U.S. 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 the Quarterly Period Ended September 30, 2002
Commission File No. 33-39238
TMP LAND MORTGAGE FUND, LTD.
A CALIFORNIA LIMITED PARTNERSHIP
(Name of small business issuer as specified in its charter)
CALIFORNIA 33-0451040
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
801 North Parkcenter Drive, Suite 235
Santa Ana, California 92705
(Address of principal executive offices, including Zip Code)
(714) 836-5503
(Issuer's telephone number, including area code)
Check whether the issuer [1] filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
Transitional Small Business Disclosure Format: ____Yes__X__No
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements are filed as a part of this form 10-QSB:
Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001, Consolidated Statements of Operations for the three and nine months ended September 30, 2002 and 2001, and Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and 2001.
The interim financial statements presented have been prepared by the Partnership without audit and in the opinion of the management, reflect all adjustments of a normal recurring nature necessary for a fair statement of (a) the results of operations for the three and nine months ended September 30, 2002 and 2001 (b) the financial position at September 30, 2002 and (c) the cash flows for the nine months ended September 30, 2002 and 2001. Interim results are not necessarily indicative of results for a full year.
The balance sheet presented as of December 31, 2001 has been derived from the financial statements that have been audited by the Partnership’s independent public accountants. The financial statements and notes are condensed as permitted by Form 10-QSB and do not contain certain information included in the annual financial statements and notes of the Partnership. The financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Partnership’s Form 10-KSB.
2
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Consolidated Balance Sheets
September 30, December 31
2002 2001
(unaudited) (audited)
-------------- -------------
AssetS
------
Cash $ 313,468 $ 273,342
Prepaid Expenses & Other 624,380 347,341
Note Receivable (Note 10) 1,512,500 0
Investment in Unimproved Land, Net 3,904,900 19,676,759
---------------- ----------------
Total Assets $ 6,355,248 $ 20,297,442
================ ================
Liabilities and Partners' Capital
---------------------------------
Accounts Payable & Other $ 895,964 $ 803,593
Due to Affiliates (Notes 5 & 6) 200 240
Franchise Taxes Payable 1,600 800
Property Taxes Payable (Note 7) 2,927 9,799,739
Notes Payable (Note 8) 0 4,231,087
---------------- ----------------
Total Liabilities 900,691 14,835,459
---------------- ----------------
Minority Interests (Note 9) 510,612 528,529
---------------- ----------------
General Partners (107,574) (107,818)
Limited Partners: 20,000 Equity Units
Authorized:
15,715 Units Outstanding 5,051,519 5,041,272
---------------- ----------------
Total Partners' Capital 4,943,945 4,933,454
---------------- ----------------
Total Liabilities and Partners'
Capital $ 6,355,248 $ 20,297,442
================ ================
See Accompanying Notes to Consolidated Financial Statements
3
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Consolidated Statements of Operations
(unaudited)
Three Months Ended
September 30
2002 2001
-------------- -------------
Property Sales $ 0 $ 1,780,856
Cost of Property Sales 0 (2,104,468)
Reimbursable Costs of Property Sales 225,706 0
--------------- ----------------
Net Income (Loss) on Property
Sales 225,706 (323,612)
Income
Interest 2,374 1,962
Other 0 2,500
-------------- ----------------
Total Income (Loss) 228,080 (319,150)
--------------- -----------------
Expenses
Accounting & Financial Reporting 6,972 6,986
General & Administrative 141 300
Outside Professional Services 11,768 29,644
Other 0 0
Participation Fees 152,333 0
-------------- ----------------
Total Expenses 171,214 36,930
-------------- ----------------
Net Income (Loss) before Minority
Interests & Taxes 56,866 (356,080)
Minority Interests Gain (Loss) in
Consolidated Affiliates (57,384) 82,046
State Franchise & Other Taxes 0 0
--------------- -------------
Net Loss $ (518) $ (274,034)
=============== =================
Allocation of NetLoss:
General Partners, in the Aggregate: $ (52) $ (2,740)
================= =================
Limited Partners, in the Aggregate: $ (466) $ (271,294)
================= =================
Limited Partners, per Equity Unit: $ (.03) $ (17.26)
================= =================
See Accompanying Notes to Consolidated Financial Statements
4
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Consolidated Statements of Operations
(unaudited)
Nine Months Ended
September 30
2002 2001
-------------- -------------
Property Sales $ 11,165,775 $ 5,676,225
Cost of Property Sales (9,706,658) (6,623,953)
Reimbursable Costs of Property Sales 225,706 0
--------------- -------------
Net Income (Loss) on Property
Sales 1,684,823 (947,728)
Income
Interest 6,914 16,764
Recovery of Investment 250,000 0
Other 11,050 8,300
---------------- ----------------
Total Income (Loss) 1,952,787 (922,664)
---------------- -----------------
Expenses
Accounting & Financial Reporting 27,170 14,924
General & Administrative 1,312 1,905
Outside Professional Services 35,220 53,145
Other 8,174 2,216
Participation Fees 221,831 0
---------------- ----------------
Total Expenses 293,707 72,190
---------------- ----------------
Net Income (Loss) before Minority
Interests & Taxes 1,659,080 (994,854)
Minority Interests Gain (Loss) in
Consolidated Affiliates (232,083) 278,398
State Franchise & Other Taxes (15,790) (9,451)
----------------- ----------------
Net Income (Loss) $ 1,411,207 $ (725,907)
================ =================
Allocation of Net Income (Loss):
General Partners, in the Aggregate: $ 14,112 $ (7,259)
================ =================
Limited Partners, in the Aggregate: $ 1,397,095 $ (718,648)
================ =================
Limited Partners, per Equity Unit: $ 88.90 $ (45.73)
================ =================
See Accompanying Notes to Consolidated Financial Statements
5
TMP LAND MORTGAGE FUND, LTD
A California Limited Partnership
Consolidated Statements of Cash Flows
(unaudited)
Nine months Ended
September 30
2002 2001
-------------- ------------
Cash Flows from Operating Activities:
Net Income (Loss) $ 1,411,207 $ (725,907)
Adjustments to Reconcile Net Income
(Loss) to Net Cash
Provided By (Used In) Operating
Activities:
Minority Interests in Consolidated
Affiliates 232,083 (278,299)
Recovery of Investment (250,000) 0
(Gain) Loss on Property Sales (1,684,823) 947,728
Other 8,174 2,216
Changes in Assets and Liabilities:
(Increase) in Prepaid Expenses and
Other (277,039) (47,575)
(Decrease) in Due to Affiliates (40) 0
Increase in Property Taxes Payable 2,927 0
Increase (Decrease) in Franchise
Taxes Payable 800 (800)
Increase in Accounts Payable & Other 92,371 409,175
------------- --------------
Net Cash (Used In) Provided By
Operating Activities (464,340) 306,538
------------- --------------
Cash Flows from Investing Activities:
Net Proceeds from Property Sales
and Payment
Of Selling Expenses 11,036,419 5,662,225
Proceeds from Sale of Peppertree
Investment 0 325,000
Issuance of Note Receivable in
Property Sale (1,512,500) 0
Increase in Land Development and
Carrying Costs (3,387,650) (3,746,272)
-------------- --------------
Net Cash Provided By Investing
Activities 6,136,269 2,240,953
----------- -----------
Cash Flows from Financing Activities:
Distributions to Partners (1,400,716) (505,052)
Net Proceeds from Affiliates 0 28,898
Net (Payments) Proceeds to/from
Notes Payable (4,231,087) (2,538,967)
-------------- --------------
Net Cash (Used In) Provided By
Financing Activities (5,631,803) (3,015,121)
-------------- --------------
Net Increase (Decrease) in Cash 40,126 (467,630)
Cash, Beginning of Period 273,342 768,350
------------- --------------
Cash, End of Period $ 313,468 $ 300,720
============= ==============
See Accompanying Notes to Consolidated Financial Statements
6
TMP LAND MORTGAGE FUND, LTD
A California Limited Partnership
Consolidated Statements of Cash Flows, con't
(unaudited)
Supplemental Disclosure of Cash Flow Information:
- -------------------------------------------------
Cash Paid for Taxes $ 14,190 $ 8,651
============= =================
Cash Paid for Interest $ 61,986 $ 318,539
============= ================
Other Disclosures:
- ------------------
Non-cash investing activities during the nine months ended September 30, 2002
and 2001 consisted of an increase in the carrying costs of Investment in
Unimproved Land equal to additional property tax liabilities incurred of $0 and
$1,528,143, respectively.
See Accompanying Notes to Consolidated Financial Statements
7
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2002
(unaudited)
Note 1 - General and Summary of Significant Accounting Policies
General- TMP Land Mortgage Fund, Ltd., A California Limited Partnership (the “Partnership”), was organized in 1991 in accordance with the provisions of the California Uniform Limited Partnership Act. The purpose of the Partnership is to make short-term (generally one to three-year) loans to unaffiliated parties secured by first trust deeds (mortgages) on unimproved real property primarily in the Inland Empire area of Southern California and to provide cash distributions on a current basis to the limited partners, primarily from interest earned on the mortgage loans.
Principles of Consolidation – The consolidated financial statements include the accounts of the Partnership and its majority-owned investments, TMP Homes Remington, LLC (“Remington”), TMP Homes Flowerfield-Sun City, LLC (“Sun City”) and RSJ Builders, LLC (“RSJ”). All significant inter-company accounts and transactions have been eliminated in consolidation.
Investment in Unimproved Land – Investment in unimproved land is stated at the balance of the foreclosed loan plus carrying and improvement costs incurred subsequent to foreclosure, net of a valuation allowance, as necessary, to state the properties at their fair value. All costs associated with the acquisition and improvement of a property is capitalized including all direct carrying costs; such as interest expense and property taxes.
Syndication Costs - Syndication costs (such as commissions, printing, and legal fees) were paid by an affiliate of the Partnership, TMP Realty, Inc.
Income Taxes – The entity is treated as a partnership for income tax purposes and any income or loss is passed through and taxable to the individual partners. Accordingly, there is no provision for federal income taxes in the accompanying financial statements. However, the minimum California Franchise tax payable annually by the Partnership is $800.
Cash and Cash Equivalents – For purposes of the Consolidated Statements of Cash Flows, the Partnership considers all highly liquid investments with maturity of three months or less to be cash equivalents. During the normal course of its business, the Partnership accumulates cash and maintains deposits at various banks. Occasionally, the cash deposit at a particular bank may exceed the federally insured limit. Any accounting loss or cash requirement resulting from the failure of a bank would be limited to such excess amounts.
Use of Estimates – In the preparation of financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from these estimates.
8
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2002
(unaudited)
Note 1 - General and Summary of Significant Accounting Policies (continued)
Concentration – All unimproved land parcels held for sale are located in the Inland Empire area of Southern California. The eventual sales price of all parcels is highly dependent on the real estate market conditions. The Partnership attempts to mitigate any potential risk by continually monitoring the market conditions and holding the land parcels through any periods of declining market conditions.
Recent Authoritative Pronouncements- In October 2001, the FASB issued SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement establishes the accounting model for long-lived assets to be disposed of by sale and applies to all long-lived assets, including discontinued operations. This new statement requires that those long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. The Partnership adopted SFAS No. 144 beginning January 1, 2002. There was no impact to the financial statements since the long-lived assets had previously been recorded at the lower of cost or market value, less disposal costs.
In June 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. This statement requires the classification of gains or losses from the extinguishments of debt to meet the criteria of APB Opinion No. 30 “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” before they can be classified as extraordinary in the income statement. The rescission of SFAS No. 4 is effective January 1, 2003. The amendment of SFAS No. 13 is effective for transactions occurring on or after May 15, 2002. Management is assessing the impact of this statement.In September 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. This statement addresses financial accounting and reporting for costs associated with exit or disposal activities. This statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions of this statement are effective for activities that are initiated after December 31, 2002. Management is assessing the impact of this statement.
In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions, an Amendment to SFAS No. 72 and 144, and FASB Interpretation No. 9. This FASB relates to the acquisition of financial institutions and is not expected to have an impact on the Partnership's financial position or results of operations since the Partnership has no intention of acquiring financial institutions.
9
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2002
(unaudited)
Note 2 - Organization of the Partnership
The Partnership is a California Limited Partnership formed on November 15, 1991. TMP Properties (A California General Partnership) and TMP Investments, Inc. (A California Corporation) are the general partners ("General Partners"). The partners of TMP Properties are William O. Passo, Anthony W. Thompson and Scott E. McDaniel. William O. Passo and Anthony W. Thompson were the shareholders of TMP Investments, Inc. until October 1, 1995, when they sold their shares to TMP Group, Inc. and then became the shareholders of TMP Group, Inc.
The Partnership was formed principally to make short-term loans to unaffiliated parties secured by first trust deeds on unimproved properties, primarily in the Inland Empire area of Southern California and in some instances, in other areas of Southern California, and to provide cash distributions to the limited partners, primarily from interest earned on the mortgage loans. The Partnership is not a mutual fund or any other type of Investment Company within the meaning of, and is not subject to regulations under, the Investment Company Act of 1940.
Since its formation, the Partnership had received and accepted subscriptions of 15,715 units, representing total subscription proceeds in the amount of $15,715,000. All proceeds were committed to mortgage loan investments made by the Partnership and to working capital reserves. During 1992, the Partnership funded five mortgage loans, four loans were funded in 1993 and three loans were funded in 1994 for a total of twelve loans.
The General Partners manage and control the affairs of the Partnership, including final approval of all loans and investments, and have ultimate authority for matters affecting the interests of the Partnership. All organization and offering expenses of the Partnership were paid by TMP Realty, an affiliate of the general partners, in exchange for loan fees (or points) on each mortgage loan.
As a consequence of adverse changes in market conditions and other economic and business factors, nine of the twelve loans went into default. The Partnership foreclosed on the properties secured by the defaulted loans and is in the process of developing and/or selling these properties.
The partnership agreement provides for two types of investments: Individual Retirement Accounts (IRA) and others. The IRA minimum purchase requirement was $2,000 and all others were a minimum purchase requirement of $5,000. The maximum liability of the limited partners is the amount of their capital contribution.
Note 3 - Partners' Contributions
The Partnership raised capital through a public offering of units at $1,000 per unit. The minimum offering size was 1,000 units or $1,000,000. The maximum offering size was 20,000 units or $20,000,000. As of April 21, 1994, 15,715 units were sold for total capital contributions of $15,715,000 and the offering was closed.
10
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2002
(unaudited)
Note 4 - Allocation of Profits and Losses and Cash Distributions
Profit, losses, and cash distributions are allocated ninety-nine percent to the limited partners and one percent to the general partners until the limited partners have received an amount equal to their capital contributions plus a cumulative, non-compounded return of eight percent per annum based on their adjusted capital account balances, at which time, remaining profits, losses and cash distributions are allocated seventy-six percent to the limited partners and twenty-four percent to the General Partners. Distributions of cash from operations, if any, are made monthly within 30 days after the end of the month.
On May 16, 2002 distributions of approximately $13,870 and $1,386,850 were made to the General Partners and limited partners, respectively, as a return of capital. On July 5, 2001 distributions of approximately $5,000 and $500,000 were made to the General Partners and limited partners, respectively, as a return of capital.
Note 5 - Related Party Transactions
During the year ended December 31, 2001, TMP Homes, managing member of Remington, paid $7,500 of bank loan fees on behalf of Remington and advanced Remington $22,500 to pay accounts payables. As of December 31, 2001 these funds have been paid back to TMP Homes.
A distribution to the Partnership by Remington was received totaling $1,000,000 during the nine-month period ended September 30, 2002 of which a 3% participation fee of $30,000 was paid to PacWest, a related party, in accordance with the Management Agreement. In addition, based on the sale of the Sun City property on April 16, 2002 for $2,025,000 PacWest, a related party is due a 13% participation fee in accordance with the Management Agreement. However, based on the issuance of a deed of trust to the Partnership (see Note 10) only a portion ($39,498) of the total participation fee ($191,831) was paid during the nine-month period ended September 30, 2002. The remaining fee of $152,333 is recorded as Accounts Payable & Other in the accompanying Consolidated Balance Sheet as of September 30, 2002.
See Note 2 regarding information on management of the Partnership during 2002.
Note 6 - Agreements with PacWest
In April 1998, the General Partners entered into the Financing Agreement with PacWest Inland Empire, LLC (“PacWest”), whereby PacWest paid the General Partners and ten other related partnerships (“the TMP Land Partnerships”) a total of $300,000 and agreed to pay up to an additional $300,000 for any deficit capital accounts for these 11 partnerships in exchange for the rights to the general partners’ distributions; referred to as a “distribution fee” as defined by the Financing Agreement.
11
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2002
(unaudited)
Note 6 - Agreements with PacWest (continued)
In addition, PacWest agreed to loan and/or secure a loan for the Partnership and the TMP Land Partnerships in the amount of $2,500,000. Loan proceeds will be allocated among the TMP Land Partnerships, based on partnership needs, from recommendations made by PacWest, and under the approval and/or direction of the General Partners. A portion of these funds will be loaned to the Partnership at 12% simple interest beginning April 1, 1998. The borrowings are secured by the Partnership’s properties, and funds will be loaned, as needed, in the opinion of the General Partners. These funds are not to exceed 50% of the 1997 appraised value of the properties, and will primarily be used to pay for on-going property maintenance, pay down existing debt, accrued property taxes and appropriate entitlement costs.
PacWest, at their option, can make additional advances with the agreement of the General Partners; however, the aggregate amount of cash loaned to the TMP Land Partnerships is limited to a maximum of $2,500,000. As of March 31, 2002 and December 31, 2001, the TMP Land Partnerships owe PacWest approximately $2,781,800 and $3,637,000 including advances & interest.
In April 1998, PacWest entered into a management, administrative and consulting agreement (the Management Agreement) with the General Partners to provide the Partnership with overall management, administrative and consulting services. Effective August 1, 2001, the Partnership entered into the First Amendment to the Management Agreement (“First Amendment”). The purpose of the First Amendment is to clarify and define certain language and the terms of the provisions of the Management Agreement. The Management Agreement, in its entirety, remains in effect apart from specific items discussed in the First Amendment.
Certain items disclosed in the First Amendment include 1) Revision of the “Asset Administration Fee” schedule and its reduction upon the sale of any property, 2) “Participation Fee” wording is altered to read “Manager Profit Participation” and its calculation is defined, 3) the maximum amount of the PacWest loan to any Partnership shall not exceed fifty percent (50%) of the fair market value of all real properties owned by the Partnership, and the maximum amount of the PacWest loan secured against each specific parcel shall not exceed a loan-to-value ratio of fifty percent of the fair market value of that parcel, 4) The maximum total PacWest loan amount shall be $2,500,000 allocated between the Partnerships and each borrowing Partnership shall execute a Promissory Note (as attached to the First Amendment) and a Trust Deed (as attached to the First Amendment). PacWest and the TMP Land Partnerships shall be entitled to enter into a separate written agreement to provide for a short term gap loan to cover emergency shortfalls, and 5) If the Partnerships need funds in excess of the $2,500,000, PacWest shall be entitled to obtain third party loans at market interest, secured against the real property of each Partnership to whom such loan(s) is made. No such loan(s) shall be made without the written consent of the General Partners.
PacWest currently contracts with third party service providers to perform certain of the financial, accounting, and investor relations' services for the Partnership.
12
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2002
(unaudited)
Note 6 - Agreements with PacWest (continued)
Pursuant to the Financing Agreement, PacWest has acquired the General Partners’ unsubordinated 1% interest in the Partnership and assumed responsibility for all partnership administration while not replacing any of the General Partners. PacWest will charge a fee for its administrative services equal to an amount not to exceed the average reimbursements to the general partners for such services over the past five years. As of September 30, 2002 and December 31, 2001, the Partnership has $200 and $240, respectively, payable to PacWest related to the aforementioned agreements.
Note 7 - Property Taxes Payable
As of December 31, 2001 $9,799,739 of property taxes was owed on the San Jacinto property representing the cumulative unpaid property taxes and Mello-Roos tax assessments at that date. The amount accrued interest each quarter at a rate of 3.75% on the outstanding balance.
As of December 31, 2000 the Partnership contributed the San Jacinto property to RSJ. As of July 18, 2001 Chapter 11 bankruptcy had been filed by RSJ. The San Jacinto property was foreclosed on during March 2002 and therefore the bankruptcy has been dismissed as of March 8, 2002. This property is no longer owned by the Partnership.
Note 8 - Notes Payable
On August 17, 1999, Remington entered into a promissory note agreement for a construction loan with a bank. The maximum loan amount was $8,498,000 and accrued interest at 1% per annum in excess of the Index Rate. Interest was payable monthly. This note matured on December 10, 2000. At this date, the bank modified the existing loan removing approximately $1,000,000 from construction loan availability. As of December 31, 2000 the new loan maximum amount was $7,406,000 with a maturity date of June 10, 2001. Interest accrued at a rate of the greater of seven-percent (7%) or two hundred basis points above the Index Rate. The interest rate changed from time to time as to when the Index Rate changed, but in no event did the Interest Rate go lower than 7%. Remington paid the note off in 2001. On June 1, 2001 Remington entered into a new loan agreement with this bank. This loan was not funded until August 2001. The new loan maximum principal amount was $3,075,000 for the construction of the next 19 production homes and had a maturity date of June 28, 2002. A fee of $15,375 was paid to complete this transaction. As of December 31, 2001, Remington had a principal balance due on the note of $2,456,675. The Partnership was a guarantor of the promissory note. As of September 30, 2002, Remington paid off the entire amount of the loan due plus an excess of approximately $61,743. The bank is holding these excess funds in an interest bearing account until one lien discrepancy is resolved. This amount is currently recorded as Prepaid Expenses and Other in the accompanying consolidated balance sheet as of September 30, 2002.
On October 2, 2001 Remington entered into a new loan agreement with a bank. The maximum loan amount is $2,225,000 and accrues interest at 1% per annum in excess of the Reference Rate. Interest is payable monthly. The interest rate shall change from time to time as to when the Reference Rate changes, but in no event shall the Interest Rate be lower than 7.5%. This note matured on the date, which is six months
13
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2002
(unaudited)
Note 8 - Notes Payable (continued)
following the date of recordation of the Deed of Trust securing this note. This note was paid in full on May 3, 2002. As of December 31, 2001, Remington had a principal balance due on the note of $1,774,412. Interest paid for the year ended December 31, 2001 on all these loans was $ 444,619 and has been capitalized.
In addition, on October 2, 2001 Remington entered into a Subordination and Recognition Agreement with a third party and a bank. Remington executed two deeds of trust in favor of the third party to secure a note for a construction loan in principal amount not to exceed $2,538,000 and the other to secure a note for a construction loan in a principal amount not to exceed $4,826,000. Remington and the third party also entered into certain purchase and sale agreements pursuant to which the third party will purchase the property from Remington.
Note 9 - Minority Interests
In 1995, the Partnership entered into joint venture agreements with TMP Homes whereby the Partnership contributed land for a 75% interest in Remington and Sun City. TMP Homes contributed $100 for its 25% interest. As a result of this transaction and subsequent capital contributions whereby the Partnership has contributed assets for a 75% interest; the Partnership has recognized a loss equal to the fair value of 25% of the assets contributed to the joint venture. TMP Homes, as the minority interest owner, who will develop the property, has recorded a gain equal to the fair value of 75% of the assets contributed to the joint venture by the Partnership. During the nine-month period ended September 30, 2002, Remington made a distribution to the Partnership of $1,000,000 allowing the Partnership to recover a portion of the losses previously recognized.
On May 26, 2000 the Partnership entered into a joint venture agreement with PacWest whereby the Partnership contributed land and $24,750 in cash for a 99% interest in RSJ. PacWest contributed $250 for its 1% interest. Additional cash contributions by the Partnership and PacWest of $9,900 and $100, respectively, were made during the year ended December 31, 2001.
Note 10 - Note Receivable
On April 16, 2002 the Partnership sold one of its properties for a total sales price of $2,025,000. In accordance with this sale a note secured by deed of trust was issued for $1,512,500. This note bears interest at 8 percent and is due to be paid in full no later than October 16, 2003.
14
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
September 30, 2002
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis provides information that the Partnership’s management believes is relevant to an assessment and understanding of the Partnership’s results of operations and financial condition. This discussion should be read in conjunction with the financial statements and footnotes, which appear elsewhere in this report.
This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are subject to the “safe harbor” created by that section. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this report. Additionally, statements concerning future matters such as the features, benefits and advantages of the Partnership’s property regarding matters that are not historical are forward-looking statements. The Partnership’s actual future results could differ materially from those projected in the forward-looking statements. The Partnership assumes no obligation to update the forward-looking statements.
Readers are urged to review and consider carefully the various disclosures made by the Partnership in this report, which attempts to advise interested parties of the risks and factors that may affect the Partnership's business, financial condition and results of operations.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached Consolidated Financial Statements and notes thereto for the fiscal year ended December 31, 2001.
The Partnership’s management believes that inflation has not had a material effect on the Partnership’s results of operations.
During the nine-month period ended September 30, 2002 and 2001, $6,914 and $16,764, respectively, of interest income was earned. During the nine-month period ended September 30, 2002 $11,050 of other income was earned primarily from the $10,000 relating to RSJ and San Jacinto Equities Agreement discussed below. The Partnership sold a property for $2,025,000 (see Note 10) and Remington had house sales to various third parties totaling $5,296,795 and Lot Sales to Centex of $3,843,980 during the nine-month period ended September 30, 2002.
During the three-month period ended September 30, 2002 and 2001, $2,374 and $1,962, respectively, of interest income was earned. Remington had no house sales to various third parties or Lot Sales to Centex during the three-month period ended September 30, 2002, however Remington recorded reimbursable cost of sales relating to the Centex Lot Sales of approximately $225,706. This income was recognized by Remington based on previously recorded cost of sales. Centex has agreed to reimburse Remington for these costs and therefore a $225,706 receivable from Centex is recorded in the accompanying Consolidated Balance Sheets as of September 30, 2002.
15
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
September 30, 2002
As of February 2002, RSJ entered into an Agreement with San Jacinto Equities, LLC (“SJE”) whereby SJE will pay RSJ a total of $50,000 to cooperate with SJE in reinstating the expired tentative tract maps and to waive its right of Redemption to the Property following the sale of the Property at foreclosure. Per the Agreement, $10,000 is to be paid to RSJ upon execution of the Agreement and an additional $40,000 is to be paid to RSJ after two of the six tentative tract maps have been reinstated. If the maps have not been reinstated within one year, SJE has the right to cancel the agreement. If the agreement is cancelled after one year SJE has no obligation to pay the $40,000 to RSJ. As of September 30, 2002, RSJ has received $10,000 from SJE and has recorded the amount as Other Income during the nine-month period ended September 30, 2002.
Total expenses for the nine-month period ended September 30, 2002 compared with the nine-month period ended September 30, 2001, increased by approximately $221,517 due primarily to an increase in Participation Fees of $221,831. Two participation fees were paid during the nine-month period ended September 30, 2002 to PacWest. A distribution to the Partnership by Remington was received totaling $1,000,000 during the six month period ended September 30, 2002 of which a 3% participation fee of $30,000 was paid to PacWest in accordance with the Management Agreement. In addition, based on the sale of the Sun City property on April 16, 2002 for $2,025,000 PacWest is due a 13% participation fee in accordance with the Management Agreement. However, based on the issuance of a deed of trust to the Partnership (see Note 10) only a portion ($39,498) of the total participation fee ($191,831) was paid during the period ended September 30, 2002. The remaining fee will be paid to PacWest no later than October 16, 2003 when the note receivable is to be paid in full, including interest. The remaining fee of $152,333 is recorded as Accounts Payable & Other in the accompanying Consolidated Balance Sheet as of September 30, 2002. Other expenses increased by approximately $6,000, which includes certain carrying costs, related to the PR Equities, Ltd. properties in San Jacinto, CA, which are expensed as incurred in order to bring the stated value of the property to fair market value. These expenses are related to property services incurred to prepare the property for future sale. This property was sold during the three month period ended March 31, 2002. Accounting and Financial Reporting expenses increased by $12,246. These increases were partially offset by a decrease of $17,925 in Outside Professional Services.
Total expenses for the three-month period ended September 30, 2002 compared with the three-month period ended September 30, 2001, increased by $134,284 due primarily to an increase in Participation Fees of $152,333. This increase was partially offset by a decrease in Outside Professional Services of $17,876.
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TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
September 30, 2002
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2002, the Partnership had cash on hand of approximately $313,500.
Operations for the nine-month period ended September 30, 2002 utilized cash of approximately $464,300. Investing activities provided cash of approximately $6,136,000. Investing activities include proceeds from property sales of approximately $11,165,800. These sales proceeds are offset by increases in land development and carrying costs of approximately $3,388,000. Financing activities utilized cash of approximately $5,631,800 related to payments on the Remington note payables and the distribution of funds of approximately $1,400,700 to the partners.
Operations for the nine-month period ended September 30, 2001 provided cash of approximately $306,500. Investing activities provided cash of approximately $2,241,000. Investing activities include proceeds from property sales of approximately $5,676,000 and proceeds from the Peppertree Investment sale of $325,000. These sales proceeds are offset by increases in land development and carrying costs of approximately $3,746,300. Financing activities utilized cash of approximately $2,539,000 related to payments on the Remington note payables and approximately $505,100 to pay distributions to partners.
The Partnership had one property as of September 30, 2002 that is being held for appreciation and resale. Remington is holding additional parcels that they have already sold to a third party. The Partnership does not intend to acquire any additional properties. Upon the sale of each property, the Partnership intends to distribute the sales proceeds, less any reserves needed for operations, to the partners.
Aside from the foregoing, the Partnership knows of no demands, commitments, events, or uncertainties, which might affect its liquidity or capital resources in any material matter.
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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.
Date: November 5, 2002
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
By: TMP Investments, Inc., A California Corporation as Co-General Partner
By: \s\ William O. Passo
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William O. Passo, President
By: \s\ Anthony W. Thompson
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Anthony W. Thompson, Exec. Vice President
By: TMP Properties, A California General Partnership as Co-General Partner
By: \s\ William O. Passo
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William O. Passo, Partner
By: \s\ Anthony W. Thompson
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Anthony W. Thompson, Partner
By: \s\ Scott E. McDaniel
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Scott E. McDaniel Partner
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CERTIFICATIONS
We, Daniel L. Stephenson and John Fonseca, certify that:
| 1. | We have reviewed this quarterly report on Form 10-Q of TMP Land Mortgage Fund, Ltd.; |
| 2. | Based on our knowledge, this quarterly 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 quarterly report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; |
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditory and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
| 6. | The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: November 12, 2002
Daniel L. Stephenson
Chief Executive Officer
/S/DANIEL L STEPHENSON
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John Fonseca
Chief Financial Officer
/S/JOHN FONSECA
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