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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 March 31,
2003

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Commission File Number 0-17401

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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 219                                 |  |                                     
|Laguna 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 No o
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | 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 May 14, 2003                                                                                                                                                                                                                                                        

|                                    |  |                                       
|----------------------------------- |  | --------------------------------------
|Class
Common Stock, $.001 par value |  | Number of Shares Outstanding
5,908,675

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TABLE OF CONTENTS



|                  |                                                                    |  |  |  |  |  |  | 
|----------------- | ------------------------------------------------------------------ |  |  |  |  |  |  | 
|                  | 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        
|CERTIFICATIONS   
|EXHIBIT 15       



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##### Table of Contents



INDEX

OPTIMUMCARE CORPORATION

|                                                                                              |                                                                                                              |  |      |    | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|PART I         FINANCIAL INFORMATION                                                          |                                                                                                              |  |      |   
|                                                                                              |                                                                                                              |  |      |   
|                                                                                              |                                                                                                              |  | Page
|                                                                                              |                                                                                                              |  |     
|Item 1. Financial Statements                                                                  |                                                                                                              |  |      |   
|                                                                                              | Report on Review by Independent Certified Public Accountants                                                 |  |      | 3  | 
|                                                                                              | Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002                             |  |      | 4  | 
|                                                                                              | Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2003 and 2002           |  |      | 5  | 
|                                                                                              | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002           |  |      | 6  | 
|                                                                                              | Notes to Condensed Consolidated Financial Statements                                                         |  |      | 7  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                              |  | 10   |   
|                                                                                              | Statement by Management Concerning Review of Interim Information by Independent Certified Public Accountants |  |      | 12 | 
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                              |  | 12   |   
|Item 4. Controls and Procedures                                                               |                                                                                                              |  | 12   |   
|PART II        OTHER INFORMATION                                                              |                                                                                                              |  | 13   |   
|                                                                                              |                                                                                                              |  |      |   
|SIGNATURE                                                                                     |                                                                                                              |  | 14   |   
|                                                                                              |                                                                                                              |  |      |   
|CERTIFICATIONS                                                                                |                                                                                                              |  | 15   |   
|                                                                                              |                                                                                                              |  |      |   
|EXHIBITS                                                                                      |                                                                                                              |  | 18   |   
|                                                                                              |                                                                                                              |  |      |   
|ACCOUNTANTS ACKNOWLEDGMENT                                                                   |                                                                                                              |  | 19   |   
|                                                                                              |                                                                                                              |  |      |   

2



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May 6, 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 March 31, 2003, and the
related condensed consolidated statements of operations for the three months
ended March 31, 2003 and 2002 and cash flows for the three months ended March
31, 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

|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           |             |           |              |           |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | - | -------------------------- | --------- | ----------- | --------- | ------------ | --------- | - | --------- | 
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           | MARCH 31,   |           | DECEMBER 31,
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           | 2003        |           | 2002        
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           | (UNAUDITED) |           |             
|ASSETS                                                                                                                                                                                                                                                                                                        |                                                                                     |   |                            |           |             |           |              |          
|CURRENT ASSETS                                                                                                                                                                                                                                                                                                |                                                                                     |   |                            |           |             |           |              |          
|                                                                                                                                                                                                                                                                                                              | CASH AND CASH EQUIVALENTS                                                           |   | $                          | 576,602   |             |           | $            | 779,235   |  
|                                                                                                                                                                                                                                                                                                              | INVESTMENTS                                                                         |   |                            | 328,387   |             |           |              | 330,268   |  
|                                                                                                                                                                                                                                                                                                              | ACCOUNTS RECEIVABLE, NET OF ALLOWANCE OF $0 AT
MARCH 31, 2003 AND DECEMBER 31, 2002 |   |                            | 943,933   |             |           |              | 927,445   |  
|                                                                                                                                                                                                                                                                                                              | PREPAID EXPENSES                                                                    |   |                            | 115,757   |             |           |              | 116,030   |  
|                                                                                                                                                                                                                                                                                                              | PREPAID INCOME TAXES                                                                |   |                            | 241,507   |             |           |              | 216,114   |  
|                                                                                                                                                                                                                                                                                                              | DEFERRED TAX ASSET                                                                  |   |                            | 31,783    |             |           |              | 27,948    |  
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           |             |           |              |           |  
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   | TOTAL CURRENT ASSETS       |           |             | 2,237,969 |              |           |   | 2,397,040 | 
|FURNITURE AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION OF $135,644 AT MARCH 31, 2003
AND $132,059 AT DECEMBER 31, 2002                                                                                                                                                                                        |                                                                                     |   | 41,392                     |           |             |           | 32,800       |          
|GOODWILL                                                                                                                                                                                                                                                                                                      |                                                                                     |   | 483,761                    |           |             |           | 225,181      |          
|DEFERRED TAX ASSET                                                                                                                                                                                                                                                                                            |                                                                                     |   | 80,867                     |           |             |           | 80,867       |          
|OTHER ASSETS                                                                                                                                                                                                                                                                                                  |                                                                                     |   | 23,234                     |           |             |           | 18,234       |          
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           |             |           |              |           |  
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   | TOTAL ASSETS               |           | $           | 2,867,223 |              |           | $ | 2,754,122 | 
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           |             |           |              |           |  
|CURRENT LIABILITIES                                                                                                                                                                                                                                                                                           |                                                                                     |   |                            |           |             |           |              |          
|                                                                                                                                                                                                                                                                                                              | ACCOUNTS PAYABLE                                                                    |   | $                          | 157,075   |             |           | $            | 112,339   |  
|                                                                                                                                                                                                                                                                                                              | ACCRUED VACATION                                                                    |   |                            | 36,541    |             |           |              | 43,320    |  
|                                                                                                                                                                                                                                                                                                              | ACCRUED EXPENSES                                                                    |   |                            | 100,235   |             |           |              | 98,348    |  
|                                                                                                                                                                                                                                                                                                              | ACCRUED BUSINESS ACQUISITION PAYMENT                                                |   |                            | 50,000    |             |           |              | 50,000    |  
|                                                                                                                                                                                                                                                                                                              | LINE OF CREDIT                                                                      |   |                            | 144,939   |             |           |              | 0         |  
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           |             |           |              |           |  
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   | TOTAL CURRENT LIABILITIES  |           |             | 488,790   |              |           |   | 304,007   | 
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           |             |           |              |           |  
|STOCKHOLDERS
EQUITY
PREFERRED STOCK, $.001 PAR VALUE; AUTHORIZED
10,000,000 SHARES, 0 SHARES ISSUED AND
OUTSTANDING AT MARCH 31, 2003 AND
AND DECEMBER 31, 2002
COMMON STOCK, $.001 PAR VALUE; AUTHORIZED
20,000,000 SHARES, 5,908,675 SHARES ISSUED
AND OUTSTANDING AT MARCH 31, 2003
AND DECEMBER 31, 2002 |                                                                                     |   | 5,909                      |           |             |           | 5,909        |          
|                                                                                                                                                                                                                                                                                                              | ADDITIONAL PAID-IN-CAPITAL                                                          |   |                            | 2,403,706 |             |           |              | 2,403,706 |  
|                                                                                                                                                                                                                                                                                                              | RETAINED EARNINGS                                                                   |   |                            | (31,182   | )           |           |              | 40,500    |  
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           |             |           |              |           |  
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   | TOTAL STOCKHOLDERS EQUITY |           | $           | 2,378,433 |              |           | $ | 2,450,115 | 
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           |             |           |              |           |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                                                                    |                                                                                     | $ | 2,867,223                  |           |             | $         | 2,754,122    |          
|                                                                                                                                                                                                                                                                                                              |                                                                                     |   |                            |           |             |           |              |           |  



| |  | See notes to condensed consolidated financial statements.
| |  | ---------------------------------------------------------

4



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OPTIMUMCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

|                         |                                               |  |           |                    |  |  |           |           | 
|------------------------ | --------------------------------------------- |  | --------- | ------------------ |  |  | --------- | --------- | 
|                         |                                               |  |           | THREE MONTHS ENDED |  |  |           |           | 
|                         |                                               |  |           | MARCH 31,          |  |  |           | MARCH 31, | 
|                         |                                               |  |           | 2003               |  |  |           | 2002      | 
|                         |                                               |  |           |                    |  |  |           |           | 
|REVENUES:                |                                               |  |           |                    |  |  |           |          
|                         | CONTRACT REVENUES                             |  | $         | 686,892            |  |  | $         | 1,388,858 | 
|                         | TEMPORARY STAFFING REVENUES                   |  |           | 731,958            |  |  |           | 0         | 
|                         | INTEREST INCOME                               |  |           | 2,629              |  |  |           | 7,646     | 
|                         |                                               |  |           |                    |  |  |           |           | 
|                         |                                               |  | 1,421,479 |                    |  |  | 1,396,504 |          
|                         |                                               |  |           |                    |  |  |           |           | 
|OPERATING EXPENSES:      |                                               |  |           |                    |  |  |           |          
|                         | COSTS OF CONTRACT SERVICES PROVIDED           |  |           | 458,053            |  |  |           | 1,250,462 | 
|                         | COSTS OF TEMPORARY STAFFING SERVICES PROVIDED |  |           | 743,192            |  |  |           | 0         | 
|                         | GENERAL AND ADMINISTRATIVE                    |  |           | 319,477            |  |  |           | 348,324   | 
|                         | INTEREST                                      |  |           | 782                |  |  |           | 70        | 
|                         |                                               |  |           |                    |  |  |           |           | 
|TOTAL OPERATING EXPENSES |                                               |  | 1,521,504 |                    |  |  | 1,598,856 |          
|                         |                                               |  |           |                    |  |  |           |           | 
|LOSS BEFORE INCOME TAXES |                                               |  | (100,025  | )                  |  |  | (202,352  | )        
|INCOME TAX BENEFIT       |                                               |  | 28,343    |                    |  |  | 76,201    |          
|                         |                                               |  |           |                    |  |  |           |           | 
|NET LOSS                 |                                               |  | ($71,682  | )                  |  |  | ($126,151 | )        
|                         |                                               |  |           |                    |  |  |           |           | 
|BASIC LOSS PER SHARE     |                                               |  | ($0.01    | )                  |  |  | ($0.02    | )        
|                         |                                               |  |           |                    |  |  |           |           | 
|DILUTED LOSS PER SHARE   |                                               |  | ($0.01    | )                  |  |  | ($0.02    | )        
|                         |                                               |  |           |                    |  |  |           |           | 

See notes to condensed consolidated financial statements.

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OPTIMUMCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

|                                                 |                                         |                                                                             |                                              |                                                                   |          |                    |           |           |          |        |          |  
|------------------------------------------------ | --------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------- | ----------------------------------------------------------------- | -------- | ------------------ | --------- | --------- | -------- | ------ | -------- | -
|                                                 |                                         |                                                                             |                                              |                                                                   |          | THREE MONTHS ENDED
|                                                 |                                         |                                                                             |                                              |                                                                   |          |                   
|                                                 |                                         |                                                                             |                                              |                                                                   |          | MARCH 31,          |           | MARCH 31,
|                                                 |                                         |                                                                             |                                              |                                                                   |          | 2003               |           | 2002     
|                                                 |                                         |                                                                             |                                              |                                                                   |          |                    |           |          
|CASH FLOW FROM OPERATING ACTIVITIES              |                                         |                                                                             |                                              |                                                                   |          |                    |           |          
|                                                 |                                         | Net Loss                                                                    |                                              | $                                                                 | (71,682  | )                  |           | $         | (126,151 | )     
|                                                 |                                         | Adjustments to reconcile net loss to net
cash used by operating activities: |                                              |                                                                   |          |                    |           |           |          |       
|                                                 |                                         |                                                                             | Depreciation & amortization                  |                                                                   |          | 5,466              |           |           |          | 2,952  |         
|                                                 |                                         |                                                                             | Deferred taxes                               |                                                                   |          | (3,835             | )         |           |          | (9,837 | )       
|                                                 |                                         |                                                                             | Changes in operating assets and liabilities: |                                                                   |          |                    |           |           |          |        |         
|                                                 |                                         |                                                                             |                                              | Decrease/(Increase) in accounts receivable, net                   |          |                    | (16,488   | )         |          |        | 67,407   |  
|                                                 |                                         |                                                                             |                                              | Decrease in advances due from officer                             |          |                    | 0         |           |          |        | 102,329  |  
|                                                 |                                         |                                                                             |                                              | Decrease in prepaid expenses                                      |          |                    | 273       |           |          |        | 13,236   |  
|                                                 |                                         |                                                                             |                                              | Increase in prepaid income taxes                                  |          |                    | (25,393   | )         |          |        | (66,364  | )
|                                                 |                                         |                                                                             |                                              | Decrease/(Increase) in other assets                               |          |                    | (5,000    | )         |          |        | 3,750    |  
|                                                 |                                         |                                                                             |                                              | (Decrease)/Increase in accounts payable                           |          |                    | 44,736    |           |          |        | (42,070  | )
|                                                 |                                         |                                                                             |                                              | (Decrease)/Increase in accrued vacation                           |          |                    | (6,779    | )         |          |        | 963      |  
|                                                 |                                         |                                                                             |                                              | (Decrease)/Increase in accrued expenses                           |          |                    | 1,887     |           |          |        | (104,523 | )
|                                                 |                                         |                                                                             |                                              | Decrease in accrued payment to officer                            |          |                    | 0         |           |          |        | (700,000 | )
|                                                 |                                         |                                                                             |                                              |                                                                   |          |                    |           |           |          |       
|                                                 |                                         |                                                                             |                                              | CASH AND CASH EQUIVALENTS USED
BY OPERATING ACTIVITIES            |          |                    | (76,815   | )         |          |        | (858,308 | )
|                                                 |                                         |                                                                             |                                              |                                                                   |          |                    |           |           |          |       
|CASH FLOW FROM INVESTING ACTIVITIES              |                                         |                                                                             |                                              |                                                                   |          |                    |           |          
|                                                 |                                         | Purchase of other assets                                                    |                                              |                                                                   | 0        |                    |           |           | (12,930  | )     
|                                                 |                                         | Payments on note receivable from officer                                    |                                              |                                                                   | 0        |                    |           |           | 225,136  |       
|                                                 |                                         | Purchase of new business entity                                             |                                              |                                                                   | (270,757 | )                  |           |           | 0        |       
|                                                 |                                         |                                                                             |                                              |                                                                   |          |                    |           |           |          |       
|                                                 |                                         |                                                                             |                                              | CASH AND CASH EQUIVALENTS PROVIDED/(USED)
BY INVESTING ACTIVITIES |          |                    | (270,757  | )         |          |        | 212,206  |  
|                                                 |                                         |                                                                             |                                              |                                                                   |          |                    |           |           |          |       
|CASH FLOW FROM FINANCING ACTIVITIES              |                                         |                                                                             |                                              |                                                                   |          |                    |           |          
|                                                 |                                         | Increase in line of credit                                                  |                                              |                                                                   | 144,939  |                    |           |           | 0        |       
|                                                 |                                         |                                                                             |                                              |                                                                   |          |                    |           |           |          |       
|                                                 |                                         |                                                                             |                                              | CASH AND CASH EQUIVALENTS PROVIDED
BY FINANCING ACTIVITIES        |          |                    | 144,939   |           |          |        | 0        |  
|                                                 |                                         |                                                                             |                                              |                                                                   |          |                    |           |           |          |       
|                                                 | (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                             |                                              | (202,633                                                          | )        |                    |           | (646,102  | )       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |                                         |                                                                             | 779,235                                      |                                                                   |          |                    | 1,646,891 |          
|                                                 |                                         |                                                                             |                                              |                                                                   |          |                    |           |           |          |       
|CASH AND CASH EQUIVALENTS AT END OF PERIOD       |                                         | $                                                                           | 576,602                                      |                                                                   |          | $                  | 1,000,789 |          
|                                                 |                                         |                                                                             |                                              |                                                                   |          |                    |           |           |          |       



| |  | See notes to condensed consolidated financial statements.
| |  | ---------------------------------------------------------

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OPTIMUMCARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 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 three month
period ended March 31, 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  INVESTMENTS

Investments consist of federal home loan bank bonds and U.S. treasury notes
with an aggregate principal amount of $328,387 and $330,268 at March 31, 2003
and December 31, 2002 respectively. The bonds and notes bear interest ranging
from 2.375% to 5.755% and have maturity dates ranging through January 2004.

The Company believes that the carrying amount of these bonds approximates their
fair value at March 31, 2003.

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NOTE C  EARNINGS PER SHARE

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

|                                                                   |  |                    |           |                |  |   |           |  
|------------------------------------------------------------------ |  | ------------------ | --------- | -------------- |  | - | --------- | -
|                                                                   |  | Three Months Ended
|                                                                   |  |                   
|                                                                   |  | March 31, 2003     |           | March 31, 2002
|                                                                   |  |                    |           |               
|Numerator                                                          |  | $                  | (71,682   | )              |  | $ | (126,151  | )
|                                                                   |  |                    |           |                |  |   |           |  
|Denominator:                                                       |  |                    |           |                |  |   |           |  
|                                                                   |  |                    |           |                |  |   |           |  
|Denominator for basic earnings per share
- weighted-average shares |  |                    | 5,908,675 |                |  |   | 5,908,675 |  
|                                                                   |  |                    |           |                |  |   |           |  
|Dilutive employee stock options                                    |  |                    | 0         |                |  |   | 0         |  
|                                                                   |  |                    |           |                |  |   |           |  
|Denominator for diluted earnings per share                         |  |                    | 5,908,675 |                |  |   | 5,908,675 |  
|                                                                   |  |                    |           |                |  |   |           |  
|Basic earnings per share                                           |  | $                  | (.01      | )              |  | $ | (.02      | )
|                                                                   |  |                    |           |                |  |   |           |  
|Diluted earnings per share                                         |  | $                  | (.01      | )              |  | $ | (.02      | )
|                                                                   |  |                    |           |                |  |   |           |  

NOTE D  NEW BUSINESS

Effective March 12, 2003, the Company acquired the assets of a health care
staffing company, through its wholly owned subsidiary, OptimumCare Staffing,
Inc., for cash consideration of $270,758 including acquisition costs of $91,675
and recorded goodwill in the amount of $258,580. Additional purchase price
payments are due at the six month and eighteen month anniversaries of the
closing date based on certain net revenue goals. An additional earn-out
provision for payment of 30% of EBITDA for the first and second twelve month
periods is contingent on the continued employment of the previous owners. As
part of the purchase, the Company entered into two year employment agreements
with the four previous owners, one of which is for a salary of $100,000 and
three of which are for salaries of $55,000 for the first year, all of which are
to be reviewed on the first anniversary and adjusted at the discretion of the
Board of Directors. The employment agreements also stipulate monthly bonuses
based on exceeding certain gross margin goals. In addition, the Company issued
100,000 options to purchase common stock for $0.50 per share to one of the
previous owners and a total of 60,000 options to purchase common stock for
$0.50 per share to the other three previous owners. The options are subject to
vesting one half per year on the anniversary date of the closing for the next
two years and expire in five years. Additional options to purchase common
stock equal to half the amount issued at this time will be granted contingent
upon extension of the original two year term of the employment agreements to
each of the four previous owners.

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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 three (3) healthcare
staffing companies during the past nine 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 March 31, 2003
|                     |  |                                  
|                     |  |                                   |           |          |  | Operating     |           | Operating
|                     |  | Net Sales                         |           | Expenses |  | Income/(Loss)
|                     |  |                                   |           |          |  |              
|Psychiatric Programs |  | $                                 | 686,892   |          |  | $             | 458,053   |           |  | $ | 228,839  |  
|Temporary Staffing   |  |                                   | 731,958   |          |  |               | 743,192   |           |  |   | (11,234  | )
|Corporate            |  |                                   | 2,629     |          |  |               | 320,259   |           |  |   | (317,630 | )
|                     |  |                                   |           |          |  |               |           |           |  |   |          |  
|                     |  | $                                 | 1,421,479 |          |  | $             | 1,521,504 |           |  | $ | (100,025 | )
|                     |  |                                   |           |          |  |              

|                     |  |                                   |         |            |  |   |           | 
|-------------------- |  | --------------------------------- | ------- | ---------- |  | - | --------- | 
|                     |  | Three months ended March 31, 2003
|                     |  |                                  
|                     |  | Accounts                          |         | Total     
|                     |  | Receivable                        |         | Assets (1)
|                     |  |                                   |         |           
|Psychiatric Programs |  | $                                 | 223,200 |            |  | $ |          | 
|Temporary Staffing   |  |                                   | 695,688 |            |  |   | 1,312,761 | 
|Corporate            |  |                                   | 25,045  |            |  |   | 1,554,462 | 
|                     |  |                                   |         |            |  |   |           | 
|                     |  | $                                 | 943,933 |            |  | $ | 2,867,223 | 
|                     |  |                                   |         |           



---

|(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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9



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##### Table of Contents



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 March 31, 2003 and December 31, 2002, the Companys working capital was
$1,749,179 and $2,093,033, respectively. The decrease in working capital for
the period is primarily due to the Companys net loss and the acquisition of a
new business entity on March 12, 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 Company evaluates the collectibility of its receivables on a
case by case basis. Accounts receivable at March 31, 2003 has increased
slightly from those which existed at December 31, 2002. This is primarily due
to the receivables from the new business entity acquired late in the quarter.
Temporary staffing receivables at March 31, 2003 were approximately $681,209 of
which four accounts comprise 52%. Management believes that no collection
problems with respect to these receivables exist. Accordingly, no allowance
for doubtful accounts has been recorded at March 31, 2003.

Cash used in operations was $76,815 and $858,308 for the three month periods
ended March 31, 2003 and 2002, respectively. Cash used during the three months
ended March 31, 2003 was primarily due to the Companys net loss for the
period.

Cash used in investing activities was
$270,757 for the three month period ended
March 31, 2003 compared to cash provided by investing activities of $212,206
for the same period of 2002. Cash used during the three months ended March 31,
2003 primarily arose from the purchase of a new business entity on March 12,
2003.

Cash flows from financing activities were
$144,939 for the period ended ending
March 31, 2003 which was the result of a draw from the Companys line of
credit. The outstanding balance under the line of credit as of May 8, 2003 was
$290,075. Interest is charged on the outstanding balance at a rate of the
One-month LIBOR, as published in the Wall Street Journal,plus 3.4% per annum
and is payable monthly. The maximum indebtedness is $750,000. Amounts
allowable for draw are based on 80% of certain qualified accounts receivable.
As of March 31, 2003, approximately $556,000 is available for future draws on
the line of credit agreement. The line of credit expires on May 31, 2003. In
the event that the line of credit is not renewed, the Company is in
negotiations with other financial institutions for a line of credit, and will
pay off the balance owing with cash on hand at expiration. The Companys
principal sources of liquidity for the fiscal year 2003 are cash on hand,
accounts receivable, a line of credit with a bank and continuing revenues from
programs and from the recently acquired staffing businesses.

10



---



##### Table of Contents



Material Changes in Results of Operations

Three Months Ended March 31, 2003 compared to Three Months Ended March 31, 2002

The Company operated four (4) contract programs during the three months ended
March 31, 2003 and six (6) contract programs during the three months ended
March 31, 2002. Net revenues from the contract programs were $686,892 and
$1,388,858 for the three months ended March 31, 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
$458,053 and $1,250,462 for the three months ended March 31, 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 temporary staffing services were $731,958 for the three month
period ended March 31, 2003. Costs of providing these services were $743,192
for the same period. Revenues and operations for this new business segment
commenced during the third quarter of 2002 and another new entity was acquired
on March 12, 2003.

General and administrative expenses were $319,477 and $348,324 for the three
months ended March 31, 2003 and March 31, 2002, respectively. The decrease in
costs was primarily due to lower costs due to attrition and the reversal of
year end accruals made during the three months ended March 31, 2003 which were
not necessary during the three months ended March 31, 2002.

The companys income tax benefit has decreased for the three months ended March
31, 2003 over the comparable three months ended March 31, 2002 due to a smaller
net loss for the period.

Net loss was $71,682 and $126,151 for the three months ending March 31, 2003
and 2002, respectively. The smaller loss was a result of decreased general and
administrative expenses due to lower staffing costs and general cost cutting
measures.

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 launch an aggressive marketing
program.

The Company acquired two temporary staffing businesses during 2002 and acquired
an additional health care staffing business in March 2003. The Company has
identified other acquisition candidates and intends to continue to pursue this
line of business.

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
60 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.

11



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##### Table of Contents



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

The March 31, 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

Within the 90 days prior to the date of this report, an evaluation was
performed under the supervision and with the participation of the Companys
management, including the Chief Executive Officer/Chief Financial Officer, of
the effectiveness of the design and operation of the Companys disclosure
controls and procedures. Based upon and as of the date of that evaluation, the
Companys Chief Executive Officer/Chief Financial Officer concluded that the
Companys disclosure controls and procedures were effective. There have been no
significant changes in the Companys internal controls or in other factors that
could significantly affect the internal controls subsequent to the last day
they were evaluated.

12



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##### Table of Contents






PART II




OTHER INFORMATION




ITEM 1       LEGAL PROCEEDINGS



| |  | Not applicable.
| |  | ---------------




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



| |  | Not Applicable
| |  | --------------




ITEM 6       EXHIBITS AND REPORTS ON FORM 8-K



|(A) |  | Exhibit 15: Accountants Acknowledgment                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(B) |  | On March 21, 2003, the Company filed a Current
Report on Form 8-K under Item 5 announcing the acquisition of
certain assets of Chicago Care Nurse Staffing, Inc., a
healthcare staffing company through a newly formed wholly
owned subsidiary, OptimumCare Staffing, Inc.

13



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##### Table of Contents






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 Corporation                                                                                                                                           
|                   
|                    |  |                                                                                                                                                                                          
|                   
|                    |  |                                                                                                                                                                                          
|                   
|Dated: May 14, 2003 |  | By: /s/Edward A. Johnson
Edward A. Johnson
Chairman of the Board and Chief Executive
Officer
(Principal Executive Officer, Principal
Financial Officer, and Principal Accounting
Officer)

14



---



##### Table of Contents






CERTIFICATIONS

I, Edward A. Johnson, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of OptimumCare
Corporation.                                                                                                                                                                                                                                                                                                           
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;                                                           
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;                                                                              
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                                                                                   
|  
|   |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;                                                                                       
|  
|   |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                                                                                                         
|  
|   |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                                                                                               
|  
|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):                                                                                                                                           
|  
|   |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                        
|  
|   |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                                                                                                                
|  
|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                                                                |  | 
|--------------------------------------------------------------- |  | 
|Date:  May 14, 2003                                             |  | 
|                                                               
|                                                                |  | 
|                                                               
|/s/ Edward A. Johnson
Edward A. Johnson
Chief Executive Officer |  | 

15



---



##### Table of Contents



CERTIFICATIONS

I, Edward A. Johnson, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of OptimumCare
Corporation.                                                                                                                                                                                                                                                                                                           
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;                                                           
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;                                                                              
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                                                                                   
|  
|   |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;                                                                                       
|  
|   |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                                                                                                         
|  
|   |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                                                                                               
|  
|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):                                                                                                                                           
|  
|   |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                        
|  
|   |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants
internal controls; and                                                                                                                                                                                                                                
|  
|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                                                                |  | 
|--------------------------------------------------------------- |  | 
|Date:  May 14, 2003                                             |  | 
|                                                               
|                                                                |  | 
|                                                               
|/s/ Edward A. Johnson
Edward A. Johnson
Chief Financial Officer |  | 

16



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##### Table of Contents



CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OptimumCare Corporation, (the
Company) on Form 10-Q for the period ended March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Edward
A. Johnson, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:



|(1) |  | The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.

| |  |                                                                             
| |  | ----------------------------------------------------------------------------
| |  | /s/ Edward A. Johnson
Edward A. Johnson
Chief Executive Officer
May 14, 2003

CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OptimumCare Corporation, (the
Company) on Form 10-Q for the period ended March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Edward
A. Johnson, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:



|(1) |  | The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.

| |  |                                                                             
| |  | ----------------------------------------------------------------------------
| |  | /s/ Edward A. Johnson
Edward A. Johnson
Chief Financial Officer
May 14, 2003

17



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##### Table of Contents



EXHIBIT INDEX



| |  | Exhibit 15: Accountants Acknowledgment
| |  | ---------------------------------------

18