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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, 2000 Commission File Number 0-21276
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DATRONIC FINANCE INCOME FUND I, L.P.
------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 36-3744792
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State or other IRS Employer Identification
jurisdiction of Number
incorporation or
organization
1300 E. Woodfield Road, Suite 312 Schaumburg, Illinois 60173
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Address of principal City, State, Zip Code
executive offices
Registrant's telephone number: (847) 240-6200
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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
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(2) Yes X No
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DATRONIC FINANCE INCOME FUND I, L.P.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements
Balance Sheets
September 30, 2000 (unaudited) 3
December 31, 1999 4
Statements of Revenue and Expenses (unaudited)
For the three months ended September 30, 2000 5
For the three months ended September 30, 1999 6
For the nine months ended September 30, 2000 7
For the nine months ended September 30, 1999 8
Statements of Changes in Partners' Equity
For the nine months ended September 30, 2000
(unaudited) 9
Statements of Cash Flows (unaudited)
For the nine months ended September 30, 2000 10
For the nine months ended September 30, 1999 11
Notes to Financial Statements (unaudited) 12
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13 - 15
Item 3.
Quantitative and Qualitative Disclosures about
Market Risk 15
PART II - OTHER INFORMATION
Items 1-6. 16
2
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DATRONIC FINANCE INCOME FUND I, L.P.
BALANCE SHEETS
September 30, 2000
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
ASSETS
------
Cash and cash equivalents $ 71,693 $ 681,323 $ 753,016
Net investment in direct financing
leases - 8,683 8,683
Diverted and other assets, net 53,174 349,047 402,221
Datronic assets, net - - -
----------- ----------- -----------
$ 124,867 $ 1,039,053 $ 1,163,920
=========== =========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued
expenses $ 176 $ 4,679 $ 4,855
Lessee rental deposits 719 4,720 5,439
----------- ----------- -----------
Total liabilities 895 9,399 10,294
Total partners' equity 123,972 1,029,654 1,153,626
----------- ----------- -----------
$ 124,867 $ 1,039,053 $ 1,163,920
=========== =========== ===========
See accompanying notes to financial statements
3
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DATRONIC FINANCE INCOME FUND I, L.P.
BALANCE SHEETS
December 31, 1999
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
ASSETS
------
Cash and cash equivalents $ 190,285 $ 1,838,427 $ 2,028,712
Net investment in direct financing
leases - 199,057 199,057
Diverted and other assets, net 81,657 536,024 617,681
Datronic assets, net - - -
----------- ----------- -----------
$ 271,942 $ 2,573,508 $ 2,845,450
=========== =========== ===========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable and accrued
expenses $ 43 $ 3,178 $ 3,221
Lessee rental deposits 1,059 6,948 8,007
----------- ----------- -----------
Total liabilities 1,102 10,126 11,228
Total partners' equity 270,840 2,563,382 2,834,222
----------- ----------- -----------
$ 271,942 $ 2,573,508 $ 2,845,450
=========== =========== ===========
See accompanying notes to financial statements
4
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DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the three months ended September 30, 2000
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
Revenue:
Lease income $ - $ 3,533 $ 3,533
Interest income 109 8,095 8,204
----------- ----------- -----------
109 11,628 11,737
----------- ----------- -----------
Expenses:
General Partner's expense
reimbursement 11,610 76,215 87,825
Professional fees 525 4,784 5,309
Other operating expenses 186 1,222 1,408
Provision (credit) for lease losses (9) 54,200 54,191
----------- ----------- -----------
12,312 136,421 148,733
----------- ----------- -----------
Net loss $ (12,203) $ (124,793) $ (136,996)
=========== =========== ===========
Net loss - General Partner $ (122) $ (1,248) $ (1,370)
=========== =========== ===========
Net loss - Limited Partners $ (12,081) $ (123,545) $ (135,626)
=========== =========== ===========
Net loss per limited
partnership unit $ (1.57) $ (2.44)
=========== ===========
Weighted average number of limited
partnership units outstanding 7,699 50,535
=========== ===========
See accompanying notes to financial statements
5
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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
6
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DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF REVENUE AND EXPENSES
For the nine months ended September 30, 2000
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
Revenue:
Lease income $ - $ 22,918 $ 22,918
Interest income 4,862 51,824 56,686
----------- ----------- -----------
4,862 74,742 79,604
----------- ----------- -----------
Expenses:
General Partner's expense
reimbursement 54,440 357,060 411,500
Professional fees 3,535 22,844 26,379
Other operating expenses 1,545 11,157 12,702
Provision (credit) for lease losses (19) 47,131 47,112
----------- ----------- -----------
59,501 438,192 497,693
----------- ----------- -----------
Net loss $ (54,639) $ (363,450) $ (418,089)
=========== =========== ====-======
Net loss - General Partner $ (546) $ (3,635) $ (4,181)
=========== =========== ===========
Net loss - Limited Partners $ (54,093) $ (359,815) $ (413,908)
=========== =========== ===========
Net loss per limited
partnership unit $ (7.03) $ (7.12)
=========== ===========
Weighted average number of limited
partnership units outstanding 7,699 50,535
=========== ===========
See accompanying notes to financial statements
7
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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
8
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DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Liquidating Continuing
General Limited Limited Total
Partner's Partner's Partner's Partner's
Equity Equity Equity Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1999* $ - $ 270,840 $ 2,563,382 $ 2,834,222
Distributions to partners - (92,229) (1,170,278) (1,262,507)
Net loss (4,181) (54,093) (359,815) (418,089)
Allocation of General
Partner's Equity 4,181 (546) (3,635) -
----------- ----------- ----------- -----------
Balance, September 30, 2000 $ - $ 123,972 $ 1,029,654 $ 1,153,626
=========== =========== =========== ===========
* Balances are net of $20,931 and $252,933 of General Partner's Equity previously
allocated to Liquidating and Continuing Limited Partners' Equity.
</TABLE>
See accompanying notes to financial statements
9
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DATRONIC FINANCE INCOME FUND I, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2000
(Unaudited)
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- -----------
Cash flows from operating activities:
Net loss $ (54,639) $ (363,450) $ (418,089)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Provision (credit) for
lease losses (19) 47,131 47,112
Changes in assets and liabilities:
Accounts payable and
accrued expenses 133 1,501 1,634
Lessee rental deposits (340) (2,228) (2,568)
----------- ----------- -----------
(54,865) (317,046) (371,911)
----------- ----------- -----------
Cash flows from investing activities:
Principal collections on leases 19 143,243 143,262
Distribution of Diverted and other
assets 28,483 186,977 215,460
----------- ----------- -----------
28,502 330,220 358,722
----------- ----------- -----------
Cash flows from financing activities:
Distributions to Limited Partners (92,229) (1,170,278) (1,262,507)
----------- ----------- -----------
Net decrease in cash and
cash equivalents (118,592) (1,157,104) (1,275,696)
Cash and cash equivalents:
Beginning of year 190,285 1,838,427 2,028,712
----------- ----------- -----------
End of third quarter $ 71,693 $ 681,323 $ 753,016
=========== =========== ===========
See accompanying notes to financial statements
10
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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
11
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DATRONIC FINANCE INCOME FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
NOTE 1 - LIMITED PARTNERSHIP DISTRIBUTION:
During June 2000, the Partnership made a cash distribution to Limited Partners
who were owners of record on March 31, 2000. This distribution was made from
residual cash, which is cash available for distribution after satisfying current
Partnership liabilities and setting aside reserves against potential future
Partnership liabilities. The total distribution paid to Continuing and
Liquidating Limited Partners was $1,170,000 and $92,000, respectively. Pursuant
to the Partnership Agreement, these amounts were allocated among Limited
Partners based on each Partners' proportionate share of total partners capital
attributable to their Class.
NOTE 2 - LITIGATION
In connection with the 1992 Ventre class action, the United States District
Court for the Northern District of Illinois entered an order on September 27,
2000 finding that Edmund J. Lopinski, Jr. had caused the Datronic Partnerships
to sustain losses of $20.0 million. Against this amount, the Court offset $10.9
million that has already been realized on behalf of the Partnerships through the
sale of Diverted and Other Assets and insurance settlements. The Court also
found that Lopinski is entitled to offset the remaining $9.1 million loss with
the proceeds previously received from the other defendants in the Ventre action
and the appraised value of the Schaumburg office building. Proceeds received
from the other defendants totaled $4.9 million, leaving $4.2 million to be
recovered from the building. During the third quarter 2000, the General Partner
received appraisals for the building indicating that its value substantially
exceeds this amount. Accordingly, the losses assessed against Lopinski have been
fully mitigated.
With this ruling, the Ventre, et al v. Datronic Rental Corp., et al class action
is closed.
12
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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, 1999
through September 30, 2000. The discussion and analysis of results of operations
is for the three and nine month periods ended September 30, 2000 as compared to
the corresponding periods in 1999. Any capitalized term not defined herein has
been defined or discussed in the Partnership's 1999 Form 10-K.
Liquidity and Capital Resources
During the nine months ended September 30, 2000, the Partnership continued to
liquidate its assets and use its cash to pay Partnership operating expenses, pay
a distribution to Limited Partners and to provide for the ultimate liquidation
of the Partnership. During this period, Partnership cash and cash equivalents
decreased by $1,276,000 to $753,000 at September 30, 2000 from $2,029,000 at
December 31, 1999. This decrease is primarily due to a distribution paid to
Limited Partners of $1,263,000 (see below) and by cash used in operations of
$372,000, partially offset by cash receipts from collections on leases of
$143,000 and a distribution of Diverted and other assets of $216,000.
During June 2000, the Partnership made a cash distribution to Limited Partners
who were owners of record on March 31, 2000. This distribution was made from
residual cash, which is cash available for distribution after satisfying current
Partnership liabilities and setting aside reserves against potential future
Partnership liabilities. The total distribution paid to Continuing and
Liquidating Limited Partners was $1,170,000 and $92,000, respectively. Pursuant
to the Partnership Agreement, these amounts were allocated among Limited
Partners based on each Partners' proportionate share of total partner's capital
attributable to their Class.
The Partnership's principal sources of future liquidity are expected to come
from cash-on-hand and proceeds from the sale of the remaining Diverted Assets
(consisting of cash and an office building in Schaumburg, Illinois). In
addition, nominal amounts are expected to be collected under payment plan
arrangements reached with delinquent lessees. The General partner expects that
the building will be sold during the first quarter of 2001 and the proceeds
included in a subsequent distribution to Limited Partners.
13
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The Partnership's interest in the Schaumburg office building is carried on its
books at $402,000 (see Note 4 to the Partnership's financial statements included
in the 1999 Form 10-K). At March 1993, the date LRC was appointed general
partner, the building was approximately 40% occupied. Since then, occupancy has
increased to more than 80% and base rental rates have increased by 75%. An
appraisal received during the third quarter 2000 indicates that the building's
value has increased substantially over its book value.
After all 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 2001.
Results of Operations
The Partnership had net losses of $137,000 and $418,000 for the three and nine
months ended September 30, 2000 in the aggregate for all classes of partners.
This compares to net losses of $90,000 and $256,000 for the three and nine
months ended September 30, 1999. Differences in operating results between
Liquidating and Continuing Limited Partners are attributable to lease income and
expenses associated with 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, 2000 and 1999 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. As of September 2000 the Partnership no longer has an active
lease portfolio. However, it does have $368,000 of fully reserved balances.
Occasionally recoveries are made against these balances and any such amounts in
excess of the reserve result in lease income.
Interest income:
Interest income includes earnings on invested cash balances. Interest income for
2000 was lower than 1999 because of lower average invested cash balances
partially offset by increased interest rates.
14
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General Partner's expense reimbursement:
General Partner's expense reimbursement includes payments to LRC for expenses it
incurred as general partner. These expenses represent expenses incurred by LRC
in its management of the day-to-day operations of the Partnership. Included in
the first quarter 2000 expenses are $88,000 of insurance premiums associated
with the final wrap up of Partnership affairs and its ultimate liquidation and
dissolution.
Professional fees:
Professional fees for the nine months ended September 30, 2000 reflect a
decreasing level of professional services required as a result of the decrease
in the Partnership's lease portfolio and related activities.
Provision (credit) for lease losses:
This provision reflects Management's ongoing assessment of the potential losses
inherent in the lease portfolio partially offset by lease collections in excess
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.
15
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3 - Legal Proceedings in the Partnership's December
31, 1999 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
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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 November 2000.
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/JEFFREY T. MCREYNOLDS
-----------------------------
Jeffrey T. McReynolds
Vice President and Chief Financial Officer,
Lease Resolution Corporation,
General Partner of
Datronic Finance Income Fund I, L.P.
17
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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27 Financial Data Schedule, which
is submitted electronically to
the Securities and Exchange
Commission for Information only
and not filed.
18
