UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report June 30, 2000 Commission file number 0-2751 ------------- ------ AMERICAN HOSPITAL MANAGEMENT CORPORATION ---------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 95-1861243 - ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 1116 Arcata, California 95521 - ------------------ ----------- (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (707) 839-8474 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ------------------------ None - -------------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: Common Stock $1.00 par value - -------------------------------------------------------------------------------- (Title of class) $2.00 Cumulative Preferred Stock $1.00 par value - -------------------------------------------------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) has filed 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 No X ---- ---- -1- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes No X ---- ---- State the aggregate market value of the voting stock held by nonaffiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, at a specified date within 60 days prior to the date of filing. (See definition of affiliate in Rule 405, 17 CRF 230.405.) There is no market for the registrant's stock. (APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of share outstanding of each of the registrant's classes of common stock as of the latest practicable date (223,568 at June 30,2000). Total number of pages, including cover - 42 -2- PART 1 Item 1. Business - ------- -------- The primary business of the Company is the operation and ownership of Mad River Community Hospital (the Hospital) and satellite clinics, located in the Humboldt County area of Northern California. Over the last several years the Company has expanded the scope of services offered by the Hospital to include advanced ancillary service departments used by physicians practicing in the rural service area. As a result of the ongoing expansion of facilities and services, the Hospital continues to recruit new physicians to provide the added care as well as to replace physicians who are retiring from active practice. The Hospital's service area on the north coast is experiencing the highest rate of growth in the county and is especially attractive to physicians who want to live and work in a community with high family values. The nearest competition to the Hospital is in Eureka (approximately 12 miles south) where two acute care facilities are located. Management of the Hospital feels that as long as it maintains a strong position in providing a full scope of health care services, the facilities located in Eureka will have less of a negative impact on Hospital use or occupancy. For this reason, the Hospital organized out-patient clinics in the outlying communities thereby maintaining the Hospital's presence in the service area. New buildings are planned for those departments still housed in mobile facilities and the Medical Office complex adjacent to the Hospital. In addition, a M.R.I.. was opened this year and major renovation has started for Radiology and the I.C.U. unit. The Hospital is improving landscaping and the overall appearance of the facility. Another positive factor supporting Hospital use is community involvement. As the largest private employer in Arcata, the Hospital provides employment to approximately 500 local residents and, through its Home Health and recently expanded Adult Day Health Care departments, is highly visible in the community served. The Hospital continues to try to build on this strength by maintaining a strong image through the media and a helping hand in the community, while providing personalized quality services. The Hospital is a strong advocate for a community health care plan involving the medical staff, employers and the area's hospitals and health care providers wherein they will work together to provide a locally based alternative to out of the area managed care. As the health care industry is dependent on government payment of care for the elderly and indigent, the Hospital may be negatively impacted by new Government regulations. As mentioned above, the Hospital is working diligently to establish a community health care plan that could compete with the various outside managed care plans planning to enter the Humboldt County area. -3- Item 2. Properties - ------- ---------- The main facility operated by the Company is Mad River Community Hospital in Arcata, California. This single-level structure is licensed as a 80-bed acute hospital in Northern Humboldt County, California, where it provides full hospital services to a population of approximately 55,000. Since opening in 1972, the Hospital has maintained a program of expansion and improvements. It is located on 12 acres (part of a 48 acre site) adjacent to an expanded medical office complex owned by staff doctors which leaves sufficient open area for further expansion of medical services as needed. The Company owns 27 acres of land approximately 4 miles from the Hospital held for future residential development. A house and barn on the property is currently used as an office, guest quarters and storage space for the Company. The Company owns a personal residence adjacent to the Hospital that had been used as a physician's office. This acquisition was made to facilitate a continued favorable occupancy by a hospital-related specialty and is presently being leased to an unrelated private resident, providing a child day care service to hospital employees. The Company also owns residences and commercial properties in Eureka and McKinleyville, California. From time to time, the Company acquires real estate being held for investment purposes. As part of its outreach program, the Company owns and operates medical office buildings under the name of Willow Creek Six Rivers Medical Center in Willow Creek, California (38 miles east of the Hospital). The Company also owns and operates real property in McKinleyville which provides laboratory and radiology outpatient services. Adult Day Health Care of Mad River , a separate not-for-profit organization, is operating an adult day health care facility in a building adjacent to and owned by Mad River Community Hospital. Michael Young, Controller of the Company, is functioning as Adult Day Health Care's Administrator and performs minimal accounting services for the organization. To meet the growing demands for this service, the existing building was expanded. This entity will continue to lease the facility from the Hospital. -4- Item 3. Legal Proceedings - ------- ----------------- None. Item 4. Submission of Matters to Vote of Security Holders - ------- ------------------------------------------------- There were no matters submitted to a vote by the security holders during the fourth quarter of the fiscal year covered by this report. -5- PART II Item 5. Market for the Registrant's Common Stock and Related Security - ------- ------------------------------------------------------------- Holder Matters -------------- There is no market for the registrant's stock. There are approximately 392 shareholders at June 30, 2000. No dividends were paid on common stock during the three years ended June 30, 2000. The Company is current on paying all cumulative preferred stock dividends. -6- Item 6. Selected Financial Data - ------- ----------------------- Year ended June 30 ----------------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Total operating revenue, net $ 24,759,228 $ 24,089,600 $ 22,992,958 $ 22,096,357 $ 22,895,801 Net income (loss) 541,259 (164,824) 350,874 200,588 223,815 Basic earnings per share 2.00 (1.15) 1.12 .45 .52 Diluted earnings per share 1.71 (1.15) 1.09 .62 .67 Cash dividends per common share -- -- -- -- -- Total assets 22,409,022 22,302,627 22,411,941 20,342,679 20,557,286 Long-term debt 676,132 741,865 206,265 206,932 403,581 Working capital 8,861,853 8,553,820 8,905,761 8,542,725 7,851,133 Redeemable preferred stock 46,829 47,442 47,690 48,334 50,850 Stockholders' equity 15,690,291 15,416,989 15,891,443 15,060,535 14,633,038 -7- Item 7 Management's Discussion and Analysis of - ------ --------------------------------------- Financial Condition and Results of Operations --------------------------------------------- 2000 ---- Results of Operations --------------------- Hospital revenues increased during 2000 as the Hospital continues to expand services to encourage use. Use of outpatient services increased, and there was a rate increase. Patient revenue totaled $50,615,000 in 2000 compared to $46,721,000 in 1999, a 8.3% increase of $3,894,000. Contractual allowances totaled $27,579,000 in 2000 compared to $23,808,000 in 1999, a 15.8% increase. Government regulatory agencies attempt to reimburse the Hospital based on cost of services. But, as the government continues its efforts to cut back on rising health care payments, the actual reimbursement to the Hospital continues to decrease as evidenced by the large increase in contractual allowances. For the three years ended June 30, 2000, contractual allowances and provisions for bad debts have amounted to approximately $74,200,000 or 52% of gross revenue. At times the Hospital is unable to even recoup costs on Medicare patients under the current methodology of reimbursement. Medi-Cal has also imposed certain limitations that negatively impacted the amount the Hospital is reimbursed for Medi- Cal patients. Operating costs and expenses were $24,908,000 compared to $25,459,000 in 1999, a 2.2% decrease. Operating costs actually decreased $1,098,000 while the provision for bad debts increased by $547,000, resulting in the combined decrease of $551,000. The increase in accounts written off is indicative of the industry wide difference between standard rates and the amount actually collected. The decrease in operating cost is mainly attributable to a decrease in employee health and welfare benefits paid, caused by not incurring a number of catastrophic claims that result in maximum reimbursement, as incurred in 1999. The continued reduction in third-party reimbursement is the major contributing factor to the increase in contractual allowances. The Hospital is still dealing with third-party payors to finalize cost reports under audit. Management is actively appealing various adjustments made by the intermediary, and, even though, it appears the Hospital will prevail on various issues, no amount will be booked as a receivable until the ultimate outcome of the appeal is known. Net income, after investment income was $541,259 in 2000 compared to net loss of $164,824 in 1999. Even though the Hospital continues to be negatively impacted by poor reimbursement contracts with third party payers, if the required daily census can be maintained and costs are controlled, management anticipates continued profitable operations. . -8- 1999 continued ---- Over the years, as the Company incurs more contractual allowances and uncollectible accounts, results from operations have suffered. The Company continues to enjoy good returns on its investments to help maintain a net profit. For the current year, sales of investments resulted in gains of $168,000, while total investment income was $773,000. As discussed in Item 1, the Company continues to expand operations to maintain a competitive edge in a continuing ever changing health care environment. All construction projects, considered necessary to maintain operations, will be completed without negative impact on the financial statements The purpose of these projects is to keep the users of the Hospital in their primary service area when health care is required, thereby enhancing the Hospital's inpatient service occupancy. By so doing, it is anticipated that operations will improve, even though the continued burden of government contractual agreements to provide health care, sometimes below cost, is being further complicated by the introduction of managed care contracts in the Humboldt County area. Liquidity and Capital Resources ------------------------------- The Company's financial condition remains very strong with substantial investments, strong liquidity and minimal debt. The cash and liquid investments are being maintained to subsidize Hospital operations, finance needed construction and increased services at Mad River Community Hospital. Currently, the Company has approximately $6,727,000 in cash and short-term investments. Included in this amount are $3,457,000 in unrealized holding gains. Cash provided by operating and investing activities continue to fund investing activities, the largest of which is the purchase of real estate, property and equipment, which totaled $768,647 in 2000. As the long-term debt relates only to the acquisition of major equipment, cash required for financing activities remains relatively low. As discussed in Item I, government regulations, as well as managed care contract agreements, may continue to negatively impact operations. Management is unable to estimate any potential negative impact of forthcoming laws or regulations. Management believes that long-term key employees approve of the working conditions at the Hospital and have proven their ability to keep the Hospital staffed under difficult conditions. Inflation --------- The inflation rate affecting costs has remained relatively low, approximately 5%, over the last three years. This moderate rate contributes to the Hospital's success in maintaining a moderate increase in costs from year to year. -9- Item 7 Management's Discussion and Analysis of - ------ --------------------------------------- Financial Condition and Results of Operations --------------------------------------------- 1999 ---- Results of Operations --------------------- Hospital revenues increased slightly during 1999 as the Hospital continues to expand services to encourage use. Use of outpatient services increased, and there was a small rate increase. Patient revenue totaled $46,721,000 in 1999 compared to $44,682,000 in 1998, a 4.6% increase of $2,039,000. Contractual allowances totaled $23,808,000 in 1999 compared to $21,690,000 in 1997, a 9.8% increase. Government regulatory agencies attempt to reimburse the Hospital based on cost of services. But, as the government continues its efforts to cut back on rising health care payments, the actual reimbursement to the Hospital continues to decrease as evidenced by the large increase in contractual allowances. For the five years ended June 30, 1999, contractual allowances and provisions for bad debts have amounted to approximately $104,000,000 or 49% of gross revenue. At times the Hospital is unable to even recoup costs on Medicare patients under the current methodology of reimbursement. Medi-Cal has also imposed certain limitations that negatively impacted the amount the Hospital is reimbursed for Medi- Cal patients. Operating costs and expenses were $25,459,000 compared to $23,984,000 in 1998, a 6.2% increase. Operating costs actually increased $1,416,000 while the provision for bad debts increased by $59,000, resulting in the combined increase of $1,475,000. The increase in accounts written off is indicative of the industry wide difference between standard rates and the amount actually collected. The continued reduction in third-party reimbursement is the major contributing factor to the 1999 operating loss of $980,000. The Hospital is still dealing with third- party payors to finalize cost reports under audit. Management is actively appealing various adjustments made by the intermediary, and, even though, it appears the Hospital will prevail on various issues, no amount will be booked as a receivable until the ultimate outcome of the appeal is known. Net loss, after investment income was $165,000 in 1999 compared to net income of $350,874 in 1998. In addition to the negative impact of write offs and contractual allowances on operations, for 1999, the Hospital, under its self insurance program had to pay for various catastrophic claims that resulted in maximum reimbursement. Management feels these types of claims will not be recurring cost in the future. . -10- 1999 continued ---- Over the years, as the Company incurs more contractual allowances and uncollectible accounts, results from operations have suffered. The Company continues to enjoy good returns on its investments to help maintain a net profit. For the current year, sales of investments resulted in gains of $433,000, while total investment income was $863,000. As discussed in Item 1, the Company continues to expand operations to maintain a competitive edge in a continuing ever changing health care environment. All construction projects, considered necessary to maintain operations, will be completed without negative impact on the financial statements The purpose of these projects is to keep the users of the Hospital in their primary service area when health care is required, thereby enhancing the Hospital's inpatient service occupancy. By so doing, it is anticipated that operations will improve, even though the continued burden of government contractual agreements to provide health care, sometimes below cost, is being further complicated by the introduction of managed care contracts in the Humboldt County area. Liquidity and Capital Resources ------------------------------- The Company's financial condition remains very strong with substantial investments, strong liquidity and minimal debt. The cash and liquid investments are being maintained to subsidize Hospital operations, finance needed construction and increased services at Mad River Community Hospital. Currently, the Company has approximately $6,070,000 in cash and short-term investments. Included in this amount are $3,055,000 in unrealized holding gains. Cash provided by operating and investing activities continue to fund investing activities, the largest of which is the purchase of real estate, property and equipment, which totaled $1,258,000 in 1999. As the long-term debt relates only to the acquisition of major equipment, cash required for financing activities remains relatively low. As discussed in Item I, government regulations, as well as managed care contract agreements, may continue to negatively impact operations. Management is unable to estimate any potential negative impact of forthcoming laws or regulations. Management believes that long-term key employees approve of the working conditions at the Hospital and have proven their ability to keep the Hospital staffed under difficult conditions. Inflation --------- The inflation rate affecting costs has remained relatively low, approximately 5%, over the last three years. This moderate rate contributes to the Hospital's success in maintaining a moderate increase in costs from year to year. -11- Item 8. Financial Statements and Supplementary Data ------- ------------------------------------------- FINANCIAL STATEMENTS -------------------- Description Page ----------- ---- Independent Auditors' Reports 14-15 Financial Statements: Balance Sheets - June 30, 2000 and 1999 16-17 Statements of Operations Years ended June 30, 2000, 1999 and 1998 18 Statements of Comprehensive Income Years ended June 30, 2000, 1999 and 1998 19 Statements of Stockholders' Equity Years ended June 30, 2000, 1999 and 1998 20 Statements of Cash Flows - Years ended June 30, 2000, 1999 and 1998 21-22 Notes to Financial Statements 23-33 Item 14. Exhibits, Financial Statement, Schedules and Reports on Form 8-K 39 -12- AMERICAN HOSPITAL MANAGEMENT CORPORATION Annual Report for Corporations - Form 10-K Years ended June 30, 2000 and 1999 Financial Statements, Supplementary Data and Auditors' Report -13- INDEPENDENT AUDITORS' REPORT To the Board of Directors American Hospital Management Corporation We have audited the accompanying balance sheet of American Hospital Management Corporation as of June 30, 2000 and the related statements of income, stockholders' equity and cash flows and the supporting financial statements as listed in the accompanying index for the year then ended. The financial statements are the responsibility of the management of American Hospital Management Corporation. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Hospital Management Corporation as of June 30, 2000, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles, and the supporting financial schedules as listed in the accompanying index, when considered in relation to the basic financial statements taken as a whole, in our opinion, present fairly in all material respects the information set forth therein. /s/ Hurley & Company --------------------- Hurley & Company Granada Hills, California October 1, 2000 -14- Independent Auditors' Report ---------------------------- The Board of Directors and Stockholders: American Hospital Management Corporation We have audited the accompanying balance sheet of American Hospital Management Corporation as of June 1999, and the related statements of operations, comprehensive income and loss, stockholders' equity, and cash flows and the supporting financial statement schedules as listed in the accompanying index at Item 14, for the years ended June 30, 1999 and 1998. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial statement schedules are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Hospital Management Corporation at June 30, 1999, and the results of its operations and its cash flows for the years ended June 30, 1999 and 1998 in conformity with generally accepted accounting principles, and the supporting financial statement schedules as listed in the accompanying index at Item 14, when considered in relation to the basic financial statements taken as a whole, in our opinion, present fairly in all material respects, the information set forth therein. /s/ K. C. Miller, CPA ---------------------- KC Miller, CPA West Covina, California September 30, 1999 -15- AMERICAN HOSPITAL MANAGEMENT CORPORATION Balance Sheets June 30, 2000 and 1999 Assets ------ 2000 1999 ----------- ----------- Current assets: Cash and cash equivalents $ 769,953 $ 103,244 Marketable securities 5,957,315 5,966,623 Receivables: Patients, net of estimated uncollectibles of $157,532 and $230,699, in 2000 and 1999, respectively 6,716,586 7,097,948 Other 236,216 347,203 Estimated third-party payor settlements 336,129 -- Refundable income tax -- 174,800 Supplies, at lower of cost (first-in, first-out) or market 913,690 1,031,050 Prepaid expenses 87,750 76,436 ----------- ----------- Total current assets 15,017,639 14,797,304 Property and equipment, net 4,443,847 4,456,871 Real estate held for investment, net 1,999,909 2,045,578 Deferred income taxes 354,705 397,236 Other assets 592,922 605,638 ----------- ----------- $22,409,022 $22,302,627 =========== =========== (continued) The accompanying notes are an integral part of these financial statements. -16- AMERICAN HOSPITAL MANAGEMENT CORPORATION Balance Sheets June 30, 2000 and 1999 Liabilities and Stockholders' Equity ------------------------------------ 2000 1999 ----------- ----------- Current Liabilities: Current maturities of long-term debt $ 113,187 $ 99,711 Portfolio credit line 654,363 -- Accounts payable and accrued expenses: Trade 1,596,078 2,068,082 Accrued liabilities 1,704,211 1,723,938 Estimated third-party payor settlements 323,364 577,572 Income taxes: Current 77,226 -- Deferred 1,687,357 1,774,181 ----------- ----------- Total current liabilities 6,155,786 6,243,484 ----------- ----------- Long-term debt, less current maturities 562,945 642,154 ----------- ----------- Stockholders' equity: $2cumulative preferred stock, par value $1 per share; authorized 100,000 shares; issued 65,270.82 shares; reacquired 18,442.26 and 17,828.68 shares; outstanding 46,828.56 and 47,442.14 shares; aggregate redemption and liquidating value of $1,287,778 and $1,304,659 at June 30, 2000 and 1999, respectively 46,829 47,442 Common stock, par value $1.00 per share; authorized 400,000 shares, issued 249,051 shares, reacquired 25,483 and 24,024 shares; outstanding - 223,568 and 225,027 shares at June 30, 2000 and 1999, respectively 223,568 225,027 Additional paid-in capital 122,384 148,783 Accumulated other comprehensive income 1,681,714 1,838,505 Retained earnings 13,615,796 13,157,232 ----------- ----------- Total Stockholders' equity 15,690,291 15,416,989 ----------- ----------- $22,409,022 $22,302,627 =========== =========== (concluded) The accompanying notes are an integral part of these financial statements. -17- AMERICAN HOSPITAL MANAGEMENT CORPORATION Statements of Operations Years ended June 30, 2000, 1999, and 1998 2000 1999 1998 ------------ ------------ ------------ Net patient service revenue $ 24,759,228 $ 24,089,600 $ 22,992,958 Other revenue 346,071 389,879 396,746 ------------ ------------ ------------ Total operating revenue 25,105,299 24,479,479 23,389,704 ------------ ------------ ------------ Operating costs and expenses: Professional care of patients 15,160,791 14,819,559 14,552,630 General services 2,357,961 2,456,966 2,485,699 Administrative services 3,304,688 3,583,756 3,227,783 Employee health and welfare 1,132,846 2,084,133 1,210,164 Medical malpractice insurance 296,639 323,546 395,630 Interest 104,938 74,966 16,327 Depreciation and amortization 827,340 939,858 979,028 Provision for bad debts 1,723,497 1,176,463 1,116,908 ------------ ------------ ------------ Total operating costs and expenses 24,908,700 25,459,247 23,984,169 ------------ ------------ ------------ Income (loss) from operations 196,599 (979,768) (594,465) ------------ ------------ ------------ Other income: Investment income 487,129 627,759 1,049,449 Other 12,642 12,385 13,391 ------------ ------------ ------------ 499,771 640,144 1,062,840 ------------ ------------ ------------ Income (loss) before income taxes 696,370 (339,624) 468,375 Provision for income tax expense (benefit) 155,111 (174,800) 117,501 ------------ ------------ ------------ Net income (loss) $ 541,259 $ (164,824) $ 350,874 ============ ============ ============ Basic earnings (loss) per common share $ 2.00 $ (1.15) $ 1.12 ============ =========== ============ Diluted earnings (loss) per common share $ 1.71 $ (1.15) $ 1.09 ============ =========== ============ The accompanying notes are an integral part of these financial statements. -18- AMERICAN HOSPITAL MANAGEMENT CORPORATION Statements of Comprehensive Income and Loss Years ended June 30, 2000, 1999, and 1998 2000 - ---- Net income $ 541,259 Other comprehensive income, net of tax Unrealized gains on securities Unrealized holding gains arising during tax period $ 10,799 Less: reclassification adjustment for gains realized in net income (167,590) (156,791) ---------- --------- Comprehensive income $ 384,468 ========= 1999 Net loss $(164,824) Other comprehensive income, net of tax Unrealized gains on securities Unrealized holding gains arising during tax period $ 216,142 Less: reclassification adjustment for gains realized in net income (432,691) (216,549) ---------- --------- Comprehensive loss $(381,373) ========= 1998 Net income $ 350,874 Other comprehensive income, net of tax Unrealized gains on securities Unrealized holding gains arising during tax period $1,116,880 Less: reclassification adjustment for gains realized in net income (517,370) 599,510 ---------- --------- Comprehensive income $ 950,384 ========= The accompanying notes are an integral part of these financial statements. -19- AMERICAN HOSPITAL MANAGEMENT CORPORATION STATEMENTS OF STOCKHOLDERS' EQUITY Years ended June 30, 2000, 1999 and 1998 2000 1999 1998 ------------ ------------ ------------ Stockholders' Equity: Cumulative Preferred Stock Beginning balance $ 47,442 $ 47,690 $ 48,334 Reacquired stock 613 248 644 ------------ ------------ ------------ Ending balance 46,829 47,442 47,690 ------------ ------------ ------------ Common Stock Beginning balance 225,027 226,157 228,057 Reacquired stock 1,459 1,130 1,900 ------------ ------------ ------------ Ending balance 223,568 225,027 226,157 ------------ ------------ ------------ Additional paid-in-capital Beginning balance 148,783 163,769 194,427 Reacquired stock 26,399 14,986 30,658 ------------ ------------ ------------ Ending balance 122,384 148,783 163,769 ------------ ------------ ------------ Accumulated other comprehensive income Beginning balance 1,838,505 2,055,054 1,455,544 Change in unrealized holdings gains, net (156,791) (216,549) 599,510 ------------ ------------ ------------ Ending balance 1,681,714 1,838,505 2,055,054 ------------ ------------ ------------ Retained Earnings Beginning balance 13,157,252 13,398,773 13,134,173 Net income (loss) 541,259 (164,824) 350,874 Cash dividends paid on preferred stock (82,715) (76,717) (86,274) ------------ ------------ ------------ Ending balance 13,615,796 13,157,232 13,398,773 ------------ ------------ ------------ Total Stockholders' equity $ 15,690,291 $ 15,416,989 $ 15,891,443 ============ ============ ============ The accompanying notes are an integral part of these financial statements. -20- AMERICAN HOSPITAL MANAGEMENT CORPORATION Statements of Cash Flows Years ended June 30, 2000, 1999 and 1998 2000 1999 1998 ------------ ------------ ------------ Cash flows from operating activities: Cash received from patients and third-party payors $ 23,172,826 $ 21,394,707 $ 22,985,273 Cash paid to employees and suppliers (22,638,608) (22,010,456) (22,342,220) Investment income received 344,897 232,119 565,439 Interest paid (104,938) (74,966) (16,327) Income taxes, net change 147,720 (116,602) (52,147) ------------ ------------ ------------ Net cash provided by (used in) operating activities 921,897 (575,198) 1,140,018 ------------ ------------ ------------ Cash flows from investing activities: Purchase of real estate held for investment -- -- (198,387) Purchase of property and equipment, net (768,647) (1,380,999) (1,258,401) Proceeds from sale of short-term investments 1,844,750 3,719,964 3,189,509 Purchase of short-term investments (1,919,742) (2,247,503) (2,691,389) Other 110,987 (65,191) 68,417 ------------ ------------ ------------ Net cash (used in) provided by investing activities (732,652) 26,271 (890,251) ------------ ------------ ------------ Cash flows from financing activities: Proceeds from issuance of long-term debt 41,522 679,699 251,216 Principal reductions of long-term debt (107,255) (144,099) (251,882) Proceeds from margin line of credit 654,363 Dividends paid (82,695) (76,717) (86,274) Payments for reacquired stock (28,471) (16,364) (33,202) ------------ ------------ ------------ Net cash provided by (used in) financing activities 477,464 442,519 (120,142) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 666,709 (106,408) 129,625 Cash and cash equivalents, beginning of year 103,244 209,652 80,027 ------------ ------------ ------------ Cash and cash equivalents, end of year $ 769,953 $ 103,244 $ 209,652 ============ ============ ============ Supplemental schedule of non-cash investing activities: (Decrease ) increase in fair value of investments $ (251,889) $ (360,915) $ 989,757 Change in deferred taxes 95,098 144,366 (390,247) ------------ ------------ ------------ (Decrease) increase in unrealized holding gains $ (156,791) $ (216,549) $ 599,510 ============ ============ ============ The accompanying notes are an integral part of these financial statements. -21- AMERICAN HOSPITAL MANAGEMENT CORPORATION Statements of Cash Flows (concluded) Years ended June 30, 2000, 1999 and 1998 2000 1999 1998 ----------- ----------- ----------- Reconciliation of net income to net cash provided by (used in) operating activities: Net income (loss) $ 541,259 $ (164,824) $ 350,874 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 844,241 964,524 1,046,223 Partnership income (4,185) -- (4,688) Gain on sale of investments (167,590) (432,691) (517,370) Increase in cash surrender value -- -- (162,300) Change in assets and liabilities: Decrease (increase) in patient receivables, net 381,362 (724,760) (326,890) (Decrease) increase in third-party payors, net (590,337) (1,183,549) 1,039,367 Change in income taxes, net 302,832 (291,402) 65,354 Decrease (increase) in supplies 117,360 (56,484) (121,912) (Increase) decrease in prepaid expenses (11,313) 651 31,120 (Decrease) increase in trade accounts payable (472,004) 1,257,343 (163,204) (Decrease) increase in accrued expenses, net (19,727) 55,994 (96,556) ----------- ----------- ----------- Net cash provided by (used in) operating activities $ 921,897 $ (575,198) $ 1,140,018 =========== =========== =========== The accompanying notes are an integral part of these financial statements. -22- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements June 30, 2000, 1999 and 1998 (1) Summary of Significant Accounting Policies ------------------------------------------ Organization ------------ The Corporation owns and operates one acute-care hospital, located in Arcata, California. The Hospital provides inpatient, outpatient and emergency care services for residents of Humboldt County. It also operates other health care related enterprises in the same location. Admitting physicians are primarily practitioners in the local area. The Company was incorporated as a C-Corporation in California in 1955. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles 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. Actual results could differ from those estimates. Cash and Cash Equivalents ------------------------- Cash and cash equivalents represent cash in checking and demand savings accounts. Cash is held in several banks with no significant concentration of risk. Investments ----------- Investments in marketable securities with readily determinable fair values and all investments in debt securities are measured at fair value in the balance sheets. All investments are held for sale Investment income or loss (including realized gains and losses on investments, interest and dividends) is included in net income. Unrealized gains and losses on investments are excluded from net income but are reported as a separate component of stockholders' equity. Property and Equipment ---------------------- Property and equipment acquisitions are recorded at cost. Depreciation is provided over the estimated useful life of each class of depreciable asset and is computed on the straight-line method. Equipment under capital leases is amortized on the straight-line method over the shorter period of the lease term or the estimated useful life of the equipment. Such amortization is included in depreciation and amortization in the financial statements. Statements of Income -------------------- Transactions deemed by management to be ongoing, major or central to the provision of health care services are reported as revenues and expenses. Peripheral or incidental transactions are reported as other income, net. -23- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements, continued Net Patient Service Revenue --------------------------- The Hospital has agreements with third-party payors that provide for payments to the Hospital at amounts different from its established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges and per diem payments. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. Income Taxes ------------ Deferred income taxes are provided for the estimated income tax effect of temporary differences between financial and taxable income. Investments in Partnership -------------------------- Investment in a partnership is carried at the Company's equity in the partnership's net assets. The partnership was organized in 1968 to provide property sites for the hospital and medical centers. The two general partners, the Company and its president, own 26% each. The limited partners, consisting of local doctors, own the remaining 48%. Impairment of Long-Lived Assets ------------------------------- The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." This statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Also, in general, long- lived assets and certain identifiable intangibles to be disposed of should be reported at the lower of carrying amount or fair market value less cost to sell. Reclassifications ----------------- Certain accounts from prior years financial statements have been reclassified to be comparable with disclosure for the current year. -24- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements, continued (2) Net Patient Service Revenue --------------------------- The Hospital has agreements with third-party payors that provide for payments to the Hospital at amounts different from its established rates. A summary of the payment arrangements with major third-party payors follows: * Medicare. Inpatient acute care services rendered to Medicare program beneficiaries are paid at prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic, and other factors. Inpatient nonacute services, certain outpatient services, and defined capital and medical education costs related to Medicare beneficiaries are paid based on a cost reimbursement methodology. The Hospital is reimbursed for cost reimbursable items at a tentative rate with final settlement determined after submission of annual cost reports by the Hospital and audits thereof by the Medicare fiscal intermediary. The Hospital's classification of patients under the Medicare program and the appropriateness of their admission are subject to an independent review by a peer review organization under contract with the Hospital. The Hospital's Medicare cost reports have been audited by the Medicare fiscal intermediary through June 30, 1998. * Medicaid. Inpatient services rendered to Medicaid program beneficiaries are reimbursed under a cost reimbursement methodology. The Hospital is reimbursed at a tentative rate with final settlement determined after submission of annual cost reports by the Hospital and audits thereof by the Medicaid fiscal intermediary. The Hospital records supplies cost acquired and used by the operating room department as operating cost of that department. The intermediary disagreed with the classification of cost in the operating department and reclassified the revenue relating to the cost to Central Supply. Therefore, the Hospital has included the cost effect of the reclassification of revenue, as required by Medicaid, in its financial statements. Management of the Hospital feels this reclassification was made in error and is appealing the decision made by the intermediary. Until a final decision is reached, the Hospital will not include the effect of including the supplies cost in the operating department as part of the revenues of the Hospital. The Hospital's Medicaid cost reports have been audited by the Medicaid fiscal intermediary through June 30, 1998. The Hospital has also entered into payment agreements with certain commercial insurance carriers, health maintenance organizations and preferred provider organizations. The basis for payment to the Hospital under these agreements includes prospectively determined rates per discharge, discounts from established charges and prospectively determined daily rates. -25- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements, continued (2) Net Patient Service Revenue, continued -------------------------------------- Gross patient service revenue and related provision for contractual allowances for the years ended June 30, are summarized as follows: 2000 1999 1998 ----------- ----------- ----------- Gross patient service revenue $50,615,111 $46,721,019 $44,682,474 Less contractual allowances 25,855,883 22,631,419 21,689,516 ----------- ----------- ----------- Net patient service revenue $24,759,228 $24,089,600 $22,992,958 At June 30, 2000 and 1999, accounts receivable are primarily concentrated in federal and state governmental entities and other patients in which the Company does not believe there is any undue credit risk. For the three years ended June 30, 2000, contractual allowances and provisions for bad debts has totaled $74,193,686, approximately 52% of gross revenue. (3) Marketable Securities --------------------- Cost and fair value of marketable equity securities at June 30, 2000 and 1999, are as follows: 2000 1999 ---- ---- Available for sale: Cost $2,500,094 $2,911 Fair Value 5,957,315 5,966,623 Unrealized Gain 3,637,800 3,085,653 Unrealized Loss (180,579) (30,906) Gain or loss from sale of securities is based on specific identification of the securities sold. The change in net unrealized holding gains on securities available for sale, net of the tax effect, of $(156,791), $(216,549) and $599,510 for the years ended June 30, 2000, 1999 and 1998 have been charged to comprehensive income. For the years ended June 30, 2000, 1999 and 1998, realized gains and realized losses were $343,889 and $(176,299), $606,848 and $(174,157), and $578,111 and $(60,741), respectively. The Company has a portfolio credit line with the broker, Salomon Smith Barney, secured by the investment portfolio. The maximum amount available under the credit line at June 30, 2000 is $2,300,812, of which $654,363 is outstanding. The interest rate at June 30, 2000 was 8.875%. -26- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements, continued (4) Property and Equipment ---------------------- At June 30, 2000 and 1999, property and equipment is comprised of the following: 2000 1999 ----------- ----------- Land and improvements $ 44,500 $ 44,500 Buildings 5,575,593 4,814,668 Equipment 8,302,909 7,969,647 Construction in progress 204,707 562,247 ----------- ----------- 14,127,709 13,391,062 Accumulated depreciation and amortization 9,683,862 8,934,191 ----------- ----------- Net property and equipment $ 4,443,847 $ 4,456,871 ========== =========== Property and equipment include certain capitalized leases, as follows: 2000 1999 ----------- ----------- Equipment $ 975,913 $ 2,308,972 Less accumulated amortization 223,218 1,499,472 ----------- ----------- $ 752,695 $ 809,500 =========== =========== Amortization expense on capitalized leases for the years ended June 30, 2000, 1999 and 1998 totaled $138,957, $136,087 and $301,767, respectively. Annual future minimum lease payments under capitalized leases at June 30, 2000 are as follows: 2001 $ 160,774 2002 160,774 2003 327,250 2004 8,979 2005 717 --------- Total minimum lease payments 658,494 Less amount representing interest (6.75% to 19.46%) 116,067 --------- Present value of minimum lease payments 542,427 Less current maturity 110,244 --------- $ 432,183 ========= -27- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements, continued (5) Real Estate Held for Investment ------------------------------- Real estate held for investment consists of 14 properties, 9 of which have a building on their lots. These are itemized as follows: Property Location: McKinleyville, California $1,475,472 Willow Creek, California 335,608 Lakeport, California 333,521 Arcata, California 161,750 Eureka, California 134,908 ---------- 2,441,259 Less accumulated depreciation for rented property 441,350 ---------- $1,999,909 ========== The properties with buildings attached are either used temporarily for Hospital purposes, or used as rental property. All properties are valued at cost as it is not cost effective to determine fair value. Based on the property records available, there is no impairment of value. (6) Other Assets ------------ At June 30, 2000 and 1999, other assets include cash surrender value of four life insurance polices totaling $449,570, and investment in partnerships of $96,302. (7) Long-Term Debt -------------- Long-term debt at June 30, 2000 and 1999, consists of the following: 2000 1999 -------- ------- Bank note, secured by investment property, interest rate of 2.25% above bank index (6.812% at June 30, 1999), payable in monthly installments, maturing in 2021 $133,705 $136,468 Lease obligations, payable in installments through 2004 with a weighted average interest rate of 10.24% 542,427 605,397 -------- ------- 676,132 741,865 Less current maturities 113,187 99,711 -------- -------- $562,945 $642,154 ======== ======== The maturities of long-term debt for each of the succeeding five years subsequent to June 30, 2000, are as follows: 2001-$113,187; 2002-$124,937; 2003-$304,523; 2004-$12,539; 2005- $4,694, and beyond-$116,252. -28- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements, continued (8) Income Taxes ------------ At June 30, income tax expense (benefit) consisted of the following: 2000 ------------------------------------------------------------ Federal California Total ------- ----------- ---------- Current $ 69,120 $ 9,564 $ 78,684 Deferred 61,486 14,941 76,427 ------- ----------- ---------- $ 130,606 $ 24,505 $ 155,111 ======= =========== ========== 1999 Federal California Total Current $(175,600) $ 800 $ (174,800) ========= =========== ========== 1998 Federal California Total Current $ 82,505 $ 33,069 $ 115,574 Deferred 4,743 (2,816) 1,927 --------- ----------- ---------- $ 87,248 $ 30,253 $ 117,501 ========= =========== ========== Deferred tax expenses (credits) for 2000, 1999, and 1998 result from the following temporary differences: 2000 1999 1998 --------- -------- -------- California franchise tax $ ( 7,167) $(11,750) $ 8,921 Depreciation and amortization 84,089 (13,667) (31,277) Allowance for bad debts 29,221 (26,571) (3,067) Vacation accrual (32,700) (2,692) 39,391 Correction of deferred tax liability 54,680 Other 2,984 (12,041) --------- -------- -------- $ 76,427 $ 0 $ 1,927 ========= ======== ========== In addition, deferred tax liability is recorded in the balance sheet, resulting from the change in unrealized holdings for investments. The change in deferred income taxes for the years ended June 30, 2000 and 1999 was $(239,465) and $(144,367), respectively. -29- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements, continued (8) Income Taxes continued ------------ Recorded income tax expense (benefit) differs from that computed by applying the statutory income tax rates for the following reasons: 2000 1998 --------- -------- Computed tax at statutory rate $ 298,325 $ (115,472) $ 186,574 Increases (decreases) resulting from: California franchise tax (8,108) (272) (1,365) Domestic dividend exclusion allowance (18,165) (22,361) (27,335) Cash surrender value (112,833) (4,321) (60,958) Entertainment deduction 11,093 9,649 11,438 Net operating loss carryover (18,043) -- -- Other 2,842 (42,023) 9,147 --------- ------- -------- $ 155,111 $ (174,800) $ 117,501 ========= ========== ========== (9) Preferred Stock --------------- The preferred stock provides for cumulative dividends of $2 per share per year. The stock has a redemption and liquidating value of $27.50 per share, plus dividends in arrears. Total redemption and liquidating value of the outstanding shares at June 30, 2000 and 1999, was $1,287,778 and $1,304,659, respectively. In the event of redemption, two shares of common stock can be issued for each share of preferred stock redeemed (if option is exercised by preferred stockholder). Redemption of the preferred stock, in total only, is at the option of the Company. (10) Income per Common Share ----------------------- Basic income per common share was computed by dividing the net income after deduction of preferred stock dividend requirements of $93,657, $94,884 and $95,380, by the weighted average number of common shares outstanding (224,298, 225,592 and 227,332) for 2000, 1999 and 1998, respectively. Diluted income per common share was computed by dividing net income by the weighted average number of common shares outstanding, after redemption of preferred stock, (317,225 and 321,537) for 2000 and 1998, respectively. For 1999, there was an anti-dilutive effect for all shares. -30- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements, continued (11) Malpractice Insurance Arrangements ---------------------------------- The Hospital purchases professional and general liability insurance to cover medical malpractice insurance claims. The coverage, through a commercial insurance carrier, is on a claims-made basis. Under claims-made policies, all accidents reported to the insurer are covered. On the basis of the Hospital's current experience, neither an accrual for a potential extended period reporting policy, which could be necessary if the Hospital ceases to purchase claims-made coverage, nor an accrual for unreported incidents has been made. (12) 401(k) Plan ----------- The Plan is a defined contribution plan to which all employees are permitted to make salary deferrals under the 401(k) provision. Such contributions are credited directly to their accounts. Based on the Plan document, the Employer can make discretionary contributions for the participants. No employer contribution was made for any of the three years ended June 30, 2000. (13) Concentrations of Credit Risk ----------------------------- The Hospital grants credit without collateral to its patients, most of whom are local residents and are insured under third-party payor agreements. The mix of receivables from patients and third-party payors at June 30, 2000 and 1999, was as follows: 2000 1999 ---- ---- Medicare 33.4% 38.4% Medi-Cal 18.4 15.1 Other third-party payors 41.0 33.8 Patients 7.2 12.7 ----- ----- 100.0% 100.0% ===== ===== -31- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements, continued (14) Self-insurance Program ----------------------- The Hospital has elected to self-insure for health care benefits to its employees. Amounts charged to expense and transferred monthly to a trust fund to cover such claims are estimated using rates comparable to actual rates in the industry. Management believes that amounts provided are sufficient to cover claims and costs incurred through June 30, 2000. The rates used to determine the amounts charged to expense for claims and costs are adjusted periodically, as appropriate, to reflect actual experience. The Hospital has 100 percent insurance coverage for individual claim expenses in excess of $50,000 and for aggregate claim expenses in excess of $1,268,767. Health care benefit expense was approximately $830,022, $2,084,133 and $1,210,164 for the years ended June 30, 2000, 1999 and 1998, respectively. (15) Commitments and Contingencies ----------------------------- Commitments. The Company had one operating lease with monthly payments of $2,450 with a remaining term of 11 months. Total rental expense for the years ended June 30, 2000, 1999 and 1998 was $388,708, $380,325 and $227,486, respectively Litigation. The Hospital is involved in litigation and regulatory investigations arising in the course of business. After consultation with legal counsel and insurance carriers, management estimates that these matters will be resolved without material adverse effect on the Hospital's future financial position or results from operations. (16) Risks and Uncertainties ----------------------- The Company's future operating results may be affected by a number of factors. The Hospital's operations are in part dependent on governmental reimbursement plans. Significant changes in the level of governmental reimbursement could have a favorable or unfavorable impact on the operating results of the Hospital. Also, as additional managed health care plans are introduced into the service area, actual admissions to the Hospital could increase or decrease depending on the Hospital's ability to contract with the health plans. -32- AMERICAN HOSPITAL MANAGEMENT CORPORATION Notes to Financial Statements, concluded (17) Fair values of Financial Instruments ------------------------------------ Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument; they are subjective in nature and involve uncertainties, matters of judgment and, therefore, cannot be determined with precision. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular instrument. Changes in assumptions could significantly affect the estimates. Since the fair value is estimated as of June 30, 2000, the amounts that will actually be realized or paid at settlement of the instruments could be significantly different. The carrying amount of cash and cash equivalents is assumed to be the fair value because of the liquidity of these instruments. Accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments. The recorded balance of notes payable are assumed to be the fair value since the rates specified in the notes approximate current market rates. -33- Item 9. Changes in and disagreements with accountants on - ------- ------------------------------------------------ Accounting and Financial Disclosure ----------------------------------- None. -34- PART III Item 10. Directors and Executive Officers of the Registrant - -------- -------------------------------------------------- Name and principal occupation during last five years Since Age Office Occupation - ---------------------- ----- --- ------ ---------- Lawrence V. Blashaw 1970 74 Director President of Freight For- warding Co. Charles F. Forbes, Attorney 1968 70 Secretary & Retired Director Attorney Allen E. Shaw, President 1960 82 President & President of of the Company Director Company Douglas A. Shaw, Vice President 1981 49 Vice President Hospital Administrator & Director Administrator Richard J. Stanczak 1977 74 Director Business Business Consultant Consultant Michael Young, Controller 1978 52 Treasurer Hospital Administrator Controller Donald J. Krpan, D.O. 1988 64 Director President of the American Osteopath Association John Aryanpur, M.D. 1998 40 Director Neurosurgeon -35- Item 11. Executive Compensation - -------- ---------------------- The following table sets forth the aggregate direct remuneration paid or accrued by the Company for services in all capacities for the fiscal year ended June 30, 2000, to each director and officer of the Company whose aggregate direct remuneration exceeded $100,000 and to all directors and officers (as a group) who were such at any time during the last fiscal year. Cash and cash equivalent forms of remuneration --------------------- Name of individual Salaries, fees, or number of Capacities in which directors' fees persons in group remuneration was received and bonuses - ---------------- ------------------------- ----------- Allen E. Shaw President and Chairman of $109,402 the Board Douglas A. Shaw Vice President, Administrator 52,000 Michael Young Treasurer and Controller of 71,032 Mad River Community Hospital All other directors and officers as a group (5 persons) 6,950 -------- (8 persons) $239,384 ======== Note: There was no contractual agreement with any directors regarding compensation, pensions or stock options. Directors, from time to time, are compensated for attendance at meetings for their general administrative duties although there is no required payment. Total director compensation for 2000 was $6,950. There have not been any payments made to officers or directors for severance of relationship. -36- Item 12. Security Ownership of Certain - -------- ----------------------------- Beneficial Owners and Management -------------------------------- Owners of 5% or more of outstanding voting securities at June 30, 1999, were as follows: Amount and nature of Title of beneficial Percent Name of beneficial owner class ownership of class - ------------------------ ----- --------- -------- Allen E. Shaw Family Common 118,079 52.80% San Clemente, California Preferred 1,970 4.20% Arcata Hospital Corporation* Common 20,898 9.38% Palos Verdes Estates, California Preferred 11,481 24.51% Security ownership of management as a group - ------------------------------------------- All directors and officers as Common 120,579 53.92% a group All directors and officers Preferred 1,970 4.20% a group Security ownership of management is as follows: Number of shares ---------------- Name Common Preferred ---- ------ --------- Lawrence V. Blashaw 2,500 -- Allen E. Shaw Family 118,079 1,970 ------- ----- 120,579 1,970 ======= ===== * Arcata Hospital Corporation is 98% owned by shareholders of the Company. -37- Item 13. Certain Relations and - -------- --------------------- Related Transactions -------------------- None. -38- PART IV Item 14. Exhibits, Financial Statement - -------- ----------------------------- Schedules, and Reports on Form 8-K ---------------------------------- Page - ---- (a) (1) The following financial statements are included in Part II, Item 8: Reports of Independent Auditors' Financial Statements: Balance Sheets June 30, 2000 and 1999 Statements of Operations Years ended June 30, 2000, 1999 and 1998 Statements of Comprehensive Income Years ended June 30, 2000, 1999 and 1998 Statements of Stockholders' Equity Years ended June 30, 2000, 1999 and 1998 Statements of Cash Flows Years ended June 30, 2000, 1999 and 1998 Notes to Financial Statements (2) The following financial schedules for the Years 2000, 1999 and 1998 are submitted herewith: Schedule II - Valuation and Qualifying Accounts Schedule III - Real Estate and Accumulated Depreciation All other schedules are omitted because they are not applicable or not required, or because the required information is included in the financial statements or notes hereto. (3) Exhibits included herein: None (b) Registrant did not file any reports on Form 8-K during the quarter ended June 30, 2000. -39- Schedule II AMERICAN HOSPITAL MANAGEMENT CORPORATION Valuation and Qualifying Accounts Years ended June 30, 2000, 1999 and 1998 Balance, Charged Charged Balance, beginning to to other end of year income accounts Deductions of year ------- ------ -------- ---------- ------- Allowance for doubtful receivables: 2000 $ 230,699 $ 1,723,497 $ 1,796,664 $ 157,532 1999 292,723 1,176,463 1,238,487 230,699 1998 285,055 1,116,908 1,109,240 292,723 -40- Schedule III AMERICAN HOSPITAL MANAGEMENT CORPORATION Real Estate and Accumulated Depreciation Years ended June 30, 2000, 1999 and 1998 Related Accumulated Useful Description debt Land Buildings Total Depreciation Life --------------------------------------------------------------------------------------------------------- Rental property $133,705 $482,346 $1,126,725 $1,609,071 $441,351 25 Investment None 832,189 832,189 ---------------------------------------------------------------- $133,705 $1,314,535 $1,126,725 $2,441,260 $441,351 =============================================================== Cost: Balance at June 30, 2000, 1999 and 1998 $ 2,241,260 Accumulated Depreciation: Balance at June 30, 1998 $ 350,013 Depreciation during period 42,669 ----------- Balance at June 30, 1999 395,682 Depreciation during period 45,669 ----------- Balance at June 30, 2000 $ 441,351 =========== -41- SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized: AMERICAN HOSPITAL MANAGEMENT CORPORATION By: /s/ Allen E. Shaw ------------------------------- Allen E. Shaw, President Date: September 16, 2000 ----------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the principal Executive Officer, principal Financial Officer, Secretary and majority of Board Members on behalf of the Registrant and in the capacities and on the dates indicated: Signature Capacity Date --------- -------- ---- /s/ Allen E. Shaw President and Director September 16, 2000 - ------------------------- ---------------------- ------------------- Allen E. Shaw /s/ Charles F. Forbes Secretary and Director September 16, 2000 - ------------------------- ---------------------- ------------------- Charles F. Forbes /s/ Michael J. Young Treasurer and Chief September 16, 2000 - ------------------------- Accounting Officer ------------------- Michael J. Young ---------------------- /s/ Donald J. Krpan Director September 16, 2000 - ------------------------- ---------------------- ------------------- Donald J. Krpan /s/ Doug Shaw Director September 16, 2000 - ------------------------- ---------------------- ------------------- Doug Shaw -42-