-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JgMHoppSofFXrwkx+HUpyz7Kywr7h77RYbolRN/bGXHKpAONE6kEwEDaVb/NipWi XlQEy7SOD34BtusESzkbSw== 0000831002-97-000011.txt : 19970520 0000831002-97-000011.hdr.sgml : 19970520 ACCESSION NUMBER: 0000831002-97-000011 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERFORMANCE ASSET MANAGEMENT FUND IV LTD CENTRAL INDEX KEY: 0001021070 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 330548134 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28710 FILM NUMBER: 97608219 BUSINESS ADDRESS: STREET 1: 4100 NEWPORT PL STREET 2: STE 400 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 7142612400 MAIL ADDRESS: STREET 1: 4100 NEWPORT PL STE 400 STREET 2: PERFORMANCE DEVELOPMENT INC CITY: NEWPORT BEACH STATE: CA ZIP: 92660 10QSB 1 Form 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended March 31, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from [ ] to [ ] Commission file number 0-28710 (Exact name of small business issuer as specified in its charter) Performance Asset Management Fund IV, Ltd., a California Limited Partnership California 33-0548134 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) (Address of principal executive offices) 4100 Newport Place, Suite 400, Newport Beach, California (Issuer's telephone number) (714) 261-2400 (Former name, former address and former fiscal year, if changed since last report) N/A 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 report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court. Yes [ ] No [ ]. APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: [ N/A ] Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] PERFORMANCE ASSET MANAGEMENT FUND IV, LTD., A CALIFORNIA LIMITED PARTNERSHIP INDEX TO FORM 10-QSB PART I Item 1. Financial Statements Item 2. Management's Discussion and Analysis or Plan of Operation PART II Item 1. Legal Proceedings Item 2. Exhibits and Reports on Form 8-K Signatures 2 PERFORMANCE ASSET MANAGEMENT FUND IV, LTD., A CALIFORNIA LIMITED PARTNERSHIP PART I ITEM 1. FINANCIAL STATEMENTS Index to the Financial Statements for the Partnership: Balance Sheets, March 31, 1997 and December 31, 1996 4 Statements of Operations, For the Three Months Ended March 31, 1997 and March 31, 1996 5 Statements of Partnership Capital, For the Three Months Ended March 31, 1997 and Year Ended December 31, 1996 6 Statements of Cash Flows, For the Three Months Ended March 31, 1997 and March 31, 1996 7 Notes to Financial Statements 8 3 PERFORMANCE ASSET MANAGEMENT FUND IV, LTD., A CALIFORNIA LIMITED PARTNERSHIP BALANCE SHEETS March 31, 1997 and December 31, 1996 ________________ ASSETS
1997 1996 --------- --------- Cash and equivalents $1,736,065 $2,121,545 Cash held in trust 5,834,268 5,834,268 Investments in distressed loan portfolios, net 8,347,451 9,091,186 Due from affiliate 697,515 136,022 Other assets 104,977 104,977 Organization costs, net 2,447 3,454 ---------- ---------- Total assets $16,722,722 $17,291,452 ========== ========== LIABILITIES AND PARTNERS' CAPITAL Accounts payable $6,826 $6,351 Due to affiliates, net 945,324 350,576 -------- -------- Total liabilities 952,150 356,927 -------- -------- Commitments and contingencies Partners' capital 15,770,572 16,934,525 ---------- ---------- Total liabilities and partners' capital $16,722,722 $17,291,452 ========== ========== The accompanying notes are an integral part of the financial statements. 4
PERFORMANCE ASSET MANAGEMENT FUND IV, LTD., A CALIFORNIA LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 1997 and 1996 ________________
1997 1996 -------- -------- Portfolio collections $745,630 $930,398 Less: portfolio basis recovery 743,735 917,151 -------- -------- Net investment income 1,895 13,247 -------- -------- Cost of operations: Collection expense 37,307 42,500 Management fee expense 57,092 65,870 Professional fees 92,615 99,583 Amortization 1,007 1,007 General and administrative expense 52,897 2,412 -------- -------- Total operating expenses 240,918 211,372 -------- -------- Income (loss) from operations (239,023) (198,125) Other income: Interest 27,584 33,258 Other income 7,718 11,551 -------- -------- Net income (loss) ($203,721) ($153,316) ======== ======== The accompanying notes are an integral part of the financial statements. 5
PERFORMANCE ASSET MANAGEMENT FUND IV, LTD., A CALIFORNIA LIMITED PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL (DEFICIT) For the Three Months Ended March 31, 1997 and Year Ended December 31,1996 ________________
General Limited Partner Partners Total ---------- ---------- ---------- Balance, December 31, 1995 ($516,291) $19,815,741 $19,299,450 Redemption of partnership units - (40,000) (40,000) Distributions (159,334) (1,433,425) (1,592,759) Net income (73,217) (658,949) (732,166) ---------- ---------- ---------- Balance, December 31, 1996 (748,842) 17,683,367 16,934,525 Redemption of partnership units - (5,000) (5,000) Distributions (95,532) (859,700) (955,232) Net income (20,372) (183,349) (203,721) ---------- ---------- ---------- Balance, March 31, 1997 ($864,746) $16,635,318 $15,770,572 ========== ========== ========== The accompanying notes are an integral part of the financial statements. 6
PERFORMANCE ASSET MANAGEMENT FUND IV, LTD., A CALIFORNIA LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1997 and 1996 ________________
1997 1996 -------- -------- Cash flows from operating activities: Net income (loss) ($203,721) ($153,314) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization 1,007 1,007 Decrease (increase) in assets: Other assets - 94,136 Due from affiliates (561,493) (122,255) Increase (decrease) in liabilities: Accounts payable 476 (19,655) Due to affiliates 594,748 240,815 -------- -------- Net cash provided by (used in) operating activities (168,983) 40,734 -------- -------- Cash flows provided by (used in) investing activities: Recovery of portfolio basis 743,735 917,151 Receivable from West Capital - - Cash held in trust - 3,502,207 Purchase of investments in distressed loan portfolios - (334,299) -------- --------- Net cash provided by investing activities 743,735 4,085,059 -------- --------- Cash flows provided by (used in) financing activities: Redemption of limited partnership units (5,000) (10,000) Distributions to partners (955,232) - -------- -------- Net cash used in financing activities (960,232) (10,000) -------- --------- Net (decrease) increase in cash (385,480) 4,115,793 Cash at beginning of period 2,121,545 559,223 --------- --------- Cash at end of period $1,736,065 $4,675,016 ========= ========= The accompanying notes are an integral part of the financial statements. 7
PERFORMANCE ASSET MANAGEMENT FUND IV, LTD., A CALIFORNIA LIMITED PARTNERSHIP Notes to Financial Statements 1. Organization and Description of Business Performance Asset Management Fund IV, Ltd., a California limited partnership was formed in October 1992, for the purpose of acquiring investments in or direct ownership of distressed loan portfolios from financial institutions and other sources. Interests in the Partnership were sold in an intrastate offering to residents of California, pursuant to the provisions of Section 3(A)(11) of the Securities Act of 1933; however, the Partnership did not begin its primary operations until March 1993. The General Partner is Performance Development, Inc., a California corporation ("PDI"). Profits, losses, and cash distributions are allocated 90% to the limited partners and 10% to the General Partner until such time as the limited partners have received cash equal to 100% of their contributions to the Partnership plus an amount equal to 6% of those yet unpaid capital contributions which will accumulate until recovery. Thereafter, Partnership profits, losses, and cash distributions are allocated 70% to the limited partners and 30% to the General Partner. Cash and Equivalents - -------------------- The Partnership defines cash equivalents as all highly liquid investments with a maturity of three months or less when purchased. The Partnership maintains its cash balances at one bank in accounts which, at times, may exceed federally insured limits. The Partnership uses a cash management system whereby idle cash balances are swept daily into a master account and invested in high quality, short-term securities. The Partnership's management believes that these cash balances are not subject to any significant credit risk due to the nature of the investments and has not experienced any past losses with cash and equivalent investments. Cash Held in Trust - ------------------ The General Partner anticipates that the Partnership and the PAM Funds may, in the future, be reorganized and merged with and into one corporation. In an effort to accomplish that reorganization and merger on terms and conditions consistent with the intent of the General Partner, on December 12, 1995, the General Partner, on behalf of the Partnership and the PAM Funds, and the State of California Department of Corporations entered into an agreement pursuant to the provisions of which the Performance Asset Management Fund Trust ("Trust") was created. These funds are subject to the terms of the Trust Agreement. The Trust was the recipient of a portion of the funds resulting from a settlement of certain litigation between the Partnership and its affiliates and West Capital Financial Services Corp. ("WCFSC") and its affiliates. 8 Notes to Financial Statements (Continued) ----------------------------------------- Investments in Distressed Loan Portfolios and Revenue Recognition - ----------------------------------------------------------------- Investments in distressed loan portfolios are carried at the lower of cost, market, or estimated net realizable value. Amounts collected are treated as a reduction to the carrying basis of the related investment on an individual portfolio basis. Accordingly, income is not recognized until 100% recovery of the original cost of the investment in each portfolio occurs. Estimated net realizable value represents management's estimates, based on its present plans and intentions, of the present value of future collections. Due to the distressed nature of these investments, no interest is earned on outstanding balances, and there is no assurance that the unpaid principal balances will ultimately be collected. Any adjustments to the carrying value of the individual portfolios are recorded in the results of operations. Organization Costs, Net - ----------------------- Organization costs include legal and other professional fees incurred related to the initial organization of the Partnership. These costs are capitalized and amortized using the straight-line method over five years. Accumulated amortization at March 31, 1997 and December 31, 1996 totaled $15,900 and $14,893, respectively. Income Taxes - ------------ No provision for income taxes has been made in the financial statements, except for the Partnership's minimum state franchise tax liability of $800. All partners are taxed individually on their share of the Partnership's earnings and losses. 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from the estimate. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations. - --------------------- Collections for the three months ended March 31, 1997 from the Partnership's portfolios decreased approximately 20% to $745,630 from $930,398 for the comparable period in 1996. The decrease is primarily attributable to collections on a number of performing portfolio assets serviced by a third party servicer. Therefore, in 1997, those portfolios were only serviced for 2 months compared to 3 months in 1996. In March 1996 the Partnership terminated all servicing relations with the servicer and entered into a settlement agreement to sell any remaining portfolio assets held by the servicer. The decrease in collections was also attributable to anticipated seasonal collection trends. The Partnership acquired six portfolios near the last quarter of 1996 from a single third party financial institution specialized in credit card originations. In the last quarter of 1996 the Partnership's Management began collection campaigns on these newly acquired portfolio accounts, which were just recently subjected to improved Partnership collection procedures and skip techniques. These portfolios normally need 120 to 180 days for mailing and skip trace procedures to identify and contact such accounts, after which settlement procedures can begin. Portfolio collections for the three months ended March 31, 1997, resulted in the Partnership recording $1,895 of net investment revenue, a 86% decrease from net investment revenue of $13,247 for the comparable period in 1996. This decrease resulted from a vast majority of collections received from newly acquired portfolio accounts for which the Partnership had not recovered its original cost basis, and accordingly, the Partnership reduced its asset carrying value for these collections. During the first quarter 1997 the Partnership had only one portfolio in which 100% cost recovery had occurred, as compared to four portfolios during the comparable period in 1996. An addition, approximately one quarter percent of collections in the three months ended March 31, 1997 resulted in revenue recognition for the Partnership, compared to 1.42% for the comparable three months ended March 31, 1996. The Partnership recorded proceeds from portfolio sales of $27,357 for the three months ended March 31, 1997. No such proceeds were received for the comparable period ended March 31, 1996. The Partnership's management believes that proceeds from both collection procedures and portfolio account sales will increase in subsequent periods and estimates that proceeds from portfolio sales accounts should exceed those amounts recorded in the fiscal year ended 1996. Total operating expenses increased 14% to $240,918 for the three months ended March 31, 1997, from $211,372 for the comparable period in 1996. Operating expenses as a percentage of portfolio collections totaled approximately 32% as compared to 23% for the comparable period in 1996. The increase is due primarily to additional nonrecurring charges to the Partnership for overpayment of collection proceeds from past periods. Operating expenses, excluding such nonrecurring charges, would have decreased approximately 11% from the comparable period in 1996. Collection expenses, management fees and professional fees for the three months ended March 31, 1997 all decreased from the comparable period in 1996. 10 The Partnership Management anticipates stronger collection activity in subsequent quarters based on current Partnership growth and past historic operational trends. In addition, the Partnership's affiliate servicer, Performance Capital Management, Inc. ("PCM") has completed upgrades to its existing collection platform which should enhance the Partnership's ability to locate present and future debtor customers more quickly and easily than in the past. These enhancements are expected to increase Partnership portfolio collections. Financial Condition, Liquidity and Capital Resources. - ---------------------------------------------------- The Partnership's total assets decreased 3% to $16,722,722 as of March 31, 1997, from $17,291,452 at December 31, 1996. The decrease was primarily attributable to distributions made to limited partner investors generated from collections of portfolio accounts. The Partnership received portfolio proceeds of $745,630, of which $743,735 were recorded as recovery of portfolio assets. The Partnership acquired no new distressed portfolio assets in the three months ended March 31, 1997, however Partnership Management anticipates that it will acquire additional portfolios in the near future. Future acquisitions will depend on the asset market, which continues to grow in size and diversity. The Partnership believes it will continue to acquire low-end-priced distressed portfolios; however, Partnership Management will continue to evaluate assets with different pricing and structure which will continue to generate strong immediate cash flows and provide additional liquidity to provide limited partner distributions and also allow Partnership Management to acquire additional portfolio assets. The Partnership has made no future commitments with credit card originators and other financial institutions to acquire portfolio assets. Partnership Management plans to use its present contacts and relationships to identify and acquire additional assets at optimal prices, and believes that it will have no difficulties in identifying and acquiring such assets. Management also believes current cash reserves and future portfolio collection proceeds will be sufficient to acquire anticipated portfolio assets in the next twelve months. However, Management will continuously monitor its liquidity and evaluate whether additional external capital resources will be necessary for future growth. Impact of Additional Partnership Acquisitions and Resources on Operations. - ------------------------------------------------------------------------- The Partnership Management anticipates that additional portfolio acquisitions and continued expansion will improve the Partnership's liquidity, profitability and financial condition, as a result of increased portfolio collections and sales. Management believes that in order to supplement such growth, PCM must continue to increase that amount of collection representatives and human resources. The Partnership's General Partner, in conjunction with PCM and other affiliated companies and partnerships, is presently evaluating additional operating facilities which will provide for future growth. Management anticipates that the Partnership and PCM will obtain additional operating space in order to facilitate its anticipated expansion by the end of its present fiscal years. In addition, Management believes that existing management will be sufficient to facilitate the anticipated additional growth of the Partnership. 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings. No additional proceedings have occurred since March 31, 1997, the date of the latest report provided. In addition, no material developments are noted with respect to those matters described in the latest report dated March 31, 1997. Reference is made to the registrant's Form 10-KSB dated March 31, 1997, in which such legal proceedings were reported in Part I, Item 3. Legal Proceedings The registrant, by this reference, makes that disclosure a part of this Form 10-QSB. Item 2. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Exhibit 1 Certificate of Limited Partnership Form LP-1 (Charter Document) * 2 Agreement of Limited Partnership (Instrument defining the rights of Security Holders) ** * Reference is made to the registrant's Form 10-KSB, dated March 31, 1997, in which that Certificate of Limited Partnership was included as an exhibit. The registrant, by this reference, makes that Certificate of Limited Partnership a part of this Form 10-QSB filing. ** Reference is made to the registrant's Form 10-KSB, dated March 31, 1997, in which that Agreement of Limited Partnership was included as an exhibit. The registrant, by this reference, makes that Agreement of Limited Partnership a part of this Form 10-QSB filing. 12 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: April 1, 1997 Performance Asset Management Fund IV, Ltd., A California Limited Partnership (Registrant) By: /S/Vincent E. Galewick ---------------------- Vincent E. Galewick President of the General Partner Performance Development, Inc. 13 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 MAR-31-1997 1736 0 698 0 0 16720 0 0 16722 952 0 0 0 0 0 16722 0 746 743 0 241 0 0 (204) 0 0 0 0 0 (204) 0 0
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