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 March 31, 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 telephones 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 of1 the
issuer's classes of common stock, as of the latest practical
date.
Common Stock, $.01 Par Value - 397,600 shares as of May 12,
1997.
<PAGE>
HEALTHCARE INVESTORS OF AMERICA, INC.
INDEX
PAGE
Part I. Financial Information
Item 1. Condensed Financial Statements (Unaudited)
Balance sheets - December 31, 1996 and March 31, 1997 1
Statements of operations -
Three months ended March 31, 1996 and 1997 2
Statements of cash flows -
Three months ended March 31, 1996 and 1997 3
Notes to financial statements - March 31, 1997 4
Item 2. Management's Discussion and Analysis or Plan of 5
Operation
Part II. Other Information
Item 6. 9
Signatures 10
PART I - FINANCIAL INFORMATION
HEALTHCARE INVESTORS OF AMERICA, INC.
BALANCE SHEETS
March 31, December 31,
1997 1996
(Unaudited) (Note)
ASSETS
Real Estate Properties:
Land $466,301 $466,301
Building and improvements, net of accumulated
depreciation of $4,034,391 and $3,997,103
March 31, 1997 and December 31, 1996
respectively 4,322,708 4,359,997
Prepaid expenses 6,418 9,169
Rent and other receivables 410 60,310
Cash and cash equivalents 162,469 166,959
TOTAL ASSETS $4,958,306 $5,062,736
LIABILITIES and STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $141,803 $181,397
Mortgage notes payable 4,938,792 4,971,910
TOTAL LIABILITIES 5,080,595 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 (3,779,088) (3,747,370)
TOTAL COMMON STOCKHOLDERS' EQUITY (122,289) (90,571)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 4,958,306 5,062,736
HEALTHCARE INVESTORS OF AMERICA, INC.
STATEMENTS OF EARNINGS AND DISTRIBUTIONS
IN EXCESS OF NET EARNINGS
Three Months Ended
March 31,
1997 1996
(Unaudited) (Unaudited)
REVENUES:
Rental income $178,929 $177,555
Miscellaneous income -- 1,000
Interest income 900 2,487
179,829 181,042
EXPENSES:
Advisory and other fees 7,500 9,870
Directors fees and other expenses 11,000 7,300
Other operating expenses 32,477 28,711
Depreciation and amortization 37,290 39,292
Interest Expense 123,281 115,337
Total Expenses 211,548 200,510
NET LOSS $(31,719) $(19,468)
NET LOSS PER COMMON SHARE $(0.08) $(0.05)
WEIGHTED AVERAGE NUMBER OF SHARES 397,600 397,600
Distributions in excess of earnings
- beginning of period $(3,747,368) $(3,642,579)
Net loss (31,719) (19,468)
Distributions during the period -- --
Distributions in excess of earnings
- end of period $(3,779,087) $(3,662,047)
HEALTHCARE INVESTORS OF AMERICA, INC.
STATEMENTS OF CASH FLOWS
Three Months Ended
March 31
1997 1996
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net loss $(31,719) $(19,468)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Provision for depreciation and amortization 37,290 39,292
Changes in operating assets and liabilities:
Decrease in contract, rents and other receivables 59,900 10,976
Decrease in prepaid expenses and other assets 2,752 4,930
Decrease in accounts payable and accrued expenses (39,595) (34,609)
NET CASH PROVIDED BY OPERATING ACTIVITIES 28,628 1,121
FINANCING ACTIVITIES
Principal payments on long-term borrowings (33,118) (33,717)
NET CASH USED IN FINANCING ACTIVITIES (33,118) (33,717)
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,490) (32,596)
Cash and cash equivalents at beginning of period 166,959 198,061
CASH AND CASH EQUIVALENTS AT END OF PERIOD $162,469 $165,465
HEALTHCARE INVESTORS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 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. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March
31, 1997 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1997. For further
information, refer to the financial statements and footnotes
thereto included in the Trust's annual report on Form 10-KSB for
the year ended December 31, 1996.
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 mature 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 prior to June 20, 1997. In the event the Trust is
unsuccessful in refinancing the notes payable prior to the
current maturity date, management believes it will be able to
obtain an extension from the bank or that the bank will not
demand payment prior to such refinancing. 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 Florida property. In the event this negotiation
is unsuccessful, Trust management believes that the Trust will
be successful in obtaining other sources of financing. There
can be no assurance that the Trust's refinancing efforts will be
successful or that the bank will not demand payment of the
mortgage notes payable. 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 of approximately $394,000 which 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.
HEALTHCARE INVESTORS OF AMERICA, INC.
Three Months Ended March 31, 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
March 31, 1997 Compared to March 31, 1996
Rental income. The Trust primarily derives its revenues from
the leasing of facilities to Healthcare providers. For the three
months ended March 31, 1997, rental income increased by $1,374
to $178,929 as compared to $177,555 for the three months ended
March 31, 1996. The increase is primarily attributable to an
increase 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 three months
ended March 31, 1997, advisory and other fees totaled $7,500
which is $2,370 less than advisory and other fees charged by
Harbor American Capital Group, the predecessor advisor to the
Trust for the three months ended March 31, 1996. The decrease
is the result of the fees charged by the new Advisor to the
Trust.
Directors fees and expenses . Directors fees and expenses for
the three months ended March 31, 1997 were $11,000, an increase
of $3,700 or 23% from $7,300 for the three months ended March
31, 1996. This increase is primarily attributable to an
increase in the number of elected Directors.
Other operating expenses. Other operating expenses consists
primarily of maintenance and administrative costs. Other
operating costs for the three months ended March 31, 1997 were
$32,477, an increase of $3,766 or 13% from $28,711 for the three
months ended March 31, 1996. This increase is primarily the
result of additional costs associated with a vacant facility.
Depreciation and amortization . Depreciation and amortization
for the three months ended March 31, 1997 were $37,290, a
decrease of $2,002 or 5% from $39,292 for the three months ended
March 31, 1996. This decreae is primarily the result of assets
becomming fully depreciated.
Interest expense. For the three months ended March 31, 1997,
interest expense totaled $123,281 as compared to $115,337 for
the same period in 1996. This increase in interest expense is
the result of an increase in the interest rate on certain
mortgage notes payable. Liquidity and Sources of Capital
At March 31, 1997, the Trust had negative working capital of
$4,926,000. Cash decreased from $166,959 from December 31, 1996
to $162,469 at March 31, 1997. The net decrease is primarily
the result of cash being expended for operating purposes. Rent
and other receivables decreased $59,900 to $410 at March 31,
1997. The decrease is the result of the collection of account
balances. Accounts payable and accrued expenses decreased
$39,594 from $181,397 at December 31, 1996 to $141,803 at March
31, 1997. The decrease is the result of the timing of payments
of certain operating expenses. Mortgage notes payable decreased
$33,118 from $4,971,910 at December 31, 1996 to $4,938,792 at
March 31, 1997. The decrease is the result of payments of
principal on mortgaged property. Distributions in excess of
net earnings decreased $25,657 from ($3,747,369) at December 31,
1996 to ($3,773,026) at March 31, 1997. The decrease is the
result of the net loss for the period ending March 31, 1997.
The Trust has relied solely on rental income to pay its
expenses in 1997 and 1996. Cash flows provided by operations
were $28,629 for the three months ended March 31, 1997 as
compared to $1,121 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 mature 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 prior to June 20, 1997. In the event the Trust is
unsuccessful in refinancing the notes payable prior to the
current maturity date, management believes it will be able to
obtain an extension from the bank or that the bank will not
demand payment prior to such refinancing. 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 Florida property. In the event this negotiation
is unsuccessful, Trust management believes that the Trust will
be successful in obtaining other sources of financing. In
addition, Trust management believes that the mortgage note
lender will not demand payment prior to the successful
completion of the refinancing transaction. There can be no
assurance that the Trust's refinancing efforts will be
successful or that the bank will not demand payment of the
mortgage notes payable. 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.
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 Healtcare reform.
<PAGE>
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 March 31, 1997.<PAGE>
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: May 14, 1997 /s/ Thomas M. Clarke
Thomas M. Clarke, President
(Principal Executive Officer)
Date: May 14, 1997 /s/ David M. Fancher
David M. Fancher
Chief Financial Officer
(Principal Financial &
Accounting Officer)
<PAGE>
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: May 14, 1997 Thomas M. Clarke, President
(Principal Executive Officer)
Date: May 14, 1997 David M. Fancher
Chief Financial Officer
(Principal Financial &
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 162,469
<SECURITIES> 0
<RECEIVABLES> 410
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,322,708
<DEPRECIATION> 4,034,391
<TOTAL-ASSETS> 4,958,306
<CURRENT-LIABILITIES> 5,080,595
<BONDS> 0
0
0
<COMMON> 3,976
<OTHER-SE> (126,265)
<TOTAL-LIABILITY-AND-EQUITY> 4,958,306
<SALES> 179,829
<TOTAL-REVENUES> 179,829
<CGS> 0
<TOTAL-COSTS> 88,2678
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123,281
<INCOME-PRETAX> (31,719)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,719)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
