NANTICOKE HEALTH SERVICES OBLIGATED GROUP COMBINING BALANCE SHEET September 30, Nanticoke Alternative Care

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1 Nanticoke Memorial Hospital Assets Current Assets: Cash 1,463,123 Patient Receivables, Net 12,747,937 Other Receivables 1,205,107 Inventories 1,933,790 Prepaid Expenses 841,766 Intercompany Receivables 1,322,681 Total Current Assets 19,514,404 NANTICOKE HEALTH SERVICES OBLIGATED GROUP COMBINING BALANCE SHEET September 30, 2007 Nanticoke Alternative Care Dual Development Corporation Eliminating Entries Combined Totals $ $ 612,952 $ 341,359 $ - $ 2,417,435 $ $ 1,059,425 $ - $ - $ 13,807,362 $ $ - $ 151,963 $ - $ 1,357,070 $ $ 47,342 $ - $ - $ 1,981,132 $ $ 6,361 $ 59,148 $ - $ 907,275 $ $ - $ - $ (110,778) $ 1,211,903 $ $ 1,726,080 $ 552,470 $ (110,778) $ 21,682,177 $ - Assets whose use is limited: Board Designated Funds $ 28,933,863 $ - $ - $ - $ 28,933,863 Pension Fund $ 556,416 $ - $ - $ - $ 556,416 Principal & Interest Sinking Fund $ 1,275,255 $ - $ 302,445 $ - $ 1,577,700 Debt Service Reserve Fund $ 4,236,000 $ - $ - $ - $ 4,236,000 Total assets whose use is limited $ 35,001,534 $ - $ 302,445 $ - $ 35,303,979 Property and Equipment: Plant & Equipment $ 97,104,470 $ 1,785,902 $ 27,743,112 $ - $ 126,633,485 Less: Accumulated Depreciation $ (50,352,639) $ (1,426,911) $ (8,778,907) $ - $ (60,558,457) Total Property and equipment net $ 46,751,831 $ 358,991 $ 18,964,206 $ - $ 66,075,028 Other Assets $ 9,107,584 $ - $ 305,993 $ - $ 9,413,577 Total Assets $ 110,375,353 $ 2,085,071 $ 20,125,114 $ (110,778) $ 132,474,760 Liabilities and Net Assets Current Liabilities: Accounts Payable $ 5,864,312 $ 256,637 $ 13,321 $ - $ 6,134,269 Accrued Payroll & Taxes $ 3,592,354 $ 541,569 $ - $ - $ 4,133,923 Long Term Debt - Current $ 1,636,120 $ - $ - $ - $ 1,636,120 Accrued Interest $ 962,970 $ - $ 237,830 $ - $ 1,200,800 Insurance Reserves $ - $ - $ - $ - $ - Inter-Company Payables $ - $ 102,543 $ 8,235 $ (110,778) $ - Total Current Liabilities $ 12,055,755 $ 900,749 $ 259,386 $ (110,778) $ 13,105,112 Long Term Liabilities: Post Retirement Benefits $ 8,286,431 $ - $ - $ - $ 8,286,431 Long Term Debt $ 42,928,659 $ - $ 10,209,809 $ - $ 53,138,468 Capital Lease - Long Term $ - $ - $ - $ - $ - Other Liabilities $ 1,175,007 $ - $ - $ - $ 1,175,007 Total Long Term Liabilities $ 52,390,097 $ - $ 10,209,809 $ - $ 62,599,906 Fund Balance $ 45,929,501 $ 1,184,322 $ 9,655,919 $ - $ 56,769,742 Total Liabilities & Equity $ 110,375,353 $ 2,085,071 $ 20,125,114 $ (110,778) $ 132,474,760

2 NANTICOKE HEALTH SERVICES OBLIGATED GROUP COMBINING STATEMENT OF OPERATIONS For the Three Months Ending September 30, 2007 Nanticoke Memorial Hospital Nanticoke Alternative Care Dual Development Corporation Eliminating Entries Combined Totals Gross Patient Revenue $ 53,931,678 $ 2,836,472 $ - $ (61,325) $ 56,706,825 Less: Contractual Allowances $ (30,315,773) $ (463,049) $ - $ - $ (30,778,822) Net Patient Revenue $ 23,615,905 $ 2,373,423 $ - $ (61,325) $ 25,928,003 Other Revenue $ 440,849 $ 8,986 $ 511,403 $ (373,302) $ 587,935 Total unrestricted revenues $ 24,056,754 $ 2,382,409 $ 511,403 $ (434,627) $ 26,515,938 Expenses Salaries & Benefits $ 13,473,418 $ 1,736,792 $ - $ - $ 15,210,210 Supplies & Purchased Services $ 5,130,254 $ 519,331 $ 123,998 $ - $ 5,773,583 Professional Fees $ 929,850 $ 13,227 $ - $ - $ 943,077 Other $ 3,716,490 $ 329,217 $ 205,140 $ (434,627) $ 3,816,219 Depreciation $ 1,945,749 $ 17,049 $ 203,474 $ - $ 2,166,272 Interest $ 583,979 $ - $ 137,050 $ - $ 721,029 Total Expenses $ 25,779,740 $ 2,615,616 $ 669,662 $ (434,627) $ 28,630,390 Operating Income (Loss) $ (1,722,986) $ (233,207) $ (158,259) $ - $ (2,114,452) Other Income: Board Designated Dividends $ 237,258 $ - $ - $ - $ 237,258 Realized Gain/Loss Investment $ 123,887 $ - $ - $ - $ 123,887 Unrealized Gain/Loss Investment $ (2,135) $ - $ - $ - $ (2,135) Total Return on Investment $ 359,010 $ - $ - $ - $ 359,010 Excess (Deficit) of Revenues Over Expenses $ (1,363,976) $ (233,207) $ (158,259) $ - $ (1,755,442)

3 NANTICOKE HEALTH SERVICES OBLIGATED GROUP Comparative Income Statement Fiscal Year June Change % Change FY 08 Budget Gross Patient Revenue $ 56,706,825 $ 54,645,793 $ 2,061, % $ 63,461,392 Contractual Allowances $ 30,778,822 $ 26,451,514 $ 4,327, % $ 34,798,601 Net Patient Revenue $ 25,928,003 $ 28,194,279 $ (2,266,276) -8.0% $ 28,662,791 Other Operating Revenue $ 587,936 $ 364,440 $ 223, % $ 421,549 Total Operating Revenue $ 26,515,939 $ 28,558,719 $ (2,042,780) -7.2% $ 29,084,340 Non-Capital Expenses $ 25,743,090 $ 26,410,610 $ (667,520) -2.5% $ 27,047,114 Operating EBIDA $ 772,849 $ 2,148,109 $ (1,375,260) -64.0% $ 2,037,226 Operating EBIDA % 2.91% 7.52% -4.61% -61.3% 7.00% Capital Related Expenses: Depreciation Expense $ 2,166,272 $ 1,642,350 $ 523, % $ 2,173,758 Interest Expense $ 721,029 $ 728,069 $ (7,040) -1.0% $ 737,400 Operating Income $ (2,114,452) $ (222,310) $ (1,892,142) % $ (873,932) Net Non-Operating Rev & Exp $ 359,010 $ 958,088 $ (599,078) -62.5% $ - Excess(Deficit)Revenue over Exp $ (1,755,442) $ 735,778 $ (2,491,220) % $ (873,932) Operating Margin (%) -8.2% -0.8% -3.0% Financial Ratios: Debt Service Coverage (Required: 1.2) (1.00) -49.8% Days Cash on Hand (Required: 60) % Current Ratio (0.63) -27.4%

4 NANTICOKE HEALTH SERVICES OBLIGATED GROUP Statement of Cash Flow Cash and Cash Equivalents at 06/30/07 $ 3,892,856 Operating Activities $ (685,346) Investing Activities $ 70,762 Financing Activities $ (860,837) Cash and Cash Equivalents at 09/30/07 $ 2,417,435

5 NANTICOKE HEALTH SERVICES, INC. Parent Company of Obligated Group OPERATING INCOME(LOSS) Change % Change FY 08 Budget The Nanticoke Group: Nanticoke Memorial Hospital $ (1,722,986) $ 31,047 $ (1,754,033) % $ (415,943) Nanticoke Alternative Care (LifeCare Lofland) $ (233,207) $ (254,394) $ 21, % $ (400,625) Dual Development Corp. $ (158,259) $ 1,037 $ (159,296) % $ (57,364) Nanticoke Group Total $ (2,114,452) $ (222,310) $ (1,892,142) % $ (873,932) Other Entities: Mid-Sussex Medical Center $ (254,147) $ (203,322) $ (50,825) -25.0% $ (330,097) Proprietary Enterprises $ (26,471) $ (25,879) $ (592) -2.3% $ (21,525) Nanticoke Health Services $ 42,444 $ (1,675) $ 44, % $ 44,523 Nanticoke Insurance Co, LTD $ - $ - $ - 0.0% $ - Other Entities Total $ (238,174) $ (230,876) $ (7,298) -3.2% $ (307,099) Total - Nanticoke Health Services $ (2,352,626) $ (453,186) $ (1,899,440) -419% $ (1,181,030)

6 NANTICOKE MEMORIAL HOSPITAL An Acute Care Hospital Utilization Statistics Change % Change FY 08 Budget Births % 270 Admissions 1,399 1,580 (181) -11.5% 1,506 Average Length of Stay (0.17) -4.1% 4.70 Patient Days 6,146 7,089 (943) -13.3% 7,809 ER Visits 8,260 7, % 8,413 Outpatient Visits 22,456 18, % 24,092 Inpatient Surgeries (37) -10.2% 363 Outpatient Surgeries % 631 Total Surgeries 1, % 994 Percent of Gross Revenue Medicare 42% 42% Medicaid 20% 19% Blue Cross 12% 12% Commercial 17% 18% Self Pay & Other 9% 9% Total 100% 100% Admissions and Patient Days exclude Newborn & Nursery days. Operating Results Overview Gross Patient Revenue per Adj Patient Day $ 3,999 $ 3,620 $ % $ 3,720 Deductible Ratio 56.2% 50.1% 6.1% 12.2% 56.4% Net Patient Revenue per Adj Patient Day $ 1,751 $ 1,806 $ (55) -3.0% $ 1,621 Non-Capital Expense per Adj Patient Day $ 1,724 $ 1,681 $ % $ 1,509 Gross Patient Revenue $ 53,931,678 $ 51,918,073 $ 2,013, % $ 60,717,511 Contractuals & Charity $ 30,315,773 $ 26,017,640 $ 4,298, % $ 34,270,043 Net Patient Revenue $ 23,615,905 $ 25,900,433 $ (2,284,528) -8.8% $ 26,447,468 Other Operating Revenue $ 440,849 $ 226,105 $ 214, % $ 300,682 Operating Revenue $ 24,056,754 $ 26,126,538 $ (2,069,784) -7.9% $ 26,748,150 Non-Capital Expenses $ 23,250,012 $ 24,104,114 $ (854,102) -3.5% $ 24,619,742 Operating EBIDA $ 806,742 $ 2,022,424 $ (1,215,682) -60.1% $ 2,128,408 Operating EBIDA % 3.42% 7.81% -4.39% -56.3% 8.05% Capital Related Expenses: Depreciation Expense $ 1,945,749 $ 1,402,106 $ 543, % $ 1,945,749 Interest Expense $ 583,979 $ 589,271 $ (5,292) -0.9% $ 598,602 Operating Income $ (1,722,986) $ 31,047 $ (1,754,033) % $ (415,943) Operating Margin (%) -7.3% 0.1% -1.6% Non-Capital Expense Detail Salary & Benefits $ 13,473,418 $ 12,848,214 $ 625, % $ 14,298,622 Supplies & Purchased Services $ 5,130,254 $ 5,204,685 $ (74,431) -1.4% $ 5,455,849 Professional Fees $ 929,850 $ 964,641 $ (34,791) -3.6% $ 983,184 Other $ 3,716,490 $ 2,846,713 $ 869, % $ 3,882,087 Total non-capital expense 23,250,012 $ 21,864,253 $ 1,385, % $ 24,619,742

7 NANTICOKE ALTERNATIVE CARE A Long Term Care Facility T/A Lifecare at Lofland Park Utilization Statistics Change % Change FY 08 Budget Patient Days Medicare 1,782 1, % 1,689 Medicaid 5,744 6,447 (703) -10.9% 6,447 Commercial (12) -6.0% 201 Private 2,172 1, % 1,669 Total Patient Days 9,887 10, % 10,006 % Occupancy 97.70% 98.87% -1.17% -1.2% 98.87% Operating Results Overview Gross Patient Revenue $ 2,836,472 $ 2,778,075 $ 58, % $ 2,805,206 Contractuals & Charity $ 463,049 $ 461,655 $ 1, % $ 528,558 Net Patient Revenue $ 2,373,423 $ 2,316,420 $ 57, % $ 2,276,648 Other Operating Revenue $ 8,986 $ 8,924 $ % $ - Operating Revenue $ 2,382,409 $ 2,325,344 $ 57, % $ 2,276,648 Non-Capital Expenses $ 2,598,567 $ 2,555,011 $ 43, % $ 2,654,773 Operating EBIDA $ (216,158) $ (229,667) $ 13, % $ (378,125) Operating EBIDA % -9.11% -9.91% 0.8% 8.1% % Capital Related Expenses: Depreciation Expense $ 17,049 $ 24,727 $ (7,678) -31.1% $ 22,500 Interest Expense $ - $ - $ - 0.0% $ - Operating Income $ (233,207) $ (254,394) $ 21, % $ (400,625) Non-Capital Expense Detail Salary & Benefits $ 1,736,792 $ 1,672,349 $ 64, % $ 1,782,874 Supplies & Purchased Services $ 519,331 $ 498,459 $ 20, % $ 446,112 Professional Fees $ 13,227 $ 31,638 $ (18,411) -58.2% $ 35,000 Other $ 329,217 $ 352,565 $ (23,348) -6.6% $ 390,787 Total non-capital expense $ 2,598,567 $ 2,555,011 $ 43, % $ 2,654,773

8 DUAL DEVELOPMENT CORPORATION Property Development & Management Company Operating Results Overview Change % Change FY 08 Budget Operating Revenue $ 511,403 $ 516,499 $ (5,096) -1.0% $ 494,169 Non-Capital Expenses $ 329,138 $ 161,147 $ 167, % $ 207,226 Operating EBIDA $ 182,265 $ 355,352 $ (173,087) -48.7% $ 286,943 Operating EBIDA % 35.64% 68.80% % -48.2% 58.07% Capital Related Expenses: Depreciation Expense $ 203,474 $ 215,517 $ (12,043) -5.6% $ 205,509 Interest Expense $ 137,050 $ 138,798 $ (1,748) -1.3% $ 138,798 Operating Income $ (158,259) $ 1,037 $ (159,296) % $ (57,364) Operating Margin (%) -30.9% 0.2% -31.1% % -11.6% Non-Capital Expense Detail Supplies & Purchased Services $ 123,998 $ 86,563 $ 37, % $ 67,537 Other $ 205,140 $ 74,584 $ 130, % $ 139,689 Total non-capital expense $ 329,138 $ 161,147 $ 167, % $ 207,226