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<P style="FONT-SIZE: 14pt; MARGIN: 0px; LINE-HEIGHT: 16pt"
align=center><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>Washington, D.C. 20549</B></P>
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<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center><B>FORM
8-K</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center>CURRENT REPORT</P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center>PURSUANT TO SECTION 13 OR 15(d) OF </P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt" align=center>THE
SECURITIES EXCHANGE ACT OF 1934</P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt" align=center>Date
of Report: &nbsp;May 19, 2008</P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt" align=center>Date
of earliest event reported: &nbsp;May 15, 2008</P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 18.5pt; MARGIN: 0px; LINE-HEIGHT: 20.5pt"
align=center><B>AdCare Health Systems, Inc.</B></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(Exact Name of Registrant as specified in its Charter)</I></P>
<P style="MARGIN: 0px" align=center><BR></P>
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<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center>Ohio</P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(State or Other Jurisdiction</I></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>of Incorporation)</I></P></TD>
<TD vAlign=top width=319>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center>333-131542</P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(Commission file Number)</I></P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center>31-1332119</P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(IRS Employer Identification No.)</I></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt" align=center>5057
Troy Road, Springfield, Ohio &nbsp;45502-9032</P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(Address of principal executive offices) &nbsp;(Zip
code)</I></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>Registrant&#146;s Telephone Number, Including Area Code</I></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center>(937) 964-8974</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Check the appropriate box below if the form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (See General Instruction A2. below):</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>[ &nbsp;] &nbsp;Written communications pursuant to Rule 425 under
the Securities Act (17 CFR 230.425)</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>[ &nbsp;] &nbsp;Soliciting material pursuant to Rule 14a-12 under
the Exchange Act (17 CFR 240.14a-12)</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>[ &nbsp;] &nbsp;Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>[ &nbsp;] &nbsp;Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)).</P>
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<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 16px" align=justify><BR><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>1</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 12.5pt"
align=justify><B>Item 2.01. &nbsp;Completion of Acquisition or Disposition of
Assets.</B></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>On May 15, 2008, AdCare Health Systems, Inc. (the &#147;Company&#148;),
completed the acquisition of 99% ownership in The New Lincoln, Ltd. (&#147;NLL&#148;).
&nbsp;The sole asset of New Lincoln, Ltd. is the New Lincoln Lodge Retirement
Residence (&#147;NLLRR&#148;). &nbsp;NLLRR is a 53 unit assisted living residence located
in Columbus, Ohio. &nbsp;NLLRR began providing independent living and assisted
living services in 1997.</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>On June 10, 1995, the Company formed New Lincoln Co. (in which the
Company owned 49%) to serve as a 1% general partner in NLL. &nbsp;NLL was formed
to acquire, renovate and operate NLLRR. &nbsp;In January 1999, the Company
transferred its interest in New Lincoln, Ltd. to the majority owner. &nbsp;In
connection with the transfer of the Company&#146;s interest in NLLRR, the Company
received a promissory note in the amount of $1,425,000. &nbsp;The note was due
to be paid in full on or prior to December 31, 2004. &nbsp;At December 31, 2004,
the outstanding principal balance was $1,389,935. &nbsp;The Company granted an
extension of the due date to December 31, 2005.</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>In October, 2005, the terms of the promissory note were
retroactively amended. &nbsp;The amended terms called for interest at 10%, and a
lump sum payment of the outstanding principal and accrued interest on December
31, 2006, the maturity date. &nbsp;The promissory note was personally guaranteed
by the owner of the facility. &nbsp;This note was subsequently extended to
December 31, 2007.</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>On March 7, 2008, the Company entered into a letter of intent to
acquire 99% of New Lincoln Lodge in exchange for the outstanding note
receivable, $12,500 in cash and 1% ownership of NLL. &nbsp;The Company expects
to recognize a gain on this transaction of approximately $500,000 during the
second quarter, 2008.</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify><B>Item 2.02. &nbsp;Financial Statements and Exhibits.</B></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>On Monday, May 19, 2008, the Company issued a press release
announcing its financial results for the first quarter ended March 31,
2008.&nbsp; A copy of this press release is furnished as Exhibit 99.1
hereto.&nbsp; Pursuant to the rules and regulations of the Securities and
Exchange Commission, the information in this Current Report on Form 8-K,
including the attached exhibit and the information set forth therein, shall not
be deemed &#147;filed&#148; for purposes of Section 18 of the Securities Exchange Act of
1934, nor shall it be deemed to be incorporated by reference in any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of
any general incorporation language in such filing.</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify><B>Item 9.01. &nbsp;Financial Statements and Exhibits.</B></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px; LINE-HEIGHT: 12.5pt"
align=justify>a.</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 12.5pt"
align=justify><U>Financial Statements of Business Acquired.</U> &nbsp;The
financial statements required by Item 9.01(a) are not included with this report.
&nbsp;The Company intends to file these financial statements by amendment not
later than 71 calendar days after the date this Form 8-K is required to be filed
with the Securities and Exchange Commission.</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: -16px; TEXT-INDENT: -24px; LINE-HEIGHT: 12.5pt"
align=justify>b.</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 12.5pt"
align=justify><U>Pro Forma Financial Information.</U> &nbsp;The pro forma
financial information required under 9.01(b) is not included with this report.
&nbsp;The Company intends to file this pro forma financial information by
amendment no later than 71 calendar days after the date this Form 8-K is
required to be filed with the Securities and Exchange Commission.</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; LINE-HEIGHT: 14pt"
align=justify>d.</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 24px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; TEXT-INDENT: 24px; LINE-HEIGHT: 14pt"
align=justify><U>Exhibits</U></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
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<TD width=127></TD>
<TD width=511></TD></TR>
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<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt"
align=justify><U>Exhibit Number</U></P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt"
align=justify><U>Description of Exhibit</U></P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt"
align=justify>99.1</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt"
align=justify>Press Release dated May 19, 2008</P></TD></TR></TABLE>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 16px" align=justify><BR></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 14px" align=justify><BR><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>2</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 12.5pt"
align=justify>SIGNATURES</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; TEXT-INDENT: 48px; LINE-HEIGHT: 12.5pt"
align=justify>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 hereto duly authorized.</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Date: &nbsp;May 19, 2008 </P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 336px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt">ADCARE
HEALTH SYSTEMS, INC.</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 336px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt">By:<U>
/s/Scott Cunningham </U></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 336px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt">Name:
Scott Cunningham</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 336px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt">Title:
&nbsp;Chief Financial Officer</P>
<P style="MARGIN: 0px" align=right><BR><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>3</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 10.5pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=right>Exhibit 99.1</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">Press Release</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B>AdCare Health Systems, Inc. Reports 2008 First Quarter</B></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B>Earning Results</B></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">SPRINGFIELD, Ohio,
May 19, 2008 /PRNewswire-FirstCall/ AdCare Health Systems, Inc. (Amex: ADK), an
Ohio based long term care, home care and management company, today reported
financial results for its first quarter of 2008.</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">Revenues for the
quarter ended March 31<SUP>st</SUP>, 2008 were $5,992,542 as compared to
$5,824,348 for the same quarter in 2007, an increase of $168,194. The increase
was primarily due to better occupancy at our skilled nursing centers and our
assisted living communities.</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">The loss before taxes
and discontinued operations for the quarter ended March 31, 2008 was $128,826 as
compared to a loss of $124,206 for the first quarter ended March 31, 2007, an
increase of $4,620. &nbsp;Basic and diluted net loss per share for the three
months ended March 31, 2008 was $0.04 as compared to $0.04 for the three months
ended March 31, 2007.</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">David A. Tenwick,
Chairman of AdCare, stated that the Company is continuing to absorb the
necessary costs of being a public company but we are energized about being
listed on the American Stock Exchange. &nbsp;&#147;Our plan is to utilize the
advantages of being a public company by expanding operations through
acquisitions in like or complimentary business areas such as rehabilitation
services, institutional pharmacy and hospice, as well as raising additional
capital. &nbsp;To assist us in carrying out our plans, we have engaged Prospect
Financial Advisors.&#148;</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">About AdCare Health
Systems, Inc.</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">AdCare Health
Systems, Inc. (Amex: ADK) develops, owns and manages assisted living facilities,
nursing homes and retirement communities and provides home health care services.
&nbsp;Prior to becoming a publicly traded company in November of 2006, AdCare
operated as a private company for 18 years. &nbsp;AdCare&#146;s 900 employees provide
high-quality care for patients and residents residing in the 15 facilities that
they manage, seven of which are assisted living facilities, six skilled nursing
centers and two independent senior living communities. &nbsp;The Company has
ownership interests in seven of those facilities. &nbsp;In the ever expanding
marketplace of long term care, AdCare&#146;s mission is to provide quality healthcare
services to the elderly.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 14pt; BORDER-BOTTOM: #000000 2px solid">Safe
Harbor Statement</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">Statements contained
in this press release that are not historical facts may be forward-looking
statements within the meaning of federal law. &nbsp;Such forward-looking
statements reflect management&#146;s beliefs and assumptions and are based on
information currently available to management. &nbsp;The forward-looking
statements involve known and &nbsp;unknown &nbsp;risks, results, performance or
achievements of the Company to differ materially from those expressed or implied
in such statements. &nbsp;Such factors are identified in the public filings made
by the Company with the Securities and Exchange Commission and include the
Company&#146;s ability to </P>
<P style="MARGIN: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>4</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 12pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 14pt">secure
lines of credit and/or an acquisition credit facility, find suitable acquisition
properties at favorable terms, changes in the health care industry because of
political and economic influences, changes in regulations governing the
industry, changes in reimbursement levels including those under the Medicare and
Medicaid programs and changes in the competitive marketplace. &nbsp;There can be
no assurance that such factors or other factors will not affect the accuracy of
such forward-looking statements.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; PADDING-BOTTOM: 4px; MARGIN: 0px; LINE-HEIGHT: 14pt; BORDER-BOTTOM: #000000 2px solid">Contact:</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">April Spittle</P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">Manager of Corporate
Communications</P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">1-703-893-0021 ext.
108</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; COLOR: #0000ff; LINE-HEIGHT: 14pt"><U>aspittle@galencc.com</U><FONT
style="COLOR: #000000"></FONT></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; COLOR: #0000ff; LINE-HEIGHT: 14pt"><U>www.adcarehealth.com</U><FONT
style="COLOR: #000000"></FONT></P>
<P style="MARGIN: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>5</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="DISPLAY: none; FONT-SIZE: 0px" height=0>
<TD width=21></TD>
<TD width=21></TD>
<TD width=23></TD>
<TD width=433></TD>
<TD width=99></TD>
<TD width=21></TD>
<TD width=99></TD></TR>
<TR>
<TD vAlign=top width=720 colSpan=7>
<P style="MARGIN: 0px" align=center><B>ADCARE HEALTH SYSTEMS, INC. AND
SUBSIDIARIES</B></P></TD></TR>
<TR>
<TD vAlign=top width=720 colSpan=7>
<P style="MARGIN: 0px" align=center>CONSOLIDATED BALANCE SHEETS</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=433>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=center>March 31,</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=center>December 31,</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=433>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=99>
<P style="MARGIN: 0px" align=center>2008</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=99>
<P style="MARGIN: 0px" align=center>2007</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=433>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=center>(Unaudited)</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=433>
<P style="MARGIN: 0px" align=center><U>ASSETS</U></P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Current Assets:&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Cash&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;886,000&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;926,625&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Certificate of deposit, restricted&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;211,998&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;209,637&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Accounts receivable:&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">Long-term care resident receivables,
net&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,197,467&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,115,364&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">Management, consulting and development receivables,
net&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;287,950&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;259,778&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">Advances and receivables from affiliates,
current&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22,669&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27,558&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Prepaid expenses and other&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;406,927&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;453,219&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=433>
<P style="MARGIN: 0px">Total current assets&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,013,011&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,992,181&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=433>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Restricted cash&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;740,803&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;973,975&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Property and equipment, net&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,378,198&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,425,868&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Note receivable, net&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;218,015&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;221,413&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">License, net&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,189,307&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,189,307&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Goodwill&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,638,193&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,638,193&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Other assets&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,151,121&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,050,506&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=433>
<P style="MARGIN: 0px">Total Assets&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=99>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;24,328,648&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=99>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;24,491,443&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=433>
<P style="MARGIN: 0px" align=center><U>LIABILITIES AND STOCKHOLDER'S
EQUITY</U></P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Current Liabilities:&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">Current portion of notes payable and other
debt&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;740,607&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;773,278&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">Current portion of notes payable to
stockholder&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=right>9,432&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,026&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">Accounts payable and accrued expenses&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,485,882&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,476,536&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">Forward purchase contract&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;900,000&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=right>&nbsp;900,000&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=433>
<P style="MARGIN: 0px">Total current liabilities&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,135,921&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,158,840&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=433>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Notes Payable and Other Debt, Net of Current
Portion&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,728,438&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,813,338&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Notes Payable to Stockholders, Net of Current
Portion&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;805,187&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;810,084&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Other Liabilities&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;569,238&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;559,509&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Deferred Tax Liability</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=right>10,642&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=right>-&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Minority Interest in Equity of Consolidated
Entities&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;307,000&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;255,070&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=456 colSpan=2>
<P style="MARGIN: 0px">Total liabilities&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19,556,426&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19,596,841&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=500 colSpan=4>
<P style="MARGIN: 0px">Stockholders' equity:&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">Preferred stock, no par value; 500,000 shares
authorized; no shares issued or outstanding&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=right>-&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px" align=right>-&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">Common stock and additional paid-in capital, no par
value;&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,500,000 shares
authorized; 3,786,129 shares issued and outstanding&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,081,044&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,063,956&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=478 colSpan=3>
<P style="MARGIN: 0px">Accumulated deficit&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9,308,822)</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9,169,354)</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=456 colSpan=2>
<P style="MARGIN: 0px">Total stockholders' equity&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,772,222&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=99>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,894,602&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD vAlign=top width=456 colSpan=2>
<P style="MARGIN: 0px">Total liabilities and stockholders'
equity&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=99>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;24,328,648&nbsp;</P></TD>
<TD vAlign=top width=21>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=99>
<P style="MARGIN: 0px" align=right>$
&nbsp;&nbsp;24,491,443&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=720 colSpan=7>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=720 colSpan=7>
<P style="MARGIN: 0px" align=center>See notes to consolidated financial
statements</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>6</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="DISPLAY: none; FONT-SIZE: 0px" height=0>
<TD width=16></TD>
<TD width=20></TD>
<TD width=431></TD>
<TD width=30></TD>
<TD width=86></TD>
<TD width=29></TD>
<TD width=86></TD>
<TD width=18></TD></TR>
<TR>
<TD vAlign=top width=701 colSpan=7>
<P style="MARGIN: 0px" align=center><B>ADCARE HEALTH SYSTEMS, INC. AND
SUBSIDIARIES</B></P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=701 colSpan=7>
<P style="MARGIN: 0px" align=center>CONSOLIDATED STATEMENTS OF
OPERATIONS</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=720 colSpan=8>
<P style="MARGIN: 0px" align=center>(UNAUDITED)</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=202
colSpan=3><P style="MARGIN: 0px" align=center>Three Months Ended March
31,</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=86>
<P style="MARGIN: 0px" align=center>2008</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=86>
<P style="MARGIN: 0px" align=center>2007</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Revenues:</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Patient care revenues</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px" align=right>&nbsp;$ &nbsp;&nbsp;5,568,061 </P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px" align=right>&nbsp;$ &nbsp;&nbsp;5,366,640 </P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Management, consulting and development fee
revenue</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;424,481
</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;457,708
</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P style="MARGIN: 0px">Total revenue</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,992,542 </P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,824,348 </P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Expenses:</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Payroll and related payroll costs</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,587,397 </P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,688,575 </P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Other operating expenses</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,023,256 </P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,779,752 </P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Depreciation and amortization</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;226,694
</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;202,903
</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P style="MARGIN: 0px">Total expenses</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,837,347 </P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,671,230 </P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Income from Continuing Operations</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;155,195
</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;153,118
</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Other Income (Expense):</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Interest income</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,133
</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,580
</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Interest expense, others</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(226,352)</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(248,073)</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Interest expense, related parties</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(14,872)</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(17,957)
&nbsp;&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Minority interest in earnings of consolidated
entities</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(51,930)</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(27,874)</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(284,021)</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(277,324)</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Loss Before Taxes and Discontinued
Operations</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(128,826)</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(124,206)</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Income Tax Expense</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px" align=right>(10,642)</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px" align=right>-&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Loss From Continuing Operations</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px" align=right>(139,468)</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px" align=right>(124,206)</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Discontinued Operations:</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Loss from discontinued operations</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
&nbsp;&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10,571)</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Net Loss</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=86>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;(139,468)</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=86>
<P style="MARGIN: 0px" align=right>$
&nbsp;&nbsp;&nbsp;&nbsp;(134,777)</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Net Loss Per Share, Basic and Diluted:</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Continuing operations</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.04)</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.04)</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Discontinued operations</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
&nbsp;&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
&nbsp;&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=86>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.04)</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=86>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.04)</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=20>
<P>&nbsp;</P></TD>
<TD vAlign=top width=431>
<P>&nbsp;</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=468 colSpan=3>
<P style="MARGIN: 0px">Weighted Average Common Shares Outstanding,</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD vAlign=top width=86>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Basic</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,786,129 </P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,786,129 </P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=451 colSpan=2>
<P style="MARGIN: 0px">Diluted</P></TD>
<TD vAlign=top width=30>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,786,129 </P></TD>
<TD vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=86>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,786,129 </P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=720 colSpan=8>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=720 colSpan=8>
<P style="MARGIN: 0px" align=center>See notes to consolidated financial
statements</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<H1>&nbsp;</H1>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>7</P>
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{"company-data": {"conformed-name": "ADCARE HEALTH SYSTEMS INC", "cik": "0001004724", "assigned-sic": "8051", "irs-number": "311332119", "state-of-incorporation": "OH"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-33135", "film-number": "08845747"}, "business-address": {"street1": "5057 TROY RD", "city": "SPRINGFEILD", "state": "OH", "zip": "45502", "phone": "937-964-8974"}, "mail-address": {"street1": "5057 TROY RD", "city": "SPRINGFIELD", "state": "OH", "zip": "45502"}}
SECURITIES AND EXCHANGE COMMISSION
UNITED STATES 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:  May 19, 2008
Date
of earliest event reported:  May 15, 2008
AdCare Health Systems, Inc.
(Exact Name of Registrant as specified in its Charter)
Ohio
(State or Other Jurisdiction
of Incorporation)
333-131542
(Commission file Number)
31-1332119
(IRS Employer Identification No.)
5057
Troy Road, Springfield, Ohio  45502-9032
(Address of principal executive offices)  (Zip
code)
Registrant's Telephone Number, Including Area Code
(937) 964-8974
Check the appropriate box below if the form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (See General Instruction A2. below):
[  ]  Written communications pursuant to Rule 425 under
the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under
the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)
[  ]  Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)).
1
Item 2.01.  Completion of Acquisition or Disposition of
Assets.
On May 15, 2008, AdCare Health Systems, Inc. (the "Company"),
completed the acquisition of 99% ownership in The New Lincoln, Ltd. ("NLL").
 The sole asset of New Lincoln, Ltd. is the New Lincoln Lodge Retirement
Residence ("NLLRR").  NLLRR is a 53 unit assisted living residence located
in Columbus, Ohio.  NLLRR began providing independent living and assisted
living services in 1997.
On June 10, 1995, the Company formed New Lincoln Co. (in which the
Company owned 49%) to serve as a 1% general partner in NLL.  NLL was formed
to acquire, renovate and operate NLLRR.  In January 1999, the Company
transferred its interest in New Lincoln, Ltd. to the majority owner.  In
connection with the transfer of the Company's interest in NLLRR, the Company
received a promissory note in the amount of $1,425,000.  The note was due
to be paid in full on or prior to December 31, 2004.  At December 31, 2004,
the outstanding principal balance was $1,389,935.  The Company granted an
extension of the due date to December 31, 2005.
In October, 2005, the terms of the promissory note were
retroactively amended.  The amended terms called for interest at 10%, and a
lump sum payment of the outstanding principal and accrued interest on December
31, 2006, the maturity date.  The promissory note was personally guaranteed
by the owner of the facility.  This note was subsequently extended to
December 31, 2007.
On March 7, 2008, the Company entered into a letter of intent to
acquire 99% of New Lincoln Lodge in exchange for the outstanding note
receivable, $12,500 in cash and 1% ownership of NLL.  The Company expects
to recognize a gain on this transaction of approximately $500,000 during the
second quarter, 2008.
Item 2.02.  Financial Statements and Exhibits.
On Monday, May 19, 2008, the Company issued a press release
announcing its financial results for the first quarter ended March 31,
2008.  A copy of this press release is furnished as Exhibit 99.1
hereto.  Pursuant to the rules and regulations of the Securities and
Exchange Commission, the information in this Current Report on Form 8-K,
including the attached exhibit and the information set forth therein, shall not
be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, nor shall it be deemed to be incorporated by reference in any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of
any general incorporation language in such filing.
Item 9.01.  Financial Statements and Exhibits.
a.
Financial Statements of Business Acquired.
The
financial statements required by Item 9.01(a) are not included with this report.
 The Company intends to file these financial statements by amendment not
later than 71 calendar days after the date this Form 8-K is required to be filed
with the Securities and Exchange Commission.
b.
Pro Forma Financial Information.
The pro forma
financial information required under 9.01(b) is not included with this report.
 The Company intends to file this pro forma financial information by
amendment no later than 71 calendar days after the date this Form 8-K is
required to be filed with the Securities and Exchange Commission.
d.
Exhibits
Exhibit Number
Description of Exhibit
99.1
Press Release dated May 19, 2008
2
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 hereto duly authorized.
Date:  May 19, 2008
ADCARE
HEALTH SYSTEMS, INC.
By:
/s/Scott Cunningham
Name:
Scott Cunningham
Title:
 Chief Financial Officer
3
Exhibit 99.1
Press Release
AdCare Health Systems, Inc. Reports 2008 First Quarter
Earning Results
SPRINGFIELD, Ohio,
May 19, 2008 /PRNewswire-FirstCall/ AdCare Health Systems, Inc. (Amex: ADK), an
Ohio based long term care, home care and management company, today reported
financial results for its first quarter of 2008.
Revenues for the
quarter ended March 31
st
, 2008 were $5,992,542 as compared to
$5,824,348 for the same quarter in 2007, an increase of $168,194. The increase
was primarily due to better occupancy at our skilled nursing centers and our
assisted living communities.
The loss before taxes
and discontinued operations for the quarter ended March 31, 2008 was $128,826 as
compared to a loss of $124,206 for the first quarter ended March 31, 2007, an
increase of $4,620.  Basic and diluted net loss per share for the three
months ended March 31, 2008 was $0.04 as compared to $0.04 for the three months
ended March 31, 2007.
David A. Tenwick,
Chairman of AdCare, stated that the Company is continuing to absorb the
necessary costs of being a public company but we are energized about being
listed on the American Stock Exchange.  "Our plan is to utilize the
advantages of being a public company by expanding operations through
acquisitions in like or complimentary business areas such as rehabilitation
services, institutional pharmacy and hospice, as well as raising additional
capital.  To assist us in carrying out our plans, we have engaged Prospect
Financial Advisors."
About AdCare Health
Systems, Inc.
AdCare Health
Systems, Inc. (Amex: ADK) develops, owns and manages assisted living facilities,
nursing homes and retirement communities and provides home health care services.
 Prior to becoming a publicly traded company in November of 2006, AdCare
operated as a private company for 18 years.  AdCare's 900 employees provide
high-quality care for patients and residents residing in the 15 facilities that
they manage, seven of which are assisted living facilities, six skilled nursing
centers and two independent senior living communities.  The Company has
ownership interests in seven of those facilities.  In the ever expanding
marketplace of long term care, AdCare's mission is to provide quality healthcare
services to the elderly.
Safe
Harbor Statement
Statements contained
in this press release that are not historical facts may be forward-looking
statements within the meaning of federal law.  Such forward-looking
statements reflect management's beliefs and assumptions and are based on
information currently available to management.  The forward-looking
statements involve known and  unknown  risks, results, performance or
achievements of the Company to differ materially from those expressed or implied
in such statements.  Such factors are identified in the public filings made
by the Company with the Securities and Exchange Commission and include the
Company's ability to
4
secure
lines of credit and/or an acquisition credit facility, find suitable acquisition
properties at favorable terms, changes in the health care industry because of
political and economic influences, changes in regulations governing the
industry, changes in reimbursement levels including those under the Medicare and
Medicaid programs and changes in the competitive marketplace.  There can be
no assurance that such factors or other factors will not affect the accuracy of
such forward-looking statements.
Contact:
April Spittle
Manager of Corporate
Communications
1-703-893-0021 ext.
108
aspittle@galencc.com
www.adcarehealth.com
5
ADCARE HEALTH SYSTEMS, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
December 31,
2008
2007
(Unaudited)
ASSETS
Current Assets:
Cash
$
       886,000
$
       926,625
Certificate of deposit, restricted
211,998
209,637
Accounts receivable:
Long-term care resident receivables,
net
2,197,467
2,115,364
Management, consulting and development receivables,
net
287,950
259,778
Advances and receivables from affiliates,
current
22,669
27,558
Prepaid expenses and other
406,927
453,219
Total current assets
4,013,011
3,992,181
Restricted cash
740,803
973,975
Property and equipment, net
14,378,198
14,425,868
Note receivable, net
218,015
221,413
License, net
1,189,307
1,189,307
Goodwill
2,638,193
2,638,193
Other assets
1,151,121
1,050,506
Total Assets
$
  24,328,648
$
  24,491,443
LIABILITIES AND STOCKHOLDER'S
EQUITY
Current Liabilities:
Current portion of notes payable and other
debt
$
       740,607
$
       773,278
Current portion of notes payable to
stockholder
9,432
9,026
Accounts payable and accrued expenses
3,485,882
3,476,536
Forward purchase contract
900,000
900,000
Total current liabilities
5,135,921
5,158,840
Notes Payable and Other Debt, Net of Current
Portion
12,728,438
12,813,338
Notes Payable to Stockholders, Net of Current
Portion
805,187
810,084
Other Liabilities
569,238
559,509
Deferred Tax Liability
10,642
-
Minority Interest in Equity of Consolidated
Entities
307,000
255,070
Total liabilities
19,556,426
19,596,841
Stockholders' equity:
Preferred stock, no par value; 500,000 shares
authorized; no shares issued or outstanding
-
-
Common stock and additional paid-in capital, no par
value;
14,500,000 shares
authorized; 3,786,129 shares issued and outstanding
14,081,044
14,063,956
Accumulated deficit
(9,308,822)
(9,169,354)
Total stockholders' equity
4,772,222
4,894,602
Total liabilities and stockholders'
equity
$
  24,328,648
$
  24,491,443
See notes to consolidated financial
statements
6
ADCARE HEALTH SYSTEMS, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended March
31,
2008
2007
Revenues:
Patient care revenues
$   5,568,061
$   5,366,640
Management, consulting and development fee
revenue
424,481
457,708
Total revenue
5,992,542
5,824,348
Expenses:
Payroll and related payroll costs
3,587,397
3,688,575
Other operating expenses
2,023,256
1,779,752
Depreciation and amortization
226,694
202,903
Total expenses
5,837,347
5,671,230
Income from Continuing Operations
155,195
153,118
Other Income (Expense):
Interest income
9,133
16,580
Interest expense, others
(226,352)
(248,073)
Interest expense, related parties
(14,872)
(17,957)
Minority interest in earnings of consolidated
entities
(51,930)
(27,874)
(284,021)
(277,324)
Loss Before Taxes and Discontinued
Operations
(128,826)
(124,206)
Income Tax Expense
(10,642)
-
Loss From Continuing Operations
(139,468)
(124,206)
Discontinued Operations:
Loss from discontinued operations
-
(10,571)
Net Loss
$
    (139,468)
$
    (134,777)
Net Loss Per Share, Basic and Diluted:
Continuing operations
$
          (0.04)
$
          (0.04)
Discontinued operations
-
-
$
          (0.04)
$
          (0.04)
Weighted Average Common Shares Outstanding,
Basic
3,786,129
3,786,129
Diluted
3,786,129
3,786,129
See notes to consolidated financial
statements
7