<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------

                                   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 DECEMBER 31, 1999

                                       OR

[ ] 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: 1-13845

                           BALANCED CARE CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                    <C>
                      DELAWARE                                              25-1761898
           (STATE OF OTHER JURISDICTION OF                               (I.R.S. EMPLOYER
           INCORPORATION OR ORGANIZATION)                               IDENTIFICATION NO.)
         1215 MANOR DRIVE, MECHANICSBURG, PA                                   17055
      (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                              (ZIP CODE)
</TABLE>

                                 (717) 796-6100
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

                            Yes [X]          No [ ]

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
                    CLASS                            OUTSTANDING AT FEBRUARY 10, 1999
                    -----                      ---------------------------------------------
<S>                                            <C>
        Common Stock, $.001 par value                           34,172,847
</TABLE>

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<PAGE>   2

                           BALANCED CARE CORPORATION

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
                 PART I -- FINANCIAL INFORMATION
ITEM 1:
FINANCIAL STATEMENTS
  Consolidated Balance Sheets as of December 31, 1999 and
     June 30, 1999..........................................    3
  Consolidated Statements of Operations for the three months
     ended December 31, 1999 and 1998.......................    4
  Consolidated Statements of Operations for the six months
     ended December 31, 1999 and 1998.......................    5
  Consolidated Statement of Stockholders' Equity for the six
     months ended December 31, 1999.........................    6
  Consolidated Statements of Cash Flows for the six months
     ended December 31, 1999 and 1998.......................    7
  Notes to Consolidated Financial Statements................    8
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS.................................   13
ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
  RISK......................................................   25

                   PART II -- OTHER INFORMATION
ITEM 2:
CHANGES IN SECURITIES AND USE OF PROCEEDS...................   26
ITEM 6:
EXHIBITS AND REPORTS ON FORM 8-K............................   26
  (A) Exhibits
  (B) Reports on Form 8-K
</TABLE>

                                        2
<PAGE>   3

PART I -- FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

                           BALANCED CARE CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                              DECEMBER 31    JUNE 30
                                                                 1999          1999
                                                              -----------    --------
                                                              (UNAUDITED)
<S>                                                           <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................   $  4,832      $  8,160
  Receivables (net of allowance for doubtful receivables)...     15,267        11,912
  Development contracts in process..........................      1,248         2,559
  Prepaid expenses and other current assets.................      1,066           973
                                                               --------      --------
     Total current assets...................................     22,413        23,604
Restricted investments......................................      1,353         2,714
Property and equipment, net.................................     79,967        24,075
Goodwill, net...............................................     15,004        15,293
Purchase option deposits....................................      4,747         2,974
Other assets................................................      3,387         2,395
                                                               --------      --------
     Total assets...........................................   $126,871      $ 71,055
                                                               ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.........................   $  7,783      $    450
  Accounts payable..........................................      6,062        10,016
  Accrued payroll...........................................      1,855         1,339
  Accrued expenses..........................................      5,849         4,357
                                                               --------      --------
     Total current liabilities..............................     21,549        16,162
Long-term debt, net of current portion......................     52,288        11,773
Straight-line lease liability...............................      2,562         3,537
Deferred revenue and other liabilities......................        715         1,225
                                                               --------      --------
     Total liabilities......................................     77,114        32,697
                                                               --------      --------
Stockholders' equity:
Common stock, $.001 par value; authorized -- 50,000,000
  Shares; issued and outstanding -- 34,172,847 shares at
  December 31, 1999 and 16,722,846 shares at June 30,
  1999......................................................         35            17
Additional paid-in capital..................................     83,333        63,814
Accumulated deficit.........................................    (33,611)      (25,473)
                                                               --------      --------
     Total stockholders' equity.............................     49,757        38,358
                                                               --------      --------
     Total liabilities and stockholders' equity.............   $126,871      $ 71,055
                                                               ========      ========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                        3
<PAGE>   4

                           BALANCED CARE CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                                     DECEMBER 31
                                                              --------------------------
                                                                 1999           1998
                                                              -----------    -----------
                                                              (UNAUDITED)    (UNAUDITED)
<S>                                                           <C>            <C>
Revenues:
  Patient services..........................................    $11,145        $12,257
  Resident services.........................................      7,032          5,604
  Development fees..........................................        142            411
  Management fees...........................................         76            308
  Other revenues............................................         70            102
                                                                -------        -------
Total revenues..............................................     18,465         18,682
                                                                -------        -------
Operating expenses:
  Facility operating expenses:
     Salaries, wages and benefits...........................      8,713          8,296
     Other operating expenses...............................      5,587          5,614
  Development, general and administrative expense...........      2,576          3,318
  Provision for losses on termination of development
     projects...............................................         --          2,400
  Provision for losses under shortfall funding agreements...        750          2,360
  Lease expense.............................................      3,463          2,407
  Depreciation and amortization expense.....................        774            537
                                                                -------        -------
Total operating expenses....................................     21,863         24,932
                                                                -------        -------
     Loss from operations...................................     (3,398)        (6,250)
Other income (expense):
  Interest and other income.................................        115            175
  Interest expense..........................................       (423)          (113)
  Loss on sale of assets....................................         --           (200)
                                                                -------        -------
     Loss before income taxes...............................     (3,706)        (6,388)
Provision for income taxes..................................          3         (1,225)
                                                                -------        -------
     Net loss...............................................    $(3,709)       $(5,163)
                                                                =======        =======
Basic loss per share........................................    $ (0.18)       $ (0.31)
                                                                =======        =======
Diluted loss per share......................................    $ (0.18)       $ (0.31)
                                                                =======        =======
Weighted average shares -- basic............................     21,166         16,709
                                                                =======        =======
Weighted average shares -- diluted..........................     21,166         16,709
                                                                =======        =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        4
<PAGE>   5

                           BALANCED CARE CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                   SIX MONTHS ENDED
                                                                     DECEMBER 31
                                                              --------------------------
                                                                 1999           1998
                                                              -----------    -----------
                                                              (UNAUDITED)    (UNAUDITED)
<S>                                                           <C>            <C>
Revenues:
  Patient services..........................................    $22,190        $24,622
  Resident services.........................................     13,927         11,517
  Development fees..........................................  538......          5,674
  Management fees...........................................        175            606
  Other revenues............................................        111            134
                                                                -------        -------
Total revenues..............................................     36,941         42,553
                                                                -------        -------
Operating expenses:
  Facility operating expenses:
     Salaries, wages and benefits...........................     17,534         16,637
     Other operating expenses...............................     11,016         11,533
  Development, general and administrative expense...........      5,169          6,960
  Provision for losses on termination of development
     projects...............................................         --          2,400
  Provision for losses under shortfall funding agreements...      1,550          2,360
  Lease expense.............................................      6,902          4,796
  Depreciation and amortization expense.....................      1,514          1,043
                                                                -------        -------
Total operating expenses....................................     43,685         45,729
                                                                -------        -------
     Loss from operations...................................     (6,744)        (3,176)
Other income (expense):
  Interest and other income.................................        172            479
  Interest expense..........................................       (822)          (218)
  Loss on sale of assets....................................         --           (200)
                                                                -------        -------
     Loss before income taxes and extraordinary item........     (7,394)        (3,115)
Provision for income taxes..................................          5            108
                                                                -------        -------
     Loss before extraordinary item.........................     (7,399)        (3,223)
Extraordinary loss on extinguishment of debt................       (739)            --
                                                                -------        -------
     Net loss...............................................    $(8,138)       $(3,223)
                                                                =======        =======
Basic loss per share:
  Loss before extraordinary item............................    $ (0.39)       $ (0.19)
                                                                =======        =======
  Net loss..................................................    $ (0.43)       $ (0.19)
                                                                =======        =======
Diluted loss per share:
  Loss before extraordinary item............................    $ (0.39)       $ (0.19)
                                                                =======        =======
  Net loss..................................................    $ (0.43)       $ (0.19)
                                                                =======        =======
Weighted average shares -- basic............................     18,945         16,703
                                                                =======        =======
Weighted average shares -- diluted..........................     18,945         16,703
                                                                =======        =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        5
<PAGE>   6

                           BALANCED CARE CORPORATION

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                 SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                               COMMON STOCK
                                              ---------------    ADDTL.
                                              ISSUED     PAR     PAID-IN
                                              SHARES    VALUE    CAPITAL    DEFICIT      TOTAL
                                              ------    -----    -------    --------    -------
<S>                                           <C>       <C>      <C>        <C>         <C>
Balance at June 30, 1999....................  16,723     $17     $63,814    $(25,473)   $38,358
Issuance of common stock, less costs of
  issuance..................................  16,700     $17     $19,519          --    $19,536
Exercise of common stock purchase
  warrants..................................     750       1          --          --          1
Net loss....................................      --      --          --      (8,138)    (8,138)
                                              ------     ---     -------    --------    -------
Balance at December 31, 1999................  34,173     $35     $83,333    $(33,611)   $49,757
                                              ======     ===     =======    ========    =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        6
<PAGE>   7

                           BALANCED CARE CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   SIX MONTHS ENDED
                                                                     DECEMBER 31
                                                              --------------------------
                                                                 1999           1998
                                                              -----------    -----------
                                                              (UNAUDITED)    (UNAUDITED)
<S>                                                           <C>            <C>
Cash Flows from Operating Activities:
Net loss....................................................   $ (8,138)       $(3,223)
Adjustments to reconcile net loss to net cash used for
  Operating activities:
  Depreciation and amortization.............................      1,514          1,043
  Loss on sale of assets....................................         --            200
  Provision for losses on development activities............         --          2,400
  Provision for losses under shortfall funding agreement....      1,550          2,360
  Extraordinary loss on extinguishment of debt..............        739             --
  Changes in operating assets and liabilities, excluding
     effects of acquisitions:
     Increase in receivables, net...........................     (3,554)        (2,908)
     Decrease (increase) in development contracts in
      process, net..........................................      1,311         (3,942)
     Increase in prepaid expenses and other current
      assets................................................        (74)          (503)
     Decrease in accounts payable, accrued payroll and
      accrued expenses......................................     (2,878)        (2,416)
                                                               --------        -------
       Net cash used for operating activities...............     (9,530)        (6,989)
                                                               --------        -------
Cash Flows from Investing Activities:
  Proceeds from sale of assets..............................         --          2,726
  Purchases of property and equipment.......................    (55,886)        (2,073)
  Decrease (increase) in restricted investments.............      1,361           (166)
  Increase in purchase options and other assets.............     (2,894)        (1,715)
  Business acquisitions.....................................     (2,457)        (1,617)
                                                               --------        -------
       Net cash used for investing activities...............    (59,876)        (2,845)
                                                               --------        -------
Cash Flows from Financing Activities:
  Proceeds from issuance of long-term debt..................     53,640            535
  Payments on long-term debt (including extinguishment costs
     of $707)...............................................     (6,499)          (122)
  Proceeds from issuance of common stock....................     19,537            128
  Increase in other liabilities.............................       (600)          (267)
                                                               --------        -------
       Net cash provided by financing activities............     66,078            274
  Decrease in cash and cash equivalents.....................     (3,328)        (9,560)
  Cash and cash equivalents at beginning of period..........      8,160         15,481
                                                               --------        -------
Cash and cash equivalents at end of period..................   $  4,832        $ 5,921
                                                               ========        =======
Supplemental Cash Flow Information:
  Cash paid for interest....................................   $    822        $   218
                                                               ========        =======
  Cash paid for income taxes................................   $      5        $    25
                                                               ========        =======
  Acquisitions:
     Fair value of assets acquired..........................     (3,482)        (1,617)
     Liabilities assumed....................................      1,025             --
                                                               --------        -------
     Consideration paid for acquisitions....................   $ (2,457)       $(1,617)
                                                               ========        =======
</TABLE>

          See accompanying notes to consolidated financial statements.
                                        7
<PAGE>   8

                           BALANCED CARE CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Organization and Background

     Balanced Care Corporation (the "Company") was incorporated in April 1995
and is engaged in the operation and selective development and acquisition of
assisted living facilities and other operations which facilitate implementation
of the Company's balanced care continuum strategy, such as medical
rehabilitation, dementia and Alzheimer's services, home health care and skilled
nursing. At December 31, 1999, the Company owned, leased or managed 68 assisted
and independent living communities and 13 skilled nursing facilities. Also at
December 31, 1999, the Company had 6 assisted living communities under
construction. The Company's operations are located in Pennsylvania, Missouri,
Arkansas, Virginia, Ohio, North Carolina, Tennessee, West Virginia, Florida,
Maryland and Indiana.

(b) Basis of Presentation

     The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries from their respective acquisition
dates. All significant intercompany accounts and transactions have been
eliminated in the consolidated financial statements.

     The financial statements as of and for the three and six-month periods
ended December 31, 1999 and 1998 are unaudited, but in the opinion of
management, have been prepared on the same basis as the audited financial
statements and reflect all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the information set forth therein. The
results of operations for the three and six-month periods ended December 31,
1999 are not necessarily indicative of the operating results to be expected for
the full year or any other period. These financial statements and notes should
be read in conjunction with the financial statements and notes included in the
audited consolidated financial statements of the Company for the year ended June
30, 1999 as contained in the Company's Annual Report on Form 10-K (as amended).

2. BUSINESS ACQUISITIONS

     Acquisitions and the manner of payment are summarized as follows:

<TABLE>
<CAPTION>
                                                       LEASED                          CASH PAID/
    MONTH             TRANSACTION DESCRIPTION         OR OWNED  BUSINESS  LOCATION     TOTAL COST
    -----             -----------------------         --------  --------  --------  ----------------
                                                                                    ($ IN THOUSANDS)
<S>            <C>                                    <C>       <C>       <C>       <C>
December 1999  Stock of Black Box of Martinsburg       Owned      ALF        WV          $  141
December 1999  Stock of Black Box of Peckville         Owned      ALF        PA             322
December 1999  Stock of TC Realty of Maumelle, Inc.    Owned      ALF        AR             499
December 1999  Stock of TC Realty of Scranton, Inc.    Owned      ALF        PA             524
December 1999  Stock of TC Realty of Berwick, Inc.     Owned      ALF        PA             140
December 1999  Stock of TC Realty of Lewistown, Inc.   Owned      ALF        PA             400
December 1999  Stock of TC Realty of Mansfield, Inc.   Owned      ALF        OH             431
                                                                                         ------
                                                                                         $2,457
                                                                                         ======
</TABLE>

     Before acquiring the operations of these Black Box entities in the
transactions detailed above, the Company managed the operations for the prior
Operator/Lessee. Subsequent to the business acquisitions, the Company also
acquired the real estate assets from the REIT owner in a separate transaction.
Refer to the descriptions of these transactions in the "Recent Developments"
section ("Property Acquisition") and the "Liquidity" section ("Operation") of
Item 2 of this Current Report.

     The following unaudited summary, prepared on a pro forma basis, combines
the results of operations of the acquired businesses with those of the Company
as if the acquisitions and leases had been consummated as of the beginning of
the period. The acquired businesses and their respective acquisition dates were
Extended

                                        8
<PAGE>   9
                           BALANCED CARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Care Operators of Harrisburg, LLC d/b/a/ Harrisburg Outlook Pointe in March
1999, TC Realty of Sherwood, Inc. d/b/a Sherwood Outlook Pointe in April 1999,
TC Realty of Mountain Home, Inc. d/b/a/ Mountain Home Outlook Pointe in April
1999, TC Realty of Altoona, Inc. d/b/a/ Altoona Outlook Pointe in May 1999 and
TC Realty of Reading, Inc. d/b/a/ Reading Outlook Pointe in May 1999. Also,
Black Box of Peckville d/b/a Outlook Pointe Keepsakes at Mid Valley, Black Box
of Martinsburg, Inc. d/b/a Outlook Pointe at Martinsburg, Inc., TC Realty at
Mansfield, Inc. d/b/a Outlook Pointe at Ontario, TC Realty at Maumelle, Inc.
d/b/a Outlook Pointe at Maumelle, TC Realty at Berwick, Inc. d/b/a Outlook
Pointe Commons at Berwick, TC Realty at Scranton, Inc. d/b/a Outlook Pointe
Commons at Scranton, and TC Realty at Lewistown, Inc. d/b/a Outlook Pointe at
Lewistown, Inc., were acquired in December 1999. The pro forma results include
the impact of certain adjustments such as: amortization of goodwill,
depreciation of assets acquired, interest on acquisition financing and lease
payments on the leased facility (in thousands, except for per share amounts):

<TABLE>
<CAPTION>
                                                               SIX MONTHS ENDED
                                                                 DECEMBER 31
                                                              ------------------
                                                               1999       1998
                                                              -------    -------
<S>                                                           <C>        <C>
Revenue.....................................................  $40,546    $45,451
                                                              =======    =======
Loss before extraordinary items.............................  $(6,925)   $(5,624)
                                                              =======    =======
Loss before extraordinary items per common
  share -- diluted..........................................  $ (0.37)   $ (0.34)
                                                              =======    =======
</TABLE>

     The unaudited pro forma results are not necessarily indicative of what
actually might have occurred if the acquisitions had been completed as of July
1, 1999 and 1998. In addition, they are not intended to be a projection of
future results of operations.

3. LOSS PER SHARE

     Loss per share is computed using the weighted average number of common
shares and common equivalent shares outstanding (using the treasury stock
method). For the three and six-month periods ended December 31, 1999 and 1998,
common equivalent shares from stock options and warrants are excluded from the
computation, as their effect is anti-dilutive.

4. LINE OF CREDIT AMENDMENTS AND LOSS ON EARLY EXTINGUISHMENT OF DEBT

     In April 1999, the Company entered into a $15 million revolving Line of
Credit with HCFP Funding, Inc. ("HCFP"). The Line of Credit is for a term of
three years, and outstanding borrowings bear interest at a rate per annum of
prime plus 2.75%. In July 1999, the Line of Credit was increased to $20 million.
Prior to July 1999, the Line of Credit was secured by the real estate owned by
five of the Company's subsidiaries (BCC at Darlington, Inc., Balanced Care at
Eyers Grove, Inc., Balanced Care at Butler, Inc., Balanced Care at Sarver, Inc.,
and Balanced Care at North Ridge, Inc.), and the eligible accounts receivable of
the Company's 10 Missouri skilled nursing facilities (the "Accounts Receivable
Borrowers"). In July 1999, the real estate of BCC at Republic Park Care Center,
Inc. and BCC at Nevada Park Care Center, Inc. (the "Skilled Nursing Facility
Borrowers") was added as security to collateralize the Line of Credit. In order
to mortgage the Skilled Nursing Facility Borrowers' real estate in favor of
HCFP, the Company repaid its $3.1 million loan to Meditrust to satisfy the
existing mortgage on this real estate. As a result of this transaction, the
Company reported a loss on the extinguishment of debt of $739,000 in the first
quarter of Fiscal 2000.

     On January 12, 2000, the Company completed the sale of its Missouri assets
(see "Missouri Divestiture" discussed below), which included the real estate,
leasehold interests and operations of the Skilled Nursing Facility Borrowers and
the Accounts Receivable Borrowers (the "Missouri Borrowers"). In order for HCFP
to release the Missouri Borrowers and their respective liens and security
interests under the Line of Credit, the

                                        9
<PAGE>   10
                           BALANCED CARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company agreed to (i) repay $5.4 million on the Line of Credit attributable to
the Missouri Borrowers, (ii) pay a prepayment fee of approximately $75,000,
(iii) reset the availability under the Line of Credit to $12.0 million as of
December 31, 1999 and (iv) cross-default its obligations under the Line of
Credit with any future obligations with HCFP.

     The primary component of the borrowing base for the Line of Credit consists
of 85% of the product of 8.0 to 8.5 times EBITDA of the Real Estate Borrowers
(as defined in the Line of Credit Agreement). At January 31, 2000, after the
repayment of $5.4 million attributable to the Missouri Borrowers, the borrowing
base available under the Line of Credit was approximately $12.0 million and $5.4
million was borrowed thereunder.

5. EQUITY TRANSACTION

     In October 1999, the Company entered into a Subscription Agreement (the
"Subscription Agreement") with IPC Advisors S.A.R.L., a Luxembourg company
("IPC"), under which IPC agreed to make an equity investment of approximately
$21.0 million in the Company (the "Transaction"). Under the first tranche of the
Transaction, which closed on October 11, 1999, the Company issued to IPC
3,300,000 shares of Series C Convertible Preferred Stock, par value $.001 (the
"Series C Preferred Stock"), at a price per share of $1.25, for an aggregate
purchase price of $4,125,000. Under the second tranche of the Transaction, which
was approved by the stockholders on December 15, 1999 and closed on December 21,
1999, the Company issued to IPC 13,400,000 shares of common stock, par value
$.001 (the "Common Stock"), at a price per share of $1.25, for an aggregate
purchase price of $16,750,000, and the outstanding shares of Series C Preferred
Stock automatically converted into 3,300,000 shares of Common Stock. At December
31, 1999, IPC owned approximately 48.87% of the outstanding shares of Common
Stock of the Company.

6. PROPERTY ACQUISITION

     In December 1999, the Company acquired the real property, improvements,
furniture, fixtures and equipment of 12 assisted living facilities. The
aggregate purchase price was $52,073,054. The purchase price was paid from the
following sources: a $7,811,054 promissory note due to the seller, New Meditrust
Company LLC, a $32,000,000 loan due to Heller Healthcare Finance, Inc., a
$7,000,000 discount note due to FRR Investments Limited, an affiliate of IPC,
and $5,262,000 in cash by the Company. The Company has an option to purchase 12
additional assisted living facilities by October 31, 2000.

7. SUBSEQUENT EVENT

     On January 12, 2000, the Company completed the sale of its Missouri assets
to Christian Health Care of Missouri, Inc. and certain of its affiliates
(collectively, "CHM") pursuant to an Asset Purchase Agreement dated October
15,1999 (as amended, the "Asset Purchase Agreement"). The Company sold its
leasehold interests in eight skilled nursing facilities and nine assisted and
independent living facilities, together with the operations of those facilities.
The Company sold its real property interests and operations in two skilled
nursing facilities. The aggregate consideration paid by CHM to the Company for
the assets was (i) $51,000,000 in assumed lease obligations, (ii) $6,675,000 in
cash, and (iii) $2,525,000 in notes. The Company has guaranteed the payments of
the lease obligations of the buyer until the occurrence of certain events. For a
more detailed description of these transactions, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Recent
Developments."

8. SEGMENT REPORTING

     Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information (SFAS No. 131) established
standards for the way public business enterprises are to report information
about operating segments in annual and interim financial statements issued to
shareholders.
                                       10
<PAGE>   11
                           BALANCED CARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

It also established standards for related disclosures about products and
services, geographic areas and major customers.

     The Company has three primary reportable segments: (i) Resident Services
which includes all assisted living and independent living services, and the
management of assisted living facilities, (ii) Patient Services which includes
skilled nursing services, home health services, and medical rehabilitation
services, and (iii) Development, General and Administrative. No other individual
business segment exceeds the 10% quantitative thresholds of SFAS No. 131.

     The Company's management evaluates the performance of its operating
segments on the basis of income from continuing operations before non-recurring
items (representing provisions for losses on development activities and
severance agreements and gains and losses on sales of assets), lease expense,
interest (net), taxes, depreciation and amortization.

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED DECEMBER 31, 1999
                                                ------------------------------------------------------
                                                                         DEVELOPMENT
                                                RESIDENT    PATIENT      GENERAL AND
                                                SERVICES    SERVICES    ADMINISTRATIVE    CONSOLIDATED
                                                --------    --------    --------------    ------------
<S>                                             <C>         <C>         <C>               <C>
Revenues......................................   $7,178     $11,145        $   142          $18,465
Operating expenses............................    4,533       9,767             --           14,300
Development, general and administrative
  expenses....................................       --          --          2,576            2,576
Provision for losses under shortfall funding
  agreements..................................      750          --             --              750
                                                 ------     -------        -------          -------
Income (loss) from continuing operations
  before non-recurring items, lease expense,
  interest (net), taxes, depreciation and
  amortization................................   $1,895     $ 1,378        $(2,434)         $   839
                                                 ======     =======        =======          =======
</TABLE>

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED DECEMBER 31, 1998
                                                ------------------------------------------------------
                                                                         DEVELOPMENT
                                                RESIDENT    PATIENT      GENERAL AND
                                                SERVICES    SERVICES    ADMINISTRATIVE    CONSOLIDATED
                                                --------    --------    --------------    ------------
<S>                                             <C>         <C>         <C>               <C>
Revenues......................................   $6,014     $12,257        $   411          $18,682
Operating expenses............................    3,570      10,340             --           13,910
Development, general and administrative
  expenses....................................       --          --          3,318            3,318
Provision for losses under shortfall funding
  agreements..................................    2,360          --             --            2,360
                                                 ------     -------        -------          -------
Income (loss) from continuing operations
  before non-recurring items, lease expense,
  interest (net), taxes, depreciation and
  amortization................................   $   84     $ 1,917        $(2,907)         $  (906)
                                                 ======     =======        =======          =======
</TABLE>

                                       11
<PAGE>   12
                           BALANCED CARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                         SIX MONTHS ENDED DECEMBER 31, 1999
                                               ------------------------------------------------------
                                                                        DEVELOPMENT
                                               RESIDENT    PATIENT      GENERAL AND
                                               SERVICES    SERVICES    ADMINISTRATIVE    CONSOLIDATED
                                               --------    --------    --------------    ------------
<S>                                            <C>         <C>         <C>               <C>
Revenues.....................................  $ 14,213    $22,190        $   538          $ 36,941
Operating expenses...........................     8,970     19,580             --            28,550
Development, general and administrative
  expenses...................................        --         --          5,169             5,169
Provision for losses under shortfall funding
  agreements.................................     1,550         --             --             1,550
                                               --------    -------        -------          --------
Income (loss) from continuing operations
  before non-recurring items, lease expense,
  interest (net), taxes, depreciation and
  amortization...............................  $  3,693    $ 2,610        $(4,631)         $  1,672
                                               ========    =======        =======          ========
Total Assets.................................  $101,132    $11,325        $14,414          $126,871
                                               ========    =======        =======          ========
</TABLE>

<TABLE>
<CAPTION>
                                                          SIX MONTHS ENDED DECEMBER 31, 1998
                                                ------------------------------------------------------
                                                                         DEVELOPMENT
                                                RESIDENT    PATIENT      GENERAL AND
                                                SERVICES    SERVICES    ADMINISTRATIVE    CONSOLIDATED
                                                --------    --------    --------------    ------------
<S>                                             <C>         <C>         <C>               <C>
Revenues......................................  $12,257     $24,622        $ 5,674          $42,553
Operating expenses............................    7,205      20,965             --           28,170
Development, general and administrative
  expenses....................................       --          --          6,960            6,960
Provision for losses under shortfall funding
  agreements..................................    2,360          --             --            2,360
                                                -------     -------        -------          -------
Income (loss) from continuing operations
  before non-recurring items, lease expense,
  interest (net), taxes, depreciation and
  amortization................................  $ 2,692     $ 3,657        $(1,286)         $ 5,063
                                                =======     =======        =======          =======
Total Assets..................................  $39,814     $16,226        $24,954          $80,994
                                                =======     =======        =======          =======
</TABLE>

                                       12
<PAGE>   13

ITEM 2:

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

     The following discussion and analysis addresses the Company's results of
operations on a historical basis for the three and six-month periods ended
December 31, 1999 and 1998, and the Company's liquidity and capital resources.
This information should be read in conjunction with the Company's consolidated
condensed financial statements contained elsewhere in this report. This report
contains, in addition to historical information, forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially. Factors that could cause or contribute to such differences include,
but are not limited to, those disclosed in "Risk Factors" in the Company's
Annual Report on Form 10-K for the year ended June 30, 1999, as amended.

OVERVIEW

     The Company was incorporated in April 1995 and is engaged in the operation
and selective development and acquisition of assisted living facilities and
other operations which facilitate implementation of the Company's balanced care
continuum strategy, such as medical rehabilitation, dementia and Alzheimer's
services, home health care and skilled nursing.

     The Company has grown primarily through acquisitions and by designing,
developing, operating and managing its Outlook Pointe(R) signature series
assisted living facilities. The following table summarizes the Company's
operating facilities at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                          -------------------------------------------------------------------
                                                        1999                               1998
                                          --------------------------------   --------------------------------
                                          OWNED   LEASED   MANAGED   TOTAL   OWNED   LEASED   MANAGED   TOTAL
                                          -----   ------   -------   -----   -----   ------   -------   -----
<S>                                       <C>     <C>      <C>       <C>     <C>     <C>      <C>       <C>
INCLUDING MISSOURI
Developed Assisted Living Facilities....   12        1       33       46      --        1       15       16
Acquired Assisted Living Facilities.....    5       13       --       18      13       12       --       25
Skilled Nursing Facilities..............    2       11       --       13       3       10       --       13
Independent Living Facilities...........   --        4       --        4      --        4       --        4
                                           --       --       --       --      --       --       --       --
                                           19       29       33       81      16       27       15       58
                                           ==       ==       ==       ==      ==       ==       ==       ==
</TABLE>

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                          -------------------------------------------------------------------
                                                        1999                               1998
                                          --------------------------------   --------------------------------
                                          OWNED   LEASED   MANAGED   TOTAL   OWNED   LEASED   MANAGED   TOTAL
                                          -----   ------   -------   -----   -----   ------   -------   -----
<S>                                       <C>     <C>      <C>       <C>     <C>     <C>      <C>       <C>
EXCLUDING MISSOURI
Developed Assisted Living Facilities....   12        1       33       46      --        1       15       16
Acquired Assisted Living Facilities.....    5        8       --       13      13        7       --       20
Skilled Nursing Facilities..............   --        3       --        3       1        2       --        3
Independent Living Facilities...........   --       --       --       --      --       --       --       --
                                           --       --       --       --      --       --       --       --
                                           17       12       33       62      14       10       15       39
                                           ==       ==       ==       ==      ==       ==       ==       ==
</TABLE>

     As of December 31, 1999, the Company had operations in Pennsylvania,
Missouri, Arkansas, Virginia, Ohio, North Carolina, Tennessee, West Virginia,
Florida, Maryland and Indiana. As of December 31, 1999, these operating
facilities had a capacity for 4,077 assisted living residents, 1,304 skilled
nursing patients and 117 independent living residents. In January 2000, the
Company divested its Missouri assets, consisting of ten skilled nursing
facilities with 1,135 beds and nine assisted and independent living facilities
with 245 beds. After the divestiture, the Company's operating facilities have a
capacity for 3,949 assisted living residents and 169 skilled nursing patients.
The Company has discontinued its own rehabilitation agencies and now exclusively
utilizes independent agencies to provide therapy services.

     In addition to the 46 Outlook Pointe(R) signature series assisted living
facilities opened as of December 31, 1999, the Company has signed agreements to
develop and manage an additional six assisted living facilities

                                       13
<PAGE>   14

which were under construction at December 31, 1999. Two of these facilities
opened in January 2000, and the remaining four facilities are scheduled to open
at various dates through April 2000, thus concluding the Company's initial round
of development activity initiated over the past 2 1/2 years.

     The Company generates revenue from four primary sources: patient services,
resident services, development fees and management fees. Patient services
revenues include charges for room and board, rehabilitation therapies, pharmacy,
medical supplies, sub-acute care, home healthcare, and other programs provided
to patients in skilled nursing facilities as well as rehabilitation and home
health services provided to assisted living facility residents. Resident
services include all revenue earned from services provided in the Company's
assisted living facilities except for medical rehabilitation services provided
by the Company's licensed agencies which are included in patient services
revenues. Development fees and management fees are earned for developing and
managing assisted living facilities for REITs and other owners or lessees. As a
result of the divestiture of the Missouri operations and the acquisition of the
operations of developed facilities (both discussed under "Recent Developments"
below), the mix of the Company's revenues will change and revenues from assisted
living resident services will increase as a percentage of total revenues.

     The Company classifies its operating expenses into the following
categories: (i) facility operating expenses, which include labor, food,
marketing, rehabilitation therapy costs and other direct facility expenses; (ii)
development, general and administrative expense, which primarily include
corporate office expenses, regional office expense, development expenses and
other overhead costs; (iii) provisions for losses, which include losses relating
to working capital advances made under shortfall funding agreements; (iv) lease
expense, which includes rent for the facilities operated by the Company as well
as corporate office and other rent; and (v) depreciation and amortization.

RECENT DEVELOPMENTS

  Equity Transaction

     In October 1999, the Company entered into a Subscription Agreement (the
"Subscription Agreement") with IPC Advisors S.A.R.L., a Luxembourg company
("IPC"), under which IPC agreed to make an equity investment of approximately
$21.0 million in the Company (the "Transaction"). Under the first tranche of the
Transaction, which closed on October 11, 1999, the Company issued to IPC
3,300,000 shares of Series C Convertible Preferred Stock, par value $.001 (the
"Series C Preferred Stock"), at a price per share of $1.25, for an aggregate
purchase price of $4,125,000. Under the second tranche of the Transaction, which
was approved by the stockholders on December 15, 1999 and closed on December 21,
1999, the Company issued to IPC 13,400,000 shares of common stock, par value
$.001 (the "Common Stock"), at a price per share of $1.25, for an aggregate
purchase price of $16,750,000, and the outstanding shares of Series C Preferred
Stock automatically converted into 3,300,000 shares of Common Stock. At December
31, 1999, IPC owned approximately 48.87% of the outstanding shares of Common
Stock of the Company.

  Property Acquisition

     On December 30, 1999, the Company and 12 of its subsidiaries (collectively
the "Subsidiaries"), IPC and New Meditrust Company LLC ("Meditrust"), entered
into a Memorandum of Understanding (the "Memorandum of Understanding"), under
which the Subsidiaries acquired the real property, improvements, furniture,
fixtures and equipment of twelve Outlook Pointe(R) assisted living facilities
located in Pennsylvania (7), Arkansas (3), Ohio (1) and West Virginia (1)
(collectively, the "Tranche One Properties"). Transaction costs of the
acquisition were paid by the Company.

     The aggregate purchase price for the Tranche One Properties was $52,073,054
(the "Tranche One Purchase Price"), which was determined based on arms' length
negotiations. The Tranche One Purchase Price was paid as follows: (a)
$44,262,000 in cash by the Company (the "Cash Portion") and (b) $7,811,054
pursuant to a Promissory Note dated as of December 30, 1999, as amended February
9, 2000 (the "Meditrust Note") made jointly by the Company and IPC in favor of
Meditrust.

                                       14
<PAGE>   15

     The Cash Portion of the Tranche One Purchase Price was funded as follows:
(a) $5,262,000 in cash by the Company, (b) $32,000,000 in the form of a loan
(the "Heller Loan") pursuant to a Loan Agreement dated as of December 30, 1999
(the "Heller Loan Agreement") entered into by and among the Subsidiaries and
Heller Healthcare Finance, Inc. ("Heller"), and (c) $7,000,000 pursuant to a
Series One 1999 BCC Discount Note (the "FRR Note") made by the Company in favor
of FRR Investments Limited ("FRR"). FRR is affiliated with IPC.

     As an inducement for IPC to enter into the Meditrust Note, IPC, Meditrust
Mortgage Investments, Inc. ("MMI") and Meditrust Corporation ("MC", and together
with MMI, the "Meditrust Parties") entered into a Right of First Refusal
Agreement dated as of December 30, 1999 (the "Right of First Refusal
Agreement"). Under the Right of First Refusal Agreement, in the event the
Meditrust Parties desire to sell, give or otherwise transfer the 1,081,312
shares of common stock of the Company (the "Stock") owned by the Meditrust
Parties to any party other than an entity that is a direct or indirect
subsidiary of MC, the Meditrust Parties are obligated to offer in writing to
sell the Stock to IPC on the same terms. The Right of First Refusal Agreement,
unless sooner terminated in accordance with the terms thereof, will remain in
effect until December 31, 2009.

     As a further inducement for IPC to enter into the Meditrust Note, the
Company entered into an Indemnification, Defense, Hold Harmless and
Reimbursement Agreement dated as of December 29, 1999 (the "Indemnification
Agreement") in favor of IPC, under which the Company has agreed to indemnify,
defend and hold harmless IPC and certain other Indemnified Parties (as defined
in the Indemnification Agreement") from any Losses (as defined in the
Indemnification Agreement") arising under or otherwise related to or in
connection with the Meditrust Note (including, without limitation, all payments
made or to be made by IPC under the Meditrust Note), except for any Losses that
arise as a result of the gross negligence or willful misconduct of any
Indemnified Party or a breach of a fiduciary duty of IPC or any affiliate of IPC
to the Company.

     As an inducement for FRR to accept the FRR Note and as additional security
for the Company's obligations under the Indemnification Agreement, the Company
and the Subsidiaries have agreed to enter into a Stock Pledge Agreement (the
"Stock Pledge Agreement") with IPC and FRR, under which the Company will pledge
the stock of each of the Subsidiaries to IPC and FRR.

     Notwithstanding the foregoing, the Company, the Subsidiaries, IPC, FRR and
Heller have agreed to enter into a Subordination Agreement in favor of Heller.
Under the Subordination Agreement, IPC and FRR will agree to subordinate their
respective rights under the Stock Pledge Agreement, the FRR Note and the
Indemnification Agreement in favor of Heller and will agree to refrain from
taking any action against the collateral pledged under the Stock Pledge
Agreement until the obligations under the Heller Loan Agreement are paid in
full; provided, however, the Subordination Agreement will permit IPC, FRR and
the Company, so long as no event of default exists under the Heller Loan
Agreement, to pay and to collect such sums that are owed under the FRR Note and
the Indemnification Agreement in accordance with the respective terms thereof.

     In connection with the foregoing, the Company, IPC and Meditrust also
entered into an Option Agreement dated as of December 30, 1999, as amended
February 9, 2000 (the "Option Agreement"), pursuant to which the Company and IPC
have the right, but not the obligation (the "Option"), to designate various
nominees (each, a "Designee") to acquire the real property, improvements,
furniture, fixtures and equipment of an additional twelve Outlook Pointe(R)
assisted living facilities located in Pennsylvania (3), Arkansas (2), Ohio (2),
Virginia (2), and Tennessee (3) (collectively, the "Tranche Two Properties").
Hereinafter, the Company, IPC and their Designees may be referred to as the
"Buyer".

     The Option is jointly exercisable by the Company and IPC upon 30 days'
prior written notice to Meditrust (the "Option Notice") for the period
commencing on January 2, 2000 and continuing up through and including October 1,
2000. The Company and IPC may not exercise the Option with respect to any single
Tranche Two Property, but rather may only exercise the Option with respect to
groups of three or more Tranche Two Properties. Therefore, the acquisition of
the Tranche Two Properties may close in a series of transactions, with the final
closing on any of the Tranche Two Properties to occur no later than October 31,
2000.

                                       15
<PAGE>   16

     The aggregate purchase price for the Tranche Two Properties is $45,530,946
(the "Tranche Two Purchase Price"), which was determined based on arms' length
negotiations. The Tranche Two Purchase Price is allocated among the Tranche Two
Properties as more specifically set forth in the Option Agreement (each, a
"Facility Purchase Price"). The Facility Purchase Price for each Tranche Two
Property for which an Option Notice has been given shall be paid to Meditrust at
closing.

     The terms and conditions of the Memorandum of Understanding, the Option
Agreement, the Right of First Refusal Agreement, the Heller Loan Agreement, the
Meditrust Note, and the FRR Note are more fully described in the Exhibits hereto
and the Company's Current Report on Form 8-K dated December 15, 1999 and filed
with the SEC on January 14, 2000, which are incorporated by reference herein.

  Divestiture of Missouri Assets

     On January 12, 2000, the Company completed the sale of its Missouri assets
to Christian Health Care of Missouri, Inc. and certain of its affiliates
(collectively, "CHM") pursuant to an Asset Purchase Agreement dated October 15,
1999 (as amended, the "Asset Purchase Agreement"). The Company sold its
leasehold interests in eight skilled nursing facilities and nine assisted and
independent living facilities, together with the operations of those facilities.
The Company sold its real property interests and operations in two skilled
nursing facilities.

     The aggregate consideration paid by CHM to the Company for the assets was
(i) $51,000,000 in assumed lease obligations, (ii) $6,675,000 in cash, (iii)
$525,000 pursuant to a First Promissory Note dated January 12, 2000 (the "First
Promissory Note"), and (iv) $2,000,000 pursuant to a Second Promissory Note
dated January 12, 2000 (the "Second Promissory Note"). The aggregate
consideration was determined based on arms' length negotiations. The terms of
the First Promissory Note and the Second Promissory Note are more fully
described in the Company's Current Report on Form 8-K dated January 12, 2000 and
filed with the SEC on January 27, 2000, which Current Report is incorporated by
reference herein.

     In 1996, Meditrust Mortgage Investments, Inc. (together with its
affiliates, "MT") loaned $41,385,000 (the "Hawthorn Loan") to Hawthorn Health
Properties, Inc. and its subsidiaries (collectively, "HHP") pursuant to a Loan
Agreement dated August 30, 1996 (the "Hawthorn Loan Agreement") for HHP to
purchase seven skilled nursing facilities and three assisted/independent living
facilities (which constitute a portion of the facilities whose leasehold
interests were transferred to CHM). HHP simultaneously leased the facilities to
certain wholly-owned subsidiaries of the Company pursuant to those certain
Facility Lease Agreements dated August 30, 1996 (collectively, the "Facility
Lease Agreements").

     MT required the following as conditions to its consent to the transfer of
the leasehold interests in the HHP facilities to CHM:

     - The Company, CHM, HHP and MT enter into an Omnibus Assignment and
       Assumption Agreement, Amendment to Loan Documents, Amendment to Lease
       Documents, Termination of Lease Documents, Consent to Assignment and
       Confirmation of Guaranties dated as of January 12, 2000 (the "Omnibus
       Agreement").

     - The Company and Dixon Management, Inc., a wholly-owned subsidiary of the
       Company ("DM"), remain as guarantors of CHM's lease obligations pursuant
       to the Guaranties previously given by the Company and DM in August 1996
       (the "Existing Guaranties") with respect to the Facility Lease
       Agreements.

     - The Company enter into a Guaranty dated as of January 12, 2000 (the "BCC
       Guaranty") in favor of MT to guaranty the obligations of HHP under the
       Hawthorn Loan.

     - The Company, Balanced Care at Stafford, Inc., a wholly-owned subsidiary
       of the Company ("Stafford"), and MT enter into a Cross-Default Agreement
       dated as of January 12, 2000 (the "Cross-Default Agreement") that
       provides that an "Event of Default" under the Hawthorn Loan Agreement
       will constitute an "Event of Default" under the Facility Lease Agreement
       dated June 30, 1998 (the "Stafford Facility Lease Agreement") between MT
       and Stafford.

                                       16
<PAGE>   17

     - CHM pay a $4,000,000 payment on the Hawthorn Loan on January 12, 2000
       (without any prepayment penalty or premium).

     The Existing Guaranties, the BCC Guaranty and the Cross-Default Agreement
will terminate in accordance with the Termination Agreement dated as of January
12, 2000 (the "Termination Agreement") entered into by and among the Company,
HHP, MT and the other parties referred to therein. Subject to the provisions of
the Termination Agreement:

     - The Existing Guaranties and the BCC Guaranty will terminate on the
       earlier to occur of (a) the complete payment and performance of the
       obligations under the Hawthorn Loan or (b) the Termination Date (as
       defined below).

     - The Cross-Default Agreement will terminate on the earlier to occur of (a)
       the Termination Date or (b) such time, if any, as the Leased Property (as
       defined in the Stafford Facility Lease Agreement) is transferred in
       accordance with the provisions of the Option Agreement dated as of
       December 30, 1999 by and among MT, the Company and the other parties
       thereto.

     As used herein, "Termination Date" means the later to occur of (a) December
31, 2000 and (b) the date upon which the HHP facilities have achieved a combined
Debt Coverage Ratio (as defined in the Termination Agreement) for the prior
fiscal quarter equal to or greater than 1.1 to 1. The Termination Date has not
yet occurred.

     In May and August 1997, the Company entered into Lease and Security
Agreements (collectively, the "Lease and Security Agreements") with Health Care
Realty Trust (together with its affiliates, "HCRT") for four
assisted/independent living facilities (which constitute a portion of the
facilities whose leasehold interests were transferred to CHM). In order to
induce HCRT to consent to the transfer of the leasehold interests of these four
facilities to CHM, the Company was required to remain as guarantor of CHM's
lease obligations pursuant to the Guaranties previously given by the Company in
1997 with respect to the Lease and Security Agreements.

OPERATING AND CENSUS TRENDS

     The Company's core business continues to improve as a result of operating
and marketing changes implemented in the fiscal year ended June 30, 1999.

     The following table sets forth, for the periods indicated, certain resident
capacity and occupancy data for the periods indicated:

<TABLE>
<CAPTION>
                                           DECEMBER 31, 1999                 DECEMBER 31, 1998
                                    -------------------------------   -------------------------------
                                       STABLE       STABLE               STABLE       STABLE
                                    FACILITIES(1)   BEDS(1)   TOTAL   FACILITIES(1)   BEDS(1)   TOTAL
                                    -------------   -------   -----   -------------   -------   -----
<S>                                 <C>             <C>       <C>     <C>             <C>       <C>
End of Period Capacity
Owned.............................       15            902    1,046         6            455      455
Leased............................        9            611      611         8            491      491
Managed...........................        8            472    2,274         5            282    1,379
                                         --          -----    -----        --          -----    -----
Total.............................       32          1,985    3,931        19          1,228    2,325
                                         ==          =====    =====        ==          =====    =====
End of Period Occupancy
Owned.............................                      91%      89%                      83%      83%
Leased............................                      88%      88%                      87%      87%
Managed...........................                      70%      45%                      69%      37%
                                                     -----    -----                    -----    -----
Total.............................                      85%      63%                      81%      56%
                                                     =====    =====                    =====    =====
</TABLE>

---------------
(1) Includes communities or expansions thereof that have (i) achieved 90%
    occupancy; (ii) have been opened at least 15 months for 75 bed or less
    communities; 18 months for 75 to 100 bed communities; and 24 months for 100+
    bed communities; or (iii) were acquired as mature properties.

                                       17
<PAGE>   18

     The above data does not contain divested communities.

     To provide information on facility operating performance, the following
table summarizes the operations of all Balanced Care facilities in operation as
of the dates indicated, including facilities owned, leased and managed for
special purpose entities and excluding recently divested Missouri operations:

<TABLE>
<CAPTION>
                                                  JUNE 30,    SEPTEMBER 30,    DECEMBER 31,
                                                    1999          1999             1999
                                                  --------    -------------    ------------
                                                              ($ IN THOUSANDS)
<S>                                               <C>         <C>              <C>
AT QUARTER END
Facilities in Operation.........................       50             55              62
Resident Capacity...............................    3,297          3,609           4,118
Census..........................................    1,946          2,278           2,655
FOR THE THREE MONTH PERIOD
Revenue.........................................  $11,432        $13,209         $15,587
EBITDAR.........................................  $   206        $ 1,624         $ 2,335
</TABLE>

     Operating highlights of the quarter ended December 31, 1999 include: (i) a
net quarterly census increase of 377, a 17% improvement; (ii) revenue increase
of 18% in owned, leased, and managed facilities; (iii) an EBITDAR increase of
44% in owned, leased, and managed facilities; and (iv) average pre-lease
deposits of 28% of total capacity on recently opened communities. Following the
quarter-end, the Company also reported census gains of 131 residents in January.

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, certain data as
a percentage of total revenue:

<TABLE>
<CAPTION>
                                                             SIX MONTHS ENDED
                                                               DECEMBER 31,
                                                             ----------------
                                                             1999       1998
                                                             -----      -----
<S>                                                          <C>        <C>
Statement of Operations Data:
Patient services...........................................   60.1%      57.9%
Resident services..........................................   37.7       27.1
Development fees...........................................    1.4       13.3
Management fees............................................    0.5        1.4
Other......................................................    0.3        0.3
                                                             -----      -----
Total revenue..............................................  100.0      100.0
Operating expenses:
  Facility operating expenses..............................   77.3       66.2
  Development, general and administrative expense..........   14.0       16.4
  Charge for termination of development projects...........     --        5.6
  Charges under shortfall funding agreements...............    4.2        5.5
  Lease expense............................................   18.7       11.3
  Depreciation and amortization expense....................    4.1        2.5
                                                             -----      -----
Loss from operations.......................................  (18.3)      (7.5)
Other income (expense).....................................   (1.9)       0.2
                                                             -----      -----
Loss before income taxes and extraordinary item............  (20.2)      (7.3)
Provision for income taxes.................................     --        0.3
                                                             -----      -----
Loss before extraordinary item.............................  (20.2)      (7.6)
Extraordinary loss on extinguishment of debt...............   (2.0)        --
                                                             -----      -----
Net loss...................................................  (22.2)      (7.6)
                                                             =====      =====
</TABLE>

                                       18
<PAGE>   19

THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1998

     Total Revenue.  Total revenue for the three months ended December 31, 1999
decreased by $217,000 to $18,465,000 compared to $18,682,000 for the three
months ended December 31, 1998. This decrease is the result of a $1,112,000
decrease in patient service revenues, due to the change in the billing rates for
Medicare Part B charges required by the Balance Budget Act and a lower census
and decreased outpatient therapy revenues. There also was a $269,000 decrease in
development fees due to the Company's decision to reduce its development
activities and a $232,000 decrease in management fees. This decrease was
partially offset by additional resident service revenues of $1,428,000,
primarily from special purpose entities acquired subsequent to the three months
ended December 31, 1998. Patient services comprised 60% and 66% of total
revenues for the three months ended December 31, 1999 and 1998 respectively.

     Operating Expenses.  Facility operating expenses for the three months ended
December 31, 1999 increased by $390,000 to $14,300,000 from $13,910,000 for the
three months ended December 31, 1998. The increase resulted from increased
operating expenses of $953,000 at assisted living facilities primarily related
to the acquisition of special purpose entities. The increase was partially
offset by: (i) decreased costs of $340,000 for the skilled nursing facilities,
due primarily to cost reduction efforts in the area of therapy delivery and (ii)
a reduced facility expense from discontinuing the therapy rehab agencies of
$233,000. As a percentage of total revenue, facility operating expenses were 77%
for the three months ended December 31, 1999 and 74% for the three months ended
December 31, 1998.

     Development, general and administrative expenses decreased by $742,000 to
$2,576,000 for the three months ended December 31, 1999 from $3,318,000 for the
three months ended December 31, 1998. The decrease in 1999 is primarily due to
the implementation of the Company's corporate restructuring plan. As a
percentage of total revenue, these expenses decreased to 14% for the three
months ended December 31, 1999 from 18% for the three months ended December 31,
1998.

     Lease expense increased to $3,463,000 for the three months ended December
31, 1999 from $2,407,000 for the three months ended December 31, 1998, an
increase of $1,056,000. This increase is attributed to the acquired special
purpose entities, additional contingent rents for assisted living facilities and
skilled nursing facilities and the sale/leaseback of two facilities. As a
percentage of total revenue, these expenses totaled 19% for the three months
ended December 31, 1999 and 13% for the three months ended December 31, 1998.

     Depreciation and amortization increased by $237,000 to $774,000 for the
three months ended December 31, 1999 from $537,000 for the three months ended
December 31, 1998. This increase resulted primarily from the additional
depreciation and amortization related to the acquired, leased or managed
facilities.

     Provision for Income Taxes (Benefit).  Income tax expense of $3,000 for
three months ended December 31, 1999 resulted from taxable income reported in
states that do not permit consolidated filings. Income tax benefit of $1,225,000
for the three months ended December 31, 1998 is the result of the Company's
revised fiscal 1999 tax position due to the development changes that occurred
during the three months ending December 31, 1998.

     Net Loss.  The Company's net loss decreased by $1,454,000 to a loss of
$3,709,000 for the three months ended December 31, 1999 from a net loss of
$5,163,000 for the three months ended December 31, 1998. This decrease in the
net loss resulted primarily from: (i) a decrease in the provision for losses on
termination of development projects of $2,400,000 and (ii) a decrease in the
provision for shortfall funding arrangements of $1,610,000. The decreases were
partially offset by increases from (i) lower income tax benefits of $1,222,000;
(ii) reduced contribution of $533,000 from the skilled nursing facilities
primarily due to the change in billing rates for Medicare Part B charges; (iii)
interest expense of $310,000 related to additional borrowings on the Line of
Credit and (iv) reduced contributions from development fees of $269,000.

SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1998

     Total Revenue.  Total revenue for the six months ended December 31, 1999
decreased by $5,612,000 to $36,941,000 compared to $42,553,000 for the six
months ended December 31, 1998. This decrease was the result of (i) a $5,136,000
decrease in development fees due to a reduction in development activities, and
(ii) a

                                       19
<PAGE>   20

$2,432,000 decrease in patient service revenues, due to the change in the
billing rates for Medicare Part B charges adopted by the Balance Budget Act,
lower census and decreased outpatient therapy revenues. This decrease was
partially offset by additional resident service revenues of $2,410,000,
primarily from special purpose entities acquired subsequent to the six months
ended December 31, 1998. Patient services comprised 60% and 58% of total
revenues for the six months ended December 31, 1999 and 1998 respectively.

     Operating Expenses.  Facility operating expenses for the six months ended
December 31, 1999 increased by $380,000 to $28,550,000 from $28,170,000 for the
six months ended December 31, 1998. The increase resulted from increased
operating expenses at assisted living facilities of $1,755,000 primarily related
to the acquisition of special purpose entities. The increase was partially
offset by: (i) decreased costs of $1,071,000 for the skilled nursing facilities,
due primarily to cost reduction efforts in the area of therapy delivery and (ii)
a reduced facility expense from discontinuing the therapy rehab agencies of
$314,000. As a percentage of total revenue, facility operating expenses were 77%
for the six months ended December 31, 1999 and 66% for the six months ended
December 31, 1998.

     Development, general and administrative expenses decreased by $1,791,000 to
$5,169,000 for the six months ended December 31, 1999 from $6,960,000 for the
six months ended December 31, 1998. The decrease in 1999 is primarily due to the
implementation of the Company's corporate restructuring plan. As a percentage of
total revenue, these expenses decreased to 14% for the six months ended December
31, 1999 from 16% for the six months ended December 31, 1998.

     Lease expense increased to $6,902,000 for the six months ended December 31,
1999 from $4,796,000 for the six months ended December 31, 1998, an increase of
$2,106,000. This increase is attributed to the acquired special purpose
entities, additional contingent rents for assisted living facilities and skilled
nursing facilities and the sale/leaseback of two facilities. As a percentage of
total revenue, these expenses totaled 19% for the six months ended December 31,
1999 and 11% for the six months ended December 31, 1998.

     Depreciation and amortization increased by $471,000 to $1,514,000 for the
six months ended December 31, 1999 from $1,043,000 for the six months ended
December 31, 1998. This increase resulted primarily from the additional
depreciation and amortization related to the acquired, leased or managed
facilities.

     Provision for Income Taxes (Benefit).  Income tax expense decreased by
$103,000 to $5,000 for six months ended December 31, 1999 from $108,000 for the
six months ended December 31, 1998. The income taxes result from taxable income
reported on individual state corporate tax returns in states that do not permit
consolidated filings.

     Net Loss.  The Company's net loss increased by $4,915,000 to a loss of
$8,138,000 for the six months ended December 31, 1999 from a net loss of
$3,223,000 for the six months ended December 31, 1998. The increase was the
result of: (i) a decrease in pretax contribution of $3,576,000 related to
reduced development activities; (ii) decreased contribution of $1,040,000 from
the skilled nursing facilities primarily due to the change in billing rates for
Medicare Part B charges; (iii) a charge for the early extinguishment of debt of
$739,000; (iv) increased interest expense of $604,000 related primarily to
interest on the Line of Credit and (v) reduced management fees of $431,000. The
increases were partially offset by a decrease in (i) the provision for losses on
termination of development projects of $2,400,000 and (ii) a decrease in the
shortfall funding arrangements of $810,000.

LIQUIDITY AND CAPITAL RESOURCES

  Equity Transaction

     During the quarter ended December 31, 1999, the Company received
approximately $19.5 million in cash (net of costs) from the Transaction with
IPC. The Company used $7.5 million (including $2.2 million of closing costs) to
acquire 12 assisted living facilities from Meditrust (see "Meditrust
Transaction" discussed below). The remaining $12 million will be used primarily
to support the Company's young portfolio of assisted living facilities,
including acquiring the leasehold interests of profitable, stabilized assisted
living facilities that the Company currently manages for Black Box operators.
The Company may also use the cash to pursue

                                       20
<PAGE>   21

additional real estate acquisitions from REITs or selective development and
acquisition opportunities that would enhance the Company's existing portfolio
from a geographic, marketing and operating standpoint.

  Working Capital Line of Credit

     In April 1999, the Company entered into a $15 million revolving Line of
Credit with HCFP Funding, Inc ("HCFP"). The Line of Credit is for a term of
three years, and outstanding borrowings bear interest at a rate per annum of
prime plus 2.75%. In July 1999, the Line of Credit was increased to $20 million.
Prior to July 1999, the Line of Credit was secured by the real estate owned by
five of the Company's subsidiaries (BCC at Darlington, Inc., Balanced Care at
Eyers Grove, Inc., Balanced Care at Butler, Inc., Balanced Care at Sarver, Inc.,
and Balanced Care at North Ridge, Inc.), and the eligible accounts receivable of
the Company's 10 Missouri skilled nursing facilities (the "Accounts Receivable
Borrowers"). In July 1999, the real estate of BCC at Republic Park Care Center,
Inc. and BCC at Nevada Park Care Center, Inc. (the "Skilled Nursing Facility
Borrowers") was added as security to collateralize the Line of Credit. In order
to mortgage the Skilled Nursing Facility Borrowers' real estate in favor of
HCFP, the Company repaid its $3.1 million loan to Meditrust to satisfy the
existing mortgage on this real estate. As a result of this transaction, the
Company reported a loss on the early extinguishment of debt of $739,000 in the
first quarter of Fiscal 2000.

     On January 12, 2000, the Company completed the sale of its Missouri assets
(see "Missouri Divestiture" discussed below), which included the real estate,
leasehold interests and operations of the Skilled Nursing Facility Borrowers and
the Accounts Receivable Borrowers (the "Missouri Borrowers"). In order for HCFP
to release the Missouri Borrowers and their respective liens and security
interests under the Line of Credit, the Company agreed to (i) repay $5.4 million
on the Line of Credit attributable to the Missouri Borrowers, (ii) pay a
prepayment fee of approximately $75,000, (iii) reset the availability under the
Line of Credit to $12.0 million as of December 31, 1999 and (iv) cross-default
its obligations under the Line of Credit with future obligations to HCFP,
including the Company's obligations under the Heller Loan (discussed under the
"Meditrust Transaction" section below).

     The primary component of the borrowing base for the Line of Credit consists
of 85% of the product of 8.0 to 8.5 times EBITDA of the Real Estate Borrowers
(as defined in the Line of Credit Agreement). At January 31, 2000, after the
repayment of $5.4 million attributable to the Missouri Borrowers, the borrowing
base available under the Line of Credit was approximately $12.0 million and
approximately $5.4 million was borrowed thereunder.

  Meditrust Transaction

     On December 30, 1999 the Company completed the acquisition of the 12
Tranche One Properties from Meditrust. The Tranche One Properties had a cost
basis of approximately $52 million and were acquired for (i) approximately $44.3
million in cash (plus $2.2 million in closing costs) and (ii) approximately $7.8
million under the Meditrust Note, including transaction costs. The $46.5 million
(including closing costs) was funded by (i) the Heller Loan ($32 million), (ii)
the FRR Note ($7 million) and (iii) cash ($7.5 million) from the Company.

     The Meditrust Note has a maturity date of April 3, 2001. No interest will
accrue on the Meditrust Note unless the note is not prepaid in full on or before
October 31, 2000, at which time interest will accrue as follows: (i) 12% from
November 1, 2000 through December 31, 2000 and (ii) 14% from January 1, 2001
through April 3, 2001. Payments under the Meditrust Note are discussed below.

     The Heller Loan has a maturity date of December 31, 2001. Interest on the
Heller Loan accrues at a floating rate per annum equal to the Base Rate (as
defined in the Heller Loan Agreement) plus 3.75%. Commencing on February 1,
2000, the Company will pay interest monthly in arrears. In addition, commencing
on November 20, 2000, the Company will pay 100% of the Excess Cash Flow (as
defined in the Heller Loan Agreement), which will be applied to the principal
balance. Although the Heller Loan has a two-year term, the exit fee due upon
payoff increases from 1% to 3% after September 30, 2000. The Company's
obligations under the Heller Loan are cross-defaulted with its obligations under
the Line of Credit.

                                       21
<PAGE>   22

     The FRR Note has a maturity date of June 26, 2000. The FRR Note is a
discount note with an issue price of $7,000,000, a maturity value of $7,424,580,
and a yield of 12.6829% per annum. Except as otherwise provided in the FRR Note,
no interest accrues on the outstanding balance of the note.

     It is the Company's intention to refinance the Heller Loan and the FRR Note
(collectively, the "Tranche One Debt") by June 30, 2000. Based on the
operational performance of the Tranche One Properties, management believes the
Tranche One Debt can be refinanced for approximately $45 - $50 million, at a
lower interest rate and over a longer amortization period. Proceeds from the
refinancing will be used to repay the Tranche One Debt, with any remaining funds
being used by the Company for the purposes discussed under the "Equity
Transaction" section above.

     As part of the Meditrust transaction, the Company obtained an Option to
purchase the real estate of an additional 12 Tranche Two Properties owned by
Meditrust and managed by the Company. The Option may not be exercised with
respect to any single Tranche Two Property, but rather only with respect to
groups of three or more Tranche Two Properties. Therefore, the acquisition of
the Tranche Two Properties may close in a series of transactions, with the final
closing to occur no later than October 31, 2000. If, after exercising the
Option, the Company fails to close, Meditrust may (i) accelerate the amount due
under the Meditrust Note, (ii) receive reimbursement of all reasonable
out-of-pocket expenses (including attorneys' fees and expenses) and (iii)
terminate the Option Agreement.

     The Tranche Two Properties have a cost basis of approximately $66 million
and an aggregate purchase price of approximately $46 million. Each time the
Option is exercised for a Tranche Two Property, a preset prepayment is required
under the Meditrust Note. If the Company exercises its Option and closes on all
12 of the Tranche Two Properties, the Meditrust Note will be fully repaid by the
prepayments. The Company expects to exercise the Option on the Tranche Two
Properties with financing to be provided from yet-to-be determined lenders, IPC
or an affiliate, and Company funds.

     The Tranche Two Properties are generally newer assisted living facilities
then the Tranche One Properties, which are essentially stabilized as of December
31, 1999. Two of the Tranche Two Properties have just opened in January 2000.
Management expects the Tranche Two Properties to experience significant lease up
and operational improvements over the next six to nine months. Management
believes these operational improvements will allow for reasonable financing to
be obtained for the Tranche Two Properties in the June to September 2000
timeframe.

  Missouri Sale

     In January 2000 the Company sold certain of its Missouri assets to
Christian Health Care of Missouri Inc. and its affiliates for $6.7 million in
cash, $2.5 million in notes, and $51 million in assumed lease obligations. The
$6.7 million was used primarily to pay down debt and to pay closing and
severance costs associated with the Missouri facilities. Management expects the
cash received on the collection of receivables to offset the operating costs to
wind down the business operations over the next several months. As the notes
receivable are collected, the proceeds are expected to be used for general
corporate purposes.

                                       22
<PAGE>   23

     To facilitate the understanding of the effect of the Missouri sale on the
continuing operations of the Company, the following table summarizes the results
of the Missouri operations over the past two quarters:

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                             ---------------------------
                                                             DECEMBER 31    SEPTEMBER 30
                                                                1999            1999
                                                             -----------    ------------
                                                                   (IN THOUSANDS)
<S>                                                          <C>            <C>
Revenues:
  Patient services.........................................    $ 8,959        $ 8,806
  Resident services........................................        913            919
  Other revenues...........................................         21             18
                                                               -------        -------
Total revenues.............................................      9,893          9,743
                                                               -------        -------
Operating expenses:
  Facility operating expenses..............................      8,262          8,177
  Development, general and administrative expense..........        537            425
  Lease expense............................................      1,516          1,483
  Depreciation and amortization expense....................         70            102
                                                               -------        -------
Total operating expenses...................................     10,385         10,187
                                                               -------        -------
Loss from operations.......................................       (492)          (444)
                                                               =======        =======
</TABLE>

  Operations

     The Company has opened 46 of its Outlook Pointe(R) signature series
assisted living facilities as of December 31, 1999. Two facilities opened in
January 2000, and the Company has adequate financing to complete construction on
the remaining four facilities currently under construction, which are expected
to open on various dates through April 2000. This will conclude the Company's
initial round of development activity initiated 2 1/2 years ago.

     The Company's development projects have generally involved entering into
development agreements with third party owners, which are typically REITs (each,
an "Owner"). A third party Operator/Lessee leases the assisted living facility
from the Owner when construction has been completed and provides funding for the
working capital during the initial occupancy period. The Company manages the
assisted living facility pursuant to a management agreement for a term of two to
nine years in return for a management fee approximating 6% of the net revenue of
the facility. The foregoing off-balance sheet financing structure is referred to
as the "Black Box Structure".

     For development projects utilizing the Black Box Structure, the Company has
the option to purchase the equity or assets of the Operator/Lessee at a purchase
price based on a formula set forth in an Option Agreement and a Shortfall
Funding Agreement, respectively. As consideration for the option, which is
exercisable by the Company at any time during the term of the Option Agreement,
the Company pays option payments to the Operator/Lessee. Without the Owner's
prior consent, the Operator/Lessee may not sell its equity or assets to any
third party other than the Company. The Company has closed 51 development
projects for which the Company holds the foregoing type of option. To date, the
Company has exercised its option to purchase the Operator/Lessee's equity
interests in 12 projects financed under the Black Box Structure for a total
purchase price of approximately $5.4 million. In conjunction with the purchase
transactions, the Company increased the lease base of 11 of the 12 facilities by
$6.5 million. These 11 facilities were part of the property acquisition
discussed under "Recent Developments" of this Current Report. The Company
estimates it will require approximately $35 - $40 million to buy the equity of
the 40 Outlook Pointe(R) facilities that remain under the Black Box Structure
through fiscal 2002. The Company has obtained commitments from certain REITs
that currently own developed properties under the Black Box Structure to finance
the Company's capital requirements to exercise its purchase options under the
aforementioned option agreements. Generally, this take-out financing will be
structured as an increase to the existing facility lease base at a blended
annual lease rate. This financing structure will provide approximately $20
million of the estimated

                                       23
<PAGE>   24

$35-$40 million capital requirement. The balance will be funded with the cash
from the IPC transaction, with cash raised from other financing transactions
discussed above, new financing transactions, possible asset divestitures and
cash to be provided from operations. The Company exercised its option to
purchase seven of its managed facilities this quarter and expects to exercise
its option on an additional nine projects by the end of this fiscal year
assuming a refinancing of the Tranche One Debt as discussed above. The capital
required to exercise the option for these additional nine projects is expected
to range from approximately $3.0-$3.5 million. The Company will be making option
payments in future quarters to maintain its purchase options for certain Outlook
Pointe(R) facilities.

     As previously discussed, the Company has incurred a cumulative charge of
$6.2 million representing advances made for the operations of facilities
financed under the Black Box Structure under existing Shortfall Funding
Agreements. The Company estimates additional shortfall funding requirements of
approximately $2.0 to $2.5 million to stabilize its existing portfolio of
properties.

     The Company currently is using approximately $1 million each month to
support corporate overhead and fund facility operating shortfalls. This amount
is generally decreasing each month as facilities become more profitable as a
result of increased census and cost reduction measures. The Company's other
significant cash need is the $15-$20 million required to make option payments
and buy back Black Box operations through fiscal 2002. Management estimates that
the Company's current cash, the funds available under current credit
arrangements, and the cash expected to be generated by the Tranche One Debt
refinancing discussed above, will be adequate to meet the Company's cash
requirements.

     Many of the facilities operated or managed by the Company are leased under
long-term operating leases. Excluding the Missouri operations, lease obligations
for the next 12 months are approximately $5,800,000. The lease documents contain
financial covenants and other restrictions which: (i) require the Company to
meet certain financial tests and maintain certain escrow funds, (ii) limit,
among other things, the ability of the Company and certain of its subsidiaries
to borrow additional funds, dispose of assets or engage in mergers or other
business combinations, (iii) cross-default certain of the Company's obligations
and (iv) prohibit the Company from operating competing facilities within a
designated radius of existing facilities. Management believes the Company is in
compliance with these lease covenants.

     The Company's lease arrangements are generally for initial terms of 9 to 15
years with aggregate renewal terms ranging from 15 to 25 years and provide for
contractually fixed rent plus additional rent, subject to certain limits. The
additional rent is capped at 2% to 3% of the prior year's total rent and is
based on either the annual increase in gross revenues of the facility or the
increase in the consumer price index. The Company's lease arrangements generally
contain an option to purchase the facility at its fair market value at the end
of the initial lease term and each renewal term.

  Other

     In September 1998, the Company entered into management agreements, option
agreements and other transaction documents with six Operator/Lessees that are
owned by FCI. FCI and its six wholly owned Operator/Lessees also entered into
lease agreements with a REIT. The terms of the agreements among the parties are
similar to the terms of the agreements the Company has entered into with
independent third party Operator/Lessees. FCI was previously owned by Brad E.
Hollinger, Chairman of the Board, President and Chief Executive Officer of the
Company. Effective as of September 30, 1999, FCI redeemed Mr. Hollinger's equity
interests in FCI and its six Operator/Lessees.

  Operating Activities

     Cash used by operations increased by $2,541,000 to $9,530,000 for the six
months ended December 31, 1999 from cash used by operations of $6,989,000 for
the six months ended December 31, 1998. The increase in cash used was due to
increased operating losses, an increase in receivables, and partially offset by
a decrease in development contracts in process.

                                       24
<PAGE>   25

  Investing and Financing Activities

     Cash used for investing activities increased by $57,031,000 to $59,876,000
for the six months ended December 31, 1999 from $2,845,000 for the six months
ended December 31, 1998. Cash provided by financing activities increased by
$65,804,000 to $66,078,000 for the six months ended December 31, 1999 from
$274,000 for the six months ended December 31, 1998. Cash used for financing
activities and provided by investing activities was the result of the property
acquisitions, the equity transaction, and the seven Black Box acquisitions
discussed above, and repayment on the Line of Credit.

YEAR 2000 READINESS DISCLOSURE

     In response to concerns that computer software and/or hardware that was
designed to define the year with a two digit date field rather than a four digit
field might fail or miscalculate data in the year 2000, causing disruption to
the operations or business activities of the Company, the Company had previously
formed a committee to research and assess the potential risk to the Company's
internal operations systems and to test its hardware and software systems for
compliance. The costs incurred by the Company relating to this project were
immaterial. To date, no significant disruptions to the operations of the Company
or computer hardware and software systems have been experienced.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company did not have any investment securities subject to market risk
as of, or during the six months ended, December 31, 1999.

                                       25
<PAGE>   26

                          PART II -- OTHER INFORMATION

ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) Not Applicable

(b) Not Applicable

(c) Securities Sold; Purchaser; Consideration; Terms of Conversion

     During the fiscal quarter ended December 31, 1999, the Company issued to
IPC an aggregate of 16,700,000 shares of Common Stock at a price of $1.25 per
share, or a total of $20,875,000, pursuant to the Subscription Agreement between
the Company and IPC. The shares were issued in two tranches:

     - On October 11, 1999, the Company issued to IPC 3,300,000 shares of Series
       C Preferred Stock at a price of $1.25 per share, or a total of
       $4,125,000. The powers, designations, preferences and rights of the
       Series C Preferred Stock are contained in the Certificate of Designations
       filed by the Company with the Delaware Secretary of State on October 8,
       1999. In accordance with the Certificate of Designations, the Series C
       Preferred Stock automatically converted into Common Stock at the
       conversion rate of one share of Series C Preferred Stock for one share of
       Common Stock on December 21, 1999.

     - On December 21, 1999, the Company issued to IPC 13,400,000 shares of
       Common Stock at a price of $1.25 per share, or a total of $16,750,000.

     Descriptions of the transaction documents (i.e., the Subscription
Agreement, the Certificate of Designations, the Voting Agreement and the
Registration Rights Agreement) are contained in the following reports and
statements filed by the Company with the SEC, which are incorporated herein by
reference: (i) Current Report on Form 8-K dated October 8, 1999 and filed
October 21, 1999; (ii) Definitive Proxy Statement dated November 15, 1999; and
(iii) Current Report on Form 8-K dated December 15, 1999 and filed January 14,
2000.

     The 16,700,000 shares of Common Stock issued by the Company to IPC were
intended to be exempt from registration under the Securities Act in accordance
with Section 4(2) of the Securities Act. IPC is entitled to certain demand and
piggyback registrations rights with respect to the 16,700,000 shares of Common
Stock pursuant to the Registration Rights Agreement between the Company and IPC.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
    10.1  Amendment No. 3 to Loan and Security Agreement among
          Balanced Care Corporation and certain of its wholly-owned
          subsidiaries and Heller Healthcare Finance, Inc. formerly
          known as HCFP Funding, Inc. dated as of December 31, 1999
          (filed herewith)
    10.2  Senior Housing Rider among Heller Healthcare Finance, Inc.,
          Balanced Care Realty at State College, Inc., Balanced Care
          Realty at Altoona, Inc., Balanced Care Realty at Lewistown,
          Inc., Balanced Care Realty at Reading, Inc., Balanced Care
          Realty at Berwick, Inc., Balanced Care Realty at Peckville,
          Inc., Balanced Care Realty at Scranton, Inc., Balanced Care
          Realty at Martinsburg, Inc., Balanced Care Realty at
          Maumelle, Inc., Balanced Care Realty at Sherwood, Inc.,
          Balanced Care Realty at Mountain Home, Inc., and Balanced
          Care Realty at Mansfield, Inc. dated as of December 30,1999
          (filed herewith)
    10.3  Promissory Note A made by Balanced Care Realty at State
          College, Inc., Balanced Care Realty at Altoona, Inc.,
          Balanced Care Realty at Lewistown, Inc., Balanced Care
          Realty at Reading, Inc., Balanced Care Realty at Berwick,
          Inc., Balanced Care Realty at Peckville, Inc., Balanced Care
          Realty at Scranton, Inc., Balanced Care Realty at
          Martinsburg, Inc., Balanced Care Realty at Maumelle, Inc.,
          Balanced Care Realty at Sherwood, Inc., Balanced Care Realty
          at Mountain Home, Inc., and Balanced Care Realty at
          Mansfield, Inc. in favor of Heller Healthcare Financing,
          Inc. dated December 30, 1999(filed herewith)
</TABLE>

                                       26
<PAGE>   27

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
    10.4  Subordinated Promissory Note B by Balanced Care Realty at
          State College, Inc., Balanced Care Realty at Altoona, Inc.,
          Balanced Care Realty at Lewistown, Inc., Balanced Care
          Realty at Reading, Inc., Balanced Care Realty at Berwick,
          Inc., Balanced Care Realty at Peckville, Inc., Balanced Care
          Realty at Scranton, Inc., Balanced Care Realty at
          Martinsburg, Inc., Balanced Care Realty at Maumelle, Inc.,
          Balanced Care Realty at Sherwood, Inc., Balanced Care Realty
          at Mountain Home, Inc., and Balanced Care Realty at
          Mansfield, Inc. in favor of Heller Healthcare Financing,
          Inc. dated December 30, 1999 (filed herewith)
    10.5  Hazardous Materials Indemnity among Heller Healthcare
          Finance, Inc., Balanced Care Corporation, Balanced Care
          Realty at State College, Inc., Balanced Care Realty at
          Altoona, Inc., Balanced Care Realty at Lewistown, Inc.,
          Balanced Care Realty at Reading, Inc., Balanced Care Realty
          at Berwick, Inc., Balanced Care Realty at Peckville, Inc.,
          Balanced Care Realty at Scranton, Inc., Balanced Care Realty
          at Martinsburg, Inc., Balanced Care Realty at Maumelle,
          Inc., Balanced Care Realty at Sherwood, Inc., Balanced Care
          Realty at Mountain Home, Inc., and Balanced Care Realty at
          Mansfield, Inc. dated as of December 30, 1999 (filed
          herewith)
    10.6  Guaranty by Balanced Care Corporation in favor of Heller
          Healthcare Finance, Inc. dated as of December 30, 1999(filed
          herewith)
    10.7  Form of Open-End Mortgage, Assignment of Rents, Leases and
          Security Agreement in favor of Heller Healthcare Finance,
          Inc. dated as of December 30, 1999 (filed herewith)
    10.8  Schedule to Form of Open-End Mortgage, Assignment of Rents,
          Leases and Security Agreement in favor of Heller Healthcare
          Finance, Inc. (filed herewith)
    10.9  Form of Mortgage, Assignment of Rents and Security Agreement
          in favor of Heller Healthcare Finance, Inc. dated as of
          December 30, 1999 (filed herewith)
    10.10 Schedule to Form of Mortgage, Assignment of Rents and
          Security Agreement in favor of Heller Healthcare Finance,
          Inc. (filed herewith)
    10.11 A Credit Line Deed of Trust, Assignment of Rents and
          Security Agreement in favor of Heller Healthcare Finance,
          Inc. dated as of December 30, 1999 (filed herewith)
    10.12 Open-End Mortgage, Assignment of Rents and Security
          Agreement in favor of Heller Healthcare Finance, Inc. dated
          as of December 30, 1999 (filed herewith)
    10.13 Subscription Agreement dated October 8, 1999, as amended and
          restated October 11, 1999, between the Company and IPC
          (incorporated by reference to Exhibit 4.1 to the Company's
          Current Report on Form 8-K dated October 8, 1999)
    10.14 Memorandum of Understanding by and among New Meditrust
          Company LLC, IPC Advisors S.a.r.l., Balanced Care
          Corporation, and Balanced Care Realty at Altoona, Inc.,
          Balanced Care Realty at Berwick, Inc., Balanced Care Realty
          at Lewistown, Inc., Balanced Care Realty at Martinsburg,
          Inc., Balanced Care Realty at Maumelle, Inc., Balanced Care
          Realty at Mountain Home, Inc., Balanced Care Realty at
          Peckville, Inc., Balanced Care Realty at Reading, Inc.,
          Balanced Care Realty at Scranton, Inc., Balanced Care Realty
          at Sherwood, Inc., and Balanced Care Realty at State
          College, Inc. dated as of December 30, 1999 (incorporated by
          reference to Exhibit 10.1 to the Company's Current Report on
          Form 8-K dated December 15, 1999)
    10.15 Option Agreement by and among New Meditrust Company LLC, IPC
          Advisors S.a.r.l., and Balanced Care Corporation dated as of
          December 30, 1999 (incorporated by reference to Exhibit 10.2
          to the Company's Current Report on Form 8-K dated December
          15, 1999)
    10.16 Promissory Note made by Balance Care Corporation and IPC
          Advisors S.a.r.l. in favor of New Meditrust Company LLC
          dated December 30, 1999 (incorporated by reference to
          Exhibit 10.3 to the Company's Current Report on Form 8-K
          dated December 15, 1999)
    10.17 Loan Agreement by and among Heller Healthcare Finance, Inc.,
          Balanced Care Realty at Berwick, Inc., Balanced Care at
          Lewistown, Inc., Balanced Care Realty at Mansfield, Inc.,
          Balanced Care Realty at Martinsburg, Inc., Balanced Care
          Realty at Maumelle, Inc., Balanced Care Realty at Mountain
          Home, Inc., Balanced Care Realty at Peckville, Inc.,
          Balanced Care Realty at Reading, Inc., Balanced Care Realty
          at Scranton, Inc., Balanced Care Realty at Sherwood, Inc.,
          and Balanced Care Realty at State College, Inc. dated as of
          December 30, 1999 (incorporated by reference to Exhibit 10.4
          to the Company's Current Report on Form 8-K dated December
          15, 1999)
    10.18 Series One 1999 BCC Discount Note made by Balanced Care
          Corporation in favor of FRR Investments Limited dated
          December 29, 1999 (incorporated by reference to Exhibit 10.5
          to the Company's Current Report on Form 8-K dated December
          15, 1999)
</TABLE>

                                       27
<PAGE>   28

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
    10.19 Indemnification Defense, Hold Harmless and Reimbursement
          Agreement by and between Balanced Care Corporation and IPC
          Advisors S.a.r.l. dated as of December 29, 1999
          (incorporated by reference to Exhibit 10.6 to the Company's
          Current Report on Form 8-K dated December 15, 1999)
    10.20 Right of First Refusal Agreement by and among Meditrust
          Mortgage Investments, Inc., Meditrust Corporation, and IPC
          Advisors S.A.R.L. dated as December 30, 1999 (incorporated
          by reference to Exhibit 10.7 to the Company's Current Report
          on Form 8-K dated December 15, 1999)
    10.21 Asset Purchase Agreement dated October 15, 1999 by and
          between Balanced Care Corporation and certain subsidiaries
          and Christian Health Care of Missouri, Inc. (incorporated by
          reference to Exhibit 10.1 to the Company's Current Report on
          Form 8-K dated January 12, 2000)
    10.22 First Amendment to Asset Purchase Agreement dated October
          21, 1999 by and between Balanced Care Corporation and
          certain subsidiaries and Christian Health Care of Missouri,
          Inc. (incorporated by reference to Exhibit 10.2 to the
          Company's Current Report on Form 8-K dated January 12, 2000)
    10.23 Second Amendment to Asset Purchase Agreement dated November
          30, 1999 by and between Balanced Care Corporation and
          certain subsidiaries and Christian Health Care of Missouri,
          Inc. (incorporated by reference to Exhibit 10.3 to the
          Company's Current Report on Form 8-K dated January 12, 2000)
    10.24 Third Amendment to Asset Purchase Agreement dated December
          31, 1999 by and between Balanced Care Corporation and
          certain subsidiaries and Christian Health Care of Missouri,
          Inc. (incorporated by reference to Exhibit 10.4 to the
          Company's Current Report on Form 8-K dated January 12, 2000)
    10.25 Fourth Amendment to Asset Purchase Agreement dated January
          7, 2000 by and between Balanced Care Corporation and certain
          subsidiaries and Christian Health Care of Missouri, Inc.
          (incorporated by reference to Exhibit 10.5 to the Company's
          Current Report on Form 8-K dated January 12, 2000)
    10.26 Promissory Note (First) dated January 12, 2000 made by
          Christian Health Care of Missouri, Inc., Christian Health
          Care Terraces, Inc., Regional Care of Nevada, LLC, Regional
          Care of Republic, LLC and Cornerstone Health Care, Inc. in
          favor of Balanced Care Corporation (incorporated by
          reference to Exhibit 10.6 to the Company's Current Report on
          Form 8-K dated January 12, 2000)
    10.27 Promissory Note (Second) dated January 12, 2000 made by
          Christian Health Care of Missouri, Inc., Christian Health
          Care Terraces, Inc., Regional Care of Nevada, LLC, Regional
          Care of Republic, LLC and Cornerstone Health Care, Inc. in
          favor of Balanced Care Corporation (incorporated by
          reference to Exhibit 10.7 to the Company's Current Report on
          Form 8-K dated January 12, 2000)
    10.28 Omnibus Assignment and Assumption Agreement, Amendment of
          Loan Documents, Amendment of Lease Documents, Termination of
          Lease Documents, Consent to Assignment and Confirmation of
          Guaranties dated as of January 12, 2000 by and among
          Hawthorn Health Properties, Inc., National Care Centers of
          Hermitage, Inc., National Care Centers, Inc., National Care
          Centers of Lebanon, Inc., Springfield Retirement Village,
          Inc., National Care Centers of Nixa, Inc. National Care
          Centers of Springfield, Inc., Mt. Vernon Park Care Center
          West, Inc., BCC at Lebanon Care Center, Inc., BCC at Lebanon
          Park Manor, Inc., BCC at Nixa Park Center, Inc., BCC at
          Springfield Care Center, Inc., BCC at Mt. Vernon Park Care
          Center, Inc., BCC at Mt. Vernon Park Care Center West, Inc.,
          Hermitage Park Care Center, Inc., Balanced Care Corporation,
          Dixon Management, Inc., Meditrust Mortgage Investments,
          Inc., Christian Health Care of Missouri, Inc., Cornerstone
          Properties Investment II, LLC, Cornerstone Health Care,
          Inc., Christian Health Care Personnel Services, Inc.,
          Christian Health Care, Inc., Christian Health Care of
          Hermitage, Inc., Christian Health Care of Lebanon North,
          Inc., Christian Health Care of Springfield West Park, Inc.,
          Christian Health Care of Springfield West, Inc., Christian
          Health Care of Lebanon South, Inc., Christian Health Care of
          Springfield East, Inc., Christian Health Care of Nixa, Inc.
          and Alington D. Kilgore (filed herewith)
    10.29 Guaranty (BCC) dated as of January 12, 2000 given by
          Balanced Care Corporation in favor of Meditrust Mortgage
          Investments, Inc. (incorporated by reference to Exhibit 10.9
          to the Company's Current Report on Form 8-K dated January
          12, 2000)
</TABLE>

                                       28
<PAGE>   29

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
    10.30 Termination Agreement dated as of January 12, 2000 by and
          among Meditrust Mortgage Investments, Inc., New Meditrust
          Company LLC, Hawthorn Health Properties, Inc., National Care
          Centers of Hermitage, Inc., National Care Centers, Inc.,
          National Care Centers of Lebanon, Inc., Springfield
          Retirement Village, Inc., National Care Centers of Nixa,
          Inc., National Care Centers of Springfield, Inc., Mt. Vernon
          Park Care Center West, Inc., Balanced Care Corporation,
          Dixon Management, Inc. and Balanced Care at Stafford, Inc.
          (incorporated by reference to Exhibit 10.10 to the Company's
          Current Report on Form 8-K dated January 12, 2000)
    10.31 Cross Default Agreement dated as of January 12, 2000 by and
          among Balanced Care at Stafford, Inc., New Meditrust Company
          LLC, Meditrust Mortgage Investments, Inc. and Balanced Care
          Corporation (incorporated by reference to Exhibit 10.11 of
          the Company's Current Report on Form 8-K dated January 12,
          2000)
    10.32 Option Agreement by and among New Meditrust Company LLC, IPC
          Advisors S.a.r.l. and Balanced Care Corporation dated as of
          December 30, 1999 (incorporated by reference to Exhibit 10.2
          to the Company's Current Report on Form 8-K dated December
          15, 1999)
    10.33 Letter Agreement dated February 9, 2000 by and among New
          Meditrust Company LLC, Balanced Care Corporation and IPC
          Advisors S.a.r.l. (filed herewith)
</TABLE>

(B) Reports on Form 8-K

     1. Current Report on Form 8-K dated October 8, 1999 regarding the
        Subscription Agreement entered into between the Company and IPC Advisors
        S.a.r.l. for an equity investment of approximately $21 million.

     2. Current Report on Form 8-K dated December 15, 1999 regarding the
        acquisition of certain assets by the Company from New Meditrust Company
        LLC, the sale by the Company of its Missouri assets to certain
        affiliates of Christian Health Care of Missouri, Inc., and the closing
        on the $21 million equity investment with IPC Advisors S.a.r.l.

     3. Current Report on Form 8-K dated January 12, 2000 regarding the sale by
        the Company of its Missouri assets to certain affiliates of Christian
        Health Care of Missouri, Inc.. including a pro forma Consolidated
        Balance Sheet as of September 30, 1999 and pro forma Consolidated
        Statements of Operations for the year ended June 30, 1999 and the three
        months ended September 30, 1999.

                                       29
<PAGE>   30

                                   SIGNATURES

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

                                          BALANCED CARE CORPORATION

                                          By:      /s/ CLINT T. FEGAN
                                            ------------------------------------
                                            Clint T. Fegan
                                            Chief Financial Officer

Date: February 14, 2000

                                       30
<PAGE>   31

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<S>      <C>
10.1     Amendment No. 3 to Loan and Security Agreement among
         Balanced Care Corporation and certain of its wholly-owned
         subsidiaries and Heller Healthcare Finance, Inc. formerly
         known as HCFP Funding, Inc. dated as of December 31, 1999
         (filed herewith)
10.2     Senior Housing Rider among Heller Healthcare Finance, Inc.,
         Balanced Care Realty at State College, Inc., Balanced Care
         Realty at Altoona, Inc., Balanced Care Realty at Lewistown,
         Inc., Balanced Care Realty at Reading, Inc., Balanced Care
         Realty at Berwick, Inc., Balanced Care Realty at Peckville,
         Inc., Balanced Care Realty at Scranton, Inc., Balanced Care
         Realty at Martinsburg, Inc., Balanced Care Realty at
         Maumelle, Inc., Balanced Care Realty at Sherwood, Inc.,
         Balanced Care Realty at Mountain Home, Inc., and Balanced
         Care Realty at Mansfield, Inc. dated as of December 30,1999
         (filed herewith)
10.3     Promissory Note A made by Balanced Care Realty at State
         College, Inc., Balanced Care Realty at Altoona, Inc.,
         Balanced Care Realty at Lewistown, Inc., Balanced Care
         Realty at Reading, Inc., Balanced Care Realty at Berwick,
         Inc., Balanced Care Realty at Peckville, Inc., Balanced Care
         Realty at Scranton, Inc., Balanced Care Realty at
         Martinsburg, Inc., Balanced Care Realty at Maumelle, Inc.,
         Balanced Care Realty at Sherwood, Inc., Balanced Care Realty
         at Mountain Home, Inc., and Balanced Care Realty at
         Mansfield, Inc. in favor of Heller Healthcare Financing,
         Inc. dated December 30, 1999(filed herewith)
10.4     Subordinated Promissory Note B by Balanced Care Realty at
         State College, Inc., Balanced Care Realty at Altoona, Inc.,
         Balanced Care Realty at Lewistown, Inc., Balanced Care
         Realty at Reading, Inc., Balanced Care Realty at Berwick,
         Inc., Balanced Care Realty at Peckville, Inc., Balanced Care
         Realty at Scranton, Inc., Balanced Care Realty at
         Martinsburg, Inc., Balanced Care Realty at Maumelle, Inc.,
         Balanced Care Realty at Sherwood, Inc., Balanced Care Realty
         at Mountain Home, Inc., and Balanced Care Realty at
         Mansfield, Inc. in favor of Heller Healthcare Financing,
         Inc. dated December 30, 1999 (filed herewith)
10.5     Hazardous Materials Indemnity among Heller Healthcare
         Finance, Inc., Balanced Care Corporation, Balanced Care
         Realty at State College, Inc., Balanced Care Realty at
         Altoona, Inc., Balanced Care Realty at Lewistown, Inc.,
         Balanced Care Realty at Reading, Inc., Balanced Care Realty
         at Berwick, Inc., Balanced Care Realty at Peckville, Inc.,
         Balanced Care Realty at Scranton, Inc., Balanced Care Realty
         at Martinsburg, Inc., Balanced Care Realty at Maumelle,
         Inc., Balanced Care Realty at Sherwood, Inc., Balanced Care
         Realty at Mountain Home, Inc., and Balanced Care Realty at
         Mansfield, Inc. dated as of December 30, 1999 (filed
         herewith)
10.6     Guaranty by Balanced Care Corporation in favor of Heller
         Healthcare Finance, Inc. dated as of December 30, 1999(filed
         herewith)
10.7     Form of Open-End Mortgage, Assignment of Rents, Leases and
         Security Agreement in favor of Heller Healthcare Finance,
         Inc. dated as of December 30, 1999 (filed herewith)
10.8     Schedule to Form of Open-End Mortgage, Assignment of Rents,
         Leases and Security Agreement in favor of Heller Healthcare
         Finance, Inc. (filed herewith)
10.9     Form of Mortgage, Assignment of Rents and Security Agreement
         in favor of Heller Healthcare Finance, Inc. dated as of
         December 30, 1999 (filed herewith)
10.10    Schedule to Form of Mortgage, Assignment of Rents and
         Security Agreement in favor of Heller Healthcare Finance,
         Inc. (filed herewith)
10.11    A Credit Line Deed of Trust, Assignment of Rents and
         Security Agreement in favor of Heller Healthcare Finance,
         Inc. dated as of December 30, 1999 (filed herewith)
10.12    Open-End Mortgage, Assignment of Rents and Security
         Agreement in favor of Heller Healthcare Finance, Inc. dated
         as of December 30, 1999 (filed herewith)
10.13    Subscription Agreement dated October 8, 1999, as amended and
         restated October 11, 1999, between the Company and IPC
         (incorporated by reference to Exhibit 4.1 to the Company's
         Current Report on Form 8-K dated October 8, 1999)
</TABLE>
<PAGE>   32

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<S>      <C>
10.14    Memorandum of Understanding by and among New Meditrust
         Company LLC, IPC Advisors S.a.r.l., Balanced Care
         Corporation, and Balanced Care Realty at Altoona, Inc.,
         Balanced Care Realty at Berwick, Inc., Balanced Care Realty
         at Lewistown, Inc., Balanced Care Realty at Martinsburg,
         Inc., Balanced Care Realty at Maumelle, Inc., Balanced Care
         Realty at Mountain Home, Inc., Balanced Care Realty at
         Peckville, Inc., Balanced Care Realty at Reading, Inc.,
         Balanced Care Realty at Scranton, Inc., Balanced Care Realty
         at Sherwood, Inc., and Balanced Care Realty at State
         College, Inc. dated as of December 30, 1999 (incorporated by
         reference to Exhibit 10.1 to the Company's Current Report on
         Form 8-K dated December 15, 1999)
10.15    Option Agreement by and among New Meditrust Company LLC, IPC
         Advisors S.a.r.l., and Balanced Care Corporation dated as of
         December 30, 1999 (incorporated by reference to Exhibit 10.2
         to the Company's Current Report on Form 8-K dated December
         15, 1999)
10.16    Promissory Note made by Balance Care Corporation and IPC
         Advisors S.a.r.l. in favor of New Meditrust Company LLC
         dated December 30, 1999 (incorporated by reference to
         Exhibit 10.3 to the Company's Current Report on Form 8-K
         dated December 15, 1999)
10.17    Loan Agreement by and among Heller Healthcare Finance, Inc.,
         Balanced Care Realty at Berwick, Inc., Balanced Care at
         Lewistown, Inc., Balanced Care Realty at Mansfield, Inc.,
         Balanced Care Realty at Martinsburg, Inc., Balanced Care
         Realty at Maumelle, Inc., Balanced Care Realty at Mountain
         Home, Inc., Balanced Care Realty at Peckville, Inc.,
         Balanced Care Realty at Reading, Inc., Balanced Care Realty
         at Scranton, Inc., Balanced Care Realty at Sherwood, Inc.,
         and Balanced Care Realty at State College, Inc. dated as of
         December 30, 1999 (incorporated by reference to Exhibit 10.4
         to the Company's Current Report on Form 8-K dated December
         15, 1999)
10.18    Series One 1999 BCC Discount Note made by Balanced Care
         Corporation in favor of FRR Investments Limited dated
         December 29, 1999 (incorporated by reference to Exhibit 10.5
         to the Company's Current Report on Form 8-K dated December
         15, 1999)
10.19    Indemnification Defense, Hold Harmless and Reimbursement
         Agreement by and between Balanced Care Corporation and IPC
         Advisors S.a.r.l. dated as of December 29, 1999
         (incorporated by reference to Exhibit 10.6 to the Company's
         Current Report on Form 8-K dated December 15, 1999)
10.20    Right of First Refusal Agreement by and among Meditrust
         Mortgage Investments, Inc., Meditrust Corporation, and IPC
         Advisors S.A.R.L. dated as December 30, 1999 (incorporated
         by reference to Exhibit 10.7 to the Company's Current Report
         on Form 8-K dated December 15, 1999)
10.21    Asset Purchase Agreement dated October 15, 1999 by and
         between Balanced Care Corporation and certain subsidiaries
         and Christian Health Care of Missouri, Inc. (incorporated by
         reference to Exhibit 10.1 to the Company's Current Report on
         Form 8-K dated January 12, 2000)
10.22    First Amendment to Asset Purchase Agreement dated October
         21, 1999 by and between Balanced Care Corporation and
         certain subsidiaries and Christian Health Care of Missouri,
         Inc. (incorporated by reference to Exhibit 10.2 to the
         Company's Current Report on Form 8-K dated January 12, 2000)
10.23    Second Amendment to Asset Purchase Agreement dated November
         30, 1999 by and between Balanced Care Corporation and
         certain subsidiaries and Christian Health Care of Missouri,
         Inc. (incorporated by reference to Exhibit 10.3 to the
         Company's Current Report on Form 8-K dated January 12, 2000)
10.24    Third Amendment to Asset Purchase Agreement dated December
         31, 1999 by and between Balanced Care Corporation and
         certain subsidiaries and Christian Health Care of Missouri,
         Inc. (incorporated by reference to Exhibit 10.4 to the
         Company's Current Report on Form 8-K dated January 12, 2000)
10.25    Fourth Amendment to Asset Purchase Agreement dated January
         7, 2000 by and between Balanced Care Corporation and certain
         subsidiaries and Christian Health Care of Missouri, Inc.
         (incorporated by reference to Exhibit 10.5 to the Company's
         Current Report on Form 8-K dated January 12, 2000)
10.26    Promissory Note (First) dated January 12, 2000 made by
         Christian Health Care of Missouri, Inc., Christian Health
         Care Terraces, Inc., Regional Care of Nevada, LLC, Regional
         Care of Republic, LLC and Cornerstone Health Care, Inc. in
         favor of Balanced Care Corporation (incorporated by
         reference to Exhibit 10.6 to the Company's Current Report on
         Form 8-K dated January 12, 2000)
</TABLE>
<PAGE>   33

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<S>      <C>
10.27    Promissory Note (Second) dated January 12, 2000 made by
         Christian Health Care of Missouri, Inc., Christian Health
         Care Terraces, Inc., Regional Care of Nevada, LLC, Regional
         Care of Republic, LLC and Cornerstone Health Care, Inc. in
         favor of Balanced Care Corporation (incorporated by
         reference to Exhibit 10.7 to the Company's Current Report on
         Form 8-K dated January 12, 2000)
10.28    Omnibus Assignment and Assumption Agreement, Amendment of
         Loan Documents, Amendment of Lease Documents, Termination of
         Lease Documents, Consent to Assignment and Confirmation of
         Guaranties dated as of January 12, 2000 by and among
         Hawthorn Health Properties, Inc., National Care Centers of
         Hermitage, Inc., National Care Centers, Inc., National Care
         Centers of Lebanon, Inc., Springfield Retirement Village,
         Inc., National Care Centers of Nixa, Inc. National Care
         Centers of Springfield, Inc., Mt. Vernon Park Care Center
         West, Inc., BCC at Lebanon Care Center, Inc., BCC at Lebanon
         Park Manor, Inc., BCC at Nixa Park Center, Inc., BCC at
         Springfield Care Center, Inc., BCC at Mt. Vernon Park Care
         Center, Inc., BCC at Mt. Vernon Park Care Center West, Inc.,
         Hermitage Park Care Center, Inc., Balanced Care Corporation,
         Dixon Management, Inc., Meditrust Mortgage Investments,
         Inc., Christian Health Care of Missouri, Inc., Cornerstone
         Properties Investment II, LLC, Cornerstone Health Care,
         Inc., Christian Health Care Personnel Services, Inc.,
         Christian Health Care, Inc., Christian Health Care of
         Hermitage, Inc., Christian Health Care of Lebanon North,
         Inc., Christian Health Care of Springfield West Park, Inc.,
         Christian Health Care of Springfield West, Inc., Christian
         Health Care of Lebanon South, Inc., Christian Health Care of
         Springfield East, Inc., Christian Health Care of Nixa, Inc.
         and Alington D. Kilgore (filed herewith)
10.29    Guaranty (BCC) dated as of January 12, 2000 given by
         Balanced Care Corporation in favor of Meditrust Mortgage
         Investments, Inc. (incorporated by reference to Exhibit 10.9
         to the Company's Current Report on Form 8-K dated January
         12, 2000)
10.30    Termination Agreement dated as of January 12, 2000 by and
         among Meditrust Mortgage Investments, Inc., New Meditrust
         Company LLC, Hawthorn Health Properties, Inc., National Care
         Centers of Hermitage, Inc., National Care Centers, Inc.,
         National Care Centers of Lebanon, Inc., Springfield
         Retirement Village, Inc., National Care Centers of Nixa,
         Inc., National Care Centers of Springfield, Inc., Mt. Vernon
         Park Care Center West, Inc., Balanced Care Corporation,
         Dixon Management, Inc. and Balanced Care at Stafford, Inc.
         (incorporated by reference to Exhibit 10.10 to the Company's
         Current Report on Form 8-K dated January 12, 2000)
10.31    Cross Default Agreement dated as of January 12, 2000 by and
         among Balanced Care at Stafford, Inc., New Meditrust Company
         LLC, Meditrust Mortgage Investments, Inc. and Balanced Care
         Corporation (incorporated by reference to Exhibit 10.11 of
         the Company's Current Report on Form 8-K dated January 12,
         2000)
10.32    Option Agreement by and among New Meditrust Company LLC, IPC
         Advisors S.a.r.l. and Balanced Care Corporation dated as of
         December 30, 1999 (incorporated by reference to Exhibit 10.2
         to the Company's Current Report on Form 8-K dated December
         15, 1999)
10.33    Letter Agreement dated February 9, 2000 by and among New
         Meditrust Company LLC, Balanced Care Corporation and IPC
         Advisors S.a.r.l. (filed herewith)
</TABLE>