Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002, Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002, and Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002.
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 months ended March 31, 2003 and 2002 (b) the financial position at March 31, 2003 and (c) the cash flows for the three months ended March 31, 2003 and 2002. Interim results are not necessarily indicative of results for a full year.
The balance sheet presented as of December 31, 2002 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.
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Consolidated Balance Sheets
March 31, December 31
2003 2002
(unaudited) (audited)
-------------- -------------
Assets
------
Cash $ 259,630 $ 785,799
Prepaid Expenses & Other 85,947 422,914
Note Receivable (Note 8) 1,512,500 1,512,500
Investment in Land, Net 5,140,592 4,351,248
---------------- ----------------
Total Assets $ 6,998,669 $ 7,072,461
================ ================
Liabilities and Partners' Capital
---------------------------------
Accounts Payable & Other $ 2,415,104 $ 1,588,713
Due to Affiliates (Note 5 and 6) 773 0
Franchise Taxes Payable 1,600 1,600
Property Taxes Payable 6,733 0
---------------- ----------------
Total Liabilities 2,424,210 1,590,313
---------------- ----------------
Minority Interests (Note 7) 284,238 514,554
---------------- ----------------
General Partners (114,111) (107,337)
Limited Partners: 20,000 Equity Units
Authorized:15,715 Units Outstanding
4,404,332 5,074,931
---------------- ----------------
Total Partners' Capital 4,290,221 4,967,594
---------------- ----------------
Total Liabilities and Partners'
Capital $ 6,998,669 $ 7,072,461
================ ================
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
March 31
2003 2002
-------------- -------------
Property Sales $ 744,360 $ 5,296,815
Cost of Property Sales (626,393) (4,311,428)
---------------- ----------------
Net Income on Property Sales 117,967 985,387
Income
Interest 906 774
Gain on Investment 250,000 0
Other 1,200 10,900
--------------- ----------------
Total Income 370,073 997,061
--------------- ----------------
Expenses
Accounting & Financial Reporting 31,630 11,268
General & Administrative 1,761 866
Outside Professional Services 9,820 11,660
Other 0 8,174
--------------- ----------------
Total Expenses 43,211 31,968
--------------- -------------
Net Income before Minority Interests &
Taxes 326,862 965,093
Minority Interests Gain (Loss) in
Consolidated Affiliates (19,683) (245,103)
State Franchise & Other Taxes (14,190) (1,600)
------------------ ----------------
Net Income $ 292,989 $ 718,390
================= ================
Allocation of Net Income:
General Partners, in the Aggregate: $ 2,930 $ 7,184
================= ================
Limited Partners, in the Aggregate: $ 290,059 $ 711,206
================= ================
Limited Partners, per Equity Unit: $ 18.46 $ 45.26
================= ================
See Accompanying Notes to Consolidated Financial Statements
4
TMP LAND MORTGAGE FUND, LTD
A California Limited Partnership
Consolidated Statements of Cash Flows
(unaudited)
Three months Ended
March 31
2003 2002
-------------- --------------
Cash Flows from Operating Activities:
Net Income $ 292,989 $ 718,390
Adjustments to Reconcile Net Income to
Net Cash
Provided By Operating Activities:
Minority Interests in Consolidated
Affiliates (230,316) 245,105
(Gain) Loss on Property Sales (117,967) 985,387
Other 0 8,174
Changes in Assets and Liabilities:
Decrease in Prepaid Expenses and
Other 336,967 240,657
Increase in Property Taxes Payable 6,733 4,669
Increase in Due to Affiliates 773 15
Increase in Franchise Taxes Payable 0 1,600
Increase in Accounts Payable & Other 826,391 633,302
------------- ---------------
Net Cash Provided By Operating
Activities 1,115,570 2,837,299
------------- ---------------
Cash Flows from Investing Activities:
Net Proceeds from Property Sales 744,360 5,296,815
Increase in Land Development and
Carrying Costs (1,415,737) (3,717,812)
-------------- ---------------
Net Cash Provided By (Used In)
Investing Activities (671,377) _______1,579,003
---------- ---------
Cash Flows from Financing Activities:
Distributions to partners (970,362) 0
Net Payments of Notes Payable 0 (3,640,829)
------------- ----------------
Net Cash (Used In) Provided By
Financing Activities (970,362) (3,640,829)
-------------- ---------------
Net(Decrease)Increase in Cash (526,169) 755,473
Cash, Beginning of Period 785,799 273,342
------------- ---------------
Cash, End of Period $ 259,630 $ 1,048,815
============= ================
See Accompanying Notes to Consolidated Financial Statements
5
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 $ 0
============== ==============
Cash Paid for Interest $ 0 $ 61,986
============== ==============
Other Disclosures: Non-cash investing activities during the three-month period
- ----- ------------
ended March 31, 2002 consisted of a decrease in property taxes payable of
$9,799,739 due to the foreclosure of the San Jacinto, CA property.
See Accompanying Notes to Consolidated Financial Statements
6
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
March 31, 2003
(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 - No provision for federal income taxes has been made in the accompanying consolidated financial statements as all profits and losses flow through to the respective partners and are recognized on their individual income tax returns. However, the minimum California franchise tax required to be paid by the Partnership and its consolidated entities is $800 per year per entity.
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.
7
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
March 31, 2003
(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 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. The Partnership does not anticipate the adoption of this statement will have a material effect on the Partnership’s financial position or results of operations.
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. The Partnership does not anticipate the adoption of this statement will have a material effect on the Partnership’s financial position or results of operations.
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.
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.
8
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
March 31, 2003
(unaudited)
Note 2 - Organization of the Partnership (continued)
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.
9
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
March 31, 2003
(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 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. 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 January 17, 2003 distributions of approximately $9,704 and $960,658 were made to the General Partners and limited partners, respectively, as a return of capital.
Note 5 - Related Party Transactions
A distribution to the Partnership by Remington was received totaling $1,000,000 during the year ended December 31, 2002 of which a 3% participation fee of approximately $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 year ended December 31, 2002. In addition an additional $29,508 was paid on January 30, 2003. The remaining fee of $122,825 is recorded as Accounts Payable & Other in the accompanying Consolidated Balance Sheet as of March 31, 2003.
See Note 2 regarding information on management of the Partnership during 2003.
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.
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
10
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
March 31, 2003
(unaudited)
Note 6 - Agreements with PacWest (continued)
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, 2003 and December 31, 2002, the TMP Land Partnerships owe PacWest approximately $1,033,300 and $924,500 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.
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 March 31, 2003 and December 31, 2002, the Partnership has $773 and $0, respectively, payable to PacWest related to the aforementioned agreements.
11
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
March 31, 2003
(unaudited)
Note7 - 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 year ended December 31, 2002, Remington made a distribution to the Partnership of $1,000,000. During the three-month period ended March 31, 2003, Remington made a distribution to the Partnership of $1,000,000. The Partnership has recognized a gain on Investment of $250,000 as a result of this distribution.
Note 8 - 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.
12
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
March 31, 2003
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 years ended December 31, 2002.
The Partnership’s management believes that inflation has not had a material effect on the Partnership’s results of operations.
During the three-month period ended March 31, 2003 and 2002, $906 and $774, respectively, of interest income was earned. During the three month period ended March 31, 2002 approximately $10,900 of other income was earned primarily the $10,000 relating to RSJ and San Jacinto Equities Agreement. Remington had house sales to various third parties totaling approximately $0 and $4,816,815 and Lot Sales to Centex of $744,360 and $480,000 during the three-month periods ended March 31, 2003 and 2002. The Partnership recognized a gain on investment of $250,000 as a result of the distribution from Remington.
Total expenses for the three-month period ended March 31, 2003 compared with the three-month period ended March 31, 2002, increased by $11,243 due to an increase in Accounting & Financial Reporting of $20,362. Other expenses, which include certain carrying costs related to property services incurred to prepare the PR Equities, Ltd. properties in San Jacinto, CA, for future sale are expensed as incurred in order to bring the stated value of the property to fair market value decreased by $8,174.
13
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
March 31, 2003
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2003, the Partnership had cash on hand of $259,630. Operations for the three-month period ended March 31, 2003 provided cash of $1,115,570. Investing activities utilized cash of $671,377. Investing activities include proceeds from property sales of $744,360. These sales proceeds are offset by increases in land development and carrying costs of 1,415,737. Financing activities utilized cash of $970,362 related to payments of distributions to partners.
Operations for the three-month period ended March 31, 2002 provided cash of $2,837,299. Investing activities provided cash of $1,579,003. Investing activities include proceeds from property sales of $5,296,815. These sales proceeds are offset by increases in land development and carrying costs of $3,717,812. Financing activities utilized cash of $3,640,829 related to payments on the Remington note payables.
The Partnership had one property (“Sunset Crossing”) as of March 31, 2003 that is listed for sale for $3,000,000. 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.
14
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: May 19, 2003
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
-------------------------------------
William O. Passo, President
By: \s\ Anthony W. Thompson
-------------------------------------
Anthony W. Thompson, Exec. Vice President
By: TMP Properties, A California General Partnership
as Co-General Partner
By: \s\ William O. Passo
-------------------------------------
William O. Passo, Partner
By: \s\ Anthony W. Thompson
-------------------------------------
Anthony W. Thompson, Partner
By: \s\ Scott E. McDaniel
-------------------------------------
Scott E. McDaniel Partner
By: JAFCO, Inc., A California Corporation as Chief Accounting
Officer
By: \s\ John A. Fonseca
-------------------------------------
John A. Fonseca, President
