<PAGE>
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, 1999
Commission File No. 0-19940
TMP INLAND EMPIRE VI, LTD
A CALIFORNIA LIMITED PARTNERSHIP
(Name of small business issuer as specified in its charter)
CALIFORNIA 33-0386437
(State or other jurisdiction of (I.R.S. Employer Identification No.)
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
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements are filed as a part of this form 10-QSB:
Balance Sheets as of September 30, 1999 and December 31, 1998, Statements of
Income for the three and nine months ended September 30, 1999 and 1998,
Statements of Cash Flows for the nine months ended September 30, 1999 and 1998.
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, 1999 and 1998 (b)
the financial position at September 30, 1999 and (c) the cash flows for the nine
months ended September 30, 1999 and 1998. Interim results are not necessarily
indicative of results for a full year.
The balance sheet presented as of December 31, 1998 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.
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VI, LTD.
A California Limited Partnership
Balance Sheets
September 30, December 31,
1999 1998
(unaudited)
------------ ------------
Assets
<S> <C> <C>
Cash $ 387,936 $ 948
Due from Affiliates (Note 6) 0 0
Prepaid Expenses 0 23,187
Investment in Unimproved Land, net 2,310,421 6,168,111
-------------- --------------
Total Assets $ 2,698,357 $ 6,192,246
============== ==============
Liabilities and Partners Capital
Due to Affiliates (Note 5) $ 2,272 $ 143,520
Franchise Tax Payable 800 800
Accrued Expenses and Other Liabilities 732 26,740
Property Taxes Payable 30,088 21,046
Notes Payable (Note 7) 0 362,719
-------------- --------------
Total Liabilities 33,892 554,825
-------------- --------------
General Partners (75,751) (46,309)
Limited Partners: 11,500 Equity Units
Authorized and Outstanding 2,740,216 5,683,730
-------------- --------------
Total Partners Capital 2,664,465 5,637,421
-------------- --------------
Total Liabilities and Partners Capital $ 2,698,357 $ 6,192,246
============== ==============
</TABLE>
See Accompanying Notes to Financial Statements
-3-
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
Statements of Income
(unaudited)
Three Months Ended
September 30 September 30
1999 1998
----------- -------------
<S> <C> <C>
Other Income $ 34,533 $ 0
Expenses
Accounting and Financial Reporting 5,858 10,904
Outside Professional Services 7,258 10,535
General and Administrative 2,499 16,533
Interest 974 695
------------- -------------
Total Expense 16,589 38,667
------------- -------------
Net Loss $ (17,944) $ (38,667)
============ ============
Allocation of Net Loss
General Partners, in the Aggregate $ (179) $ (387)
============ ============
Limited Partners, in the Aggregate $ (17,765) $ (38,280)
============ ============
Limited Partners, per Equity Unit $ (1.54) $ (3.40)
============ ============
</TABLE>
See Accompanying Notes to Financial Statements
-4-
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
Statements of Income
(unaudited)
Nine months Ended
September 30 September 30
1999 1998
-------- -------------
<S> <C> <C>
Property Sale $ 4,800,000 $ 0
Cost of Property Sale 4,320,952 0
------------- -------------
Net Gain on Property Sale 479,048 0
------------- -------------
Income
Interest 1,767 0
------------- -------------
Total Income 1,767 0
------------- -------------
Gross Profit 480,815 0
Expenses
Accounting and Financial Reporting 40,541 22,605
Outside Professional Services 19,191 42,807
Manager Profit Participation 456,666 0
General and Administrative 12,667 24,719
Interest Expense 20,157 1,052
------------- -------------
Total Expenses 549,222 91,183
------------- -------------
Loss Before Income Taxes (68,407) (91,183)
------------- -------------
State Franchise Tax 800 800
------------- -------------
Net Loss $ (69,207) $ (91,983)
============ ============
Allocation of Net Loss
General Partners, in the Aggregate $ (692) $ (919)
============ ============
Limited Partners, in the Aggregate $ (68,515) $ (91,064)
============ ============
Limited Partners, per Equity Unit $ (5.96) $ (7.92)
============ ============
</TABLE>
See Accompanying Notes to Financial Statements
-5-
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
Statements of Cash Flows
(unaudited)
Nine months Ended
September 30, September 30,
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Loss $ (69,207) $ (91,983)
Adjustments to Reconcile Net Loss
to Net Cash Used In Operating Activities:
Gain on Sale of Property (479,048) 0
Changes in assets and liabilities:
(Decrease) Increase in Due to Affiliates (141,248) 38,051
Decrease in Prepaid Expenses 23,187 7,630
(Decrease) Increase in Accrued Expenses
and Other (26,008) 5,010
Increase (Decrease) in Property Taxes
Payable 9,042 (8,666)
------------ ------------
Net Cash Used in Operating Activities (683,281) (49,958)
------------ ------------
Cash Flows from Investing Activities
Net Proceeds from Property Sale 4,800,000 0
Increase in investment in unimproved land (154,533) (91,190)
Payments of selling expenses (308,729) 0
------------ ------------
Net Cash Provided By (Used in) Investing
Activities 4,336,738 (91,190)
------------ ------------
Cash Flows from Financing Activities
Distributions Paid to Partners (2,903,750) 0
Borrowings (Repayment) of Notes Payable (362,719) 19,514
--------- ------------
Net Cash Provided by (Used In) Financing
Activities (3,266,469) 19,514
----------- -------------
Increase (Decrease) in Cash 386,988 (121,634)
Cash, Beginning 948 126,159
------------ ------------
Cash, Ending $ 387,936 $ 4,525
=========== ===========
Supplemental Disclosures of Cash Flow Information
Cash paid for income taxes $ 800 $ 800
=========== ===========
Cash paid for interest $ 43,288 $ 38,121
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
-6-
<PAGE>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
Notes to Financial Statements
For the nine months ended September 30, 1999
(unaudited)
Note 1 - General and Summary of Significant Accounting Policies
General - TMP Inland Empire VI, Ltd. (the Partnership) was organized in 1990 in
accordance with the provisions of the California Uniform Limited Partnership Act
for the purpose of acquiring, developing and operating real property in the
Inland Empire area of Southern California.
Accounting Method - The Partnership's policy is to prepare its financial
statements on the accrual basis of accounting.
Investment in Unimproved Land - Investment in unimproved land is stated at the
lower of cost or fair value. All costs associated with the acquisition of a
property are capitalized. Additionally, the Partnership capitalizes all direct
carrying costs (such as interest expense and property taxes). These costs are
added to the cost of the properties and are deducted from the sales prices to
determine gains when properties are sold.
Syndication Costs - Syndication costs (such as commissions, printing, and legal
fees) totaling $1,231,617 represent costs incurred to raise capital and,
accordingly, are recorded as a reduction in partners' capital (see Note 3).
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Concentration - All unimproved land parcels held for investment 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 condition that
geographical area. 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.
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.
-7-
<PAGE>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
Notes to Financial Statements
For the nine months ended September 30, 1999
(unaudited)
Note 2 - Organization of the Partnership
The Partnership was originally formed on March 20, 1990, with TMP Properties (A
California General Partnership) and TMP Investments, Inc. (A California
Corporation) as the 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 originally acquired eleven separate parcels of unimproved real
property in Riverside and San Bernardino Counties, California. The properties
were to be held for investment, appreciation, and ultimate sale and/or
improvement of all or portion thereof, either alone or in conjunction with a
joint venture partner. During 1995, the Partnership sold 11 acres in Palm Desert
and 42 acres in Adelanto. The land was sold at a combined loss of $386,393, but
enabled the Partnership to pay off certain notes payable and replenish cash
reserves. The Partnership carried a $248,000 note from the Adelanto sale, but as
of December 31, 1997 the Partnership had foreclosed on the note and taken back
the land. In June 1999, the Partnership sold approximately 70 acres in Palm
Desert. The sale price of the property was $4,800,000 and the Partnership
recorded a gain of approximately $479,000 (excluding the "manager profit
participation" as defined in the Management Agreement of approximately $457,000
that was paid to PacWest, payoff of the note payable and certain property taxes)
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 offered for sale 11,500 units at $1,000 each to qualified
investors. As of December 31, 1990, all 11,500 units had been sold for total
limited partner contributions of $11,500,000. There have been no contributions
made by the general partners. As described in Note 1, syndication costs have
been recorded as a reduction in partners' capital.
Note 4 - Allocation of Profits, Losses and Cash Distributions
Profits, losses and cash distributions are allocated 99% to the limited partners
and 1% to the general partners until the limited partners have received an
amount equal to their capital
-8-
<PAGE>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
Notes to Financial Statements
For the nine months ended September 30, 1999
(unaudited)
Note 4 - Allocation of Profits, Losses and Cash Distributions (con't)
contributions plus a cumulative, non-compounded return of 6% per annum on there
adjusted capital contributions. At that point, the limited partners are
allocated 83.5% and the general partners 16.5% of profits, losses and cash
distributions. There were no distributions in 1998.
A distribution of $2,875,000 to the limited partners and $28,750 to the general
partners occurred in July 1999.
Note 5 - Agreements with PacWest Group
In March 1998, the general partners of the Partnership entered into an agreement
(the Financing Agreement) with PacWest Inland Empire, LLC (PacWest), a Delaware
Limited Liability Company, whereby PacWest paid the general partners of the
Partnership 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.
Pursuant to a management, administrative, and consulting agreement (the
Management 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.
In addition, PacWest has agreed to loan and/or secure a loan for 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
over a 24-month period 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, property taxes in
arrears, appropriate entitlement costs and partnership operations.
PacWest, can, at their option, made 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.
-9-
<PAGE>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
Notes to Financial Statements
For the nine months ended September 30, 1999
(unaudited)
Note 5 - Agreements with PacWest Group (con't)
In April 1998, PacWest entered into a management, administrative and consulting
agreement with the general partners of the Partnership to provide the
Partnership with overall management, administrative and consulting services.
PacWest currently contracts with third party service providers to perform
certain of the financial, accounting, and investor relations' services for the
Partnership. 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, 1999, the
Partnership has $2,272 due to PacWest related to the aforementioned agreements.
Note 6 - Related Party Transactions
Syndication costs (see Note 1) netted against partners' capital contributions
include $1,150,000 in selling commissions paid in prior years to TMP Capital
Corp. for the sale of partnership units of which a portion was then paid to
unrelated registered representatives. William O. Passo and Anthony W. Thompson
were the shareholders of TMP Capital Corp. until October 1, 1995, when they sold
their shares to TMP Group, Inc.
Investment in unimproved land includes acquisition fees of approximately
$650,000 paid in prior years to TMP Properties and TMP Investments, Inc., the
general partners, for services rendered in connection with the acquisition of
the properties.
During the nine-month period ended September 30, 1999, approximately $7,000 of
property service fees were paid by the Partnership on behalf of an affiliate,
TMP Inland Empire V, Ltd. This amount was reimbursed to the Partnership in
August 1999.
Notes 7 - Notes Payable
The Partnership entered into a loan agreement with an outside party who
performed engineering services for various land parcels. The total loan amount
was originally $108,408 and due on February 28, 1998. The note was renegotiated
in 1997 to a face amount of $112,719. The note was secured by a deed of trust on
a parcel of land owned by the Partnership in Adelanto, California. Interest
accrued at 10% per annum, payable upon the due date of the note. Interest
payable as of December 31, 1998 was approximately $21,000. The note was
guaranteed by the three general partners of TMP Properties and by TMP
Properties. The note was repaid in full in February 1999.
-10-
<PAGE>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
Notes to Financial Statements
For the nine months ended September 30, 1999
(unaudited)
Notes 7 - Notes Payable (con't)
The Partnership entered into a loan agreement with an outside party by offering
parcels owned by the Partnership as collateral. The total loan amount of
$250,000 accrued interest at 13.5% per annum, and the interest is payable
monthly. The note was secured by a deed of trust on a parcel of land owned by
the Partnership in Palm Desert, CA. The note was repaid in full in June 1999.
Note 8 - Sale of Property
In June 1999, the Partnership sold approximately 70 acres of property in Palm
Desert, California. The following is a summary of the property sale
<TABLE>
<CAPTION>
<S> <C>
Sales Price $ 4,800,000
Cost of Property 3,534,200
Capitalized Carrying Costs 478,023
Sales Costs 308,729
-------
Total Costs (4,320,952)
Gain on Sale of Property $ 479,048
============
</TABLE>
In addition, the Partnership paid a "manager profit participation" as defined in
the Management Agreement to PacWest related to this sale of property of
$456,666.
Note 9 - Year 2000 Issue (unaudited)
Like other organizations and individuals around the world, the Partnership could
be adversely affected if the computer systems it uses and those used by the
Partnership's major customers and vendors do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Issue." Management is assessing its computer
systems and the systems compliance issues of its major service providers. Based
on information available to management, the Partnership's major customers and
vendors are taking steps that they believe are reasonably designed to address
the Year 2000 Issue with respect to computer systems that they use. At this
time, however, there can be no assurance that these steps will be sufficient,
and the failure of a timely completion of all necessary procedures could have a
material adverse effect on the Partnership's operations. Management will
continue to monitor the status of, and its exposure to, this issue.
-11-
<PAGE>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
For the nine months ended September 30, 1999
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. Such statements are subject to
certain risks and uncertainties, including without limitation those discussed in
"Risk Factors" sections of this report. 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
financial statements and notes thereto and with the Partnership's audited
financial statements and notes thereto for the fiscal year ended December 31,
1998.
During the period from inception (March 20, 1990) through December 31, 1990, the
Partnership was engaged primarily in the sale of Units of Limited Partnership
Interest and the investment of the subscription proceeds to purchase parcels of
unimproved real property. During 1997 the only cash revenues received were a
nominal amount of income from the rental of houses located on one parcel at the
time of its purchase, and interest income earned on cash reserves. During 1998
and the three month period ended March 31, 1999 the only revenue earned was
interest income on cash reserves.
In compliance with Statement of Financial Accounting Standards No. 121
Accounting for the Impairment of Long-Lived Assets to Be Disposed Of (SFAS 121),
the 1996 financial statements reported an expense for the decline in fair market
value of unimproved land of $2,013,087.
-12-
<PAGE>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
For the nine months ended September 30, 1999
It has been determined through additional evaluation by management that certain
real estate assets required an additional valuation reserve of $2,000,000 as of
December 31, 1996. Therefore the 1996 financial statements were restated on
April 8, 1999 to reflect the value of the investment in unimproved land at the
lower of cost or market. The 1997 financial statements originally issued with
the auditor's report dated January 26, 1998 reported $1,948,003 of income due to
appreciation in fair value of land. Current clarification reveals that SFAS 121
does not provide for recording appreciation in fair value of an asset even in
view of previously recording a decline in value. Therefore, the 1997 financial
statements were re-stated to reverse the appreciation in fair value of land on
August 3, 1998 by the predecessor accounting firm.
During 1995, the Partnership sold 11 acres in Palm Desert and 42 acres in
Adelanto. The land was sold at a combined loss of $386,393, but enabled the
Partnership to pay off certain notes payable and replenish cash reserves. The
Partnership carried a $248,000 note from the Adelanto sale, but as of December
31, 1997 the Partnership had foreclosed on the note and taken back the land. In
June 1999 the Partnership sold approximately 70 acres in Palm Desert. The sale
price of the property was $4,800,000 and the Partnership recorded a gain of
approximately $479,000 (excluding the "manager profit participation" as defined
in the Management Agreement of approximately $457,000 that was paid to PacWest,
payoff of the note payable and certain property taxes)
The Partnership's management believes that inflation has not had a material
effect on the Partnership's results of operations or financial condition.
Fiscal Quarters Ended September 30, 1999 and 1998
Partnership revenues during the six periods ended September 30, 1998 consisted
primarily of interest income.
During the six-month period ended September 30, 1999 the Partnership sold
approximately 70 acres of property in Palm Desert, CA. The following is a
summary of the property sale:
<TABLE>
<CAPTION>
<S> <C>
Sales Price $ 4,800,000
Cost of Property 3,534,200
Capitalized Carrying Costs 478,023
Sales Costs 308,729
-------
Total Costs (4,320,952)
Gain on Sale of Property $ 479,048
============
</TABLE>
-13-
<PAGE>
TMP INLAND EMPIRE VI, LTD.
(A California Limited Partnership)
For the nine months ended September 30, 1999
In addition, the Partnership paid a "manager profit participation" as defined in
the Management Agreement to PacWest related to this sale of property of
$456,666.
In addition to the above, investing activities for the nine months ended
September 30, 1999 and 1998 used approximately $155,000 and $91,000 of cash,
respectively, mainly to pay development and carrying costs of the land held for
investment. Financing activities for the nine months ended September 30, 1999
used approximately $363,000 to payoff certain notes payable and approximately
$2,904,000 to pay distributions to the limited and general partners. Financing
activities for the nine months ended September 30, 1998 provided approximately
$20,000 from the proceeds from certain notes payable.
Total expenses for the three months ended September 30, 1999 compared with the
three months ended September 30, 1998, decreased by approximately $22,000, or
57%, due primarily to the decrease in Accounting and Financial Reporting,
Outside Professional Services and General & Administrative. These decreases were
partially offset by an increase in Interest Expense of approximately $280
pursuant to the Financing Agreement with PacWest entered into April 1, 1998.
Continuity and experience with the internal accounting staff and external
accountant reviews is the explanation for the decrease in Accounting and
Financial Reporting. Outside Professional Services decrease is due to certain
insurance and investor relation expenses incurred during 1998 yet not in 1999.
General and Administrative costs decreased during the period by $14,034 due to
certain services provided during the period ended September 30, 1998 by PacWest
pursuant to the Management Agreement that were not necessary during the same
period in 1999. In addition, reimbursement of funds that were overpaid by the
Partnership in Q2 1999, were received during the three-month period ended
September 30, 1999 relating to a reduction in the Manager Profit Participation
to PacWest of approximately $38,000 which is included in Other Income. Certain
additional selling expenses relating to the sale of 70 acres in Palm Desert in
June 1999 were paid and expensed during the three-month period ended September
30, 1999. These expenses have been included as an offset to the $38,000 of Other
Income.
Total expenses for the nine months ended September 30, 1999 compared with the
nine months ended September 30, 1998, increased by approximately $458,000, or
83%, due primarily to the increase in Accounting and Financial Reporting,
Interest Expense and Manager Profit Participation. These increases were
partially offset by decreases in Outside Professional Services and General &
Administrative. Accounting and Financial Reporting increases are associated with
the restatement of financial statements discussed above and with the enhancing
of accounting and financial functions provided pursuant to the Management
Agreement. Manager Profit Participation to PacWest of approximately $457,000 is
due to the payment of the "manager profit participation" as defined in the
Management Agreement. Interest Expense increased by approximately $19,000 or 95%
pursuant to the Financing Agreement with PacWest entered into April 1, 1998 and
therefore only six months of interest expense was incurred during the nine month
-14-
<PAGE>
period ended September 30, 1998. Outside Professional Services decrease is due
to certain insurance and investor relation expenses incurred during 1998 yet not
in 1999. General and Administrative costs decreased during the period by $12,052
due to certain services provided during the period ended September 30, 1998 by
PacWest pursuant to the Management Agreement that were not necessary during the
same period in 1999.
The Partnership obtained funds from the sale of the Palm Desert property in June
1999. Portions of these funds were used to pay PacWest the balance of monies
owed them in the amount of approximately $416,000 during the three-month period
ended June 1999.
The Partnership had six properties as of September 30, 1999 that are being held
for appreciation and resale. Upon the sale of each property, the Partnership
intends to distribute the sales proceeds, less any reserves needed for
operations, to the partners.
Liquidity and Capital Resources
The Partnership has raised a total of $10,236,125, net of syndication costs,
from the sale of limited partnership units. During the period from inception
through December 31, 1997, the Partnership acquired a total of eleven properties
for all cash at a total expenditure of $10,724,808. The Partnership capitalized
the acquisition costs of the property and direct carrying costs, such as
interest and property taxes. The Partnership does not intend to acquire any
additional properties. The remaining six properties are being held for resale.
Upon sale, if any, the Partnership intends to distribute the sales proceeds,
less any reserves needed for operations, to the partners.
The Partnership owns land in the Riverside and San Bernardino counties. That
region of Southern California experienced a significant economic recession that
has substantially eroded the value of real estate in that area. The region is
beginning to show some signs of recovery; however, the recovery has been very
slow.
There are no current plans to further develop any of the parcels, and it is
expected that no such plans would be undertaken unless adequate funding could be
obtained, either from the sale or refinancing of parcels or from a joint venture
partner.
In March, 1998, the general partners of the Partnership entered into an
agreement (the Financing Agreement) with PacWest Inland Empire, LLC (PacWest), a
Delaware Limited Liability Company, whereby PacWest paid a total of $300,000 to
the general partners of the Partnership and ten other related partnerships (the
TMP Land Partnerships). PacWest agreed to pay up to an additional $300,000 for
any deficit capital accounts for these 11 partnerships in exchange for the
rights to distributions from the general partners; referred to as a
"distribution fee" as defined by the Financing Agreement.
In addition, PacWest has agreed to loan and/or secure a loan for the TMP Land
Partnerships in the amount of $2,500,000. Loan proceeds will be allocated among
the 11 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%
-15-
<PAGE>
simple interest over a 24-month period beginning April 1, 1998. The borrowings
are secured by the Partnership's properties, and the 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, reduction of existing debt, property
taxes in arrears, appropriate entitlement costs and Partnership operations.
PacWest, can, at their option, 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.
In April 1998, PacWest entered into a management, administrative and consulting
agreement (the Management Agreement) with the general partners of the
Partnership to provide the Partnership with overall management, administrative
and consulting services. PacWest currently contracts with third party service
providers to perform certain of the financial, accounting, and investor
relations services for the Partnership. PacWest is paid an annual fee of $9,648
for its administrative services.
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.
RISK FACTORS
Year 2000 Compliance. Many currently installed computer systems and software
products are coded to accept only two digit entries in the date code field.
Beginning in the year 2000, these date code fields will need to accept four
digit entries to distinguish 21st century dates. As a result, computer systems
and/or software used by organizations may need to be upgraded to comply with the
"Y2K" requirements. There is significant uncertainty in the software and
information services industries concerning the potential effects associated with
such compliance. While the Partnership believes that its systems are compatible
with Y2K applications, there can be no assurance that all partnership systems
will function properly in all operating environments and on all platforms. The
failure to comply with Y2K requirements by systems not designed by the
Partnership may also have a material adverse effect on the Partnership's
business, financial condition and results of operations. The Partnership has
developed and implemented a plan to identify and address potential difficulties
associated with Y2K issues and does not expect to expend any significant funds
as a result of these issues.
The Partnership utilizes a number of computer software programs and operating
systems across its organization including applications used in financial
business systems and various administrative functions. The Partnership has
established an action plan for addressing Year 2000 issues. As a general matter,
the Partnership is vulnerable to failures by third parties to address their own
Year 2000 issues. The Partnership relies heavily upon third parties for
financial services. There can be no assurance that the Partnership's suppliers
and other third parties will adequately address their Year 2000 issues, and any
such issues could have a material adverse affect upon the Partnership's
financial condition and results of operation.
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<PAGE>
The Partnership has not spent a material amount of financial resources to
remediate Year 2000 problems and does not anticipate that it will spend a
material amount of financial resources to remediate Year 2000 problems in the
future. The costs of such remediation will be part of the Partnership's general
and administrative expenses.
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<PAGE>
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 3, 1999
TMP INLAND EMPIRE V, 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
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