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          MARCH 31, 1997
                               --------------------------------------------

                                       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)                          

   470 Atlantic Avenue, Boston, Massachusetts             02210
--------------------------------------------------------------------------------
    (Address of principal executive offices)            (Zip Code)


                                 (617) 556-1515
--------------------------------------------------------------------------------
              (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 
May 12, 1997: 8,000,000.



<PAGE>



               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES

                                Table of Contents


                                                                         PAGE

Part I.      Financial Information

             Condensed Consolidated Balance Sheets
             December 31, 1996 and March 31, 1997                          3

             Condensed Consolidated Statements of Operations
             For the Three Months Ended March 31, 1996 and 1997            4

             Condensed Consolidated Statements of Changes
               in Stockholders' Equity
             For the Three Months Ended March 31, 1997                     5

             Condensed Consolidated Statements of Cash Flows
             For the Three Months Ended March 31, 1996 and 1997            6

             Notes to Condensed Consolidated Financial Statements        7-8

             Management's Discussion and Analysis of Financial
               Condition and Results of Operations                      9-13

Part II      Other Information                                            14

             Signatures                                                   15



                                       -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)
                               ------------------

                                                      December 31,   March 31,
                                                         1996           1997
                      ASSETS                          -----------   ---------- 
                                                                    (Unaudited)
Current assets:
  Cash and cash equivalents                             $   9,722    $   7,755
  Accounts receivable, net of allowances for doubtful
    accounts of $1,860 and $2,149, respectively            22,984       24,722
  Prepaid expenses and other                                3,570        7,801
  Demand note due from limited partnership                  1,369         --
  Deferred income taxes                                     1,580        1,580
                                                        ---------    ---------
    Total current assets                                   39,225       41,858
 Restricted cash                                            3,751        3,623
 Investment in limited partnership                            256          287
 Property and equipment, net                               95,187       95,196
 Intangible assets, net                                     3,004        4,090
 Deferred income taxes                                        376          376
                                                        ---------    ---------
    Total assets                                        $ 141,799    $ 145,430
                                                        =========    =========

                    LIABILITIES
Current liabilities:
  Current maturities of long-term debt                  $     169    $     173
  Current portion of capital lease obligation               3,744        3,816
  Accounts payable                                          6,011        5,591
  Employee compensation and benefits                        8,639        9,877
  Other accrued liabilities                                 2,177        3,319
  Accrued interest                                             19           19
  Current portion of deferred income                          368          369
  Income taxes payable                                      1,272        1,771
                                                        ---------    ---------
    Total current liabilities                              22,399       24,935
 Long-term portion of deferred income                       2,948        2,855
 Long-term portion of capital lease obligation             53,533       53,264
 Long-term debt                                            18,039       17,994
                                                        ---------    ---------
    Total liabilities                                      96,919       99,048
                                                        ---------    ---------

           STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 30,000,000 shares
     authorized, 8,000,000 shares issued
     and outstanding                                           80           80
Additional paid-in capital                                 48,340       48,340
Accumulated deficit                                        (3,540)      (2,038)
                                                        ---------    ---------
    Total stockholders' equity                             44,880       46,382
                                                        ---------    ---------
    Total liabilities and stockholders' equity          $ 141,799    $ 145,430
                                                        =========    =========




               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
                        (Combined prior to June 14, 1996)
                                   (Unaudited)
                (dollars in thousands, except per share amounts)
                               ------------------


                                           For the three months ended
                                                     MARCH 31,
                                              ---------------------
                                                1996         1997
                                              -------       -------
Total net revenues                            $34,931       $47,384
                                              -------       -------

Expenses:
  Facility operating                           28,120        37,452
  General and administrative                    1,720         2,389
  Service charges paid to affiliate               185           177
  Special compensation and other                  515            --
  Depreciation and amortization                   539           922
  Facility rent                                 2,545         2,622
                                              -------       -------
    Total expenses                             33,624        43,562
                                              -------       -------

Income from operations                          1,307         3,822
Other:
  Interest expense, net                           975         1,392
  (Income) loss on investment
      in limited partnership                      127           (31)
                                              -------       -------
Income before income taxes                        205         2,461
Income taxes                                      --            959
                                              -------       -------
Net income                                    $   205       $ 1,502
                                              =======       =======

Net income per share                                        $  0.19
                                                            =======

Pro forma data:
  Historical income                           $   205
  Pro forma income taxes                           80
                                              -------     
   Pro forma net income                       $   125
                                              =======

Pro forma net income per share                $  0.03
                                              =======

  Weighted average number of
    common and common equivalent shares
    used in per share computations          4,425,000     8,025,000



               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
                                   (Unaudited)
                             (dollars in thousands)
                               ------------------

<TABLE>
<CAPTION>
                                                           Additional
                                                Common      Paid-In   Accumulated
                                                 STOCK      CAPITAL     DEFICIT       TOTAL
                                                -------     -------     -------      -------
<S>                                             <C>         <C>         <C>          <C>    
Stockholders' equity, December 31, 1996         $    80     $48,340     $(3,540)     $44,880
Net income for the three months ended                                               
 March 31, 1997                                    --          --         1,502        1,502
                                                -------     -------     -------      -------
                                                                                    
Stockholders' equity, March 31, 1997            $    80     $48,340     $(2,038)     $46,382
                                                =======     =======     =======      =======
</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
                        (Combined prior to June 14, 1996)
                                   (Unaudited)
                             (dollars in thousands)
                               ------------------

<TABLE>
<CAPTION>
                                                            FOR THE THREE MONTHS ENDED MARCH 31,
                                                            ------------------------------------
                                                                   1996              1997
                                                                 --------          --------
<S>                                                              <C>               <C>     
Operating activities:                                                            
 Net income                                                      $    205          $  1,502
 Adjustments to reconcile net income                                             
  to net cash provided by operating activities:                                  
    Minority interest                                                 234              --
    Depreciation of property and equipment                            459               839
    Amortization of intangible assets                                  80                83
    Amortization of deferred income                                   (91)              (92)
    Loss from investment in limited partnership                       127               (31)
    Amortization of loan costs and fees                                33                17
    Accretion of interest on capital lease obligation                --                 709
    Other                                                              (5)                3
                                                                 --------          --------
                                                                    1,042             3,030
Changes in operating assets and liabilities:                                     
 (Increase) in accounts receivable                                 (1,387)           (1,738)
 (Increase) in prepaid expenses and other                            (406)           (4,231)
 (Increase) in deferred income taxes                                 --                --
 (Decrease) in accounts payable                                      (272)             (420)
 Increase in employee compensation and benefits                     2,145             1,238
 Increase in accrued interest                                          42              --
 (Decrease) increase in other accrued liabilities                     (67)            1,142
 Increase in income taxes payable                                    --                 499
                                                                 --------          --------
  Net cash provided (used) by operating activities                  1,097              (480)
                                                                 --------          --------
                                                                                 
Investing activities:                                                            
 Additions to property and equipment                                 (504)             (848)
 Facility acquisition deposits                                      3,000              --
 Additions to intangibles                                            (696)           (1,186)
 Transfers to (from) restricted cash, net                          (1,576)              128
  Repayment of demand note                                           --               1,369
                                                                 --------          --------
  Net cash provided (used) by investing activities                    224              (537)
                                                                 --------          --------
                                                                                 
Financing activities:                                                            
 Payment of long-term debt                                           (102)              (41)
 Principal payments of capital lease obligation                      --                (909)
 Note payable to an affiliate                                      (2,000)             --
 Receipt of lease inducement                                        3,685              --
 Dividend distribution                                               (137)             --
 Distribution to minority interest                                (33,727)             --
 Purchase of equity interests                                         803              --
                                                                 --------          --------
  Net cash used by financing activities                           (31,478)             (950)
                                                                 --------          --------
                                                                                 
Net (decrease) in cash and cash equivalents                       (30,157)           (1,967)
Cash and cash equivalents, beginning of period                     40,157             9,722
                                                                 --------          --------
Cash and cash equivalents, end of period                         $ 10,000          $  7,755
                                                                 ========          ========
                                                                                 
Supplemental Disclosure:                                                         
  Interest paid                                                  $  1,227          $    888
                                                                 ========          ========
</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
                        (Combined prior to June 14, 1996)
                                   (Unaudited)
                               ------------------

A. General

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 Annual Report or Form 10-K for the year ended December
31, 1996. 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
March 31, 1997 and the results of its operations and its cash flows for the
three-month periods ended March 31, 1997 and 1996. The results of operations for
the three-month period ended March 31, 1997 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.


B.  Basis of Presentation

The Company was incorporated as a Delaware corporation on March 19, 1996 and was
formed as a holding company, in anticipation of an initial public offering (the
"Offering"), to combine under the control of a single corporation the operations
of various business entities (the "Predecessor Entities") which were all under
the majority control of several related stockholders. Immediately prior to the
Offering, the Company executed an agreement (the "Reorganization Agreement")
which resulted in the transfer of ownership of the Predecessor Entities to the
Company prior to completion of the Offering in exchange for 4,400,000 shares of
the Company's common stock. The Company's financial statements for periods prior
to the Offering have been prepared by combining the historical financial
statements of the Predecessor Entities, similar to a pooling of interests
presentation. On June 14, 1996, the Company completed the issuance of 3,600,000
shares of common stock through the Offering resulting in net proceeds to the
Company (after deducting underwriters' commissions and other offering expenses)
of $37,731,000. The consolidated financial statements include the accounts of
Harborside Healthcare Corporation and its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated in
consolidation.


C.  Investment in Limited Partnership

The Company holds a 75% partnership interest in Bowie Center Limited Partnership
(the "Partnership") which the Company accounts for using the equity method.
Although the Company owns a majority interest in the Partnership, the Company
only holds a 50% voting interest in the Partnership and accordingly, it does not
exercise control over the operations of the Partnership.

The results of operations of the Partnership are summarized below:

                                               For the three months ended
                                                        MARCH 31,
                                            --------------------------------
                                                1996                  1997
                                            -----------          -----------
   Net operating revenues                   $ 1,976,000          $ 2,092,000
   Net operating expenses                     1,982,000            1,900,000
   Net income (loss)                           (170,000)              42,000
   

The financial position of the Partnership is as follows:

                                                    AS OF MARCH 31, 1997
                                                    --------------------
   Current assets                                             $2,504,000
   Non-current assets                                          4,889,000
   Current liabilities                                           751,000
   Non-current liabilities                                     6,258,000
   Partners' equity                                              384,000




                                    continued

                                       -7-

<PAGE>



               HARBORSIDE HEALTHCARE CORPORATION AND SUBSIDIARIES
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
                        (Combined prior to June 14, 1996)
                                   (Unaudited)
                               ------------------

D.  Special Compensation and Other

During the first quarter of 1996, the Company incurred $515,000 of non-recurring
expenses. Substantially all of these non-recurring expenses related to a special
compensation arrangement with a key member of management in connection with the
reorganization of the Company's ownership structure which preceded the
completion of its initial public offering.


E.  Income Taxes

Prior to the implementation of the Reorganization Agreement, the Predecessor
Entities (primarily partnerships and subchapter S corporations) operated under
common control but were not directly subject to federal or state income taxes
and, accordingly, no provision for income taxes was made in the Company's
historical financial statements prior to the implementation date of the
Reorganization Agreement. A pro forma income tax expense has been reflected for
each period presented prior to the reorganization date, as if the Company had
always owned the Predecessor Entities. The pro forma income tax expense was
computed using an estimated effective tax rate of 39%. The rate was derived by
using the statutory federal income tax rate of 34% plus an average of the
various state statutory income tax rates (net of federal benefits) where the
Company operates.



F.  Recent Acquisitions

As of July 1, 1996, a subsidiary of the Company began leasing four long-term
care facilities in Ohio (the "Ohio Facilities"). The following unaudited pro
forma condensed consolidated statement of earnings presents the condensed
results of operations of the Company after giving effect to the acquisition of
the Ohio Facilities for the three month period ended March 31, 1996, as if this
acquisition had occurred as of January 1, 1996. The pro forma financial results
are not necessarily indicative of the actual results of operations which might
have occurred or of the results of operations which may occur in the future.

                                            FOR THE THREE MONTHS ENDED MARCH 31,
                                                            1996
                                                          -------

Total net revenues                                        $43,203
Income before income taxes                                    578
Net income                                                    578
Pro forma net income                                          353
Pro forma net income per common share
     using 4,425,000 common and common
     common equivalent shares                             $  0.08








                                       -8-

<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 provides high quality long-term care, subacute care and
other specialty medical services in four principal regions: the Southeast, the
Midwest, New England and the Mid-Atlantic. As of March 31, 1997, the Company
operated 31 facilities (13 owned and 18 leased) with a total of 3,864 licensed
beds. The Company provides traditional skilled nursing care, a wide range of
subacute care programs (such as orthopedic, CVA/stroke, cardiac, pulmonary and
wound care), as well as distinct programs for the provision of care to
Alzheimer's and hospice patients. In addition, the Company provides
rehabilitation therapy at Company-operated and non-affiliated facilities. As of
March 31, 1997, the Company provided rehabilitation therapy services to patients
at 39 non-affiliated long-term care facilities. The Company seeks to position
itself as the long-term care provider of choice to managed care and other
private referral sources in its target markets by achieving a strong regional
presence and by providing a full range of high quality, cost effective nursing
and specialty medical services.

The Company was created in March 1996, in anticipation of an initial public
offering (the "Offering"), in order to combine under its control the operations
of various long-term care facilities and ancillary businesses (the "Predecessor
Entities") which had operated since 1988. The Company completed the Offering on
June 14, 1996 and issued 3,600,000 shares of common stock at $11.75 per share.
The owners of the Predecessor Entities contributed their interests in such
Predecessor Entities to the Company and received 4,400,000 shares of the
Company's common stock.

The Company's financial statements for periods prior to the Offering have been
prepared by combining the historical financial statements of the Predecessor
Entities, similar to a pooling of interests presentation. The Company's
financial statements prior to the date of the Offering do not include a
provision for Federal or state income taxes because the Predecessor Entities
(primarily partnerships and subchapter S corporations) were not directly subject
to Federal or state income taxation. The Company's consolidated financial
statements for periods prior to the date of the Offering include a pro forma
income tax expense for each period presented, as if the Company had always owned
the Predecessor Entities. See Note E to the financial statements included
elsewhere in this report.

One of the Predecessor Entities was the general partner of the Krupp Yield Plus
Limited Partnership ("KYP"), which owned seven facilities (the "Seven
Facilities") until December 31, 1995. The Company held a 5% interest in KYP
while the remaining 95% was owned by the limited partners of KYP (the
"Unitholders"). Effective December 31, 1995, KYP sold the Seven Facilities and a
subsidiary of the Company began leasing the facilities from the buyer. Prior to
December 31, 1995 the accounts of KYP were included in the Company's
consolidated financial statements and the interest of the Unitholders was
reflected as minority interest. In March of 1996, a liquidating distribution was
paid to the Unitholders.

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

                                                     AS OF MARCH 31,
                                                 -----------------------
                                                 1996              1997
                                                 -----             -----
Facilities:
   Owned (1)                                         9                13
   Leased                                           17                18
                                                 -----             -----
      Total                                         26                31
                                                 =====             =====

Licensed beds:
   Owned (1)                                     1,028             1,720
   Leased                                        1,980             2,144
                                                 -----             -----
      Total                                      3,008             3,864
                                                 =====             =====

(1) Includes the Larkin Chase Center, which is owned by Bowie Center Limited
    Partnership, a joint venture in which the Company has a 75% ownership
    interest and a non-affiliated investor has a 25% ownership interest.


                                      -9-

<PAGE>






The following table sets forth certain operating data for the periods indicated:

                                       FOR THE THREE MONTHS ENDED MARCH 31,
                                       ------------------------------------
                                           1996                     1997
                                        ---------                ---------
Patient days:                                               
   Private and other                       74,365                   85,603
   Medicare                                23,496                   33,906
   Medicaid                               142,226                  178,893
                                        ---------                ---------
         Total                            240,087                  298,402
                                        =========                =========
                                                            
Average Occupancy rate (1)                  91.3%                    91.2%
                                                            
Net patient service                                         
   revenue(2):                                              
          Private and other                 31.8%                    28.3%
          Medicare                          28.3%                    31.4%
          Medicaid                          39.9%                    40.3%
                                        ---------                ---------
                Total                      100.0%                   100.0%
                                        =========                =========
                                                      
(1)  "Average occupancy rate" is computed by dividing the number of occupied 
     licensed beds by the total number of available licensed beds during each of
     the periods indicated.
(2)  Net patient service revenues exclude all rehabilitation therapy service
     revenues from non-affiliate contracts.

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.

                                      -10-

<PAGE>




THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997

  TOTAL NET REVENUES. Total net revenues increased by $12,453,000 or 35.7%, from
$34,931,000 in the first three months of 1996 to $47,384,000 in the first three
months of 1997. This increase resulted primarily from the acquisition of four
Ohio Facilities on July 1, 1996 and the acquisition of the Harford Gardens
facility on March 1, 1997, the generation of revenues from rehabilitation
therapy services provided to additional non-affiliated long-term care facilities
and increased net patient service revenues per patient day at the Company's
"same store" facilities. Of such increase, $8,556,000 or 68.7% of the increase
resulted from the operation of the Ohio Facilities and $613,000 or 4.9% of the
increase resulted from the operation of the Harford Gardens facility. The
Company began providing rehabilitation therapy services at non-affiliated
long-term care facilities during 1995. Revenues generated by providing these
services increased by $1,211,000, from $2,141,000 in the first three months of
1996 to $3,352,000 in the first three months of 1997. The remaining $2,073,000,
or 16.7% of such increase, is attributable to higher average net patient service
revenues per patient day at the Company's "same store" facilities, primarily
resulting from increased levels of care provided to patients with medically
complex conditions. Average net patient service revenues per patient day at
"same store" facilities increased from $135.08 during the first three months of
1996 to $145.52 during the first three months of 1997. Partially offsetting this
increase was a reduction in occupancy at "same store" facilities from 91.4%
during the first three months of 1996 to 91.1% during the first three months of
1997. The average occupancy rate at all of the Company's facilities decreased
from 91.3% during the first three months of 1996 to 91.2% during the first three
months of 1997. The Company's quality mix of private, Medicare and insurance
revenues was 59.7% for the three months ended March 31, 1997 as compared to
60.1% in the similar period of 1996. The slight decrease in the quality mix
percentage was primarily due to the acquistion of the Harford Garden and Ohio
facilities.

  FACILITY OPERATING EXPENSES. Facility operating expenses increased by
$9,332,000, or 33.2%, from $28,120,000 in the first three months of 1996 to
$37,452,000 in the first three months of 1997. The acquisition of the Ohio
Facilities accounted for $6,283,000, or 67.3% of the increase in facility
operating expenses while Harford Gardens accounted for $414,000, or 4.4% of this
increase. Operating expenses associated with additional non-affiliate therapy
contracts increased from $1,995,000 during the first three months of 1996 to
$3,034,000 during the first three months of 1997 and accounted for 11.1% of the
increased costs. The remainder of the increase in facility operating expenses,
approximately $1,596,000, is due to increases in the costs of labor, medical
supplies and rehabilitation therapy services purchased from third parties at
"same store" facilities.

  GENERAL AND ADMINISTRATIVE; SERVICE CHARGES PAID TO AFFILIATE. General and
administrative expenses increased by $669,000, or 38.9%, from $1,720,000 in the
first three months of 1996 to $2,389,000 in the first three months of 1997. This
increase resulted from the acquisition of the Ohio Facilities, the expansion of
regional and corporate support, and additional travel and consulting expenses
associated with the Company's growth. The Company reimburses an affiliate for
rent and other expenses related to its corporate headquarters as well as for
certain data processing and administrative services provided to the Company.
During the first quarter of 1996, such reimbursements totaled $185,000 compared
to $177,000 during the first quarter of 1997.

  SPECIAL COMPENSATION AND OTHER. In connection with the Offering and corporate
reorganization, the Company recorded $515,000 of non- recurring charges in the
first three months of 1996. Substantially all of these non-recurring expenses
consisted of compensation earned by a key member of management in connection
with the corporate restructuring which preceded the Offering.

  DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from
$539,000 in the first three months of 1996 to $922,000 in the first three months
of 1997 primarily as a result of the acquisition of the Ohio facilities.

  FACILITY RENT. Facility rent expense for the first three months increased by
$77,000 from $2,545,000 in 1996 to $2,622,000 in 1997. The increase in rent
expense is the result of the acquisition of Harford Gardens on March 1, 1997.

  INTEREST EXPENSE, NET. Interest expense, net, increased from $975,000 in the
first three months of 1996 to $1,392,000 in the first three months of 1997. This
net increase is due to additional interest expense resulting from the
acquisition of the Ohio Facilities partially offset by reduced interest
following the repayment of $25,000,000 of long-term debt in June 1996, using
proceeds from the Offering.

  LOSS ON INVESTMENT IN LIMITED PARTNERSHIP. The Company accounts for its
investment in Bowie Center Limited Partnership using the equity method. The
Company recorded a loss of $127,000 in the first three months of 1996 as
compared to income of $31,000 during the first three months of 1997 in
connection with this investment.

  INCOME TAXES. Prior to the date of the Offering, the Company's financial
statements do not include a provision for Federal or state income taxes because
the Predecessor Entities were not subject to Federal or state income taxation.
Income taxes for the first three months of 1997 totaled $959,000.

  NET INCOME. Net income was $205,000 in the first three months of 1996 as
compared to income of $1,502,000 in the first three months of 1997.

                                      -11-

<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

 The Company has historically financed its operations and acquisitions growth
through a combination of mortgage financing and operating leases. Leased
facilities are leased from either the seller of the facilities or from a real
estate investment trust which has purchased the facilities from the seller. In
addition, in 1996 the Company financed the acquisition of the Ohio Facilities
from the seller by means of a lease which is accounted for as a capital lease
for financial reporting purposes. The Company's existing facility leases
generally require it to make monthly lease payments, establish escrow funds to
serve as debt service reserve accounts, 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. The Company
expects that various forms of leasing arrangements will continue to provide it
with an attractive form of financing to support its growth. In April of 1997,
the Company obtained a three-year $25 million revolving credit facility from a
commercial bank. Borrowings under this facility will be used to provide working
capital for existing operations and acquisitions and to finance a portion of
future acquisitions. From time to time, the Company expects to pursue certain
expansion and new development opportunities associated with existing facilities.
In connection with a Certificate of Need received by its Ocala facility, the
Company expects to commence construction of a sixty-bed addition and a
rehabilitation therapy area during 1997. The costs of this project are estimated
to be approximately $2,800,000. The Company has been and will continue to be
dependent on third-party financing to fund its acquisition strategy, and there
can be no assurances that such financings will be available to the Company on
acceptable terms, or at all. The Company expects that cash on hand and generated
through operations, as well as funds available through the credit facility will
be sufficient to meet its operating requirements through the remainder of 1997.

The Company had two mortgage loans outstanding as of March 31, 1997. One
mortgage loan had an outstanding principal balance of $16,574,000, of which
$15,140,000 is due at maturity in 2004. This loan 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 the four mortgaged facilities and actual
revenues during a twelve-month base period. As of March 31, 1997, the Company's
other mortgage loan, which encumbers a single facility, had an outstanding
principal balance of $1,593,000, of which $1,338,000 is due in 2010. This
mortgage matures bears interest at 14% per annum.

The Company's operating activities during the first three months of 1996
generated net cash of $1,097,000 as compared to a net use of cash of $480,000 in
1997, a decrease of $1,577,000. Most of the reduction in cash provided by
operations was the net result of increases in accounts receivable, prepaid and
other current assets and accruals relating to acquisitions.

Net cash generated by investing activities was $224,000 during the first three
months of 1996 as compared to $537,000 used in 1997. In each period the primary
use of invested cash related to additions to property and equipment ($504,000 in
1996 compared to $848,000 in 1997) and additions to deferred financing costs
associated with acquired facilities ($696,000 in 1996 compared to $1,186,000 in
1997). Additionally, in 1996 the Company received $3,000,000 in refunded
acquisition deposits (made in 1995) in connection with two groups of facilities
which it was negotiating to acquire. The Company began leasing the first group
of facilities (the New Hampshire Facilities) on January 1, 1996 and received a
$1,000,000 deposit back upon the closing of the transaction. The Company's offer
to lease the second group of facilities was rescinded by the Company and it
received its $2,000,000 deposit back in March 1996. The Company had borrowed
$2,000,000 in 1995 from an affiliate to pay this acquisition deposit and repaid
the affiliate in March 1996.

Net cash used by financing activities was $31,478,000 in 1996 as compared to
$950,000 in 1997. During the first half of 1996, the company received a cash
lease inducement from the landlord of $3,685,000 in connection with the leasing
of the New Hampshire Facilities. During the first three months of 1996 the
Company also received $803,000 from the sale of equity interests to an officer
and a director of the Company and paid a liquidating distribution of $33,727,000
to the KYP Unitholders. Also, as noted above, during the first quarter of 1996
the Company repaid a $2,000,000 advance from an affiliate. The Company had
borrowed these funds in order to make an acquisition deposit. During the first
three months of 1997, the Company made principal payments of $909,000 in
connection with capital lease obligations associated with the Ohio Facilities.

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.

                                      -12-

<PAGE>



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.


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 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

                                      -13-

<PAGE>



         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.

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.



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

Item 6.     Exhibits and Reports on Form 8-K

            (a) Exhibits

                NUMBER                 DESCRIPTION
                10.1                   Credit Agreement, dated as of April 14,
                                       1997, among Harborside Healthcare 
                                       Corporation and the other Borrowers 
                                       specified therein, the Lenders party
                                       thereto and the Chase Manhattan Bank, as
                                       Aministrative Agent
                27.1                   Financial Data Schedule

            (b) Reports on 8-K
                None

                                      -14-

<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:  May 13, 1997

                                      -15-