Page 45 - 2019 Apple Supply Chain Co-op, Inc. Annual Report

APPLE SUPPLY CHAIN CO-OP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2019 and 2018

NOTE 3 - MEMBER NOTES RECEIVABLE

During 2019, the Co-op’s Board of Directors authorized a Co-op Member Equipment Financing Program
relative to a rollout of fajita induction unit equipment for certain of its restaurants. The financing program
provides that a member of the Co-op may elect to finance the purchase of the specified equipment under
the terms of an Equipment Obligation Agreement. The Co-op funds each participating member’s equipment
purchases. The Co-op is repaid for the cost of the equipment plus interest at a rate of LIBOR plus 2.85%.
The cost of the financed equipment will be repaid to the Co-op via per case surcharge on all cases of
products purchased through a distributor. If a distributor cannot accommodate the surcharge, the member
must repay the Co-op via monthly Automated Clearing House payments. Under the terms of the agreement,
the balances are due in full by October 31, 2020.

Interest income was $24,023 for the year ended December 31, 2019.

NOTE 4 - NOTE PAYABLE

On May 3, 2019, the Co-op entered into a $1,200,000 credit agreement with its primary bank which expires
November 3, 2021. Advances under the credit agreement were used to fund the Co-op Member Equipment
Financing Program described in Note 3. Outstanding borrowings under the credit agreement bear interest
at a rate of LIBOR plus 2.85%, paid monthly. The principal of each advance under the credit agreement
shall be repaid monthly over an eighteen month period. Outstanding borrowings were $524,893 at
December 31, 2019. The credit agreement contains a certain financial covenant. At December 31, 2019,
the Company was in compliance with this covenant.

Interest expense was $23,026 for the year ended December 31, 2019.

NOTE 5 - INCOME TAXES

The provision for income taxes for the year ended December 31, 2019 and 2018 consists of the following:

2019 2018
Current
Federal $ 6,008 $ 16,100
State 2,449 5,937

$ 8,457 $ 22,037

Effective rates vary from expected marginal rates due to the deductibility of patronage dividends.

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