SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                  FORM 10-K/A


(Mark One)

    [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES AND EXCHANGE ACT OF 1934 [FEE REQUIRED]
                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
                                      OR
    [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                SECURITIES AND EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                  FOR THE TRANSITION PERIOD FROM     TO
                       COMMISSION FILE NUMBER 000-21263


                     INTEGRATED LIVING COMMUNITIES, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


            Delaware                               52-1967027
(State or other jurisdiction of        (I.R.S. Employer Identification Number)
incorporation or organization)
     24850 Old 41 Road Suite 10     
        Bonita Springs, FL                            34135
(Address of principal executive offices)           (Zip Code)



       Registrant's telephone number, including area code: 941-947-7200
         Securities registered pursuant to Section 12 (b) of the Act:


                                     None

         Securities registered pursuant to Section 12(g) of the Act:
                   Common Stock, par value $0.01 per share

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 [ ]


Indicate by check mark if the  disclosure of delinquent  filer  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by  reference in Part III of this Form 10-K or any  amendments  to
this Form 10-K. [X]

Aggregate market value of Registrant's  Common Stock held by  non-affiliates  at
April 25, 1997 (based on the closing  sale price for such shares as reported by
Nasdaq: $30,975,000.

       Common Shares outstanding as of April 25, 1997: 6,697,900 shares

                     Documents Incorporated by Reference:


Portions of the Registrant's Definitive Proxy Statement for its 1997 annual
                         meeting of stockholders are
            incorporated by reference into Part III of this report





<PAGE>



                                    PART III

           ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The executive officers and directors at April 30, 1997 were as follows:
<TABLE>
<CAPTION>
NAME                       AGE                 POSITION
----------------------    ----- -----------------------------------------------------
<S>                        <C>         <C>
Robert N. Elkins, M.D.     54          Chairman of the Board of Directors
Edward J. Komp........     42          President, Chief Executive Officer and Director
Kayda A. Johnson......     49          Senior Vice President -- Chief Operating Officer
John B. Poole.........     45          Senior Vice President -- Chief Financial Officer and Treasurer
Dan Hirschfeld    ....     39          Senior Vice President -- Acquisitions and Development
Lawrence P. Cirka ....     45          Director
Charles A. Laverty ...     51          Director
Lisa K. Merritt.......     36          Director
---------------
</TABLE>

Robert N. Elkins,  M.D.  became the Chairman of the Board of the Company in June
1996. Dr. Elkins has been the Chairman of the Board and Chief Executive  Officer
of IHS, the sole stockholder of the Company prior to October,  1996, since March
1986 and he served as President  of IHS from March 1986 to July 1994.  From 1980
until co-founding IHS in 1985, Dr. Elkins was a co-founder and Vice President of
Continental  Care Centers,  Inc., an owner and operator of long-term  healthcare
facilities.  From 1976 through 1980, Dr. Elkins was a practicing physician.  Dr.
Elkins is a graduate of the University of Pennsylvania, received his M.D. degree
from the Upstate Medical Center, State University of New York, and completed his
residency at Harvard  University  Medical  Center.  Dr.  Elkins is a director of
Capstone  Capital  Corporation,  Community  Care of America,  Inc. and UroHealth
Systems, Inc.

Edward J. Komp has  served as  President  and  Chief  Executive  Officer  of the
Company since March 1996 and as a director of the Company since June 1996. Prior
to  joining  the  Company,  he served  as  Executive  Vice  President--Corporate
Operations  of  IHS  from  November  1995  to  March  1996  and as  Senior  Vice
President--Managed  Operations of IHS from October 1993 to November 1995,  where
he had  operational  responsibility  for over 100 assisted  living and long-term
care facilities with  approximately  13,000 beds nationwide.  From 1979 until he
joined  IHS,  Mr.  Komp  served in  various  senior  operational  and  financial
capacities with National Medical Enterprises, Inc., now Tenet Healthcare Corp.

Kayda A. Johnson has served as Senior Vice  President--Chief  Operating  Officer
and Secretary of the Company since March 1996. Prior to joining the Company, she
served as Senior Vice  President for  Operations of IHS'  Retirement  Management
Services  division  from March 1991.  Prior to joining  IHS, she was Director of
Operations  for Forum  Group from 1990,  and from 1982 to 1990 she was  regional
Vice President of Operations for Retirement  Corporation of America. Ms. Johnson
is a licensed  Nursing Home  Administrator  and Registered  Nurse. She is also a
licensed Preceptor for Nursing Home  Administrators and a Certified  Residential
Care Administrator.  She has served on the faculty of the University of Redlands
for the past 15 years,  teaching business and management  courses to MBA and BBA
students.  She is a member of the Board of Directors of the National Association
for the Senior Living  Industries  ("NASLI") and serves as NASLI's  Commissioner
for Health Care as well as on the  Executive  Committee.  She is a member of the
Board of Directors  of the Assisted  Living  Facilities  Association  of America
("ALFAA");  serves on the  Residential  Services  Committee  for the  California
Association of Homes and Services for the Aged ("CAHSA"); and is a member of the
advisory committee of the American Seniors Housing Association.  She also serves
on the Assisted Living  Advisory Board of the American  Health Care  Association
("AHCA"), the Assisted Living Advisory Board -- Contemporary Long Term Care, and
the Advisory Group for the NIC.

John B. Poole has served as Chief  Financial  Officer of the Company since March
1996.  From November 1995 until he joined the Company,  he was as an independent
consultant to the long-term care industry.  From July 1994 through  October 1995
he served as Chief  Financial  Officer of American  Care  Communities,  Inc., an
owner and operator of assisted living  residences.  From March 1993 through June
1994 he served as Chief Financial Officer of Medifit of America,  Inc., an owner
and  operator of  outpatient  physical  therapy  centers and  corporate  fitness
centers. From October 1990 to February 1993 he served as Chief Financial Officer
of  Frankwood   Holdings,   Ltd.,   an  owner  and  operator  of  a  third-party
administrator  of health  claims.  From 1979 to August 1990 he served in various
positions  at Beverly  Enterprises,  Inc.,  an owner and  operator of  long-term
health care facilities, including Senior Vice President

<PAGE>



and Chief Accounting Officer, where he had responsibility for all accounting and
data processing for the entire company.

Daniel A.  Hirschfeld  has served as Senior Vice  President -  Acquisitions  and
Development  of the Company  since  February  1997.  From  January  1995 through
February 1997, he held the position of Vice President - Health Care Acquisitions
for Manor Care Inc.,  a New York  Stock  Exchange  listed  company  involved  in
ownership,  operation and  development  of assisted  living,  long term care and
hospitality facilities. From April 1994 through January 1995, Mr. Hirschfeld was
employed as President and Chief Operating Officer - Essential  Services Division
for Mariner Health Care, Inc., a NASDAQ traded company engaged in providing post
acute services for long term care residents.  Mr. Hirschfeld was responsible for
the  operation  of  all  non-facility  based  services  including  home  health,
pharmacy, therapies and medical supplies. From 1985 through 1994, Mr. Hirschfeld
was  employed by Meridian  Health  Care,  Inc.,  (which was  acquired by Genesis
Health  Ventures,  Inc., a New York Stock Exchange  listed  company,  in October
1994), an owner and operator of long term care facilities. Mr. Hirschfeld served
in various positions  including Vice President - Development and Planning,  Vice
President - Pharmacy  Services and Chief Operating Officer for Staff Replacement
Services. From 1979 until 1985, he was employed by Crown Central Petroleum, Inc.
and  Constellation  Services,  Inc., a subsidiary of Baltimore Gas and Electric,
Inc.  (both  companies  are  listed  on  the  New  York  Stock  Exchange).   His
responsibilities  including treasury functions,  strategic  planning,  financial
analysis, acquisitions, and accounting.

Lawrence P. Cirka  became a director  of the  Company in June 1996.  He has been
President  and Chief  Operating  Officer of IHS and a director of IHS since July
1994.  He was Senior  Vice  President  and Chief  Operating  Officer of IHS from
October  1987 to July 1994.  Prior to joining  IHS,  Mr. Cirka served in various
operational capacities with Unicare Healthcare  Corporation,  a long-term health
care company, for 15 years, most recently as Vice President-Western Division.

Charles A. Laverty became a director of the Company in June 1996.  Mr.  Laverty,
Chairman and Chief Executive Officer of UroHealth Systems,  Inc.  ("UroHealth"),
became President and Chief Executive  Officer in September 1994, and Chairman of
the  Board of  Directors  of  UroHealth  in  December  1994.  Prior  to  joining
UroHealth, Mr. Laverty was employed as Senior Executive Vice President and was a
director of Coram Healthcare Corporation,  a home infusion therapy company which
was  formed  in  1994  by  the  merger  of  Curaflex  Health   Services,   Inc.,
HealthInfusion,  Inc., Medisys, Inc., and T2 Medical, Inc. Mr. Laverty served as
the Chairman of the Board,  President  and Chief  Executive  Officer of Curaflex
Health Services from February 1989 to August 1994. Prior to his association with
Curaflex,  Mr.  Laverty  served as  President  and Chief  Executive  Officer  of
InfusionCare,  Inc.,  a home  infusion  services  company,  from October 1988 to
February  1989.  In addition,  he has held several  positions,  including  Chief
Operating Officer, with Foster Medical Corporation,  a durable medical equipment
supply company, and worked in both sales and management for C.R. Bard, a medical
device company.

Lisa K.  Merritt  became a director of the Company in June 1996.  She has been a
Vice President of The Chase Manhattan  Private Bank since May 1996. From January
1989 to May 1996, Ms. Merritt served as Vice President/District Manager of Chase
Manhattan  Personal Financial Services and from July 1987 to January 1989 served
in various  capacities,  including  commercial  real  estate,  residential  real
estate,  and consumer  lending at Chase  Manhattan  Bank,  N.A. Prior to joining
Chase  Manhattan  Bank,  Ms.  Merritt was  Divisional  Vice President at Pioneer
Savings Bank from 1986 to 1987.  From 1983 to 1986, she served as Assistant Vice
President at  Presidential  Bank. Ms. Merritt is a past Director of the Mortgage
Bankers Association of Southwest Florida.



<PAGE>



ITEM 11.  EXECUTIVE COMPENSATION

         SUMMARY  COMPENSATION  TABLE. The following table shows all of the cash
compensation  paid or to be paid by the Company or its  subsidiaries  as well as
certain other  compensation  paid or accrued during the fiscal year indicated to
the Chief Executive Officer of the Company and each of the two other most highly
compensated  executive officers of the Company for such period in all capacities
in which they served.  No other executive  officers of the Company received more
then $100,000 in compensation during 1996.
<TABLE>
<CAPTION>

                                            SUMMARY COMPENSATION TABLE

       NAME AND PRINCIPAL POSITION    YEAR         SALARY        BONUS(1)           LONG - TERM           ALL OTHER
                                                                                   COMPENSATION        COMPENSATION(2)
                                                                                    SECURITIES
                                                                                UNDERLYING OPTIONS
                                                                                      / SARS
       ---------------------------------------   -----------     ----------     ------------------------------------------
<S>                                      <C>        <C>      <C>   <C>                  <C>                 <C>    
       Edward J. Komp                    1996       244,858  (3)   142,500              157,000             145,300
        President and
        Chief Executive Officer

       John B. Poole                     1996       127,944  (4)    45,000               78,000              81,000
        Senior Vice President and
        Chief Financial Officer

       Kayda Johnson                     1996       159,706  (5)    58,500               78,000             102,500
        Senior Vice President and
        Chief Operating Officer
</TABLE>

(1)  These  amounts  represent  the 1996 bonuses  actually paid in 1997 and were
     required by the terms of employment  agreements  because the company met or
     exceeded  performance  goals  established by the Board of Directors.  See "
     Employment Agreements. "

(2)  These  amounts  represent  $9,600  for each of the  executives  annual  car
     allowance  and  $135,700,  $71,400,  and  $92,900 in  contributions  to the
     Company's  Supplemental  Employee  Retirement Plan for Mr. Komp, Mr. Poole,
     and Ms. Johnson respectively.

(3)  Mr. Komp joined the Company in March 1996. Prior thereto,  he was Executive
     Vice  president-Corporate  Operations of IHS, the sole  stockholder  of the
     Company prior to its initial  public  offering in October,  1996.  Mr. Komp
     received $50,939 in salary and $32,500 in all other  compensation  from IHS
     in 1996.

(4)  Mr. Poole joined the Company in March 1996.


(5)  Ms. Johnson joined the Company in March 1996. Prior thereto, she was Senior
     Vice president of Operations for IHS' retirement services division. IHS was
     the sole stockholder of the Company prior to its initial public offering in
     October,  1996. Ms. Johnson  received $32,545 in salary and $ 15,000 in all
     other compensation from IHS in 1996.

The Company was organized in November 1995. During fiscal 1995, Mr. Komp and Ms.
Johnson  served as executive  officers of IHS.  For the year ended  December 31,
1995, Mr. Komp received from IHS a salary of $261,000,  a cash bonus of $32,500,
a bonus  consisting  of 2,614  shares  of IHS  common  stock  (having a value of
$57,508  based  on the  $22.00  price  of the IHS  common  stock  on the date of
issuance),  a car  allowance  of $6,000 and a $67,720  contribution  by IHS to a
Supplemental  Deferred  Compensation Plan. For the year ended December 31, 1995,
Ms. Johnson received from IHS a salary of $162,665, a cash bonus of $15,000, and
a bonus  consisting of 682 shares of IHS common stock (having a value of $15,004
based on the $22.00 price of the IHS common stock on the date of issuance).  Mr.
Poole was not employed by IHS or the Company during 1995.


         EMPLOYMENT AGREEMENTS.  The Company is a party to Employment Agreements
(the "Employment Agreements") with each of Edward J. Komp, Kayda A. Johnson, and
John B. Poole to serve as President and

<PAGE>



Chief Executive Officer,  Senior Vice President -- Chief Operating Officer,  and
Senior Vice  President  -- Chief  Financial  Officer,  respectively.  Subject to
earlier  termination,  as discussed  below,  each Employment  Agreement is for a
three-year term commencing as of May 1, 1996; however, the Employment Agreements
of Mr. Komp and Ms. Johnson  provide for automatic  one-year  extensions on each
anniversary  thereof  unless 120 days' notice of  nonrenewal  is given by either
party prior to such anniversary date. As a result,  Mr. Komp's and Ms. Johnson's
employment  agreements now expire April 30, 2000. The current annual base salary
("Base Salary") for each executive is:  $285,000 for Mr. Komp;  $195,000 for Ms.
Johnson; and $185,000 for Mr. Poole. Each Employment Agreement provides that the
executive's Base Salary is to be increased annually by a percentage equal to the
percentage  increase in the Consumer  Price Index  ("CPI") and,  with respect to
each  executive  other  than Mr.  Komp,  by such  additional  amounts  as may be
determined  in the  discretion  of the  Company's  President or Chief  Executive
Officer.  The Base Salary of Mr. Komp may be increased in the  discretion of the
Board of Directors.  Each  executive may also receive  annual cash bonuses in an
amount  determined  in the  discretion  of the  Board  of  Directors;  provided,
however,  if the Company  meets or exceeds  performance  goals  specified by the
Board of Directors,  each executive will receive a bonus of not less than 30% of
Base Salary (50% in the case of Mr. Komp).

Pursuant  to the  Employment  Agreements,  each  executive  is  entitled  to (a)
comprehensive  individual and dependent health insurance,  (b) Company paid life
insurance  coverage  in the amount of  $500,000  ($1,000,000  in the case of Mr.
Komp) and accidental death and dismemberment insurance, (c) disability insurance
coverage in a monthly  benefit amount equal to the sum of the  executive's  Base
Salary plus a "Bonus Amount" (as defined in the Employment  Agreements),  (d) an
annual automobile allowance of $9,600, subject to increase based on the CPI, (e)
a Company paid  personal  umbrella  (excess)  insurance  policy in the amount of
$2,000,000  ($5,000,000  in the case of Mr. Komp),  and (f)  participate  in any
executive   retirement  program   established  and  maintained  by  the  Company
(collectively,  the  "Executive  Benefits").  In  addition,  each  executive  is
entitled  to  receive  equity-based   compensation  in  the  discretion  of  the
Compensation Committee of the Board of Directors. The Company has also agreed to
reimburse each executive (other than Ms. Johnson) for certain expenses  incurred
as a result of their relocation to Florida.

The  Employment  Agreement with Mr. Komp may be terminated by either party on 90
days' notice.  Upon  termination of Mr. Komp's  employment  without  Cause,  the
expiration of, or the Company's failure to renew, the Employment  Agreement,  or
the  resignation  of Mr. Komp for Good Reason,  Mr. Komp will be entitled to the
sum of (1)  the  remaining  Base  Salary  due  under  his  Employment  Agreement
(generally three years unless prior notice of nonrenewal has been given) and (2)
the higher of his bonus in the year of  termination  or in the previous year. In
addition,  Mr. Komp will  continue to receive his  existing  level of  Executive
Benefits or the level of Executive  Benefits received during the preceding year,
whichever is greater,  throughout the severance  period  (generally three years)
and all stock options,  other equity-based rights and rights under the Company's
Supplemental  Deferred  Compensation  Plan  ("SERP")  then held by Mr. Komp will
become fully vested.  The Employment  Agreements  with Ms. Johnson and Mr. Poole
may each be  terminated  by either party on 90 days'  notice.  Upon  termination
without Cause, the expiration of the Employment Agreement, or the resignation of
the executive for Good Reason,  or, in the case of Ms.  Johnson,  the failure to
renew the Employment  Agreement,  the executive will be entitled to a payment of
one and  one-half  times the sum of (1) the  greater of his or her salary in the
year of  termination  or in the  previous  year and (2) the higher of his or her
bonus in the year of  termination  or in the previous  year. In addition,  for a
period of 18 months  following  such  termination,  each of Ms.  Johnson and Mr.
Poole will continue to receive their existing level of Executive Benefits or the
level of Executive  Benefits  received during the preceding  year,  whichever is
greater,  and all stock options,  other equity-based rights and SERP rights then
held by Ms. Johnson and Mr. Poole, respectively, will become fully vested.

For  purposes of each of the  Employment  Agreements,  "Cause" is defined as (i)
material failure to perform duties,  (ii) material breach of  confidentiality or
noncompete provisions,  (iii) conviction of a felony, or (iv) theft, larceny, or
embezzlement  of Company  property.  "Good  Reason" is defined as (i) a material
breach of the  agreement  by the Company or (ii)  resignation  of the  executive
within one year after a change in control.  A "change of control" of the Company
is deemed to occur  under the  Employment  Agreements,  in  general:  (i) when a
person, other than the executive or a group controlled by the executive, becomes
the "beneficial owner" of 20% or more of the Company's Common Stock, (ii) in the
event of  certain  mergers  or  consolidations  in which the  Company is not the
surviving  entity,  (iii)  in the  event  of the  sale,  lease  or  transfer  of
substantially  all of the Company's  assets or the liquidation of the Company or
(iv) if, within any 24-month  period,  the persons who were members of the Board
of Directors at the  beginning of such period cease to  constitute a majority of
the Board of Directors of the Company or any successor entity.

Each Employment  Agreement  contains  covenants by the executive to, among other
things,  maintain the confidentiality of trade secrets of the Company during the
term of their Employment Agreements and thereafter,  as well as covenants not to
solicit  employees  or  customers  of the Company and not to be employed or have
certain other relationships

<PAGE>



with  entities  which are  directly  in the  business  of owning,  operating  or
managing  facilities  which  compete with any such facility then operated by the
Company or any of its subsidiaries during the term of their Employment Agreement
and for a 12 month period thereafter.

         OPTION  GRANTS.   The  following   table  sets  forth  certain  summary
information  concerning  individual grants of stock options made during the year
ended December 31, 1996 to each of the Company's executive officers named in the
Summary Compensation Table who received options during the year. No options were
exercised during 1996.

<TABLE>
<CAPTION>

                  OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1996

                               INDIVIDULA GRANTS
                    ------------------------------------------               POTENTIAL REALIZABLE
                     NUMBER OF    PERCENT OF                               VALUE AT ASSUMED ANNUAL
                    SECURITIES   TOTAL OPTIONS                               RATES OF STOCK PRICE
                    UNDERLYING    GRANTED TO      EXERCISE                     APPRECIATION FOR
                      OPTIONS    EMPLOYEES IN      PRICE      EXPIRATION       OPTION TERM (4)
NAME                GRANTED(1)      1996(2)     ($/SHARE)(3)     DATE        5%($)        10%($)
----                ------------ -------------- ------------- ----------- ------------ --------------
<S>                     <C>              <C>           <C>     <C>           <C>          <C>       
Edward J. Komp          157,000          34.9%         $8.00   6/10/2006     $789,710     $2,001,750
Kayda Johnson            78,000          17.3%         $8.00   6/10/2006     $392,340     $  994,500
John B. Poole            78,000          17.3%         $8.00   6/10/2006     $392,340     $  994,500
</TABLE>

(1)  These options  become  exercisable  as to 20% on June 10, 1997 and as to an
     additional 20% on each successive June 10.
(2)  Based on options to purchase 450,000 shares granted to all employees during
     1996.
(3)  Equal to the initial public offering price of the Company's Common Stock.
(4)  These amounts  represent  assumed rates of appreciation in the price of the
     Company's  Common Stock during the terms of the options in accordance  with
     rates specified in applicable federal securities regulations. Actual gains,
     if any, on stock  option  exercises  will depend on the future price of the
     Company's Common Stock and overall market conditions.  The 5% and 10% rates
     of  appreciation  over the 10-year term of the option of the $8.00 exercise
     price would result in stock prices of $13.03 and $20.75 respectively. There
     is no representation that the rates of appreciation reflected in this table
     will be achieved.
<TABLE>
<CAPTION>
                                        AGGREGATE YEAR - END OPTION VALUES

                               NUMBER OF SHARES SUBJECT                  VALUE OF UNEXERCISED IN THE
                           TO UNEXPIRED OPTIONS AT YEAR END             MONEY OPTIONS AT YEAR END (1)
                       ------------------------------------------ ------------------------------------------
NAME                       EXERCISABLE        NON-EXERCISABLE         EXERCISABLE         NON-EXERCISABLE
---------------------- -------------------- --------------------- --------------------- --------------------
<S>                             <C>               <C>                      <C>                   <C>
Edward J Komp                   0                 157,000                  0                     0
Kayda Johnson                   0                  78,000                  0                     0
John B Poole                    0                  78,000                  0                     0
</TABLE>

(1) The Company's Common Stock was trading below the option price at year end.


<PAGE>



STOCK OPTIONS

Stock Incentive Plan. The Company adopted the Stock Incentive Plan to enable the
Company and its stockholders to secure the benefits of Common Stock ownership by
key  personnel of the Company and its  subsidiaries.  The Stock  Incentive  Plan
permits the issuance of restricted stock and the granting of options to purchase
an aggregate of 470,040 shares of the Company's Common Stock to key employees of
and consultants to the Company or any of its subsidiaries. Directors who perform
services  for the  Company  solely  in their  capacities  as  directors  are not
eligible  to  receive  shares of  restricted  stock or  options  under the Stock
Incentive  Plan.  The  number  of shares  which  may be  issued  under the Stock
Incentive  Plan is  subject to  adjustment  in  proportion  to any  increase  or
decrease in the number of issued shares of Common Stock  resulting  from a stock
dividend,  split-up,  consolidation or any similar capital  adjustment.  Options
granted under the Stock  Incentive  Plan may be either  incentive  stock options
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended ("ISOs"), or options which do not qualify as ISOs ("non-ISOs").

The Stock Incentive Plan is administered  by the  Compensation  Committee of the
Board of Directors (the "Committee").  No member of the Committee may receive an
option or a  restricted  stock award under the Stock  Incentive  Plan within one
year prior to his or her becoming a member of the Committee or at any time while
he or she is serving as a member of the Committee.  Subject to the provisions of
the Stock  Incentive  Plan,  the  Committee  has the  authority to determine the
individuals to whom shares of restricted stock or stock options will be granted,
the number of shares to be issued or covered by each restricted  stock or option
grant, the purchase or option price, the type of option,  the option period, the
vesting  restrictions  or repurchase  restrictions,  if any, with respect to the
restricted  stock or exercise  of the  option,  the terms for the payment of the
restricted stock or the option price and other terms and conditions. Payment for
shares under a  restricted  stock award or pursuant to the exercise of an option
may be made (as  determined  by the  Committee)  in cash or by  shares of Common
Stock.

The exercise price for shares covered by an ISO may not be less than 100% of the
fair market  value of the Common Stock on the date of grant (110% in the case of
a grant to an employee who owns stock  possessing  more than 10% of the combined
voting power of all classes of stock of the Company or any  subsidiary  entitled
to vote (a "10%  Stockholder")).  The  purchase  price for shares of  restricted
stock and the  exercise  price for shares  covered by a non-ISO  may not be less
than the par value of the Common  Stock at the date of grant.  All options  must
expire no later than ten years  (five  years in the case of an ISO  granted to a
10% Stockholder)  from the date of grant. The Stock Incentive Plan also provides
that the options will become exercisable and restricted stock awards will become
fully  vested  upon a change in control of the Company or if, at any time within
two years  following  the date any person (as such term is used in Section 13(d)
and 14(d)(2) of the  Securities  Exchange Act of 1934 as amended (the  "Exchange
Act") shall become the beneficial  owner (within the meaning of Rule 13d-3 under
the Exchange Act) of 30% or more of the Company's outstanding Common Stock other
than  pursuant  to a plan or  arrangement  entered  into by such  person and the
Company, either the Company terminates the optionee's employment (other than for
Cause (as defined in the Stock  Incentive  Plan)),  or the  optionee  leaves the
employ of the Company for Good Reason (as defined in the Stock Incentive  Plan).
A "change in control of the  Company"  is deemed to occur if (i) there  shall be
consummated (x) any  consolidation or merger of the Company in which the Company
is not the  continuing  or  surviving  entity or pursuant to which shares of the
Company's  Common  Stock  would be  converted  into  cash,  securities  or other
property,  other  than a merger  of the  Company  in which  the  holders  of the
Company's  Common  Stock   immediately   prior  to  the  merger  have  the  same
proportionate ownership of common stock of the surviving corporation immediately
after the merger,  or (y) any sale,  lease,  exchange or other  transfer (in one
transaction or a series of related  transactions) of all, or substantially  all,
of the assets of the  Company,  or (ii) the  stockholders  of the Company  shall
approve any plan or proposal for  liquidation or dissolution of the Company,  or
(iii)  during  any  period  of two  consecutive  years,  individuals  who at the
beginning of such period  constitute  the entire Board of Directors  shall cease
for any reason to  constitute a majority  thereof  unless the  election,  or the
nomination for election by the Company's stockholders,  of each new director was
approved by a vote of at least  two-thirds  (2/3) of the directors then still in
office who were directors at the beginning of the period. In general,  no option
may be exercised more than three months after the  termination of the optionee's
service with the Company and its subsidiaries.  However,  the three-month period
is extended to twelve months if the  optionee's  service is terminated by reason
of disability or death and the Committee may in its discretion extend the period
of exercise  following  termination of employment.  No individual may be granted
ISOs that become  exercisable for the first time in any calendar year for Common
Stock having a fair market value at the time of grant in excess of $100,000.  In
addition,  the  maximum  option  grant  which may be made to an  employee of the
Company in a calendar year shall not cover more than 350,000 shares.

Options may not be  transferred  during the lifetime of an optionee.  Subject to
certain  limitations  set forth in the Stock  Incentive Plan and applicable law,
the Board of Directors may amend or terminate the Stock Incentive Plan. In any

<PAGE>
event,  no  restricted  stock awards or stock  options may be granted  under the
Stock Incentive Plan after May 24, 2006.

On June 10, 1996, each of Ms. Johnson and Messrs.  Komp and Poole was granted an
option  to  purchase   78,000  shares,   157,000   shares,   and  78,000  shares
respectively,  of Common  Stock at an  exercise  price  per  share  equal to the
initial public offering price of $8 per share. The options become exercisable in
five equal annual  installments  commencing June 10, 1997. The options expire on
the earlier of June 10, 2006 or three months after the optionee  ceases to be an
employee of the Company (one year if by reason of death or disability).

NON-PLAN DIRECTOR OPTIONS. On June 10, 1996, each of Ms. Merritt, Dr. Elkins and
Messrs.  Bared,  Cirka and  Laverty  was  granted an option to  purchase  16,000
shares,  235,000  shares,  28,000  shares,  98,000  shares  and  28,000  shares,
respectively,  of Common  Stock at an  exercise  price  per  share  equal to the
initial public offering of $8.00 per share.  These options become exercisable in
three equal annual  installments,  commencing June 10, 1997,  although they will
become  immediately  exercisable upon (i) a change in control of the Company (as
defined below under "Non-Employee Director Stock Option Plan"), (ii) the removal
(other than for justifiable  cause (as defined in the option  agreement)) of the
optionee as, or the Company's  failure to renominate (other than for justifiable
cause) the  optionee  for  election  as, a director  of the  Company at any time
within two years  following the date any person (as such term is used in Section
13(d) and  14(d)(2)  of the  Exchange  Act) shall  become the  beneficial  owner
(within the meaning of Rule 13d-3 under the Exchange  Act) of 30% or more of the
Company's  outstanding Common Stock other than pursuant to a plan or arrangement
entered into by such person and the Company, or (iii) the death or disability of
the optionee. The options expire on the earlier to occur of June 10, 2006 or six
months  after the  optionee  ceases to be a  director  (one year if by reason of
death or disability).

NON-EMPLOYEE   DIRECTOR   STOCK  OPTION  PLAN.   The  Company  has  adopted  the
Non-Employee  Director Stock Option Plan (the  "Non-Employee  Director Plan") to
promote the Company's  interests by attracting  and  retaining  highly  skilled,
experienced  and   knowledgeable   non-employee   directors.   Pursuant  to  the
Non-Employee  Director  Plan,  each  non-employee  director of the Company  will
automatically  receive on the date of each annual meeting of stockholders of the
Company  (the  "Grant  Date"),   beginning  with  the  1997  Annual  Meeting  of
Stockholders,  as long as such person remains a director following such meeting,
an option to purchase 7,500 shares of the Company's  Common Stock (the "Option")
at a per share exercise price equal to the fair market value of the Common Stock
on the Grant Date. A total of 75,000 shares are reserved for issuance  under the
Non-Employee  Director  Plan. The number of shares which may be issued under the
Non-Employee  Director  Plan is subject to adjustment to reflect any increase or
decrease in the number of shares of Common Stock  resulting  from a stock split,
stock dividend, consolidation or other similar capital adjustment.

Except as set forth  below,  Options  become  exercisable  in three equal annual
installments commencing on the first anniversary of the Grant Date. In the event
that a director ceases to be a director of the Company, such person may exercise
the Option if it is exercisable by him at the time he ceases to be a director of
the Company,  within six months after the date he ceases to be a director of the
Company  (one  year  if he  ceases  to be a  director  by  reason  of  death  or
disability). Notwithstanding the foregoing, in the event a "Change of Control of
the Company" shall occur, or the optionee is removed (other than for justifiable
cause (as defined in the Non-Employee  Director Plan)) as, or is not renominated
(other than for justifiable cause) for election as, a director of the Company at
any time within two years following the date any person (as such term is used in
Section  13(d) and  14(d)(2) of the Exchange  Act) shall  become the  beneficial
owner  (within the meaning of Rule 13d-3 under the Exchange  Act) of 30% or more
of the  Company's  outstanding  Common  Stock  other than  pursuant to a plan or
arrangement  entered  into by such  person  and the  Company,  then all  options
granted under the Non-Employee  Director Plan which are then  outstanding  shall
immediately  become  exercisable.  A "Change in Control of the Company" shall be
deemed to occur if (i)  there  shall be  consummated  (x) any  consolidation  or
merger of the Company in which the Company is not the  continuing  or  surviving
corporation  or pursuant to which shares of the Company's  Common Stock would be
converted into cash,  securities or other  property,  other than a merger of the
Company in which the holders of the Company's Common Stock  immediately prior to
the  merger  have  the  same  proportionate  ownership  of  common  stock of the
surviving  corporation  immediately  after the merger,  or (y) any sale,  lease,
exchange  or  other  transfer  (in  one  transaction  or  a  series  of  related
transactions)  of all, or  substantially  all, of the assets of the Company,  or
(ii) the  stockholders  of the Company  shall  approve any plan or proposal  for
liquidation  or  dissolution  of the Company,  or (iii) during any period of two
consecutive  years,  individuals who at the beginning of such period  constitute
the  entire  Board of  Directors  shall  cease for any  reason to  constitute  a
majority  thereof  unless the election,  or the  nomination  for election by the
Company's  stockholders,  of each  director  was  approved by a vote of at least
two-thirds  of the  directors  then  still in office who were  directors  at the
beginning of the period.  Options granted under the  Non-Employee  Director Plan
shall have a term of ten years  from the Grant Date and shall not be  "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.

<PAGE>
The Non-Employee Director Plan will be administered by the Board of Directors of
the Company.  However, the Non-Employee Director Plan prescribes the individuals
who would be awarded Options,  the number of shares subject to the Options,  and
the terms and  conditions of each award.  The Board of Directors may at any time
terminate  the  Non-Employee  Director  Plan and may from time to time  alter or
amend the  Non-Employee  Director  Plan or any part  thereof,  provided that the
rights  of  a  director  with  respect  to  an  option  granted  prior  to  such
termination, alteration or amendment may not be impaired.

SUPPLEMENTAL DEFERRED COMPENSATION PLAN

The  Company's  Supplemental  Deferred  Compensation  Plan  (the  "SERP")  is an
unfunded  deferred  compensation  plan which offers certain  executive and other
highly  compensated  employees an  opportunity to defer  compensation  until the
termination of their  employment with the Company.  Contributions to the SERP by
the  Company,  which  vest  over  a  period  of  five  years  (immediately  if a
participant's  employment is terminated  because of death,  disability,  without
cause or for any  reason  within one year  following  a change in control of the
company),  are determined by the Board upon  recommendation of the Committee and
are  allocated  to  participants'  accounts  on a pro rata basis  based upon the
compensation of all  participants  in the SERP in the year such  contribution is
made.  The SERP also  provides  that upon a change in control of the Company (as
defined in the SERP),  the Company is  obligated  to  contribute  to the SERP on
behalf  of each  participant  an  amount  generally  equal  to three  times  the
participant's  annual  compensation  as  defined  in the plan.  In  addition,  a
participant  may elect to defer a portion  of his or her  compensation  and have
that  amount  added to his or her SERP  account.  Participants  may  direct  the
investments in their respective SERP accounts. All participant contributions and
the earnings  thereon,  plus the  participant's  vested portion of the Company's
contribution account, are payable upon termination of a participant's employment
with the Company.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The  Compensation  Committee  currently  consists of Charles A. Laverty and Lisa
Merritt. Mr. Laverty and Ms. Merritt have received options to purchase shares of
Common Stock. See "--Stock Options -- Non-Plan Director Options."

COMPENSATION OF DIRECTORS

The Company pays each director who is not an employee  $1,000 for  attendance in
person at each  meeting of the Board of Directors  or of any  committee  thereof
held on a day on which the Board of Directors  does not meet.  In addition,  the
Company will reimburse the directors for travel expenses  incurred in connection
with their activities on behalf of the Company.


<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEEFICIAL OWNERS AND MANAGEMENT

         The following  table sets for the certain  information  as of April 15,
1997 (except as otherwise noted,  regarding the beneficial ownership (as defined
by the Securities and Exchange  Commission  (the "SEC") of the Company's  Common
Stock by (i) each person known to the Company to be the beneficial owner of more
then five percent of the outstanding  shares of Common Stock, (ii) each director
of the Company,  (iii) each person named in the Summary  Compensation Table (see
"Item  11.  Executive  Compensation"),  and (iv)  all  directors  and  executive
officers  of the Company as a group.  Unless  otherwise  indicated,  the persons
named below have sole voting and investment  power with respect to the number of
shares set forth opposite their names,  subject to community property laws where
applicable.

                NAME OF BENEFICIAL OWNER               NUMBER OF      PERCENT 
                ------------------------               ---------      ------- 
                                                        SHARES           OF
                                                        ------           --    
                                                    BENEFICIALLY      COMMON
                                                    ------------      ------
                                                      OWNED (1)        STOCK
                                                      ---------        -----
Integrated Health Services, Inc. (2)                 2,497,900        37.3%
Wellington Management Company (10)                     663,100         9.9%
Massachusetts Financial Services (11)                  594,900         8.9%
FMR Corp.(12)                                          414,500         6.2%
Oppenheimer Management Corp.(13)                       335,000         5.0%
Robert N. Elkins, M.D. (3)                           2,732,900        39.4%
Edward J. Komp (4)                                     161,100         2.3%
Kayda Johnson (5)                                       79,000         1.2%
John B. Poole (5)                                       79,000         1.2%
Lawrence P. Cirka (6)                                   98,000         1.4%
Charles A. Laverty (7)                                  28,000         *
Lisa Merritt (8)                                        16,000         *
All executive officers and directors as a
     group (7 persons) (9)                           3,194,000        43.2%

*      Less then 1%

(1)  Beneficial  ownership is  determined  in  accordance  with the rules of the
     Securities and Exchange Commission, which attribute beneficial ownership to
     persons who possess sole or shared  voting power  and/or  investment  power
     with respect to these securities.
(2)  The  address of  Integrated  Health  Services  is 10065 Red Run  Boulevard,
     Ownings Mills, Maryland 21117.
(3)  Consists of the shares of Common Stock owned by IHS and options to purchase
     235,000 shares of Common Stock, only 78,333 of which are exercisable within
     60 days of April 15,  1997.  Dr.  Elkins is Chairman of the Board and Chief
     Executive  Officer of IHS and, as a result,  may be deemed to  beneficially
     own the  shares  of  Common  Stock  owned  by  IHS.  Dr.  Elkins  disclaims
     beneficial  ownership of such shares.  Dr. Elkin's address is c/o IHS, 8889
     Pelican Bay Blvd., Naples, Florida 33963.
(4)  Includes options to purchase 157,000 shares of Common Stock, only 31,400 of
     which are exercisable within 60 days of April 15, 1997.
(5)  Includes options to purchase 78,000 shares of Common Stock,  only 15,600 of
     which are exercisable within 60 days of April 15, 1997.
(6)  Consists  of options to  purchase  shares of Common  Stock,  only 32,666 of
     which are exercisable within 60 days of April 15, 1997.
(7)  Consists of options to purchase shares of Common Stock, only 9,333 of which
     are exercisable within 60 days of April 15, 1997.
(8)  Consists of options to purchase shares of Common Stock, only 5,333 of which
     are exercisable within 60 days of April 15, 1997.
(9)  Includes  Common Stock owned by IHS and options to purchase  690,000 shares
     of common stock, of which are exercisable within 60 days of April 15, 1997.
(10) The address of Wellington Management Company is 75 State Street, Boston, MA
     02109.  The number of shares is based off a schedule  13G filed in December
     of 1996.
(11) The address of Massachusetts  Financial Services is 500 Boston Street, 15th
     Floor,  Boston,  MA 02116. The number of shares is based off a schedule 13G
     filed in December of 1996.

<PAGE>

(12) The address of FMR Corp is 82  Devonshire  Street,  Boston,  MA 02109.  The
     number of shares is based off a schedule 13G filed in December of 1996.
(13) The address of  Oppenheimer  Management  Corp.  is Two World Trade  Center,
     Suite 3400,  New York, NY  10048-0203.  The number of shares is based off a
     schedule 13G filed in December of 1996.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section  16(a) of the Exchange Act  requires  the  Company's  executive
officers and directors,  and persons who beneficially own ;more than ten percent
of the Company's  Common Stock, to file initial reports of ownership and reports
of  changes  in  ownership  with  the SEC and the  NASDAQ.  Executive  officers,
directors and greater than ten percent beneficial owners are required by the SEC
to furnish the Company with copies of all Section 16(a) forms they file.

         Based  upon a review  of the  copies  of such  forms  furnished  to the
Company and written  representations  from the Company's  executive officers and
directors, the Company believes that during fiscal 1996 all Section 16(a) filing
requirements  applicable to its executive  officers,  directors and greater than
ten percent beneficial owners were complied with.


<PAGE>
ITEM 13.CERTAIN RELATIONSHIPS AND TRANSACTIONS

         The Company was formed in November 1995 as a wholly-owned subsidiary of
IHS to operate the assisted  living and other senior housing  facilities  owned,
leased and managed by IHS. Following the Company's formation, IHS transferred to
the Company as a capital  contribution  its ownership  interest in The Waterside
and The  Homestead  facilities,  sublet to the Company  The Shores and  Cheyenne
Place  facilities,  and leased to the  Company the  assisted  living and related
portions of the Treemont and West Palm Beach facilities. IHS also transferred to
the  Company  all the stock of a company  which had  agreements  to manage  nine
facilities (five of which were subsequently canceled in 1996).

         From the Company's inception through September,  1996, IHS provided all
required financial,  legal, accounting,  human resources and information systems
services to the Company, and satisfied all the Company's capital requirements in
excess of internally  generated funds. IHS has charged the Company a flat fee of
6% of total revenue for these services.  The Company  estimates that the cost of
obtaining these services from third parties would have been significantly higher
than the fees charged by IHS.

         Effective June 1, 1996,  IHS  contributed to the capital of the Company
condominium  interests in the assisted  living  portions of the West Palm Beach,
Treemont and Vintage  facilities  to the Company as a  contribution  to capital.
These  assisted  living  facilities are  immediately  adjacent to or are located
within the same  building and share common areas with an existing IHS  facility.
Prior to the  contribution  of  condominium  interests  in the  assisted  living
portion of each of these facilities, a condominium association was created and a
Declaration of Condominium was filed that governs these facilities.  The Company
and IHS are the only members of these  condominium  associations,  and share the
cost of maintaining the common areas of such facilities.

         In  connection  with the  Company's  operation  of the West Palm Beach,
Treemont and Vintage  assisted living  facilities,  the Company and an operating
subsidiary  of IHS have entered into  Services  Agreements  whereby IHS provides
certain  facility  services to the Company.  Pursuant to the individual  Service
Agreements,  IHS provides the Company (and its residents)  with a combination of
the following services:  building maintenance services (West Palm Beach facility
only:  $3,200 monthly fee paid to IHS);  housekeeping  (West Palm Beach facility
only: $2,000 monthly fee paid to IHS); laundry services (all facilities: monthly
fees  paid to IHS are $850  (West  Palm  Beach),  $1,500  (Vintage)  and  $3,300
(Treemont));  emergency call services (all facilities:  $100 monthly fee paid to
IHS): and nutrition (resident meals) services (all facilities:  fees paid to IHS
equal $8.00 (Vintage) and $10.00 (West Palm Beach and Treemont) per resident/per
day). In addition,  pursuant to each Services Agreement,  the Company pays IHS a
monthly general building management and landscaping services fee equal to $4,583
(Vintage),  $14,166 (West Palm Beach) and $31,083 (Treemont),  respectively.  In
connection with the administration of the Vintage facility,  IHS and the Company
share the services of the executive  director and the Company pays IHS an amount
equal to thirty  percent  (30%) of the total costs and expenses  (including  all
wages,  benefits,  payroll  taxes,  and workers'  compensation  premiums) of the
executive director of the facility.  Other than the general building  management
and landscaping services fee, each of the above described fees are subject to an
annual  increase equal to the Consumer price Index for All Urban  Consumers--All
Cities (not to exceed 4%).  Each Service  Agreement has a one-year term and will
be  automatically   renewed  for  successive   one-ear  terms  unless  otherwise
terminated.  Each Service  Agreement  may be terminated by either party upon 180
days' notice or 30 days following the delivery of a notice of material breach if
the breach is not cured to the satisfaction of the non-breaching party.

         Pursuant to sublease  agreements dated as of June 1, 1996, an operating
subsidiary of the Company subleases The Shores and The Cheyenne Place facilities
from IHS. The subleases  provide for the payment of annual rent aggregating $1.7
million,  which amount is substantially similar to the amount paid by IHS to the
property  owner ($1.4  million in rent plus $321,000 in annual  purchase  option
deposits  representing  the  facilities'  allocable  portion of the total annual
purchase  option  deposit  IHS is  required  to make).  In  connection  with the
execution  of each  sublease  agreement,  the  Company  has  executed a guaranty
agreement  whereby the Company  guarantees the payment of obligations  due under
the sublease agreements.

         In November 1996, the Company engaged Timothy F. Nicholson,  a director
of IHS, to advise the Company with respect to its  acquisition  and  development
activities.  Pursuant to this arrangement which was effective  November 1, 1996,
Mr. Nicholson receives an annual consulting fee of $250,000,  and will receive a
negotiated  brokerage commission on each transaction he brings to the Company or
participates  in on behalf of the Company.  Up to $175,000 of his consulting fee
will be  credited  against  any  commissions  unless  extended.  The  consulting
arrangement will terminate December 31, 1997.

         The  Company  and  IHS  were  parties  to  an  Administrative  Services
Agreement,  dated June 1, 1996, pursuant to which IHS provided accounts payable,
accounts receivable, corporate accounting, payroll and payroll tax services,

<PAGE>



human resources support and risk management support services (the "Services") to
the Company. This agreement was terminated on September 30, 1996.

         Through the closing of the initial public offering,  IHS made available
to the Company a $75 million  revolving  credit  facility.  Borrowings under the
facility bore interest at the rate of 14% per annum. All outstanding borrowings,
together  with all accrued but unpaid  interest  aggregating  $7.4  million were
repaid  to IHS form the  proceeds  of the  Company's  initial  public  offering.
Following the closing of the  offering,  ILC borrowed $3.4 million from IHS. The
loan bears interest at the rate of 14% per annum and is to be repaid in 24 equal
monthly installments of principal plus interest beginning December 2, 1996.

SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

                                           INTEGRATED LIVING COMMUNITIES, INC.
                                                       (Registrant)

                                           By: /s/ JOHN. B. POOLE
                                               ---------------------------------
                                                John B. Poole
                                                Senior Vice President -
                                                Chief Financial Officer
                                               (Principal Financial Officer)