<PAGE>
 
================================================================================
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20459

                                   FORM 10-Q
                                        
             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended June 30, 1997

                                      OR

            [_]  TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the Transition period from ___ to___

                        Commission file number 1-13498

                        ASSISTED LIVING CONCEPTS, INC.
            (Exact name of registrant as specified in its charter)

            NEVADA                                             93-1148702
(State or other jurisdiction of                              (IRS Employer
 incorporation or organization)                            Identification No.)
                                                   

                         9955 SE Washington, Suite 201
                            Portland, Oregon  97216
                   (Address of principle executive offices)

                                (503) 252-6233
             (Registrant's telephone number, including area code)

     Indicated by check mark whether Registrant (1) has filed all reports to be
filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that Registrants was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.

                                 Yes  X    No 
                                     ---      ---


     Shares of Registrant's common stock, $.01 par value, outstanding at
July 31, - 11,043,512.

================================================================================

                                                                    Page 1 of 20
<PAGE>
 
                        ASSISTED LIVING CONCEPTS, INC.
                                        
                                   FORM 10-Q

                                 June 30, 1997
                                        

                                     INDEX
                                     -----
                                        
<TABLE> 
<CAPTION> 
PART I - FINANCIAL  INFORMATION                                            Page
      <S>                                                                    
      Item 1.  Financial Statements                                         <C> 
 
      Consolidated Balance Sheets of Assisted
      Living Concepts, Inc. and Subsidiary
      as of  June 30, 1997 and December 31, 1996..........................   3
 
      Consolidated Statements of Operations of Assisted
      Living Concepts, Inc.and Subsidiary for the three
      and six months ended June 30, 1997 and June 30, 1996................   4
 
      Consolidated Statements of  Cash Flows of Assisted
      Living Concepts, Inc. and Subsidiary for the three
      and six months ended June 30, 1997 and June 30, 1996................   5
 
      Notes to Consolidated Financial Statements..........................   6
 
      Item 2.  Management's Discussion and Analysis of
               Financial Condition and Results of Operations..............   8
</TABLE>


                                                                    Page 2 of 20
<PAGE>
 
                                    PART 1
                                        
ITEM 1 - FINANCIAL INFORMATION

                        ASSISTED LIVING CONCEPTS, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE> 
<CAPTION> 
                                                                                             (IN THOUSANDS)

                                                                                    (UNAUDITED)
                                                                                      June 30,       December 31,
                                    ASSETS                                              1997             1996
                                                                                    -----------      ------------    
<S>                                                                                 <C>              <C> 
Current assets:
  Cash and cash equivalents                                                          $  8,828          $  2,105
  Investments                                                                           8,688             8,515
  Accounts receivable                                                                   1,083               730
  Other current assets                                                                  2,164             1,043
                                                                                     --------          --------
    Total current assets                                                               20,763            12,393
                                                                                     --------          --------
Property and equipment                                                                 77,246            59,574
Construction in process (Note 2)                                                       61,333            53,458
                                                                                     --------          --------
  Total property and equipment                                                        138,579           113,032
  Less accumulated depreciation                                                         1,331               674
                                                                                     --------          --------
  Property and equipment - net                                                        137,248           112,358
Goodwill                                                                                  348               362
Other assets                                                                            6,431             5,394
                                                                                     --------          --------
   
    Total assets                                                                     $164,790          $130,507
                                                                                     ========          ========
                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses                                              $  5,297          $  3,803
  Construction payables                                                                14,082            16,002
  Construction financing (Note 2)                                                      51,910            18,850
  Current portion of long-term debt                                                       113               110
                                                                                     --------          --------
    Total current liabilities                                                          71,402            38,765
 
Mortgages payable                                                                      18,710            18,768
Convertible subordinated debt                                                          13,915            13,915
                                                                                     --------          --------
    Total liabilities                                                                 104,027            71,448
                                                                                     --------          --------
Shareholders' equity:
  Preferred Stock, $.01 par value; 1,000,000 shares authorized;
   none issued and outstanding
  Common Stock, $.005 par value; 40,000,000 shares authorized;
   11,043,512 and  11,030,500 shares issued and outstanding                                55                55
  Additional paid-in capital                                                           59,806            59,733
  Fair market value in excess of historical cost of acquired net assets
   attributable to related party transactions                                            (239)             (239)
    Retained Earnings (Accumulated deficit)                                             1,141              (490)
                                                                                     --------          --------
    Shareholders' equity                                                               60,763            59,059
                                                                                     --------          --------
      Total liabilities and shareholders' equity                                     $164,790          $130,507
                                                                                     ========          ========
</TABLE>


The accompanying notes are in integral part of these Financial Statements.


                                                                    Page 3 of 20
<PAGE>
 
                        ASSISTED LIVING CONCEPTS, INC.
                                        
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE> 
<CAPTION> 
                                                                                      (UNAUDITED)
                                                                  THREE MONTHS ENDED               SIX MONTHS ENDED
                                                                       JUNE 30,                        June 30,
                                                                1997              1996          1997             1996
                                                              --------          -------       --------          -------
<S>                                                           <C>               <C>           <C>               <C>
Revenues                                                       $10,848           $3,742        $20,092           $6,492
                                                               -------           ------        -------           ------
Operating expenses:
Residence operating expenses                                     6,557            2,340         12,249            4,276
Corporate general and administrative                               676              393          1,317              608
Building rentals                                                 1,654              687          2,870            1,051
Building rentals - related party                                   355              248            699              444
Depreciation and amortization                                      702              167          1,208              384
                                                               -------           ------        -------           ------
Total operating expenses                                         9,944            3,835         18,343            6,763
                                                               -------           ------        -------           ------
Operating income (loss)                                            904              (93)         1,749             (271)
                                                               -------           ------        -------           ------
Interest expense                                                  (245)             (20)          (408)             (51)
Interest income                                                    153               47            276               69
Other income                                                       482               82            482               82
                                                               -------           ------        -------           ------
Other income - net                                                 390              109            350              100
                                                               -------           ------        -------           ------
Pre-tax income (loss)                                          $ 1,294           $   16        $ 2,099            $(171)
                                                               -------           ------        -------           ------
Provision for income tax                                           327                -            468                -
                                                               -------           ------        -------           ------ 
Net income (loss)                                              $   967           $   16        $ 1,631           $ (171)
                                                               =======           ======        =======           ======     
Basic income (loss) per common share                           $   .09           $  .01        $   .15           $ (.06)
                                                               =======           ======        =======           ======
Diluted income (loss) per common share                         $   .09           $  .01        $   .15           $ (.06)
                                                               =======           ======        =======           ======
Basic common shares outstanding                                 11,044            6,027         11,044            6,027
Diluted common shares outstanding                               13,280            8,933         13,281            8,927
</TABLE>

The accompanying notes are an integral part of these Financial Statements.

                                                                    Page 4 of 20
<PAGE>
 
                        ASSISTED LIVING CONCEPTS, INC.
                                        
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)
<TABLE> 
<CAPTION> 
                                                                                       (UNAUDITED)
                                                                  Three Months Ended                Six Months Ended
                                                                       JUNE 30,                         JUNE 30,
                                                                  1997          1996                1997         1996
                                                                  ----          ----                ----         ----    
<S>                                                           <C>               <C>            <C>               <C>
Operating activities:
Net income (loss)                                               $   967      $     16            $  1,631     $   (171)
Adjustment to reconcile net income (loss) to net
  cash provided by operating activities:
  Gain on sale of asset                                             (36)          (82)                (36)         (82)
  Depreciation and amortization                                     702           167               1,208          384
Changes in other non-cash items:
  Accounts receivable                                               (58)         (235)               (353)        (316)
  Other current assets                                              522          (142)             (1,121)        (235)
  Other assets                                                       24           328                (168)      (1,283)
  Accounts payable and accrued expenses                           1,819          (259)              1,495       (2,068)
                                                                -------        ------             -------      -------   
Net cash provided by (used for) operating activities              3,940          (207)              2,656       (3,771)
                                                                -------        ------             -------      -------
INVESTING ACTIVITIES:
Funds held in trust                                                  (5)            -                (173)           -
Proceeds from sale of land and residences                        32,978        23,910              35,568       38,290
Purchases of property and equipment                             (33,507)      (25,799)            (61,410)     (45,665)
                                                                -------       -------             -------      -------
Net cash used for investing activities                             (534)       (1,889)            (26,015)      (7,375)
                                                                -------       -------             -------      -------
FINANCING ACTIVITIES:
Proceeds from short-term construction borrowings
  expected to be refinanced                                       6,860             -              43,210            -
Payoff of construction financing                                 (7,600)            -             (10,150)           -
Construction payables                                             3,249             -              (1,919)           -
Proceeds from long-term debt                                          -             -                   -        5,865
Payments on long-term debt                                          (28)          (20)                (55)         (46)
Proceeds from issuance of common stock                               55             -                  73            -
Debt issuance costs                                                (434)           77              (1,077)         123
                                                                -------       -------             -------      -------
Net cash  provided by financing activities                        2,102            57              30,082        5,942
                                                                -------       -------             -------      -------
Net increase (decrease) in cash and cash equivalents              5,508        (2,039)              6,723       (5,204)
Cash and cash equivalents, beginning of period                    3,320         4,170               2,105        7,335
                                                                -------       -------             -------      -------
Cash and cash equivalents, end of period                        $ 8,828       $ 2,131             $ 8,828        2,131
                                                                =======       =======             =======      =======   
Supplemental disclosure of cash flow information:              
  Cash payments for interest                                    $ 1,561       $   221             $ 3,267      $ 1,005
                                                                =======       =======             =======      =======   
</TABLE>

The accompanying notes are an integral part of these Financial Statements.

                                                                    Page 5 of 20
<PAGE>
 
                        ASSISTED LIVING CONCEPTS, INC.
                                        
                         Notes to Financial Statements
                                        

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Assisted Living Concepts, Inc. ("the Company") owns, operates and develops
assisted living residences which provide housing to senior citizens who need
help with the activities of daily living such as bathing and dressing. The
Company provides personal care and support services and makes available routine
nursing services designed to meet the needs of its residents.  As of June 30,
1997, the Company had received certificates of occupancy for 93 residences of
which 79 had commenced operations.

Basis of Presentation

These financial statements have been prepared without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.  The
accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary.  All significant intercompany accounts
and transactions have been eliminated in consolidation.  Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations.  These condensed financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's annual report on Form 10-
K for the year ended December 31, 1996.

The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the results for interim periods.  The
result of operations for the three and six-month periods ended June 30, 1997 and
1996 are not necessarily indicative of the results to be expected for the full
year.


2.  PROPERTY AND EQUIPMENT

Construction In Process

As of June 30, 1997 the Company had begun construction or had purchased land to
begin construction on 35 parcels of land.  The Company has also entered into
agreements pursuant to which it may purchase, subject to completion of due
diligence and various other conditions, 25 additional sites.

                                                                    Page 6 of 20
<PAGE>
 
                        ASSISTED LIVING CONCEPTS, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                        

2.  PROPERTY AND EQUIPMENT (CONTINUED)

As of June 30, 1997 the Company had capitalized all costs incurred in connection
with the development of these properties and, accordingly, construction in
process consisted of  the following (in thousands):

<TABLE>
<S>                                                          <C>
  Land purchased                                             $ 7,995
  Construction costs and architectural fees                   42,400
  Other costs, including legal fees, building permits
  and other development costs                                 10,938
                                                             -------
                                                             $61,333
                                                             =======
</TABLE>

During the quarter ended June 30, 1997, the Company capitalized $1,606,000 of
interest cost relative to financing of construction in process. Of the 93
residences the Company had opened or had received certificates of occupancy, 46
were leased (15 in the Northwest, 29 in the Southwest and 2 in the East) and 47
were owned (23 in the Northwest, 10 in the Southwest and 14 in the East).



3.  LEASES

During the quarter ended June 30, 1997, the Company completed the sale of 13
residences (4 in the Northwest, one in the East and 8 in the Southwest) under
sale and leaseback arrangements.  In addition, the Company sold one residence in
the East and is operating the residence under a six month management agreement
and also has entered into a agreement to lease the property after the management
agreement expires.  The Company sold the residences for approximately
$32,978,000 which approximates cost, and leased them back over initial terms
ranging from 12 to 15 years.  The residences were leased back at an initial
annual lease rate of approximately $3,313,000.


4.  STOCK SPLIT AND ADOPTION OF STOCKHOLDERS RIGHTS PLAN

The Company's Board of Directors declared a two for one stock split on the
Company's Common Stock and dividend distribution of one Preferred Share Purchase
Right on each outstanding share of the Company's Common Stock. The record date
for the stock split and the Preferred Share Purchase Right distribution is June
30, 1997 and the stock split occurred immediately prior to the Preferred Share
Purchase right distributions.


5.  SUBSEQUENT EVENTS

The Company has agreed, in principle, to acquire Carriage House Assisted Living
Inc., a privately held developer and operator of assisted living facilities. It
is contemplated that the transaction will be completed by September 30, 1997 for
approximately $6 million in the Company's stock. Completion of the transaction
is subject to negotiation of a satisfactory definitive agreement and receipt of
normal regulatory and third party consents and approvals. Currently Carriage
House operates 4 facilities with 156 units and has an additional 6 facilities
with 198 units under construction. All units are located in Nebraska.

                                                                    Page 7 of 20
<PAGE>
 
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

THE COMPANY

The Company reported net income of $967,000 or  $.09 per share, on revenue of
$10,848,000 for the three months ended June 30, 1997.

Operating results for the three and six month periods ended June 30, 1997
include the operating results of 79 residences and the Company's corporate
overhead, and are not necessarily indicative of future operating financial
performance, as the Company intends to significantly expand its operating base
of residences in 1997 and 1998.


RESULTS OF OPERATIONS

Revenues consist of rentals of units in assisted living residences and fees
associated with the provision of services to residents pursuant to contracts
with the residents.  Operating expenses include (i) residence operating
expenses, such as staff payroll, food, property taxes, utilities, insurance and
other direct residence operating expenses, (ii) general and administrative
expenses consisting of corporate and support functions such as legal accounting
and other administrative expenses, (iii) building rentals and (iv) depreciation
and amortization expense.

The following table sets forth, for the periods presented, the number of
residences and units operated, and the average occupancy rates and sources of
revenue for the three months ended June 30, 1997.  The portion of revenues
received from state Medicaid agencies are labeled as "Medicaid State Portion"
while the portion of the Company's revenues that a Medicaid-eligible resident
must pay out of his or her own resources is labeled "Medicaid Resident Portion".

<TABLE>
<CAPTION>
                                                                             Three  Months Ended June 30, 1997
                                                                Stabilized               Start-up
                                                              Residences (1)          Residences (2)             Total (3)
                                                             ---------------          --------------             ---------    
<S>                                                          <C>                      <C>                        <C>
Residences operated (end of period)                                 42                       37                      79
Units operated                                                   1,459                    1,397                   2,856
Average occupancy rate                                            93.8%                    56.3%                   75.4%
Sources of revenue:
  Private                                                         81.5%                    86.5%                   83.3%
  Medicaid Resident Portion                                        6.7%                     4.4%                    5.9%
  Medicaid State Portion                                          11.8%                     9.1%                   10.8%
                                                                 -----                    -----                   -----
Total                                                            100.0%                   100.0%                  100.0%
                                                                 =====                    =====                   =====  
----------------------
</TABLE>

(1) Stabilized residences are those residences that have been operating for nine
    months or have achieved a stabilized occupancy of 95% or more as of the
    beginning of the quarter.
(2) Start-up residences are those residences that have not been operating for
    nine months and have not achieved a stabilized occupancy of 95% or more  as
    of the beginning of the quarter.
(3) The Company had received certificates of occupancy on 93 residences, of
    which 84 had received licensure and 79 were fully operational.

                                                                    Page 8 of 20
<PAGE>
 
               Compilation of Stabilized and Start-up Residences
                       Three Months Ended June 30, 1997

<TABLE>
<CAPTION>
                                          Stabilized                Start-up                                              Combined
                                          Residences               Residences                  Corporate                   Total
                                          ----------               ----------                  ---------                  ---------
<S>                                    <C>                    <C>                       <C>                          <C>
Revenue                                     $7,079                    $3,769                     $    -                   $10,848
Residence Operating Expense                  3,921                     2,636                          -                     6,557
                                            ------                    ------                     ------                   -------
  Residence Operating Income                 3,158                     1,133                          -                     4,291
Corporate Overhead                               -                         -                        676                       676
Building Rentals                             1,462                       547                          -                     2,009
Depreciation and Amortization                  212                       468                         22                       702
                                            ------                    ------                     ------                   -------
    Total Other Operating Expenses           1,674                     1,015                        698                     3,387
                                            ------                    ------                     ------                   -------
    Operating Income (Loss)                  1,484                       118                       (698)                      904
Interest Expense                              (403)                     (882)                     1,040                      (245)
Interest Income                                  -                         -                        153                       153
Other Income (Expense)                           -                       357                        125                       482
                                            ------                    ------                     ------                   -------
  Pre-Tax Income (Loss)                     $1,081                    $ (407)                    $  620                   $ 1,294
                                            ======                    ======                     ======                   =======   

Residences Operated                             42                       37                                                    79
Units Operated                               1,459                    1,397                                                 2,856
Average Occupancy Rate                        93.8%                    56.3%                                                 75.4%
</TABLE>

                          Results of Same Residences
                          Three and Six Months Ended
                        June 30, 1997 and June 30, 1996

<TABLE>
<CAPTION>
                                                     Three                 Three                  Six                       Six
                                                  Months Ended          Months Ended         Months Ended              Months Ended
                                                 June 30, 1997         June 30, 1996         June 30, 1997             June 30, 1996
                                                 -------------         -------------         -------------             -------------
<S>                                             <C>                    <C>                   <C>                       <C>
Revenue                                              $4,142                 $3,525              $6,118                    $5,067
Residence Operating Expense                           2,319                  2,217               3,405                     3,141
                                                     ------                 ------              ------                    ------ 
  Residence Operating Income                          1,823                  1,308               2,713                     1,926
 
Building Rentals                                        741                    852               1,116                     1,100
Depreciation and Amortization                           167                    147                 222                       229
                                                     ------                 ------              ------                    ------
Other Operating Expenses                                908                    999               1,338                     1,329
                                                     ------                 ------              ------                    ------
    Operating Income                                    915                    309               1,375                       597
 
Interest Expense                                       (332)                  (221)               (398)                     (322)

                                                     ------                 ------              ------                    ------ 
  Pre-tax Income                                     $  583                 $   88              $  977                    $  275
                                                     ======                 ======              ======                    ======
Residences Operating                                     26                     26                  19                        19
Units Operating                                         830                    823                 605                       595
Average Occupancy Rate                                 94.1%                  83.6%               95.0%                     83.8%
</TABLE>

                                                                    Page 9 of 20
<PAGE>
 
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996

Revenues.  For the three months ended June 30, 1997, revenues were $10,848,000
compared to $3,742,000 in the three months ended June 30, 1996, an increase of
$7,106,000 or 190%.  The Company had opened or received certificates of
occupancy on 93 residences as of June 30, 1997, of which 79 had operating
results for the quarter period compared to 31 in the corresponding 1996 period.
For the 26 residences which had operated for the entire quarter for both June
30, 1997 and June 30, 1996, revenue increased by $617,000, or 17%  from the
$3,525,000 in the second quarter of 1996.  This increase was primarily
attributable to average occupancy throughout the two periods.  Average occupancy
increased 12.5% to 94.1% from the corresponding period in 1996 of 83.6%.   The
remaining $6,489,000 of the increase was due to the new residences which began
operating subsequent to July 1, 1996.


Residence Operating Expenses.  Residence operating expenses were $6,557,000 in
the three months ended June 30, 1997 compared to $2,340,000 in the corresponding
1996 period, an increase of $4,217,000, or 180%.  For the 26 residences that
operated the entire second quarter of 1997 and 1996, residence operating
expenses were $2,319,000, an increase of $102,000, or 4.6%, from the $2,217,000
of residence operating expenses in the second quarter of 1996.   The increase in
expenses for these 26 residences is due the increase in staffing to accommodate
the level of care due to higher occupancy percentages.   The remaining
$4,115,000 of the increase was due to the new residences which began operating
subsequent to July 1, 1996.


Corporate, General and Administrative.  Corporate, general and administrative
expenses were $676,000 in the three months ended June 30, 1997 compared to
$393,000 in the corresponding 1996 period, an increase of $283,000, or 72%.
Corporate, general and administrative expenses increased due to the expansion of
regional operations as well as corporate staffing to accommodate the increase in
operating residences.


Building Rentals.  Building rentals  increased to $2,009,000 in the three months
ended June 30, 1997 from $935,000 during the corresponding 1996 period.  This
increase was due to the increased number of sale and leaseback transactions
completed by the Company from July of 1996 through June of 1997.  The Company
had 46 operating leases as of June 30, 1997 compared to 29 at June 30, 1996.
Building rentals for the 26 residences that were operating for the entire second
quarter of 1997 and 1996 declined slightly because the Company repurchased four
residences which were previously leased.


Depreciation and Amortization.   Depreciation and amortization expense was
$702,000 in the three month period ended June 30, 1997 compared to $167,000 in
1996, an increase of $535,000, or 320%.  This increase in depreciation and
amortization was directly related to the new residences that opened subsequent
to July 1, 1996.  Depreciation and amortization expense for the 26 residences
which operated for the entire second quarter of 1997 and 1996 increased slightly
because the Company purchased four residences which were previously leased.


Interest expense.  Interest expense net of capitalized interest was $245,000 for
the three month period ended June 30, 1997 compared to $20,000 in the
corresponding 1996 period, an increase of $225,000. The Company's gross interest
expense was $1,851,000 for the three month period ended June 30, 1997 compared
to $603,000 in the corresponding 1996 period, an increase of $1,248,000. The
increase in interest expense is due to temporary construction financing obtained
for the expansion of assisted living

                                                                   Page 10 of 20
<PAGE>
 
residences through development activity. Capitalized interest for the three
month period ended June 30, 1997 was $1,606,000 compared to $583,000 in the
corresponding 1996 period, a change of $1,023,000.

Interest Income.  Interest income was $153,000 for the three month period ended
June 30, 1997 compared to $47,000 in the corresponding 1996 period, an increase
of $106,000. The increase in interest income is directly related to the cash
management of financing transactions and the time opportunity for investment of
idle funds.

Other Income:  Other income was $482,000 for the three month period ended June
30, 1997 compared to $82,000 in the corresponding 1996 period, an increase of
$400,000. Approximately $357,000 of the $482,000 in other income for the three
months ended June 30, 1997 relates to a participation agreement on 5 residences
with an entity that has agreed to bear the economic risk for the first six
months that the residences are open in exchange for the right to participate in
future operating results. The remaining $125,000 related to development fees
received by the Company from outside developers to assist them in developing
similar assisted living residences. The $82,000 for the three month period ended
June 30, 1996 was from a gain on the sale of real property.

Pre-Tax Income:  Pre-tax income for the three months ended June 30, 1997 was
$1,294,000 compared to $16,000 during the corresponding period in 1996, an
increase of $1,278,000. The Company's pre-tax income has continued to increase
as the number of operating residences increases. As the Company has matured in
certain of its regions and occupancy has increased, the operating income of the
residences has been able to cover general corporate overhead plus provide
additional income.

Provision for Income Tax:   The Company's provision for income tax for the three
months ended June 30, 1997 was $327,000 compared to $0 for the corresponding
period in 1996. The Company has been utilizing its operating loss carryforwards
from previous periods to offset current income tax provisions. As of June 30,
1997, the Company had extinguished its carryforwards and will be experiencing a
tax rate of approximately 38%.

Net Income:   Net income for the three months ended June 30, 1997 was $967,000
compared to $16,000 during the corresponding period in 1996. The Company has
continued to increase income due to the number of residences operating as
compared to the corresponding period in 1996. This has been partially offset by
the increase in corporate overhead, including additional staffing, necessary to
accommodate the Company's expansion plans.

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996.

Revenues.  For the six months ended June 30, 1997, revenues were $20,092,000
compared to $6,492,000 in the six months ended June 30, 1996, an increase of
$13,600,000 or 209%. The Company operated 79 residences in the 1997 period
compared to 31 in the corresponding 1996 period. The additional residences
increased revenue by $12,549,000. The 19 residences in operation in both the
1997 and 1996 periods reported an aggregate increase in revenues of $1,051,000
or 20.7%. This increase was primarily attributable to increases in both average
occupancy and yearly rent increases.


Residence Operating Expenses.  Residence operating expenses were $12,249,000 in
the six months ended June 30, 1997 compared to $4,276,000 in the corresponding
1996 period, an increase of $7,973,000, or 186%. The Company operated 79
residences in the 1997 period compared to 31 in the corresponding 1996 period.
For the 19 residences that operated for 1997 and 1996, residence operating
expenses were $3,405,000, a increase of $264,000, or 7.7% from the $3,141,000 of
residence operating expenses in the

                                                                   Page 11 of 20
<PAGE>
 
corresponding period in 1996. The increase in expenses for these 19 residences
is due to the increase in staffing to accommodate the level of care due to
higher occupancy percentages The remaining $7,709,000 of the increase was due to
the new residences that opened subsequent to January 1, 1996.

Building Rentals. Building rentals  increased to $3,569,000 in the six months
ended June 30, 1997 from $1,495,000 in 1996.  The increase in building rentals
is directly related to the increase in the number of leases entered into by the
Company between January 1, 1996 and June 30, 1997.  The Company had 47 operating
leases at June 30, 1997 compared to 29 at June 30, 1996.  Building rentals for
the 19 residences which operated for the entire period of 1997 and 1996 stayed
relatively unchanged.

Depreciation and Amortization.   Depreciation and amortization expense was
$1,208,000 in the six month period ended June 30, 1997 compared to $384,000 in
1996, an increase of  $824,000, or 215%.  The increase in depreciation and
amortization is directly related to the 48 new residences that opened subsequent
to July 1, 1996.   Depreciation and amortization expense for the 19 residences
which operated for the entire six month period in 1996 and 1996, stayed
relatively unchanged.

Interest expense.  Interest expense net of capitalized interest was $408,000
for the six month period ended June 30,  1997 compared to $51,000 in the
corresponding 1996 period, a change of $357,000.  The Company's gross interest
expense was $3,352,000 for the six month period ended June 30, 1997 compared to
$1,081,000 in the corresponding 1996 period, a change of  $2,271,000.  The
increase in interest expense is due to temporary construction financing obtained
for the expansion of our assisted living residences through development
activity.  Capitalized interest for the six month period ended June 30, 1997 was
$2,944,000 compared to $1,031,000 in the corresponding 1996 period, a change of
$1,913,000.

Interest Income.  Interest income was $276,000 for the six  month period ended
June 30,  1997 compared to $69,000 in the corresponding 1996 period, a change of
$207,000.  The increase in interest income is directly related the fluctuation
in the amounts invested.

Other Income:  Other income was $482,000 for the six month period ended June 30,
1997 compared to $82,000 in the corresponding 1996 period, a change of $400,000.
Approximately $357,000 of the $482,000 in other income for the six months ended
June 30, 1997 relates to a participation agreement on 5 residences with an
investment company that has agreed to bear the economic risk for the first six
months that the residences are open in exchange for the right to participate in
future operating results. The remaining $125,000 related to development fees
received by the Company from outside developers to assist them in developing
similar assisted living residences. The $82,000 for the six month period ended
June 30, 1996 was from a gain on the sale of real property.

Pre-Tax Income (Loss):  Pre-tax income for the six months ended June 30, 1997
was $2,099,000 compared to a pre-tax loss of $171,000 during the corresponding
period in 1996, an increase of $2,270,000.  The Company's pre-tax income has
continued to increase as the number of operating residences increases.  As the
Company has matured in certain of its regions and occupancy has increased, the
operating income of the residences has been able to cover general corporate
overhead plus provide additional income.

Provision for Income Tax:  The Company's provision for income tax for the six
months ended June 30, 1997 was $468,000 compared to $0 for the corresponding
period in 1996. The Company has been utilizing its operating loss carryforwards
from previous periods to offset current income tax provisions. As of June 30,
1997, the Company had extinguished its carryforwards and will be experiencing a
tax rate of approximately 38%.

                                                                   Page 12 of 20
<PAGE>
 
Net Income (Loss):   Net income for the six months ended June 30, 1997 was
$1,631,000 compared to net loss of $171,000 during the corresponding period in
1996. The Company has generated income due to the increased number of residences
operating as compared to the corresponding period in 1996. This has been
partially offset by the increase in corporate overhead, including additional
staffing, necessary to accommodate the Company's expansion plans.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1997, the Company had negative working capital of approximately of
$50.6 million. Included in this amount was approximately $14 million of
construction draws that the Company received for the June development activity
which was not payable until July 10. The Company completed the sale and
leaseback of two properties for $5.1 million and closed on five permanent
mortgage financings with the State of Idaho and Washington for $9.1 million
subsequent to June 30, 1997. In addition, the temporary construction financing
of $51.9 million is classified as current liabilities because it will be
converted into sale-leaseback or other permanent financing within one year.
Excluding the construction draws payable and temporary construction financing,
the Company has positive working capital of $15.4 million.

Net cash provided by operating activities was approximately $2.7 million during
the six month period ended June 30, 1997. The primary source of funds was from
net income of $1.6 million and the add back of depreciation and amortization of
$1.2 million. Other operating type items netted to a use of cash of $100,000.

Net cash used in investing activities totaled $26 million during the six month
period ended June 30, 1997. The primary use of cash was $61.4 million related to
the development of new assisted living residences in Oregon, Washington, Texas,
New Jersey, Idaho, Ohio and Arizona. This was offset by proceeds of $35.6
million related to the sale of 15 residences of which 13 were leased backed. Two
of the residences sold entered into six month management agreements and have
also entered into a agreement to lease the property after the management
agreement expires.

Net cash provided by financing activities totaled $30.1 million during the six
month period ended June 30, 1997. The Company entered into 19 additional
construction financing loans which netted the Company $43.2 million, paid off
four construction loans for $10.2 million, experienced a decline in construction
draws of $1.9 million and incurred approximately $1.1 million in debt issuance
costs related to temporary construction financing and bond issuance costs.

The Company intends to utilize current working capital resources to develop
additional residences in 1997 and 1998. The Company intends to seek additional
long-term financing through low-cost bond financing and sale and leaseback
transactions in Washington, Oregon, Idaho, New Jersey and Ohio. As of June 30,
1997, the Company has started construction or had purchased land for development
on 35 parcels of land in Oregon, Washington, Texas, Ohio, Idaho, New Jersey, and
other states. The Company has also entered into agreements pursuant to which, it
may purchase, subject to completion of due diligence and various other
conditions, 25 undeveloped sites. The Company expects these developments to open
through the third and fourth quarter of 1997 and the first quarter of 1998.

Capital expenditures for 1997 are estimated to approximate $140 million to $168
million, related primarily to the development of additional residences, of which
approximately $61 million had been spent through June 30, 1997. The Company has
outstanding $46.5 million in commitments from several health care REITs to
finance 18 residences through sale and leaseback transactions. The Company
anticipates being able to continue to utilize tax-exempt bond financing for
approximately $22.8 million from the States of Ohio, Idaho and Washington. The
Company has agreed in principle subject to written confirmation for the

                                                                   Page 13 of 20
<PAGE>
 
sale and leaseback of an additional $25 million. The Company does not anticipate
any significant capital expenditures within the foreseeable future with respect
to the residences acquired in 1994, 1995, 1996 and those currently operating or
those pending licensure as of June 30, 1997. It is expected that cash generated
from operations will be sufficient to fund any expenditures the Company may be
required to make with respect to these residences.

As of  June 30, 1997, the Company had invested excess cash balances in short-
term certificates of deposit and U.S. Treasury securities.  The Company intends
to satisfy future capital requirements for its development activities by various
means, including financing obtained from sale/leaseback transactions, permanent
mortgage financing and long-term state bond financing and to the extent
available, cash generated from operations.


RISK FACTORS

Except for the historical information contained herein, the matters discussed
herein are foreword looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. The following discussion highlights
some of these risks and others are discussed elsewhere herein or in other
documents filed by the Company with the Securities and Exchange Commission.

ANTICIPATED OPERATING LOSSES OF NEW RESIDENCES. The Company anticipates that
each residence will have an operating loss (prior to depreciation, rent or
interest, if any) of $10,000 during the first three to four months of operation.
To the extent the Company sells a residence and leases it back or otherwise
finances it, the aggregate loss may increase by up to an additional $120,000.
The Company currently plans to open 50 to 60 residences in 1997, of which 26
were opened during the first six months of 1997. The Company estimates that the
losses to be incurred during 1997 due to start-up residences could range from
$1.7 million to $2.4 million. The success of the Company's future operations is
directly tied to the expansion of its operational base. There can be no
assurance that the Company will not experience unforeseen expenses,
difficulties, complications and delays in connection with the expansion of its
operational base which could have a material adverse effect on the Company's
financial condition and results of operations.

NO ASSURANCE AS TO ABILITY TO DEVELOP OR ACQUIRE ADDITIONAL ASSISTED LIVING
RESIDENCES.  The Company's prospects for growth are directly affected by its
ability to develop and, to a lesser extent, acquire additional assisted living
residences. While the Company currently plans to open 50 to 60 residences in
1997 and 1998, there can be no assurance that such residences will be completed.
The success of the Company's growth strategy will also depend upon, among other
factors, the Company's ability to obtain government licenses and approvals, the
Company's ability to obtain financing and the competitive environment for
development and acquisitions. The nature of such licenses and approvals and the
timing and likelihood of obtaining them vary widely from state to state,
depending upon the residence, or its operation, and the type of services to be
provided. The successful development of additional assisted living residences
will involve a number of risks, including the possibility that the Company may
be unable to locate suitable sites at acceptable prices or may be unable to
obtain, or may experience delays in obtaining, necessary zoning, land use,
building, occupancy, and other required governmental permits and authorizations.
The Company is dependent upon these permits and authorizations to construct and
operate its residences and any delay or inability to obtain such permits could
adversely affect the results of operations. The Company may also incur
construction costs that exceed original estimates, may not complete construction
projects on schedule and may experience

                                                                   Page 14 of 20
<PAGE>
 
competition in the search for suitable development sites. The Company relies on
third-party general contractors to construct its new assisted living facilities.
There can be no assurance that the Company will not experience difficulties in
working with general contractors and subcontractors, which could result in
increased construction costs and delays. Further, facility development is
subject to a number of contingencies over which the Company will have little
control and that may adversely affect project cost and completion time,
including shortages of, or the inability to obtain, labor or materials, the
inability of the general contractor or subcontractors to perform under their
contracts, strikes, adverse weather conditions and changes in applicable laws or
regulations or in the method of applying such laws and regulations. Accordingly,
if the Company is unable to achieve its development plans, its business,
financial condition and results of operations could be adversely affected. There
can be no assurance that the Company will be successful in developing or
acquiring any particular residence, that the Company's rapid expansion will not
adversely affect its operations or that any residence developed or acquired by
the Company will be successful. The various risks associated with the Company's
development or acquisition of assisted living residences and uncertainties
regarding the profitability of such operations could have a material adverse
effect on the Company's financial condition and results of operations.

NEED FOR ADDITIONAL FINANCING TO FUND FUTURE DEVELOPMENT AND ACQUISITIONS.  To
achieve its growth objectives, the Company will need to obtain sufficient
financial resources to fund its development, construction and acquisition
activities. The estimated cost to complete and fund start-up losses for the new
facilities that will be developed by December 31, 1998 is between $280 million
and $336 million; accordingly, the Company's future growth will depend on its
ability to obtain additional financing on acceptable terms. The Company will,
from time to time, seek additional funding through public and/or private
financing sources, including equity and/or debt financing. If additional funds
are raised by issuing equity securities, the Company's stockholders may
experience dilution. There can be no assurance that adequate funding will be
available as needed or on terms acceptable to the Company. A lack of available
funds may require the Company to delay or eliminate all or some of its
development projects and acquisition plans.

The Company's aggregate annual fixed debt and lease payment obligations
currently total approximately $16.4 million. These fixed payment obligations
will significantly increase as the Company pursues its development plan. Failure
to meet these obligations may results in the Company being in default of its
financing agreements and, as a consequence, the Company may lose its ability to
operate any individual residence or other residences which may be cross-
defaulted. There can no assurance that the Company will generate sufficient cash
flow to meet its current or future obligations. The Company has not historically
covered its fixed charges with earnings. In addition, the Company anticipates,
there is a risk that, upon completion of construction, permanent financing for
newly developed residences may not be available or may be available only on
terms that are unfavorable or unacceptable to the Company.


GEOGRAPHIC CONCENTRATION; DEPENDENCE ON STATE MEDICAID WAIVER PROGRAMS   As of
June 30, 1997, approximately 39.8% of the Company's properties are located in
the State of Texas, approximately 21.5% are located in the State of Oregon,
13.9% are located in the State of Ohio and 11.8% are located in the State of
Washington; therefore, the Company is dependent on the economies of Texas,
Oregon, Ohio and Washington and, to a certain extent, on the continued funding
of state Medicaid waiver programs. The Company has operated residences in Oregon
since December 1994. In addition, the Company began operating residences in
Texas and Washington in July 1995 and December 1995, respectively. During the
three months and six months ended June 30, 1997 and years ended 1996 and 1995,
direct payments received from state Medicaid agencies accounted for
approximately 10.8%, 11.1% 11.4%, 13.8% and 21.4%, respectively of the Company's
revenue while the tenant-paid portion of Medicaid residents accounted for
approximately 5.9%, 6.0%, 6%, 8% and 10% of the Company's revenue during these

                                                                   Page 15 of 20
<PAGE>
 
periods. The Company expects that State Medicaid reimbursement programs will
constitute a significant source of revenue for the Company. The Company intends
to continue developing and operating assisted living residences in other states.
Adverse changes in general economic factors affecting these states' respective
health care industries or in these states' laws and regulatory environment,
including Medicaid reimbursement rates, could have a material adverse effect on
the Company's financial condition and results of operations.

POSSIBLE VOLATILITY OF STOCK PRICE  The market price of the Common Stock could
be subject to significant fluctuations in response to various factors and
events, including the liquidity of the market for the Common Stock, variations
in the Company's operating results, new statutes or regulations or changes in
the interpretation of existing statutes or regulations affecting the health care
industry generally or assisted living residence businesses in particular.  In
addition, the stock market in recent years has experienced broad price and
volume fluctuations that often have been unrelated to the operating performance
of particular companies.  These market fluctuation also may adversely affect the
market price of the Common Stock.
 
DEPENDENCE ON SENIOR MANAGEMENT AND SKILLED PERSONNEL  The Company depends, and
will continue to depend, upon the services of Dr. Wilson, its Chief Executive
Officer and President, Connie Baldwin, its Director of Operations and Stephen
Gordon, its Chief Administrative Officer and Chief Financial Officer.  The
Company has entered into an employment agreement with Dr. Wilson and has
obtained a $500,000 key employee insurance policy covering her life. Company is
also dependent upon its ability to attract and retain management personnel who
will be responsible for the day-to-day operations of each residence.  The loss
of the services of any or all of such officers or the Company's inability to
attract additional management personnel in the future could have a material
adverse effect on the Company's financial condition or results of operations.

DEPENDENCE ON REIMBURSEMENT BY THIRD-PARTY PAYORS  A portion of the Company's
revenues will be dependent upon reimbursement from third-party payors, including
state Medicaid programs and private insurers.  For the three months and six
months ended June 30, 1997, and the years ended December 31, 1996, 1995, the
Company received, as a percentage of total revenue, under Medicaid programs
10.8%, 11.1%,  11.4%, 13.8% and 21.4%, respectively.  Furthermore, there can be
no assurance the Company's proportionate percentage of revenue received from
Medicaid programs will not increase.  The revenues and profitability of the
Company will be affected by the continuing efforts of governmental and private
third-party payors to contain or reduce the costs of health care by attempting
to lower reimbursement rates, increasing case management review of services and
negotiating reduced contract pricing.  In an attempt to reduce the federal and
certain state budget deficits, there have been, and management expects that
there will continue to be, a number of proposals to limit Medicaid reimbursement
in general.  Adoption of any such proposals at either the federal or the state
level could have a material adverse effect on the Company's business, financial
condition, results of operations and prospects.

GOVERNMENT REGULATION.  Health care is an area of extensive and frequent
regulatory change.  Changes in the laws or new interpretations of existing laws
can have a significant effect on methods of doing business, cost of doing
business and amounts of reimbursement from governmental and other payors.  The
Company is and will continue to be subject to varying degrees of regulation and
licensing by health or social service agencies and other regulatory authorities
in the various states and localities in which it operates or intends to operate.
As a provider of services under the Medicaid program in the United States, the
Company is subject to Medicaid fraud an abuse law, violations of which may
result in civil and criminal penalties and exclusions from participation in the
Medicaid program.  The Company at all times attempts to comply with all
applicable fraud and abuse laws; however, there can be no assurance

                                                                   Page 16 of 20
<PAGE>
 
that administrative or judicial interpretation of existing laws or regulations
will not have a material adverse effect on the Company's operations or financial
condition.

The success of the Company will be dependent in part upon its ability to satisfy
the applicable regulations and requirements and to procure and maintain required
licenses. The Company's operations could also be adversely affected by, among
other things, regulatory developments such as mandatory increases in the scope
and quality of care to be afford residents and revisions in licensing and
certification standards. Currently, no federal rules explicitly define or
regulate assisted living. In addition, federal and state laws currently exist
restricting health care providers from referring patients to affiliated
entities. The Company believes that its operations do not presently violate
these referral laws. However, there can be no assurance that federal, state or
local laws or regulatory procedures which might adversely affect the Company's
business, financial condition, results of operations or prospects will not be
expanded or imposed.

STAFFING AND LABOR COSTS  The Company will compete with other providers of long-
term care with respect to attracting and retaining qualified personnel. The
Company will also be dependent upon the available labor pool of low-wage
employees. A shortage of nurses and/or trained personnel may require the Company
to enhance its wage and benefits package in order to compete. No assurance can
be given that the Company's labor costs will not increase, or that, if they do
increase, they can be matched by corresponding increases in revenues.
 
COMPETITION  The long-term care industry is highly competitive and the Company
expects that the assisted living business, in particular, will become more
competitive in the future. The Company will be competing with numerous other
companies providing similar long-term care alternatives, such as home health
agencies, life care at home, community-based service programs, retirement
communities and convalescent centers. The Company expects that as assisted
living receives increased attention and the number of states which include
assisted living in their Medicaid waiver programs increases, competition will
grow from new markets entrants, including publicly and privately held companies
focusing primarily on assisted living. Nursing facilities that provide long-term
care services are also a source of competition to the Company. Moreover, in the
implementation of the Company's expansion program, the Company expects to face
competition for development and acquisitions of assisted living residences. Some
of the Company's present and potential competitors are significantly larger and
have, or may obtain, greater financial resources than those of the Company.
Consequently, there can be no assurance that the Company will not encounter
increased competition in the future which could limit its ability to attract
residents or expand its business and could have a material adverse effect on the
Company's financial condition, results of operations and prospects.

DIFFICULTIES OF MANAGING RAPID GROWTH   The Company expects that the number of
residences which it owns, leases or otherwise operates will increase
substantially as it pursues its growth strategy.  This rapid growth will place
significant demands on the Company's management resources.  The Company's
ability to manage its growth effectively will require it to continue to expand
its operational, financial and management information systems and to continue to
attract, train, motivate, manage and retain key employees.  If the Company is
unable to manage its growth effectively, its business, financial condition and
results of operations could be adversely affected.

LIABILITY AND INSURANCE  The provision of health care services entails an
inherent risk of liability. In recent years, participants in the long-term care
industry have become subject to an increasing number of lawsuits alleging
malpractice or related legal theories, many of which involve large claims and
significant defense costs. The Company currently maintains liability insurance
intended to cover such claims and the Company believes that its insurance is in
keeping with industry standards. There can be

                                                                   Page 17 of 20
<PAGE>
 
no assurance, however, that claims in excess of the Company's insurance coverage
or claims not covered by the Company insurance coverage (e.g., claims for
punitive damages) will not 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 upon the Company's financial condition and results of
operations. Claims against the Company regardless of their merit or eventual
outcome, may also have a material adverse effect upon the Company's ability to
attract residents or expand its business and would require management to devote
time to matters unrelated to the operation of the Company's business. In
addition, the Company's insurance policies must be renewed annually. There can
be no assurance that the Company will be able to obtain liability insurance
coverage in the future or that, if such coverage is available, it will be
available on acceptable terms.

ENVIRONMENTAL RISKS  Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be held liable for the cost of removal or remediation of certain
hazardous or toxic substances, including, without limitation, asbestos-
containing materials, that could be located on, in or under such property. Such
laws and regulations often impose liability whether or not the owner or operator
knew of, or was responsible for, the presence of the 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 the 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 substances
properly may also adversely affect 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 a
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. As a result, the presence, with or
without the Company's knowledge, of hazardous or toxic substances at any
property held or operated by the Company, or acquired or operated by the Company
in the future, could have an adverse effect on the Company's business, financial
condition and results of operations. Environmental audits performed on the
Company's properties have not revealed any significant environmental liability
that management believes would have a material adverse effect on the Company's
business, financial condition or results of operations. No assurance can be
given that existing environmental audits with respect to any other Company's
properties reveal all environmental liabilities.




PART II.     OTHER INFORMATION

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

                                                                   Page 18 of 20
<PAGE>
 
(a)  The following documents are filed as part of this report:

<TABLE> 
<CAPTION> 

     Exhibit
     Number
     ------
     <S>       <C> 
       12      Computation of Fixed Charge to Earnings
       27      Financial Data Schedule
</TABLE> 

(b)  Reports on Form 8-K.

     On July 16, 1997, the Company filed a report on Form 8-K dated July 16,
     1997 reporting a two-for-one Stock Split on the Company's common stock. The
     record date for the stock split was June 30, 1997. 

     Reporting the adoption by the Company's Board of Directors of a
     Stockholders Plan. For each common share outstanding as of June 30, 1997
     one dividend of one preferred share will be payable.
     
                                                                   Page 19 of 20
<PAGE>
 
                                  SIGNATURES
                                        

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

                              ASSISTED LIVING CONCEPTS, INC.
                              Registrant

August 14, 1997               By:    /s/    STEPHEN GORDON
                                     ---------------------

                              Name:  Stephen Gordon
                              Title: Chief Administrative Officer and CFO


August 14, 1997               By:    /s/    RHONDA S. MARSH
                                     ----------------------
                              Name:  Rhonda S. Marsh          
                              Title: Chief Accounting Officer and Controller

                                                                   Page 20 of 20