UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended March 31, 1999
Commission File Number 0-18727
CARC, Inc.
(Name of small business issuer in its charter)
South Carolina 57-0641693
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation of organization)
500 Downs Loop, Clemson, South Carolina 29631
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including
area code: (864) 654-1155
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock
(Title of class)
Check whether the issuer (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
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [x]
The issuer's revenues for its most recent fiscal year: $3,518,666
The aggregate market value of the voting stock held by non-affiliates of the
registrant is unknown and the stock is not currently being traded.
The number of shares outstanding of each of the registrant's classes of
common stock, as of June 1, 1999:
Common stock, $1 par value 536,000
Documents Incorporated by Reference
Portions of registrant's definitive proxy statement (to be filed pursuant to
Regulation 14A) or definitive information statement (to be filed pursuant to
Regulation 14C) for registrant's 1999 annual meeting are incorporated by
reference in Part III.
PART 1
Item 1. Business.
CARC, Inc., the registrant, was organized under the laws of the State of
South Carolina on December 20, 1976 to plan, develop, construct and operate a
retirement community ("Clemson Downs") in the Clemson, South Carolina area to
include residential apartments, an accredited health care center and related
recreational and social facilities. The Company's present office is located
at 500 Downs Loop, Clemson, South Carolina 29631, and its telephone number
is (864) 654-1155.
The principal services rendered by the registrant are retirement community
services. They include the operation of a health care center, apartment
rentals and providing recreational and other associated services. For the
last two fiscal years, the percentage of total revenue contributed by each of
these services which provided 15% or more of consolidated revenue are as
follows:
1999 1998
1. Health care center - 48.7% 51.9%
2. Apartment rentals - 49.7% 46.6%
The apartment buildings at Clemson Downs provide a choice of seven floor
plans. The apartments rent for between $885 and $1,767 per month, depending
on which floor plan is chosen and whether the apartment is rented by one
person or a couple. One meal per day for each resident is included in the
rental fee. In addition, residents may select extra services including
housekeeping and meal delivery. The additional services are billed monthly.
Each apartment has a patio deck, and each floor of each building has its own
washer and dryer room. All buildings have entrances at ground level.
Elevators also serve some buildings. Doors are electric with wheelchair level
door openers. There are thermal-pane windows in patio doors. All halls have
assist rails and wide doorways. Each apartment unit has individual heating
and air-conditioning systems and an individual hot water heater. All the
apartments and publin areas in the apartment wings are carpeted, with the
exception of the kitchen and bathroom areas. The kitchens are fully equipped
with a rnage and oven, refrigerator, dishwasher and disposal. There is an
emergency response call system to the health care center in each apartment
and smoke detectors are located throughout the property.
Item 1. Business. (continued)
The health care center provides convalescent and rehabilitative treatment to
inpatient adults, including those who are admitted after hospitalization and
before returning to their homes, and is designed to supplement general
hospital care, rather than compete directly with general hospitals. The
services furnished by the health care center include room, board, nursing
care, drugs, supplies, medical equipment, other medical services, social
activities and physical, speech and recreational therapy. The health
care center contains private and semi-private rooms. It also has laundry
facilities and a reception area. The admission, treatment and discharge
of each heal care center resident are under the direction of the resident's
attending physician. Although no full-time staff physicians are retained,
the health care center has a part time medical director as well as consulting
and on-call physicians as required.
The health care center receives payments for resident care directly on a
private pay basis, including payments from private health insurance.
Health care facility operations are subject to federal, state and local
government regulations. Health care facilities are subject to periodic
inspection by state licensing agencies to determine whether the standards
necessary for continued licensure are maintained. In granting and renewing
licenses, the state agencies consider, among other things, the buildings,
furniture and equipment; the qualifications of the administrative personnel
and staff; the quality of care; and the compliance with the laws and
regulations relating to operation of the facilities. Management believes that
the health care center at Clemson Downs is presently in substantial compliance
with all applicable federal, state and local regulations with respect to
licensure requirements. However, because those standards are subject to
change, there can be no assurance that the health care center will be able
to maintain its licenses upon a change in standards, and future changes in
those standards could necessitate substantial expenditures by the registrant
to comply with them.
Clemson Downs competes with other local and regional retirement communities
on the basis of reputation and physical appearance and in the case of its
health care center on the basis of the quality of care provided. The primary,
secondary and tertiary service areas for Clemson Downs are as follows:
Primary Service Area - the City of Clemson;
Secondary Service Area - an 18 mile radius extending from the City of
Clemson; and
Tertiary Service Area - All other areas.
Item 1. Business. (continued)
Approximately 60% of the current patients in the health care center resided
in the Primary Service Area immediately before being admitted to the health
care center. The Secondary Service Area accounted for almost 30% of the
current patients last residence and the remaining 10% of the patients at the
health care center were from areas outside of the 18 mile radius, or the
Tertiary Service Area.
There are many health care institutions and corporations that furnish
services similar to those offered by the registrant. Some competitors operate
nationally and have substantially greater resources than the registrant.
The registrant also experiences competition in the search for nurses,
technicians, aides and other high-quality professional and non-professional
employees.
The registrant maintains professional liability, comprehensive general
liability and other typical insurance coverage on all its facilities. The
registrant believes that its insurance is adequate in amount and coverage.
The registrant employs approximately 75 persons in its business and believes
its relations with its employees are good.
Item 2. Properties.
The only property owned by the registrant is Clemson Downs, a retirement
community located in Clemson, South Carolina, which consists of 116
apartments, 52 nursing home beds and a community center which includes a
dining room, library, recreation areas and administrative offices. The
buildings are suitable and adequate for which they were designed and are in
good state of repair. In management's opinion, all properties are adequately
covered by insurance.
There is a primary mortgage balance of $1,759,941 at March 31, 1999 that is
collateralized by land and buildings. The Center also has a secondary
mortgage with a balance of $2,566,859 at March 31, 1999 for the construction
of a new apartment building and activity center. The construction was
completed during the early part of fiscal 1999.
Item 3. Legal Proceedings.
Registrant is not currently engaged in legal proceedings of material
consequence other than ordinary routine litigation incidental to its business.
Item 4. Submission of Matters to a Vote of Shareholders.
No matters were submitted to a vote of shareholders during the fourth quarter
of 1999.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
There is no established public trading market for the registrant's common
stock. The Center has served as agent in transferring shares from
stockholders to new residents interested in obtaining shares and has received
fees for these services. At March 31, 1999, there are approximately 536
holders of the registrant's common stock. There have been no cash dividends
declared or paid during the past two fiscal years to the holders of the
registrant's common stock.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The discussion and analysis that follow discusses the financial condition,
results of operations, liquidity and capital resources of the registrant.
Financial Condition
At March 31, 1999 and 1998, assets were $7.3 million and $7.4 million,
respectively. Also, the Center completed construction of a new apartment
building at a cost of $2.9 million and financed the cost with a loan of $2.8
million. All other assets and liabilities remained relatively unchanged.
On November 6, 1998, the Center began offering home health services to its
apartment residents. The Center is also in the planning stage of upgrading
one of its buildings to provide assisted living to residents.
Results of Operations
Net income for the years ended March 31, 1999 and 1998 was $139,000 and
$610,000, respectively. The decrease of $471,000 was the result of additional
depreciation and amortization expenses, debt service cost, and income tax
expense offset by increased operating revenues.
Operating Revenues
Operating revenues for the years ended March 31, 1999 and 1998 totaled $3.5
million and $3.3 million, respectively. The overall increase in operating
revenues of $233,000 was due primarily to the addition of twenty new
apartments and a rate increase of 3% of all fees.
Operating Expenses
Operating expenses for the years ended March 31, 1999 and 1998 were $3.4
million and $2.9 million, respectively. Expenses increased in all areas
except maintenance. Dietary expenses increased approximately $18,000 due to
an increase in food and beverage costs and labor costs. Residential services
increased $20,000 due to the hiring of an activity director for the new
activities building. Health care center costs increased $71,000 due to an
increase in the use of temporary employees and salary increases. Housekeeping
expenses increased approximately $7,000 due to an increase in salary and
supply costs. Administrative and general expenses increased approximately
$32,00 due primarily to an increase in wages. Depreciation expenses increased
$90,000 due to the new apartment building. Interest expense increased
$146,000 as a result of the additional facilities' financing.
Nonoperating revenue
Net nonoperating revenues for the years ended March 31, 1999 and March 31,
1998 remained stable.
Liquidity
The Center generated $520,000 in cash flows from operating activities and
$269,000 from a bank loan for the year ended December 31, 1998. The cash
flows were used primarily to fund $221,000 of capital expenditures and repay
long-term debt of $434,000.
Future Commitments for Capital Expenditures
During the year ended March 31, 1999, the Center completed construction of a
twenty unit two-bedroom apartment building and an activity center at a cost
of $2,896,000.
The Center received a maximum construction loan of $2,800,000 from Wachovia
Bank. This loan is secured by the real estate and future apartment rents.
Interest is at prime less .25%. Monthly principal and interest payments of
$25,206 will be made through April 2007.
Year 2000
The Company has addressed its Year 2000 compliance issues internally through
a plan that included upgrading computer terminals at a minimal cost. The
network operating system was upgraded to Windows 95 in December 1998.
Estimated costs of this upgrade range from $7,000 to $10,000. Externally,
the Company has received notification from its most significant vendors and
its primary financial institution confirming their Year 2000 compliance.
The Company will continue to monitor the Year 2000 issue and, if necessary,
develop a contingency plan to enable operations to continue and its financial
position and operating results not to be materially impacted should their
current plans not provide the desired results.
Item 7. Financial Statements.
The financial statements required to be filed are attached hereto following
the signature page.
Item 8. Changes in and Disagreement with Accountants on Accounting and
Financial Disclosure. - None.
PART III
Item 9. Directors and Executive Officers of the Registrant.
Item 10. Executive Compensation.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Item 12. Certain Relationships and Related Transactions.
The information called for by Items 9, 10, 11, and 12 has been omitted
because the registrant will file with the SEC no later than 120 days after
the close of its fiscal year a definitive proxy pursuant to Regulation 14A.
Such information is hereby incorporated by reference from registrant's
definitive proxy statement.
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
a. Exhibits
Exhibit 27.1 Financial Data Schedule
b. Reports on Form 8-K - None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CARC, INC.
Date: June 17, 1999 by: /s/ Susan Davis
Susan Davis
Administrator
(Principal Executive Officer)
Date: June 17, 1999 by: /s/ Debra Turner
Debra Turner
Accountant
(Principal Financial and
Accounting Officer)
Independent Auditors' Report
The Board of Directors
CARC, Inc.
Clemson, South Carolina
We have audited the accompanying balance sheets of CARC, Inc. (the Center) as
of March 31, 1999 and 1998, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Center's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CARC, Inc. as of March 31,
1999 and 1998 and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
/s/ Crisp Hughes Evans LLP
Greenville, South Carolina
May 6, 1999
CARC, INC.
Balance Sheets
March 31, 1999 and 1998
[CAPTION]
<TABLE>
Assets
<S> <C> <C>
1999 1998
Current assets:
Cash and cash equivalents $ 521,472 $ 292,918
Investments 107,568 213,441
Accounts receivable, net of allowance
for doubtful accounts of $5,000 in
1999 and 1998 132,828 105,237
Other receivables 654 113
Prepaid insurance 10,815 9,449
Inventory 9,756 11,120
Deferred tax asset 127,600 210,600
Total current assets 910,693 842,878
Property, buildings, and equipment, net 6,142,624 6,277,449
Entrance fees in escrow 121,441 112,817
Other assets 110,295 124,332
Total assets $ 7,285,053 $ 7,357,476
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 385,331 $ 325,248
Accounts payable 69,786 169,253
Accrued liabilities 154,907 142,573
Unearned revenue 40,517 9,494
Total current liabilities 650,541 646,568
Refundable entrance fees and deposits 121,441 112,817
Long-term debt, excluding current installment 3,941,469 4,167,094
Deferred tax liability 23,600 21,500
Total liabilities 4,737,051 4,947,979
Stockholders' equity:
Common stock, $1 par value. Authorized
600,000 shares; issued and outstanding
536,000 shares 536,000 536,000
Additional paid-in capital 2,111,886 2,111,886
Accumulated deficit (99,884) (238,389)
Total stockholders' equity 2,548,002 2,409,497
Total liabilities and
stockholders' equity $ 7,285,053 $ 7,357,476
</TABLE>
[CAPTION]
<TABLE>
CARC, INC.
Statements of Operations
Years Ended March 31, 1999 and 1998
<S> <C> <C>
1999 1998
Operating revenues:
Apartments $ 1,746,929 $ 1,530,828
Health care center, net 1,714,668 1,705,095
Dietary 44,971 39,258
Residential services 2,673 4,823
Miscellaneous 9,425 4,942
Net operating revenues 3,518,666 3,284,946
Operating expenses:
Apartments 241,040 209,186
Health care center 904,068 832,759
Dietary 603,872 585,516
Residential services 20,943 894
Maintenance and repair 100,785 108,420
Housekeeping 137,810 131,141
Administrative and general 327,998 296,475
Depreciation and amortization 365,240 275,457
Utilities 167,806 156,073
Interest 355,703 209,724
Property taxes 96,810 84,255
Total operating expenses 3,322,075 2,889,900
Income from operations 196,591 395,046
Nonoperating revenues (expenses):
Interest and investment income 31,274 31,368
Loss on sale of equipment (4,260) (5,756)
Nonoperating revenues (expenses) 27,014 25,612
Income before income taxes 223,605 420,658
Income tax benefit (expense) (85,100) 189,100
Net income $ 138,505 $ 609,758
Weighted common shares outstanding 536,000 536,000
Basic earnings per share $ .26 $ 1.14
</TABLE>
[CAPTION]
<TABLE>
CARC, INC.
Statements of Stockholders' Equity
Years Ended March 31, 1999 and 1998
<S> <C> <C> <C> <C>
Additional Total
Common Paid In Accumulated Stockholders'
Stock Capital Deficit Equity
Balances at
March 31, 1997 $ 536,000 $ 2,111,886 $ (848,147) $1,799,739
Net income - - 609,758 609,758
Balances at
March 31, 1998 536,000 2,111,886 (238,389) 2,409,497
Net income - - 138,505 138,505
Balances at
March 31, 1999 $ 536,000 $ 2,111,886 $ (99,884) $2,548,002
</TABLE>
[CAPTION]
<TABLE>
CARC, INC.
Statements of Cash Flows
Years Ended March 31, 1999 and 1998
<S> <C> <C>
1999 1998
Cash flows from operating activities:
Net income $ 138,505 $ 609,758
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 365,240 275,457
Loss on sale of equipment 4,260 5,756
Deferred income tax expense (benefit) 85,100 (189,100)
Decrease (increase) in:
Accounts receivable, net (27,591) 13,112
Accrued other receivables 2,541 1,385
Prepaid insurance (1,366) 2,343
Inventory 1,364 (321)
Other assets - (30,834)
Increase (decrease) in:
Accounts payable (99,467) 115,288
Accrued liabilities 12,334 17,716
Unearned revenue 31,023 (17,026)
Entrance fee proceeds 8,624 6,899
Net cash provided by operating activities 520,567 810,433
Cash flows from investing activities:
Purchases of investments (218,246) (312,413)
Maturities of investments 312,413 313,262
Capital expenditures (220,638) (2,688,911)
Net cash used in investing activities (126,471) (2,688,062)
Cash flows from financing activities:
Principal payments of long-term debt (434,281) (458,563)
Proceeds from construction loan 268,739 2,392,874
Net cash provided by (used in) financing activities (165,542) 1,934,311
Net increase in cash and cash equivalents 228,554 56,682
Cash and cash equivalents, at beginning of year 292,918 236,236
Cash and cash equivalents, at end of year $ 521,472 $ 292,918
</TABLE>
CARC, INC.
Notes to Financial Statements
March 31, 1999 and 1998
1. Summary of Significant Accounting Policies
CARC, Inc. (the "Center") is a corporation existing for the purpose of
operating a retirement community in the Clemson, South Carolina area with an
accredited health care facility, residential apartments and other facilities.
The following are the significant accounting policies used in preparation of
the accompanying financial statements.
Operating Revenues - Apartment revenues consist of rental, meals and
miscellaneous other income. Health Care Center revenues consist primarily of
room and board fees and fees for medical supplies and physical therapy.
Dietary revenues consist of fees charged for meals and catered functions.
Resident Revenue - Resident revenue is reported at the estimated net
realizable amounts from residents, third-party payors, and others for service
rendered.
Revenue received under the South Carolina Medicare program is subject to
audit and retroactive adjustment. Settlements, if any, are included as
contractual revenue adjustments in the year of determination.
Refundable Fees and Deposits - Refundable application fees are refunded upon
demand by the original applicant. Refundable security deposits are refunded
upon termination of the rental agreement less the cost of repairs.
Investments - The Center accounts for investments according to Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investment in
Debt and Equity Securities" ("SFAS 115"). Under SFAS 115, investment
securities held for investment are stated at amortized cost since the Center
has both the ability and intent to hold such securities to maturity. Premiums
and discounts on the investments are amortized into income over the
contractual terms of the security using a level yield interest method. Gains
and losses on the sale of these securities would be calculated on the
specific identification method.
Other Assets - Other assets consist of loan refinancing cost and loan closing
cost. Debt financing cost is amortized over the life of each respective loan.
Property, Buildings, and Equipment - Property, buildings, and equipment are
stated at cost or, if donated at fair market value at date of receipt,
less accumulated depreciation. Depreciation on buildings and equipment is
calculated on the straight-line method over the estimated useful lives of the
assets.
Inventory - Inventory consists of food and medical supplies and is carried at
cost (first-in, first-out).
Accounts Receivable - Accounts receivable consist of unsecured balances from
residents and patients for monthly apartment and health care center charges.
The Center uses the allowance method to account for uncollectible accounts
receivable. The allowance for bad debt accounts is based upon prior years'
experience and management's analysis of possible bad debts.
Income Taxes - The Center accounts for income taxes according to Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS
109"). Under SFAS 109, deferred income assets and liabilities are recognized
for the tax consequences of "temporary differences" by applying enacted
statutory rates applicable for future years to differences between the
financial statement carrying amounts and the tax basis of existing assets and
liabilities. In the event the future tax consequences of differences between
financial reporting bases and the tax bases of the Center's assets and
liabilities results in a deferred tax asset, an evaluation of the probability
of being able to realize the future benefits of such an asset is made. A
valuation allowance is provided for the portion of the deferred tax asset
when it is more likely than not that some portion or all of the deferred tax
asset will not be realized.
Statements of Cash Flows - For purposes of the statements of cash flows, the
Center considers unrestricted highly liquid investments with an original
maturity of three months or less when purchased to be cash or cash
equivalents.
As supplemental disclosure to the statements of cash flows, the Center paid
interest amounting to $355,703 in 1999 and $212,872 in 1998. The Center paid
no income taxes in 1999 or 1998.
Unearned Revenue - Unearned revenue represents advance payment of gross room
rates.
Earnings Per Share - The Center provides earnings per share in accordance
with SFAS No. 128, "Earnings Per Share". Basic earnings per share were
computed by dividing earnings available to shareholders by the weighted
average number of common shares outstanding. There are no securities
outstanding that represent potential common stock that would require
presentation of diluted earnings per share.
Estimates - The presentation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Reclassifications - Certain reclassifications to the 1998 amounts have been
made to conform to the presentation used in the 1999 financial statements.
2. Health Care Center Revenues
A portion of Health Care Center revenue is generated by patients who qualify
for the Medicare program. The approximate percentage of such revenue was 2%
in 1999 and 4% in 1998. The remainder of the revenues are from private paying
patients. Patient service revenue is recorded at established rates with
provisions made for differences between patient service revenue at the
Center's established rates and the related Medicare reimbursement. During the
year ended March 31, 1999, the Center discontinued its policy of accepting
Medicare payments.
3. Cash, Cash Equivalents and Investments
A summary of the Center's cash, cash equivalents and investments at March 31
follows:
1999 1998
Cash $ 521,472 $ 292,918
Investments:
U. S. Treasury obligations due within one year 229,009 326,258
$ 750,481 $ 619,176
The carrying amount of investments approximates their estimated market value.
Included in the carrying amount is accreted interest earned on the zero
coupon bonds which will be collected at maturity. The aggregate of these
investments are presented in the accompanying balance sheets as follows:
1999 1998
Investments $ 107,568 $ 213,441
Entrance fees in escrow 121,441 112,817
$ 229,009 $ 326,258
The Center maintains cash accounts at one financial institution. At times
throughout the year, the Center may have balances in excess of FDIC insured
limits. Due to the strong credit rating of this financial institution,
management believes there is no significant credit risk related to these
accounts.
4. Property, Building, and Equipment
A summary of property, buildings, and equipment at March 31 follows:
1999 1998
Land and land improvements $ 550,220 $ 550,220
Buildings 9,220,014 6,314,414
Equipment 593,551 565,188
Vehicles 53,079 53,079
Construction in progress - 2,726,075
10,416,864 10,208,976
Less accumulated depreciation 4,274,240 3,931,527
Property, buildings and equipment, net $ 6,142,624 $ 6,277,449
The Center capitalized interest of $43,500 on the construction in progress
in 1998. No interest was capitalized in 1999.
5. Long-Term Debt
Long-term debt consists of a primary mortgage note due in October 2005 and a
secondary mortgage note due April 2007. The primary mortgage note has monthly
payments of $40,626, including interest at 7.5% which are to be made until
October 1999. For the period to October 2005, the interest rate will equal
the yield of the bank's cost of issuing a large certificate of deposit in the
secondary market and having a maturity most proximate to six years plus 2.5%
per annum. The note had an outstanding balance of $1,759,941 at March 31, 1999
and $2,099,468 at March 31, 1998. The note is collateralized by land and
buildings.
The secondary mortgage note is secured by the real estate and apartment
rents. Monthly payments $25,206, including interest at 7.85% are payable
through April 2007, at which time the remainder of principal and interest is
due. The balance at March 31, 1999 was $2,566,859. The balance of the loan at
March 31, 1998 was $2,392,874. This loan was a construction loan and
converted to a mortgage note in 1999.
The mortgage notes have certain restrictive covenants pertaining to its
current ratio, working capital, cash flow coverage ratio, and tangible worth.
The Center is also limited as to property and equipment purchases. As of
March 31, 1999, the Center was in compliance with such covenants or received
a waiver for events of noncompliance.
The aggregate annual maturities of long-term debt for each of the five years
subsequent to March 31, 1999 and thereafter are as follows:
2000 $ 385,331
2001 326,357
2002 354,401
2003 384,866
2004 418,350
Thereafter 2,457,495
$ 4,326,800
6. Income Taxes
As of March 31, 1999, the Center has net operating loss carryforwards of
approximately $280,000 available to offset future taxable income which expire
as follows:
Year:
2006 $ 152,000
2007 128,000
$ 280,000
The components of the net deferred income tax assets are as follows:
1999 1998
Deferred income tax asset:
Net operating loss carryovers $ 102,900 $ 195,700
Accrued expense not currently deductible
for tax purposes 7,800 9,300
Bad debts expense not currently deductible
for tax purposes 1,900 1,900
Accrued revenue not currently recognized
for book purposes 15,000 3,700
127,600 210,600
Deferred income tax liability:
Tax depreciation greater than book
depreciation (23,600) (21,500)
Net deferred income tax asset $ 104,000 $ 189,100
The effective tax rate on income before income taxes was different than
amounts computed by applying the statutory Federal tax rate of 34% to income
before income taxes. The reasons for these differences are as follows:
1999 1998
Income taxes at statutory rate $ 76,000 $ 143,000
Increase (decrease) resulting from:
State taxes, net of Federal tax benefit 7,500 14,000
Utilization of net operating loss carryforwards - (157,000)
Recognition of future income tax benefit
of net operating loss carryforwards - (189,100)
Other 1,600 -
Actual income tax expense (benefit) $ 85,100 $ (189,100)
7. Retirement Plan
The Center has a 401(k) Retirement Plan for all employees who have completed
one year of service. Active participants may elect to have the Center make
salary reduction contributions on their behalf based on a percentage of their
earnings, not to exceed 15%. The Center has the option of making an annual
discretionary contribution and can also match each employees' contribution to
the plan up to a predetermined limit. The Center's combined contribution
totaled $15,833 and $13,582 for the years ended March 31, 1999 1998,
respectively.
8. Financial Instruments
Generally accepted accounting principles require disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value.
Instruments such as accounts receivable, accounts payable, accrued expenses,
notes payable that are currently due, and cash equivalents are of a
short-term nature and carrying value approximates fair value. The estimated
fair value of long-term notes payable is based on discounting amounts at
contractual rates using current market rates for similar instruments. The
Center estimates the fair value of these items to be the same as their
carrying value.
9. Uncertainty Due to the Year 2000 Issue
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the Center and its business
partners will not be fully determinable until the Year 2000 and thereafter.
If Year 2000 modifications are not properly completed either by the Center or
entities with which the Center conducts business, the Center's revenues and
financial condition could be adversely impacted.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 521,472
<SECURITIES> 107,568
<RECEIVABLES> 137,828
<ALLOWANCES> 5,000
<INVENTORY> 9,756
<CURRENT-ASSETS> 910,693
<PP&E> 10,416,864
<DEPRECIATION> 4,274,240
<TOTAL-ASSETS> 7,285,053
<CURRENT-LIABILITIES> 650,541
<BONDS> 4,326,800
0
0
<COMMON> 536,000
<OTHER-SE> 2,012,002
<TOTAL-LIABILITY-AND-EQUITY> 7,285,053
<SALES> 0
<TOTAL-REVENUES> 3,518,666
<CGS> 0
<TOTAL-COSTS> 3,322,075
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 355,703
<INCOME-PRETAX> 223,605
<INCOME-TAX> 85,100
<INCOME-CONTINUING> 138,505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138,505
<EPS-BASIC> .26
<EPS-DILUTED> .26
</TABLE>
