<PAGE>

<PAGE>
                    U. S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549


                                  FORM 10-QSB


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


              For the Quarterly Period ended: February 28, 1999


                         Commission File No. 0-22155


                        PERENNIAL HEALTH SYSTEMS, INC.
       -----------------------------------------------------------------
       (Exact Name of Small Business Issuer as Specified in its Charter)


           Colorado                                  84-0987697
-------------------------------       ---------------------------------------
(State or Other Jurisdiction of       (I.R.S. Employer Identification Number)
Incorporation or Organization)


        325 West Main Street, Suite 1400B, Louisville, Kentucky 40202
        --------------------------------------------------------------
         (Address of Principal Executive Offices, Including Zip Code)


                               (502) 568-8923
                         ---------------------------
                         (Issuer's telephone number)




Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.

                           Yes [ X ]   No [   ]


There were 13,395,072 shares of the Registrant's Common Stock outstanding as
of April 14, 1999.

Transitional Small Business Disclosure Format:     Yes ---     No -X-

<PAGE>


<PAGE>
PART I.   FINANCIAL INFORMATION
Item 1.   Financial Statements

PERENNIAL HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
February 28, 1999 and May 31, 1998                February 28,
                                                     1999         May 31,
    ASSETS                                        (Unaudited)      1998
Current assets:                                   -----------   -----------
  Cash                                            $   274,299   $   358,230
  Accounts receivable-trade, less allowance
   for doubtful accounts of $685,430 and
   $382,000 at February 28, 1999 and
   May 31, 1998, respectively                       4,806,843     5,206,978
  Accounts receivable-trade - related party            91,512     2,360,371
  Income taxes refundable                             201,139       265,098
  Other current assets                                143,398        34,764
                                                  -----------   -----------
     Total current assets                           5,517,192     8,225,441

  Equipment, Land Bldgs., Improvements at Cost      3,440,229       380,911
    Less accumulated depreciation                    (200,778)     (107,455)
                                                  -----------   -----------
                                                    3,239,431       273,456
  Intangible assets, net of accumulated
   amortization of $347,295 and $338,000
   at February 28, 1999 and May 31, 1998,
   respectively                                     2,124,843       802,012
  Other assets                                        548,638       460,421
                                                  -----------   -----------
     Total Assets                                 $11,430,103   $ 9,761,330
                                                  ===========   ===========
     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term borrowings                           $ 2,862,473   $ 4,206,535
  Notes payable                                        73,696       104,500
  Accounts payable                                    433,288       263,392
  Accrued expenses                                    905,471     1,035,128
                                                  -----------   -----------
     Total Current Liabilities                      4,274,928     5,609,555
  Financing arrangements, net of current portion    4,159,976             -
                                                  -----------   -----------
     Total Liabilities                              8,434,904     5,609,555

Stockholders' equity:
  Preferred stock, $10 par value; 10,000,000
   shares authorized; no shares issued                      -             -
  Common stock, no par value; 20,000,000
   shares authorized; 13,395,072 and 13,390,072
   shares issued and outstanding at February 28,
   1999 and May 31, 1998, espectively               2,142,676     2,136,584
  Subordinated convertible common stock,
   no par value; 1,200,000 shares authorized;
   no shares issued                                         -             -
  Retained earnings                                   852,523     2,015,191
                                                  -----------   -----------
                                                    2,995,200     4,151,775
     Total Liabilities and Stockholders'
      Equity                                      $11,430,103   $ 9,761,330
                                                  ===========   ===========
See accompanying notes to condensed consolidated financial statements.
                                      2
<PAGE>

<PAGE>
PERENNIAL HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the quarter and nine months ended February 28, 1999 and 1998
(Unaudited)

                                     Quarter               Nine Months
                                1999        1998        1999        1998
                             ----------  ---------- -----------  -----------
Revenues:
  Contract services          $2,821,979  $2,899,654 $ 9,155,609  $ 8,099,805
  Contract services -
   related party                     --   1,461,654   1,324,648    6,276,740
                             ----------  ---------- -----------  -----------
                              2,821,979   4,361,218  10,480,257   14,376,545

Cost of services:
  Salaries, wages and
   benefits                   1,725,280   2,563,640   6,305,011    7,718,745
  Contract therapists           111,190     370,934     598,936    1,888,099
                             ----------  ---------- -----------  -----------
                              1,836,470   2,934,574   6,903,947    9,606,844
                             ----------  ---------- -----------  -----------

     Gross profit               985,509   1,426,644   3,576,310    4,769,701

Selling, general and adminis-
  trative expenses            1,464,720     951,310   4,671,383    3,072,446

     Income (loss) from
      operations               (479,211)    475,334  (1,095,073)   1,697,255

Interest expense                149,319     121,050     366,165      313,314

     Income (loss) before
      income taxes             (628,530)    354,284  (1,461,238)   1,383,941

Provision (benefit) for
  income taxes                 (224,437)    149,620    (540,000)     562,620
                             ----------  ---------- -----------  -----------
     Net income (loss)       $ (404,093) $  204,664 $  (921,238) $   821,321
                             ----------  ---------- -----------  -----------

Net income (loss) per common
  share:
    Basic                    $     (.03) $      .02 $      (.07) $       .06
                             ==========  ========== ============ ===========
    Assuming dilution        $     (.03) $      .02 $      (.02) $       .06
                             ==========  ========== ============ ===========











See accompanying notes to condensed consolidated financial statements.

                                      3
<PAGE>


<PAGE>
PERENNIAL HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended February 28, 1999 and 1998
(Unaudited)
                                                1999            1998
                                             ----------      ----------
Cash flows from operating activities:
  Net income (loss)                          $ (921,238)     $  821,321
  Adjustments to reconcile net income to
  net cash used in operating activities:
    Depreciation                                 93,819          38,539
    Amortization                                 65,108          63,459
    Minority interest                              -             40,611
    Allowance for doubtful accounts                -            270,630
    Loss on sale of accounts receivable            -               -
    Change in assets and liabilities,
     net of effects from acquisitions:
      Accounts receivable                     2,668,994      (1,374,272)
      Income taxes refundable                  (177,474)           -
      Other current assets                     (108,634)       (152,140)
      Other assets                              (90,000)       (101,376)
      Accounts payable                          169,896         (15,325)
      Accrued expenses                          124,417         232,003
                                             ----------      ----------
          Net cash provided by (used in)
           operating activities               1,576,057        (640,556)
                                             ----------      ----------
Cash flows from investing activities:
  Purchase of equipment                        (123,284)        (91,157)
  Investment in Rehab Tools, Inc.                  -           (145,500)
  Acquisition of Scott County Healthcare
   net of Seller's financing                 (3,561,838)           -
                                             ----------      ----------
          Net cash used in investing
           activities                        (3,685,122)       (236,657)
                                             ----------      ----------
Cash flows from financing activities:
  Long-term borrowings                        3,400,000            -
  Proceeds from stock subscription
   receivable                                      -             58,919
  Issuance of common stock                         -              5,000
  Issuance of short-term borrowings          10,589,749       2,030,000
  Repayments of short-term borrowings        11,933,811      (1,117,102)
  Checks issued in excess of cash on
   deposit                                         -           (121,900)
  Repayment of notes payable                    (30,804)           -
                                             ----------      ----------
          Net cash (used in) provided by
           financing activities               2,025,134         854,917
                                             ----------      ----------
Increase (Decrease) in cash and equivalents     (83,931)       (441,708)

Beginning cash balance                          358,230               -
                                             ----------      ----------
Ending cash balance                          $  274,299      $  441,708
                                             ----------      ----------
Supplemental disclosures:
  Income taxes                               $   25,901      $  721,330
  Cash paid for interest                     $  351,153      $  247,774
                                             ----------      ----------
See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

<PAGE>
PERENNIAL HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.  BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of Perennial
Health Systems, Inc. (formerly In-House Rehab Corporation) (the "Company") are
unaudited.  The balance sheet as of May 31, 1998, is condensed from the
audited balance sheet of the Company at that date.  These statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission and should be read in conjunction with the Company's
consolidated financial statements and the notes thereto for the year ended May
31, 1998.  Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations.  In the opinion of Company management, the condensed consolidated
financial statements for the unaudited interim periods presented include all
adjustments (consisting of only normal recurring adjustments) necessary to
present a fair statement of the results for such interim periods.

Operating results for the periods ended February 28, 1999, are not necessarily
indicative of the results that may be expected for a full year or any portion
thereof.

Certain reclassifications of amounts in the consolidated financial statements
have been made to reflect comparability.

2.  NET INCOME PER SHARE

The following table sets forth the computation and reconciliation of net
income per share-basic and net income per share-assuming dilution:

                            For the Quarter Ended      For the Nine Months
                                 February 28,           Ended February 28,
                              1999         1998         1997          1998
                           -----------  -----------  -----------  -----------
Net (loss) income          $  (404,093) $   204,664  $  (921,238) $   821,321
                           ===========  ===========  ===========  ===========
Weighted average shares
 outstanding:
  Weighted average shares
   outstanding - basic      13,395,072   13,347,072   13,392,936   13,345,802
  Stock options and
   warrants                    159,422       41,345      207,672      143,447
                           -----------  -----------  -----------  -----------
  Weighted average shares
   outstanding - assuming
   dilution                 13,554,494   13,388,417   13,600,608   13,489,250
                           ===========  ===========  ===========  ===========
  Net (loss) income per
   share - basic           $      (.03) $       .02  $      (.07) $       .06
                           ===========  ===========  ===========  ===========
  Net (loss) income per
   share - assuming
   dilution                $      (.03) $       .02  $      (.07) $       .06
                           ===========  ===========  ===========  ===========

                                       5
<PAGE>

<PAGE>
The Company did not include warrants, equivalent to 360,000 and 500,000 shares
of common stock or options to purchase 840,000 and 684,000 shares of common
stock for the periods ended February 28, 1999 and 1998, respectively, because
their effects are antidilutive.  There were no transactions that occurred
subsequent to February 28, 1999 that would have materially changed the number
of shares used in computing net income per share-basic or net income per
share-assuming dilution.

3.  MAJOR CUSTOMERS

Approximately $1,325,000 or 12% of all revenue for the nine months ended
February 28, 1999, related to one customer.  In October 1998, the Company
ceased providing services to this customer at which time the customer had an
accounts receivable balance of $1,873,194.  On November 25, 1998, the Company
accepted a note receivable from the customer for the full amount of the
accounts receivable balance.  The note receivable bears interest at the rate
of 9.5% and is to be repaid at the rate of $50,000 per month for 24 months
with the balance of principal and interest payable at that time.  The Company
subsequently sold the note receivable to a lending institution at a discount.
The discount was computed on a basis that would assure the lending institution
a combined return of 15%.  This resulted in a loss on the sale of
approximately $170,000.  In the event the customer defaults on monthly
payments to the lending institution, the lending institution can require the
Company to buy back the note.  Such an event could have a significant
unfavorable effect on the Company's cash flow from operations.  However, if
the lending institution resells the note receivable, the Company will have no
further liability related to the note receivable.  As of April 12, 1999, the
customer had made all regularly scheduled payments on the note receivable to
the lending institution.

Approximately $6,277,000 or 44% of all revenue for the nine months ended
February 28, 1998, related to one customer who is a stockholder and related
party of the Company.  This customer was acquired by a Company who provides
rehabilitation services.  As a result, the Company ceased providing services
to this customer in February 1998.  The outstanding accounts receivable
balance was paid in full.

4.  COMMITMENTS AND CONTINGENCIES

The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business.  In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will not have a
material adverse effect on the financial position or results of operations of
the Company.

5.  ACQUISITIONS.

On November 10, 1998, the Company announced that it had reached an agreement
with Medilodge based in Detroit, Michigan, to acquire eight skilled nursing
centers and one assisted living center for approximately $79 million.  The
acquisition is expected to be accounted for as a purchase and is contingent
upon the completion of the Company's due diligence review; the receipt and
approvals from certain licensing authorities; the completion of financing
arrangements; and the satisfaction of customary closing conditions.


                                       6
<PAGE>


<PAGE>
Item 2.  Management's Discussion and Analysis.

RESULTS OF OPERATIONS

QUARTER ENDED FEBRUARY 28, 1999 AND 1998

For the quarter ending February 28, 1999, the Company generated approximately
$2,822,000 in gross revenues compared to $4,361,000 during the same period
last year.  Management fees from customers totaling approximately $414,000
that were available to the Company in 1998 have not been replaced as they are
not an allowable cost under the Prospective Pay System (PPS) of reimbursement
under Medicare which went into effect July 1, 1998.  The remaining differences
of $1,125,000 resulted from contract cancellations and contract revisions.
This effect was partially offset by the addition of 14 new contracts started
during the quarter and in full operation during the next quarter.

The cost of services as a percent of revenue for the three months ending
February 28, 1999 was 65%.  This compares with 67% for the same period of the
prior year.  The increased margin was the result of significant changes made
to reduce operating costs.  These included:

     1.  Lowered almost all clinical salary levels (300 employees).

     2.  The recruiting budget was significantly reduced.

     3.  The benefit packages offered to field clinicians were reduced to
         require employee participation in payment for health benefits.

     4.  Many clinicians had work schedules realigned from full time
         to pay only for hours worked as a result of the methodology by
         which Medicare pays for services rendered.

Selling, general and administrative expenses for the three months ended
February 28, 1999, were 52% of revenues versus 22% for the same period last
year.  As previously disclosed, management had stated a prime focus of this
year's activity would be to enter the nursing home industry as evidenced by
its creation of Perennial Health Management, Inc.  A sizable amount of the
variance reflected above can be attributed to administrative and general
expenses incurred in the start-up of this new company.  Although financial
reporting this period is consolidated, management estimates that as much as
$250,000 of its expenditures this quarter were a direct result of this start-
up endeavor.  On November 11, 1998, the Company announced it had reached
agreement with MediLodge based in Detroit, Michigan, to acquire eight skilled
nursing centers and one assisted living center.  Additionally, on December 4,
1998, the Company acquired Healthcare of Indiana, a 99 bed nursing home in
Scottsburg, Indiana.



                                       7
<PAGE>



<PAGE>
This quarter reflects a net loss of $(404,093) or $(.03) per share.  These
losses are primarily due to the negative impact of PPS reimbursement and the
Company's start-up cost associated with Perennial Health Management, Inc.  In
addition to previously mentioned cost cutting measures, 15 members of
management have agreed to a 90-day pay reduction of 10% of their salaries
starting December 1, 1998.

NINE MONTHS ENDED FEBRUARY 28, 1999 AND 1998

The Company generated approximately $10,480,000 in gross revenue for the nine
months ended February 28, 1999 compared with $14,377,000 for the same period
last year.  The cancellation of contracts with a non-related customer due to
non-payment contributed approximately $1,325,000 to the change.  Management
fees  totaling approximately $961,900 during this period last year have also
not been replaced. The remaining difference of $2,572,000 resulted from the
change to PPS referenced earlier.  This affect was partially offset by the
addition of 23 new contracts during this fiscal year.

The cost of services as a percentage of revenue for the nine months ended
February 28, 1999 was 66%.  This compares with 67% for the same period in the
prior year.

Selling, general and administrative expenses for the nine months ended
February 28, 1999 were 45% of revenue versus 21% for the nine months ended
February 28, 1998.  As previously disclosed,  management has stated a prime
focus of this year's activity would be to enter the nursing home industry as
evidenced by its creation of Perennial Health Management, Inc.  A sizable
amount of the variance reflected above can be attributed to administrative and
general expenses incurred in the start-up of this new company.  Although
financial reporting this period is consolidated, management estimates that as
much as $550,000 of its expenditure for the nine months ended February 28,
1999 were a direct result of this start-up endeavor.  On November 11, 1998,
the Company announced it had reached agreement with MediLodge based in
Detroit, Michigan, to acquire eight skilled nursing centers and one assisted
living center.  Additionally, on December 4, 1998, the Company acquired
Healthcare of Indiana, a 99 bed nursing home in Scottsburg, Indiana.

LIQUIDITY AND CAPITAL RESOURCES

As of February 28, 1999, the Company had working capital of approximately
$1,242,000 versus $2,616,000 at May 31, 1998.  The decrease resulted  from
accelerated collections of accounts receivable, including $1,321,000 due from
Retirement Care Associates, Inc.  This affect was partially offset by a
disproportionate decrease in current liabilities due to the start-up of 23 new
contracts in the second and third quarters.  New contracts typically consume
working capital during the start-up phase of operations.

Net cash used in operating activities was approximately $1,576,000 for the
nine months ended February 28, 1999.  This compares with approximately
$641,000 provided by operating activities for the same period in the prior
year.  The increase is primarily attributable to the increase of accounts
receivable.







                                       8
<PAGE>

<PAGE>
Net cash used toward investing activities for the nine month period ending
February 28, 1999 was approximately $3,685,000.  This compares with
approximately $237,000 for the same period in the prior year.  The increase
was primarily due to the $3,561,838 investment made in the Scott County
Healthcare Center acquisition.  This was partially offset by the $145,000
investment made in Rehab Tools, Inc. ("RTI") in the prior year.  RTI is a
corporation that is 50% owned by the Company and 50% owned by the unrelated
company.

The Company had approximately $2,025,000 provided by in financing activities.
This compares with approximately $858,000 provided by financing activities for
the same period in the prior year.  The increase was primarily attributable to
increase in the amount of long term borrowings as compared to the same period
in the prior year.

Approximately $1,325,000 or 12% of all revenue for the nine months ended
February 28, 1999, related to one customer.  In October 1998, the Company
ceased providing services to this customer at which time the customer had an
accounts receivable balance of $1,873,194.  On November 25, 1998, the Company
accepted a note receivable from the customer for the full amount of the
accounts receivable balance.  The note receivable bears interest at the rate
of 9.5% and is to be repaid at the rate of $50,000 per month for 24 months
with the balance of principal and interest payable at that time.  The Company
subsequently sold the note receivable to a lending institution.  The discount
was computed on a basis that would assure the lending institution a combined
return of 15%; this resulted in a loss on the sale of approximately $170,000.
In the event the customer defaults on monthly payments to the lending
institution, the lending institution can require the Company to buy back the
note.  Such an event could have a significant unfavorable effect on the
Company's cash flow from operations.  However, if the lending institution
resells the note receivable, the Company will have no further liability
related to the note receivable.  As of April 12, 1999, the customer had made
all regularly scheduled payments on the note receivable to the lending
institution.

On November 10, 1998, the Company announced that it had reached an agreement
with Medilodge based in Detroit, Michigan, to acquire eight skilled nursing
centers and one assisted living center for approximately $79 million.  The
acquisition is expected to be accounted for as a purchase and is contingent
upon the completion of the Company's due diligence review; the receipt and
approvals from certain licensing authorities; the completion of financing
arrangements; and the satisfaction of customary closing conditions.

On December 4, 1998, a wholly owned subsidiary of the Company acquired
Healthcare of Indiana, Inc. ("HII"), a 99 bed nursing home in Scottsburg,
Indiana, and other certain assets.  The acquisition was made in exchange for
$3,400,000 in cash from a loan, a seller financed Promissory Note in the
amount of $759,976, and non-qualified stock options to purchase 50,000 shares
of the Company's Common Stock at $2.00 per share.  These stock options vest
immediately and expire three years from the date of grant.  The acquisition
was accounted for as a purchase and, accordingly, the results of HII's
operations will be included in the Company's consolidated financial statements
from the date of acquisition.  The appraised value of the assets acquired, was
$4,500,000.



                                       9
<PAGE>


<PAGE>
To finance the purchase of the above-mentioned property, Scott County
Healthcare (SCH), formerly "HII," borrowed the sum of $3,400,000 (U.S.) from
The National Bank of Evansville. SCH is a wholly owned subsidiary of Perennial
Health Management, Inc.  The loan agreement calls for 60 monthly payments of
principal and interest at a rate of 7.25% ($28,970.23), followed by another 60
payments of principal and interest computed at the prime rate on the fifth
anniversary of this note plus .5%.  All payments will follow a 20 year
amortization schedule with the remaining unpaid principal and interest balance
to be paid on the 10th anniversary of this note.

The transaction also included seller financing totaling $759,976.  This sum is
to be financed over a period of five years; interest payments will be computed
at a rate of 8% and will be paid quarterly.  The principal and any remaining
interest will be due and payable in full on the fifth anniversary.

On April 6, 1999, the Company was notified by First Midwest Bank that it would
not renew the line of credit.  The current balance is approximately $679,000.
The Company is currently negotiating to replace this line of credit.

YEAR 2000 COMPLIANCE

The Company is continuing its assessment of its existing computer systems to
identify the systems that could be affected by the "Year 2000" issue, which
results from computer programs having been written to defining the applicable
year using two digits rather than four digits.  These systems will falsely
recognize the year 2000 as 1900.

As of April 12, 1999, the Year 2000 compliance assessment for corporate
operations is complete.  All hardware systems have been evaluated to ensure
that their internal processors are compliant.

Non-compliant systems have been either replaced or updated to conform to
compliance.  While the current financial software package is Year 2000
compliant, the Company has decided to migrate to a financial and accounting
system which while being Year 2000 compliant also fully integrates to a
clinical information system.  Policies and procedures for acquisition of
hardware and software systems are being modified to ensure that future
technology acquisitions and enhancements are compliant.

The Company has instigated an evaluation of the risks of non-information
technology problems connected to the Year 2000.  Areas of potential exposure
to risk are being identified, and assessment of non-information technology
status is expected to be completed by May 31, 1999.

Corporate acquisitions will be evaluated for Year 2000 compliance as those
transactions are completed.  Due diligence on potential acquisitions to this
date have revealed no cause for concern regarding the Year 2000 issue.

Additionally, relationships may exist with third-party payors, suppliers,
vendors, and others that may have non-compliant computer systems outside of
the Company's control.  No assurance can be given that fiscal intermediaries,
governmental agencies, and other payors with which the Company transacts
business and who are responsible for payment to the Company will not
experience significant problems with Year 2000 compliance.  Failure of these
payors to remedy Year 2000 problems could have a material and adverse effect
on the Company's business, financial condition and results of operations.

                                       10
<PAGE>

<PAGE>
CAUTIONARY STATEMENT

Except for historical information, matters discussed above, including but not
limited to, statements concerning future growth, are forward-looking
statements that are based on management's estimates, assumptions and
projections.  Important factors that could cause results to differ materially
from those expected by management include reimbursement system changes,
including customer response to the establishment of salary equivalency
guidelines for certain therapies and the change from cost-based reimbursement
to fee schedules and per diem payments, the number and productivity of
clinicians, pricing of payer contacts, management retention and development,
management's success in integrating acquired business and in developing and
introducing new products and lines of business.

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings.

     On October 16, 1998, the Company filed suit in the Jefferson Circuit
Court, Jefferson County, Kentucky, against the former shareholders of Gateway
Rehab, Inc., claiming, among other things, that such shareholders had
misrepresented certain assets and liabilities on the financial statements of
Gateway Rehab that were used in the valuation of the business.  The Company
has asked that the court reform the agreements to reflect the true value of
Gateway Rehab by making adjustments to amounts that are or may be owed to the
former shareholders.  At the present time, the Company is not able to
calculate the amount of the adjustment that will be requested, however, it is
believed that the requested adjustment will be at least $125,000.  The former
shareholders of Gateway Rahab responded to the claims of the Company by filing
a counterclaim asking for enforcement of the agreements without adjustments,
as well as for other damages.

Item 2.   Changes in Securities.

     None.

Item 3.   Defaults Upon Senior Securities.

     None.

Item 4.   Submission of Matters to a Vote of Security-Holders.

     None.

Item 5.   Other Events.

     On January 21, 1999, the Company announced the resignation of Chief
Financial Officer and director Robert J. Babine.  Mr. Babine will continue to
serve the Company as a consultant through July 31, 1999.








                                       11
<PAGE>


<PAGE>
Item 6.   Exhibits and Reports on Form 8-K.

     (a)  Exhibits.

EXHIBIT
NUMBER      DESCRIPTION                     LOCATION
-------     -----------                     --------

 27         Financial Data Schedule         Filed herewith electronically

     (b)  Reports on Form 8-K.  No reports on Form 8-K were filed
during the quarter ended February 28, 1999.













































                                       12
<PAGE>


<PAGE>
                                  SIGNATURES

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

                                     PERENNIAL HEALTH SYSTEMS, INC.



Dated:  April 14, 1999               By: /s/ Michael J. Kitchen
                                         Michael J. Kitchen, Vice President



                                     By: /s/ Frank A. Littriello
                                         Frank A. Littriello, Acting Chief
                                         Financial Officer








































                                       13