##### Table of Contents






UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q

(Mark One)

x


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2001



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 000-23953

OMEGA WORLDWIDE, INC.

(Exact name of registrant as specified in its
charter)


|                                 |  |                                               
|-------------------------------- |  | ----------------------------------------------
|                                
|                                
|                                
|                                
|Maryland(State of Incorporation) |  | 38-3382537(I.R.S. Employer Identification No.)

900 Victors Way, Suite 345, Ann Arbor, MI 48108

(Address of principal executive offices)


(734) 887-0300

(Telephone number, including area code)


Indicate by check mark whether the
registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for
the past 90 days.

Yes ü  No

Indicate the number of shares
outstanding of each of the issuers classes of common stock
as of June 30, 2001

|                                    |  |                             
|----------------------------------- |  | ----------------------------
|                                   
|                                   
|                                   
|                                   
|Common Stock, $.10 par value(Class) |  | 12,340,533(Number of shares)









---

TABLE OF CONTENTS



|                                                                                                      |  |  |  |  |  |  |  | 
|----------------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART 1 -- FINANCIAL INFORMATION                                                                      
|Item 1. Financial Statements                                                                         
|CONDENSED CONSOLIDATED BALANCE SHEETS                                                                
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                      
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                      
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                 
|Item 2 -- Managements Discussion and Analysis of Financial Condition and Results of Operations      
|PART II -- OTHER INFORMATION                                                                         
|Item 1.Legal Proceedings                                                                             
|Item 2.Change in Securities and Use of Proceeds                                                      
|Item 3.Defaults upon Senior Securities NoneItem 4.Submission of Matters to a Vote of Security Holders
|NoneItem 4.Submission of Matters to a Vote of Security Holders                                       
|Item 4.Submission of Matters to a Vote of Security Holders                                           
|Item 5.Other Information                                                                             
|Item 6.Exhibits and Reports on Form 8-K:                                                             
|SIGNATURES                                                                                           



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##### Table of Contents



OMEGA WORLDWIDE, INC.

FORM 10-Q

June 30, 2001

INDEX

|         |  |                                                                                        |                                                                  |          |    |   | 
|-------- |  | -------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | -------- | -- | - | 
|         |  |                                                                                        |                                                                  | Page No.
|         |  |                                                                                        |                                                                  |         
|PART I   |  | Financial Information                                                                  |                                                                  |          |    |  
|Item  1. |  | Financial Statements:                                                                  |                                                                  |          |    |  
|         |  | Condensed Consolidated Balance Sheets                                                  |                                                                  |          |    |  
|        
|        
|        
|        
|         |  |                                                                                        | June 30, 2001 (unaudited) and
	September 30, 2000                |          |    | 2 | 
|         |  | Condensed Consolidated Statements of Operations
	(unaudited)                          |                                                                  |          |    |  
|        
|        
|        
|        
|         |  |                                                                                        | Three-month and nine-month periods ended
	June 30, 2001 and 2000 |          |    | 3 | 
|         |  | Condensed Consolidated Statements of Cash Flows
	(unaudited)                          |                                                                  |          |    |  
|        
|        
|        
|        
|         |  |                                                                                        | Nine-month periods ended June 30, 2001 and
	2000                 |          |    | 4 | 
|         |  | Notes to Condensed Consolidated Financial
	Statements                                  |                                                                  |          |    |  
|        
|        
|        
|        
|         |  |                                                                                        | June 30, 2001 (unaudited)                                        |          |    | 5 | 
|        
|        
|        
|        
|        
|Item  2. |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |                                                                  |          | 12 |  
|        
|        
|        
|        
|        
|Item  3. |  | Quantitative and Qualitative Disclosure About
	Market Risk                             |                                                                  |          | 14 |  
|        
|        
|        
|        
|        
|PART II  |  | Other Information                                                                      |                                                                  |          |    |  
|        
|        
|        
|        
|        
|Item  1. |  | Legal Proceedings                                                                      |                                                                  |          | 16 |  
|        
|        
|        
|        
|        
|Item  2. |  | Change in Securities and Use of Proceeds                                               |                                                                  |          | 16 |  
|        
|        
|        
|        
|        
|Item  3. |  | Defaults upon Senior Securities                                                        |                                                                  |          | 16 |  
|        
|        
|        
|        
|        
|Item  4. |  | Submission of Matters to a Vote of Security
	Holders                                   |                                                                  |          | 16 |  
|        
|        
|        
|        
|        
|Item  5. |  | Other Information                                                                      |                                                                  |          | 16 |  
|        
|        
|        
|        
|        
|Item  6. |  | Exhibits and Reports on Form 8-K                                                       |                                                                  |          | 16 |  



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##### Table of Contents








PART 1  FINANCIAL INFORMATION







Item 1.  Financial Statements


OMEGA WORLDWIDE, INC.






CONDENSED CONSOLIDATED BALANCE SHEETS


(In Thousands, Except Par Values)

|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |        |       |        | 
|-------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------------ | ------------- | ----- | ------ | ------ | ------ | ----- | ------ | 
|                                                                                                   |                                                                                  | June 30,                                                                  |                                            | September 30,
|                                                                                                   |                                                                                  | 2001                                                                      |                                            | 2000         
|                                                                                                   |                                                                                  |                                                                           |                                            |              
|                                                                                                   |                                                                                  | (Unaudited)                                                               |                                            | (Audited)    
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|ASSETS                                                                                             |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Current Assets:                                                                                    |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Cash and short-term investments                                                  |                                                                           | $                                          | 3,621         |       |        | $      | 3,415  |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Restricted cash                                                                  |                                                                           |                                            | 2,173         |       |        |        | 2,786  |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Patient receivables                                                              |                                                                           |                                            | 9,272         |       |        |        | 7,763  |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Other current assets                                                             |                                                                           |                                            | 3,268         |       |        |        | 3,026  |      
|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                   |                                                                                  |                                                                           | Total Current Assets                       |               |       | 18,334 |        |        |       | 16,990 | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Plant, property and equipment, net of accumulated
	depreciation of $2,314 and $1,416, respectively |                                                                                  |                                                                           | 14,652                                     |               |       |        | 14,560 |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Investments in and advances to Principal
	Healthcare Finance Limited                               |                                                                                  |                                                                           | 38,845                                     |               |       |        | 42,735 |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Investments in Principal Healthcare Finance Trust                                                  |                                                                                  |                                                                           | 6,981                                      |               |       |        | 6,930  |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Prepaid rent                                                                                       |                                                                                  |                                                                           | 1,116                                      |               |       |        | 4,031  |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Rent deposits                                                                                      |                                                                                  |                                                                           | 3,563                                      |               |       |        | 3,657  |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Other assets                                                                                       |                                                                                  |                                                                           | 1,752                                      |               |       |        | 3,597  |       
|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                   |                                                                                  |                                                                           | 66,909                                     |               |       |        | 75,510 |       
|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                   |                                                                                  |                                                                           | Total Assets                               |               | $     | 85,243 |        |        | $     | 92,500 | 
|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |       
|LIABILITIES AND SHAREHOLDERS
	EQUITY                                                              |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Current Liabilities:                                                                               |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Short-term debt                                                                  |                                                                           | $                                          | 2,510         |       |        | $      | 7,755  |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Accounts payable and accrued expenses                                            |                                                                           |                                            | 15,254        |       |        |        | 15,190 |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Accrued income taxes                                                             |                                                                           |                                            |              |       |        |        | 80     |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Deferred income                                                                  |                                                                           |                                            | 69            |       |        |        | 1,072  |      
|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                   |                                                                                  |                                                                           | Total Current Liabilities                  |               |       | 17,833 |        |        |       | 24,097 | 
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Long-term debt                                                                                     |                                                                                  |                                                                           | 1,687                                      |               |       |        | 2,323  |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Other long-term liabilities                                                                        |                                                                                  |                                                                           | 213                                        |               |       |        | 322    |       
|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                   |                                                                                  |                                                                           | Total Liabilities                          |               |       | 19,733 |        |        |       | 26,742 | 
|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |       
|Shareholders Equity:                                                                              |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Preferred stock $1.00 par value:                                                 |                                                                           |                                            |               |       |        |        |        |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                                                                                  | Authorized 10,000 shares; issued 260 Class B
	shares at liquidation value |                                            |               |      |        |        |        | 2,600 |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   |                                                                                  | Authorized 260 shares; issued 260 Class C
	shares at liquidation value    |                                            |               | 2,600 |        |        |        |      |       
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Common stock $.10 par value
	Authorized 50,000 shares
	Outstanding 12,341 shares |                                                                           |                                            | 1,234         |       |        |        | 1,234  |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Additional paid-in capital                                                       |                                                                           |                                            | 53,157        |       |        |        | 53,157 |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Retained earnings                                                                |                                                                           |                                            | 8,752         |       |        |        | 8,864  |      
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                   | Accumulated other comprehensive income (loss)                                    |                                                                           |                                            | (233          | )     |        |        | (97    | )    
|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                   |                                                                                  |                                                                           | Total Shareholders Equity                 |               |       | 65,510 |        |        |       | 65,758 | 
|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |       
|                                                                                                   |                                                                                  |                                                                           | Total Liabilities and Shareholders Equity |               | $     | 85,243 |        |        | $     | 92,500 | 
|                                                                                                   |                                                                                  |                                                                           |                                            |               |       |        |        |       

See notes to condensed consolidated financial statements.

2



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##### Table of Contents



OMEGA WORLDWIDE, INC.






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


Unaudited

(In Thousands, Except Per Share
Amounts)

|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |         |       | 
|------------------------------------------------------------------ | -------------------------------------------------- | ------------------------------------ | ------- | ----------------- | --- | ---- | ------ | ------ | ----- | - | ------- | ------- | ----- | - | ------- | ------- | ----- | 
|                                                                   |                                                    |                                      |         |                  
|                                                                   |                                                    | Three Months Ended                   |         | Nine Months Ended
|                                                                   |                                                    | June 30,                             |         | June 30,         
|                                                                   |                                                    |                                      |         |                  
|                                                                   |                                                    | 2001                                 |         | 2000              |     | 2001 |        | 2000  
|                                                                   |                                                    |                                      |         |                   |     |      |        |       
|Revenues:                                                          |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Patient services revenue                           |                                      | $       | 35,463            |     |      | $      | 36,890 |       |   | $       | 104,778 |       |   | $       | 98,656  |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Fee income  Principal Healthcare
	Finance Limited |                                      |         | 1,056             |     |      |        | 1,283  |       |   |         | 3,199   |       |   |         | 3,958   |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Fee income  Principal Healthcare
	Finance Trust   |                                      |         | 309               |     |      |        | 256    |       |   |         | 899     |       |   |         | 753     |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Interest Income:                                   |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |         |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                                    | Principal Healthcare Finance Limited |         |                   | 876 |      |        |        | 1,127 |   |         |         | 2,721 |   |         |         | 3,537 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                                    | Short-term investments               |         |                   | 131 |      |        |        | 58    |   |         |         | 440   |   |         |         | 167   | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Other income                                       |                                      |         |                  |     |      |        | 1      |       |   |         |        |       |   |         | 21      |      
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|                                                                   |                                                    |                                      | 37,835  |                   |     |      | 39,615 |        |       |   | 112,037 |         |       |   | 107,092 |        
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Expenses:                                                          |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Direct cost of patient services                    |                                      |         | 35,724            |     |      |        | 38,376 |       |   |         | 106,566 |       |   |         | 103,062 |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Direct costs of asset management                   |                                      |         | 733               |     |      |        | 744    |       |   |         | 2,096   |       |   |         | 2,007   |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Interest expense                                   |                                      |         | 110               |     |      |        | 247    |       |   |         | 466     |       |   |         | 855     |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | General, administrative and other expenses         |                                      |         | 929               |     |      |        | 535    |       |   |         | 1,996   |       |   |         | 1,632   |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Foreign currency exchange loss                     |                                      |         | 316               |     |      |        |       |       |   |         | 316     |       |   |         |        |      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Non-recurring expenses                             |                                      |         | 552               |     |      |        | 437    |       |   |         | 683     |       |   |         | 437     |      
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|                                                                   |                                                    |                                      | 38,364  |                   |     |      | 40,339 |        |       |   | 112,123 |         |       |   | 107,993 |        
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|Loss before equity earnings and taxes                              |                                                    |                                      | (529    | )                 |     |      | (724   | )      |       |   | (86     | )       |       |   | (901    | )      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Equity in earnings of Principal Healthcare
	Finance Limited        |                                                    |                                      | 556     |                   |     |      | 403    |        |       |   | 1,560   |         |       |   | 1,016   |        
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Equity in earnings of Principal Healthcare
	Finance Trust          |                                                    |                                      | 13      |                   |     |      | 112    |        |       |   | 179     |         |       |   | 297     |        
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Equity in earnings of Essex Healthcare Corporation                 |                                                    |                                      |        |                   |     |      | 61     |        |       |   | 26      |         |       |   | 24      |        
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Recognized impairment of investment (Moran Health
	Care (UK) Ltd.) |                                                    |                                      | (2,665  | )                 |     |      |       |        |       |   | (2,665  | )       |       |   |        |        
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|Earnings (loss) before income taxes                                |                                                    |                                      | (2,625  | )                 |     |      | (148   | )      |       |   | (986    | )       |       |   | 436     |        
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Income tax benefit                                                 |                                                    |                                      | 1,082   |                   |     |      | 208    |        |       |   | 874     |         |       |   | 205     |        
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|Net earnings (loss)                                                |                                                    |                                      | (1,543  | )                 |     |      | 60     |        |       |   | (112    | )       |       |   | 641     |        
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net earnings allocated to preferred stock
	dividends               |                                                    |                                      | (52     | )                 |     |      | (52    | )      |       |   | (156    | )       |       |   | (156    | )      
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|Net earnings (loss) available to common
	shareholders              |                                                    | $                                    | (1,595  | )                 |     | $    | 8      |        |       | $ | (268    | )       |       | $ | 485     |        
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|Earnings (loss) per common share, basic                            |                                                    |                                      | $(0.13  | )                 |     | $    |       |        |       | $ | (0.02   | )       |       | $ | 0.04    |        
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|Earnings (loss) per common share, diluted                          |                                                    |                                      | $(0.13  | )                 |     | $    |       |        |       | $ | (0.02   | )       |       | $ | 0.04    |        
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|Average shares outstanding, basic                                  |                                                    |                                      | 12,341  |                   |     |      | 12,308 |        |       |   | 12,341  |         |       |   | 12,291  |        
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|Average shares outstanding, diluted                                |                                                    |                                      | 12,363  |                   |     |      | 12,309 |        |       |   | 12,341  |         |       |   | 12,292  |        
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        
|Total comprehensive income (loss), net of income
	taxes            |                                                    |                                      | $(1,560 | )                 |     | $    | 198    |        |       | $ | (248    | )       |       | $ | 500     |        
|                                                                   |                                                    |                                      |         |                   |     |      |        |        |       |   |         |         |       |   |         |        

See notes to condensed consolidated financial statements.

3



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##### Table of Contents



OMEGA WORLDWIDE, INC.






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


Unaudited

(In Thousands)

|                                                        |                                                                                                                  |                                                                    |        |        |        |   |        |        |         |  
|------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------ | ------ | ------ | - | ------ | ------ | ------- | -
|                                                        |                                                                                                                  |                                                                   
|                                                        |                                                                                                                  | Six Months Ended                                                  
|                                                        |                                                                                                                  | June 30,                                                          
|                                                        |                                                                                                                  |                                                                   
|                                                        |                                                                                                                  | 2001                                                               |        | 2000  
|                                                        |                                                                                                                  |                                                                    |        |       
|Operating activities:                                   |                                                                                                                  |                                                                    |        |        |        |   |        |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Net earnings (loss)                                                                                              |                                                                    | $      | (112   | )      |   | $      | 641    |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Adjustments to reconcile net earnings to cash
	provided by (used in) operating activities:                       |                                                                    |        |        |        |   |        |        |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                  | Equity in earnings of Principal Healthcare
	Finance Limited        |        |        | (1,560 | ) |        |        | (1,016  | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                  | Equity in earnings of Principal Healthcare
	Finance Trust          |        |        | (179   | ) |        |        | (297    | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                  | Equity in earnings of Essex Healthcare Corporation                 |        |        | (26    | ) |        |        | (24     | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                  | Recognized impairment of investment (Moran Health
	Care (UK) Ltd.) |        |        | 2,665  |   |        |        |        |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                  | Straight-line rent adjustment                                      |        |        | 2,549  |   |        |        | 2,575   |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                  | Depreciation and amortization                                      |        |        | 1,078  |   |        |        | 1,295   |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                  | Payments of Federal and foreign income taxes                       |        |        | (560   | ) |        |        | (2,126  | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                  | Other non-cash charges                                             |        |        | 399    |   |        |        | 232     |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                  | Net change in operating assets and liabilities                     |        |        | (2,944 | ) |        |        | (10,837 | )
|                                                        |                                                                                                                  |                                                                    |        |        |        |   |        |       
|Net cash provided by (used in) operating
	activities    |                                                                                                                  |                                                                    | 1,310  |        |        |   | (9,557 | )     
|                                                       
|                                                       
|                                                       
|                                                       
|Cash flows from financing activities:                   |                                                                                                                  |                                                                    |        |        |        |   |        |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Repayments of revolving credit facility with bank                                                                |                                                                    |        | (4,850 | )      |   |        |       |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Proceeds from (repayments of) revolving warehouse
	facility drawn by subsidiary                                  |                                                                    |        | (253   | )      |   |        | 6,304  |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Repayment of long-term borrowing by subsidiary                                                                   |                                                                    |        | (621   | )      |   |        | (1,055 | )      
|                                                        |                                                                                                                  |                                                                    |        |        |        |   |        |       
|Net cash (used in) provided by financing
	activities    |                                                                                                                  |                                                                    | (5,724 | )      |        |   | 5,249  |       
|                                                       
|                                                       
|                                                       
|                                                       
|Cash flows from investing activities:                   |                                                                                                                  |                                                                    |        |        |        |   |        |       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Repayments from Principal Healthcare Finance
	Limited                                                            |                                                                    |        | 5,450  |        |   |        | 7,244  |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Acquisition of plant, property and equipment by
	subsidiaries                                                    |                                                                    |        | (1,823 | )      |   |        | (1,323 | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Decrease (increase) in restricted cash                                                                           |                                                                    |        | 613    |        |   |        | (3,072 | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Dividends from affiliates                                                                                        |                                                                    |        | 183    |        |   |        | 174    |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Proceeds from sale of Essex Healthcare
	Corporation investment                                                   |                                                                    |        | 325    |        |   |        |        |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Cash received in acquisition of operating
	companies by Idun Health Care Limited net of cash consideration
	paid |                                                                    |        |       |        |   |        | 857    |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other                                                                                                            |                                                                    |        | (128   | )      |   |        | 128    |        
|                                                        |                                                                                                                  |                                                                    |        |        |        |   |        |       
|Net cash provided by investing activities               |                                                                                                                  |                                                                    | 4,620  |        |        |   | 4,008  |       
|                                                        |                                                                                                                  |                                                                    |        |        |        |   |        |       
|Increase (decrease) in cash and short-term
	investments |                                                                                                                  | $                                                                  | 206    |        |        | $ | (300   | )     
|                                                        |                                                                                                                  |                                                                    |        |        |        |   |        |       

See notes to condensed consolidated financial statements.

4



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##### Table of Contents



OMEGA WORLDWIDE, INC.






NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Unaudited

June 30, 2001

Note A  Significant Accounting Policies

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial
statements for Omega Worldwide, Inc. and its wholly owned
subsidiaries (the Company) have been prepared in
accordance with accounting principles generally accepted in the
United States (U.S. GAAP) for interim financial
information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by
accounting principles generally accepted in the United States
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three-month and nine-month periods
ended June 30, 2001, are not necessarily indicative of the
results that may be expected for the year ending
September 30, 2001. For further information, refer to the
financial statements and footnotes thereto in the Companys
annual report, Form 10-K for the year ended
September 30, 2000.

The balance sheet at September 30, 2000, has been derived
from audited consolidated financial statements at that date but
does not include all of the information and footnotes required
by U.S. GAAP.

Certain prior period amounts have been reclassified to
correspond with the current quarters presentation.

CONSOLIDATION AND SUBSIDIARIES

The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries after elimination
of all material intercompany accounts and transactions. The
Companys policy is to report the results of its
subsidiaries and equity method investees on a one-month lag
basis. This allows time to produce accounts in local generally
accepted accounting principles and then convert to
U.S. GAAP.

The Company reports the results of those subsidiaries which it
has over 20% ownership, but in which it does not hold a majority
interest, using the equity method of accounting, using a
one-month lag basis. Investments in public companies over which
the Company does not exercise control are recorded at fair
market value. Temporary changes in fair market value are charged
to accumulated other comprehensive income, while permanent
reductions in fair market value are charged to operations.

RESTRICTED CASH

The Companys wholly-owned subsidiary Idun Health Care
Limited has restricted cash of $1,784,000 supporting its debt
(See Note H). In addition, the Company has $389,000 of other
restricted cash.

NON-RECURRING EXPENSES

As previously announced, the Company is actively exploring ways
to boost shareholder value. The cost of legal advice related to
the process and analyzing the previously announced offer by a
third party to purchase the Companys investment in
Principal Healthcare Finance Limited totaled $552,000 and
$437,000 for the three-month periods ended June 30, 2001
and 2000, respectively and $683,000 and $437,000 for the
nine-month periods ended June 30, 2001 and 2000,
respectively.

TRANSLATION

Translation of currencies for foreign subsidiary financial
information is computed pursuant to the provisions of Financial
Accounting Standards Board Statement No. 52, which provides
that balance sheet amounts are translated at the period-end
exchange rate and income statement amounts are translated at the

5



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##### Table of Contents





Accumulated other comprehensive income (loss) consists of
the net exchange gains and losses resulting from the translation
of foreign financial statements and charged directly to the
balance sheet as a component of shareholders equity.

ACCOUNTING FOR CERTAIN DERIVATIVES INSTRUMENTS AND CERTAIN
HEDGING ACTIVITIES

In the first quarter of fiscal year 2001, the Company adopted
SFAS No. 133, Accounting for Derivatives Instruments
and Hedging Activities. The adoption of SFAS No. 133
did not have a significant effect on the Companys
consolidated results of operations or financial position.

Note B  Principal Healthcare Finance Limited
(Principal-UK)

On June 29, 2001, Principal-UK had subordinated debt and
revolving debt, with the Company and other major creditors, in
the amount of £54,648,000 (approximately $77,352,000) that
matured. Principal-UK is currently in negotiations to reach
accommodations with its creditors, including the Company, to
extend the terms of the indebtedness, which will enable
Principal-UK to repay or refinance the debt. (See Note I for
amounts related to the Company). Principal-UK continues to make
monthly interest payments as they become due.

6



---



##### Table of Contents



The following summarizes selected financial information of
Principal-UK in accordance with U.S. GAAP (in thousands):

|                                           |                                 |                    |        |                   |         |         |        |         |         |   |        |         |         |   |        |         |         |  
|------------------------------------------ | ------------------------------- | ------------------ | ------ | ----------------- | ------- | ------- | ------ | ------- | ------- | - | ------ | ------- | ------- | - | ------ | ------- | ------- | -
|                                           |                                 |                    |        |                  
|                                           |                                 | Three-Month Period |        | Nine-Month Period
|                                           |                                 | Ended              |        | Ended            
|                                           |                                 |                    |        |                  
|                                           |                                 | May 31,            |        | May 31,           |         | May 31, |        | May 31,
|                                           |                                 | 2001               |        | 2000              |         | 2001    |        | 2000   
|Selected Operating Results for the period: |                                 |                    |        |                   |         |         |        |        
|Revenues:                                  |                                 |                    |        |                   |         |         |        |         |         |   |        |         |         |   |        |        
|                                          
|                                          
|                                          
|                                          
|                                           | Rent income                     |                    | $      | 13,893            |         |         | $      | 15,150  |         |   | $      | 41,648  |         |   | $      | 45,459  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Patient service revenue         |                    |        | 2,102             |         |         |        |        |         |   |        | 6,427   |         |   |        |        |        
|                                          
|                                          
|                                          
|                                          
|                                           | Interest income                 |                    |        | 32                |         |         |        | 129     |         |   |        | 96      |         |   |        | 403     |        
|                                          
|                                          
|                                          
|                                          
|                                           | Other income                    |                    |        | 1,026             |         |         |        | 1,130   |         |   |        | 3,606   |         |   |        | 3,618   |        
|                                           |                                 |                    |        |                   |         |         |        |         |         |   |        |         |         |   |        |        
|                                           |                                 | Total revenues     |        |                   | 17,053  |         |        |         | 16,409  |   |        |         | 51,777  |   |        |         | 49,480  |  
|                                          
|                                          
|                                          
|                                          
|Expenses:                                  |                                 |                    |        |                   |         |         |        |         |         |   |        |         |         |   |        |        
|                                          
|                                          
|                                          
|                                          
|                                           | Interest expense                |                    |        | (8,854            | )       |         |        | (10,083 | )       |   |        | (27,061 | )       |   |        | (30,675 | )      
|                                          
|                                          
|                                          
|                                          
|                                           | Depreciation and amortization   |                    |        | (2,434            | )       |         |        | (2,772  | )       |   |        | (7,433  | )       |   |        | (8,320  | )      
|                                          
|                                          
|                                          
|                                          
|                                           | Direct cost of patient services |                    |        | (2,024            | )       |         |        |        |         |   |        | (6,498  | )       |   |        |        |        
|                                          
|                                          
|                                          
|                                          
|                                           | General and administrative      |                    |        | (1,382            | )       |         |        | (1,428  | )       |   |        | (4,075  | )       |   |        | (4,940  | )      
|                                           |                                 |                    |        |                   |         |         |        |         |         |   |        |         |         |   |        |        
|                                           |                                 | Total expenses     |        |                   | (14,694 | )       |        |         | (14,283 | ) |        |         | (45,067 | ) |        |         | (43,935 | )
|                                           |                                 |                    |        |                   |         |         |        |         |         |   |        |         |         |   |        |        
|Income from operations before income taxes |                                 |                    | 2,359  |                   |         |         | 2,126  |         |         |   | 6,710  |         |         |   | 5,545  |        
|                                          
|                                          
|                                          
|                                          
|Provision for income taxes                 |                                 |                    | (633   | )                 |         |         | (850   | )       |         |   | (1,852 | )       |         |   | (2,310 | )      
|                                           |                                 |                    |        |                   |         |         |        |         |         |   |        |         |         |   |        |        
|Net income from operations                 |                                 | $                  | 1,726  |                   |         | $       | 1,276  |         |         | $ | 4,858  |         |         | $ | 3,235  |        
|                                           |                                 |                    |        |                   |         |         |        |         |         |   |        |         |         |   |        |        
|Average exchange rate ($ per £)            |                                 |                    | 1.4320 |                   |         |         | 1.5654 |         |         |   | 1.4483 |         |         |   | 1.5948 |        

|                                                                             |  |         |         |            |  |   |         |  |  |  |  |  |  |  |  | 
|---------------------------------------------------------------------------- |  | ------- | ------- | ---------- |  | - | ------- |  |  |  |  |  |  |  |  | 
|                                                                             |  | May 31, |         | August 31, |  |   |         | 
|                                                                             |  | 2001    |         | 2000       |  |   |         | 
|Selected Balance Sheet Information as of:                                    |  |         |         |            |  |   |         | 
|Investments in real estate subject to triple-net
	lease, net of depreciation |  | $       | 369,896 |            |  | $ | 382,270 |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Total assets                                                                 |  |         | 533,415 |            |  |   | 539,339 |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Non-recourse debt borrowings                                                 |  |         | 435,010 |            |  |   | 445,887 |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Total liabilities                                                            |  |         | 509,018 |            |  |   | 519,292 |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Total stockholders equity                                                   |  |         | 24,397  |            |  |   | 20,047  |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Exchange rate ($ per £)                                                      |  |         | 1.4276  |            |  |   | 1.4600  |  |  |  |  |  |  |  |  | 

The functional currency of Principal-UK is the British pound
sterling. In accordance with FASB 52, the balance sheet amounts
are translated at the period end exchange rate and the income
statement amounts are translated at the average exchange rate
for the period.

The effective tax rates are 28% and 42% for the nine-month
periods ending May 31, 2001 and 2000, respectively. These
rates differ from the UK tax rate primarily because the
provision for depreciation and amortization is not deductible
for tax purposes in the United Kingdom. The Companys
proportionate share of Principal-UKs earnings for the
three-month periods ended May 31, 2001 and May 31,
2000 are approximately $577,000 and $424,000 respectively, and
approximately $1,621,000 and $1,077,000 for the nine-month
periods ended May 31, 2001 and May 31, 2000,
respectively. Additionally, the Company has recorded a charge
against earnings of approximately $21,000 for the three-month
periods ended May 31, 2001 and May 31, 2000,
respectively, and approximately $61,000 for the nine-month
periods ending May 31, 2001 and May 31, 2000,
respectively, representing amortization over a ten-year period
of the excess of the Companys investment in Principal-UK
over its proportionate share of Principal-UKs underlying
equity.

7



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##### Table of Contents



Note C  Acquisition of Idun Health Care Limited
(Idun)

On October 31, 1999 the Company, through its wholly owned
subsidiary, Idun acquired the operating subsidiaries of Tamaris,
plc, a nursing home operating company in the United Kingdom. The
48 subsidiaries acquired operate 119 nursing homes located
throughout England, Scotland and Northern Ireland. The fair
market value of the net assets at the date of acquisition was
$7.2 million. Fixed assets included in the
$7.2 million amount have been written down by $3.5 million
to report net assets equal to the purchase price.

Pro forma information for the Company, as if the Idun purchase
had been made as of October 1, 1999, is as follows:

|                                                                                          |  |               |         |  
|----------------------------------------------------------------------------------------- |  | ------------- | ------- | -
|                                                                                          |  | Nine-Month   
|                                                                                          |  | Period Ended 
|                                                                                          |  | June 30, 2000
|                                                                                          |  |              
|Pro forma operating results for the period
	ended:
	(in thousands, except per share data) |  |               |         |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Revenues                                                                                  |  | $             | 116,708 |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Net earnings (loss) available to common
	shareholders                                     |  |               | (936    | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Earnings (loss) per common share, basic                                                   |  |               | (0.08   | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Earnings (loss) per common share, diluted                                                 |  |               | (0.08   | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Average exchange rate ($ per £)                                                           |  |               | 1.5948  |  

Iduns results are included in the Companys
consolidated results for the entire three-month period ended
June 30, 2000 and the entire nine-month period ended
June 30, 2001.

The functional currency of Idun is the British pound sterling.
In accordance with FASB 52, the balance sheet amounts are
translated at the period end exchange rate and the income
statement amounts are translated at the average exchange rate
for the period.

8



---



##### Table of Contents



Note D  Principal Healthcare Finance Trust
(Principal-Australia)

The following summarizes selected financial information of
Principal-Australia in accordance with U.S. GAAP (in thousands):

|                                           |                                                   |                          |        |                         |        |         |        |         |        |   |        |        |        |   |        |        |        |  
|------------------------------------------ | ------------------------------------------------- | ------------------------ | ------ | ----------------------- | ------ | ------- | ------ | ------- | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                           |                                                   |                          |        |                        
|                                           |                                                   | Three-Month Period Ended |        | Nine-Month Period Ended
|                                           |                                                   |                          |        |                        
|                                           |                                                   | May 31,                  |        | May 31,                 |        | May 31, |        | May 31,
|                                           |                                                   | 2001                     |        | 2000                    |        | 2001    |        | 2000   
|                                           |                                                   |                          |        |                         |        |         |        |        
|Selected Operating Results for the period: |                                                   |                          |        |                         |        |         |        |         |        |   |        |        |        |   |        |       
|                                          
|                                          
|                                          
|                                          
|Revenues:                                  |                                                   |                          |        |                         |        |         |        |         |        |   |        |        |        |   |        |       
|                                          
|                                          
|                                          
|                                          
|                                           | Rent income                                       |                          | $      | 2,931                   |        |         | $      | 2,935   |        |   | $      | 8,857  |        |   | $      | 8,839  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Interest income                                   |                          |        | 34                      |        |         |        | 368     |        |   |        | 244    |        |   |        | 689    |       
|                                          
|                                          
|                                          
|                                          
|                                           | Other income                                      |                          |        | 9                       |        |         |        | 10      |        |   |        | 28     |        |   |        | 32     |       
|                                           |                                                   |                          |        |                         |        |         |        |         |        |   |        |        |        |   |        |       
|                                           |                                                   | Total revenues           |        |                         | 2,974  |         |        |         | 3,313  |   |        |        | 9,129  |   |        |        | 9,560  |  
|                                          
|                                          
|                                          
|                                          
|Expenses:                                  |                                                   |                          |        |                         |        |         |        |         |        |   |        |        |        |   |        |       
|                                          
|                                          
|                                          
|                                          
|                                           | Interest expense                                  |                          |        | (1,977                  | )      |         |        | (2,250  | )      |   |        | (6,014 | )      |   |        | (6,541 | )     
|                                          
|                                          
|                                          
|                                          
|                                           | Depreciation and amortization                     |                          |        | (480                    | )      |         |        | (490    | )      |   |        | (1,454 | )      |   |        | (1,488 | )     
|                                          
|                                          
|                                          
|                                          
|                                           | Amortization of debt issue and organization costs |                          |        | (58                     | )      |         |        | (30     | )      |   |        | (177   | )      |   |        | (142   | )     
|                                          
|                                          
|                                          
|                                          
|                                           | General and administrative                        |                          |        | (431                    | )      |         |        | (305    | )      |   |        | (1,055 | )      |   |        | (757   | )     
|                                           |                                                   |                          |        |                         |        |         |        |         |        |   |        |        |        |   |        |       
|                                           |                                                   | Total expenses           |        |                         | (2,946 | )       |        |         | (3,075 | ) |        |        | (8,700 | ) |        |        | (8,928 | )
|                                           |                                                   |                          |        |                         |        |         |        |         |        |   |        |        |        |   |        |       
|Net income from operations                 |                                                   | $                        | 28     |                         |        | $       | 238    |         |        | $ | 429    |        |        | $ | 632    |       
|                                           |                                                   |                          |        |                         |        |         |        |         |        |   |        |        |        |   |        |       
|Average exchange rate ($ per A$)           |                                                   |                          | 0.5086 |                         |        |         | 0.5983 |         |        |   | 0.5310 |        |        |   | 0.6249 |       

|                                                                             |  |         |         |            |  |   |         |  |  |  |  |  |  |  |  | 
|---------------------------------------------------------------------------- |  | ------- | ------- | ---------- |  | - | ------- |  |  |  |  |  |  |  |  | 
|                                                                             |  | May 31, |         | August 31, |  |   |         | 
|                                                                             |  | 2001    |         | 2000       |  |   |         | 
|                                                                             |  |         |         |            |  |   |         | 
|Selected Balance Sheet Information as of:                                    |  |         |         |            |  |   |         |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Investments in real estate subject to triple-net
	lease, net of depreciation |  | $       | 89,425  |            |  | $ | 88,298  |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Total assets                                                                 |  |         | 108,222 |            |  |   | 116,255 |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Non-recourse debt borrowings                                                 |  |         | 85,127  |            |  |   | 94,546  |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Total liabilities                                                            |  |         | 95,480  |            |  |   | 102,261 |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Total stockholders equity                                                   |  |         | 12,742  |            |  |   | 13,994  |  |  |  |  |  |  |  |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Exchange rate ($ per A$)                                                     |  |         | 0.5132  |            |  |   | 0.5766  |  |  |  |  |  |  |  |  | 

The functional currency of Principal-Australia is the Australian
dollar (A$). In accordance with FASB 52, the balance
sheet amounts are translated at the period end exchange rate and
the income statement amounts are translated at the average
exchange rate for the period.

Note E  Essex Healthcare Corporation
(Essex)

The Company (until December 1, 2000) held approximately 47%
of the outstanding common shares of Essex, an Atlanta-based
private operator of skilled nursing facilities. Essexs
primary activities are in Ohio, where it operates 68 long-term
care and assisted living facilities (approximately 4,200 beds).
It also manages 55 facilities (approximately 2,800 beds) in
Indiana, Wisconsin, Michigan and Texas. The Company accounted
for this investment using the equity method.

On December 1, 2000, the Company sold its interest in Essex
for $325,000, which approximated book value and accordingly, no
income or loss is recorded in the current quarter of the fiscal
year. The Company recorded its proportionate share of
Essexs income of $26,000 during the first fiscal quarter
of the year. The Companys proportionate share of
Essexs income for the three-month and nine-month periods
ending May 31, 2000 was $61,000 and $24,000, respectively.

9



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##### Table of Contents



Note F  Preferred Stock

On February 28, 2001, the Company authorized and issued
260,000 shares of Class C Preferred Stock to exchange with
the outstanding shares of Class B Preferred Stock held by
Omega Healthcare Investors Inc. (OHI). The terms and
conditions of the Class C Preferred Stock are identical to
that of the Class B Preferred Stock replaced. In addition,
on February 28, 2001, all Class B Preferred Stock
shares were cancelled.

Note G  Earnings Per Share

Earnings per share are computed based on the weighted average
number of common shares outstanding during the period. Diluted
earnings per share amounts reflect the dilutive effect of stock
options (22,527 and 824 shares for the three-month periods
ending June 30, 2001 and 2000, respectively and 486 and
1,081 shares for the nine-month periods ended June 30, 2001
and 2000, respectively). The assumed conversion of shares of
preferred stock is antidilutive.

Note H  Credit Facilities

The Companys outstanding indebtedness consists of the
following (in thousands):

|                           |  |               |        |                    |  |   |        |  
|-------------------------- |  | ------------- | ------ | ------------------ |  | - | ------ | -
|                           |  | June 30, 2001 |        | September 30, 2000
|                           |  |               |        |                   
|(1) Credit agreement       |  | $             |       |                    |  | $ | 4,850  |  
|                          
|                          
|                          
|                          
|(2) Loan due on demand     |  |               | 1,784  |                    |  |   | 1,879  |  
|                          
|                          
|                          
|                          
|(3) Loan due February 2003 |  |               | 818    |                    |  |   | 1,358  |  
|                          
|                          
|                          
|                          
|(4) Loan due February 2017 |  |               | 1,595  |                    |  |   | 1,555  |  
|                          
|                          
|                          
|                          
|(5) Loan due April 2018    |  |               |       |                    |  |   | 436    |  
|                           |  |               |        |                    |  |   |        |  
|                           |  |               | 4,197  |                    |  |   | 10,078 |  
|                          
|                          
|                          
|                          
|Less current maturities    |  |               | (2,510 | )                  |  |   | (7,755 | )
|                           |  |               |        |                    |  |   |        |  
|Long-term debt             |  | $             | 1,687  |                    |  | $ | 2,323  |  
|                           |  |               |        |                    |  |   |        |  




|    |                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Companys bank credit agreement has been repaid in
	full. Interest on borrowings under the agreement was at LIBOR
	plus 3.25% (9.91% interest at September 30, 2000). Omega
	Healthcare Investors, Inc. provided a guarantee to the banks in
	consideration of a fee of 1%, plus an annual 25 basis point
	facility fee. No further borrowings may be made under this
	agreement.
|   
|(2) | Idun has a loan with a bank that is secured by the business and
	assets of a nursing home subsidiary and carries an interest rate
	of 2.5% above the banks base lending rate (8.37% and 8.50%
	interest at June 30, 2001 and September 30, 2000,
	respectively).                                                                                                                    
|   
|(3) | Idun has a loan with a bank that is secured by the business and
	assets of a nursing home company and carries a floating interest
	rate of LIBOR plus 2% (7.33% and 8.34% interest at June 
	30, 2001 and September 30, 2000, respectively). The loan is
	being amortized over its life and requires quarterly payments of
	approximately $157,000.                                  
|   
|(4) | Idun has a loan with a bank that is secured by the business and
	assets of a nursing home company and carries a floating interest
	rate of LIBOR plus 2% (7.33% and 8.34% interest at June 
	30, 2001 and September 30, 2000, respectively). The loan is
	being amortized over its life and requires quarterly payments of
	approximately $24,000.                                   
|   
|(5) | Iduns unsecured bank loan has been repaid in full. The
	interest rate on this loan is at a banks base rate less
	0.5% (5.50% interest at September 30, 2000).                                                                                                                                                                                                                      

The Company guarantees none of the loans of Idun. Cash of
$1,784,000 (included in Restricted Cash) will be used for
partial payment of a yet undetermined combination of items 2, 3
and 4 above.

10



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##### Table of Contents



Note I  Related Party Transactions

Pursuant to the provisions of a services agreement between OHI
and the Company, indirect costs incurred by OHI, including
compensation of shared executive officers and related support
personnel, and costs incurred by OHI for rent, insurance,
telephone, utilities, supplies, maintenance and travel, were
allocated to the Company based upon the relationship of assets
under the Companys management to the combined total of
those assets and OHIs assets. Assets and costs in the
formula are on a one-quarter lag basis. Such allocations were
based on estimates and formulas that management believed to be
reasonable. Allocated expenses for the three-month periods
ending June 30, 2001 and 2000 were approximately $32,000
and $129,000, respectively, and for the nine-month periods
ending June 30, 2001 and 2000 were approximately $99,000
and $507,000, respectively. Such allocations are based on
estimates and formulas that management believes to be
reasonable. The service agreement has expired. The Company and
OHI are currently negotiating a new arrangement.

OHI holds preferred Class C shares in the Company of
$2.6 million at June 30,2001. At September 30, 2000,
OHI held preferred Class B shares in the Company of
$2.6 million. On February 28, 2001, the Company
completed an equal exchange of Class C preferred shares for
Class B preferred shares held by OHI. The preferred shares
are entitled to cumulative undeclared dividends of $676,000
prior to any distribution to common shareholders. OHI also holds
1,163,061 shares of common stock.

Temporary unsecured advances to Principal-UK in the amounts of
$5,343,000 and $10,793,000 are outstanding at June 30, 2001
and September 30, 2000, respectively. Commencing
March 5, 2001 the interest on the temporary advances is at
9.00% on the first £4.3 million of advances
(approximately $6.1 million) and 15% on the advances in excess
of £4.3 million, with the maximum temporary advance
limit of £7 million (approximately $10 million).
Prior to March 5, 2001, interest on the temporary advances
was at 9.25%. Interest is paid monthly. Interest arising from
temporary advances to Principal-UK included in interest income
for the three-month periods ended June 30, 2001 and 2000 is
approximately $123,000 and $351,000, respectively, and for the
nine-month periods ending June 30, 2001 and 2000 is
approximately $586,000 and $1,201,000. As of June 29, 2001,
the temporary advances to Principal-UK became due. The Company
is currently in negotiations with Principal-UK to extend the
terms of the temporary advances. Until then the existing terms
are still in place and Principal-UK has continued to make
monthly interest payments. The Companys management does
not believe there is a collectability issue at this time, but
will continue to monitor Principal-UKs operation.

A subordinated loan to Principal-UK in the amount of $23,805,000
is outstanding at June 30, 2001 and September 30,
2000, respectively. Interest on the subordinated loan is 12.93%
at June 30, 2001 and September 30, 2000, is paid
monthly. The loan matured on June 29, 2001. The Company is
currently in negotiations with Principal-UK to extend the terms
of the subordinated loan. Until then the existing terms are
still in place and Principal-UK has continued to make monthly
interest payments. The Companys management does not
believe there is a collectability issue at this time, but will
continue to monitor Principal-UKs operation. Interest
arising from the subordinated loan to Principal-UK included in
interest income for the three-month periods ended June 30, 2001
and 2000 is $753,000 and $776,000, respectively, and for the
nine-months period ended June 30, 2001 and 2000 is
$2,135,000 and $2,336,000, respectively.

Fees from services provided to Principal-UK for the three-month
periods ended June 30, 2001 and 2000 are $1,056,000 and
$1,283,000, respectively, and for the nine-month periods ended
June 30, 2001 and 2000 are $3,199,000 and $3,958,000,
respectively.

Fees from services provided to Principal-Australia for the
three-month periods ended June 30, 2001 and 2000 are
$309,000 and $256,000, respectively, and for the nine-month
periods ending June 30, 2001 and 2000 are $899,000 and
$753,000, respectively.

Rent expense, included in direct cost of patient services,
related to Iduns leases with Principal-UK for the
three-month periods ended June 30, 2001 and 2000 is
approximately $3,359,000 and $3,557,000, respectively, and for
the nine-month periods ended June 30, 2001 and 2000 is
approximately $10,241,000 and $9,696,000, respectively.

11



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##### Table of Contents



Note J  Recognized Impairment of Investment (Moran
Health Care (UK) Ltd.)

On June 30, 2001, the Company evaluated the recoverability
of its 19.9% investment in Moran Health Care (UK) Ltd.
(Moran), which is accounted for under the cost
method. Based on an analysis of the future cash flow expected to
be received from Moran, the Company expensed the carrying value
of its investment in Moran of $2,665,000 ($1,759,000 after tax).

Similarly, the Company had various loans to Moran which were
deemed to be unrecoverable at June 30, 2000. The Company in
the current quarter provided a bad debt provision of $399,000,
included in general, administrative and other expenses in the
income statement, for the total amount of loans and interest
receivable due from Moran.






|         |                                                                                       
|-------- | --------------------------------------------------------------------------------------
|Item 2  | Managements Discussion and Analysis of Financial
	Condition and Results of Operations

Safe Harbor Statement under the United States
Private Securities Litigation Reform Act of 1995. Statements
that are not historical facts contained in Managements
Discussion and Analysis are forward-looking statements that
involve risks and uncertainties that could cause actual results
to differ from projected results. Some of the factors that could
cause actual results to differ materially include: the financial
strength of the operators of the facilities owned by the
Companys investees as it affects their continuing ability
to meet their obligations under the terms of the lease
agreements; changes in operators or ownership of operators;
government policy relating to the healthcare industry, including
changes in the reimbursement levels; operators continued
eligibility to participate in the government sponsored payment
programs; changes in reimbursement by other third-party payors;
occupancy levels at the facilities; the availability and cost of
capital of the Company and its investees; the strength and
financial resources of competitors of the Company and investees;
the ability of investees to make additional real estate
investments at attractive yields; and the ability of investees
to obtain debt and equity capital at reasonable costs.

Following is a discussion and analysis of the Companys
consolidated results of operations, financial condition and
liquidity and capital resources. The discussion should be read
in conjunction with the unaudited condensed consolidated
financial statements and accompanying footnotes.

Results of Operations

The Company generates income from four primary sources:
(1) fee income from providing investment advisory and
management services; (2) interest income from providing
financing to companies in the healthcare and healthcare
financing industries; (3) operating nursing homes in the
United Kingdom through its wholly-owned subsidiary, Idun Health
Care Ltd. (Idun); and (4) equity in earnings of
companies in the healthcare and healthcare financing industries.
The Companys results for the nine-months ended
June 30, 2000 include only eight-months of Iduns
operations since its acquisition on November 1, 1999.

Most of the Companies operations are in the United Kingdom and
they transact business in the British Pound Sterling
(£). Results are translated to US$ at average
exchange rates for the period. For both the three-month period
and the nine-month periods the £ has declined relative to
the US$ by approximately 9% from the comparable period last year.

Revenues

Patient services revenue from the Idun operations was
$35,463,000 for the quarter ending June 30, 2001 compared
with $36,890,000 for the quarter ending June 30, 2000. For
the nine-month period revenue was $104,778,000 compared to
$98,656,000 for the eight-months of Iduns results included
in the period ending June 30, 2000. After adjusting for
exchange rate reductions, the three and nine-month results
represent a 5% and 4%, respectively improvement over the prior
years results. The average occupancy rate for the quarter
was 90.0% compared to 87.6% for the comparable period last year.
Increased marketing focus throughout Idun but specifically in
the England homes that have lower occupancy than those in
Scotland and Northern Ireland has improved occupancy rates. The
Company acquired Idun with the intention of bringing occupancy
up to levels required for profitability and is directing
significant resources to this end.

12



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##### Table of Contents



Fee income from Principal Finance Healthcare Limited
(Principal-UK) for the quarter ending June 30,
2001 was $1,056,000 compared with $1,283,000 for the same period
in 2000. For the nine-month period ending June 30, 2001,
fee income from Principal-UK was $3,199,000 compared to
$3,958,000 for the comparable period last year. The decrease is
primarily due to the decrease in the exchange rate of the £
as well as adjustments to the value of assets under management
that are defined by accounting principles generally accepted in
the United Kingdom (UK GAAP). At June 30,
2001 assets under management totaled £306 million
compared with (pound)310 million at June 30, 2000. Fee
income from Principal Healthcare Finance Trust
(Principal-Australia) increased to $309,000 for the
quarter ending June 30, 2001 from $256,000 for the quarter
ending June 30, 2000 due to the growth of assets under
management to A$208 million at June 30, 2001 from
A$187 million at June 30, 2000, which is also
responsible for the 19% growth for the nine-month period.

Interest income from Principal-UK for the quarter ending
June 30, 2001 was $876,000 compared with $1,127,000 for the
same period in 2000. For the nine-month period ending
June 30, 2001, interest income from Principal-UK was
$2,721,000 compared to $3,537,000 for the comparable period last
year. In addition to the exchange rate impact discussed above,
the reduction is reflective of principal repayments on the
temporary unsecured advances of $13,0255,000 over the past
21 months.

Expenses

Direct cost of patient services was $35,724,000 for the quarter
ending June 30, 2001 compared with $38,376,000 for the
quarter ending June 30, 2000. Direct cost of patient
services is incurred in running the Idun subsidiarys
nursing homes in the United Kingdom. They exceed patient service
revenues due to staff cost pressures. Minimum wage increases and
increased costs of temporary services and overtime have pushed
costs up faster than government-determined fees. In addition,
the long-term nature of the Companys operating leases with
scheduled rent increases results in significant (approximately
$280,000 per month) non-cash rent expense. The Idun nursing
homes were unprofitable under previous management. The Company
has made progress as direct cost of patient services as a
percentage of patient service revenues declined to 101% for the
three-month period ending June 30, 2001 compared with 104%
for the same period in 2000.

Direct costs of asset management for the nine-month period
increased 4% while general, administrative and other expenses
increased 22%.

Interest expense for the three-month period ending June 30,
2001 was $110,000 compared with $247,000 for the same period in
2000. For the nine-month period ending June 30, 2001,
interest expense was $466,000 compared to $855,000 for the
comparable period last year. These decreases are primarily the
result of the principal payments totaling $11,825,000 over the
past 21 months on the bank credit agreement with Fleet and
Harris Banks.

During the current quarter, the Company recorded a foreign
currency exchange loss of $316,000. The continued decline in the
£ relative to the US$, coupled with the currency exposure
at quarter-end of certain receivables and cash, resulted in an
asset write-down of $844,000, net of foreign currency exchange
hedge gains of $528,000 realized during the quarter.

Non-recurring expenses for the quarter and nine-month periods
ending June 30, 2000 was $552,000 and $683,000,
respectively compared with $437,000 for the same periods in
2000. Non-recurring expenses represent legal fees in pursuing
strategic alternatives and analyzing issues associated with the
previously announced offer of a third party to purchase the
Companys investment in Principal-UK, which has
subsequently been withdrawn.

Other

Equity in earnings of Principal-UK increased to $556,000 in the
current year quarter from $403,000 in the prior year quarter.
Equity in earnings of Principal-UK for the nine-month period
increased to $1,560,000 from $1,016,000. The Companys
ownership percentage in Principal-UK has remained constant at
33.375%. The overall increase in income for the nine-month
period is due to a non-recurring gain from interest-rate

13



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##### Table of Contents





In December 2000, the Company sold its interest in the
common stock of Essex Healthcare Corporation (Essex)
for $325,000, which approximated book value and accordingly no
income or loss is booked in the current quarter. Until
December 1, 2000, the Company held approximately 47% of the
common shares of Essex Healthcare Corporation, an Atlanta-based
private operator of skilled nursing facilities. The
Companys proportionate share of Essexs income was
$26,000 in the first fiscal quarter compared with income of
$24,000 in the prior year nine-month period.

At June 30, 2001, the Company evaluated the recoverability
of its 19.9% investment in Moran Health Care (UK) Ltd.
(Moran), which is accounted for under the cost
method. Based on an analysis of the future cash flow expected to
be received from Moran, the Company expensed the carrying value
of its investment in Moran of $2,665,000, in the third quarter.

The Companys effective tax rate on a year-to-date basis
varies from the federal statutory rate of 34% due to the benefit
of available foreign tax credits on equity in earnings of
Principal Healthcare Finance Limited which is reported after UK
tax expense.

Liquidity and Capital Resources

As of June 28, 2001, the Company has repaid its corporate
debt under its line of credit agreement with Fleet Bank, N.A.
and Harris Trust and Savings Bank. No further borrowings may be
made under this agreement.

Cash on hand of over $3 million is adequate to meet its
potential obligations. Idun continues to generate adequate cash
to fund maturities of its debt as it becomes due and to maintain
and enhance its nursing home facilities, although temporary
advances will be required for seasonal fluctuations. The Company
has adequate resources to meet both its short-term and long-term
capital requirements. As previously announced, the Company
continues to pursue strategic alternatives to maximize
shareholder value and is exploring the sale of certain of its
underlying assets.

Impact of Recently Issued Accounting Standards

In the first quarter of fiscal year 2001, the Company adopted
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. The adoption of SFAS No. 133
did not have a significant effect on the Companys
consolidated results of operations or financial position.

Item 3. Qualitative and Quantitative Disclosure About
Market Risk

The Company is exposed to various market risks. Market risk is
the potential loss arising from adverse changes in market
interest rates and prices, such as foreign currency exchange
rates, interest rates and inflation indices.

14



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##### Table of Contents



Foreign Currency Exchange Rate Risk

A significant portion of the Companys assets are
denominated in either the British Pound Sterling (pound
sterling ) or the Australian Dollar (A$). The
following summarizes these assets and their carrying amounts at
June 30, 2001:

|                                               |       |   |        |        | 
|---------------------------------------------- | ----- | - | ------ | ------ | 
|                                              
|                                              
|                                              
|                                              
|Net operating assets of Idun (pound sterling ) |       | $ | 18,149 |       
|                                              
|                                              
|                                              
|                                              
|Investment in Principal-UK (pound sterling )   |       |   | 9,697  |       
|                                              
|                                              
|                                              
|                                              
|Loans to Principal-UK (pound sterling )        |       |   | 29,148 |       
|                                              
|                                              
|                                              
|                                              
|Other UK investments (pound sterling )         |       |   | 656    |       
|                                              
|                                              
|                                              
|                                              
|Investment in Principal-Australia (A$)         |       |   | 6,981  |       
|                                               |       |   |        |       
|                                               | Total |   | $      | 64,631 | 
|                                               |       |   |        |       

The loans to Principal-UK are due on demand. The investments
have no maturity date. The Company has entered into forward
currency contracts at June 30, 2001 related to $38,489,000
of the assets listed above. Due to the percentage of the assets
hedged and the long-term nature of the investments, the Company
considers its exposure to currency risk to be minor. However,
the loans to Principal-UK are subject to foreign currency
exchange rate risk.

Interest Rate Risk.

All of the $4.2 million in debt outstanding at
June 30, 2001 fluctuates with LIBOR or a similar benchmark.
In addition, the Companys return on its $1.8 million of
cash restricted as collateral to these loans fluctuates with
LIBOR. The remaining debt, net of restricted cash on deposit is
$2,413,000. At these levels, a 1% increase in the LIBOR rate
will result in an annual increase in expense of $24,130 to the
Company.

Inflation Indices Risk.

In addition to being subject to inflation increases in its
operating costs and corresponding increases in its revenues,
Iduns lease expense is subject to annual inflation
adjustments based on the increase in consumer indices in the
United Kingdom. Annual adjustments, to the extent such amounts
exceed minimum levels reflected in the straight-line rent
computation, will increase Iduns lease expense.
Principal-UK will have a corresponding benefit in lease income
as most of its leases contain similar clauses.

15



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##### Table of Contents








PART II  OTHER INFORMATION







Item 1. Legal Proceedings


None






Item 2. Change in Securities and Use of Proceeds


None






Item 3. Defaults upon Senior Securities





None






Item 4. Submission of Matters to a Vote of Security
Holders


None






Item 5. Other Information




| |  |                                                                                                                                                                                                                 
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Robert Parker resigned as Director effective June 29, 2001
	
	 Todd P. Robinson appointed as Director effective July 17,
	2001 
	 Todd P. Robinson appointed as Chief Executive Officer effective
	July 25, 2001






Item 6. Exhibits and Reports on Form 8-K:


(a)  Exhibit  the following exhibit is filed
herewith:

|        |      |             |  | 
|------- | ---- | ----------- |  | 
|Exhibit |      | Description
|        |      |            
|        | None |             |  | 

(b)  Reports on Form 8-K  none were
filed.

16



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##### Table of Contents








SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.



| |                      
| | ---------------------
| | OMEGA WORLDWIDE, INC.
| | Registrant           



| |    |                     
| | -- | --------------------
| | By | /s/ TODD P. ROBINSON

| |                        
| | -----------------------
| |                        
| | Todd P. Robinson       
| | Chief Executive Officer

August 13, 2001

17