FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
WASHINGTON DC 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Period Ended September 30, 2001
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Commission file number 000-17573
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REDWOOD MORTGAGE INVESTORS VI
(exact name of registrant as specified in its charter)
California 94-3031211
- ------------------------- -----------------------------------------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
650 El Camino Real, Suite G, Redwood City, CA. 94063
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(address of principal executive office)
(650) 365-5341
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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 reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES XX NO
---------------- -------------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES NO NOT APPLICABLE XX
------- --------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest date.
NOT APPLICABLE
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2000 (audited) AND
SEPTEMBER 30, 2001 (unaudited)
ASSETS
September 30, December 31,
2001 2000
(unaudited) (audited)
------------ --------------
Cash $409,805 $354,860
------------- --------------
Accounts receivable
Loans, secured by deeds of trust 4,919,661 5,570,576
Accrued interest on loans 671,554 664,292
Advances on loans 193,530 133,647
Accounts receivables, unsecured 82,362 82,362
------------- --------------
5,867,107 6,450,877
Less allowance for doubtful accounts 268,245 261,452
-------------- --------------
5,598,862 6,189,425
-------------- --------------
Note receivable - Redwood Mortgage Corp. 0 125,000
Real estate owned, held for sale,
acquired through foreclosure 1,145,050 767,583
--------------- --------------
Total assets $7,153,717 $7,436,868
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable $13,068 $13,068
--------------- ---------------
Total liabilities 13,068 13,068
--------------- ---------------
Partners' capital
Limited Partners' capital, subject
to redemption, (note 4D): 7,130,883 7,414,034
General Partners' capital: 9,766 9,766
--------------- ---------------
Total Partners' capital 7,140,649 7,423,800
--------------- ---------------
Total liabilities and partners' capital $7,153,717 $7,436,868
=============== ===============
The accompanying notes are an integral part of the financial statements.
REDWOOD MORTGAGE INVESTORS VI
A California Limited Partnership)
STATEMENTS OF INCOME
FOR THE NINE AND THREE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000 (unaudited)
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
----------------- ---------------- ---------------- ----------------
Revenues
Interest on loans $390,580 $433,489 $123,159 $140,335
Interest on bank deposits 11,960 8,261 4,017 1,641
Late charges, prepayment penalties, and fees 12,809 24,548 3,951 11,160
Interest on promissory note 4,912 15,107 3,476 5,107
----------------- ---------------- ---------------- ----------------
420,261 481,405 134,603 158,243
----------------- ---------------- ---------------- ----------------
Expenses
Loan servicing fees 31,757 32,914 9,904 16,233
Asset management fee 6,879 7,403 2,262 2,420
Clerical costs through Redwood
Mortgage Corp. 21,763 14,738 6,511 4,663
Provision for doubtful accounts and
Losses on real estate acquired
through foreclosure 6,792 30,941 6,792 17,978
Professional services 18,368 23,612 2,245 -1,946
Other 8,505 8,858 1,535 1,870
----------------- ---------------- ---------------- ----------------
94,064 118,466 29,249 41,218
----------------- ---------------- ---------------- ----------------
Net income $326,197 $362,939 $105,354 $117,025
================= ================ ================ ================
Net income:
General Partners (1%) $3,262 $3,629 $1,054 $1,170
Limited Partners (99%) $322,935 $359,310 $104,300 115,855
----------------- ---------------- ---------------- ----------------
$326,197 $362,939 $105,354 $117,025
================= ================ ================ ================
Net income per $1,000 invested by Limited
Partners for entire period
-where income is reinvested and
Compounded $44.87 $46.42 $14.48 $15,03
================= ================ ================ ================
-where partner receives income
in monthly distributions $44.01 $45.50 $14.41 $14.96
================= ================ ================ ================
The accompanying notes are an integral part of these financial statements.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 2000 (audited) and
THE NINE MONTHS ENDED SEPTEMBER 30, 2001 (unaudited)
PARTNERS' CAPITAL
-----------------------------------------------------------------------------------
LIMITED PARTNERS' CAPITAL
-------------------------------------------------
Capital Capital
Account Formation Account
Limited loan General
Partners Receivable Total Partners Total
------------- -------------- -------------- ------------- --------------
Balances at January 1, 1998 $9,481,208 $-59,521 $9,421,687 $9,766 $9,431,453
Formation loan collections 0 53,291 53,291 0 53,291
Net income 507,380 0 507,380 5,125 512,505
Early withdrawal penalties 6,230 0
-9,834 -3,604 -3,604
Partners' withdrawals -1,280,986 0 -1,280,986 -5,125 -1,286,111
------------- -------------- -------------- ------------- -------------
Balances at December 31, 1998 $8,697,768 0 $8,697,768 $9,766 $8,707,534
Net income 515,700 0 515,700 5,209 520,909
Early withdrawal penalties 0 -10,028 0
-10,028 -10,028
Partners' withdrawals -1,182,860 0 -1,182,860 -5,209 -1,188,069
------------- -------------- -------------- ------------- -------------
Balances at December 31, 1999 $8,020,580 0 $8,020,580 $9,766 $8,030,346
Net income 473,150 0 473,150 4,779 477,929
Early withdrawal penalties 0 -16,335 0 -16,335
-16,335
Partners' withdrawals -1,063,361 0 -1,063,361 -4,779 -1,068,140
------------- -------------- -------------- ------------- -------------
Balances at December 31, 2000 7,414,034 0 7,414,034 9,766 7,423,800
Net income 322,935 0 322,935 3,262 326,197
Early withdrawal penalties -10,449 0 0 -10,449
-10,449
Partners' withdrawals -595,637 0 -595,637 -3,262 -598,899
------------- -------------- -------------- ------------- -------------
Balances at September 30, 2001 $7,130,883 0 $7,130,883 $9,766 $7,140,649
============= ============== ============== ============= =============
The accompanying notes are an integral part of these financial statements.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001AND 2000 (unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
2001 2000
------------ -------------
Cash flows from operating activities:
Net income $326,197 $362,939
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for doubtful accounts 6,792 30,391
Provision for Losses (recovery) on real estate
held for sale 0 550
Early withdrawal penalty credited to income -10,449 -13,446
(Increase) decrease in assets:
Accrued interest & advances -67,145 -80,605
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 0 13,423
Deferred Interest on loans 0 -15,676
------------ -------------
Net cash provided by operating activities 255,395 297,576
------------ -------------
Cash flows from investing activities:
Principal collected on loans 1,863,950 1,110,352
Loans made -1,103,266 -1,672,861
Additions to real estate held for sale -547,580 -65,215
Dispositions of real estate held for sale 60,345 0
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Net cash provided by (used in) investing
activities 273,449 -627,724
------------ -------------
Cash flows from financing activities:
Partners withdrawals -598,899 -793,632
Note receivable - Redwood Mortgage Corp. 125,000 220,093
------------ -------------
Net cash provided by (used in) financing
activities -473,899 -573,539
------------ -------------
Net increase (decrease) in cash 54,945 -903,687
Cash - beginning of period 354,860 1,120,295
------------ -------------
Cash - end of period $409,805 $216,608
============ =============
The accompanying notes are an integral part of these financial statements.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
NOTE 1 - ORGANIZATION AND GENERAL
Redwood Mortgage Investors VI, (the "Partnership") is a California Limited
Partnership, of which the General Partners are Michael R. Burwell and Gymno
Corporation, a California corporation partially owned and operated by the
individual General Partner. The partnership was organized to engage in business
as a mortgage lender for the primary purpose of making loans secured by Deeds of
Trust on California real estate. Loans are being arranged and serviced by
Redwood Mortgage Corp., (Redwood Mortgage), an affiliate of the General
Partners. The offering of partnership units was closed with contributed capital
totaling $9,772,594.
Each month's income is distributed to partners based upon their
proportionate share of partners' capital. Some partners have elected to withdraw
income on a monthly, quarterly or annual basis.
A. Sales Commissions - Formation Loan Sales commissions ranging from 0%
(units sold by General Partners) to 10% of gross proceeds were paid by Redwood
Mortgage Corp. an affiliate of the General Partners that arranges and services
the loans. To finance the sales commissions, the Partnership loaned to Redwood
Mortgage Corp. $623,255 (the "formation loan") relating to contributed capital
of $9,772,594. The formation loan was unsecured, and was repaid without
interest, over 10 years, commencing December 31, 1989. The last payment was made
in 1998.
B. Other Organizational and Offering Expenses Organizational and offering
expenses, other than sales commissions, (including printing costs, attorney and
accountant fees, and other costs), paid by the Partnership from the offering
proceeds totaled $360,885 or 3.69% of the gross proceeds contributed by the
Partners. Such costs have been fully amortized and allocated to the Partners.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Accrual Basis
Revenues and expenses are accounted for on the accrual basis of accounting
wherein income is recognized as earned and expenses are recognized as incurred.
Once a loan is categorized as impaired, interest is no longer accrued thereon.
B. Management Estimates
In preparing the financial statements, management is required to make
estimates based on the information available that affect the reported amounts of
assets and liabilities as of the balance sheet date and revenues and expenses
for the related periods. Such estimates relate principally to the determination
of the allowance for doubtful accounts, including the valuation of impaired
loans, and the valuation of real estate acquired through foreclosure. Actual
results could differ significantly from these estimates.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
C. Loans, Secured by Deeds of Trust
The Partnership has both the intent and ability to hold the loans to
maturity, i.e., held for long-term investment. They are therefore valued at cost
for financial statement purposes with interest thereon being accrued by the
simple interest method.
Financial Accounting Standards Board Statements (SFAS) 114 and 118
(effective January 1, 1995) provide that if the probable ultimate recovery of
the carrying amount of a loan, with due consideration for the fair value of
collateral, is less than the recorded investment and related amounts due and the
impairment is considered to be other than temporary, the carrying amount of the
investment (cost) shall be reduced to the present value of future cash flows. As
of September 30, 2001 and at December 31, 2000 and 1999, reductions in the cost
of loans categorized as impaired by the Partnership totaled $159,090, $159,090
and $283,249, respectively. The reduction in stated value was accomplished by
increasing the allowances for doubtful accounts.
As presented in Note 9 to the financial statements as of September 30,
2001, the average loan to appraised value of security at the time the loans were
consummated was 70.63%. When a loan is valued for impairment purposes, an
updating is made in the valuation of collateral security. However, a low loan to
value ratio tends to minimize reductions for impairment.
D. Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents
include interest bearing and non-interest bearing bank deposits.
E. Real Estate Owned, Held for Sale
Real estate owned, held for sale, includes real estate acquired through
foreclosure and is stated at the lower of the recorded investment in the
property, net of any senior indebtedness, or at the property's estimated fair
value, less estimated costs to sell.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
The following schedule reflects the costs of real estate acquired through
foreclosure and the recorded reductions to estimated fair values, less estimated
costs to sell as of September 30, 2001 and December 31, 2000 was as follows:
September 30, December 31,
2001 2000
----------------- ----------------
Costs of properties $1,587,786 $1,240,579
Reduction in value -442,736 -472,996
----------------- ----------------
Fair value reflected in financial
statements $1,145,050 $767,583
================= ================
F. Income Taxes
No provision for Federal and State income taxes is made in the financial
statements since income taxes are the obligation of the partners if and when
income taxes apply.
G. Organization and Syndication Costs
The Partnership bears its own organization and syndication costs (other
than certain sales commissions and fees described above) including applicable
legal and accounting expenses, printing costs, selling expenses, a 1% wholesale
brokerage fee and filing fees.
H. Allowance for Doubtful Accounts
Loans and the related accrued interest, fees and advances are analyzed on a
continuous basis for recoverability. Delinquencies are identified and followed
as part of the loan system. A provision is made for bad debt to adjust the
allowance for doubtful accounts to an amount considered by management to be
adequate with due consideration to collateral value to provide for unrecoverable
accounts receivable, including impaired loans, unspecified loans, accrued
interest and advances on loans, and other accounts receivable (unsecured). The
composition of the allowance for doubtful accounts as of September 30, 2001 and
December 31, 2000 was as follows:
September 30, December 31,
2001 2000
-------------- ----------------
Impaired loans $159,090 $159,090
Unspecified loans 26,793 20,000
Accounts receivable, unsecured 82,362 82,362
-------------- ----------------
$268,245 $261,452
============== ================
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
I. Net Income Per $1,000 Invested
Amounts reflected in the statements of income as net income per $1,000
invested by Limited Partners for the entire period are actual amounts allocated
to Limited Partners who held their investment throughout the period and have
elected to either leave their earnings to compound or have elected to receive
monthly distributions of their net income. Individual income is allocated each
month based on the Limited Partners' pro rata share of Partners' Capital.
Because the net income percentage varies from month to month, amounts per $1,000
will vary for those individuals who made or withdrew investments during the
period, or select other options.
NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES
The following are commissions and/or fees, which are paid to the General
Partners and/or related parties.
A. Mortgage Brokerage Commissions
Mortgage brokerage commissions for services in connection with the review,
selection, evaluation, negotiation and extension of the loans were limited to
12% of the principal amount of the loans through the period ending 6 months
after the termination date of the offering. Thereafter, commissions are limited
to an amount not to exceed 4% of the total Partnership assets per year. Such
commissions are paid by the borrowers, thus, not an expense of the Partnership.
Such commissions totaled $33,206, $45,164, $46,527 and $36,700 for the nine
months through September 30, 2001, and for the years ended December 31, 2000,
1999, and 1998, respectively.
B. Loan Servicing Fees
Monthly loan servicing fees are paid to Redwood Mortgage up to 1/8 of 1%
(1.5% annual) of the unpaid principal, or such lesser amount as is reasonable
and customary in the geographic area where the property securing the loan is
located. Loan servicing fees of $31,757, $48,557, $50,150, and $70,630, were
incurred for nine months through September 30, 2001, and for the years ended
December 31, 2000, 1999, and 1998, respectively.
C. Asset Management Fee
The General Partners are authorized to receive monthly fees for managing
the Partnership's loan portfolio and operations of up to 1/32 of 1% (3/8 of 1%
annually). Management fees of $6,879, $9,780, $10,626, and $6,640 were incurred
during nine months through September 30, 2001, and for the years 2000, 1999, and
1998, respectively.
D. Other Fees
The Partnership Agreement provides for other fees such as reconveyance,
mortgage assumption and mortgage extension fees. These fees are paid by the
borrowers to parties related to the General Partners.
E. Income and Losses
All income and losses are credited or charged to partners in relation to
their respective partnership interests. The partnership interest of the General
Partners (combined) is a total of 1%.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
F. Operating Expenses
The General Partners or their affiliate (Redwood Mortgage Corp.) are
reimbursed by the Partnership for all operating expenses actually incurred by
them on behalf of the Partnership, including without limitation, out-of-pocket
general and administration expenses of the Partnership, accounting and audit
fees, legal fees and expenses, postage and preparation of reports to Limited
Partners. As of September 30, 2001, and in the years 2000, 1999, and 1998,
clerical costs totaling $21,763, $19,647, $21,748, and $24,440, respectively,
were reimbursed to Redwood Mortgage Corp. and are included in expenses in the
Statements of Income.
NOTE 4 - OTHER PARTNERSHIP PROVISIONS
A. Term of the Partnership
The term of the Partnership is approximately 40 years, unless sooner
terminated as provided. The provisions provided for no capital withdrawal for
the first five years, subject to the penalty provision set forth in (D) below.
Thereafter, investors have the right to withdraw over a five-year period, or
longer.
B. Election to Receive Monthly, Quarterly or Annual Distributions
Upon subscriptions, investors elected either to receive monthly, quarterly
or annual distributions of earnings allocations, or to allow earnings to
compound for at least a period of 5 years.
C. Profits and Losses
Profits and losses are allocated monthly among the Limited Partners
according to their respective capital accounts after 1% is allocated to the
General Partners.
D. Withdrawal From Partnership
A Limited Partner had no right to withdraw, without penalty, from the
Partnership or to obtain the return of his capital account for at least five
years after such units are purchased which in all instances had occurred by
December 31, 1994. After that time, at the election of the Partner, capital
accounts can be returned over a five-year period in 20 equal quarterly
installments or such longer period as is requested.
Notwithstanding the above, in order to provide a certain degree of
liquidity to the Limited Partners, the General Partners will liquidate a Limited
Partner's entire capital account in four quarterly installments beginning on the
last day of the calendar quarter following the quarter in which the notice of
withdrawal is given. Such liquidations shall, however, be subject to a 10% early
withdrawal penalty applicable to any sums withdrawn prior to the time when such
sums otherwise could have been withdrawn pursuant to the liquidation procedure
set forth above. The 10% early withdrawal penalties were received by the
Partnership, and a portion of the sums collected as such penalties were applied
toward the next installment(s) of principal under the formation loan owed to the
Partnership by Redwood Mortgage Corp. Such portion was determined by the ratio
between the initial amount of formation loan and the total amount of other
organization and syndication costs incurred by the Partnership in this offering.
The balance of any such early withdrawal penalties shall be retained by the
Partnership for its own account and applied against syndication costs. Since the
syndication costs have been fully amortized as of December 31, 1993, and the
formation loan was paid in 1998, the early withdrawal penalties paid in the
future will be credited to income for the period received.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
The Partnership will not establish a reserve from which to fund withdrawals
and, accordingly, the Partnership's capacity to return a Limited Partner's
capital account is restricted to the availability of Partnership cash flow.
Furthermore, no more than 20% of the total Limited Partners' capital accounts
outstanding at the beginning of any year shall be liquidated during any calendar
year.
NOTE 5 - NOTE RECEIVABLE - REDWOOD MORTGAGE CORP.
Redwood Mortgage Corp., an affiliate of the General Partners, which
arranges and services the loans of the Partnership, has subsidized loan losses
on certain identified properties of the Partnership in the form of a note
receivable, which has been paid in full. The note had an interest rate of 8%. If
the identified properties ultimately recover from their write-downs, Redwood
Mortgage Corp. will be credited or reimbursed up to the amount of the note.
NOTE 6 - LEGAL PROCEEDINGS
In the normal course of business the Partnership may become involved in
various types of legal proceedings such as assignments of rents, bankruptcy
proceedings, appointments of receivers, unlawful detainers, judicial
foreclosures, etc., to enforce the provisions of the deeds of trust, collect the
debt owed under the promissory notes or to protect/recoup its investment from
the real property secured by the deeds. As of the date hereof, the Partnership
is a defendant along with numerous other defendants, including a developer,
contractor, and other lenders, in a lawsuit involving a homeowners'
association's attempt to recover "damages" for alleged faulty construction.
Management anticipates that the ultimate outcome of the legal matters will not
have a material adverse effect on the net assets of the Partnership, with due
consideration having been given in arriving at the allowance for doubtful
accounts.
NOTE 7 - INCOME TAXES
The following reflects a reconciliation from net assets (Partners' Capital)
reflected in the financial statements to the tax basis of those net assets:
September 30, December 31,
2001 2000
-------------- --------------
Net assets - Partners' Capital per
financial statements $7,140,649 $7,423,800
Allowance for doubtful accounts 268,245 261,452
-------------- --------------
Net assets tax basis $7,408,894 $7,685,252
============== ==============
In 2000, approximately 73% of taxable income was allocated to tax exempt
organizations i.e., retirement plans. Such plans do not have to file income tax
returns unless their "unrelated business income" exceeds $1,000. Applicable
amounts become taxable when distribution is made to participants.
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of financial instruments:
(a) Cash and cash equivalents - The carrying amount equals fair value. All
amounts, including interest-bearing accounts are subject to immediate
withdrawal.
(b) Loans (see note 2 (c))-Loan carrying values were $4,919,661 at
September 30, 2001. The fair value of these investments of $5,206,839 was
estimated based upon projected cash flows discounted at the estimated current
interest rates at which similar loans would be made. The applicable amount of
the allowance for doubtful accounts along with accrued interest and advances
related thereto should also be considered in evaluating the fair value versus
the carrying value.
NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS
The loans are secured by recorded deeds of trust. At September 30, 2001,
there were 26 loans outstanding with the following characteristics:
Number of loans outstanding 26
Total loans outstanding $4,919,661
Average loan outstanding $189,218
Average loan as percent of total 3.85%
Average loan as percent of Partners' Capital 2.65%
Largest loan outstanding $1,376,117
Largest loan as percent of Partners' Capital 19.27%
Largest loan as percent of total loan 27.97%
Number of counties where security is located (all California) 10
Largest percentage of loans in one county 37.92%
Average loan to appraised value of security at time
loan was consummated 70.63%
Number of loans in foreclosure 1
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
The following categories of loans were held at September 30, 2001 and
December 31, 2000:
September 30, December 31,
2001 2000
----------------- ---------------
First Trust Deeds $3,774,023 $4,011,117
Second Trust Deeds 1,081,774 1,385,496
Third Trust Deeds 63,864 173,963
---------------- ---------------
Total loans 4,919,661 5,570,576
Prior liens due other lenders 5,552,516 8,467,477
---------------- ---------------
Total debt $10,472,177 $14,038,053
================ ===============
Appraised property value at time of loan $14,826,199 $20,364,599
================ ===============
Total investments as a percent of
appraisals 70.63% 68.93%
================ ===============
Investments by Type of Property
Owner occupied homes $683,700 $755,014
Non-Owner occupied homes 182,086 672,518
Apartments 565,861 575,407
Commercial 3,488,014 3,567,637
---------------- ---------------
4,919,661 $5,570,576
================ ===============
REDWOOD MORTGAGE INVESTORS VI
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
Scheduled maturity dates are as follows:
Year Ending
December 31, Amount
------------------- ----------------
2001 $2,969,134
2002 340,257
2003 587,282
2004 533,700
2005 40,125
Thereafter 449,163
----------------
$4,919,661
================
The scheduled maturities for 2001 include $2,783,033 in loans, which are
past maturity at September 30, 2001. $2,468,705 of those loans were categorized
as delinquent over 90 days.
The cash balance at September 30, 2001 of $409,805 was in one bank with
interest bearing balances totaling $390,156. The balances exceeded FDIC
insurance limits (up to $100,000 per bank) by $309,805.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
As of September 2, 1989, the Partnership had sold 97,725.94 Units and its
contributed capital totaled $9,772,594 of the approved $12,000,000 issue, in
Units of $100 each. As of that date the offering was formally closed. On
September 30, 2001, the Partnership's net capital totaled $7,140,649.
The Partnership began funding loans in October 1987. The Partnership's
loans outstanding for the years ended December 31, 1998, 1999, 2000, and nine
months through September 30, 2001 were $7,969,735, $5,282,773, $5,570,576, and
$4,919,661 respectively. The decrease in loans outstanding from December 31,
1998 to September 30, 2001, was due primarily to the Partnership utilizing loan
payoffs to meet Limited Partner capital liquidations, line of credit pay-down,
uninvested cash in loans and an increase in Real Estate Owned or in process.
During the years 1998, 1999, 2000, and nine months through September 30, 2001,
loan principal collections exceeded Limited Partner liquidations.
Between the fall of 1999 and January, 2001, mortgage interest rates have
been rising due primarily to economic forces and by the Federal Reserve raising
its core interest rates. However, since January 2001, the Federal Reserve has
been dramatically cutting its core interest rates with eight successive cuts,
ranging from .25% to .50%. The latest cut being October 2, 2001, which reduced
the Federal Funds Rate to 2.5%. The effect of the cuts has greatly reduced
short-term interest rates and to a lesser extent reduced long-term interest
rates. New loans will be originated at then existing interest rates. In the
future, the General Partners anticipate that interest rates likely will change
from their current levels. The General Partners cannot at this time predict at
what levels interest rates will be in the future. Although the rates charged by
the Partnership are influenced by the level of interest rates in the market, the
General Partners anticipate that rates charged by the Partnership to its
borrowers will be somewhat lower than the first half of 2001. The General
Partners anticipate that new loans will be placed at rates approximately 1%
lower than similar loans during the first half of 2001. The lowering of interest
rates has encouraged those borrowers that hold higher interest rate loans than
those currently available to seek refinancing of their existing obligations to
take advantage of these lower rates. The Partnership may face prepayments in the
existing portfolio from borrowers taking advantage of these lower rates.
However, demand for loans from qualified borrowers continues to be strong and as
prepayments and new funds, which are being generated from Partnership unit
sales, occur, we expect to replace these loans with loans at somewhat lower
interest rates. At this time, the General Partners believe that the average loan
portfolio interest rate will decline approximately .25% to .50% over the
remainder of the year. Nevertheless, based upon the rates expected in connection
with the existing loans, and anticipated interest rates to be charged by the
Partnership and the General Partners' experience, the General Partners
anticipate that the annualized yield will range between 5.75% and 6.25% for the
remainder of 2001.
Previously the Partnership had a line of credit with a commercial bank,
which was secured by its loan portfolio. On December 31, 1999 the Partnership,
on its own accord, closed its line of credit with that bank and since that time
has not negotiated a similar credit line with any institution. Management felt
that the need for the credit line was not necessary as cash flows from loan
payments and payoffs have been in synchronization with loan opportunities and
Limited Partner liquidations.
The Partnership's operating results and delinquencies are within the normal
range of the General Partners expectations, based upon their experience in
managing similar Partnerships over the last twenty-four years. Foreclosures are
a normal aspect of partnership operations and the General Partners anticipate
that they will not have a material effect on liquidity. As of September 30,
2001, there was one property in foreclosure. As of September 30, 2001 the
Partnership's Real Estate Owned account balance was $1,145,050. This account had
a balance of $169,922, $133,300 and $767,583 as of December 31, 1998, 1999, and
2000, respectively. The increase was due to acquisition and paying off the first
lien holder of a commercial property through foreclosure recorded as REO in
process in December 1999. As of September 30, 2001 the Partnership disposed of
one of its other pieces of real estate owned property through sale.
Cash is continually being generated from interest earnings, late charges,
prepayment penalties, and amortization and pay-off of notes. Currently, this
amount exceeds Partnership expenses and earnings and Partner liquidation
requirements. As loan opportunities become available, excess cash and available
funds are invested in new loans.
The General Partners regularly review the loan portfolio, examining the
status of delinquencies, the underlying collateral securing these loans, REO
expenses, sales activities, and borrower's payment records and other data
relating to the loan portfolio. Data on the local real estate market, and on the
national and local economy are studied. Based upon this information and more,
loan loss reserves and allowance for doubtful accounts are increased or
decreased. Because of the number of variables involved, the magnitude of
possible swings and the General Partners inability to control many of these
factors, actual results may and do sometimes differ significantly from estimates
made by the General Partners. Management provided $180,054, $437,558, $193,427,
and $6,792 as provision for doubtful accounts for the years ended December 31,
1998, 1999, 2000, and nine months through September 30, 2001, respectively. The
decrease in the provision in 1998 reflects the decrease in the amount of REO,
unsecured receivables and the decreasing levels of delinquency within the
portfolio. The increase in allowance for 1999 and 2000 was to build up reserve
for any potential loss in the future. The Partnership acquired a piece of
property through foreclosure in 2000. In anticipation of this event, the
Partnership carried $668,132 in its balance sheet as Real Estate Owned in
Process as of December 31, 1999. This investment was reclassified into Real
Estate Owned in the year 2000. Management believes that reserves previously set
aside in anticipation of this acquisition are adequate. The modest increase to
$6,792 in doubtful accounts provision for the nine months through September 30,
2001 is due to Managements belief that the current overall reserve balances of
$268,245 are adequate and additional reserves set aside are not currently
warranted.
The Partnership makes loans primarily in Northern California. As of
September 30, 2001, approximately 77%, ($3,802,420) of the loans held by the
Partnership were in the four San Francisco Bay Area Counties. The remainder of
the loans held were secured primarily by Northern California real estate outside
the San Francisco Bay Area.
The United States Economy had slowed from the robust Gross Domestic Product
growth levels of 4.2% in 1999 and 5.0% in 2000 to a growth rate of 1.2%, and .7%
in the 1st and 2nd quarters to a decrease of .4% in the 3rd quarter of 2001.
Additionally, the United States was attacked by terrorists on September 11,
2001. Management is deeply saddened by the loss of life and property from these
attacks and is outraged at the perpetrators. Our thoughts and prayers go out to
all those who have been affected by this horrific event. President Bush has
declared war on the terrorists, and the United States has begun military actions
in Afghanistan in response. The terrorist attacks occurred on the East Coast of
the United States far removed from the operations of the Partnership. The
Partnership was not affected directly by these attacks. Indirectly, the
Partnership will feel the effects of the attacks. The terrorist attacks have
caused a further slowing of the United States economy, the extent of this slow
down and it's longevity is not yet known. Key to the Partnership is the ability
of borrowers to make the payments associated with their respective loans. In
response to the slow down in the United States economy, the Federal Reserve has
acted as noted primarily through reductions in the Federal Funds rates to
stimulate the United States economy. Their interest rate cuts have lowered the
Federal Funds rate form 6.5% to 2.5% or 66.67% over the course of 2001.
Like the rest of the nation, the San Francisco Bay Area has also felt the
slow down in economic growth. The technology companies of Silicon Valley, and
now the airline industry, the tourism industry and other industries are feeling
the effects of the overall US economy slowdown, which include lower earnings,
losses and layoffs. The Northern California real estate market and particularly
the San Francisco Bay Area real estate marketplace experienced increases in
values of over 10% in 1999 and 2000.
Throughout 2000, in the San Francisco Bay Area residential marketplace,
offers for residential real estate were often at or above asking price. The
residential market has slowed and is returning to a more normal market, wherein
buyers and sellers negotiate the terms of a sale without undue influence from
other buyers desiring the property. This has resulted in longer listing and
transaction times. According to Dataquick Information Systems, August 2001,
residential real estate sales were 14.5% lower than the previous year, with the
six San Francisco Bay Area counties experiencing residential sales transactions
down between 7.0% and 29.1%. In spite of the lower number
of transactions, the median sales price for resale homes increased by 4%
from the previous year with variances of between minus 4.2% to a positive 16.7%
for the six San Francisco Bay Area Counties. The General Partners believe,
mid-priced and lower-end homes have continued to increase in value, although at
a reduced rate from 2000, while the high end homes have begun to decrease in
value. The Partnership may experience higher delinquencies due to layoffs or
from borrowers who need to sell their homes in order to repay their debt not
anticipating currently existing transaction times. Significant foreclosures and
the take back of the real estate security have not significantly manifested
themselves as borrowers have been able to handle their own financial affairs.
For commercial properties vacancy rates continued to increase as space
absorption has slowed and sub lease space has been put on the market. C.B.
Richard Ellis, reports office vacancy in the San Francisco Bay Area at an
approximately 14% level as of the 3rd quarter 2001. County variances range from
10.1% to 17.2% of total availability. Lease rates are down as landlords attempt
to attract tenants. "Despite the current conditions, many feel the cycle will
not be as deep as those seen during the 80's and 90's, where new supply, not
decreased demand, drove corrections." The Partnership may experience
delinquencies in its commercial portion of the portfolio if landlord's existing
leases expire or space becomes available through business failures or the
completion of building renovations.
The Partnership had an average loan to value ratio computed as of the date
the loan was made of 70.63%, as of September 30, 2001. This did not account for
any changes in property values for loans, which were acquired by the Partnership
during 1997, 1998, 1999, and 2000 when Northern California Real Estate
substantially increased in value. This low loan to value will assist the
Partnership in weathering downturns in real estate values if they materialize in
the coming months.
On April 6, 2001, Pacific Gas and Electric (PG&E) California's biggest
public utility company filed for Chapter 11 bankruptcy. The full effect of
PG&E's bankruptcy is unknown. Stockholders, other utility companies and banks
that loaned PG&E millions of dollars were particularly hit hard. When a company
like PG&E goes bankrupt, it has a ripple effect. This has not only affected the
hi-tech and manufacturing industries, professional and commercial businesses,
transportation and utilities sectors, but every household and individual as a
whole. The crisis, which means higher costs to consumers, could adversely affect
the economy, employment and the Partnership's lending in its commercial sector.
The state government, PG&E and others are working diligently to solve the power
crisis in California. The likely result is that electric and natural gas will
cost consumers more than ever before. This may have some effect upon real estate
values as demand for real estate could be reduced as companies make long term
plans to locate in areas without power delivery problems and lower cost power
availability.
The Partnership's interest in land located in East Palo Alto, CA was
acquired through foreclosure. The investment was previously classified as
Investment in Partnership in the Financial Statements and has been reclassified
into Real Estate Owned. The Partnership's basis of $98,817, $80,142, $20,377 and
$ 0, for the nine months ended September 30, 2001 and the years ended December
31, 2000, 1999, and 1998, respectively, has been invested with that of two other
partnerships. In order to pursue development options, rezoning of the property's
existing residential zoning classification will be required. The Partnership is
continuing to explore remediation options available to mitigate the pesticide
contamination, which affects the property. This pesticide contamination appears
to be the result of agricultural operations by prior owners. The General
Partners do not believe at this time that remediation of the pesticide
contaminants will have a material adverse effect on the financial condition of
the Partnership. The efforts of the General Partners to subdivide the land have
met with success. The arsenic contaminated portion of the property has been
delivered to the party responsible for the arsenic contamination. The remaining
land will be made available for development or sale by the Partnership. The
General Partners believe this to be a good result for the Partnership.
At the time of subscription to the Partnership, Limited Partners made an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound earnings in their capital account. For the years
ended December 31, 1998, 1999 and 2000, and nine months through September 30,
2001, the Partnership made distributions of earnings to Limited Partners after
allocation of syndication costs of $235,837, $217,526, $192,356, and $121,392,
respectively. Distribution of Earnings to Limited Partners after allocation of
syndication costs for the years ended December 31, 1998, 1999, and 2000, and
nine months through September 30, 2001, to Limited Partners' capital accounts
and not withdrawn, was $271,543, $298,174, $280,794, and $201,543, respectively.
As of December 31, 1998, 1999, and 2000, Limited Partners electing to withdraw
earnings represented 43%, 42% and 41% respectively, of the Limited Partners
outstanding capital accounts.
The Partnership also allows the Limited Partners to withdraw their capital
account subject to certain limitations (see liquidation provisions of
Partnership Agreement). For the years ended December 31, 1998, 1999, and 2000,
and nine months through September 30, 2001, $122,069, $128,295, $200,417, and
$130,611, respectively, were liquidated subject to the 10% and/or 8% penalty for
early withdrawal. These withdrawals are within the normally anticipated range
that the General Partners would expect in their experience in this and other
partnerships. The General Partners expect that a small percentage of Limited
Partners will elect to liquidate their capital accounts over one year with a 10%
and/or 8% early withdrawal penalty. In originally conceiving the Partnership,
the General Partners wanted to provide Limited Partners needing their capital
returned a degree of liquidity. Generally, Limited Partners electing to withdraw
over one year need to liquidate investments to raise cash. The trend the
Partnership is experiencing in withdrawals by Limited Partners electing a one
year liquidation program represents a small percentage of Limited Partner
capital as of December 31, 1998, 1999, 2000, and September 30, 2001,
respectively, and is expected by the General Partners to commonly occur at these
levels.
Additionally, for the years ended December 31, 1998, 1999, 2000, and nine
months through September 30, 2001, $938,040, $847,067, $686,923, and $354,083,
respectively, were liquidated by Limited Partners who have elected a liquidation
program over a period of five years or longer. Once the initial five-year hold
period has passed, the General Partners expect to see an increase in
liquidations due to the ability of Limited Partners to withdraw without penalty.
This ability to withdraw after five years by Limited Partners has the effect of
providing Limited Partner liquidity. The General Partners expect a portion of
the Limited Partners to take advantage of this provision. This has the
anticipated effect of the Partnership growing, primarily through reinvestment of
earnings in years one through five. The General Partners expect to see
increasing numbers of Limited Partner withdrawals in years five through eleven,
at which time the bulk of those Limited Partners who have sought withdrawal will
have been liquidated. After year eleven, liquidation generally subsides and the
Partnership capital again tends to increase.
Actual liquidation of both capital and earnings from year five (1992)
through year twelve (2000) and nine months through September 30, 2001, is shown
hereunder, which confirms the General Partners theory on the liquidation habits
of the Limited Partners:
Years ended December 31,
1992 1993 1994 1995 1996
------------- ------------- ------------- ------------- ----------------------
Earnings $323,037 $377,712 $303,014 $303,098 $294,678
Capital *232,370 *528,737 *729,449 *892,953 *1,183,099
------------- ------------- ------------- ------------- ----------------------
Total $555,407 $906,449 $1,032,463 $1,196,051 $1,477,777
============= ============= ============= ============= ======================
Nine months
ended
1997 1998 1999 2000 September 30, 2001
------------- -------------- ------------- ------------- ----------------------
Earnings $257,670 $235,837 $217,526 $192,356 $121,392
Capital *1,297,410 *1,060,109 *975,362 *887,340 *484,694
------------- -------------- ------------- ------------- ----------------------
Total $1,555,080 $1,295,946 $1,192,888 $1,079,696 $606,086
============= ============== ============= ============= ======================
*These amounts represent gross of early withdrawal penalties.
After 25 years of active participation in the mortgage business, D. Russell
Burwell, our founder and a General Partner of the Partnership, retired effective
September 30, 2001. "Russ" has enjoyed a long and successful career. His
original business model, upon which our Partnership has its roots, has withstood
the test of time through varying economic cycles. Under Russ' stewardship
Redwood Mortgage Investor's VI originally raised $9,772,594 in Limited Partner
Capital contributions and at September 30, 2001 had $7,140,649 in remaining
Partners' Capital.
Over the last few years, Russ has been passing along his duties and
responsibilities to the remaining General Partners and certain senior
executives. The General Partners are Mr. Michael Burwell and Gymno Corporation,
a California Corporation. Mr. Michael Burwell has been a General Partner of
Redwood Mortgage Investors VI since its inception and has been employed by
Redwood Mortgage Corp, an affiliate of the Partnership, since 1979. The
Partnership through the remaining General Partners and the employees of its
affiliate Redwood Mortgage Corp., is well prepared for Russ' departure and looks
forward to emulating the steady consistent returns that the Limited Partners
have enjoyed during Russ' tenure.
In some cases in order to satisfy Broker Dealers and other reporting
requirements, the General Partners have valued the limited partners' interest in
the Partnership on a basis which utilizes a per unit system of calculation,
rather than based upon the investors' capital account. This information has been
reported in this manner in order to allow the Partnership to integrate with
certain software used by the Broker Dealers and other reporting entities. In
those cases, the Partnership will report to Broker Dealers, Trust Companies and
others a "reporting" number of units based upon a $1.00 per unit calculation.
The number of reporting units provided will be calculated based upon the Limited
Partner's capital account value divided by $1.00. Each investor's capital
account balance is set forth periodically on the partnership account statement
provided to investors. The reporting units are solely for Broker Dealers
requiring such information for their software programs and do not reflect actual
units owned by a limited partner or the limited partners' right or interest in
cash flow or any other economic benefit in the Partnership. Each investor's
capital account balance is set forth periodically on the Partnership account
statement provided to investors. The amount of Partnership earnings each
investor is entitled to receive is determined by the ratio that each investor's
capital account bears to the total amount of all investor capital accounts then
outstanding. The capital account balance of each investor should be included on
any NASD member client account statement in providing a per unit estimated value
of the client's investment in the Partnership in accordance with NASD Rule 2340.
While the General Partners have set an estimated value for the Partnership
units, such determination may not be representative of the ultimate price
realized by an Investor for such units upon sale. No public trading market
exists for the Partnership's units and none is likely to develop. Thus, there is
no certainty that the units can be sold at a price equal to the stated value of
the capital account. Furthermore, the ability of an investor to liquidate his or
her investment is limited subject to certain liquidation rights provided by the
Partnership, which may include early withdrawal penalties (See the section of
the Prospectus entitled "Risk Factors - Purchase of Units is a long term
investment").
COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP
The Partnership has no officers or directors. The Partnership is managed by
the General Partners. There are certain fees and other items paid to management
and related parties. A more complete description of management compensation is
found in the Prospectus, pages 11-12, under the section "Compensation of the
General Partners and the Affiliates," which is incorporated by reference. Such
compensation is summarized below.
The following compensation has been paid to the General Partners and their
affiliates for services rendered during the nine months ended September 30,
2001. All such compensation is in compliance with the guidelines and limitations
set forth in the Prospectus.
Entity Receiving Description of Compensation
Compensation and Services Rendered Amount
- -------------------- ------------------------------------------- ---------
I.
Redwood Mortgage Loan Servicing Fee for servicing loans $31,757
Corp.
General Partners
&/or Affiliates Asset Management Fee for managing assets $6,879
General Partners 1% interest in profits $3,262
II. FEES PAID BY BORROWERS ON LOANS PLACED BY COMPANIES RELATED TO THE
GENERAL PARTNERS WITH THE PARTNERSHIP (EXPENSES OF BORROWERS NOT OF THE
PARTNERSHIP):
Redwood Mortgage Mortgage Brokerage Commissions for services
Corp. in connection with the review, selection,
evaluation, negotiation, and extension of the
loans paid by the borrowers
and not by the Partnership $33,206
Redwood Mortgage Processing and Escrow Fees for services in
Corp. connection with notary, document preparation,
credit investigation, and escrow fees payable by
the borrowers and not by the Partnership $1,750
Gymno Corp. Inc. Reconveyance Fee $722
III. IN ADDITION, THE GENERAL PARTNERS AND/OR RELATED COMPANIES PAY CERTAIN
EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE
STATEMENT OF INCOME. . . . . . . . . . . . . . . . . . . . . . . $21,763
As of September 30, 2001, a summary of the Partnership's loan portfolio is
set forth below.
Loans as a Percentage of Total Loans
First Trust Deeds $3,774,023.36
Appraised Value of Properties 5,013,260.40
Total Investment as a % of Appraised Value 75.28%
First Trust Deeds 3,774,023.36
Second Trust Deed Loans 1,081,774.37
Third Trust Deed Loans 63,863.76
--------------------
4,919,661.49
First Trust Deeds due other Lenders 5,477,923.00
Second Trust Deeds due other Lenders 74,593.00
--------------------
Total Debt $10,472,177.49
Appraised Property Value $14,826,199.40
Total Investments as a % of Appraised Value 70.63%
Number of Loans Outstanding 26
Average loan $189,217.75
Average loan as a % of loans outstanding 3.85%
Largest loan outstanding 1,376,117.03
Largest loan as a % of loans outstanding 27.97%
Loans as a Percentage of Total Loans
First Trust Deeds 76.71%
Second Trust Deeds 21.99%
Third Trust Deeds 1.30%
--------------------
100.00%
Total
Loans by Type of Property: Amount Percent
Owner Occupied Homes $683,700.00 13.90%
Non-Owner Occupied Homes 182,085.65 3.70%
Apartments 565,861.55 11.50%
Commercial 3,488,014.29 70.90%
---------------- ------------
Total 4,919,661.49 100.00%
The following is a distribution of loans outstanding as of September 30,
2001 by Counties.
Santa Clara $1,865,585.51 37.92%
Alameda 997,786.50 20.28%
San Mateo 518,668.81 10.54%
Sacramento 509,182.55 10.35%
San Francisco 420,379.00 8.55%
Stanislaus 177,121.56 3.60%
Tuolumne 170,000.00 3.46%
Placer 138,456.63 2.81%
Shasta 78,851.91 1.60%
Sonoma 43,629.02 .89%
------------------- ------------
Total $4,919,661.49 100.00%
Statement of Condition of Loans:
Number of Loans in Foreclosure 1
PART 2
OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is a defendant in a legal
action. Please refer to note (6) of financial
statements.
Item 2. Changes in the Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Not Applicable
(b) Form 8-K
Form 8-K was filed on February 7, 2000, relating
to a change by the Partnership's accountants in
accounting firms. Another Form 8-K was filed on
February 13, 2001, relating to the subsequent change
by the Partnership's accountants to another
accounting firm. On April 11, 2001, the Partnership
filed another Form 8-K regarding D. Russell Burwell's
retirement as more fully discussed earlier under
"Management Discussion and Analysis" section. An
Amended Form 8-K was filed on August 3, 2001
regarding the Partnership's change in Accountants.
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934 the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized on the 13th day of
November 2001.
REDWOOD MORTGAGE INVESTORS VI
By: /S/ Michael R. Burwell
---------------------------------------------
Michael R. Burwell, General Partner
By: Gymno Corporation, General Partner
By: /S/ D. Russell Burwell
---------------------------------------------
D. Russell Burwell, President
By: /S/ Michael R. Burwell
---------------------------------------------
Michael R. Burwell, Secretary/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity indicated on the 13th day of November 2001.
Signature Title Date
/S/ Michael R. Burwell
- ---------------------------
Michael R. Burwell General Partner November 13, 2001
/S/ D. Russell Burwell
- ---------------------------
D. Russell Burwell President of Gymno Corporation, November 13, 2001
(Principal Executive Officer);
Director of Gymno Corporation
/S/ Michael R. Burwell
- ---------------------------
Michael R. Burwell Secretary/Treasurer of Gymno November 13, 2001
Corporation (Principal Financial
and Accounting Officer);
Director of Gymno Corporation