UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
Annual report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the fiscal year ended June 30, 1998.
Commission File Number 0-13963
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
(Exact name of registrant as specified in its charter)
NEW MEXICO 85-0054230
(State of incorporation) (I.R.S. Employer I.D. No.)
811 South Platinum, Deming, New Mexico 88030
(505) 546-2769
<PAGE> This amendment to the Form 10-KSB of Mimbres Valley Farmers
Association,
Inc. ("Farmers" or the "Company") for the year ended June 30, 1998 has been
filed to (i) present certain changes in Item 6 "Management's Discussion and
Analysis of Financial Condition and Results of Operation", (ii) present
certain changes in the format of the required Financial Statements, and (iii)
present the signed Report of Independent Accountants for the year ended June
30, 1997.
1. THE INFORMATION CONTAINED IN THIS ITEM 6
TO FORM 10-KSB/A AMENDS, MODIFIES AND
SUPERSEDES IN ITS ENTIRETY THE INFORMATION
CONTAINED IN ITEM 6 TO THE COMPANY'S
FORM 10-KSB DATED SEPTEMBER 28, 1998.
ITEM 6.MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Retail sales to the general public generates most of the Company's
receipts. Total revenues for the fiscal year ending June 30, 1998 were
$15,521,847, of which $12,063,450 were from grocery sales. This continues
the
same pattern of sales experienced in the previous two years. In fiscal year
1997 total sales and grocery sales were $19,103,199 and $12,483,400,
respectively, and in fiscal year 1996 total sales and grocery sales were
$21,949,927 and $15,111,185, respectively. The percentage of total revenues
attributable to grocery sales for the past three fiscal years is as follows:
77.7% (1998), 65.4% (1997), 68.8% (1996). Corresponding percentages for
hardware sales are 10.2% (1998), 17.2% (1997) and 11.2% (1996). No class of
similar products or services other than the grocery business and the hardware
business amounted to more than ten percent of total revenues.
The Company's total sales in fiscal year 1998 were $15,521,847, an 18.7%
decrease from the previous year. Grocery sales decreased 3.4% (from
$12,483,400 to $12,063,450), hardware sales decreased 51.9% (from $3,293,000
to $1,583,819), and other sales decreased 56.3% (from $3,326,799 to
$1,454,628). Corresponding changes from fiscal year 1996 to fiscal year 1997
were a 13% decrease in total sales, a 17.4% decrease in grocery sales, a 34%
increase in hardware sales, and a 24% decrease in other sales.
In the last two fiscal years, the capital expenditures associated with
the expansion ceased, but the operating costs arising from the expansion have
remained stubbornly high. In an effort to control costs, the Board decided
to
discontinue the furniture business, which was outside of the Company's
traditional scope of retail activity, and to move the appliance business to
the hardware store. The Radio Shack franchise, historically a poor financial
performer, was sold. The sales decreases during the current fiscal year
(i.e.
1998) resulted largely from the relocation and downsizing of its hardware
store in the fourth quarter and the closing of its furniture and appliance
store, the sale of the Radio Shack Store and the closing of its Ben Franklin
craft franchise due to Ben Franklin's bankruptcy. High inventory levels,
especially in the hardware business, have been reduced, and total employment
has been reduced to 113 as opposed to 241 two years ago, for a total decrease
of 53.1%. The Company was able to improve its overall gross margin slightly
while reducing its inventory by 34%. Notwithstanding these actions,
however,
the Company ended the year with a loss of $357,346.
In comparing the Company's current circumstances with the Company's
consistently profitable operations prior to fiscal year 1996, two factors
stand out: increased competition in the grocery business, and increased
operating costs associated with the hardware operations.
Prior to Peppers' opening in June, 1996, the Company shared the Deming
retail grocery market with only a Furrs' store. The entry of a third
"supermarket" competitor could only be expected to reduce, at least
initially,
the Company's grocery sales, and that is exactly what has happened. In the
first full year of Peppers' operation, the Company's grocery sales for fiscal
year 1997 decreased 17.4% and last year decreased 3.4%. The Board does not
believe, however, that this indicates that any major changes are necessary or
desirable with respect to the Company's supermarket. Competition in the
grocery business is based primarily on price and selection, and the Board
feels that the Company remains an effective competitor in both of these
areas,
due largely to the low prices and large selection available to the Company
from its supplier, Fleming Foods. In addition, the Company has a loyal
customer base, including many shareholders. Accordingly, the grocery
business
should be able to be profitable in the near future with only incremental
adjustments and improvements.
In the fourth quarter of fiscal year 1998, the Company returned its
hardware store to its original location at 811 South Platinum adjacent to the
supermarket in an effort to stop continued operating losses. The move
continues to involve certain risks. The Company expects to incur certain
costs associated with the relocation of its hardware store. The costs
include: loss from discounting of discontinued products, costs of moving,
and
continuing lease expense.
The Company is obligated under its lease on the vacant K-Mart Building
at
Highway 70/80 until the year 2002. The rent is approximately $110,000 per
year payable monthly. The Company is attempting to lease the building and
expects to be totally out of the K-Mart Building by the end of the first
quarter of its current fiscal year. The Company may have to substantially
discount its lease to encourage potential renters. The Company will make
every effort to lease the K-Mart Building to potential tenants for the
remainder of its lease, which matures in the year 2002.
Farmers terminated its hardware purchasing agreement with TRUSERV in the
fourth quarter of the 1998 fiscal year. It signed a similar purchasing
agreement HWI, DO IT BEST to provide merchandise to its hardware store. As a
result of this change in suppliers, the Company converted an existing
investment in TRUSERV in the amount of $125,000 into notes receivable payable
to the Company over five years.
According to a recent news article in the Deming newspaper, a new
hardware store is expected to open in Deming by January 1, 1998. From its
recent experience with Peppers, Farmers expects some reduction of its
hardware sales once the new hardware store opens.
The Company relocated the clothing store and combined it with its craft
and fabric store in the fourth quarter of its 1997 fiscal year. The clothing
store has not returned to its previous profitability. A new clothing store
in
Deming has also increased competition in the clothing business. Improved
inventory selection and continued cost-cutting measures are expected to
improve the clothing stores operating profitability. The Company will
continue to monitor the operating results of the clothing store. The Company
may consider leasing all or part of the retail space in the mall occupied by
the clothing store to other merchants if the clothing store fails to return
its prior profitability.
The Company is exploring the possibility of refinancing its long-term
debt in an effort to reduce its interest expense and provide funds to improve
its building, make parking lot repairs and replace walk in coolers and
freezers in its grocery store. The Company has not planned any other major
capital expenditures.
Future results from operations may differ from the opinions expressed by
Management in the above Management Discussion and Analysis.
Year 2000
The Company has conducted a review of its computers systems to identify
the systems that could be affected by the year 2000 problem. The year 2000
problem is the effect of computer programs using two digits (rather than
four)
to define the applicable year. Any of the Company's programs that utilizes
date sensitive software could recognize the year "00"as 1900 rather than the
year 2000. This could result in a major computer system failure or
malfunction.
The Company presently believes that, with modifications to existing
software and conversion to new software and replacement of some equipment,
the
Year 2000 problem will not pose a significant operational problem for the
Company's information systems as so modified and converted. However, if such
actions are not timely completed, the arrival of the year 2000 may have a
material impact on the Company's ability to accurately process data. The
Company intends to make its information systems Year 2000 compliant during
the
current fiscal year. The Company does not believe making its information
systems Year 2000 compliant will have a significant effect on the Company's
capital expenditures.
The Company's main supplier, Fleming Foods, has represented to the
Company that it is Year 2000 compliant with respect to its dealings with the
Company.
2. THE INFORMATION CONTAINED IN THE FOLLOWING
INDEPENDENT AUDITORS REPORTS AMENDS, MODIFIES
AND SUPERSEDES THE INFORMATION CONTAINED IN
THE INDEPENDENT AUDITORS REPORTS INCLUDED
IN THE FINANCIAL STATEMENTS TO THE COMPANY'S
FORM 10-KSB DATED SEPTEMBER 28, 1998.
Report of Independent Public Accountants
To the Board of Directors and Stockholders
Mimbres Valley Farmers Association, Inc.
d.b.a. Farmers, Inc.
We have audited the accompanying balance sheet of Mimbres Valley Farmers
Association, Inc., d.b.a. Farmers, Inc. (a New Mexico corporation), as of
June
30, 1998, and the related statements of operations, shareholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides 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 Mimbres Valley Farmers
Association, Inc., d.b.a. Farmers, Inc., as of June 30, 1998, and the results
of its operations and its cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/ Torres, Jones & Company
A Professional Corporation
El Paso, TX
September 25, 1998
<PAGE>
Report of Independent Public Accountants
To the Shareholders and Board
of Directors of Mimbres Valley
Farmers Association, Inc.
d.b.a. Farmers, Inc.
We have audited the accompanying related statements of operations and cash
flows of Mimbres Valley Farmers Association, Inc., d.b.a. Farmers, Inc. (a
New
Mexico corporation) as of June 30, 1997, and the accompanying related
statements of shareholders' equity as of June 30, 1997 and 1996, and for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
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 results of its operations and its cash flows of
Mimbres Valley Farmers Association, Inc. d.b.a. Farmers, Inc. as of June 30,
1997 and 1996, and for the years then ended in conformity with generally
accepted accounting principles.
As explained in Note 1 of the financial statements, Mimbres Valley Farmers
Association, Inc., d.b.a. Farmers, Inc. changed its method of reporting cash
flows from operating activities from the direct method to the indirect method
during 1996.
/s/ Arthur Andersen, LLP
Albuquerque, New Mexico
September 22, 1997
<PAGE>3. THE INFORMATION CONTAINED IN THE
FOLLOWING BALANCE SHEET AND FOOTNOTES
TO FINANCIAL STATEMENTS AMENDS, MODIFIES
AND SUPERSEDES THE INFORMATION CONTAINED
IN THE BALANCE SHEET AND FOOTNOTES TO
THE COMPANY'S FORM 10-KSB DATED SEPTEMBER 28, 1998.
THE BALANCE SHEET AND FOOTNOTES TO FINANCIAL
STATEMENTS HAVE BEEN REVISED TO PRESENT
ONLY THE COMPANY'S 1998 BALANCE SHEET
AND TO DELETE REFERENCES TO THE
COMPANY'S 1997 BALANCE SHEET.
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
BALANCE SHEET
June 30, 1998
<CAPTION>
ASSETS
CURRENT ASSETS: 1998
<S> <S>
Cash and equivalents 392,092
Accounts receivable, net of
allowance for doubtful accounts
of $25,000
Trade 127,699
Related parties 4,651
Inventories 1,232,669
Prepaid expenses 61,074
Note receivable--supplier 11,741
Deferred income tax asset 240,100
Total current assets 2,070,026
PROPERTY AND
EQUIPMENT, net 1,746,749
OTHER NON-CURRENT
ASSETS:
Note receivable-supplier 47,926
Investments in supplier 78,400
Other Assets 37,016
Other non-current assets, net 163,342
Total assets 3,980,117
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
BALANCE SHEET
June 30, 1998
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES 1998
<S> <C>
Accounts payable 503,988
Current portion of long-term
debt and capital leases 141,954
Accrued expenses payable 163,915
Total current liabilities 809,857
NON-CURRENT LIABILITIES:
Deferred income taxes 239, 469
Long-term debt and capital
leases, less current portion 1,543,339
Total non-current liabilities 1,782,808
Total liabilities 2,592.665
SHAREHOLDERS' EQUITY:
Common stock, $25 par value:
500,000 authorized; 13,910
issued and 13,776 outstanding 347,750
Retained earnings 1,043,052
Less: 134 shares of
treasury stock (3,350)
Total shareholder's equity 1,387,452
Total liabilities and
shareholder's equity 3,980,117
The accompanying notes to financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
d.b.a. FARMERS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1. NATURE OF BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES:
Mimbres Valley Farmers Association, Inc. d.b.a. Farmers, Inc. ("Farmers" or
the "Company"), a New Mexico corporation, currently operates two retail food
stores, a hardware store, a clothing and craft store and a feed store. The
Company also leases certain retail space to unrelated parties and operates a
self-service laundry. All operations are located in Deming, New Mexico
("Deming"). The economy of Deming is dependent mainly on agriculture and
related agri-business.
Use of Estimates
The preparation 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.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with original
maturities of three months or less to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
The Company grants credit to customers, substantially all of whom are
residents of Luna County, New Mexico. Management of the Company has
established an allowance for doubtful accounts to cover possible losses
inherent in the accounts receivable portfolio. Ultimate losses may vary from
the current estimates.
Inventories
Inventories, which represent merchandise available for sale, are stated at
the
lower of cost or market, determined on a first-in, first-out (FIFO) basis.
Property and Equipment
Property and equipment are stated at cost, including capitalized interest and
labor incurred to construct major additions, and are depreciated on a
straight-line basis over the estimated useful lives of the respective assets.
Capital leases are amortized using the straight-line method over the shorter
of the estimated useful life of the property or the lease term. The
estimated
useful lives for property and equipment are as follows:
Buildings-30 years
Furniture, fixtures and equipment-3 to 10 years
Leasehold improvements-5 years
Gains and losses upon retirement or disposal of property and equipment are
recognized as incurred. Additions and major improvements are capitalized,
and
repairs and maintenance, and minor improvements are expensed as incurred.
Income Taxes
The Company records deferred income taxes to reflect the tax consequences on
future years of differences between the tax basis of assets and liabilities
and their financial reporting amounts.
Advertising
The Company expenses costs of advertising as incurred. For the years ended
June 30, 1998 and 1997, advertising expense was $133,672 and $253,278
respectively.
Net Loss per Common Share
Net loss per share is computed by dividing the net loss by the number of
shares of common stock outstanding during the period.
Reclassification
Certain prior year balances have been reclassified to conform to the 1998
financial statement presentation.
2. PROPERTY AND EQUIPMENT:
Property and equipment as of June 30, 1998, consist of the following:
<TABLE>
<S> <C>
Furniture, fixtures
and equipment 2,685,171
Buildings 2,417,468
Land 80,203
5,182,842
Less: Accumulated
depreciation and
amortization (3,436,093)
1,746,749
</TABLE>
3. NOTES RECEIVABLE-SUPPLIER:
The notes receivable-supplier at June 30, 1998, are unsecured and have
maturities which range from December 1998 to 2000, with interest rates
ranging
from 6.5% to 8.2%.
4. INVESTMENTS IN SUPPLIER:
Investments in supplier, at cost, as of June 30, 1998, consist of the
following :
<TABLE>
<S> <C>
693 shares of Class B
non-voting stock 71,400
10 shares of Class A
voting stock 6,000
20 shares of voting
Common Stock 1,000
78,400
</TABLE>
Farmers terminated its agreement with one of its suppliers in June 1998. All
Class A and B stock was transferred to the supplier in return for its
promissory notes payable from the supplier over five years.
The Class B stock of the supplier was received as patronage dividends. None
of the stock shown as investments in supplier is readily marketable.
5. LONG-TERM DEBT AND CAPITAL LEASES:
Long-term debt and capital leases as of June 30, 1998, consist of the
following :
<TABLE>
<S> <C>
Fixed rate note payable to
Norwest Bank ("Bank"), due
in monthly installments of
$16,788 with a balloon
payment of $1,314,459
due on January 24, 2001,
interest at the rate of 9.50%,
and secured by real estate
mortgages. 1,480,224
Variable rate note payable
to Bank, due in monthly
installments of $1,675 plus
interest of 9.25%, secured
by real estate mortgages,
inventory, and accounts
receivable. 34,675
Capital leases, net 100,923
Notes payable to Supplier,
due in monthly installments
ranging from $272 to $2,322.
Interest rates ranging from
9.25% to 10.50%, secured by
equipment and notes
receivable-supplier 69,471
1,685,293
Less: Current portion 141,954
1,543,339
</TABLE>
Future maturities of long-term
debt and capital leases as
of June 30, 1998,
are as follows:
<TABLE>
<S> <C>
1999 141,954
2000 146,991
2001 1,393,671
2002 2,677
Total 1,685,293
</TABLE>
Certain of the notes payable to a Bank require the Company to comply with
debt
covenants at June 30, 1998 and 1997 including, but not limited to: (a)
Minimum working capital balance of $1.2 million or greater, (b) total
liabilities to net worth of 1.15 to 1 or lower, (c) $100,000 additional
principal reduction beyond scheduled payments for fiscal year 1998 and (d)
profitable operations by December 31, 1996. The Company is not in compliance
with several of its debt covenants at June 30, 1998 and 1997. Consistent
with
the prior year, the Company has obtained a waiver from the Bank for all
exceptions to its debt covenants through October 1, 1998. Management
believes
the Bank will forbear acceleration of the collection of these notes, and
accordingly, the notes have not been classified as current liabilities in the
accompanying balance sheet.
Property and equipment, net financed under capital leases was $44,446 as of
June 30, 1998.
6. OPERATING LEASES:
Future minimum rental payments under operating leases that have initial or
remaining noncancellable lease terms in excess of one year as of June 30,
1998, are as follows:
<TABLE>
<S> <C>
1999 110,000
2000 110,000
2001 110,000
2002 82,503
Total future minimum
rental payments 412,503
</TABLE>
7. OTHER INCOME (EXPENSE)
Other income (expense) as of June 30, consists of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Rental of retail space 78,690 47,932
Check cashing fees 17,190 32,419
Western Union commissions 36,956 31,586
Other, net 100,643 99,948
Obsolete equipment expense (52, 846) --
Total other income, net 180,633 211,885
</TABLE>
8. RENTAL INCOME:
The Company leases retail space to customers with terms generally ranging
from
1 to 10 years. The leases generally contain provisions for renewal options
of
5 to 10 years.
The future minimum rental payments on retail rental space that have initial
or
remaining non-cancelable lease terms in excess of one year as of June 30,
1998, are as follows:
<TABLE>
<S> <C>
1999 71,076
2000 61,476
2001 45,474
2002 29,472
2003 10,872
Thereafter 6,342
Total future minimum
rental payments 224,712
</TABLE>
9. TENDER OFFER:
During the fiscal year ended June 30, 1996, the Company was involved with
legal proceedings concerning a tender offer for all the outstanding shares of
Farmers common stock. During the fiscal year ended June 30, 1997, the
Company
and the participants of the tender offer entered into a settlement agreement,
in which the tender offer was withdrawn.
10. LITIGATION:
The Company is engaged in various legal proceedings, including an action
involving an environmental claim, all of which are incidental to its normal
business activities. In the opinion of the Company, none of such proceedings
are material in relation to the Company's financial position or operations.
11. MAJOR SUPPLIERS:
A substantial portion of the inventory of the Company is purchased from a
limited number of suppliers. During the years ended June 30, 1998 and 1997,
two such suppliers accounted for 77% and 74% of inventory purchases,
respectively. In addition, a certain related party of the Company is a
guarantor for amounts outstanding to certain major suppliers.
12. MANAGEMENT'S PLANS FOR FUTURE OPERATIONS (UNAUDITED)
The Company incurred operating losses and violated its debt covenants in the
preceding year. The Company's viability as a going concern is dependent upon
several factors:
Restructuring fixed operating expenses in relation to the overall decline in
gross sales
Improving its product profit margins and inventory turn
Identifying unprofitable products, services or locations
Discontinuing such unprofitable ventures while continuing the tradition of
competitive prices and quality service.
Management of the Company is expecting a return to profitability and positive
cash flows from operations as soon as the second quarter of fiscal year
1999.
They attribute this to the following factors:
In fourth quarter of fiscal year 1998, the Company returned its hardware
store
to its original location adjacent to the supermarket in an effort to stop
continued operating losses. The move continues to involve certain risks.
Farmers is obligated under its lease on the building until the year 2002. In
addition, there is no assurance the hardware store will return to its
original
profitability at its new location.
The Company is in the process of removing all excess inventory and fixtures
from its Highway 70/80 location (KMART Building) and expects to be totally
out of the building by the end of the first quarter. The Company will make
every effort to lease the building to potential tenants for the remainder of
its lease, which matures in the Year 2002.
The Company was able to reduce its Selling, General and Administrative
expenses by $1,088,578 in fiscal year 1998. Substantial savings resulted
from
the implementation of a purchase order system in mid 1997.
The Company installed a new financial computer system in mid 1998. It
provides more timely and accurate information resulting in continuous review
of operating expense.
The Company installed a new point of sale computer system in the IGA
Supermarket. The system provides improved product sales information,
improved
inventory controls and expands the store's ability to produce in-store
signage.
The Company is reviewing the possibility of refinancing its long-term debt in
an effort to reduce its interest expense and improve the Company's liquidity
by reducing its annual debt service requirements by expanding the maturity of
the Company's mortgage debt.
Future results from operations may differ from the opinions expressed by
management in the above discussion.
13. INCOME TAXES
Components of the net deferred income tax asset and liability at June 30,
1998
are as follows:
<TABLE>
<CAPTION>
1998
<S> <C>
Deferred income tax assets:
Net operating loss
carryback and carryover 267,619
Inventory method change 62,493
Inventory capitalization 22,063
Allowance for doubtful accounts 7,875
Other 3,145
Deferred income tax asset 363,195
Valuation allowance (123,095)
Deferred income tax asset,
net of valuation allowance 240,100
Deferred income tax liability
related to depreciation (239,469)
</TABLE>
The Company had prior and current year losses for federal tax purposes of
approximately $703,000, which will be carried forward resulting in a deferred
tax asset of $197,061. The Company had prior and current year losses for
state tax purposes of approximately $2,015,000, which will be carried forward
resulting in a deferred tax asset of $70,558. Due to recent operating
losses,
a valuation allowance has been recorded to adjust the federal and state
deferred tax asset.
The income tax benefit consists of the following for the fiscal years ended
June 30, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Deferred income tax benefits:
Federal (65,994) (310,169)
State (15,396) ( 31,929)
Total (81,390) (342,098)
</TABLE>
The income tax benefit is reconciled with the expected Federal statutory
rates
for the years ended June 30, 1998 and 1997, as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Provision computed
at Federal statutory rate (107,772) (309,552)
State taxes net Federal benefit ( 15,396) ( 21,031)
Non-deductible meals
and entertainment -- 2,040
Recovery of previously
paid taxes -- ( 74,926)
Valuation allowance 50,363 72,732
Other (8,585) ( 11,361)
Total ( 81,390) (342,098)
</TABLE>
The Company has net operating loss and contributions carryovers to offset
future income tax. If not used, these credits will expire as follows:
<TABLE>
<CAPTION>
Federal
Years Ending Contributions Net Operating Loss Total
<S> <C>
<C> <C>
2001 2,202
- --- 2,202
2002 5,862
- --- 5,862
2003 1,919
- ---
1,919
2012 ---
71,485 71,485
2013 ---
632,307 632,307
Total 9,983
703,792 713,775
</TABLE>
14. YEAR 2000
The Company has conducted a review of its computer systems to identify the
systems that could be affected by the Year 2000 issue. The Year 2000 is
terminology used to describe the effect of computer programs using two digits
(rather than four) to define the applicable year. Any of the Company's
programs utilizing date sensitive software could recognize the year "00" as
1900 rather than the year 2000. This could result in a major computer system
failure or malfunction.
The Company presently believes that, with modifications to existing software
and conversion to new software and replacement of some equipment, the Year
2000 problem will not pose a significant operational problem for the
Company's
information systems as so modified and converted. However, if such actions
are not timely completed, the arrival of the year 2000 may have a material
impact on the Company's ability to accurately process data.
<PAGE>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.
Dated: December 14, 1998.
MIMBRES VALLEY FARMERS ASSOCIATION, INC.
By: /s/ Garry S. Carter
Garry S. Carter,
Chief Executive Officer,
General Manager, and Secretary
(Duly Authorized Representative)
