<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 March 31, 1999
Commission File No. 0-20120
TMP INLAND EMPIRE VII, LTD
A CALIFORNIA LIMITED PARTNERSHIP
(Name of small business issuer as specified in its charter)
CALIFORNIA 33-0416043
(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 March 31, 2000 and December 31, 1999, Statements of
Operations for the three months ended March 31, 2000 and 1999, Statements of
Cash Flows for the three months ended March 31, 2000 and 1999.
The interim financial statements presented have been prepared by the Partnership
without audit and in the opinion of the management, reflect all adjustments of a
normal recurring nature necessary for a fair statement of (a) the results of
operations for the three months ended March 31, 2000 and 1999 (b) the financial
position at March 31, 2000 and (c) the cash flows for the three months ended
March 31, 2000 and 1999. Interim results are not necessarily indicative of
results for a full year.
The balance sheet presented as of December 31, 1999 has been derived from the
financial statements that have been audited by the Partnership's independent
public accountants. The financial statements and notes are condensed as
permitted by Form 10-QSB and do not contain certain information included in the
annual financial statements and notes of the Partnership. The financial
statements and notes included herein should be read in conjunction with the
financial statements and notes included in the Partnership's Form 10-KSB.
2
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Balance Sheets
March 31, December 31,
2000 1999
(unaudited)
--------------------------------
Assets
<S> <C> <C>
Cash $ 2,901 $ 3,138
Investment in Unimproved Land, net (Note 1) 2,811,019 2,784,496
------------ ---------
Total Assets $ 2,813,920$ 2,787,634
=========== ================
Liabilities and Partners Capital
Accounts Payable $ 8,631 $ 0
Due to Affiliates (Notes 5 and 6) 857,833 802,191
Franchise Tax Payable 1,600 800
Property Taxes Payable 12,987 0
Notes Payable (Note 7) 369,000 369,000
------------ ------------
Total Liabilities 1,250,051 1,171,991
--------- ---------
General Partners (61,289) (60,771)
Limited Partners: 8,700 Equity Units
Authorized and Outstanding 1,625,158 1,676,414
--------- ---------
Total Partners Capital 1,563,869 1,615,643
------------ ---------
Total Liabilities and Partners Capital $2,813,920$ 2,787,634
=========== ================
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Statements of Operations
(Unaudited)
Three Months Ended
March 31, March 31,
2000 1999
--------------------------
Income
<S> <C> <C>
Interest $ 0 $ 0
------------ --
Total Income 0 0
------------ ------------
Expenses
Accounting & Financial Reporting 15,801 5,796
Outside Professional Services 8,846 6,788
General & Administrative 3,226 4,188
Interest 23,101 12,339
------------ ---------
Total Expenses 50,974 29,111
------------ ------------
Loss Before Income Taxes (50,974) (29,111)
State Franchise Tax 800 800
------------ ------------
Net Loss $ (51,774) $ (29,911)
============ ============
Allocation of Net Loss (Note 4):
General Partners, in the Aggregate: $ (518) $ (299)
============ ============
Limited Partners, in the Aggregate: $ (51,256) $ (29,612)
============ ============
Limited Partners, per Equity Unit: $ (5.89) $ (3.40)
============ ============
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
TMP INLAND EMPIRE VII, LTD
A California Limited Partnership
Statement of Cash Flows
(unaudited)
Three months Ended
March 31 March 31
2000 1999
------------ ----------
Cash Flows from Operating Activities:
<S> <C> <C>
Net Loss $ (51,774) $ (29,911)
Adjustments to Reconcile Net Loss to Net Cash
Provided By (Used In) Operating Activities:
Increase in Due to Affiliates 55,642 432,117
Decrease in Prepaid Expenses 0 2,358
(Decrease) Increase in Interest & Accounts
Payable 8,631 (57,021)
Increase in Franchise Tax Payable 800 0
Increase in Property Taxes Payable 12,987 12,725
------------ ------------
Net Cash Provided By Operating Activities 26,286 360,268
Cash Flows from Investing Activities:
Increase in Investment in Unimproved Land (26,523) (49,523)
------------ ------------
Net Cash Used In Investing Activities (26,523) (49,523)
Cash Flows from Financing Activities:
Payments Made on Notes Payable 0 (307,704)
------------ -----------
Net Cash Used In Financing Activities 0 (307,704)
------------ ------------
Increase (Decrease) in Cash (237) 3,041
Cash, Beginning of Period 3,138 547
------------ ------------
Cash, End of Period $ 2,901 $ 3,588
=========== ============
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Taxes $ 0 $ 800
============ =======
Cash Paid for Interest $ 83,557 $ 73,882
============ ============
</TABLE>
See Accompanying Notes to Financial Statements
5
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Notes to the Financial Statements
March 31, 2000
(Unaudited)
Note 1 - General and Summary of Significant Accounting Policies
General - TMP Inland Empire VII, 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, if any, when properties are sold.
Syndication Costs - Syndication costs (such as commissions, printing, and legal
fees) totaling $1,007,223 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 in 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 partnership for income tax purposes and
accordingly 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.
6
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Notes to the Financial Statements
March 31, 2000
(Unaudited)
Note 2 - Organization of the Partnership
The Partnership was originally formed on July 20, 1990 with TMP Properties (A
California General Partnership) and TMP Investments, Inc. (A California
Corporation) as the general partners ("General Partners"). The partners' of TMP
Properties are William O. Passo, Anthony W. Thompson and Scott E. McDaniel.
William O. Passo and Anthony W. Thompson were the shareholders of TMP
Investments, Inc. until October 1, 1995, when they sold their shares to TMP
Group, Inc. and then became the shareholders of TMP Group, Inc.
The Partnership originally acquired four separate parcels of unimproved real
property in Riverside and San Bernardino Counties, California. During 1992, one
additional parcel in Riverside County was purchased by the Partnership. 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.
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 8,700 units at $1,000 each to qualified
investors. As of December 31, 1992, all 8,700 units had been sold for total
limited partner contributions of $8,700,000. There have been no contributions
made by the General Partners since its formation. As described in Note 1,
syndication costs have been recorded as a reduction in partners' capital.
7
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Notes to the Financial Statements
March 31, 2000
(Unaudited)
Note 4 - 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 83.5 percent to the limited partners and 16.5
percent to the General Partners. There were no distributions in 2000 or 1999.
Note 5 - Agreements with PacWest Inland Empire, LLC (PacWest),
In March 1998, the General Partners entered into an agreement (the Financing
Agreement) with PacWest, a Delaware Limited Liability Company, whereby PacWest
paid a total of $300,000 to the General Partners and ten other related
partnerships (the TMP Land Partnerships). In addition, 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 the General Partners' distributions;
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 TMP Land Partnerships, based on partnership needs, from recommendations made
by PacWest, and under the approval and/or direction of the General Partners. A
portion of these funds will be loaned to the Partnership at 12% simple interest
beginning April 1, 1998. The borrowings are secured by the Partnership's
properties, and funds will be loaned, as needed, in the opinion of the General
Partners. These funds are not to exceed 50% of the 1997 appraised value of the
properties, and will primarily be used to pay for on-going property maintenance,
reduction of existing debt, property taxes in arrears, appropriate entitlement
costs and partnership operations.
8
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Notes to the Financial Statements
March 31, 2000
(Unaudited)
As of March 31, 2000 the TMP Land Partnerships have been funded approximately
$2,981,000 by PacWest. An addendum to the Financing Agreement which states
PacWest shall be entitled to increase the aggregate amount of the loan by
written agreement is currently being approved by both the General Partners and
PacWest. Upon signing of this addendum, PacWest, can, at their option and with
the written agreement of the General Partners, make additional advances and the
aggregate amount of cash loaned to the TMP Land Partnerships is not limited to a
maximum of $2,500,000.
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.
In April 1998, PacWest entered into the Management Agreement with the General
Partners 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 March 31, 2000 and December 31, 1999, the Partnership has an amount
due of approximately $858,000 and $802,000, respectively, including interest, to
PacWest related to the aforementioned agreements.
Note 6 - Related Party Transactions
Syndication costs (see Notes 1 and 3) netted against partners' capital
contributions include $870,000 of 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 $500,000 paid in
prior years to TMP Properties, TMP Investments, Inc., and the General Partners,
for services rendered in connection with the acquisition of the properties.
See Note 5 regarding information on management of the Partnership during 2000.
9
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
Notes to the Financial Statements
March 31, 2000
(Unaudited)
Note 7 - Notes Payable
In 1997, the Partnership entered into an amended loan agreement with an outside
party who provided engineering services for various land parcels. The loan
amount of $317,704 accrued interest at 10% per annum, and was originally payable
on or before February 28, 1998. The loan was guaranteed by the general partners
of TMP Properties and by TMP Properties. The note was repaid in full in January
1999.
In February 1997, 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 $125,000 accrued interest at 14% per annum, with the interest payable
monthly beginning April 1, 1997. The principal was originally due in February
1999. In February 1999, the note was amended to extend the due date to February
2001, to decrease the interest rate to 12.25% and reduce the monthly interest
payment to $1,276 beginning on March 1, 1999. For the three months ended March
31, 2000, $2,552 of the interest relating to this note has been paid and
capitalized to investment in unimproved land.
In 1997, 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 $233,825 accrues interest at 13.5% per annum, and the interest is payable
monthly. This note was refinanced in November 1999. The original lender was paid
off and the Partnership entered into a new loan agreement. The new loan amount
of $244,000 accrues interest at 12% per annum. The interest payment of $2,440 is
due monthly with the initial interest payment due December 1, 1999. The due date
of the loan is November 2001. For the three months ended March 31, 2000, $4,880
of interest relating to this note has been paid and capitalized to investment in
unimproved land.
10
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
March 31, 2000
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis provides information that the
Partnership's management believes is relevant to an assessment and understanding
of the Partnership's results of operations and financial condition. This
discussion should be read in conjunction with the financial statements and
footnotes, which appear elsewhere in this report.
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are subject to the "safe harbor" created
by that section. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions or variations of such
words are intended to identify forward-looking statements, but are not the
exclusive means of identifying forward-looking statements in this report.
Additionally, statements concerning future matters such as the features,
benefits and advantages of the Partnership's property regarding matters that are
not historical are forward-looking statements. The Partnership's actual future
results could differ materially from those projected in the forward-looking
statements. The Partnership assumes no obligation to update the forward-looking
statements. Readers are urged to review and consider carefully the various
disclosures made by the Partnership in this report, which attempts to advise
interested parties of the risks and factors that may affect the Partnership's
business, financial condition and results of operations.
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,
1999.
11
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
March 31, 2000
During the period from inception (July 20, 1990) through December 31, 1991, the
Partnership was engaged primarily in the sale of Units of Limited Partnership
Interest ("Units") and the investment of the subscription proceeds to purchase
parcels of unimproved real property. The only cash revenues received during
1995-1999 was from the interest income earned on funds held.
The Partnership recognized losses in 1995 and 1996 due to the write-down in
value of the Partnership land. The decline in land value was due mainly to the
downturn in Southern California's real estate market.
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 March 31, 2000 and 1999
There were no Partnership revenues during the three-month periods ended March
31, 2000 and 1999. No properties were sold during the periods presented.
Investing activities for the three months ended March 31, 2000 and 1999 used
approximately $27,000 and $50,000 of cash, respectively; mainly to pay for
development and carrying costs of the land held for investment. Financing
activities for the three months ended March 31, 1999 used approximately $308,000
to payoff a note payable.
Total expenses for the three months ended March 31, 2000 compared with the three
months ended March 31, 1999, increased by approximately $22,000 due primarily to
increases in Accounting & Financial Reporting, Outside Professional Services and
Interest Expense. Interest Expense increased by $10,762 pursuant to the
Financing Agreement with PacWest entered into April 1, 1998. Accounting &
Financial Reporting increases are directly related to the timing of the costs
incurred to prepare audit and file the appropriate financial information for the
Partnership. In accordance with the Management Agreement, reimbursement of
certain outside consultant expenses charged to the Partnership by PacWest, were
incurred during the three-month period ended March 31, 2000 and not in the same
period ended March 31, 1999. These charges amounted to approximately $1,200 and
are primarily responsible for the increase in Outside Professional Services of
$2,058. The remaining increase is related to the timing and payment of certain
insurance expenses based on new contract negotiations.
12
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
March 31, 2000
Due to Affiliates increases as the Partnership pays its' operating costs. As
discussed above, and pursuant to the Financing Agreement, all funds required to
pay for operating costs are received from PacWest. During the three month period
ended March 31, 1999, the Partnership paid off one of its' notes payable which
required approximately $365,000 of funds (principal and interest) from PacWest.
The Partnership had five properties as of March 31, 2000 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 $7,722,751, net of syndication costs, from
the sale of Units. During the period from inception through December 31, 1995,
the Partnership acquired a total of five properties for all cash at a total
expenditure of $7,457,705. 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
five 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.
In March and November 1997, the General Partners procured loans of $125,000 and
$233,825, respectively to provide cash for partnership operations. The loans are
secured by partnership land. Both these loans were either paid off or
renegotiated during the year ended December 31, 1999. (See Note 7 in the
accompanying financial statements).
The Partnership had a note with Ludwig Engineering for the engineering on the
Victorville 70-acre parcel. This note was paid off in January 1999. (See Note 7
in the accompanying financial statements).
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.
13
<PAGE>
TMP INLAND EMPIRE VII, LTD.
A California Limited Partnership
March 31, 2000
In March 1998, the General Partners entered into the Financing Agreement with
PacWest, whereby PacWest paid a total of $300,000 to the General Partners and
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 TMP Land Partnerships, based on partnership needs, from recommendations made
by PacWest, and under the approval and/or direction of the General Partners. A
portion of these funds will be loaned to the Partnership at 12% simple interest
beginning April 1, 1998. The borrowings are secured by the Partnership's
properties, and 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.
As of March 31, 2000 the TMP Land Partnerships have been funded approximately
$2,981,000 by PacWest. An addendum to the Financing Agreement which states
PacWest shall be entitled to increase the aggregate amount of the loan by
written agreement is currently being approved by both the General Partners and
PacWest. Upon signing of this addendum, PacWest, can, at their option and with
the written agreement of the General Partners, make additional advances and the
aggregate amount of cash loaned to the TMP Land Partnerships is not limited to a
maximum of $2,500,000.
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.
In April 1998, PacWest entered into the Management Agreement with the General
partners 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
$15,998 for its administrative services.
14
<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: May 15, 2000
TMP INLAND EMPIRE VII, 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
