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 June 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 jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
75 South Church Street
Pittsfield, MA 01201
(Address of principal executive offices) (Zip Code)
(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 ir 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 Aug. 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 June 30, 1997 1
Statements of operations -
Six months ended June 30, 1996 and 1997 2
Statements of cash flows -
Six months ended June 30, 1996 and 1997 3
Notes to financial statements - June 30, 1997 4
Item 2. Management's Discussion and Analysis or Plan of Operation 5
Part II. Other Information
Item 6. 9
Signatures 10
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTHCARE INVESTORS OF AMERICA, INC.
BALANCE SHEETS
June 30, December 31,
1997 1996
(Unaudited) (Note)
ASSETS
Real Estate Properties:
Land $466,301 $466,301
Building and improvements, net of accumulated
depreciation of $4,071,683 and $3,997,103
at June 30, 1997 and December 31, 1996
respectively 4,285,419 4,359,997
Prepaid expenses 6,418 9,169
Rent and other receivables - - 60,310
Cash and cash equivalents 100,577 166,959
TOTAL ASSETS $4,858,715 $5,062,736
LIABILITIES and STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses 96,765 181,397
Mortgage notes payable 4,887,835 4,971,910
Distributions in excess of net earnings (3,782,684) (3,747,370)
TOTAL COMMON STOCKHOLDERS' EQUITY (125,885) (90,571)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY 4,858,715 5,062,736
HEALTHCARE INVESTORS OF AMERICA, INC.
STATEMENTS OF EARNINGS AND DISTRIBUTIONSIN EXCESS OF NET EARNINGS
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
REVENUES:
Rental income 174,103 178,823 353,032 356,377
Miscellaneous income - - 2,503 - - 1,000
Interest income 12 181,326 912 4,990
174,115 362,651 353,944 362,367
EXPENSES:
Advisory and other fees 7,500 39,182 15,000 19,740
Directors fees and other expenses 5,500 122,988 16,500 18,200
Other operating expenses 24,826 9,870 57,303 62,147
Depreciation and amortization 37,292 10,900 74,580 78,474
Interest Expense 102,594 33,435 225,875 238,324
Total Expenses 177,710 216,375 389,258 416,885
NET LOSS (3,595) (35,049) (35,314) (54,518)
NET LOSS PER COMMON SHARE (.01) (.09) (.09) (.14)
WEIGHTED AVERAGE NUMBER OF
SHARES 397,600 397,600 397,600 397,600
Distributions in excess of
earnings - beginning of
period (3,779,087) (3,662,047) (3,747,370) (3,642,580)
Net Loss (3,595) (35,049) (35,314) (54,518)
Distributions during the period - - - - - - - -
Distributions in excess of
earnings - end of period $(3,782,684)$(3,697,096)$(3,782,684)$(3,697,098)
HEALTHCARE INVESTORS OF AMERICA, INC.
STATEMENTS OF CASH FLOWS
Six Months Ended
June 30
1997 1996
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net loss $(35,314) $(54,518)
Adjustments to reconcile net loss to
net cash provided by
operating activities:
Provision for depreciation and
amortization 74,580 78,474
Changes in operating assets
and liabilities:
Decrease in contract, rents and
other receivables 60,310 9,657
Decrease in prepaid expenses and
other assets 2,751 9,860
Decrease in accounts payable and
accrued expenses (84,634) (28,083)
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,693 15,390
FINANCING ACTIVITIES
Principal payments on long-term borrowings (84,075) (59,231)
NET CASH USED IN FINANCING ACTIVITIES (84,075) (59,231)
NET DECREASE IN CASH AND CASH EQUIVALENTS (66,382) (43,841)
Cash and cash equivalents at beginning of period 166,959 198,061
CASH AND CASH EQUIVALENTS AT END OF PERIOD $100,577 $154,220
HEALTHCARE INVESTORS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
June 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 continuing to seek sources to refinance 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 alternmative 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, 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 provisions.
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.
HEALTHCARE INVESTORS OF AMERICA, INC.
Six Months Ended June 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
June 30, 1997 Compared to June 30, 1996
Rental income. The Trust primarily derives its revenues from the leasing
of facilities to Healthcare providers. For the six months ended June 30,
1997, rental income was $353,032 as compared to $356,377 for the six months
ended June 30, 1996. For the three months ended June 30, 1997 rental income
was $174,103 as compared to $178,823 for the three months ended June 30, 1996
These decreases are primarily attributable to a decrease in rents charged
lessees at one of the Trust's facilities.
Advisory and other fees. Advisor and other fees consist of the fees charged
by Lenox Healthcare Capital Services, LLC (the "Advisor"), the advisor of
the Trust. For the six months ended June 30, 1997, advisory and other fees
totaled $15,000 which is $3,200 less than advisory and other fees charged by
Harbor American Capital Group, the predecessor advisor to the Trust for the
six months ended June 30, 1996. For the three months ended June 30, 1997
advisory and other fees totalled $7,500 which is $31,662 less than advisory
fees charged by the predecessor advisor to the Trust for the three months
ended June 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 six months
ended June 30, 1997 were $16,500, a decrease of $3,700 or 23% from $18,200
for the six months ended June 30, 1996. Directors fees and expenses for the
three months ended June 30, 1997 were $5,500, a decrease of $117,488 from
$122,988 for the three months ended June 30, 1996. These decreases are
primarily attributable to an decrease in the number of elected Directors.
Other operating expenses. Other operating expenses consists primarily of
maintenance and administrative costs. Other operating costs for the six
months ended June 30, 1997 were $57,303, a decrease of $4,844 or 7.8%
from $62,147 for the six months ended June 30, 1996. This decrease is
primarily the result of lower costs associated with a vacant facility.
Depreciation and amortization. Depreciation and amortization for the six
months ended June 30, 1997 were $74,580, a decrease of $3,894 or 5% from
$78,474 for the six months ended June 30, 1996. This decrease is primarily
the result of assets becoming fully depreciated.
Interest expense. For the six months ended June 30, 1997, interest expense
totaled $225,875 as compared to $238,324 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 June 30, 1997, the Trust had negative working capital of $4,884,021.
Cash decreased from $166,959 from December 31, 1996 to $100,577 at June 30,
1997. This decrease is primarily the result of cash being expended for
operating purposes. Rent and other receivables decreased $60,310 to $0 at
June 30, 1997. This decrease is the result of the collection of account
balances. Accounts payable and accrued expenses decreased $84,634 from
$181,397 at December 31, 1996 to $96,763 at June 30, 1997. This decre
The Trust has relied solely on rental income to pay its expenses in 1997 and
1996. Cash flows provided by operations were $17,693 for the six months
ended June 30, 1997 as compared to $15,390 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,
accumul
Management's plans include continuing to seek sources to refinance 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 two of the Trust's directors would assume the lease for the new
Florida property. In the event this negotiation is unsuccesful, Trust
management believes that the Trust wil be successful n obtaining other
sources of financing. There can be no assurnce that the Trust's refinancing
efforts will be successful or that the bank will not demand payment of the
mortage 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 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 od approximately $394,000 wich will expire beginning
in 2006.
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.
Six Months Ended June 30, 1997
Item
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
June 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.
HEALTH CARE INVESTORS OF AMERICA, INC.
(Registrant)Date: Aug 12, 1997 /s/ Thomas M. Clarke
Thomas M. Clarke, President
(Principal Executive Officer)
Date: Aug 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: Aug 12, 1997 Thomas M. Clarke, President
(Principal Executive Officer)
Date: Aug 12, 1997
David M. Fancher
Chief Financial Officer
(Principal Financial &
Accounting Officer)
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 100,577
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<RECEIVABLES> 0
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<PP&E> 8,357,102
<DEPRECIATION> 4,071,683
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<COMMON> 3,976
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<TOTAL-LIABILITY-AND-EQUITY> 4,858,715
<SALES> 353,032
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<CGS> 0
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<INCOME-PRETAX> (35,314)
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