<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------------- -----------------
COMMISSION FILE NUMBER 333-2820
FLORDECO, LTD.
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 65-0671467
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
3591 FOWLER STREET 33901
FT. MYERS, FLORIDA (Zip Code)
(Address of Principal Executive Offices)
(941) 936-8888
(Registrant's Telephone Number, Including Area Code)
------------------------
Indicate by check whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days. Yes No X
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<PAGE> 2
FLORDECO, LTD.
FORM 10-Q
For the Quarter Ended September 30, 1996
INDEX
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Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements................................................1
Condensed Balance Sheet - September 30, 1996........................2
Notes to Condensed Financial Statement..............................3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................7
Item 3. Quantitative and Qualitative Disclosures about Market Risk..........8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................8
Item 2. Changes in Securities...............................................8
Item 3. Defaults Upon Senior Securities.....................................8
Item 4. Submission of Matters to a Vote of Securities Holders...............8
Item 5. Other Information...................................................9
Item 6. Exhibits and Reports on Form 8-K....................................9
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
<S> <C>
Condensed Financial Statement:
Condensed Balance Sheet 2
Notes to Condensed Financial Statement 3
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<PAGE> 4
FLORDECO, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED BALANCE SHEET
September 30, 1996
(Unaudited)
ASSETS
<TABLE>
<S> <C>
Cash in bank $62,000
-------
Total assets $62,000
=======
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Due to related party $50,277
PARTNERS' EQUITY 11,723
-------
Total liabilities and partners' equity $62,000
=======
</TABLE>
The accompanying notes are an integral part of this condensed financial
statement.
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<PAGE> 5
FLORDECO, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENT
(Unaudited)
1. NATURE OF BUSINESS:
Flordeco, Ltd. (Flordeco), a Florida limited partnership, was formed to
make equity investments in a diversified portfolio of income producing
residential and commercial properties. Profits, losses, and distributions
of cash or property by the Partnership generally will be made to the
Unitholders (including the general partner) in proportion to the units held
by each of them.
As of September 30, 1996, Flordeco has not commenced operations and is
considered a development stage enterprise.
The accompanying unaudited interim financial statements prepared by
management include all normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation for the interim
period reported upon. Such statements have been prepared from Flordeco's
accounting records in accordance with the instructions to Form 10Q.
2. BASIS OF PRESENTATION:
The accompanying unaudited condensed balance sheet, in the opinion of
management, includes all adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation of the balance sheet for the
interim period. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
SEC rules and regulations, although Flordeco believes that the disclosures
included herein are adequate to make the information presented not
misleading.
3. PARTNERS' EQUITY:
In 1996, Flordeco filed a registration statement (Form S-11) with the
Securities and Exchange Commission in order to sell partnership units to
the public. The offering called for a maximum of 1,000 units and a minimum
of 100 units at $12,000 per unit, payable $2,000 in cash and a $10,000
full-recourse promissory note. Each promissory note is payable over ten
years at $1,000 per year without interest. The offering will terminate no
later than April 30, 1997.
As of September 30, 1996, Flordeco had sold 31 units, receiving cash of
$62,000 and notes totaling $310,000. Of the 31 units sold, 5 units were
purchased by the general partner (Investors Trust, Inc.) and 26 units were
purchased, directly or indirectly, by shareholders of the general partner.
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<PAGE> 6
NOTES TO CONDENSED FINANCIAL STATEMENT, CONTINUED
(Unaudited)
3. PARTNERS' EQUITY, CONTINUED
Partners' capital at September 30, 1996 consisted of the following:
<TABLE>
<S> <C>
Sale of units $ 372,000
Less: Notes receivable (310,000)
Offering costs (50,277)
---------
Balance, September 30, 1996 $ 11,723
=========
</TABLE>
4. RELATED PARTIES:
The Management Company will provide certain management services to the
partnership and its real property investments. Mr. Thomas R. Cronin and Dr.
Gerald Laboda, shareholders of the general partner, together own a
controlling interest in the Management Company. Flordeco Realty, Inc. is a
Florida corporation and a wholly-owned subsidiary of the Management
Company.
Partnership transactions involving the purchase, lease, and sale of the
partnership's properties may result in the immediate realization by the
general partner and its affiliates, including the Management Company and
Flordeco Realty, Inc., of substantial commissions, fees, compensation and
other income. These fees will generally be based upon a percentage of the
amount paid to or by the partnership. None of the agreements for such
services were the result of arm's-length negotiations.
As of September 30, 1996, the Management Company paid offering costs of
$50,277 on behalf of Flordeco. This liability is classified as "due to
related party" on the balance sheet.
5. RISKS AND UNCERTAINTIES:
The partnership is subject to all of the risks inherent in owning real
property investments. Such risks include, but are not limited to, changes
in the investment climate for real estate, unanticipated operating
expenses, occupancy levels, and rental rates. It is anticipated that the
majority of the investments will be located in the limited geographical
area of Southwest Florida.
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<PAGE> 7
NOTES TO CONDENSED FINANCIAL STATEMENT, CONTINUED
(Unaudited)
6. SUBSEQUENT EVENTS:
On March 3, 1997, Flordeco obtained a three-year revolving line of credit
in the amount of $500,000. The line is collateralized by the partners'
promissory notes receivable. The rate of interest on the credit line is
prime plus one percent. Under terms of the credit line, the maximum
outstanding principal balance shall be reduced to $400,000 in the second
year and $300,000 in the third year. The loan matures March 1, 2000.
On March 5, 1997, Flordeco purchased commercial rental property for
approximately $755,000. The property is located in North Fort Myers,
Florida. Currently the property, a warehouse, is unoccupied.
As of April 21, 1997, Flordeco had sold an additional 164 units, receiving
$318,000 in cash, undeveloped land valued at $60,000 and notes totaling
$1,590,000. Included in the additional 164 units were 51 units sold,
directly or indirectly, to shareholders of the general partner and 10 units
to an affiliate of the general partner, Flordeco, Inc., a Florida
corporation, (the Management Company).
7. FUTURE ACCOUNTING PRONOUNCEMENTS:
In June 1996, Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," (SFAS No. 125) was issued. SFAS No. 125
provides accounting and reporting standards based on a control-oriented
"financial-components" approach. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets
it controls and liabilities it has incurred, derecognizes financial assets
when control has been surrendered, and derecognizes liabilities when
extinguished. SFAS No. 125 is effective on a prospective basis January 1,
1997. However, in December 1996, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125," which delays until January 1, 1998 the effective date for certain
provisions. Earlier or retroactive application is not permitted.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS No. 128). SFAS No. 128
establishes standards for computing and presenting earnings per share (EPS)
and applies to entities with publicly held common stock. SFAS No. 128
simplifies the standards for computing earnings per share previously found
in Accounting Principles Board Opinion No. 15, "Earnings per Share"
(Opinion 15), and makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of basic EPS.
It also requires dual presentation of basic and diluted EPS on the face of
the income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation.
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<PAGE> 8
NOTES TO CONDENSED FINANCIAL STATEMENT, CONTINUED
(Unaudited)
7. FUTURE ACCOUNTING PRONOUNCEMENTS, CONTINUED
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that would occur if securities or other contracts to issue common stock
were exercised.
SFAS No. 128 supersedes Opinion 15 and related accounting interpretations
and is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. However, an entity is permitted to disclose pro forma amounts
computed using SFAS No. 128 in the notes to the financial statements in
periods prior to required adoption.
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Flordeco, Ltd., a Florida limited partnership (the "Partnership"), was
organized on March 19, 1996 primarily for the purposes of making equity
investments in a diversified portfolio of income producing properties located
primarily in Southwest Florida.
The Partnership was initially capitalized in 1996 with total cash
contributions of $5,000 from Investors Trust, Inc., the corporate general
partner of the Partnership ("General Partner"), and $900 from the initial
limited partner.
In order to obtain the necessary capitalization to commence its business
activities, the Partnership filed a registration statement on Form S-11 with the
Securities and Exchange Commission to register 1,000 units of limited
partnership interests in the Partnership ("Units") for sale in a public offering
at a purchase price of $12,000 per Unit. The purchase price of each Unit is
payable $2,000 in cash and $10,000 in a full recourse promissory note
collateralized by (and subject to offset against) such Unit ("Promissory Note").
The Promissory Note is noninterest bearing and it is payable in ten equal annual
installments. The registration statement was declared effective on August 12,
1996, and the sale of Units was commenced. The Units are offered for sale
through certain officers and directors of the General Partner on behalf of the
Partnership, on a self underwritten, minimum/maximum best-efforts basis. The
minimum offering of 100 Units ("Minimum Offering") was required to be sold prior
to December 31, 1996, unless extended to January 31, 1997 ("Initial Termination
Date"). All cash subscription funds received for the Units are held in a
noninterest bearing escrow account pending receipt of the Minimum Offering. As
of November 15, 1996, the Partnership had received subscriptions for 59 Units.
Approximately 35 of the Units were subscribed for by the General Partner and its
affiliates.
RESULTS OF OPERATIONS
The following discussion regarding the results of operations should be read
in conjunction with the historical financial statements of the Partnership.
The Partnership was recently formed and is a development stage company.
During the period ended September 30, 1996, the Partnership was engaged only in
certain organizational activities and the public offering of its Units. As a
result, the Partnership did not engage in any revenue generating operations for
the period and incurred a loss of $50,277, all of which were incurred in
connection with offering related activities. The Management Company, Flordeco,
Inc., paid such costs on behalf of the Partnership and will be reimbursed for
such advances upon release of funds from escrow if the Minimum Offering is sold.
The ability of the Partnership to commence operations is highly dependent
upon its ability to sell the Minimum Offering prior to the Initial Termination
Date and obtain the subscription proceeds held in escrow. If the Minimum
Offering is timely achieved, then revenues and expenses of the Partnership in
future periods will be dependent upon the number of Units sold prior to the
Final Termination Date, and upon the type of real property investments acquired
by the Partnership and the timing of their acquisition.
LIQUIDITY AND CAPITAL RESOURCES
The following discussion regarding liquidity and capital resources should
be read in conjunction with the Balance Sheet as of September 30, 1996.
The Partnership currently has limited funds because substantially all of
its capital is being raised from the public offer and sale of its Units. The
Partnership's principal source of liquidity through the date hereof has been the
initial capital contributions of the General Partner and the initial limited
partner. The
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<PAGE> 10
Partnership's business plan provides for it to raise capital from investors by
means of a public offering of its Units and then to invest the net proceeds
therefrom into real property investments. As of November 15, 1996, the
Partnership did not have any outstanding commitments or arrangements to purchase
any real property investment.
Accordingly, the Partnership's future liquidity will depend to a
significant extent upon the sale of the Minimum Offering prior to the Initial
Termination Date and, if the Minimum Offering is timely sold, then upon the
number of additional Units sold prior to the Final Termination Date.
Upon receipt of the Minimum Offering, the Partnership's investment plans
are to acquire and develop a diversified portfolio of real property investments
located primarily in Southwest Florida on a highly leveraged basis. The amount
and timing of any financing used for the Partnership's acquisitions and
investments will depend, in part, on the availability, terms, and cost of such
debt and the actual or anticipated revenues to be derived from the property
investment. The Partnership currently anticipates using the Promissory Notes as
collateral for bank loans or other institutional financing to be used for the
acquisition of any such property investments. Such borrowings are expected to be
repaid with installment payments received from investors under the Promissory
Notes and, to the extent necessary, funds generated from Partnership operations.
The Partnership Agreement does not restrict the type of debt that may be
incurred by the Partnership. The maximum indebtedness which may be incurred by
the Partnership as a whole shall not exceed 100% of the total purchase price of
all property investments which have not been refinanced and 100% of the
aggregate value as determined by the lender as of the date of refinancing as to
all property investments which have been refinanced. There is no maximum
leverage limitation with respect to any single property investment, nor are
there any limitations as to the number of mortgages or loans which may be placed
on any single property. In connection with its real property investments, the
Partnership currently anticipates that it will incur aggregate borrowings of
75-100% of the total purchase price of such investments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
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<PAGE> 11
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
27.1 -- Financial Data Schedule (for SEC use only).
(B) REPORTS ON FORM 8-K
None.
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<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FLORDECO, LTD.
Date: June 17, 1997 By: INVESTORS TRUST, INC.,
a Florida corporation,
as general partner
/s/ Allan E. Fox
------------------------------
Allan E. Fox
President
/s/ Eileen W. Murphy
------------------------------
Eileen W. Murphy,
Treasurer and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 62,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 62,000
<CURRENT-LIABILITIES> 50,277
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,723
<TOTAL-LIABILITY-AND-EQUITY> 62,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
