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, 2004

	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: 	$3,924,541

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 11, 2004:

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 2004 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 (the "Center") in the Clemson, South Carolina area to
include residential apartments, an accredited health care center and related
recreational and social facilities. The Center'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 revenue are as follows:

                                                          2004		2003
1.	Health care center -	45.2%		45.1%

2.	Apartment rentals -	39.8%		40.2%

The apartment buildings at the Center provide a choice of seven floor plans.
The apartments rent for between $954 and $1,646 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 additional 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 public
areas in the apartment wings are carpeted, with the exception of the kitchen
and bathroom areas. The kitchens are fully equipped with a range and oven,
refrigerator, dishwasher and disposal. There is an emergency response call
system in each apartment and smoke and heat detectors are located throughout
the property.

The Assisted Living apartments at the Center offer 4 levels of care. The rent
ranges from $2,126 to $2,979 per month depending on the assessed level of
care. Three meals per day are included with the rental fee. The Assisted
Living apartments have a separate living room and bedroom areas. Each
apartment has it's own individual bathroom. The kitchen area has a
refrigerator and dishwasher. Housekeeping and laundry are included with the
rental fee. All apartments have ground levels entrances and private patios.
 Each apartment has individual heating, air conditioning, and water heater
systems. The apartments are carpeted except for the kitchen and bathroom
areas. There is an emergency response call system to the nurses' station in
Assisted Living. Heat and smoke detectors are in all apartments and common
areas. The Assisted Living apartments are staffed 24 hours a day year round.

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 health care center resident are under the direction of the resident's
attending physician. The health care center has a 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.

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 the Center is presently in 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.

The Center 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 the Center 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.

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.


Item 1.		Business. (continued)

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 79 persons, of which 67 are full-time, 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 95
independent living apartments, 20 assisted living apartments, 52 nursing home
beds, a community center which includes a dining room, library, and
administrative offices, and an activities building. All 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 mortgage with a balance of $2,895,748 at March 31, 2004
that is collateralized by land and buildings.

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 2004.


	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, 2004, 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 follows discusses the financial condition,
results of operations, liquidity and capital resources of the registrant.

Financial Condition

At March 31, 2004 and 2003, assets were $6.1 million and $6.3 million,
respectively. The balance sheet of the Center has not materially changed from
March 31, 2003 to March 31, 2004.

Results of Operations

Net income for the years ended March 31, 2004 and 2003 was $104,000 and
$90,000, respectively. The increase of $14,000 was primarily the result of
the facility's increase in rates. The Health Care Center, apartments and
assisted living experienced steady occupancy of greater than 95% for the year.

 Operating Revenues

Operating revenues for the years ended March 31, 2004 and 2003 totaled $3.92
million and $3.85 million, respectively. The increase in revenues is
primarily due to an increase of 1.5% in rates charged to residents effective
August 1, 2003.

Operating Expenses

Operating expenses for the years ended March 31, 2004 and 2003 were $3.8
million and $3.7 million, respectively. Administrative and general expense
increased approximately $42,000 due to $23,000 of expenses related to
exploration of potential reorganization as a non-profit entity and $10,000
of employee appreciation expenses.


Nonoperating revenue

Net nonoperating revenue for the year ended March 31, 2004 decreased
approximately $2,000 due to a reduction in interest income from decreased
interest rates paid on certificates of deposit and other interest-earning
accounts.

Liquidity

The Center generated $415,000 in cash flows from operating activities for the
year ended March 31, 2004. The cash flows were used primarily to fund $56,000
of capital expenditures and net repayment of long-term debt of $293,000.

Future Commitments for Capital Expenditures

Management has no anticipated commitments for future capital expenditures as
of March 31, 2004.

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.

N/A

Item 8a.		Controls and Procedures

An evaluation as of the end of the period covered by this report was carried
out under the supervision and with the participation of the Center's
management, including the Center's Administrator and Principal Executive
Officer and Principal Financial Officer, of the effectiveness of the design
and operation of the Registrant's disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934). Based upon that evaluation, the Center's Administrator and Principal
Executive Officer and Principal Financial Officer concluded that those
disclosure controls and procedures were effective to ensure that information
required to be disclosed by the Center in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported as
specified in the SEC's rules and forms.

There have not been any changes in the Center's internal control over
financial reporting during the quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, the
Center's internal control over financial reporting.

Item 8b.		Other Information

N/A


PART III

Item 9.				Directors and Executive Officers of the Registrant.

The Center has adopted a code of ethics applicable to our principal executive
officers, principal financial officer, principal accounting officer and
persons performing similar functions. The text of this code of ethics will be
provided to any person without charge, upon request by writing to the
Corporate Secretary. The address for any request is CARC, Inc., 500 Downs
Loop, Clemson, SC 29631.

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.

Item 13.			Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

a.			Exhibits

13 2004 Annual Report to stockholders, is filed here within

31.1 Sarbanes-Oxley Section 302(a) Certification - Administrator and
              Principal Executive Officer

31.2 Sarbanes-Oxley Section 302(a) Certification - Principal Financial Officer

32 Certification of Administrator and Principal Executive Officer and
              Principal Financial Officer under Section 906 of the Sarbanes-
              Oxley Act of 2002

      b.      Reports on Form 8-K

On March 5, 2004, the Center filed a current report on Form 8-K reporting
under Item 4.


Item 14.	Principal Accountant Fees and Services.

The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant under the
various categories are as follows:

Fees
2004
2003



Audit Fees (1)
	$	22,100
	$	21,000



Audit - Related Fees
	$	-
	$	-



Tax Fees (2)
	$	2,340
	$	1,650



All Other Fees (3)
	$	12,975
	$	-

All of these fees were approved by the Center's audit committee and all
services were performed by the principal accountants' full-time, permanent
employees.

(1) "Audit Fees" consist of fees billed for professional services rendered in
connection with the audit of our annual financial statements, the review of
our interim financial statements included in quarterly reports, and the audit
in connection with regulatory filings.

(2) "Tax Fees" consist of fees billed for professional services rendered for
tax compliance and tax advice. These services include assistance regarding
federal and state tax compliance.

(3) "All Other Fees" consist of fees for products and services other than the
service reported above. In fiscal 2004, this category included fees related
to exploration of potential reorganization as a not-for-profit entity.



	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: 			 by:
					Susan Davis
					Administrator
					(Principal Executive Officer)


Date: 			by:
					Evelyn Kimbrough
					Accountant
				(Principal Financial Officer)


			Exhibit 31.1
                                  Sarbanes-Oxley Section 302(a) Certification
I, Susan Davis, certify that;

1. 	I have reviewed this annual report on Form 10-KSB of CARC, Inc.
("registrant").

2. 	Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. 	Based on my knowledge, the financial statements, and other financial
information included in this  report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

4. 	The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e))  for the registrant and have:

a. 	designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant is made known to
us by others within those entities, particularly during the period in which
this report is being prepared;
b. 	evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c. 	disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and

5. 	The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):

a. 	all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b. 	any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.

Date: 				       /s/ Susan Davis
Susan Davis
	Administrator and Principal Executive Officer


				Exhibit 31.2
                          Sarbanes-Oxley Section 302(a) Certification

I, Evelyn Kimbrough, certify that;

1. I have reviewed this annual report on Form 10-KSB of CARC, Inc.
 ("registrant").

2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this  report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e))  for the registrant and have:

a. designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant is made known to
us by others within those entities, particularly during the period in which
this report is being prepared;
b.	evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c. disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.

Date: 		/s/ Evelyn Kimbrough
       Evelyn Kimbrough								Principal Financial Officer


				                                                              Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to
18 U.S.C. Section 1350
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002


I, Susan Davis, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual
Report of CARC, Inc. on Form 10-KSB for the year ended March 31, 2004 fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that information contained in such Annual Report on
Form 10-KSB fairly presents in all material respects the financial condition
and results of operations of CARC, Inc.

				By:
				Name:	Susan Davis
				Title:	Administrator and Principal Executive Officer




I, Evelyn Kimbrough, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual
Report of CARC, Inc. on Form 10-KSB for the year ended March 31, 2004 fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that information contained in such Annual Report on
Form 10-KSB fairly presents in all material respects the financial condition
and results of operations of CARC, Inc.

				By:
				Name:		Evelyn Kimbrough
				Title:		Principal Financial Officer



A signed original of this written statement required by Section 906 has been
provided to CARC, Inc. and will be retained by CARC, Inc. and furnished to
the Securities and Exchange Commission or its staff upon request.









	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, 2004 and 2003, 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 auditing standards of the Public
Company Accounting Oversight Board (United States). 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,
2004 and 2003 and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted
in the United States of America.

Greenville, South Carolina
May 5, 2004


CARC, INC
Balance Sheet
March 31, 2004 and 2003

Assets


























2004


2003














Current assets:











Cash and cash equivalents


$
742,678

$
676,672



Accounts receivable, net of allowance











for doubtful accounts of $5,000 in










2004 and 2003


159,088


152,082



Other receivables



                 -


592



Prepaid expenses



38,741


39,939



Inventory



27,589


16,820



Deferred income tax asset



11,000


36,000
















Total current assets

979,096


922,105
























Property, buildings, and equipment, net




4,887,245


5,157,321


Deposits in escrow




154,927


148,712


Other assets




84,605


95,894



























Total assets
$
6,105,873

$
6,324,032



























CARC, INC.
Balance Sheet (continued)
March 31, 2004 and 2003

Liabilities and Stockholders' Equity
























2004


2003












Current liabilities:










Current installments of long-term debt


$
315,361

$
295,927


Accounts payable



49,940


60,878


Accrued liabilities



159,158


185,445














Total current liabilities

524,459


542,250











Refundable entrance fees




154,927


148,712

Long-term debt, excluding current installments




2,591,387


2,903,738

Deferred income tax liability




        18,000


16,000














Total liabilities

3,288,773


3,610,700











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


Retained earnings (accumulated deficit)



169,214


65,446














Total stockholders' equity

2,817,100


2,713,332














Total liabilities and stockholders' equity
$
6,105,873

$
6,324,032

























CARC, INC.
Statements of Operations
Years Ended March 31, 2004 and 2003


























2004


2003




Operating revenues:
















Apartments






$
  1,558,624

$
  1,550,596




Assisted Living







     583,899


     558,478




Health Care Center







  1,768,542


  1,738,424




Miscellaneous







         7,983


         7,360





Total operating revenues






  3,919,048


  3,854,858



















Operating expenses:
















Apartments







     515,459


     500,610




Assisted Living







     429,802


     436,611




Health Care Center







  1,228,555


  1,223,514




Maintenance and repair







     142,607


     155,493




Housekeeping







     214,603


     209,953




Administrative and general







     386,184


     343,979




Depreciation and amortization







     365,431


     371,678




Utilities







     186,289


     181,615




Interest







     214,465


     230,607




Property taxes







       90,878


       84,358





Total operating expenses






  3,774,273


  3,738,418





















Income from operations






     144,775


     116,440



















Nonoperating revenue:
















Interest income







         5,493


         7,720



















Income before income taxes








     150,268


     124,160



















Income tax expense








       46,500


       34,000



















Net income







$
     103,768

$
       90,160



















Basic and diluted earnings per share







$
0.19

$
0.17



















Weighted average number of shares








     536,000


     536,000





















Calculation of income/loss






3/31/04


3/31/03





Dietary Revenue






  1,056,117


  1,060,956





Dietary Expense






     882,604


     868,569












     173,513


     192,387




Revenue:
















Apartments






411886


413773
39%




Health Care






     454,130


     456,210
43%




Assisted Living






     190,101


     190,973
18%











1056117


1060956
100%



Expenses:
















Apartments






344,216


338,742





Health Care






379,519


373,485





Assisted Living






158,869


156,342












882,604


868,569






CARC, INC.
Statements of Stockholders' Equity
Years Ended March 31, 2004 and 2003


































Additional


Retained Earnings


Total




Common


Paid-In


(Accumulated


Stockholders'




Stock


Capital


 Deficit)


Equity
















Balances at March 31, 2002

$
    536,000

$
  2,111,886

$
             (24,714)

$
  2,623,172















Net income


         -


         -


              90,160


      90,160















Balances at March 31, 2003


    536,000


  2,111,886


              65,446


  2,713,332















Net income


         -


         -


            103,768


     103,768















Balances at March 31, 2004

$
    536,000

$
  2,111,886

$
            169,214

$
  2,817,100


















CARC, INC.
Statements of Cash Flows
Years Ended March 31, 2004 and 2003
































2004


2003














Cash flows from operating activities:












Net income




$
     103,768

$
       90,160


Adjustments to reconcile net income to net cash












provided by operating activities:












Depreciation and amortization



     365,431


     371,678




Deferred income tax expense



       27,000


       34,000




Decrease (increase) in:












Deposits in escrow


       (6,215)


       (6,082)





Accounts receivable, net


       (7,006)


         7,981





Other receivables


            592


          (480)





Prepaid expenses


         1,198


       (8,533)





Inventory


     (10,769)


                -




Increase (decrease) in:












Accounts payable


     (38,894)


       (1,206)





Accrued liabilities


     (26,287)


       27,887





Unearned revenue


                -


     (12,774)





Refundable entrance fees


         6,215


         6,082






Net cash provided by operating activities

     415,033


     508,713













Cash flows from investing activities:












Purchase of property and equipment





     (56,110)


     (83,633)






Net cash used in investing activities

     (56,110)


     (83,633)













Cash flows from financing activities:












Principal payments of long-term debt





   (292,917)


   (274,331)






Net cash used in financing activities

   (292,917)


   (274,331)


















Net increase in cash and cash equivalents

       66,006


     150,749













Cash and cash equivalents, at beginning of year






     676,672


     525,923













Cash and cash equivalents, at end of year





$
     742,678

$
     676,672















	CARC, INC.
	Notes to Financial Statements
              March 31, 2004 and 2003




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 and assisted living 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. Revenue is reported at the estimated net realizable amounts
from residents, third-party payors, and others for service rendered.

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.

Other Assets - Other assets consist of loan refinancing and loan closing
costs. These costs are 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 and Deferred Income Taxes - Deferred income tax 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 depository cash accounts to be cash or cash equivalents.
Depository accounts that are held in escrow for fees and deposits are not
considered to be cash or cash equivalents.

As supplemental disclosure to the statements of cash flows, the Center paid
interest amounting to $216,151 in 2004 and $234,737 in 2003. The Center paid
$2,700 for income taxes in 2004 and paid no income taxes in 2003. In 2004, t
he Center had a $27,956 non-cash accrual for purchase of equipment.

Credit Risk - 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.

Unearned Revenue - Unearned revenue represents advance payment of gross room
rates.

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 common stock equivalents outstanding that
would have a dilutive effect on earnings per share.

Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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.


2.	Property, Building, and Equipment

A summary of property, buildings, and equipment at March 31 follows:


2004
2003



			Land and land improvements
	$	561,560
	$	550,220
			Buildings
		9,407,890
		9,407,890
			Equipment
		882,885
		810,157
			Vehicles
	  	99,563
	  	99,563

		10,951,898
		10,867,830
			Less accumulated depreciation
	  	6,064,653
	  	5,710,509



				Property, buildings and equipment, net
	$	4,887,245
	$	5,157,321

3.	Long-Term Debt

The Center has a mortgage note secured by its land and buildings with monthly
payments of $41,422, including interest at 6.97%, payable through October
2011. The outstanding balance on the note at March 31, 2004 and 2003 was
$2,895,748 and $3,176,665, respectively.

The mortgage note has 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 and must
maintain a balance of $250,000 in a project maintenance account. This balance
is reported in cash and cash equivalents on the balance sheet. If the balance
falls below this minimum, the Center must deposit $3,000 per month into this
account until the minimum balance is attained. As of March 31, 2004, the
Center was in compliance with such covenants or received a waiver for events
of noncompliance.

In May 2001, the Center signed a promissory note (without collateral or
interest) payable to a resident. Funds obtained from the note were used to
purchase a vehicle. Terms of the note include 44 monthly payments of $1,000,
beginning in July 2001 and the balance outstanding at March 31, 2004 and 2003
was $11,000 and $23,000, respectively.

The aggregate annual maturities of long-term debt for each of the five years
subsequent to March 31, 2004 and thereafter are as follows:

			2005

	$	315,361
			2006

		326,266
			2007

		349,748
			2008

		374,919
			2009

		401,902
			Thereafter

	  	1,138,552





	$	2,906,748


4.	Income Taxes and Deferred Income Taxes

The components of the net deferred income tax assets are as follows:


2004
2003
			Deferred income tax asset:


				Net operating loss carryovers
	$	-
	$	25,200
				Accrued expense not currently deductible


					for tax purposes
		9,600
		9,000
				Bad debts expense not currently deductible


					for tax purposes
	  	1,400
	  	1,800

		11,000
		36,000



			Deferred income tax liability:


				Tax depreciation greater than book depreciation
	    	(18,000)
	    	(16,000)



						Net deferred income tax asset (liability)
	$	 (7,000)
	$	 20,000


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:

2004
2003



			Income taxes at statutory rate
	$	51,000
	$	42,000



			Increase (decrease) resulting from:


				State taxes, net of federal tax benefit
		5,000
		4,000
				Surtax exemption
		(3,000)
		(11,000)
				Other
		-
		(1,000)
				Deferred tax rate adjustment
	    	(6,500)
	  	-



						Actual income tax  expense
	$	46,500
	$	34,000


5.	Retirement Plan

The Center has a 401(k) Retirement Plan for all employees who are at least
eighteen years of age and 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 $17,688 and $21,341 for the
years ended March 31, 2004 and 2003, respectively.


6.	Financial Instruments

Accounting principles generally accepted in the United States of America
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 Center estimates the fair value of these items to be the same as
their carrying 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 total carrying value of debt at March 31, 2004 and 2003 was
approximately $2,907,000 and $3,200,000, respectively, which approximates
market value.

7.	Operating Lease

The Center has noncancelable operating leases for two copiers which expire in
January 2007 and April 2008. Rental expenses for these leases consisted of
$2,745 and $1,215 for the years ended March 31, 2004 and 2003, respectively.

Future minimum lease payments under this operating lease as of March 31, 2004
are:

	2005

	$	3,490
	2006

		3,490
	2007

		3,389
	2008

	  	2,153
	2009

	  	135





	$	12,657








2


12







	11


13



18


CARC, INC.		Notes to Financial Statements (continued)


9