-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IbpkMZ0NnmWlnTS8HZvcYAinye77YSOwRmuqQ+b92j0OD7oWkefWWJ07EQ/nzpCe ycm2H3UMDqNE7+GJDIxeKg== 0000950137-99-000661.txt : 19990331 0000950137-99-000661.hdr.sgml : 19990331 ACCESSION NUMBER: 0000950137-99-000661 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATRONIC EQUIPMENT INCOME FUND XVII L P CENTRAL INDEX KEY: 0000833409 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 363581924 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-17744 FILM NUMBER: 99577438 BUSINESS ADDRESS: STREET 1: 1300 E WOODFIELD RD STE 312 CITY: SCHAUMBURG STATE: IL ZIP: 60173 BUSINESS PHONE: 7082406200 MAIL ADDRESS: STREET 1: 1300 E WOODFIELD DRIVE STREET 2: SUITE 312 CITY: SCHAUMBURG STATE: IL ZIP: 60173 10-K405 1 FORM 10-K DATED 12/31/98 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] 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 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 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 5 Statements of Revenue and Expenses Data (in thousands, except for Unit amounts)
For the years ended December 31, -------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- 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 -------- ------- ------- -------- -------
Balance Sheet Data (in thousands, except for Unit amounts)
As of December 31, -------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- 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 -------- ------- ------- -------- -------
5 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 7 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, 7 8 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 9 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 10 ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Audited Financial Statements: Page(s) ------- 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
10 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 11 12 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 12 13 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. BALANCE SHEETS IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS
December 31, --------------------- 1998 1997 ---- ---- 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 ========== ==========
See accompanying notes to financial statements. 13 14 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. BALANCE SHEETS BY CLASS OF LIMITED PARTNER
December 31, 1998 ------------------------------------------ Liquidating Continuing Limited Limited Partners Partners Total ----------- ---------- --------- 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 ========== ========== ==========
See accompanying notes to financial statements. 14 15 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. BALANCE SHEETS BY CLASS OF LIMITED PARTNER
December 31, 1997 -------------------------------------------- Liquidating Continuing Limited Limited Partners Partners Total ----------- --------- -------- 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 ========== ========== ==========
See accompanying notes to financial statements. 15 16 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. STATEMENTS OF REVENUE AND EXPENSES IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS
For the years ended December 31, -------------------------------- 1998 1997 1996 ---- ---- ---- 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) ========== ========== ===========
See accompanying notes to financial statements. 16 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
Liquidating Continuing Limited Limited Partners Partners Total ------------ ------------ ----------- 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 ======== =========
See accompanying notes to financial statements. 17 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
Liquidating Continuing Limited Limited Partners Partners Total ---------- ---------- ----------- 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 ========== ==========
See accompanying notes to financial statements. 18 19 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. STATEMENTS OF REVENUE AND EXPENSES BY CLASS OF LIMITED PARTNER For the year ended December 31, 1996
Liquidating Continuing Limited Limited Partners Partners Total ------------ ---------- ----- 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 ========= ==========
See accompanying notes to financial statements. 19 20 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. STATEMENTS OF CHANGES IN PARTNERS' EQUITY For the three years ended December 31, 1998
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 ========== ========== ========== ==========
See accompanying notes to financial statements. 20 21 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. STATEMENTS OF CASH FLOWS IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS
For the years ended December 31, ------------------------------------------- 1998 1997 1996 ---------- ---------- ----------- 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 ========== ========== ==========
See accompanying notes to financial statements 22 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. STATEMENTS OF CASH FLOWS BY CLASS OF LIMITED PARTNER For the year ended December 31, 1998
Liquidating Continuing Limited Limited Partners Partners Total ----------- ------------ ----------- 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 ========== ========== ==========
See accompanying notes to financial statements 22 23 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. STATEMENTS OF CASH FLOWS BY CLASS OF LIMITED PARTNER For the year ended December 31, 1997
Liquidating Continuing Limited Limited Partners Partners Total ---------- ---------- ---------- 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 ========== ========== ==========
See accompanying notes to financial statements 23 24 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. STATEMENTS OF CASH FLOWS BY CLASS OF LIMITED PARTNER For the year ended December 31, 1996
Liquidating Continuing Limited Limited Partners Partners Total ----------- ----------- ------------ 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 ========== ========== ===========
See accompanying notes to financial statements 24 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 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 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: 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 =========== =========== ==========
27 28 DATRONIC EQUIPMENT INCOME FUND XVII, L.P. NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
December 31, 1997 ------------------------------------------------------------ Liquidating Continuing Limited Limited Partners Partners Total ----------- ---------- ----- 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 =========== =========== ==========
An analysis of the changes in the allowance for lease losses by Class of Limited Partner for 1996, 1997 and 1998 follows:
Liquidating Continuing Limited Limited Partners Partners Total ----------- ---------- ----- 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 =========== =========== ==========
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. 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 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:
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 =========== ===========
30 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 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 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 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:
Year ended December 31, ------------------------------------------- 1998 1997 1996 ------ ------ ------ 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 ========== ========== ==========
The Partnership's share of these payments were:
Year ended December 31, ------------------------------------------ 1998 1997 1996 ------ ------ ------ 1% Distribution $ - $ - $ - Expense Reimbursement in excess of the 1% Distribution 685,033 952,000 537,803 ---------- --------- ---------- Total $ 685,003 $ 952,000 $ 537,803 ========== ========= ==========
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.
Liquidating Continuing General Limited Limited Partner Partners Partners Total --------- --------- --------- -------- 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) ========= ========= ========= =========
35 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:
Director Name Position and Office Since ---- ----------------------------- ------ 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
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 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 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:
Chairman of the Board and Chief All Other Executive Officer Salary Compensation(b) ----------------- ------ --------------- Donald D. Torisky $463,409 $3,200(a)
(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 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 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 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 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 EX-27 2 FINANCIAL DATA SCHEDULE
5 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. YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 5,998,910 0 0 0 0 0 0 0 6,311,827 0 0 0 0 0 6,252,671 6,311,827 0 1,224,398 0 0 63,421 (217,703) 0 0 0 0 0 0 0 (206,617) 0 0
-----END PRIVACY-ENHANCED MESSAGE-----