<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, 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 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, 1998
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements
Balance Sheets
June 30, 1998 (unaudited) 3
December 31, 1997 4
Statements of Revenue and Expenses (unaudited)
For the three months ended June 30, 1998 5
For the three months ended June 30, 1997 6
For the six months ended June 30, 1998 7
For the six months ended June 30, 1997 8
Statements of Changes in Partners' Equity
For the six months ended June 30, 1998
(unaudited) 9
Statements of Cash Flows (unaudited)
For the six months ended June 30, 1998 10
For the six months ended June 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 - 16
PART II - OTHER INFORMATION
Items 1-6. 17
<PAGE> 3
DATRONIC FINANCE INCOME FUND I, L.P.
BALANCE SHEETS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $248,738 $1,845,212 $2,093,950
Net investment in direct
financing leases - 918,645 918,645
Diverted and other assets, net 157,990 1,037,091 1,195,081
Datronic assets, net - - -
-------- ---------- ----------
$406,728 $3,800,948 $4,207,676
======== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and
accrued expenses $ 778 $ 10,288 $ 11,066
Lessee rental deposits 5,934 40,414 46,348
-------- ---------- ----------
Total liabilities 6,712 50,702 57,414
Total partners' equity 400,016 3,750,246 4,150,262
-------- ---------- ----------
$406,728 $3,800,948 $4,207,676
======== ========== ==========
</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 June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 457 $ 44,218 $ 44,675
Interest income 2,509 21,168 23,677
----------- ---------- ----------
2,966 65,386 68,352
----------- ---------- ----------
Expenses:
General Partner's
expense reimbursement 12,313 114,847 127,160
Professional fees 16,626 112,852 129,478
Other operating expenses 735 4,819 5,554
Credit for lease losses (306) (36,009) (36,315)
----------- ---------- ----------
29,368 196,509 225,877
----------- ---------- ----------
Net loss $ (26,402) $ (131,123) $ (157,525)
=========== ========== ==========
Net loss -
General Partner $ (264) $ (1,311) $ (1,575)
=========== ========== ==========
Net loss -
Limited Partners $ (26,138) $ (129,812) $ (155,950)
=========== ========== ==========
Net loss per limited
partnership unit $(3.39) $(2.57)
=========== ==========
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, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
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.
6
<PAGE> 7
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 457 $ 90,284 $ 90,741
Interest income 4,540 37,598 42,138
----------- ---------- ----------
4,997 127,882 132,879
----------- ---------- ----------
Expenses:
General Partner's
expense reimbursement 25,946 238,387 264,333
Professional fees 28,195 190,205 218,400
Other operating expenses 1,511 10,480 11,991
Credit for lease losses (2,127) (77,960) (80,087)
----------- ---------- ----------
53,525 361,112 414,637
----------- ---------- ----------
Net loss $ (48,528) $ (233,230) $ (281,758)
=========== ========== ==========
Net loss -
General Partner $ (485) $ (2,332) $ (2,817)
=========== ========== ==========
Net loss -
Limited Partners $ (48,043) $ (230,898) $ (278,941)
=========== ========== ==========
Net loss per limited
partnership unit $ (6.24) $ (4.57)
=========== ==========
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, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
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.
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 (2,817) (48,043) (230,898) (281,758)
Allocation of General
Partner's Equity 2,817 (485) (2,332) -
--------- ----------- ---------- ----------
Balance, June 30, 1998 $ - $ 400,016 $3,750,246 $4,150,262
========= =========== ========== ==========
</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 six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (48,528) $ (233,230) $ (281,758)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (2,127) (77,960) (80,087)
Changes in assets and liabilities:
Accounts payable and accrued
expenses (419) (6,970) (7,389)
Lessee rental deposits (135) (18,552) (18,687)
----------- ---------- ----------
(51,209) (336,712) (387,921)
----------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 5,539 596,842 602,381
----------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents (45,670) 260,130 214,460
Cash and cash equivalents:
Beginning of year 294,408 1,585,082 1,879,490
----------- ---------- ----------
End of second quarter $ 248,738 $1,845,212 $2,093,950
=========== ========== ==========
</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, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
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.
11
<PAGE> 12
DATRONIC FINANCE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
June 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. ("Settlement Agreement"). (See Note 7 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 for the Northern District of Illinois, Eastern Division (the
"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 expects to determine the
appropriate allocation of these proceeds among the Partnerships, net of
contingent attorneys fees of $600,000, during the third quarter after
considering all relevant factors associated with the Settlement. Weiss & Co.
has transferred $2.4 million to an escrow account; this amount will be
transferred to LRC no later than 30 days following the
12
<PAGE> 13
District Court entering an order of dismissal of Weiss & Co. The District
Court has scheduled a hearing for August 19, 1998 to entertain the motion for
dismissal of Weiss & Co. as a party defendant.
On June 10, 1998, a verdict was rendered finding Price Waterhouse liable for
negligence, but not guilty of breach of contract. On July 20, 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 June 30, 1998. The discussion and analysis of results of operations is
for the three and six month periods ended June 30, 1998 as compared to the
corresponding periods in 1997.
Liquidity and Capital Resources
During the six months ended June 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 six months ended June 30, 1998, the Partnership's cash and cash
equivalents increased by $214,000 to $2,094,000 at June 30, 1998 from
$1,880,000 at December 31, 1997. This increase is primarily due to cash
receipts from collections on leases of $602,000 partially offset by cash used
in operations of $388,000.
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
through a bulk sale. 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 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. As a result of these uncertainties, it is
unlikely that any significant 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
14
<PAGE> 15
all likelihood, will be significantly less than the amount of partners' equity
reflected in the June 30, 1998 balance sheets (see Partnership's financial
statements included in Item 1).
Results of Operations
The Partnership had net losses of $158,000 and $282,000 for the three and six
months ended June 30, 1998, respectively, in the aggregate for all classes of
partners. This compares to aggregate net losses of $104,000 and $222,000 for
the same period 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 six month periods ended June 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 six months ended June 30, 1998 as compared to
the corresponding periods in 1997.
Interest income:
Interest income increased for the three and six month periods ended June 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 six month periods ended June 30, 1998 is
primarily due to changes in the premium payments for D&O insurance, relocation
costs and 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 increase reflects fees paid in connection with the ongoing litigation
against the Partnership's former accountants. As of August 14, 1998 the
litigation process continues. These increases are 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.
15
<PAGE> 16
Credit for lease losses:
This credit primarily reflects collections on previously reserved balances.
16
<PAGE> 17
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. and Price Waterhouse.
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.
17
<PAGE> 18
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 14th day of
August 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.
18
<PAGE> 19
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.
19
<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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,093,950
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,207,676
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,150,262
<TOTAL-LIABILITY-AND-EQUITY> 4,207,676
<SALES> 0
<TOTAL-REVENUES> 132,879
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,991
<LOSS-PROVISION> (80,087)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (281,758)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
