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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


Form 10-KSB/ A

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended September 30,
    2002                                            
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                             

Commission file number 000-25313

Agemark Corporation

(Name of small business issuer in its
charter)


|                                                                                   |  |                                         
|---------------------------------------------------------------------------------- |  | ----------------------------------------
|Nevada                                                                             |  | 94-3270169                              
|(State or Other Jurisdiction of
    Incorporation or Organization)                 |  | (I.R.S. Employer
    Identification No.)
|                                                                                  
|2614 Telegraph Avenue
    Berkeley, CA(Address of Principal Executive
    Offices) |  | 94704(ZIP Code)                         

Issuers telephone number:
(510) 548-6600

Securities registered pursuant to
Section 12(b) of the Act: None

Securities registered pursuant to
Section 12(g) of the Act: Common Stock, par value $.001 per
share

Check whether the registrant (1) has 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 þ     No o

Check if there is no disclosure of delinquent
filers pursuant to Item 405 of Regulation S-B is not
contained in this form, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this
Form 10-KSB.     o

State issuers revenues for its most recent
fiscal year: $10,694,000

State the aggregate market value of the voting
and non-voting common equity held by non-affiliates computed by
reference to the price at which the common equity was sold, or
the average bid and asked price of such common equity, as of a
specified date within the past 60 days. $691,062; based on
a per-share market value of $1.00 as determined by the Board of
Directors of the issuer.

Check whether the issuer has filed all documents
and reports required to be filed by Section 12, 13 or 15(d)
of the Exchange Act after the distribution of securities under a
plan confirmed by a court. Yes
þ No
o

At December 16, 2002, there were 1,109,481
shares of common stock, par value $.001 per share, of the
registrant issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Not Applicable.


Transitional Small Business Disclosure Format
(check
one):     Yes o     No þ



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|                                                                      |                                                                                                                        |  |  |  |  |  |  | 
|--------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                               
|                                                                      | Item 1. Description of Business                                                                                       
|                                                                      | Item 2. Description of Property                                                                                       
|                                                                      | Item 3. Legal Proceedings                                                                                             
|                                                                      | Item 4. Submission of Matters to a Vote of Security Holders                                                           
|PART II                                                              
|                                                                      | Item 5. Market for Common Stock and Related Stockholder Matters                                                       
|                                                                      | Item 6. Managements Discussion and Analysis or Plan of Operation                                                     
|                                                                      | Item 7. Financial Statements                                                                                          
|                                                                      | Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                          
|PART III                                                             
|                                                                      | Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance withSection 16(A) of the Exchange Act
|                                                                      | Item 10. Executive Compensation                                                                                       
|                                                                      | Item 11. Security Ownership of Certain Beneficial Owners and Management                                               
|                                                                      | Item 12. Certain Relationships and Related Transactions                                                               
|                                                                      | Item 13. Financial Statements and Exhibits                                                                            
|                                                                      | Item 14. Controls and Procedures                                                                                      
|SIGNATURES                                                           
|EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-KSB FOR AGEMARK CORPORATION
|Exhibit 99.1                                                         
|Exhibit 99.2                                                         



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TABLE OF CONTENTS

|         |  |                                                                                                                         |    |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|         |  |                                                                                                                         |    | Page
|         |  |                                                                                                                         |    |     
|PART I   |  |                                                                                                                         | 2  |     
|Item 1.  |  | DESCRIPTION OF BUSINESS                                                                                                 |    |      | 2  | 
|Item 2.  |  | DESCRIPTION OF PROPERTY                                                                                                 |    |      | 8  | 
|Item 3.  |  | LEGAL PROCEEDINGS                                                                                                       |    |      | 9  | 
|Item 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                                                 |    |      | 10 | 
|PART II  |  |                                                                                                                         | 11 |     
|Item 5.  |  | MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER
    MATTERS                                                             |    |      | 11 | 
|Item 6.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN
    OF OPERATION                                                           |    |      | 11 | 
|Item 7.  |  | FINANCIAL STATEMENTS                                                                                                    |    |      | 15 | 
|Item 8.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE                                |    |      | 30 | 
|PART III |  |                                                                                                                         | 30 |     
|Item 9.  |  | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
    CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
    EXCHANGE ACT |    |      | 30 | 
|Item 10. |  | EXECUTIVE COMPENSATION                                                                                                  |    |      | 30 | 
|Item 11. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT                                                      |    |      | 31 | 
|Item 12. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                          |    |      | 32 | 
|Item 13. |  | FINANCIAL STATEMENTS AND EXHIBITS                                                                                       |    |      | 34 | 
|Item 14. |  | CONTROLS AND PROCEDURES                                                                                                 |    |      | 34 | 

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PART I






Item 1.     Description
of Business


General

Agemark Corporation (the Company)
owns and operates assisted living residences, which offer a
combination of housing and personalized services for senior
citizens who can no longer live independently but who do not
require the 24-hour medical care provided by a skilled nursing
facility. The Company operates 7 properties located in
non-urban, secondary markets in four states. The Companys
primary focus is on private pay residents, who
generally pay for the Companys services from their own
funds, with the help of other family members or through private
insurance.

Background and Formation of the Company; Plan
of Reorganization

The Company was organized in April, 1997 pursuant
to an order of the U.S. Bankruptcy Court dated April 27,
1997 (the Order) to receive the assets of and
continue the businesses of four reorganized, publicly registered
limited partnerships and two privately held limited partnerships
(the Partnerships). The Order confirmed the Second
Amended Joint Plan of Reorganization (the Plan) of
the Partnerships filed in January, 1997 and amended in April,
1997. The first of the property transfers to the Company
pursuant to the Plan was accomplished in January, 1998 and the
final transfer took place in July, 1998. A total of 1,000,000
shares of stock were issued to the Partnerships for these
properties as of September 30, 1998 and immediately
distributed to their partners.

The following is a summary of the properties
transferred to the Company and the adjustments made to
historical values to arrive at values approved by the Bankruptcy
Court pursuant to the Plan of Reorganization:

|                  |  |                                   |         |            |  |              |        |          |  |          |       |              |  |   |        |  |  |   |        |   |  |   |        | 
|----------------- |  | --------------------------------- | ------- | ---------- |  | ------------ | ------ | -------- |  | -------- | ----- | ------------ |  | - | ------ |  |  | - | ------ | - |  | - | ------ | 
|                  |  |                                   |         |            |  | Accumulated  |        | Net Book |  |          |       |             
|                  |  | Transferred                       |         | Historical |  | Depreciation |        | Value    |  | Write Up |       | Plan of     
|Property Location |  | From                              |         | Value      |  | 12/31/97     |        | 12/31/97 |  | (Down)   |       | Reorg. Value
|                  |  |                                   |         |            |  |              |        |          |  |          |       |             
|                  |  |                                  
|                  |  | (Amounts in thousands of dollars)
|Beatrice, NE      |  |                                   | HHS I   |            |  | $            | 2,742  |          |  | $        | 888   |              |  | $ | 1,854  |  |  | $ | (618   | ) |  | $ | 1,236  | 
|Cumberland, MD    |  |                                   | HHS I   |            |  |              | 2,188  |          |  |          | 635   |              |  |   | 1,553  |  |  |   | 2,315  |   |  |   | 3,868  | 
|Hastings, NE      |  |                                   | HHS I   |            |  |              | 3,211  |          |  |          | 1,120 |              |  |   | 2,091  |  |  |   | 198    |   |  |   | 2,289  | 
|Chanute, KS       |  |                                   | HHS II  |            |  |              | 2,602  |          |  |          | 750   |              |  |   | 1,852  |  |  |   | (901   | ) |  |   | 951    | 
|Rock Island, IL   |  |                                   | HHS II  |            |  |              | 4,345  |          |  |          | 1,212 |              |  |   | 3,133  |  |  |   | (735   | ) |  |   | 2,398  | 
|Fort Madison, IA  |  |                                   | HHS III |            |  |              | 3,460  |          |  |          | 781   |              |  |   | 2,679  |  |  |   | (464   | ) |  |   | 2,215  | 
|Manitowoc, WI     |  |                                   | HHS III |            |  |              | 3,642  |          |  |          | 693   |              |  |   | 2,949  |  |  |   | (2,154 | ) |  |   | 795    | 
|Port Huron, IL    |  |                                   | PIF I   |            |  |              | 1,090  |          |  |          | 0     |              |  |   | 1,090  |  |  |   | 86     |   |  |   | 1,176  | 
|Dickinson, ND     |  |                                   | Private |            |  |              | 1,380  |          |  |          | 380   |              |  |   | 1,000  |  |  |   | 1,273  |   |  |   | 2,273  | 
|Williston, ND     |  |                                   | Private |            |  |              | 1,932  |          |  |          | 538   |              |  |   | 1,394  |  |  |   | 2,978  |   |  |   | 4,372  | 
|                  |  |                                   |         |            |  |              |        |          |  |          |       |              |  |   |        |  |  |   |        |   |  |   |        | 
|                  |  |                                   |         |            |  | $            | 26,592 |          |  | $        | 6,997 |              |  | $ | 19,595 |  |  | $ | 1,978  |   |  | $ | 21,573 | 
|                  |  |                                   |         |            |  |              |        |          |  |          |       |              |  |   |        |  |  |   |        |   |  |   |        | 

In connection with the transfers of the
facilities, the Company also assumed various notes payable. The
following is a summary of the notes payable assumed by the
Company:

|                                                                             |  |             |        | 
|---------------------------------------------------------------------------- |  | ----------- | ------ | 
|                                                                             |  | (Amounts in
|                                                                             |  | thousands  
|                                                                             |  | of dollars)
|Carrying value of notes (including accrued
    interest) by the Partnerships |  | $           | 24,186 | 
|Less forgiveness of debt recognized by the
    Partnerships                  |  |             | 8,595  | 
|                                                                             |  |             |        | 
|Notes payable assumed by the Company                                         |  |             | 15,591 | 
|                                                                             |  |             |        | 

The Senior Care Industry

The senior care industry is characterized by a
wide range of living accommodations and health care services.
For those who are able to live in a home setting, home health
care and other limited services can be an appropriate
alternative. Community housing or retirement centers, which are
commonly referred to as

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independent living facilities, are also available
to persons who need modest assistance, such as with meal
preparation, housekeeping and laundry. Assisted living
facilities are typically for those persons whose physical or
cognitive frailties have reached a state where independent
living accommodations can no longer provide the level of care
required. These people do not need the continuous medical
attention of a skilled nursing facility. Generally, assisted
living facilities provide a combination of housing and 24-hour
personal support services designed to assist seniors with
activities of daily living (ADLs), which include
bathing, eating, personal hygiene, grooming, ambulating and
dressing. Certain assisted living facilities also offer higher
levels of personal assistance for residents with
Alzheimers disease or other forms of dementia but always
in a residential, as compared with a
medical, setting. Skilled nursing facilities provide
care in a comparatively institutional environment. Assisted
living residences provide a homelike atmosphere. For
example, the Companys facilities feature carpeted floors
compared with the linoleum typically found in nursing home, and
single-occupancy rooms. Additionally, assisted living residences
operated by the Company encourage residents to bring their own,
more familiar furniture, serve meals in dining rooms and provide
a wide range of social programs including outings to shows,
museums, movies and the like.


The senior care industry, including assisted
living, is highly fragmented and characterized by numerous
providers whose services, experience and capital resources vary
widely. The Company believes that the assisted living industry
is evolving as the preferred alternative to meet the growing
demand for a cost-effective setting for those seniors who cannot
live independently due to physical or cognitive frailties, but
who do not require the more intensive medical attention provided
by a skilled nursing facility. According to the United States
Bureau of the Census, approximately 45% of persons aged
85 years and older, approximately 24% of persons aged 80 to
84 and approximately 20% of persons aged 75 to 79 need
assistance with ADLs.

Services

The Company operates assisted living facilities
in the following locations: Rock Island, Illinois; Fort Madison,
Iowa; Port Huron, Michigan; Beatrice, Nebraska; Hastings,
Nebraska; Dickinson, North Dakota; and Williston, North Dakota.
Except for the facilities in North Dakota, which are modern
buildings, the Companys facilities are located in
historic, renovated hotels, most of which are on the National
Register of Historic Places. The Companys facilities range
in size from 64 units to 115 units. See Item 2 
Description of Property.

Assisted Living
Properties.The Companys current
portfolio of properties is aimed at the middle to more
affordable price range within the senior care market. The
Company offers a range of assisted living care and services,
which are available 24 hours per day at each of its assisted
living facilities. The services offered by the Company include
personal care, support and certain supplemental services.
Personal care services include assistance with ADLs, such as
ambulating, bathing, dressing, eating, grooming, personal
hygiene, monitoring or assistance with medications and confusion
management. Support services include meal preparation,
assistance with social and recreational activities, laundry
services, general housekeeping, maintenance services and
transportation services. Supplemental services, which are
offered at an extra charge, include beauty and barber services,
extra laundry services and non-routine care services. The rates
for assisted living units at the Companys facilities range
from approximately $1,000 to $2,400 per month, depending, among
other things, on the size of the unit and the location of the
community.

Marketing and Sales

The Companys marketing strategy is intended
to create awareness of the Company and its services among
potential residents and their family members and referral
sources, such as physicians, clergy, local area agencies for the
elderly, home health agencies and social workers. A central
marketing staff person located at the Companys facility in
Hastings, Nebraska coordinates the Companys overall
strategies for promoting the Company throughout its markets and
monitors the success of the Companys marketing efforts.
Additionally, the Company has hired an outside marketing and
public relations firm to develop marketing materials for the
Company as a whole and for each of the Companys
facilities. The Company also relies on print advertising, yellow
pages advertising, direct mail, signage and special events, such
as grand openings for new facilities and community receptions.

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Competition

The health care industry is highly competitive
and the Company believes that the assisted living business will
become more competitive in the future. There are currently few
regulatory and other barriers to entry in the assisted living
industry. The Company faces competition for residents and for
employees from numerous local, regional and national providers
of facility-based assisted living and long-term care, including
skilled nursing facilities, as well as medical rehabilitation
and home health care providers. Many of the Companys
present and potential competitors are significantly larger or
have greater financial resources than those of the Company.
Additionally, some of the Companys competitors operate on
a not-for-profit basis or as charitable organizations. If the
development of new assisted living facilities surpasses the
demand for such facilities in particular markets, such markets
could become saturated. Competition could limit the
Companys ability to attract residents and patients and
expand its business and could have a material adverse effect on
the Companys business, results of operations and financial
condition.

The Company believes the primary competitive
factors in the senior care industry are: reputation for, and
commitment to, high quality care; quality of support services
offered (such as home health care and food services); price of
services; physical appearance and amenities associated with the
facilities; and location. Because seniors tend to choose senior
living facilities near their homes, the Companys principal
competitors are other senior living and long-term care
facilities in the same geographic areas as the Companys
facilities. The Company also competes with other health care
businesses with respect to attracting and retaining nurses,
technicians, aides, and other high quality professional and
nonprofessional employees and managers.

Government Regulation

The assisted living industry is subject to
extensive federal, state and local regulation. The various
layers of governmental regulation affect the Companys
business by controlling its growth, requiring licensure or
certification of its facilities, regulating the use of its
facilities and controlling reimbursement to the Company for
services provided. Licensing, certification and other applicable
governmental regulations vary from jurisdiction to jurisdiction
and are revised periodically. It is not possible to predict the
content or impact of future legislation and regulations
affecting the assisted living industry.

Assisted Living
Facilities.The Companys
assisted living facilities are subject to regulation by various
state and local agencies. There are currently no federal laws or
regulations specifically governing assisted living facilities.
State requirements relating to the licensing and operation of
assisted living facilities vary from state to state; however,
most states regulate many aspects of a facilitys
operations, including physical plant requirements; resident
rights; personnel training and education; requisite levels of
resident independence; administration of medications; safety and
evacuation plans; and the level and nature of services to be
provided, including dietary and housekeeping. In most states,
assisted living facilities must also comply with state and local
building and fire codes and certain other licenses or
certifications, such as a food service license, may be required.
Assisted living facilities are subject to periodic survey by
governmental agencies with licensing authority. In certain
circumstances, failure to satisfy survey standards could result
in a loss of licensure and closure of a facility.

Because assisted living facilities historically
have not been considered as traditional health care entities and
government and private insurers have not reimbursed providers
for assisted living services, these facilities have not been
subject to the degree of regulation which governs nursing homes
and other health care providers. As assisted living emerges as a
cost-effective alternative to nursing facility care, assisted
living facilities could become subject to more extensive
regulation, particularly in the areas of licensure and
reimbursement. The content of such regulations, the extent of
any increased regulation and the impact of any such regulation
on the Company cannot be predicted at this time and there can be
no assurance that such regulations will not adversely affect the
Companys business.

The Company believes the structure and
composition of government regulation of health care will
continue to change and, as a result, it regularly monitors
developments in the law. The Company expects to modify its
agreements and operations from time to time as the business and
regulatory environment changes. While the Company believes it
will be able to structure all its agreements and operations in
accordance with applicable law, there can be no assurance that
its arrangements will not be successfully challenged.

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Americans with Disabilities
Act.Under the Americans with
Disabilities Act of 1990, all places of public accommodation are
required to meet certain federal requirements related to access
and use by disabled persons. A number of additional federal,
state and local laws exist which also may require modifications
to existing and planned properties to create access by disabled
persons. While the Company believes that its properties are
substantially in compliance with present requirements or are
exempt therefrom, in part because of their historic value, if
required changes involve a greater expenditure than anticipated
or must be made on a more accelerated basis than anticipated,
additional costs would be incurred by the Company. Further,
legislation may impose additional burdens or restrictions with
respect to access by disabled persons, the costs of compliance
with which could be substantial.

Environmental
Regulation.The Company is subject to
various federal, state and local environmental laws and
regulations. Such laws and regulations often impose liability
whether or not the owner or operator knew of, or was responsible
for, the presence of hazardous or toxic substances. The costs of
any required remediation or removal of these substances could be
substantial and the liability of an owner or operator as to any
property is generally not limited under such laws and
regulations and could exceed the propertys value and the
aggregate assets of the owner or operator. The presence of these
substances, or failure to remediate such contamination properly,
may also affect adversely the owners ability to sell or
rent the property, or to borrow using the property as
collateral. Under these laws and regulations, an owner, operator
or an entity that arranges for the disposal of hazardous or
toxic substances, such as asbestos-containing materials, at the
disposal site, may also be liable for the costs of any required
remediation or removal of the hazardous or toxic substances at
the disposal site. In connection with the ownership or operation
of its properties, the Company could be liable for these costs,
as well as certain other costs, including governmental fines and
injuries to persons or properties.

Employees

As of October 5, 2002, the Company had
approximately 287 employees, including 125 part-time employees.
None of the Companys employees are currently represented
by a union. The Company believes that it has a good relationship
with its employees, in part because it provides them with annual
cash bonuses, a stock option program, health care coverage and a
401(k) program.

Factors That May Affect Results

The Companys business, financial condition
and results of operations are subject to many risks, including
those discussed under  Competition and
 Government Regulation above and those
set forth below.

Limited Operating
History.The Company was incorporated
in 1997 and began operations in January 1998 and consequently
has a limited operating history. Accordingly, there can be no
assurance that the Company will not incur losses. Failure to
achieve profitability could have a material adverse effect on
the Companys business, results of operations and financial
condition.

Formation from Chapter 11
Proceedings.The Company was formed
pursuant to the Plan of Reorganization, which became effective
on September 30, 1998. The Companys experience with
Chapter 11 reorganization has affected the Companys
ability to negotiate favorable trade terms with vendors. The
failure to obtain such favorable terms could have a material
adverse effect on the Companys business, results of
operations and financial condition.

Need for Additional Capital.The Companys growth is subject
to its ability to maintain or further increase revenues at
existing facilities and the availability of capital. The Company
has begun and continues to work with various sources of
long-term financing to refinance existing loans in order to
obtain financing with a longer term and obtain additional
liquidity for future capital projects. In the opinion of
management, we expect the Company will have sufficient cash from
operations for the Companys operating and capital
expenditure needs for at least the next 12 months. There
can be no assurance that the Company will be able to maintain or
further increase revenues at current facilities or that
sufficient capital will be available or, if available, that it
will be available on terms that the Company considers
reasonable. Further, owing to the age of the Companys
historic properties, the Companys facilities may require
greater upkeep and capital expenditures than more modern
facilities. The Companys inability or failure to maintain
or further increase such revenues or obtain such sufficient
capital on favorable terms could have a material adverse effect
on its business, results of operations and financial condition.

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Debt Obligations.As
of September 30, 2002, there was an aggregate balance of
approximately $11,981,000 outstanding on mortgages secured by
certain of the Companys properties. See
Item 2  Description of Property.
Virtually all of the Companys long-term debt will come due
in one year, subject to an extension to as much as an additional
two years upon the repayment of substantial amounts of
principal. Consequently, a significant portion of the
Companys cash flow is expected to be devoted to debt
service, and there is a risk that the Company will not be able
to generate sufficient cash flow from operations to cover
required debt payments. The Company has begun and continues to
work with various sources of long-term financing to refinance
the existing loans in order to obtain financing with a longer
term, reduce the impact of debt financing on future cash flows,
and obtain additional liquidity for future capital projects. If
the Company were unable to generate sufficient cash flow from
operations to cover required debt payments in the future, there
can be no assurance that sufficient financing would be available
to cover the insufficiency or, if available, that the financing
would be on terms acceptable to the Company. In the absence of
financing, the Companys ability to make scheduled
principal and interest payments on its indebtedness would be
adversely affected.

Obtaining Residents and Maintaining Rental
Rates.As of September 30, 2002,
the senior citizen housing facilities owned and operated by the
Company had a combined occupancy rate of approximately 79%.
Occupancy may drop in these facilities primarily due to changes
in the health of residents, increased competition from other
providers of assisted living services that may give residents
more choices with respect to the provision of such services, and
changes in state regulations. Turnover among residents is
affected by their health, and higher turnover can adversely
affect the Companys results of operations. There can be no
assurance that, at any time, any of the Companys
facilities will be substantially occupied at assumed rents. In
addition, full occupancy may be achievable only at rental rates
below those assumed. The Companys operating expenses could
be affected adversely by a variety of factors, including the
level of services required to retain residents, which in turn is
affected by the age and health of residents. If operating
expenses increase, local rental market conditions may limit the
extent to which rents may be increased. In addition, the failure
of the Company to generate sufficient revenue could result in an
inability to make interest and principal payments on its
indebtedness.

General Real Estate Risks.The performance of the Companys
senior citizen housing facilities is influenced by factors
affecting real estate investments, including the general
economic climate and local conditions, such as an oversupply of,
or a reduction in demand for, assisted living residences. Other
factors include the attractiveness of properties to residents,
zoning, rent control, environmental quality regulations or other
regulatory restrictions, competition from other forms of housing
and the ability of the Company to provide adequate maintenance
and insurance and to control operating costs, including
maintenance, insurance premiums and real estate taxes. Real
estate investments are also affected by such factors as
applicable laws, including tax laws, interest rates and the
availability of financing. Real estate investments are
relatively illiquid and, therefore, limit the ability of the
Company to vary its portfolio promptly in response to changes in
economic or other conditions. Any failure by the Company to
operate its senior citizen housing facilities effectively may
have a material adverse effect on the Companys business,
financial condition and results from operations.

Liability and
Insurance.Providing assisted living
services involves an inherent risk of liability. Participants in
the senior living and health care industry are subject to
lawsuits alleging negligence or related legal theories, many of
which may involve large claims and significant legal costs. The
Company currently maintains liability insurance intended to
cover claims in amounts and with such coverages and deductibles
that it believes are adequate and in keeping with industry
practice. However, claims in excess of the Companys
insurance coverage or claims not covered by the Companys
insurance (e.g., claims for punitive damages) may arise.
A successful claim against the Company not covered by or in
excess of the Companys insurance coverage could have a
material adverse effect on the Companys business, results
of operations and financial condition. Claims against the
Company, regardless of their merit or eventual outcome, may also
have a material adverse effect upon the Companys
reputation and its ability to attract residents or expand its
business. The Companys insurance policies generally must
be renewed annually, and there can be no assurance that the
Company will be able to obtain liability insurance coverage in
the future on acceptable terms, if at all.

Dependence on Key
Personnel.The Companys
operations have been significantly dependent on the
contributions of management, and the loss of the services of the
Companys senior officers  Messrs. Pittore,
Tolley and Westin  could have a material adverse
effect on the Companys business, results of operations

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and financial condition. The Company has entered
into employment agreements with each of its senior officers. See
Item 10  Executive
Compensation  Employment Agreements. The
Companys success also depends to a significant extent upon
a number of other key employees of the Company, including the
Companys Chief Operating Officer and National Marketing
Director. The loss of the services of one or more of these key
employees also could have a material adverse effect on the
Company. The Company does not carry key person life insurance.
In addition, the Company believes that its future success will
depend in part upon its ability to attract and retain additional
highly skilled professional, managerial, sales and marketing
personnel. Competition for such personnel is intense. There can
be no assurance that the Company will be successful in
attracting and retaining the personnel that it requires for its
business and planned growth.


Labor Costs.The
Company competes with various health care providers and other
employers for limited qualified and skilled personnel in the
markets that it serves. The Company expects that its labor costs
will increase over time. Currently, none of the Companys
employees is represented by a labor union. If employees of the
Company were to unionize, the Company could incur labor costs
higher than those of competitors with nonunion employees. The
Companys business, results of operations and financial
condition could be adversely affected if the Company is unable
to control its labor costs.

Conflicts of Interest.Certain of the Companys officers
and directors may, by virtue of their investment in or
involvement with entities providing services or office space to
the Company have an actual or potential conflict of interest
with the interests of the Company. See Item 12 
Certain Relationships and Related Transactions. From
time to time, vendors may require personal guarantees from the
executive officers of the Company and such personal guarantees
may create a conflict of interest for such executive officer.

No Public Market for the Common
Stock.If shares of the Companys
Common Stock are traded after their original issuance pursuant
to the Plan of Reorganization, they are expected to trade at
varying prices, depending upon the market for similar securities
and other factors, including general economic conditions and the
financial condition and performance of, and prospects for, the
Company. The Plan of Reorganization provides that, as soon as
practicable after the effective date of the Plan of
Reorganization, the Company shall take the necessary steps to
have the Companys Common Stock publicly traded. The
Companys management is currently investigating
over-the-counter quotation of the Companys
Common Stock on the OTC Bulletin Board®. However, there can
be no assurance that the Company will be successful in its
efforts to establish a public trading market for the Common
Stock or that any market making activity with respect to the
Common Stock will continue in the future, if and once initiated.
See   Risks of Low-Priced Stock; Possible
Effect of Penny Stock Rules on Liquidity for the
Companys Securities.

Risks of Low-Priced Stock; Possible Effect of
Penny Stock Rules on Liquidity for the
Companys Securities. As
discussed above, the Companys management is currently
investigating over-the-counter quotation of the
Companys Common Stock on the OTC Bulletin Board®. See
  No Public Market for the Common Stock.
As such, the Companys securities may become subject to
Rule 15g-9 under the Exchange Act, which imposes additional
sales practice requirements on broker-dealers that sell such
securities to persons other than established customers and
accredited investors (generally, individuals with a
net worth in excess of $1,000,000 or annual incomes exceeding
$200,000 or $300,000 together with their spouses).
Rule 15g-9 defines penny stock to be any equity
security that has a market price (as therein defined) of less
than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions, none of which are
currently met or are anticipated to be met by the Company in the
foreseeable future. For transactions covered by Rule 15g-9, a
broker-dealer must make a special suitability determination for
the purchaser and have received the purchasers written
consent to the transaction prior to sale. For any transaction
involving a penny stock, unless exempt, the rules require
delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Securities and Exchange
Commission (SEC) relating to the penny stock market.
Disclosure is also required to be made about sales commissions
payable to both the broker-dealer and the registered
representative and current quotations for the securities.
Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account
of the broker-dealers client and information on the
limited market in penny stock. Consequently, such Rule may
affect the ability of broker-dealers to sell the Companys
securities and may affect the ability of purchasers to sell any
of the Companys securities in the secondary market.

There can be no assurance that the Companys
securities will qualify for an exemption from the penny stock
restrictions. In any event, even if the Companys
securities become exempt from such restrictions, the

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Company would remain subject to
Section 15(b)(6) of the Exchange Act, which gives the SEC
the authority to restrict any person from participating in a
distribution of penny stock, if the SEC finds that such a
restriction would be in the public interest.


If the Companys securities are subject to
the rules on penny stocks, the market liquidity for the
Companys securities could be materially and adversely
affected.

Limitation on Payment of Dividends on Capital
Stock.Since the Companys
formation in April 1997, the Company has not paid any dividends
on its common stock and does not anticipate doing so in the
foreseeable future. Moreover, the Plan of Reorganization
provides that the Company may not declare any dividends until
certain indebtedness specified in the Plan of Reorganization is
paid in full or otherwise satisfied. There can be no assurance
that the Company will pay out any return on its common stock.

Control by Officers, Directors and Affiliated
Entities. The Companys executive
officers, directors and certain entities affiliated with such
directors beneficially own in the aggregate approximately 35.1%
of the issued and outstanding shares of the Companys
common stock. See Item 11  Security
Ownership of Certain Beneficial Owners and Management.
Such stockholders may have sufficient voting power to control
the outcome of matters (including the election of directors and
any merger, consolidation or sale of all or substantially all of
the Companys assets) submitted to the stockholders for
approval and may be deemed to have effective control over the
affairs and management of the Company. This controlling interest
in the Company may also have the effect of making certain
transactions more difficult or impossible, absent the support of
such stockholders. Such transactions could include a proxy
contest, mergers involving the Company, tender offers and open
market purchase programs involving the Companys common
stock that could give stockholders of the Company the
opportunity to realize a premium over the then prevailing market
price for their shares of the Companys common stock.

Anti-Takeover
Provisions.Certain provisions of the
Companys Bylaws and Nevada law could have the effect of
making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control
of the Company. Such provisions could limit the price that
certain investors might be willing to pay in the future for
shares of the Companys Common Stock.






|        |                        
|------- | -----------------------
|Item 2. | Description of Property

The following table sets forth, as of
September 30, 2002, certain information as to the
facilities owned by the Company:

|                                                           |  |        |     |       |  |             |      |  |  |  |      | 
|---------------------------------------------------------- |  | ------ | --- | ----- |  | ----------- | ---- |  |  |  | ---- | 
|                                                           |  | No. of |     | Year  |  | Year       
|Facility Location (Facility Name)                          |  | Beds   |     | Built |  | Reopened(1)
|                                                           |  |        |     |       |  |            
|Rock Island, Illinois (The Fort Armstrong)                 |  |        | 92  |       |  |             | 1926 |  |  |  | 1990 | 
|Fort Madison, Iowa (The Kensington)                        |  |        | 75  |       |  |             | 1954 |  |  |  | 1988 | 
|Port Huron, Michigan (The Harrington Inn)                  |  |        | 72  |       |  |             | 1896 |  |  |  | 1990 | 
|Beatrice, Nebraska (The Kensington Paddock)                |  |        | 64  |       |  |             | 1934 |  |  |  | 1989 | 
|Hastings, Nebraska (The Kensington)                        |  |        | 80  |       |  |             | 1914 |  |  |  | 1988 | 
|Dickinson, North Dakota (The Evergreen Retirement
    Inn) |  |        | 78  |       |  |             | 1980 |  |  |  | 1990 | 
|Williston, North Dakota (The Kensington)                   |  |        | 115 |       |  |             | 1983 |  |  |  | 1988 | 



---



|    |                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Year Reopened refers to the year in
    which the facility was reopened as an assisted living facility,
    after renovation of the historic property. The Companys
    facilities at Dickinson, North Dakota and Williston, North
    Dakota are not historic properties.

Each of the facilities listed in the table above
is subject to a mortgage, except Port Huron, Michigan and
Beatrice, Nebraska. See Item 6 
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and
Capital Resources. As of September 30, 2002 there was
an aggregate balance of $11,981,000 outstanding under the
mortgages, with the amount owing on a property ranging from
approximately $806,000 to $4,171,000.

In July, 2002 the Company disposed of its
interest in CountryHouse, LLC. This entity was organized in
conjunction with entities controlled by Richard J. Westin and
Jesse A. Pittore, directors and officers of the Company, to
jointly develop, build and operate an Alzheimers facility
in Cumberland, Maryland. The

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Company contributed land located adjacent to its
Cumberland, Maryland facility upon which the Alzheimers
facility has been built. The Westin and Pittore entities have
funded or guaranteed financing of all costs to build, furnish
and operate the facility. For its contribution of land, the
Company received a 25% ownership interest and 25% of all net
income and proceeds from the operation of the facility. The
Company received $200,000 for its interest which was sold to the
joint venturers.


On August 30, 2002, the Company completed
the sale of certain assets and liabilities related to the
ownership and operation of its 85-bed assisted living facility
located in Cumberland, MD (the Kensington
Algonquin). Title to the Kensington Algonquin facility was
transferred to Kensington Algonquin, LLC, a Nevada single member
limited liability company, wholly owned by the Company in
calendar year 2000 in anticipation of a financing transaction
that was never consummated. Since that transfer the entity has
been 100% owned by the Company. The form of the August 30,
2002 transaction was the sale of the Companys member
interest to Richard J. Westin and Jesse A. Pittore for a price
of $3,300,000 less a credit for repairs of $200,000.

As indicated above, the purchasers in these two
transactions are affiliates of the Company. Both Richard J.
Westin and Jesse A. Pittore are officers and directors of the
Company. Their offers for these property interests of $200,000
and $3,300,000 were tested in an auction process that took place
during the month of May, 2002. The auction was advertised in the
national edition of the Wall Street Journal and the Baltimore
Sun. These advertisements produced approximately 30 responses
for additional information. Each of the respondents to the
advertisements was sent additional information regarding the
property and the auction process. No further interest in the
property was expressed by any of these respondents. None of the
respondents pursued the auction further by visiting the property
or bidding on the property. The auction was held on June 5,
2002. The only bids made on the property were those by Messrs
Westin and Pittore.

On August 26, 2002 the Company signed an
agreement to sell its property located in Chanute, KS for
$275,000 to an unaffiliated buyer. The contract provides for a
5% commission to an unaffiliated broker and was conditional
until October 15, 2002. On November 20, 2002 the sale
closed by means of a $100,000 down payment and the execution of
Contract for Sale of Real Estate in the amount of $175,000
bearing interest at 8% per annum all due April 23, 2003.

On October 22, 2002 the Company signed an
agreement to sell its property located in Rock Island, IL for
$2,500,000 to an unaffiliated buyer. The property has previously
been listed with an unaffiliated broker with an agreed
commission of 3%. On December 13, 2002 the buyer removed
all contingencies except for financing. Conditional on the buyer
obtaining financing, the proposed closing date for the sale is
February 28, 2003.

The Company is in the process of considering
other sales of its property. The Company does not believe that a
sale of all of the Companys assets would be in the best
interests of its stockholders as the buyer in such a sale would
likely seek a bulk sale discount. However, the
Company is actively contemplating undertaking a sale of its
assets through the sales of its individual properties in
separate transactions. If the Company determines that such a
sale of assets is in the best interests of its stockholders, it
will solicit stockholder approval for the liquidation of the
Company and the sale of its assets. No final decision has been
reached to sell the assets of the Company, but the Company
anticipates that a final decision will be reached in the near
future.

The Company currently maintains insurance on its
properties in amounts and with such coverages and deductibles
that it believes are adequate and in keeping with industry
practice. The Company also believes that its properties are
suitable for their use as assisted living facilities.

The Company leases its headquarters in Berkeley,
California from The Waterford Company, which is owned by members
of Mr. Westins family, for $24,000 per year and on
terms and conditions that the Companys believes are at or
more favorable than prevailing market rates. See
Item 12  Certain Relationships and Related
Transactions.




Item 3.     Legal
Proceedings

The Company was formed pursuant to the Plan of
Reorganization, which was proposed by the Partnerships in
January 1997 and confirmed by the bankruptcy court on
September 30, 1998. See Item 1 
Business  Formation of the Company and Plan of
Reorganization.

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From time to time, the Company is party to
litigation arising out in the ordinary course of business. The
Company believes that no pending legal proceeding will have a
material adverse effect on the Companys business,
financial condition or results of operations.




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

No matter was submitted to a vote of security
holders during the fourth quarter of the fiscal year covered by
this Report.

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##### Table of Contents






PART II




Item 5.     Market
for Common Stock and Related Stockholder Matters

There is currently no public trading market for
the Companys Common Stock. As of December 15, 2002,
there were 3,959 stockholders of record.

The outstanding Common Stock of the Company
issued pursuant to the Plan of Reorganization is freely tradable
by reason of the exemption from registration provided by section
1145 of the Bankruptcy Code.

The Plan of Reorganization prohibits the Company
from declaring any dividends on its Common Stock until certain
of the notes issued pursuant to the Plan of Reorganization are
paid in full or otherwise satisfied. Since the Companys
formation in April 1997, the Company has not paid any dividends
on its common stock and does not anticipate doing so in the
foreseeable future.

In December 1998, the stockholders of the Company
approved the adoption of the Companys 1997 Employee Stock
Incentive Plan, a stock option plan for certain employees and
directors. As of September 30, 2002, options to purchase up
to a total of 237,164 shares of common stock were granted at
exercise prices ranging from $1.00 to $1.10 per share to the
officers and directors of the Company. The Company relied on the
exemption from the registration requirements of the Securities
Act provided by Rule 701 under the Securities Act.




Item 6.     Managements
Discussion and Analysis or Plan of Operation

When used in this discussion, the words
expects, anticipates,
estimates, and similar expressions are intended to
identify forward-looking statements. Such statements, which
include statements as to the adequacy of the Companys
capital resources, the ability to obtain new sources of capital,
and the ability to service its debt obligations as they become
due, are subject to risks and uncertainties that could cause
actual results to differ materially from those projected. These
risks and uncertainties include, but are not limited to, those
risks discussed below, as well as the matters discussed in
Factors That May Affect Results. See
Item 1  Description of
Business  Factors That May Affect Results.
These forward-looking statements speak only as of the date
hereof. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any
change in the Companys expectations with regard thereto or
any change in events, conditions or circumstances on which any
such statement is based.

Results of Operations

Overview

Operations for the twelve months ended
September 30, 2002 reflect partial year operations for one
property and a full year of operations for six of the
Companys eight properties. The property in Chanute, KS
closed and is held for sale. Operations for the twelve months
ended September 30, 2001 reflect partial year operations
for two of the Companys properties and a full year for
eight of the Companys properties.



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Twelve Months Ended September 30, 2002
    Compared to the Twelve Months Ended September 30,
    2001

Property gross revenue increased from $10,520,000
for the twelve months ended September 30, 2001 to
$10,597,000 for the twelve months ended September 30, 2002,
reflecting generally higher rental rates. In general, higher
rates reflect an increase in the kinds and quantities of
services being provided to residents.

Payments on the Companys secured
indebtedness were allowed to be deferred during a moratorium
period from June, 2000 through January, 2001. To the extent
amounts have been expended to make improvements to the
Companys Hastings, NE property these payments have been
forgiven. During the periods ended September 30, 2002 and
September 30, 2001, $89,000 and $374,000, respectively, was
paid or incurred for such improvements.

Other income decreased from $66,000 in 2001 to
$8,000 in 2002.

Property operating expenses decreased from
$8,960,000 in the 2001 period to $8,575,000 in the 2002 period,
reflecting higher costs of providing higher levels of services
primarily driven by higher personnel costs

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##### Table of Contents



offset by lower costs for insurance and a month
less operations at the Cumberland, MD property and no costs for
the Chanute, KS and Manitowoc, WI properties.


Administrative and overhead expenses decreased
from $734,000 in the 2001 period to $687,000 in the 2002 period.
The decrease is reflected in lower amounts for each
classification of expense in the 2002 period except for
personnel and occupancy costs which increased during the period.
Administrative and overhead expenses for the 2002 period
consisted of $510,000 in salaries and other personnel-related
costs including employee benefits, payroll taxes and travel
expenses; legal and accounting expenses of $55,000; office and
occupancy costs of $35,000; and other administrative costs of
$87,000. Administrative and overhead expenses for the 2001
period consisted of $475,000 in salaries and other
personnel-related costs including employee benefits, payroll
taxes and travel expenses; legal and accounting expenses of
$65,000; office and occupancy costs of $28,000; and other
administrative costs of $166,000. Within other administrative
costs are $58,000 of expenses paid and capitalized during the
2000 period for reports and appraisals required to refinance
debt which were expensed in 2001 when financing was not obtained.

Stock option compensation increased from $210,000
during the 2001 period to $215,000 during the 2002 period,
reflecting fewer options being ceded in the 2002 period.

Income tax expense decreased from $445,000 for
the 2001 period to $4,000 in 2002, due primarily to the
adjustment of deferred taxes in the earlier period.

Interest expense increased from $1,002,000 in the
2001 period to $1,025,000 in the 2002 period, primarily due to
interest attributable to a note secured by the Companys
Cumberland, MD facility.

Liquidity and Capital Resources

Cash and cash equivalents increased from $188,000
at September 30, 2001 to $519,000 at September 30,
2002. Net cash provided by operations was $313,000 in the 2002
period compared to net cash provided by operations of $379,000
in the 2001 period. This change was primarily due to greater
deferrals of interest payments in the 2001 period.

Net cash provided by investing activities in the
2002 period was $2,507,000 consisting of sales proceeds of
$200,000 from the sale of the Companys interest in the
joint venture , sales proceeds of $2,543,000 from the sale of
the facility in Cumberland, MD and the recovery of $90,000 in
advances to the joint venture. Offsetting these were additions
to property and equipment of $326,000 at the Companys
facilities. Net cash used by investing activities was $673,000
in 2001, reflecting additions to property and equipment at the
Companys facilities.

Net cash used in financing activities in the 2002
period was $2,489,000 consisting primarily of regular and
special principal payments of $2,485,000 on secured notes
payable and tax notes. Net cash provided by financing activities
in the 2001 period was $127,000 consisting of new notes payable
proceeds of $550,000 offset by principal payments on Superfirst
notes payable of $366,000, principal payments on tax notes of
$50,000 and principal payments on lease obligations of $7,000.

Notes payable (in thousands) consist of the
following at September 30, 2002:

|                              |                           |                     |    |       |        | 
|----------------------------- | ------------------------- | ------------------- | -- | ----- | ------ | 
|Notes secured by real estate: |                           |                     |    |      
|                              | Regular mortgage notes    |                     | $  | 7,810 |       
|                              | Rock Island mortgage note |                     |    | 4,171 |       
|                              |                           |                     |    |      
|                              |                           | Total secured notes |    | $     | 11,981 | 
|Tax notes                     |                           |                     | 91 |      
|                              |                           |                     |    |      
|                              |                           | Total notes payable |    | $     | 12,072 | 
|                              |                           |                     |    |      

As of September 30, 2002 there are four
regular mortgage notes, dated September 30, 1998, that bear
interest at 8% per annum. Interest on each of the notes is
payable monthly at a rate of 6% per annum. Accrued and unpaid
interest resulting from this deferral provision increased by
$231,926 and $278,309 respectively, during the years ended
September 30, 2002 and 2001. As of September 30, 2002,
the total amount of accrued and unpaid interest on these notes
is $908,680. The notes were originally due on September 30,
2001 but were extended to September 30, 2002 and
additionally extended to September 30, 2003 after
significant principal

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##### Table of Contents



reductions. They may be extended for an
additional period of one year upon payment of $222,000 before
September 30, 2003. On a quarterly basis, any portion of
the 8% interest which is unpaid and 75% of any computed net cash
flow from the properties securing the notes is payable. To the
extent that this calculation results in a payment of principal,
that sum is to be retained by the lender as a reserve for
capital improvements. No amounts were computed to be payable
under this provision during the years ended September 30,
2002 and 2001. These notes are secured by first mortgage liens
on properties in Dickinson, ND, Williston, ND, Fort Madison, IA
and Hastings, NE.


The Rock Island mortgage note, dated
September 30, 1998, bears interest as follows: from
October 1, 1998 through September 30, 1999, the lesser
of 3% per annum on the unpaid principal balance or computed cash
flow from the Rock Island property; from October 1, 1999
through September 30, 2000, the greater of 3% per annum on
the unpaid principal balance or computed cash flow from the Rock
Island property; from October 1, 2000 until maturity, the
greater of 4% per annum on the unpaid principal balance or
computed cash flow from the Rock Island property. For the year
ended September 30, 200 interest payable $165,240 was
computed and $171,525 was paid. For the year ended
September 30, 2001, interest payable of $110,160 was
computed and $62,565 was paid. The note is secured by a first
mortgage lien on the property located in Rock Island, IL and was
due on September 30, 2001 but was extended to
September 30, 2003.

By agreement with the holder of the regular
mortgage notes and the Rock Island mortgage note, minimum
interest payments required to be paid from June, 2000 through
January, 2001 have been deferred to provide funds to perform
substantial modifications to the property located in Hastings,
NE. These modifications are required by local licensing
authorities in order to continue the operation of the property
as an assisted living facility. Accrued and unpaid interest
pursuant to this arrangement amounted to $467,870 by January,
2001. For the years ended September 30, 2002 and 2001,
respectively, $89,162 and $374,049 were incurred for the
modifications required on the Hastings, NE property leaving a
remaining balance of $4,659 deferred.

The tax notes bear interest at 8% per annum.
Payments of interest and principal are due semi-annually each
January and July in the amount of $5,886 through January, 2004
and each February and August in the amount of $26,638 through
February, 2004.

Future maturities of notes payable (in thousands)
at September 30, 2002 are as follows:

|                           |      |   |        |        | 
|-------------------------- | ---- | - | ------ | ------ | 
|Years ending September 30: |      |   |        |       
|                           | 2003 |   |        | 12,042 | 
|                           | 2004 |   |        | 30     | 
|                           |      |   |        |       
|                           |      | $ | 12,072 |       
|                           |      |   |        |       

Virtually all of the Companys long-term
debt will come due next year, subject to an extension of an
additional year upon the repayment of substantial amounts of
principal. In addition, the loans provide for substantial
discounts for early repayment. As a result of the Companys
economic difficulty, we have been actively pursuing strategic
transactions in order to satisfy the needs of our creditors and
to maximize stockholder value. Unfortunately, we have met with
little success in these endeavors. Accordingly, we believe it is
in the best interests of our stockholders to sell substantially
all of the Companys assets, dissolve the corporation and
distribute any available proceeds to the Companys
stockholders. Management believes that in order to obtain the
largest possible discount on the secured indebtedness, we must
offer the note holder payment well before the final due date for
these notes, which is September 30, 2004 if all of the
possible extensions are exercised. The Company has engaged in
preliminary discussions with the holder of the secured
obligations and believes that an agreement may be reached to
reduce the existing debt from over $12 million to
approximately $6 million, representing a discount of
approximately 50% from the total otherwise due. The board of
directors believes that if the Company is unable to negotiate
this discount, there will be no proceeds available for
distribution to our stockholders. Subject to stockholder
approval, we intend to liquidate and distribute to our
stockholders available proceeds from the sale of the assets. We
believe that we will be able to generate enough cash through
these sales to pay creditors, and subject to our ability to
obtain a discount on the repayment of our secured indebtedness,
that the sale of such assets would be sufficient to effect a
distribution of proceeds to all of our stockholders.

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Impact of Inflation

Management believes that the Companys
operations have not been materially adversely affected by
inflation. The Company expects that it will be able to offset
the effects of inflation on salaries and other operating
expenses by increases in rental rates, subject to applicable
restrictions in North Dakota, where the Company receives
subsidies.

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|        |                     
|------- | --------------------
|Item 7. | Financial Statements

AGEMARK CORPORATION

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                       |  |      |       | 
|-------------------------------------------------------------------------------------- |  | ---- | ----- | 
|                                                                                       |  | Page
|                                                                                       |  |     
|REPORT OF INDEPENDENT CERTIFIED PUBLIC
    ACCOUNTANTS                                 |  |      | 16    | 
|FINANCIAL STATEMENTS                                                                   |  |      |       | 
|Balance sheet as of September 30, 2002                                                 |  |      | 17    | 
|Statements of operations for the years ended
    September 30, 2002 and 2001           |  |      | 18    | 
|Statements of stockholders equity for the
    years ended September 30, 2002 and 2001 |  |      | 19    | 
|Statements of cash flows for the years ended
    September 30, 2002 and 2001           |  |      | 20    | 
|Notes to financial statements                                                          |  |      | 21-29 | 

15



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REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

To the Stockholders and

Board of Directors of


Agemark Corporation


We have audited the accompanying balance sheet of
Agemark Corporation(a Nevada corporation) as of
September 30, 2002, and the related statements of
operations, stockholders equity, and cash flows for the
years ended September 30, 2002 and 2001. These financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of Agemark Corporationas of September 30,
2002, and the results of its operations and its cash flows for
the years ended September 30, 2002 and 2001 in conformity
with accounting principles generally accepted in the United
States of America.



| |                    
| | -------------------
| | TIMPSON GARCIA, LLP

Oakland, California


December 19, 2002


16



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##### Table of Contents



AGEMARK CORPORATION

BALANCE SHEET

September 30, 2002


|                                         |                                                                                                             |                                            |                            |        |        |       | 
|---------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------------------------- | ------ | ------ | ----- | 
|                                         |                                                                                                             | (In thousands                             
|                                         |                                                                                                             | except share data)                        
|                                         |                                                                                                             |                                           
|ASSETS                                  
|Cash and cash equivalents                |                                                                                                             | $                                          | 519                        |       
|Property and equipment, net              |                                                                                                             |                                            | 15,159                     |       
|Property held for sale                   |                                                                                                             |                                            | 255                        |       
|Other assets                             |                                                                                                             |                                            | 482                        |       
|                                         |                                                                                                             |                                            |                            |       
|                                         |                                                                                                             | Total assets                               |                            | $      | 16,415 |      
|                                         |                                                                                                             |                                            |                            |       
|                                        
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|LIABILITIES                              |                                                                                                             |                                            |                            |       
|                                         | Accounts payable and accrued liabilities                                                                    |                                            | $                          | 1,918  |       
|                                         | Notes payable                                                                                               |                                            |                            | 12,072 |       
|                                         | Vehicle loans                                                                                               |                                            |                            | 29     |       
|                                         | Capitalized lease obligations                                                                               |                                            |                            | 64     |       
|                                         |                                                                                                             |                                            |                            |       
|                                         |                                                                                                             | Total liabilities                          |                            | $      | 14,083 |      
|                                         |                                                                                                             |                                            |                            |       
|                                        
|STOCKHOLDERS EQUITY                     |                                                                                                             |                                            |                            |       
|                                         | Common stock, stated value $.001, 20,000,000
    shares authorized, 1,109,481 shares issued and outstanding |                                            | $                          | 1      |       
|                                         | Additional paid in capital                                                                                  |                                            |                            | 7,152  |       
|                                         | Unearned compensation                                                                                       |                                            |                            | (171   | )     
|                                         | Stock notes receivable                                                                                      |                                            |                            | (204   | )     
|                                         | Accumulated (deficit)                                                                                       |                                            |                            | (4,446 | )     
|                                         |                                                                                                             |                                            |                            |       
|                                         |                                                                                                             |                                            | Total stockholders equity |        | $      | 2,332 | 
|                                         |                                                                                                             |                                            |                            |       
|                                         |                                                                                                             | Total liabilities and stockholders equity |                            | $      | 16,415 |      
|                                         |                                                                                                             |                                            |                            |       

See accompanying notes to financial statements.

17



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AGEMARK CORPORATION

STATEMENTS OF OPERATIONS

Years Ended September 30, 2002 and
2001

|                                          |                                      |                                                     |      |        |        |   |      |        |        |  
|----------------------------------------- | ------------------------------------ | --------------------------------------------------- | ---- | ------ | ------ | - | ---- | ------ | ------ | -
|                                          |                                      | 2002                                                |      | 2001  
|                                          |                                      |                                                     |      |       
|                                          |                                      |                                                    
|                                          |                                      | (In thousands except                               
|                                          |                                      | share data)                                        
|Revenue                                   |                                      |                                                     |      |        |        |   |      |       
|                                          | Property gross revenue               |                                                     | $    | 10,597 |        |   | $    | 10,520 |       
|                                          | Interest forgiven                    |                                                     |      | 89     |        |   |      | 374    |       
|                                          | Other income                         |                                                     |      | 8      |        |   |      | 66     |       
|                                          |                                      |                                                     |      |        |        |   |      |       
|                                          |                                      | Total revenue                                       |      | $      | 10,694 |   |      | $      | 10,960 |  
|                                          |                                      |                                                     |      |        |        |   |      |       
|Expenses                                  |                                      |                                                     |      |        |        |   |      |       
|                                          | Property operating expenses          |                                                     | $    | 8,575  |        |   | $    | 8,960  |       
|                                          | Administrative and overhead expenses |                                                     |      | 687    |        |   |      | 734    |       
|                                          | Stock option compensation            |                                                     |      | 215    |        |   |      | 210    |       
|                                          | Interest expense                     |                                                     |      | 1,025  |        |   |      | 1,002  |       
|                                          | Depreciation                         |                                                     |      | 597    |        |   |      | 615    |       
|                                          |                                      |                                                     |      |        |        |   |      |       
|                                          |                                      | Total expenses                                      |      | $      | 11,099 |   |      | $      | 11,521 |  
|                                          |                                      |                                                     |      |        |        |   |      |       
|                                          |                                      | $                                                   | (405 | )      |        | $ | (561 | )     
|Gain on sale of joint venture interest    |                                      |                                                     | 98   |        |        |   |      |       
|Loss on disposition of property           |                                      |                                                     | (607 | )      |        |   | (626 | )     
|Loss from write down of long lived assets |                                      |                                                     | (25  | )      |        |   | (642 | )     
|Equity in net income of joint venture     |                                      |                                                     | 18   |        |        |   | 13   |       
|                                          |                                      |                                                     |      |        |        |   |      |       
|                                          |                                      | (Loss) before income taxes                          |      | $      | (921   | ) |      | $      | (1,816 | )
|Income tax expense                        |                                      |                                                     | 4    |        |        |   | 445  |       
|                                          |                                      |                                                     |      |        |        |   |      |       
|                                          |                                      | Net (loss)                                          |      | $      | (925   | ) |      | $      | (2,261 | )
|                                          |                                      |                                                     |      |        |        |   |      |       
|                                          |                                      | Basic and fully diluted (loss) per common
    share |      | $      | (0.92  | ) |      | $      | (2.26  | )
|                                          |                                      |                                                     |      |        |        |   |      |       

See accompanying notes to financial statements.

18



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AGEMARK CORPORATION

STATEMENTS OF STOCKHOLDERS
EQUITY

Years Ended September 30, 2002 and
2001

|                            |  |                |   |            |  |              |       |            |  |             |      |       |  |   |      |   |  |   |        |   |  |   |        |  
|--------------------------- |  | -------------- | - | ---------- |  | ------------ | ----- | ---------- |  | ----------- | ---- | ----- |  | - | ---- | - |  | - | ------ | - |  | - | ------ | -
|                            |  |                |   | Additional |  |              |       | Stock      |  |             |      |      
|                            |  | Common         |   | Paid-In    |  | Unearned     |       | Notes      |  | Accumulated |      |      
|                            |  | Stock          |   | Capital    |  | Compensation |       | Receivable |  | (Deficit)   |      | Total
|                            |  |                |   |            |  |              |       |            |  |             |      |      
|                            |  |               
|                            |  | (In thousands)
|Balance, September 30, 2000 |  | $              | 1 |            |  | $            | 6,352 |            |  |             |      |       |  |   |      |   |  | $ | (1,260 | ) |  | $ | 5,093  |  
|Stock option compensation   |  |                |   |            |  |              | 210   |            |  |             |      |       |  |   |      |   |  |   |        |   |  |   | 210    |  
|Net (loss)                  |  |                |   |            |  |              |       |            |  |             |      |       |  |   |      |   |  |   | (2,261 | ) |  |   | (2,261 | )
|                            |  |                |   |            |  |              |       |            |  |             |      |       |  |   |      |   |  |   |        |   |  |   |        |  
|Balance, September 30, 2001 |  | $              | 1 |            |  | $            | 6,562 |            |  |             |      |       |  |   |      |   |  | $ | (3,521 | ) |  | $ | 3,042  |  
|Stock option compensation   |  |                |   |            |  |              | 172   |            |  | $           | 43   |       |  |   |      |   |  |   |        |   |  |   | 215    |  
|Stock option exercise       |  |                |   |            |  |              | 418   |            |  |             | (214 | )     |  | $ | (204 | ) |  |   |        |   |  |   | 0      |  
|Net (loss)                  |  |                |   |            |  |              |       |            |  |             |      |       |  |   |      |   |  |   | (925   | ) |  |   | (925   | )
|                            |  |                |   |            |  |              |       |            |  |             |      |       |  |   |      |   |  |   |        |   |  |   |        |  
|Balance, September 30, 2002 |  | $              | 1 |            |  | $            | 7,152 |            |  | $           | (171 | )     |  | $ | (204 | ) |  | $ | (4,446 | ) |  | $ | 2,332  |  
|                            |  |                |   |            |  |              |       |            |  |             |      |       |  |   |      |   |  |   |        |   |  |   |        |  

See accompanying notes to financial statements.

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AGEMARK CORPORATION

STATEMENTS OF CASH FLOWS

Years Ended September 30, 2002 and
2001

|                                                 |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |        |      |     |      |  
|------------------------------------------------ | ------------------------------------------------------------------------------------- | --------------------------------------------------------------- | -------------------------------------------------------- | -------------------------------------------------------- | ------- | -- | ------ | ------ | ---- | --- | ---- | -
|                                                 |                                                                                       | 2002                                                            |                                                          | 2001                                                    
|                                                 |                                                                                       |                                                                 |                                                          |                                                         
|                                                 |                                                                                       |                                                                
|                                                 |                                                                                       | (In thousands)                                                 
|CASH FLOWS FROM OPERATING ACTIVITIES             |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|                                                 | Net (loss)                                                                            |                                                                 | $                                                        | (925                                                     | )       |    | $      | (2,261 | )   
|                                                 | Adjustments to reconcile net (loss) to net
    cash provided by operating activities: |                                                                 |                                                          |                                                          |         |    |        |        |     
|                                                 |                                                                                       | Depreciation                                                    |                                                          |                                                          | 597     |    |        |        | 615  |    
|                                                 |                                                                                       | Deferred income taxes                                           |                                                          |                                                          |        |    |        |        | 445  |    
|                                                 |                                                                                       | Prepetition liabilities settled or compromised                  |                                                          |                                                          |        |    |        |        | (17  | )  
|                                                 |                                                                                       | Moratorium interest forgiven                                    |                                                          |                                                          | (89     | )  |        |        | (374 | )  
|                                                 |                                                                                       | Gain on sale of joint venture interest                          |                                                          |                                                          | (98     | )  |        |        |      |    
|                                                 |                                                                                       | Loss on disposition of property                                 |                                                          |                                                          | 607     |    |        |        | 626  |    
|                                                 |                                                                                       | Loss from write down of long-lived assets                       |                                                          |                                                          | 25      |    |        |        | 642  |    
|                                                 |                                                                                       | Stock option compensation                                       |                                                          |                                                          | 215     |    |        |        | 210  |    
|                                                 |                                                                                       | Loan costs expensed                                             |                                                          |                                                          | 2       |    |        |        | 58   |    
|                                                 |                                                                                       | Undistributed income from joint venture                         |                                                          |                                                          | (18     | )  |        |        | (13  | )  
|                                                 |                                                                                       | Change in assets and liabilities:                               |                                                          |                                                          |         |    |        |        |      |    
|                                                 |                                                                                       |                                                                 | (Increase) in other assets                               |                                                          |         | (7 | )      |        |      | (78 | )   
|                                                 |                                                                                       |                                                                 | Increase in accounts payable and accrued
    liabilities |                                                          |         | 4  |        |        |      | 526 |     
|                                                 |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|                                                 |                                                                                       |                                                                 |                                                          | Net cash provided by operating activities                |         | $  | 313    |        |      | $   | 379  |  
|                                                 |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|CASH FLOWS FROM INVESTING ACTIVITIES             |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|                                                 | Additions to property and equipment                                                   |                                                                 | $                                                        | (326                                                     | )       |    | $      | (675   | )   
|                                                 | Sales proceeds joint venture interest                                                 |                                                                 |                                                          | 200                                                      |         |    |        |       |     
|                                                 | Sales proceeds Cumberland facility                                                    |                                                                 |                                                          | 2,543                                                    |         |    |        |       |     
|                                                 | Distributions from joint venture                                                      |                                                                 |                                                          | 90                                                       |         |    |        | 2      |     
|                                                 |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|                                                 |                                                                                       |                                                                 |                                                          | Net cash provided by (used in) investing
    activities  |         | $  | 2,507  |        |      | $   | (673 | )
|                                                 |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|CASH FLOWS FROM FINANCING ACTIVITIES             |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|                                                 | Proceeds from notes payable                                                           |                                                                 | $                                                        |                                                         |         |    | $      | 550    |     
|                                                 | Proceeds from vehicle loans                                                           |                                                                 |                                                          | 32                                                       |         |    |        |       |     
|                                                 | Principal payments on notes payable and vehicle
    loans                             |                                                                 |                                                          | (2,485                                                   | )       |    |        | (416   | )   
|                                                 | Principal payments on capital lease obligations                                       |                                                                 |                                                          | (36                                                      | )       |    |        | (7     | )   
|                                                 |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|                                                 |                                                                                       |                                                                 |                                                          | Net cash provided by (used in) financing
    activities  |         | $  | (2,489 | )      |      | $   | 127  |  
|                                                 |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|                                                 |                                                                                       |                                                                 |                                                          | Net increase (decrease) in cash and cash
    equivalents |         | $  | 331    |        |      | $   | (167 | )
|CASH AND CASH EQUIVALENTS, BEGINNING OF
    YEAR |                                                                                       |                                                                 | 188                                                      |                                                          |         |    | 355    |       
|                                                 |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|                                                 |                                                                                       |                                                                 |                                                          | Cash and cash equivalents, end of year                   |         | $  | 519    |        |      | $   | 188  |  
|                                                 |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|SUPPLEMENTAL DISCLOSURES                         |                                                                                       |                                                                 |                                                          |                                                          |         |    |        |       
|                                                 | Cash payments for:                                                                    |                                                                 |                                                          |                                                          |         |    |        |        |     
|                                                 |                                                                                       | Interest                                                        |                                                          | $                                                        | 826     |    |        | $      | 552  |    
|                                                 |                                                                                       | Taxes                                                           |                                                          | $                                                        | 4       |    |        | $      |     |    
|                                                 | Noncash investing and financing activities:                                           |                                                                 |                                                          |                                                          |         |    |        |        |     
|                                                 |                                                                                       | Property and equipment acquired by capital lease
    obligation |                                                          | $                                                        | 61      |    |        | $      | 46   |    
|                                                 |                                                                                       | Note payable cancelled on sale of facility                      |                                                          | $                                                        | 550,000 |    |        | $      |     |    

See accompanying notes to financial statements.

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##### Table of Contents



AGEMARK CORPORATION

NOTES TO FINANCIAL STATEMENTS



|        |                                                     
|------- | ----------------------------------------------------
|Note 1. | Organization and Significant Accounting
    Policies



| |              
| | -------------
| | Organization:

Agemark Corporation (the Company) was
organized in April, 1997 pursuant to an order of the
U.S. Bankruptcy Court dated April 27, 1997 (the
Order) to receive the assets of and continue the
businesses of four reorganized, publicly registered limited
partnerships and two privately held limited partnerships (the
Partnerships). The Order confirmed the Second
Amended Joint Plan of Reorganization (the Plan) of
the Partnerships filed in January, 1997 and amended in April,
1997. The first of the property transfers to the Company
pursuant to the Plan was accomplished in January, 1998 and the
final transfer took place in July, 1998. A total of 1,000,000
shares of stock were issued to the Partnerships for these
properties as of September 30, 1998 and immediately
distributed to their partners.

The property locations and their transfer dates
were as follows:

|                 |  |              
|---------------- |  | -------------
|Williston, ND    |  | January, 1998
|Beatrice, NE     |  | April, 1998  
|Chanute, KS      |  | April, 1998  
|Cumberland, MD   |  | April, 1998  
|Manitowoc, WI    |  | April, 1998  
|Port Huron, MI   |  | April, 1998  
|Fort Madison, IA |  | July, 1998   
|Hastings, NE     |  | July, 1998   
|Dickinson, ND    |  | July, 1998   
|Rock Island, IL  |  | July, 1998   

All of the above properties transferred and
retained by the Company are renovated hotels that have been
designated as Certified Historic Structures, except
for the two facilities in North Dakota, which are modern
buildings. All of the locations are operated as senior
residential and assisted living facilities, except for the
Manitowoc, WI property. These facilities provide an apartment
style residence, three meals per day, housekeeping,
transportation, activities and 24-hour non-medical assistance to
elderly residents for a monthly fee. Revenues are received
directly from residents, their family, or another responsible
party. Services are generally not covered by government or
private insurance programs, except in North Dakota, where the
State government provides limited subsidies. Resident fee
revenue is recognized when services are rendered.

The property located in Manitowoc, WI was
operated as an apartment complex. Those units were generally
rented on a month-to-month basis.



| |                  
| | -----------------
| | Use of Estimates:

Management uses estimates and assumptions in
preparing financial statements. Those estimates and assumptions
affect the reported amounts of assets and liabilities, and the
reported revenues and expenses. Actual results could differ from
those estimates.



| |                        
| | -----------------------
| | Property and Equipment:

Property and equipment transferred to the Company
pursuant to the Plan is carried at amounts stated in the Plan.
Additions to property and equipment are stated at cost.
Depreciation of buildings is computed using the straight-line
method over estimated useful lives of forty years. Personal
property is depreciated using the straight-line method over
useful lives of fifteen years.

In accordance with SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, these long-lived assets
to be held and used by the Company are reviewed to determine
whether any events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. For
long-lived assets to be held and used, the Company bases its
evaluation on such

21



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##### Table of Contents



AGEMARK CORPORATION


NOTES TO FINANCIAL
STATEMENTS  (Continued)

impairment indicators as the nature of the
assets, the future economic benefit of the assets, any
historical or future profitability measurements, as well as
other external market conditions or factors that may be present.
If such impairment indicators are present or other factors exist
that indicate that the carrying amount of the asset may not be
recoverable, the Company determines whether an impairment has
occurred through the use of an undiscounted cash flows analysis
of assets at the lowest level for which identifiable cash flow
exists. If an impairment has occurred, the Company recognizes a
loss for the difference between the carrying amount and the
estimated value of the asset.



| |                             
| | ----------------------------
| | Investment in Joint Venture:

The Company has adopted the equity method of
accounting for 20% or more owned investee companies. Under this
method, the Companys equity in the earnings or losses of
these companies is reflected in the Companys earnings.



| |              
| | -------------
| | Income Taxes:

Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of
taxes currently due plus deferred taxes. Deferred taxes are
recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes. The
differences relate primarily to the accrual of compensated
absences that are not deductible for income tax purposes, stock
options and differences between the carrying amounts of the
property and equipment transferred to the Company pursuant to
the Plan. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will
either be deductible or taxable when the assets and liabilities
are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable
income.



| |                          
| | -------------------------
| | Stock-Based Compensation:

The Company has elected to account for its stock
option plan under Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees.
Accordingly, no compensation expense has been recognized for the
stock option grants.



| |                           
| | --------------------------
| | Cash and Cash Equivalents:

For purposes of the statement of cash flows, the
Company considers all money market funds purchased with a
maturity of three months or less to be cash equivalents.



|        |                          
|------- | -------------------------
|Note 2. | Cash and Cash Equivalents

At September 30, 2002, cash and cash
equivalents included approximately $306,000 invested in Vanguard
Federal Money Market Fund. Vanguard Federal Money Market Fund
invests in United States Treasury obligations, securities issued
or guaranteed by agencies of the U.S. Government, and
repurchase agreements collateralized by these obligations and
securities.

22



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##### Table of Contents



AGEMARK CORPORATION


NOTES TO FINANCIAL
STATEMENTS  (Continued)



|        |                       
|------- | ----------------------
|Note 3. | Property and Equipment

Property and equipment (in thousands) consists of
the following at September 30, 2002:

|                              |  |        |        |      |  |       |       |  |  |   |        | 
|----------------------------- |  | ------ | ------ | ---- |  | ----- | ----- |  |  | - | ------ | 
|                              |  | Plan   |        |      |  |      
|                              |  | Values |        | Cost |  | Total
|                              |  |        |        |      |  |      
|Land                          |  | $      | 556    |      |  | $     |      |  |  | $ | 556    | 
|Buildings                     |  |        | 13,599 |      |  |       | 999   |  |  |   | 14,598 | 
|Personal property             |  |        | 1,804  |      |  |       | 323   |  |  |   | 2,127  | 
|                              |  |        |        |      |  |       |       |  |  |   |        | 
|                              |  | $      | 15,959 |      |  | $     | 1,322 |  |  | $ | 17,281 | 
|                              |  |        |        |      |  |       |       |  |  |   |        | 
|Less accumulated depreciation |  |        |        |      |  |       |       |  |  |   | 2,122  | 
|                              |  |        |        |      |  |       |       |  |  |   |        | 
|                              |  |        |        |      |  |       |       |  |  | $ | 15,159 | 
|                              |  |        |        |      |  |       |       |  |  |   |        | 

Plan values represent the assets transferred from
the four publicly registered limited partnerships and two
privately held limited partnerships pursuant to the Order of the
U.S. Bankruptcy Court. The Partnerships were as follows:

Publicly registered limited partnerships:

| |                                                                                
| | -------------------------------------------------------------------------------
| | Historic Housing for Seniors Limited Partnership
    (HHS I)                   
| | Historic Housing for Seniors II Limited
    Partnership (HHS II)               
| | Historic Housing for Seniors III Limited
    Partnership (HHS III)             
| | Housing for Seniors Participating Mortgage Fund
    Limited Partnership (PIF I)

Privately held limited partnerships:

| |                                         
| | ----------------------------------------
| | Dickinson Associates Limited Partnership
| | Williston Associates Limited Partnership

Under the Plan, those facilities which were
determined to have the strongest long-term potential for
generating cash flow to support ongoing debt or which were
needed to secure certain obligations from previous loans were
transferred to the Company. The following is a summary (in
thousands) of the properties the Company currently holds, net of
transfers, and the adjustments made to historical values to
arrive at Plan values pursuant to the Order of the U.S.
Bankruptcy Court:

|                  |  |             |  |            |        |          |  |          |       |        |  |        |        |  |  |   |       |   |  |   |        | 
|----------------- |  | ----------- |  | ---------- | ------ | -------- |  | -------- | ----- | ------ |  | ------ | ------ |  |  | - | ----- | - |  | - | ------ | 
|                  |  |             |  |            |        | Accum.   |  | Net Book |       | Write  |  |       
|                  |  | Transferred |  | Historical |        | Depr.    |  | Value    |       | Up     |  | Plan  
|Property Location |  | From        |  | Value      |        | 12/31/97 |  | 12/31/97 |       | (Down) |  | Values
|                  |  |             |  |            |        |          |  |          |       |        |  |       
|Beatrice, NE      |  | HHS I       |  | $          | 2,742  |          |  | $        | 888   |        |  | $      | 1,854  |  |  | $ | (618  | ) |  | $ | 1,236  | 
|Hastings, NE      |  | HHS I       |  |            | 3,211  |          |  |          | 1,120 |        |  |        | 2,091  |  |  |   | 198   |   |  |   | 2,289  | 
|Rock Island, IL   |  | HHS II      |  |            | 4,345  |          |  |          | 1,212 |        |  |        | 3,133  |  |  |   | (735  | ) |  |   | 2,398  | 
|Fort Madison, IA  |  | HHS III     |  |            | 3,460  |          |  |          | 781   |        |  |        | 2,679  |  |  |   | (464  | ) |  |   | 2,215  | 
|Port Huron, IL    |  | PIF I       |  |            | 1,090  |          |  |          | 0     |        |  |        | 1,090  |  |  |   | 86    |   |  |   | 1,176  | 
|Dickinson, ND     |  | Private     |  |            | 1,380  |          |  |          | 380   |        |  |        | 1,000  |  |  |   | 1,273 |   |  |   | 2,273  | 
|Williston, ND     |  | Private     |  |            | 1,932  |          |  |          | 538   |        |  |        | 1,394  |  |  |   | 2,978 |   |  |   | 4,372  | 
|                  |  |             |  |            |        |          |  |          |       |        |  |        |        |  |  |   |       |   |  |   |        | 
|                  |  |             |  | $          | 18,160 |          |  | $        | 4,919 |        |  | $      | 13,241 |  |  | $ | 2,718 |   |  | $ | 15,959 | 
|                  |  |             |  |            |        |          |  |          |       |        |  |        |        |  |  |   |       |   |  |   |        | 

In connection with the transfers of the
facilities, the Company also assumed various notes payable. The
following is a summary (in thousands) of the notes payable
assumed by the Company:

|                                                                             |                                      |   |        |        | 
|---------------------------------------------------------------------------- | ------------------------------------ | - | ------ | ------ | 
|Carrying value of notes (including accrued
    interest) by the Partnerships |                                      | $ | 24,186 |       
|Less forgiveness of debt recognized by the
    Partnerships                  |                                      |   | 8,595  |       
|                                                                             |                                      |   |        |       
|                                                                             | Notes payable assumed by the Company |   | $      | 15,591 | 
|                                                                             |                                      |   |        |       

23



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##### Table of Contents



AGEMARK CORPORATION


NOTES TO FINANCIAL
STATEMENTS  (Continued)

Note 4.     Accounts
Payable and Accrued Liabilities

Accounts payable and accrued liabilities (in
thousands) consist of the following at September 30, 2002:

|                                             |  |   |       | 
|-------------------------------------------- |  | - | ----- | 
|Current and continuing operating liabilities |  | $ | 964   | 
|Accrued interest on notes payable            |  |   | 954   | 
|                                             |  |   |       | 
|                                             |  | $ | 1,918 | 
|                                             |  |   |       | 

Note 5.     Notes
Payable

Notes payable (in thousands) consist of the
following at September 30, 2002:

|                              |                           |                     |    |       |        | 
|----------------------------- | ------------------------- | ------------------- | -- | ----- | ------ | 
|Notes secured by real estate: |                           |                     |    |      
|                              | Regular mortgage notes    |                     | $  | 7,810 |       
|                              | Rock Island mortgage note |                     |    | 4,171 |       
|                              |                           |                     |    |      
|                              |                           | Total secured notes |    | $     | 11,981 | 
|Tax notes                     |                           |                     | 91 |      
|                              |                           |                     |    |      
|                              |                           | Total notes payable |    | $     | 12,072 | 
|                              |                           |                     |    |      

There are four regular mortgage notes, dated
September 30, 1998, that bear interest at 8% per annum.
Interest on each of the notes is payable monthly at a rate of 6%
per annum. Accrued and unpaid interest resulting from this
deferral provision increased by $231,926 and $278,309
respectively, during the years ended September 30, 2002 and
2001. As of September 30, 2002, the total amount of accrued
and unpaid interest on these notes is $906,818. The notes were
originally due on September 30, 2001 but were extended to
September 30, 2002 and additionally extended to
September 30, 2003. They may be extended for additional
period of one year upon payment of $222,000 before
September 30, 2003. On a quarterly basis, any portion of
the 8% interest which is unpaid and 75% of any computed net cash
flow from the properties securing the notes is payable. To the
extent that this calculation results in a payment of principal,
that sum is to be retained by the lender as a reserve for
capital improvements. No amounts were computed to be payable
under this provision during the years ended September 30,
2002 and 2001. These notes are secured by first mortgage liens
on properties in Dickinson, ND, Williston, ND, Fort Madison, IA
and Hastings, NE.

The Rock Island mortgage note, dated
September 30, 1998, bears interest as follows: from
October 1, 1998 through September 30, 1999, the lesser
of 3% per annum on the unpaid principal balance or computed cash
flow from the Rock Island property; from October 1, 1999
through September 30, 2000, the greater of 3% per annum on
the unpaid principal balance or computed cash flow from the Rock
Island property; from October 1, 2000 until maturity, the
greater of 4% per annum on the unpaid principal balance or
computed cash flow from the Rock Island property. For the year
ended September 30, 2002 interest payable $165,240 was
computed and $171,525 was paid. For the year ended
September 30, 2001, interest payable of $110,160 was
computed and $62,565 was paid. As of September 30, 2002,
the total amount of accrued and unpaid interest on this note is
$41,310. The note is secured by a first mortgage lien on the
property located in Rock Island, IL and was due on
September 30, 2001 but was extended to September 30,
2003.

By agreement with the holder of the regular
mortgage notes and the Rock Island mortgage note, minimum
interest payments required to be paid from June, 2000 through
January, 2001 have been deferred to provide funds to perform
substantial modifications to the property located in Hastings,
NE. These modifications are required by local licensing
authorities in order to continue the operation of the property
as an assisted living facility. Accrued and unpaid interest
pursuant to this arrangement amounted to $467,870 by January,
2001. For the years ended September 30, 2002 and 2001,
respectively, $89,162 and $374,049 were incurred for the
modifications required on the Hastings, NE property leaving a
remaining balance of $4,659 deferred.

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AGEMARK CORPORATION


NOTES TO FINANCIAL
STATEMENTS  (Continued)

The tax notes bear interest at 8% per annum.
Payments of interest and principal are due semi-annually each
January and July in the amount of $5,886 through January, 2004
and each February and August in the amount of $26,638 through
February, 2004.

Future maturities of notes payable (in thousands)
at September 30, 2002 are as follows:

|                           |      |   |        |        | 
|-------------------------- | ---- | - | ------ | ------ | 
|Years ending September 30: |      |   |        |       
|                           | 2003 |   |        | 12,042 | 
|                           | 2004 |   |        | 30     | 
|                           |      |   |        |       
|                           |      | $ | 12,072 |       
|                           |      |   |        |       

Note 6.     Vehicle
Loans

During 2002, the Company financed the purchase of
two automobiles at two of its facilities. The loans are secured
by the automobiles, bear interest at 6.75% and 3.9%, and require
monthly payments of principal and interest of $392 through
January 2005 and $392 through July 2007.

Future maturities of vehicle loans (in thousands)
at September 30, 2002 are as follows:

|                           |      |   |    |   | 
|-------------------------- | ---- | - | -- | - | 
|Years ending September 30: |      |   |    |  
|                           | 2003 |   | $  | 8 | 
|                           | 2004 |   |    | 8 | 
|                           | 2005 |   |    | 6 | 
|                           | 2006 |   |    | 4 | 
|                           | 2007 |   |    | 3 | 
|                           |      |   |    |  
|                           |      | $ | 29 |  
|                           |      |   |    |  

Note 7.     Lease
Obligations

The Company leases an emergency generator and an
alarm system at its Hastings, NE facility under capital leases
expiring in April 2003 and September 2004, respectively. The
cost of the emergency generator has been capitalized at $46,353
and the alarm system at $61,051 and included in property and
equipment.

The Company currently also leases a total of
three buses at three of its facilities under operating leases
expiring in July 2003. Annual rent expense under these operating
leases amounted to $58,533 in 2002 and $59,461 in 2001.

The following is a schedule by year of future
minimum lease payments under capital and operating leases,
together with the present value of the net minimum lease
payments as of September 30, 2002 (in thousands):

|                           |                                        |         |    |           |    |       |    |   |    |   |     |   |    | 
|-------------------------- | -------------------------------------- | ------- | -- | --------- | -- | ----- | -- | - | -- | - | --- | - | -- | 
|                           |                                        | Capital |    | Operating |    | Total
|                           |                                        |         |    |           |    |      
|Years ending September 30: |                                        |         |    |           |    |       |    |   |    |   |     |  
|                           |                                        | 2003    |    | $         | 46 |       |    | $ | 37 |   |     | $ | 83 | 
|                           |                                        | 2004    |    |           | 25 |       |    |   |   |   |     |   | 25 | 
|                           |                                        |         |    |           |    |       |    |   |    |   |     |  
|                           |                                        | $       | 71 |           |    | $     | 37 |   |    | $ | 108 |  
|                           |                                        |         |    |           |    |       |    |   |    |   |     |  
|                           | Less amount representing interest      |         |    | (7        | )  |       |    |   |    |   |     |   |   
|                           | Total obligations under capital leases |         | $  | 64        |    |       |    |   |    |   |     |   |   
|                           |                                        |         |    |           |    |       |    |   |    |   |     |  

Note
8.     Transactions With
Affiliates

The Company contracts with Opus X, Inc.
(OPUS) for the management of its owned and operated
properties. OPUS is co-owned by Richard J. Westin and Jesse A.
Pittore, directors and officers of the

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AGEMARK CORPORATION


NOTES TO FINANCIAL
STATEMENTS  (Continued)

Company. Prior to June 1, 2001 these
management services were provided by Evergreen Management, Inc.
(EMI), also an affiliate of Westin and Pittore.
Compensation for these management services is 4.5% of gross
income paid monthly prior to October 1, 2001 and 3.75%
thereafter. Management fees of $397,404 and $473,400 for the
years ended September 30, 2002 and 2001, respectively, are
included in the property operating expenses on the statement of
operations for services provided by EMI and OPUS. At
September 30, 2002, accounts payable includes $28,403 owed
by the Company to OPUS.

The Company rents its corporate headquarters in
Berkeley, CA pursuant to a lease between the Company and the
Waterford Company, which is owned by members of Richard J.
Westins family. The lease was written for a one-year term
starting October 1, 1998 at a rent of $2,000 per month and
automatically renews unless terminated by either party. The
lessee is responsible for limited maintenance and repair
expenses and all utilities. The Waterford Company is responsible
for major repairs, real estate taxes and debt service.

For the years ended September 30, 2002 and
2001, administrative expenses include rent for the
Companys headquarters in the amount of $24,000 paid
pursuant to the above lease between the Company and the
Waterford Company.

During 1999, the Company entered into a joint
venture agreement with entities controlled by Richard J. Westin
and Jesse A. Pittore, directors and officers of the Company (see
Note 9).

During 2002, entities controlled by Richard J.
Westin and Jesse A. Pittore, directors and officers of the
Company, purchased the Companys interests in the joint
venture discussed above and in Note 9 and the Cumberland, MD
facility (see Note 10).

Note
9.     Investment in Joint
Venture

During 1999, the Company entered into an
agreement with entities controlled by Richard J. Westin and
Jesse A. Pittore, directors and officers of the Company, to
jointly develop, build and operate an Alzheimers facility
in Cumberland, MD. The agreement provided, in part, for the
Company to contribute land located adjacent to its Cumberland,
MD facility upon which the Alzheimers facility was built.
The Westin and Pittore entities funded all of the costs to
build, furnish and operate the facility. For its contribution of
land, the Company received a 25% ownership interest and 25% of
all net income and proceeds from the operation of the facility.
This facility began operations in August, 2000.

The following information (in thousands)
summarizes the activity of the joint venture since its inception:

|                                  |  |   |     |  
|--------------------------------- |  | - | --- | -
|Land contributed to joint venture |  | $ | 130 |  
|Distributions net of advances     |  |   | (40 | )
|Companys share of net income     |  |   | 12  |  
|                                  |  |   |     |  
|Investment in joint venture       |  | $ | 102 |  
|                                  |  |   |     |  

On July 1, 2002, the Company sold its
interest in the joint venture to the Westin and Pittore entities
for $200,000 in cash for a gain of $98,000.

Note 10.     Loss
on Disposition of Property

In December, 2000 the Company disposed of its
property located in Manitowoc, WI in return for cancellation of
liability for prior years unpaid property taxes. The
depreciated book value of the property disposed of was $769,000
and the liabilities cancelled were $143,000, resulting in a net
loss of $626,000. This property has always been operated as an
apartment house and was not part of the core business of the
Company.

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##### Table of Contents



AGEMARK CORPORATION


NOTES TO FINANCIAL
STATEMENTS  (Continued)

On August 31, 2002, the Company sold its
facility located in Cumberland, MD to entities controlled by
Richard J. Westin and Jesse A. Pittore, directors and
officers of the Company, as follows:

|                                                         |  |   |           |  
|-------------------------------------------------------- |  | - | --------- | -
|Sales price                                              |  | $ | 3,300,000 |  
|Credit for repairs                                       |  |   | (200,000  | )
|Related party note cancelled                             |  |   | (550,000  | )
|Costs of sale                                            |  |   | (7,000    | )
|                                                         |  |   |           |  
|Net proceeds from sale                                   |  | $ | 2,543,000 |  
|Book value of assets sold, net of related party
    note |  |   | 3,150,000 |  
|                                                         |  |   |           |  
|Loss on disposition of facility                          |  | $ | (607,000  | )
|                                                         |  |   |           |  



|         |                                              
|-------- | ---------------------------------------------
|Note 11. | Loss from Write-down of Long-lived
    Assets

In May 2001, the Company closed its facility
located in Chanute, KS and offered the property for sale. In
November 2001, the Company signed a contract to sell the
property for $300,000, less estimated commissions and closing
costs of $20,000. The write down of the net book value of the
real and personal property of $922,000 to the net sales price of
$280,000 resulted in the recognition of a loss of $642,000. This
contract was never finalized.

On August 26, 2003, the Company signed an
agreement to sell its property located in Chanute, KS for
$275,000 to an unaffiliated buyer. The contract provides for a
5% commission to an unaffiliated broker and was conditional
until October 15, 2002. On the basis of this contract, the
carrying value of the property was further written down by
$25,000.



|         |             
|-------- | ------------
|Note 12. | Income Taxes

Income taxes consist of deferred federal income
taxes of $445,000 for the year ended September 30, 2001 and
current state franchise taxes of approximately $13,000 for the
year ended September 30, 2000. The following is a
reconciliation (in thousands) of the federal statutory income
tax amount on income to the provision for income tax expense:

|                                               |                    |      |        |      |  |   |      |    | 
|---------------------------------------------- | ------------------ | ---- | ------ | ---- |  | - | ---- | -- | 
|                                               |                    | 2001 |        | 2000
|                                               |                    |      |        |     
|Federal statutory income tax (benefit) at 34%  |                    | $    | (1,700 | )    |  | $ | (476 | ) 
|State franchise taxes                          |                    |      |       |      |  |   | 13   |   
|Valuation allowance increase during the period |                    |      | 2,145  |      |  |   | 476  |   
|                                               |                    |      |        |      |  |   |      |   
|                                               | Income tax expense |      | $      | 445  |  |   | $    | 13 | 
|                                               |                    |      |        |      |  |   |      |   

A summary (in thousands) of the deferred tax
assets and liabilities at September 30, 2001 follows:

|                          |                                         |   |       |       | 
|------------------------- | --------------------------------------- | - | ----- | ----- | 
|Deferred tax assets:      |                                         |   |       |      
|                          | Net operating loss carryforward         |   | $     | 2,519 | 
|                          | Accrued compensated absences            |   |       | 20    | 
|                          | Stock option compensation               |   |       | 240   | 
|                          |                                         |   |       |      
|                          |                                         | $ | 2,779 |      
|Deferred tax liabilities: |                                         |   |       |      
|                          | Depreciation and property and equipment |   |       | 730   | 
|                          |                                         |   |       |      
|Net deferred tax assets   |                                         | $ | 2,049 |      
|                          |                                         |   |       |      

SFAS No. 109, Accounting for Income
Taxes, requires a valuation allowance to be recorded when it
is more likely than not that some or all of the deferred tax
assets will not be realized. At September 30, 2001, a

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AGEMARK CORPORATION


NOTES TO FINANCIAL
STATEMENTS  (Continued)

valuation allowance for the full amount of the
net deferred tax asset was recorded because of the uncertainties
as to the amount of taxable income that will be generated in
future years.

At September 30, 2001, the Company has
federal net operating loss carryforwards of approximately
$7,410,000 that will expire as follows:

|                        |  |   |           | 
|----------------------- |  | - | --------- | 
|Amount expiring in 2018 |  | $ | 410,000   | 
|Amount expiring in 2019 |  |   | 600,000   | 
|Amount expiring in 2020 |  |   | 1,400,000 | 
|Amount expiring in 2021 |  |   | 5,000,000 | 



|         |                    
|-------- | -------------------
|Note 13. | 401(k) Savings Plan

The Company has adopted a Savings Plan effective
July 1, 1998 (the 401(k) Plan) that is intended
to qualify under Section 401(k) of the Internal Revenue
Code. After completing twelve months of service, employees that
are at least twenty-one years of age are eligible to participate
in the 401(k) Plan by contributing up to 15% of their gross
income to the 401(k) Plan subject to Internal Revenue Service
restrictions. The Company may make contributions to the 401(k)
Plan at the discretion of the Board of Directors, but such
contributions are not required. For the years ended
September 30, 2002 and 2001, no contributions to the 401(k)
Plan were made by the Company.



|         |                          
|-------- | -------------------------
|Note 14. | Net Loss per Common Share

In accordance with Statement of Financial
Accounting Standards No. 128, Earnings per Share,
the Company is required to present both basic and diluted loss
per common share.

For the year ended September 30, 2002 the
weighted average common shares outstanding is 1,000,232. For the
year ended September 30, 2001 the weighted average common
shares outstanding is 1,000,000 shares for the calculation of
basic loss per common share. Diluted loss per common share is
computed on the basis of the weighted average number of common
shares outstanding plus the effect, if any, of outstanding stock
options using the treasury stock method. During 2002
and 2001, the impact of the stock options are anti-dilutive and,
accordingly, are not included in the calculation of diluted loss
per common share.



|         |                              
|-------- | -----------------------------
|Note 15. | Employee Stock Incentive Plan

In December, 1998 the stockholders approved the
adoption of the 1997 Employee Stock Incentive Plan, a stock
option plan for certain employees and directors. The total
number of shares that may be issued upon the exercise of options
under this plan is 250,000. Also under this plan, no participant
may be granted more than 100,000 shares and no awards may be
granted after November 21, 2007.

Options to purchase up to a total of 237,164
shares of common stock have been granted at exercise prices
ranging from $1.00 to $1.10 per share to the officers, directors
and employees of the Company. On June 1, 2002 the officers
and directors exercised their vested options and acquired
187,749 shares of the Companys

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AGEMARK CORPORATION


NOTES TO FINANCIAL
STATEMENTS  (Continued)

common stock by executing promissory notes and
pledge agreements totaling $204,415. The notes have a term of
four years and bear interest at 5%. Details of the options are:

|                    |       |         |          |                |  |                   |      |  |  |  |                  |  | 
|------------------- | ----- | ------- | -------- | -------------- |  | ----------------- | ---- |  |  |  | ---------------- |  | 
|                    |       | Shares  |          | Exercise Price |  |                  
|Date of Grant       |       | Granted |          | Per Share      |  | Date Fully Vested
|                    |       |         |          |                |  |                  
|January 1, 1999     |       |         | 166,666  |                |  | $                 | 1.10 |  |  |  | July 1, 1999     | 
|January 1, 1999     |       |         | 1,000    |                |  |                   | 1.00 |  |  |  | January 1, 2000  | 
|January 1, 1999     |       |         | 42,750   |                |  |                   | 1.00 |  |  |  | January 1, 2003  | 
|April 1, 1999       |       |         | 18,748   |                |  |                   | 1.00 |  |  |  | April 1, 2001    | 
|November 10, 1999   |       |         | 5,000    |                |  |                   | 1.00 |  |  |  | November 1, 2001 | 
|December 22,1999    |       |         | 3,000    |                |  |                   | 1.00 |  |  |  | December 1, 2000 | 
|                    |       |         |          |                |  |                   |      |  |  |  |                  | 
|                    | Total |         |          | 237,164        |  |                   |      |  |  |  |                  |  | 
|Options ceded       |       |         | (12,882  | )              |  |                   | 1.00 |  |  |  |                  | 
|Options exercised   |       |         | (166,666 | )              |  |                   | 1.10 |  |  |  |                  | 
|Options exercised   |       |         | (21,083  | )              |  |                   | 1.00 |  |  |  |                  | 
|                    |       |         |          |                |  |                   |      |  |  |  |                  | 
|Options outstanding |       |         | 36,533   |                |  |                   | 1.00 |  |  |  |                  | 
|                    |       |         |          |                |  |                   |      |  |  |  |                  | 

The stock of the Company has not been listed for
sale on any public exchange. For purposes of accounting for
compensation expense arising from the granting of stock options
under APB Opinion No. 25, the book value of $5.97 per share
on September 30, 1998 has been used in the absence of any
other reliable market information. In the case of the 166,666
options which fully vest July 1, 1999, the compensation
represented by the difference between the $1.10 exercise price
and the $5.97 net book value is being recognized over the
57 months remaining of the terms of the employment
contracts of the officers to whom the options were granted. The
compensation attributable to the remaining 70,498 options is
being recognized over their respective vesting periods. Total
compensation for the years ended September 30, 2002 and
2001 under APB Opinion No. 25 was approximately $215,000
and $210,000.

If the Company had used the fair value based
method of accounting for its employee stock incentive plan, as
prescribed by SFAS No. 123, stock option compensation cost
in the statement of operations for the year ended
September 30, 2002 would have decreased by $171,000,
resulting in a net loss of $754,000 and the basic loss per
common share would have been $0.75. For the year ended
September 30, 2001 stock option compensation costs would
have decreased by $171,000, resulting in a net loss of
$2,090,000 and the basic loss per common share would have been
$2.09



|         |                 
|-------- | ----------------
|Note 16. | Subsequent Event

On October 22, 2002, the Company signed an
agreement to sell its property located in Rock Island, IL for
$2,500,000 to an unaffiliated buyer. The property has previously
been listed with an unaffiliated broker with an agreed
commission of 3%. On December 13, 2002, the buyer removed
all contingencies except for financing. Conditional on the buyer
obtaining financing, the proposed closing date for the sale is
February 28, 2003

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##### Table of Contents








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 8. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

Not applicable.




PART III






|        |                                                                                  
|------- | ---------------------------------------------------------------------------------
|Item 9. | Directors, Executive Officers, Promoters
    and Control Persons; Compliance with

Section 16(A) of the Exchange
Act


As of September 30, 2002, the directors and
executive officers and their respective ages of the Company are
as follows:

|                        |  |     |    |          |  |                                                                              
|----------------------- |  | --- | -- | -------- |  | -----------------------------------------------------------------------------
|Name                    |  | Age |    | Position
|                        |  |     |    |         
|Richard J. Westin       |  |     | 61 |          |  | Director, Co-Chairman of the Board,
    Chief Executive Officer and Secretary
|Jesse A. Pittore        |  |     | 62 |          |  | Director, Co-Chairman of the Board, President                                
|Robert R. Herrick, M.D. |  |     | 63 |          |  | Director                                                                     
|James P. Tolley         |  |     | 59 |          |  | Treasurer and Chief Financial Officer                                        

The business experience of the Companys
directors and executive officers, including each such
persons principal occupations and employment during the
last five years, is summarized below.

Richard J. Westin has been Director,
Co-Chairman of the Board of Directors, Chief Executive Officer
and Secretary of the Company since its incorporation in April
1997. From 1986 until 1998, Mr. Westin served as President
of The Westor Financial Group, Inc., now, Opus X Inc.
(Opus), a company specializing in financing the
development of assisted living facilities across the county.
Mr. Westin received his B.A. degree from the University of
North Carolina at Chapel Hill and his Juris Doctor degree from
the University of Californias Hastings College of the Law.

Jesse A. Pittore has been Director,
Co-Chairman of the Board of Directors, President and Chief
Operating Officer of the Company since its incorporation in
April 1997. From 1986 until 1998, Mr. Pittore was Chairman
of the Board of Opus. Mr. Pittore holds a Bachelor of
Science degree in Industrial Engineering and Business Management
from the University of California, Berkeley.

Robert R. Herrick, M.D. has been a
Director of the Company since January 1998. Dr. Herrick has
been in private practice in neurology in Northern California
since 1971. In 1997, he served as Chief of Staff to
Doctors Medical Center in San Pablo, California and
currently serves as President of the Board of Governors of that
hospital. Dr. Herrick received his bachelors degree
from Oberlin College in Ohio and his medical degree from the
University of Chicago Medical School.

James P. Tolley has been Treasurer and Chief
Financial Officer of the Company since its incorporation in
April 1997. From 1988 to present, he has served as Controller of
Opus. Mr. Tolley is a Certified Public Accountant and holds
a Bachelor of Science degree from California State University,
San Francisco.

Section 16(a) Beneficial Ownership
Reporting Compliance.Under the
securities laws of the United States, the Companys
directors, executive officers and any persons holding more than
10% of the Companys Common Stock are required to report
their initial ownership of the Companys Common Stock and
any subsequent changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have
been established and the Company is required to identify in this
Annual Report on Form 10-KSB those persons who failed to
timely file these reports. Based on a review of the
Companys records, all of the filing requirements were
satisfied for the fiscal year ended September 30, 2002.






|         |                       
|-------- | ----------------------
|Item 10. | Executive Compensation

Pursuant to the Plan of Reorganization, for two
years after the effective date of the Plan of Reorganization,
which period ended on September 30, 2000,
Messrs. Westin and Pittore have agreed not to accept more
than $1,000 per month in salary for their services as officers
of the Company. The Plan also provides that neither of
Messrs. Westin nor Pittore may receive compensation for his
services as director of the Company except for stock options and
other perquisites as set forth in each of their employment
agreements. See

30



---



##### Table of Contents



 Employment Agreements
below. Dr. Herrick, who is a nonemployee director received
a payment of $25,000 for his services from June 1, 2002 to
May 31, 2003 which was paid in October, 2002.


Summary Compensation Table

|                            |                                        |      |      |              |  |            |         |              |  |                 |   |   |  |  |   |       |  |   |        |        | 
|--------------------------- | -------------------------------------- | ---- | ---- | ------------ |  | ---------- | ------- | ------------ |  | --------------- | - | - |  |  | - | ----- |  | - | ------ | ------ | 
|                            |                                        |      |      |              |  |            |         | Long-Term    |  |                
|                            |                                        |      |      |              |  |            |         | Compensation |  |                
|                            |                                        |      |      |              |  | Awards     |         |             
|                            |                                        |      |      | Annual       |  |            |         |             
|                            |                                        |      |      | Compensation |  | Securities |         |             
|                            |                                        |      |      |              |  | Underlying |         | All Other   
|Name and Principal Position |                                        | Year |      | Salary       |  | Bonus      |         | Options/SARs |  | Compensation(1)
|                            |                                        |      |      |              |  |            |         |              |  |                
|Richard J. Westin           |                                        |      | 2002 |              |  | $          | 24,000  |              |  |                 |  |   |  |  |  |       |  | $ | 12,000 |       
|                            | Co-Chairman of the Board and           |      |      | 2001         |  |            |         | 12,000       |  |                 |   |  |  |  |   |      |  |   |        | 12,000 | 
|                            | Chief Executive Officer                |      |      |              |  |            |         |              |  |                 |   |   |  |  |   |       |  |   |        |        | 
|Jesse A. Pittore            |                                        |      | 2002 |              |  |            | 24,000  |              |  |                 |  |   |  |  |  |       |  |   | 12,000 |       
|                            | Co-Chairman of the Board and President |      |      | 2001         |  |            |         | 12,000       |  |                 |   |  |  |  |   |      |  |   |        | 12,000 | 
|Robert R. Herrick, M.D.     |                                        |      | 2002 |              |  |            | 8,332   |              |  |                 |  |   |  |  |   |       |  |   |       |       
|                            | Director                               |      |      | 2001         |  |            |         |             |  |                 |   |  |  |  |   | 1,000 |  |   |        |       | 
|James P. Tolley             |                                        |      | 2002 |              |  |            | 133,500 |              |  |                 |   |   |  |  |  |       |  |   |       |       
|                            | Chief Financial Officer                |      |      | 2001         |  |            |         | 120,000      |  |                 |   |  |  |  |   |      |  |   |        |       | 



---



|    |                                              
|--- | ---------------------------------------------
|(1) | Car and travel allowance of $1,000 per month.

Employment Agreements

Each of Messrs. Pittore and Westin have
entered into employment agreements with the Company dated as of
September 30, 1998. The employment agreements provide that
from October 1, 1998 through September 30, 2000, each
shall be paid a salary at the annual rate of $12,000.
Thereafter, the salary to be paid to each shall be at the
discretion of the board of directors, but in no case shall such
salary be less than $240,000 per year. The agreements also
provide that each of Messrs. Pittore and Westin is eligible
for an annual incentive bonus to be granted in the discretion of
the board of directors with such bonus to be up to 100% of base
salary. The agreements provide further that the Company shall
grant to each of Messrs. Pittore and Westin options to purchase
up to 83,333 shares of the Companys Common Stock, pursuant
to the Companys 1997 Employee Stock Incentive Plan.
Pursuant to the agreements, each of Messrs. Pittore and
Westin are eligible for loans from the Company up to $720,000
subject to certain terms and conditions provided in the
employment agreements.






|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 11. | Security Ownership of Certain Beneficial
    Owners and Management

The following table shows as of December 15,
2002 (i) the beneficial owners of more than 5% of the
outstanding Common Stock of the Company and their holdings and
(ii) the number of shares held by each director and each
executive officer listed in the table under the section titled
Executive Compensation below and all directors and
executive officers as group, as reported by each person. Except
as noted, each person has sole voting and investment power over
shares indicated in the table.

|                                              |  |                                 |         |                  |  |  |      | 
|--------------------------------------------- |  | ------------------------------- | ------- | ---------------- |  |  | ---- | 
|                                              |  |                                
|                                              |  | Amount and Nature of           
|                                              |  | Common Stock Beneficially Owned
|                                              |  |                                
|Common Stock Holder                           |  | Number of Shares                |         | Percent of Class
|                                              |  |                                 |         |                 
|Directors and Other Executive
    Officers    |  |                                 |         |                  |  |  |      | 
|Jesse A. Pittore                              |  |                                 | 194,177 |                  |  |  | 17.9 | 
|Richard J. Westin                             |  |                                 | 194,178 |                  |  |  | 17.9 | 
|Robert Herrick, M.D.                          |  |                                 | 4,131   |                  |  |  | *    | 
|James P. Tolley                               |  |                                 | 28,850  | (1)              |  |  | 2.6  | 
|Directors and Officers as a Group (4 persons) |  |                                 | 421,336 |                  |  |  | 37.9 | 



---



| |   |             
| | - | ------------
| | * | Less than 1%



|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(1) | Includes 2,917 shares that Mr. Tolley could
    acquire by exercising options within 60 days of
    December 15, 2002.

31



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##### Table of Contents



Stock Incentive Plan

In December 1998, the stockholders of the Company
approved the adoption of the 1997 Employee Stock Incentive Plan,
a stock option plan for certain employees and directors. The
total number of shares that may be issued upon the exercise of
options under this plan is 250,000. Also under this plan, no
participant may be granted more than 100,000 shares and no
awards may be granted after November 21, 2007.

Options to purchase up to a total of 237,164
shares of common stock have been granted at exercise prices
ranging from $1.00 to $1.10 per share to the officers, directors
and employees of the Company. On June 1, 2002 the officers
and directors exercised their vested options and acquired
187,749 shares of the Companys common stock by executing
promissory notes and pledge agreements totaling $204,415. The
notes have a term of four years and bear interest at 5%. Details
of the options are:

|                    |  |         |          |                |  |                   |      |  |  |  |                  | 
|------------------- |  | ------- | -------- | -------------- |  | ----------------- | ---- |  |  |  | ---------------- | 
|                    |  | Shares  |          | Exercise Price |  |                  
|Date of Grant       |  | Granted |          | Per Share      |  | Date Fully Vested
|                    |  |         |          |                |  |                  
|January 1, 1999     |  |         | 166,666  |                |  | $                 | 1.10 |  |  |  | July 1, 1999     | 
|January 1, 1999     |  |         | 1,000    |                |  |                   | 1.00 |  |  |  | January 1, 2000  | 
|January 1, 1999     |  |         | 42,750   |                |  |                   | 1.00 |  |  |  | January 1, 2003  | 
|April 1, 1999       |  |         | 18,748   |                |  |                   | 1.00 |  |  |  | April 1, 2001    | 
|November 10, 1999   |  |         | 5,000    |                |  |                   | 1.00 |  |  |  | November 1, 2001 | 
|December 22,1999    |  |         | 3,000    |                |  |                   | 1.00 |  |  |  | December 1, 2000 | 
|                    |  |         |          |                |  |                   |      |  |  |  |                  | 
|Total               |  |         | 237,164  |                |  |                   |      |  |  |  |                  | 
|Options ceded       |  |         | (12,882  | )              |  |                   | 1.00 |  |  |  |                  | 
|Options exercised   |  |         | (166,666 | )              |  |                   | 1.10 |  |  |  |                  | 
|Options exercised   |  |         | (21,083  | )              |  |                   | 1.00 |  |  |  |                  | 
|                    |  |         |          |                |  |                   |      |  |  |  |                  | 
|Options outstanding |  |         | 36,533   |                |  |                   | 1.00 |  |  |  |                  | 
|                    |  |         |          |                |  |                   |      |  |  |  |                  | 






|         |                                                   
|-------- | --------------------------------------------------
|Item 12. | Certain Relationships and Related
    Transactions

Evergreen, which is jointly owned by
Messrs. Westin and Pittore, managed all of the
Companys properties under management agreements that were
substantially amended pursuant to the Plan of Reorganization
through the month of May, 2001. The Company and Evergreen
entered into individual contracts for each of the facilities
owned by the Company. Each management contracts initial
term is three years, and Evergreen has the option to extend each
management contract for an additional three year term. The
management fee paid pursuant to each management contract is
based on a percentage of gross revenues of the property, with
the contract management fee being 4.5% prior to October 1, 2001
and 3.75% thereafter. The existing contracts were assigned to
Opus X, Inc., also an affiliate of Westin and Pittore on
June 1, 2001. The following table sets forth the management
fees earned by Evergreen and Opus for each property for the
years ended September 30, 2002 and 2001.

|                                                           |       |                 |        |         |  |   |        |         | 
|---------------------------------------------------------- | ----- | --------------- | ------ | ------- |  | - | ------ | ------- | 
|                                                           |       |                
|                                                           |       | Management Fees
|                                                           |       |                
|Facility Location (Facility Name)                          |       | 2002            |        | 2001   
|                                                           |       |                 |        |        
|Rock Island, Illinois (The Fort Armstrong)                 |       | $               | 48,895 |         |  | $ | 60,162 |        
|Fort Madison, Iowa (The Kensington)                        |       |                 | 53,903 |         |  |   | 60,640 |        
|Chanute, Kansas (The Tioga)                                |       |                 | 0      |         |  |   | 14,834 |        
|Cumberland, Maryland (The Kensington Algonquin)            |       |                 | 58,871 |         |  |   | 69,596 |        
|Port Huron, Michigan (The Harrington Inn)                  |       |                 | 37,320 |         |  |   | 54,149 |        
|Beatrice, Nebraska (The Kensington Paddock)                |       |                 | 34,416 |         |  |   | 30,840 |        
|Hastings, Nebraska (The Kensington)                        |       |                 | 51,346 |         |  |   | 54,593 |        
|Dickinson, North Dakota (The Evergreen Retirement
    Inn) |       |                 | 56,286 |         |  |   | 60,568 |        
|Williston, North Dakota (The Kensington)                   |       |                 | 56,367 |         |  |   | 66,570 |        
|Manitowoc, Wisconsin (Hotel Manitowoc)                     |       |                 | 0      |         |  |   | 1,448  |        
|                                                           |       |                 |        |         |  |   |        |        
|                                                           | Total |                 | $      | 397,404 |  |   | $      | 473,400 | 
|                                                           |       |                 |        |         |  |   |        |        

32



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##### Table of Contents



The Company leases its headquarters in Berkeley,
California from The Waterford Company, which is owned by members
of Mr. Westins family, for $24,000 per year and on
terms and conditions that the Companys believes are at or
more favorable than prevailing market rates. See
Item 2  Description of Property.

In July, 2002 the Company disposed of its
interest in CountryHouse, LLC. This entity was organized in
conjunction with entities controlled by Richard J. Westin and
Jesse A. Pittore, directors and officers of the Company, to
jointly develop, build and operate an Alzheimers facility
in Cumberland, Maryland. The Company contributed land located
adjacent to its Cumberland, Maryland facility upon which the
Alzheimers facility has been built. The Westin and Pittore
entities have funded or guaranteed financing of all costs to
build, furnish and operate the facility. For its contribution of
land, the Company received a 25% ownership interest and 25% of
all net income and proceeds from the operation of the facility.
The Company received $200,000 for its interest which was sold to
the joint venturers.

On August 30, 2002, Agemark Corporation (the
Company) completed the sale of certain assets and
liabilities related to the ownership and operation of its 85-bed
assisted living facility located in Cumberland, MD (the
Kensington Algonquin). Title to the Kensington
Algonquin facility was transferred to Kensington Algonquin, LLC,
a Nevada single member limited liability company, wholly owned
by the Company in calendar year 2000 in anticipation of a
financing transaction that was never consummated. Since that
transfer the entity has been 100% owned by the Company. The form
of the August 30, 2002 transaction was the sale of the
Companys member interest to Richard J. Westin and Jesse A.
Pittore for a price of $3,300,000 less a credit for repairs of
$200,000.

As indicated above, the purchasers in these two
transactions are affiliates of the Company. Both Richard J.
Westin and Jesse A. Pittore are officers and directors of the
Company. Their offers for these property interests of $200,000
and $3,300,000 were tested in an auction process that took place
during the month of May, 2002. The auction was advertised in the
national edition of the Wall Street Journal and the Baltimore
Sun. These advertisements produced approximately 30 responses
for additional information. Each of the respondents to the
advertisements was sent additional information regarding the
property and the auction process.

No further interest in the property was expressed
by any of these respondents. None of the respondents pursued the
auction further by visiting the property or bidding on the
property. The auction was held on June 5, 2002. The only
bids made on the property were those by Messrs Westin and
Pittore.

33



---



##### Table of Contents








|         |                                      
|-------- | -------------------------------------
|Item 13. | Financial Statements and
    Exhibits

(a) Exhibit List.

|        |         |             |  |                                                                                                                 
|------- | ------- | ----------- |  | ----------------------------------------------------------------------------------------------------------------
|Exhibit |         | Description
|        |         |            
|        | 3.1*    |             |  | Articles of Incorporation                                                                                       
|        | 3.2*    |             |  | Bylaws                                                                                                          
|        | 10.1*   |             |  | Order Confirming Debtors Second Amended
    Joint Plan of Reorganization dated
    April 29, 1997              
|        | 10.2*   |             |  | Amended Modification of Debtors Second
    Amended Joint Plan of Reorganization dated April 24, 1997           
|        | 10.3*   |             |  | Debtors Second Amended Joint Plan of
    Reorganization dated January 15, 1997                                 
|        | 10.4*   |             |  | Employment Agreement between the Company and
    Jesse A. Pittore                                               
|        | 10.5*   |             |  | Employment Agreement between the Company and
    Richard J. Westin                                              
|        | 10.6*   |             |  | 1997 Employee Stock Incentive Plan                                                                              
|        | 10.7*   |             |  | Form of management contract between Evergreen
    Management, Inc. and the Company                              
|        | 10.8**  |             |  | Lease Agreement between The Waterford Company and
    Westor Financial Group, Inc.                              
|        | 10.9*** |             |  | Purchase Agreement dated May 1, 2002 by and
    between Jesse A. Pittore, Richard Westin and Agemark Corporation
|        | 24      |             |  | Power of Attorney (see page 48)                                                                                 
|        | 99.1    |             |  | Section 906 Certification of Chief Executive
    Officer                                                        
|        | 99.2    |             |  | Section 906 Certification of Chief Financial
    Officer                                                        



---



| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| | * | Incorporated by reference to the
    registrants Form 10-SB filed on January 29, 1999.



| |    |                                                                                            
| | -- | -------------------------------------------------------------------------------------------
| | ** | Incorporated by reference to Amendment No. 1
    to Form 10-SB filed on September 17, 1999.



| |     |                                                                                
| | --- | -------------------------------------------------------------------------------
| | *** | Incorporated by reference to Report on
    Form 8-K filed on September 13, 2002



| |     |                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------
| | (b) | Reports on Form 8-K.: September 13,
    2002 Reporting the Sale of Cumberland, MD Property Interests.






|         |                        
|-------- | -----------------------
|Item 14. | Controls and Procedures

(a) Under the supervision and with the
participation of our management, including our principal
executive officer and principal financial officer, we conducted
an evaluation of our disclosure controls and procedures, as such
term is defined under Rule 13a-14(c) promulgated under the
Securities Exchange Act of 1934, as amended, within the
90 day period prior to the filing date of this report.
Based on this evaluation, our principal executive officer and
principal financial officer concluded that our disclosure
controls and procedures were effective as of that date.

(b) There have been no significant changes
(including corrective actions with regard to significant
deficiencies or material weaknesses) in our internal controls or
in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in paragraph
(a) above.

34



---



##### Table of Contents






SIGNATURES

In accordance with Section 13 or 15(d) of
the Exchange Act, the registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

|   |  |                                                               |  |                     |  |                                                                                                               
|-- |  | ------------------------------------------------------------- |  | ------------------- |  | --------------------------------------------------------------------------------------------------------------
|   |  |                                                               |  | AGEMARK CORPORATION
|  
|By |  | /s/ RICHARD J. WESTINRichard J. WestinChief Executive Officer |  | By                  |  | /s/ JAMES P. TOLLEY
    -------------------------------------------
    James P. TolleyChief Financial Officer

Date: May 29, 2003

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints
Richard J. Westin and James P. Tolley, and each of them, his
true and lawful attorneys-in-fact, each with full power of
substitution, for him in any and all capacities, to sign any
amendments to this report on Form 10-KSB and to file the
same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact
or their substitute or substitutes may do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dated indicated.

|                                             |  |                                                                                            |  |              |  | 
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | ------------ |  | 
|                                             |  |                                                                                            |  |             
|Signature                                    |  | Title                                                                                      |  | Date        
|                                             |  |                                                                                            |  |             
|                                            
|/s/ RICHARD J. WESTINRichard J. Westin       |  | Chief Executive Officer and Director (Principal
    Executive Officer)                     |  | May 29, 2003
|                                            
|/s/ JAMES P. TOLLEYJames P. Tolley           |  | Chief Financial Officer (Principal Financial
    Officer and Principal Accounting Officer) |  | May 29, 2003
|                                            
|/s/ JESSE A. PITTOREJesse A. Pittore         |  | President and Director                                                                     |  | May 29, 2003
|                                            
|/s/ ROBERT R. HERRICKRobert R. Herrick, M.D. |  | Director                                                                                   |  | May 29, 2003

Supplemental Information to be Furnished With
Reports Filed Pursuant to Section 15(d) of the Exchange Act
by Non-reporting Issuers.

No such annual report or proxy material has been
sent to security holders.

35



---



##### Table of Contents



CERTIFICATIONS

Certification of Chief Executive
Officer

I, Richard J. Westin, certify that:

1.     I have reviewed
this annual report on Form 10-KSB of Agemark Corporation;

2.     Based on my
knowledge, this annual 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 annual
report;

3.     Based on my
knowledge, the financial statements, and other financial
information included in this annual report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
period presented in this annual report;

4.     The
registrants other certifying officer 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 annual 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 annual
    report (the Evaluation Date); and                                                                                                      
|
| | (c) presented in this annual 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 officer 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 functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could aversely
    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 officer and I have indicated
in this annual report whether there are 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.



| |                        
| | -----------------------
| | /s/ RICHARD J. WESTIN  
| |                        
| | Richard J. Westin      
| | Chief Executive Officer

Dated: May 29, 2002

36



---



##### Table of Contents



Certification of Chief Financial
Officer

I, James Tolley, certify that:

1.     I have reviewed
this annual report on Form 10-KSB of Agemark Corporation;

2.     Based on my
knowledge, this annual 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 annual
report;

3.     Based on my
knowledge, the financial statements, and other financial
information included in this annual report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
period presented in this annual report;

4.     The
registrants other certifying officer 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 annual 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 annual
    report (the Evaluation Date); and                                                                                                      
|
| | (c) presented in this annual 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 officer 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 functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could aversely
    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 officer and I have indicated
in this annual report whether there are 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.



| |                        
| | -----------------------
| | /s/ JAMES TOLLEY       
| |                        
| | James Tolley           
| | Chief Financial Officer

Dated: May 29, 2002

37



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##### Table of Contents






EXHIBIT INDEX TO

ANNUAL REPORT ON FORM 10-KSB

FOR AGEMARK CORPORATION

|        |    |             |  |                                                                                                                 
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------
|Exhibit |    | Description
|        |    |            
|        | 3  | .1*         |  | Articles of Incorporation                                                                                       
|        | 3  | .2*         |  | By-Laws                                                                                                         
|        | 10 | .1*         |  | Order Confirming Debtors Second Amended
    Joint Plan of Reorganization dated April 29, 1997                  
|        | 10 | .2*         |  | Amended Modification of Debtors Second
    Amended Joint Plan of Reorganization dated April 24, 1997           
|        | 10 | .3*         |  | Debtors Second Amended Joint Plan of
    Reorganization dated January 15, 1997                                 
|        | 10 | .4*         |  | Employment Agreement between the Company and
    Jesse A. Pittore                                               
|        | 10 | .5*         |  | Employment Agreement between the Company and
    Richard J. Westin                                              
|        | 10 | .6*         |  | 1997 Employee Stock Incentive Plan                                                                              
|        | 10 | .7*         |  | Form of management contract between Evergreen
    Management, Inc. and the Company                              
|        | 10 | .8**        |  | Lease Agreement between The Waterford Company and
    Westor Financial Group, Inc.                              
|        | 10 | .9***       |  | Purchase Agreement dated May 1, 2002 by and
    between Jesse A. Pittore, Richard Westin and Agemark Corporation
|        | 24 |             |  | Power of Attorney (see page 47)                                                                                 
|        | 99 | .1          |  | Section 906 Certification of Chief Executive
    Officer                                                        
|        | 99 | .2          |  | Section 906 Certification of Chief Financial
    Officer                                                        



---



| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| | * | Incorporated by reference to the
    registrants Form 10-SB filed on January 29, 1999.



| |    |                                                                                           
| | -- | ------------------------------------------------------------------------------------------
| | ** | Incorporated by reference to Amendment No. 1
    to Form 10-SB filed on September 17, 1999



|    |                                                                                
|--- | -------------------------------------------------------------------------------
|*** | Incorporated by reference to Report on
    Form 8-K filed on September 13, 2002