<PAGE> 1
SECURITIES & EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998 Commission File #0-9305
REEVES TELECOM LIMITED PARTNERSHIP
(name changed from Reeves Telecom Associates)
South Carolina 57-0700063
(State of Incorporation) (I.R.S. Employer I.D. Number)
c/o Grace Property Management Inc.
P. O. Box 163
55 Brookville Road
Glen Head, New York 11545
(Address of General Partner) (Zip Code)
Registrants telephone number (516) 686-2201
Indicate by check mark whether the registrant (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 ( )
<PAGE> 2
PART 1. FINANCIAL INFORMATION
REEVES TELECOM LIMITED PARTNERSHIP
BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1998 1997
(UNAUDITED) (AUDITED)
------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 75,643 $ 148,131
Inventory 11,223 --
----------- -----------
86,866 148,131
Land held for development or sale
and related buildings and
equipment, net 1,043,169 911,197
----------- -----------
Total Assets $ 1,130,035 $ 1,059,328
=========== ===========
Liabilities and Partners' Capital
Current Liabilities:
Accounts payable and
accrued expenses $ 1,390,832 $ 1,171,439
Notes payable - Current
portion 44,127 63,750
----------- -----------
1,434,959 1,235,189
Notes payable - Non-Current
portion 112,000 32,708
----------- -----------
Total Liabilities 1,546,959 1,267,897
Partners' capital (416,924) (208,569)
----------- -----------
Total Liabilities and
Partners' Capital $ 1,130,035 $ 1,059,328
=========== ===========
</TABLE>
<PAGE> 3
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
Operating revenues:
<S> <C> <C>
Property sales $ 370,276 $ 250,815
Country Club revenue 344,041 292,496
Interest income 1,532 2,298
Other income and sale of timber -- 1,452
--------- ---------
715,849 547,061
--------- ---------
Operating Costs and Expenses:
Direct costs of property sold $ 151,048 $ 24,418
Selling, general and administrative
expenses of Country Club 330,320 241,011
Selling, general and administrative
expenses 301,802 262,701
Depreciation 46,500 45,667
Interest 94,534 76,915
--------- ---------
924,204 650,712
--------- ---------
Net Income or (Loss) (208,355) (103,651)
Partners' capital at beginning
of period (208,569) 20,388
--------- ---------
Partners' capital at end of period $(416,924) $ (83,263)
========= =========
Income or (Loss) per partnership unit
(1,828,248 units outstanding as of
Sept. 30, 1998 and Sept. 30, 1997.) $ (0.11) $ (0.06)
========= =========
</TABLE>
<PAGE> 4
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Operating revenues:
Property sales $ 81,809 $ 104,747
Country Club revenue 116,905 103,373
Interest income 506 1,046
Other income and sale of timber -- --
--------- ---------
199,220 209,166
--------- ---------
Operating Costs and Expenses:
Direct costs of property sold $ 6,943 $ 11,719
Selling, general and administrative
expenses of Country Club 122,192 87,503
Selling, general and administrative
expenses 99,493 93,511
Depreciation 13,473 15,563
Interest 33,282 28,684
--------- ---------
275,383 236,980
--------- ---------
Net Income or (Loss) (76,163) (27,814)
Partners' capital at beginning
of period (340,761) (55,449)
--------- ---------
Partners' capital at end of period $(416,924) $ (83,263)
========= =========
Income or (Loss) per partnership unit
(1,828,248 units outstanding as of
Sept. 30, 1998 and Sept. 30, 1997.) $ (0.04) $ (0.02)
========= =========
</TABLE>
<PAGE> 5
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(208,355) $(103,651)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 46,500 45,667
Change in assets and liabilities:
(Increase) in inventory (11,223) --
Decrease in Land held for
development or sale 39,048 21,775
Increase in accounts payable
and accrued expenses 219,393 166,034
--------- ---------
Net cash used in operating activities 85,363 129,825
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of land improvements,
buildings and equipment $(217,520) $ (44,208)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt $ (52,331) $ (43,196)
Borrowing under line of credit 112,000 --
--------- ---------
Net cash provided by financing
activities 59,669 (43,196)
--------- ---------
NET INCREASE (DECREASE) IN CASH $ (72,488) $ 42,421
CASH BALANCE - BEGINNING 148,131 133,919
--------- ---------
CASH BALANCE - ENDING $ 75,643 $ 176,340
========= =========
</TABLE>
<PAGE> 6
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (76,163) $ (27,814)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 13,473 15,563
Change in assets and liabilities:
(Decrease) in inventory 1,924 --
Decrease in Land held for
development or sale 13,311 9,076
Increase in accounts payable
and accrued expenses 89,675 78,359
--------- ---------
Net cash used in operating activities 42,220 75,184
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of land improvements,
buildings and equipment $ (43,518) $ (14,704)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt $ (14,110) $ (13,793)
Borrowing under line of credit -- --
--------- ---------
Net cash provided by financing
activities (14,110) (13,793)
--------- ---------
NET INCREASE (DECREASE) IN CASH $ (15,408) $ 46,687
CASH BALANCE - BEGINNING 91,051 129,653
--------- ---------
CASH BALANCE - ENDING $ 75,643 $ 176,340
========= =========
</TABLE>
<PAGE> 7
REEVES TELECOM LIMITED PARTNERSHIP
SEPTEMBER 30, 1998
(Unaudited)
ITEM 2. Management Discussion and Analysis of Financial Condition and
Results of Operations.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the nine
month period ended September 30, 1998 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1998.
For further information, refer to the consolidated financial statements
and notes thereto included in the Partnership's Annual Report on Form
10-K for the year ended December 31, 1997 as filed with the Securities
and Exchange Commission on March 31, 1998.
Certain matters discussed herein are forward-looking statements about
the business, financial condition and prospects of the Partnership. The
actual results could differ materially from those indicated by such
forward-looking statements because of various risks and uncertainties.
Such risks and uncertainties may include, but are not limited to,
regional and national economic conditions, changes in consumer demand
for real estate, changes in interest rates and the availability of
credit to the Partnership and/or potential purchasers of real estate,
changes in state and federal regulations relating to environmental and
health matters, and, in connection with Fox Squirrel, weather
conditions and changes in employee relations which may adversely affect
the ability of the Partnership to maintain Fox Squirrel as desired. The
Partnership cannot control these risks and uncertainties and, in many
cases, cannot predict the risks and uncertainties that could cause its
actual results to differ materially from those indicated by the
forward-looking statements. The Partnership undertakes no obligation to
publicly update or revise any forward-looking statement, whether as a
result of new information, future events or otherwise.
The Partnership will adopt Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131") on December 31, 1998. SFAS No. 131
establishes standards for the way that public business enterprises
report information about operating segments in financial statements and
requires that those enterprises report selected information about
operating segments in its interim financial reports issued to
shareholders. It also establishes standards for related
<PAGE> 8
REEVES TELECOM LIMITED PARTNERSHIP
SEPTEMBER 30, 1998
(Unaudited)
disclosures about products and services, geographic areas, and major
customers. The Partnership has yet to determine the impact, if any, of
adoption of the new pronouncement.
Revenue from real estate operations for the nine months ended September
30, 1998 was $370,276, comprised of revenue from the sales of 37
individual undeveloped lots for an aggregate of $239,276 and gross
proceeds from the sale of one "spec house" of $131,000. Revenue for the
same period in 1997 was $250,815, generated from the sale of 45
individual undeveloped lots. No "spec houses" were sold during the
first nine months of 1997. Management attributes the increase in
revenues largely to the sale of the "spec house" during 1998 and to the
relative mix of lots sold as to location. Individual lots adjacent to
or near the golf course, for example, generally command a higher sales
price than lots which are not so situated. The Partnership sold more
lots situated on or near the golf course during the first half of this
year than in the same period last year.
Revenue at Fox Squirrel Country Club ("Fox Squirrel") for the nine
months ended September 30, 1998 and 1997 were $344,041 and $292,496,
respectively. Management attributes the increase in revenue largely to
the Partnership's assuming the interim operation of the Pro Shop and
Dining Service at Fox Squirrel in February 1998. Prior to such time,
the Pro Shop and Dining Service were operated by the Manager of Fox
Squirrel for his own account and not for the benefit of the
Partnership. As stated in the Partnership's Form 10-K for the fiscal
year ended December 31, 1997, the Partnership and the Manager concluded
an agreement pursuant to which, among other things, the Manager's
employment agreement and related agreement to operate the Dining
Service were canceled. Apart from the effect of revenue from the Pro
Shop and Dining Service, revenue at Fox Squirrel during the first three
quarters of 1998 was marginally lower than in the same period in 1997.
Higher revenue from dues failed to offset lower revenue from cart
rentals resulting from a lower number of rounds played during 1998 than
in the same period one year ago. Direct operating expenses at Fox
Squirrel for the nine months ended September 30, 1998 and 1997 were
$330,320 and $241,011, respectively. Management attributes the increase
largely to the Partnership's operation of the Pro Shop and Dining
Service at Fox Squirrel beginning in February, 1998.
Direct cost of property sold during the nine months ended September 30,
1998 and 1997 was $151,048 and $24,418, respectively. The increase is
due to the costs associated with the sale of one "spec house".
<PAGE> 9
REEVES TELECOM LIMITED PARTNERSHIP
SEPTEMBER 30, 1998
(Unaudited)
In April 1997 the Partnership sold a "spec house" to certain purchasers
who subsequently filed suit against the Partnership and others
claiming, among other things, that the property flooded during periods
of severely inclement weather, making the house uninhabitable. The suit
seeks among other things, rescission of the sale and reimbursement to
the purchasers of certain expenses. The Partnership believes that the
costs to remedy the alleged defects to the property are unlikely to
exceed $10,000. The Partnership has agreed to enter into discussions
with plaintiffs regarding a settlement of the matter principally to
avoid the costs and expenses involved with litigation. While there can
be no assurance that discussions with plaintiffs will result in
settlement and, if such a settlement occurs, of the costs to the
Partnership of such settlement and/or remedy, the Partnership has
established a reserve of $10,000 to cover costs and expenses associated
with a possible settlement.
To provide funds for working capital and other purposes, on June 1,
1995 the Partnership borrowed $200,000 from the president of the
General Partner, payable in full on June 1, 1998. The promissory note
issued bears interest at a rate equal to 6% above 12-month LIBOR,
requires interest to be paid quarterly commencing September 1, 1995,
and allows for prepayment without penalty. The promissory note is
secured by a mortgage on Fox Squirrel. As of September 30, 1998,
$190,000 of the principal has been repaid, leaving an outstanding
balance of $10,000. Pursuant to the terms of the promissory note, the
Partnership will be charged interest on the remaining balance at an
annual rate equal to three percent (3%) above the rate provided for in
the promissory note, or 11.84375% as of June 1, 1998, the date on which
the principal was due.
Management believes that the variable nature of the Partnership's
revenues and its current liquidity position raise doubts about the
Partnership's ability to fund its operations and currently planned
capital programs without obtaining additional financing. Management is
not certain that additional outside financing is available and, if
available, that such financing may be obtained on terms Management
believes to be acceptable.
<PAGE> 10
REEVES TELECOM LIMITED PARTNERSHIP
SEPTEMBER 30, 1998
(Unaudited)
APPRAISAL OF ASSETS
In September 1998, the Partnership obtained from Robert C. Cantwell and
Associates an updated MAI appraisal of its assets located in Boiling
Spring Lakes, North Carolina. Such assets comprise substantially all of
the assets of the Partnership other than cash. The appraisal, dated as
of July 9, 1998, values the appraised assets at $1,350,000. Such value
is the appraiser's opinion of the market value of the appraised assets
and assumes, among other things, a willing buyer and seller, both
parties are reasonably informed about the assets, and the purchase/sale
is an "arm's length" transaction. As such, there is no guarantee that
the Partnership could realize the appraised value of such assets upon a
sale. The actual sale price could be higher of lower than the appraised
value. The appraisal is not in connection with any requested minimum,
maximum or specific appraised value, any pending or proposed sale or
other transaction, or approval of any loan involving the appraised
assets or the Partnership. The foregoing summary of the appraisal is
limited in its entirety to the full appraisal report, a copy of which
has been filed with the U.S. Securities and Exchange Commission as a
paper-form exhibit to this Form 10-Q.
As a result of such appraisal, the Partnership and its accountants
believe that the valuation allowance of $1,886,624 at June 30, 1998 is
appropriate, and that no adjustment to the valuation allowance need be
made.
<PAGE> 11
REEVES TELECOM LIMITED PARTNERSHIP
SEPTEMBER 30, 1998
(Unaudited)
ITEM 6. Exhibits and Reports on Form 8-K
(a) In accordance with Rule 202 of Regulation S-T, the
Partnership filed in paper pursuant to a continuing
hardship exemption an exhibit to this Form 10-Q. The
exhibit is an appraisal by Robert C. Cantwell and
Associates, dated September 1, 1998, of the Partnership's
assets at Boiling Spring Lakes, North Carolina. A summary
of the appraisal is set forth in Part I, Item 2:
"Management Discussion and Analysis of Financial Condition
and Results of Operations" of this Form 10-Q.
(b) The Partnership filed no reports on Form 8-K for the quarter
ended September 30, 1998.
<PAGE> 12
REEVES TELECOM LIMITED PARTNERSHIP
SEPTEMBER 30, 1998
(Unaudited)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
REEVES TELECOM LIMITED PARTNERSHIP
By: Grace Property Management Inc.
General Partner
By: /s/ John S. Grace
-----------------------------------
John S. Grace
President
Dated: November 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 75,643
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 11,223
<CURRENT-ASSETS> 86,866
<PP&E> 1,043,169
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,130,035
<CURRENT-LIABILITIES> 1,434,959
<BONDS> 112,000
0
0
<COMMON> (416,924)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,130,035
<SALES> 370,276
<TOTAL-REVENUES> 715,849
<CGS> 151,048
<TOTAL-COSTS> 829,670
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,534
<INCOME-PRETAX> (208,355)
<INCOME-TAX> 0
<INCOME-CONTINUING> (208,355)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (208,355)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
