<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 31, 1998
Senior Retirement Communities, Inc.
----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Louisiana 72-1394159
-------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number
507 Trenton Street, West Monroe, Louisiana 71291
-----------------------------------------------------------
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including are code (318) 323-2115
Number of share outstanding of each of the registrant's class of common
shares and preferred shares, as of September 31, 1998
Common Shares 624,410 par value $ .10 per share:
Preferred shares 425,000 par value $1.00 per share:
- ------------------------------------------------------------------------------
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 twelve (12) months (or for such shorter
period that the registrant was required to file such report) and (2) has
subject to such filing requirements for the past ninety (90) days.
Yes X No
----- ------
<PAGE>
Senior Retirement Communities, Inc.
Form 10-QSB
TABLE OF CONTENTS
Part 1: Financial Information Page
Item 1. Financial Statements (Unaudited)
Balance Sheets as of September 30, 1998 (unadited)
and December 31, 1997 (Audited)................................. 2
Statements of Income for the three months and nine months
ended September 30, 1998........................................ 3
Statement of Retained Earnings for the three months and
nine months ended September 30, 1998............................ 4
Statements of Cash Flows for the three months and nine
Months ended September 30, 1998................................. 5-6
Notes to Financial Statements................................... 7-15
Item 2. Plan of Operations .......................................... 16-19
Part II: Other Information
Item 1. Legal Proceedings........................................... 19
Item 2. Changes in Securities....................................... 19
Item 3. Defaults Upon Senior Securities............................. 19
Item 4. Submission of Matters to a Vote of Security Holders......... 20
Item 5. Other Information........................................... 20
Item 6. Other Matters............................................... 20
Item 7. Exhibits and reports on Form 8-K ........................... 20
<PAGE>
SENIOR RETIREMENT COMMUNITIES, INC.
FINANCIAL STATEMENT
SEPTEMBER 30, 1998
<PAGE>
Senior Retirement Communities, Inc.
Financial Statement
September 30, 1998
Table of Contents
FINANCIAL STATEMENTS: Page
Report 1
Balance Sheets 2
Statements of Income 3
Statements of Retained Earnings 4
Statements of Cash Flows 5
Notes to Financial Statements 7
<PAGE>
To the Board of Directors and Shareholders
Senior Retirement Communities, Inc.
West Monroe, Louisiana
The accompanying balance sheets of Senior Retirement Communities, Inc.
( A Development Stage Company) as of September 30, 1998 and December 31,
1997 and the related statements of income, retained earnings and cash flows
for the three and nine months then ended were prepared internally from the
books and records of Senior Retirement Communities, Inc. These financial
statements were not audited or reviewed.
Joanne Caldwell-Bayles
President, Senior Retirement Communities, Inc.
October 20, 1998
<PAGE>
-2-
<TABLE>
<CAPTION>
Senior Retirement Communities, Inc.
Balance Sheets
ASSETS September 30, December 31,
1998 1997
<S> <C> <C>
Current assets:
Cash $ 1,076,175 $ 352
Prepaid insurance 4,125 4,125
----------- -----------
Total current assets 1,080,300 4,477
----------- -----------
Property, plant and equipment
Building construction in progress 4,524,264 716,307
Land 1,626,500 635,000
----------- -----------
Total property, plant and equipment 6,150,764 1,351,307
----------- -----------
Other assets:
Deposits 0 2,000
Deferred charges 405,737 120,000
----------- -----------
Total other assets 405,737 122,000
----------- -----------
$ 7,636,801 $ 1,477,784
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft $ 0 $ 21,405
Accrued expenses 268,483 0
Notes payable 2,452,158 450,000
----------- -----------
Total current liabilities 2,720,641 471,405
----------- -----------
Long-term debt:
Bonds payable 3,127,750 0
----------- -----------
Other liabilities:
Due to stockholders and affiliates 128,790 58,200
----------- -----------
Stockholders' Equity
Common stock, $ 2 par value,
1,500,000 shares authorized, 624,410
shares issued and outstanding 62,441 47,441
Preferred stock, $ 1 par value,
425,000 shares authorized, issued
and outstanding 425,000 0
Additional paid- in capital 1,186,379 901,379
Retained earnings ( deficit )
accumulated during the development
stage (14,200) (641)
----------- -----------
Total stockholder's equity 1,659,620 948,179
----------- -----------
$ 7,636,801 $ 1,477,784
----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
-3-
<TABLE>
<CAPTION>
Senior Retirement Communities, Inc.
Statement of Income
For the Three and Nine Months ended September 30, 1998
Three Months Ended Nine Months ended
September 30, 1998 September 30, 1998
<S> <C> <C>
Revenues $ 2,137 $ 2,137
----------- -----------
Operating expenses
Advertising 2,238 2,244
Bank charges 90 125
Casual labor 0 174
Donations 0 150
Dues and subscriptions 25 275
Education 2 1,268
Insurance 364 471
Legal and accounting 0 210
Miscellaneous 161 161
Office 79 79
Permits 0 75
Printing 2,526 2,798
Taxes 0 2,581
Travel and entertainment 660 835
----------- -----------
Total operating expenses 6,145 11,446
----------- -----------
Net income (loss) $ (4,008) $ (9,309)
----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
-4-
<TABLE>
<CAPTION>
Senior Retirement Communities, Inc.
Statement of Retained Earnings ( Deficit )
For the Three and Nine Months ended September 30, 1998
Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998
<S> <C> <C>
Beginning retained earnings $ (5,942) $ (641)
Net income (loss) (4,008) (9,309)
----------- -----------
Preferred dividends paid (4,250) (4,250)
----------- -----------
Ending retained earnings (deficit) $ (14,200) $ (14,200)
----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
-5-
<TABLE>
<CAPTION>
Senior Retirement Communities, Inc.
Statement of Cash Flows
For the Three and Nine Months ended September 30, 1998
Three Nine
Months Ended Months Ended
September 30,1998 September 30, 1998
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 2,137 $ 2,137
Cash paid to suppliers and employees (6,145) (11,446)
----------- -----------
Net cash provided (used) by
operations (4,008) ( 9,309)
----------- -----------
Cash flows from investing activities
Acquisitions land 0 ( 991,500)
Payments towards construction (2,295,867) (3,807,957)
Payments of deposits (4,000) (2,000)
Payment of deferred charges ( 36,045) (285,737)
Net cash provided by (applied to)
Investing activities (2,255,822) (5,083,194)
----------- -----------
Cash flows from financing activities
Issuance of common stock 0 300,000
Issuance of preferred stock 0 425,000
Interim construction loans 301,904 2,270,641
Issuance of bonds 3,127,750 3,127,750
Payment of Preferred dividends (4,250) (4,250)
Loans from stockholders and affiliates (100,532) 70,590
----------- -----------
Net cash provided by (applied to)
financing activities 3,324,872 6,189,731
----------- -----------
Net increase (decrease) in cash 1,065,042 1,097,228
Cash at the beginning of the period 11,133 (21,053)
----------- -----------
Cash at the end of the period $ 1,076,175 $ 1,076,175
----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
-6-
<TABLE>
<CAPTION>
Senior Retirement Communities, Inc.
Statement of Cash Flows
For the Three and Nine Months ended September 30, 1998
Three Nine
Months Ended Months Ended
September 30, September 30,
1998 1998
Reconciliation of net income to net cash provided by operations:
<S> <C> <C>
Net income $ (4,008) $ (9,309)
----------- -----------
Adjustments to reconcile net income to cash
provided by operations 0 ( 0)
----------- -----------
Net cash provided (used) by operations $ (4,008) $ (9,309)
----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
-7-
Senior Retirement Communities, Inc.
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Business
The Company is a Louisiana corporation established to develop assisted living
center and dementia facilities for the housing and care of senior citizens in
Ruston, Bossier City, and Shreveport, Louisiana
Basis of Accounting
The Company uses the accrual basis of accounting and will utilize a calendar
year for all reporting purposes.
Income Taxes
The Company is treated as a corporation for federal income tax purposes.
Property, Buildings, Equipment, and Depreciation
Buildings and equipment are stated at cost and are to be depreciated by the
straight- line method over their estimated economic lives. Buildings shall
include capitalized construction period interest which will be treated
as a component cost of the building and depreciated over the same economic
life as the building. Some of the land was acquired in a series of tax-free
exchange in return for shares of the Company's common stock (Note 5).
Consequently, the Company's tax basis in those properties for income tax
purposes is the stockholder's basis.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affects certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Advertising
The Company follows the policy of charging the costs of advertising to expense
as incurred.
<PAGE>
-8-
Senior Retirement Communities, Inc.
Notes to Financial Statements
Note 1- Summary of Significant Accounting Policies- (continued)
Deferred Charges
Deferred charges represents the costs associated with obtaining long- term
financing for the care facilities of the Company. These costs are to be
amortized over the life of the bonds using the effective interest rate method.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-QSB and Article 10 of
Regulations S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In management's opinion, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of the unaudited interim financial statements have been included.
Operating results for interim periods reflected are not necessarily
indicative of the results that may be expected for a full fiscal year. These
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-KSB.
Certain reclassifications have been made to previously reported amounts to
conform with the current presentation.
Note 2 - Related Party Transactions
The Company acquired 6 acres of land at the Ruston location with an estimated
fair market value of $ 450,000 in a transaction with one of its stockholders
in exchange for 77,500 shares of common stock and by assuming a debt of
$200,000, which is reflected as a due to stockholders and affiliates. This
transaction would have resulted in a gain to the transferring shareholder
of approximately $ 95,000 had it not been a tax-free exchange. This land is
included on the balance sheet at a value of $ 355,000 which is the
transferring shareholder's basis in this property.
<PAGE>
-9-
Senior Retirement Communities, Inc.
Notes to Financial Statements
Note 2- Related Party Transactions - (continued)
The Company acquired 20 acres of land at the Ruston location with an estimated
fair market value of $ 250,000 in a transaction with one of its stockholders
in exchange for 40,000 shares of common stock. This transaction would have
resulted in a gain to the transferring shareholder of approximately $ 170,000
had it not been a tax-free exchange. This land is included on the balance
sheet at a value of $ 80,000 which is the transferring shareholder's basis
in this property.
The Company acquired land at the West Monroe location with an estimated fair
market value of $ 200,000 in a transaction with one of its stockholders in
exchange for 100,000 shares of common stock. This transaction would have
resulted no gain to the transferring shareholder had it not been a tax free
exchange.
The Company has entered into a construction contract in the amount of
$ 2,750,000 with one of the shareholders to construct the Ruston facility.
The contract calls for the cash payments of $ 2,500,000 during the building
of the facility as approved by the contract engineer and the issuance of an
additional 125,000 shares of common stock at the completion of the project,
such stock issuance to represent the builders profit in the project. As of
September 30, 1998 $ 2,114,864 has been paid on this contract.
The Company has entered into a construction contract in the amount of
$1,225,000 with one of the shareholders to construct the Shreveport
facility. The contract calls for the cash payments during the building
of the facility as approved by the contract engineer. As of September 30,
1998 $ 345,653 has been paid on this contract.
The Company has entered into a construction contract in the amount of
$2,200,000 with one of the shareholders to construct the Bossier City
facility. The contract calls for the cash payments during the building of
the facility as approved by the contract engineer. As of September 30, 1998
$ 771,123 has been paid on this contract.
Due to stockholder and affiliates consist of amounts advanced by stockholders
and other related entities.
<PAGE>
-10-
Senior Retirement Communities, Inc.
Notes to Financial Statements
Note 3 - Deferred Charges
Deferred charges are summarized as follows:
Loan fees $405,737
The loan fees are to be amortized as interest expense over the life
of the related loan by use of the interest method.
Note 4 - Notes Payable
Notes payable at September 30, 1998 consists of the following:
1. Church Loans $ 552,452
2. Church Loans 1,046,168
3. Church Loans 651,538
4. First Republic Bank 202,000
-----------
Total $ 2,452,158
1. Note payable to Church Loans, dated December 1, 1997. This note
is to provide the funding for the construction of the Ruston location
in an amount not to exceed $ 2,700,000. The loan is to be repaid from the
permanent financing of the project through the issuance of bonds on a best
efforts basis. This note calls for the payment of interest at a rate of
prime (as published in the Wall Street Journal plus two per cent but in no
case shall the rate be less than ten and one-half per cent per annum. The
lender shall maintain a co-first mortgage position on the Ruston location
until such time as the bonds are sold. At that time Church Loans will
maintain a co- first mortgage position for any amounts which are not
liquidated by the bond proceeds in such proportion that said amount bears
to the amount of bonds issued for that location.
2. Note payable Church Loans, dated April 28, 1998. This note is to
provide the funding for the construction of the Bossier City location in an
amount not to exceed $2,200,000. The loan is to be repaid from the permanent
financing of the project through the issuance of bonds on a best
efforts basis. This note calls for the payment of interest at a rate of
prime (as published in the Wall Street Journal plus two per cent but in no
case shall the rate be less than ten and one- half per cent per annum. The
lender shall maintain a co-first mortgage position on the Bossier City
location until such time as the bonds are sold. At that time Church Loans
will maintain a co- first mortgage position for any
<PAGE>
-11-
Senior Retirement Communities, Inc.
Notes to Financial Statements
Note 4 - Notes Payable - (continued)
amounts which are not liquidated by the bond proceeds in such proportion that
said amount bears to the amount of bonds issued for that location.
3. Note payable Church Loans, dated April 28, 1998. This note is to
provide the funding for the construction of the Shreveport location in an
amount not to exceed $ 1,845,000. The loan is to be repaid from the
permanent financing of the project through the issuance of bonds on
a best efforts basis. This note calls for the payment of interest at a rate
of prime (as published in the Wall Street Journal plus two per cent but in no
case shall the rate be less than ten and one- half per cent per annum. The
lender shall maintain a co-first mortgage position on the Shreveport location
until such time as the bonds are sold. At that time Church Loans will
maintain a co- first mortgage position for any amounts which are not
liquidated by the bond proceeds in such proportion that said amount bears
to the amount of bonds issued for that location.
4. Note payable First Republic Bank, dated April 30, 1998 represents
a loan in the amount of $ 202,000 secured by a first mortgage on a 9.72
acre tract of land at the proposed Minden location. This loan requires
monthly interest payments based on interest at the rate of ten per cent per
annum with the principal due November 1, 1998.
Through September 30, 1998 the Company has incurred $ 346,462 of interest
expense, all of which has been treated as construction period interest
and included as part of the Building construction on progress on the balance
sheet.
Note 5 - Issuances of Common Stock
The Company was formed September 10, 1997. The Company has issued Common
Stock totaling 624,410 shares of $ .10 par value in exchange for Property and
cash as follows:
<TABLE>
<CAPTION>
Total Issue
Description Shares Amount
<S> <C> <C>
1. Certificate number 1 issued in 20,417 $ 40,834
exchange for cash
2. Certificate number 2 issued in exchange 85,896 $ 171,792
for services rendered in connection with
<PAGE>
-12-
Senior Retirement Communities, Inc.
Notes to Financial Statements
Note 5 - Issuance of Common Stock - (continued)
developing the plans for construction for the
Ruston location and a deposit on the plans
for the Bossier City, Shreveport, Minden, and
West Monroe locations
3. Certificate number 3 issued in exchange 20,417 40,834
for cash
4. Certificate number 4 issued in exchange 77,500 155,000
for the equity in 6 acres of land at the
Ruston location.
5. Certificate number 5 issued in exchange 40,000 80,000
for 20 acres of land at the Ruston location.
6. Certificate number 6 issued in exchange 57,264 114,528
for services rendered in connection with
developing the plans for construction
for the Ruston location and a deposit on
the plans for the Bossier City, Shreveport,
Minden, and West Monroe locations
7. Certificate number 7 issued in exchange 20,416 40,832
for cash
8. Certificate number 8 issued in exchange for 100,000 200,000
land at the West Monroe location.
9. Certificate number 9 issued in exchange 52,500 105,000
for cash.
10. Certificate number 10 issued in exchange 150,000 300,000
for services rendered in connection with
developing the plans for construction for
the Ruston, Bossier City, and Shreveport
--------- ---------
Totals 624,410 $1,248,820
========= =========
</TABLE>
The Company has also reserved 102,440 shares of Common Stock to be issued
at the completion of the services described above relative to certificates
2 and 6.
<PAGE>
-13-
Senior Retirement Communities, Inc.
Notes to Financial Statements
Note 6 - Issuances of Prefered Stock
In April of 1998 the Company issued 425,000 shares of Preferred Stock in
connection with a purchase of land for the Bossier City, Louisiana location.
<TABLE>
<CAPTION>
The stock certificates were issued as follows:
Description Shares Amount
<S> <C> <C>
1. Certificate number 1 issued in 100,000 $ 100,000
exchange for land
2. Certificate number 2 issued in 100,000 $ 100,000
exchange for land
3. Certificate number 3 issued in 100,000 $ 100,000
exchange for land
4. Certificate number 4 issued in 100,000 $ 100,000
exchange for land
5. Certificate number 5 issued in 25,000 $ 25,000
exchange for land ======= =========
Totals 425,000 $ 425,000
</TABLE>
The Preferred Stock issued accrues dividends at the rate of four per cent per
year for each of the first two years, then six per cent per year for the next
two years then at eight per cent per year for the final two years. The
Preferred Stock is callable at the Company's option and shall be redeemed at
the end of the sixth year if still outstanding. The preferred shareholders
have an option to purchase common stock at a twenty per cent discount at any
time within eight years of the preferred stock issue date if the Company
issues additional common stock through a public offering.
Note 7 - Development Stage Operations
The Company has begun construction of the Ruston, Shreveport, and Bossier City
facilities. Ruston has an estimated completion date of late 1998, while
Shreveport and Bossier City are scheduled to open in early 1999. The
expenditures related to this project are reflected as building construction
in progress on the balance sheet.
<PAGE>
-14-
Senior Retirement Communities, Inc.
Notes to Financial Statements
Note 8 - Bonds Payable
On June 23, 1998, the Company's issue of $ 9,000,000 of bonds
became effective. These bonds are to become the permanent financing for
the projects under construction reflected in this financial statement. As of
September 30, 1998, these bonds are in the process of being sold with the
proceeds of these bond sales being used to liquidate the construction loans
noted in note 4. As of September 30, 1998, the status of these bonds is as
follows:
<TABLE>
<CAPTION>
Amount Amount
Location Authorized Issued
<S> <C> <C>
Ruston $ 3,685,000 $ 2,320,750
Bossier City 3,470,000 451,500
Shreveport 1,845,000 355,500
---------- ----------
Totals $ 9,000,000 $ 3,127,750
---------- ----------
</TABLE>
These bonds have varying interest rates from 7.5 percent per annum to
11 percent per annum. The maturity of these bonds is from one to twenty
years.
Note 9 - Subsequent Events
On October 2, 1998, the Company sold part of its real estate to The Biltmore
Group, LLC. The land sold was 5.72 acres of the total of 9.72 acres purchased
for a potential Minden, Louisiana location. The sales price was $ 203,739
which results in a gain to the Company of $ 86,059. The Biltmore Group,
LLC is a related party to the Company in that the majority shareholders
in the Company are also members of The Biltmore Group, LLC.
As described in note 8, the Company is in the process of issuing bonds
to form the permanent financing of the three locations currently under
construction. Through October 20, 1998, bond sales after the balance
sheet date were as follows:
<PAGE>
-15-
Senior Retirement Communities, Inc.
Notes to Financial Statements
Note 9 - Subsequent Events (continued)
<TABLE>
<CAPTION>
Amount Issued Amount Issued
Amount through Sept. Oct. 1 through
Location Authorized 30, 1998 Oct. 20, 1998
<S> <C> <C> <C>
Ruston $ 3,685,000 $ 2,320,750 $ 193,000
Bossier City 3,470,000 451,500 592,000
Shreveport 1,845,000 355,500 456,750
---------- ---------- ----------
Totals $ 9,000,000 $ 3,127,750 $ 1,241,750
---------- ---------- ----------
</TABLE>
According to the terms of the bond issues, all funds are held in escrow and
the bonds are not issued until certain levels of sales have been achieved at
each location. Those levels and the date achieved for each location is as
follows:
<TABLE>
<CAPTION>
Amount Amount to Date
Location Authorized Achieved Issuance Achieved
<S> <C> <C> <C>
Ruston $ 3,685,000 750,000 July 10, 1998
Bossier City 3,470,000 750,000 October 15, 1998
Shreveport 1,845,000 500,000 October 7, 1998
</TABLE>
If the above stated levels had not been achieved for any particular location,
then proceeds from the sales of those bonds would have been returned to the
purchasers and the Company would have had to pursue other means of permanently
financing the facilities under construction.
<PAGE>
-16-
PLAN OF OPERATIONS
This commentary should be read in conjunction with the following documents
for a full understanding of Senior Retirement Communities, Inc. financial
condition and the status of the Company which reflect no operations; the
entire Prospectus dated June 23, 1998; 10QSB for the period ending June 30,
1998; and the unaudited financial statement presented herein along with all
of the footnotes thereto. As a result of the Company not having any
operations as of the end of the third quarter, readers should be aware of
the success and/or failures within the Assisted Living Industry. Because the
bonds are being sold on a best efforts basis, particular attention should be
paid to the bond sale results as set forth in footnote 8 and 9 of the
financial statement.
As of September 30, 1998 the Company had under construction three Assisted
Living Facilities ("ALFs") in Ruston, Bossier City, and Shreveport, Louisiana
containing 134 units. There are 48 memory disorder units primarily for the
support of individuals suffering from Alzheimer's and related disorders. The
balance of the 86 units is designed for more traditional assisted living
units. The Ruston site that was under development consists of 48 assisted
living units and 12 independent living units. The Ruston ALF opened for
business on October 16, 1998. The other two construction sites discussed are
located in Bossier City, Louisiana which consists of 36 assisted living units
and 24 Alzheimer and related disorder units; the other site is located in
Shreveport, Louisiana consisting of 24 Alzheimer's and related disorder
units. Bossier and Shreveport are scheduled to open in early winter
1998-1999.
The construction of the facilities are being financed through the sale
of Co-First Mortgage bonds as set forth in the prospectus dated June 23, 1998
with construction loans provided by Church Loans and Investments Trust.
The Company also owns approximately 26 acres of land located in
Ruston(20 acres), Shreveport (2 acres), and Minden (4 acres), Louisiana for
future construction.
The Company continues to finance the expansion and development by
a combination of private placement of Common stock and Preferred stock as
well as the public offering of First Mortgage Bonds. In March 1998 the
Company purchased approximately 6 acres of land for $525,000 paying $100,000
in cash and the issuing 425,000 shares of $1.00 par value Preferred stock.
The property is the location of the Bossier City, Louisiana facility. The
Preferred stock is paying dividends at a rate of 4% for the first two years,
6% for the second two years, and 8% for the final two years. The Preferred
stock shall be redeemed in full at the end of the fifth year for the total
sum including accrued dividends. It is recallable at anytime at the option
of the Company.
<PAGE>
-17-
The holders of the Preferred stock shall also have the right to purchase
common stock at a 20% discount if and when the company issues additional
common stock in the form of a public offering if done so within 8 years of
date issued for preferred stock.
Change in Employees
Prior to the opening of the Ruston ALF, the Company had no operations.
Employees consisted of the President, Joanne M. Caldwell-Bayles and two other
employees. After the opening of the Ruston ALF on October 16, 1998, the
Company's employees increased to 18. It is anticipated upon opening of the
Bossier and Shreveport facilities, the number of employees will increase to
38. As occupancy increases, additional employees will be required. The
number required will be determined by the increase in occupancy of each
facility.
Results of operations:
The Company's first ALF opened for business on October 16, 1998 in Ruston,
Louisiana. The Facility has been well received by the community. There has
been insufficient rentals to form an opinion of future success with any
certainty. The projected operating loss for the fourth quarter of 1998 is
estimated to be approximately $196,000.00, which includes start-up costs of
approximately $100,000.00 for the Ruston ALF, excluding a one time gain of
$86,059 from the sale of the Minden, Louisiana property. The Shreveport and
Bossier City facilities are expected to open for business in the first
quarter of 1999 at which point all of the facilities will be open and
operating. Operating results for the first quarter of 1999 will depend on
the actual date of the completion and opening of the Shreveport and Bossier
City ALF's.
Major changes in Financial Conditions
The major changes in financial condition between December 31, 1997 and
September 30, 1998 are as follows: Current assets consisted primarily of
cash in the amount of $1,076,175. Cash is restricted as follows: $182,280 to
fund bond reserve accounts and the balance of $893,895 is restricted to pay
Operating Fund Payments and retire Construction Loans. Reader is encouraged
to read page 13 of the Prospectus. Property, Plant, and Equipment increased
from $1,351,307 as of December 31,1997 to $6,150,764 as of September 30, 1998.
The increase is the result of land acquisition and construction in progress
at Ruston, Bossier City and Shreveport, Louisiana. Other assets increased
from $122,000 as of December 31, 1997 to $405,737 as of September 30, 1998
which consisted of deferred charges. Deferred charges consist of loan fees
to be amortized as interest expense over the life of the related loan by use
of the interest method. Total current liabilities increased $471,405 as of
December 31, 1997 to $2,720,641 as of September 30, 1998 consisting primarily
of construction loans. Long term debt
<PAGE>
-18-
increased from $0 as of December 31, 1997 to $3,127,750 as of September
30, 1998 which consisted of bond payables. Liabilities due stockholders
and affiliates increased from $58,200 as of December 31, 1997 to $128,790
as of September 30, 1998. Total Stockholders Equity increased from $948,179
as of December 31, 1997 to $1,659,620 as of September 30, 1998. The increase
is the result of issuing 425,000 shares of Preferred Stock to the Patterson
Insurance Company for the purchase of land for the Bossier City, Louisiana
location. (A more detailed explanation is set forth in Note 6 of the financial
statement.)
Liquidity and Financial Position
The Company receives significant operating funds from its affiliate The
Forsythe Group, Inc. through short-term loans. The ability of The Forsythe
Group to continue to make available loans is necessary for the continuing
success of the company. If future conditions would create problems in
Forsythe's ability to advance funds to the Company, the Company's future
success would be in doubt.
Year 2000
The Company relies on computer hardware, software, and related technology,
together with data, in the operation of its business. In addition, the
Company is dependent on the same type of technology and data generated
by financial institutions; the Federal Government including the Social
Security Administration; State of Louisiana; Investment Bankers; Trustees
for the bond holder; Interim lenders; and Utility companies. The Company
has initiated an enterprise wide program to prepare for the year 2000.
The Company has created a year 2000 program office reporting to the Chief
Executive Officer to coordinate and oversee the company's year 2000 program.
All of the Company's computer systems have been cleared to meet the year
2000 requirements by contacting the manufacturer of the equipment and
receiving written notice of compliance. The computer software necessary
for the accounting function has also been cleared for the year 2000 requirements
in writing from the developer of the accounting software. The Company
has discussed the year 2000 with all of the above set forth companies
and agencies and have been assured either in writing or verbally that
each anticipates compliance for the year 2000. As a result of the Company's
own operations already being in compliance with the year 2000, it is dependent
upon outside forces to also be in compliance. It is impossible for the
Company to be sure that all governmental agencies, utilities, financial
institutions, and others with whom it does business will also be in compliance.
The failure of some or all the above stated agencies being in compliance
with the year 2000 would be catastrophic, and the survival of the Company
would be in doubt.
<PAGE>
-19-
Forward- Looking Statements:
Statements that are not historical facts, including statements about
(I) operating profits or losses as those discussed in results of operations;
(II) completion dates of facilities; (III) fixed asset expenditures; and
(IV) the successful sale of the balance of the bonds are forward-looking
statements that involve risks and uncertainties. The Company wishes to
caution the reader that factors below, along with the factors set forth
in the Company's June 23, 1998 prospectus and in the Company's other documents
filed with the SEC, have affected and could affect the Company's actual
results causing results to differ materially from those in any forward-looking
statement. These factors include: the acceptance of the Assisted Living
Concept by each of the communities in which they are located, increased
competition in each of the communities, economic outlook whether the economy
improves or slips into recession, technological changes in dealing with
seniors, change in government regulation, the success of strategic decisions
to improve financial performance, the ability of the Company to contain cost,
and the continued increase in the market acceptance of ALF's.
Part II - Other Information
Item 1. Legal proceedings
None
Item 2. Change in Securities
Common Stock
On May 18, 1998, the Company issued certificate number 100 for
150,000 shares to the Forsythe Group in exchange for services
rendered On the plans and specifications for the Bossier City and
Shreveport Locations.
Preferred Stock
On April 24, 1998, the Company issued certificates number 1 through
5 Totaling 425,000 shares to Patterson Insurance in addition to $ 100,000
Cash in payment of the land for the land for the Bossier City location.
Item 3. Defaults Upon Senior Securities
None
<PAGE>
-20-
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Real Estate Acquisitions and Sale:
On April 30, 1998, the Company acquired land for a proposed facility
in Minden, Louisiana for cash in the amount of $ 200,000 and a sale of a
portion of the Minden land. *See note 9. Subsequent Events for more
detailed information about the sale of Minden land.
On April 27, 1998, the Company acquired land for a proposed facility
in Shreveport, Louisiana for cash in the amount of $ 266,500.
On April 24, 1998, the Company acquired land for a proposed facility
in Bossier City, Louisiana for cash in the amount of $ 100,000 and the
issuance of 425,000 shares of preferred stock for a total consideration
of $525,000.
Item 6: Other Matters
In its prospectus to potential buyers of the bonds to be issued, the
Company stated that all positions requiring skilled personnel would be
filled with people holding Nursing degrees. The Company has found that
people holding gerontology degrees or those who have been trained in
gerontology are also qualified to hold many of the positions and in many
cases are more qualified than are the nursing graduates. Due to this
discovery, some of the positions presented in the Prospectus projected to
be staffed with nursing graduates will instead be staffed Gerontology
graduates or those who have been trained in gerontology in order to
provide better quality services to those being served.
Item 7. Exhibits and reports on Form 8-K
None
<PAGE>
-21-
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Senior Retirement Communities, Inc. (Registrant)
/S/Joanne M. Caldwell-Bayles
Date: November 3, 1998 By: Joanne M. Caldwell-Bayles
President, Finance and Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
==============================================================================
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE UNAUDITED FINANCIAL STATEMENT OF SENIOR RETIREMENT COMMUNITIES, INC.
DATED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
INFORMATION SET FORTH IN THIS SCHEDULE DOES NOT CONTAIN ALL OF THE INFORMATION
NECESSARY AND SHOULD BE READ IN CONJUNCTION WITH THE COMPLETE UNAUDITED
FINANCIAL STATEMENT DATED SEPTEMBER 30, 1998 INCLUDING FOOTNOTES.
===============================================================================
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,076,175
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<CURRENT-LIABILITIES> 2,720,641
<BONDS> 0
425,000
0
<COMMON> 62,441
<OTHER-SE> 1,186,379
<TOTAL-LIABILITY-AND-EQUITY> 7,636,801
<SALES> 0
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<OTHER-EXPENSES> 11,446
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<NET-INCOME> (9,309)
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