UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
Of
The Securities Exchange Act of 1934
for the Quarterly Period ended September 30, 1998
Commission File No. 0-19963
TMP INLAND EMPIRE II, LTD.
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0311624
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
801 North Parkcenter Drive, Suite 235
Santa Ana, California 92705
(Address of principal executive office) (Zip Code)
(714) 836-5503
(Registrant's telephone number, including area code)
------------------------------
Indicate by check mark whether Registrant has [1] 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 such shorter period that the registrant was required
to file such reports) and [2] has been subject to such filing requirement for
the past 90 days.
Yes [ X ] No [ ]
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TMP INLAND EMPIRE II, LTD.
INDEX
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheets as of September 30, 1998 (unaudited)
and December 31, 1997 3
Statements of Operations for the Three Months
and Nine Months ended September 30, 1998 and 1997
(unaudited) 4,5
Statements of Cash Flows for the Nine Months
ended September 30, 1998 and 1997(unaudited) 6
Notes to Financial Statements (unaudited) 7,8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
OTHER INFORMATION
PART II
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
TMP INLAND EMPIRE II, LTD.
A California Limited Partnership
Balance Sheets
<CAPTION>
September 30
1998 December 31,
(unaudited) 1997
----------- ---------
Assets
<S> <C> <C>
Cash $ 3,016 $ 2,004
Prepaid Assets 3,637 -----
Investment In Unimproved Land (Note 1) 1,024,223 1,006,111
--------- ---------
Total Assets $ 1,030,876 $ 1,008,115
============= ================
Liabilities and Partners' Capital
Accounts Payable $ 3,198 $ ---
Due to Affiliates 4,531 1,562
Due to Manager (Note 1) 46,467 ---
Commission Payable (Note 3) 90,000 90,000
Property Taxes Payable 1,534 ---
Franchise Tax Payable 800 800
--------- ---------
Total Liabilities 146,530 92,362
--------- ---------
Partners' Capital (Deficit)
General Partners (55,739) (55,425)
Limited Partners, 7250 units (at $1,000/unit) 940,085 971,178
authorized, issued and outstanding --------- ---------
Total Partners' Capital 884,346 915,753
--------- ---------
Total Liabilities and Partners' Capital $ 1,030,876 $ 1,008,115
============= ================
See Accompanying Notes to Financial Statements
</TABLE>
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<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
TMP INLAND EMPIRE II, LTD.
A California Limited Partnership
Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended
September 30, September 30,
1998 1997
<S> <C> <C>
Interest Income $ --- $ 37
General & Administrative Expenses 15,795 1,811
------ -----
Net Loss $ (15,795) $ (1,774)
========= ============
Allocation of Net Loss (Note 2)
General Partners: $ (158) $ (18)
========= ============
Limited Partners: $ (15,637) $ (1,756)
========= =============
Limited Partners, per unit: $ (2.16) $ (.24)
======= =============
</TABLE>
See Accompanying Notes to Financial Statement
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
TMP INLAND EMPIRE II, LTD.
A California Limited Partnership
Statements of Operations
(Unaudited)
<CAPTION>
Nine Months Ended
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Interest Income $ 3 $ 218
General & Administrative Expenses 31,410 13,686
---- ----- ---------------
Net Loss $ (31,407) $ (13,468)
======== ========
Allocation of Net Loss (Note 2)
General Partners: $ (314) $ (135)
Limited Partners: $ (31,093) $ (13,333)
============ =============
Limited Partners, per unit $ (4.29) $ (1.84)
</TABLE>
See Accompanying Notes to Financial Statements
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
TMP INLAND EMPIRE II, LTD.
A California Limited Partnership
Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Net Loss $ (31,407) $ (13,468)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used In) Operating Activities:
Due to Changes In:
Prepaid Assets (3,637) ---
Due to Affiliates 2,969 ---
Due to Manager 46,467 ---
Property Taxes Payable 1,534 ---
Accounts Payable 3,198 (773)
----- -----
Net Cash Provided by (Used in) Operating
Activities 19,124 (14,241)
------ -------
Investment In Unimproved Land (18,112) (4,193)
------- ------
Net Cash Used In Investing Activities (18,112) (4,193)
------- ------
Net Increase (Decrease) In Cash 1,012 (18,434)
Cash at the Beginning of the Period 2,004 23,477
----- ------
Cash at the End of the Period $ 3,016 $ 5,043
=========== ========
</TABLE>
See Accompanying Notes to Financial Statements
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TMP INLAND EMPIRE II, LTD.
A California Limited Partnership
Notes to the Financial Statements
(Unaudited)
The accompanying unaudited interim financial statements include all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion of
management, necessary to present fairly the financial position of the
Partnership as of September 30, 1998 and the results of its operations, and cash
flows for the three and nine months then ended in accordance with generally
accepted accounting principles for interim financial information.
NOTE 1 - The Partnership and its Significant Accounting Policies
TMP Inland Empire II, Ltd. (the Partnership) was organized in 1988 in accordance
with the provisions of the California Uniform Limited Partnership Act for the
purpose of acquiring, developing and operating real property. The general part-
ners in the Partnership are William O. Passo, Anthony W. Thompson, Scott E.
McDaniel of TMP Properties, a California General Partnership and TMP Investments
Inc. (the General Partners).
On March 12, 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 a total of $300,000 and
agreed to pay up to a total of 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.
On April 1, 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 Preferred Partnership
Services, Inc. and other entities to perform certain of the financial,
accounting, and investor relations services for the Partnership.
In addition, PacWest has agreed to provide certain additional liquidity to this
partnership as further discussed in the MD&A section of this report. As of
September 30, 1998, the Partnership has a payable of $46,467 to PacWest related
to these agreements.
The following is a summary of the Partnership significant accounting policies:
Basis of Presentation - The Partnership prepares its financial statements on the
accrual basis of accounting.
Investment in Unimproved Land - The Partnership's land is stated at the lower of
actual cost or net realizable value. All costs associated with the acquisition
of a property are capitalized. In addition, the Partnership capitalizes interest
and property taxes as carrying costs.
Income Taxes - The entity is treated as a partnership for income tax purposes
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and any income or loss is passed through and taxable at the partner level.
Accordingly, no provision for federal income taxes is provided.
NOTE 2 - Allocation of Profits, Losses and Cash Distributions
Profits, losses, and cash distributions are allocated 99 percent to the limited
partners and one percent to the general partners until the limited partners have
received an amount equal to their capital contributions plus a cumulative,
non-compounded return of six percent per annum based on their adjusted capital
account balances. At that point, remaining profits, losses and cash
distributions are allocated 85 percent to the limited partners and 15 percent to
the General Partners.
During each of the nine month periods ended September 30, 1998 and 1997,
profits, losses and cash distributions were allocated 99 percent to the limited
partners and one percent to the General Partners.
NOTE 3 - Commission Payable
As of September 30, 1998 and 1997, the Partnership owes $90,000 to a related
party for services rendered relating to sales of properties prior to 1990.
NOTE 4 - Restatement and Reissuance of 1997 Financial Statements
In compliance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" (SFAS 121), the 1996 financial statements reported an expense
for the decline in fair value of unimproved land of $2,659,594. The 1997
financial statements originally issued with the auditor's report dated January
28, 1998 reported $1,692,884 of income due to appreciation in the fair value of
this same land. Current clarification reveals that SFAS 121 does not provide for
recording appreciation in the fair value of an asset even in view of a
previously recorded decline in value. Therefore, the 1997 financial statements
were restated on August 3, 1998 to reflect the reversal of this appreciation in
the fair value of land.
In addition, certain carrying costs of land that had been previously capitalized
have been reclassified as current expenses in the amount of $1,811 and $13,686
for the three and nine months ended September 30, 1997.
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 discussion and analysis contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of
the Securities Act of 1933, 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
works are intended to identify forward-looking statements, but are not the
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exclusive means of identifying forward-looking statements in this report.
Additionally, statements concerning future matters such as the features,
benefits and advantages of the Partnerships properties regarding matters that
are not historical are forward-looking statements. Such statements are subject
to certain risks and uncertainties and 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.
The Partnership has one property at September 30, 1998, which is being held for
appreciation and resale. Upon the sale of this property, the Partnership intends
to distribute the sale proceeds, less any reserves needed for winding up the
Partnership operations, to the partners.
Results of Operations
Partnership revenues during the three and nine month periods ended September 30,
1998 and 1997 consisted primarily of interest earned on funds held in reserve.
No properties were sold during the periods presented.
Investing activities for the nine months ended September 30, 1998 and 1997 used
approximately $18,000 and $4,000, respectively, the majority of which was used
to pay development and carrying costs of the land held for investment.
General and administrative expenses for the three and nine months ended
September 30, 1997 and 1998 represent legal, accounting and related expenses
which vary from quarter to quarter based on certain activity in the Partnership.
In addition in 1998, they reflect fees charged to the Partnership pursuant to
the Management Agreement described in Note 1 for various management and
administrative services.
Liquidity and Capital Resources
Management believes that cash reserves as of September 30, 1998 are insufficient
to meet the anticipated cash requirements of the Partnership for the next 12
months. As discussed in Note 1, PacWest has agreed to loan and/or secure a loan
for TMP Land Partnerships in the amount of $2,500,000. Loan proceeds will be
allocated to eleven (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 TMP Inland Empire
II, Ltd., at 12% simple interest over a 24 month period beginning April 1, 1998,
secured by the Partnership's properties, as funds are 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 and appropriate entitlement costs.
PacWest, at their option, can make additional advances with the agreement of the
General Partners; however, the aggregate amount of cash loaned to all TMP
partnerships is limited to a maximum of $2,500,000.
TMP properties and TMP Investments, Inc. will remain as general partners,
however, PacWest has acquired the General Partner's unsubordinated 1% interest
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in the Partnership and assumed responsibility for all partnership
administration. 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 the Partnership properties are sold, cash will be used to first pay back
PacWest loans, then other creditors, then to accrued but unpaid partnership
indebtedness.
Sale proceeds in excess of the amounts necessary to pay the Partnershi indebt-
edness shall be split 90% to the Partnership and 10% to PacWest.
The General Partners believe that ultimately the aforementioned arrangement will
benefit the Partnership and the limited partners. Without the cash infusion from
PacWest, the Partnership stands to lose its property due to foreclosure
resulting from the inability to pay outstanding loans.
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 codes fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by organizations may need to 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 is
currently developing and implementing 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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: (date)
TMP INLAND EMPIRE II, LTD.
A California Limited Partnership
By: TMP Investments, Inc., as General Partner
By: \s\ William O. Passo
William O. Passo, President
By: \s\ Anthony W. Thompson
Anthony W. Thompson, Exec. VP
By: TMP Properties, a California General
Partnership as General Partner
By: \s\ William O. Passo
William O. Passo, General Partner
By: \s\ Anthony W. Thompson
Anthony W. Thompson, General Partner
By: \s\ Scott E. McDaniel
Scott E. McDaniel, General Partner
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