<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ____________________ TO __________
COMMISSION FILE NUMBER: 110-9305
REEVES TELECOM LIMITED PARTNERSHIP
(NAME CHANGED FROM REEVES TELECOM ASSOCIATES)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
SOUTH CAROLINA 57-0700063
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
C/O GRACE PROPERTY MANAGEMENT, INC.
P.O. BOX 163, 55 BROOKVILLE ROAD
GLEN HEAD, NEW YORK 11545
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (516) 686-2201
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
WHICH REGISTERED
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
WHICH REGISTERED
PARTNERSHIP UNITS NONE
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 / /
ON MARCH 16, 1998, THE REGISTRANT HAD OUTSTANDING 1,828,248 PARTNERSHIP UNITS.
SEE ITEM 5. THERE IS NO ACTIVE MARKET FOR THE PARTNERSHIP UNITS. WITH REGARD TO
RECENT SALES SEE ITEM 5. AS OF MARCH 16, 1998, NON-AFFILIATES HELD 1,187,903
PARTNERSHIP UNITS.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Reeves Telecom Limited Partnership (the "Registrant" or the
"Partnership") is a South Carolina Limited Partnership formed for the purpose of
accepting certain assets and liabilities from its predecessor corporation,
Reeves Telecom Corporation (the "Corporation"). The Corporation sold its
principal assets during the twelve month period ended May 15, 1980 and
distributed cash and the limited partnership units of the Registrant to its
former shareholders as a liquidation distribution. The partnership units were
registered under the Securities Act of 1933 by the filing of a Registration
Statement pursuant to Form S-14 (File No. 2-66452) which became effective April
8, 1980 and pursuant to which a Proxy statement/prospectus dated April 14, 1980
was mailed to all shareholders. Reference is made to said Registration Statement
and said Proxy statement/prospectus for a description of the liquidation of the
Corporation and the formation of the Registrant. The Registrant was initially
organized October 25, 1979 but had only nominal assets and no liabilities until
May 15, 1980. To reflect a change in South Carolina law, Registrant's name was
changed from Reeves Telecom Associates to Reeves Telecom Limited Partnership on
January 21, 1987.
GENERAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership's business may be categorized into two industry
segments: (i) owning, developing, selling, leasing, or otherwise dealing in real
estate, and (ii) owning and operating a golf course and country club. See the
audited financial statements for financial information about each segment.
NARRATIVE DESCRIPTION OF BUSINESS
The principal asset of the Partnership is real estate for
development located in Boiling Spring Lakes, in Brunswick County, North
Carolina, where the Partnership also owns and operates a golf course and country
club. The Partnership also owns real estate for development at Pimlico
Plantation, in Berkeley County, South Carolina (see Item 2, "Properties").
Prior to mid-1993, in view of limited resources, Management
concentrated on holding down costs and focused on a bulk sale of all or
substantially all of the assets of the Partnership. Local real estate brokers
were relied upon to generate individual lot sales, and the golf course and
country club were leased to an operator. Under this arrangement, lot sales were
slow and operating expenses generally significantly exceeded revenue from such
sales. Were it not for cash generated from activities other than the sale of
real estate during those years, the Partnership would likely have become
insolvent.
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In June 1993, Management began to place greater emphasis on the sale
of individual lots and pursued other means of generating revenue. At that time,
the Partnership also became increasingly involved in the management and
operation of the golf course and country club.
BOILING SPRING LAKES
- REAL ESTATE SALES
Revenues during the last five fiscal years are as follows:
<TABLE>
<CAPTION>
No. of Individual Lots Sold
---------------------------- Large Total
Improved Unimproved Parcels Revenues
-------- ---------- ------- --------
<S> <C> <C> <C> <C>
Fiscal 1997 2 55 0 $411,609
Fiscal 1996 1 49 1 463,051
Fiscal 1995 0 37 0 209,055
Transition Quarter 0 6 0 27,075
Fiscal 1994 0 37 0 314,548
Fiscal 1993 0 15 0 101,665
</TABLE>
The Transition Quarter is the three month period from October 1,
1994 to December 31, 1994 and reflects the change in the Partnership's fiscal
year end from September 30 to December 31 (see Item 6, "Selected Financial
Data"). Accordingly, the above figures, and the figures contained in all tables
in this Item 1, for Fiscal 1995, 1996 and 1997 are for the twelve months ended
December 31 of each such year and the figures for prior fiscal years are for the
twelve months ended September 30 of each such year.
In the foregoing table, an "individual" lot typically comprises
about 1/4 acre, an "improved" lot is an individual lot on which the Partnership
has started and, in some cases, completed, construction of a house, and an
"unimproved" lot is an individual lot on which a house may be built by the
purchaser. In 1997, the Partnership sold two improved lots; the first was sold
for $115,000 and generated a profit of approximately $20,000, the second was
sold for $128,000 shortly after construction of the house had commenced and
generated a profit of approximately $17,100. In 1996, the Partnership sold one
improved lot for $113,000, which generated a profit of approximately $19,400,
and a 430-acre parcel of undeveloped land for approximately $85,000. For
accounting purposes, the Partnership's revenues reflect only the net proceeds
received by the Partnership upon the sale of the improved lot in 1996 and of the
second improved lot in 1997. Apart from the foregoing, Management attributes the
increase in revenues and the number of lots sold in recent years to greater
flexibility in the Partnership's pricing structure of lots and to generally
improved economic conditions in the region.
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- FOX SQUIRREL COUNTRY CLUB
The Registrant is the owner of Fox Squirrel Country Club ("Fox
Squirrel"), a semi-private golf course and country club. Fox Squirrel's 18-hole
golf course serves, along with numerous recreational lakes and ponds, as the
centerpiece of the Boiling Spring Lakes development.
Prior to October 1993, Fox Squirrel was leased to an operator. The
Partnership paid the operator a subsidy, which eventually ceased, and beginning
in July 1990 the Partnership began receiving monthly rental payments of $1,000.
During 1992, the monthly rent was increased to $1,500 and the Partnership
assumed certain operating expenses. Because of unfavorable operating conditions,
however, the operator fell behind in payments. In October 1993, at the request
of the operator and to ensure uninterrupted operation of the golf course and
country club, the Partnership began operating Fox Squirrel, receiving all
revenue and paying all expenses relating thereto, and the operator became an
employee of the Partnership, managing Fox Squirrel on behalf of the Partnership.
In November 1995, the Partnership hired a new manager and golf pro of Fox
Squirrel, replacing the former manager, who resigned. The new manager also
leased the kitchen and dining area in the club house from the Partnership, which
paid for certain improvements to the kitchen and dining area. Although the lease
provided for the payment to the Partnership of monthly lease payments in varying
amounts, the Partnership waived most lease payments to enable the dining service
to become financially established. In February 1998, the manager of Fox Squirrel
and the Partnership agreed to the termination of the manager's employment
agreement and related agreement to lease the kitchen and dining area. The
Partnership agreed, among other things, to purchase certain assets from, and
assume certain liabilities of, the manager in exchange for cash consideration to
the manager of $49,404. As a result of the foregoing, the Partnership became the
operator of the dining service and Management is currently searching for a new
manager of Fox Squirrel.
Management views Fox Squirrel as being highly important to the
success of the development. Its attraction as a recreational facility to those
who are considering purchasing or building a home in the region is believed to
allow for more lot sales and a higher sales price per lot than would be the case
in the absence of such a facility. As a consequence, Management currently
expects to continue operating Fox Squirrel.
The Partnership's revenue and operating income from Fox Squirrel for
the last five fiscal years are as follows:
<TABLE>
<CAPTION>
Operating
Revenue Income (Loss)
------- -------------
<S> <C> <C>
Fiscal 1997 $373,972 $ 34,206
Fiscal 1996 358,580 8,126
Fiscal 1995 340,699 41,522
Transition Quarter 68,189 (13,269)
Fiscal 1994 345,737 44,175
Fiscal 1993 10,000 10,000
</TABLE>
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As previously described, the Transition Quarter is the three month
period from October 1, 1994 to December 31, 1994 and reflects the change in the
Partnership's fiscal year end from September 30 to December 31 beginning with
Fiscal 1995.
The increase in revenue and variability in operating income
beginning in Fiscal 1994 is attributable to the Partnership assuming operating
responsibility for Fox Squirrel on October 1, 1993 and reflects the actual
operations of Fox Squirrel. Prior to 1994, a base rent was collected from the
operator under a lease with the Partnership. Accordingly, revenue and operating
income for Fiscal 1994 and thereafter are not directly comparable to prior
years.
- OTHER
The Partnership has generated revenue from the sale of timber and
pine straw on certain unsold lots. While additional revenue from such sources
continues to be sought as a means of supplementing revenue from lot sales,
Management believes that these activities will not be a material source of
revenue during the next fiscal year or thereafter due principally to the
harvesting of seasoned timber performed in past years. The amount of revenue
generated from the sale of timber and pine straw during the last five fiscal
years is as follows:
<TABLE>
<CAPTION>
Revenue
-------
<S> <C>
Fiscal 1997 $ 694
Fiscal 1996 12,866
Fiscal 1995 35,920
Transition Quarter 15,381
Fiscal 1994 91,611
Fiscal 1993 202,830
</TABLE>
As previously described, the Transition Quarter is the three month
period from October 1, 1994 to December 31, 1994 and reflects the change in the
Partnership's fiscal year end from September 30 to December 31 beginning with
Fiscal 1995.
Since the 1970's, health standards at Boiling Spring Lakes have
become increasingly stringent regarding septic tanks and on-site sewage
disposal. It is estimated that 70% to 75% of the property which would have
complied with applicable rules and regulations a number of years ago no longer
meets present day health standards. This has had a detrimental effect on the
operations of the Partnership. In a few cases the problem could be cured by the
use of drains, or by the scraping away of hard pan and adding fill dirt. In most
instances, however, health departments have declared a majority of the areas as
irremediable by ordinary measures. In such cases, the only solution would be to
install area-wide sewer systems. While the Partnership does not have the
resources to install a sewer system covering most or all of the entire
development, a small multi-user system has been installed on eight lots zoned
for commercial use. Depending upon the Partnership's financial resources, the
market for real estate in and around Boiling Spring Lakes and economic
conditions generally, among other factors, Management may consider
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installing similar multi-user systems in other areas of the development in the
future but currently has no plans to do so.
PIMLICO PLANTATION
Revenues during the last five fiscal years are as follows:
<TABLE>
<CAPTION>
Number of Lots Revenues
-------------- --------
<S> <C> <C>
Fiscal 1997 -0- $ -0-
Fiscal 1996 -0- -0-
Fiscal 1995 -0- -0-
Transition Quarter -0- -0-
Fiscal 1994 23 202,075
Fiscal 1993 3 29,266
</TABLE>
As previously described, the Transition Quarter is the three month
period from October 1, 1994 to December 31, 1994 and reflects the change in the
Partnership's fiscal year end from September 30 to December 31 beginning with
Fiscal 1995.
Pursuant to a letter agreement dated September 14, 1993 and amended
on November 22, 1993, the Partnership transferred 23 lots to a major unit holder
in exchange for $10,000 cash and 492,584 partnership units held by such unit
holder. The transaction closed on December 15, 1993 and is valued by the
Partnership at $202,075. The Partnership currently owns only two lots at Pimlico
Plantation. Management is contemplating transferring ownership of such lots to
the local civic association but, as of the date of this report, has not
committed to do so. In view of the foregoing, revenue from the sale of lots at
Pimlico Plantation in future years is expected to represent, at best, a
negligible percentage of total revenue.
SEASONALITY
The sale of real estate in North and South Carolina is seasonal. The
Partnership has generally experienced slower than average lot sales in the
period from November to January, inclusive.
Although played year-round, depending upon the climate and weather,
golf is by and large a summer sport. Accordingly, revenue at Fox Squirrel is
generally highest in the period from June to September, inclusive. Revenue is
generally lowest in the period from November to February, inclusive, when
extensive seeding and course repair work is usually performed.
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<PAGE> 7
DEPENDENCE UPON CUSTOMERS
The Partnership is not dependent in any respect upon one or a few
customers, the loss of any one of which might significantly affect the financial
results of the Partnership.
COMPETITION
The real estate markets in Brunswick County, North Carolina and
Berkeley County, South Carolina are extremely competitive. Prospective
residential property owners may buy from real estate developers, who generally
sell lots suitable for building but who may also sell improved properties,
existing homeowners looking to relocate, and others. Property values are
dependent upon, among other factors, proximity to and the nature and quality of
recreational facilities, retail shopping, commercial sites and schools, and the
availability of county water (as opposed to well water) and sewer service (as
opposed to septic systems).
Many real estate developments in the two markets in which the
Partnership operates provide recreational facilities, such as a golf course,
lakes and/or swimming pools, and tennis courts. In many cases, depending upon
the financial resources of the particular developer, such facilities are more
extensive and/or more varied than the Partnership's facilities. Within a radius
of 100 miles of Boiling Spring Lakes are several golf courses designed by
well-known golf course designers, some of which courses serve as the site of
significant professional golf tournaments, as well as numerous golf courses in
and surrounding the resort community of Myrtle Beach, South Carolina. Lots
associated with such facilities generally command higher sales prices than lots
owned by the Partnership. Management believes that the Partnership can compete
effectively against other real estate developers and golf course operators, many
of whom are believed to have substantially greater resources than the
Partnership, principally on the basis of price and, depending upon the amount of
cash generated from lot sales, by making selective improvements to recreational
facilities, including Fox Squirrel.
LIQUID ASSETS AND RESERVES
As of December 31, 1997, the Partnership held $148,131 in cash.
Current liabilities as of this date totaled $1,235,189.
The Partnership Agreement obligates the General Partner to
distribute Distributable Cash (as such term is defined in the Partnership
Agreement). Distributable Cash excludes, among other items, reserves established
for working capital, contingent liabilities, taxes, debt service, repairs,
replacements, renewals, capital expenditures or other purposes consistent with
the Partnership Agreement. Such reserves are used solely for calculating
Distributable Cash and are not treated as deductions from income for accounting
purposes. During the first quarter of Fiscal 1994, a reserve of $100,000 was
established to fund certain capital expenditures, including, among others,
construction of a new maintenance shed at the golf course and re-roofing of the
Fox Squirrel
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<PAGE> 8
clubhouse. Also in 1994, the Partnership established a reserve of $20,000 to
fund the initial portion of a regional marketing campaign, one aspect of which
involves the construction of one or more model homes. In Fiscal 1995 a reserve
of $250,000 was established to fund primarily certain capital improvements at
Fox Squirrel. In Fiscal 1996, reserves totaling $200,000 were established to
fund, principally, certain capital improvements at Fox Squirrel and certain
capital projects within the development, including a multi-user septic system
installed on eight lots zoned for commercial use. In Fiscal 1997, reserves
totaling $200,000 were established for substantially the same purposes.
See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," for further discussion of factors
affecting liquidity.
ITEM 2. PROPERTIES
BOILING SPRING LAKES
Boiling Spring Lakes began as a 14,000 acre development which was
commenced by the Corporation in 1962. Part of the tract is now within the City
of Boiling Spring Lakes, which has approximately eighteen hundred residents. The
city is in Brunswick County, 25 miles south of Wilmington, North Carolina, and 8
miles west of Southport.
The Registrant presently owns the following real estate: (1) 159.9
acres comprising a surveyed 18 hole sprinklered golf course, club house and
maintenance building, together known as Fox Squirrel; (2) 140 building lots
located near the golf course which have been surveyed and platted and are
suitable for building; (3) 194 acres surrounding the golf course which could be
developed; (4) 3,267 surveyed and platted lots of which approximately 8% are
suitable for building, 6% are conditionally suitable for building and the
balance are unsuitable for building; (5) approximately 4,000 acres of wetlands
and woodlands which have no development potential; and (6) a sales office.
During 1988, the Partnership reduced the carrying value of the
Boiling Spring Lakes property as a result of an appraisal obtained in December
1988 (see Note 3 of financial statements). During 1993 and 1995 the Partnership
received updated appraisals of the Boiling Spring Lakes property. Based upon the
updated appraisals, no additional reduction to the carrying value was made.
Management anticipates that an updated appraisal will be obtained during 1998.
Management intends to emphasize the sale of individual lots at
Boiling Spring Lakes, concentrating first on lots situated on existing paved
roads. Depending upon the Partnership's financial resources, cost estimates, and
projected sales prices, among other things, Management may undertake the
development of additional sections of Boiling Spring Lakes.
During 1995, the Partnership undertook certain improvements to Fox
Squirrel, including paving of the 25,360 linear feet of cart paths. During 1996,
the Partnership undertook substantial
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<PAGE> 9
remodeling of the kitchen and dining area of the club house and made further
improvements to the golf course. During 1997, the Partnership made further
improvements to the club house and golf course. Depending upon the Partnership's
financial resources, revenues from Fox Squirrel, and cost estimates, among other
things, Management may undertake additional improvement projects at Fox
Squirrel.
In December 1995, Management initiated a project involving the
construction of a house on a lot owned by the Partnership and the immediate
marketing of the house and lot for sale. In January 1996 the Partnership
obtained from a local bank a line of credit of $85,000 to finance the
construction of the house. The property was sold in June 1996 for approximately
$113,000 and the outstanding borrowing under the line of credit was repaid at
closing, resulting in a profit to the Partnership of approximately $19,400,
greater than would have been the case if the lot had been sold unimproved. The
project was continued in 1997 and the Partnership sold two improved lots during
the year; the first was sold for $115,000 and generated a profit of
approximately $20,000 after repayment of outstanding borrowing under the line of
credit, the second was sold for $128,000 and generated a profit of approximately
$17,100. Since construction of the house had barely commenced at the time of the
sale of the last mentioned property, there was no outstanding borrowing under
the line of credit at the time of sale and, for accounting purposes, the
Partnership's revenues reflect only the net proceeds received by the Partnership
upon the sale. Management may undertake similar projects during Fiscal 1998.
In late 1996 the City of Boiling Spring Lakes granted its approval
for the construction of 23 patio homes on 13 contiguous lots owned by the
Partnership. Construction has been delayed due to new state regulations,
promulgated after the city granted its approval but before construction on the
patio homes commenced, which requires the Partnership to file storm water
drainage plans with respect to the patio homes project. The storm water drainage
plans were filed during 1997 and Management is hopeful that construction of the
first patio home may commence during the second quarter of Fiscal 1998.
Management expects that, once construction begins, the Partnership will have one
or two patio homes under construction at any given time, and that once a house
is sold, construction will begin immediately on an additional house.
PIMLICO PLANTATION
Following the exchange described in Item 1(c), "Narrative
Description of Business: Pimlico Plantation," the Registrant owns two lots,
comprising an aggregate of approximately 3/4 acre, at this location in Berkeley
County, near Charleston, South Carolina. Pimlico Plantation was developed by the
Corporation and its predecessors. The Registrant believes that the lots have
limited value and is contemplating transferring the lots to the local civic
association but has not committed to do so.
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<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not a party to any material pending legal
proceedings. From time to time the Partnership has been and may become a party
to ordinary routine litigation incidental to its business. Management believes
that the potential liability to the Partnership from any of such proceedings is
immaterial.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNIT HOLDERS
No matters were submitted to a vote of unit holders during Fiscal
1997.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S PARTNERSHIP UNITS AND RELATED SECURITY MATTERS
As of December 31, 1997 there were 1,930 recorded holders of
partnership units, including 597 registered holders of an aggregate of 68,384
shares of Corporation common stock which have yet to be exchanged for
partnership units. The total number of record holders is not substantially
changed from December 31, 1996. The units are not registered on any exchange,
and there is only a limited over-the-counter market for the units. It is not
anticipated that there will ever be an active public market for the units.
It is the Partnership's experience that revenues are highly variable
and may not be sufficient in future years to cover expenses and necessary
capital expenditures and that, in the absence of enhanced prospects for the
development as a whole, a bulk sale of assets for cash is extremely difficult to
achieve. Management believes that the best use of the current cash balance and
cash surpluses, if any, generated in future fiscal years is to improve the
overall value of the Partnership's assets by (i) making certain improvements at
Fox Squirrel, thereby increasing the attractiveness of Fox Squirrel as a
recreational facility to prospective homeowners, (ii) undertaking certain
infrastructure and other improvements in the development, (iii) undertaking on a
limited scale home construction on lots owned by the Partnership to demonstrate
the viability of larger scale building programs, and (iv) paying down accrued
expenses. Management believes that this plan will, in future years, result in,
among other things, an increase in the number of lots sold, a higher average
sales price per lot, and higher operating income at Fox Squirrel and the
Partnership as a whole. There can be no assurance, however, that sufficient cash
will be generated from operations to successfully implement Management's plan.
Consistent with such plan and in view of the costs associated with a
distribution to all partners, Management believes it would be impractical and
imprudent to make a general distribution prior to the sale of a major asset, the
bulk sale of all or substantially all of the Partnership's assets, or such time
as the Boiling Spring Lakes development, as a whole, has been established to
operate at a level sufficient to consistently generate revenues in excess of
expenses and capital expenditures. However, from time to time in future periods,
in accordance with applicable Securities laws, the Partnership may utilize
excess cash by repurchasing partnership units, either in privately negotiated
transactions or through open market purchases, although there are currently no
plans to do so. Since the amount of excess cash available for such purpose
cannot be estimated at this time due to the highly variable nature of the
Partnership's cash flow, there can be no assurance as to the number of
partnership units which will actually be repurchased, if any such repurchases
will, in fact, occur, or the prices at which such repurchases, if any, will be
made. As of the date of this Form 10-K, no filings have been made with the
Securities and Exchange Commission with respect to any such planned repurchases.
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<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth has been derived from the
historical audited financial statements of the Partnership. The selected
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the audited
financial statements and related notes thereto.
<TABLE>
<CAPTION>
Year Ended
Year Ended December 31, 3 Mos Ended September 30,
--------------------------------------------- Dec. 31, -----------------------
1997 1996 1995 1994 1994 1993
----------- ----------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Property sales $ 411,609 $ 463,051 $ 209,055 $ 27,075 $516,623 $ 130,931
Country Club revenue 373,972 358,580 340,699 68,189 345,737 0
Other revenue 3,303 3,756 8,880 593 5,305 5,123
----------- ----------- --------- --------- -------- ---------
Total revenue 788,884 825,387 558,634 95,857 867,665 136,054
Expenses:
Direct cost of property sold 113,611 40,201 95,992 13,900 184,450 74,825
SG&A of Country Club 339,766 350,454 299,177 81,458 301,562 0
SG&A 391,067 432,767 293,277 54,317 357,536 293,760
Depreciation 61,565 50,756 39,190 6,566 13,276 12,224
Interest 112,526 225,200 14,627 0 691 2,170
----------- ----------- --------- --------- -------- ---------
Total expenses 1,018,535 1,099,378 742,263 156,241 857,515 382,979
----------- ----------- --------- --------- -------- ---------
Operating income (loss) (229,651) (273,991) (183,629) (60,384) 10,150 (246,925)
Other income, net 694 13,547 43,685 15,381 98,700 160,338
----------- ----------- --------- --------- -------- ---------
Net income (loss) $ (228,957) $ (260,444) $(139,944) $ (45,003) $108,850 $ (86,587)
=========== =========== ========= ========= ======== =========
Income (loss) per unit $ (0.13) $ (0.14) $ (0.08) $ 0.00 $ 0.06 $ (0.04)
</TABLE>
<TABLE>
<CAPTION>
At December 31, At At September 30,
----------------------------------------- Dec. 31, ------------------------
1997 1996 1995 1994 1994 1993
----------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets $ 148,131 $ 133,919 $ 73,860 $137,549 $178,294 $ 249,626
Land held for sale and related
buildings and equipment, net 911,197 1,037,678 910,183 811,073 790,566 859,565
Other assets 0 0 1,201 4,204 4,704 3,810
Total assets 1,059,328 1,171,597 985,244 952,826 973,564 1,113,001
Current liabilities 1,235,189 997,568 531,467 523,628 499,312 573,997
Long-term debt 32,708 153,641 172,945 8,422 8,473 0
Total liabilities 1,267,897 1,151,209 704,412 532,050 507,785 573,997
Partners' capital (deficit) (208,569) 20,388 280,832 420,776 465,779 539,004
</TABLE>
The Partnership's fiscal year end was changed from September 30 to
December 31 beginning with 1995. For financial reporting purposes, a transition
quarter, covering the period from October 1, 1994 to December 31, 1994, was
employed. The change in fiscal year end reflects Management's desire to avoid
having to make certain deposits to the U.S. Internal Revenue Service (the "IRS")
required by Code Section 7519 and the regulations thereunder of the Internal
Revenue Code of 1986, as amended (the "Code"). The Code requires that any
limited partnership having a fiscal year end other than December 31 and which
generates income taxable to its partners during any fiscal year make such a
deposit in respect of such
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<PAGE> 13
fiscal year. By changing its fiscal year end to December 31, the Partnership was
able to reclaim $9,481 held on deposit by the IRS for income deferred through
September 30, 1993. Furthermore, the Partnership will not be required to make
future deposits in the event that income taxable to its partners is generated in
the current or future years, although there can be no assurance that the
Partnership will, in fact, generate such income.
Beginning in October 1993, the Partnership became the operator of
Fox Squirrel Country Club. Prior to such time, Fox Squirrel was leased to an
operator. See Item 1, "Business."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
audited financial statements of the Partnership and the notes thereto which are
attached to this report.
The Partnership has continued to liquidate its assets through real
estate sales. Prior to 1993, Management concentrated its efforts on effecting a
bulk sale of the Partnership's real estate holdings to a single buyer. It is
Management's current belief, however, that in the absence of enhanced prospects
for the development as a whole, a bulk sale of assets for cash is extremely
difficult to achieve. In June 1993, Management began to place greater emphasis
on the sale of individual lots and pursued other means of generating revenue.
FACTORS THAT MAY AFFECT FUTURE RESULTS
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 varius 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.
-12-
<PAGE> 14
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
For the 12 months ended December 31, 1997 and 1996, revenues from
the sale of real estate were $411,609 and $463,051, respectively. Results for
1996 include the sale of a 430-acre parcel for $85,000. Excluding the sale of
such parcel, revenue from real estate sales in 1997 and 1996 was $411,609 and
$378,051, respectively. Management attributes the increase in revenue to the
recognition in 1997 of the full sales price of one improved lot, containing a
house built by the Partnership, whereas no similar recognition occurred in 1996.
The number of unimproved lots sold in 1997 was 55, compared to 49 in 1996.
Management attributes the increase in lots sold to generally improved market
conditions in the region and to the relative mix of lots sold as to location and
asking price.
Revenues from Fox Squirrel for Fiscal 1997 and 1996 were $373,972
and $358,580, respectively. Increased revenues from greens fees and cart rentals
more than offset declines in dues and other revenues. Revenue from concessions
and the dining service was $1,000 in 1997, compared to $9,040 in 1996. The
decline is due, in part, to the decision by Management to assist the dining
service in 1996 through a one-time imposition of a "food minimum" from members
totaling $9,040, whereas no such revenue was collected in 1997.
Selling, general and administrative expenses for 1997, exclusive of
those relating to Fox Squirrel, were $391,067, compared to $432,767 in 1996.
Management attributes the decrease, in part, to the payment in 1996 of incentive
bonuses in respect of 1996, whereas no such payments were made in 1997 in
respect of 1997. In addition, the Partnership incurred standard accounting and
administrative expenses in 1997 in respect of 1996, whereas in 1996 the
Partnership incurred additional accounting and administrative expenses relating
to the transition of the Partnership's fiscal year end from September 30 to
December 31 effective 1995.
Selling, general and administrative expenses at Fox Squirrel were
$339,766 for 1997, compared to $350,454 for 1996. Management attributes the
decrease in expenses principally to lower maintenance-related expenditures,
which were higher in 1996 than anticipated due to lower than required
maintenance expenditures in prior years. Expenses related to concessions and
the dining service declined to $2,040 in 1997 from $7,000 in 1996, reflecting
the payment of money to the dining service operator collected from the "food
minimum" in 1996. Expenses in 1997 relating to equipment rental were higher
than in 1996 due to the replacement of certain aged equipment with leased
equipment. Advertising and telephone expenses were lower in 1997 than in 1996,
reflecting targeted cuts in expenditures in the face of lower than anticipated
revenues.
Direct cost of land sold in 1997 was $113,611, compared to $40,201
in 1996. Management attributes the increase to the inclusion in 1997 of costs
associated with the sale in 1997 of the improved lot for $115,000, whereas no
similar expenses were recorded for 1996. Depreciation increased as a result of
capital expenditures made in 1996, especially with respect to the improvements
to the club house. Interest expense decreased in part to prepayments of
principal made during 1997 on the note payable due to the president of the
General Partner and
-13-
<PAGE> 15
in part to the amount of interest charged in each year by the general partner
and its affiliates on accrued but unpaid expenses outstanding.
Other Income in 1997 was $694, derived from the sale of pine straw
on lots owned by the Partnership, and $13,547 in 1996, derived principally from
the sale of timber on unsold lots and unplatted woodlands owned by the
Partnership. As stated in previous annual reports, Management does not expect to
realize meaningful revenue in 1998 or future years from the sale of timber due
to a reduction in the number of trees suitable for cutting.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
For the 12 months ended December 31, 1996 and 1995, the number of
lots sold were 51 and 37, respectively, and revenues from such sales were
$463,051 and $209,055, respectively. Results for 1996 include the sale of a
430-acre parcel for $85,000. Except for such sale, revenue from the sale of lots
in 1996 was $378,051. Management attributes the increase in revenue principally
to generally improved market conditions in the region and to a more favorable
mix of lots sold as to location and asking price. Individual lots adjacent to or
near the golf course, for example, generally command a higher asking price than
lots which are not so situated. Lots sold during 1996 were generally located
nearer to the golf course than lots sold during 1995.
Revenues from Fox Squirrel for Fiscal 1996 and 1995 were $358,580
and $340,699, respectively. Increased revenues from cart rentals and dues more
than offset declines in greens fees and other revenues. Revenue from the sale of
concessions was $0 in 1996 compared to $23,839 in 1995. This decline is due to
the decision in 1995 to lease the dining service to an operator rather than have
the Partnership continue to operate the service. To assist the operator in
establishing his business, the Partnership has waived lease payments on the
kitchen and dining area through 1997. As a further means of assisting the dining
service, Fox Squirrel collected revenues in 1996 through a one-time imposition
of a "food minimum" from members, whereas no such revenue was collected in 1995.
The Partnership's operating expenses for 1996, exclusive of those
relating to Fox Squirrel, were $432,767 compared to $293,277 in 1995. Management
attributes the increase principally to a higher fee charged by the general
partner, higher compensation in the form of incentive bonuses paid to employees,
and higher accounting and administrative expenses relating to the transition of
the Partnership's fiscal year end from September 30 to December 31 effective
1995.
Selling, general and administrative expenses at Fox Squirrel were
$350,454 for 1996 as compared to $299,177 for 1995. Management attributes the
increase in expenses principally to increased maintenance-related expenditures,
much of which was of a deferred nature, relating to the golf course. Management
expects that maintenance-related expenditures in 1997 will be less than in 1996.
Expenses related to concessions declined to $0 in 1996 from $15,695 in 1995,
reflecting the decision to lease the dining service to an operator. However,
1996 saw payment
-14-
<PAGE> 16
of money to the dining service operator collected from the "food minimum"
whereas there were no such payments in the prior year. Expenses in 1996 relating
to equipment rental were higher than in 1995 due to the replacement of certain
aged equipment with leased equipment. Advertising and telephone expenses were
higher in 1996 than in 1995, reflecting an intensified marketing campaign to
attract golfers to Fox Squirrel.
Direct cost of land sold decreased due to a modification of the
formula utilized to determine the cost basis of land sold. Depreciation
increased as a result of capital expenditures made in 1995, especially with
respect to the cart paths. Interest expense increased in part due to capital
leases entered into during 1996 for certain golf course maintenance equipment
which replaced obsolete equipment owned by Fox Squirrel, and in part due to
interest charged by the general partner and its affiliates on accrued but unpaid
expenses outstanding.
During 1996, the Partnership earned $12,866 in revenue from the sale
of timber on certain unsold lots and unplatted woodlands, compared to $35,920 in
the prior year. The decrease reflects a reduction in the number of trees
suitable for cutting. While additional revenue from tree cutting will be sought
as a means of supplementing revenue from lot sales, Management believes that
tree cutting will not be a source of substantial revenues during 1997 and cannot
be considered a source of on-going revenue in future years.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership requires cash primarily for the payment of overhead
and operating expenses and capital expenditures incurred in connection with real
estate sales and, since 1993, the operation of Fox Squirrel. Historically, the
Partnership has met its liquidity requirements by accruing general partners fees
and certain other fees and expenses payable to the General Partner and its
affiliates, selling certain non-real estate assets, and, from time to time, by
borrowing from local banks or the General Partner and its affiliates. Although
there can be no assurances, Management anticipates that existing cash balances,
cash flow generated from operations and borrowings will be sufficient to fund
operations for the next few fiscal years, by which time it is expected that the
Partnership will be generating sufficient cash flow from operations to begin
paying down accrued expenses. The Partnership may seek to increase the amount of
its credit facility, negotiate additional credit facilities, issue debt on such
terms and conditions as the General Partner deems prudent, or seek other forms
of debt or equity financing as the General Partner deems appropriate.
The Partnership finances construction of houses for sale on lots
owned by the Partnership with construction loans obtained through a line of
credit established with a local bank. From time to time, the bank will make
payments to the contractor for work performed, increasing the amount of the
construction loan and decreasing by the same amount the total available for
future borrowing under the line of credit. Borrowing under the line of credit in
respect of any house is repaid at closing of the sale. Under the terms of the
line of credit, if the house is unsold at the time of its completion, interest
will accrue for up to one year after the date of the first draw, after
-15-
<PAGE> 17
which time the construction loan converts to a fixed-rate loan. At any given
time, the Partnership has had not more than one construction loan outstanding,
with a maximum balance, including accrued interest, not exceeding $110,000, and
has generally succeeded in selling the house and lot on which it stands prior to
the completion of construction. In 1998 and subsequent years, depending upon
market conditions and other factors, the Partnership may have up to two
construction loans outstanding at any given time and the maximum amount of any
construction loan, including accrued interest, is not expected to exceed
$110,000.
During 1997, the Partnership used $94,748 of cash in operating
activities, compared to $164,839 during 1996. The increase is primarily due to
higher depreciation and a lower net loss in 1997 than in 1996.
Cash used in investing activities was $15,663 in 1997, compared to
$217,771 in 1996. The decrease is attributable to lower capital expenditures at
Fox Squirrel.
Cash provided by financing activities was $124,623 in 1997, compared
to $442,669 in 1996. The decrease is attributable primarily to the Partnership's
decreased drawings upon the line of credit relating to construction loans during
1997 and to lower accruals of expenses owed to the General Partner and its
affiliates.
IMPACT OF YEAR 2000
The Partnership has assessed the impact Year 2000 could have on its
operations. Management believes that Year 2000 will not have a material impact
upon the Partnership's information systems, business or ability to operate in a
well-controlled environment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14, "Exhibits, Financial Statement Schedules, and Reports
on Form 8-K," for response to this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements between the
Partnership and Coopers & Lybrand L.L.P. on accounting and financial matters.
-16-
<PAGE> 18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
IDENTIFICATION OF GENERAL PARTNER
Period of Service as
Name Age General Partner Commenced
- ------------------------------ --- -------------------------
Grace Property Management, Inc. N/A May 15, 1980
Grace Property Management, Inc. is a Delaware corporation engaged in
the business of real estate management. It is owed 50% by the Bank of
Butterfield Executor & Trustee Company, as trustee for John S. Grace, and 50% by
the Estate of Oliver R. Grace, Mr. Grace being a former director of Registrant's
predecessor.
INDEMNIFICATION OF EXECUTIVE OFFICERS
None
ITEM 11. EXECUTIVE COMPENSATION
Name Capacity General Partner's Fees
- ------------------------------ --------------- ----------------------
Grace Property Management, Inc. General Partner $ 150,000
Mr. Ralph McDermid resigned as a General Partner effective June 1,
1994. The amount of General Partner's fees accrued for Fiscal 1994 for Mr.
McDermid was $16,000. Pursuant to a letter agreement dated August 6, 1994
between Mr. McDermid and the Partnership, the Partnership paid Mr. McDermid
$50,000 in September 1994 and $50,000 in September 1995 in lieu of $147,000 in
accrued but unpaid General Partner's fees owed to Mr. McDermid as of June 1,
1994.
Except for a $25,000 payment in April 1990 and except as discussed
in the preceding paragraph, the General Partners' fees have not been paid since
January 1986, although they have been provided for in the accompanying financial
statements. As of December 31, 1997, the fees accrued but not paid to Grace
Property Management in respect of General Partner's fees totaled $606,000. The
Registrant has no on-going plan or arrangement with respect to future
remuneration to Grace Property Management other than to accrue interest (at an
annual rate of 10%, compounded quarterly) on the unpaid balance due to Grace
Property Management when cash flow is insufficient to pay General Partner's
fees. As of December 31, 1997, the Registrant had no group life insurance plan
but such a plan was instituted commencing February 1, 1998, covering all
full-time employees of the Partnership located in Boiling Spring Lakes. The
-17-
<PAGE> 19
Registrant has no pension or profit sharing plan but does provide for incentive
bonus compensation to certain managerial employees for meeting or exceeding
pre-designated budget targets. The Registrant has no options, warrants, or
appreciation rights outstanding. No Management person is indebted to the
Registrant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1997, the Partnership has 1,828,248 partnership
units issued and outstanding. Information with respect to the principal holders
of record known to the Partnership to beneficially own more than five (5%)
percent of the outstanding voting securities is set forth below.
<TABLE>
<CAPTION>
Name and Address Amount and Nature
of Beneficial of Beneficial Percent of
Owner Ownership Class
-------------------------- ------------------------- ----------
<S> <C> <C>
Estate of Oliver R. Grace 421,680 units are owned 23.1%
515 Madison Avenue by the Estate of Oliver R.
20th Floor Grace, Mr. Grace's widow
New York, NY 10022 and a company he formerly
controlled(1)
</TABLE>
The General Partner owns 25,100 partnership units, representing
approximately 1.4% of all units issued and outstanding.
In December 1995, following an unsolicited offer from a securities
broker-dealer to sell all of the units it owned to Mr. John S. Grace, the
president of the General Partner, an agreement was reached among Mr. Grace, the
Partnership, and such broker-dealer which provided for, among other things: (i)
a fifteen-year "standstill" by such broker-dealer; (ii) the purchase by Mr.
Grace from such broker-dealer of 22,160 units, representing all of the units
then held by such broker-dealer, for aggregate consideration of $5,540.00,
equivalent to $0.25 per unit; and (iii) the allocation of the consideration per
unit as being $0.10 for the standstill covenant and $0.15 for the purchase
price.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1995 the Partnership borrowed $200,000 from Mr. John S.
Grace, president of
- --------
(1)The Estate of Oliver R. Grace beneficially owns 421,680 units
(including 39,950 units held in trusts of which the Estate of Oliver R. Grace is
the trustee). In addition, other members of the family beneficially own an
additional 218,665 units, which represents approximately 12.0% of the units
issued and outstanding. The Estate of Oliver R. Grace disclaims beneficial
ownership with respect to these additional units as well as the 39,950 units
held in certain trusts.
-18-
<PAGE> 20
the General Partner, in the form of a promissory note. The note bears interest
at a rate equal to 6% over 12-month LIBOR (11.96875% at December 31, 1997),
requires quarterly interest payments, and is due on June 1, 1998. The
Partnership may repay any or all of such note without penalty. During 1997, the
Partnership paid $11,400 in interest on such note and at various times
throughout the year made pre-payments of principal totaling, in aggregate,
$60,000. During 1996, the Partnership paid $18,600 in interest on such note and
at various times throughout the year made pre-payments of principal totaling, in
aggregate, $60,000.
For fiscal years 1997, 1996 and 1995, the General Partners elected
to charge the Partnership for services and office space. These charges include
$10,000 in 1997, $10,000 in 1996, and $10,000 in 1995 for legal services and
$15,000 in each of 1997, 1996 and 1995 for rent on office space used by various
members of the Partnership's management. The General Partners fees were
$150,000, $150,000, and $60,000, for 1997, 1996 and 1995, respectively (see Item
11, "Executive Compensation"). In 1997, the General Partner and its affiliates
charged the Partnership interest totaling $96,767.84, representing cumulative
interest at an annual rate of 10%, compounded quarterly, on the unpaid balances
owed them by the Partnership. In 1996 the General Partner and its affiliates
charged the Partnership interest totaling $201,245, representing cumulative
interest at an annual rate of 10%, compounded quarterly, on the unpaid balances
owed them by the Partnership since 1993. Such interest included $71,208 with
respect to 1996, $51,292 with respect to 1995, $10,863 with respect to the
Transition Quarter, and $37,797 with respect to 1994. These charges have been
included in selling, general and administrative expenses. On January 5, 1994 and
September 30, 1994, $45,463 and $15,000, respectively, of accrued rent was paid
to an affiliate of the General Partner.
To fund certain capital expenditures and for working capital
purposes, on August 22, 1994, the Partnership sold 25,000 partnership units to
Grace Property Management, Inc., the General Partner, for an aggregate of
$10,000, or $0.40 per unit.
The Partnership paid a former General Partner $50,000 during 1994
and an additional $50,000 on September 30, 1995 in lieu of accrued but unpaid
General Partner's fees due to him. See Item 11, "Executive Compensation."
Except for the preceding items, there were no transactions between
Management (or the immediate families of Management) and the Registrant during
the fiscal year ended December 31, 1997 or thereafter. Further, there were no
other related party transactions and there existed no indebtedness to the
Registrant from Management (or any member of the immediate family of
Management.)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
-19-
<PAGE> 21
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
The following financial information is contained within
Exhibit 1, "Audited Financial Statements:"
Report of Independent Accountants F-1
Balance Sheets as of December 31, 1997 and 1996 F-2
Statements of Operations for the fiscal years
ended December 31, 1997, 1996 and 1995 F-3
Statements of Partners' Capital for the fiscal
years ended December 31, 1997, 1996 and 1995 F-4
Statements of Cash Flows for the fiscal
years ended December 31, 1997, 1996 and 1995 F-5
Notes to Financial Statements F-6
Report of Independent Accountants
on Supplemental Schedules 38
Valuation and Qualifying Accounts 39
Real Estate and Accumulated Depreciation 40
Independent Auditors' Report relating to audited
financial statements for the year ended
December 31, 1995 41
</TABLE>
All other required supplemental financial schedules are either
contained within the notes to the financial statements or are not applicable.
REPORTS ON FORM 8-K
No current reports on Form 8-K were filed during the fourth quarter
of the fiscal year ended December 31, 1997.
INDEX TO EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A complete listing of exhibits, including those incorporated by
reference, follows. All other exhibits or financial statement schedules are not
applicable.
-20-
<PAGE> 22
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page
- ----------- ------------------------------------------------------------------------ ----
<S> <C> <C>
3.1* The Limited Partnership Agreement of Reeves Telecom Associates
sets forth the rights of unit holders. It has been previously filed as
Exhibit B to Amendment No.2 to Registrant's Registration Statement
on Form S-14 dated March 28, 1980 (Registration No.2-66452).
16.1* Letter from KPMG Peat Marwick, L.L.P., the former independent
accountant of Registrant, regarding its concurrence with the statements
made by Registrant concerning the resignation or dismissal as
Registrant's principal accountant. Such letter was filed as part of
Form 10-K for December 31, 1996.
27.1** Financial Data Schedule.
99.1* The Robert C. Cantwell IV, MAI appraisals of the Boiling Spring
Lakes property dated 12/21/88, 7/17/84, and 2/23/82, which were
filed as a part of Form 10-K for September 30, 1988.
99.2* The Robert C. Cantwell IV, MAI appraisal of the Boiling Spring
Lakes property dated September 10, 1993, which appraisal was
filed as part of Form 10-K for September 30, 1993.
99.3* The Robert C. Cantwell IV, MAI appraisal of the Boiling Spring
Lakes property dated July 10, 1995, which was filed as Exhibit 3 to
the Form 10-K for December 31, 1995.
</TABLE>
* Incorporated herein by reference.
** Included in the Partnership's electronic filing on EDGAR
-21-
<PAGE> 23
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.
REEVES TELECOM LIMITED PARTNERSHIP
Signatures Title Date
By: Grace Property
Management, Inc. General Partner March 31, 1998
By: /s/ JOHN S. GRACE
----------------------
John S. Grace
President
-22-
<PAGE> 24
REEVES TELECOM LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996, AND 1995
<PAGE> 25
REEVES TELECOM LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
Report of Independent Accountants 1
Financial Statements
Balance Sheets as of December 31, 1997 and 1996 2
Statements of Operations for the years ended December 31,
1997, 1996 and 1995 3
Statements of Partners' Capital for the years ended December 31,
1997, 1996, and 1995 4
Statements of Cash Flows for the years ended December 31,
1997, 1996, and 1995 5
Notes to Financial Statements 6 - 13
</TABLE>
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
The Partners
Reeves Telecom Limited Partnership
We have audited the balance sheets of Reeves Telecom Limited Partnership (the
"Partnership") as of December 31, 1997 and 1996 and the related statements of
operations, partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 the
Partnership's 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 the Partnership as of December
31, 1997 and 1996 and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 10 to the
financial statements, the Partnership's recurring losses from operations and
liquidity position raise substantial doubt about the entity's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 10. The financial statements do not include any
adjustments relating to the recoverability and classification of reported asset
amounts or the amounts and classification of liabilities that might result
should the Partnership be unable to continue in existence.
/s/ Coopers & Lybrand L.L.P.
Raleigh, North Carolina
January 14, 1998, except as to the information
presented in Note 13 for which the date is
February 9, 1998
<PAGE> 27
REEVES TELECOM LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
ASSETS
Current assets - cash and cash equivalents $ 148,131 $ 133,919
Land held for sale and related buildings and equipment, net 911,197 1,037,678
----------- -----------
$ 1,059,328 $ 1,171,597
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses $ 65,126 $ 73,061
Accrued expenses, affiliates 1,106,313 827,876
Current maturities of long-term debt 63,750 96,631
----------- -----------
Total current liabilities 1,235,189 997,568
----------- -----------
Long-term debt, less current maturities 32,708 153,641
Partners' capital (deficit) - issued and outstanding 1,828,248 units
at December 31, 1997 and 1996 (208,569) 20,388
----------- -----------
$ 1,059,328 $ 1,171,597
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 28
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
for the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Revenues:
Property sales $ 411,609 $ 463,051 $ 209,055
Profit on property sales recognized under
installment method -- -- 6,599
Country Club revenue 373,972 358,580 340,699
Interest income and finance charges 3,303 3,756 2,281
----------- ----------- -----------
788,884 825,387 558,634
----------- ----------- -----------
Expenses:
Direct costs of property sold 113,611 40,201 95,992
Selling, general and administrative expenses of
Country Club 339,766 350,454 299,177
Selling, general and administrative expenses 391,067 432,767 293,277
Depreciation 61,565 50,756 39,190
Interest 112,526 225,200 14,627
----------- ----------- -----------
1,018,535 1,099,378 742,263
----------- ----------- -----------
Operating loss (229,651) (273,991) (183,629)
Other income:
Timber sales 694 12,866 35,920
Gain on disposal of fixed assets -- 681 --
Miscellaneous -- -- 7,765
----------- ----------- -----------
694 13,547 43,685
----------- ----------- -----------
Net loss $ (228,957) $ (260,444) $ (139,944)
=========== =========== ===========
Loss per partnership unit $ (.13) $ (.14) $ (.08)
=========== =========== ===========
Weighted average partnership units outstanding 1,828,248 1,828,248 1,828,258
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 29
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Partners' capital at beginning of year $ 20,388 $ 280,832 $ 420,776
Net loss (228,957) (260,444) (139,944)
--------- --------- ---------
Partners' capital (deficit) at end of year $(208,569) $ 20,388 $ 280,832
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 30
REEVES TELECOM LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(228,957) $(260,444) $(139,944)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 61,565 50,756 39,190
Gain on disposal of fixed assets -- (681) --
Change in assets and liabilities:
Other assets, net -- 1,201 1,711
Property held for sale and contracts on land
sales, net 80,579 40,201 1,292
Accounts payable and accrued expenses (7,935) 4,128 7,630
--------- --------- ---------
Net cash used in operating activities (94,748) (164,839) (90,121)
--------- --------- ---------
Cash flows from investing activities:
Acquisition of land improvements, buildings and
equipment (15,663) (217,771) (138,300)
--------- --------- ---------
Net cash used in investing activities (15,663) (217,771) (138,300)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 66,666 200,000
Repayment of long-term debt (71,165) (76,223) (35,268)
Borrowings under line of credit 515 167,650 --
Repayments of line of credit (83,165) (85,000) --
Increase in accrued expenses, affiliates 278,438 369,576 --
--------- --------- ---------
Net cash provided by financing activities 124,623 442,669 164,732
--------- --------- ---------
Net increase (decrease) in cash 14,212 60,059 (63,689)
Cash at beginning of year 133,919 73,860 137,549
--------- --------- ---------
Cash at end of year $ 148,131 $ 133,919 $ 73,860
========= ========= =========
Supplemental information:
Interest paid $ 17,009 $ 23,955 $ 14,627
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 31
REEVES TELECOM LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. PLAN OF LIQUIDATION
On May 17, 1979 the stockholders of Reeves Telecom Corporation (the
"Corporation") approved a plan of liquidation (the "Plan") for the
Corporation and its subsidiaries. The plan, which was determined by the
Internal Revenue Service to qualify as a Section 337 liquidation,
authorized the Corporation's Board of Directors to sell the Corporation's
assets and distribute any remaining unsold assets to its stockholders
and/or a liquidation trust. On May 8, 1980, stockholders at a special
meeting approved an amendment to the Plan whereby assets not sold within
one year of the date the Plan was approved could, at the discretion of
the Board of Directors, be transferred from the Corporation to a South
Carolina limited partnership which would undertake to sell the remaining
assets on behalf of the stockholders. On May 15, 1980, the Corporation
was liquidated and all of its unsold assets and liabilities were
transferred to Reeves Telecom Associates, a South Carolina limited
partnership (the "Partnership"). Stockholders of the Corporation received
one Partnership unit in exchange for each share of common stock. The
units are registered under the Securities Act of 1933 but are not listed
on any national securities exchange. In January 1987, pursuant to a
change in South Carolina law, the Partnership's legal name was changed
from Reeves Telecom Associates to Reeves Telecom Limited Partnership.
Pursuant to the Plan, the Corporation sold all of its broadcasting assets
and substantially all of the land held for development and sale at one of
its two land development locations and distributed cash to its
stockholders of $.90 per share on February 29, 1980 and $2.30 per share
on May 15, 1980.
Remaining assets relate primarily to land held for sale, and cash,
generated primarily from the sale of timber and real estate (Note 3).
The Partnership's Managing General Partner is Grace Property Management,
Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements have been prepared using the
accrual basis of accounting. The Partnership's assets have been written
down, from time to time, to reflect their fair values based upon
appraisals.
PROPERTY SALES
Property sales represent individual building lots sold for cash and the
gross sales price of residential houses built by the Partnership for
resale. Land cost included in direct costs of property sold represents
the proportionate amount of the total project costs, after recorded
valuation allowances, based on the sales value of the lot to the total
estimated project sales value.
6
<PAGE> 32
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LAND HELD FOR SALE AND RELATED BUILDINGS AND EQUIPMENT
Land held for development or sale is recorded at the lower of cost less
previously established valuation allowances or estimated fair value.
Related buildings and equipment are stated at cost less accumulated
depreciation. Depreciation for financial reporting purposes is calculated
on the straight-line basis over the estimated useful lives of 8 to 31.5
years for buildings and 5 to 20 years for equipment and land
improvements.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount 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.
ACCOUNTING AND REPORTING CHANGES
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of ("SFAS 121"). The statement requires
that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Management believes the valuation allowance
against the property at Boiling Spring Lakes, N.C. is adequate.
ADVERTISING COSTS
Advertising costs of $27,360, $11,627, and $12,190 were expensed as
incurred during the years ended December 31, 1997, 1996 and 1995,
respectively.
CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
7
<PAGE> 33
3. LAND HELD FOR SALE AND RELATED BUILDINGS AND EQUIPMENT
During July 1995, the Partnership obtained an appraisal of the Boiling
Spring Lakes property. Based upon the updated appraisal, the valuation
allowance established in previous years of $1,902,644 was considered
adequate. Management believes that based upon the 1997 sales activities
and the golf course operations, the valuation allowance continues to be
adequate.
A summary of land held for sale and related buildings and equipment at
December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Boiling Spring Lakes:
Land held for sale $ 2,247,763 $ 2,226,340
Other land and land improvements 392,612 391,669
Residential house held for sale -- 82,650
Buildings 270,076 305,648
Equipment 284,876 269,956
----------- -----------
3,195,327 3,276,263
Pimlico Plantation lots 500 500
Less:
Accumulated depreciation (398,007) (336,441)
Valuation allowance (1,886,623) (1,902,644)
----------- -----------
$ 911,197 $ 1,037,678
=========== ===========
</TABLE>
4. ACCRUED EXPENSES, AFFILIATES
A summary of accrued expenses, affiliates at December 31, 1997 and 1996
is as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
General partner fees $ 606,000 $ 456,000
Legal fees 101,728 91,728
Rent 63,904 48,903
Interest 298,013 201,245
Brokerage commission 30,000 30,000
Fees to a former general partner 6,668 --
---------- ----------
$1,106,313 $ 827,876
========== ==========
</TABLE>
General partners fees represents amounts owed to the General Partner.
Legal fees, rent and brokerage commission represent amounts owed to
certain affiliates of the General Partner. From time to time the General
Partner and its affiliates charge the Partnership interest on amounts
owed to them by the Partnership, which interest is accrued by the
Partnership as being owed to such entities. See Note 6 for additional
information regarding related party transactions.
8
<PAGE> 34
5. LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Uncollateralized note payable to John S. Grace, an affiliate of the
General Partner, interest payable at the 12 month LIBOR rate plus
6% (11.969% and 12.375% at December 31, 1997
and 1996, respectively), maturing in June 1998 $ 50,000 $110,000
Borrowings outstanding under a revolving credit facility, as
defined below -- 82,650
8.57% note payable in monthly installments of $1,370,
including interest, maturing in February 2001, collateralized
by equipment with a net book value of $39,943 and $52,725
at December 31, 1997 and 1996, respectively 46,458 55,773
Other -- 1,849
-------- --------
96,458 250,272
Less current maturities 63,750 96,631
-------- --------
$ 32,708 $153,641
======== ========
</TABLE>
Periodically the Partnership enters into non-revolving credit facilities
requiring interest only payments at the lenders prime rate plus .5% (9.0%
and 8.75% at December 31, 1997 and 1996, respectively). These agreements
are collateralized by building lots in Boiling Springs Lakes. At December
31, 1997, the Partnership had $105,500 available under one of these
agreements.
Principal maturities of long-term debt for the years subsequent to
December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $63,750
1999 14,975
2000 16,310
2001 1,423
-------
$96,458
=======
</TABLE>
9
<PAGE> 35
6. RELATED PARTY TRANSACTIONS
The General Partners charged the Partnership for services and office
space for the years ended December 31, 1997, 1996 and 1995 as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
General Partner fees $150,000 $150,000 $ 60,000
Legal fees 10,000 10,000 10,000
Office space 15,000 15,000 15,000
Interest 96,769 201,245 -
-------- -------- --------
$271,769 $376,245 $ 85,000
======== ======== ========
</TABLE>
7. LITIGATION
In the past, litigation has been filed against the Partnership claiming
breach of contract because lots guaranteed in the sales contract as being
"high, dry and suitable for building" will not pass current county health
department requirements regarding the installation of septic tanks and
on-site sewage disposal systems. Management contends this language does
not constitute a guarantee of soil conditions for sewer purposes and that
even if it did, installation and use of septic tanks on these lots would
have been permitted under county regulations in effect prior to August
1976 and that it had no way of knowing that stricter regulations would
later be enacted. In the event litigation is filed which results in an
unfavorable ruling, possible remedies could include: refunding the
purchase price of the lots; building nitrification fields with fill dirt
that would allow installation of sewage disposal systems on the lots;
providing the litigants with lots that will pass current county health
department requirements; and paying monetary damages. If mandated, the
cost of such remedial action in the aggregate could be substantial. No
provision for this contingent liability has been made in the accompanying
financial statements; however, at December 31, 1997 no suits or claims
are pending against the Partnership related to this matter.
8. INCOME TAXES
Results of operations of the Partnership are taxable to the partners and
no recognition of Federal and state income tax is included in the
financial statements.
10
<PAGE> 36
9. LEASES
The Company leases certain office and golf course equipment under
operating leases. The minimum lease payments under operating leases for
the years subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 31,205
1999 30,509
2000 10,100
--------
$ 71,814
========
</TABLE>
Equipment rental and lease expense for the years ending December 31,
1997, 1996 and 1995 was $31,984, $28,145 and $32,908, respectively.
10. LIQUIDITY AND GOING CONCERN ISSUES
Cash generated from Fox Squirrel Country Club and individual lot sales
may not be sufficient to meet future operating costs, debt service and
other cash requirements. Operating cash flows have been negative in each
of the years ended December 31, 1997, 1996 and 1995. Further, at December
31, 1997, the current liabilities of the Partnership exceeded its current
assets by $1,087,058. The partners deficit at December 31, 1997 is
$208,569. No reasonable offer has been received for the assets of the
Partnership due principally to the fact that the majority of the land is
wetland and that most of the unsold plotted lots do not satisfy current
county health standards regarding the installation of septic tanks and
on-site sewage disposal systems. If the Partnership's cash flow is less
than management's expectations, capital programs presently planned may be
either postponed, scaled back, or eliminated, and certain operating
expenditures may be either deferred or, in the case of payments to
affiliates of the General Partner, accrued. Despite such contingency
plans by management, the above mentioned factors indicate that the
Partnership may be unable to continue in existence while attempting to
complete the sale and liquidation of the Partnership's remaining assets.
The financial statements have been prepared assuming the Partnership will
continue as a going concern. The Partnership's recurring losses from
operations and liquidity position raise substantial doubt about the
entity's ability to continue while attempting to sell the remaining
assets of the Partnership.
The financial statements do not include any adjustments relating to the
recoverability and classification of reported asset amounts or the
amounts and classification of liabilities that might result should the
Partnership be unable to continue in existence.
11
<PAGE> 37
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosure About Fair Value of
Financial Instruments". The estimated fair value amounts have been
determined by the Partnership using the methods and assumptions described
below. However, considerable judgment is required to interpret market
data to develop estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts the
Partnership could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practical to
estimate that value:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are by definition short-term and the carrying
amount is a reasonable estimate of fair value.
LONG-TERM DEBT
The fair value of long term debt has been estimated by discounting the
future cash flows using the current rates offered for debt issues with
similar characteristics. The carrying amount of long-term debt
approximates fair value at December 31, 1997 and 1996.
12. NEW ACCOUNTING PRONOUNCEMENTS
The Company 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 disclosures
about products and services, geographic areas, and major customers.
The Company has yet to determine the impact, if any of adoption of the
new pronouncement.
The Company will adopt Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS No. 130") for the fiscal
year ended December 31, 1998 and the related interim periods. SFAS
No. 130 requires the Company to display an amount representing total
comprehensive income for the period in a financial statement which is
displayed with the same prominence as other financial statements. Upon
adoption, all prior period data presented will be restated to conform to
the provisions of SFAS No. 130. The Company has yet to determine the
impact, if any, of adoption of the new pronouncement.
12
<PAGE> 38
13. SUBSEQUENT EVENTS
On February 9, 1998, the Partnership entered into a settlement agreement
with an employee of the country club for the termination of the
employment contract with that employee. The Partnership paid cash of
$49,404 on February 6, 1998 and agreed to acquire all of the employee's
assets relating to the country club and to assume certain liabilities
relating thereto. The Partnership was also required to pay the employee
three months compensation.
13
<PAGE> 39
REEVES TELECOM LIMITED PARTNERSHIP
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at Charged to Changes Balance at
Beginning Costs and Add At End
Description of Period Expenses Deductions (Deduct) of Period
- ---------------------------- --------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
For year ended Dec. 31, 1997
RE valuation allowance $1,902,644 $ -0- $ 16,020 $ -0- $1,836,624
For year ended Dec. 31, 1996
RE valuation allowance 1,902,644 -0- -0- -0- 1,902,644
For year ended Dec. 31, 1995
RE valuation allowance 1,902,644 -0- -0- -0- 1,902,644
</TABLE>
-39-
<PAGE> 40
REEVES TELECOM LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Life Upon
Which
Depreciation
Capitalized Amounts in Latest
Initial Subsequent Carried Income
Encum- Cost to to at End Accumulated Net Date of Statement is
Description brances Partnership Acquisition of Period Depreciation Book Value Acquisition Computed
- ---------------------------- ------- ------------ ----------- ---------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Boiling Spring Lakes, NC
Building lots and land $0 $2,173,945 $73,818 $2,247,763 $0 $2,247,763 May 1980 N/A
Pimlico Plantation, SC
Building lots and land 0 500 0 500 0 500 May 1980 N/A
--- ---------- ------- ---------- -- ----------
TOTAL $0 $2,174,445 $73,818 $2,248,263 $0 $2,248,263
=== ========== ======= ========== == ==========
</TABLE>
-40-
<PAGE> 41
Independent Auditors' Report
The Partners
Reeves Telecom Limited Partnership:
We have audited the balance sheet of Reeves Telecom Limited Partnership (the
"Partnership") as of December 31, 1995, and the related statement of operations,
partners' capital and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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 Reeves Telecom Limited
Partnership as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that Reeves
Telecom Limited Partnership will continue as a going concern. As discussed in
Note 12 to the financial statements, the Partnership's recurring losses from
operations in prior years and liquidity position raise substantial doubt about
the entity's ability to continue in existence while attempting to sell the
remaining assets of the Partnership. Management's plans in regard to these
matters are also described in Note 12. The financial statements do not include
any adjustments relating to the recoverability and classification of reported
asset amounts or the amounts and classification of liabilities that might result
should the Partnership be unable to continue in existence.
/s/ KPMG Peat Marwick LLP
February 9, 1996
-41-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 148,131
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 148,131
<PP&E> 911,197
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,059,328
<CURRENT-LIABILITIES> 1,235,189
<BONDS> 32,708
0
0
<COMMON> (208,569)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,059,328
<SALES> 411,609
<TOTAL-REVENUES> 788,884
<CGS> 113,611
<TOTAL-COSTS> 906,009
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112,526
<INCOME-PRETAX> (228,957)
<INCOME-TAX> 0
<INCOME-CONTINUING> (228,957)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (228,957)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
