UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the quarterly period ended September 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________________to ____________________
Commission file number 333-45419
Senior Retirement Communities, Inc.
Louisiana 72-1394159
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization )
507 Trenton Street, West Monroe, Louisiana 71291-3033
(318) 323-2115
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes_____ No_____.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: September 30, 2002. Common shares,
par value $.10 per share: 16,588,200
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
SENIOR RETIREMENT COMMUNITIES, INC.
Form 10-QSB
INDEX
Part I Page
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis
of Results of Operations 10
Part II
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other information 11
Item 6. Exhibits and Reports on Form 8-K 11
Part I
Item 1. Financial Statements
Senior Retirement Communities, Inc.
For the three months and the nine months
ended September 30, 2002 and 2001
Table of Contents
Financial Statements Page
Report 1
Balance Sheet 2
Statement of Income 3
Statement of Retained Earnings (Deficit) 5
Statement of Cash Flows 6
Notes to Financial Statements 7
1
W. L. ALBRITTON
CERTIFIED PUBLIC ACCOUNTANT
1500 Stubbs Avenue
Monroe, LA 71201
To the Stockholders
Senior Retirement Communities, Inc.
West Monroe, LA 71291
I have reviewed the accompanying balance sheet of Senior Retirement Communities,
Inc. as of September 30, 2002 and 2001, and the related statements of income,
retained earnings and cash flows for the nine months then ended in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institutes of Certified Public Accountants. All information included in
these financial statements is the representation of the management of Senior
Retirement Communities, Inc.
A review consists principally of inquiries of Senior Retirement Communities,
Inc. personnel and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, I do not
express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 4, the Company
has suffered continued recurring losses from operations and has a net capital
deficiency that raises substantial doubt about its ability to continue as a
going concern. Managements plans in regard to these matters are also described
in note 4. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
October 31, 2002
/s/ W.L. Albritton
W. L. Albritton
Certified Public Accountant
1
Senior Retirement Communities, Inc.
Balance Sheet
September 30, 2002
Sep 30, 02
==================
ASSETS
Current Assets
Cash on hand and in banks $ 24,626
Accounts Receivable 1,384
------------------
Total Current Assets 26,010
Property, Plant and Equipment
Buildings 8,221,491
Automobiles 13,610
Furniture and Fixtures 174,370
Land 1,508,820
Subtotal 9,918,292
Less: Accumulated depreciation (821,924)
Net Property, Plant and Equipment 9,096,368
TOTAL ASSETS $ 9,122,378
==================
LIABILITIES & EQUITY
Current Liabilities
Accrued current liabilities and payables $ 87,987
Long Term Liabilities
Bonds and bond interest payable 10,779,458
Other long term liabilities 589,610
Redeemable preferred stock 425,000
Total Long Term Liabilities 11,794,068
Other Liabilities
Due to stockholders and affiliates 230,408
Total Liabilities $ 12,112,464
Equity
Common stock, no par value, 90,000,000 $ 1,658,820
shares authorized, 16,588,200 shares
issued and outstanding
Retained Earnings (3,959,632)
Net Income (689,274)
------------------
Total Equity $ (2,990,086)
------------------
TOTAL LIABILITIES & EQUITY $ 9,122,378
==================
see accompanying notes
2
Senior Retirement Communities, Inc.
Statement of Income
For the three months and nine months ended September 30, 2002, and for
the three months and nine months ended September 30, 2001
Three Months Nine Months Three Months Nine Months
Sept 30, 02 Sept 30, 02 Sept 30, 01 Sept 30, 01
-------------------------------------------------------
Revenues $ 671,360 $1,959,811 $531,546 $ 1,444,743
Expense
Accounting Fee 12,000 36,000 12,000 36,000
Activities 2,240 8,136 2,682 8,369
Advertising 0 0 398 1,917
Appraisal 0 3,500 0 0
Automobile 0 0 1,045 1,487
Bank Service Charges 127 332 25 171
Bond Fees 0 6,962 0 4,156
Carpet Cleaning 0 0 20 530
CGS-China,Glass Silver expense 210 581 69 83
Commissions 0 0 0 221
Consulting 391 391 2,500 2,500
Decorations 1,020 2,345 683 4,298
Depreciation Expense 54,690 164,070 54,690 164,070
Donations 0 30 20 20
Dues 274 2,593 74 506
Employee Incentives 814 2,998 243 1,915
Employee Screening 1,118 3,592 903 2,722
Equipment Rental 2,008 6,461 2,085 6,221
Fire Drills 18 95 0 0
Food Costs 56,218 172,015 50,425 133,893
Furniture & Equipment Expense 7,361 13,570 3,858 10,210
Gloves 1,500 3,050 959 2,550
Grease Trap 0 0 150 975
Housekeeping 3,078 9,595 3,489 9,059
Insurance 61,678 162,738 21,279 68,954
Interest Expense 326,590 781,704 267,900 718,327
Kitchen Supplies 0 0 934 1,597
Laundry 967 3,193 762 2,565
Lawn Care 5,863 12,093 5,608 13,309
Licenses and Permits 414 4,075 1,405 4,337
Linens 70 515 50 516
Management Fees 46,924 137,371 39,102 102,789
Miscellaneous 0 0 250 694
Office Supplies 1,108 4,329 1,569 5,140
3
Paper Goods 1,901 5,587 1,234 3,174
Payroll Expenses 301,909 831,899 256,593 678,884
Pest Control 505 2,206 629 2,478
Pet Supplies 67 180 125 476
Postage and Delivery 802 2,485 814 6,484
Printing and Reproduction 3,215 9,789 3,570 10,976
Professional fees 0 0 0 820
Promotion 2,020 5,783 2,870 9,247
Rental bonus 0 0 297 1,437
Repairs 8,998 23,228 12,062 20,006
Resident Gifts 42 324 90 351
Taxes 3,085 68,587 5,551 47,631
Telephone 5,625 14,644 5,165 13,566
Training & Education 254 2,153 408 1,076
Travel & Ent 797 3,128 1,132 5,611
Uniforms 463 1,367 281 696
Utilities 41,180 109,192 42,035 118,711
Van Expense 6,053 19,568 6,049 18,428
Waste Removal 1,313 3,538 995 3,064
Wellness 190 1,378 218 531
Workers Comp 796 1,715 0 0
Total Expense $ 965,896 2,649,084 815,295 2,253,750
-------------------------------------------------------
Net Ordinary Income $ (294,536) (689,274) (283,749) (809,007)
-------------------------------------------------------
Net Income $ (294,536) (689,274) (283,749) (809,007)
=======================================================
Earnings per share $ (0.02) (0.04) (0.02) (0.05)
see accompanying notes
4
Senior Retirement Communities, Inc.
Statement of Retained Earnings For the three months and
nine months ended September 30, 2002 and the three months and nine
months ended September 30, 2001
Three months Nine months Three months Nine months
Sept 30, 02 Sept 30, 02 Sept 30, 01 Sept 30, 01
--------------------------------------------------
Beginning Retained Earnings $ (4,354,371)$ (3,959,633)$ (1,226,002)$ (700,744)
Net income (loss) (294,536) (689,274) (283,749) (809,007)
Preferred dividends paid 0 0 0 0
---------------------------------------------------
Ending Retained Earnings $ (4,648,907) $(4,648,907)$ (1,509,751)$ 1,509,751)
see accompanying notes
5
Senior Retirement Communities, Inc.
Statement of Cash Flows For the three months and
nine months ended September 30, 2002 and the three months and nine
months ended September 30, 2001
Three month Nine month Three month Nine month
Sept 30, 02 Sept 30, 02 Sept 30, 01 Sept 30, 01
--------------------------------------------------
Cash flows from operating activities
Revenues 671,360 1,959,811 531,546 1,444,743
Paid to suppliers & employees (935,905) (2,614,165) (813,486) (2,249,933)
----------------------------- --------------------
Net cash provided by
Operating Activities (264,545) (654,354) (281,940) (805,190)
Cash flows from investing activities
Purchase equipment (18,556) (34,929) (4,025) (18,004)
Building Improvements (7,508) (15,692) 0 0
Depreciation 54,690 164,070 54,690 164,070
--------------------------------------------------
Net cash provided by
Investing Activities 28,627 113,449 50,665 146,066
Cash flows from financing activities
Increase (Decrease)in
notes payable 13,610 13,610 0 19,906
Accrual of interest on bonds 319,750 743,190 211,722 635,161
Loans from stockholders
and affiliates (155,131) (206,385) 48,912 (32,767)
--------------------------------------------------
Net cash provided by
Financing Activities 178,229 550,415 260,634 622,300
Net cash increase for period (57,690) 9,510 29,358 (36,824)
Cash at beginning of period 82,316 15,115 2,413 68,595
Cash at end of period 24,626 24,626 31,771 31,771
==================================================
Reconciliation of net income to net cash provided by operations
Net income (loss) (294,536) (689,274) (283,749) (809,007)
.
Adjustments to reconcile net income to cash provided by operations
Decrease (increase) in
accounts receivable 4,581 (5,906) (6,866) (10,224)
Decrease (increase) in
prepaid expenses 14,995 14,995 (4,079) (11,229)
Increase (decrease) in
resident deposits 4,700 13,000 7,200 28,200
Increase (decrease) in
accrued expenses 5,715 12,830 5,554 (2,930)
-------------------------------------------------
Net cash provided (used)
by operations (264,545) (652,354) (281,940) (805,190)
see accompanying notes
6
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
centers 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 utilizes 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 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.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect 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.
Deferred Charges
Deferred charges represent the costs associated with obtaining long-term
financing for the care facilities of the Company. These costs are being
amortized over the life of the bonds using the effective interest rate method.
7
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles and with instructions to Form 10-QSB
and Article 10 of Regulation S-X. In managements opinion, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of the financial statements have been included. Operating results
for the interim periods are not always 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
Companys Form 10-KSB.
Note 2 - Related Party Transactions
Due to stockholders and affiliates consists of amounts advanced by the
stockholders and other related entities. This amount accrues interest at the
current market rate.
Note 3 - Long-term Debt
Redeemable Preferred Stock
The Preferred Stock issued accrues dividends at the rate of four percent per
year for each of the first two years, the six percent per year for the next two
years, then at eight percent per year for the final two years. The Preferred
Stock is callable at the Companys options 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 percent discount at any time within eight
years of the Preferred stock issue dates, if the Company issues additional
common stock through a public offering.
Bonds Payable
On June 23, 1998, the Companys issue of $9,000,000 of bonds became effective.
These bonds are to become the permanent financing for the projects reflected in
this financial statement. As of December 23, 2001, the status of these bonds is
as follows:
Original
Amount Amount
Location Authorized Outstanding
Ruston $ 3,685,000 $ 3,291,750
Bossier City 3,470,000 3,023,750
Shreveport 1,845,000 1,834,500
Totals $ 9,000,000 $ 8,150,000
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. Bonds
payable on the balance sheet reflects the accrued interest due and is reflected
net after the deferred charges incurred in issuing and selling the bonds.
During the third quarter of 2002, the Company incurred $326,590 of interest
expense, all of which has been charged to operations.
Maturities of Long-Term Debt
Maturities of the long-term debt, as adjusted by the payment plans disclosed in
Note 4 are as follows:
Year ending
December 31, Amount
2002 $ 0
2003 2,276,750
2004 1,047,750
2005 531,000
2006 1,874,500
Thereafter 2,845,000
$ 8,575,000
Note 4 - Going concern and subsequent events
As a result of continuing operating losses as a result of not achieving desired
occupancy levels, the Company filed a request on February 27, 2001 with Colonial
Trust Company, who acts as agent for the bondholders, a request to extend all
principal and interest for four years. This request includes amounts which were
already past due and amounts which would have become due by February 1, 2002. In
accordance with the trust indenture, the request was submitted to the
bondholders for a vote on the proposed extension. The votes were due to be
returned by March 27, 2001. As of March 27, 2001, bondholders representing
$122,250 of bonds out of the total of $8,150,000 bonds outstanding voted to
reject the plan. As a result of this vote, the request to postpone certain
payments for a period of four years was approved. This proposal is intended to
provide the Company additional time to achieve full occupancy which should allow
for the future payments to be paid as they become due. Should the Company fail
to increase its occupancy levels, additional measures would become necessary for
the Company to remain a going concern. As a continuing part of the Companys
effort to improve cash flow and provide working capital for its operations, the
Company has adopted a plan to refinance the debt on the Ruston facility by
selling the facility to a related party who would obtain permanent financing and
liquidate the bond debt on that facility. In contemplation of this move, the
Company had planned to transfer the operations of the Ruston facility to the
related entity effective January 1, 2002. The transfer did not take place as
planned. The Company expects the sale to be completed in the fourth quarter of
2002.
8
Item 2 - Management's Discussions and Analysis of Results of Operations.
Management is encouraged by progress being shown in occupancy levels and
corresponding financial gains. While occupancy continues to lag behind
projection and operating losses continue, management believes the future is good
for the company. In the third quarter of the year, operating losses were
approximately $10,000 more than the same period last year. However, the losses
for the first nine months of 2002 were approximately $120,000 less than the same
period in 2001. Revenues were approximately 125 - 135% greater than the same
periods in 2001. Major increases in expenses occurred in food costs, management
fees (which are based on revenues) and taxes. Large increases occurred in
payroll expenses (as a result of increased occupancy requiring more employees)
and insurance. As expected, the majority of the increased expenses occurred in
variable costs which are a result of increased occupancy. The entire industry
was hit with large increases in insurance rates and the expectation is that
increases will occur again this year.
The company showed a cash increase for the period as opposed to cash losses for
previously reported periods.
Stockholders equity decreased from ($1,509,751) as of September 30, 2001 to
($2,990,086) as of September 30, 2002 due to severe operating losses. Current
assets decreased slightly. Liabilities increased approximately $1,269,000,
primarily due to accrued interest on bonds payable.
As of September 30, 2002, overall occupancy was at 83%. The occupancy rate
comparisons to last year are as follows:
City Facility # of Units Sept 30, 2002 Sept 30, 2001
Bossier City Arbor 36 100% 94%
Terrace 24 83% 46%
Shreveport Terrace 24 83% 92%
Ruston Arbor 37 76% 79%
Terrace 15 60% 47%
Improvement has been made in the occupancy levels over the same period as last
year, especially in the Bossier and Ruston Terraces. Due the age of the
population we serve, maintaining occupancy levels in a competitive market is a
challenge. However, it is a challenge we are meeting and working with. It is
believed that occupancy will reach stabilized levels by the end of this year.
As discussed in Note 4 to the financial statements, the operations of the Ruston
facility were to be transferred to a related entity on January 1, 2002 in
anticipation of a sale to occur later this year.
9
The transfer did not take place. Management believes the transfer will be
completed by the end of 2002. This related entity will obtain permanent
financing to pay off the bond debt on the Ruston facility. Management believes
this move will free up operating cash for the Company and allow streamlined
operation of the Shreveport and Bossier City facilities.
The market for assisted living is improving as the population ages and the
industry finds greater acceptance and familiarity among its target audience.
More and more insurance companies are offering policies for long-term assisted
living care. We believe the market for our product will only continue to
improve.
PART II OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
See note 4 to the financial statements and disclosure in form 10-KSB for year
ended December 31, 2001.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Not applicable
10
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized on this the 13th day of November, 2002 in the City of West Monroe,
State of Louisiana.
Senior Retirement Communities, Inc.
/s/ Joanne M. Caldwell-Bayles
By: Joanne M. Caldwell-Bayles
President, CEO, Chairperson of the Board of Directors.
11