<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13
or 15 (d) of the Securities
Exchange Act of 1934
----------------------------------
For the Quarter Ended
March 31, 1998 Commission File Number 0-16764
- --------------------- -------------------------------
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
----------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 36-3535958
- --------------------- ---------------------------
State or other IRS Employer Identification
jurisdiction of Number
incorporation or
organization
1300 E. Woodfield Road, Suite 312 Schaumburg, Illinois 60173
- --------------------------------- --------------------------
Address of principal City, State, Zip Code
executive offices
Registrant's telephone number: (847) 240-6200
---------------------------
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.
(1) Yes x No
--- ---
(2) Yes x No
--- ---
<PAGE> 2
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1.
Index to Financial Statements
Balance Sheets
March 31, 1998 (unaudited) 3
December 31, 1997 4
Statements of Revenue and Expenses (unaudited)
For the three months ended March 31, 1998 5
For the three months ended March 31, 1997 6
Statements of Changes in Partners' Equity
For the three months ended March 31, 1998
(unaudited) 7
Statements of Cash Flows (unaudited)
For the three months ended March 31, 1998 8
For the three months ended March 31, 1997 9
Notes to Financial Statements (unaudited) 10 - 11
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12 - 13
PART II - OTHER INFORMATION
Items 1-6. 14
</TABLE>
2
<PAGE> 3
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
BALANCE SHEETS
March 31, 1998
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 885,938 $1,862,972 $2,748,910
Net investment in direct
finance leases - - -
Investment in foreclosed
properties, net 685,189 1,106,623 1,791,812
Diverted and other assets, net 153,599 248,074 401,673
Datronic assets, net - - -
---------- ---------- ----------
$1,724,726 $3,217,669 $4,942,395
========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts payable and
accrued expenses $ 52,573 $ 90,142 $ 142,715
Lessee rental deposits 4,545 8,371 12,916
---------- ---------- ----------
Total liabilities 57,118 98,513 155,631
Total partners' equity 1,667,608 3,119,156 4,786,764
---------- ---------- ----------
$1,724,726 $3,217,669 $4,942,395
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
BALANCE SHEETS
December 31, 1997
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 903,609 $1,882,675 $2,786,284
Net investment in direct
finance leases - - -
Diverted and other assets, net 153,599 248,074 401,673
Investment in foreclosed
properties, net 732,126 1,182,430 1,914,556
Datronic assets, net - - -
---------- ---------- ----------
$1,789,334 $3,313,179 $5,102,513
========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts payable and
accrued expenses $ 53,420 $ 91,937 $ 145,357
Lessee rental deposits 4,905 8,968 13,873
---------- ---------- ----------
Total liabilities 58,325 100,905 159,230
Total partners' equity 1,731,009 3,212,274 4,943,283
---------- ---------- ----------
$1,789,334 $3,313,179 $5,102,513
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 2,905 $ 5,127 $ 8,032
Interest income 10,811 20,533 31,344
----------- ---------- ----------
13,716 25,660 39,376
----------- ---------- ----------
Expenses:
General Partner's
expense reimbursement 44,755 72,368 117,123
Professional fees 48,703 78,800 127,503
Other operating expenses 3,642 5,884 9,526
Credit for lease losses (19,983) (38,274) (58,257)
----------- ---------- ----------
77,117 118,778 195,895
----------- ---------- ----------
Net loss $ (63,401) $ (93,118) $ (156,519)
=========== ========== ==========
Net loss - General Partner $ (634) $ (931) $ (1,565)
=========== ========== ==========
Net loss - Limited Partners $ (62,767) $ (92,187) $ (154,954)
=========== ========== ==========
Net loss per limited
partnership unit $(1.64) $(1.49)
====== ======
Weighted average number
of limited partnership
units outstanding 38,197 61,696
====== ======
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ---------
<S> <C> <C> <C>
Revenue:
Lease income $ 1,971 $ 5,949 $ 7,920
Interest income 12,823 21,655 34,478
Rental income 39,653 64,043 103,696
----------- ---------- ---------
54,447 91,647 146,094
----------- ---------- ---------
Expenses:
General Partner's
expense reimbursement 63,911 106,309 170,220
Professional fees 24,045 39,536 63,581
Other operating expenses 5,271 8,788 14,059
Credit for lease losses (50,298) (81,234) (131,532)
----------- ---------- ---------
42,929 73,399 116,328
----------- ---------- ---------
Net earnings $ 11,518 $ 18,248 $ 29,766
=========== ========== =========
Net earnings
-General Partner $ 115 $ 182 $ 297
=========== ========== =========
Net earnings
-Limited Partners $ 11,403 $ 18,066 $ 29,469
=========== ========== =========
Net earnings per limited
partnership unit $ 0.30 $ 0.29
====== ======
Weighted average number
of limited partnership
units outstanding 38,197 61,696
====== ======
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
General Limited Limited Total
Partner's Partners' Partners' Partners'
Equity Equity Equity Equity
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1997* $ - $1,731,009 $3,212,274 $4,943,283
Net loss (1,565) (62,767) (92,187) (156,519)
Allocation of General
Partner's Equity 1,565 (634) (931) -
--------- ----------- ----------- ----------
Balance, March 31, 1998 $ - $1,667,608 $3,119,156 $4,786,764
========= =========== =========== ==========
</TABLE>
* Balances are net of $42,867 and $78,868, of General Partner's equity
previously allocated to Liquidating and Continuing Limited Partners'
Equity.
See accompanying notes to financial statements.
7
<PAGE> 8
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ------------ ---------
<S> <C> <C> <C>
Cash flows from
operating activities:
Net loss $ (63,401) $ (93,118) $ (156,519)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (19,983) (38,274) (58,257)
Changes in assets
and liabilities:
Accounts payable and
accrued expenses (847) (1,795) (2,642)
Lessee rental deposits (360) (597) (957)
----------- ---------- ----------
(84,591) (133,784) (218,375)
----------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 19,983 38,274 58,257
Net proceeds from foreclosed
properties 46,937 75,807 122,744
----------- ---------- ----------
66,920 114,081 181,001
----------- ---------- ----------
Net decrease in cash and
cash equivalents (17,671) (19,703) (37,374)
Cash and cash equivalents:
Beginning of year 903,609 1,882,675 2,786,284
----------- ---------- ----------
End of first quarter $ 885,938 $1,862,972 $2,748,910
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from
operating activities:
Net earnings $ 11,518 $ 18,248 $ 29,766
Adjustments to
reconcile net earnings to
net cash used in
operating activities:
Credit for lease losses (50,298) (81,234) (131,532)
Changes in assets and
liabilities:
Accounts payable and
accrued expenses (38,075) (62,365) (100,440)
Lessee rental deposits (17,946) (38,731) (56,677)
Due to management company 12,826 21,678 34,504
----------- ---------- ----------
(81,975) (142,404) (224,379)
----------- ---------- ----------
Cash flows from investing activities:
Principal collections
on leases 52,818 114,205 167,023
Investment in foreclosed
properties 2,180 3,520 5,700
----------- ---------- ----------
54,998 117,725 172,723
----------- ---------- ----------
Net decrease in cash and
cash equivalents (26,977) (24,679) (51,656)
Cash and cash equivalents:
Beginning of year 1,065,965 2,093,544 3,159,509
----------- ---------- ----------
End of first quarter $ 1,038,988 $2,068,865 $3,107,853
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 10
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
NOTE 1 - ORGANIZATION:
Datronic Equipment Income Fund XVI, L.P., a Delaware Limited Partnership (the
"Partnership"), was formed on April 21, 1987 for the purpose of acquiring and
leasing both high- and low-technology equipment. See Notes 5, 8, and 10 to the
Partnership's financial statements included in the 1997 Form 10-K for a
discussion of the alleged diversion of Partnership assets in 1991 and 1992 and
the subsequent litigation and settlement, change in general partner, new
classes of limited partners established and amendments to the Partnership
Agreement which occurred.
NOTE 2 - BASIS OF FINANCIAL STATEMENTS:
The accompanying financial statements should be read in conjunction with the
Partnership's financial statements included in the 1997 Form 10-K. The
financial information furnished herein is unaudited but in the opinion of
Management includes all adjustments necessary(all of which are normal recurring
adjustments) for a fair presentation of financial condition and results of
operations. See Note 2 to the Partnership's financial statements included in
the 1997 Form 10-K.
NOTE 3 - LIMITED PARTNERSHIP DISTRIBUTIONS:
Distributions to Liquidating Limited Partners were suspended after payment of
the April 1, 1995 distribution. Distributions to Continuing Limited Partners
were suspended after payment of the January 1, 1996 distribution.
NOTE 4 - INVESTMENT ON FORECLOSED PROPERTIES:
During 1991 and 1992, the Partnership acquired three real estate properties
through foreclosure on defaulted leases. Two of the properties are occupied by
tenants who are paying monthly rentals of $11,248 and $20,000, respectively.
The third property was sold in 1996 to its occupant. The purchase price was
paid in the form of a secured note with a $245,000 balloon payment due on March
31, 1998. As of March 31, 1998, $27,000 was received against the balloon
amount, with the occupant expecting to secure financing to pay off the
remaining balance. The Partnership has elected not to enforce the remedies
available to it under the contract as long as the buyer's financing source is
processing the loan request.
NOTE 5 - SUBSEQUENT EVENT: SETTLEMENT OF LITIGATION:
On May 5, 1998, Lease Resolution Corporation (LRC), on behalf of Datronic
Equipment Income Funds XVI, XVII, XVIII, XIX, XX and Datronic Finance Income
Fund I, reached an agreement to settle all claims of
10
<PAGE> 11
the aforementioned partnerships against Weiss & Co. ("Settlement Agreement").
(See Note 8 to the financial statements included in the Partnership's 1997 Form
10-K). The Settlement Agreement is contingent upon subsequent approval by the
United States District Court dismissing Weiss & Co. as a party defendant.
Pursuant to the terms of the Settlement Agreement, Weiss & Co. has agreed to
pay LRC, on behalf of the aforementioned partnerships, $2.4 million. LRC will
determine how these proceeds, net of contingent attorneys fees of $600,000,
will be distributed among the partnerships upon the completion of the trial
currently in process against Price Waterhouse. The Settlement Agreement
provides for Weiss & Co. to transfer $2.4 million to an escrow account. This
amount will be transferred to LRC no later than 30 days following the United
States District Court entering an order of dismissal of Weiss & Co. for which
no date has yet been set. All limited partners will be notified of the date
once it has been scheduled.
11
<PAGE> 12
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of liquidity and capital resources covers
material changes in the Partnership's financial condition from December 31,
1997 through March 31, 1998. The discussion and analysis of results of
operations is for the three month period ended March 31, 1998 as compared to
the corresponding period in 1997.
Liquidity and Capital Resources
During the three months ended March 31, 1998, Partnership assets continued to
be converted to cash in order to pay Partnership operating expenses, liquidate
Partnership liabilities and provide for the ultimate liquidation of the
Partnership.
During the three months ended March 31, 1998, the Partnership's cash and cash
equivalents decreased by $37,000 to $2,749,000 at March 31, 1998 from
$2,786,000 at December 31, 1997. This decrease is primarily due to cash used
in operations of $218,000, partially offset by cash receipts from collections
on leases of $181,000.
The Partnership's sources of liquidity on both a long-term and short-term basis
are expected to come principally from cash-on-hand and the rental or sale of
foreclosed properties. In addition, the Partnership's sources of liquidity on
a long-term basis include proceeds from the sale of Diverted and other assets.
Management believes that its sources of liquidity in the short and long-term
are sufficient to meet its operating cash requirements, provide for ongoing
pursuit of litigation, and an orderly liquidation of the Partnership.
The continued operation and eventual liquidation of the Partnership involves
numerous complex issues which have to be resolved. These issues relate to the
timing and realizability of lease-related assets, Diverted and other assets,
Datronic assets, litigation and the liquidation of the other Datronic
Partnerships. These issues make it difficult to predict the time and costs
necessary to operate and liquidate the Partnership in an orderly manner. As a
result of these uncertainties, it is unlikely that any additional distributions
will be made until all remaining assets are liquidated and the pending
litigation is resolved. The amount of future distributions, if any, to the
Limited Partners, in all likelihood, will be significantly less than the amount
of partners' equity reflected in the March 31, 1998 balance sheets (see
Partnership's financial statements included in Item 1.)
12
<PAGE> 13
Results of Operations
The Partnership had a net loss of $157,000 for the three months ended March 31,
1998 in the aggregate for all classes of partners. This compares to aggregate
net income for the same period in 1997 of $30,000. Differences in operating
results between Liquidating and Continuing Limited Partners are attributable to
lease income, acquisition costs, and expenses associated with new lease
investments made since the March 4, 1993 Settlement. Liquidating Limited
Partners do not participate in these post Settlement activities. Significant
factors affecting overall operating results for the two periods ended March 31,
1998 and 1997 include the following:
Rental income:
The 1998 decrease reflects management's decision to apply rental receipts on
foreclosed properties as a recovery of its investment balance, effective
January 1, 1998. For the period beginning April 1995 through December 1997
rental receipts on foreclosed properties were recognized as income.
General Partner's expense reimbursement:
The decrease in first quarter 1998 expense is primarily due to D&O insurance
and reductions in staff and related costs. Through the first quarter 1997,
insurance premiums were paid on an annual basis; however, in September 1997 a
one-time premium was paid that extended coverage through the ultimate
liquidation date of the Partnership.
Professional fees:
The 1998 increase reflects fees paid in connection with the ongoing litigation
against the Partnership's former accountants which is presently scheduled for
trial in May of 1998. This increase is partially offset by the decreasing
level of professional services required in such areas as collections,
consulting and auditing. These decreases are the result of the decrease in the
Partnership's lease portfolio and related activities.
Credit for lease losses:
The credit reflects Management's ongoing assessment of the potential losses
inherent in the lease portfolio and collections on previously reserved
balances.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3 - Legal Proceedings in the Partnership's December
31, 1997 Form 10-K for a discussion of material legal proceedings involving the
Partnership.
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.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized, on the 15th day of May 1998.
DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
Registrant
By: /s/ DONALD D. TORISKY
----------------------------------------
Donald D. Torisky
Chairman and Chief Executive Officer,
Lease Resolution Corporation
General Partner of
Datronic Equipment Income Fund XVI, L.P.
By: /s/ ROBERT P. SCHAEN
----------------------------------------
Robert P. Schaen
Vice Chairman and Chief Financial Officer,
Lease Resolution Corporation
General Partner of
Datronic Equipment Income Fund XVI, L.P.
15
<PAGE> 16
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 Financial Data Schedule, which is submitted
electronically to the Securities and
Exchange Commission for Information only and
not filed.
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet and the Statements of Revenue and Expenses and is qualified in its
entirety by reference to such Report on Form 10-Q.
</LEGEND>
<CIK> 0000814323
<NAME> DATRONIC EQUIPMENT INCOME FUND XVI, L.P.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,748,910
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,942,395
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,786,764
<TOTAL-LIABILITY-AND-EQUITY> 4,942,395
<SALES> 0
<TOTAL-REVENUES> 39,376
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,526
<LOSS-PROVISION> (58,257)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (156,519)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
