<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, 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 MARCH 31, 1999
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements
Balance Sheets
March 31, 1999 (unaudited) 3
December 31, 1998 4
Statements of Revenue and Expenses (unaudited)
For the three months ended March 31, 1999 5
For the three months ended March 31, 1998 6
Statements of Changes in Partners' Equity
For the three months ended March 31, 1999
(unaudited) 7
Statements of Cash Flows (unaudited)
For the three months ended March 31, 1999 8
For the three months ended March 31, 1998 9
Notes to Financial Statements (unaudited) 10
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 12
PART II - OTHER INFORMATION
Items 1-6. 13
</TABLE>
2
<PAGE> 3
DATRONIC EQUIPMENT INCOME FUND I, L.P.
BALANCE SHEETS
March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 316,377 $2,660,330 $2,976,707
Net investment in direct financing
leases -- 488,697 488,697
Diverted and other assets, net 81,657 536,024 617,681
Datronic assets, net -- -- --
---------- ---------- ----------
$ 398,034 $3,685,051 $4,083,085
========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued
expenses $ 742 $ 7,853 $ 8,595
Lessee rental deposits 1,962 12,879 14,841
---------- ---------- ----------
Total liabilities 2,704 20,732 23,436
Total partners' equity 395,330 3,664,319 4,059,649
---------- ---------- ----------
$ 398,034 $3,685,051 $4,083,085
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
DATRONIC FINANCE INCOME FUND I, L.P.
BALANCE SHEETS
December 31, 1998
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
------------ ----------- -----------
<S> <C> <C> <C>
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
========== ========== ==========
</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, 1999
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
------------ ----------- -----------
<S> <C> <C> <C>
Revenue:
Lease income $ 286 $ 18,572 $ 18,858
Interest income 3,440 25,754 29,194
--------- --------- ---------
3,726 44,326 48,052
--------- --------- ---------
Expenses:
General Partner's expense
reimbursement 13,709 123,088 136,797
Professional fees 2,168 32,806 34,974
Other operating expenses 174 2,332 2,506
Credit for lease losses (223) (6,462) (6,685)
--------- --------- ---------
15,828 151,764 167,592
--------- --------- ---------
Net loss $ (12,102) $(107,438) $(119,540)
========= ========= =========
Net loss - General Partner $ (121) $ (1,074) $ (1,195)
========= ========= =========
Net loss - Limited Partners $ (11,981) $(106,364) $(118,345)
========= ========= =========
Net loss per limited
partnership unit $ (1.56) $ (2.10)
========= =========
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, 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
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, 1998* $ -- $ 407,432 $ 3,771,757 $ 4,179,189
Net loss (1,195) (11,981) (106,364) (119,540)
Allocation of General
Partner's Equity 1,195 (121) (1,074) --
----------- ----------- ----------- -----------
Balance, March 31, 1999 $ -- $ 395,330 $ 3,664,319 $ 4,059,649
=========== =========== =========== ===========
</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
7
<PAGE> 8
DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (12,102) $ (107,438) $ (119,540)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (223) (6,462) (6,685)
Changes in assets and liabilities:
Judgment receivable, net 5,136 33,717 38,853
Accounts payable and
accrued expenses (1,531) (12,753) (14,284)
Lessee rental deposits (383) (2,513) (2,896)
----------- ----------- -----------
(9,103) (95,449) (104,552)
----------- ----------- -----------
Cash flows from investing activities:
Principal collections on leases 223 151,328 151,551
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents (8,880) 55,879 46,999
Cash and cash equivalents:
Beginning of year 325,257 2,604,451 2,929,708
----------- ----------- -----------
End of first quarter $ 316,377 $ 2,660,330 $ 2,976,707
=========== =========== ===========
</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, 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
9
<PAGE> 10
DATRONIC FINANCE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 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.
10
<PAGE> 11
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 March 31, 1999. The discussion and analysis of results of
operations is for the three month period ended March 31, 1999 as compared to
the corresponding period in 1998. Any capitalized term not defined herein has
been defined or discussed in the Partnerships 1998 Form 10-K.
Liquidity and Capital Resources
During the three months ended March 31, 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 three
months ended March 31, 1999, Partnership cash and cash equivalents increased by
$47,000 to $2,977,000 at March 31, 1999 from $2,930,000 at December 31, 1998.
This increase is primarily due to cash receipts from collections on leases of
$152,000 partially offset by cash used in operations of $105,000.
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
remaining cash-on-hand after the April 1999 distribution, the cash receipts
from leases owned by the Partnership as well as the disposition of 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 the Diverted Assets to be converted to cash during 1999
thereby enabling the Partnership to pay an additional distribution in early
2000. After all assets are disposed of and the proceeds are distributed to the
limited partners, the Partnership will be required
11
<PAGE> 12
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.
Results of Operations
The Partnership had a net loss of $120,000 for the three months ended March 31,
1999 in the aggregate for all classes of partners. This compares to a net loss
of $124,000 for the three months ended March 31, 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 month period ended March 31, 1999 as compared
to the corresponding period in 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 in excess of those covered by its partner
distributions. 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 months ended March 31, 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.
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for in this disclosure is not applicable to the
Registrant.
12
<PAGE> 13
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
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.
13
<PAGE> 14
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 10th day of May 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.
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for Information
only and not filed.
</TABLE>
<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-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,976,707
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,083,085
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,059,649
<TOTAL-LIABILITY-AND-EQUITY> 4,083,085
<SALES> 0
<TOTAL-REVENUES> 48,052
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,506
<LOSS-PROVISION> (6,685)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (119,540)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
