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, 1997      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-


<PAGE>

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 (228,057 at June 30, 1997).

Total number of pages, including cover - 35



                                       -2-


<PAGE>

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 two out-patient
                  clinics, one in-house clinic and one clinic in the outlying
                  community thereby maintaining the Hospital's presence in the
                  service area. New buildings are planned for those departments
                  still housed in mobile facilities adjacent to the Hospital.
                  The business department has been moved to a new permanent
                  location. The area will be used for the expansion of the adult
                  day health care building. In addition, a cath-lab is in the
                  final process of being approved for installation in the
                  Hospital. An MRI is on order and is expected to be operating
                  adjacent to the Hospital by early 1998.

                  Another positive factor supporting Hospital use is community
                  involvement. As the largest private employer in Arcata, the
                  Hospital provides employment to approximately 520 local
                  residents and, through its Home Health and 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.

                                       -3-


<PAGE>
                  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.

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 78-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. It also operates an after-hours
                  clinic at this location.

                  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 will be expanded. This entity will continue to lease
                  the facility from the Hospital.

Item 3.           Legal Proceedings
------            -----------------
                  None.

                                       -4-


<PAGE>



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-


<PAGE>



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 415 shareholders at June 30, 1997. No dividends
                  were paid on common stock during the three years ended June
                  30, 1997. The Company is current on paying all cumulative
                  preferred stock dividends.


                                       -6-


<PAGE>



Item 6.           Selected Financial Data
------            -----------------------

<TABLE>
<CAPTION>
                                                              Year ended June 30
                                ----------------------------------------------------------------------------
                                1997              1996              1995              1994              1993
                                ----              ----              ----              ----              ----
<S>                       <C>               <C>                <C>                <C>             <C>   
Total operating
revenue, net              $21,843,882       $21,421,707        $21,148,254        $20,671,387      $19,218,602

Net income                    200,588           223,815            593,342            502,956          387,436

Primary earnings
per share                         .45               .52               2.06               1.67             1.18

Fully diluted
earnings per share                .62               .67               1.75               1.47             1.13

Cash dividends per
common share                       --                --                 --                 --               --

Total assets               20,342,679        20,557,286         19,800,615         18,325,512       16,995,552

Long-term debt                206,932           403,581            803,248            861,648          809,411

Working capital             8,542,725         7,851,133          7,165,927          6,010,324        6,265,004

Redeemable
preferred stock                48,334            50,850             51,623             51,768           51,900

Stockholders'
equity                     15,060,535        14,633,038         14,077,102         13,040,598       12,636,033


</TABLE>


                                       -7-


<PAGE>

Item 7            Management's Discussion and Analysis of
------            Financial Condition and Results of Operations
                  ---------------------------------------------

                                            1997
                                            ----
                  Results of Operations
                  ---------------------

                  Hospital revenues increased slightly during 1997 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 $41,030,000 in 1997 compared
                  to $40,617,000 in 1996, a 1% increase of $413,000.

                  Contractual allowances totaled $15,147,000 in 1997 compared to
                  $13,808,000 in 1996, a 10% 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. 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 MediCal patients.

                  Operating costs and expenses were $27,145,000 compared to
                  $27,928,000 in 1996, a 3% decrease. Operating costs actually
                  increased $524,000 while the provision for bad debts decreased
                  by $1,309,000, resulting in the combined decrease of 3%. The
                  Hospital has concentrated efforts in the collection of
                  receivables resulting in less accounts being written off.

                  The continued reduction in third-party reimbursement is a
                  major contributing factor to the 1997 operating loss of
                  $805,000. Net income, after investment income was $201,000 in
                  1997 compared to $224,000 in 1996.

                  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 $125,000,
                  while total investment income was $990,000. 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.

                                       -8-


<PAGE>

                                            1997 continued
                                            --------------


                  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 $6,438,000 in cash and
                  short-term investments. As previously noted, some of these
                  investments, as determined by management, will be used to fund
                  needed expansion.

                  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
                  $706,000 in 1997. 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-


<PAGE>

                  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                  ---------------------------------------------

                                          1996
                                          ----

                  Results of Operations
                  ---------------------

                  Hospital revenues increased slightly during 1996 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 $40,617,000 in 1996 compared
                  to $39,002,000 in 1995, a 4% increase of $1,615,000.

                  Contractual allowances totaled $13,808,000 in 1996 compared to
                  $13,638,000 in 1995, only a 1% increase. Government regulatory
                  agencies attempt to reimburse the hospital based on the cost
                  of services rendered. As the government continues its efforts
                  to cut back on rising health care costs, the actual
                  reimbursement continues to decrease and the Hospital is unable
                  to even recoup costs on many Medicare patients. Medi-Cal has
                  also imposed certain limitations (discharge and Maximum
                  Inpatient Reimbursement Liability) that have adversely
                  affected reimbursements. As discussed in the next paragraph,
                  the result of these continuing cuts is to increase the
                  provision for bad debts.

                  Operating costs and expenses were $27,928,000 compared to
                  $25,749,000 in 1995, an 8.5% increase. This increase, other
                  than the provision for bad debts, is mainly related to
                  increased labor costs and moderate inflation. In 1996, the
                  provision for bad debts increased 24% from 1995. The provision
                  for bad debts increases as third-party payors reduce the
                  amount they reimburse, as discussed in prior paragraph.
                  Increased use of outpatient services and the change in patient
                  mix also affects bad debt write offs.

                  The result in the reduction of third-party reimbursement,
                  causing increased bad debt write offs, was a $769,000 decrease
                  in income from operations. Net income, after investment
                  income, was $224,000 in 1996 compared to $593,000 in 1995.

                  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 $113,600 while
                  total investment income was $1,076,100. 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 close to the Hospital
                  and medical staff members, 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.
                                      -10-


<PAGE>
                                 1996 continued
                                 --------------

                  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 $6,187,000 in cash and
                  short-term investments. As previously noted, some of these
                  investments, as determined by management, will be used to fund
                  needed expansion.

                  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
                  $608,400 in 1996. 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 1, 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-


<PAGE>

 Item 8.          Financial Statements and Supplementary Data
 ------           -------------------------------------------

                              FINANCIAL STATEMENTS
                              --------------------


                  Description                                        Page
                  -----------                                        ----

Independent Auditors' Report                                            14

Financial Statements:

         Balance Sheets - June 30, 1997 and 1996                     15-16

         Statements of Income -
           Years ended June 30, 1997, 1996 and 1995                     17

         Statements of Stockholders' Equity
           Years ended June 30, 1997, 1996 and 1995                     18

         Statements of Cash Flows -
           Years ended June 30, 1997, 1996 and 1995                  19-20

         Notes to Financial Statements                               21-27

Item 14.  Exhibits, Financial Statement, Schedules
            and Reports on Form 8-K                                     33




                                      -12-


<PAGE>






                    AMERICAN HOSPITAL MANAGEMENT CORPORATION

                   Annual Report for Corporations - Form 10-K
                       Years ended June 30, 1997 and 1996


                              Financial Statements,
                     Supplementary Data and Auditors' Report









                                      -13-


<PAGE>

                          Independent Auditors' Report
                          ----------------------------


         The Board of Directors
         American Hospital Management Corporation


         We have audited the accompanying balance sheets of American Hospital
         Management Corporation as of June 30, 1997 and 1996, and the related
         statements of income, 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, 1997, 1996 and 1995.
         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, 1997 and 1996, and the
         results of its operations and its cash flows for the years ended June
         30, 1997, 1996 and 1995 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.


                                                             K.C. Miller, CPA

         West Covina, California
         September 26, 1997


                                      -14-
<PAGE>

                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                                 Balance Sheets
                             June 30, 1997 and 1996
<TABLE>
<CAPTION>

                           Assets
                                                                               1997                     1996
                                                                               ----                     ----
<S>                                                                  <C>                         <C>   
Current assets:
         Cash and cash equivalents ($425,000 held
          as security for a letter of credit in 1997)                 $      505,027             $     925,843
         Investments                                                       5,933,303                 5,260,968
         Receivables:
              Patients, net of estimated uncollectibles
                of $285,055 and $202,650, in 1997
                and 1996, respectively                                     6,046,298                 6,231,306
              Other                                                          350,429                   290,028
         Supplies, at lower of cost
           (first-in, first-out) or market                                   852,654                   855,334
         Prepaid expenses                                                    108,207                    84,981
                                                                        ------------             -------------

                  Total current assets                                    13,795,918                13,648,460
                                                                        ------------             -------------
Deferred income taxes                                                        432,702                   478,107
                                                                        ------------             -------------

Investments and other assets:
         Real estate held for investment, at cost, net
           of $307,476 and $268,071 accumulated
           depreciation in 1997 and 1996, respectively                     1,935,397                 1,974,803
         Investments in partnerships                                          87,429                    87,086
         Cash surrender value of life insurance                              287,270                   227,270
         Other                                                               113,275                   146,216
                                                                        ------------             -------------
                                                                           2,423,371                 2,435,375
                                                                        ------------             -------------
Property and equipment, at cost:
         Land and improvements                                                44,500                    44,500
         Buildings                                                         4,233,728                 4,233,728
         Equipment                                                         6,314,556                 5,727,870
         Construction in progress                                            158,879                        --
                                                                        ------------             -------------
                                                                          10,751,663                10,006,098
         Less accumulated depreciation and
           amortization                                                    7,060,975                 6,010,754
                                                                        ------------             -------------

                                                                           3,690,688                 3,995,344
                                                                        ------------             -------------

                                                                         $20,342,679               $20,557,286
                                                                        ============             =============
</TABLE>

(continued)
The accompanying notes are an integral part of these financial statements.

                                      -15-


<PAGE>

                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                           Balance Sheets (concluded)
                             June 30, 1997 and 1996
<TABLE>
<CAPTION>

                  Liabilities and Stockholders' Equity
                  ------------------------------------
                                                                              1997                       1996
                                                                              ----                       ----
<S>                                                                   <C>                        <C>   
Current Liabilities:
     Current maturities of long-term debt                              $      177,981             $     276,660
     Accounts payable and accrued expenses:
         Trade                                                                973,944                   562,306
         Accrued liabilities                                                1,764,500                 1,802,106
         Estimated third-party payor settlements                              721,754                 1,823,149
     Income taxes:
         Current                                                               30,502                        --
         Deferred                                                           1,584,512                 1,333,106
                                                                          -----------               -----------

                  Total current liabilities                                 5,253,193                 5,797,327
                                                                          -----------               -----------

Long-term debt, less current maturities                                        28,951                   126,921
                                                                          -----------               -----------

Stockholders' equity:
     $2  cumulative preferred stock, par value 
         $1 per share; authorized 100,000 shares; 
         issued 65,270.82 shares; reacquired 
         16,937.28 and 14,421.08 shares; outstanding 
         48,333.54 and 50,849.74 shares; aggregate
         redemption and liquidating value of $1,329,172 
         and $1,398,368 at June 30, 1997 and 1996,
         respectively                                                          48,334                   50,850
     Common stock, par value $1.00 per share;
         authorized 400,000 shares, issued 
         249,051 shares, reacquired 20,994 and
         15,838 shares; outstanding - 228,057 and 
         233,123 shares at June 30, 1997 and 1996, 
         respectively                                                         228,057                  233,213
     Additional paid-in capital                                               194,427                  296,210
     Unrealized holdings gains, net, for investments                        1,455,544                1,026,809
     Retained earnings                                                     13,134,173               13,025,956
                                                                           ----------               ----------

                  Total stockholders' equity                               15,060,535               14,633,038
                                                                           ----------               ----------

                                                                          $20,342,679              $20,557,286
                                                                           ==========               ==========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      -16-
<PAGE>

                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                              Statements of Income
                    Years ended June 30, 1997, 1996, and 1995
<TABLE>
<CAPTION>

                                                                 1997                1996                1995
                                                                 ----                ----                ----
<S>                                                           <C>                  <C>              <C>        
Net patient service revenue                                   $   25,883,197       $26,809,409      $25,364,285

Other revenue                                                        456,549           417,075          453,126
                                                                ------------     -------------    -------------

                  Total operating revenue                         26,339,746        27,226,484       25,817,411
                                                                ------------     -------------    -------------

Operating costs and expenses:
     Professional care of patients                                13,730,083        13,462,486       12,984,368
     General services                                              2,588,394         2,734,438        2,426,633
     Administrative services                                       3,388,734         2,989,859        2,759,002
     Employee health and welfare                                   1,459,831         1,318,048        1,322,370
     Medical malpractice insurance                                   382,619           406,630          430,435
     Interest                                                         48,775            76,290           97,401
     Depreciation and amortization                                 1,050,221         1,135,152        1,059,902
     Provision for bad debts                                       4,495,864         5,804,777        4,669,157
                                                                ------------     -------------    -------------
                  Total operating costs and expenses              27,144,521        27,927,680       25,749,268
                                                                ------------     -------------    -------------

                  (Loss) income from operations                     (804,775)         (701,196)          68,143
                                                                ------------     -------------    -------------
Other income:
     Investment income                                               990,102         1,076,148          944,052
     Other                                                            36,418            31,019            9,974
                                                                ------------     -------------    -------------
                                                                   1,026,520         1,107,167          954,026
                                                                ------------     -------------    -------------
Income before provision for income taxes                             221,745           405,971        1,022,169
     Provision for income taxes                                       21,157           182,156          428,827
                                                                ------------     -------------    -------------

                  Net income                                   $     200,588     $     223,815      $   593,342
                                                               =============     =============    =============


Primary earnings per share                                     $         .45     $         .52      $      2.06
                                                               =============     =============    =============

Fully diluted earnings per share                               $         .62     $         .67      $      1.75
                                                               =============     =============    =============

</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      -17-

<PAGE>
                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                    Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>

                                                                 1997                1996               1995
                                                                 ----                ----               ----
<S>                                                          <C>                <C>             <C>  
Stockholders' Equity:

     Cumulative Preferred Stock
       Beginning balance                                      $       50,850    $       51,623   $       51,768
          Reacquired stock                                             2,516               773              145
                                                              --------------    --------------  ---------------
       Ending balance                                                 48,334            50,850           51,623
                                                              --------------    --------------  ---------------

     Common Stock
       Beginning balance                                             233,213           236,479          238,579
          Reacquired stock                                             5,156             3,266            2,100
                                                              --------------    --------------  ---------------
       Ending balance                                                228,057           233,213          236,479
                                                              --------------    --------------  ---------------

     Additional paid-in-capital
       Beginning balance                                             296,210           340,912          356,150
          Reacquired stock                                           101,783            44,702           15,238
                                                              --------------    --------------  ---------------
       Ending balance                                                194,427           296,210          340,912
                                                              --------------    --------------  ---------------

     Unrealized holdings gains, net, for investments
       Beginning balance                                           1,026,809           551,933                0
          Increase in unrealized holdings gains                      428,735           474,876          551,933
                                                              --------------    --------------  ---------------
       Ending balance                                              1,455,544         1,026,809          551,933
                                                              --------------    --------------  ---------------

     Retained Earnings
       Beginning balance                                          13,025,956        12,896,155       12,394,101
          Net income                                                 200,588           223,815          593,342
          Cash dividends paid on preferred stock                     (92,371)          (94,014)         (91,288)
                                                              --------------    --------------  ---------------
       Ending balance                                             13,134,173        13,025,956       12,896,155
                                                              --------------    --------------  ---------------

         Total Stockholders' equity                              $15,060,535       $14,633,038      $14,077,102
                                                              ==============    ==============  ===============


</TABLE>
The accompanying notes are an integral part of these financial statements.

                                      -18-


<PAGE>
                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                            Statements of Cash Flows
                    Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>

                                                                     1997              1996             1995
                                                                     ----              ----             ----
<S>                                                           <C>                 <C>              <C>   
Cash flows from operating activities:
     Cash received from patients
       and third-party payors                                    $20,927,495       $22,245,219      $20,398,950
     Cash paid to employees and suppliers                        (21,256,175)      (21,312,243)     (19,638,638)
     Investment income received                                      934,579         1,025,397          666,219
     Interest paid                                                  ( 48,775)          (76,290)         (97,401)
     Income taxes, net change                                         20,332          (412,073)        (225,467)
                                                               -------------      ------------     ------------
              Net cash provided by
                operating activities                                 577,456         1,470,010        1,103,663
                                                               -------------      ------------     ------------

Cash flows from investing activities:
     Purchase of real estate held for investment, net                      -          (127,135)               -
     Distributions from partnerships                                       -                 -          132,424
     Purchase of property and equipment, net                        (706,159)         (608,324)        (844,109)
     Proceeds from sale of short-term investments                  2,433,022         2,381,529        1,983,228
     Purchase of short-term investments                           (2,691,259)       (2,356,870)      (2,119,134)
     Other                                                           (60,401)         (110,286)         (20,596)
                                                               -------------      ------------     ------------
              Net cash used in investing activities               (1,024,797)         (821,086)        (868,187)
                                                               -------------      ------------     ------------

Cash flows from financing activities:
     Proceeds from issuance of long-term debt                        121,216                -           336,766
     Principal reductions of long-term debt                         (317,865)         (399,667)        (395,166)
     Dividends paid                                                  (92,371)          (94,014)         (91,288)
     Payments for reacquired stock                                  (109,455)          (48,741)         (17,483)
                                                               -------------      ------------     ------------
              Net cash used by financing activities                 (398,475)         (542,422)        (167,171)
                                                               -------------      ------------     ------------

Net (decrease) increase in cash and cash equivalents                (845,816)          106,502           68,305
Cash and cash equivalents, beginning of year                         925,843           819,341          751,036
                                                               -------------      ------------     ------------
Cash and cash equivalents, end of year, unrestricted           $      80,027      $    925,843     $    819,341
                                                               =============      ============     ============
Supplemental schedule of non-cash investing
 activities:
     Increase in fair value of investments                     $     714,559      $    791,459     $    919,888
     Increase in deferred taxes                                     (285,824)         (316,583)        (367,955)
                                                               -------------      ------------     ------------

     Increase in unrealized holding gains                      $     428,735      $    474,876     $    551,933
                                                               =============      ============     ============

</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      -19-


<PAGE>
                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                      Statements of Cash Flows (concluded)
                    Years ended June 30, 1997, 1996 and 1995

<TABLE>
<CAPTION>

                                                                     1997              1996             1995
                                                                     ----              ----             ----
<S>                                                            <C>               <C>              <C>    
Reconciliation of net income to net cash 
  provided by operating activities:
Net income                                                      $   200,588      $    223,815     $    593,342
Adjustments to reconcile net income to net
     cash provided by operating activities:
         Depreciation and amortization                            1,083,162         1,169,924        1,092,844
         Partnership income                                            (343)           (2,957)        (149,813)
         Gain on sale of investments                               (124,539)         (113,586)        (170,936)
         Increase in cash surrender value                           (60,000)          (18,621)         (21,924)

Change in assets and liabilities:
         (Decrease) increase in patient receivables, net            185,008           (53,082)        (385,725)
         (Decrease) increase in third-party payors, net          (1,101,395)          876,594         (363,579)
         (Decrease) increase in income taxes, net                    41,489          (229,917)         203,361
         (Decrease) increase in supplies                              2,680            31,842         (100,581)
          Decrease in prepaid expenses                              (23,226)          (19,295)          (1,893)
         (Increase) decrease in trade accounts payable              411,638          (576,265)         189,208
         (Decrease) increase in accrued expenses, net               (37,606)          181,558          219,359
                                                                -----------      ------------     ------------

Net cash provided by operating activities                       $   577,456      $  1,470,010     $  1,103,663
                                                                ===========      ============     ============

</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      -20-


<PAGE>

                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                          Notes to Financial Statements
                          June 30, 1997, 1996 and 1995

(1)      Summary of Significant Accounting Policies
         ------------------------------------------

         Organization
         ------------
         The Corporation owns and operates one acute-care hospital in the
         Arcata, California area. It also operates other health-care related
         enterprises in the same location. Most of the patients to whom the
         hospital extends credit are residents of the area.

         Net Patient Service Revenue
         ---------------------------
         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-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.

         Statement of Revenue and Expenses
         ---------------------------------
         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.

         Cash and Cash Equivalents
         -------------------------
         All cash and cash equivalents represent cash in checking and demand
         savings accounts. Cash is held in several banks with no significant
         concentration of risk.

         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.

         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%.

                                      -21-


<PAGE>
                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                    Notes to Financial Statements, continued

         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,
         1997. 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 $45,000 and for aggregate claim
         expenses in excess of $1,459,187.

         Health care benefit expense was approximately $1,459,831, $1,318,048
         and $1,322,370 for the years ended June 30, 1997, 1996 and 1995,
         respectively.

         Use of Estimates
         ----------------
         Generally accepted accounting principles require management to make
         estimates and assumptions that affect the reported amounts of assets
         and liabilities and the disclosure of contingent assets and liabilities
         at year-end and the reported amounts of revenues and expenses during
         the year. Actual results could differ from those estimates.

         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, 1997, 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.

         Reclassifications
         -----------------
         Certain accounts from prior years financial statements have been
         reclassified to be comparable with disclosure for the current year.

                                      -22-


<PAGE>

                    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, 1994.

              *   Medicaid. Inpatient and outpatient 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's
                  Medicaid cost reports have been audited by the Medicaid fiscal
                  intermediary through June 30, 1995.

              *   Blue Cross. Inpatient services rendered to Blue Cross
                  subscribers are reimbursed at prospectively determined rates
                  per day of hospitalization. The prospectively determined
                  per-diem rates are not subject to retroactive adjustment.

         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.

         At June 30, 1997 and 1996, 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.

(3)      Investments
         -----------
         For the year ended June 30, 1995, the Company adopted Statement of
         Financial Accounting Standard No. 115(SFAS 115), Accounting for Certain
         Investments in Debt and Securities, SFAS 115 requires that securities,
         which are available for sale, be recorded at their fair value.
         Unrealized holding gains and losses are reported in a separate
         component of stockholders' equity, net of tax effect, until realized.
         The total amount recorded in stockholders' equity was $1,455,544 of
         which $403,400 relates to the change in unrealized gain in securities
         for the current year, net of the income tax effect.

                                      -23-
<PAGE>

                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                    Notes to Financial Statements, continued


         Short term investments at June 30, 1997 and 1996 consist of the
         following:
                                                     1997              1996
                                                     ----              ----
                           Equity securities:
                               Fair Value            $5,933,303     $5,260,968
                               Unrealized Gain       $2,466,856     $1,680,334
                               Unrealized Loss       $  (40,950)    $  (82,381)

         Gain or loss from sale of securities is based on specific
         identification of the securities sold. For the year ended June 30, 1997
         and 1996, realized gains and realized losses were $327,314 and
         $(202,775), and $170,507 and $(56,921), respectively.

(4)      Capital Lease Obligations
         -------------------------
         A portion of the Hospital's equipment is leased under capital leases
         that expire at various dates through 1999. Property and equipment, at
         June 30, 1997 and 1996, respectively, includes the following amounts
         for property leased under capital leases:
                                                           1997       1996
                                                           ----       ----
                  Equipment                          $ 1,495,799    $1,374,581
                    Less accumulated amortization      1,061,888       774,850
                                                       ---------    ----------
                                                     $   433,911    $  599,731
                                                      ==========    ==========

         Amortization expense on capitalized leases for the years ended June 30,
         1997, 1996 and 1995 totaled $287,038, $272,240 and $235,889,
         respectively.

         Annual future minimum lease payments under capitalized leases at June
         30, 1997 are as follows:

                                                     1998             $ 189,736
                                                     1999                23,984
                                                     2000                 6,940
                                                                      ---------
                  Total minimum lease payments                          220,660
                  Less amount representing interest (5.5% to 10.75%)    (13,728)
                                                                      ---------
                  Present value of minimum lease payments               206,932
                  Less current maturity                                 177,981
                                                                      ---------
                                                                      $  28,951
                                                                      =========

                                      -24-


<PAGE>

                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                    Notes to Financial Statements, continued

(5)      Net Patient Service Revenue
         ---------------------------

         Gross patient service revenue and related provision for contractual
         allowances for the years ended June 30, are summarized as follows:
<TABLE>
<CAPTION>

                                                1997               1996             1995
                                                ----               ----             ----
<S>                                          <C>             <C>              <C>        
         Gross patient service revenue       $41,030,222     $ 40,617,321     $39,002,465
              Less contractual allowances     15,147,025       13,807,912      13,638,180
                                             -----------     ------------     -----------
         Net patient service revenue         $25,883,197     $ 26,809,409     $25,364,285
                                             ===========     ============     ===========
</TABLE>

(6)      Income Taxes

         At June 30, income tax expense consisted of the following:

                                                           1997    
                                         ------------------------------------
                                           Federal     California      Total
                                           -------     ----------      -----

                  Current                $  48,502     $  33,995     $  82,497
                  Deferred                 (38,344)      (22,996)      (61,340)
                                         ---------     ---------     ---------
                                         $  10,158     $  10,999     $  21,157
                                         =========     =========     =========


                                                           1996  
                                         ------------------------------------
                                           Federal     California      Total
                                           -------     ----------      -----

                  Current                  $139,977     $  54,424     $194,401
                  Deferred                   (8,447)       (3,798)     (12,245)
                                           --------     ---------    ---------
                                           $131,530     $  50,626     $182,156
                                           ========     =========    =========

                                                           1995
                                         ------------------------------------
                                             Federal    California       Total
                                             -------    ----------       -----

                  Current                  $141,990     $ 53,808       $195,798
                  Deferred                  184,833       48,196        233,029
                                           --------     --------      ---------
                                           $326,823     $102,004       $428,827
                                           ========     ========      =========

         Deferred tax expenses (credits) for 1997, 1996, and 1995 result from
         the following temporary differences:
                                                1997       1996          1995
                                                ----       ----          ----

         California franchise tax          $  16,095    $  19,494     $  21,203
         Depreciation and amortization       (67,878)      26,532        38,112
         Allowance for bad debts             (35,681)        (229)      189,582
         Vacation accrual                     33,937      (26,387)       (8,464)
         Other                                (7,813)     (31,655)       (7,404)
                                           ---------    ---------    ----------
                                           $ (61,340)   $ (12,245)     $233,029
                                           =========    =========    ==========

                                      -25-


<PAGE>

                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                    Notes to Financial Statements, continued

         In addition, deferred tax liability is recorded in the balance sheet,
         resulting from the change in unrealized holdings for investments. The
         increase in deferred income taxes for the years ended June 30, 1997 and
         1996 was $235,471 and $270,219, respectively.

         Recorded income tax expense differs from that computed by applying the
         statutory income tax rates for the following reasons:
<TABLE>
<CAPTION>

                                                     1997             1996        1995
                                                     ----             ----        ----
<S>                                               <C>           <C>            <C>      
         Computed tax at statutory rate           $  95,866     $  175,785     $ 442,600
         Increases (decreases) resulting from:
            California franchise tax                 (5,691)       (13,671)      (32,548)
            Domestic dividend exclusion
               allowance                            (37,056)       (24,661)      (25,466)
            Cash surrender value                    (22,260)         8,063         4,620
            Prior year (over) under accrual         ( 9,702)        36,640        39,621
                                                  ---------     ----------     ---------

                                                  $  21,157     $  182,156     $ 428,827
                                                  =========     ==========     =========
</TABLE>

(7)      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, 1997 and 1996, was
         $1,329,172 and $1,398,368, 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.

(8)      Income per Common Share
         -----------------------

         Income per common share, assuming no dilution, was computed by dividing
         the net income after deduction of preferred stock dividend requirements
         of $96,667, $101,699 and $103,247, by the weighted average number of
         common shares outstanding (230,635, 234,846 and 237,846) for 1997, 1996
         and 1995, respectively. Income per common share, assuming full
         dilution, was computed by dividing net income by the weighted average
         number of common shares outstanding, after redemption of preferred
         stock, (324,724, 334,912, 339,726) for 1997, 1996 and 1995,
         respectively. (Note 7)


                                      -26-


<PAGE>

                    AMERICAN HOSPITAL MANAGEMENT CORPORATION
                    Notes to Financial Statements, concluded


(9)      Malpractice Insurance Arrangements
         ----------------------------------

         The Hospital maintains medical malpractice insurance coverage through a
         commercial insurance carrier 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.

(10)     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 contribution was made for any of the three years
         ended June 30, 1997.



                                      -27-


<PAGE>




Item 9.           Changes in and disagreements with accountants on
------            Accounting and Financial Disclosure
                  -----------------------------------

                  None.




                                      -28-


<PAGE>



PART III

Item 10.          Directors and Executive Officers of the Registrant
-------           --------------------------------------------------
<TABLE>
<CAPTION>

Name and principal occupation
during last five years                      Since             Age      Office                    Occupation
-----------------------------               -----             ---      ------                    ----------
<S>                                         <C>                <C>     <C>                       <C>                                
Lawrence V. Blashaw                         1970               71      Director                  President of
                                                                                                 Freight For-
                                                                                                 warding Co.

Charles F. Forbes, Attorney                 1968               67      Secretary &               Attorney
Musick, Peeler & Garrett                                               Director

Allen E. Shaw, President                    1960               79      President &               President of
of the Company                                                         Director                  Company

Douglas A. Shaw, Vice President             1981               46      Vice President            Hospital
(son of president)                                                     & Director                Administrator

Richard J. Stanczak                         1977               71      Director                  Business
Business Consultant                                                                              Consultant

Michael Young, Controller                   1978               49      Treasurer                 Hospital
Administrator                                                                                    Controller

Scott L. Holmes, M.D.                       1988               60      Director                  Physician

Donald J. Krpan, D.O.                       1988               61      Director                  Dean of
                                                                                                 Students
                                                                                                 College of
                                                                                                 Medicine

</TABLE>
                                      -29-


<PAGE>



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, 1997, 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            $100,000
                            the Board

Douglas A. Shaw             Vice President, Administrator          52,000

Michael Young               Treasurer and Controller of            65,968
                            Mad River Community Hospital

All other directors
  and officers as a
 group (5 persons)                                                  7,100
                                                                ---------

(8 persons)                                                      $225,068
                                                                =========

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 1997 was $7,100. There have not been any
         payments made to officers or directors for severance of relationship.



                                      -30-


<PAGE>



Item 12.          Security Ownership of Certain
-------           Beneficial Owners and Management
                  --------------------------------

                  Owners of 5% or more of outstanding voting securities at June
                  30, 1997, 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     51.78%
San Clemente, California                      Preferred        1,970      4.08%

Arcata Hospital Corporation*                  Common          20,898      9.16%
Palos Verdes Estates, California              Preferred       11,481     23.75%

Security ownership of management as a group
-------------------------------------------

All directors and officers as                 Common         120,579     52.87%
  a group
All directors and officers                    Preferred        1,970      4.08%
  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.


                                      -31-


<PAGE>



Item 13.          Certain Relations and
-------           Related Transactions
                  ---------------------

                  None.



                                      -32-


<PAGE>



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:

                       Report of Independent Auditors'

                       Financial Statements:
                           Balance Sheets
                             June 30, 1997 and 1996

                           Statements of Income and Retained Earnings Years
                             ended June 30, 1997, 1996 and 1995

                           Statements of Cash Flows -
                             Years ended June 30, 1997, 1996 and 1995

                           Notes to Financial Statements

     (2)          The following financial schedules for the Years 1997, 1996 and
                  1995 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, 1997


                                      -33-


<PAGE>



                                   Schedule II

                    AMERICAN HOSPITAL MANAGEMENT CORPORATION

                        Valuation and Qualifying Accounts
                    Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>


                            Balance,      Charged     Charged                      Balance,
                           beginning        to        to other                       end
                            of year       income      accounts   Deductions        of year
                           ---------      -------     --------   ----------       --------
<S>                       <C>            <C>                      <C>            <C> 
Allowance for
 doubtful receivables:


         1997           $    202,650    $4,495,864                $4,413,459    $   285,055
         1996                217,709     5,804,777                 5,819,836        202,650
         1995                655,845     4,669,157                 5,107,293        217,709


</TABLE>
                                      -34-


<PAGE>



                                  Schedule III

                    AMERICAN HOSPITAL MANAGEMENT CORPORATION

                    Real Estate and Accumulated Depreciation
                    Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>


                                  Related                                             Accumulated     Useful
              Description          debt            Land     Buildings      Total      Depreciation     Life
         ------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>            <C>         <C>         <C>                <C>
         Rental property          None          $440,554    $970,130     $1,410,684     $307,476        25

         Investment               None           832,189                    832,189
                                              --------------------------------------------------
                                              $1,272,743    $970,130     $2,242,873     $307,476
                                              ==================================================


         Balance at June 30, 1995                                                    $ 2,115,739
           Purchases during period                                                       127,135
                                                                                     -----------
         Balance at June 30, 1996 and 1997                                           $ 2,242,874
                                                                                     ===========

         Balance at June 30, 1995                                                    $   228,666
           Depreciation during period                                                     39,405
                                                                                     -----------
         Balance at June 30, 1996                                                        268,071
           Depreciation during period                                                     39,405
                                                                                     -----------
         Balance at June 30, 1997                                                    $   307,476
                                                                                     ===========


</TABLE>



                                      -35-


<PAGE>


                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized:


                                     AMERICAN HOSPITAL MANAGEMENT CORPORATION


                                     By: /s/ Allen E. Shaw
                                        ----------------------------------------
                                          Allen E. Shaw, President

                                     Date: April 13, 1998 

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         April 13, 1998 
Allen E. Shaw


/s/ Charles F. Forbes
------------------------          Secretary and Director         April 13, 1998 
Charles F. Forbes


/s/ Michael J. Young 
------------------------          Treasurer and Chief
Michael J. Young                  Accounting Officer             April 13, 1998 


/s/ Donald J. Krpan
------------------------          Director                       April 13, 1998 
Donald J. Krpan


/s/ Doug Shaw
------------------------          Director                       April 13, 1998 
Doug Shaw