UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter ended September 30, 1996
Commission file number 0-16832
IDM Participating Income Company - II
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
State of California 33-0177934
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One World Trade Center
Suite 198
Long Beach, California 90831
(Address of principal executive offices) (Zip Code)
(310) 498-0141
-------------------------------------------------------
Registrant's telephone number, including area code:
Indicate by check mark 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 90 days. Yes [X] No [ ].
Number of limited partnership interests outstanding as of September 30, 1996:
200,000
1
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IDM PARTICIPATING INCOME COMPANY - II
(A CALIFORNIA LIMITED PARTNERSHIP)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are submitted in the next pages:
PAGE
NUMBER
Balance Sheets - September 30, 1996 and December 31, 1995 6
Statements of Operations - For the Nine Months Ended September 30, 1996
and 1995 and the Three Months Ended September 30, 1996 and 1995 7
Statements of Cash Flows - For the Nine Months Ended September 30, 1996
and 1995 8
Notes to Financial Statements 9
2
<PAGE>
IDM PARTICIPATING INCOME COMPANY - II
(A CALIFORNIA LIMITED PARTNERSHIP)
Item 2. Management's Discussion and Analysis Of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
IDM Participating Income Company-II, a California Limited Partnership (the
"Partnership" or "Registrant"), is a California limited partnership formed in
1986 under the California Revised Limited Partnership Act to make participating
loans to affiliates of IDM Participating Income Corporation, the general partner
of the general partner ("General Partner"), and to other parties as determined
by the General Partner ("Borrower"). The Partnership is an affiliate of IDM
Corporation ("IDM"), a California corporation, together with certain affiliates,
reorganized under Chapter 11 of the United States Bankruptcy Code effective on
March 22, 1993.
All units of Limited Partnership Interests were sold for cash resulting in
proceeds of $20,000,000, all of which was invested in construction or permanent
real estate loans made to the Borrowers.
IDM and its affiliates were severely impacted by the current economic recession,
especially the decline in real estate values, the state of disarray in the
savings and loan industry and the limited availability of commercial real estate
loans from domestic and international banks. These conditions limited IDM's
access to funding for various projects and subsequently, IDM and certain of its
affiliates, including the Partnership, suspended distributions to investors.
Thereafter, specifically on July 10, 1992, IDM and certain affiliated entities
filed for protection under Chapter 11 of the United States Bankruptcy Code. The
Chapter 11 filing allowed IDM as debtor in possession to continue its business
operations without interruption under the supervision of the bankruptcy court.
On March 10, 1993, an order confirming the Reorganization Plan of IDM and
certain affiliated debtors ("the Plan") was entered by the United States
Bankruptcy Court for the Central District of California, Northern Division. The
Plan became effective on March 22, 1993.
The Chapter 11 proceedings stayed the Borrower's payment of interest that would
otherwise have been received by the Partnership. Therefore, interest income,
which is earned on funds loaned and bank deposits, decreased in 1993 and 1994
due to the fact that no interest was accrued on several of the loans after July
10, 1992, since the Borrowers filed for protection under Chapter 11 of the
United States Bankruptcy Code.
3
<PAGE>
IDM PARTICIPATING INCOME COMPANY - II
(A CALIFORNIA LIMITED PARTNERSHIP)
Item 2. Management's Discussion and Analysis Of Financial Condition and Results
of Operations (Cont.)
ORGANIZATION
IDM Participating Income Company-II, a California limited partnership (the
"Partnership"), was formed in 1986 for the purpose of lending funds to various
affiliated companies. The general partner, IDM Participating Income General
Partners' Co.-II, an affiliate of IDM Corporation ("IDM"), contributed an amount
equal to one percent of the limited partners' contributed capital. All
organizational, offering and operating expenses of the Partnership are borne by
the general partner or its affiliates. Profits, losses and distributions are
allocated to the partners in accordance with their partnership interest until
the partners have received a 12% cumulative annual return, at which time
profits, losses and distributions will be allocated 85% among the limited
partners and 15% to the general partner.
REORGANIZATION
IDM has been impacted by the current economic recession, especially the decline
in real estate values, the state of disarray in the savings and loan industry
and the limited availability of commercial real estate loans from domestic and
international banks. In addition, IDM's source of public funds was critically
reduced in July 1991, as the majority of the dealers who sold IDM partnership
units stopped selling these units. Subsequently, IDM suspended distributions to
investors and on July 10, 1992, IDM filed for protection under Chapter 11 of the
United States Bankruptcy Code. The Chapter 11 filing allowed IDM as debtor in
possession to continue its business operations without interruption under the
supervision of the bankruptcy court. On March 10, 1993, an order confirming the
Reorganization Plan of IDM ("the Plan") was entered by the United States
Bankruptcy Court for the Central District of California, Northern Division. The
Plan became effective on March 22, 1993.
LOANS
The reserve for possible losses is established by provisions charged to expense.
The reserve is based on management's assessment of the loans outstanding, the
outcome of IDM's plan of reorganization and on prevailing and anticipated
economic conditions. The valuation of the loans outstanding depends on the
valuation of the properties securing such loans. The estimation process involved
in the determination of net realizable value is inherently uncertain since it
requires estimates as to future events and conditions. Such estimation process
assumes IDM's ability to complete development and dispose of its real estate in
the ordinary course of business based on management's plans and intentions.
Accordingly, the ultimate net realizable
4
<PAGE>
IDM PARTICIPATING INCOME COMPANY - II
(A CALIFORNIA LIMITED PARTNERSHIP)
Item 2. Management's Discussion and Analysis Of Financial Condition and Results
of Operations (Cont.)
LOANS (Cont.)
values of the real estate are dependent upon future economic and market
conditions, the availability of financing, as well as other unpredictable
influences which may cause the ultimate realizations to be materially different
from the amounts presently estimated.
Prior to the bankruptcy, the loan terms included interest at 12.12% payable
monthly with all principal due at maturity. The accrual of interest ceased July
10, 1992 with the bankruptcy filing of the borrowers. As of September 30, 1996,
the Partnership has total debt which is adequately collateralized ("Secured
Debt") of $1,341,000, including accrued interest, and total undercollateralized
debt ("Undersecured Debt") of $9,898,000.
The Secured Debt includes $815,000 related to Harbor Plaza, Ltd. Effective
January 1, 1994, the cash flow improved and was sufficient to allow the
Partnership to resume current payments of interest at 8% in accordance with the
Plan.
Also included in the Secured Debt is $526,000 related to the Beach & Lampson
loan. On August 22, 1996, IDM sold a portion of the real estate serving as
collateral on the Beach & Lampson to an unrelated party. The net proceeds of
this sale were remitted to the Partnership as first lien holder at closing.
These proceeds were applied to principal as the Partnership has fully reserved
the interest receivable on the Beach & Lampson loan. To the extent that cash
flow is available, the Partnership will receive all of its allowed Secured Debt
on this loan with interest at 8% per year through December 31, 1997. The
Partnership has received 73,607 shares of newly issued IDM stock for the
Undersecured Debt of this loan, including accrued interest at July 10, 1992,
amounting to $1,321,000. These shares were distributed to the partners during
1993.
IDM and its affiliates, including the aforementioned entities to whom the
Partnership has advanced loans, have continued to experience significant
difficulty since emerging from bankruptcy in March 1993. Consequently, there is
uncertainty as to their ability to continue to service these loans. This raises
substantial doubt about the Partnership's ability to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts that might result
should the Partnership be unable to continue as a going concern.
5
<PAGE>
IDM PARTICIPATING INCOME COMPANY - II
(A California Limited Partnership)
BALANCE SHEETS
September 30, 1996 and December 31, 1995
- --------------------------------------------------------------------------------
September 30, December 31,
1996 1995
---------- ----------
ASSETS
Cash ............................................. $ 475,000 $ 14,000
Loans to affiliates:
Interest, less reserve for possible losses
of $192,000 at September 30, 1996 ................ 33,000 27,000
Principal, less reserve for possible losses
of $9,898,900 at September 30, 1996
December 31, 1995 ................................ 1,341,000 1,815,000
---------- ----------
Total Assets ..................................... $1,849,000 $1,856,000
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities .................... $ 2,000 $ --
---------- ----------
Total Liabilities ................................ 2,000 --
---------- ----------
Partners' equity :
General Partner .................................. 442,000 442,000
Limited Partners ................................. 1,405,000 1,414,000
---------- ----------
Total Partners' equity ........................... 1,847,000 1,856,000
---------- ----------
Total Liabilities and Partners' equity .......... $1,849,000 $1,856,000
========== ==========
Unaudited
See Accompanying Notes
6
<PAGE>
IDM PARTICIPATING INCOME COMPANY - II
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1996 and 1995
and for the Three Months Ended September 30, 1996 and 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------- -----------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income ........................................ $ 247,000 $ 249,000 $ 74,000 $ 82,000
General and administrative expenses .................... (64,000) (22,000) (17,000) (10,000)
Provision for possible losses .......................... (192,000) -- (58,000) --
--------- --------- --------- ---------
Net income (loss) ...................................... $ (9,000) $ 227,000 $ (1,000) $ 72,000
--------- --------- --------- ---------
Net income (loss) allocable to
limited partners .................................... $ (9,000) $ 227,000 $ (1,000) $ 72,000
========= ========= ========= =========
Average number of limited
partnership interests outstanding ................... 200,000 200,000 200,000 200,000
========= ========= ========= =========
Net income (loss) per limited
partnership interest ................................ $ (0.05) $ 1.14 $ (0.01) $ 0.36
========= ========= ========= =========
</TABLE>
Unaudited
See Accompanying Notes
7
<PAGE>
IDM PARTICIPATING INCOME COMPANY - II
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and 1995
- --------------------------------------------------------------------------------
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................... $ (9,000) $ 227,000
Adjustments to reconcile net income (loss)
to cash (used in) provided by operating activities:
(Increase) decrease in interest receivable ........ (198,000) 1,000
Increase in accrued and other liabilities ......... 2,000 --
Provision for possible losses ..................... 192,000 --
--------- ---------
Net cash (used in) provided by operating activities
operating activities ............................. (13,000) 228,000
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections of loans from affiliates ................. 474,000 100,000
--------- ---------
Net cash provided by investing activities ......... 474,000 100,000
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners ............................ -- (321,000)
--------- ---------
Net cash used in financing activities .............. -- (321,000)
--------- ---------
NET INCREASE IN CASH ................................... 461,000 7,000
Cash beginning of period ............................ 14,000 5,000
--------- ---------
Cash end of period .................................. $ 475,000 $ 12,000
========= =========
Unaudited
See Accompanying Notes
8
<PAGE>
IDM PARTICIPATING INCOME COMPANY - II
(A CALIFORNIA LIMITED PARTNERSHIP)
Note to Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been
included.
<PAGE>
IDM PARTICIPATING INCOME COMPANY - II
(A CALIFORNIA LIMITED PARTNERSHIP)
PART II. OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
a. Exhibits
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-K.
Exhibit Number 27 - Financial Data Schedule
b. Report on Form 8-K - There were no reports filed on Form 8-K during the
quarter ended September 30, 1996.
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 as a duly
authorized officer of the registrant.
IDM Participating Income Company-II
A CALIFORNIA LIMITED PARTNERSHIP
(Registrant)
IDM Participating Income Corporation,
general partner of the general partner
Date: OCTOBER 25, 1996 /S/ STEVEN M. SPEIER
Steven M. Speier
President and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM IDM PARTICIPATING INCOME COMPANY-II SEPTEMBER 30, 1996 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 475,000
<SECURITIES> 0
<RECEIVABLES> 225,000
<ALLOWANCES> 192,000
<INVENTORY> 0
<CURRENT-ASSETS> 33,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,849,000
<CURRENT-LIABILITIES> 2,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,847,000
<TOTAL-LIABILITY-AND-EQUITY> 1,849,000
<SALES> 0
<TOTAL-REVENUES> 247,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 64,000
<LOSS-PROVISION> 192,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,000)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
