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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="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B>Washington, D.C. &nbsp;20549</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 14pt; MARGIN: 0px; LINE-HEIGHT: 16pt" align=center><B>FORM
8-K</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B>CURRENT REPORT</B></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B>Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>Date of
Report: &nbsp;May 13, 2011</P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>Date of
Earliest Event Reported: &nbsp;May 10, 2011</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: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><I>(Exact Name of Registrant as specified in its Charter)</I></P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=309></TD>
<TD width=218></TD>
<TD width=248></TD></TR>
<TR>
<TD vAlign=bottom width=309>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>Ohio</B></P></TD>
<TD vAlign=top width=218>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>333-131542</B></P></TD>
<TD vAlign=bottom width=248>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>31-1332119</B></P></TD></TR>
<TR>
<TD vAlign=top width=309>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(State or other jurisdiction of</I></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>incorporation or organization)</I></P></TD>
<TD vAlign=top width=218>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(Commission File Number)</I></P></TD>
<TD vAlign=top width=248>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(I.R.S. Employer Identification No.)</I></P></TD></TR>
<TR>
<TD vAlign=bottom width=528 colSpan=2>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>5057 Troy Rd, Springfield, OH</B></P></TD>
<TD vAlign=bottom width=248>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>45502-9032</B></P></TD></TR>
<TR>
<TD vAlign=top width=528 colSpan=2>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(Address of principal executive offices)</I></P></TD>
<TD vAlign=top width=248>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><I>(Zip Code)</I></P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>Registrant&#146;s Telephone Number, Including Area Code</B></P>
<P style="FONT-SIZE: 10.5pt; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=center><B>(937) 964-8974</B></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;] 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;] 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;] 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;] Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c)).</P>
<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>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 12.5pt"
align=justify><B>Item 2.02. &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 Tuesday, May 10, 2011, AdCare Health Systems, Inc. (the
&#147;Company&#148;) issued a press release announcing its financial results for the three
months ended March 31, 2011.&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; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; TEXT-INDENT: 48px; LINE-HEIGHT: 12.5pt"
align=justify>Exhibits</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=127></TD>
<TD width=511></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify><U>Exhibit Number</U></P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify><U>Description of Exhibit</U></P></TD></TR>
<TR>
<TD vAlign=top width=127>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>99.1</P></TD>
<TD vAlign=top width=511>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; LINE-HEIGHT: 12.5pt"
align=justify>Press Release dated May 10, 2011</P></TD></TR></TABLE>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 14px" align=justify><BR></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 16px" align=center><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>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 10.5pt; MARGIN-BOTTOM: 14px; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 48px; LINE-HEIGHT: 12.5pt"
align=center>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 13, 2011</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>
&nbsp;/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>
<P
style="FONT-SIZE: 10.5pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 12.5pt"
align=right>Exhibit 99.1</P>
<P
style="PADDING-RIGHT: 2px; MARGIN-TOP: 0px; FONT-SIZE: 9pt; MARGIN-BOTTOM: 7px; LINE-HEIGHT: 17pt; FONT-FAMILY: Calibri"><B>NOT
FOR IMMEDIATE RELEASE</B></P>
<P
style="PADDING-RIGHT: 24px; MARGIN-TOP: 0px; PADDING-LEFT: 36px; FONT-SIZE: 15.5pt; MARGIN-BOTTOM: 10px; LINE-HEIGHT: 17pt; FONT-FAMILY: Calibri"
align=center><B>AdCare Health Systems Reports First Quarter 2011 Results</B></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>SPRINGFIELD,
Ohio, May 10, 2011</B> <B>&#151;</B> <B>AdCare Health Systems, Inc. </B>(NYSE AMEX:
ADK), a leading skilled nursing and assisted living provider, reported unaudited
financial results for the first quarter ended March 31, 2011.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>Financial
Highlights: Q1 2011 vs. Q1 2010</B></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -24px; LINE-HEIGHT: 14pt; FONT-FAMILY: Symbol">&#183;</P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Record
quarter revenues, up 394% to $31.5 million </P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -24px; LINE-HEIGHT: 14pt; FONT-FAMILY: Symbol">&#183;</P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Income
from operations totaled $357,000 versus loss from operations</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -24px; LINE-HEIGHT: 14pt; FONT-FAMILY: Symbol">&#183;</P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Adjusted
EBITDAR up 689% to a record $3.9 million</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>Q1
2011 Summary of Financial Results</B></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Revenue
in the first quarter of 2011 increased 394% to a record $31.5 million from $6.4
million in the same quarter a year ago. The increase in revenue was primarily
due to acquisitions completed since August 2010 as part of the company&#146;s M&amp;A
program. An increase in revenue from company&#146;s skilled nursing and assisted
living facilities that existed before August 2010 also contributed to the
improvement in revenue. A more detailed discussion and analysis of the company&#146;s
performance will be available in AdCare&#146;s Form 10-Q to be filed with the
Security and Exchange Commission.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Income
from operations in the first quarter of 2011 was $357,000, which compares to a
loss from operations of $114,000 in the same year-ago period. The increase in
income from operations was primarily due to acquisitions that substantially
increased patient care revenue.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">For
earnings attributable to the company and its shareholders, the company recorded
a net loss in the first quarter of 2011 of $765,000 or $(0.09) per share, versus
net income of $410,000 or $0.05 per diluted share in the same year-ago period.
The first quarter 2011 net loss included acquisition expense of approximately
$148,000 and a derivative loss of $1.3 million, compared to neither occurring in
the same year-ago quarter. This was offset by a gain on acquisition, net of
acquisition cost of $979,000 in the first quarter of 2011. The company also
experienced an increase in cash-based corporate payroll overhead costs of
approximately $354,000 in Q1 2011 versus Q1 2010, as the company ramps up
operations and facility integration activity related to its acquisition
strategy. Total stock-based compensation in the first quarter of 2011 was
$390,000, as compared to $216,000 in the same year-ago quarter.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Adjusted
EBITDAR in the first quarter of 2011 totaled $3.9 million, up 689% from an
adjusted EBITDAR of $496,000 in the first quarter of 2010 (see the definition
and an important discussion about the presentation of adjusted EBITDAR, a
non-GAAP term, below.)</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Cash
at March 31, 2011 totaled $9.7 million, with deposits on pending acquisitions of
$1.2 million. This compares to cash of $3.9 million at December 31, 2010, with
the increase of cash in the first quarter primarily due to financings and the
collection of certain receivables purchased as part of an acquisition completed
in 2010.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>Q1
2011 Operational Highlights</B></P>
<P
style="MARGIN-TOP: 6px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -24px; LINE-HEIGHT: 14pt; FONT-FAMILY: Symbol">&#183;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">AdCare
assumed control effective January 1, 2011 of Mountain Trace Nursing Center, a
106-bed nursing facility in North Carolina. Mountain Trace was generating an
estimated $7.8 million in annualized revenues </P>
<P style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 16px"><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>
<P
style="MARGIN-TOP: 6px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">when
AdCare closed the acquisition at the end of December 2010. (See table &#147;Summary
of Closed and Pending Transactions Since Start of M&amp;A Program,&#148; below).</P>
<P
style="MARGIN-TOP: 6px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -24px; LINE-HEIGHT: 14pt; FONT-FAMILY: Symbol">&#183;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">In
January, AdCare appointed Boyd P. Gentry as Co-CEO. Gentry is sharing the new
co-CEO position with Gary Wade, AdCares's co-founder, president and chief
executive officer, who is planning to retire from his management roles in June
2011. Upon Wade's retirement, Gentry will become president and chief executive
officer, and Wade will continue as a member of the company's board of
directors.</P>
<P
style="MARGIN-TOP: 6px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -24px; LINE-HEIGHT: 14pt; FONT-FAMILY: Symbol">&#183;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">In
March, AdCare signed a definitive agreement for the asset purchase of four
skilled nursing facilities in Arkansas and the acquisition of a 10-year lease
for one skilled nursing facility in Missouri. The five facilities have 506 beds
in total, which generated revenues of more than $25 million in 2010. The
transaction is anticipated to be immediately accretive to AdCare's earnings when
it closes, as expected, early in the third quarter. </P>
<P
style="MARGIN-TOP: 6px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -24px; LINE-HEIGHT: 14pt; FONT-FAMILY: Symbol">&#183;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">In
May, AdCare acquired two new skilled nursing centers in Georgia. The facilities
have a total of 235 beds that were generating at the time of the acquisition
approximately $16 million in annualized revenue.</P>
<P
style="MARGIN-TOP: 6px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -24px; LINE-HEIGHT: 14pt; FONT-FAMILY: Symbol">&#183;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">By
the end of the first quarter, the company owned or leased 16 skilled nursing
facilities with 1,790 beds and six assisted living facilities with 196 units.
Facilities managed by the company for third parties totaled five skilled nursing
homes with 403 beds, two assisted living facilities with 139 units, and an
83-unit independent living campus.</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>Management
Commentary</B></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">&#147;Our
record revenues in the first quarter of 2011 reflect the major contribution of
our successful, ongoing M&amp;A program,&#148; said Boyd P. Gentry, AdCare&#146;s co-CEO.
&#147;We also realized organic growth from our previously existing skilled nursing
and assisted living facilities, which operate in market segments that
increasingly represent our core business focus and greatest opportunity for
revenue growth. These results reflect the gains we expect to realize across all
of our facilities as we continue to leverage operational improvements, as well
as maintain the aggressive pace of our acquisition efforts.&#148;<STRIKE>
</STRIKE></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Chris
Brogdon, AdCare&#146;s chief acquisition officer, commented: &#147;We&#146;ve now purchased or
acquired under lease some 19 facilities since we introduced our M&amp;A program
at the end of 2009. Including the transactions we have announced and are in the
process of closing, we expect our annualized revenue run-rate to exceed an
estimated $175 million. This would represent an increase of more than 555% over
annual revenues in 2009 when this all began. We continue to expect an EBITDAR
margin with these facilities <FONT style="FONT-FAMILY: Arial">&#59450;</FONT> exclusive
of acquisition-related costs <FONT style="FONT-FAMILY: Arial">&#59450;</FONT> to be at
least 10% going forward.&#148;</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">"We
are currently evaluating several attractive acquisition opportunities in the
southern region of the U.S., as well as around our home base in the Midwest,"
added Brogdon. "We expect to announce signing a number of them over the next few
months.&#148; </P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>Conference
Call and Webcast</B></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">The
company will hold a conference call to discuss its 2011 financial results later
today, May 10, 2011 at 4:30 p.m. Eastern time. Management will host the
presentation, followed by a question and answer period.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Date:
Tuesday, May 10, 2011</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Time:
4:30 p.m. Eastern time (1:30 p.m. Pacific time)</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>
<P
style="FONT-SIZE: 12pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Dial-In
Number: 1-877-941-8602</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">International:
1-480-629-9811</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Conference
ID#: 4439538</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">The
conference call will be broadcast simultaneously at
http://viavid.net/dce.aspx?sid=00008600<FONT
style="FONT-FAMILY: Times New Roman"></FONT> and available for replay via the
investor section of the company's Web site at www.adcarehealth.com.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Please
call the conference telephone number 5-10 minutes prior to the start time. An
operator will register your name and organization and ask you to wait until the
call begins. If you have any difficulty connecting with the conference call,
please contact the Liolios Group at 949-574-3860.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">A
replay of the call will be available after 7:30 p.m. Eastern time on the same
day and until June 10, 2011:</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Toll-free
replay number: 1-877-870-5176</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">International
replay number: 1-858-384-5517</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Replay
pin number: 4439538</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 8px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>Summary
of Closed and Pending Transactions Since Start of M&amp;A Program</B></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=96></TD>
<TD width=48></TD>
<TD width=72></TD>
<TD width=90></TD>
<TD width=96></TD>
<TD width=132></TD>
<TD width=114></TD></TR>
<TR>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #d8d8d8"
vAlign=bottom width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Description</B></P></TD>
<TD style="BORDER-TOP: #000000 1px solid" vAlign=bottom width=48>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Size</B></P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid"
vAlign=bottom width=72>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Location</B></P></TD>
<TD style="BORDER-TOP: #000000 1px solid" vAlign=bottom width=90>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Type&nbsp;</B></P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid"
vAlign=bottom width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>ARR*</B></P></TD>
<TD style="BORDER-TOP: #000000 1px solid" vAlign=bottom width=132>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Terms</B></P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid"
vAlign=bottom width=114>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Closing
Status</B></P></TD></TR>
<TR>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #d8d8d8"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Assisted Living Facility
</B></P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=48>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">105 Units</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=72>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Hoover, AL</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=90>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Consolidated Variable
Interest Entity (CVIE)</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Currently $2 million at 59%
occupancy</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=132>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">1 yr purchase option,
expiring June 2011</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=114>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Signed Option 6-25. Currently
a CVIE</P></TD></TR>
<TR>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #d8d8d8"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Five Nursing
Homes</B></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=48>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">615 beds</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=72>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Georgia</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=90>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Lease</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">$35 million</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=132>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">10-yr lease</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=114>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Closed 7-30-10</P></TD></TR>
<TR>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #d8d8d8"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Three Nursing
Homes</B></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=48>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">280 beds</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=72>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Georgia</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=90>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Lease</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">$15.5 million</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=132>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">10-yr lease (combined with
the above)</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=114>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Closed 9-2-10</P></TD></TR>
<TR>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #d8d8d8"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Two Nursing
Homes</B></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=48>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">306 beds</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=72>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Alabama</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=90>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Purchase</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">$18 million</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=132>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Long-term fixed rate loan,
USDA guaranteed </P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=114>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Closed 10-1-10</P></TD></TR>
<TR>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #d8d8d8"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Two Nursing
Homes</B></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=48>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">300 beds</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=72>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Atlanta, GA</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=90>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Lease</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">$21 million</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width=132>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">12-yr lease with renewal
option</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=114>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Closed 11-2-10</P></TD></TR>
<TR>
<TD
style="BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #d8d8d8"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Nursing
Facility</B></P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=48>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">106 beds</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=72>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Sylva, NC</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=90>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Purchase</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">$7.8 million</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=132>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Long-term fixed rate loan,
USDA guaranteed</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=114>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Closed 12-31-10</P></TD></TR>
<TR>
<TD
style="BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #d8d8d8"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Three Nursing
Homes</B></P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=48>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">335 beds</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=72>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Atlanta, GA &amp; Dublin,
GA</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=90>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Purchase</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">$16.4 million</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=132>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Long-term fixed rate loan
(USDA guaranteed and bank loans)</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=114>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Closed Two 5-2-2011; Other
Expected in Q2-11</P></TD></TR>
<TR>
<TD
style="BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #d8d8d8"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Five Nursing
Homes</B></P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=48>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">506 beds</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=72>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Arkansas &amp;
Missouri</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=90>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Purchase (four) and Lease
(one)</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">$25.0 million</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=132>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Long-term fixed rate loan
(USDA guaranteed and bank loans), one 10-year lease</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=114>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri">Closing Expected in Early
Q3-11</P></TD></TR>
<TR>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>Total</B></P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=48>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>2,553 </B></P></TD>
<TD width=72>
<P>&nbsp;</P></TD>
<TD width=90>
<P>&nbsp;</P></TD>
<TD
style="BORDER-RIGHT: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
width=96>
<P style="MARGIN: 0px; FONT-FAMILY: Calibri"><B>$140.7 million</B></P></TD>
<TD width=246 colSpan=2>
<P>&nbsp;</P></TD></TR></TABLE>
<P style="MARGIN-TOP: 8px; MARGIN-BOTTOM: 0px"><BR></P>
<P style="MARGIN-TOP: 10px; MARGIN-BOTTOM: 0px; FONT-FAMILY: Calibri">*ARR=
Annualized Revenue Run-rate at the time of purchase/lease or signing,
estimated</P>
<P style="MARGIN-TOP: 10px; MARGIN-BOTTOM: 0px"><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>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>About
AdCare Health Systems</B></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">AdCare
Health Systems, Inc. (NYSE Amex: ADK<FONT
style="FONT-FAMILY: Times New Roman"></FONT>) is a recognized innovator in
senior living and health care facility management. AdCare develops, owns and
manages assisted living facilities, nursing homes and retirement communities, as
well as provides home health care services. Since its inception in 1988,
AdCare's mission has been to provide the highest quality of healthcare services
to the elderly. For more information about AdCare, visit
www.adcarehealth.com<FONT style="FONT-FAMILY: Times New Roman"></FONT>.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>Important
Cautions Regarding Forward-Looking Statements<BR></B>Statements contained in
this press release that are not historical facts may be forward-looking
statements within the meaning of federal law. Such statements can be identified
by the use of forward-looking terminology, such as "believes," "expects, "
"plans," "intends," "anticipates" and variations of such words or similar
expressions, but their absence does not mean that the statement is not
forward-looking. Statements in this announcement that are forward-looking
include, but are not limited to, statments made by Mr. Gentry that these results
reflect the gains we expect to realize across all of our facilities, and
statements by Mr. Brogdon that the company &nbsp;expect its annualized revenue
run-rate to exceed an estimated $175 million, and that this would represent an
increase of more than 555% over annual revenues in 2009 when the company&#146;s
M&amp;A program began, as well as statements regarding the signing and closing
of expected acquisitions. Such forward-looking statements reflect management's
beliefs and assumptions and are based on information currently available to
management, and involve known and unknown risks, results, performance or
achievements of AdCare which may differ materially from those expressed or
implied in such statements. Such factors are identified in the public filings
made by AdCare with the SEC and include, among others, AdCare's ability to
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. Except where required by law, AdCare undertakes
no obligation to revise or update any forward-looking statements to reflect
events or circumstances after the date of this press release.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>Use
of Non-GAAP Financial Information</B></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Beginning
with the reporting of results for this first quarter of 2011, the company has
transitioned from reporting EBITDA, and EBITDAR, to also reporting adjusted
EBITDAR. These are measures of operating performance that are not calculated in
accordance with U.S. generally accepted accounting principles (&#147;GAAP&#148;). The
company defines EBITDA as net income (loss) before interest income, interest
expense, income tax expense, depreciation and amortization (including
amortization of non-cash stock-based compensation). The company defines EBITDAR
as net income (loss) before interest income, interest expense, income tax
expense, depreciation, amortization (including amortization of non-cash
stock-based compensation) and rent cost. The company defines adjusted EBITDAR as
net income (loss) before interest income; interest expense; income tax expense;
depreciation; amortization (including amortization of non-cash stock-based
compensation); rent cost; gain on acquisitions, net of acquisition costs; and
derivative loss.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">EBITDA,
EBITDAR, and adjusted EBITDAR should not be considered in isolation or as a
substitute for net income, income from operations or cash flows provided by or
used in operations, as determined in accordance with GAAP. The metrics are a key
measures of AdCare Health Systems&#146; operating performance used by management to
focus on operating performance and management without mixing in items of income
and </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>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">expense
that relate to the financing and capitalization of the business, fixed rent or
lease payments of facilities, derivative loss and certain gains on
acquisitions.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">The
company believes these measures are useful to investors in evaluating the
company&#146;s performance, results of operations and financial position for the
following reasons:</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 36px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -18px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">&#149;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 36px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">It
is helpful in identifying trends in the company&#146;s day-to-day performance because
the items excluded have little or no significance to the company&#146;s day-to-day
operations;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 36px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -18px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">&#149;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 36px; FONT-SIZE: 12pt; MARGIN-BOTTOM: 16px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">It
provides an assessment of controllable expenses and affords management the
ability to make decisions, which are expected to facilitate meeting current
financial goals as well as achieve optimal financial performance; and </P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 36px; FONT-SIZE: 12pt; MARGIN-BOTTOM: -18px; TEXT-INDENT: -18px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">&#149;</P>
<P
style="PADDING-LEFT: 36px; FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">It
is an indication to determine if adjustments to current spending decisions are
needed.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">AdCare
believes that the use of the measures provides a meaningful and consistent
comparison of the company&#146;s underlying business between periods by eliminating
certain items required by GAAP, which have little or no sig<A
name=OLE_LINK16></A><A name=OLE_LINK17></A>nificance in the company&#146;s day-to-day
operations.</P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=15></TD>
<TD width=297></TD>
<TD width=125></TD>
<TD width=15></TD>
<TD width=125></TD></TR>
<TR>
<TD vAlign=bottom width=578 colSpan=5>
<P style="MARGIN: 0px; FONT-FAMILY: Arial" align=center><B>AdCare Health
Systems, Inc and Subsidiaries</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=578 colSpan=5>
<P style="MARGIN: 0px; FONT-FAMILY: Arial" align=center><B>Reconciliation
of Net (Loss) Income to EBITDA, EBITDAR and Adjusted EBITDAR</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=578 colSpan=5>
<P style="MARGIN: 0px; FONT-FAMILY: Arial"
align=center><B>(Unaudited)</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=265 colSpan=3>
<P style="MARGIN: 0px; FONT-FAMILY: Arial" align=center>Three Months
Ended</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=265
colSpan=3>
<P style="MARGIN: 0px; FONT-FAMILY: Arial" align=center>&nbsp;March 31,
</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=125>
<P style="MARGIN: 0px; FONT-FAMILY: Arial" align=center>2011</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=125>
<P style="MARGIN: 0px; FONT-FAMILY: Arial" align=center>2010</P></TD></TR>
<TR>
<TD vAlign=bottom width=313 colSpan=2>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">Net Income (Loss)</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(941,633)</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;414,205
</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">Interest income</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(19,159)</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,689)</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">Interest expense</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,459,349
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;292,945
</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">Income tax expense</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;96,372
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,642
</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">Amortization of stock based
compensation</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;389,994
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;215,810
</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">Depreciation and
amortization</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;651,193
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;242,564
</P></TD></TR>
<TR>
<TD vAlign=bottom width=313 colSpan=2>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">EBITDA</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,636,116
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,170,477
</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">Rent expense</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,902,724
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;151,151
</P></TD></TR>
<TR>
<TD vAlign=bottom width=313 colSpan=2>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">EBITDAR</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,538,840
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,321,628
</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">Gain on acquisitions, net of
acquisition costs</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(979,339)</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(825,989)</P></TD></TR>
<TR>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=297>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">Derivative loss</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,349,866
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
&nbsp;&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=313 colSpan=2>
<P style="MARGIN: 0px; FONT-FAMILY: Arial">Adjusted EBITDAR</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,909,367
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=125>
<P
style="MARGIN: 0px; FONT-FAMILY: Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;495,639
</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=center><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>Company
Contacts</B></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Boyd
Gentry, Co-CEO</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Chris
Brogdon, Vice Chairman &amp; CAO</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">David
A. Tenwick, Chairman of Board</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">AdCare
Health Systems, Inc.</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Tel
(937) 964-8974</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">info@adcarehealth.com</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><B>Investor
Relations</B></P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Ron
Both or Geoffrey Plank</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>8</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 12pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Liolios
Group, Inc.</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri">Tel
(949) 574-3860</P>
<P
style="FONT-SIZE: 12pt; MARGIN: 0px; COLOR: #0000ff; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"><U>info@liolios.com</U><FONT
style="COLOR: #000000; FONT-FAMILY: Times New Roman"></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>9</P>
<P style="MARGIN: 0px"><BR></P>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"
align=center><B>ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES</B></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"
align=center><B>CONSOLIDATED BALANCE SHEETS</B></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"
align=center><B>(unaudited)</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=25></TD>
<TD width=25></TD>
<TD width=25></TD>
<TD width=444></TD>
<TD width=108></TD>
<TD width=0.467></TD>
<TD width=23></TD>
<TD width=2></TD>
<TD width=97></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=444>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px" align=center>March 31,</P></TD>
<TD vAlign=bottom width=24 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=99 colSpan=2>
<P style="MARGIN: 0px" align=center>December 31,</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=444>
<P style="MARGIN: 0px" align=center><U>ASSETS</U></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=108
colSpan=2>
<P style="MARGIN: 0px" align=center>2011</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=97>
<P style="MARGIN: 0px" align=center>2010</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Current Assets:</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=center>(Unaudited)</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Cash and cash equivalents</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,703,956&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;3,911,140&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Restricted cash</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>408,172&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>1,047,454&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Accounts receivable:</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=494 colSpan=3>
<P style="MARGIN: 0px">Long-term care resident receivables, net</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>13,394,390&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>10,943,963&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=494 colSpan=3>
<P style="MARGIN: 0px">Management, consulting and development receivables,
net</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;228,191&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;271,224
&nbsp;&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Prepaid expenses and other</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,718,264&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>1,243,663&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=444>
<P style="MARGIN: 0px">Total current assets</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>25,452,973&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17,417,444&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=444>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Restricted cash and investments</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,166,029&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,099,936&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Property and equipment, net</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;43,843,404&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;37,606,301&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Intangibles, net</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>16,994,030&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>16,159,845&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Goodwill</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>2,679,482&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>2,679,482&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Escrow deposits for acquisitions</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>1,150,000&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>1,725,086&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Lease deposits</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>1,670,282&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>1,670,282&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Other assets</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=108
colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,279,207&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=97>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,600,530&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=444>
<P style="MARGIN: 0px">Total assets</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;98,235,407&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;82,958,906&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=444>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=444>
<P style="MARGIN: 0px" align=center><U>LIABILITIES AND STOCKHOLDERS&#146;
EQUITY</U></P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Current Liabilities:</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=494 colSpan=3>
<P style="MARGIN: 0px">Current portion of notes payable and other
debt</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,833,596&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;3,633,401&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=494 colSpan=3>
<P style="MARGIN: 0px">Accounts payable </P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>4,905,709&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>3,411,772&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=494 colSpan=3>
<P style="MARGIN: 0px">Accrued expenses</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>10,967,743&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>9,664,325&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=444>
<P style="MARGIN: 0px">Total current liabilities</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23,707,048&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,709,498&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=444>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Notes payable and other debt, net of current
portion</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>54,217,648&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>47,210,995&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Derivative liability</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>4,255,616&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>2,905,750&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Other liabilities</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>1,347,700&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>1,267,429&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Deferred tax liability</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>351,512&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>255,141&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=469 colSpan=2>
<P style="MARGIN: 0px">Total liabilities</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=108
colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;83,879,524&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>68,348,813&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=444>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Commitments and contingencies </P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=444>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=519 colSpan=4>
<P style="MARGIN: 0px">Stockholders' equity:</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=494 colSpan=3>
<P style="MARGIN: 0px">Preferred stock, no par value; 1,000,000 shares
authorized;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=469 colSpan=2>
<P style="MARGIN: 0px">no shares issued or outstanding</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<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=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<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></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=494 colSpan=3>
<P style="MARGIN: 0px">Common stock and additional paid-in capital, no par
value;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=469 colSpan=2>
<P style="MARGIN: 0px">29,000,000 shares authorized; 8,349,197 shares
issued and outstanding</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>27,299,293&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>26,611,870&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=494 colSpan=3>
<P style="MARGIN: 0px">Accumulated deficit</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;(13,314,166)</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=97>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;(12,548,870)</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=469 colSpan=2>
<P style="MARGIN: 0px">Total stockholders' equity</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>13,985,127&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>14,063,000&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=494 colSpan=3>
<P style="MARGIN: 0px">Noncontrolling interest in subsidiaries</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>370,756&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>547,093&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=469 colSpan=2>
<P style="MARGIN: 0px">Total equity</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=108
colSpan=2>
<P style="MARGIN: 0px" align=right>14,355,883&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>14,610,093&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=469 colSpan=2>
<P style="MARGIN: 0px">Total liabilities and stockholders' equity</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=108 colSpan=2>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;98,235,407&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=97>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;82,958,906&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=25>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=469 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=26 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=97>
<P>&nbsp;</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>10</P>
<P style="MARGIN: 0px"><BR></P>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"
align=center><B>ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES</B></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"
align=center><B>CONSOLIDATED STATEMENTS OF OPERATIONS</B></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt; FONT-FAMILY: Calibri"
align=center><B>(unaudited)</B></P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=19></TD>
<TD width=15></TD>
<TD width=298></TD>
<TD width=88></TD>
<TD width=19></TD>
<TD width=96></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=298>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=204
colSpan=3>
<P style="MARGIN: 0px" align=center>Three Months Ended March 31,</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=298>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=88>
<P style="MARGIN: 0px" align=center>2011</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=96>
<P style="MARGIN: 0px" align=center>2010</P></TD></TR>
<TR>
<TD vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Revenues:</P></TD>
<TD vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Patient care revenues</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P style="MARGIN: 0px">$ &nbsp;31,012,524 </P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>$
&nbsp;&nbsp;&nbsp;&nbsp;5,866,787&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Management, consulting and development fee
revenue</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>&nbsp;&nbsp;&nbsp;&nbsp;497,341 </P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=96>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;507,731&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=298>
<P style="MARGIN: 0px">Total revenue</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>&nbsp;&nbsp;&nbsp;31,509,865 </P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>6,374,518&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=298>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Expenses:</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Payroll and related payroll costs</P></TD>
<TD vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>18,115,812 </P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>4,060,964&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Other operating expenses</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>&nbsp;&nbsp;&nbsp;10,482,845 </P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>2,033,725&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Lease expense</P></TD>
<TD vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>1,902,724 </P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>151,151&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Depreciation and amortization</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>651,193 </P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>242,564&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=298>
<P style="MARGIN: 0px">Total expenses</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>31,152,574 </P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>6,488,404&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=298>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Income (Loss) from Operations</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>357,291 </P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=96>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(113,886)</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=333 colSpan=3>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Other (Expense) Income:</P></TD>
<TD vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Interest income</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19,159&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=96>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,689&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Interest expense</P></TD>
<TD vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>&nbsp;&nbsp;&nbsp;(1,459,349)</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(292,945)</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Gain on acquisitions, net of acquisition
costs</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;979,339&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>825,989&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Derivative loss</P></TD>
<TD vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>(1,349,866)</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>-&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Other income</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=88>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;608,165&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>-&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=298>
<P style="MARGIN: 0px">Total other (expense) income</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>&nbsp;&nbsp;&nbsp;(1,202,552)</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=96>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;538,733&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=298>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">(Loss) Income Before Income Taxes</P></TD>
<TD vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>(845,261)</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>424,847 </P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Income Tax Expense</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>(96,372)</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>(10,642)</P></TD></TR>
<TR>
<TD vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Net (Loss) Income </P></TD>
<TD vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>(941,633)</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>414,205</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Net Loss (Income) Attributable to Noncontrolling
Interests</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P style="MARGIN: 0px"
align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;176,337</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>(4,704)</P></TD></TR>
<TR>
<TD vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Net (Loss) Income Attributable to AdCare Health
Systems</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 3px double"
vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>$(765,296)</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid" vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;409,501&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=298>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 3px double; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Net (Loss) Income Per Share, Basic:</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.09)</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.07&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Net (Loss) Income Per Share, Diluted:</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.09)</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=96>
<P style="MARGIN: 0px" align=right>$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.05&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=333 colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=333 colSpan=3>
<P style="MARGIN: 0px">Weighted Average Common Shares Outstanding,</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Basic</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=88>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,349,197&nbsp;</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=96>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,670,007&nbsp;</P></TD></TR>
<TR>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=314 colSpan=2>
<P style="MARGIN: 0px">Diluted</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=88>
<P style="MARGIN: 0px" align=right>8,349,197&nbsp;</P></TD>
<TD style="BACKGROUND-COLOR: #ccffcc" vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double; BACKGROUND-COLOR: #ccffcc"
vAlign=bottom width=96>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,196,206</P></TD></TR>
<TR>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=314 colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=88>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=19>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=96>
<P>&nbsp;</P></TD></TR></TABLE>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 8px" align=center><BR></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 14px"><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></P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 14px"><BR><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>11</P>
<P
style="MARGIN: 0px"><BR></P></DIV></BODY>
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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 13, 2011
Date of
Earliest Event Reported:  May 10, 2011
AdCare Health Systems, Inc.
(Exact Name of Registrant as specified in its Charter)
Ohio
333-131542
31-1332119
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)
5057 Troy Rd, Springfield, OH
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 2.02.  Financial Statements and Exhibits.
On Tuesday, May 10, 2011, AdCare Health Systems, Inc. (the
"Company") issued a press release announcing its financial results for the three
months ended March 31, 2011.  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.
Exhibits
Exhibit Number
Description of Exhibit
99.1
Press Release dated May 10, 2011
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 13, 2011
ADCARE
HEALTH SYSTEMS, INC.
By:
/s/ Scott Cunningham
Name:
Scott Cunningham
Title:
 Chief Financial Officer
3
Exhibit 99.1
NOT
FOR IMMEDIATE RELEASE
AdCare Health Systems Reports First Quarter 2011 Results
SPRINGFIELD,
Ohio, May 10, 2011
—
AdCare Health Systems, Inc.
(NYSE AMEX:
ADK), a leading skilled nursing and assisted living provider, reported unaudited
financial results for the first quarter ended March 31, 2011.
Financial
Highlights: Q1 2011 vs. Q1 2010
·
Record
quarter revenues, up 394% to $31.5 million
·
Income
from operations totaled $357,000 versus loss from operations
·
Adjusted
EBITDAR up 689% to a record $3.9 million
Q1
2011 Summary of Financial Results
Revenue
in the first quarter of 2011 increased 394% to a record $31.5 million from $6.4
million in the same quarter a year ago. The increase in revenue was primarily
due to acquisitions completed since August 2010 as part of the company's M&A
program. An increase in revenue from company's skilled nursing and assisted
living facilities that existed before August 2010 also contributed to the
improvement in revenue. A more detailed discussion and analysis of the company's
performance will be available in AdCare's Form 10-Q to be filed with the
Security and Exchange Commission.
Income
from operations in the first quarter of 2011 was $357,000, which compares to a
loss from operations of $114,000 in the same year-ago period. The increase in
income from operations was primarily due to acquisitions that substantially
increased patient care revenue.
For
earnings attributable to the company and its shareholders, the company recorded
a net loss in the first quarter of 2011 of $765,000 or $(0.09) per share, versus
net income of $410,000 or $0.05 per diluted share in the same year-ago period.
The first quarter 2011 net loss included acquisition expense of approximately
$148,000 and a derivative loss of $1.3 million, compared to neither occurring in
the same year-ago quarter. This was offset by a gain on acquisition, net of
acquisition cost of $979,000 in the first quarter of 2011. The company also
experienced an increase in cash-based corporate payroll overhead costs of
approximately $354,000 in Q1 2011 versus Q1 2010, as the company ramps up
operations and facility integration activity related to its acquisition
strategy. Total stock-based compensation in the first quarter of 2011 was
$390,000, as compared to $216,000 in the same year-ago quarter.
Adjusted
EBITDAR in the first quarter of 2011 totaled $3.9 million, up 689% from an
adjusted EBITDAR of $496,000 in the first quarter of 2010 (see the definition
and an important discussion about the presentation of adjusted EBITDAR, a
non-GAAP term, below.)
Cash
at March 31, 2011 totaled $9.7 million, with deposits on pending acquisitions of
$1.2 million. This compares to cash of $3.9 million at December 31, 2010, with
the increase of cash in the first quarter primarily due to financings and the
collection of certain receivables purchased as part of an acquisition completed
in 2010.
Q1
2011 Operational Highlights
·
AdCare
assumed control effective January 1, 2011 of Mountain Trace Nursing Center, a
106-bed nursing facility in North Carolina. Mountain Trace was generating an
estimated $7.8 million in annualized revenues
4
when
AdCare closed the acquisition at the end of December 2010. (See table "Summary
of Closed and Pending Transactions Since Start of M&A Program," below).
·
In
January, AdCare appointed Boyd P. Gentry as Co-CEO. Gentry is sharing the new
co-CEO position with Gary Wade, AdCares's co-founder, president and chief
executive officer, who is planning to retire from his management roles in June
2011. Upon Wade's retirement, Gentry will become president and chief executive
officer, and Wade will continue as a member of the company's board of
directors.
·
In
March, AdCare signed a definitive agreement for the asset purchase of four
skilled nursing facilities in Arkansas and the acquisition of a 10-year lease
for one skilled nursing facility in Missouri. The five facilities have 506 beds
in total, which generated revenues of more than $25 million in 2010. The
transaction is anticipated to be immediately accretive to AdCare's earnings when
it closes, as expected, early in the third quarter.
·
In
May, AdCare acquired two new skilled nursing centers in Georgia. The facilities
have a total of 235 beds that were generating at the time of the acquisition
approximately $16 million in annualized revenue.
·
By
the end of the first quarter, the company owned or leased 16 skilled nursing
facilities with 1,790 beds and six assisted living facilities with 196 units.
Facilities managed by the company for third parties totaled five skilled nursing
homes with 403 beds, two assisted living facilities with 139 units, and an
83-unit independent living campus.
Management
Commentary
"Our
record revenues in the first quarter of 2011 reflect the major contribution of
our successful, ongoing M&A program," said Boyd P. Gentry, AdCare's co-CEO.
"We also realized organic growth from our previously existing skilled nursing
and assisted living facilities, which operate in market segments that
increasingly represent our core business focus and greatest opportunity for
revenue growth. These results reflect the gains we expect to realize across all
of our facilities as we continue to leverage operational improvements, as well
as maintain the aggressive pace of our acquisition efforts."
Chris
Brogdon, AdCare's chief acquisition officer, commented: "We've now purchased or
acquired under lease some 19 facilities since we introduced our M&A program
at the end of 2009. Including the transactions we have announced and are in the
process of closing, we expect our annualized revenue run-rate to exceed an
estimated $175 million. This would represent an increase of more than 555% over
annual revenues in 2009 when this all began. We continue to expect an EBITDAR
margin with these facilities

exclusive
of acquisition-related costs

to be at
least 10% going forward."
"We
are currently evaluating several attractive acquisition opportunities in the
southern region of the U.S., as well as around our home base in the Midwest,"
added Brogdon. "We expect to announce signing a number of them over the next few
months."
Conference
Call and Webcast
The
company will hold a conference call to discuss its 2011 financial results later
today, May 10, 2011 at 4:30 p.m. Eastern time. Management will host the
presentation, followed by a question and answer period.
Date:
Tuesday, May 10, 2011
Time:
4:30 p.m. Eastern time (1:30 p.m. Pacific time)
5
Dial-In
Number: 1-877-941-8602
International:
1-480-629-9811
Conference
ID#: 4439538
The
conference call will be broadcast simultaneously at
http://viavid.net/dce.aspx?sid=00008600
and available for replay via the
investor section of the company's Web site at www.adcarehealth.com.
Please
call the conference telephone number 5-10 minutes prior to the start time. An
operator will register your name and organization and ask you to wait until the
call begins. If you have any difficulty connecting with the conference call,
please contact the Liolios Group at 949-574-3860.
A
replay of the call will be available after 7:30 p.m. Eastern time on the same
day and until June 10, 2011:
Toll-free
replay number: 1-877-870-5176
International
replay number: 1-858-384-5517
Replay
pin number: 4439538
Summary
of Closed and Pending Transactions Since Start of M&A Program
Description
Size
Location
Type
ARR*
Terms
Closing
Status
Assisted Living Facility
105 Units
Hoover, AL
Consolidated Variable
Interest Entity (CVIE)
Currently $2 million at 59%
occupancy
1 yr purchase option,
expiring June 2011
Signed Option 6-25. Currently
a CVIE
Five Nursing
Homes
615 beds
Georgia
Lease
$35 million
10-yr lease
Closed 7-30-10
Three Nursing
Homes
280 beds
Georgia
Lease
$15.5 million
10-yr lease (combined with
the above)
Closed 9-2-10
Two Nursing
Homes
306 beds
Alabama
Purchase
$18 million
Long-term fixed rate loan,
USDA guaranteed
Closed 10-1-10
Two Nursing
Homes
300 beds
Atlanta, GA
Lease
$21 million
12-yr lease with renewal
option
Closed 11-2-10
Nursing
Facility
106 beds
Sylva, NC
Purchase
$7.8 million
Long-term fixed rate loan,
USDA guaranteed
Closed 12-31-10
Three Nursing
Homes
335 beds
Atlanta, GA & Dublin,
GA
Purchase
$16.4 million
Long-term fixed rate loan
(USDA guaranteed and bank loans)
Closed Two 5-2-2011; Other
Expected in Q2-11
Five Nursing
Homes
506 beds
Arkansas &
Missouri
Purchase (four) and Lease
(one)
$25.0 million
Long-term fixed rate loan
(USDA guaranteed and bank loans), one 10-year lease
Closing Expected in Early
Q3-11
Total
2,553
$140.7 million
*ARR=
Annualized Revenue Run-rate at the time of purchase/lease or signing,
estimated
6
About
AdCare Health Systems
AdCare
Health Systems, Inc. (NYSE Amex: ADK
) is a recognized innovator in
senior living and health care facility management. AdCare develops, owns and
manages assisted living facilities, nursing homes and retirement communities, as
well as provides home health care services. Since its inception in 1988,
AdCare's mission has been to provide the highest quality of healthcare services
to the elderly. For more information about AdCare, visit
www.adcarehealth.com
.
Important
Cautions Regarding Forward-Looking Statements
Statements contained in
this press release that are not historical facts may be forward-looking
statements within the meaning of federal law. Such statements can be identified
by the use of forward-looking terminology, such as "believes," "expects, "
"plans," "intends," "anticipates" and variations of such words or similar
expressions, but their absence does not mean that the statement is not
forward-looking. Statements in this announcement that are forward-looking
include, but are not limited to, statments made by Mr. Gentry that these results
reflect the gains we expect to realize across all of our facilities, and
statements by Mr. Brogdon that the company  expect its annualized revenue
run-rate to exceed an estimated $175 million, and that this would represent an
increase of more than 555% over annual revenues in 2009 when the company's
M&A program began, as well as statements regarding the signing and closing
of expected acquisitions. Such forward-looking statements reflect management's
beliefs and assumptions and are based on information currently available to
management, and involve known and unknown risks, results, performance or
achievements of AdCare which may differ materially from those expressed or
implied in such statements. Such factors are identified in the public filings
made by AdCare with the SEC and include, among others, AdCare's ability to
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. Except where required by law, AdCare undertakes
no obligation to revise or update any forward-looking statements to reflect
events or circumstances after the date of this press release.
Use
of Non-GAAP Financial Information
Beginning
with the reporting of results for this first quarter of 2011, the company has
transitioned from reporting EBITDA, and EBITDAR, to also reporting adjusted
EBITDAR. These are measures of operating performance that are not calculated in
accordance with U.S. generally accepted accounting principles ("GAAP"). The
company defines EBITDA as net income (loss) before interest income, interest
expense, income tax expense, depreciation and amortization (including
amortization of non-cash stock-based compensation). The company defines EBITDAR
as net income (loss) before interest income, interest expense, income tax
expense, depreciation, amortization (including amortization of non-cash
stock-based compensation) and rent cost. The company defines adjusted EBITDAR as
net income (loss) before interest income; interest expense; income tax expense;
depreciation; amortization (including amortization of non-cash stock-based
compensation); rent cost; gain on acquisitions, net of acquisition costs; and
derivative loss.
EBITDA,
EBITDAR, and adjusted EBITDAR should not be considered in isolation or as a
substitute for net income, income from operations or cash flows provided by or
used in operations, as determined in accordance with GAAP. The metrics are a key
measures of AdCare Health Systems' operating performance used by management to
focus on operating performance and management without mixing in items of income
and
7
expense
that relate to the financing and capitalization of the business, fixed rent or
lease payments of facilities, derivative loss and certain gains on
acquisitions.
The
company believes these measures are useful to investors in evaluating the
company's performance, results of operations and financial position for the
following reasons:
•
It
is helpful in identifying trends in the company's day-to-day performance because
the items excluded have little or no significance to the company's day-to-day
operations;
•
It
provides an assessment of controllable expenses and affords management the
ability to make decisions, which are expected to facilitate meeting current
financial goals as well as achieve optimal financial performance; and
•
It
is an indication to determine if adjustments to current spending decisions are
needed.
AdCare
believes that the use of the measures provides a meaningful and consistent
comparison of the company's underlying business between periods by eliminating
certain items required by GAAP, which have little or no sig
nificance in the company's day-to-day
operations.
AdCare Health
Systems, Inc and Subsidiaries
Reconciliation
of Net (Loss) Income to EBITDA, EBITDAR and Adjusted EBITDAR
(Unaudited)
Three Months
Ended
March 31,
2011
2010
Net Income (Loss)
(941,633)
414,205
Interest income
(19,159)
(5,689)
Interest expense
1,459,349
292,945
Income tax expense
96,372
10,642
Amortization of stock based
compensation
389,994
215,810
Depreciation and
amortization
651,193
242,564
EBITDA
1,636,116
1,170,477
Rent expense
1,902,724
151,151
EBITDAR
3,538,840
1,321,628
Gain on acquisitions, net of
acquisition costs
(979,339)
(825,989)
Derivative loss
1,349,866
-
Adjusted EBITDAR
3,909,367
495,639
Company
Contacts
Boyd
Gentry, Co-CEO
Chris
Brogdon, Vice Chairman & CAO
David
A. Tenwick, Chairman of Board
AdCare
Health Systems, Inc.
Tel
(937) 964-8974
info@adcarehealth.com
Investor
Relations
Ron
Both or Geoffrey Plank
8
Liolios
Group, Inc.
Tel
(949) 574-3860
info@liolios.com
9
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31,
December 31,
ASSETS
2011
2010
Current Assets:
(Unaudited)
Cash and cash equivalents
$
      9,703,956
$
   3,911,140
Restricted cash
408,172
1,047,454
Accounts receivable:
Long-term care resident receivables, net
13,394,390
10,943,963
Management, consulting and development receivables,
net
228,191
271,224
Prepaid expenses and other
1,718,264
1,243,663
Total current assets
25,452,973
17,417,444
Restricted cash and investments
3,166,029
3,099,936
Property and equipment, net
43,843,404
37,606,301
Intangibles, net
16,994,030
16,159,845
Goodwill
2,679,482
2,679,482
Escrow deposits for acquisitions
1,150,000
1,725,086
Lease deposits
1,670,282
1,670,282
Other assets
3,279,207
2,600,530
Total assets
$
    98,235,407
$
 82,958,906
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Current portion of notes payable and other
debt
$
      7,833,596
$
   3,633,401
Accounts payable
4,905,709
3,411,772
Accrued expenses
10,967,743
9,664,325
Total current liabilities
23,707,048
16,709,498
Notes payable and other debt, net of current
portion
54,217,648
47,210,995
Derivative liability
4,255,616
2,905,750
Other liabilities
1,347,700
1,267,429
Deferred tax liability
351,512
255,141
Total liabilities
83,879,524
68,348,813
Commitments and contingencies
-
-
Stockholders' equity:
Preferred stock, no par value; 1,000,000 shares
authorized;
no shares issued or outstanding
-
-
Common stock and additional paid-in capital, no par
value;
29,000,000 shares authorized; 8,349,197 shares
issued and outstanding
27,299,293
26,611,870
Accumulated deficit
(13,314,166)
(12,548,870)
Total stockholders' equity
13,985,127
14,063,000
Noncontrolling interest in subsidiaries
370,756
547,093
Total equity
14,355,883
14,610,093
Total liabilities and stockholders' equity
$
    98,235,407
$
 82,958,906
10
ADCARE HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended March 31,
2011
2010
Revenues:
Patient care revenues
$  31,012,524
$
    5,866,787
Management, consulting and development fee
revenue
497,341
507,731
Total revenue
31,509,865
6,374,518
Expenses:
Payroll and related payroll costs
18,115,812
4,060,964
Other operating expenses
10,482,845
2,033,725
Lease expense
1,902,724
151,151
Depreciation and amortization
651,193
242,564
Total expenses
31,152,574
6,488,404
Income (Loss) from Operations
357,291
(113,886)
Other (Expense) Income:
Interest income
19,159
5,689
Interest expense
(1,459,349)
(292,945)
Gain on acquisitions, net of acquisition
costs
979,339
825,989
Derivative loss
(1,349,866)
-
Other income
608,165
-
Total other (expense) income
(1,202,552)
538,733
(Loss) Income Before Income Taxes
(845,261)
424,847
Income Tax Expense
(96,372)
(10,642)
Net (Loss) Income
(941,633)
414,205
Net Loss (Income) Attributable to Noncontrolling
Interests
176,337
(4,704)
Net (Loss) Income Attributable to AdCare Health
Systems
$(765,296)
$
       409,501
Net (Loss) Income Per Share, Basic:
$
        (0.09)
$
            0.07
Net (Loss) Income Per Share, Diluted:
$
        (0.09)
$
            0.05
Weighted Average Common Shares Outstanding,
Basic
8,349,197
5,670,007
Diluted
8,349,197
8,196,206
11