<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 0-21276
--------------------- -------------------------------
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 MARCH 31, 1998
PART I - FINANCIAL INFORMATION
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 7
(unaudited)
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
2
<PAGE> 3
DATRONIC FINANCE INCOME FUND I, L.P.
BALANCE SHEETS
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
ASSETS
------
<S> <C> <C> <C>
Cash and cash equivalents $ 275,412 $1,753,381 $2,028,793
Net investment in direct
financing leases - 1,158,405 1,158,405
Diverted and other assets, net 157,990 1,037,091 1,195,081
Datronic assets, net - - -
--------- ---------- ----------
$ 433,402 $3,948,877 $4,382,279
========= ========== ==========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable and
accrued expenses $ 935 $ 10,954 $ 11,889
Lessee rental deposits 6,049 56,554 62,603
--------- ---------- ----------
Total liabilities 6,984 67,508 74,492
Total partners' equity 426,418 3,881,369 4,307,787
--------- ---------- ----------
$ 433,402 $3,948,877 $4,382,279
========= ========== ==========
</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
----------- ---------- ----------
ASSETS
------
<S> <C> <C> <C>
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 March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ - $ 46,066 $ 46,066
Interest income 2,031 16,430 18,461
--------- ---------- ----------
2,031 62,496 64,527
--------- ---------- ----------
Expenses:
General Partner's
expense reimbursement 13,633 123,540 137,173
Professional fees 11,569 77,353 88,922
Other operating expenses 776 5,661 6,437
Credit for lease losses (1,821) (41,951) (43,772)
--------- ---------- ----------
24,157 164,603 188,760
--------- ---------- ----------
Net loss $ (22,126) $ (102,107) $ (124,233)
========= ========== ==========
Net loss-General Partner $ (221) $ (1,021) $ (1,242)
========= ========== ==========
Net loss-Limited Partners $ (21,905) $ (101,086) $ (122,991)
========= ========== ==========
Net loss per limited
partnership unit $ (2.85) $ (2.00)
========= ==========
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 March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Lease income $ 195 $ 99,069 $ 99,264
Interest income 1,725 13,171 14,896
--------- -------- ---------
1,920 112,240 114,160
--------- -------- ---------
Expenses:
General Partner's
expense reimbursement 17,480 148,322 165,802
Professional fees 7,839 53,798 61,637
Other operating expenses 525 4,265 4,790
--------- -------- ---------
25,844 206,385 232,229
--------- -------- ---------
Net loss $ (23,924) $(94,145) $(118,069)
========= ======== =========
Net loss -
General Partner $ (239) $ (941) $ (1,180)
========= ======== =========
Net loss -
Limited Partners $ (23,685) $(93,204) $(116,889)
========= ======== =========
Net loss per limited
partnership unit $ (3.08) $ (1.84)
========= ========
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 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 (1,242) (21,905) (101,086) (124,233)
Allocation of General
Partner's Equity 1,242 (221) (1,021) -
------- -------- ---------- ----------
Balance, March 31, 1998 $ - $426,418 $3,881,369 $4,307,787
======= ======== ========== ==========
</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.
7
<PAGE> 8
DATRONIC FINANCE INCOME FUND I, 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 $(22,126) $ (102,107) $ (124,233)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (1,821) (41,951) (43,772)
Changes in assets and liabilities:
Accounts payable and
accrued expenses (262) (6,304) (6,566)
Lessee rental deposits (20) (2,412) (2,432)
--------- ---------- ----------
(24,229) (152,774) (177,003)
--------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 5,233 321,073 326,306
--------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents (18,996) 168,299 149,303
Cash and cash equivalents:
Beginning of year 294,408 1,585,082 1,879,490
--------- ---------- ----------
End of first quarter $ 275,412 $1,753,381 $2,028,793
========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
DATRONIC FINANCE INCOME FUND I, 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 loss $ (23,924) $ (94,145) $ (118,069)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Changes in assets and liabilities:
Accounts payable and accrued
expenses (5,467) (21,497) (26,964)
Lessee rental deposits (1,721) (12,331) (14,052)
Due to management company 3,725 33,628 37,353
----------- ---------- ----------
(27,387) (94,345) (121,732)
----------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 8,101 495,451 503,552
----------- ---------- ----------
Cash flows from financing activities:
Distributions to
Limited Partners - (390,000) (390,000)
Distributions to
General Partner - (2,895) (2,895)
----------- ---------- ----------
- (392,895) (392,895)
----------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents (19,286) 8,211 (11,075)
Cash and cash equivalents:
Beginning of year 388,154 1,233,075 1,621,229
----------- ---------- ----------
End of first quarter $ 368,868 $1,241,286 $1,610,154
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 10
DATRONIC FINANCE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 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 - 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 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 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 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
10
<PAGE> 11
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 increase cash balances to provide cash reserves for
the ultimate liquidation of the Partnership.
During the three months ended March 31, 1998, the Partnership's cash and cash
equivalents increased by $149,000 to $2,029,000 at March 31, 1998 from
$1,880,000 at December 31, 1997. This increase is primarily due to cash
receipts from collections on leases of $326,000 partially offset by cash used
in operations of $177,000.
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 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 $124,000 for the three months ended March 31,
1998 in the aggregate for all classes of partners. This compares to an
aggregate net loss for the same period in 1997 of $118,000. 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:
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 months ended March 31, 1998 as compared to the
corresponding period in 1997.
Interest income:
Interest income increased for the three months ended March 31, 1998 as compared
to the corresponding period in 1997 as a result of increased invested cash
balances.
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:
This 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 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.
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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,028,793
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,382,279
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,307,787
<TOTAL-LIABILITY-AND-EQUITY> 4,382,279
<SALES> 0
<TOTAL-REVENUES> 64,527
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,437
<LOSS-PROVISION> (43,772)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (124,233)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
