a valuation allowance for those amounts it believes are not
likely to be realized. Establishing or increasing a valuation allowance in a
period results in income tax expense in the statement of operations. The Company
considers estimated future taxable income, tax planning strategies, and the
expected timing of reversals of existing temporary differences in assessing the
need for a valuation allowance against deferred tax assets. In the event the
Company were to determine that it would not be able to realize all or part of
its deferred tax assets in the future, an adjustment to the valuation allowance
would be charged to income in the period such determination was made. Likewise,
should the Company determine that it would be able to realize its deferred tax
assets in the future in excess of the net recorded amount, an adjustment to the
valuation allowance would increase income in the period such determination was
made.

Aircraft Overhaul Costs

The Company uses the accrual method of accounting for major engine and airframe
component overhauls and replacements. The cost of overhaul or replacement is
estimated using published manufacturers' price lists, when available, or
historical experience. This cost is accrued based on usage of the aircraft
component over the period between overhauls or replacements as mandated by the
parts manufacturer. If the cost of overhaul or replacement is greater than
estimated by management, additional aircraft operating costs may be recorded in
the period in which the price increase becomes effective or in which the
aircraft component is overhauled.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 and related receivables are payable in U.S. dollars. The
Company is subject to interest rate risk on its debt obligations and notes
receivable, all of which have fixed interest rates, except the line of credit
which did not have a balance outstanding as of September 30, 2002.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation of the Company's internal controls, disclosure
controls and procedures within 90 days of the filing date of this report, the
Chief Executive Officer and the Chief Financial Officer have concluded that the
effectiveness of such controls and procedures is satisfactory. Further, there
were not any significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.


18

PART II: OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

Not Applicable

ITEM 2. CHANGES IN SECURITIES

Not Applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

Not Applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------

99.1 Certification adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

Current Report on Form 8-K dated October 16, 2002, regarding the
Company's acquisition of 100% of the membership interest of Rocky
Mountain Holdings, L.L.C.


19

SIGNATURES

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


AIR METHODS CORPORATION



Date: November 14, 2002 By \s\ George W. Belsey
-------------------------------------------------
George W. Belsey
Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)


Date: November 14, 2002 By \s\ Aaron D. Todd
-------------------------------------------------
Aaron D. Todd
Chief Financial Officer and Chief
Operating Officer
(Principal Financial Officer)


Date: November 14, 2002 By \s\ Sharon J. Keck
-------------------------------------------------
Sharon J. Keck
Chief Accounting Officer
(Principal Accounting Officer)


20

SECTION 302 CHIEF EXECUTIVE OFFICER CERTIFICATION


I, George W. Belsey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Air Methods
Corporation;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002


/s/ George W. Belsey
- ---------------------------
George W. Belsey
Chief Executive Officer



SECTION 302 CHIEF FINANCIAL OFFICER CERTIFICATION

I, Aaron D. Todd, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Air Methods
Corporation;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 14, 2002

/s/ Aaron D. Todd
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Aaron D. Todd
Chief Financial Officer