<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
June 30, 1997 Commission File Number 0-21276
- --------------------- -------------------------------
DATRONIC FINANCE INCOME FUND I, L.P.
------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 36-3744792
- ------------------------------ ---------------------------
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 FINANCE INCOME FUND I, L.P.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements
Balance Sheets
June 30, 1997 (unaudited) 3
December 31, 1996 4
Statements of Revenue and Expenses (unaudited)
For the three months ended June 30, 1997 5
For the three months ended June 30, 1996 6
For the six months ended June 30, 1997 7
For the six months ended June 30, 1996 8
Statements of Changes in Partners' Equity
For the six months ended June 30, 1997
(unaudited) 9
Statements of Cash Flows (unaudited)
For the six months ended June 30, 1997 10
For the six months ended June 30, 1996 11
Notes to Financial Statements (unaudited) 12
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13 - 15
PART II - OTHER INFORMATION
Items 1-6. 16
<PAGE> 3
DATRONIC FINANCE INCOME FUND I, L.P.
BALANCE SHEETS
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ---------- ---------
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $336,488 $1,179,859 $1,516,347
Net investment in direct
financing leases 3,926 2,094,305 2,098,231
Diverted and other assets, net 144,697 949,836 1,094,533
Datronic assets, net - - -
-------- ---------- ----------
$485,111 $4,224,000 $4,709,111
======== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts payable and
accrued expenses $ 1,745 $ 20,998 $ 22,743
Lessee rental deposits 7,201 88,581 95,782
-------- ---------- ----------
Total liabilities 8,946 109,579 118,525
Total partners' equity 476,165 4,114,421 4,590,586
-------- ---------- ----------
$485,111 $4,224,000 $4,709,111
======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
DATRONIC FINANCE INCOME FUND I, L.P.
BALANCE SHEETS
December 31, 1996
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ---------- ---------
ASSETS
- ------
<S> <C> <C> <C>
Cash and cash equivalents $ 388,154 $1,233,075 $1,621,229
Due from management company 3,725 33,628 37,353
Net investment in direct
financing leases 12,084 3,091,844 3,103,928
Diverted and other assets, net 144,697 949,836 1,094,533
Datronic assets, net - - -
---------- ---------- ----------
$ 548,660 $5,308,383 $5,857,043
========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts payable and
accrued expenses $ 7,019 $ 56,404 $ 63,423
Lessee rental deposits 20,240 177,855 198,095
---------- --------- ----------
Total liabilities 27,259 234,259 261,518
Total partners' equity 521,401 5,074,124 5,595,525
---------- ---------- ----------
$ 548,660 $5,308,383 $5,857,043
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ---------
Revenue:
<S> <C> <C> <C>
Lease income $ 40 $ 86,663 $ 86,703
Interest income 1,376 11,071 12,447
-------- --------- ---------
1,416 97,734 99,150
-------- --------- ---------
Expenses:
General Partner's
expense reimbursement 17,763 141,572 159,335
Professional fees 4,594 36,258 40,852
Other operating expenses 371 2,569 2,940
-------- --------- ---------
22,728 180,399 203,127
-------- --------- ---------
Net loss $(21,312) $ (82,665) $(103,977)
======== ========= =========
Net loss -
General Partner $ (213) $ (826) $ (1,039)
======== ========= =========
Net loss -
Limited Partners $(21,099) $ (81,839) $(102,938)
======== ========= =========
Net loss per limited
partnership unit $(2.74) $(1.62)
====== ======
Weighted average number
of limited partnership units
outstanding 7,699 50,535
====== ======
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ---------
Revenue:
<S> <C> <C> <C>
Lease income (loss) $ (3,860) $ 124,360 $ 120,500
Interest income 7,635 70,568 78,203
-------- --------- ---------
3,775 194,928 198,703
-------- --------- ---------
Expenses:
Amortization of organization
and equipment acquisition costs 7,912 51,933 59,845
Management fees-New Era 19,236 173,265 192,501
General Partner's
expense reimbursement 1,966 12,909 14,875
Professional fees 6,133 43,097 49,230
Other operating expenses 59 2,956 3,015
Provision for lease losses - 75,000 75,000
-------- --------- ---------
35,306 359,160 394,466
-------- --------- ---------
Net loss $(31,531) $(164,232) $(195,763)
======== ========= =========
Net loss -
General Partner $ (315) $ (1,642) $ (1,957)
======== ========= =========
Net loss -
Limited Partners $(31,216) $(162,590) $(193,806)
======== ========= =========
Net loss per limited
partnership unit $(4.05) $(3.22)
====== ======
Weighted average number
of limited partnership units
outstanding 7,699 50,535
====== ======
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the six months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ---------- ---------
Revenue:
<S> <C> <C> <C>
Lease income $ 235 $ 185,732 $ 185,967
Interest income 3,101 24,242 27,343
-------- --------- ---------
3,336 209,974 213,310
-------- --------- ---------
Expenses:
General Partner's
expense reimbursement 35,243 289,894 325,137
Professional fees 12,433 90,056 102,489
Other operating expenses 896 6,834 7,730
-------- --------- ---------
48,572 386,784 435,356
-------- --------- ---------
Net loss $(45,236) $(176,810) $(222,046)
======== ========= =========
Net loss -
General Partner $ (452) $ (1,768) $ (2,220)
======== ========= =========
Net loss -
Limited Partners $(44,784) $(175,042) $(219,826)
======== ========= =========
Net loss per limited
partnership unit $(5.82) $(3.46)
====== ======
Weighted average number
of limited partnership units
outstanding 7,699 50,535
====== ======
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the six months ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ---------- ---------
Revenue:
<S> <C> <C> <C>
Lease income (loss) $ (1,644) $ 306,293 $ 304,649
Interest income 7,919 81,578 89,497
-------- --------- ---------
6,275 387,871 394,146
-------- --------- ---------
Expenses:
Amortization of organization
and equipment acquisition costs 15,823 103,865 119,688
Management fees-New Era 39,505 366,816 406,321
General Partner's
expense reimbursement 8,809 57,827 66,636
Professional fees 16,245 113,228 129,473
Other operating expenses 1,714 15,043 16,757
Provision for lease losses - 125,000 125,000
-------- --------- ---------
82,096 781,779 863,875
-------- --------- ---------
Net loss $(75,821) $(393,908) $(469,729)
======== ========= =========
Net loss -
General Partner $ (758) $ (3,939) $ (4,697)
======== ========= =========
Net loss -
Limited Partners $(75,063) $(389,969) $(465,032)
======== ========= =========
Net loss per limited
partnership unit $(9.75) $(7.72)
====== ======
Weighted average number
of limited partnership units
outstanding 7,699 50,535
====== ======
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS 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, 1996 $(260,963)* $540,745 $5,315,743 $5,595,525
Distribution to
partners (2,895) -0- (779,998) (782,893)
Net loss (2,220) (44,784) (175,042) (222,046)
Allocation of General
Partner's equity 266,078 (19,796) (246,282) -0-
-------- -------- ---------- ----------
Balance, June 30, 1997 $ -0- $476,165 $4,114,421 $4,590,586
======== ======== ========== ==========
</TABLE>
* Balance as previously reported was $0 due to allocation of $19,344 and
$241,619 to Liquidating and Continuing Limited Partners' Equity,
respectively.
See accompanying notes to financial statements.
9
<PAGE> 10
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ---------- ---------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $(45,236) $ (176,810) $ (222,046)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Changes in assets and liabilities:
Accounts payable and accrued
expenses (5,274) (35,406) (40,680)
Lessee rental deposits (13,039) (89,274) (102,313)
Due from management company 3,725 33,628 37,353
-------- ---------- ----------
(59,824) (267,862) (327,686)
-------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 8,158 997,539 1,005,697
-------- ---------- ----------
Cash flows from financing activities:
Distributions to Limited Partners - (779,998) (779,998)
Distributions to General Partner - (2,895) (2,895)
-------- ---------- ----------
- (782,893) (782,893)
-------- ---------- ----------
Net decrease in cash and
cash equivalents (51,666) (53,216) (104,882)
Cash and cash equivalents:
Beginning of year 388,154 1,233,075 1,621,229
-------- ---------- ----------
End of second quarter $336,488 $1,179,859 $1,516,347
======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 11
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ---------- ---------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $(75,821) $ (393,908) $ (469,729)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Amortization expense 15,823 103,865 119,688
Provision for lease losses - 125,000 125,000
Changes in assets and liabilities:
Accounts payable and accrued
expenses (4,577) (31,161) (35,738)
Lessee rental deposits (5,791) (52,703) (58,494)
Due to management company 4 88 92
-------- ---------- ----------
(70,362) (248,819) (319,181)
-------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 36,826 1,331,200 1,368,026
Release of restricted cash 44,363 291,209 335,572
--------- ---------- ----------
81,189 1,622,409 1,703,598
--------- ---------- ----------
Cash flows from financing activities:
Distributions to
Limited Partners - (755,965) (755,965)
Distributions to
General Partner - (7,433) (7,433)
-------- ---------- ----------
- (763,398) (763,398)
-------- ---------- ----------
Net increase in cash and
cash equivalents 10,827 610,192 621,019
Cash and cash equivalents:
Beginning of year 469,897 1,079,361 1,549,258
-------- ---------- ----------
End of second quarter $480,724 $1,689,553 $2,170,277
======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 12
DATRONIC FINANCE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
NOTE 1 - ORGANIZATION:
Datronic Finance Income Fund I, L.P., a Delaware Limited Partnership (the
"Partnership"), was formed on November 21, 1990 for the purpose of leasing both
high- and low-technology equipment. Reference is made to Notes 3, 4, 5 and 6 to
the Partnership's financial statements included in the 1996 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 1996 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.
NOTE 3 - LIMITED PARTNERSHIP DISTRIBUTIONS:
Distributions to Liquidating Limited Partners were suspended after payment of
the April 1, 1995 distribution and distributions to Continuing Limited Partners
were suspended after payment of the April 1, 1997 distribution.
12
<PAGE> 13
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,
1996 through June 30, 1997. The discussion and analysis of results of
operations is for the three and six month periods ended June 30, 1997 as
compared to the corresponding periods in 1996.
Financial Condition, Liquidity and Capital Resources
During the six months ended June 30, 1997, Partnership assets continued to be
converted to cash in order to pay Partnership operating expenses, liquidate
Partnership liabilities and make distributions to limited partners.
Net investment in direct financing leases decreased approximately $1,006,000
during the six months ended June 30, 1997. This decrease is due to principal
collections on leases.
Lessee rental deposits decreased approximately $102,000 for the six months
ended June 30, 1997 resulting from payments made to lessees at the end of lease
term.
In the aggregate, partners' equity decreased approximately $1,005,000 during
the six months ended June 30, 1997 due to a net loss of approximately $222,000
and distributions to partners of approximately $783,000.
During the six months ended June 30, 1997, the Partnership's operating
activities resulted in a use of approximately $328,000 of cash. This was due
principally to a net loss of approximately $222,000, decreases in accounts
payable and lessee rental deposits of approximately $143,000, partially offset
by a decrease in due from management company of approximately $37,000. During
the period, cash flows from investing activities aggregated approximately
$1,006,000 relating to principal collections on leases. Cash flows used for
financing activities of approximately $783,000, consisted of distributions to
limited partners of $780,000 and the general partner of approximately $3,000.
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 cash receipts from
lessees under leases owned by the Partnership. In addition, the Partnership's
sources of liquidity on a long-term basis are expected to include proceeds from
the sale of Diverted and other assets and portions of the Partnership's lease
portfolio which may be sold in bulk. Management believes that its sources of
13
<PAGE> 14
liquidity in the short and long-term are sufficient to meet its operating cash
obligations, provide for the ongoing pursuit of litigation and an orderly
liquidation of the Partnership. Distributions to the Liquidating Limited
Partners were suspended after payment of the April 1, 1995 distribution.
Distributions to the Continuing Limited Partners were suspended after the April
1, 1997 distribution.
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 (see Notes 3, 5 and 9 to the Partnership's financial statement
included in the 1996 Form 10-K). 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 are likely to be significantly less than the amount of
partners' equity reflected in the June 30, 1997 Balance Sheets (see the
financial statements included in Item 1).
Results of Operations
Lease income decreased approximately $34,000 and $119,000 for the three and six
month periods ended June 30, 1997 compared to the corresponding periods in
1996. The decrease is primarily due to a decline in the lease portfolios
partially offset by a $45,000 provision recorded in the second quarter of 1996
to provide for the return of lessee overpayments previously recorded as lease
income.
Interest income decreased approximately $66,000 and $62,000 for the three and
six month periods ended June 30, 1997 as compared to the corresponding periods
in 1996. The decrease is primarily due to the recognition in the second
quarter of 1996 of interest previously earned on restricted cash balances.
Management fees-New Era represent amounts paid New Era for managing the
Partnership on a day-to-day basis pursuant to a Management Agreement which was
terminated effective June 30, 1996. Accordingly, fees paid to New Era amounted
to zero for the three and six month periods ended June 30, 1997 as compared to
$193,000 and $406,000 for the same periods in 1996. Subsequent to June 30,
1996 the General Partner, Lease Resolution Corporation ("LRC"), has assumed
responsibility for day-to-day management of the Partnership and the
corresponding costs and expenses are included in General Partner's expense
reimbursement (see Note 8 to the Partnership's financial statements included in
the 1996 Form 10-K).
14
<PAGE> 15
The General Partner's expense reimbursement represents the amount paid to LRC
in its capacity as general partner in excess of what LRC received as partner
distributions. LRC was paid approximately $159,000 for the three months ended
June 30, 1997 and $328,000 for the six months then ended (including $3,000 in
partner distributions). This compares to total payments of $18,000 (including
$3,000 in partner distributions) and $74,000 (including $7,000 in partner
distributions), respectively, for the comparable three and six month periods of
1996. The increase of $141,000 and $254,000, respectively, for the three and
six month periods primarily represent expenses associated with LRC's assumption
of the day-to-day management of the Partnership's operations effective July 1,
1996. These expenses were previously included in the Management Fees - New Era
(see Note 8 to the Partnership's financial statements included in the 1996
Form 10-K). Included in the 1997 expenses is $19,000 representing a one time
expense associated with the relocation of former New Era employees to reduced
office space.
Professional Fees decreased approximately $8,000 and $27,000 for the three and
six month periods ended June 30, 1997 as compared to the corresponding periods
in 1996 primarily due to decreased audit fees and legal fees related to
collections and other legal matters.
The provision for lease losses reflects Management's ongoing assessment of
potential losses inherent in the lease portfolios.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3 - Legal Proceedings in the Partnership's December
31, 1996 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.
16
<PAGE> 17
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 12th day of August 1997.
DATRONIC FINANCE INCOME FUND I, L.P.
Registrant
By: /s/DONALD D. TORISKY
-------------------------------------
Donald D. Torisky
Chairman and Chief Executive Officer,
Lease Resolution Corporation
General Partner of
Datronic Finance Income Fund I, L.P.
By: /s/ROBERT P. SCHAEN
------------------------------------------
Robert P. Schaen
Vice Chairman and Chief Financial Officer,
Lease Resolution Corporation
General Partner of
Datronic Finance Income Fund I, L.P.
17
<PAGE> 18
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.
18
<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>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,516,347
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,709,111
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,590,586
<TOTAL-LIABILITY-AND-EQUITY> 4,709,111
<SALES> 0
<TOTAL-REVENUES> 213,310
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,730
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (222,046)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
