<PAGE> 1
Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission File Number 0-17744
_______
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
(Exact name of Registrant as specified in its charter)
Delaware 36-3581924
________________ __________________
State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization
1300 E. Woodfield Road, Suite 312, Schaumburg, Illinois 60173
______________________________________________________ _____
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 240-6200
______________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
NONE NONE
___________________ _____________________
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
_____________________________________
(Title of class)
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 report(s)), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
___ ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
<PAGE> 2
PART I
ITEM 1 - BUSINESS
Datronic Equipment Income Fund XVII, L.P. (the "Partnership"), a Delaware
Limited Partnership, was formed on May 12, 1988. The Partnership offered Units
of Limited Partnership Interests (the "Units") during 1988 and 1989 raising
$99,999,500 of limited partner funds.
As more fully described in Part II, Item 8, Notes 1, 4 and 7, during the second
calendar quarter of 1992, it was learned that Edmund J. Lopinski, Jr., the
president, director and majority stockholder of Datronic Rental Corporation
("DRC"), the then general partner, in conjunction with certain other parties,
may have diverted approximately $13.3 million of assets from the Datronic
Partnerships and Transamerica Equipment Leasing Income Fund, L.P. ("TELIF") for
his/their direct or indirect benefit. During 1992, a class action lawsuit was
filed and subsequently certified on behalf of the limited partners in the
Datronic Partnerships against DRC, various officers of DRC and various other
parties. On March 4, 1993, a settlement was approved to resolve certain
portions of the suit to enable the operations of the Datronic Partnerships to
continue while permitting the ongoing pursuit of claims against alleged
wrongdoers (the "Settlement"). In connection with the Settlement, DRC was
replaced by Lease Resolution Corporation ("LRC") as General Partner of the
Partnership.
The Partnership was formed to acquire a variety of low-technology,
high-technology and other equipment for lease to unaffiliated third parties
under full payout leases as well as to acquire equipment subject to existing
leases. The cash generated during the Partnership's Operating Phase from such
investments was used to pay the operating costs of the Partnership, make
distributions to the limited partners and the general partner (subject to
certain limitations) and reinvest in additional equipment for lease. During the
Partnership's Liquidating Phase, which began May 31, 1994, the cash generated
from such investments is used to pay the liquidating costs of the Partnership
and make cash distributions to the limited partners and the general partner
(subject to certain limitations). Concurrent with the commencement of the
Liquidating Phase, the Partnership ceased reinvestment in equipment and leases
and began the orderly liquidation of the Partnership's assets.
A presentation of information about industry segments, geographic regions,
raw materials or seasonality is not applicable and would not be material to
an understanding of the Partnership's business taken as a whole. Since the
Partnership ceased investing in leases effective May 31, 1994, a discussion
of sources and availability of leases, backlog and competition is not
material to an understanding of the Partnership's future activity.
2
<PAGE> 3
The Partnership has no employees. LRC, the General Partner, employed 27
persons at December 31, 1998 all of whom attend to the operations of the
Datronic Partnerships.
ITEM 2 - PROPERTIES
The Partnership's operations are located in leased premises of
approximately 15,000 square feet in Schaumburg, Illinois.
LRC occupies approximately 3,800 square feet of office space in Schaumburg,
Illinois a real estate property that is a Recovered Asset (see Part II,
Item 8, Note 4) held for the benefit of the Datronic Partnerships.
ITEM 3 - LEGAL PROCEEDINGS
Reference is made to Part II, Item 8, Note 7 for a discussion of material
legal proceedings involving the Partnership.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of limited partners during the fourth
quarter of the fiscal year covered by this report through the solicitation
of proxies or otherwise.
3
<PAGE> 4
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP UNITS AND
RELATED LIMITED PARTNER AND GENERAL PARTNER MATTERS
MARKET INFORMATION
The Units are not listed on any exchange or national market system, and
there is no established public trading market for the Units. To the best
of LRC's knowledge, no trading market exists for the Units that would
jeopardize the Partnership's status for federal income tax purposes.
As of March 16, 1999, the Partnership estimates that there were
approximately 8,163 record owners of Units.
DISTRIBUTIONS
Reference is made to Part II, Item 8, Notes 6 and 9 for a discussion of
classes of limited partners and distributions paid to limited partners and
the general partner.
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth selected financial data as of December 31,
1998, 1997, 1996, 1995, and 1994 and for the five years then ended. The
amounts presented are aggregated for all Classes (A, B, and C) of Limited
Partners, unless otherwise noted. This information should be read in
conjunction with the financial statements included in Item 8 which also
reflects amounts for each of the classes of limited partners.
4
<PAGE> 5
Statements of Revenue and Expenses Data
(in thousands, except for Unit amounts)
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenue $ 1,224 $ 514 $ 1,092 $ 1,901 $ 3,123
Total expenses 1,431 1,234 2,522 1,855 3,276
-------- ------- ------- -------- -------
Net earnings (loss) $ (207) $ (720) $(1,430) $ 46 $ (153)
-------- ------- ------- -------- -------
Net earnings (loss)
per Unit
Class A $ (1.39) $ (4.06) $ (8.39) $ (1.76) $ (2.73)
-------- ------- ------- ------- -------
Class B $ (.85) $ (3.34) $ (6.47) $ 1.14 $ .15
-------- ------- ------- ------- -------
Class C $ (.85) $ (3.34) $ (6.47) $ 1.14 $ .15
-------- ------- ------- ------- -------
Distributions per Unit
(per year)
Class A $ - $ - $ - $ 3.98 $ 73.59
-------- ------- ------- -------- -------
Class B $ - $ - $ 1.00 $ 69.38 $ 70.30
-------- ------- ------- -------- -------
Class C $ - $ - $ 1.00 $ 69.38 $ 70.30
-------- ------- ------- -------- -------
Weighted average number
of Units outstanding
Class A 63,030 63,030 63,030 63,030 63,030
-------- ------- ------- -------- -------
Class B 136,859 136,859 136,859 136,859 136,859
-------- ------- ------- -------- -------
Class C 110 110 110 110 110
-------- ------- ------- -------- -------
</TABLE>
Balance Sheet Data
(in thousands, except for Unit amounts)
<TABLE>
<CAPTION>
As of December 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total assets $ 6,312 $ 6,568 $ 7,683 $ 10,031 $19,775
-------- ------- ------- -------- -------
Total liabilities $ 59 $ 109 $ 503 $ 1,284 $ 1,259
-------- ------- ------- -------- -------
Partners' equity $ 6,253 $ 6,459 $ 7,180 $ 8,747 $18,516
-------- ------- ------- -------- -------
Book value per Unit
Class A $ 30.64 $ 32.04 $ 36.09 $ 44.48 $ 49.36
-------- ------- ------- -------- -------
Class B $ 34.48 $ 35.33 $ 38.68 $ 46.15 $113.43
-------- ------- ------- -------- -------
Class C $ 37.89 $ 39.34 $ 42.69 $ 50.16 $117.44
-------- ------- ------- -------- -------
</TABLE>
5
<PAGE> 6
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis presents information pertaining to the
Partnership's operating results and financial condition.
RESULTS OF OPERATIONS
The Partnership had a net loss of $207,000 in 1998 in the aggregate for all
classes of partners. This compares to aggregate net losses in 1997 and 1996 of
$721,000 and $1,429,000, respectively. 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 years ended December 31, 1998 include the following:
Lease income:
Since May 1994, 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 over the three years ended December 31, 1998. This trend will
continue as the Partnership liquidates its remaining leases.
Litigation proceeds:
Litigation proceeds represent the Partnership's proportionate share of
recoveries received in connection with the resolution of litigation against its
former accountants. See Note 7 to the Partnership's financial statements
included in Item 8.
Recovery of Datronic Assets:
Recovery of Datronic Assets represents the Partnership's 16.0% share of
previously reserved cash balances held by a nominee company for the benefit of
the Datronic Partnerships. During 1998, potential claims against these funds
were resolved and a total of $750,000 was distributed proportionately to each of
the Datronic Partnerships. See Note 5 to the Partnership's financial statements
included in Item 8.
Interest income:
Interest income for all three years includes earnings on invested cash balances.
In addition, 1996 includes interest earned on an installment contract, including
$243,000 of previously unrecorded interest income recorded in connection with
the payoff of the remaining balance due.
6
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Management fees - New Era:
These fees were paid to New Era Funding for managing the day-to-day operations
of the Partnership under a Management Agreement that was terminated effective
June 30, 1996. Accordingly, 1998 and 1997 reflect no New Era management fees
and 1996 results reflect only six months of such fees plus $813,000 in
termination and non-compete fees. Effective July 1, 1996, LRC assumed
responsibility for the day-to-day management of the Partnership and the related
expenses are included in General Partner's expense reimbursement (see Note 8 to
the Partnership's financial statements included in Item 8).
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. Effective July 1, 1996, these expenses include
additional expenses incurred by LRC in its management of the day-to-day
operations of the Partnership. The decrease in 1998 is due to the effects
of staff reductions and other cost savings realized during 1998. Included
in 1997 expenses is $120,000 of insurance premiums for coverage that
extends through the ultimate liquidation of the Partnership and $66,000 of
one-time charges for relocating the former New Era staff to reduced office
space. See Note 9 to the Partnership's financial statements included in
Item 8.
Professional fees - litigation:
Professional fees - litigation represent fees paid in connection with the
Partnership's litigation which is described in Note 7 to the Partnership's
financial statements included in Item 8. The 1998 and 1997 increases reflect
fees paid in connection with the litigation against the Partnership's former
accountants. Included in the 1998 amount are contingent fees paid or accrued
based on amounts recovered.
Professional fees - other:
Professional fees - other for the three years ended December 31, 1998 reflect a
decreasing level of professional services required as a result of the decrease
in the Partnership's lease portfolio and related activities.
Credit for lease loss:
This credit reflects Management's ongoing assessment of the potential losses
inherent in the lease portfolio. The credits in 1997 and 1998 reflect net
recoveries of lease balances previously reserved.
Provision (credit) for loss on Diverted and other assets: This provision
(credit) represents the Partnership's share of any decrease (recovery) in the
estimated net realizable value of various assets held for the benefit of the
Datronic Partnerships. The credit in 1997 reflects a recovery of amounts
previously reserved for in 1995. Because of the fluctuating nature of real
estate values and the inherent difficulty of estimating the affects of future
events,
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the amounts ultimately realized from these assets could differ significantly
from their recorded amounts. See Note 4 to the Partnership's financial
statements included in item 8.
LIQUIDITY AND CAPITAL RESOURCES
During 1998, 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 year, Partnership's cash and cash equivalents
increased by $219,000 to $5,999,000 at December 31, 1998 from $5,780,000 at
December 31, 1997. This increase is primarily due to cash receipts from
collections on leases of $669,000 (includes approximately $218,000 from leases
that were fully reserved) and a distribution of Diverted and other assets of
$157,000, partially offset by cash used in operations of $607,000.
The Partnership's sources of future liquidity are expected to come from
cash-on-hand, the cash receipts from leases owned by the Partnership as well as
the disposition of the remaining Diverted Assets. The ultimate liquidation date
of the Partnership and its associated costs are not yet certain due to various
timing issues relating to the liquidation of the Partnership's remaining assets.
The lease portfolio is scheduled to be fully liquidated by April 1999 and the
remaining Diverted Assets (consisting primarily of an office building in
Schaumburg, Illinois) are expected to be liquidated during 1999.
Through the second quarter of 1998, it appeared unlikely that the Partnership
would make any additional distributions until such time as its remaining assets
were liquidated and the pending litigation resolved. Now that additional assets
have been liquidated, the General Partner has determined that an interim cash
distribution will be paid to the limited partners shortly after the end of the
first quarter 1999. The General Partner is in the process of determining the
amount that will be available for this distribution and its allocation among
each class of Limited Partner. This distribution will be made to owners of
record as of December 31, 1998 even if their units are subsequently sold.
IMPACT OF INFLATION AND CHANGING PRICES
Inflation is not expected to have any significant direct, determinable effect on
the Partnership's business or financial condition.
8
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IMPACT OF YEAR 2000 ISSUE
LRC has conducted a comprehensive review of the computer systems used to support
the Partnership's operations to determine whether any systems could be affected
by the Year 2000 Issue. The Year 2000 Issue relates to computer programs that
use two digits rather than four to define the year. This could cause
date-sensitive software to recognize the digits "00" as the year 1900 rather
than 2000. LRC does not expect the Partnership to be affected by the Year 2000
Issue because the systems used to support the Partnership's operations are
already substantially able to meet the reduced operating requirements of the
Partnership in the Year 2000. Furthermore, the only material relationships the
Partnership has with third parties that could be affected by the Year 2000 are
those with the Partnership's banking institutions. LRC has been advised by the
Partnership's banking institutions that they are Year 2000 compliant.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for in this disclosure is not applicable to the
Registrant.
9
<PAGE> 10
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Audited Financial Statements: Page(s)
-------
<S> <C>
Independent Auditors' Report 11-12
Balance Sheets
In Total for All Class of Limited Partners
at December 31, 1998 and 1997 13
By Class of Limited Partner December 31, 1998 14
December 31, 1997 15
Statements of Revenue and Expenses
In Total for All Classes of Limited Partners for the
years ended December 31, 1998, 1997 and 1996 16
By Class of Limited Partner for the years ended
December 31, 1998 17
December 31, 1997 18
December 31, 1996 19
Statements of Changes in Partners' Equity
For the years ended December 31, 1998, 1997 and 1996 20
Statements of Cash Flows
In Total for All Classes of Limited Partners
for the years ended December 31, 1998, 1997 and 1996 21
By Class of Limited Partner for the years ended
December 31, 1998 22
December 31, 1997 23
December 31, 1996 24
Notes to Financial Statements 25-35
</TABLE>
10
<PAGE> 11
INDEPENDENT AUDITORS' REPORT
The Partners of Datronic
Equipment Income Fund XVII, L.P.
We have audited the accompanying balance sheets in total for all classes of
limited partners of DATRONIC EQUIPMENT INCOME FUND XVII, L.P. ("the
Partnership") as of December 31, 1998 and 1997 and the related statements of
revenue and expenses in total for all classes of limited partners, of changes in
partners' equity and of cash flows in total for all classes of limited partners
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership as of December
31, 1998 and 1997, and the results of its operations in total for all classes of
limited partners and its cash flows in total for all classes of limited partners
for each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the Partnership's
financial statements taken as a whole. As described in Note 2, the accounting
records of the Partnership are maintained to reflect the interests of each of
the classes of limited partners. Additional information consisting of the
balance sheets by class of limited partner as of December 31, 1998 and 1997, the
statements of revenue and expenses by class of limited partner and the
statements of cash flows by class of limited partner for the three years in the
period ended December 31, 1998 have been prepared by management solely for the
information of the limited partners and are not a required part of the financial
statements. This additional information has been subjected to the auditing
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procedures applied in the audit of the Partnership's financial statements and,
in our opinion, has been allocated to the respective classes of limited partners
in accordance with the terms of the Amended Partnership Agreement described in
Note 9 and is fairly stated in all material respects in relation to the
Partnership's financial statements taken as a whole.
As explained more fully in Notes 1 and 4, the former President and Majority
Stockholder of Datronic Rental Corporation ("DRC"), the general partner of the
Partnership until March 4, 1993, and others are alleged to have diverted, for
their benefit, approximately $13 million from the Partnership and related
entities -- Datronic Equipment Income Fund XVI, XVIII, XIX, XX, L.P., Datronic
Finance Income Fund I, L.P. and Transamerica Equipment Leasing Income Fund, L.P.
(collectively "the Partnerships"). Substantially all of the assets known to
have been improperly acquired with the diverted funds have been recovered for
the benefit of the Partnerships.
Altschuler, Melvoin and Glasser LLP
Chicago, Illinois
March 9, 1999
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DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
BALANCE SHEETS
IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $5,998,910 $5,779,984
Judgment receivable, net 133,435 -
Net investment in direct
financing leases 11,039 461,900
Diverted and other assets, net 168,443 325,883
Datronic assets, net - -
---------- ----------
$6,311,827 $6,567,767
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued
expenses $ 26,444 $ 21,797
Lessee rental deposits 32,712 86,682
---------- ----------
Total liabilities 59,156 108,479
Total partners' equity 6,252,671 6,459,288
---------- ----------
$6,311,827 $6,567,767
========== ==========
</TABLE>
See accompanying notes to financial statements.
13
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DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
BALANCE SHEETS
BY CLASS OF LIMITED PARTNER
<TABLE>
<CAPTION>
December 31, 1998
------------------------------------------
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $1,748,534 $4,250,376 $5,998,910
Judgment receivable, net 42,059 91,376 133,435
Net investment in direct
financing leases - 11,039 11,039
Diverted and other assets, net 53,093 115,350 168,443
Datronic assets, net - - -
---------- ---------- ----------
$1,843,686 $4,468,141 $6,311,827
========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued
expenses $ 3,973 $ 22,471 $ 26,444
Lessee rental deposits 9,682 23,030 32,712
---------- ---------- ----------
Total liabilities 13,655 45,501 59,156
Total partners' equity 1,830,031 4,422,640 6,252,671
---------- ---------- ----------
$1,843,686 $4,468,141 $6,311,827
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
14
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DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
BALANCE SHEETS
BY CLASS OF LIMITED PARTNER
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- --------- --------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $1,843,376 $3,936,608 $5,779,984
Net investment in direct
financing leases - 461,900 461,900
Diverted and other assets, net 102,718 223,165 325,883
Datronic assets, net - - -
---------- ---------- ----------
$1,946,094 $4,621,673 $6,567,767
========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued
expenses $ 1,711 $ 20,086 $ 21,797
Lessee rental deposits 25,672 61,010 86,682
---------- ---------- ----------
Total liabilities 27,383 81,096 108,479
Total partners' equity 1,918,711 4,540,577 6,459,288
---------- ---------- ----------
$1,946,094 $4,621,673 $6,567,767
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
15
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DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenue:
Lease income $ 72,761 $ 214,630 $ 522,261
Litigation proceeds 762,854 - -
Recovery of Datronic assets 120,000 - -
Interest income 268,783 299,208 569,816
---------- ---------- -----------
1,224,398 513,838 1,092,077
---------- ---------- -----------
Expenses:
Management fees - New Era $ - $ - $ 1,354,358
General Partner's expense
reimbursement 685,033 952,000 537,803
Professional fees - litigation 773,535 428,583 303,523
Professional fees - other 126,729 165,453 251,777
Other operating expenses 63,421 59,085 54,526
Credit for lease losses (217,703) (343,211) -
Provision (credit) for loss on
Diverted and other assets - (27,419) 19,585
---------- ---------- -----------
1,431,015 1,234,491 2,521,572
---------- ---------- -----------
Net loss $ (206,617) $ (720,653) $(1,429,495)
========== ========== ===========
Net loss - General Partner $ (2,066) $ (7,207) $ (14,295)
========== ========== ===========
Net loss - Limited Partners $ (204,551) $ (713,446) $(1,415,200)
========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 17
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
------------ ------------ -----------
<S> <C> <C> <C>
Revenue:
Lease income $ 7,705 $ 65,056 $ 72,761
Litigation proceeds 240,452 522,402 762,854
Recovery of Datronic assets 37,824 82,176 120,000
Interest income 81,362 187,421 268,783
-------- --------- ----------
367,343 857,055 1,224,398
-------- --------- ----------
Expenses:
General Partner's expense
reimbursement $202,985 $ 482,048 $ 685,033
Professional fees - litigation 243,818 529,717 773,535
Professional fees - other 37,470 89,259 126,729
Other operating expenses 19,882 43,539 63,421
Credit for lease losses (48,132) (169,571) (217,703)
-------- --------- -----------
456,023 974,992 1,431,015
-------- --------- -----------
Net loss $(88,680) $(117,937) $ (206,617)
======== ========= ===========
Net loss - General Partner $ (887) $ (1,179) $ (2,066)
======== ========= ===========
Net loss - Limited Partners $(87,793) $(116,758) $ (204,551)
======== ========= ===========
Net loss per limited
partnership unit $ (1.39) $ (0.85)
======== =========
Weighted average number of limited
partnership units outstanding 63,030 136,969
======== =========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE> 18
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ---------- -----------
<S> <C> <C> <C>
Revenue:
Lease income $ 22,526 $ 192,104 $ 214,630
Interest income 84,237 214,971 299,208
---------- ---------- -----------
106,763 407,075 513,838
---------- ---------- -----------
Expenses:
General Partner's expense
reimbursement $ 282,806 $ 669,194 $ 952,000
Professional fees - litigation 135,089 293,494 428,583
Professional fees - other 45,493 119,960 165,453
Other operating expenses 18,500 40,585 59,085
Credit for lease losses (108,180) (235,031) (343,211)
Credit for loss on
Diverted and other assets (8,642) (18,777) (27,419)
---------- ---------- -----------
365,066 869,425 1,234,491
---------- ---------- -----------
Net loss $(258,303) $(462,350) $ (720,653)
========== ========== ===========
Net loss - General Partner $ (2,583) $ (4,624) $ (7,207)
========== ========== ===========
Net loss - Limited Partners $(255,720) $(457,726) $ (713,446)
========== ========== ===========
Net loss per limited
partnership unit $ (4.06) $ (3.34)
========== ==========
Weighted average number of limited
partnership units outstanding 63,030 136,969
========== ==========
</TABLE>
See accompanying notes to financial statements.
18
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DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF REVENUE AND EXPENSES
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1996
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
------------ ---------- -----
<S> <C> <C> <C>
Revenue:
Lease income $ 53,900 $ 468,361 $ 522,261
Interest income 116,911 452,905 569,816
---------- --------- -----------
170,811 921,266 1,092,077
---------- --------- -----------
Expenses:
Management fees - New Era $ 400,921 $ 953,437 $ 1,354,358
General Partner's expense
reimbursement 162,294 375,509 537,803
Professional fees - litigation 95,670 207,853 303,523
Professional fees - other 71,834 179,943 251,777
Other operating expenses 16,818 37,708 54,526
Provision (credit) for lease
losses (48,856) 48,856 -
Provision for loss on
Diverted and other assets 6,173 13,412 19,585
--------- ---------- -----------
704,854 1,816,718 2,521,572
--------- ---------- -----------
Net loss $(534,043) $ (895,452) $(1,429,495)
========= ========== ===========
Net loss - General Partner $ (5,340) $ (8,955) $ (14,295)
========= ========== ===========
Net loss - Limited Partners $(528,703) $ (886,497) $(1,415,200)
========= ========== ===========
Net loss per limited
partnership unit $ (8.39) $ (6.47)
========= ==========
Weighted average number of limited
partnership units outstanding 63,030 136,969
========= ==========
</TABLE>
See accompanying notes to financial statements.
19
<PAGE> 20
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the three years ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Liquidating Continuing
General Limited Limited Total
Partner's Partners' Partners' Partners'
Equity Equity Equity Equity
----------- ---------- ---------- ----------
Balance, December 31, 1995 $ - $2,711,057 $6,035,349 $8,746,406
Distributions to partners - - (136,970) (136,970)
Net loss (14,295) (528,703) (886,497) (1,429,495)
Allocation of General
Partner's Equity 14,295 (5,340) (8,955) -
---------- ---------- ---------- ----------
Balance, December 31, 1996 - 2,177,014 5,002,927 7,179,941
---------- ---------- ---------- ----------
Net loss (7,207) (255,720) (457,726) (720,653)
Allocation of General
Partner's Equity 7,207 (2,583) (4,624) -
---------- ---------- ---------- ----------
Balance, December 31, 1997 - 1,918,711 4,540,577 6,459,288
---------- ---------- ---------- ----------
Net loss (2,066) (87,793) (116,758) (206,617)
Allocation of General
Partner's Equity 2,066 (887) (1,179) -
---------- ---------- ---------- ----------
Balance, December 31, 1998 $ - $1,830,031 $4,422,640 $6,252,671
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 21
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF CASH FLOWS
IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(206,617) $(720,653) $(1,429,495)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (217,703) (343,211) -
Provision (credit) for loss on
Diverted and other assets - (27,419) 19,585
Changes in assets and liabilities:
Judgment receivable, net (133,435) - -
Accounts payable and
accrued expenses 4,647 (218,824) (188,036)
Lessee rental deposits (53,970) (176,186) (592,490)
Due from management
company - 44,010 (44,420)
--------- ---------- -----------
(607,078) (1,442,283) (2,234,856)
---------- ---------- -----------
Cash flows from investing activities:
Principal collections on leases 668,564 1,486,947 4,004,869
Distribution of Diverted and other
assets 157,440 - -
Release of Restricted cash - - 34,301
Principal collections on installment
contract receivable - - 172,673
---------- ---------- -----------
826,004 1,486,947 4,211,843
---------- ---------- -----------
Cash flows from financing activities:
Distributions to Limited Partners - - (136,970)
---------- ---------- -----------
- - (136,970)
---------- ---------- -----------
Net increase in cash and
cash equivalents 218,926 44,664 1,840,017
Cash and cash equivalents:
Beginning of year 5,779,984 5,735,320 3,895,303
---------- ---------- ----------
End of year $5,998,910 $5,779,984 $5,735,320
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
<PAGE> 22
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF CASH FLOWS
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (88,680) $ (117,937) $ (206,617)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (48,132) (169,571) (217,703)
Changes in assets and liabilities:
Judgment receivable, net (42,059) (91,376) (133,435)
Accounts payable and
accrued expenses 2,262 2,385 4,647
Lessee rental deposits (15,990) (37,980) (53,970)
---------- ---------- ----------
(192,599) (414,479) (607,078)
---------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 48,132 620,432 668,564
Distribution of Diverted and other
assets 49,625 107,815 157,440
---------- ---------- ----------
97,757 728,247 826,004
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents (94,842) 313,768 218,926
Cash and cash equivalents:
Beginning of year 1,843,376 3,936,608 5,779,984
---------- ---------- ----------
End of year $1,748,534 $4,250,376 $5,998,910
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
22
<PAGE> 23
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF CASH FLOWS
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(258,303) $(462,350) $(720,653)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Credit for lease losses (108,180) (235,031) (343,211)
Credit for loss on
Diverted and other assets (8,642) (18,777) (27,419)
Changes in assets and liabilities:
Accounts payable and
accrued expenses (65,885) (152,939) (218,824)
Lessee rental deposits (50,369) (125,817) (176,186)
Due from management
company 12,676 31,334 44,010
---------- ---------- ----------
(478,703) (963,580) (1,442,283)
---------- ---------- ----------
Cash flows from investing activities:
Principal collections on leases 119,004 1,367,943 1,486,947
---------- ---------- ----------
119,004 1,367,943 1,486,947
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents
Cash and cash equivalents: (359,699) 404,363 44,664
Beginning of year
End of year 2,203,075 3,532,245 5,735,320
---------- ---------- ----------
$1,843,376 $3,936,608 $5,779,984
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
23
<PAGE> 24
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
STATEMENTS OF CASH FLOWS
BY CLASS OF LIMITED PARTNER
For the year ended December 31, 1996
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (534,043) $(895,452) $(1,429,495)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Provision (credit) for lease
losses (48,856) 48,856 -
Provision for loss on
Diverted and other assets 6,173 13,412 19,585
Changes in assets and liabilities:
Accounts payable and
accrued expenses (57,668) (130,368) (188,036)
Lessee rental deposits (177,026) (415,464) (592,490)
Due from management
company (12,810) (31,610) (44,420)
---------- ---------- -----------
(824,230) (1,410,626) (2,234,856)
---------- ---------- -----------
Cash flows from investing activities:
Principal collections on leases 582,314 3,422,555 4,004,869
Release of Restricted cash 10,812 23,489 34,301
Principal collections on -
installment contract receivable 54,427 118,246 172,673
---------- ---------- -----------
647,553 3,564,290 4,211,843
---------- ---------- -----------
Cash flows from financing activities:
Distributions to Limited Partners - (136,970) (136,970)
---------- ---------- -----------
- (136,970) (136,970)
---------- ---------- -----------
Net increase (decrease) in cash and
cash equivalents (176,677) 2,016,694 1,840,017
Cash and cash equivalents:
Beginning of year 2,379,752 1,515,551 3,895,303
---------- ---------- -----------
End of year $2,203,075 $3,532,245 $ 5,735,320
========== ========== ===========
</TABLE>
See accompanying notes to financial statements
24
<PAGE> 25
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, AND 1996
NOTE 1 - ORGANIZATION:
Datronic Equipment Income Fund XVII, L.P., a Delaware Limited Partnership
(the "Partnership"), was formed on May 12, 1988 for the purpose of acquiring
and leasing both high- and low-technology equipment. Through March 4, 1993,
Datronic Rental Corporation ("DRC") was the general partner of the Partnership
and Datronic Equipment Income Funds XVI, XVIII, XIX, XX and Datronic Finance
Income Fund I, (collectively, the "Datronic Partnerships") and was co-general
partner of Transamerica Equipment Leasing Income Fund, L.P. ("TELIF").
In 1992, it was alleged that the chairman of DRC (who was also its president and
majority stockholder), in conjunction with various other parties, had
misappropriated and commingled $13.3 million of funds belonging to this and the
other Datronic Partnerships and TELIF. The Partnership's portion of these funds
was $519,000. In connection with a partial settlement of a class action lawsuit
arising from these allegations, Lease Resolution Corporation ("LRC") replaced
DRC as general partner of this and the other Datronic Partnerships on March 4,
1993. LRC is a Delaware non-stock corporation formed for the sole purpose of
acting as general partner of the Datronic Partnerships.
On May 31, 1994, the Partnership began its Liquidating Phase under which it has
ceased investing in new leases and began the orderly liquidation of its assets.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF FINANCIAL STATEMENTS - The accounting records of the Partnership
are being maintained to reflect the interests of each of the classes of limited
partners (see Note 9). Each class of limited partner is not a separate legal
entity holding title to individual assets nor the obligor of individual
liabilities. Accordingly, assets allocated to a specific class of limited
partner are available to settle claims of the Partnership as a whole. Additional
information consisting of the balance sheets by class of limited partner as of
December 31, 1998 and 1997, the statements of revenue and expenses by class of
limited partner and the statements of cash flows by class of limited partner for
the three years ended December 31, 1998 have been prepared to present
allocations of the various categories of assets, liabilities, revenue, expenses
and cash flows of the Partnership to each of the classes of limited partners in
accordance with the Amended Partnership Agreement. In addition, the general
partner's equity has been allocated to each class of limited
25
<PAGE> 26
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
partner for purposes of additional information because the equity attributable
to the general partner will be allocated to the limited partners upon final
dissolution of the Partnership. For purposes of this additional information,
the interests of the Class B and Class C Limited Partners have been combined as
"Continuing Limited Partners." At December 31, 1998, the amounts per Unit
relating to these two classes are identical with the exception that the per Unit
value of Class C Limited Partners is $3.41 per Unit higher than the Class B
Limited Partners because, in accordance with the 1993 Settlement, Class Counsel
fees and expenses related to the Settlement, net of Datronic Assets, were not
allocated to the Class C Limited Partners (see Note 5).
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist principally
of overnight investments in high quality, short-term corporate demand notes
(commercial paper). Due to the nature of the Partnership's commercial paper
investments, Management does not believe there is any significant market risk
associated with such investments. Amounts due (to) from the general partner
(LRC) and other Datronic Partnerships are also included.
NET INVESTMENT IN DIRECT FINANCING LEASES - Net investment in direct
financing leases consists of the present value of future minimum lease payments
and residuals under non-cancelable lease agreements. Residuals are valued at
the estimated fair market value of the underlying equipment at lease
termination.
Leases are classified as non-performing when it is determined that the only
remaining course of collection is litigation. All balances relating to the
lease are netted together and no further income is accrued when a lease is
classified as non-performing.
Lease income includes interest earned on the present value of lease payments and
residuals (recognized over the term of the lease to yield a constant periodic
rate of return), interest collected on non-performing leases, late fees, and
other lease related items.
ALLOWANCE FOR LEASE LOSSES - An allowance is recorded to reflect estimated
losses inherent in the existing portfolio of leases. Additions to the allowance
are made by means of a provision for lease losses, which is charged to expense.
Recoveries of amounts previously reserved are reflected as credits to the
provision for lease loss. The amounts shown in the accompanying Statements of
Revenue and Expenses reflect the net effect of provisions and recoveries.
Write-offs are deducted from the allowance.
26
<PAGE> 27
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
DUE (TO) FROM GENERAL PARTNER AND OTHER DATRONIC PARTNERSHIPS - In the
ordinary course of the Partnership's day-to-day operations, there are
occasions when the general partner and/or other Datronic Partnerships owe
amounts to, and are owed amounts from, the Partnership. It is the
Partnership's policy not to charge (credit) interest on these payable
(receivable) balances and to include them as cash equivalents.
NET EARNINGS (LOSS) PER LIMITED PARTNERSHIP UNIT - Net earnings (loss) per
unit is based on net earnings (loss) after giving effect to a 1% allocation
to the general partner. The remaining 99% of net earnings (loss) for each
of the Liquidating and Continuing Limited Partners is divided by the
weighted-average number of units outstanding to arrive at net earnings
(loss) per limited partnership unit for each class of limited partner.
USE OF ESTIMATES - In preparing financial statements in conformity with
generally accepted accounting principles, Management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
NOTE 3 - NET INVESTMENT IN DIRECT FINANCING LEASES:
The components of the net investment in direct financing leases at December 31,
1998 and 1997 are as follows:
<TABLE>
<S> <C> <C> <C>
December 31, 1998
--------------------------------------------
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ----------- ----------
Performing leases
Minimum lease payments
receivable $ 2,791 $ 21,626 $ 24,417
Unearned income - (152) (152)
Estimated residuals - - -
----------- ----------- ----------
Total performing leases 2,791 21,474 24,265
Non-performing leases 584,531 1,696,276 2,280,807
----------- ----------- ----------
Net investment in direct financing
leases before allowance for
lease losses 587,322 1,717,750 2,305,072
Allowance for lease losses (587,322) (1,706,711) (2,294,033)
----------- ----------- ----------
Net investment in direct financing
leases $ - $ 11,039 $ 11,039
=========== =========== ==========
Billed and outstanding balances
included in net investment
in direct financing leases $ 2,791 $ 8,769 $ 11,560
=========== =========== ==========
</TABLE>
27
<PAGE> 28
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
December 31, 1997
------------------------------------------------------------
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- -----
<S> <C> <C> <C>
Performing leases
Minimum lease payments
receivable $ 49,507 $ 629,430 $ 678,937
Unearned income - (23,682) (23,682)
Estimated residuals 57 124 181
----------- ----------- ----------
Total performing leases 49,564 605,872 655,436
Non-performing leases 611,031 1,844,275 2,455,306
Net investment in direct financing ----------- ----------- ----------
leases before allowance for
lease losses 660,595 2,450,147 3,110,742
Allowance for lease losses (660,595) (1,988,247) (2,648,842)
----------- ----------- ----------
Net investment in direct financing
leases $ - $ 461,900 $ 461,900
=========== =========== ==========
Billed and outstanding balances
included in net investment
in direct financing leases $ 49,601 $ 122,382 $ 171,983
=========== =========== ==========
</TABLE>
An analysis of the changes in the allowance for lease losses by Class of Limited
Partner for 1996, 1997 and 1998 follows:
<TABLE>
<CAPTION>
Liquidating Continuing
Limited Limited
Partners Partners Total
----------- ---------- -----
<S> <C> <C> <C>
Balance at December 31, 1995 $ 990,387 $ 2,723,793 $3,714,180
Additions (recoveries) (48,856) 48,856 -
Write-offs (134,921) (391,156) (526,077)
----------- ----------- ----------
Balance at December 31, 1996 806,610 2,381,493 3,188,103
Recoveries (108,180) (235,031) (343,211)
Write-offs (37,835) (158,215) (196,050)
----------- ----------- ----------
Balance at December 31, 1997 660,595 1,988,247 2,648,842
Recoveries (48,132) (169,571) (217,703)
Write-offs (25,141) (111,965) (137,106)
----------- ----------- ----------
Balance at December 31, 1998 $ 587,322 $ 1,706,711 $2,294,033
=========== =========== ==========
</TABLE>
The Partnership leased equipment with lease terms generally ranging from two to
five years. All remaining minimum payments are scheduled to be received on
performing leases during 1999.
<PAGE> 29
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
NOTE 4 - DIVERTED AND OTHER ASSETS:
The $13.3 million of funds allegedly misappropriated from the Datronic
Partnerships and TELIF (collectively, the "Partnerships") (see Note 1) were
commingled by the alleged wrongdoers with $10.3 million of funds and used to
acquire various assets. $20.7 million of such assets (collectively, "Diverted
and other assets" or "Recovered Assets") were subsequently recovered for the
benefit of the Partnerships and each Partnership was assigned an undivided,
pro-rata interest in them. These assets are held by a nominee company.
Since 1993, LRC has been liquidating these assets and distributing available
funds to the Partnerships. The Partnership's 3.9% interest in the remaining
Diverted and other assets is reflected in the accompanying balance sheets at
cost, less valuation allowances established in prior years. At December 31,
1998, these assets consisted of a seven-story office building in Schaumburg,
Illinois and cash of $1.3 million.
During 1998, $4.0 million of cash (Partnership's share, $157,440) was
transferred from the nominee company to the Partnerships. These proceeds were
recorded as a reduction of "Diverted and other assets, net" in the Partnership's
Balance Sheet. The Partnership's Statements of Revenue and Expenses reflect a
1997 recovery ($27,419) of previously reserved balances and a 1996 loss
($19,585) from the settlement of claims against the Diverted and other assets.
LRC is continuing its efforts to market and sell the Schaumburg, Illinois office
building. The net sales proceeds, along with other available cash balances will
be distributed to the Partnerships. Due to the fluctuating nature of real estate
values, the ultimate net realizable value of the office building cannot be
predicted.
NOTE 5 - DATRONIC ASSETS:
At December 31, 1998, Datronic Assets consisted of the Partnership's 16.0%
interest in fully-reserved residual cash of $46,000 held by a nominee company
for the benefit of the Class A and B Limited Partners of the Datronic
Partnerships. The reserves are in anticipation of future costs or claims that
may be paid by the nominee.
Originally, Datronic Assets consisted of all of DRC's net assets which were
transferred to an LRC nominee company for the purpose of reimbursing the Class A
and B Limited Partners for legal fees paid
29
<PAGE> 30
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
in connection with the 1993 court-approved partial settlement of class action
litigation (see Notes 1, 2 and 7). Since then, all but $46,000 of the
$1,732,000 (Partnership's share $277,000) realized from the liquidation of the
Datronic Assets has been distributed to the Partnerships, including $750,000
(Partnership's share $120,000) during 1998. The $120,000 realized by the
Partnership this year was previously fully-reserved for claims that were
ultimately resolved during 1998 and is shown in the accompanying Statements of
Revenue and Expenses as "Recovery of Datronic Assets". The $120,000 and all
previously realized Datronic Assets have been allocated to the Class A and B
Limited Partners.
Upon dissolution of the nominee company, any portion of the $46,000 which is
realized in excess of its fully reserved balance of zero, will be distributed
proportionately to the Partnerships.
NOTE 6 - PARTNERS' EQUITY:
Distributions per Unit to the Limited Partners for 1996 were:
Class A $ -
Class B $ 1.00
Class C $ 1.00
No distributions were made in 1997 or 1998.
At December 31, 1998, 1997 and 1996 there were 63,030 Class A Units, 136,859
Class B Units, 110 Class C Units, and one General Partner Unit outstanding.
Funds raised by each Class and cumulative distributions to limited partner by
Class from the Partnership's formation through December 31, 1998 are:
<TABLE>
<CAPTION>
<S> <C> <C>
Funds Cumulative
Raised Distributions
Class A $31,515,000 $25,229,905
Class B 68,429,500 55,206,272
Class C 55,000 42,059
----------- -----------
Total $99,999,500 $80,478,236
=========== ===========
</TABLE>
30
<PAGE> 31
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - LITIGATION:
CLAIMS AGAINST PROFESSIONALS
During 1992, various class action lawsuits and Partnership cross- claims were
filed against the Partnerships' former securities counsel (Siegan, Barbakoff,
Gomberg & Kane - "Siegan") alleging breach of fiduciary duty and the
Partnerships' former independent accountants (Weiss and Company and Price
Waterhouse) alleging professional negligence, breach of contract, and violations
of Section 11 of the Securities Act of 1933.
The claims against Siegan were settled in 1995 pursuant to which Siegan paid a
total of $1.78 million (of which $426,000 went to the Partnership). Costs,
consisting primarily of legal fees, incurred by the Partnerships in pursuing
their claim against Siegan totaled approximately $683,000 (including $164,000
paid by the Partnership).
During 1998, the claims against the Partnerships' former accountants were
resolved. In May, LRC reached a settlement with Weiss under which Weiss agreed
to pay the Partnerships $2.4 million (Partnership's share is $585,000) in
exchange for a release from all Partnership claims and dismissal of the class
claims against it. The settlement was consummated in September and the
settlement proceeds, along with $37,000 of interest earned since May, were
transferred to LRC for the benefit of the Partnerships. After payment of
$609,000 in contingent legal fees (Partnership's share is $146,000), $1.83
million of net proceeds were made available to the Partnerships. The
Partnership's share of the gross proceeds has been included in its 1998
Statements of Revenue and Expenses as "Litigation proceeds." The contingent
legal fees are included in the Statements of Revenue and Expenses as part of
"Professional fees - litigation."
In June, a jury verdict was rendered against Price Waterhouse finding them
negligent in the conduct of their prior audits of the Datronic Partnerships.
The jury awarded damages of $739,300. In January 1999, the court entered final
judgment and awarded an additional $2,000 for trial costs. The Partnership's
share ($178,000) of the total award has been included in its 1998 Statements of
Revenue and Expenses as "Litigation proceeds." These damages bear 9% interest
until paid by the defendant. Contingent fees of 25% of the recovery will be due
upon receipt of the damages and are reflected in the Statements of Revenue and
Expenses as part of "Professional fees - litigation." The proceeds due to the
31
<PAGE> 32
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
Partnership are included in its December 31, 1998 Balance Sheet, net of
contingent legal fees, as "Judgment receivable, net."
Legal fees and trial expenses incurred by the Partnership in pursuing its claims
against the former accountants have totaled $1,333,000 since 1993.
OTHER CLAIMS
During 1994, a suit was filed on behalf of certain of the Datronic Partnerships
(including the Partnership) arising out of their 1990 acquisition of a lease
portfolio. The suit charges fraud and breach of contract against the original
owner. During 1995, the Court dismissed the claim for lack of jurisdiction
without ruling on its merits. LRC, on behalf of the affected partnerships,
filed a revised complaint in the Circuit Court of Cook County, Illinois for
fraud and breach of contract in the amount of $5.5 million plus punitive damages
and interest. This action is expected to come to trial in 1999.
NOTE 8 - PARTNERSHIP MANAGEMENT:
Since July 1, 1996, LRC has directly managed the day-to-day operations of the
Datronic Partnerships. The cost of the day-to-day management services is
allocated to each partnership based on the level of services performed for each
partnership. These expenses are reimbursed to LRC pursuant to the terms of the
Amended Partnership Agreement (see Note 9).
Prior to July 1, 1996, the Datronic Partnerships were managed by New Era Funding
under the direction of LRC pursuant to a Management Agreement. Effective June
30, 1996, this agreement was terminated and, pursuant to the Management
Termination Agreement, New Era and its principals were paid an aggregate amount
of $4.2 million. The Partnership's share of these payments was $813,444, and is
included in the 1996 Statements of Revenue and Expenses as part of "Management
fees - New Era".
As part of the Management Termination Agreement, two of New Era's principals
have been retained as consultants to the Datronic Partnerships through March 31,
1999 for an annual fee of $200,000 each. These payments are allocated to each
of the Datronic Partnerships based on the services performed for each
Partnership and are included in the accompanying Statements of Revenue and
Expenses as part of "General Partner's expense reimbursement".
32
<PAGE> 33
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
NOTE 9 - PARTNERSHIP AGREEMENT:
As part of the 1993 Settlement each limited partner elected to become a Class A,
B or C Limited Partner.
Class A Limited Partners
This class elected to begin liquidating their interest in the Partnership as of
the Settlement date. Accordingly, each Class A Limited Partner is entitled to
receive cash distributions equal to their pro rata share of the net proceeds
from the disposition of assets owned by the Partnership on the Settlement Date,
plus their pro rata interest in the net proceeds from the disposition of
Datronic Assets, Diverted and other assets, and temporary investments. In
addition, Class A Limited Partners participated in the Class Action.
Class B Limited Partners
This class elected not to begin liquidation of their interest in the Partnership
as of the Settlement Date. Until the Liquidating Phase of the Partnership began
on May 31, 1994, each Class B Limited Partner received cash distributions equal
to 11% annually of their Adjusted Capital Contributions (as that term is defined
in the Amended Partnership Agreement). Available cash in excess of that
required to pay these distributions was invested in equipment and equipment
leases ("New Investments") and temporary investments on behalf of the Class B
Limited Partners. In addition, Class B Limited Partners participated in the
Class Action.
Class C Limited Partners
This class elected not to participate in the Class Action. Therefore, each Class
C Limited Partner: (i) preserved their individual claims against DRC and the
other defendants, (ii) did not participate in the Class Action, and (iii) did
not participate in the Settlement. In all other respects, including
distributions from the Partnership, Class C Limited Partners are the same as
Class B Limited Partners.
Concurrent with the beginning of the Liquidating Phase on May 31, 1994, the
Partnership ceased making New Investments and the General Partner (LRC) began
the orderly liquidation of Partnership assets. Pursuant to this, cash reserves
are to be maintained sufficient to satisfy all liabilities of the Partnership
and provide for future contingencies. Cash available after satisfying such
requirements ("Cash Flow Available for Distribution") will be distributed to the
General and Limited Partners as described below.
33
<PAGE> 34
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
During the Liquidating Phase, net Partnership proceeds from all sources, less
cash reserves needed to satisfy Partnership liabilities and provide for future
contingencies will be apportioned among the Class A, B and C Limited Partners,
each class as a group, in accordance with each class' interest in each type of
asset. Then, Liquidating Distributions will be made to the Limited Partners
within each class in accordance with the positive Capital Account balance of
each Limited Partner until all Limited Partners' Capital Account balances are
zero, and thereafter, pro rata based on the number of units outstanding.
The Amended Partnership Agreement provides for the General Partner (LRC) to
receive quarterly distributions equal to 1% of the Cash Flow Available for
Distribution. In addition, LRC receives reimbursement for expenses incurred in
excess of those covered by the 1% distribution. These expense reimbursements
are paid one quarter in advance and are adjusted based on LRC's actual expenses.
LRC allocates its expenses to each of the Datronic Partnerships based on its
activities performed for each Partnership. Beginning July 1, 1996, LRC's
expense reimbursement includes expenses incurred in managing the day-to-day
operations of this and the other Datronic Partnerships. LRC is entitled to no
other fees or reimbursements from the Partnership.
The following summarizes the total of all payments to LRC during the three years
ended December 31, 1998:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
1% Distribution $ - $ 21,233 $ 104,304
Expense Reimbursement in excess
of the 1% Distribution 4,079,994 5,369,846 2,955,260
---------- ---------- ----------
Total $4,079,994 $5,391,079 $3,059,564
========== ========== ==========
</TABLE>
The Partnership's share of these payments were:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
1% Distribution $ - $ - $ -
Expense Reimbursement in excess
of the 1% Distribution 685,033 952,000 537,803
---------- --------- ----------
Total $ 685,003 $ 952,000 $ 537,803
========== ========= ==========
</TABLE>
<PAGE> 35
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
NOTES TO THE FINANCIAL STATEMENTS - CONCLUDED
NOTE 10 - CONCENTRATION OF CREDIT RISK:
Leasing activity was conducted throughout the United States, with emphasis in
certain states such as California, Massachusetts and New York. The cost of
equipment under lease typically ranged from $15,000 to $30,000. Such equipment
includes, but is not limited to: general purpose plant/office equipment,
printing and graphic processing equipment, machine tool and manufacturing
equipment, telecommunications equipment, computers and terminals for management
information systems, photocopying equipment and medical equipment. At December
31, 1998 there are no significant concentrations of business activity in any
industry or with any one lessee. The Partnership maintains a security interest
in all equipment until the lessee's obligations are fulfilled.
NOTE 11 - INCOME TAXES:
The Partnership is not subject to Federal income taxes and, accordingly, no
provision or credit for such taxes is reflected in the accompanying financial
statements. Instead, the tax effects of the Partnership's activities are
includable in the individual tax returns of its partners. The following table
reconciles the Partnership's net operating results determined in accordance with
generally accepted accounting principles with those reported for Federal income
tax purposes in total for all Partners and by Class of Partner for the year
ended December 31, 1998.
<TABLE>
<CAPTION>
Liquidating Continuing
General Limited Limited
Partner Partners Partners Total
<S> <C> <C> <C> <C>
--------- --------- --------- --------
Net loss per accompanying
statements $ (2,066) $ (87,793) $(116,758) $(206,617)
Effect of leases treated as
operating leases for
tax purposes (3,009) (92,997) (204,869) (300,875)
Effect of principal repayments
treated as income for
tax purposes (366) (11,199) (25,067) (36,632)
Provision for recovery of
Diverted and other assets 384 11,969 26,009 38,362
Provision for Class Counsel
fees and expenses, net - 47,224 102,541 149,765
Other, net (280) (8,120) (19,493) (27,893)
--------- --------- --------- ---------
Loss for Federal income tax
purposes in total $ (5,337) $(140,916) $(237,637) $(383,890)
========= ========= ========= =========
</TABLE>
35
<PAGE> 36
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have been no changes in accountants or disagreements with accountants on
accounting and financial disclosure.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no employees or directors. LRC was formed in December 1992
in contemplation of the Settlement for the sole purpose of acting as the general
partner for each of the Datronic Partnerships. LRC became general partner in
1993. LRC has a nominal net worth.
LRC, as a non-stock, not-for-profit corporation, does not have stockholders.
The executive officers of LRC are also the members of the Board of Directors of
LRC. None of the executive officers of LRC were previously affiliated with
Datronic. While LRC's duration is perpetual, it is anticipated that it will
liquidate and dissolve following the liquidation and dissolution of the last
remaining Datronic Partnership.
LRC's Board of Directors and executive officers, together with
certain pertinent information regarding their background, are set
forth below:
<TABLE>
<CAPTION>
Director
Name Position and Office Since
---- ----------------------------- ------
<S> <C> <C>
Donald D. Torisky Chairman of the Board and
Chief Executive Officer 12/92
Robert P. Schaen Vice-Chairman of the Board and
Chief Financial Officer 12/92
Arthur M. Mintz Vice-Chairman of the Board and
General Counsel 12/92
</TABLE>
Donald D. Torisky, age 60, has been associated with LRC since its inception in
1992. Mr. Torisky is also President of Barrington Management and Consulting,
Inc. where, prior to March 1993, he coordinated management consulting
opportunities for national and international Fortune 500 finance companies.
From 1987 to 1990, Mr. Torisky worked with the TransAmerica Corporation as an
Executive Vice-President and board member of the TransAmerica Finance Group. Mr.
Torisky also served as the President and Chief Executive Officer of TransAmerica
Commercial Finance Corporation. With TransAmerica, Mr. Torisky managed and
directed a diversified financial services portfolio of $4.6 billion with
branches in the United States,
36
<PAGE> 37
Canada, the United Kingdom and Australia. From 1962 to 1987, Mr. Torisky was
with the Borg-Warner Corporation. In 1983 he became President and Chief
Executive Officer of Borg-Warner Financial Services and an officer of
Borg-Warner Corp. Mr. Torisky has completed the Advanced Management Program at
the Harvard Graduate School of Business Administration. Mr. Torisky served
honorably in the United States Marine Corps, and holds a license in life,
accident, and health insurance and a Series 6 NASD license.
Robert P. Schaen, age 72, has been associated with LRC since its inception in
1992. Prior to his association with LRC, Mr. Schaen retired from Ameritech in
1991 after 39 years of service with the Bell System and Ameritech. At his
retirement he was the Vice-President and Comptroller of Ameritech. He started
his Bell System career with New York Telephone Company in 1952, was promoted and
transferred to AT&T in 1962, and thereafter, promoted and transferred to
Illinois Bell Telephone Company in 1965 where he managed personnel, accounting,
data systems and general operations prior to being elected Comptroller and
Assistant Secretary. In 1983, Mr. Schaen was named Vice-President and
Comptroller of Ameritech. Mr. Schaen served as a naval officer in the Pacific
Theater during World War II and retired from the Naval Reserve Intelligence
Service in 1968 with the rank of Commander. He graduated from Hobart College in
Geneva, New York in 1948 and after graduation remained there as a mathematics
and statistics instructor. In 1967 Mr. Schaen completed the Advanced Management
Program at the Harvard Graduate School of Business Administration.
Arthur M. Mintz, age 62, has been associated with LRC since its inception in
1992. Mr. Mintz is also Chairman of the Board of Olicon Imaging Systems, Inc.,
which was founded in 1991. Olicon Imaging Systems, Inc. is a teleradiology
company serving approximately 800 hospitals nationwide. Since 1987, he has also
served as President of AMRR Leasing Corporation and Vice President and General
Counsel of Mobile M.R. Venture, Ltd. In 1983, Mr. Mintz was a founder of
Diasonics, Incorporated and served as its Corporate Counsel. Diasonics was
listed on the New York Stock Exchange prior to its acquisition by Elsinth in
1995. In 1957, Mr. Mintz obtained a Bachelor of Arts Degree from Northwestern
University and in 1959, obtained his J.D. from Northwestern University School of
Law. Thereafter, Mr. Mintz served in the United States Army and was honorably
discharged. From 1965 to 1982, Mr. Mintz was a principal with the law firms of
Mintz, Raskin, Rosenberg, Lewis & Cohen (1965-1975), Mintz, Raskin and Lewis
(1975-1979), and Arthur M. Mintz, Ltd., P.C. (1979-1982).
Any change in the compensation of a director of LRC must be approved by the
other two non-interested members of the Board of Directors.
37
<PAGE> 38
ITEM 11 - MANAGEMENT REMUNERATION
The Partnership has no officers or directors and instead is managed by the
general partner, LRC.
The Partnership Agreement, as amended, provides for LRC to receive reimbursement
for its operating expenses incurred in relation to its functions as General
Partner of the Datronic Partnerships. These reimbursements are detailed in Note
9 to the Partnership's financial statements included in Item 8.
Compensation paid to the Chief Executive Officer of LRC during 1998 was as
follows:
<TABLE>
<CAPTION>
Chairman of the
Board and Chief All Other
Executive Officer Salary Compensation(b)
----------------- ------ ---------------
<S> <C> <C>
Donald D. Torisky $463,409 $3,200(a)
</TABLE>
(a) Represents the value of LRC's contribution to LRC's Savings and Retirement
Plan allocable to Mr. Torisky for services rendered during 1998.
(b) Information concerning Bonus, Other Annual Compensation, Restricted
Stock Award, Option/SARs and LTIP Payouts is not applicable.
This compensation was included in LRC's operating expenses reimbursed by all
Datronic Partnerships. The Partnership's share of such expense reimbursements,
including the 1% of Cash Flow Available for Distribution, if any, was 16.79%.
The compensation of the other four highly compensated LRC executives, when
allocated to the Partnership, individually do not exceed $100,000.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
None.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership has no officers or directors and instead is managed
by the general partner, LRC.
38
<PAGE> 39
The Partnership Agreement, as amended, provides for LRC to receive reimbursement
for its operating expenses incurred in relation to its functions as General
Partner of the Datronic Partnerships. These reimbursements are detailed in Note
9 to the Partnership's financial statements included in Item 8.
39
<PAGE> 40
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
See index to Financial Statements included in Item 8 of this report.
(2) Financial Statement Schedules
None.
(3) Exhibits
The Exhibits listed in the Exhibit Index immediately following the
signature page are filed as a part of this report.
(b) Reports on Form 8-K
None.
40
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 30th day of March
1999.
DATRONIC EQUIPMENT INCOME FUND XVII, L.P.
March 30, 1999 By: Lease Resolution Corporation,
General Partner
By: /s/ Donald D. Torisky
-------------------------------------
Donald D. Torisky
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated and on the dates indicated.
By: /s/ Donald D. Torisky March 30, 1999
----------------------------------
Donald D. Torisky
Chairman and Chief Executive Officer,
Lease Resolution Corporation,
General Partner of Datronic
Equipment Income Fund XVII, L.P.
By: /s/ Robert P. Schaen March 30, 1999
---------------------------------
Robert P. Schaen
Vice-Chairman and
Chief Financial Officer,
Lease Resolution Corporation,
General Partner of Datronic
Equipment Income Fund XVII, L.P.
By: /s/ Arthur M. Mintz March 30, 1999
---------------------------------
Arthur M. Mintz
Vice-Chairman and General Counsel,
Lease Resolution Corporation,
General Partner of Datronic
Equipment Income Fund XVII, L.P.
41
<PAGE> 42
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.
42
<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> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,998,910
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,311,827
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,252,671
<TOTAL-LIABILITY-AND-EQUITY> 6,311,827
<SALES> 0
<TOTAL-REVENUES> 1,224,398
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 63,421
<LOSS-PROVISION> (217,703)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (206,617)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
