10-Q 1 c64253e10-q.txt QUARTERLY REPORT 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, 2001 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 --- --- 2 DATRONIC FINANCE INCOME FUND I, L.P. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001 PART I - FINANCIAL INFORMATION Item 1. Index to Financial Statements Balance Sheets June 30, 2001 (unaudited) 3 December 31, 2000 4 Statements of Revenue and Expenses (unaudited) For the three months ended June 30, 2001 5 For the three months ended June 30, 2000 6 For the six months ended June 30, 2001 7 For the six months ended June 30, 2000 8 Statements of Changes in Partners' Equity For the six months ended June 30, 2001 (unaudited) 9 Statements of Cash Flows (unaudited) For the six months ended June 30, 2001 10 For the six months ended June 30, 2000 11 Notes to Financial Statements (unaudited) 12 - 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 - 15 Item 3. Quantitative and Qualitative Disclosures about Market Risk 15 PART II - OTHER INFORMATION Items 1-6. 16 2 3 DATRONIC FINANCE INCOME FUND I, L.P. BALANCE SHEETS June 30, 2001 (Unaudited) Liquidating Continuing Limited Limited Partners Partners Total ----------- ---------- ---------- ASSETS Cash and cash equivalents $ 340,533 $2,459,181 $2,799,714 Residual lease balances -- -- -- Other assets, net -- -- -- ---------- ---------- ---------- $ 340,533 $2,459,181 $2,799,714 ========== ========== ========== LIABILITIES AND PARTNERS' EQUITY Accounts payable and accrued expenses $ 243 $ 988 $ 1,231 Accrued post-dissolution expenses 28,687 188,313 217,000 ---------- ---------- ---------- Total liabilities 28,930 189,301 218,231 Total partners' equity 311,603 2,269,880 2,581,483 ---------- ---------- ---------- $ 340,533 $2,459,181 $2,799,714 ========== ========== ========== See accompanying notes to financial statements 3 4 DATRONIC FINANCE INCOME FUND I, L.P. BALANCE SHEETS December 31, 2000 Liquidating Continuing Limited Limited Partners Partners Total ----------- ---------- ---------- ASSETS Cash and cash equivalents $ 62,345 $ 627,611 $ 689,956 Residual lease balances -- 3,620 3,620 Diverted assets, net 53,174 349,047 402,221 Other assets, net -- -- -- ---------- ---------- ---------- $ 115,519 $ 980,278 $1,095,797 ========== ========== ========== LIABILITIES AND PARTNERS' EQUITY Accounts payable and accrued expenses $ 269 $ 4,292 $ 4,561 Lessee rental deposits 296 1,942 2,238 Accrued post-dissolution expenses 28,687 188,313 217,000 ---------- ---------- ---------- Total liabilities 29,252 194,547 223,799 Total partners' equity 86,267 785,731 871,998 ---------- ---------- ---------- $ 115,519 $ 980,278 $1,095,797 ========== ========== ========== See accompanying notes to financial statements 4 5 DATRONIC FINANCE INCOME FUND I, L.P. STATEMENTS OF REVENUE AND EXPENSES For the three months ended June 30, 2001 (Unaudited) Liquidating Continuing Limited Limited Partners Partners Total ----------- ----------- ----------- Revenue: Interest income $ -- $ 2,757 $ 2,757 Gain on sale of Diverted assets 249,872 1,640,234 1,890,106 ----------- ----------- ----------- 249,872 1,642,991 1,892,863 ----------- ----------- ----------- Expenses: General Partner's expense reimbursement 10,622 69,727 80,349 Professional fees 1,569 10,562 12,131 Other operating expenses 171 1,123 1,294 Credit for lease losses (8) (3,135) (3,143) ----------- ----------- ----------- 12,354 78,277 90,631 ----------- ----------- ----------- Net income $ 237,518 $ 1,564,714 $ 1,802,232 =========== =========== =========== Net income - General Partner $ 2,375 $ 15,647 $ 18,022 =========== =========== =========== Net income - Limited Partners $ 235,143 $ 1,549,067 $ 1,784,210 =========== =========== =========== Net income per limited partnership unit $ 30.54 $ 30.65 =========== =========== Weighted average number of limited partnership units outstanding 7,699 50,535 =========== =========== See accompanying notes to financial statements 5 6 DATRONIC FINANCE INCOME FUND I, L.P. STATEMENTS OF REVENUE AND EXPENSES For the three months ended June 30, 2000 (Unaudited) Liquidating Continuing Limited Limited Partners Partners Total ----------- ----------- --------- Revenue: Lease income $ -- $ 15,896 $ 15,896 Interest income 2,318 22,420 24,738 --------- --------- --------- 2,318 38,316 40,634 --------- --------- --------- Expenses: General Partner's expense reimbursement 16,791 102,657 119,448 Professional fees 1,510 10,569 12,079 Other operating expenses 968 6,351 7,319 Credit for lease losses (10) (7,069) (7,079) --------- --------- --------- 19,259 112,508 131,767 --------- --------- --------- Net loss $ (16,941) $ (74,192) $ (91,133) ========= ========= ========= Net loss - General Partner $ (169) $ (742) $ (911) ========= ========= ========= Net loss - Limited Partners $ (16,772) $ (73,450) $ (90,222) ========= ========= ========= Net loss per limited partnership unit $ (2.18) $ (1.45) ========= ========= Weighted average number of limited partnership units outstanding 7,699 50,535 ========== ========= See accompanying notes to financial statements 6 7 DATRONIC FINANCE INCOME FUND I, L.P. STATEMENTS OF REVENUE AND EXPENSES For the six months ended June 30, 2001 (Unaudited) Liquidating Continuing Limited Limited Partners Partners Total ----------- ----------- ----------- Revenue: Interest income $ 469 $ 5,909 $ 6,378 Gain on sale of Diverted assets 249,872 1,640,234 1,890,106 ----------- ----------- ----------- 250,341 1,646,143 1,896,484 ----------- ----------- ----------- Expenses: General Partner's expense reimbursement 22,822 149,814 172,636 Professional fees 2,466 17,424 19,890 Other operating expenses 725 4,755 5,480 Credit for lease losses (1,008) (9,999) (11,007) ----------- ----------- ----------- 25,005 161,994 186,999 ----------- ----------- ----------- Net income $ 225,336 $ 1,484,149 $ 1,709,485 =========== =========== =========== Net income - General Partner $ 2,253 $ 14,841 $ 17,094 =========== =========== =========== Net income - Limited Partners $ 223,083 $ 1,469,308 $ 1,692,391 =========== =========== =========== Net income per limited partnership unit $ 28.98 $ 29.08 =========== =========== Weighted average number of limited partnership units outstanding 7,699 50,535 =========== =========== See accompanying notes to financial statements 7 8 DATRONIC FINANCE INCOME FUND I, L.P. STATEMENTS OF REVENUE AND EXPENSES For the six months ended June 30, 2000 (Unaudited) Liquidating Continuing Limited Limited Partners Partners Total ----------- ---------- --------- Revenue: Lease income $ -- $ 19,385 $ 19,385 Interest income 4,753 43,729 48,482 --------- --------- --------- 4,753 63,114 67,867 --------- --------- --------- Expenses: General Partner's expense reimbursement 42,830 280,845 323,675 Professional fees 3,010 18,060 21,070 Other operating expenses 1,359 9,935 11,294 Credit for lease losses (10) (7,069) (7,079) --------- --------- --------- 47,189 301,771 348,960 --------- --------- --------- Net loss $ (42,436) $(238,657) $(281,093) ========= ========= ========= Net loss - General Partner $ (424) $ (2,387) $ (2,811) ========= ========= ========= Net loss - Limited Partners $ (42,012) $(236,270) $(278,282) ========= ========= ========= Net loss per limited partnership unit $ (5.46) $ (4.68) ========= ========= Weighted average number of limited partnership units outstanding 7,699 50,535 ========= ========= See accompanying notes to financial statements 8 9 DATRONIC FINANCE INCOME FUND I, L.P. STATEMENTS OF CHANGES IN PARTNERS' EQUITY (Unaudited)

* Balances are net of $21,854 and $259,007 of General Partner's Equity previously allocated to Liquidating and Continuing Limited Partners' Equity. See accompanying notes to financial statements 9 10 DATRONIC FINANCE INCOME FUND I, L.P. STATEMENTS OF CASH FLOWS For the six months ended June 30, 2001 (Unaudited)

See accompanying notes to financial statements 10 11 DATRONIC FINANCE INCOME FUND I, L.P. STATEMENTS OF CASH FLOWS For the six months ended June 30, 2000 (Unaudited)

See accompanying notes to financial statements 11 12 DATRONIC FINANCE INCOME FUND I, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 (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 acquiring and leasing equipment. See Notes 4, 7, and 10 to the Partnership's financial statements included in the 2000 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 that occurred. Since October 1, 1996, the Partnership has been in its Liquidating Phase which means that it ceased investing in new leases and began the orderly liquidation of its assets. The general partner expects the Liquidating Phase to be completed sometime after mid-2001, at which time the Partnership will be dissolved and post-dissolution activities will commence, being concluded by the end of 2001. NOTE 2 - BASIS OF FINANCIAL STATEMENTS: The accompanying financial statements should be read in conjunction with the Partnership's financial statements included in the 2000 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 2000 Form 10-K. NOTE 3 - GAIN ON SALE OF DIVERTED ASSETS: The Partnership's gain on sale of Diverted Assets of $1,890,106 represents its share of the June 30, 2001 cash balance of DRC Partnership Fund Inc. (Fund Inc.) in excess of its book value thereof. On June 12, 2001, the Southwick Office Centre was sold for $15 million. After payment of sales commissions and other closing costs of $456,654 net proceeds of $14,543,346 were received by Fund Inc. for the benefit of the Partnerships. Additionally, Fund Inc. held $1,415,485 of cash previously generated by the operations of the Southwick Office Centre. The Partnership's interest in these amounts is $2,292,327 (14.4%) and is included in "Cash and cash equivalents" at June 30, 2001. The Partnership's book value of Diverted Assets was $402,221. 12 13 NOTE 4 - LITIGATION: During May of 2001, Edumund J. Lopinski, Jr., acting as his own attorney and who is presently incarcerated at the Marion Federal Correctional Institution in Marion, Illinois, filed several motions with the Federal District Court for the Northern District of Illinois claiming that all proceeds received from the sale of the Southwick office building in excess of the unsatisfied civil judgement entered against him (approximately $10 million) belongs to him. Attorneys for the Partnership believe that Mr. Lopinski's claims are without merit and will be vigorously defended. 13 14 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, 2000 through June 30, 2001. The discussion and analysis of results of operations is for the six month period ended June 30, 2001 as compared to the corresponding period in 2000. Any capitalized term not defined herein has been defined or discussed in the Partnership's 2000 Form 10-K. Liquidity and Capital Resources During the six months ended June 30, 2001, Partnership cash and cash equivalents increased by $2.1 million. This increase is due to proceeds of $2.3 million received from the sale of Southwick office building (see below) and cash receipts from collections on leases of $15,000, partially offset by cash used to pay operating expenses of $197,000. On June 12, 2001, the general partner closed the sale of the Southwick Office Centre, the last remaining Diverted Asset, for $15 million. After payment of sales commissions and other closing costs the net proceeds for all Partnerships totaled approximately $14.5 million. The Partnership's share of net proceeds along with an additional $1.4 million held by DRC Partnership Fund, Inc. are included in the Partnership's June 30, 2001 balance sheet as "Cash and cash equivalents". The Partnership's 14.4% share is $2.3 million. The Partnership's source of future liquidity will come from its cash-on-hand. After the cost of liquidating the Partnership has been funded, all remaining known liabilities of the Partnership have been satisfied and reserves have been provided for future contingent Partnership liabilities, all remaining cash will be distributed to the Limited Partners. The general partner expects this final distribution to occur sometime in the fourth quarter 2001. The general partner expects to utilize $217,000 to pay for Partnership liquidation activities. This amount is reflected on the Partnership's June 30, 2001 balance sheet as "Accrued post-dissolution expenses". The liquidation activities will include preparation of final state and federal tax returns, provide Limited Partners with final K-1s, file final state and federal regulatory documents, close all bank accounts, and complete all other such tasks as are necessary to conclude the Partnership's affairs. In accordance with the limited partnership agreement, as amended, the general partner also expects to set aside up to $228,000 to provide for any uninsured, currently unasserted claims that might arise from the operations or final liquidation of the Partnership. 14 15 Results of Operations The Partnership had net income of $1.8 million and $1.7 million for the three and six months ended June 30, 2001. This compares to net losses of $91,000 and $281,000 for the corresponding periods ended June 30, 2000. The increase in net income for the three month period is primarily attributable to the $1.9 million gain on the sale of the Southwick office building recorded in June of 2001 as well as an approximate $39,000 reduction in the general partner's expense reimbursement. The increase in net income for the six month period is primarily attributable to the aforementioned gain coupled with an approximate $151,000 reduction in the general partner's expense reimbursement. The decrease in the general partner's expense reimbursement is attributable to cost reductions associated with decreased partnership activities as well as a one time payment, in the first quarter of 2000, of $88,000 for insurance coverage through the final dissolution of the Partnership. The majority of other income and expense categories have decreased compared to the second quarter 2000 because of an overall reduction in activity. In addition, interest income decreased because of lower average invested cash balances due to the June 2000 distribution to investors and ongoing operating expenses. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information called for in this disclosure is not applicable to the Registrant. 15 16 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to Item 3 - Legal Proceedings in the Partnership's December 31, 2000 Form 10-K, for a discussion of material legal proceedings involving the Partnership. Reference is made to Part I, Item 1, Note 4 for a discussion of claims made by Edmund J. Lopinski. 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 None. 16 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 14th day of August 2001. 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, (and Principal Accounting Officer) Lease Resolution Corporation General Partner of Datronic Finance Income Fund I, L.P. 17

DATRONIC FINANCE INCOME FUND I LP 10-Q