<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, 1999 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 SEPTEMBER 30, 1999
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements
Balance Sheets
September 30, 1999 (unaudited) 3
December 31, 1998 4
Statements of Revenue and Expenses (unaudited)
For the three months ended September 30, 1999 5
For the three months ended September 30, 1998 6
For the nine months ended September 30, 1999 7
For the nine months ended September 30, 1998 8
Statements of Changes in Partners' Equity
For the nine months ended September 30, 1999
(unaudited) 9
Statements of Cash Flows (unaudited)
For the nine months ended September 30, 1999 10
For the nine months ended September 30, 1998 11
Notes to Financial Statements (unaudited) 12
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13 - 14
Item 3.
Quantitative and Qualitative Disclosures about
Market Risk 15
PART II - OTHER INFORMATION
Items 1-6. 16
2
<PAGE> 3
DATRONIC FINANCE INCOME FUND I, L.P.
BALANCE SHEETS
September 30, 1999
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
ASSETS
Cash and cash equivalents $ 204,104 $ 1,875,850 $ 2,079,954
Net investment in direct financing
leases - 262,196 262,196
Diverted and other assets, net 81,657 536,024 617,681
Datronic assets, net - - -
----------- ----------- -----------
$ 285,761 $ 2,674,070 $ 2,959,831
=========== ============ ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued
expenses $ 87 $ 3,077 $ 3,164
Lessee rental deposits 1,453 9,536 10,989
----------- ----------- -----------
Total liabilities 1,540 12,613 14,153
Total partners' equity 284,221 2,661,457 2,945,678
----------- ----------- -----------
$ 285,761 $ 2,674,070 $ 2,959,831
=========== ============ ===========
See accompanying notes to financial statements
3
<PAGE> 4
DATRONIC FINANCE INCOME FUND I, L.P.
BALANCE SHEETS
December 31, 1998
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
ASSETS
Cash and cash equivalents $ 325,257 $2,604,451 $2,929,708
Judgment receivable, net 5,136 33,717 38,853
Net investment in direct financing
leases - 633,563 633,563
Diverted and other assets, net 81,657 536,024 617,681
Datronic assets, net - - -
----------- ----------- -----------
$ 412,050 $3,807,755 $4,219,805
=========== =========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued
expenses $ 2,273 $ 20,606 $ 22,879
Lessee rental deposits 2,345 15,392 17,737
----------- ----------- -----------
Total liabilities 4,618 35,998 40,616
Total partners' equity 407,432 3,771,757 4,179,189
----------- ----------- -----------
$ 412,050 $3,807,755 $4,219,805
=========== =========== ===========
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, 1999
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
Revenue:
Lease income $ - $ 10,415 $ 10,415
Interest income 2,523 20,785 23,308
----------- ----------- -----------
2,523 31,200 33,723
----------- ----------- -----------
Expenses:
General Partner's expense
reimbursement 11,694 107,396 119,090
Professional fees 1,118 10,129 11,247
Other operating expenses 328 2,147 2,475
Credit for lease losses (309) (9,029) (9,338)
----------- ----------- -----------
12,831 110,643 123,474
----------- ----------- -----------
Net loss $ (10,308) $ (79,443) $ (89,751)
=========== =========== ===========
Net loss - General Partner $ (103) $ (794) $ (897)
=========== =========== ===========
Net loss - Limited Partners $ (10,205) $ (78,649) $ (88,854)
=========== =========== ===========
Net loss per limited
partnership unit $ (1.33) $ (1.56)
=========== ===========
Weighted average number of limited
partnership units outstanding 7,699 50,535
=========== ===========
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, 1998
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
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
=========== ===========
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, 1999
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
Revenue:
Lease income $ 753 $ 44,841 $ 45,594
Interest income 8,088 65,290 73,378
----------- ----------- -----------
8,841 110,131 118,972
----------- ----------- -----------
Expenses:
General Partner's expense
reimbursement 35,690 324,619 360,309
Professional fees 4,916 59,262 64,178
Other operating expenses 1,235 9,295 10,530
Credit for lease losses (1,640) (58,766) (60,406)
----------- ----------- -----------
40,201 334,410 374,611
----------- ----------- -----------
Net loss $ (31,360) $ (224,279) $ (255,639)
=========== =========== ===========
Net loss - General Partner $ (313) $ (2,243) $ (2,556)
=========== =========== ===========
Net loss - Limited Partners $ (31,047) $ (222,036) $ (253,083)
=========== =========== ===========
Net loss per limited
partnership unit $ (4.03) $ (4.39)
=========== ===========
Weighted average number of limited
partnership units outstanding 7,699 50,535
=========== ===========
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, 1998
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
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
=========== ===========
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
Partners' Partners' Partners' Partners'
Equity Equity Equity Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1998* $ - $ 407,432 $ 3,771,757 $ 4,179,189
Distributions to partners - (91,851) (886,021) (977,872)
Net loss (2,556) (31,047) (222,036) (255,639)
Allocation of General
Partner's Equity 2,556 (313) (2,243) -
----------- ----------- ----------- -----------
Balance, September 30, 1999 $ - $ 284,221 $ 2,661,457 $ 2,945,678
=========== =========== =========== ===========
</TABLE>
* Balances are net of $20,484 and $249,709 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, 1999
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
Cash flows from operating activities:
Net loss $ (31,360) $ (224,279) $ (255,639)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (1,640) (58,766) (60,406)
Changes in assets and liabilities:
Judgment receivable, net 5,136 33,717 38,853
Accounts payable and
accrued expenses (2,186) (17,529) (19,715)
Lessee rental deposits (892) (5,856) (6,748)
----------- ----------- -----------
(30,942) (272,713) (303,655)
----------- ----------- -----------
Cash flows from investing activities:
Principal collections on leases 1,640 430,133 431,773
----------- ----------- -----------
Cash flows from financing activities:
Distributions to Limited Partners (91,851) (886,021) (977,872)
----------- ----------- -----------
Net decrease in cash and
cash equivalents (121,153) (728,601) (849,754)
Cash and cash equivalents:
Beginning of year 325,257 2,604,451 2,929,708
----------- ----------- -----------
End of third quarter $ 204,104 $ 1,875,850 $2,079,954
=========== =========== ===========
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, 1998
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
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 (2,127) (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)
----------- ----------- -----------
(61,977) (415,711) (477,688)
----------- ----------- -----------
Cash flows from investing activities:
Principal collections on leases 5,539 596,842 602,381
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents (56,438) 181,131 124,693
Cash and cash equivalents:
Beginning of year 294,408 1,585,082 1,879,490
----------- ----------- -----------
End of third quarter $ 237,970 $ 1,766,213 $ 2,004,183
=========== =========== ===========
See accompanying notes to financial statements
11
<PAGE> 12
DATRONIC FINANCE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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 1998 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 1998 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
1998 Form 10-K.
NOTE 3 - LIMITED PARTNERSHIP DISTRIBUTIONS:
In early April 1999, the Partnership made a cash distribution to Limited
Partners who were owners of record on December 31, 1998. This distribution
consisted of two components: (i) the net proceeds from the Price Waterhouse and
Weiss & Company legal actions ($22,000 and $145,000 for Liquidating and
Continuing Limited Partners, respectively), and (ii) residual cash resulting
from the net cash flows of the Partnership ($70,000 and $741,000 for Liquidating
and Continuing Limited Partners, respectively). The portion of the distribution
attributable to legal action proceeds was allocated to each Limited Partner
based on the number of units held at the rate of $2.87 per unit. See Note 7 to
the Partnership's financial statements included in the 1998 Form 10-K. Pursuant
to the Partnership Agreement, residual cash was allocated to each Limited
Partner based on their proportionate share of total partners' capital
attributable to their Class.
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, 1998
through September 30, 1999. The discussion and analysis of results of operations
is for the three and nine month periods ended September 30, 1999 as compared to
the corresponding periods in 1998. Any capitalized term not defined herein has
been defined or discussed in the Partnership's 1998 Form 10-K.
Liquidity and Capital Resources
During the nine months ended September 30, 1999, Partnership assets continued to
be converted to cash in order to pay Partnership operating expenses and to
provide for the ultimate liquidation of the Partnership. During this period,
Partnership cash and cash equivalents decreased by $850,000 to $2,080,000 at
September 30, 1999 from $2,930,000 at December 31, 1998. This decrease is
primarily due to the distribution paid to Limited Partners of $978,000 (see
below) and by cash used in operations of $304,000, partially offset by cash
receipts from collections on leases of $432,000.
In early April 1999, the Partnership made a cash distribution to Limited
Partners who were owners of record on December 31, 1998. This distribution
consisted of two components: (i) the net proceeds from the Price Waterhouse and
Weiss & Company legal actions ($22,000 and $145,000 for Liquidating and
Continuing Limited Partners, respectively), and (ii) residual cash resulting
from the net cash flows of the Partnership ($70,000 and $741,000 for Liquidating
and Continuing Limited Partners, respectively). The portion of the distribution
attributable to legal action proceeds was allocated to each Limited Partner
based on the number of units held at the rate of $2.87 per unit. See Note 7 to
the Partnership's financial statements included in the 1998 Form 10-K. Pursuant
to the Partnership Agreement, residual cash was allocated to each Limited
Partner based on their proportionate share of total partners' capital
attributable to their Class.
The Partnership's sources of future liquidity are expected to come from
cash-on-hand, cash receipts from leases owned by the Partnership and the
disposition of the remaining Diverted Assets (consisting primarily of an office
building in Schaumburg, Illinois). The lease portfolio is scheduled to be fully
liquidated by September 2000. The general partner expects that the building will
be sold sometime during 2000. The proceeds will be included in the next
distribution to the Limited Partners sometime during 2000. After all assets are
disposed of and the proceeds distributed to the Limited Partners, the
13
<PAGE> 14
Partnership will be required to file final reports with the Securities and
Exchange Commission and the Internal Revenue Service. The general partner
expects this to occur sometime during the year 2000 or early 2001.
Results of Operations
The Partnership had net losses of $90,000 and $256,000 for the three and nine
months ended September 30, 1999 in the aggregate for all classes of partners.
This compares to net losses of $90,000 and $372,000 for the three and nine
months ended September 30, 1998. Differences in operating results between
Liquidating and Continuing Limited Partners are attributable to lease income 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, 1999 and 1998 include
the following:
Lease income:
Since October 1996, the Partnership has been in its Liquidating 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. This trend will continue as the Partnership liquidates its
remaining leases.
Interest income:
Interest income includes earnings on invested cash balances. Interest income for
1999 was higher than 1998 because of higher average invested cash balances.
General Partner's expense reimbursement:
General Partner's expense reimbursement includes payments to LRC for expenses it
incurred as general partner. These expenses include expenses incurred by LRC in
its management of the day-to-day operations of the Partnership.
Professional fees:
Professional fees for the three and nine months ended September 30, 1999 reflect
a decreasing level of professional services required as a result of the decrease
in the Partnership's lease portfolio and related activities. Included in the
1998 amount are fees paid in connection with the litigation against the
Partnership's former accountants.
Credit for lease losses:
This credit reflects recovery of previously reserved balances.
14
<PAGE> 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for in this disclosure is not applicable to the
Registrant.
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, 1998 Form 10-K for a discussion of material legal proceedings involving the
Partnership.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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 4th day of November 1999.
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,079,954
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,959,831
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,945,678
<TOTAL-LIABILITY-AND-EQUITY> 2,959,831
<SALES> 0
<TOTAL-REVENUES> 118,972
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,530
<LOSS-PROVISION> (60,406)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (255,639)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
