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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2011
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-50764
 
 NexCore Healthcare Capital Corp
 (Exact name of Registrant as specified in its charter)
 
 Delaware
    
    20-0003432(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1621 18th Street, Suite 250
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
 303-244-0700
(Registrants telephone number, including area code)
 
 þ o
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
  Common Stock
    
    49,455,841(Class)
    
    (Outstanding on May 7, 2011)




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##### 



FORM 10-Q
for the quarter ended March 31, 2011
TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATION
    
    
    2ITEM 1. Financial Statements (unaudited)
    
    
    2ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    15ITEM 4. Controls and Procedures
    
    
    15PART II. OTHER INFORMATION
    
    
    16ITEM 1. Legal Proceedings
    
    
    16ITEM 1A Risk Factors
    
    
    16ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24ITEM 3. Defaults Upon Senior Securities
    
    
    24ITEM 4. (Removed and Reserved)
    
    
    24ITEM 5. Other Information
    
    
    24ITEM 6. Exhibits
    
    
    24SIGNATURES
    
    
    25Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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ITEM 1.
    
    FINANCIAL STATEMENTS
 
 March 31,
    
    
    December 31,2011
    
    
    2010(unaudited)
    
    
    (audited)AssetsAssets:Cash and equivalents
    
    $
    2,307,919
    
    
    $
    3,513,651Restricted cash
    
    
    1,001,087
    
    
    
    1,006,342Accounts receivable
    
    
    219,338
    
    
    
    284,883Accounts receivable related parties
    
    
    318,445
    
    
    
    301,662Revenue in excess of billings
    
    
    263,066
    
    
    
    335,460Pre-development costs
    
    
    448,249
    
    
    
    246,527Equity method investment
    
    
    2,551,343
    
    
    
    2,551,343Real estate held for sale
    
    
    
    
    
    
    7,191,821Property and equipment, net of accumulated depreciation
    
    
    229,272
    
    
    
    120,561Prepaids and deposits
    
    
    64,309
    
    
    
    47,948Total assets
    
    $
    7,403,028
    
    
    $
    15,600,198Liabilities and Shareholders EquityAccounts payable
    
    $
    255,200
    
    
    $
    142,522Accrued liabilities
    
    
    184,633
    
    
    
    229,709Senior subordinated notes, related parties
    
    
    
    
    
    
    3,336,661Deferred rent
    
    
    69,952
    
    
    
    Notes payable
    
    
    
    
    
    
    3,915,869Total liabilities
    
    
    509,785
    
    
    
    7,624,761Commitments and contingenciesShareholders equityCommon stock, $.001 par value; 200,000,000 shares authorized,
49,455,841 issued and outstanding March 31, 2011 and
December 31, 2010
    
    
    49,456
    
    
    
    49,456Additional paid-in-capital
    
    
    11,053,296
    
    
    
    11,033,914Accumulated deficit
    
    
    (4,517,829
    )
    
    
    (3,525,064
    )Total equity
    
    
    6,584,923
    
    
    
    7,558,306Non-controlling interest
    
    
    308,320
    
    
    
    417,131Total shareholders equity
    
    
    6,893,243
    
    
    
    7,975,437Total liabilities and shareholders equity
    
    $
    7,403,028
    
    
    $
    15,600,198
   2




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For the quarters endedMarch 31,2011
    
    
    2010Revenue
    
    $
    431,643
    
    
    $
    357,771Revenue, related parties
    
    
    414,487
    
    
    
    253,885Other
    
    
    13,489
    
    
    
    Total revenue
    
    
    859,619
    
    
    
    611,656Operating expenses:Direct costs of revenue
    
    
    56,165
    
    
    
    61,819Direct costs of revenue, related parties
    
    
    86,747
    
    
    
    27,864Selling, general and administrative
    
    
    1,805,301
    
    
    
    1,097,457Total operating expenses
    
    
    1,948,213
    
    
    
    1,187,140Loss from operations
    
    
    (1,088,594
    )
    
    
    (575,484
    )Non-operating incomeInterest income
    
    
    480
    
    
    
    573Loss before income taxes
    
    
    (1,088,114
    )
    
    
    (574,911
    )Income tax provision
    
    
    
    
    
    
    Net loss
    
    
    (1,088,114
    )
    
    
    (574,911
    )Net loss attributable to non-controlling interest
    
    
    (108,811
    )
    
    
    Net loss attributable to common shareholders
    
    $
    (979,303
    )
    
    $
    (574,911
    )Basic loss per common share
    
    $
    (0.02
    )
    
    $
    (0.02
    )Diluted loss per common share
    
    $
    (0.02
    )
    
    $
    (0.02
    )Basic weighted average common shares outstanding
    
    
    49,455,841
    
    
    
    25,000,000Diluted weighted average common shares outstanding
    
    
    49,455,841
    
    
    
    25,000,000
   3




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For the quarters endedMarch 31,2011
    
    
    2010Cash flows from operating activities:Net loss
    
    $
    (1,088,114
    )
    
    $
    (574,911
    )Adjustments to reconcile net income to net cash used by operating activities:Depreciation and write-off of assets
    
    
    52,671
    
    
    
    13,222*Loss from transfer of debt and assets
    
    
    13,461
    
    
    
    Stock compensation expense
    
    
    19,382
    
    
    
    Changes in operating assets and operating liabilities:Pre-development costs
    
    
    (201,722
    )
    
    
    (66,294
    )*Accounts receivable
    
    
    (62,900
    )
    
    
    (46,265
    )Revenue in excess of billings
    
    
    72,394
    
    
    
    Prepaids and deposits
    
    
    (16,361
    )
    
    
    30,466*Accounts payable and accrued liabilities
    
    
    91,632
    
    
    
    41,178Deferred rent
    
    
    69,952
    
    
    
    Net cash (used in)provided by operating activities
    
    
    (1,049,605
    )
    
    
    (602,604
    )Cash flows from investing activities:Cash paid for property and equipment
    
    
    (161,382
    )
    
    
    (5,382
    )Earnings on restricted cash
    
    
    5,255
    
    
    
    Net cash provided by(used in) investing activities
    
    
    (156,127
    )
    
    
    (5,382
    )Cash flows from financing activities:Net cash provided by financing activities
    
    
    
    
    
    
    Net change in cash and cash equivalents
    
    $
    (1,205,732
    )
    
    $
    (607,986
    )Cash and cash equivalents, beginning of the period
    
    $
    3,513,651
    
    
    $
    2,250,837Cash and cash equivalents, end of the period
    
    $
    2,307,919
    
    
    $
    1,642,851Supplemental disclosure of cash flow information:Cash paid during the year for:Income taxes
    
    $
    
    
    
    $
    Interest
    
    $
    
    
    
    $
    
 *
    
    On March 25, 2011 the Company transferred its interest in nine subsidiaries holding these
real estate assets to CDA Fund, LLC, as further described in Note 2 below, a subsidiary of
BOCO Investments, LLC in exchange CDA Fund LLC assumed the Companys Subordinated Debt
facilities from BOCO Investments, LLC and GDBA Investments LLC., as well as our credit
facility with First Citizens Bank. In addition, CDA Fund LLC assumed certain accrued
liabilities of approximately $24K and accounts receivable of approximately $118K related to
the assumed real estate assets. The transaction resulted in loss of $13,461. Related party
debt that was assumed by CDA Fund, LLC is no longer an obligation of the Company.   4




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(1) Nature of Organization and Summary of Significant Accounting Policies
            5




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
    
    The property owner, with ultimate approval rights relating to the
expenditures and bearing all of the economic costs of such
expenditures, is determined to be the primary obligor in the
arrangement;
  6




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
    
    Because the property owner is contractually obligated to fund all
operating costs of the property from existing cash flow or direct
funding from its building operating account, the Company bears little
or no credit risk; and
    
    The Company generally earns no margin in the reimbursement aspect of
the arrangement, obtaining reimbursement only for actual costs
incurred.
     Guarantees
  Fair Value Measurements
   Level 1:
    
    Quoted prices in active markets for identical assets or liabilities;
 Level 2:
    
    Quoted prices in active markets for similar assets and liabilities and inputs that
are observable for the asset or liability; or
 Level 3:
    
    Unobservable inputs in which there is little or no market data, which requires the
reporting entity to develop its own assumptions.
     7




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Income Taxes
  Recently Adopted Accounting Pronouncements
   (2) Real Estate Held for Sale
    8




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(3) Equity Method Investment
  (4) Accrued Liabilities
  March 31,
    
    
    December 31,2011
    
    
    2010Accrued vacation
    
    $
    119,866
    
    
    $
    161,847Other accrued liabilities
    
    
    64,767
    
    
    
    67,862$
    184,633
    
    
    $
    229,709
 (5) Related Parties
        9




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Guarantees
  Revenue
   (6) Notes Payable
     (7) Stockholders Equity
 Stock Options
    10




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(8) Revenue
  For the three months endedMarch 31,2011
    
    
    2010Development fees
    
    $
    244,200
    
    
    $
    62,031Leasing/commission fees
    
    
    189,768
    
    
    
    69,545Property management
    
    
    355,454
    
    
    
    429,622Other
    
    
    70,197
    
    
    
    50,457Total
    
    $
    859,619
    
    
    $
    611,656
 (9) Commitments and Contingencies
      Year
    
    Amount2011
    
    $
    136,9702012
    
    
    158,9152013
    
    
    253,4492014
    
    
    271,5532015
    
    
    277,587Remaining
    
    
    591,381Total
    
    $
    1,689,855
   11




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(10) Concentrations
  (11) Subsequent Events
   12




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ITEM 2Managements Discussion and Analysis of Financial Condition and Results of Operations
    Overview
    13




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Critical Accounting Policies
  Results of Operations
       14




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Liquidity and Capital Resources
       
 ITEM 3Quantitative and Qualitative Disclosures about Market Risk
  
 ITEM 4Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   15




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PART II. OTHER INFORMATION
 
 ITEM 1Legal Proceedings.
  
 ITEM 1ARisk Factors.
 Risks Related to Our Operations and Properties
  We may not be profitable in the future.
  We will need additional capital in the future, but it may not be available to us on acceptable
terms or at all.
  We may not be able to manage our growth.
  Our quarterly operating results may fluctuate.
   16




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Recent adverse macroeconomic and business conditions may continue
  We may face adverse economic or other conditions in the geographic markets in which we conduct
business
  Our real estate investments are concentrated in Healthcare Real Estate
     A material aspect of our business is investment in Healthcare Real Estate which can be highly
illiquid
   17




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We may not realize the benefits that we anticipate from focusing on Healthcare Real Estate
  Our investments in development and re-development projects may not yield anticipated returns
  
    
    we may be unable to obtain financing for these projects on
reasonable terms or at all;
    
    we may not complete development or re-development projects
on schedule or within budgeted amounts due to a variety of
factors, including materials and labor shortages and price
increases;
    
    we may encounter delays or refusals in obtaining all
necessary zoning, land use, building, occupancy and other
required governmental permits and authorizations; and
    
    we may be unable to achieve planned occupancy levels as
quickly as expected or at all
 We may not be successful in identifying and consummating suitable acquisitions or development
opportunities in our existing or new geographic markets.
  We may face increasing competition for the acquisition and development of Healthcare Real Estate
  We may not be successful in integrating and operating acquired or newly-developed Healthcare Real
Estate in the future.
   18




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We are exposed to risks associated with Real Estate Partnerships.
  We may develop and acquire Healthcare Real Estate subject to ground or air space leases that will
expose us to the loss of such buildings upon a breach or termination of the ground or air space
leases.
  The success of our business is dependent upon our management.
    19




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Uninsured losses or losses in excess of our insurance coverage could harm our financial condition
and our cash flows.
  If any of our insurance carriers become insolvent, we could be adversely impacted.
  We face environmental compliance costs and liabilities associated with owning, leasing, developing
and operating our properties.
    20




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Risks Related to the Healthcare Industry
 Recent healthcare reform legislation may affect our business in ways that are difficult to predict.
  We may be impacted by adverse trends in healthcare provider operations.
  
    
    changes in the demand for and methods of delivering healthcare services;
    
    changes in third party reimbursement methods and policies;
    
    consolidation and pressure to integrate within the healthcare industry through
acquisitions and Real Estate Partnerships; and
    
    increased scrutiny of billing, referral and other practices by U.S. federal and
state authorities.
  Reductions in reimbursement from third-party payors, including Medicare and Medicaid, could
adversely affect the profitability of our tenants and hinder their ability to make rent payments to
us or renew their lease.
   21




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The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws
or regulations, loss of licensure or failure to obtain licensure could harm our company and result
in the inability of our tenants to make rent payments to us.
    Our tenants and our company are subject to fraud and abuse laws, the violation of which by a tenant
may jeopardize the tenants ability to make rent payments to us.
   
    
    the Federal Anti-Kickback Statute, which prohibits, among
other things, the offer, payment, solicitation or receipt of
any form of remuneration in return for, or to induce, the
referral of any federal or state healthcare program
patients;
    
    the Federal Physician Self-Referral Prohibition (commonly
called the Stark Law), which, subject to specific
exceptions, restricts physicians who have financial
relationships with healthcare providers from making
referrals for designated health services for which payment
may be made under Medicare or Medicaid programs to an entity
with which the physician, or an immediate family member, has
a financial relationship;
  22




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
    
    the False Claims Act, which prohibits any person from
knowingly presenting false or fraudulent claims for payment
to the federal government, including under the Medicare and
Medicaid programs;
    
    the Civil Monetary Penalties Law, which authorizes the
Department of Health and Human Services to impose monetary
penalties for certain fraudulent acts; and
    
    state anti-kickback, anti-inducement, anti-referral and
insurance fraud laws which may be generally similar to, and
potentially more expansive than, the federal laws set forth
above.
  Our healthcare-related tenants may be subject to significant legal actions that could subject them
to increased operating costs and substantial uninsured liabilities, which may harm their ability to
pay their rent payments to us, and we could be subject to healthcare industry violations.
    23




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ITEM 2Unregistered Sales of Equity Securities and Use of Proceeds
  
 ITEM 3Defaults Upon Senior Securities.
  
 ITEM 4(Removed and Reserved)
 
 ITEM 5Other Information.
  
 ITEM 6Exhibits
  ExhibitNumber
    
    Description3.1
    
    
    Certificate of Incorporation of the Company, incorporated by reference to
Exhibit 3.1 to the Companys Current Report on Form 8-K filed on April 7, 2011.3.2
    
    
    Bylaws of the Company, incorporated by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K filed on April 7, 2011.10.1
    
    
    Amended and Restated 2008 Equity Compensation Plan, incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on January 5, 2011.31.1
    *
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    *
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    *
    
    Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    *
    
    Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.  24




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SIGNATURES
   NexCore Healthcare Capital CorpBy:
    /s/ Robert GrossRobert GrossChief Financial Officer
(duly authorized officer and
principal financial officer)  25