SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 19, 1998
HEALTHCARE INVESTORS OF AMERICA, INC.
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(Exact name of registrant as specified in its charter)
Maryland 33-11863 86-0576027
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(State or other (Commission (IRS Employer
jurisdiction of File Identification
incorporation) Number) Number)
2990 N. Swan Road, Suite 228, Tucson, Arizona 85712
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (520) 326-2000
75 South Church Street, Pittsfield, Massachusetts 01201
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(Former name or former address, if changed since last report)
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a)(1)
(i) On March 19, 1998, Healthcare Investors of America,
Inc. (the "Trust") dismissed Arthur Andersen LLP
("Arthur Andersen") as its independent accountants.
(ii) The 1996 Independent Auditor's Report issued by Arthur
Andersen was modified as follows: "The accompanying
financial statements have been prepared assuming that
the Trust will continue as a going concern. As
discussed in Note 1 to the financial statements, the
accumulation of losses, the carrying costs of unleased
assets and the current maturity of all of the Trust's
notes payable raise a substantial doubt about its
ability to continue as a going concern. Management's
plans concerning these matters are also described in
Note 1. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty."
The 1995 Independent Auditor's Report issued by LaVoie,
Clark, Charvoz & May ("LCC&M"), the independent
accountants for the Trust in 1995 and previous years,
was modified as follows: "The accompanying financial
statements have been prepared assuming that the Trust
will continue as a going concern. As discussed in Note
1 to the financial statements, the accumulated
recurring operating losses, the carrying costs of
unleased assets and the current maturity of all of the
Trust's notes payable raise a substantial doubt about
its ability to continue as a going concern.
Management's plans concerning these matters are also
described in Note 1. The financial statements do not
include any adjustments that might result from the
outcome of this uncertainty."
(iii) The decision to change accountants was approved by the
Board of Directors.
(iv) (A) With respect to Arthur Andersen, during the fiscal
year of the Trust ended December 31, 1996, and for
the interim period from December 31, 1996 through
March 19, 1998, there were no disagreements
between Arthur Andersen and the Trust for the
respective applicable periods, whether or not
resolved, on any matter of accounting principles
or practices, financial statement disclosure, or
auditing scope or procedure, which, if not
resolved to the accountant's satisfaction, would
have caused the accountant to make reference to
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the subject matter of the disagreement in
connection with the report of such accountant.
With respect to LCC&M, during the fiscal year
ended December 31, 1995, there were no
disagreements between LCC&M and the Trust, for the
applicable period, whether or not resolved, on any
matter of accounting principles or practices,
financial statement disclosure, or auditing scope
or procedure, which, if not resolved to the
accountant's satisfaction, would have caused such
accountant to make reference to the subject matter
of the disagreement in connection with the report
of such accountant.
(iv) (B) Not applicable
(iv) (C) Not applicable
(iv) (D) Not applicable
(iv) (E) Not applicable
(a)(2) The Trust has engaged LaVoie, Clark, Charvoz & May as
the auditor for the year ending December 31, 1997.
(i) and (ii) Not applicable
ITEM 5. OTHER EVENTS
(a) RESIGNATION OF DIRECTORS AND OFFICERS
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Pursuant to separate letters of resignation, each dated
March 2, 1998, Thomas M. Clarke resigned as President, Chief
Executive Officer and Director of the Trust; Linda M. Clarke
resigned as Secretary of the Trust; John F. Lunt resigned as
Director of the Trust; and David Fancher resigned as Chief
Financial Officer of the Trust. The remaining members of the
Board of Directors, Messrs. Grady P. Hunter, F. Dale Markham and
Charles E. Trefzger voted to accept the resignations on March 19,
1998 at a meeting of the Board of Directors. As a result, two
vacancies in the Board of Directors exist.
At the same meeting of the Board of Directors, Mr. Markham
was selected to serve as Chairman, President and Chief Financial
Officer of the Trust with Joan M. Zeller to serve as Secretary of
the Trust.
In connection with the accepted resignations, the Board of
Directors also voted to terminate the contract with the advisor
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of the Trust, Lenox Healthcare Capital Services, LLC ("Lenox").
In its place the Board has voted to enter into a two year
contract effective March 1, 1998 with Harbor American Capital
Group ("Harbor American"), a California partnership, the general
partner of which is Heritage Advisory Corporation ("Heritage").
Harbor American was the former advisor to the Trust prior to the
selection in December 1996 of Messrs. Clarke and others as new
Directors of the Trust. James R. Sellers is the President and
sole stockholder of Heritage. Both Harbor American and Heritage
presently are members of Lenox and have indicated their
respective intents to resign from Lenox. Neither of such
entities was the managing member of Lenox.
In connection with the resignations, Mr. Clarke submitted a
letter (the "Clarke Letter") dated March 4, 1998 to Mr. Markham
stating that Mr. Sellers had engaged in discussions with respect
to the receipt of a formal proposal for the sale of the Bayshore
Convalescent Center ("Bayshore") in Miami, Florida to the
facility manager of the facility. Mr. Clarke stated that these
actions are inconsistent with discussions held during the
February 10, 1998 Board of Directors meeting of the Trust with
respect to terminating the facility manager for blatant
violations of a certain Management Agreement dated May 1, 1993.
Mr. Clarke stated that such actions indicated, among other
things, a lack of confidence in Lenox's ability to consummate
acquisitions and provide financing to the Trust. Mr. Clarke did
not specifically request that this explanation for his
resignation be included in this Form 8-K.
Mr. Markham, in a letter dated March 26, 1998 to Mr. Clarke,
stated, among other things, that the reasons set forth in the
Clarke Letter seemed without merit and did not reflect the facts.
Other principals of the Trust agreed that the contents of the
Clarke Letter were not reflective of the facts. Mr. Markham also
noted that discussions involving Mr. Clarke had occurred in
connection with the unsuccessful attempts of the facility manager
to reach Mr. Clarke regarding the person to whom the facility
manager should submit his unsolicited offer to purchase Bayshore.
Mr. Markham advised that as a result of this inability to contact
Mr. Clarke, the facility manager talked with Mr. Sellers as a
member of the then Trust advisor regarding this offer to
purchase.
(b) LITIGATION
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On March 11, 1998, John W. Madagan, Sr., d/b/a Sundance
Realty Advisors filed an action in the Commonwealth of
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Massachusetts District Court Department, Pittsfield Division
entitled John W. Madagan, Sr., d/b/a Sundance Realty Advisors v.
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Lenox Healthcare, Inc. and Healthcare Investors of America, Inc.
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in Civil Action No. 9827-CV-0199. This suit alleges that Lenox
Healthcare, Inc. ("Lenox Healthcare") and the Trust owe
compensation in the amount of $50,000 to Sundance Realty Advisors
("Sundance") as a result of John W. Madagan, Sr. ("Madagan")
having introduced Lenox Healthcare and the Trust to one another.
This allegation is pursuant to a letter attached to the Complaint
dated November 8, 1996. Additional correspondence in 1997 is
alleged to have been sent by Lenox Healthcare indicating the
Trust's commitment to the compensation to Madagan for services
performed, at which time an alleged good faith partial payment to
Sundance in the amount of $4,970 was paid. The Complaint alleges
joint and several liability for both Defendants for the unpaid
amounts, interest thereon plus attorneys fees, disbursements,
expenses and litigation and collection costs. To date, the Trust
has not responded to this Complaint. Although the Trust intends
to defend the allegations, at this time the Trust is not in a
position to comment upon the possible outcome of this litigation
or as to the loss or range of loss, if any, in connection
therewith.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits.
Exhibit 16 - Letter on Change in Certifying
Accountant
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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 hereunto duly authorized.
Dated: March 26, 1998 HEALTHCARE INVESTORS OF AMERICA, INC.
By: /s/ F. Dale Markham
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F. Dale Markham, President
and Chief Financial Officer
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EXHIBIT 16
ARTHUR ANDERSEN LLP
CERTIFIED PUBLIC ACCOUNTANTS
424 Church Street, Suite 1000
Nashville, Tennessee 37219
(615) 726-6000
Facsimile: (615) 725-5272
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read paragraph (i), the first paragraph of (ii), and the
first paragraph of (iv)(A) of Item 4(a)(1) of Form 8-K dated
March 26, 1998 of Healthcare Investors of America, Inc. to be
filed with the Securities and Exchange Commission and are in
agreement.
As a point of clarification, our firm has not been consulted in
the preparation of any of the interim filings with the Commission
during or related to the fiscal year ended December 31, 1997, nor
has it read or reviewed those filings. Accordingly, our
concurrence with the disclosures in the above-referenced Form 8-K
should not be construed as our agreement with the presentations,
disclosures or underlying accounting principles or practices that
were utilized in the preparation of those interim filings.
Sincerely,
/s/ Arthur Andersen LLP
March 26, 1998
