SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
ANNUAL REPORT UNDER SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: |
| Commission File Number: |
December 31, 2004 |
| 33-2320 |
EXCEL PROPERTIES, LTD.
(Exact name of registrant as specified in its charter)
CALIFORNIA |
| 87-0426335 |
(State or other jurisdiction of |
| (IRS Employer |
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17140 Bernardo Center Drive, Suite 310; San Diego, California 92128 | ||
(Address of principal executive offices and zip code) | ||
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Registrant’s telephone number, including area code: (858) 613-1800 | ||
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Securities registered pursuant to Section 12(b) of the Act: 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), (2) has been subject to such filing requirements for the past 90 days and (3) is an accelerated filer (as defined in Exchange Act Rule 12 b-2).
(1) Yes ý No o
(2) Yes ý No o
(3) Yes o No ý
FORWARD LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K/A contain forward-looking statements within the meaning of the Private Securities Reform Act of 1995 which provides a “safe harbor” for these types of statements. You can identify these forward-looking statements by forward-looking words such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “should,” “would,” “likely,” “will” and similar expressions in this Annual Report on Form 10-K/A. These forward-looking statements are subject to a number of risks, uncertainties and assumptions about Excel Properties, Ltd, including, among other things: the effect of economic, credit and market conditions in general and on real estate companies in particular, developments in the real estate industry, the ability to successfully complete real estate transactions, government approvals, actions and initiatives, reliance on tenants, and environmental risks.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership is filing as part of this report, its financial statements which contain the following:
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) Documents filed as part of this report:
(1) (2) Financial statements under Item 8 in Part II hereof.
(3) Exhibits:
Exhibit 31.1 and 31.2. 302 Officers’ Certifications
Exhibit 32.1 and 32.2 906 Officers’ Certifications
(B) Reports on Form 8-K
No reports on Form 8-K have been filed during the past year.
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SIGNATURES
Pursuant to the requirement 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.
Date: March 31, 2005 | Excel Properties, Ltd. | ||
| (Registrant) | ||
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| By: | /s/ Gary B. Sabin |
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| Gary B. Sabin | |
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| General Partner | |
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| By: | /s/ James Y. Nakagawa |
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| James Y. Nakagawa | |
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| Principal Accounting Officer |
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INDEX TO FINANCIAL STATEMENTS
1. | FINANCIAL STATEMENTS: |
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2. | FINANCIAL STATEMENT SCHEDULES: |
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F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Excel Properties, Ltd.
We have audited the accompanying balance sheets of Excel Properties, Ltd., as of December 31, 2004 and 2003, and the related statements of income, changes in partners’ equity, and cash flows for each of the three years in the period ended December 31, 2004. 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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Excel Properties, Ltd., as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
Our audits were made for the purposes of forming an opinion on the basic financial statements taken as a whole. Financial statement Schedule II is presented for the purpose of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ SQUIRE & COMPANY, PC |
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February 7, 2005 | |
Orem, Utah |
F-2
EXCEL PROPERTIES, LTD.
December 31, 2004 and 2003
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| 2004 |
| 2003 |
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ASSETS |
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Cash |
| $ | 92 |
| $ | 941,198 |
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Notes receivable, net of allowance of $50,000 at December 31, 2003 |
| — |
| 165,750 |
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Other assets |
| — |
| 407 |
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Total assets |
| $ | — |
| $ | 1,107,355 |
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LIABILITIES AND PARTNERS’ EQUITY |
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Liabilities: |
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Accounts payable |
| $ | — |
| $ | 3 |
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Total liabilities |
| — |
| 3 |
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Partners’ Equity: |
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General partner’s equity |
| 1 |
| 150 |
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Limited partners’ equity, 235,308 units authorized, 135,199 units issued and outstanding |
| 91 |
| 1,107,202 |
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Total partners’ equity |
| 92 |
| 1,107,352 |
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Total liabilities and partners’ equity |
| $ | 92 |
| $ | 1,107,355 |
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The accompanying notes are an integral part of the financial statements
F-3
EXCEL PROPERTIES, LTD.
STATEMENTS OF INCOME
For the Years Ended December 31, 2004, 2003, and 2002
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| 2004 |
| 2003 |
| 2002 |
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Revenue: |
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Rental Income |
| $ | — |
| $ | 68,966 |
| $ | 286,895 |
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Interest and other income |
| 63,705 |
| 50,724 |
| 68,673 |
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Total revenue |
| 63,705 |
| 119,690 |
| 355,568 |
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Operating Expenses: |
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Depreciation |
| — |
| 17,734 |
| 48,673 |
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Accounting and legal |
| 73,126 |
| 33,121 |
| 32,792 |
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Administrative |
| 10,800 |
| 10,800 |
| 10,800 |
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Office and other expenses |
| 5,412 |
| 8,356 |
| 5,183 |
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Management fees |
| — |
| 773 |
| 2,825 |
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Bad debts |
| (48,644 | ) | — |
| 50,000 |
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Total operating expenses |
| 40,694 |
| 70,784 |
| 150,273 |
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Net income before real estate sales |
| 23,011 |
| 48,906 |
| 205,295 |
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Gain - sales of real estate |
| — |
| 229,622 |
| 108,181 |
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Net income |
| $ | 23,011 |
| $ | 278,528 |
| $ | 313,476 |
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Net income allocated to: |
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General partner |
| $ | 11,265 |
| $ | 7,315 |
| $ | 3,621 |
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Limited partners |
| 11,746 |
| 271,213 |
| 309,855 |
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Total |
| $ | 23,011 |
| $ | 278,528 |
| $ | 313,476 |
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Net income per weighted average limited partnership unit |
| $ | 0.09 |
| $ | 2.01 |
| $ | 2.29 |
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The accompanying notes are an integral part of the financial statements
F-4
STATEMENTS OF CHANGES IN PARTNERS’ EQUITY
For the Years Ended December 31, 2004, 2003, and 2002
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| Limited |
| Total |
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Balance at January 1, 2002 |
| $ | 20,914 |
| $ | 3,679,287 |
| $ | 3,700,201 |
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Net Income - 2002 |
| 3,621 |
| 309,855 |
| 313,476 |
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Partner distributions – 2002 |
| (7,500 | ) | (742,502 | ) | (750,002 | ) | |||
Balance at December 31, 2002 |
| 17,035 |
| 3,246,640 |
| 3,263,675 |
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Net income - 2003 |
| 7,315 |
| 271,213 |
| 278,528 |
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Partner distributions - 2003 |
| (24,200 | ) | (2,410,651 | ) | (2,434,851 | ) | |||
Balance at December 31, 2003 |
| 150 |
| 1,107,202 |
| 1,107,352 |
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Net income - 2004 |
| 11,265 |
| 11,746 |
| 23,011 |
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Partner distributions - 2004 |
| (11,414 | ) | (1,118,857 | ) | (1,130,271 | ) | |||
Balance at December 31, 2004 |
| $ | 1 |
| $ | 91 |
| $ | 92 |
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The accompanying notes are an integral part of the financial statements
F-5
EXCEL PROPERTIES, LTD.
For the Years Ended December 31, 2004, 2003, and 2002
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| 2003 |
| 2002 |
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Cash flows from operating activities: |
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Net income |
| $ | 23,011 |
| $ | 278,528 |
| $ | 313,476 |
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Adjustments to reconcile net income to net cash provided by operations: |
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Depreciation |
| — |
| 17,734 |
| 48,673 |
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Allowance for doubtful accounts |
| (48,644 | ) | — |
| 50,000 |
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Gain on sale of real estate |
| — |
| (229,622 | ) | (108,181 | ) | |||
Changes in operating assets and liabilities: |
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(Increase) decrease in assets: |
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Accounts receivable |
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| 8,983 |
| 3,602 |
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Interest receivable |
| — |
| 4,895 |
| 1,701 |
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Other assets |
| 407 |
| 12 |
| (308 | ) | |||
Decrease in liabilities: |
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Accounts payable |
| (3 | ) | (463 | ) | (18,828 | ) | |||
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Net cash provided by operating activities |
| (25,229 | ) | 80,067 |
| 290,135 |
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Cash flows from investing activities: |
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Proceeds from real estate sales |
| — |
| 1,423,900 |
| 700,000 |
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Collection of notes receivable |
| 214,394 |
| 691,067 |
| 23,473 |
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Net cash provided by investing activities |
| 214,394 |
| 2,114,967 |
| 723,473 |
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Cash flows from financing activities: |
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Cash distributions |
| (1,130,271 | ) | (2,434,851 | ) | (750,002 | ) | |||
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Net cash used by financing activities |
| (1,130,271 | ) | (2,434,851 | ) | (750,002 | ) | |||
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Net increase (decrease) in cash |
| (941,106 | ) | (239,817 | ) | 263,606 |
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Cash at beginning of year |
| 941,198 |
| 1,181,015 |
| 917,409 |
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Cash at end of year |
| $ | 92 |
| $ | 941,198 |
| $ | 1,181,015 |
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The accompanying notes are an integral part of the financial statements
F-6
EXCEL PROPERTIES, LTD.
1. Summary of Significant Accounting Policies:
Organization
Excel Properties, Ltd. (the “Partnership”) was formed in the State of California on September 19, 1985, for the purpose of, but not limited to, acquiring real property and syndicating such property.
Real Estate
Land and buildings are recorded at cost. Buildings are depreciated using the straight-line method over the tax life of 31.5 years. The tax life does not differ materially from the economic useful life. Expenditures for maintenance and repairs are charged to expense as incurred. Significant renovations are capitalized. The cost and related accumulated depreciation of real estate are removed from the accounts upon disposition. Gains and losses arising from the dispositions are reported as income or expense.
The Partnership assesses whether there has been an impairment in the value of its real estate by considering factors such as expected future operating income, trends, and prospects, as well as the effects of the demand, competition and other economic factors. Such factors include a lessee’s ability to pay rent under the terms of the lease. If a property is leased at a significantly lower rent, the Partnership may recognize a permanent impairment loss if the income stream is not sufficient to recover its investment.
Cash Deposits
At December 31, 2004, the carrying amount of the Partnership’s cash deposits total $92. The bank balance was $349,247 related primarily to outstanding distribution checks of which $100,000 which is covered by federal depository insurance.
Statement of Cash Flows - Supplemental Disclosure
There was no interest or taxes paid for the years ended December 31, 2004, 2003, or 2002. There were no noncash investing or financing transactions in the years ended December 31, 2004, 2003 or 2002.
Income Taxes
The Partnership is not liable for payment of any income taxes because as a partnership, it is not subject to income taxes. The tax effects of its activities accrue directly to the partners.
Accounts and Notes Receivable
All net accounts receivable are deemed to be collectible within the next 12 months. A note receivable of $50,000 was deemed uncollectible during the year ended December 31, 2002, as the debtor has filed for bankruptcy and an allowance for bad debts of $50,000 was established. In 2004, $48,644 was collected and this amount was reversed from the allowance account.
F-7
Financial Statement Estimates
The preparation of financial statements in conformity with generally accepted accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. Financial Statement and Tax Return Differences
The Partnership had the following differences between the financial statements and the Partnership tax return.
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| 2003 |
| 2002 |
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Net income: |
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Financial statements |
| $ | 23,010 |
| $ | 278,528 |
| $ | 313,476 |
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Tax returns |
| (1,523,808 | ) | 542,543 |
| 372,443 |
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Difference |
| $ | 1,546,818 |
| $ | (264,015 | ) | $ | (58,967 | ) | |||
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Difference is due to: |
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Allowance for bad debts |
| $ | 50,000 |
| $ | — |
| $ | (50,000 | ) | |||
Syndication costs |
| 1,496,818 |
| — |
| — |
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Deferred gain - sale of building |
| — |
| (264,015 | ) | (8,967 | ) | ||||||
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| $ | 1,546,818 |
| $ | (264,015 | ) | $ | (58,967 | ) | |||
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Partners’ equity: |
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Financial statements |
| $ | 92 |
| $ | 1,107,352 |
| $ | 3,263,675 |
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Tax returns |
| 92 |
| 2,654,120 |
| 4,546,477 |
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Difference |
| $ | — |
| $ | (1,546,768 | ) | $ | (1,282,802 | ) | |||
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Difference is due to: |
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Syndication costs |
| $ | — |
| $ | (1,496,818 | ) | $ | (1,496,818 | ) | |||
Allowance for bad debts |
| — |
| (50,000 | ) | (50,000 | ) | ||||||
Deferred gain on sale of building |
| — |
| — |
| 264,016 |
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Distributions payable |
| — |
| 50 |
| — |
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| $ | — |
| $ | (1,546,768 | ) | $ | (1,282,802 | ) | |||
F-8
3. Fees Paid to General Partner:
The Partnership has paid the General Partner or its affiliates the following fees:
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| 2004 |
| 2003 |
| 2002 |
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Management fees |
| $ | — |
| $ | 773 |
| $ | 2,825 |
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Administrative fees |
| 10,800 |
| 10,800 |
| 10,800 |
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Accounting |
| 6,480 |
| 6,480 |
| 6,480 |
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Dissolution costs |
| 6,185 |
| — |
| — |
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4. Notes Receivable:
The Company had the following notes receivable at December 31, 2004 and 2003:
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| 2004 |
| 2003 |
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Note from the sale of land. Secured by land. |
| $ | — |
| $ | 165,750 |
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Note from sale of building. Currently due. Interest |
| — |
| 50,000 |
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Total notes receivable |
| — |
| 215,750 |
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Allowance for Bad Debts |
| — |
| (50,000 | ) | |||
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| $ | — |
| $ | 165,750 |
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5. Real Estate:
In August 2003, the Partnership sold a property leased to Mountain Jack’s Restaurant which was located in Lafayette, Indiana. The net sales price for the property was $897,181 and a gain of $199,117 was recognized on the sale. In March 2003, the Partnership sold a property leased to Autoworks, which was located in Bellevue, Nebraska. The net sales price for the building was $543,893 and a gain of $30,505 was recognized on the sale.
In December 2002, the Partnership sold a building in Ann Arbor, Michigan that was on lease to Ponderosa Restaurant. The sales price of the building was $700,000 and a $108,181 gain was recognized on the sale.
6. Dissolution of Partnership:
In December 2004, the Partnership made its final distribution to its partners after paying for anticipated expenses related to year-end audit and tax services as well as anticipated expenses to dissolve the Partnership. Anticipated expenses recorded and paid in December 2004 totaled $32,985.
F-9
SCHEDULE II - - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
Description |
| Balance at |
| Additions |
| Deductions |
| Amount |
| Balance at |
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Charged to | Description | ||||||||||||||
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Year ended December 31, 2004: |
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Allowance for bad debts |
| $ | 50,000 |
| $ | (48,644 | ) | Recovery of bad debts |
| $ | — |
| $ | — |
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Year ended December 31, 2003: |
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Allowance for bad debts |
| $ | 50,000 |
| $ | — |
| Written-off bad debts |
| $ | — |
| $ | 50,000 |
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Year ended December 31, 2002: |
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Allowance for bad debts |
| $ | — |
| $ | 50,000 |
| Written-off bad debts |
| $ | — |
| $ | 50,000 |
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F-10