<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
September 30, 1998 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 jurisdiction of IRS Employer Identification
incorporation or organization Number
1300 E. Woodfield Road, Suite 312 Schaumburg, Illinois 60173
- ---------------------------------------- ---------------------------
Address of principal executive offices City, State, Zip Code
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 SEPTEMBER 30, 1998
----------------------------------------
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1.
- -------
Index to Financial Statements
Balance Sheets
September 30, 1998 (unaudited) 3
December 31, 1997 4
Statements of Revenue and Expenses (unaudited)
For the three months ended September 30, 1998 5
For the three months ended September 30, 1997 6
For the nine months ended September 30, 1998 7
For the nine months ended September 30, 1997 8
Statements of Changes in Partners' Equity
For the nine months ended September 30, 1998
(unaudited) 9
Statements of Cash Flows (unaudited)
For the nine months ended September 30, 1998 10
For the nine months ended September 30, 1997 11
Notes to Financial Statements (unaudited) 12-13
Item 2.
- -------
Management's Discussion and Analysis of
Financial Condition and Results of Operations 14-15
PART II - OTHER INFORMATION
Items 1-6. 16
- ----------
</TABLE>
2
<PAGE> 3
DATRONIC FINANCE INCOME FUND I, L.P.
BALANCE SHEETS
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
ASSETS
------
Cash and cash equivalents $235,626 $1,907,576 $2,143,202
Net investment in direct
financing leases -- 756,993 756,993
Diverted and other assets, net 157,990 1,037,091 1,195,081
Datronic assets, net -- -- --
----------- ---------- ----------
$393,616 $3,701,660 $4,095,276
=========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable and
accrued expenses $ 742 $ 9,556 $ 10,298
Lessee rental deposits 3,626 20,857 24,483
----------- ---------- ----------
Total liabilities 4,368 30,413 34,781
Total partners' equity 389,248 3,671,247 4,060,495
----------- ---------- ----------
$393,616 $3,701,660 $4,095,276
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
DATRONIC FINANCE INCOME FUND I, 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 $294,408 $1,585,082 $1,879,490
Net investment in direct
financing leases 3,412 1,437,527 1,440,939
Diverted and other assets, net 157,990 1,037,091 1,195,081
Datronic assets, net -- -- --
----------- ---------- ----------
$455,810 $4,059,700 $4,515,510
=========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable and
accrued expenses $1,197 $17,258 $18,455
Lessee rental deposits 6,069 58,966 65,035
----------- ---------- ----------
Total liabilities 7,266 76,224 83,490
Total partners' equity 448,544 3,983,476 4,432,020
----------- ---------- ----------
$455,810 $4,059,700 $4,515,510
=========== ========== ==========
</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 September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ---------
<S> <C> <C> <C>
Revenue:
Lease income $482 $36,095 $36,577
Interest income 2,777 20,739 23,516
----------- ---------- ---------
3,259 56,834 60,093
----------- ---------- ---------
Expenses:
General Partner's
expense reimbursement 13,074 127,741 140,815
Professional fees 1,347 10,655 12,002
Other operating expenses 302 2,005 2,307
Credit for lease losses (696) (4,568) (5,264)
----------- ---------- ---------
14,027 135,833 149,860
----------- ---------- ---------
Net loss $(10,768) $(78,999) $(89,767)
=========== ========== =========
Net loss -
General Partner $(108) $(790) $(898)
=========== ========== =========
Net loss -
Limited Partners $(10,660) $(78,209) $(88,869)
=========== ========== =========
Net loss per limited
partnership unit $(1.38) $(1.55)
=========== ==========
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 September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 713 $ 69,900 $ 70,613
Interest income 1,715 18,484 20,199
----------- ---------- ----------
2,428 88,384 90,812
----------- ---------- ----------
Expenses:
General Partner's
expense reimbursement 16,234 138,258 154,492
Professional fees 5,405 42,219 47,624
Other operating expenses 986 6,482 7,468
----------- ---------- ----------
22,625 186,959 209,584
----------- ---------- ----------
Net loss $(20,197) $(98,575) $(118,772)
=========== ========== ==========
Net loss - General Partner $ (202) $ (986) $ (1,188)
=========== ========== ==========
Net loss - Limited Partners $(19,995) $(97,589) $(117,584)
=========== ========== ==========
Net loss per limited
partnership unit $ (2.60) $ (1.93)
=========== ==========
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 nine months ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 939 $ 126,379 $ 127,318
Interest income 7,317 58,337 65,654
----------- ---------- ----------
8,256 184,716 192,972
----------- ---------- ----------
Expenses:
General Partner's
expense reimbursement 39,020 366,128 405,148
Professional fees 29,542 200,860 230,402
Other operating expenses 1,813 12,485 14,298
Credit for lease losses (2,823) (82,528) (85,351)
----------- ---------- ----------
67,552 496,945 564,497
----------- ---------- ----------
Net loss $(59,296) $(312,229) $(371,525)
=========== ========== ==========
Net loss -
General Partner $ (593) $ (3,122) $ (3,715)
=========== ========== ==========
Net loss -
Limited Partners $(58,703) $(309,107) $(367,810)
=========== ========== ==========
Net loss per limited
partnership unit $ (7.62) $ (6.12)
=========== ==========
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 nine months ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 948 $ 255,632 $ 256,580
Interest income 4,816 42,726 47,542
----------- ---------- ----------
5,764 298,358 304,122
----------- ---------- ----------
Expenses:
General Partner's
expense reimbursement 51,477 428,152 479,629
Professional fees 17,838 132,275 150,113
Other operating expenses 1,882 13,316 15,198
----------- ---------- ----------
71,197 573,743 644,940
----------- ---------- ----------
Net loss $(65,433) $(275,385) $(340,818)
=========== ========== ==========
Net loss - General Partner $ (654) $ (2,754) $ (3,408)
=========== ========== ==========
Net loss - Limited Partners $(64,779) $(272,631) $(337,410)
=========== ========== ==========
Net loss per limited
partnership unit $ (8.41) $ (5.39)
=========== ==========
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, 1997* $ -- $ 448,544 $3,983,476 $4,432,020
Net loss (3,715) (58,703) (309,107) (371,525)
Allocation of General
Partner's Equity 3,715 (593) (3,122) --
--------- ----------- ---------- ----------
Balance, September 30, 1998 $ -- $ 389,248 $3,671,247 $4,060,495
========= =========== ========== ==========
</TABLE>
* Balances are net of $20,073 and $247,592, of General Partner's equity
previously allocated to Liquidating and Continuing Limited Partners'
Equity.
See accompanying notes to financial statements.
9
<PAGE> 10
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(59,296) $(312,229) $(371,525)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (2,823) (82,528) (85,351)
Changes in assets and liabilities:
Accounts payable and accrued
expenses (455) (7,702) (8,157)
Lessee rental deposits (2,443) (38,109) (40,552)
----------- ---------- ----------
(65,017) (440,568) (505,585)
----------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 6,235 763,062 769,297
----------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents (58,782) 322,494 263,712
Cash and cash equivalents:
Beginning of year 294,408 1,585,082 1,879,490
----------- ---------- ----------
End of third quarter $ 235,626 $1,907,576 $2,143,202
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 11
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows used for operating activities:
Net loss $(65,433) $(275,385) $(340,818)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Changes in assets and liabilities:
Accounts payable and
accrued expenses (6,034) (40,800) (46,834)
Lessee rental deposits (13,289) (113,101) (126,390)
Due from management company 3,725 33,628 37,353
----------- ---------- ----------
(81,031) (395,658) (476,689)
----------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 8,019 1,331,117 1,339,136
----------- ---------- ----------
Cash flows used for financing activities:
Distributions to Limited Partners -- (779,999) (779,999)
Distributions to General Partner -- (2,895) (2,895)
----------- ---------- ----------
-- (782,894) (782,894)
----------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents (73,012) 152,565 79,553
Cash and cash equivalents:
Beginning of year 388,154 1,233,075 1,621,229
----------- ---------- ----------
End of third quarter $ 315,142 $1,385,640 $1,700,782
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 12
DATRONIC FINANCE INCOME FUND I, L.P.
------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
September 30, 1998
------------------
(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. See Notes 4, 7 and 9 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 and distributions to Continuing Limited Partners
were suspended after payment of the April 1, 1997 distribution.
NOTE 4 - 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 the aforementioned
partnerships against Weiss & Co. The settlement was contingent upon the
subsequent approval by the United States District Court for the Northern
District of Illinois, Eastern Division (the "District Court") dismissing Weiss
& Co. as a party defendant. On August 19, 1998, the District Court entered an
order dismissing Weiss & Co. as a party defendant, and on September 20, 1998,
$2,437,331 was transferred to LRC in full and final settlement of the Weiss
matter. In connection with this matter, a total of $1,410,950 of expenses
($708,600 for the nine months ended September 30, 1998) consisting primarily of
legal fees, was incurred. After payment of contingent legal fees of $609,333,
a total of $1,827,998 is available for transfer to the Datronic Partnerships.
LRC will determine the appropriate allocation of these amounts among the
Partnerships after resolution of the post-trial motions filed in the Price
Waterhouse matter.
12
<PAGE> 13
On June 10, 1998 a verdict was rendered finding Price Waterhouse liable for
negligence, but not guilty of breach of contract. On July 20, 1998, LRC and
Price Waterhouse both filed post-trial motions requesting relief from the
Court. The Court is not expected to rule on these motions for several months.
13
<PAGE> 14
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 September 30, 1998. The discussion and analysis of results of
operations is for the three and nine month periods ended September 30, 1998 as
compared to the corresponding periods in 1997.
Liquidity and Capital Resources
- -------------------------------
During the nine months ended September 30, 1998, Partnership assets continued
to be converted to cash in order to pay Partnership operating expenses,
liquidate Partnership liabilities and increase cash balances to provide cash
reserves for the ultimate liquidation of the Partnership.
During the nine months ended September 30, 1998, the Partnership's cash and
cash equivalents increased by $264,000 to $2,143,000 at September 30, 1998 from
$1,880,000 at December 31, 1997. This increase is primarily due to cash
receipts from collections on leases of $769,000 partially offset by cash used
in operations of $505,000.
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
leases owned by the Partnership. The lease portfolio is scheduled to be
substantially run out by the end of 2000, unless it is determined that it is in
the Partnership's best interest to dispose of the remaining portfolio earlier.
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 these sources of liquidity in the short and long-term are
sufficient to meet 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
complex issues some of which have been resolved. These issues relate to the
timing and the amount to be realized from the liquidation 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. Through the second quarter of 1998, it
appeared unlikely that the Partnership would make any additional distributions
until such time as its remaining assets were liquidated and the pending
litigation was resolved. Now that additional assets have been liquidated the
General Partner has determined that an interim cash distribution will be paid
to the Limited Partners shortly after the end of the first quarter 1999. The
General Partner is in the process of determining the amount that will be
available for this distribution and its allocation among each class of Limited
Partner. This distribution will be made to owners of record as of
December 31, 1998 even if their units are subsequently sold.
14
<PAGE> 15
Results of Operations
- ---------------------
The Partnership had net losses of $90,000 and $372,000 for the three and nine
months ended September 30, 1998, respectively, in the aggregate for all classes
of partners. This compares to aggregate net losses of $119,000 and $341,000
for the same periods in 1997. 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 three and nine month periods ended September
30, 1998 as compared to the corresponding periods in 1997 include the
following:
Lease income:
Since October 1996, the Partnership has been in its Liquidation Phase which
prohibits investing in any new leases. Accordingly, the lease portfolio has
continued to decrease as collections are made, resulting in a continued decline
in lease income for the three and nine months ended September 30, 1998 as
compared to the corresponding periods in 1997.
Interest income:
Interest income increased for the three and nine month periods ended September
30, 1998 as compared to the corresponding periods in 1997 as a result of
increased invested cash balances.
General Partner's expense reimbursement:
The decrease for the three and nine month periods ended September 30, 1998 is
primarily due to the elimination of premium payments for D&O insurance and
relocation costs as well as reductions in staff and related costs. Through the
first quarter 1997, D&O 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. Included in the
second quarter of 1997 is a one-time charge for relocating staff to reduced
office space.
Professional fees:
The 1998 nine months increase reflects fees paid during the second quarter of
1998 in connection with the ongoing litigation against one of the Partnership's
former accountants. 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. The decrease for the three months ended
September 30, 1998 primarily reflects the reduction in fees paid in connection
with the ongoing litigation. There was little activity while awaiting rulings
on post-trial motions filed in July 1998. See Note 4 to the Partnership's
financial statements included in Item 1.
Credit for lease losses:
This credit primarily reflects collections on previously reserved balances.
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, 1997 Form 10-K for a discussion of material legal proceedings involving the
Partnership.
Reference is made to Part I, Item 1, Note 4 for a discussion of legal
proceedings involving claims against Weiss & Co.
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 16th day of November 1998.
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
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
27 Financial Data Schedule, which
is submitted electronically to
the Securities and Exchange
Commission for Information only
and not filed.
</TABLE>
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,143,202
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,095,276
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,060,495
<TOTAL-LIABILITY-AND-EQUITY> 4,095,276
<SALES> 0
<TOTAL-REVENUES> 192,972
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,298
<LOSS-PROVISION> (85,351)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (371,525)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
