UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 1997

                                       OR

{ }                    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

             For the Transition period from _________ to ___________

                        Commission file number 000-21263

                       INTEGRATED LIVING COMMUNITIES, INC.
             (Exact name of registrant as specified in its charter)


           DELAWARE                                          52-1967027
  (State or other jurisdiction of                          (IRS Employer
   incorporation or organization)                       Identification No.)
                                                      
                                                
                           24850 Old 41 Road Suite 10
                            Bonita Springs, FL 34135
                    (Address of principal executive offices)

                                 (941) 947-7200
              (Registrant's telephone number, including area code)

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

                                    Yes ___x____    No __________

Number of shares of Registrant's  common stock,  $.01 par value,  outstanding at
May 5, 1997:   6,697,000
               ---------




<PAGE>



                       INTEGRATED LIVING COMMUNITIES, INC.
                                      INDEX



PART 1.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Balance Sheets - December 31, 1996 and
         March 31, 1996                                                      2

         Consolidated Statements of Operations -
         Three Months Ended March 31, 1996 and 1997                          3

         Consolidated Statement of Changes in Stockholders' Equity -
         Three Months Ended March 31, 1997                                   4

         Consolidated Statements of Cash Flows -
         Three Months Ended March 31, 1996 and 1997                          5

         Notes to the Consolidated Financial Statements                      6

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                               8

PART II. OTHER INFORMATION                                                  

Item 6.  Exhibits and Report on Form 8-K                                    11
         Signature Page                                                     12




<PAGE>
              INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES


                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                            DECEMBER 31,     MARCH 31,
                                                               1996            1997
ASSETS                                                                     (UNAUDITED)
                                                           ------------    ------------
Current assets:
<S>                                                        <C>             <C>         
     Cash and cash equivalents                             $  4,474,786    $  3,855,596
     Accounts receivable                                        719,212         750,347
     Prepaid expenses and other current assets                  272,830         207,041
                                                           ------------    ------------
            Total current assets                              5,466,828       4,812,984
Property, plant  and equipment, net                          68,560,932      87,016,181
Other assets                                                  1,546,909       1,607,546
                                                           ------------    ------------
                                                           $ 75,574,669    $ 93,436,711
                                                           ============    ============

LIABILITIES AND STOCKHOLDERS EQUITY 
Current liabilities:
     Accounts payable                                      $  1,721,765    $  2,933,642
     Accrued expenses                                         2,176,863       1,629,089
     Refundable security deposits                             1,194,377       1,605,346
     Current portion of note payable to affiliate             1,722,512       1,230,366
                                                           ------------    ------------
            Total current liabilities                         6,815,517       7,398,443
Long term portion of note payable to affiliate                1,578,969       1,640,487
Other long term debt                                                  0      17,408,272
Refundable deposits                                           5,079,837       5,087,036
Deferred gain on sale/leaseback                                       0         261,321
Unearned entrance fees                                        4,134,126       4,163,607
                                                           ------------    ------------
            Total liabilities                                17,608,449      35,959,166
Stockholders' equity:
     Common stock                                                66,979          66,979
     Additional paid in capital                              60,558,963      60,558,963
     Accumulated deficit                                     (2,659,722)     (3,148,397)
                                                           ------------    ------------
            Net stockholders' equity                         57,966,220      57,477,545
                                                           ------------    ------------
                                                           $ 75,574,669    $ 93,436,711
                                                           ============    ============
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       2
<PAGE>
              INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES


                     CONSOLIDATED STATEMENTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 1996 AND 1997
                                  (UNAUDITED)


                                                           THREE MONTHS ENDED
                                                              MARCH 31,
                                                      --------------------------

                                                          1996         1997
                                                      -----------   -----------
Revenues:
     Monthly service and entrance fees                $ 5,164,054   $ 8,076,902
     Management services and other                        451,399       351,113
                                                      -----------   -----------
         Total revenues                                 5,615,453     8,428,015
                                                      -----------   -----------

Expenses:
     Community operations                               3,512,944     5,572,191
     Corporate general and administrative                 336,887     1,737,788
     Rent                                                 725,276       841,974
     Depreciation and amortization                        248,195       521,971
                                                      -----------   -----------
         Total expenses                                 4,823,302     8,673,924
                                                      -----------   -----------

Operating income (loss)                                   792,151      (245,909)

Other income (expense):
     Interest income                                            0        63,850
     Interest expense (including interest on loan
         payable to affiliate)                                  0      (306,616)
                                                      -----------   -----------

Earnings (loss) before income taxes                       792,151      (488,675)

Federal and state income taxes                            304,978             0
                                                      -----------   -----------

Net earnings (loss)                                   $   487,173   ($  488,675)
                                                      ===========   ===========

Weighted average common shares outstanding              3,897,900     6,697,900
                                                      ===========   ===========

Earnings per common share                             $      0.12   ($     0.07)
                                                      ===========   ===========

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       3
<PAGE>
              INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES


           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                   FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>

                                                                  ADDITIONAL
                                                 COMMON            PAID-IN               RETAINED
                                                  STOCK            CAPTIAL               DEFICIT                   TOTAL
                                             ----------------    -----------------     ----------------     ---------------------
<S>                                                  <C>              <C>                  <C>                       <C>        
Balance at December 31, 1996                         $66,979          $60,558,963          ($2,659,722)              $57,966,220

Net loss (unaudited)                                       0                    0             (488,675)                 (488,675)
                                             ----------------    -----------------     ----------------     ---------------------

Balance at March 31, 1997 (unaudited)                $66,979          $60,558,963          ($3,148,397)              $57,477,545
                                             ================    =================     ================     =====================
</TABLE>


          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       4
<PAGE>
              INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES


                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>

                                                                THREE MONTHS ENDED
                                                                   MARCH 31,
                                                             1996            1997
                                                         ------------    -------------
Cash flow from operating activities
<S>                                                      <C>             <C>          
       Net earnings (loss)                               $    487,173    ($   488,675)
       Adjustments to reconcile net earnings to
          net cash provided by operating activities:
          Deferred income taxes                               172,112               0
          Depreciation and amortization                       248,195         521,971
          Decrease (increase) in accounts receivable          137,262         (31,135)
          Decrease (increase) in prepaid expenses and
                other current assets                         (362,953)         65,789
          Earned entrance fees                               (261,528)       (185,520)
          Entrance fees received                              134,000         178,500
          Increase in accounts payable and
                accrued expenses                              393,119          97,190
                                                         ------------    ------------
Net cash provided by operating activities                     947,380         158,120
                                                         ------------    ------------

Cash flows from financing activities:
       Net capital contribution from parent company         1,008,411               -
       Net proceeds on sale/leaseback                               -         261,321
       Principal payments on note payable to affiliate              -        (430,628)
       Refundable deposits received                           134,000         178,500
       Refunds of deposits and entrance fees                 (292,980)       (134,800)
                                                         ------------    ------------
Net cash from financing activities                            849,431        (125,607)
                                                         ------------    ------------

Cash flows from investing activities:
       Property, plant  and equipment additions              (142,368)       (582,794)
       Increase in other assets                              (642,800)        (68,909)

                                                         ------------    ------------
Net cash used in investing activities                        (785,168)       (651,703)
                                                         ------------    ------------

Increase (decrease) in cash                                 1,011,643        (619,190)
Cash, beginning of period                                     413,362       4,474,786
                                                         ------------    ------------
Cash, end of period                                      $  1,425,005    $  3,855,596
                                                         ============    ============

Non-cash investing and financing activities:

Assets of facilities and land acquired                   $          -    $ 17,408,272

Long term debt acquired                                  $          -    $ 17,408,272
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       5
<PAGE>




               INTEGRATED LIVING COMMUNITES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE UNAUDITED THREE MONTHS ENDED MARCH 31, 1997

1.    BASIS OF PRESENTATION

Integrated  Living  Communities,  Inc.  ("ILC" or "the  Company")  was formed in
November  1995  through  a  corporate  reorganization  whereby  the  assets  and
liabilities of the Integrated Living  Communities  Division of Integrated Health
Services,  Inc.  ("IHS") were transferred or leased from IHS subsidiaries to ILC
and its  subsidiaries.  At March 31, 1996, ILC was a wholly owned  subsidiary of
IHS. In October 1996,  the Company  consummated  an initial  public  offering of
4,200,000 shares of common stock (see note 2 below).

The  consolidated  financial  statements  included  herein  do not  contain  all
information and footnote  disclosures  normally included in financial statements
prepared in  accordance  with  generally  accepted  accounting  principles.  For
further  information,  such as the significant  accounting  policies followed by
ILC, refer to the consolidated  financial  statements and notes thereto included
in the  Company's  Annual  Report on Form 10-K for the year ended  December  31,
1996.  In the  opinion of  management,  the  consolidated  financial  statements
include all necessary adjustments (consisting only of normal recurring accruals)
for a fair presentation of the financial  position and results of operations for
the interim periods presented. The results of operations for the interim periods
presented are not necessarily indicative of the results that may be achieved for
the full year.

2.    INITIAL PUBLIC OFFERING

On October 9, 1996, ILC completed an initial public offering of 4,200,000 shares
of common stock, of which 2,800,000 shares were sold by ILC and 1,400,000 shares
were sold by IHS. The initial public  offering  price was $8.00 per share.  This
offering reduced IHS's ownership of the Company's common stock to 37%.

3.    ACQUISITIONS

In January 1997, the Company  purchased four facilities in Virginia totaling 198
beds for $15.8 million.  The Company  financed the transaction  through a bridge
loan with  NationsBank  which bore interest at a floating rate of libor plus 300
basis  points  and  matured  on April  29,  1997.  In April  1997,  the  Company
refinanced this loan with a revolving credit facility from NationsBank (see Note
4).

In February 1997 the Company  purchased the Jenni-Lynn  Retirement  Center, a 55
bed assisted living community located in W. Columbia,  South Carolina,  for $2.3
million. Subsequently, the Company sold this facility to and leased it back from
Capstone  Capital  Corporation  ("Capstone")  resulting  in a  deferred  gain of
approximately $261,000. The annual rental on this facility is $257,000.

In March 1997, the Company acquired  leasehold  interests in two assisted living
facilities  in Florida  and  Georgia  totaling  103 beds for  annual  rentals of
$151,000 and $229,000, respectively.

                                       6
<PAGE>




4.    SUBSEQUENT EVENTS

In April 1997, the Company closed a revolving credit facility with  NationsBank.
The facility  bears  interest at a rate between  libor plus 225 basis points and
libor plus 300 basis points and matures in April 1998.

In April 1997, the Company completed the development of and acquired a leasehold
interest in The Manhattan  Homestead,  a 35 bed assisted living facility located
in Manhattan, Kansas. Annual rental is approximately $258,500.

                                       7
<PAGE>




ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

STATEMENTS  IN THIS  QUARTERLY  REPORT ON FORM  10-Q  CONCERNING  THE  COMPANY'S
BUSINESS  OUTLOOK OR FUTURE  ECONOMIC  PERFORMANCE;  ANTICIPATED  PROFITABILITY,
REVENUES,  EXPENSES OR OTHER FINANCIAL ITEMS; AND PRODUCT LINE GROWTH,  TOGETHER
WITH  OTHER  STATEMENTS  THAT ARE NOT  HISTORICAL  FACTS,  ARE  "FORWARD-LOOKING
STATEMENTS"   AS  THAT  TERM  IS  DEFINED   UNDER   FEDERAL   SECURITIES   LAWS.
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER  MATERIALLY FROM THOSE STATED IN SUCH
STATEMENTS.  SUCH RISKS,  UNCERTAINTIES AND FACTORS INCLUDE, BUT ARE NOT LIMITED
TO, THE COMPANY'S RAPID GROWTH STRATEGY,  ANTICIPATED OPERATING LOSSES,  LIMITED
DEVELOPMENT  EXPERIENCE,  NEED FOR SUBSTANTIAL  ADDITIONAL CAPITAL,  SUBSTANTIAL
DEBT AND LEASE  OBLIGATIONS,  COMPETITION,  GOVERNMENT  REGULATION  AND  GENERAL
ECONOMIC  CONDITIONS,  AS WELL AS OTHER RISKS DETAILED IN THE COMPANY'S  FILINGS
WITH THE  SECURITIES  AND EXCHANGE  COMMISSION,  INCLUDING THE COMPANY'S  ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996.

OVERVIEW

As of May 5, 1997, the Company operates 24 facilities  consisting of 11 owned, 9
leased and 4 managed  facilities for a total of 2,481 beds. The Company also has
28 sites in various stages of development and construction.

To achieve its growth  objectives,  the Company  will need to obtain  sufficient
financial  resources  to fund its  development,  construction,  and  acquisition
activities and anticipated operating losses.  Accordingly,  the Company's future
growth will depend on its ability to obtain  additional  financing on acceptable
terms.  There can be no  assurance  additional  financing  will be  available on
acceptable  terms or at all. The Company expects negative cash flow for at least
the next year as it continues to develop and acquire assisted living facilities,
primarily  as a result of the  development  and opening of new  assisted  living
facilities in each of the next three years.  There can be no assurance  that any
newly developed  facility will achieve a stabilized  occupancy rate and resident
mix that meets the Company's expectations or generates positive cash flow.

The Company  intends to finance the  development and acquisition of its assisted
living  facilities  through  mortgage  financing,  operating  leases  (including
sale/leaseback  transactions)  and lines of  credit.  As a result,  the  Company
expects to incur substantial  indebtedness and debt related payments  (including
payments  on  operating  leases) as the  Company  pursues  its growth  strategy.
Consequently,  the  Company  anticipates  that  a  substantial  portion  of  the
Company's  cash flow will be devoted to debt service and lease  payments.  There
can be no assurance  that the Company will  generate  sufficient  cash flow from
operations to cover required interest, principal and lease payments.

The Company derives its revenues from two primary sources: (i) resident fees for
the delivery of assisted living services and (ii) management services income for
the  management  of  facilities  in which the Company does not own a controlling
interest.

The  Company  categorizes  its  operating  expenses as  follows:  (i)  community
operations,  which includes labor, food, advertising, and other direct operating
expense; (ii) general and administrative  expenses,  consisting of corporate and
other  support  functions;  (iii) rent,  which  includes  facility and equipment
rentals; and (iv) depreciation and amortization.


                                       8
<PAGE>



THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996

Total  revenue  increased  $2.8  million  or 50%,  to $8.4  million in the first
quarter  of 1997  from  $5.6  million  in the  first  quarter  of 1996.  Of this
increase,  $2.7 million,  or 96%, was due to revenue from  communities  acquired
after January 1, 1996.  The remaining  increase was due to increased  revenue at
communities  in  operation  in  both  periods   partially  offset  by  decreased
management fee revenue.

Community  operations  expense increased $2.1 million or 59%, to $5.6 million in
the first quarter of 1997 from $3.5 million in the first  quarter of 1996.  This
increase  was  primarily  due to the  acquisition  of twelve  communities  after
January 1, 1996.

Corporate general and administrative expense increased $1.4 million, or 416%, to
$1.7 million in the first  quarter of 1997 from $337,000 in the first quarter of
1996.  This  increase  was  primarily  due to the  relocation  of the  Company's
corporate  office from Owings Mills,  Maryland to Bonita  Springs,  Florida.  In
addition,  the Company  increased  corporate  capacity in anticipation of future
growth.  In the  first  quarter  of  1996,  IHS  provided  all of the  Company's
corporate services for a fee of 6% of revenue.

Rent expense  increased  $117,000,  or 16%, to $842,000 in the first  quarter of
1997 from $725,000 in the first quarter of 1996. This increase was primarily due
to the  acquisition  of leasehold  interests in Jenni-Lynn,  Jaylene,  Brantley,
Cabot Pointe,  Wichita and Garden City; the corporate office; and an increase in
rent expense at The Shores and Cheyenne Place, all of which occurred  subsequent
to March 31, 1996.  This increase was  partially  offset by the  acquisition  of
condominium interests in the West Palm, Treemont and Vintage communities in June
of 1996 which were previously leased.

Depreciation and amortization  increased  $274,000,  or 110%, to $522,000 in the
first quarter of 1997 from $248,000 in the first quarter of 1996.  This increase
was  primarily  due to  communities  acquired  subsequent  to March 31, 1996 and
routine capital expenditures.

Interest  expense  increased  from $0 in  1996  to  $307,000  in  1997.  This is
attributable  to interest on the Company's note payable to IHS and the Company's
revolving  credit facility with  NationsBank  used to finance the January,  1997
acquisition of four facilities in Virginia.


                                       9

<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1997, the Company had a net working capital deficit of $2.6 million
compared to a deficit of $1.3 million at December 31, 1996. For the three months
ended  March 31,  1996 and 1997,  cash  flows  from  operating  activities  were
$947,000  and  $158,000,  respectively.  Net cash  provided  (used) by financing
activities was $849,000 and $(126,000) in 1996 and 1997, respectively.  Net cash
used in  investing  activities  was  $785,000  and  $652,000  in 1996 and  1997,
respectively.

In April 1997, the Company closed a $50 million senior secured  revolving credit
facility from  NationsBank,  SouthTrust  and SunTrust.  Under the senior secured
revolving credit facility, the Company can borrow up to the lesser of 75% of the
appraised  value of the  facilities  secured  in the line or six times the total
EBITDAR (as defined) of the secured  facilities.  Borrowings under the facility,
which  matures in April 1998,  bear  interest at a rate  between  libor plus 225
basis points and libor plus 300 basis points.

In anticipation of closing the above mentioned  facility,  NationsBank  provided
the Company with a $15.8 million  bridge loan to close the  acquisition  of four
facilities  in Virginia  in January  1997.  This  bridge  loan was  subsequently
refinanced with the revolving credit facility discussed above.

The Company  intends to use the  NationsBank  line to fund future  acquisitions.
However, under the facility, the Company may borrow up to $5 million for working
capital  purposes.  The  NationsBank  line is  intended to enable the Company to
complete  acquisitions  without long financing  delays.  Once the acquisition is
closed,  the Company will seek longer term  financing  for the  facility  either
through a mortgage or lease.  Although  there can be no assurance such long-term
financing will be available on acceptable terms or at all.

In April 1997, the Company closed a $5.0 million unsecured revolving credit note
with IHS. The note, which matures in April 1998, bears interest at a rate of 12%
with a reduction in maximum  principal  outstanding  at October 1997 and January
1998 to $4.5 million and $4.0 million, respectively.  These borrowings are to be
used to assist the Company in its working capital needs.

Also in April 1997,  the Company  re-negotiated  its existing  note payable with
IHS. Under the new terms, the interest rate was reduced to 12% from 14%, with no
principal  payments  due until  September  1997.  The  amended  note  matures on
November 20, 1998.

The Company has agreed to guaranty the indebtedness on two development sites for
one of its  developers.  There currently is no balance  outstanding  relating to
these two sites. However, the maximum amount of the guarantee on these two sites
is $4 million.

The Company currently has employment agreements with three of its officers which
provide annual base salaries aggregating $694,000.


                                       10
<PAGE>



Part II.          Other Information

Items 1 - 5 are not applicable

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

Exhibit Number             Description

         10.1       Credit agreement with  NationsBank,  SouthTrust and SunTrust
                    dated April 9, 1997
         10.2       Security agreement with NationsBank dated April 9, 1997
         10.3       Subordination agreement with NationsBank dated April 9, 1997
         10.4       Lease  agreement with The Homestead,  L.C. for The Manhattan
                    Homestead, dated August 29, 1996

         10.5       Revolving credit note with IHS dated April 30, 1997
         10.6       Amended unsecured credit note with IHS dated April 30, 1997

         27         Financial Data Schedule

(b)      Reports on Form 8-K

         Current  Report on Form 8-K dated  January  29,  1997  relating  to the
         acquisition of the Bullock facilities, as amended.


                                       11
<PAGE>



SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized



                              INTEGRATED LIVING COMMUNITIES, INC.
                              (Registrant)



                              John B. Poole
                              -----------------------------------------------
                              John B. Poole
Dated May 15, 1997            Senior Vice President - Chief Financial Officer