13
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly Period Ended September 30, 1997 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ______ to ______
Commission file number 33-11863
HEALTHCARE INVESTORS OF AMERICA, INC.
(Exact name of small business issuer
as specified in its charter)
Maryland 86-0576027
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
75 South Church Street
Pittsfield, MA 01201
(Address Of Principal (Zip Code)
Executive Offices)
(413) 448-2111
(Issuer's telephone number,
including area code)
Not Applicable
(Former name, former address and former
fiscal year, if changed since last report)
Check whether the issuer (1) 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock, $.01 Par Value - 397,600 shares as of Nov. 12, 1997.
HEALTHCARE INVESTORS OF AMERICA, INC.
INDEX
PAGE
Part I. Financial Information
Item 1. Condensed Financial Statements (Unaudited)
Balance sheets - December 31, 1996 and September 3
30, 1997
Statements of operations -
Three months ended September 30, 1996 and 1997
Nine months ended September 30, 1996 and 1997 4
Statements of cash flows -
Nine months ended September 30, 1996 and 1997 5
Notes to financial statements - September 30, 1997 6
Item 2. Management's Discussion and Analysis or Plan of
Operation
Results of operations 8
Part II. Other Information
Item 6. Exhibits and reports on Form 8-K
Exhibits and reports on Form 8-K 11
Signatures 12
PART I - FINANCIAL INFORMATION
HEALTHCARE INVESTORS OF AMERICA, INC.
BALANCE SHEETS
September December
30, 31,
1997 1996
(Unaudited) Note
ASSETS
Real Estate Properties:
Land $466,301 $466,301
Building and improvements, net of
accumulated depreciation
of $4,108,967 and $3,997,103 at
September 30, 1997 and
December 31, 1996 respectively 4,248,127 4,359,997
Prepaid expenses 917 9,169
Rent and other receivable - - 60,310
Cash and cash equivalents 78,966 166,959
_________ _________
TOTAL ASSETS 4,794,311 5,062,736
_________ _________
_________ _________
LIABILITIES and STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses 145,997 168,624
Mortgage notes payable 4,849,532 4,971,910
Deferred revenue 5,585 12,773
_________ _________
TOTAL LIABILITIES 5,001,114 5,153,307
_________ _________
COMMON STOCKHOLDERS EQUITY
Common Stock, $.01 par value 3,976 3,976
Capital in excess of par value 3,652,823 3,652,823
Distributions in excess of net
earnings (3,863,602)(3,747,370)
TOTAL COMMON STOCKHOLDERS' EQUITY (206,803) (90,571)
__________ _________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $4,794,311 $5,062,736 6
__________ __________
__________ __________
Note: See notes to financial statements
HEALTHCARE INVESTORS OF AMERICA, INC.
STATEMENTS OF EARNINGS AND DISTRIBUTIONS IN EXCESS OF NET EARNINGS
Three Months Ended Nine Months
Ended
September 30, September 30,
1997 1996 1997 1996
(Unaudited((Unaudited)(Unaudited)(Unaudited)
REVENUES:
Rental income $184,315 $178,486 $537,347 $534,863
Miscellaneous income - - 38,730 - - 39,730
Interest income - - 2,024 912 7,014
184,315 219,240 538,259 581,607
_______ _______ _______ _______
EXPENSES:
Advisory and other fees 7,500 9,870 22,500 29,610
Directors fees and other 8,250 5,400 24,750 23,600
expenses
Other operating expenses 107,456 36,720 164,759 98,867
Depreciation and amortization 37,290 39,182 111,870 117,656
Interest Expense 104,737 120,678 330,612 359,003
_______ _______ _______ _______
Total Expenses 265,233 211,850 654,491 628,736
NET INCOME/(LOSS) (80,918) 7,390 (116,232) (47,129)
NET INCOME/(LOSS) PER COMMON
SHARE ($0.20) $0.02 ($0.29) ($0.12)
WEIGHTED AVERAGE NUMBER OF
SHARES 397,600 397,600 397,600 397,600
Distributions in excess of
earnings-beginning of period (3,782,684)(3,697,098)(3,747,370)(3,642,579)
__________ _________ _________ ___________
Net Income/(Loss) (80,918) 7,390 (116,232) (47,129)
Distributions during the period - - - - - - - -
Distributions in excess of
earnings - End of period $(3,863,602) $(3,689,708) $(3,863,602)$(3,689,708)
____________ ___________ ___________ ___________
____________ ___________ ___________ ___________
HEALTHCARE INVESTORS OF AMERICA, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30
1997 1996
(Unaudited) (Unaudited)
CASH FLOW FROM OPERATIONS:
Net Loss $(116,232) $(47,129)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Provision for depreciation and
amortization 111,870 117,656
Changes in operating assets and
liabilities:
Decrease in contract, rents and
other receivables 60,310 27,712
Decrease in prepaid expenses and
other assets 8,252 14,790
Decrease in accounts payable and
accrued expenses (29,815) (24,632)
________ ________
Net cash provided by (used in) operating
activities 34,385 88,397
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS ON LONG-TERM
BORROWING (122,378) (89,999)
_________ ________
NET CASH USED IN FINANCING ACTIVITIES (122,378) (89,999)
_________ ________
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (87,993) (1,602)
CASH AND CASH EQUIVALENTS - Beginning of
period 166,959 198,061
_______ ________
CASH AND CASH EQUIVALENTS -End of Period $78,966 $196,459
_______ ________
_______ ________
HEALTHCARE INVESTORS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-
QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
The independent public accountants' report for the year ended
December 31, 1996 included an explanatory paragraph with respect to
the ability of the Trust to continue as a going concern. The above
discussion and the Trust's financial statements have been presented
on the basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Trust has three properties
remaining, two of which are under lease, thus limiting cash flows
available to pay operating expenses. Mortgage notes payable on the
Trust's properties matured on June 20, 1997. The current maturity
of all of the Trust's notes payable, accumulated recurring
operating losses and the carrying costs of unleased assets raise a
substantial doubt about the Trust's ability to continue as a going
concern for a reasonable period of time.
Management's plans include refinancing the mortgage notes payable,
developing alternative uses to retain the economic viability of the
Colorado Properties and minimizing operating costs. Management is
currently negotiating with a third party for a new debt agreement
to refinance the mortgage notes payable. Management believes it
will be successful in refinancing the mortgage notes payable. In
connection with the proposed refinancing, it is likely that a new
entity controlled by one of the Trust's directors would assume the
lease for the Florida property. Trust management is currently
evaluating alternative uses for the Colorado Properties. The Trust
has evaluated the realization of the Colorado Properties using the
appraisals as vacant facilities and the exploration of alternative
uses.
NOTE 2 - INCOME TAXES
The Trust did not file its applicable Federal and State income tax
returns for the periods 1992 through 1996 on a timely basis. The
Trust had cumulative net operating losses during the periods from
1991 through 1996. As of December 31, 1996, the Trust had net
operating loss carryforwards for income tax purposes of
approximately $394,000 which will expire beginning in 2006.
Lenox Healthcare Capital Services, LLC ("The Advisor") is currently
evaluating the Trust's compliance with the provisions of the
Internal Revenue Code (the "Code"), Treasury Regulations and other
relevant laws pertaining to the qualification of the Trust as a
real estate investment trust ("REIT"). In the event it is
determined that the Trust did not qualify as a REIT, it would be
taxable as a C corporation under the Code. However, as a taxable
corporation, the Trust would not owe any current tax or tax for the
prior years due to its net operating loss carryovers. Therefore,
no adjustment would be required to the historical financial
statements related to any tax provision.
The Advisor and its independent accountants intend to assist the
Trust in determining the best method to clarify its tax status.
The Advisor and the Trust's independent accountants are reviewing
various alternatives, including having the Trust obtain a tax
opinion as to its status, requesting a determination letter from
the Internal Revenue Service and evaluating the applicability of
reelecting status as a REIT. If a determination is made that the
Trust does not qualify as a REIT for the purposes of the Code, the
Advisor intends to assist the Trust in implementing procedures to
requalify the Trust.
The Trust also anticipates reviewing and evaluating other
properties for possible investment opportunities. However the
Trust's efforts are limited by the resources available and the
Trust's ability to raise additional resources.
Much national attention is currently focused on Healthcare reform.
Although there is concern as to the status of reimbursement
programs on which the Trust indirectly relies for its rental
income, management believes the long term care industry will
benefit from any significant Healthcare reform.
HEALTHCARE INVESTORS OF AMERICA, INC.
Nine Months Ended September 30, 1997
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(a) Not applicable
(b) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
September 30, 1997 Compared to September 30, 1996
Rental income. The Trust primarily derives its revenues from the
leasing of facilities to Healthcare providers. For the nine months
ended September 30, 1997, rental income was $537,347 as compared to
$534,863 for the nine months ended September 30, 1996. For the
three months ended September 30, 1997 rental income was $184,315 as
compared to $178,486 for the three months ended September 30, 1996.
These increases are primarily attributable to an increase in rents
charged lessees at one of the Trust's facilities.
Advisory and other fees. Advisory and other fees consist of the
fees charged by Lenox Healthcare Capital Services, LLC (the
"Advisor"), the advisor of the Trust. For the nine months ended
September 30, 1997, advisory and other fees totaled $22,500 which
is $7,110 less than advisory and other fees charged by Harbor
American Capital Group, the predecessor advisor to the Trust for
the nine months ended September 30, 1996. For the three months
ended September 30, 1997 advisory and other fees totaled $7,500
which is $2,370 less than advisory fees charged by the predecessor
advisor to the Trust for the three months ended September 30, 1996.
These decreases are the result of the fees charged by the new
Advisor to the Trust.
Directors fees and expenses. Directors fees and expenses for the
nine months ended September 30, 1997 were $24,750, an increase of
$1,150 or 4.9% from $23,600 for the nine months ended September 30,
1996. Directors fees and expenses for the three months ended
September 30, 1997 were $8,250, an increase of $2,850 or 52.8% from
$5,400 for the three months ended September 30, 1996. These
increases are primarily attributable to an increase in the number
of elected Directors.
Other operating expenses. Other operating expenses consist
primarily of maintenance and administrative costs. Other operating
costs for the nine months ended September 30, 1997 were $164,759,
an increase of $65,892 or 67% from $98,867 for the nine months
ended September 30, 1996. Other operating costs for the three
months ended September 30, 1997 were $107,456, an increase of
$70,736 or 192% from $36,720 for the three months ended September
30, 1996. These increases are primarily the results of legal fees
associated with a planned acquisition.
Depreciation and amortization. Depreciation and amortization for
the nine months ended September 30, 1997 were $111,870, a decrease
of $5,786 or 4.9% from $117,656 for the nine months ended September
30, 1996. Depreciation and amortization for the three months ended
September 30, 1997 were $37,290, a decrease of $1,892 or 4.8% from
$39,182 for the three months ended September 30, 1996. These
decreases are primarily the result of assets becoming fully
depreciated.
Interest expense. For the nine months ended September 30, 1997,
interest expense totaled $330,612 as compared to $359,003 for the
same period in 1996. This decrease in interest expense is the
result of a decrease in the principal amount due on certain
mortgage notes payable.
Liquidity and Sources of Capital
At September 30, 1997, the Trust had negative working capital of
$4,922,148. Cash decreased from $166,959 from December 31, 1996 to
$78,966 at September 30, 1997. This decrease is primarily the
result of cash being expended for operating purposes and payments
of principal and interest related to the Trust's Mortgage Notes
Payable. Rent and other receivables decreased $60,310 to $0 at
September 30, 1997. This decrease is the result of the collection
of account balances. Accounts payable and accrued expenses
decreased $22,627 from $168,624 at December 31, 1996 to $145,997
at September 30, 1997. This decrease is the result of the timing
of certain cash payments. Distributions in excess of net earnings
decreased $116,232 from ($3,747,370) at December 31, 1996 to
($3,863,602) at September 30, 1997. This decrease was the result
of the net loss for the period ended September 30, 1997.
The Trust has relied solely on rental income to pay its expenses in
1997 and 1996. Cash flows provided by operations were $34,385 for
the nine months ended September 30, 1997 as compared to $88,397 for
the same period in 1996.
The above discussion and the Trust's financial statements have been
presented on the basis that it is a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Trust has three
properties remaining, two of which are under lease, thus limiting
cash flows available to pay operating expenses. Mortgage notes
payable on the Trust's properties matured on June 20, 1997. The
current maturity of all of the Trust's notes payable, accumulated
recurring operating losses and the carrying costs of unleased
assets raise a substantial doubt about the Trust's ability to
continue as a going concern for a reasonable period of time.
Management's plans include refinancing the mortgage notes payable,
developing alternative uses to retain the economic viability of the
Colorado Properties and minimizing operating costs. Management is
currently negotiating with a third party for a new debt agreement
to refinance the mortgage notes payable. Management believes it
will be successful in refinancing the mortgage notes payable. In
connection with the proposed refinancing, it is likely that a new
entity controlled by one of the Trust's directors would assume the
lease for the Florida property. Trust management is currently
evaluating alternative uses for the Colorado Properties. The Trust
has evaluated the realization of the Colorado Properties using the
appraisals as vacant facilities and the exploration of alternative
uses.
PART II - OTHER INFORMATION
HEALTHCARE INVESTORS OF AMERICA, INC.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(b) No reports on Form 8-K were filed during the three months
ended September 30, 1997.
HEALTHCARE INVESTORS OF AMERICA, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HEALTHCARE INVESTORS OF AMERICA, INC
(Registrant)
Date: Nov 12, 1997 /s/ Thomas M. Clarke
Thomas M. Clarke, President
(Principal Executive Officer)
Date: Nov 12, 1997 /s/ David M. Fancher
David M. Fancher
Chief Financial Officer
(Principal Financial & Accounting
Officer)
HEALTHCARE INVESTORS OF AMERICA, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HEALTHCARE INVESTORS OF AMERICA,
INC
(Registrant)
Date: Nov 12, 1997
Thomas M. Clarke, President
(Principal Executive Officer)
Date: Nov 12, 1997
David M. Fancher
Chief Financial Officer
(Principal Financial & Accounting
Officer)
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 78,966
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 78,966
<PP&E> 8,357,094
<DEPRECIATION> 4,108,967
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0
0
<COMMON> 3,976
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,794,311
<SALES> 537,347
<TOTAL-REVENUES> 538,259
<CGS> 0
<TOTAL-COSTS> 323,879
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<LOSS-PROVISION> 0
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<INCOME-PRETAX> (116,232)
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