The company has been in business since 1981, has several group homes located in one county in north Texas and serves about 100 residents or “clients” in various residential settings.

The company receives its funding from Medicaid directly through the state of Texas by way of a licensed contract to provide the necessary care. Additional funding is also received from the clients in the way of room and board payments as determined by state agencies. Revenues are extremely stable and predictable, but the rate of payment for services rendered is determined by state legislators every biennium and can fluctuate. Despite recent rate cuts, the company has made the decisions necessary to cut many expenses to maintain a positive position.

Key senior management is experienced with most of them each having over 20 year’s experience and work history in the company. Management turnover is minimal, making for a stable managerial and leadership base. The company consistently receives “zero deficiency” surveys during its annual exhaustive and rigorous inspections, clearly demonstrating a high level of competency not often seen in this industry. The current board of directors is composed of key management, all of whom have a vested interest in the company to help it succeed and be an ongoing and dynamic player in this market.

Land & buildings have recently been appraised by the local tax district at approximately $950,000. In addition, the Company maintains 49 bed licenses, each of which have a liquidation value estimated at $25,000. This additional asset value of $1.225 million is not shown on the Company’s balance sheet.

The current configuration of the industry is such that consolidation to achieve scale is a key competitive factor. Thus, management has concluded that the Company needs an infusion of equity, or it should be acquired another industry participant.

Posted Oct 3, 2016

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