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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1996
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Commission file number 0-12523
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JES PROPERTIES LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0756362
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 10025, Federal Station
Greenville, South Carolina 29603
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 675-6071
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Former name, former address and former fiscal year, if changed since last
report: N/A
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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
and (2) has been subject to the filing requirements for the past
90 days.
Yes X No
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JES Properties Limited Partnership
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheet - June 30, 1996
Condensed statements of operations - Three months and six months ended
June 30, 1996 and 1995
Condensed statements of cash flows - Six months ended June 30,
1996 and 1995
Notes to condensed financial statements - June 30, 1996
Report of independent auditors on review of interim financial information
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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Part I. Financial Statements
Item 1. Financial Statements (Unaudited)
JES Properties Limited Partnership
Condensed Balance Sheet (Unaudited)
June 30, 1996
ASSETS
Cash $ 8,577
Note receivable, including interest of $61,363 (Note 3) 994,225
Less: Sales commissions payable, including interest
of $22,541 (162,213)
Unamortized discount (2,080)
Deferred gross profit on sale (829,932)
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0
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Total assets $ 8,577
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LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Accounts payable $ 2,000
Partners' capital (deficit):
General partners 13,201
Limited partners (6,624)
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6,577
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$ 8,577
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See accompanying notes.
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JES Properties Limited Partnership
Condensed Statements of Operations (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1996 1995 1996 1995
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Interest income $ 3 $ - $ 6 $ 370
Expenses:
Administrative, including management
fees of $1,250 each quarter to the
general partners (1996 and 1995) 3,941 6,650 22,753 24,346
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Net (loss) $ (3,938) $ (6,650) $ (22,747) $ (23,976)
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Net (loss) attributable to general
partners (1.5%) $ (59) $ (100) $ (341) $ (360)
Net (loss) attributable to limited
partners (98.5%) (3,879) (6,550) (22,406) (23,616)
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$ (3,938) $ (6,650) $ (22,747) $ (23,976)
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Net (loss) per limited partnership unit
(599,868 units) $ (.01) $ (.01) $ (.04) $ (.04)
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See accompanying notes.
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JES Properties Limited Partnership
Condensed Statements of Cash Flows (Unaudited)
SIX MONTHS ENDED
JUNE 30
1996 1995
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OPERATING ACTIVITIES
Net (loss) $(22,747) $ (23,976)
Increase in accounts payable 2,000 -
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Net cash used by operating activities (20,747) (23,976)
INVESTING ACTIVITIES
Increase in escrow deposit - -
FINANCING ACTIVITIES
Distribution to partners (2,765) -
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(Decrease) in cash (23,512) (23,976)
Cash at beginning of period 32,089 24,434
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Cash at end of period $ 8,577 $ 458
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See accompanying notes.
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JES Properties Limited Partnership
Notes to Condensed Financial Statements (Unaudited)
June 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six-month period
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. For further information, refer
to the financial statements and footnotes thereto included in the Partnership's
annual report on Form 10-KSB for the year ended December 31, 1995.
2. INCOME TAXES
The entity has been treated as a partnership for income tax purposes.
Accordingly, no taxes are provided on income of the Partnership. Taxable
income or loss of the Partnership is reported in the income tax returns of its
partners.
3. SALE OF PARTNERSHIP ASSETS AND NOTE RECEIVABLE
In connection with the sale of its assets to Horsham Properties Limited, the
Partnership received cash of $3,800,000 and a $3,820,000 purchase money
promissory note ("the Note"). The Note bears interest at a stated rate of
6.97% per annum with interest only payments due on August 1, of 1988 - 1990.
Pursuant to the terms of the Note, Horsham exercised its option to defer the
interest payments due on August 1, 1988, 1989 and 1990. Interest at 11.97% per
annum accrues on any deferred interest payment. On August 1, 1991 and
continuing each year on August 1 until the Note is paid in full, Horsham is to
pay the Partnership consecutive annual installments of $1,000,000 (or such
lesser sum as required to fully satisfy the Note), which shall be applied first
to interest currently due and payable, second to accrued but unpaid interest
and third to principal. On August 16, 1991, 1992, 1993, 1994 and 1995 the
Partnership received the first five $1,000,000 payments from Horsham.
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JES Properties Limited Partnership
Notes to Condensed Financial Statements (Unaudited) (continued)
3. SALE OF PARTNERSHIP ASSETS AND NOTE RECEIVABLE (CONTINUED)
Profits related to the note receivable are being deferred under the cost
recovery method of accounting for sales of real estate. Interest income on the
note receivable and amortization of the present value discount are credited to
deferred gross profit and interest expense on the unpaid sales commissions is
charged to deferred gross profit in accordance with the cost recovery method.
Sales commissions and related interest are payable only out of collections on
the note receivable and these funds have been placed in an interest-bearing
escrow account for the payment of these commissions pending resolution of the
litigation described in Note 4.
Interest income on the Note is being accrued at an imputed interest rate of
9.5% and deferred in accordance with the cost recovery methods of accounting
for sales of real estate.
4. LITIGATION
On May 10, 1989, a group of 17 Limited Partners, derivatively on behalf of the
Partnership, filed a suit against the Partnership's General Partners and
Padmar, Inc. in the Court of Common Pleas, Greenville, South Carolina. The
plaintiffs allege, among other things, that the General Partners did not have
authority to consummate the sale to Horsham on August 18, 1987. All defendants
denied plaintiffs' allegations, and the General Partners, by counterclaim,
sought indemnification from the Partnership of their expenses and attorneys'
fees incurred in defense of the suit, which through June 30, 1996 are in excess
of $450,000.
On November 13, 1995, the South Carolina Court of Appeals affirmed the trial
court's finding that the General Partners lacked authority to consummate the
sale, but reduced the damages awarded by the lower court against the General
Partners and Padmar from $6,868,162 to $1,317,581. The defendants filed a
Petition for Certiorari with the South Carolina Supreme Court in May 1996
seeking to have that court review and reverse the Appellate Court's decision.
The defendants continue to believe that their defenses and their counterclaim
are meritorious; but the ultimate outcome of the litigation and its affect on
the Partnership cannot be predicted with certainty.
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Independent Accountants' Review Report
The Partners
JES Properties Limited Partnership
We have reviewed the accompanying condensed balance sheet of JES Properties
Limited Partnership as of June 30, 1996, and the related condensed statements
of operations for the three-month and six-month periods ended June 30, 1996 and
1995, and the condensed statements of cash flows for the six-month periods
ended June 30, 1996 and 1995. These financial statements are the
responsibility of the Partnership's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
July 17, 1996
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
Should additional funds be needed to meet operating expenses, prior to the
receipt of the next note payment from Horsham, the Partnership will seek to
re-establish a short-term line of credit with a bank.
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements at June 30, 1996, and for the six-month period then
ended, have been reviewed, prior to filing, by independent auditors, Ernst &
Young LLP, and their report is included herein.
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Part II. Other Information
Item 1. Legal Proceedings
On May 10, 1989, a group of 17 Limited Partners, derivatively on behalf of the
Partnership, filed a suit against the Partnership's General Partners and
Padmar, Inc. in the Court of Common Pleas, Greenville, South Carolina. The
plaintiffs allege, among other things, that the General Partners did not have
authority to consummate the sale to Horsham on August 18, 1987. All defendants
denied plaintiffs' allegations, and the General Partners, by counterclaim,
sought indemnification from the Partnership of their expenses and attorneys'
fees incurred in defense of the suit, which through June 30, 1996 are in excess
of $450,000.
On November 13, 1995, the South Carolina Court of Appeals affirmed the trial
court's finding that the General Partners lacked authority to consummate the
sale, but reduced the damages awarded by the lower court against the General
Partners and Padmar from $6,868,162 to $1,317,581. The defendants filed a
Petition for Certiorari with the South Carolina Supreme Court in May 1996
seeking to have that court review and reverse the Appellate Court's decision.
The defendants continue to believe that their defenses and their counterclaim
are meritorious; but the ultimate outcome of the litigation and its affect on
the Partnership cannot be predicted with certainty.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
27 Financial Data Schedule (for SEC use only)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JES PROPERTIES LIMITED PARTNERSHIP
By: /s/ Kenneth R. Padgett, Jr.
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Kenneth R. Padgett, Jr.
Managing General Partner
August 14, 1996
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(Date)