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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

 

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2004

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

 

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From _____ to ____

Commission file number 33-26327

      Raines Lenders, L.P.      
(Exact name of registrant as specified in its charter)

Tennessee
(State or other jurisdiction of
incorporation or organization)

 

62-1375240
(IRS Employer
Identification Number)

 

 

 

3310 West End Avenue, Suite 490
Nashville, Tennessee 37203
(Address of principal executive offices)

(615) 292-1040
(Registrant's telephone number, including area code)

NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

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       .

Indicate by check mark whether the Company is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes              No    X .

As of November 15, 2004, there were 5,625 outstanding Units of Limited Partnership Interest.



PART 1. FINANCIAL INFORMATION

RAINES LENDERS, L.P.
(A Delaware Limited Partnership)


FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
(Unaudited)


INDEX

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

 

Balance Sheets as of September 30, 2004 and December 31, 2003

3

 

Statements of Operations for the three and nine months ended September 30, 2004 and 2003

4

 

Statements of Cash Flows for the nine months ended September 30, 2004 and 2003

5

 

Notes to Financial Statements for the nine months ended September 30, 2004 and 2003

6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

7

Item 4. Disclosure Controls and Procedures

8

 

 

PART II. OTHER INFORMATION

 

Item 6. Exhibits and Reports on Form 8-K

8

Signatures

12


RAINES LENDERS, L.P.
(A Limited Partnership)
BALANCE SHEETS

 

 

September 30, 2004

 

December 31, 2003

ASSETS

 

 

 

 

 

 

 

 

 

Cash

$

336

$

516

Restricted cash

 

142,532

 

131,732

Land

 

2,990,643

 

2,990,643

Total assets

$

3,133,511

$

3,122,891

 

 

====================

 

====================

 

 

 

 

 

LIABILITIES AND PARTNERS' EQUITY

 

 

 

 

 

 

 

 

 

Due to affiliate

$

102,988

$

20,350

Accounts payable

 

11,733

 

14,275

Property tax payable

 

321,907

 

169,628

Note payable

 

559,880

 

579,236

Total Liabilities

 

996,508

 

783,489

 

 

 

 

 

Partners' equity:

 

 

 

 

Limited partners, 5,625 units outstanding

 

2,137,003

 

2,339,402

General partner

 

 

 

 

Total partners' equity

2,137,003

2,339,402

 

 

 

 

 

Total liabilities and partners' equity

$

3,133,511

$

3,122,891

====================

====================

 

See accompanying notes to financial statements

 


RAINES LENDERS, L.P.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months

 

 

For the nine months

 

 

 

Ending September 30,

 

 

 

2004

 

 

2003

 

 

2004

 

 

2003

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miscellaneous

$

0

 

$

0

 

$

10,800

 

$

71,000

 

Total Revenues

 

0

 

 

0

 

 

10,800

 

 

71,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State tax expense

 

1,500

 

 

1,240

 

 

7,234

 

 

4,605

 

Property tax expense

 

104,093

 

 

24,093

 

 

152,279

 

 

72,279

 

Grounds maintenance

 

0

 

 

0

 

 

1,300

 

 

0

 

Management fees

 

2,250

 

 

2,250

 

 

6,750

 

 

6,750

 

Legal and accounting fees

 

8,554

 

 

10,488

 

 

22,519

 

 

22,497

 

Office administration expense

 

2,423

 

 

2,289

 

 

6,665

 

 

5,864

 

Interest expense

 

6,490

 

 

7,172

 

 

16,452

 

 

25,153

 

Total expenses

 

125,310

 

 

47,532

 

 

213,199

 

 

137,148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(125,310

)

$

(47,532

)

$

(202,399

)

$

(66,148

)

================

==============

============

===========

Net loss per limited partner unit

$

(22.28

)

$

(8.45

)

$

(35.98

)

$

(11.76

)

Limited partner units outstanding

 

5,625

 

 

5,625

 

 

5,625

 

 

5,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements

 


 

RAINES LENDERS, L.P.
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)

 

 

 

 

 

 

 

 

 

For the nine months ending September 30,

 

 

 

2004

 

 

2003

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(202,399

)

$

(66,148

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in due to affiliate

 

82,638

 

 

0

 

Increase in restricted cash

 

(10,800

)

 

0

 

Decrease in accounts payable

 

(2,542

)

 

5,806

 

Increase in property tax payable

 

152,279

 

 

72,279

 

Net cash provided by operating actitivies

 

19,176

 

 

11,937

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Payments on note payable

 

(19,356

)

 

(13,708

)

Net cash used in financing activities

 

(19,356

)

 

(13,708

)

 

 

 

 

 

 

 

Net decrease in cash

$

(180

)

$

(1,771

)

 

 

=============

 

 

=============

 

Cash at beginning of period

 

516

 

 

8,324

 

Cash at end of period

$

336

$

6,553

See accompanying notes to financial statements


RAINES LENDERS, L.P.
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited)

A. ACCOUNTING POLICIES

The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's Form 10-K for the year ended December 31, 2003. In the opinion of management such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to summarize fairly the Partnership's financial position and results of operations. The results of operations for the nine-month period ended September 30, 2004 may not be indicative of the results that may be expected for the year ending December 31, 2004.

B. RELATED PARTY TRANSACTIONS

The General Partner and its affiliates have been actively involved in managing the Partnership. Compensation earned for these services were as follows:

Nine months ended September 30,

2004

2003

Management fees

$6,750

6,750

Accounting fees

$11,023

10,539


C. COMPREHENSIVE INCOME

During the nine-month periods ended September 30, 2004 and 2003, the Partnership had no components of other comprehensive loss.  Accordingly, comprehensive loss for each of the periods was the same as net loss.

D. LIQUIDITY


The Partnership has suffered recurring losses from operations and has a net working capital deficiency at September 30, 2004. At September 30, 2004, the Partnership had unrestricted cash of $336 and liabilities to non-affiliated entities of $893,520. The cash is insufficient to fund ongoing operations. The Partnership owns assets with a net book value of $2,990,643 and has liabilities of $996,508. If funds are not sufficient to fund operations in 2004, the General Partner will defer the collection of fees for certain affiliated expenses and will provide advances until cash becomes available.

  1. IMPAIRMENT
  2. Land and improvements held for sale are reported at the lower of the carrying value or estimated fair value less estimated costs to sell (Fair Value). To determine the Fair Value, management estimates the future discounted net cash flows using a discount rate commensurate with the risk associated with the property. If this land is considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated Fair Value. Inherent in the calculation of future discounted net cash flows are certain significant management judgments and estimates including, among others, liquidation period, discount rate, selling price, and costs to sell, which significantly impact the estimated Fair Value.

     

  3. NOTE PAYABLE

On December 31, 2003, the Partnership held a term loan to a bank of $579,236 which bears interest at prime rate + .50% with a floor of 4.00% and a ceiling of 24.0% (4.5% at December 31, 2003). The land and improvements held for sale serve as collateral for the loan. The general partners of 222 Raines, Ltd., the Registrant's General Partner, have personally guaranteed the note. The term loan from the bank was due on March 25, 2004. The Note was renewed on March 30, 2004 extending the maturity to March 25, 2005. All terms of the note agreement remained the same except the interest rate which is prime +.50% with a floor of 4.25% and a ceiling of 21% (4.5% at September 30, 2004). Principal and interest payments were $4,689 per month until March 30, 2004, but were reduced to $4,405 per month due to the decline in the prime rate. The aggregate maturities of long-term debt are $26,228 in 2004 and $547,382 in 2005.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations for the Quarter Ended September 30, 2004.

The Registrant had no land sales during the first nine months of 2004 or 2003. Operating expenses of the Registrant were comparable with prior quarters except for the increase in property taxes. During the third quarter of 2004, the General Partners accrued all penalties and interest on unpaid property taxes, an amount equal to $80,000. Due to a lack of available cash, the General Partners have decided to delay property tax payments until such time that the loss of property is imminent. When the City of Memphis or Shelby County notifies the General Partners that the property sale is scheduled, the General Partners will loan the Registrant the necessary funds to pay the property taxes and all associated costs. The General Partners will have two weeks from the notice of land sale to make property tax payments and terminate sale proceedings.

Financial Condition and Liquidity

As of September 30, 2004, the Registrant had $336 in unrestricted cash. This balance is not sufficient to meet the operating needs of the Registrant. The Partnership has suffered recurring losses from operations and has a net working capital deficiency at September 30, 2004. At September 30, 2004, the Partnership had liabilities to non-affiliated entities of $893,520. The cash is insufficient to fund ongoing operations. The Partnership owns assets of $3,133,511 and has liabilities of $996,508. If funds are not sufficient to fund operations in 2004, the General Partner can defer the collection of fees for certain affiliated expenses and can provide advances until cash becomes available.

Critical Accounting Policies

Land and improvements held for sale are reported at the lower of the carrying value or estimated fair value less estimated costs to sell (Fair Value). To determine the Fair Value, management estimates the future discounted net cash flows using a discount rate commensurate with the risk associated with the property. If this land is considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated Fair Value. Inherent in the calculation of future discounted net cash flows are certain significant management judgments and estimates including, among others, liquidation period, discount rate, selling price, and costs to sell, which significantly impact the estimated Fair Value.

Contractual Obligations and Commitments

At September 30, 2004, the Partnership has no capital lease obligations, operating leases, or unconditional purchase obligations. The Partnership does not enter into derivative transactions. As of September 30, 2004, the partnership owes $559,880 on a term loan to a bank. The term loan from the bank was due on March 25, 2004. The Note was renewed on March 30, 2004, extending the maturity to March 25, 2005. All terms of the note agreement remained the same except the interest rate which is prime +.50%, with a floor of 4.25% and a ceiling of 21% (4.5% at September 30, 2004). Principal and interest payments were $4,689 per month until March 30, 2004, but due to the decline in the prime rate, the payments were reduced to an amount of $4,405 per month. Steven D. Ezell and Michael A. Hartley have personally guaranteed the note. The aggregate maturities of long-term debt are $26,228 in 2004, and $547,382 in 2005.

At September 30, 2004 and 2003, the Partnership had cash balances of $ 142,532, restricted by the City of Memphis to be used to fund property improvements, consisting of road and utility work. This restricted cash secures a letter of credit in the same amount to ensure the required developments are made. The Partnership may also borrow from the General Partner in order to meet cash flow needs and may have amounts payable to the General Partner for management fees or other services. At September 30, 2004, the Partnership had borrowings from the General Partner totaling $102,988. Transactions with the General Partner and affiliates are discussed in Note 2 to the financial statements.


Item 4. Controls and Procedures

The Registrant maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Registrant files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the President and Vice president of General Partner of the Registrant concluded that the Registrant's disclosure controls and procedures were adequate.

There have been no significant changes in the Registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

Part II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit

Number Description

31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Steven D. Ezell, general partner of 222 Raines, Ltd., General Partner of Raines Lenders, L.P. on November 15, 2004.

31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by Michael A. Hartley, general partner of 222 Raines, Ltd., General Partner of Raines Lenders, L.P. on November 15, 2004.

32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Steven D. Ezell, general partner of 222 Raines, Ltd., General Partner of Raines Lenders, L.P. on November 15, 2004.

32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Michael A. Hartley, general partner of 222 Raines, Ltd., General Partner of Raines Lenders, L.P. on November 15, 2004.

(b) The Registrant has not filed a Form 8-K during the nine-month period ending September 30, 2004.


 

 

RAINES LENDERS, L. P.

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002.

CERTIFICATE OF CHIEF EXECUTIVE OFFICER

Exhibit 31.1

I, Steven D. Ezell, certify that:

  1. I have reviewed this quarterly report on Form 10-Q of Raines Lenders, L.P.
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and15d-15(e) for the registrant and have;

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

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

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

 

Raines Lenders, L.P.

 

By:

222 Raines, Ltd.

Date: November 15, 2004

 

By:

Steven D. Ezell

 

 

 

general partner


 

RAINES LENDERS, L. P.
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002.

CERTIFICATE OF CHIEF FINANCIAL OFFICER

Exhibit 31.2

I, Michael A. Hartley, certify that:

  1. I have reviewed this quarterly report on Form 10-Q of Raines Lenders, L.P.
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and15d-15(e) for the registrant and have;
    1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;
    2. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
    3. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

  5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function);
    1. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
    2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

 

Raines Lenders, L.P.

 

By:

222 Raines, Ltd.

Date: November 15, 2004

 

By:

Steven D. Ezell

 

 

 

general partner

 


 

 

RAINES LENDERS, L. P.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Report of Raines Lenders, L.P. on Form 10-Q for the quarter ended September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steven D. Ezell, Chief Executive Officer of the Raines Lenders, L. P. certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Raines Lenders, L.P.

 

By:

222 Raines, Ltd.

Date: November 15, 2004

 

By:

Steven D. Ezell

 

 

 

general partner

 

In connection with the Report of Raines Lenders, L. P. on Form 10-Q for the quarter ended September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael A. Hartley, Chief Financial Officer of Raines Lenders, L. P, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Raines Lenders, L.P.

 

By:

222 Raines, Ltd.

Date: November 15, 2004

 

By:

Steven D. Ezell

 

 

 

general partner

 


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.

 

RAINES LENDERS, L.P.

 

By: 222 RAINES LTD.

 

General Partner

 

 

Date: November 15, 2004

By: /s/ Steven D. Ezell

 

General Partner

 

By: 222 PARTNERS, INC.

 

General Partner

 

 

Date: November 15, 2004

By: /s/ Michael A. Hartley

 

General Partner