Healthcare Corp of America

During the three months ended March 31, 2014, the Company issued 75,000 shares of common stock as part of the settlement of two disputed claims. The Company recorded a gain of approximately $340,000 in Selling General and Administrative expenses as result of the difference in value of the executed settlement and the Company’s initial estimate.

On May 2, 2014, we and the Lenders agreed to extend the time periods specified in the foregoing covenants by five days from the original maturity date to May 9th, 2014. On May 7, 2014, the Company and the Lenders agreed to further extend the time periods specified in the foregoing covenants from May 9, 2014 to May 23, 2014, which will allow the Company time to continue exploring its financing options.

The increase in SG&A costs is primarily attributable to: increase of approximately $442,000 in reinsurance expenses relating to the fully funded business due to premium increases , professional fees that increased by approximately $220,000 due to public company costs, and wages and payroll taxes that increased by approximately $146,000 due to the increased staff. These expense increases were partly offset by a gain of approximately $340,000 relating to a reduction of a liability which was settled during the first quarter of 2014 partly through the issuance of shares of the Company’s common stock.

Other (Expense) Income, net for the three months ended March 31, 2014 which included interest expense, net of positive change in fair value of derivative liabilities, totaled ($591,212) compared to a net expense of ($1,186,305) for the three months ended March 31, 2013.

Interest expenses for the three months ended March 31, 2014 were approximately $0.9 million and included approximately $0.4 million incurred in connection with the senior convertible note, approximately $0.2 million in connection with the junior convertible notes, approximately $0.2 million in connection with the Incentive Notes and the balance of $0.1 million was incurred in connection with the capital leases and other interest expenses.

Cash used in the first quarter of 2014 for purchasing of property and equipment was $11,620.

For the three months ended March 31, 2014, cash provided by financing activities was $426,286. The Company’s net cash in–flow from the senior convertible loan was $500,000 offset by debt costs of $22,895 and repayment capital leases of $50,819.