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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For quarter ended September 30, 2003

Commission File Number 0-17401

OPTIMUMCARE CORPORATION

(Exact name of registrant specified in its charter)


Delaware
    
    33-0218003(State of other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)30011 Ivy Glenn Drive, Ste 219Laguna Niguel, CA
    
    92677


(949) 495-1100

(Registrants telephone number, including area code)


Not Applicable

(Former name, former address and former fiscal year, if changed since last report).


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 periods
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 Noo

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act) Yes o No x

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of November 12, 2003.

Class
    
    Number of Shares OutstandingCommon Stock, $.001 par value
    
    5,908,675






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|                            |                                                                                              |                                                                                                                        |  |  |  |  |  | 
|--------------------------- | -------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|                            |                                                                                              | Report on Review by Independent Certified Public Accountants                                                          
|                            |                                                                                              | Condensed Consolidated Balance Sheets                                                                                 
|                            |                                                                                              | Condensed Consolidated Statements of Operations                                                                       
|                            |                                                                                              | Condensed Consolidated Statements of Cash Flows                                                                       
|                            | ITEM 1 FINANCIAL STATEMEMTS                                                                 
|                            |                                                                                              | Notes to Condensed Consolidated Financial Statements                                                                  
|                            | ITEM 2: Managements Discussion and Analysis of Financial Condition and Results of Operation
|                            |                                                                                              | Statement by Management Concerning Review of Interim Financial Information by Independent Certified Public Accountants
|                            | ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                            | ITEM 4 CONTROLS AND PROCEDURES                                                              
|PART II  OTHER INFORMATION
|                            | ITEM 1 LEGAL PROCEEDINGS                                                                    
|                            | ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                            | ITEM 3 DEFAULTS UPON SENIOR SECURITIES                                                      
|                            | ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                            | ITEM 5 OTHER INFORMATION                                                                    
|                            | ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURE                  
|EXHIBIT INDEX              
|EXHIBIT 15                 
|EXHIBIT 31.1               
|EXHIBIT 31.2               
|EXHIBIT 32.1               
|EXHIBIT 32.2               



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INDEX

OPTIMUMCARE CORPORATION

PagePART I
    
    FINANCIAL INFORMATIONItem 1. Financial StatementsReport on Review by Independent Certified Public Accountants
    
    
    3Condensed Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002
    
    
    4Condensed Consolidated Statements of Operations for the Nine Months and Three Months Ended September 30, 2003 and 2002
    
    
    5Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Statement by Management Concerning Review of Interim Information by Independent Certified Public Accountants
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    14Item 4. Controls and Procedures
    
    
    14PART II
    
    OTHER INFORMATION
    
    
    15SIGNATURE
    
    
    17EXHIBIT INDEX
    
    
    18ACCOUNTANTS ACKNOWLEDGMENTCERTIFICATIONS


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November 7, 2003

Independent Accountants Review Report

To the Board of Directors of
OptimumCare Corporation

We have reviewed the accompanying condensed consolidated balance sheet of
OptimumCare Corporation and its subsidiaries as of September 30, 2003, and
the related condensed consolidated statements of operations for the nine
months and the three months ended September 30, 2003 and 2002 and cash flows
for the nine months ended September 30, 2003 and 2002, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information
included in these financial statements is the representation of the
management of OptimumCare Corporation.

A review of interim financial information consists principally of inquiries
of Company personnel and analytical procedures applied to financial data.
It is substantially less in scope than an audit in accordance with auditing
standards generally accepted in the United States of America, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to
be in conformity with accounting principles generally accepted in the United
States of America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as
of December 31, 2002, and the related consolidated statements of operations,
stockholders equity, and cash flows for the year then ended (not presented
herein), and in our report dated February 28, 2003, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 2002 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which
it has been derived.

/s/ Lesley, Thomas, Schwarz & Postma, Inc.
A Professional Accountancy Corporation
Newport Beach, California

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OPTIMUMCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30
    
    DECEMBER 31,2003
    
    2002(UNAUDITED)ASSETSCURRENT ASSETSCASH AND CASH EQUIVALENTS
    
    $
    244,356
    
    
    $
    779,235INVESTMENTS
    
    
    0
    
    
    
    330,268ACCOUNTS RECEIVABLE, NET OF ALLOWANCE OF
$0 AT SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
    
    
    874,568
    
    
    
    927,445PREPAID EXPENSES
    
    
    43,774
    
    
    
    116,030PREPAID INCOME TAXES
    
    
    0
    
    
    
    216,114DEFERRED TAX ASSET
    
    
    40,446
    
    
    
    27,948TOTAL CURRENT ASSETS
    
    
    1,203,144
    
    
    
    2,397,040FURNITURE AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION OF $141,472 AT SEPTEMBER 30, 2003
AND $132,059 AT DECEMBER 31, 2002
    
    
    32,436
    
    
    
    32,800GOODWILL
    
    
    562,280
    
    
    
    225,181DEFERRED TAX ASSET
    
    
    279,899
    
    
    
    80,867OTHER ASSETS
    
    
    46,973
    
    
    
    18,234TOTAL ASSETS
    
    $
    2,124,732
    
    
    $
    2,754,122CURRENT LIABILITIESACCOUNTS PAYABLE
    
    $
    93,198
    
    
    $
    112,339ACCRUED VACATION
    
    
    35,392
    
    
    
    43,320ACCRUED EXPENSES
    
    
    220,792
    
    
    
    98,348ACCRUED BUSINESS ACQUISITION PAYMENT
    
    
    0
    
    
    
    50,000LINE OF CREDIT/NOTES PAYABLE
    
    
    145,000
    
    
    
    0TOTAL CURRENT LIABILITIES
    
    
    494,382
    
    
    
    304,007STOCKHOLDERS EQUITYPREFERRED STOCK, $.001 PAR VALUE; AUTHORIZED
10,000,000 SHARES, 0 SHARES ISSUED AND
OUTSTANDING AT SEPTEMBER 30, 2003 AND
AND DECEMBER 31, 2002COMMON STOCK, $.001 PAR VALUE; AUTHORIZED
20,000,000 SHARES, 5,908,675 SHARES ISSUED
AND OUTSTANDING AT SEPTEMBER 30, 2003
AND DECEMBER 31, 2002
    
    
    5,909
    
    
    
    5,909ADDITIONAL PAID-IN-CAPITAL
    
    
    2,403,706
    
    
    
    2,403,706RETAINED EARNINGS (ACCUMULATED DEFICIT)
    
    
    (779,265
    )
    
    
    40,500TOTAL STOCKHOLDERS EQUITY
    
    
    1,630,350
    
    
    
    2,450,115TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,124,732
    
    
    $
    2,754,122


See notes to condensed consolidated financial statements.

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OPTIMUMCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

NINE MONTHS ENDED
    
    NINE MONTHS ENDED
    
    THREE MONTHS ENDED
    
    THREE MONTHS ENDEDSEPTEMBER 30, 2003
    
    SEPTEMBER 30, 2002
    
    SEPTEMBER 30, 2003
    
    SEPTEMBER 30, 2002REVENUES:CONTRACT REVENUES
    
    $
    2,072,591
    
    
    $
    3,393,181
    
    
    $
    692,332
    
    
    $
    756,573TEMPORARY STAFFING REVENUES
    
    
    2,431,860
    
    
    
    486,170
    
    
    
    903,931
    
    
    
    486,170INTEREST INCOME
    
    
    2,000
    
    
    
    21,771
    
    
    
    492
    
    
    
    6,2804,506,451
    
    
    
    3,901,122
    
    
    
    1,596,755
    
    
    
    1,249,023OPERATING EXPENSES:COSTS OF CONTRACT SERVICES PROVIDED
    
    
    1,368,620
    
    
    
    2,516,137
    
    
    
    454,545
    
    
    
    552,587COSTS OF TEMPORARY STAFFING SERVICES PROVIDED
    
    
    2,413,342
    
    
    
    471,380
    
    
    
    928,415
    
    
    
    471,380GENERAL AND ADMINISTRATIVE
    
    
    1,115,026
    
    
    
    1,447,232
    
    
    
    435,237
    
    
    
    699,884INTEREST
    
    
    3,281
    
    
    
    70
    
    
    
    0
    
    
    
    0TOTAL OPERATING EXPENSES
    
    
    4,900,269
    
    
    
    4,434,819
    
    
    
    1,818,197
    
    
    
    1,723,851LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAX BENEFIT
    
    
    (393,818
    )
    
    
    (533,697
    )
    
    
    (221,442
    )
    
    
    (474,828
    )INCOME TAX BENEFIT
    
    
    102,393
    
    
    
    195,026
    
    
    
    42,399
    
    
    
    178,926NET LOSS FROM CONTINUING OPERATIONS
    
    
    (291,425
    )
    
    
    (338,671
    )
    
    
    (179,043
    )
    
    
    (295,902
    )LOSS FROM DISCONTINUED OPERATIONS
    
    
    (277,528
    )
    
    
    0
    
    
    
    (190,924
    )
    
    
    0LOSS ON IMPAIRMENT/SHUTDOWN
    
    
    (436,445
    )
    
    
    0
    
    
    
    (436,445
    )
    
    
    0LOSS FROM DISCONTINUED OPERATIONS
    
    
    (713,973
    )
    
    
    0
    
    
    
    (627,369
    )
    
    
    0INCOME TAX BENEFIT, DISCONTINUED OPERATIONS
    
    
    185,633
    
    
    
    0
    
    
    
    155,492
    
    
    
    0NET LOSS FROM DISCONTINUED OPERATIONS
    
    
    (528,340
    )
    
    
    0
    
    
    
    (471,877
    )
    
    
    0NET LOSS
    
    
    ($819,765
    )
    
    
    ($338,671
    )
    
    
    ($650,920
    )
    
    
    ($295,902
    )BASIC LOSS PER SHARE FROM CONTINUING OPERATIONS
    
    
    ($0.05
    )
    
    
    ($0.06
    )
    
    
    ($0.03
    )
    
    
    ($0.05
    )BASIC LOSS PER SHARE FROM DISCONTINUED OPERATIONS
    
    
    ($0.09
    )
    
    $
    0.00
    
    
    
    ($0.08
    )
    
    $
    0.00BASIC LOSS PER SHARE
    
    
    ($0.14
    )
    
    
    ($0.06
    )
    
    
    ($0.11
    )
    
    
    ($0.05
    )DILUTED LOSS PER SHARE FROM CONTINUING OPERATIONS
    
    
    ($0.05
    )
    
    
    ($0.06
    )
    
    
    ($0.03
    )
    
    
    ($0.05
    )DILUTED LOSS PER SHARE FROM DISCONTINUED OPERATIONS
    
    
    ($0.09
    )
    
    $
    0.00
    
    
    
    ($0.08
    )
    
    $
    0.00DILUTED LOSS PER SHARE
    
    
    ($0.14
    )
    
    
    ($0.06
    )
    
    
    ($0.11
    )
    
    
    ($0.05
    )SHARES USED IN LOSS PER SHARE CALCULATIONS:BASIC
    
    
    5,908,675
    
    
    
    5,908,675
    
    
    
    5,908,675
    
    
    
    5,908,675DILUTED
    
    
    5,908,675
    
    
    
    5,908,675
    
    
    
    5,908,675
    
    
    
    5,908,675


See notes to condensed consolidated financial statements.

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OPTIMUMCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

NINE MONTHS ENDEDSEPTEMBER 30
    
    SEPTEMBER 302003
    
    2002CASH FLOW FROM OPERATING ACTIVITIESNet Loss
    
    
    ($819,765
    )
    
    
    ($338,671
    )Adjustments to reconcile net loss to net
cash used by operating activities:Depreciation & amortization
    
    
    9,413
    
    
    
    8,893Deferred taxes
    
    
    211,531
    
    
    
    (26,318
    )Changes in operating assets and liabilities:Decrease in accounts receivable, net
    
    
    52,877
    
    
    
    470,204Impairment of accounts receivable
    
    
    (76,614
    )
    
    
    0Decrease in advances due from officer
    
    
    0
    
    
    
    131,642Decrease in prepaid expenses
    
    
    72,256
    
    
    
    76,330Decrease in prepaid income taxes
    
    
    216,114
    
    
    
    382,474Decrease/(increase)
in other assets
    
    
    (28,739
    )
    
    
    4,166Impairment of fixed assets and deposits
    
    
    (16,314
    )
    
    
    0(Decrease) in accounts payable
    
    
    (19,141
    )
    
    
    (117,873
    )(Decrease) in accrued vacation
    
    
    (7,929
    )
    
    
    (15,840
    )(Decrease)/Increase in accrued expenses
    
    
    122,444
    
    
    
    (84,537
    )(Decrease) in accrued business acquisition
    
    
    (50,000
    )
    
    
    0Decrease in accrued payment to officer
    
    
    0
    
    
    
    (700,000
    )CASH AND CASH EQUIVALENTS USED
BY OPERATING ACTIVITIES
    
    
    (333,867
    )
    
    
    (209,530
    )CASH FLOW FROM INVESTING ACTIVITIESPurchase of investments
    
    
    0
    
    
    
    (483,305
    )Purchase of other assets
    
    
    0
    
    
    
    (12,930
    )Purchase of office furniture and computer equipment
    
    
    0
    
    
    
    (5,187
    )Payments on note receivable from officer
    
    
    0
    
    
    
    225,136Purchase of new business entities
    
    
    (676,280
    )
    
    
    (200,000
    )CASH AND CASH EQUIVALENTS USED
BY INVESTING ACTIVITIES
    
    
    (676,280
    )
    
    
    (476,286
    )CASH FLOW FROM FINANCING ACTIVITIESIncrease in line of credit/note payable
    
    
    145,000
    
    
    
    0Decrease (sale) of investments
    
    
    330,268
    
    
    
    0CASH AND CASH EQUIVALENTS PROVIDED
BY FINANCING ACTIVITIES
    
    
    475,268
    
    
    
    0DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (534,879
    )
    
    
    (685,816
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    779,235
    
    
    
    1,646,891CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    244,356
    
    
    $
    961,075


See notes to condensed consolidated financial statements.

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ITEM 1 FINANCIAL STATEMEMTS




OPTIMUMCARE CORPORATION  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

SEPTEMBER 30, 2003

NOTE A  BASIS OF PRESENTATION

The accompanying unaudited financial statements include the accounts of the
Company and its majority owned subsidiaries. All significant intercompany
transactions, if any, have been eliminated. The unaudited financial statements
included herein have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the nine month
period ended September 30, 2003 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2003. For further
information, refer to the financial statements and footnotes thereto included
in the Companys Form 10-K for the year ended December 31, 2002.

NOTE B  STOCK-BASED COMPENSATION

The Company accounts for its stock option plans under the recognition and
measurement principles of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees(APB 25) and related
Interpretations. No stock-based employee compensation cost is reflected in net
income, as all options granted under its plans had an exercise price equal to
the market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of FASB Statement
No. 123, Accounting for Stock-Based Compensation", to stock-based employee
compensation.

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Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Net Loss, as reported
    
    $
    (650,920
    )
    
    $
    (295,902
    )
    
    $
    (819,765
    )
    
    $
    (338,671
    )Deduct: Total
stock-based employee
compensation expense
determined under fair
value based methods
for all awards, net
of related tax
effects
    
    
    (0
    )
    
    
    (0
    )
    
    
    (992
    )
    
    
    (40,920
    )Pro forma net Loss
    
    $
    (650,920
    )
    
    $
    (295,902
    )
    
    $
    (820,757
    )
    
    $
    (379,591
    )Loss per share:Basic, as reported
    
    $
    (.11
    )
    
    $
    (.05
    )
    
    $
    (.14
    )
    
    
    ($.06
    )Basic, pro forma
    
    $
    (.11
    )
    
    $
    (.05
    )
    
    $
    (.14
    )
    
    
    ($.06
    )Diluted, as reported
    
    $
    (.11
    )
    
    $
    (.05
    )
    
    $
    (.14
    )
    
    
    ($.06
    )Diluted, pro forma
    
    $
    (.11
    )
    
    $
    (.05
    )
    
    $
    (.14
    )
    
    
    ($.06
    )


NOTE C  INVESTMENTS

Investments consist of federal home loan bank bonds and U.S. treasury notes
with an aggregate principal amount of $0 and $330,268 at September 30, 2003 and
December 31, 2002 respectively. The bonds were liquidated to fund working
capital needs and pay off an existing line of credit during the period ended
June 30, 2003.

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NOTE D  LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per
share:

Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Numerator
    
    $
    (650,920
    )
    
    $
    (295,902
    )
    
    $
    (819,765
    )
    
    $
    (338,671
    )Denominator:Denominator for basic
loss per share -
weighted-average
shares
    
    
    5,908,675
    
    
    
    5,908,675
    
    
    
    5,908,675
    
    
    
    5,908,675Dilutive employee
stock options
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Denominator for
diluted loss per
share
    
    
    5,908,675
    
    
    
    5,908,675
    
    
    
    5,908,675
    
    
    
    5,908,675Basic loss per share
    
    $
    (.11
    )
    
    $
    (.05
    )
    
    $
    (.14
    )
    
    $
    (.06
    )Diluted loss per share
    
    $
    (.11
    )
    
    $
    (.05
    )
    
    $
    (.14
    )
    
    $
    (.06
    )


NOTE E  BUSINESS SEGMENTS

The Companys principal business is to develop, market and manage hospital
based programs for the treatment of psychiatric disorders on both an inpatient
and outpatient basis. However, with the acquisition of four (4) healthcare
staffing companies during the past twelve months, the Company adopted Statement
of Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information(SFAS 131). The Company has two (2)
segments, psychiatric programs and temporary staffing.

The Company evaluates segment performance and allocates resources based on
several factors, of which, net sales, accounts receivable and operating income
are the primary financial measures. The accounting policies of the reportable
segments are the same as those described in Note 1 to the consolidated
financial statements.

Three Months ended September 30, 2003Operating
    
    OperatingNet Sales
    
    Expenses
    
    Income(Loss)Psychiatric Programs
    
    $
    692,332
    
    
    $
    454,545
    
    
    $
    237,787Temporary Staffing
    
    
    903,931
    
    
    
    928,415
    
    
    
    (24,484
    )Corporate
    
    
    492
    
    
    
    435,237
    
    
    
    (434,745
    )$
    1,596,755
    
    
    $
    1,818,197
    
    
    $
    (221,442
    )


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Nine months ended September 30, 2003Operating
    
    OperatingNet Sales
    
    Expenses
    
    Income/(Loss)Psychiatric Programs
    
    $
    2,072,591
    
    
    $
    1,368,620
    
    
    $
    703,971Temporary Staffing
    
    
    2,431,860
    
    
    
    2,413,342
    
    
    
    18,518Corporate
    
    
    2,000
    
    
    
    1,118,307
    
    
    
    (1,116,307
    )$
    4,506,451
    
    
    $
    4,900,269
    
    
    $
    (393,818
    )


As of September 30, 2003Accounts
    
    TotalReceivable
    
    Assets (1)Psychiatric Programs
    
    $
    229,200
    
    
    $
    Temporary Staffing
    
    
    645,368
    
    
    
    1,026,592Corporate
    
    
    
    
    
    
    1,098,140$
    874,568
    
    
    $
    2,124,732




|(1) |  | The temporary staffing business is part of the Companys wholly owned
subsidiaries which are accounted for separately internally. However, the
assets of the parent companys corporate offices are not maintained
separately from those that are associated with the psychiatric programs
such as, cash, fixed assets, etc. and therefore, cannot be reported
individually.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE F  DISCONTINUED OPERATIONS

Management made the decision to suspend operations in its Florida health care
staffing offices on September 5, 2003 due to underperformance. Operating losses
related to the discontinued health care staffing operation total $(277,528) for
the nine months ended September 30, 2003 and have been treated for reporting
purposes as a discontinued operation. The Florida staffing agency represented
health care staffing revenues of $637,198 and operating costs of $838,112 for
the nine months ended September 30, 2003. In addition to the loss from
operations, the Company has accrued other charges related to the shutdown
(including legal and administrative costs and impairment of goodwill and other
assets) in the amount of $436,445.

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ITEM 2 :

Managements Discussion and Analysis of Financial Condition and Results of Operation

Safe harbor statements under the Private Securities Litigation Reform Act of 1995

Managements Discussion and Analysis of Financial Condition and Results of
Operations contains statements which are forward-looking in time and involve
risks and uncertainties, including the risks associated with plans, the effects
of changing economic and competitive conditions, government regulation which
may affect facilities, licensing, healthcare reform which may affect payment
amounts and timing, availability of sufficient working capital, program
development efforts and timing and market acceptance of new programs which may
affect future sales growth and/or costs of operations.

Material Changes in Financial Condition

At September 30, 2003 and December 31, 2002, the Companys working capital was
$708,762 and $2,093,033, respectively. The decrease in working capital for the
period is primarily due to the Companys net loss, growth in the temporary
staffing business and associated accounts receivable, and the acquisition of
two new business entities in March and September 2003. The nature of the
Companys business requires significant working capital to fund operations of
its programs as well as to fund corporate expenditures until receivables can be
collected. Moreover, because each of the existing contracts represents a
significant portion of the Companys contract business, the inability to
collect certain of the accounts receivable could materially and adversely
affect the Companys liquidity. The accounts receivable of the temporary
staffing business are less concentrated with no customer representing more than
25%. Accounts receivable from continuing operations at September 30, 2003 have
decreased from those that existed at December 31, 2002. This is due to the net
effects of more aggressive collection practices in the existing staffing
business, growth in our non-Florida staffing operations, reductions in accounts
receivable due to writeoffs of impaired accounts from the Companys
discontinued Florida staffing operations (see Note F above), and recording of
an allowance for doubtful accounts in continuing operations. Temporary
staffing receivables from continuing operations at September 30, 2003 were
$645,368 of which 12 accounts comprise approximately 35%. The Company evaluates
the collectibility of its receivables in continuing operations on a
case-by-case basis on a regular basis.

Cash used in operations was $333,867 for the nine month period ending September
30, 2003 compared to cash used of $209,530 for the nine month period ended
September 30, 2002. Cash used during the nine months ended September 30, 2003
was primarily due to the Companys net loss for the period.

Cash used in investing activities was $676,280 for the nine month period ended
September 30, 2003 compared to cash used in investing activities of $476,286
for the same period of 2002. Cash was primarily used during the nine months
ended September 30, 2003 for the purchase of two new business entities in March
and September, 2003.

Cash flows from financing activities were $475,268 for the period ended
September 30, 2003. Funds were provided from sales of investments and a note
payable from the seller of one acquired business. Goodwill represents the
excess of the purchase price over the fair value of the net tangible and
identifiable intangible assets acquired in a business combination. In
accordance with SFAS No. 142,

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Goodwill and Other Intangible Assets, goodwill
is no longer subject to amortization. Rather, goodwill is subject to at least
an annual assessment for impairment, applying a fair-value based test. The
Company evaluates the recoverability of the carrying amount of these long-lived
assets (including goodwill, fixed assets, and trademarks) at least annually or
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be fully recoverable. Accordingly, an impairment was
recorded to goodwill and certain other assets in the discontinued operation
(see Note F above). The Company will continue to evaluate the recoverability of
the carrying amount of these long term assets, primarily goodwill.

The Company is currently in discussions with several lenders who could provide
working capital lines of credit on competitive terms. The Companys principal
sources of liquidity for fiscal year 2003 are cash on hand, accounts
receivable, and continuing revenues from programs and from the recently
acquired staffing businesses.

Material Changes in Results of Operations

Three Months Ended September 30, 2003 compared to Three Months Ended September
30, 2002

The Company operated four (4) contract programs during the three months ended
September 30, 2003 and five (5) contract programs during the three months ended
September 30, 2002. Net revenues from the contract programs were $692,332 and
$756,573 for the three months ended September 30, 2003 and 2002, respectively.
The decrease in net revenues among periods is primarily due to the decrease in
the number of operating programs. Cost of contract services provided were
$454,545 and $552,587 for the three months ended September 30, 2003 and 2002,
respectively. The decrease in cost of contract services provided among periods
is due to the decrease in the number of programs.

Revenues for continuing operations in temporary staffing services were $903,931
and $486,170 for the three months ended September 30, 2003 and 2002
respectively. Costs of providing these services were $928,415 (including an
allowance for uncollectible accounts of $42,199) and $471,380 for the three
months ended September 30, 2003 and 2002. These figures for the three months
ended September 30, 2003 do not include revenues and costs of services for the
discontinued Florida health care staffing operation (see Note F above,
Discontinued Operations). Revenues and operations in the discontinued
operations commenced during the first quarter of 2003 and, therefore, there are
no corresponding amounts for the previous year. Results of continuing
operations in temporary staffing services for the three months ended September
30, 2003 included operations of Heartline Inc. (see Item 5B below) from
September 3, 2003.

General and administrative expenses were $435,237 and $699,884 for the three
months ended September 30, 2003 and September 30, 2002, respectively. The
decrease in costs due to an aggressive effort on the part of management to
deliver services more cost effectively and was offset by increased legal and
administrative costs associated with the discontinued operation.

The Companys income tax benefit has increased for the three months ended
September 30, 2003 over the comparable three months ended September 30, 2002
due to a net loss for the period.

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Net loss from continuing operations was $(179,043) and net loss including
discontinued operations was $(650,920) for the three months ended September 30,
2003 compared to a net loss of $(295,902) for the three months ended September
30, 2002.

Nine Months Ended September 30, 2003 compared to Nine Months Ended September
30, 2002

The Company operated four (4) contract programs during the nine months ended
September 30, 2003 and six (6) contract programs during the nine months ended
September 30, 2002. Net revenues from the contract programs were $2,072,591
and $3,393,181 for the nine months ended September 30, 2003 and 2002,
respectively. The decrease in net revenues among periods is primarily due to
the decrease in the number of operating programs. Cost of contract services
provided were $1,368,620 and $2,516,137 for the nine months ended September
30, 2003 and 2002, respectively. The decrease in cost of contract services
provided among periods is due to the decrease in the number of programs.

Revenues for continuing operations in temporary staffing services were
$2,431,860 and $486,170 for the nine month periods ended September 30, 2003 and
2002 respectively. Costs of providing these services were $2,413,342 and
$471,380 for the nine months ended September 30, 2003 and 2002 respectively.
These figures for the nine months ended September 30, 2003 do not include
revenues and costs of services for the suspended Florida health care staffing
operation (see Note F above, Suspended Operations). Revenues and operations for
the discontinued operations commenced during the first quarter of 2003 and,
therefore, there are no corresponding amounts for the previous year. Results of
continuing operations in temporary staffing services for the nine months ended
September 30, 2003 included operations of Heartline Inc. (see Item 5B below)
from September 3, 2003.

General and administrative expenses were $1,115,026 and $1,447,232 for the nine
months ended September 30, 2003 and September 30, 2002, respectively. The
decrease in costs is primarily related to an aggressive cost reduction effort
offset by increased legal expenses and the administrative costs associated with
the shutdown of the Florida health care staffing operation as well as increased
legal reserves (see Part II Item 1).

The Companys income tax benefit has increased for the nine months ended
September 30, 2003 over the comparable nine months ended September 30, 2002 due
to a larger net loss for the period.

Net loss from continuing operations was $(291,425) and net loss including
discontinued operations was $(819,765) for the nine months ended September 30,
2003. Net loss was $(338,671) for the nine months ended September 30, 2002.

The Company is continuing to make efforts to expand the number of its
operational contract programs and has contracted with a consulting firm managed
by one of the Companys previous directors to pursue an aggressive marketing
program.

The Company acquired two temporary staffing businesses during 2002. In the nine
months ended September 30, 2003 the Company acquired two additional health care
staffing businesses and suspended operations at one of these acquired
businesses (see Note F above and Item 5B below). The Company has identified
other acquisition candidates and intends to continue to pursue this line of
business, and regularly evaluates all staffing operations on performance
criteria such as achieving
revenue and profitability goals.

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The Companys contract business has a dependence on a small customer base,
presently consisting of three hospitals. However, the temporary staffing
services segment has a fairly large customer base consisting of approximately
80 active hospitals. The Company has a significant amount of variable expenses
associated with the production of its revenues, although certain fixed costs do
exist. To that end, the loss of certain customers could have a significant
adverse effect on the Companys profit margin.




Statement by Management Concerning Review of Interim Financial Information by
Independent Certified Public Accountants

The September 30, 2003 condensed consolidated financial statements included in
this filing on Form 10-Q have been reviewed by Lesley, Thomas, Schwarz &
Postma, Inc., independent certified public accountants, in accordance with
established professional standards and procedures for such review. The report
of Lesley, Thomas, Schwarz & Postma, Inc. commenting upon their review
accompanies the condensed consolidated financial statements included in Item 1
of Part 1.






|        |                                                           
|------- | ----------------------------------------------------------
|ITEM 3: | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Immaterial






|       |                        
|------ | -----------------------
|ITEM 4 | CONTROLS AND PROCEDURES

The Companys disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports that the Company files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms of the Securities and Exchange Commission. The Chief Executive Officer
and the Chief Financial Officer of the Company have reviewed the effectiveness
of the Companys disclosure controls and procedures as of the end of the period
covered by this report and have concluded that the disclosure controls and
procedures are effective. There were no significant changes in the Companys
internal controls or in other factors that could significantly affect these
controls subsequent to the last day they were evaluated.

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PART II

OTHER INFORMATION






|       |                  
|------ | -----------------
|ITEM 1 | LEGAL PROCEEDINGS

The Company is involved in legal proceedings stemming from its suspension
of its temporary nurse staffing business in Florida. On September 22,
2003, Chicago Care Nurse Staffing, Inc., John W. Stephens, Joshua G.
Zayas and Aaron Schwartz filed a Complaint against the Company and its
wholly owned subsidiary, OptimumCare Staffing, Inc. in the Circuit Court
of the Ninth Judicial Circuit, in and for Orange County, Florida, Case
No. 03CA-8783, Div. 34. The Complaint alleges breach of contract, fraud
in the inducement and unjust enrichment actions with respect to an asset
purchase agreement pursuant to which OptimumCare Staffing, Inc. acquired
the assets of Chicago Care, breach of contract and unpaid wages claims
with respect to employment agreements with the three individual
plaintiffs, and an action to declare the non-compete agreements with the
individual plaintiffs void. The parties have stipulated to the dismissal
of the Complaint. Plaintiffs will pursue their claims in arbitration
under the rules of the American Arbitration Association as provided in
the various agreements. The Company believes that it has meritorious
defenses and intends to defend itself vigorously. Dispute resolution,
even through arbitration, is costly and subject to inherent uncertainties
and an unfavorable result could result in a material adverse impact on
the results of operations in a future period or periods. Accordingly,
during the period ended September 30, 2003, management has recorded a
reserve for potential legal expenses for this matter of $100,000.






|       |                                          
|------ | -----------------------------------------
|ITEM 2 | CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.






|       |                                
|------ | -------------------------------
|ITEM 3 | DEFAULTS UPON SENIOR SECURITIES

Not applicable.






|       |                                                    
|------ | ---------------------------------------------------
|ITEM 4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.






|       |                  
|------ | -----------------
|ITEM 5 | OTHER INFORMATION

On
September 3, 2003, the Company acquired 100% of the issued and
outstanding capital stock of Heartline Inc., a healthcare staffing
company located in southern California, specializing in registered
nurses. The total purchase price was $385,000. The purchase price
included cash consideration of $215,000, $10,000 in shares of OptimumCare
Corporation restricted common stock, and a promissory note in favor of the
seller in the principal amount of $145,000. In addition a brokerage fee
of $15,000 was paid to a third party. The principal amount of the
promissory note is subject to an upward or downward adjustment based on
the dollar amount of sales collected during the one year period following
the closing. The major assets of the business acquired are contractual
relationships with healthcare agencies and hospitals and registered nurses
who will be matched and managed utilizing computer

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software previously acquired by the Company. The acquisition is
expected to add $1,100,000 in annual revenues to the temporary staffing
segment of the Company.






|       |                                 
|------ | --------------------------------
|ITEM 6 | EXHIBITS AND REPORTS ON FORM 8-K

|    |                                                                                                                                |  |                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Exhibit 15:                                                                                                                    |  | Accountants Acknowledgment                                                                                                                       
|    |                                                                                                                                | 
|    | Exhibit 31.1:                                                                                                                  |  | Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002                                                
|    |                                                                                                                                | 
|    | Exhibit 31.2:                                                                                                                  |  | Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002                                                
|    |                                                                                                                                | 
|    | Exhibit 32.1:                                                                                                                  |  | Certification of Chief Executive Officer of Periodic Financial Reports pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350
|    |                                                                                                                                | 
|    | Exhibit 32.2:                                                                                                                  |  | Certification of Chief Financial Officer of Periodic Financial Reports pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350
|    |                                                                                                                                | 
|(b) | On September 3, 2003, the Company filed a report on Form 8-K reporting
the acquisition of the capital stock of Heartline, Inc.

On September 5, 2003, the Company filed a report on Form 8-K reporting the
suspension of operations of its Florida staffing agency.

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SIGNATURE

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 authorized.

OPTIMUMCARE CORPORATION
A Delaware CorporationDated: November 10, 2003
    
    By:
    
    /s/ Edward A. JohnsonEdward A. JohnsonChairman of the Board and
Chief Executive Officer(Principal Executive Officer,
Principal Financial Officer, and
Principal Accounting Officer)


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EXHIBIT INDEX

|              |  |                                                                                                                                                   
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 15:   |  | Accountants Acknowledgment                                                                                                                       
|              |  |                                                                                                                                                   
|Exhibit 31.1: |  | Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002                                                
|              |  |                                                                                                                                                   
|Exhibit 31.2: |  | Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002                                                
|              |  |                                                                                                                                                   
|Exhibit 32.1: |  | Certification of Chief Executive Officer of Periodic Financial Reports pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350
|              |  |                                                                                                                                                   
|Exhibit 32.2: |  | Certification of Chief Financial Officer of Periodic Financial Reports pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350

18