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, 1999
                                                   --------------

                                       OR


 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

For the transition period from                      to
                               ---------------------  ------------------------




               Commission file number     01-14358
                                     --------------------


                        Harborside Healthcare Corporation
--------------------------------------------------------------------------------


               Delaware                                 04-3307188
--------------------------------------------------------------------------------
 (State or other jurisdiction of             (IRS employer identification no.)
        incorporation or organization)


                 One Beacon Street, Boston, Massachusetts      02108
--------------------------------------------------------------------------------
               (Address of principal executive offices)      (Zip Code)


                                 (617) 646-5400
--------------------------------------------------------------------------------
              (Registrant's 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 x No
                                             ---  ---

    Number of shares of common stock, par value $0.01 per share  outstanding as
of August 13, 1999: 7,261,332.


<PAGE>


               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES

                                Table of Contents

<TABLE>
<CAPTION>

<S>                                                                    <C>
                                                                        Page

Part I.      Financial Information

              Condensed Consolidated Balance Sheets
               December 31, 1998 and June 30, 1999                      3

              Condensed Consolidated Statements of Operations
               For the Three Months and the Six Months Ended
               June 30, 1998 and 1999                                   4

              Condensed Consolidated Statement of Changes
               in Stockholders' Equity (Deficit) for the Six Months
               Ended June 30, 1999                                      5

              Condensed Consolidated Statements of Cash Flows
               For the Six Months Ended June 30, 1998 and 1999          6

              Notes to Condensed Consolidated Financial Statements      7

              Management's Discussion and Analysis of Financial
               Condition and Results of Operations                      15

Part II       Other Information                                         22

              Signatures                                                23

</TABLE>
                                      -2-

<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                (dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>


                                                                                      December 31,    June 30,
                                                                                         1998          1999
                                                                                    -------------  ------------
                                                                                      (Unaudited)
<S>                                                                                 <C>          <C>
                    ASSETS
Current assets:
  Cash and cash equivalents .......................................................   $     896    $   3,744
  Accounts receivable, net of allowances for doubtful
     accounts of $2,864 and $2,275,  respectively .................................      49,946       50,399
  Prepaid expenses and other ......................................................      10,934       15,931
  Prepaid income taxes ............................................................       3,873        9,190
  Deferred income taxes ...........................................................       4,084        4,084
                                                                                      ---------    ---------
     Total current assets .........................................................      69,733       83,348

 Restricted cash ..................................................................       2,110        2,410
 Property and equipment, net ......................................................     160,504      164,339
 Deferred financing and other non-current assets, net .............................      18,173       17,771
 Other assets, net ................................................................       4,300        3,700
 Note receivable...................................................................       7,487        7,487
 Deferred income taxes ............................................................       2,229        2,229
                                                                                      ---------    ---------
   Total assets ...................................................................   $ 264,536    $ 281,284
                                                                                      =========    =========

                    LIABILITIES
Current liabilities:
  Current maturities of long-term debt ............................................   $     207    $     213
  Current portion of capital lease obligation .....................................       4,278        4,452
  Accounts payable ................................................................       7,401       10,242
  Employee compensation and benefits ..............................................      13,220       13,818
  Other accrued liabilities .......................................................       7,485        6,723
  Accrued interest ................................................................          62          115
  Current portion of deferred income ..............................................         677          677
                                                                                      ---------    ---------
    Total current liabilities .....................................................      33,330       36,240

 Long-term portion of deferred income .............................................       3,104        2,766
 Long-term debt ...................................................................     134,473      158,098
 Long-term portion of capital lease obligation ....................................      51,253       50,586
                                                                                      ---------    ---------
    Total liabilities .............................................................     222,160      247,690
                                                                                      ---------    ---------

Exchangeable  preferred  stock,  redeemable,  $.01 par value with a  liquidation
  value of $1,000 per share; 500,000
  shares authorized; 42,293 and 45,185 issued and outstanding .....................      42,293       45,185
                                                                                      ---------    ---------

        STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, 19,000,000 shares
  authorized, 7,261,332 shares issued and outstanding .............................         146          146
Additional paid-in capital ........................................................     204,607      201,705
Less common stock in treasury, at cost, 7,349,832 shares ..........................    (183,746)    (183,746)
Accumulated deficit ...............................................................     (20,924)     (29,696)
                                                                                      ---------    ---------
    Total stockholders' equity (deficit) ..........................................          83      (11,591)
                                                                                      ---------    ---------
    Total liabilities and stockholders' equity (deficit) ..........................   $ 264,536    $ 281,284
                                                                                      =========    =========
</TABLE>








          The accompanying notes are an integral part of the condensed
                       consolidated financial statements.

                                      -3-
<PAGE>


               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                (dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                            For the three months      For the six months
                                                ended June 30,           ended June 30,

                                               1998        1999         1998       1999
                                               ----        -----        ----       -----
<S>                                         <C>         <C>         <C>          <C>

Total net revenues .......................   $  76,186   $  75,016    $ 148,640   $ 146,720
                                             ---------   ---------    ---------   ---------

Expenses:
  Facility operating .....................      59,649      61,347      117,030     124,052
  General and administrative .............       4,110       4,589        7,475       9,381
  Service charges paid to former affiliate         315         277          628         573
  Amortization of prepaid management fee .        --           300         --           600
  Depreciation and amortization ..........       1,178       2,563        2,263       5,104
  Facility rent ..........................       6,065       5,593       11,621      11,204
                                             ---------   ---------    ---------   ---------
    Total expenses .......................      71,317      74,669      139,017     150,914
                                             ---------   ---------    ---------   ---------

Income (loss) from operations ............       4,869         347        9,623      (4,194)

Other:
  Interest expense, net ..................       1,552       5,056        3,202       9,856
  Other expense ..........................          41         267           72         330
                                             ---------   ---------    ---------   ---------
Income (loss) before income taxes ........       3,276      (4,976)       6,349     (14,380)
Income tax expense (benefit) .............       1,278      (1,940)       2,476      (5,608)
                                             ---------   ---------    ---------   ---------

Net income (loss) ........................   $   1,998   $  (3,036)   $   3,873   $  (8,772)
                                             =========   =========    =========   =========


Earnings (loss) per common share:
       Basic .............................   $    0.25   $   (0.62)   $    0.48   $   (1.61)
                                             =========   =========    =========   =========
       Diluted ...........................   $    0.24   $   (0.62)   $    0.47   $   (1.61)
                                             =========   =========    =========   =========

</TABLE>






























          The accompanying notes are an integral part of the condensed
                       consolidated financial statements.

                                      -4-
<PAGE>


               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES

  CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                   (Unaudited)
                             (dollars in thousands)





<TABLE>
<CAPTION>
                                                              Additional
                                                      Common   Paid-In     Treasury     Retained      Total
                                                      Stock    Capital      Stock        Deficit

<S>                                                <C>        <C>        <C>          <C>          <C>


Stockholders' equity (deficit), December 31, 1998   $  146    $ 204,607    $ (183,746)  $   (20,924)$      83
                                                    ------    ---------    ----------   ----------- ---------
Preferred stock dividends .......................       --       (2,902)           --            --    (2,902)

Net loss for the six months ended
  June 30, 1999 .................................       --           --            --       (8,772)    (8,772)
                                                    ------    ---------    ----------   ----------  ---------
Stockholders' equity (deficit), June 30, 1999 ...   $  146    $ 201,705    $ (183,746)  $  (29,696) $ (11,591)
                                                    ======    =========    ==========   ==========  =========


</TABLE>









































          The accompanying notes are an integral part of the condensed
                       consolidated financial statements.

                                      -5-
<PAGE>


               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                For the six months ended June 30,

                                                                                           1998        1999
                                                                                           ----        ----
<S>                                                                                     <C>         <C>

Operating activities:
 Net income (loss) ...................................................................   $  3,873    $ (8,772)
 Adjustments to reconcile net income (loss)
  to net cash provided (used) by operating activities:
  Depreciation of property and equipment .............................................      1,895       3,279
  Amortization of deferred financing and
     other non-current assets  .......................................................        368       1,825
  Amortization of prepaid management fee .............................................       --           600
  Amortization of deferred income ....................................................       (255)       (338)
  Accretion of senior subordinated discount notes ....................................       --         5,732
  Amortization of loan costs and fees ................................................        108          78
  Accretion of interest on capital lease obligation ..................................      1,532       1,655
                                                                                         --------    --------
                                                                                            7,521       4,059
Changes in operating assets and liabilities:
  (Increase) in accounts receivable ..................................................     (9,068)       (453)
  (Increase) in prepaid expenses and other ...........................................     (1,755)     (4,997)
  Increase in accounts payable .......................................................        688       2,841
  Increase in employee compensation and benefits .....................................      2,955         598
  Increase (decrease) in accrued interest ............................................        (52)         53
  Increase (decrease) in other accrued liabilities ...................................      1,369        (762)
  (Increase) in prepaid income taxes .................................................       --        (5,317)
                                                                                         --------    --------
Net cash provided (used) by operating activities .....................................      1,658      (3,978)
                                                                                         --------    --------

Investing activities:
  Additions to property and equipment ................................................     (7,071)     (7,114)
  Additions to deferred financing and other non-current assets .......................     (1,586)     (1,501)
  Transfers to restricted cash, net ..................................................     (1,571)       (300)
                                                                                         --------    --------
 Net cash used by investing activities ...............................................    (10,228)     (8,915)
                                                                                         --------    --------

Financing activities:
  Borrowings under revolving line of credit...........................................      3,000      18,000
  Payment of long-term debt ..........................................................        (94)       (101)
  Principal payments of capital lease obligation .....................................     (2,019)     (2,148)
  Receipt of cash in connection with lease............................................      1,935        --
  Exercise of stock options ..........................................................         29        --
  Dividends paid on exchangeable preferred stock                                             --           (10)
                                                                                         --------    --------
 Net cash provided by financing activities
                                                                                            2,851      15,741
                                                                                         --------    --------

Net increase (decrease) in cash and cash equivalents .................................     (5,719)      2,848
Cash and cash equivalents, beginning of period .......................................      8,747         896
                                                                                         --------    --------
Cash and cash equivalents, end of period .............................................   $  3,028    $  3,744
                                                                                         ========    ========

Supplemental Disclosure:
  Interest paid ......................................................................   $  2,128    $  2,891
                                                                                         ========    ========
  Income taxes paid ..................................................................   $  2,923    $    113
                                                                                         ========    ========


</TABLE>










          The accompanying notes are an integral part of the condensed
                       consolidated financial statements.
                                      -6-
<PAGE>


               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


A.       General

  Harborside Healthcare Corporation and its subsidiaries (the "Company") operate
long-term care facilities and provide  rehabilitation  therapy  services.  As of
June 30, 1999, the Company owned twenty-two  facilities,  operated  twenty-seven
additional  facilities  under various  leases,  managed one facility and owned a
rehabilitation therapy services company. The Company accounts for its investment
in one 75% owned facility using the equity method.

B.       Basis of Presentation

  The accompanying  unaudited condensed consolidated financial statements should
be read in  conjunction  with the  consolidated  financial  statements and notes
thereto  included in the  Company's  Form 10-K for the year ended  December  31,
1998.  In the  opinion  of  management,  the  accompanying  unaudited  financial
statements  reflect  all  adjustments   (consisting  of  only  normal  recurring
accruals)  necessary to present  fairly the Company's  financial  position as of
June 30, 1999, the results of its operations for the  three-month  and six-month
periods  ended  June 30,  1998 and 1999  and its cash  flows  for the  six-month
periods  ended  June 30,  1998 and  1999.  The  results  of  operations  for the
three-month  and  six-month  period  ended  June 30,  1999  are not  necessarily
indicative  of the  results  which  may be  expected  for  the  full  year.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" included elsewhere in this report.

C.  Earnings (Loss) Per Common Share

  The following table sets forth the  computation of basic and diluted  earnings
 (loss) per Common Share for the periods ended June 30, 1998 and 1999:

<TABLE>
<CAPTION>

                                                                 Three Months Ended              Six Months Ended
                                                                      June 30,                        June 30,
                                                                  1998          1999            1998           1999
                                                                  ----          ----            ----           ----

<S>                                                        <C>             <C>             <C>           <C>
Numerator:
    Net income (loss) ....................................   $  1,998,000   $ (3,036,000)   $   3,873,000  $  (8,772,000)
    Preferred Stock dividends ............................           --       (1,475,000)            --       (2,902,000)
                                                             ------------   ------------    -------------   ------------
Earnings (loss) available for Common Shares ..............   $  1,998,000   $ (4,511,000)   $   3,873,000   $(11,674,000)
                                                             ============   ============    =============   ============

Denominator:
    Denominator for basic earnings (loss) per
     Common Share - weighted average shares ..............      8,062,000      7,261,000        8,061,000      7,261,000

    Effect of dilutive securities - employee stock options        289,000           --            267,000           --
                                                            ------------    ------------    -------------   ------------

Denominator for diluted earnings (loss) per Common
    Share - adjusted weighted-average shares and
      assumed conversions ................................      8,351,000      7,261,000        8,328,000      7,261,000
                                                             ============   ============    =============   ============


Basic earnings  (loss)  per Common Share .................   $       0.25   $      (0.62)   $        0.48   $      (1.61)
                                                             ============   ============    =============   ============
Diluted earnings (loss)  per Common Share ................   $       0.24   $      (0.62)   $        0.47   $      (1.61)
                                                             ============   ============    =============   ============

</TABLE>















                                      -7-
<PAGE>


D. Condensed Consolidating Financial Information

 Certain of the Company's  subsidiaries are precluded from guaranteeing the debt
of the parent  company (the  "Non-Guarantors"),  based on current  agreements in
effect.  The  Company's  remaining   subsidiaries  (the  "Guarantors")  are  not
restricted from serving as guarantors of the parent company debt. The Guarantors
are comprised of Harborside  Healthcare  Limited  Partnership,  Belmont  Nursing
Center Corp., Orchard Ridge Nursing Center Corp.,  Oakhurst Manor Nursing Center
Corp.,  Riverside  Retirement  Limited  Partnership,  Harborside  Toledo Limited
Partnership,  Harborside Connecticut Limited Partnership,  Harborside of Florida
Limited  Partnership,   Harborside  of  Ohio  Limited  Partnership,   Harborside
Healthcare  Baltimore  Limited  Partnership,  Harborside  of  Cleveland  Limited
Partnership,  Harborside of Dayton Limited Partnership, Harborside Massachusetts
Limited Partnership,  Harborside of Rhode Island Limited Partnership, Harborside
North  Toledo  Limited  Partnership,   Harborside  Healthcare  Advisors  Limited
Partnership,  Harborside  Toledo  Corp.,  KHI  Corporation,  Harborside  Danbury
Limited  Partnership,  Harborside  Acquisition Limited Partnership V, Harborside
Acquisition Limited  Partnership VI, Harborside  Acquisition Limited Partnership
VII, Harborside  Acquisition Limited  Partnership VIII,  Harborside  Acquisition
Limited  Partnership IX, Harborside  Acquisition Limited Partnership X, Sailors,
Inc.,  New  Jersey  Harborside  Corp.,   Bridgewater   Assisted  Living  Limited
Partnership, Maryland Harborside Corp., Harborside Homecare Limited Partnership,
Harborside  Rehabilitation  Limited Partnership,  Harborside  Healthcare Network
Limited Partnership and Harborside Health I Corporation.

 The information  which follows presents the condensed  consolidating  financial
position as of December 31, 1998 and June 30, 1999; the condensed  consolidating
results of operations for the three-month  and six-month  periods ended June 30,
1998 and 1999; and the  consolidating  cash flows for the six months  ended June
30,  1998  and 1999 of (a) the  parent  company  only  ("the  Parent"),  (b) the
combined Guarantors,  (c) the combined  Non-Guarantors,  (d) eliminating entries
and (e) the Company on a consolidated basis.


                                      -8-
<PAGE>


D. Condensed Consolidating Financial Information (Continued)

               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
                      Condensed Consolidating Balance Sheet
                             As of December 31, 1998
                                   (Unaudited)
                (dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                    Parent     Guarantors  Non-Guarantors Elimination  Consolidated
                                                                  -----------  ----------  -------------- -----------  -----------
<S>                                                               <C>         <C>           <C>        <C>             <C>

ASSETS
Current assets:
   Cash and cash equivalents ....................................  $       51   $       99   $     746   $     --       $    896
   Accounts receivable, net of allowance ........................        --         36,485      15,733       (2,272)      49,946
   Intercompany receivable ......................................     116,555         --          --       (116,555)        --
   Prepaid expenses and other ...................................       1,268        7,291       2,804         (429)      10,934
   Prepaid income taxes .........................................       3,873         --          --           --          3,873
   Deferred income taxes ........................................       2,150        1,934        --           --          4,084
                                                                    ---------    ---------   ---------    ---------    ---------
Total current assets ............................................     123,897       45,809      19,283     (119,256)      69,733

Restricted cash .................................................        --          2,162         472         (524)       2,110
Investment in limited partnership ...............................      15,584         --         4,044      (19,628)        --
Property and equipment, net .....................................        --        142,383      18,595         (474)     160,504
Deferred financing and other
  non-current assets, net .......................................      10,532        6,176       1,642         (177)      18,173
Other assets, net ...............................................       4,300         --          --           --          4,300
Note receivable .................................................        --          7,487        --           --          7,487
Deferred income taxes ...........................................          71        2,158        --           --          2,229
                                                                    ---------    ---------   ---------    ---------    ---------
Total assets ....................................................   $ 154,384    $ 206,175   $  44,036    $(140,059)   $ 264,536
                                                                    =========    =========   =========    =========    =========

LIABILITIES
Current liabilities:
   Current maturities of long-term debt   .......................   $    --      $      22   $     185    $    --      $     207
   Current portion of capital lease
     obligation .................................................        --          4,278        --           --          4,278
   Accounts payable .............................................        --          5,010       3,159         (768)       7,401
   Intercompany payable .........................................        --         90,284       8,923      (99,207)        --
   Employee compensation and benefits ...........................        --          9,853       3,367         --         13,220
   Other accrued liabilities ....................................       3,254        3,306         925         --          7,485
   Accrued interest .............................................       1,385        3,260        --         (4,583)          62
   Current portion of deferred income ...........................        --           --          --            677          677
                                                                    ---------    ---------   ---------    ---------    ---------
Total current liabilities .......................................       4,639      116,013      16,559     (103,881)      33,330

Long-term portion of deferred income ............................        --          1,202       2,579         (677)       3,104
Long-term debt ..................................................     112,243        2,721      16,109        3,400      134,473
Long-term  portion of capital lease obligation ..................        --         54,348        --         (3,095)      51,253
                                                                    ---------    ---------   ---------    ---------    ---------
Total liabilities ...............................................     116,882      174,284      35,247     (104,253)     222,160
                                                                    ---------    ---------   ---------    ---------    ---------

Exchangeable  preferred  stock,  redeemable,  $.01 par value
 with a  liquidation value of $1,000 per share;
 500,000 shares authorized;
 42,293 shares issued and outstanding ...........................      42,293         --          --           --         42,293
                                                                    ---------    ---------   ---------    ---------    ---------

STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value; 19,000,000
   shares authorized; 7,261,332 shares issued
   and outstanding ..............................................         146        2,569       3,885       (6,454)         146
Additional paid-in capital ......................................     204,381         --          --            226      204,607
Less common stock in  treasury, at
   cost, 7,349,832 shares .......................................    (183,746)        --          --           --       (183,746)
Retained earnings (deficit) .....................................     (25,572)       4,567      (2,170)       2,251      (20,924)
Partners' equity ................................................        --         24,755       7,074      (31,829)        --
                                                                    ---------    ---------   ---------    ---------    ---------
Total stockholders' equity (deficit) ............................      (4,791)      31,891       8,789      (35,806)          83
                                                                    ---------    ---------   ---------    ---------    ---------

Total liabilities and stockholders' equity   ....................   $ 154,384    $ 206,175   $  44,036    $(140,059)   $ 264,536
                                                                    =========    =========   =========    =========    =========

</TABLE>
                                      -9-

<PAGE>


D. Condensed Consolidating Financial Information (Continued)

               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
                      Condensed Consolidating Balance Sheet
                               As of June 30, 1999
                                   (Unaudited)
                (dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                  Parent      Guarantors  Non-Guarantors Elimination  Consolidated
                                                                 -----------  ----------  -------------- -----------  ------------
<S>                                                               <C>          <C>        <C>          <C>         <C>

ASSETS
Current assets:
   Cash and cash equivalents ....................................  $   5,962    $  (4,181) $     1,963   $     --      $   3,744
   Accounts receivable, net of allowance ........................       --         33,180       17,219         --         50,399
   Intercompany receivable ......................................    123,317        2,365         --       (125,682)        --
   Prepaid expenses and other ...................................      1,330       12,237        2,364         --         15,931
   Prepaid income taxes .........................................      9,190         --           --           --          9,190
   Deferred income taxes ........................................      2,150        1,934         --           --          4,084
                                                                   ---------    ---------    ---------    ---------    ---------
Total current assets ............................................    141,949       45,535       21,546     (125,682)      83,348

Restricted cash .................................................       --          1,864          546         --          2,410
Investment in limited partnership ...............................     15,584         --          4,044      (19,628)        --
Property and equipment, net .....................................       --        144,896       19,443         --        164,339
Deferred financing and other
  non-current assets, net .......................................     10,793        5,470        1,508         --         17,771
Other assets, net ...............................................      3,700         --           --           --          3,700
Note receivable .................................................       --          7,487         --           --          7,487
Deferred income taxes ...........................................         71        2,158         --           --          2,229
                                                                   ---------    ---------    ---------    ---------    ---------
Total assets ....................................................  $ 172,097    $ 207,410    $  47,087    $(145,310)   $ 281,284
                                                                   =========    =========    =========    =========    =========


LIABILITIES
Current liabilities:
   Current maturities of long-term debt .........................  $    --      $      18    $     195    $    --      $     213

   Current portion of capital lease
     obligation .................................................       --          4,452         --           --          4,452
   Accounts payable .............................................       --          7,936        2,306         --         10,242
   Intercompany payable .........................................       --         90,028       14,235     (104,263)        --
   Employee compensation and benefits ...........................       --         10,318        3,500         --         13,818
   Other accrued liabilities ....................................      3,251        2,605          867         --          6,723
   Accrued interest .............................................      2,823        4,719         --         (7,427)         115
   Current portion of deferred income ...........................       --            677         --           --            677
                                                                   ---------    ---------    ---------    ---------    ---------
Total current liabilities .......................................      6,074      120,753       21,103     (111,690)      36,240


Long-term portion of deferred income ............................       --          1,048        2,395         (677)       2,766
Long-term debt ..................................................    130,243        5,601       16,010        6,244      158,098
Long-term portion of capital lease obligation ...................       --         53,767         --         (3,181)      50,586
                                                                   ---------    ---------    ---------    ---------    ---------
Total liabilities ...............................................    136,317      181,169       39,508     (109,304)     247,690
                                                                   ---------    ---------    ---------    ---------    ---------


Exchangeable  preferred  stock,  redeemable,  $.01 par value
 with a  liquidation value of $1,000 per share;
 500,000 shares authorized;
 45,185 shares issued and outstanding ..........................      45,185         --           --           --         45,185
                                                                   ---------    ---------    ---------    ---------    ---------

STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value; 19,000,000
    shares authorized; 7,261,332 shares issued
    and outstanding .............................................        146        2,569        3,885       (6,454)         146
Additional paid-in capital ......................................    201,478         --           --            227      201,705
Less common stock in treasury, at
   cost, 7,349,832 shares .......................................   (183,746)        --           --           --       (183,746)
Partners' equity ................................................       --         24,755        7,074      (31,829)        --

Accumulated deficit .............................................    (27,283)      (1,083)      (3,380)       2,050      (29,696)
                                                                   ---------    ---------    ---------    ---------    ---------

Total stockholders' equity (deficit) ............................     (9,405)      26,241        7,579      (36,006)     (11,591)
                                                                   ---------    ---------    ---------    ---------    ---------
Total liabilities and stockholders' equity (deficit)               $ 172,097    $ 207,410    $  47,087    $(145,310)   $ 281,284
                                                                   =========    =========    =========    =========    =========
</TABLE>
                                      -10-
<PAGE>


D. Condensed Consolidating Financial Information (Continued)

          HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES Condensed
           Consolidating Statements of Operations For the three months
                          ended June 30, 1998 and 1999
                                   (Unaudited)
                             (dollars in thousands)


For the three months ended June 30, 1998:
<TABLE>
<CAPTION>
                                                       Parent   Guarantors Non-Guarantors Elimination Consolidated
                                                      -------   ---------- -------------- ----------- ------------
<S>                                                   <C>         <C>         <C>         <C>         <C>

Total net revenues .................................   $   --      $ 57,796    $ 25,304    $ (6,914)   $ 76,186
                                                       --------    --------    --------    --------    --------

Expenses:
  Facility operating ...............................       --        45,255      21,126      (6,732)     59,649
  General and administrative .......................        101       3,862         147        --         4,110
  Service charges paid to affiliate ................       --           338        --           (23)        315
  Depreciation and amortization ....................         14         791         373        --         1,178
  Facility rent ....................................       --         3,919       2,054          92       6,065
  Management fees paid to affiliates ...............       --        (1,462)      1,462        --          --
                                                       --------    --------    --------    --------    --------
Total expenses .....................................        115      52,703      25,162      (6,663)     71,317
                                                       --------    --------    --------    --------    --------

Income (loss) from operations ......................       (115)      5,093         142        (251)      4,869

Other:
  Interest expense, net ............................       --         1,660         146        (254)      1,552
  Other expense (income) ...........................       --            72        --           (31)         41
                                                       --------    --------    --------    --------    --------

Income (loss) before income taxes ..................       (115)      3,361          (4)         34       3,276
Income tax expense (benefit) .......................        (45)      1,311          (2)         14       1,278
                                                       --------    --------    --------    --------    --------
Net income (loss) ..................................   $    (70)   $  2,050    $     (2)   $     20    $  1,998
                                                       ========    ========    ========    ========    ========


For the three months ended June 30, 1999:

                                                       Parent    Guarantors  Non-Guarantors Elimination Consolidated
                                                       -------   ----------  -------------- ----------- ------------

Total net revenues .................................   $     17    $ 55,292    $ 24,068    $ (4,361)   $ 75,016
                                                       --------    --------    --------    --------    --------


Expenses:
  Facility operating ...............................       --        45,197      20,511      (4,361)     61,347
  General and administrative .......................         16       4,573        --          --         4,589
  Service charges paid to affiliate ................       --           277        --          --           277
  Amortization of prepaid management fee ...........        300        --          --          --           300
  Depreciation and amortization ....................        406       1,742         415        --         2,563
  Facility rent ....................................       --         3,479       2,114        --         5,593
  Management fees paid to affiliates ...............       --        (1,423)      1,423        --          --
                                                       --------    --------    --------    --------    --------

Total expenses .....................................        722      53,845      24,463      (4,361)     74,669
                                                       --------    --------    --------    --------    --------

Income (loss) from operations ......................       (705)      1,447        (395)       --           347

Other:
  Interest expense, net ............................        726       3,894         436        --         5,056
  Other expense ....................................       --          --          --           267         267
                                                       --------    --------    --------    --------    --------

(Loss) before income taxes .........................     (1,431)     (2,447)       (831)       (267)     (4,976)
Income tax (benefit) ...............................       (558)       (954)       (324)       (104)     (1,940)
                                                       --------    --------    --------    --------    --------
Net loss ...........................................   $   (873)   $ (1,493)   $   (507)   $   (163)   $ (3,036)
                                                       ========    ========    ========    ========    ========

</TABLE>

                                      -11-
<PAGE>


D. Condensed Consolidating Financial Information (Continued)

               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
                Condensed Consolidating Statements of Operations
                 For the six months ended June 30, 1998 and 1999
                                   (Unaudited)
                             (dollars in thousands)


For the six months ended June 30, 1998:
<TABLE>
<CAPTION>
                                                      Parent    Guarantors   Non-Guarantors  Elimination Consolidated
                                                      -------   ----------   --------------  ----------- ------------
<S>                                                   <C>         <C>           <C>         <C>           <C>


Total net revenues .................................   $    --      $ 111,371    $  50,867    $ (13,598)   $ 148,640
                                                       ---------    ---------    ---------    ---------    ---------

Expenses:
  Facility operating ...............................        --         88,225       42,403      (13,598)     117,030
  General and administrative .......................         216        7,088          171         --          7,475
  Service charges paid to affiliate ................        --            628         --           --            628
  Depreciation and amortization ....................          14        1,509          740         --          2,263
  Facility rent ....................................        --          7,454        4,167         --         11,621
  Management fees paid to affiliates ...............        --         (3,069)       3,069         --           --
                                                       ---------    ---------    ---------    ---------    ---------
Total expenses .....................................         230      101,835       50,550      (13,598)     139,017
                                                       ---------    ---------    ---------    ---------    ---------

Income (loss) from operations ......................        (230)       9,536          317         --          9,623

Other:
  Interest expense, net ............................        --          2,909          293         --          3,202
  Other expense ....................................        --             72         --           --             72
                                                       ---------    ---------    ---------    ---------    ---------

Income (loss) before income taxes ..................        (230)       6,555           24         --          6,349
Income tax expense (benefit) .......................         (90)       2,557            9         --          2,476
                                                       ---------    ---------    ---------    ---------    ---------
Net income (loss) ..................................   $    (140)   $   3,998    $      15    $    --      $   3,873
                                                       =========    =========    =========    =========    =========


For the six months ended June 30, 1999:

                                                      Parent    Guarantors   Non-Guarantors  Elimination Consolidated
                                                      -------   ----------   --------------  ----------- ------------

Total net revenues .................................   $      24    $ 108,728    $  47,217    $  (9,249)   $ 146,720
                                                       ---------    ---------    ---------    ---------    ---------


Expenses:
  Facility operating ...............................        --         92,886       40,415       (9,249)     124,052
  General and administrative .......................          26        9,355         --           --          9,381
  Service charges paid to affiliate ................        --            573         --           --            573
  Amortization of prepaid management fee ...........         600         --           --           --            600
  Depreciation and amortization ....................         780        3,487          837         --          5,104
  Facility rent ....................................        --          6,947        4,257         --         11,204
  Management fees paid to affiliates ...............        --         (2,825)       2,825         --           --
                                                       ---------    ---------    ---------    ---------    ---------

Total expenses .....................................       1,406      110,423       48,334       (9,249)     150,914
                                                       ---------    ---------    ---------    ---------    ---------

Income (loss) from operations ......................      (1,382)      (1,695)      (1,117)        --         (4,194)


Other:
  Interest expense, net ............................       1,423        7,567          866         --          9,856
  Other expense ....................................        --           --           --            330          330
                                                       ---------    ---------    ---------    ---------    ---------

(Loss) before income taxes .........................      (2,805)      (9,262)      (1,983)        (330)     (14,380)
Income tax (benefit) ...............................      (1,094)      (3,612)        (773)        (129)      (5,608)
                                                       ---------    ---------    ---------    ---------    ---------
Net loss ...........................................   $  (1,711)   $  (5,650)   $  (1,210)   $    (201)   $  (8,772)
                                                       =========    =========    =========    =========    =========

</TABLE>



                                      -12-
<PAGE>



D. Condensed Consolidating Financial Information (Continued)


               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
                 Condensed Consolidating Statement of Cash Flows
                     For the six months ended June 30, 1998
                                   (Unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>

                                                       Parent    Guarantors   Non-Guarantors  Elimination Consolidated
                                                       -------   ----------   --------------  ----------- ------------

<S>                                                  <C>           <C>         <C>           <C>          <C>

Operating activities:
Net cash provided (used) by operating activities:  ..  $    (563)   $   5,683   $   (1,069)   $  (2,393)   $   1,658
                                                       ---------    ---------    ---------    ---------    ---------

Investing activities:
     Additions to property and equipment ............         (5)     (6,422)         (644)       --          (7,071)
     Additions to deferred financing and other
       non-current assets ...........................        (28)       (539)          (72)       (947)       (1,586)
     Transfers (to) from restricted cash, net .......       --          (638)          (67)       (866)       (1,571)
                                                       ---------    ---------    ---------    ---------    ---------
Net cash provided (used) by investing activities ....        (33)     (7,599)         (783)     (1,813)      (10,228)
                                                       ---------    ---------    ---------    ---------    ---------


Financing activities:
     Borrowings under revolving line of credit ......       --         3,000          --          --           3,000
     Payment of long-term debt ......................       --           (14)          (80)       --             (94)
     Principal payments of capital lease obligation         --        (2,019)         --          --          (2,019)
     Receipt of cash in connection with lease .......       --         1,935          --          --           1,935
     Exercise of stock options ......................         29        --            --          --              29
                                                        --------    --------      --------     --------     --------
Net cash provided (used) by financing activities ....         29       2,902           (80)       --           2,851
                                                        --------    --------      --------     --------     --------

Net increase (decrease) in cash and cash equivalents        (567)        986        (1,932)     (4,206)       (5,719)

Cash and cash equivalents, beginning of period ......        698       4,383         3,666        --           8,747
                                                        --------    --------      --------    --------      --------
Cash and cash equivalents, end of period ............   $    131    $  5,369      $  1,734    $ (4,206)     $  3,028
                                                        ========    ========      ========    ========      ========

Supplemental Disclosure:
Interest paid .......................................   $   --      $  1,933      $    195    $   --        $  2,128
                                                        ========    ========      ========    ========      ========
Income taxes paid ...................................   $   --      $  2,913      $     10    $   --        $  2,923
                                                        ========    ========      ========    ========      ========


</TABLE>

















                                      -13-
<PAGE>


D. Condensed Consolidating Financial Information (Continued)


               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
                 Condensed Consolidating Statement of Cash Flows
                     For the six months ended June 30, 1999
                                   (Unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>

                                                      Parent    Guarantors   Non-Guarantors  Elimination Consolidated
                                                      -------   ----------   --------------  ----------- ------------
<S>                                                   <C>          <C>          <C>          <C>        <C>

Operating activities:
Net cash provided (used) by operating activities:  ..  $ (10,433)   $   2,697    $   2,760   $     998   $ (3,978)
                                                       ---------    ---------    ---------   ---------   ---------

Investing activities:
     Additions to property and equipment ............       --         (5,077)     (1,563)       (474)     (7,114)
     Additions to deferred financing and other
      non-current assets ............................     (1,646)         140           5        --        (1,501)
     Transfers (to) from restricted cash, net .......       --            298         (74)       (524)       (300)
                                                        --------     --------    --------    --------    --------
Net cash provided (used) by investing activities ....     (1,646)      (4,639)     (1,632)       (998)     (8,915)
                                                        --------     --------    --------    --------    --------

Financing activities:
     Borrowings under revolving line of credit            18,000        --          --           --        18,000
     Payment of long-term debt ......................       --          (190)         89         --          (101)
     Principal payments of capital lease obligation         --        (2,148)       --           --        (2,148)
     Dividends paid on exchangeable preferred stock .        (10)       --          --           --           (10)
                                                        --------    --------    --------     --------    --------
Net cash provided (used) by financing activities ....     17,990      (2,338)         89         --        15,741
                                                        --------    --------    --------     --------    --------

Net increase (decrease) in cash and cash equivalents       5,911      (4,280)      1,217         --         2,848

Cash and cash equivalents, beginning of period ......         51          99         746         --           896
                                                        --------    --------    --------     --------    --------

Cash and cash equivalents, end of period ............   $  5,962    $ (4,181)   $  1,963     $   --      $  3,744
                                                        ========    ========    ========     ========    ========

Supplemental Disclosure:
Interest paid .......................................   $    417    $  2,220    $    254     $   --      $  2,891
                                                        ========    ========    ========     ========    ========
Income taxes paid ...................................   $    113    $   --      $   --       $   --      $    113
                                                        ========    ========    ========     ========    ========


</TABLE>















                                      -14-
<PAGE>


Item 2.

                           MANAGEMENT'S DISCUSSION AND
                       ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

  This Management's  Discussion and Analysis of Financial  Condition and Results
of Operations  contains  forward-looking  statements  including those concerning
Management's  expectations  regarding  future  financial  performance and future
events.   These   forward-looking   statements  involve   significant  risk  and
uncertainties, including those described herein and included under "Special Note
Regarding   Forward-Looking   Statements"  below.   Actual  results  may  differ
materially from those anticipated by such forward-looking statements.

OVERVIEW

  Harborside  Healthcare  Corporation,  ("Harborside"  or  the  "Company")  is a
leading provider of high-quality  long-term care and specialty  medical services
in the eastern United  States.  The Company has focused on  establishing  strong
local market positions with high-quality  facilities in five principal  regions:
the  Southeast   (Florida),   the  Midwest  (Ohio  and  Indiana),   New  England
(Massachusetts,  New Hampshire and Rhode Island),  the Northeast  (Connecticut),
and the Mid-Atlantic (New Jersey and Maryland). As of June 30, 1999, the Company
operated 50  facilities  (22 owned,  27 leased and one managed)  with a total of
6,124 licensed beds. The Company  provides a broad continuum of medical services
including:  (i)  traditional  skilled  nursing care and (ii)  specialty  medical
services,  including  a variety of subacute  care  programs  such as  orthopedic
rehabilitation,  CVA/stroke care, cardiac recovery, pulmonary rehabilitation and
wound  care,  as  well  as  distinct  programs  for  the  provision  of  care to
Alzheimer's and hospice patients. As part of its subacute services,  the Company
provides physical, occupational and speech rehabilitation therapy services, both
at  Company-operated  and  non-affiliated  facilities,  through its wholly owned
subsidiary, Theracor.

The  following  table  sets  forth the  number of  facilities  and the number of
licensed beds operated by the Company:

<TABLE>
<CAPTION>

                                             As of June 30,
                                      1998                  1999
                                      ----                  ----
<S>                                <C>                  <C>

Facilities operated (1)                 49                    50
Licensed beds (1)                    5,983                 6,124
</TABLE>

The following table sets forth certain operating data for the periods indicated:
<TABLE>
<CAPTION>

                                                       For the three months      For the six months
                                                          ended June 30,           ended June 30,
                                                     -----------------------    ---------------------
                                                         1998        1999         1998        1999
                                                         ----        ----         ----        ----
<S>                                                  <C>           <C>          <C>        <C>

Patient days (2):
  Private and other ..................                  126,029      122,052      246,132     246,081
  Medicare ...........................                   50,976       56,068       99,198     106,810
  Medicaid ...........................                  290,944      305,068      555,773     608,858
                                                      ---------    ---------    ---------    --------
Total ................................                  467,949      483,188      901,103     961,749
                                                      =========    =========    =========    ========

Total net revenues:
  Private and other...................                   31.3%        29.6%        31.8%        30.2%
  Medicare............................                   25.8%        22.0%        26.2%        21.5%
  Medicaid ...........................                   42.9%        48.4%        42.0%        48.3%
                                                      ---------    ---------    ---------    --------
Total ................................                  100.0%       100.0%       100.0%       100.0%
                                                      =========    =========    =========    ========

Average Occupancy rate (3) ...........                   92.2%        90.5%        92.6%        90.6%
Quality Mix (4) ......................                   57.1%        51.6%        58.0%        51.7%

</TABLE>

(1) Includes two managed  facilities with 178 licensed beds on June 30, 1998 and
one managed facility with 106 licensed beds on June 30, 1999.

(2)  "Patient Days" includes  billed  bed days for  facilities  operated  by the
Company  excluding  billed bed days of managed  facilities  and the one facility
accounted for using the equity method.

(3)  "Average  Occupancy  Rate" is computed by dividing the number of billed bed
days by the total  number of  available  licensed  bed days  during  each of the
periods  indicated.  This  calculation  includes all facilities  operated by the
Company excluding managed facilities.

(4) "Quality Mix" consists of the percentage of revenues  derived from Medicare,
commercial insurers and other private payors.



                                      -15-
<PAGE>


RESULTS OF OPERATIONS

 The  Company's  total net  revenues  include net patient  service  revenues and
rehabilitation  therapy  service  revenues from  contracts  with  non-affiliated
long-term care facilities.  Private net patient service revenues are recorded at
established  per  diem  billing  rates.  Net  patient  service  revenues  to  be
reimbursed under contracts with third-party  payers,  primarily the Medicare and
Medicaid programs,  are recorded at amounts estimated to be realized under these
contractual arrangements.

 The  Company's  facility  operating expenses  consist  primarily of payroll and
employee benefits related to nursing, housekeeping and dietary services provided
to patients, as well as maintenance and administration of the facilities.  Other
significant  facility  operating  expenses  include  the cost of  rehabilitation
therapy services, medical and pharmacy supplies, food, utilities,  insurance and
taxes. The Company's  facility  operating  expenses also include the general and
administrative   costs   associated   with  the   operation  of  the   Company's
rehabilitation  therapy  business.  The  Company's  general  and  administrative
expenses   include  all  costs   associated  with  its  regional  and  corporate
operations.

Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1999

  Total Net Revenues.  Total net revenues  decreased by $1,170,000 or 1.5%, from
$76,186,000  in the second  quarter of 1998 to $75,016,000 in the second quarter
of 1999. This reduction was partially offset by the following  revenue increases
at facilities  acquired in 1998:  $1,240,000  from the  acquisition of two Rhode
Island facilities (the "Rhode Island Facilities") on May 8, 1998, and $1,972,000
from the  acquisition  of two  Danbury,  Connecticut  facilities  (the  "Danbury
Facilities")  on December 1, 1998.  The reduction in total revenues from 1998 to
1999 was primarily the result of lower occupancy and lower average  revenues per
patient  day.  The average  occupancy  rate at all of the  Company's  facilities
decreased  from  92.2%  during the  second  quarter of 1998 to 90.5%  during the
second quarter of 1999.  Average net patient service revenues per patient day at
"same store" facilities  decreased from $153.93 in the second quarter of 1998 to
$152.47 in the second  quarter of 1999.  This  decrease  in average  net patient
service revenues per patient day was a result of the  implementation  of the new
Medicare Prospective Payment System ("PPS") which became effective at all of the
Company's  facilities  on  January  1,  1999.  Implementation  of PPS caused the
Company's  average  Medicare  Part A per diem  rate to  decrease  from  $358 per
Medicare  patient day in the second quarter of 1998 to $282 per Medicare patient
day in the second  quarter  of 1999.  During  the  second  quarter of 1999,  the
Company also  experienced  reduced revenues  generated  through the provision of
Medicare Part B services to residents at its facilities. PPS established certain
annual  per  patient  limitations  on the  amount  of  Part B  therapy  that  is
reimbursable  through  the  Medicare  program.   Management  believes  that  the
introduction  of these annual  limits  resulted in reduced  revenues  during the
second  quarter  of 1999  as  affected  parties  adapted  to the new  regulatory
environment.  The  Company's  quality mix of  private,  Medicare  and  insurance
revenues was 57.1% for the three months ended June 30, 1998 as compared to 51.6%
during the same period of 1999. This decrease in quality mix of revenues was the
result of the decrease in Medicare revenues caused by the implementation of PPS.

  Facility  Operating   Expenses.   Facility  operating  expenses  increased  by
$1,698,000,  or  2.8%,  from  $59,649,000  in the  second  quarter  of  1998  to
$61,347,000 in the second quarter of 1999 as the result of acquired  facilities.
Of this  increase,  $1,666,000  was due to the  operations  of the Rhode  Island
Facilities and $1,585,000 was due to the operations of the Danbury Facilities.

  General and Administrative;  Service Charges Paid to Former Affiliate. General
and administrative  expenses increased by $479,000,  or 11.7% from $4,110,000 in
the second  quarter of 1998 to  $4,589,000 in the second  quarter of 1999.  This
increase  resulted  from the expansion of regional and  corporate  support,  and
additional travel,  consulting and systems development  expenses associated with
the Company's growth. The Company reimburses a former affiliate for certain data
processing  and  administrative  services  provided to the  Company.  During the
second  quarter  of 1998,  such  reimbursements  totaled  $315,000  compared  to
$277,000 during the second quarter of 1999.

 Depreciation and  Amortization.  Depreciation and amortization  increased from
$1,178,000 in the second  quarter of 1998 to $2,563,000 in the second quarter of
1999  primarily  due to the  amortization  of  costs  related  to the  leveraged
recapitalization and the exercise of purchase options for seven facilities which
were financed through synthetic leases prior to the leveraged  recapitalization.
The exercise of these purchase options was funded through financing  arranged in
connection with the leveraged recapitalization.

 Amortization of Prepaid Management Fees.   Amortization of prepaid management
fees (paid in connection with the merger) was $300,000 during the second quarter
of 1999.

 Facility  Rent.  Facility  rent  expense  for the second  quarter  decreased by
$472,000 from  $6,065,000  in 1998 to  $5,593,000 in 1999.  The decrease in rent
expense is the result of a reduction in rent expense  related to the exercise of
purchase  options  on  previously  leased  facilities  partially  offset  by the
acquisition of the Danbury Facilities by means of a synthetic lease.

 Interest Expense,  net. Interest expense, net, increased from $1,552,000 in the
second  quarter of 1998 to  $5,056,000 in the second  quarter of 1999.  This net
increase  is  primarily  due to  the  issuance  of  $99,500,000  of  11%  Senior
Subordinated  Discount Notes in connection with the leveraged  recapitalization.
The interest  associated  with these notes accretes until cash payments begin on
August 1, 2003.

  Income Tax  Expense  (Benefit).  As a result of a loss  incurred in the second
quarter of 1999, an income tax benefit of  $1,940,000  was  recognized  for that
period compared to income tax expense of $1,278,000 for the same period of 1998.

  Net Income/Loss. Net income was $1,998,000 in the second quarter of 1998 as
compared to a loss of $3,036,000 in the second quarter of 1999.
                                      -16-
<PAGE>

Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1999

 Total Net Revenues.  Total net revenues  decreased by  $1,920,000 or 1.3%, from
$148,640,000  in the first  half of 1998 to  $146,720,000  in the first  half of
1999. This reduction was partially offset by the following  revenue increases at
facilities  acquired  in 1998:  $2,010,000  from the  acquisition  of two  North
Toledo,  Ohio  facilities  (the  "North  Toledo  Facilities")  on April 1, 1998;
$4,095,000  from the  acquisition  of two Rhode  Island  facilities  (the "Rhode
Island  Facilities")  on May 8, 1998, and $4,062,000 from the acquisition of two
Danbury,  Connecticut facilities (the "Danbury Facilities") on December 1, 1998.
The  reduction in total  revenues  from 1998 to 1999 was primarily the result of
lower  occupancy  and lower  average  revenues  per  patient  day.  The  average
occupancy  rate at all of the Company's  facilities  decreased from 92.6% during
the first  half of 1998 to 90.6%  during  the first  half of 1999.  Average  net
patient service  revenues per patient day at "same store"  facilities  decreased
from  $155.47  in the first  half of 1998 to  $151.07 in the first half of 1999.
This  decrease  in average net patient  service  revenues  per patient day was a
result of the  implementation  of the new Medicare  Prospective  Payment  System
("PPS") which became effective at all of the Company's  facilities on January 1,
1999.  Implementation  of PPS caused the Company's  average  Medicare Part A per
diem rate to decrease  from $363 per  Medicare  patient day in the first half of
1998 to $285 per  Medicare  patient  day in the first  half of 1999.  During the
first half of 1999,  the Company also  experienced  reduced  revenues  generated
through  the  provision  of  Medicare  Part  B  services  to  residents  at  its
facilities.  This reduction was due partially to lower  productivity  by Company
therapists  during the first quarter as they  adjusted to the newly  implemented
Medicare reimbursement system. Additionally,  PPS established certain annual per
patient limitations on the amount of Part B therapy that is reimbursable through
the Medicare program.  Management believes that the introduction of these annual
limits  resulted in reduced  revenues  during the first half of 1999 as affected
parties adapted to the new regulatory  environment.  Implementation  of PPS also
caused a decrease in revenues  generated  by  providing  rehabilitation  therapy
services to  non-affiliated  long-term care  facilities.  In response to reduced
reimbursement from the Medicare program,  non-affiliated  facilities reduced the
amount of therapy  services  provided  at their  facilities.  Additionally,  the
Company  (consistent  with  other  rehabilitation  service  providers)  has seen
reduced  pricing  levels and the  Company  also  terminated  certain  low profit
contracts with non-affiliated  facilities. The Company's quality mix of private,
Medicare and insurance revenues was 58.0% for the six months ended June 30, 1998
as compared to 51.7%  during the same period of 1999.  This  decrease in quality
mix of revenues  was the result of the decrease in Medicare  revenues  caused by
the implementation of PPS.

 Facility   Operating   Expenses.   Facility  operating  expenses  increased  by
$7,022,000,   or  6.0%,  from  $117,030,000  for  the  first  half  of  1998  to
$124,052,000 for the first half of 1999 as the result of acquired facilities. Of
this  increase,  $2,519,000  was  due to the  operations  of  the  North  Toledo
Facilities, $4,487,000 was due to the operations of the Rhode Island Facilities,
and $3,252,000 was due to the operations of the Danbury Facilities.

 General and Administrative;  Service Charges Paid to Former Affiliate. General
and administrative  expenses increased by $1,906,000,  or 25.5%, from $7,475,000
for the  first  half of 1998 to  $9,381,000  for the  first  half of 1999.  This
increase  resulted  from the expansion of regional and  corporate  support,  and
additional travel,  consulting and systems development  expenses associated with
the Company's growth. The Company reimburses a former affiliate for certain data
processing and administrative services provided to the Company. During the first
half of 1998, such reimbursements totaled $628,000 compared to $573,000 in 1999.

 Depreciation and  Amortization.  Depreciation and amortization  increased from
$2,263,000  for the first half of 1998 to $5,104,000  for the first half of 1999
primarily   due  to  the   amortization   of  costs  related  to  the  leveraged
recapitalization and the exercise of purchase options for seven facilities which
were financed through synthetic leases prior to the leveraged recapitalization.
The exercise of these purchase options was funded through financing  arranged in
connection with the leveraged recapitalization.

 Amortization of Prepaid  Management  Fees.  Amortization of prepaid  management
fees (paid in connection  with the Merger) was $600,000 during the first half of
1999.

 Facility  Rent.  Facility  rent  expense for the first six months  decreased by
$417,000 from  $11,621,000  in 1998 to $11,204,000 in 1999. The decrease in rent
expense is the result of a reduction in rent expense  related to the exercise of
purchase  options  on  previously  leased  facilities  partially  offset  by the
acquisition of the Danbury Facilities by means of a synthetic lease.

 Interest Expense, net. Interest expense, net, increased from $3,202,000 for the
first half of 1998 to $9,856,000 for the  first half of 1999.  This net increase
is  primarily  due to the  issuance of  $99,500,000  of 11% Senior  Subordinated
Discount Notes in connection with the leveraged  recapitalization.  The interest
associated  with these notes  accretes  until cash  payments  begin on August 1,
2003.

 Income Tax Expense (Benefit). As a result of a loss incurred in the first half
of 1999,  an income tax benefit of  $5,608,000  was  recognized  for that period
compared to income tax expense of $2,476,000 for the same period of 1998.

 Net  Income/Loss.  Net income was  $3,873,000 for the first half of 1998 as
compared to a loss of $8,772,000 for the first half of 1999.
                                      -17-
<PAGE>


 LIQUIDITY AND CAPITAL RESOURCES

  The Company's primary cash needs are for acquisitions,  capital  expenditures,
working capital,  debt service and general corporate  purposes.  The Company has
historically  financed  these  requirements  primarily  through a combination of
internally  generated cash flow,  mortgage  financing and operating  leases,  in
addition to funds borrowed  under a credit  facility.  In addition,  in 1996 the
Company financed the acquisition of four facilities  located in Ohio by means of
a lease  which is  accounted  for as a  capital  lease for  financial  reporting
purposes.  The Company's  existing leased  facilities are leased from either the
owner of the facilities, from a real estate investment trust which has purchased
the  facilities  from the owner,  or through  synthetic  lease  borrowings.  The
Company's  existing  facility leases generally  require it to make monthly lease
payments and pay all property operating costs. The Company generally  negotiates
leases which provide for extensions  beyond the initial lease term and an option
to  purchase  the leased  facility.  In some cases,  the option to purchase  the
leased  facility is at a price based on the fair market value of the facility at
the time the option is  exercised.  In other  cases,  the lease for the facility
sets forth a fixed purchase option price which the Company  believes is equal to
the fair market value of the facility at the inception date of such lease,  thus
allowing the Company to realize the value  appreciation  of the  facility  while
maintaining   financial   flexibility.   In   connection   with  the   leveraged
recapitalization  completed  on August 11,  1998,  the  Company  obtained  gross
proceeds  of $99.5  million  through  the  issuance  of 11% Senior  Subordinated
Discount  Notes (the  "Discount  Notes")  due 2008 and $40  million  through the
issuance  of  13.5%   Exchangeable   Preferred  Stock  (the  "Preferred  Stock")
mandatorily  redeemable in 2010.  Interest on the Discount Notes accretes at 11%
per annum with cash  interest on the Discount  Notes not payable until August 1,
2003.  Dividends  on the  Preferred  Stock  are  payable,  at the  option of the
Company, in additional shares of the Preferred Stock until August 1, 2003. After
that date  dividends  may only be paid in cash.  The Company also entered into a
new $250 million collateralized credit facility (the "New Credit Facility"). The
terms of the New Credit Facility provide up to $75 million on a revolving credit
basis plus an additional $175 million initially funded on a revolving basis that
converts to a term loan on an annual basis on each  anniversary  of the closing.
During the first four years of the facility, any or all of the full $250 million
of availability  under the facility may be used for synthetic lease  financings.
Proceeds  of loans  under the  facility  may be used for  acquisitions,  working
capital purposes, capital expenditures and general corporate purposes.  Interest
is based on either  LIBOR or prime rates of interest  (plus  applicable  margins
determined by the Company's leverage ratio) at the election of the Company.  The
New Credit Facility contains various  financial and other restrictive  covenants
and limits aggregate borrowings under the New Credit Facility to a predetermined
multiple of EBITDA.

  During the first quarter of 1999, the Company  determined that its anticipated
financial  results  for  that  quarter  would  cause  the  Company  to be out of
compliance  with certain  financial  covenants of the New Credit  Facility.  The
Company's expected lower first quarter results were attributable to transitional
difficulties  associated with the implementation of the new Medicare prospective
payment  system which became  effective at all of the  Company's  facilities  on
January 1, 1999. Such transitional  difficulties resulted in lower than expected
revenues,  primarily due to fewer than  expected  Medicare  patient days,  lower
Medicare  Part A rates,  reduced  revenues  from  therapy  services  provided to
non-affiliated  long-term  care  centers  and a reduction  in revenues  from the
provision of Medicare Part B services. In response, during the first quarter the
Company  initiated  additional  facility-based  training  directed  towards  the
documentation  requirements of the revised Medicare  reimbursement  system.  The
Company also continued to refine its admission and assessment protocols in order
to increase patient  admissions and introduced a series of targeted  initiatives
to lower operating  expenses.  Such  initiatives have included wage and staffing
reductions (primarily related to the delivery of rehabilitative therapy services
and indirect  nursing  support),  renegotiation  of vendor contracts and ongoing
efforts to reduce the Company's reliance on outside nurse agency personnel.  All
of the  staffing  reductions  were  implemented,  on or prior to, April 1, 1999.
Effective  March 30, 1999,  the Company  obtained an amendment to the New Credit
Facility which limits  borrowings  under the New Credit Facility to an aggregate
of $58,500,000  (exclusive of undrawn letters of credit  outstanding as of March
30, 1999) and which modified certain financial  covenants.  Access to additional
borrowings for acquisitions and general corporate  purposes under the New Credit
Facility are  permitted  to the extent the Company  achieves  certain  financial
targets.  The  amendment  allows the Company  access to the entire $250  million
facility  if  the  Company's  operating  performance  returns  to the  level  of
compliance  contemplated  by the original  financial  covenants.  As of June 30,
1999,  total  borrowings  under the New Credit  Facility  (exclusive  of undrawn
letters  of  credit  outstanding  as  of  March  30,  1999)  were  approximately
$46,652,000  and consisted of  $30,750,000  of revolver  loans,  $13,700,000  of
synthetic leasing loans and $2,202,000 of undrawn letters of credit issued after
March 30,  1999.  As of June 30,  1999 the Company  was in  compliance  with the
financial covenants of the New Credit Facility.

  The Company's operating activities during the first half of 1999 used net cash
of $4.0 million as compared to net cash of $1.7 million provided during the same
period in 1998. The increase in net cash used by operations during the first six
months of 1999 was  primarily  due to  increases  in  prepaid  income  taxes and
prepaid expenses, partially offset by an increase in accounts payable.

  Net cash used by investing  activities  was $8.9 million  during the first six
months of 1999 as compared to $10.2 million used during the same period in 1998.
Net cash  invested  in each  period  was used  primarily  to fund  additions  to
property and equipment at the facilities. Additionally, during the first quarter
of 1999,  approximately $1,000,000 was expended in connection with obtaining the
amendment of the Company's New Credit Facility.

  Net cash provided by financing  activities during the first six months of 1999
was $15.7  million as  compared to $2.9  million  during the first six months of
1998.  During the first six months of 1999 the Company  borrowed  $18.0  million
under the New Credit Facility.

  In addition to the Discount  Notes,  as of March 31, 1999, the Company had two
mortgage loans outstanding in the aggregate amount of $17.8 million, in addition
to advances outstanding under its revolving credit facility and $55.0 million of
capital  lease  obligations.   One  of  the  Company's  mortgage  loans  had  an
outstanding  balance of $16.2 million, of which $15.1 million is due at maturity
in 2004.  This loans bears interest at an annual rate of 10.65% plus  additional
interest equal to 0.3% of the difference  between the annual operating  revenues
of four mortgaged  facilities and the actual revenues of these facilities during
a twelve month base period. The Company's other mortgage loan, which encumbers a
single facility,  had an outstanding principal balance of $1.6 million, of which
$1.3 million is due in 2010.
                                      -18-
<PAGE>

  The Company had expected  that its capital  expenditures  for 1999,  excluding
acquisitions of new long-term care  facilities,  would  aggregate  approximately
$12,000,000.  During  the  second  quarter,  the  Company  began  a  process  of
identifying  which of these  projects could be deferred in order to improve cash
flow. Capital additions declined from $4,397,000 in the first quarter of 1999 to
$2,732,000  during the second quarter of 1999. The Company  expects that capital
additions for the second half of 1999 will not exceed $6,000,000.  The Company's
expected  capital  expenditures  relate  to  maintenance  capital  expenditures,
systems   enhancements,   special   construction   projects  and  other  capital
improvements.  The Company expects that its future facility acquisitions will be
financed with borrowings under the Company's  revolving credit facility,  direct
operating  leases  or  assumed  debt.  The  Company  may be  required  to obtain
additional  equity  financing  to finance any  significant  acquisitions  in the
future.

 Harborside's  principal  sources  of funds are cash flow  from  operations  and
borrowings under the New Credit Facility.  These funds are being used to finance
working capital, meet debt service and capital expenditure requirements, finance
acquisitions  and for  general  corporate  purposes.  Harborside  believes  that
operating  cash flow and  availability  under the New  Credit  Facility  will be
adequate to meet its liquidity  needs for the  foreseeable  future,  although no
assurance can be given in this regard.

 During the third  quarter of 1999,  the Company  announced  that it would cease
providing  contract therapy  services to  non-affiliated  facilities  during the
third quarter of 1999. Harborside, through its subsidiary Theracor, has provided
physical,  speech and occupational  services to  non-affiliated  skilled nursing
facilities since 1995.  Significant  changes in the contract  therapy  business,
primarily  related to reductions in Medicare  reimbursement for therapy services
caused by the  Balanced  Budget Act of 1997 led to this  decision.  The  Company
expects to record a pre-tax  restructuring  charge of approximately $5.0 million
to $6.5 million during the third quarter as a result of this action.  The charge
will be substantially non-cash in nature and consists primarily of the write-off
of   unamortized   goodwill  and  a  potential   increase  to  the  reserve  for
uncollectible  contract  therapy  receivables  as  a  result  of  the  Company's
termination of  non-affiliate  contracts.  The Company  expects that its ongoing
EBITDA will not be negatively impacted by this decision.  Theracor will continue
to be responsible for the delivery of therapy services at facilities operated by
Harborside.

SEASONALITY

 The  Company's  earnings  generally  fluctuate  from  quarter to  quarter. This
seasonality  is related to a combination of factors which include the timing and
amount of Medicaid rate  increases,  seasonal  census cycles,  and the number of
days in a given fiscal quarter.

INFLATION

 The healthcare industry is labor intensive. Wages and other labor related costs
are especially  sensitive to inflation.  Certain of the Company's  other expense
items, such as supplies and real estate costs are also sensitive to inflationary
pressures.  Shortages in the labor market or general inflationary pressure could
have a  significant  effect on the Company.  In addition,  suppliers  pass along
rising  costs to the  Company  in the form of higher  prices.  When  faced  with
increases in operating costs, the Company has sought to increase its charges for
services  and its requests  for  reimbursement  from  government  programs.  The
Company's  private pay  customers and third party  reimbursement  sources may be
less able to absorb increased prices for the Company's  services.  The Company's
operations  could be adversely  affected if it is unable to recover  future cost
increases or experiences significant delays in increasing rates of reimbursement
of its labor or other costs from Medicare and Medicaid revenue sources.

The Year 2000 Issue

  The  Company  continues  to  evaluate  and  address  risks that could arise in
connection with the potential  inability of computer programs to recognize dates
that follow  December 31, 1999 (the "Year 2000 Issue").  The Company's focus has
been on  evaluating  the impact that the Year 2000 Issue might have on essential
equipment and systems of the Company as well as major  suppliers,  customers and
other third parties.  The Company has  formulated and  implemented a remediation
plan in connection with those systems that will not be Year 2000  compliant.  As
of June 30, 1999 the Company has tested and evaluated  substantially  all of its
information  technology  ("IT")  systems  and  equipment.  The  Company  is also
evaluating the compliance of its major suppliers and their  respective  products
with the Year 2000 Issue.

  With  respect to the Year 2000  compliance  of  critical  third  parties,  the
Company  derives a  significant  portion of its  revenues  from the Medicare and
Medicaid  programs.  The  Health  Care  Finance  Administration   ("HCFA"),  the
governmental  agency that administers the Medicare program,  has publicly stated
that it will be Year 2000  compliant by December 31, 1998.  HCFA has imposed the
same December 31, 1998 deadline on its fiscal intermediaries and has stated that
it expects state  Medicaid  agencies to be compliant by March 1999.  The General
Accounting Office cannot make any assurances that the government payment systems
will be Year 2000  compliant  on time.  The  Company  derives  its  governmental
payments through fiscal intermediaries,  however, there can be no assurance that
the payments from the fiscal  intermediaries  will not be negatively impacted by
any Year 2000 issues not corrected in a timely  manner.  The Company  intends to
actively  pursue  assurances of the status of the  remediation  efforts and Year
2000 compliance by the government and its fiscal intermediaries.

  The  Company  began  replacing  critical  IT systems  for Year 2000  issues in
connection  with a  comprehensive  evaluation  of  system  wide  operational  IT
efficiencies  in 1996.  The Company has recently  completed  the  conversion  of
certain  of its  financial  reporting  systems  to new  software  that  has been
certified as Year 2000 compliant. The Company is in the process of upgrading and
consolidating  its remaining  financial  applications to new Year 2000 compliant
software by September 30, 1999. Additionally, the Company has received Year 2000
compliance  certification  from its remaining software suppliers with respect to
operating  systems that will not be upgraded.  The  Company's  Year 2000 systems
conversions  and  upgrades  have been  funded from  operating  cash flow and its
credit facility.
                                      -19-
<PAGE>

 The  Company,  as part of its  comprehensive  ongoing  evaluation  process,  is
testing  and  upgrading  where  necessary,  all local  area  networks  ("LANS"),
personal  computers and related operating software for compliance with Year 2000
Issues.  The Company expects to implement any required  remediation by September
30, 1999. The Company plans to remediate any Year 2000 issues  discovered in its
review of LANS through the installation of upgraded  hardware and software.  The
Company on a going forward basis is  endeavoring to ensure that all software and
hardware purchased is Year 2000 compliant.

  The Company has  undertaken an evaluation  of facility  operating  systems for
potential  problems  associated with Year 2000 Issues. The Company has evaluated
and tested  virtually  all of its  facility  heating,  cooling  and  ventilation
("HVAC") systems,  life safety and security systems,  and mechanical systems for
Year 2000 compliance. In connection with the review and testing procedures,  the
Company has contacted the  manufacturer  of the  respective  systems for further
assurance  of potential  exposure to Year 2000  Issues.  Based on the results of
testing to date,  the Company  does not believe that above  referenced  facility
operating  systems will have any significant  risk associated with the Year 2000
Issue.

                                      -20-
<PAGE>



                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 Certain statements in this Form 10-Q, including information set forth under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations",  constitute  "Forward-Looking  Statements" within the meaning of
the Private  Securities  Litigation  Reform Act of 1995 (the "Reform Act").  The
Company  desires to take  advantage of certain "safe  harbor"  provisions of the
Reform Act and is  including  this  special note to enable the Company to do so.
Forward-looking  statements included in this Form 10-Q, or hereafter included in
other  publicly  available  documents  filed with the  Securities  and  Exchange
Commission,  reports to the Company's  stockholders and other publicly available
statements  issued or released by the Company  involve known and unknown  risks,
uncertainties, and other factors which could cause the Company's actual results,
performance  (financial or operating) or achievements to differ  materially from
the  future  results,  performance  (financial  or  operating)  or  achievements
expressed or implied by such  forward-looking  statements.  The Company believes
the following important factors could cause such a material difference to occur:

1.   The Company's  ability to grow through the  acquisition  and development of
     long-term care facilities or the acquisition of ancillary businesses.

2.   The  Company's  ability to identify  suitable  acquisition  candidates,  to
     consummate or complete  construction  projects, or to profitably operate or
     successfully integrate enterprises into the Company's other operations.

3.   The  occurrence  of changes in the mix of payment  sources  utilized by the
     Company's patients to pay for the Company's services.

4.   The  adoption of cost  containment  measures by private pay sources such as
     commercial insurers and managed care  organizations,  as well as efforts by
     governmental reimbursement sources to impose cost containment measures.

5.   Changes  in the  United  States  healthcare  system,  including  changes in
     reimbursement  levels and the method of  reimbursement,  under Medicaid and
     Medicare, and other changes in applicable government regulations that might
     affect the profitability of the Company.

6.   The  Company's   continued  ability  to  operate  in  a  heavily  regulated
     environment  and to  satisfy  regulatory  authorities,  thereby  avoiding a
     number of  potentially  adverse  consequences,  such as the  imposition  of
     fines,  temporary suspension of admission of patients,  restrictions on the
     ability to acquire  new  facilities,  suspension  or  decertification  from
     Medicaid  or  Medicare  programs,  and in extreme  cases,  revocation  of a
     facility's  license or the closure of a facility,  including as a result of
     unauthorized activities by employees.

7.   The  Company's  ability to secure the capital and the related  cost of such
     capital  necessary  to fund  its  future  growth  through  acquisition  and
     development, as well as internal growth.

8.   Changes in certificate of need laws that might increase  competition in the
     Company's  industry,  including,  particularly,  in the states in which the
     Company currently operates or anticipates operating in the future.

9.   The Company's ability to staff its facilities  appropriately with qualified
     healthcare personnel, including in times of shortages of such personnel and
     to maintain a satisfactory relationship with labor unions.

10.  The level of  competition  in the  Company's  industry,  including  without
     limitation,  increased competition from acute care hospitals,  providers of
     assisted  and  independent  living and  providers  of home  healthcare  and
     changes in the regulatory system in the state in which the Company operates
     that facilitate such competition.

11.  The continued availability of insurance for the inherent risks of liability
     in the healthcare industry.

12.  Price increases in  pharmaceuticals,  durable  medical  equipment and other
     items.

13.  The Company's  reputation for delivering  high-quality care and its ability
     to attract and retain  patients,  including  patients with  relatively high
     acuity levels.

14.  Changes in general  economic  conditions,  including  changes that pressure
     governmental  reimbursement  sources  to  reduce  the  amount  and scope of
     healthcare coverage.

15.  The Company's,  its vendors,  banks and payors ability to address  computer
     system concerns related to the Year 2000 issue.

  The  foregoing  review of  significant  factors  should  not be  construed  as
exhaustive or as an admission  regarding the adequacy of disclosures  previously
made by the Company.

                                      -21-
<PAGE>


                           PART II - OTHER INFORMATION


Item 1.   Legal Proceedings
                 None.

Item 2.   Changes in Securities
                 None.

Item 3.   Defaults upon Senior Securities
                 None.

Item 4.   Submission of Matters to a Vote of Security Holders
                 None.

Item 5.   Other Information
                 None.




















                                      -22-
<PAGE>




                                   SIGNATURES



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



                        Harborside Healthcare Corporation



                             By:   /s/ Stephen L. Guillard
                                   -----------------------
                                   Stephen L. Guillard
                                   Chairman, President, and Chief Executive
                                   Officer


                             By:   /s/ William H. Stephan
                                   ----------------------
                                   William H. Stephan
                                   Senior Vice President and Chief Financial
                                   Officer









DATE:   August 16, 1999

                                      -23-