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, 2000
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
incorporation or organization) Identification No.)
2940 N. Swan Rd., Suite 212
Tucson, AZ 85712
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(520) 326-2000
------------------------------------------------
(Issuer's telephone number, including area code)
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(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 November 09, 2000.
<PAGE>
HEALTHCARE INVESTORS OF AMERICA, INC.
INDEX
PAGE
PART I. Financial Information
Item 1. Condensed Financial Statements (Unaudited)
Balance Sheets - December 31, 1999 and September 30, 2000......... 2
Statements of Earnings (3 Months) - September 30, 1999
and September 30, 2000......................................... 3
Statement of Cash Flows (3 Months) - September 30, 1999
and September 30, 2000......................................... 4
Statement of Earnings (9 Months) - September 30, 1999
and September 30, 2000......................................... 5
Statement of Cash Flows (9 Months) - September 30, 1999
and September 30, 2000......................................... 6
Notes to Financial Statements - September 30, 2000................ 7
Item 2. Management's Discussion and Analysis or Plan of Operation......... 16
PART II. Other Information................................................. 23
Signatures................................................................. 24
<PAGE>
HEALTHCARE INVESTORS OF AMERICA, INC.
FORM 10-QSB
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
BALANCE SHEETS
September 30, December 31,
2000 1999
(Unaudited) (Audited)
ASSETS: ------------- ------------
Real Estate Properties:
Land $ 393,195 $ 393,195
Building and improvements, net of
accumulated depreciation of $1,469,786
and $1,381,974 at September 30, 2000
and December 31, 1999, respectively 3,363,044 3,301,343
Prepaid expenses 50,000 50,000
Rent and other receivables 10,000 90,000
Cash and cash equivalents 92,942 76,285
Restricted cash 328,864
--------------------------
TOTAL ASSETS $ 3,909,181 $ 4,239,687
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Mortgage notes payable $ 3,990,887 $ 4,325,404
Accounts payable and accrued expenses 117,448 107,413
Disputed claims 92,623 92,623
Option deposit 435,000 435,000
--------------------------
TOTAL LIABILITIES $ 4,635,958 $ 4,960,440
Stockholders' Equity:
Common stock, $.01 par value; 10,000,000
shares authorized; issued and outstanding,
397,600 shares 3,976 3,976
Paid in Capital 3,652,823 3,652,823
Distributions in excess of net earnings (4,383,576) (4,377,552)
--------------------------
TOTAL STOCKHOLDERS' EQUITY (726,777) (720,753)
--------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 3,909,181 $ 4,239,687
==========================
See Notes to Financial Statements
2
<PAGE>
HEALTHCARE INVESTORS OF AMERICA, INC.
FORM 10-QSB
PART I: FINANCIAL INFORMATION
STATEMENT OF EARNINGS AND DISTRIBUTIONS
IN EXCESS OF NET EARNINGS
For the Three Months Ended September 30, 2000 and September 30, 1999
Three Months Three Months
Ended Sept. 30, Ended Sept. 30,
2000 1999
(Unaudited) (Unaudited)
REVENUES: --------------- ---------------
Rental income $ 144,942 $ 128,836
Gain on sale of assets
Interest income 1,012 5,193
----------- -----------
Total revenues $ 145,954 $ 134,029
=========== ===========
EXPENSES:
Depreciation and amortization $ 29,271 $ 29,271
Interest expense 90,319 67,955
Advisory and other fees 7,500 7,500
Directors fees and expenses 8,250 8,250
Other operating expenses 4,053 8,264
----------- -----------
Total expenses $ 139,393 $ 121,240
----------- -----------
NET INCOME (LOSS) $ 6,561 $ 12,789
=========== ===========
NET INCOME (LOSS) PER SHARE $ 0.02 $ 0.03
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 397,600 397,600
=========== ===========
Distributions in excess of
earnings-beginning of period $(4,390,137) $(4,359,846)
Net income/(loss) 6,561 12,789
Distributions during the period
----------- -----------
Distributions in excess of
earnings-end of period $(4,383,576) $(4,347,057)
=========== ===========
See Notes to Financial Statements
3
<PAGE>
HEALTHCARE INVESTORS OF AMERICA, INC.
FORM 10-QSB
PART I: FINANCIAL INFORMATION
STATEMENT OF CASH FLOWS
Three Months Three Months
Ended Sept. 30, Ended Sept. 30,
2000 1999
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATIONS: --------------- ---------------
Net income/(loss) $ 6,561 $ 12,789
Adjustments to reconcile net income to net
cash provide by (used in) operating
activities:
Depreciation and amortization 29,271 29,271
Changes in assets and liabilities:
Contract, rents and other receivables 182,500
Prepaid expenses 1,946
Accounts payable and accrued expenses 12,915 (48,089)
Option Deposit 100,000
--------- ---------
Net cash provided by (used in) operating
activities 48,747 278,418
--------- ---------
CASH FLOWS FROM INVESTING AND FINANCING
ACTIVITIES:
Disposition of real estate properties
Payments on long-term borrowings (34,822) (190,397)
--------- ---------
Net cash provided by (used in) investing and
financing activities (34,822) (190,397)
--------- ---------
INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 13,924 88,021
CASH AND CASH EQUIVALENTS -
Beginning of period 79,018 63,134
--------- ---------
CASH AND CASH EQUIVALENTS -
End of period $ 92,942 $ 151,155
========= =========
See Notes to Financial Statements
4
<PAGE>
HEALTHCARE INVESTORS OF AMERICA, INC.
FORM 10-QSB
PART I: FINANCIAL INFORMATION
STATEMENT OF EARNINGS AND DISTRIBUTIONS
IN EXCESS OF NET EARNINGS
For the Nine Months Ended September 30, 2000 and September 30, 1999
Nine Months Nine Months
Ended Sept. 30, Ended Sept. 30,
2000 1999
(Unaudited) (Unaudited)
REVENUES: --------------- ---------------
Rental income $ 425,341 $ 416,318
Gain on sale of assets 12,879
Interest Income 6,701 14,589
----------- -----------
Total revenues $ 444,921 $ 430,907
EXPENSES:
Depreciation and amortization $ 87,812 $ 87,812
Interest expense 284,105 266,620
Advisory and other fees 22,500 22,500
Directors fees and expenses 25,045 24,750
Other operating expenses 31,482 32,340
----------- -----------
Total expenses $ 450,945 $ 434,022
----------- -----------
NET INCOME (LOSS) $ (6,024) $ (3,115)
=========== ===========
NET INCOME (LOSS) PER SHARE $ (0.02) $ (0.01)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 397,600 397,600
=========== ===========
Distributions in excess of earnings-
beginning of period $(4,377,552) $(4,343,942)
Net income/(loss) (6,024) (3,115)
Distributions during the period
----------- -----------
Distributions in excess of earnings-
end of period $(4,383,576) $(4,347,057)
=========== ===========
See Notes to Financial Statements
5
<PAGE>
HEALTHCARE INVESTORS OF AMERICA, INC.
FORM 10-QSB
PART I: FINANCIAL INFORMATION
STATEMENT OF CASH FLOWS
Nine Months Nine Months
Ended Sept. 30, Ended Sept. 30,
2000 1999
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATIONS: --------------- ---------------
Net income/(loss) $ (6,024) $ (3,115)
Adjustments to reconcile net income to net
cash provide by (used in) operating
activities:
Depreciation and amortization 87,812 87,812
Changes in assets and liabilities:
Rents and other receivables 80,000 182,500
Prepaid expenses 5,838
Accounts payable and accrued expenses 10,035 (31,791)
Option deposit 125,000
--------- ---------
Net cash provided by (used in) operating
activities 171,823 366,244
--------- ---------
CASH FLOWS FROM INVESTING AND FINANCING
ACTIVITIES:
Reduction of restricted cash 328,864
Acquisition of personal property (149,513)
Payment of long-term borrowings (334,517) (253,510)
--------- ---------
Net cash provided by (used in) investing
and financing activities (155,166) (253,510)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 16,657 112,734
CASH AND CASH EQUIVALENTS -
Beginning of period 76,285 38,421
--------- ---------
CASH AND CASH EQUIVALENTS -
End of period $ 92,942 $ 151,155
========= =========
See Notes to Financial Statements
6
<PAGE>
HEALTHCARE INVESTORS OF AMERICA, INC.
Notes to Financial Statements
For the Three Month Period Ended September 30, 2000 and 1999
NOTE 1: ORGANIZATION
The affairs of Healthcare Investors of America, Inc. (the "Trust") are managed
by its advisor, Harbor American Capital Group (the "Advisor") effective March 1,
1998. The Trust engages in acquiring and leasing health care facilities (nursing
homes and intermediate care mental retardation developmentally disabled nursing
facilities) under long-term leases.
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"). The historical financial statements presented are
prepared under the assumption that the Trust qualified as a REIT. If the Trust
qualified as a REIT, then it is not subject to federal income taxes on amounts
distributed to stockholders provided distributions to stockholders are at least
95% of the Trust's real estate investment trust taxable income and the Trust
meets certain other conditions. In the event it is determined that the Trust did
not qualify as a REIT, the Trust 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 prior years due to its net operating loss carryovers. Therefore, no
adjustment would be required to the historical financial statements presented
related to any tax provision.
The Advisor and the Trust's 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 purposes of the Code, the Advisor
intends to assist the Trust in implementing procedures to requalify the Trust as
a REIT.
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. As of September 30, 2000, the
Trust has only one property leased. Therefore, the cash flow available to pay
operating expenses is limited.
Management's plans include continuing to seek sources to refinance or sell the
Florida Property.
The financial statements do not include any adjustments relating to the
recoverability of recorded asset amounts or the amount of liabilities that might
be necessary should the Trust be unable to continue as a going concern.
At September 30, 2000, the remaining property owned by the Trust is Watercrest
Nursing and Rehabilitation Center, formerly known as Bayshore Convalescent
Center in North Miami, Florida ("Bayshore") Bayshore was leased to BHS. BHS is
7
<PAGE>
an affiliate of the Trust as it is owned by James R. Sellers, an affiliate of
the Advisor. On June 3, 1999, the Trust entered into a Purchase and Sale
Agreement to sell Bayshore to Abraham Shaulson for $5,750,000.
The Trust's continuing plan of operation for the year ending December 31, 2000
is as follows: The Trust intends to own, lease or sell (including by auction)
its Properties. To the extent it has funds available for investment (it
currently has no such funds available and no plans for raising such funds), it
will invest primarily in healthcare related properties, including long term care
facilities, assisted living facilities, medical office buildings, retirement
housing facilities, psychiatric hospitals and substance abuse recovery centers
through acquisitions, joint ventures and mortgage loans. The Trust may also
invest in commercial, industrial and residential income producing real
properties through similar means. Since the Trust has no available funds for
such investments, its ability to undertake such investments will be dependent
upon the availability of capital to the Trust.
The Company's mortgage notes payable matured on June 20, 1997 and the Bank
demanded payment in full by letter dated August 15, 1997. In that connection,
the Trust and the Bank entered into Forbearance Agreement (the "Forbearance
Agreement") dated as of April 30, 1998. Under the Forbearance Agreement, the
Bank agreed to forbear from exercising its remedies until July 31, 1998. In
consideration therefor, the Trust agreed to increase the outstanding principal
amount of a Promissory Note (Renewal and Increase), dated as of September 20,
1992, in favor of the Bank from $1,000,000 to $1,681,170, a portion of the
security for which is a second mortgage on Bayshore. The Trust agreed to waive
any defenses, offset or claims it may have as of the date of the Forbearance
Agreement against the Bank related to the outstanding debt of the Trust to the
Bank. The Forbearance Agreement also contained representations of the Trust
that, among other items, it is solvent and has no present intention of filing or
acquiescing in any bankruptcy or insolvency proceeding. To the extent that the
Trust would so file or acquiesce, the Trust agreed not to contest any motion of
the Bank seeking relief from an automatic stay. Upon (i) a breach or violation
of any term covenant or condition of the Forbearance Agreement or related
documents, (ii) a material breach or default under any of the other loan
documents in connection with the Trust indebtedness to the Bank, or (iii) any
representation or warranty or other statement contained in the Forbearance
Agreement or related documents, or any loan documents in connection with Trust
indebtedness to the Bank being false or misleading in any material respect or
omitting a material fact necessary to make such representation, warranty or
statement not misleading, then the Bank could terminate its forbearance.
Effective July 31, 1998, the Forbearance Agreement was extended to January 31,
1999. It has now been further extended to November 30, 2000.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) CASH AND CASH EQUIVALENTS - For purposes of the statements of cash flows,
the Trust considers all short-term debt securities purchased with an
original maturity of three months or less to be cash equivalents.
(2) BUILDINGS AND IMPROVEMENTS - Depreciation of these assets is computed by
the straight-line method over the useful lives of the assets which have
been estimated to be 20 to 40 years. The Trust periodically evaluates the
net realizable value of its properties and provides a valuation allowance
when it becomes probable there has been a permanent impairment of value.
Depreciation is suspended while a facility is vacant.
8
<PAGE>
(3) LOAN COSTS - Loan costs have been deferred and are being amortized using
the straight-line method over the term of the related borrowing.
(4) REVENUE RECOGNITION - Rental income from operating leases is recognized as
earned over the life of the lease agreements.
(5) INCOME TAXES - As of December 31, 1999, the Company had net operating loss
carryforwards for income tax purposes of approximately $1,466,000 which
will expire beginning in 2006. The Trust did not file its applicable
Federal and State income tax return for the periods 1992 through 1997 on a
timely basis. The Trust had cumulative net operating losses during the
periods from 1991 through 1997.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of the financial
instruments disclosed elsewhere in these notes, are deemed to be
representative of their fair values, as the interest rates approximate
market rates giving consideration to their respective risks.
(7) USE OF ESTIMATES - Management has made certain estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
NOTE 3: REAL ESTATE PROPERTIES AND LEASES
At September 30, 2000, the Trust owned one nursing home in Florida (the "Florida
Property").
At September 30, 2000, the net book value of the remaining property is as
follows:
Florida
Property
Cost: --------
Land $ 393,195
Buildings and Improvements 4,641,317
Accumulated Depreciation (1,469,786)
Net Carrying Value $3,564,726
----------
Trust management has evaluated the carrying value of the Property and believes
that the remaining net carrying value of the Property is realizable.
THE FLORIDA PROPERTY
Effective September 1, 1999, the Trust entered into a one year lease to lease
the former Bayshore property to Watercrest Nursing and Rehabilitation Center,
Inc. Effective October 23, 2000 the lease termination date was extended to
January 31, 2001.
The lease provides for monthly rentals of $48,314.00
In accordance with the original provisions of the Forbearance Agreement (defined
herein), the original monthly payment on the mortgage was subsequently increased
9
<PAGE>
to $51,958, resulting in a monthly payment of $58,958 on the subsequently
extended lease by BHS. The current extension of the forbearance agreement
reduced the monthly payment, commencing in 1999, to $41,314, resulting in a
monthly lease payment of $48,314. There is no assurance that the terms of the
lease with Watercrest represents a market rate or that Watercrest has the
liquidity to pay rental payments when due.
NOTE 4: MORTGAGE NOTES PAYABLE
9/30/00
-------
Bank mortgage note-Florida Property, payable in $ 4,113,292
monthly installments of $41,314, including interest
at 9.00%, through November 30, 2000, at which date
the unpaid balance is due in full.
The Property is secured by first mortgages, assignments of the lease and rents
thereunder. The bank mortgage note balance on the Colorado Properties was also
added and secured, to the extent unpaid by sales of the Colorado Properties, in
accordance with the terms of the Forbearance Agreement, by a second mortgage on
the Florida Property.
The Trust entered into a Forbearance Agreement which is further discussed in
Note 1.
NOTE 5: RELATED PARTY TRANSACTIONS
Effective March 1, 1998, the Trust entered into an agreement with the
Predecessor Advisor, and affiliates of the Predecessor Advisor, to provide
various services to the Trust in exchange for fees, as follows:
Advisory fees at an annual rate of the greater of $30,000 or 5% of net
income of the Trust, as defined. The Trust incurred advisory fees of $7,500
to the Advisor during the quarterly period ended September 30, 2000.
Property management, acquisition and disposition fees to be paid based upon
contractual agreements between the parties. The Trust incurred no such fees
in the third quarter of 2000.
NOTE 6: DISPUTED CLAIMS
Management of the Predecessor Advisor entered into certain transactions related
to the potential debt refinancing and/or sale of the Properties. The Trust has
recorded certain professional fees related to those transactions as disputed
claims, believing that they are obligations, not of the Trust, but of former
management or other third parties. In connection with one of these disputes, the
Trust has been named a codefendant with the Predecessor Advisor for payment of
fees totaling approximately $50,000 which relate to establishing the advisory
relationship with the Predecessor Advisor. The advisory relationship was
terminated by the Trust for nonperformance of management of the Predecessor
Advisor. It is the opinion of current management that these claims are the
obligation of former management due to its nonperformance.
10
<PAGE>
NOTE 7: CONTINGENCIES
Intended Sale of Bayshore and Related Lease
At January 1, 1999, Bayshore was leased under an operating agreement to
Bayshore Healthcare Services, Inc., an Arizona corporation ("BHS"). BHS is an
affiliate of the Trust as it is owned by James R. Sellers, an affiliate of the
Advisor. Effective August 30, 1999, the lease with BHS was cancelled and the
Trust and BHS, as "Sellers", and Abraham Shaulson, hereinafter referenced as the
"Buyer", entered into a Purchase and Sale Agreement (the "Original Agreement"),
dated as of June 3, 1999, as amended by Amendment to Purchase and Sale Agreement
dated as of August 31, 1999 (the "Amendment,") and as further amended by the
Second Amendment to Purchase and Sale Agreement, dated March 31, 2000 (the
"Second Amendment") and as further amended by the Third Amendment to Purchase
and Sale Agreement dated October 23, 2000 (the Third Amendment) which together
with the Original Agreement are hereinafter collectively referred to as the
"Agreement". The Second Amendment removed BHS as a part of the selling entity.
The Third Amendment extended the date for closing to January 31, 2001. Under the
Agreement, Seller agreed to sell all of the real estate, personal property,
inventory, trademarks and other intangibles, and patient contracts
(collectively, the "Assets") to Buyer with respect to the Bayshore Convalescent
Center ("Bayshore") located at 16650 West Dixie Highway, Miami, Florida.
Excepted from the Asset sale is all cash, accounts receivables, prepaid
expenses, notes receivable and personal property of the residents at Bayshore.
Buyer agreed to pay Seller $5,750,000 (the "Purchase Price") for Seller's
Assets as follows:
(i) $350,000 (the "Deposit") from Buyer to Seller as a nonrefundable
deposit except in the event of a default by Seller under the
Agreement; and
(ii) The balance of the purchase price due on the closing date scheduled on
or before January 31, 2001 (the "Closing Date").
The Agreement provides for the allocation of the Purchase Price in
accordance with a schedule that will be attached to the Agreement. To date, the
Seller has not made an allocation to disclose on the schedule that the Seller
will attach to the Agreement.
With the execution of the Amendment, the Buyer deposited $150,000 into a
separate interest bearing account of Seller. The proceeds in this account are
for capital improvements to Bayshore, as described in the Agreement. Buyer is
responsible for the completion of the improvements. Buyer submits evidence of
the completion of the improvements and costs to Seller for reimbursement by
Seller. Upon the closing of the sale under the Agreement, any amount not used
for the completion of improvements shall be applied to the Purchase Price. If
the Asset sale fails to close by the Closing Date for any reason other than a
default by the Seller, any amount not used for capital improvements shall become
the property of the Seller.
Pending the closing of the sale under the Agreement, Seller has agreed to
have the Registrant lease Bayshore to a Buyer affiliate. The terms of the Lease
(the "Watercrest Lease"), dated as of July 30, 1999, from the Registrant to
Watercrest Nursing and Rehabilitation Center, Inc. (the "Lessee"), are as
follows:
11
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The initial term of the Watercrest Lease commenced September 1, 1999 and
ends October 31, 2000. Effective October 23, 2000 the end date has been extended
to January 31, 2001. The base rent for Bayshore is $47,814 per month payable on
the 20th day of each calendar month plus such additional amounts that may be
necessary to cover the debt service under the loan agreement between the
Registrant and any mortgagee of Bayshore. Lessee assumes the obligation to pay
all taxes and other charges which arise out of Bayshore. Lessee is responsible
for all utilities, insurance premiums related to the premises including a $2,500
monthly insurance administration fee due the Registrant for monitoring the
insurance coverage of Bayshore.
In the event of a partial condemnation or damage to or destruction of
Bayshore, which does not render Bayshore unsuitable for its primary intended
use, the rent shall be abated to the extent that it is fair, just and equitable
to both the Registrant and Lessee. The primary intended use of the property is
as a health care facility licensed for skilled and intermediate long-term
nursing services. Lessee covenants in the Lease to operate Bayshore in
accordance with the primary intended use and to maintain its qualifications for
licensure and accreditation. Under the Watercrest Lease, Lessee may enter into a
management agreement with the prior written consent of the Registrant and any
mortgagee of Bayshore, subject to the payment of the management fees being
subordinate to all sums due under the Lease.
The Watercrest Lease requires the Lessee to maintain Bayshore in good order
and repair. Lessee is responsible for the cost of any capital additions to
Bayshore which shall be deemed a leasehold improvement. The Watercrest Lease
further requires the Lessee to spend the $150,000 referred to above on
improvements to Bayshore. As of October 20, 2000, Lessee has spent this $150,000
primarily on computer equipment, floor coverings, window frame and glass
replacements, exterior painting, roof repairs and air conditioning equipment.
Lessee may not create or allow to remain on the premises of Bayshore any lien or
encumbrance on Bayshore. Lessee may, however, contest any taxes, insurance
requirements, liens or encumbrances so long as Lessee shall provide reasonable
security in the event any such lien, taxes, insurance requirements or
encumbrance exceeds $50,000.
Lessee must maintain all-risk insurance in an amount equal to the
replacement costs of Bayshore, boiler insurance, business interruption insurance
covering the Registrant's risk of loss, comprehensive public liability insurance
in an amount not less than $4 million per occurrence for injuries and $2 million
for property damage, malpractice insurance in an amount of not less than $5
million for each person and $10 million for each occurrence, and flood insurance
if Bayshore lies in a flood plain area.
Insurance proceeds as a result of loss or damage to Bayshore are payable to
the Registrant for reconstruction or repair of Bayshore. If Bayshore is totally
or substantially destroyed from a risk covered by insurance, Lessee, subject to
the rights of any mortgagee, shall have the option to restore Bayshore or
acquire Bayshore at fair market value or terminate the Watercrest Lease. If
Bayshore is destroyed from a risk not covered by insurance, the Registrant may
elect to restore Bayshore or absent such an election Lessee may terminate the
Lease.
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A partial condemnation of Bayshore so long as Bayshore is not rendered
unsuitable for its primary intended use, shall not cause a termination of the
Watercrest Lease. If the condemnation causes Bayshore to be rendered unsuitable
for its primary intended use, then Lessee has the right to restore Bayshore at
its own expense, to acquire Bayshore for fair market value or terminate the
Watercrest Lease. In the event Lessee or its affiliate purchases Bayshore, any
condemnation award belongs to Lessee, otherwise the award belongs to the
Registrant.
An event of default occurs upon:
(i) the existence of an event of default under any other lease between the
Registrant and Lessee;
(ii) failure of Lessee to make a rental payment under the Watercrest Lease
and such failure continues for a period of 10 days after receipt of
written notice;
(iii)Lessee's failure to observe or perform any other term, covenant or
condition of the Watercrest Lease and such failure is not cured within
30 days after receipt of notice;
(iv) bankruptcy of Lessee;
(v) voluntary cessation of operations by Lessee at Bayshore for a period
of longer than 30 days; or
(vi) failure of Lessee to provide financial statements or copies of
required licensing information, to maintain quarterly cash flow of not
less than 125% of minimum rent or to operate Bayshore for its primary
intended use.
If an event a default shall have occurred and be continuing, the Registrant
may terminate the Watercrest Lease. The Registrant may not remove Lessee from
Bayshore until the Registrant provides for a substitute operator acceptable to
any Bayshore mortgagee. Notwithstanding termination of the Watercrest Lease,
Lessee is responsible for all rent due and payable with respect to Bayshore. In
addition, if an event of default shall have occurred and be continuing the
Registrant may require Lessee to purchase Bayshore for the Purchase Price plus
all rent then due and payable. If Lessee fails to perform under the Watercrest
Lease and is removed from Bayshore, such action by the Registrant shall not be
deemed an eviction of Lessee.
Lessee agrees to indemnify the Registrant against all liabilities arising
from the operation of Bayshore. Lessee may not, without the prior written
consent of the Registrant and any mortgagee, assign the Lease or sublet any part
of Bayshore.
The Seller owns all personal property used at Bayshore. The Lessee is not
paying any consideration for the personal property and upon termination of the
Watercrest Lease, all the personal property shall be deemed owned by the Seller.
The Registrant agrees to indemnify the Lessee from:
(i) any liability arising from any breach of representations, warranties,
covenants or agreements made in the Lease;
(ii) any overpayment or assessment relating to Bayshore from the Medicare
or Medicaid programs;
(iii)any claims by any creditor incurred by Bayshore prior to the
effective date of the Watercrest Lease; and
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(iv) any claim arising out of operation of Bayshore prior to the effective
date of the Watercrest Lease.
In the event either Medicaid or Medicare withholds, recoups or offsets any
payment due the Lessee for claims arising prior to the effective date of the
Watercrest Lease, the Registrant agrees to immediately reimburse Lessee for such
withholding, recoupment or offset. Notwithstanding other terms of the Watercrest
Lease, the Lessee may offset any payments that the Registrant fails to make in
this situation from the monthly rent and insurance administration fee. Any
amounts due to the Lessee from the Registrant as a result of the unreimbursed
Medicaid or Medicare payments shall bear interest at 10% per annum until paid by
the Registrant to the Lessee.
One of the principal conditions to the closing of the sale of Bayshore is
the shareholder approval of the sale by the Registrant's shareholders. If Seller
has not obtained shareholder approval at least six (6) months prior to the end
of the Watercrest Lease, Buyer has the option to extend the Watercrest Lease for
three one-year renewal terms with a rent increase equal to the consumer price
index increase for the preceding twelve (12) months. Such shareholder approval
was received and on February 10, 2000, the Trust Board of Directors accepted the
Inspector of Elections count of 271,162.4806 as an appropriate number of votes
in excess of the required two-thirds super majority.
Under the terms of the Agreement, Buyer was required to file applications
for the appropriate licenses to operate Bayshore with the applicable licensing
agencies by September 30, 1999, with all licenses to be issued on or before
December 31, 1999. This was accomplished effective September 1, 1999. Buyer
further agrees to indemnify and hold Sellers harmless from all liabilities
arising in connection with the operation of Bayshore from and after the date of
the Watercrest Lease until the Closing Date.
The Agreement contains Seller's representations and warranties related to,
among others:
(i) due organization and existence;
(ii) authorization of the Agreement;
(iii) good title to the real and personal property of Bayshore;
(iv) the operating condition of the buildings and appurtenances on the
real estate;
(v) proper licensing for operation of Bayshore as a 150 bed nursing
home;
(vi) payment of real estate taxes;
(vii) fair presentation of the financial condition and results of
operations of Bayshore as contained in the financial statements
Seller has delivered to Buyer;
(viii) no pending labor problems with the existing union at Bayshore;
(ix) no material and adverse litigation with respect to Bayshore;
(x) proper filing of all taxes, tax returns and cost reports;
(xi) sufficient insurance coverage with respect to Bayshore; and
(xii) no environmental claims.
The Agreement contains Buyer's warranties and representations related to due
organization and existence, and proper authorization of the Agreement, among
others.
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Conditions to the Buyer's obligation to consummate the Agreement include:
(i) no adverse change in Bayshore and the Seller's Assets;
(ii) Seller's compliance with the terms of the Agreement;
(iii) Buyer's receipt of a commitment to finance the Assets on terms
reasonably acceptable to Buyer;
(iv) no material and adverse litigation affecting Bayshore or the
Seller's Assets;
(v) the patient census shall not be less than 113 with Medicaid
certified beds to be 115 and Medicare certified beds to be 16; and
(vi) Buyer's receipt of evidence that all cost reports of Seller required
to be filed prior to the Closing Date have been timely filed.
Conditions to the Seller's obligation to close the sale of Bayshore include
Buyer's continuing compliance with the Agreement, no litigation pending against
Buyer questioning the legality of the transactions under the Agreement, and
Seller's receipt of shareholder approval of the sale of Seller's Assets. Such
shareholder approval was secured effective February 10, 2000
Closing adjustments to the Purchase Price shall include proration of:
(i) real estate taxes;
(ii) water, sewage and electricity charges;
(iii) fees for customer annual or periodic licenses and permits;
(iv) employee wages and related payroll taxes and expenses; and
(v) charges on service and maintenance agreements.
Seller shall also be responsible for the payment of real estate brokerage
commissions. Buyer and Seller shall pay equally all closing costs including
documentary stamp taxes, county surtax, recording fees and title insurance
premiums.
Seller jointly and severally indemnifies Buyer for, among others items:
(i) liabilities and obligations of Seller arising prior to the Closing
Date unless otherwise expressly assumed by Buyer;
(ii) damages or deficiencies resulting from any misrepresentation, breach
of warranty or nonfulfillment of any obligation on the part of
Seller;
(iii) any retroactive payments due to the State of Florida or the United
States for periods prior to the closing unless specifically assumed
by Buyer; and
(iv) liabilities arising out of the transfer of funds or property by any
patient to the Seller prior to the Closing Date.
Buyer indemnifies Seller for, among other items:
(i) liabilities of Seller arising after the Closing Date and expressly
assumed by Buyer or relating to the operation of Bayshore by Buyer; or
(ii) any damage or deficiency resulting from any misrepresentation, breach
of warranty or nonfulfillment of any obligation on the part of Buyer
under the Agreement.
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HEALTHCARE INVESTORS OF AMERICA, INC.
Three Months Ended September 30, 2000
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, 2000 compared to September 30, 1999
RENTAL INCOME. The Trust primarily derives its revenues from the leasing of
facilities to healthcare providers. For the nine months ended September 30,
2000, rental income was $425,341 as compared to $416,318 for the nine months
ended September 30, 1999. For the three months ended September 30, 2000, rental
income was $144,942 as compared to $128,836 for the three months ended September
30, 1999.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the nine months
ended September 30, 2000 were $87,812 which compares with $87,812 for the nine
months ended September 30, 1999. These costs are primarily the result of the
remaining asset becoming fully depreciated.
INTEREST EXPENSE. For nine months ended September 30, 2000, interest expense
totaled $284,105 as compared to $266,620 for the same period in 1999.
ADVISORY AND OTHER FEES. Advisor and other fees consist of the fees charged by
Harbor American Capital Group, the advisor to the Trust. For three and nine
month periods ended September 30, 2000, advisory and other fees totaled $7,500
and $22,500, respectively. These are the same as the charges for the three and
nine month periods ended September 30, 1999.
DIRECTORS FEES AND EXPENSES. Director's fees and expenses for the three months
ended September 30, 2000 were $8,250. There are three Directors, each of whom
receives $2,750 per quarter. These were the basis for the same charges made in
the three and nine month periods ended September 30, 1999.
OTHER OPERATING EXPENSES. Other operating expenses consists primarily of
maintenance and administrative costs. Other operating costs for the nine months
ended September 30, 2000 were $31,482 which compares with $32,340 for the nine
months ended September 30, 1999. These costs include insurance and other
administrative costs.
LIQUIDITY AND SOURCES OF CAPITAL
Cash increased from $76,285 at December 31, 1999 to $92,942 at September 30,
2000. Of this amount $60,000 was held as a portion of the Bayshore capital
improvement escrow. Accounts payable and accrued expenses increased from
$107,413 at December 31, 1999 to $117,448 at September 30, 2000. Mortgage notes
payable decreased from $4,325,404 at December 31, 1999 to $3,990,887 at
September 30, 2000. The decrease is the result of payments of principal on
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mortgaged property. Distributions in excess of net earnings increased from
($4,377,552) at December 31, 1999 to ($4,383,576) at September 30, 2000.
The Trust has relied on rental income and use of formerly restricted cash to pay
its expenses in 2000 and 1999. Cash flows provided by operations were $171,823
for the nine months ended September 30, 2000 as compared to $366,244 for the
same period in 1999. This decrease resulted primarily from the release of a
deposit made by the Bayshore purchaser, formerly restricted cash.
The above discussion and the Trust's financial statements have been presented on
the basis that it is a going concern, which contemplated the realization of
assets and the satisfaction of liabilities in the normal course of business. At
September 30, 2000, the Trust had one property remaining, Bayshore, a 150 bed
skilled and intermediate care nursing home facility in North Miami Beach,
Florida, thus limiting cash flows available to pay operating expenses. Mortgage
notes payable on the Trust's properties mature on November 30, 2000. The current
maturity of the Trust's notes payable raises a substantial doubt about the
Trust's ability to continue as a going concern for a reasonable period of time.
Management's plans include selling Bayshore or, continuing to seek sources to
refinance the mortgage notes payable secured by Bayshore, and minimizing
operating costs. 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 or sale. There can be no assurance that the Trust's
sale or refinancing efforts will be successful or that the bank will not demand
payment of the mortgage notes payable.
Under the terms of the lease agreement, the payment of real estate taxes levied
against the Bayshore Convalescent Center were the responsibility of Bayshore
Healthcare Services, Inc., the lessee, during the period from May 1, 1993 to
September 1, 1999 BHS did not pay such taxes for the years 1997, 1998 and 1999.
The Trust agreed to borrow the necessary funds to bring these taxes current and
paid the tax collector of Dade County, Florida the total sum of $125,582.21 ,
which was sufficient to pay said taxes in full including all interest and
penalties for late payment.
In consideration therefore, the Trust accepted from BHS a Promissory Note in the
amount of $125,582.21 plus interest at the rate of 10% per annum payable on
demand. There can be no assurance that Bayshore will have adequate funds to pay
this Promissory Note.
Intended Sale of Bayshore and Related Lease
At January 1, 1999, Bayshore was leased under an operating agreement to
Bayshore Healthcare Services, Inc., an Arizona corporation ("BHS"). BHS is an
affiliate of the Trust as it is owned by James R. Sellers, an affiliate of the
Advisor. Effective August 30, 1999, the lease with BHS was cancelled and the
Trust and BHS, as "Sellers", and Abraham Shaulson, hereinafter referenced as the
"Buyer", entered into a Purchase and Sale Agreement (the "Original Agreement"),
dated as of June 3, 1999, as amended by Amendment to Purchase and Sale Agreement
dated as of August 31, 1999 (the "Amendment,") and as further amended by the
Second Amendment to Purchase and Sale Agreement, dated March 31, 2000 (the
"Second Amendment") and as further amended by the Third Amendment to Purchase
and Sale Agreement, which together with the Original Agreement are hereinafter
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collectively referred to as the "Agreement". The Second Amendment removed BHS as
a part of the selling entity. The Third Amendment extended the sale closing date
to January 31, 2001. Under the Agreement, Seller agreed to sell all of the real
estate, personal property, inventory, trademarks and other intangibles, and
patient contracts (collectively, the "Assets") to Buyer with respect to the
Bayshore Convalescent Center ("Bayshore") located at 16650 West Dixie Highway,
Miami, Florida. Excepted from the Asset sale is all cash, accounts receivables,
prepaid expenses, notes receivable and personal property of the residents at
Bayshore.
Buyer agreed to pay Seller $5,750,000 (the "Purchase Price") for Seller's
Assets as follows:
(i) $350,000 (the "Deposit") from Buyer to Seller as a nonrefundable
deposit except in the event of a default by Seller under the
Agreement; and
(ii) The balance of the purchase price due on the closing date scheduled on
or before January 31, 2001 (the "Closing Date").
The Agreement provides for the allocation of the Purchase Price in
accordance with a schedule that will be attached to the Agreement. To date, the
Seller has not made an allocation to disclose on the schedule that the Seller
will attach to the Agreement.
With the execution of the Amendment, the Buyer deposited $150,000 into a
separate interest bearing account of Seller. The proceeds in this account are
for capital improvements to Bayshore, as described in the Agreement. Buyer is
responsible for the completion of the improvements. Buyer submits evidence of
the completion of the improvements and costs to Seller for reimbursement by
Seller. Upon the closing of the sale under the Agreement, any amount not used
for the completion of improvements shall be applied to the Purchase Price. If
the Asset sale fails to close by the Closing Date for any reason other than a
default by the Seller, any amount not used for capital improvements shall become
the property of the Seller.
Pending the closing of the sale under the Agreement, Seller has agreed to
have the Registrant lease Bayshore to a Buyer affiliate. The terms of the Lease
(the "Watercrest Lease"), dated as of July 30, 1999, from the Registrant to
Watercrest Nursing and Rehabilitation Center, Inc. (the "Lessee"), are as
follows:
The initial term of the Watercrest Lease commenced September 1, 1999 and
ends January 31, 2001. The base rent for Bayshore is $47,814 per month payable
on the 20th day of each calendar month plus such additional amounts that may be
necessary to cover the debt service under the loan agreement between the
Registrant and any mortgagee of Bayshore. Lessee assumes the obligation to pay
all taxes and other charges which arise out of Bayshore. Lessee is responsible
for all utilities, insurance premiums related to the premises including a $2,500
monthly insurance administration fee due the Registrant for monitoring the
insurance coverage of Bayshore.
In the event of a partial condemnation or damage to or destruction of
Bayshore, which does not render Bayshore unsuitable for its primary intended
use, the rent shall be abated to the extent that it is fair, just and equitable
to both the Registrant and Lessee. The primary intended use of the property is
as a health care facility licensed for skilled and intermediate long-term
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nursing services. Lessee covenants in the Lease to operate Bayshore in
accordance with the primary intended use and to maintain its qualifications for
licensure and accreditation. Under the Watercrest Lease, Lessee may enter into a
management agreement with the prior written consent of the Registrant and any
mortgagee of Bayshore, subject to the payment of the management fees being
subordinate to all sums due under the Lease.
The Watercrest Lease requires the Lessee to maintain Bayshore in good order
and repair. Lessee is responsible for the cost of any capital additions to
Bayshore which shall be deemed a leasehold improvement. The Watercrest Lease
further requires the Lessee to spend the $150,000 referred to above on
improvements to Bayshore. As of August 7, 2000, Lessee has spent $65,000
primarily on computer equipment, floor coverings, window frame and glass
replacements and exterior painting. Lessee may not create or allow to remain on
the premises of Bayshore any lien or encumbrance on Bayshore. Lessee may,
however, contest any taxes, insurance requirements, liens or encumbrances so
long as Lessee shall provide reasonable security in the event any such lien,
taxes, insurance requirements or encumbrance exceeds $50,000.
Lessee must maintain all-risk insurance in an amount equal to the
replacement costs of Bayshore, boiler insurance, business interruption insurance
covering the Registrant's risk of loss, comprehensive public liability insurance
in an amount not less than $4 million per occurrence for injuries and $2 million
for property damage, malpractice insurance in an amount of not less than $5
million for each person and $10 million for each occurrence, and flood insurance
if Bayshore lies in a flood plain area.
Insurance proceeds as a result of loss or damage to Bayshore are payable to
the Registrant for reconstruction or repair of Bayshore. If Bayshore is totally
or substantially destroyed from a risk covered by insurance, Lessee, subject to
the rights of any mortgagee, shall have the option to restore Bayshore or
acquire Bayshore at fair market value or terminate the Watercrest Lease. If
Bayshore is destroyed from a risk not covered by insurance, the Registrant may
elect to restore Bayshore or absent such an election Lessee may terminate the
Lease.
A partial condemnation of Bayshore so long as Bayshore is not rendered
unsuitable for its primary intended use, shall not cause a termination of the
Watercrest Lease. If the condemnation causes Bayshore to be rendered unsuitable
for its primary intended use, then Lessee has the right to restore Bayshore at
its own expense, to acquire Bayshore for fair market value or terminate the
Watercrest Lease. In the event Lessee or its affiliate purchases Bayshore, any
condemnation award belongs to Lessee, otherwise the award belongs to the
Registrant.
An event of default occurs upon:
(i) the existence of an event of default under any other lease between
the Registrant and Lessee;
(ii) failure of Lessee to make a rental payment under the Watercrest Lease
and such failure continues for a period of 10 days after receipt of
written notice;
(iii) Lessee's failure to observe or perform any other term, covenant or
condition of the Watercrest Lease and such failure is not cured
within 30 days after receipt of notice;
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(iv) bankruptcy of Lessee;
(v) voluntary cessation of operations by Lessee at Bayshore for a period
of longer than 30 days; or
(vi) failure of Lessee to provide financial statements or copies of
required licensing information, to maintain quarterly cash flow of
not less than 125% of minimum rent or to operate Bayshore for its
primary intended use.
If an event a default shall have occurred and be continuing, the Registrant
may terminate the Watercrest Lease. The Registrant may not remove Lessee from
Bayshore until the Registrant provides for a substitute operator acceptable to
any Bayshore mortgagee. Notwithstanding termination of the Watercrest Lease,
Lessee is responsible for all rent due and payable with respect to Bayshore. In
addition, if an event of default shall have occurred and be continuing the
Registrant may require Lessee to purchase Bayshore for the Purchase Price plus
all rent then due and payable. If Lessee fails to perform under the Watercrest
Lease and is removed from Bayshore, such action by the Registrant shall not be
deemed an eviction of Lessee.
Lessee agrees to indemnify the Registrant against all liabilities arising
from the operation of Bayshore. Lessee may not, without the prior written
consent of the Registrant and any mortgagee, assign the Lease or sublet any part
of Bayshore.
The Seller owns all personal property used at Bayshore. The Lessee is not
paying any consideration for the personal property and upon termination of the
Watercrest Lease, all the personal property shall be deemed owned by the Seller.
The Registrant agrees to indemnify the Lessee from:
(i) any liability arising from any breach of representations, warranties,
covenants or agreements made in the Lease;
(ii) any overpayment or assessment relating to Bayshore from the Medicare
or Medicaid programs;
(iii) any claims by any creditor incurred by Bayshore prior to the
effective date of the Watercrest Lease; and
(iv) any claim arising out of operation of Bayshore prior to the effective
date of the Watercrest Lease.
In the event either Medicaid or Medicare withholds, recoups or offsets any
payment due the Lessee for claims arising prior to the effective date of the
Watercrest Lease, the Registrant agrees to immediately reimburse Lessee for such
withholding, recoupment or offset. Notwithstanding other terms of the Watercrest
Lease, the Lessee may offset any payments that the Registrant fails to make in
this situation from the monthly rent and insurance administration fee. Any
amounts due to the Lessee from the Registrant as a result of the unreimbursed
Medicaid or Medicare payments shall bear interest at 10% per annum until paid by
the Registrant to the Lessee.
One of the principal conditions to the closing of the sale of Bayshore is
the shareholder approval of the sale by the Registrant's shareholders. If Seller
has not obtained shareholder approval at least six (6) months prior to the end
of the Watercrest Lease, Buyer has the option to extend the Watercrest Lease for
three one-year renewal terms with a rent increase equal to the consumer price
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index increase for the preceding twelve (12) months. Such shareholder approval
was received and on February 10, 2000, the Trust Board of Directors accepted the
Inspector of Elections count of 271,162.4806 as an appropriate number of votes
in excess of the required two-thirds super majority.
Under the terms of the Agreement, Buyer was required to file applications
for the appropriate licenses to operate Bayshore with the applicable licensing
agencies by September 30, 1999, with all licenses to be issued on or before
December 31, 1999. This was accomplished effective September 1, 1999. Buyer
further agrees to indemnify and hold Sellers harmless from all liabilities
arising in connection with the operation of Bayshore from and after the date of
the Watercrest Lease until the Closing Date.
The Agreement contains Seller's representations and warranties related to,
among others:
(i) due organization and existence;
(ii) authorization of the Agreement;
(iii) good title to the real and personal property of Bayshore;
(iv) the operating condition of the buildings and appurtenances on the
real estate;
(v) proper licensing for operation of Bayshore as a 150 bed nursing
home;
(vi) payment of real estate taxes;
(vii) fair presentation of the financial condition and results of
operations of Bayshore as contained in the financial statements
Seller has delivered to Buyer;
(viii) no pending labor problems with the existing union at Bayshore;
(ix) no material and adverse litigation with respect to Bayshore;
(x) proper filing of all taxes, tax returns and cost reports;
(xi) sufficient insurance coverage with respect to Bayshore; and
(xii) no environmental claims.
The Agreement contains Buyer's warranties and representations related to due
organization and existence, and proper authorization of the Agreement, among
others.
Conditions to the Buyer's obligation to consummate the Agreement include:
(i) no adverse change in Bayshore and the Seller's Assets;
(ii) Seller's compliance with the terms of the Agreement;
(iii) Buyer's receipt of a commitment to finance the Assets on terms
reasonably acceptable to Buyer;
(iv) no material and adverse litigation affecting Bayshore or the Seller's
Assets;
(v) the patient census shall not be less than 113 with Medicaid certified
beds to be 115 and Medicare certified beds to be 16; and
(vi) Buyer's receipt of evidence that all cost reports of Seller required
to be filed prior to the Closing Date have been timely filed.
Conditions to the Seller's obligation to close the sale of Bayshore include
Buyer's continuing compliance with the Agreement, no litigation pending against
Buyer questioning the legality of the transactions under the Agreement, and
Seller's receipt of shareholder approval of the sale of Seller's Assets. Such
shareholder approval was secured effective February 10, 2000
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Closing adjustments to the Purchase Price shall include proration of:
(i) real estate taxes;
(ii) water, sewage and electricity charges;
(iii) fees for customer annual or periodic licenses and permits;
(iv) employee wages and related payroll taxes and expenses; and
(v) charges on service and maintenance agreements.
Seller shall also be responsible for the payment of real estate brokerage
commissions. Buyer and Seller shall pay equally all closing costs including
documentary stamp taxes, county surtax, recording fees and title insurance
premiums.
Seller jointly and severally indemnifies Buyer for, among others items:
(i) liabilities and obligations of Seller arising prior to the Closing
Date unless otherwise expressly assumed by Buyer;
(ii) damages or deficiencies resulting from any misrepresentation, breach
of warranty or nonfulfillment of any obligation on the part of
Seller;
(iii) any retroactive payments due to the State of Florida or the United
States for periods prior to the closing unless specifically assumed
by Buyer; and
(iv) liabilities arising out of the transfer of funds or property by any
patient to the Seller prior to the Closing Date.
Buyer indemnifies Seller for, among other items:
(i) liabilities of Seller arising after the Closing Date and expressly
assumed by Buyer or relating to the operation of Bayshore by Buyer; or
(ii) any damage or deficiency resulting from any misrepresentation, breach
of warranty or nonfulfillment of any obligation on the part of Buyer
under the Agreement.
As indicated above, the Trust entered into an Agreement dated June 3, 1999, as
amended, with Abraham Shaulson to sell Bayshore. If the sale is completed, the
Trust intends to liquidate, pay off all debts and disburse any remaining assets
to the shareholders.
IMPACT OF YEAR 2000
The Trust experienced no financial or operational impact related to Year
2000 issues. Insofar as could be determined, the Trust's relationship with
suppliers, vendors and other third parties were not adversely affected by the
Year 2000 concerns.
Bayshore is substantially dependent on Medicaid reimbursements from the State of
Florida. There were no identifiable computer problems resulting in the failure
of the State of Florida to make Medicaid payments.
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 significant healthcare reform.
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HEALTHCARE INVESTORS OF AMERICA, INC.
PART II - OTHER INFORMATION
Items 1. through 6. Not Applicable
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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: November 09, 2000 /s/ F. Dale Markham
------------------------------------
F. Dale Markham
Director, President and Chief Financial Officer
(Principal Executive, Financial and Accounting
Officer)
24
