CONTINENTAL HEALTH AFFILIATES INC
10-K/A, 1997-10-29
SKILLED NURSING CARE FACILITIES
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                              SECURITIES AND EXCHANGE COMMISSION

                                    Washington, D.C.  20549

                                          FORM 10-K/A
                                       (AMENDMENT NO. 2)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934

For the fiscal year ended June 30, 1997.


Commission file number: 0-11895

                              CONTINENTAL HEALTH AFFILIATES, INC.
                    (Exact name of registrant as specified in its charter)

                  Delaware                                      22-2362097
       (State or other jurisdiction of                      (I.R.S. Employer
       incorporation or organization)                       Identification No.)

                910 Sylvan Avenue
                Englewood Cliffs, N.J.                               07632
       (Address of principal executive offices)                   (Zip Code)

     Registrant's telephone number, including area code:  (201) 567-4600

     Securities registered pursuant to Section 12(b) of the Act: NONE

     Securities  registered  pursuant to Section 12(g) of the Act: Common Stock,
par value $.02

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                               YES   X                 NO

     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. [X]

As of September 23, 1997 the aggregate  market value of the voting stock held by
non-affiliates of the registrant was $17,598,098.

As of September 23, 1997,  10,127,151  shares of the  registrant's  common stock
were outstanding.

                             DOCUMENTS INCORPORATED BY REFERENCE.

                                             None

                                              1

<PAGE>



                                           PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS.

DIRECTORS
                                                                      Served on
                                                                    the Board of
                                                                      Directors
      Name                                     Age                      Since

Jack Rosen.................................    51                        1981
Joseph Rosen...............................    46                        1981
Israel Ingberman...........................    51                        1981
Joseph Giglio..............................    56                        1981
Bruce Slovin...............................    61                        1988
Carl D. Glickman...........................    71                        1989

        Jack Rosen has served as the chief  executive  officer (the President or
Chairman of the Board) and as a Director of the Company since its  incorporation
in 1981 and of its subsidiaries  from their  respective dates of  incorporation,
the first of which was in 1976.  Mr. Rosen is also the  President and a Director
of  CompreMedx  Corporation  ("CompreMedx"),  an  89.1%-owned  subsidiary of the
Company,  and the Chairman of the Board of Directors and Chief Executive Officer
of Infu-Tech,  Inc.  ("Infu-Tech"),  a 59% owned  subsidiary of the Company.  He
first became  involved in the health care field in September 1971 when he became
a director of Garden State Health Care Center of East Orange,  New Jersey. He is
actively  engaged,  together  with Joseph  Rosen and Israel  Ingberman,  who are
officers  and  directors,  and along with Jack  Rosen,  are the three  principal
stockholders  of the Company  (the  "Principal  Stockholders"),  in a variety of
enterprises,   including  real  estate  development  and  hotel  ownership  (the
"Rosen-Ingberman Enterprises"). Jack Rosen is the brother of Joseph Rosen.

        Joseph  Rosen has served as a Vice  President  and as a Director  of the
Company since its incorporation in 1981 and as a director and officer of all its
subsidiaries (including CompreMedx and Infu-Tech) from their respective dates of
incorporation. He became an Assistant Secretary of the Company in March 1983. He
first  became  involved  in the  health  care  field in  October  1974  with the
organization of Jayber Inc.,  which operates a nursing home in West Orange,  New
Jersey and now is a subsidiary of the Company. He is actively engaged,  together
with the other Principal  Stockholders,  in the Rosen-Ingberman  Enterprises and
with Israel  Ingberman in nursing home  ownership and  management  ("R-I nursing
homes"). He is the brother of Jack Rosen.

        Israel Ingberman has served as Secretary, Treasurer and as a Director of
the Company since its incorporation in 1981 and as a director and officer of all
its  subsidiaries  (including  CompreMedx and Infu-Tech)  from their  respective
dates of  incorporation.  He first  became  involved in the health care field in
October  1974 with the  organization  of Jayber  Inc.  He is  actively  engaged,
together  with  the  other  Principal  Stockholders,  in  the  Rosen-  Ingberman
Enterprises and in the R-I nursing homes with Joseph Rosen.

        Joseph M. Giglio has been a director of the Company  since  January 1983
and is also a Director of Infu-Tech. Since December 1993, he has been serving as
the Chairman of Apogee Research,  Inc., an infrastructure  consulting firm. From
December  1993  until  August  1994,  he was the  Senior  Advisor  to the  First
Southwest  Company.  From April 1992 to November  1993, he was an Executive Vice
President  of Smith  Barney & Co.  And from  June 1991 to April  1992,  he was a
Managing  Director  of that firm.  From  January  1990 to June 1991,  he was the
President  of Chase  Municipal  Securities,  Inc.,  an  affiliate  of The  Chase
Manhattan  Bank,  N.A. From August 1988 through  December 1989, Mr. Giglio was a
Senior  Vice  President  at Chase  Securities,  Inc.  in the  Municipal  Finance
Division.  For more than five years prior to joining  Chase,  Mr. Giglio was the
Senior Managing Director of the Public Finance Department at Bear Stearns & Co.,
Inc.  Mr.  Giglio  served as Chairman of the  National  Council on Public  Works
Improvement,  which released its final report, "Fragile Foundation," in February
1988.  Mr. Giglio  chaired the U.S.  Senate Budget  Committee's  Private  Sector
Advisory Panel on Infrastructure  Financing. He serves on the board of directors
of The Hudson  Institute.  Mr.  Giglio has served as an  Associate  Professor of
Finance at New York  University.  He is a graduate  of Rutgers  University,  and
holds a Master of Public  Administration  degree from New York  University and a
Master's degree in Business from Columbia University.

                                              2

<PAGE>



     Carl D.  Glickman has been a director of the Company  since August 1989 and
is also a Director of  Infu-Tech.  Since 1953,  he has been the president of The
Glickman  Organization,  a real estate  ownership  and  management  company.  In
addition,  Mr.  Glickman  is a director  of Bear  Stearns  Companies,  Inc.  (an
investment  banking company),  Jerusalem  Economic  Corporation (an Israeli real
estate  company),  Alliance Tyre and Rubber Co. (an Israeli tire  manufacturer),
Franklin Holdings, Inc. (an investment company), Lexington Corporate Properties,
Inc.  (a real  estate  investment  trust),  Modern  Video Co. (a motion  picture
production company) and Office Max, Inc. (an office supply retailer).

        Bruce  Slovin has been a Director of the Company  since June 1988 and is
also a Director of Infu-Tech. Mr. Slovin is a graduate of Harvard Law School and
Cornell  University.  Since  1980,  he has  been  president  and a  director  of
MacAndrews & Forbes Group, Inc., an industrial  holding company.  Since 1985, he
has been  president  and a director  of Revlon  Group  Incorporated,  a consumer
products holding company. In addition, Mr. Slovin is a director of Andrews Group
Incorporated  (industrial  holding company),  M&F Worldwide Corp.,  (producer of
licorice  extract  and  other  flavoring  agents),   Cantel   Industries,   Inc.
(distributor  of medical  equipment)  and The  Coleman  Company,  Inc.  (outdoor
recreational equipment manufacturer).


ITEM 11.       EXECUTIVE COMPENSATION.

        The following table sets forth the compensation  received during each of
the years ended June 30, 1997,  1996 and the six months ended June 30, 1995,  by
the Company's chief executive officer and its other executive officers:

<TABLE>
<CAPTION>

                                         SUMMARY COMPENSATION TABLE
                                        Annual Compensation           Long-Term Compensation
                                                                         Awards          Payouts
                                                          Other
                                                         Annual   Restricted                       All Other
                                                         Compen-     Stock    Options/    LTIP      Compen-
  Name and Principal                Salary     Bonus     sation    Award(s)     SARs     Payouts    sation
       Position           Year       ($)        ($)        ($)        ($)        (#)       ($)        ($)

<S>                        <C>   <C>        <C>           <C>        <C>        <C>       <C>        <C>
Jack Rosen, Chairman,      1997  368,000**  $150,000**
  President and Chief      1996  300,000**     None
  Executive Officer        1995*  150,000**    None      None       None       None      None       None
Israel Ingberman
  Treasurer, Secretary     1997   150,000                           None       None      None       None
  and President of TNS     1996   150,000      None      None
  Nursing Homes, Inc.      1995*   75,000
S. Colin Neill             1997   147,212                                     25,000
  Vice President and       1996      --                              None       None      None       None
  Chief Financial Officer  1995*     --         None      None                  None

                            1997
Benjamin Geizhals,          1996     137,712                                    5,000
  Vice President           1995*     130,000    None      None       None       2,000     None       None
                                      65,000                                      --
*       Six months ended June 30, 1995
**      Includes compensation paid by Infu-Tech


DIRECTORS' FEES

        Since 1993, the directors have waived  directors' fees (which,  prior to
1993,  had been paid to directors  who were not employees at the rate of $10,000
plus $500 for each  directors'  meeting  attended).  Since 1994  Directors  have
received  options in consideration of their waiver of directors fees. In January
1997 the Board of  Directors  approved  the annual  grant of options to purchase
10,000  shares  of the  Company's  common  stock  to  each  of  the  independent
directors.

</TABLE>

<PAGE>



OPTION PLANS

        The  following  table  sets forth  certain  information  with  regard to
options  granted  during the year end June 30, 1997 to the  Company's  executive
officers:

<TABLE>
<CAPTION>

                                 OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                                                               Potential Realizable Value at
                                                                                  Assumed Annual Rates of
                                                                                Stock Price Appreciation For
                               Individual Grants                                     Option Term
                               -----------------                                     -----------
                            Number of   Percent of Total
                            Securities  Options/SARs
                            underlying   Granted to   )Exercise or
                           option/SARs  Employees in    Base Price  Expiration
          Name             Granted (#)  Fiscal Year (%    ($/Sh)       Date       5% ($)     10% ($)
- ----------------------------------------------------------------------------------------------------
<S>                        <C>          <C>            <C>          <C>         <C>         <C>

Benjamin Geizhals                 5,000      3.4               2.22  10/18/06         7,000     17,000
- -------------------------  ------------ -------------  ------------ ----------- ----------- ----------
S. Colin Neill                   25,000      17%               2.17  0/7/08/06       34,000     86,500
=========================  ============ =============  ============ =========== =========== ==========
</TABLE>

     The following table sets forth certain information with regard to exercises
of options  and SARs  during year end June 30, 1997 and options and SARs held at
June 30, 1997.


<TABLE>
<CAPTION>
                      AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                             AND FISCAL YEAR-END OPTION/SAR VALUES

                                                   Number of Securities   Value of Unexercised
                                                   nderlying Unexercised      in-the-Money
                                                       Options/SARs           Options/SARs
                                                   at Fiscal Year-End*     at Fiscal Year End
                                                  U        (#)                   ($)**
                         Shares         Value
                      Acquired on      Realized      Exercisable(E)/        Exercisable(E)/
        Name          Exercise (#)       ($)         Unexercisable(U)       Unexercisable(U)
        ----          ------------       ---         ----------------       ----------------

<S>                  <C>            <C>                        <C>                    <C>
Jack Rosen                --             --                     500,000(E)             $875,000(E)
                                                                      0(U)                    0(U)
Benjamin Geizhals         --             --                      17,000(E)              $25,025(E)
                                                                      0(U)                    0(U)

S. Colin Neill            --             --                      25,000(E)              $14,500(E)
                                                                      0(U)                    0(U)

*       The Corporation has not granted any SARs.
**      Based upon the amount by which the high bid price of the Company's Common Stock on June 30, 1997 ($2.75 per share) exceeded
        the exercise price of the options.
</TABLE>


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

        During  the  year  ended  June  30,  1997,  the  Company's  Compensation
Committee  reviewed and approved the  compensation of the Chairman of the Board.
Compensation of the Company's senior executive officers, other than its Chairman
of the Board, was set by the Chairman of the Board.

        Transactions  between the Company and members of its Board of  Directors
during 1997 were as follows:




<PAGE>



        Early in 1990 a dispute  over  management  fees  between the Company and
three  nursing  homes owned by the  Principal  Stockholders  was resolved by the
nursing  homes'  agreeing to pay a total of  $1,940,000 in  satisfaction  of all
their  December  31,  1989  obligations  to the  Company.  In  early  1992,  the
settlement  agreement  between  the  Company  and the  three  nursing  homes was
modified to provide that the  then-existing  balance of $1,046,000 would be paid
in sixteen equal quarterly  payments of $76,000 each (which included interest at
7 1/2% and principal)  beginning June 15, 1992 and continuing  through March 15,
1996. The balances  remaining on the modified  settlement  agreement at December
31, 1994 and 1993 (including accrued interest due to payment delinquencies) were
$839,000 and  $783,000.  In January 1995 the  settlement  agreement  was further
modified to provide for a $227,000  principal and interest payment to be made on
or before  March  30,1995  and the  remaining  balance of $626,000 to be paid in
twelve equal quarterly  installments  of $60,000 each  (including  interest at 8
1/2%)  beginning  July 1, 1995 and  continuing  through  March 31, 1998. In June
1997, a credit of $300,000 was applied against the balance then due, because the
purchase price obtained by the Company for the sale of one of its properties was
enhanced by $300,000 due to the contemporaneous  sale of a property owned by the
principal  stockholders  to the same buyer. As of June 30, 1997, the balance was
$326,000 including interest, and scheduled payments of $88,000 were in arrears.

        At June 30,  1997,  the Company  was owed a total of  $246,000  from two
entities  owned  by the  Principal  Stockholders  resulting  from  loans  to the
entities from various  corporations  which now are  subsidiaries of the Company,
but which were not owned by the Company when the loans were made. The Company is
also owed $15,000 for health insurance premiums and other charges with regard to
the R-I nursing homes.

        During  1997,  the Company  (including  its  Infu-Tech  subsidiary)  was
charged  $46,000 by a  corporation  owned by Jack  Rosen for use of an  airplane
owned by that corporation. The Company believes the rates it was charged for use
of that airplane were lower than those which would have been  available  from an
independent charter company for use of a similar airplane.

     During  1997,  the Company  issued  600,000  shares of common stock to U.S.
Management, Inc. in exchange for the extinction of $2,542,174 of trade debt owed
by the Company.

        During 1997, Carl Glickman, a director of the Company and Infu-Tech, was
paid $59,000 by the Company for financial  consulting fees, including his $5,000
fee as a director of Infu-Tech.

        In  November  1993,  as part of a financial  restructuring,  the Company
offered to exchange  530 shares of its Common  Stock for each  $1,000  principal
amount  of  its  14-1/8%   Subordinated   Debentures  due  1996   ("Subordinated
Debentures").  In  response  to this  offer,  The 1965  Trust,  of which Carl D.
Glickman,  a director  of the  Company  and of  Infu-Tech  is the sole  trustee,
tendered $1,774,000  principal amount of Subordinated  Debentures,  which it had
purchased on October 12, 1993 for $709,600 (40% of their  principal  amount) and
received in exchange 940,220 shares of the Company's Common Stock.  Prior to the
purchase  of the  Subordinated  Debentures,  the  Board  of  Directors  had been
informed of the proposed  purchase and had determined that the Company would not
at that time be able to purchase the  Subordinated  Debentures  for the price at
which  they  were  being  made  available  to The 1965  Trust.  The day after it
purchased  the  Subordinated  Debentures,  The 1965 Trust gave the  Company  the
option, exercisable until October 12, 1994, to purchase 939,160 of the shares it
would receive in exchange for the  Subordinated  Debentures for $779,680  (which
was 110% of the amount The 1965 Trust paid for the Subordinated Debentures). The
option expired without being exercised.




<PAGE>



ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The following table contains information concerning the ownership of the
Company's Common Stock on September 30, 1997 by each person known to the Company
to be a beneficial  owner of more than 5% of any class of the  Company's  voting
securities, by the Company's directors, by each of the executive officers of the
Company who was among the five most highly compensated executive officers of the
Company  in 1997 and by  directors  and  executive  officers  as a group  are as
follows:

<TABLE>
<CAPTION>

                                                          Amount and Nature
                            Name and Address                     of
  Title of Class           Of Beneficial Owner          Beneficial Ownership    Percent of Class
- ------------------ ----------------------------------- ---------------------- --------------------
<S>                <C>                                        <C>                             <C>
   Common Stock    Colonial Management Associates, Inc.        530,000 shares                   5.2%
                   1 Financial Center
                   Boston, MA  02111
   Common Stock    Michael Klein                               939,160 shares                   9.3%
 Preferred Stock   100 Shoreline Highway                         3,305 shares                  23.8%
                   Building A, Suite 190
                   Mill Valley, CA 94941
Common Stock       U.S. Management, Inc.                       600,000 shares                   5.9%
                   129 South 8th Street
                   Brooklyn, NY  11211
Common Stock       Private Opportunity Partners, II Ltd.       775,000 shares                   7.7%
                   201 South Biscayne Blvd., Suite 2950
                   Miami, FL  33131
Common Stock       Carl D. Glickman                         96,000 shares (a)                  (b)
                   The Leader Building, Suite 1140
                   Cleveland, OH 44114
   Common Stock    Israel Ingberman                            875,372 shares                   8.6%
                   910 Sylvan Avenue
                   Englewood Cliffs, NJ  07632
   Common Stock    Jack Rosen                          1,398,876 shares (a)(c)                 13.2%
                   910 Sylvan Avenue
                   Englewood Cliffs, NJ  07632
   Common Stock    Joseph Rosen                         922,827 shares (c)(d)                   9.1%
                   910 Sylvan Avenue
                   Englewood Cliffs, NJ  07632
   Common Stock    Bruce Slovin                            112,000 shares (a)                   1.1%
                   35 E. 62nd Street
                   New York, NY 10021
   Common Stock    Joseph M. Giglio                        115,517 shares (a)                   1.1%
                   4350 East West Highway, Suite 600
                   Bethesda, MD 20814
   Common Stock    S. Colin Neill                           25,000 shares (a)                  (b)
                   910 Sylvan Avenue
                   Englewood Cliffs, NJ 07632
   Common Stock    Benjamin Geizhals                        17,000 shares (a)                  (b)
                   910 Sylvan Avenue
                   Englewood Cliffs, NJ 07632

   Common Stock    All directors and executive officers      3,562,592 shares                  32.5%
                   as a group (8 persons)
 -----------------
(a)     Includes shares of Common Stock issuable on exercise of outstanding stock options as follows:  Mr. Rosen 500,000
        shares; Mr. Giglio, 105,000 shares; Mr. Glickman, 95,000 shares; Mr. Slovin, 105,000 shares; Mr. Geizhals,
        17,000 shares; Mr. Neill, 25,000 shares; all directors and executive officers as a group, 847,000 shares.
(b)     Less than 1%.
(c)     Includes shares of common stock held by children as follows: Jack Rosen,19,500 shares, Joseph Rosen, 9,750 shares and Israel
        Ingberman, 41,666 shares.
(d)     Includes  shares of common  stock  held as  Custodian  for  children  as
        follows:  Jack Rosen,  125,000 shares,  Joseph Rosen, 144,500 shares and
        Israel Ingberman, 83, 333 shares.

</TABLE>



<PAGE>



        On September 23, 1997,  Cede & Co. owned of record  6,608,773  shares of
the Company's Common Stock,  constituting 65.3% of the outstanding Common Stock.
The Company  understands  those shares were held beneficially for members of the
New York  Stock  Exchange,  some of whom may in turn  have been  holding  shares
beneficially for customers.


ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        Transactions  between the Company and members of its Board of  Directors
are   described   under   "Compensation   Committee   Interlocks   and   Insider
Participation."


FILING OF REPORTS

        To the  best  of the  Company's  knowledge,  no  director,  officer,  or
beneficial  owner of more than 10% of the  Company's  stock  failed to file on a
timely basis reports required by ss. 16(a) of the Securities and Exchange Act of
1934, as amended, with regard to the year ended June 30, 1997.




<PAGE>


                                          SIGNATURES

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


                                    CONTINENTAL HEALTH AFFILIATES, INC.


                                    By:  /S/  BENJAMIN GEIZHALS
                                         -------------------------------------
Date: October 29, 1997                          Benjamin Geizhals
                                         Vice President and General Counsel

                                             S-1

<PAGE>


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