<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, 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 JUNE 30, 1999
PART I - FINANCIAL INFORMATION
Item 1.
- -------
Index to Financial Statements
Balance Sheets
June 30, 1999 (unaudited) 3
December 31, 1998 4
Statements of Revenue and Expenses (unaudited)
For the three months ended June 30, 1999 5
For the three months ended June 30, 1998 6
For the six months ended June 30, 1999 7
For the six months ended June 30, 1998 8
Statements of Changes in Partners' Equity
For the six months ended June 30, 1999
(unaudited) 9
Statements of Cash Flows (unaudited)
For the six months ended June 30, 1999 10
For the six months ended June 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
June 30, 1999
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ----------- -----------
ASSETS
- ------
Cash and cash equivalents $ 214,374 $ 1,813,689 $ 2,028,063
Net investment in direct
financing leases - 402,948 402,948
Diverted and other
assets, net 81,657 536,024 617,681
Datronic assets, net - - -
---------- ----------- -----------
$ 296,031 $ 2,752,661 $ 3,048,692
========== =========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts payable and accrued
expenses $ 49 $ 2,225 $ 2,274
Lessee rental deposits 1,453 9,536 10,989
---------- ----------- -----------
Total liabilities 1,502 11,761 13,263
Total partners' equity 294,529 2,740,900 3,035,429
---------- ----------- -----------
$ 296,031 $ 2,752,661 $ 3,048,692
========== =========== ===========
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 June 30, 1999
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ----------- -----------
Revenue:
Lease income $ 467 $ 15,854 $ 16,321
Interest income 2,125 18,751 20,876
---------- ----------- -----------
2,592 34,605 37,197
---------- ----------- -----------
Expenses:
General Partner's expense
reimbursement 10,287 94,135 104,422
Professional fees 1,630 16,327 17,957
Other operating expenses 733 4,816 5,549
Credit for lease losses (1,108) (43,275) (44,383)
---------- ----------- -----------
11,542 72,003 83,545
---------- ----------- -----------
Net loss $ (8,950) $ (37,398) $ (46,348)
========== =========== ===========
Net loss - General Partner $ (89) $ (374) $ (463)
========== =========== ===========
Net loss - Limited Partners $ (8,861) $ (37,024) $ (45,885)
========== =========== ===========
Net loss per limited
partnership unit $ (1.15) $ (0.73)
========== ===========
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 June 30, 1998
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ----------- -----------
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
========== ===========
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, 1999
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ----------- -----------
Revenue:
Lease income $ 753 $ 34,426 $ 35,179
Interest income 5,565 44,505 50,070
---------- ----------- -----------
6,318 78,931 85,249
---------- ----------- -----------
Expenses:
General Partner's expense
reimbursement 23,996 217,223 241,219
Professional fees 3,798 49,133 52,931
Other operating expenses 907 7,148 8,055
Credit for lease losses (1,331) (49,737) (51,068)
---------- ----------- -----------
27,370 223,767 251,137
---------- ----------- -----------
Net loss $ (21,052) $ (144,836) $ (165,888)
========== =========== ===========
Net loss - General Partner $ (211) $ (1,448) $ (1,659)
========== =========== ===========
Net loss - Limited Partners $ (20,841) $ (143,388) $ (164,229)
========== =========== ===========
Net loss per limited
partnership unit $ (2.71) $ (2.84)
========== ===========
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 six months ended June 30, 1998
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ----------- -----------
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
========== ===========
See accompanying notes to financial statements
8
<PAGE> 9
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
(Unaudited)
Liquidating Continuing
General Limited Limited Total
Partner's Partners' Partners' Partners'
Equity Equity Equity Equity
--------- ----------- ---------- ---------
Balance, December 31, 1998* $ - $ 407,432 $ 3,771,757 $ 4,179,189
Distributions to partners - (91,851) (886,021) (977,872)
Net loss (1,659) (20,841) (143,388) (165,888)
Allocation of General
Partner's Equity 1,659 (211) (1,448) -
------- ---------- ----------- -----------
Balance, June 30, 1999 $ - $ 294,529 $ 2,740,900 $ 3,035,429
======= ========== =========== ===========
* 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 six months ended June 30, 1999
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ----------- -----------
Cash flows from operating activities:
Net loss $ (21,052) $ (144,836) $ (165,888)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (1,331) (49,737) (51,068)
Changes in assets and liabilities:
Judgment receivable, net 5,136 33,717 38,853
Accounts payable and
accrued expenses (2,224) (18,381) (20,605)
Lessee rental deposits (892) (5,856) (6,748)
---------- ----------- -----------
(20,363) (185,093) (205,456)
---------- ----------- -----------
Cash flows from investing activities:
Principal collections on leases 1,331 280,352 281,683
---------- ----------- -----------
Cash flows from financing activities:
Distributions to Limited Partners (91,851) (886,021) (977,872)
---------- ----------- -----------
Net decrease in cash and
cash equivalents (110,883) (790,762) (901,645)
Cash and cash equivalents:
Beginning of year 325,257 2,604,451 2,929,708
========== =========== ===========
End of second quarter $ 214,374 $ 1,813,689 $ 2,028,063
========== =========== ===========
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, 1998
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ----------- -----------
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
========== =========== ===========
See accompanying notes to financial statements
11
<PAGE> 12
DATRONIC FINANCE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
June 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 June 30, 1999. The discussion and analysis of results of operations is
for the three and six month periods ended June 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 six months ended June 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 the six months ended
June 30, 1999, Partnership cash and cash equivalents decreased by $902,000 to
$2,028,000 at June 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 $205,000, partially offset by cash
receipts from collections on leases of $282,000.
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 during the second half of 1999 or 2000 and the proceeds included in the
next distribution to the Limited Partners sometime during 2000. After all
13
<PAGE> 14
assets are disposed of and the proceeds distributed to the Limited Partners, the
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 $46,000 and $166,000 for the three and six
months ended June 30, 1999 in the aggregate for all classes of partners. This
compares to net losses of $158,000 and $282,000 for the three and six months
ended June 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 six month periods ended June 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 a 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 six months ended June 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 August 1999.
DATRONIC FINANCE INCOME FUND I, L.P.
Registrant
By: /s/DONALD D. TORISK
-------------------------------------
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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,028,063
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,048,692
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,035,429
<TOTAL-LIABILITY-AND-EQUITY> 3,048,692
<SALES> 0
<TOTAL-REVENUES> 85,249
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,055
<LOSS-PROVISION> (51,068)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (165,888)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
