<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, 1997

Commission File Number 0-18650

                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

    Delaware                                             36-3639399
 -------------------                                --------------------
   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 XVIII, L.P. (the "Partnership"), a Delaware
Limited Partnership, was formed on April 12, 1989. The Partnership offered Units
of Limited Partnership Interests (the "Units") during 1989 and early 1990
raising $99,999,500 of limited partner funds.

As more fully described in Part II, Item 8, Notes 1, 5 and 8(a) during the
second calendar quarter of 1992, it was learned that Edmund J. Lopinski, Jr.,
the president, director and majority stockholder of Datronic Rental
Corp.("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 April 12, 1995, 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
Liquidation 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 April 12, 1995, 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 34 persons
at December 31, 1997 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 in a real estate property that is a Recovered Asset (see Part II, Item
8, Note 5) held for the benefit of the Datronic Partnerships.

ITEM 3 - LEGAL PROCEEDINGS

Reference is made to Part II, Item 8, Note 8 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 18, 1998, the Partnership estimates that there were approximately
7,138 record owners of Units.

                              Distributions

Reference is made to Part II, Item 8, Notes 7 and 10 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, 1997,
1996, 1995, 1994, and 1993 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
Statement of Revenue and
 Expenses Data
 (in thousands, except for
  Unit amounts)

<TABLE>
<CAPTION>
                                       For the years ended December 31,
                           --------------------------------------------------------
                             1997       1996       1995       1994         1993
                             ----       ----       ----       ----         ----
<S>                        <C>        <C>        <C>        <C>         <C>
Total revenue              $   678    $ 2,432    $ 2,456    $  3,102    $     3,427

Total expenses                 666      2,768      3,609       5,392          6,431
                           -------    -------    -------    --------    -----------

Net earnings (loss)        $    12    $  (336)   $(1,153)   $ (2,290)   $    (3,004)
                           =======    =======    =======    ========    ===========

Net earnings (loss)
 per Unit

 Class A                   $  (.51)   $ (3.72)   $ (8.06)   $ (12.28)   $    (13.34)
                           =======    =======    =======    ========    ===========
 Class B                   $   .22    $ (1.07)   $ (5.03)   $ (11.07)   $    (15.34)
                           =======    =======    =======    ========    ===========
 Class C                   $   .22    $ (1.07)   $ (5.03)   $ (11.07)   $    (15.34)
                           =======    =======    =======    ========    ===========

Distributions per Unit
 (per year)

 Class A                   $  --      $  --      $  6.25    $  49.71    $     90.06
                           =======    =======    =======    ========    ===========
 Class B                   $  --      $ 11.30    $ 44.47    $  54.99    $     48.02
                           =======    =======    =======    ========    ===========
 Class C                   $  --      $ 11.30    $ 44.47    $  54.99    $     48.02
                           =======    =======    =======    ========    ===========

Weighted average number
 of Units outstanding

 Class A                    44,468     44,468     44,468      44,468         44,508
                           =======    =======    =======    ========    ===========
 Class B                   155,489    155,489    155,489     155,489        155,449
                           =======    =======    =======    ========    ===========
 Class C                        20         20         20          20             20
                           =======    =======    =======    ========    ===========
</TABLE>

Balance Sheet Data
 (in thousands, except for
  Unit amounts)

<TABLE>
<CAPTION>
                                            As of December 31,
                            ---------------------------------------------------
                              1997       1996       1995       1994       1993
                              ----       ----       ----       ----       ----
<S>                         <C>        <C>        <C>       <C>         <C>
Total assets                $10,495    $10,823    $13,079   $ 21,650    $34,444
                            =======    =======    =======   ========    =======

Total liabilities           $   197    $   537    $   692   $    645    $   289
                            =======    =======    =======   ========    =======

Partners' equity            $10,298    $10,286    $12,387   $ 21,005    $34,155
                            =======    =======    =======   ========    =======

Book value per Unit

    Class A                 $ 58.88    $ 59.38    $ 63.10   $  76.92    $139.40
                            =======    =======    =======   ========    =======
    Class B                 $ 51.70    $ 51.48    $ 63.86   $ 113.86    $180.46
                            =======    =======    =======   ========    =======
    Class C                 $ 57.27    $ 57.05    $ 69.43   $ 119.43    $186.03
                            =======    =======    =======   ========    =======
</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 net income of $12,000 in 1997 in the aggregate for all
classes of partners. This compares to aggregate net losses in 1996 and 1995 of
$336,000 and $1,153,000, respectively. Differences in operating results between
Liquidating and Continuing Limited Partners are attributable to lease income,
acquisition costs, 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, 1997 include the
following:

Lease income:

Since April 1995, the Partnership has been in its Liquidation 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, 1997. This trend will
continue as the Partnership liquidates its remaining leases. The following 1996
transactions also affect the year-to-year comparison of lease income: (i) income
was reduced by $400,000 due to the return of lease overpayments that were
recognized as revenue in earlier periods and (ii) income was increased by
$324,000 from the full and final settlement of a sublease agreement with PCR.

Settlement proceeds:

Settlement proceeds in 1995 reflect the settlement with the Datronic
Partnerships' former attorneys (see Note 8(a)(i) 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, both 1995 and 1996 include interest earned on an installment
contract. 1996 interest on this contract also includes $1.3 million of
previously unrecorded interest income received in December of that year from the
early payoff of the remaining balance due.

Amortization of organization and equipment acquisition costs:

Amortization of organization and equipment acquisition costs ended as of April
1995 when these costs became fully amortized.

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, 1997 reflects no New Era management fees and 1996
results reflect only six months of such


                                        6
<PAGE>   7
fees plus $830,000 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 9 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. As a result of these additional expenses, the General Partner's
expense reimbursement shows a year-to-year increase for the three years ended
December 31, 1997. Partially offsetting these increases are the effects of staff
reductions and other cost savings realized during 1997 and the second half of
1996. 1997 expenses also include $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 10 to the Partnership's financial statements included in Item 8.

Professional fees - Litigation:

This represents fees paid in connection with the Partnership's litigation which
is described in Note 8 to the Partnership's financial statements included in
Item 8. The 1997 increase reflects fees paid in connection with the ongoing
litigation against the Partnership's former accountants which is presently
scheduled for trial in May of 1998. The 1995 expense includes fees paid in
connection with a settlement with the Partnership's former attorneys.

Professional fees - Other:

These fees show a year-to-year decrease for the three years ended December 31,
1997 because of the decreasing level of professional services required in such
areas as collections, consulting, accounting and auditing. These decreases are
the result of the decrease in the Partnership's lease portfolio and related
activities.

Other operating expenses:

This represents losses from equipment sales as well as general administrative
expenses. There has been a year-to-year decrease in such expenses as losses on
equipment sales become less frequent due to the declining size of the lease
portfolio.

Provision (credit) for lease loss:

This provision (credit) reflects Management's ongoing assessment of the
potential losses inherent in the lease portfolio. The credits in 1996 and 1997
reflect recoveries of lease balances previously reserved, including recoveries
on the Master Lease agreement with CRCA of $155,000 and $815,000, respectively.
See Note 4 to the Partnership's financial statements included in Item 8.

Provision (credit) for loss on Diverted and other assets:

This provision (credit) reflects Management's ongoing assessment of the net
realizable value of various assets held for the benefit of


                                        7
<PAGE>   8
this and the other Datronic Partnerships. The credit in 1997 reflects a recovery
of amounts previously reserved for loss in 1995 in connection with a decrease in
the estimated net realizable value of one of the Diverted and other assets.
Because of the fluctuating nature of real estate values and the inherent
difficulty of estimating the affects of future events, the amounts ultimately
realized from these assets could differ significantly from their recorded
amounts.

Liquidity and Capital Resources

During 1997, Partnership assets continued to be converted to cash in order to
pay Partnership operating expenses, liquidate Partnership liabilities, and
increase cash balances to provide cash reserves for the ultimate liquidation of
the Partnership.

The Partnership's sources of liquidity on both a long-term and short-term basis
are expected to come principally from cash-on-hand and cash receipts from leases
owned by the Partnership. The lease portfolio is scheduled to be substantially
run out by the end of 1999, unless it is determined that it is in the
Partnership's best interest to dispose of the remaining portfolio earlier
through a bulk sale. In addition, the Partnership's sources of liquidity on a
long-term basis include proceeds from the sale of Diverted and other assets.
Management believes that its sources of liquidity in the short and long-term are
sufficient to meet its operating cash requirements, provide for ongoing pursuit
of litigation, and an orderly liquidation of the Partnership.

During 1997, the Partnership's cash and cash equivalents increased by $1,574,000
to $7,917,000 at December 31, 1997 from $6,343,000 at December 31, 1996. This
increase is primarily due to cash receipts from collections on leases of
$3,051,000 (including approximately $1 million from leases that were fully
reserved), partially offset by cash used in operations of $1,478,000.

The continued operation and eventual liquidation of the Partnership involves
numerous complex issues which have to be resolved. These issues relate to the
timing and realizability of lease-related assets, Diverted and other assets,
Datronic Assets, litigation and the liquidation of the other Datronic
Partnerships. These issues make it difficult to predict the time and cost
necessary to operate and liquidate the Partnership in an orderly manner. As a
result of these uncertainties, it is unlikely that any additional distributions
will be made until all remaining assets are liquidated and the pending
litigation is resolved. The amount of future distributions, if any, to the
Limited Partners, in all likelihood, will be significantly less than the amount
of partners' equity reflected in the December 31, 1997 balance sheets (see
Partnership's financial statements included in Item 8).


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
<PAGE>   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, if any,
of the Partnership in the Year 2000.


                                        9
<PAGE>   10
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Audited Financial Statements:                                          Page(s)

   Independent Auditors' Report                                         11-12

   Balance Sheets
      In Total for All Classes
      of Limited Partners at December 31,
      1997 and 1996                                                       13

      By Class of Limited Partner
        December 31, 1997                                                 14

        December 31, 1996                                                 15

   Statements of Revenue and Expenses
      In Total for All Classes of Limited Partners
      for the years ended December 31,
      1997, 1996 and 1995                                                 16

      By Class of Limited Partner for the years ended
        December 31, 1997                                                 17

        December 31, 1996                                                 18

        December 31, 1995                                                 19

   Statements of Changes in Partners' Equity
      for the years ended December 31,
      1997, 1996 and 1995                                                 20

   Statements of Cash Flows
      In Total for All Classes of Limited Partners
      for the years ended December 31,
      1997, 1996 and 1995                                                 21

      By Class of Limited Partner for the years ended
        December 31, 1997                                                 22

        December 31, 1996                                                 23

        December 31, 1995                                                 24

   Notes to Financial Statements                                        25-39


                                       10
<PAGE>   11
                          INDEPENDENT AUDITORS' REPORT



The Partners of Datronic
Equipment Income Fund XVIII, L.P.

We have audited the accompanying balance sheets in total for all classes of
limited partners of DATRONIC EQUIPMENT INCOME FUND XVIII, L.P. ( "the
Partnership") as of December 31, 1997 and 1996 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, 1997. 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, 1997 and 1996, 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, 1997 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, 1997 and 1996, 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, 1997 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
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 10 and is fairly stated in all material respects in relation to the
Partnership's financial statements taken as a whole.


                                       11
<PAGE>   12
As explained more fully in Notes 1 and 5, 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 Funds XVI, XVII, 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 6, 1998


                                       12
<PAGE>   13
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                                 BALANCE SHEETS
                  IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS


<TABLE>
<CAPTION>
                                                            December 31,
                                                  ------------------------------
                                                      1997               1996
                                                      ----               ----
<S>                                               <C>                <C>
ASSETS

Cash and cash equivalents                         $ 7,916,860        $ 6,343,472
Due from management company                              --               59,676
Net investment in direct
  financing leases                                  1,045,601          3,015,876
Residual interest in CRCA                                --                 --
Diverted and other assets, net                      1,532,318          1,403,546
Datronic assets, net                                     --                 --
                                                  -----------        -----------

                                                  $10,494,779        $10,822,570
                                                  ===========        ===========

LIABILITIES AND PARTNERS' EQUITY

Accounts payable and
  accrued expenses                                $    83,514        $   291,816
Lessee rental deposits                                113,488            245,160
                                                  -----------        -----------

     Total liabilities                                197,002            536,976

Total partners' equity                             10,297,777         10,285,594
                                                  -----------        -----------

                                                  $10,494,779        $10,822,570
                                                  ===========        ===========
</TABLE>


                See accompanying notes to financial statements.


                                       13
<PAGE>   14
                   DATRONIC EQUIPMENT INCOME FUND XVIII, 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              $ 2,253,955    $ 5,662,905    $ 7,916,860
Net investment in direct
  financing leases                            --        1,045,601      1,045,601
Residual interest in CRCA                     --             --             --
Diverted and other assets, net             340,788      1,191,530      1,532,318
Datronic assets, net                          --             --             --
                                       -----------    -----------    -----------

                                       $ 2,594,743    $ 7,900,036    $10,494,779
                                       ===========    ===========    ===========

LIABILITIES AND PARTNERS' EQUITY

Accounts payable and
  accrued expenses                     $    15,101    $    68,413    $    83,514
Lessee rental deposits                      18,786         94,702        113,488
                                       -----------    -----------    -----------

     Total liabilities                      33,887        163,115        197,002

Total partners' equity                   2,560,856      7,736,921     10,297,777
                                       -----------    -----------    -----------

                                       $ 2,594,743    $ 7,900,036    $10,494,779
                                       ===========    ===========    ===========
</TABLE>


                 See accompanying notes to financial statements.


                                       14
<PAGE>   15




                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                                 BALANCE SHEETS
                           By Class of Limited Partner


<TABLE>
<CAPTION>
                                                   December 31, 1996
                                       -----------------------------------------
                                       Liquidating    Continuing
                                         Limited        Limited
                                        Partners       Partners         Total
                                       -----------    ----------        -----
<S>                                    <C>            <C>            <C>
ASSETS

Cash and cash equivalents              $ 2,357,430    $ 3,986,042    $ 6,343,472
Due from management company                 12,674         47,002         59,676
Net investment in direct
  financing leases                           4,491      3,011,385      3,015,876
Diverted and other assets, net             312,149      1,091,397      1,403,546
Datronic assets, net                          --             --             --
                                       -----------    -----------    -----------

                                       $ 2,686,744    $ 8,135,826    $10,822,570
                                       ===========    ===========    ===========

LIABILITIES AND PARTNERS' EQUITY

Accounts payable and
  accrued expenses                     $    57,989    $   233,827    $   291,816
Lessee rental deposits                      45,101        200,059        245,160
                                       -----------    -----------    -----------

     Total liabilities                     103,090        433,886        536,976

Total partners' equity                   2,583,654      7,701,940     10,285,594
                                       -----------    -----------    -----------

                                       $ 2,686,744    $ 8,135,826    $10,822,570
                                       ===========    ===========    ===========
</TABLE>


                 See accompanying notes to financial statements.


                                       15
<PAGE>   16
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                       STATEMENTS OF REVENUE AND EXPENSES
                  IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS


<TABLE>
<CAPTION>
                                            For the years ended December 31,
                                      -------------------------------------------
                                          1997            1996            1995
                                          ----            ----            ----
<S>                                   <C>             <C>             <C>
Revenue:
  Lease income                        $   313,851     $   720,709     $ 1,603,618
  Settlement proceeds                        --              --           425,938
  Interest income                         364,777       1,711,794         426,220
                                      -----------     -----------     -----------

                                          678,628       2,432,503       2,455,776
                                      -----------     -----------     -----------

Expenses:
  Amortization of organization and
    equipment acquisition costs              --              --           145,888
  Management fees-New Era                    --         1,506,648       1,588,172
  General Partner's expense
    reimbursement                       1,254,994         712,459         528,905
  Professional fees-Litigation            442,186         340,469         470,344
  Professional fees-Other                 124,043         207,277         317,696
  Other operating expenses                 54,646          64,198         108,637
  Provision (credit) for
    lease losses                       (1,080,652)       (154,655)        150,000
  Provision (credit) for loss on
    Diverted and other assets            (128,772)         91,980         298,934
                                      -----------     -----------     -----------

                                          666,445       2,768,376       3,608,576
                                      -----------     -----------     -----------

Net earnings (loss)                   $    12,183     $  (335,873)    $(1,152,800)
                                      ===========     ===========     ===========

Net earnings (loss)
  -General Partner                    $       122     $    (3,359)    $   (11,528)
                                      ===========     ===========     ===========

Net earnings (loss)
  -Limited Partners                   $    12,061     $  (332,514)    $(1,141,272)
                                      ===========     ===========     ===========
</TABLE>


                 See accompanying notes to financial statements.


                                       16
<PAGE>   17
                   DATRONIC EQUIPMENT INCOME FUND XVIII, 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                        $     8,502     $   305,349     $   313,851
  Interest income                          75,046         289,731         364,777
                                      -----------     -----------     -----------

                                           83,548         595,080         678,628
                                      -----------     -----------     -----------

Expenses:
  General Partner's expense
     reimbursement                        263,409         991,585       1,254,994
  Professional fees-Litigation             98,342         343,844         442,186
  Professional fees-Other                  25,106          98,937         124,043
  Other operating expenses                 11,817          42,829          54,646
  Credit for lease losses                (263,689)       (816,963)     (1,080,652)
  Credit for loss on
    Diverted and other assets             (28,639)       (100,133)       (128,772)
                                      -----------     -----------     -----------

                                          106,346         560,099         666,445
                                      -----------     -----------     -----------

Net earnings (loss)                   $   (22,798)    $    34,981     $    12,183
                                      ===========     ===========     ===========

Net earnings (loss)
  -General Partner                    $      (228)    $       350     $       122
                                      ===========     ===========     ===========

Net earnings (loss)
  -Limited Partners                   $   (22,570)    $    34,631     $    12,061
                                      ===========     ===========     ===========

Net earnings (loss) per limited
  partnership unit                    $      (.51)    $       .22
                                      ===========     ===========

Weighted average number of limited
   partnership units outstanding           44,468         155,509
                                      ===========     ===========
</TABLE>


                 See accompanying notes to financial statements.


                                       17
<PAGE>   18
                   DATRONIC EQUIPMENT INCOME FUND XVIII, 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                       $   33,318    $  687,391   $  720,709
  Interest income                       354,821     1,356,973    1,711,794
                                     ----------    ----------   ----------

                                        388,139     2,044,364    2,432,503
                                     ----------    ----------   ----------


Expenses:
  Management fees-New Era               308,322     1,198,326    1,506,648
  General Partner's expense
     reimbursement                      155,152       557,307      712,459
  Professional fees-Litigation           75,720       264,749      340,469
  Professional fees-Other                43,939       163,338      207,277
  Other operating expenses               13,819        50,379       64,198
  Credit for lease losses               (62,195)      (92,460)    (154,655)
  Provision for loss on
    Diverted and other assets            20,456        71,524       91,980
                                     ----------    ----------   ----------

                                        555,213     2,213,163    2,768,376
                                     ----------    ----------   ----------

Net loss                             $ (167,074)   $ (168,799)  $ (335,873)
                                     ==========    ==========   ==========

Net loss-General Partner             $   (1,671)   $   (1,688)  $   (3,359)
                                     ==========    ==========   ==========

Net loss-Limited Partners            $ (165,403)   $ (167,111)  $ (332,514)
                                     ==========    ==========   ==========

Net loss per limited
  partnership unit                       $(3.72)      $ (1.07)
                                         ======       =======

Weighted average number of limited
   partnership units outstanding         44,468       155,509
                                         ======       =======
</TABLE>


                 See accompanying notes to financial statements.


                                       18
<PAGE>   19
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                       STATEMENTS OF REVENUE AND EXPENSES
                           BY CLASS OF LIMITED PARTNER
                      For the year ended December 31, 1995

<TABLE>
<CAPTION>
                                     Liquidating  Continuing
                                       Limited      Limited
                                      Partners     Partners          Total
                                     -----------  ----------         -----
<S>                                  <C>          <C>            <C>         
Revenue:
  Lease income                       $  144,393   $1,459,225     $ 1,603,618 
  Settlement proceeds                    94,729      331,209         425,938
  Interest income                        84,450      341,770         426,220
                                     ----------   ----------     -----------
                                                                 
                                        323,572    2,132,204       2,455,776
                                     ----------   ----------     -----------
                                                                 
                                                                 
Expenses:                                                        
  Amortization of organization                                   
    and equipment acquisition costs      32,445      113,443         145,888
  Management fees-New Era               279,423    1,308,749       1,588,172
  General Partner's                                              
    expense reimbursement               117,628      411,277         528,905
  Professional fees-Litigation          104,605      365,739         470,344
  Professional fees-Other                65,468      252,228         317,696
  Other operating expenses               19,458       89,179         108,637
  Provision for lease losses               -         150,000         150,000
  Provision for loss on                                          
    Diverted and other assets            66,483      232,451         298,934
                                     ----------   ----------     -----------
                                                                 
                                        685,510    2,923,066       3,608,576
                                     ----------   ----------     -----------
                                                                 
Net loss                             $ (361,938)  $ (790,862)    $(1,152,800)
                                     ==========   ==========     ===========
                                                                 
Net loss-General Partner             $   (3,619)  $   (7,909)    $   (11,528)
                                     ==========   ==========     ===========
                                                                 
Net loss-Limited Partners            $ (358,319)  $ (782,953)    $(1,141,272)
                                     ==========   ==========     ===========
                                                                 
Net loss per limited partnership                                 
  unit                                   $(8.06)      $(5.03)    
                                         ======       ======     
                                                                 
Weighted average number                                          
  of limited partnership                                         
  units outstanding                      44,468      155,509     
                                        =======      =======     
</TABLE>


                 See accompanying notes to financial statements.


                                       19
<PAGE>   20
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                    STATEMENTS OF CHANGES IN PARTNERS' EQUITY
                   For the three years ended December 31, 1997


<TABLE>
<CAPTION>
                                              Liquidating     Continuing
                                 General        Limited         Limited          Total
                                Partner's      Partners'       Partners'       Partners'
                                 Equity         Equity          Equity          Equity
                                ---------     -----------     ----------       ---------
<S>                           <C>             <C>             <C>             <C>         
Balance, December 31, 1994    $       --      $  3,400,032    $ 17,604,746    $ 21,004,778

  Distributions to partners       (103,661)       (277,925)     (7,083,103)     (7,464,689)
  Net loss                         (11,528)       (358,319)       (782,953)     (1,152,800)
  Allocation of General
    Partner's Equity               115,189         (13,060)       (102,129)           --
                              ------------    ------------    ------------    ------------

Balance, December 31, 1995            --         2,750,728       9,636,561      12,387,289
                              ------------    ------------    ------------    ------------

  Distributions to partners         (8,570)           --        (1,757,252)     (1,765,822)
  Net loss                          (3,359)       (165,403)       (167,111)       (335,873)
  Allocation of General
    Partner's Equity                11,929          (1,671)        (10,258)           --
                              ------------    ------------    ------------    ------------

Balance, December 31, 1996            --         2,583,654       7,701,940      10,285,594
                              ------------    ------------    ------------    ------------

  Net earnings (loss)                  122         (22,570)         34,631          12,183
  Allocation of General
    Partner's Equity                  (122)           (228)            350            --
                              ------------    ------------    ------------    ------------


Balance, December 31, 1997    $       --      $  2,560,856    $  7,736,921    $ 10,297,777
                              ============    ============    ============    ============
</TABLE>


                 See accompanying notes to financial statements.


                                       20
<PAGE>   21
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                            STATEMENTS OF CASH FLOWS
                  IN TOTAL FOR ALL CLASSES OF LIMITED PARTNERS


<TABLE>
<CAPTION>
                                               For the years ended December 31,
                                          -----------------------------------------
                                              1997           1996           1995
                                              ----           ----           ----
<S>                                       <C>            <C>            <C>         
Cash flows from operating activities:
  Net earnings (loss)                     $    12,183    $  (335,873)   $(1,152,800)
  Adjustments to reconcile net earnings
    (loss) to net cash used in
    operating activities:
      Amortization expense                       --             --          145,888
      Provision (credit) for
        lease losses                       (1,080,652)      (154,655)       150,000
      Provision (credit) for loss on
        Diverted and other assets            (128,772)        91,980        298,934
      Changes in assets and
        liabilities:
        Accounts payable and
          accrued expenses                   (208,302)       (16,729)        55,676
        Lessee rental deposits               (131,672)      (138,490)        21,774
        Due to/from
          management company                   59,676        (59,950)       (30,234)
                                          -----------    -----------    -----------

                                           (1,477,539)      (613,717)      (510,762)
                                          -----------    -----------    -----------

Cash flows from investing activities:
  Purchases of lease receivables                 --             --       (2,834,959)
  Principal collections on leases           3,050,927      4,253,902      7,550,809
  Sale of leases                                 --             --        1,336,058
  Distribution of Diverted and
    other assets                                 --             --          552,498
  Distribution of Datronic assets                --             --           86,639
  Release of restricted cash                     --           90,612           --
  Principal collections on
    installment contracts
    receivable                                   --          968,866        572,844
                                          -----------    -----------    -----------

                                            3,050,927      5,313,380      7,263,889
                                          -----------    -----------    -----------

Cash flows from financing activities:
  Distributions to Limited Partners              --       (1,757,252)    (7,361,028)
  Distributions to General Partner               --           (8,570)      (103,661)
                                          -----------    -----------    -----------

                                                 --       (1,765,822)    (7,464,689)
                                          -----------    -----------    -----------

Net increase (decrease) in
  cash and cash equivalents                 1,573,388      2,933,841       (711,562)
Cash and cash equivalents:
  Beginning of year                         6,343,472      3,409,631      4,121,193
                                          -----------    -----------    -----------

  End of year                             $ 7,916,860    $ 6,343,472    $ 3,409,631
                                          ===========    ===========    ===========
</TABLE>


                 See accompanying notes to financial statements.


                                       21
<PAGE>   22
                   DATRONIC EQUIPMENT INCOME FUND XVIII, 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 earnings (loss)                     $   (22,798)   $    34,981    $    12,183
  Adjustments to reconcile net earnings
    (loss) to net cash used in
    operating activities:
      Credit for lease losses                (263,689)      (816,963)    (1,080,652)
      Credit for loss on
        Diverted and other assets             (28,639)      (100,133)      (128,772)
      Changes in assets and
        liabilities:
        Accounts payable and
          accrued expenses                    (42,888)      (165,414)      (208,302)
        Lessee rental deposits                (26,315)      (105,357)      (131,672)
        Due to management company              12,674         47,002         59,676
                                          -----------    -----------    -----------

                                             (371,655)    (1,105,884)    (1,477,539)
                                          -----------    -----------    -----------

Cash flows from investing activities:
  Principal collections on leases             268,180      2,782,747      3,050,927
                                          -----------    -----------    -----------

Net increase (decrease) in cash and
  cash equivalents                           (103,475)     1,676,863      1,573,388
Cash and cash equivalents:
  Beginning of year                         2,357,430      3,986,042      6,343,472
                                          -----------    -----------    -----------

  End of year                             $ 2,253,955    $ 5,662,905    $ 7,916,860
                                          ===========    ===========    ===========
</TABLE>


                 See accompanying notes to financial statements.


                                       22
<PAGE>   23
                   DATRONIC EQUIPMENT INCOME FUND XVIII, 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                              $  (167,074)   $  (168,799)   $  (335,873)
  Adjustments to reconcile net loss
    to net cash used in
    operating activities:
      Credit for lease losses               (62,195)       (92,460)      (154,655)
      Provision for loss on
        Diverted and other assets            20,456         71,524         91,980
      Changes in assets and
        liabilities:
        Accounts payable and
          accrued expenses                   (4,409)       (12,320)       (16,729)
        Lessee rental deposits              (30,511)      (107,979)      (138,490)
        Due to management company           (12,736)       (47,214)       (59,950)
                                        -----------    -----------    -----------

                                           (256,469)      (357,248)      (613,717)
                                        -----------    -----------    -----------

Cash flows from investing activities:
  Principal collections on leases           401,060      3,852,842      4,253,902
  Release of restricted cash                 20,152         70,460         90,612
  Principal collections on
    installment contracts receivable        215,476        753,390        968,866
                                        -----------    -----------    -----------

                                            636,688      4,676,692      5,313,380
                                        -----------    -----------    -----------

Cash flows from financing activities:
  Distributions to Limited Partners            --       (1,757,252)    (1,757,252)
  Distributions to General Partner             --           (8,570)        (8,570)
                                        -----------    -----------    -----------

                                               --       (1,765,822)    (1,765,822)
                                        -----------    -----------    -----------

Net increase in cash and
  cash equivalents                          380,219      2,553,622      2,933,841
Cash and cash equivalents:
  Beginning of year                       1,977,211      1,432,420      3,409,631
                                        -----------    -----------    -----------

  End of year                           $ 2,357,430    $ 3,986,042    $ 6,343,472
                                        ===========    ===========    ===========
</TABLE>


                 See accompanying notes to financial statements.


                                       23
<PAGE>   24
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                            STATEMENTS OF CASH FLOWS
                           BY CLASS OF LIMITED PARTNER
                      For the year ended December 31, 1995

<TABLE>
<CAPTION>
                                        Liquidating    Continuing
                                          Limited        Limited
                                         Partners       Partners         Total
                                        -----------    ----------        -----
<S>                                     <C>            <C>            <C>         
Cash flows from operating activities:
  Net loss                              $  (361,938)   $  (790,862)   $(1,152,800)
  Adjustments to reconcile net loss
    to net cash used in
    operating activities:
      Amortization expense                   32,445        113,443        145,888
      Provision for lease losses               --          150,000        150,000
      Provision for loss on
        Diverted and other assets            66,483        232,451        298,934
      Changes in assets and
        liabilities:
        Accounts payable and
          accrued expenses                   16,620         39,056         55,676
        Lessee rental deposits                 (116)        21,890         21,774
        Due to management company               (16)       (30,218)       (30,234)
                                        -----------    -----------    -----------

                                           (246,522)      (264,240)      (510,762)
                                        -----------    -----------    -----------

Cash flows from investing activities:
  Purchases of lease receivables               --       (2,834,959)    (2,834,959)
  Principal collections on leases         1,087,596      6,463,213      7,550,809
  Sales of leases                            35,267      1,300,791      1,336,058
  Distribution of
    Diverted and other assets               122,875        429,623        552,498
  Distribution of Datronic assets            19,269         67,370         86,639
  Principal collections on
   installment contracts receivable         127,400        445,444        572,844
                                        -----------    -----------    -----------

                                          1,392,407      5,871,482      7,263,889
                                        -----------    -----------    -----------

Cash flows from financing activities:
  Distributions to Limited Partners        (277,925)    (7,083,103)    (7,361,028)
  Distributions to General Partner           (9,440)       (94,221)      (103,661)
                                        -----------    -----------    -----------

                                           (287,365)    (7,177,324)    (7,464,689)
                                        -----------    -----------    -----------
Net increase (decrease) in cash and
  cash equivalents                          858,520     (1,570,082)      (711,562)
Cash and cash equivalents:
  Beginning of year                       1,118,691      3,002,502      4,121,193
                                        -----------    -----------    -----------

  End of year                           $ 1,977,211    $ 1,432,420    $ 3,409,631
                                        ===========    ===========    ===========
</TABLE>


                 See accompanying notes to financial statements.


                                       24
<PAGE>   25
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                        NOTES TO THE FINANCIAL STATEMENTS
                        DECEMBER 31, 1997, 1996, AND 1995

NOTE 1 - ORGANIZATION:

Datronic Equipment Income Fund XVIII, L.P., a Delaware Limited Partnership (the
"Partnership"), was formed on April 12, 1989 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, XVII, 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 $2.4 million. 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 April 12, 1995, the Partnership began its Liquidation 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 10). 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, 1997 and 1996, 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, 1997 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 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, 1997, the amounts per Unit relating to these
two classes are identical


                                       25
<PAGE>   26
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED

with the exception that the per Unit value of Class C Limited Partners is $5.57
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 6).

  CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist principally of
overnight investments in high quality, short-term corporate demand notes
(commercial paper). 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), 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.

  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.


                                       26
<PAGE>   27
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED


  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,
1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                  December 31, 1997
                                      -----------------------------------------
                                      Liquidating     Continuing
                                         Limited        Limited
                                        Partners       Partners         Total
                                      -----------     ----------        -----
<S>                                   <C>            <C>            <C>        
Performing leases
  Minimum lease payments
    receivable                        $     5,397    $ 1,248,096    $ 1,253,493
  Unearned income                            --          (98,647)       (98,647)
  Estimated residuals                         232            810          1,042
                                      -----------    -----------    -----------
Total Performing leases                     5,629      1,150,259      1,155,888
Non-performing leases                     120,854      1,065,325      1,186,179
                                      -----------    -----------    -----------
Net investment in direct
  financing leases before
  allowance                               126,483      2,215,584      2,342,067
Allowance for lease losses               (126,483)    (1,169,983)    (1,296,466)
                                      -----------    -----------    -----------
Net investment in direct
  financing leases                    $      --      $ 1,045,601    $ 1,045,601
                                      ===========    ===========    ===========

Amounts currently due
  included in net investment
  in direct financing leases          $     5,397    $    40,795    $    46,192
                                      ===========    ===========    ===========
</TABLE>


                                       27
<PAGE>   28
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED


<TABLE>
<CAPTION>
                                                December 31, 1996
                                   --------------------------------------------
                                   Liquidating      Continuing
                                      Limited         Limited
                                     Partners        Partners         Total
                                   -----------      ----------        -----
<S>                                <C>             <C>             <C>         
Performing leases
  Minimum lease payments
    receivable                     $     42,139    $  3,464,073    $  3,506,212
  Unearned income                          (600)       (363,348)       (363,948)
  Estimated residuals                     7,690          26,887          34,577
                                   ------------    ------------    ------------
Total Performing leases                  49,229       3,127,612       3,176,841
Non-performing leases                 1,692,099       6,696,916       8,389,015
                                   ------------    ------------    ------------
Net investment in direct
  financing leases before
  allowance                           1,741,328       9,824,528      11,565,856
Allowance for lease losses           (1,736,837)     (6,813,143)     (8,549,980)
                                   ------------    ------------    ------------
Net investment in direct
  financing leases                 $      4,491    $  3,011,385    $  3,015,876
                                   ============    ============    ============

Amounts currently due
  included in net investment
  in direct financing leases       $     26,368    $    169,677    $    196,045
                                   ============    ============    ============
</TABLE>


An analysis of the changes in the allowance for lease losses by Class of Limited
Partner for 1995, 1996 and 1997 follows:


<TABLE>
<CAPTION>
                                  Liquidating      Continuing
                                    Limited          Limited
                                   Partners         Partners           Total
                                  -----------      ----------          -----
<S>                               <C>              <C>              <C>        
Balance, beginning
   of 1995                        $ 2,055,637      $ 7,807,805      $ 9,863,442
Additions                                --            150,000          150,000
Write-offs                           (198,049)        (788,455)        (986,504)
                                  -----------      -----------      -----------

Balance, beginning
   of 1996                          1,857,588        7,169,350        9,026,938
Recoveries                            (62,195)         (92,460)        (154,655)
Write-offs                            (58,556)        (263,747)        (322,303)
                                  -----------      -----------      -----------

Balance, beginning
   of 1997                          1,736,837        6,813,143        8,549,980
Recoveries                           (263,689)        (816,963)      (1,080,652)
Write-offs                         (1,346,665)      (4,826,197)      (6,172,862)
                                  -----------      -----------      -----------

Balance, end of 1997              $   126,483      $ 1,169,983      $ 1,296,466
                                  ===========      ===========      ===========
</TABLE>


The 1996 and 1997 recoveries and the 1997 write-offs relate primarily to a
Master Lease Agreement between the Partnership and CRCA. See Note 4.


                                       28
<PAGE>   29
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED


The Partnership leases equipment with lease terms generally ranging from two to
five years. Minimum payments scheduled to be received on performing leases for
each of the succeeding five years ending after December 31, 1997 by Class of
Limited Partner are as follows:

<TABLE>
<CAPTION>
                                Liquidating     Continuing
                                  Limited         Limited
                                 Partners        Partners          Total
                                -----------     ----------         -----
<S>                             <C>             <C>             <C>       
1998                            $     5,397     $  901,809      $  907,206
1999                                   -           328,317         328,317
2000                                   -            17,970          17,970
2001                                   -              -               -
2002                                   -              -               -
                                -----------     ----------      ----------

                                $     5,397     $1,248,096      $1,253,493
                                ===========     ==========      ==========
</TABLE>


NOTE 4 -  RESIDUAL INTEREST IN CRCA

Residual interest in CRCA represents the Partnership's 65% interest in the
assets of Computer Rental Corporation of America, Inc.("CRCA"). Fund XX holds
the remaining 35% interest in CRCA. All of the stock of CRCA was obtained by LRC
for the benefit of the Partnership and Fund XX as a result of CRCA's 1992
default on its master lease agreements with the Partnership and Fund XX.

At December 31, 1996, $6.8 million due from CRCA under the master lease was
included in the Net Investment in Direct Financing Leases as a non-performing
lease and was fully reserved for in the allowance for lease losses. At December
31, 1997, the remaining $6.0 million was written-off against the allowance (see
Note 3) since the Partnership's sole means of recovering amounts due it is from
the liquidation of CRCA's remaining assets. At December 31, 1997, CRCA's assets
consisted of the following:

<TABLE>
<CAPTION>
                                                        Partnership's
                                          Total           interest
                                          -----         -------------
<S>                                    <C>              <C>         
    Cash                               $   224,714      $    146,064
    Notes receivable                     4,812,770         3,128,300
    Less accrued liabilities               (54,355)          (35,331)
                                       -----------      ------------
    Net assets                         $ 4,983,129      $  3,239,033
                                       ===========      ============
</TABLE>


Notes receivable represent remaining amounts due CRCA from the 1996 sale of
substantially all of its assets to Personal Computer Rental Corp. ("PCR"). PCR's
$6.2 million purchase price was paid in the form of a $1.5 million senior note,
a $4.2 million subordinated note, and the assumption of approximately $500,000
of liabilities. The $4.2 million note is subordinate to the $14 million security
interest of


                                       29
<PAGE>   30
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED

another PCR creditor. The following summarizes PCR's 1996 and 1997 note payments
to CRCA and the respective amounts of these payments that were distributed to
the Partnership and Fund XX:

<TABLE>
<CAPTION>
                                            Partnership's       Fund XX's
                            Total             interest          interest
                            -----           -------------       ---------
<S>                      <C>                <C>               <C>        
1996                     $   237,931        $    154,655      $    83,276
1997                     $ 1,253,961        $    815,074      $   438,887
</TABLE>

These amounts are shown as recoveries on the Partnership's master lease with
CRCA and are included in the Partnership's credit for lease losses in the
accompanying Statement of Revenue and Expenses (see Note 3).

Principal and interest at 9% were payable monthly with the final $4.8 million of
principal due on November 1, 1997. PCR did not make the November 1, 1997
payments on either note. On January 2, 1998 LRC, on behalf of CRCA, exercised
its rights under the note agreements. Subsequently, CRCA received $644,952 from
the aforementioned secured creditor in full satisfaction of the senior note
($590,075) plus associated expenses. LRC subsequently transferred $383,549 to
the Partnership and $206,526 to Fund XX representing their respective shares of
the proceeds. The Partnerships have recorded these payments as 1998 recoveries.
LRC is continuing to pursue collection of the $4.2 million subordinated note.

The Partnership and Fund XX will record any additional amounts realized from the
liquidation of CRCA's remaining assets as credits to the provision for lease
losses when the cash, if any, is received by the Partnerships.

During 1992 through 1995, up to 62% of the outstanding stock of PCR was held by
a subsidiary of CRCA. A portion of the stock was held for the benefit of the
Partnership and Fund XX and the remainder was held as a Diverted and other asset
(see Note 5). These shares were sold in 1995. In early 1996, prior to the sale
of CRCA's assets to PCR, LRC sold CRCA's assets to a company owned by one of its
executives. In order to avail itself of PCR's higher offer, LRC repurchased the
assets previously sold at no gain or loss.


NOTE 5 - DIVERTED AND OTHER ASSETS:

The $13.3 million of funds allegedly misappropriated from the Datronic
Partnerships and TELIF (collectively the "Partnerships") (see Notes 1 and 8)
were commingled by the alleged wrongdoers with $10.3 million of other 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


                                       30
<PAGE>   31
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED

Partnerships and each Partnership was assigned an undivided pro-rata interest in
them.

Since 1993, LRC has been liquidating these assets and distributing available
funds to the Partnerships. The Partnership's undivided interest in the Diverted
and other assets, and related distributions, is approximately 18.4% of the
total. The Partnership's remaining interest in the Diverted and other assets is
reflected in the accompanying Balance Sheets at estimated net realizable value
which is equal to cost, less allowances to reflect Management's estimates of
current market value and future costs to be incurred. At December 31, 1997,
these assets consisted primarily of real estate and cash.

The following tables summarize the activity related to Diverted and other
assets, both in total and for the Partnership's interest therein, for the three
years ended December 31, 1997.

<TABLE>
<CAPTION>
                                                    Diverted and other assets
                                                --------------------------------
                                                                   Partnership's
                                                    Total               Share
<S>                                             <C>                <C>         
Balance at December 31, 1994                    $ 12,747,945       $  2,346,958
Distribution to the Partnerships                  (3,000,000)          (552,498)
Provision for loss                                (1,625,000)          (298,934)
                                                ------------       ------------

Balance at December 31, 1995                       8,122,945          1,495,526
Provision for loss                                  (500,000)           (91,980)
                                                ------------       ------------

Balance at December 31, 1996                       7,622,945          1,403,546
Credit for recovery
  of assets                                          700,000            128,772
                                                ------------       ------------

Balance at December 31, 1997                    $  8,322,945       $  1,532,318
                                                ============       ============
</TABLE>


                                       31
<PAGE>   32
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED


Total Diverted and other assets at December 31, 1997 consisted of the following:

<TABLE>
<S>                                               <C>        
Office building (at adjusted cost)                $ 4,178,666
Cash                                                3,693,607
Amount due from settlement                            700,000
Allowance for carrying and
  disposition costs                                  (249,328)
                                                   ----------

                                                   $8,322,945
                                                   ==========
</TABLE>


The 1995 loss provision of $1,625,000 (Partnership's share was $298,934)
primarily represents the write-off of the Datronic Partnerships' interest in a
real estate development limited partnership. $700,000 (Partnership's share was
$128,772) of this was recovered in 1997 and is reflected as a credit for
recovery of assets. The 1996 loss provision of $500,000 (Partnership's share was
$91,980) primarily reflects a settlement of claims against Diverted and other
assets.

LRC is continuing its efforts to liquidate the remaining Diverted and other
assets and will make additional distributions to the Partnerships as funds
become available. Due to the fluctuating nature of real estate values, the
ultimate net realizable value of the office building cannot be predicted.


NOTE 6 - DATRONIC ASSETS:

In accordance with a 1993 Court approved Settlement, substantially all of DRC's
assets, net of related debt, were transferred to LRC as nominee and agent for
the Datronic Partnerships for the benefit of the Class A and B Limited Partners.
The Partnership was assigned an undivided, pro-rata interest in the Datronic
Assets equal to 22.2% of the total. Proceeds from the liquidation of these
assets have been and will be, if additional amounts are realized, used to
reimburse the Class A and Class B Limited Partners for legal fees paid in
connection with the 1993 partial settlement of class action litigation (see
Notes 2 and 8(a)(i)). During 1995, $393,013 was distributed to the Datronic
Partnerships (the Partnership's share was $86,639).

At December 31, 1996 and 1997, the remaining Datronic Assets consisted of
$800,892 of cash, less a corresponding reserve for claims against Datronic
assets including a claim made by a former DRC creditor (see Note 8(b)).


                                       32
<PAGE>   33
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED

NOTE 7 - PARTNERS' EQUITY:

Distributions per Unit to the Limited Partners for the years 1995, 1996 and 1997
were:

<TABLE>
<CAPTION>
                          Class A     Class B      Class C
                          -------     -------      -------
<S>                      <C>          <C>          <C>    
               1995      $   6.25     $ 44.47      $ 44.47
               1996      $    -       $ 11.30      $ 11.30
               1997      $    -       $   -        $   -
</TABLE>


At December 31, 1997, 1996 and 1995, there were 44,468 Class A Units, 155,489
Class B Units, 20 Class C Units, and one General Partner Unit outstanding.

Funds raised by each Class and cumulative distributions to limited partners by
class from the Partnership's formation through December 31, 1997 are:

<TABLE>
<CAPTION>
                                  Funds           Cumulative
                                 Raised          Distributions
                                 ------          -------------
<S>                             <C>              <C>        
             Class A            $22,234,000       $14,055,325
             Class B             77,744,500        51,086,383
             Class C                 10,000             6,572
                                -----------       -----------

             Total              $99,988,500       $65,148,280
                                ===========       ===========
</TABLE>


NOTE 8 - LITIGATION:

(a) At December 31, 1997, the Partnerships and/or the limited partners of the
Datronic Partnerships were plaintiffs in the following matters:

(i) Claims against professionals

During 1992, a class action lawsuit ("Class Action") was certified on behalf of
the limited partners in the Datronic Partnerships ("the Class") against DRC,
various officers of DRC and various other parties. The Class Action was
subsequently amended to add, as defendants, Siegan, Barbakoff, Gomberg & Kane
(the Datronic Partnerships' former securities counsel) ("Siegan"), Weiss and
Company, (the Datronic Partnerships' independent accountants prior to 1990)
("Weiss") and Price Waterhouse (the Datronic Partnerships' independent
accountants during 1990 and 1991). During 1993, the Datronic Partnerships filed
cross-claims against Siegan, Weiss and Price Waterhouse (collectively
"Defendants") alleging professional negligence, breach of contract, violations
of Section 11 of the Securities Act of 1933 (as to Weiss and Price Waterhouse
only) and breach of fiduciary duty (as to Siegan).


                                       33
<PAGE>   34
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED


During 1995, the Court dismissed all Class claims against Price Waterhouse.
Class Counsel intends to appeal the dismissal order in accordance with Court
rules at the appropriate time. The Court also ruled it did not have jurisdiction
with respect to the Datronic Partnerships' cross-claims against Price Waterhouse
and Weiss. As a result, the cross-claims, excluding those alleging violations of
the Securities Act of 1933, were refiled and are pending in the Circuit Court of
Cook County, Illinois.

As plaintiffs in the above claims against Price Waterhouse and Weiss, the
Datronic Partnerships allege, among other things, that the actions of the
Defendants contributed to the improper payment of fees and expense
reimbursements to DRC. If fees and expenses were inappropriately paid, the
Datronic Partnerships might be deemed to have had a receivable from DRC for any
such payments. Since all of the assets of DRC were transferred to LRC for the
benefit of the Datronic Partnerships in connection with the Settlement (see Note
6) and DRC had subsequently ceased operations, such receivables would be
uncollectible.

During 1995, the Court approved a settlement of all Class claims and all
cross-claims against Siegan, whereby Siegan paid an aggregate amount of
$1,775,000 ($425,938 for the Partnership).

(ii) Other Claims

During 1996, the Court entered an order removing any claim that one of the
defendants of the class action had against the Partnership's Recovered Assets
and certain cash accounts. Pursuant to the terms of the order, approximately
$725,000 of Recovered Assets (the Partnership's interest therein is
approximately $133,000 and is included in Diverted and other assets at a net
amount of $0) will be held in escrow for the potential benefit of the defendant
pending the outcome of the litigation discussed below.

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 remains pending.

(iii) Litigation Costs, Expenses and Fees

Future costs, expenses and fees of the Class Action and any subsequent Class
litigation will be paid in such amounts and from such sources as the Court shall
determine. Future fees and costs relating to the cross-claims and other
litigation undertaken on behalf of the Partnership will be paid by the
Partnership subject to the approval


                                       34
<PAGE>   35
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED

of LRC. It is anticipated that the Datronic Partnerships will continue to expend
funds in the future in pursuit of claims described herein. Counsel for the
Datronic Partnerships (same as Class Counsel) is charging rates which are less
than their normal rates and have a right to receive a contingent fee equal to a
percentage of the proceeds, if any, resulting from the cross-claims against
professionals.

(b) At December 31, 1997, the Partnership's General Partner, LRC, was a
defendant in the following matter:

Secured Lender Litigation

During 1993, in connection with the liquidation of a Recovered Asset, a secured
lender filed suit against LRC for an approximate $175,000 loss incurred by the
secured lender (see Note 6). The suit was dismissed by the Court during 1995 for
failure to state a claim. Upon appeal, a portion of the suit was remanded to the
lower court for trial. LRC believes the suit is without merit and is vigorously
contesting it.

Due to the uncertainty of the outcome of the pending litigation, no assets have
been recorded in the Partnership's financial statements relating to the pending
litigation discussed above.


NOTE 9 - 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 10).

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 was paid a $3.2 million dollar termination fee
(plus accrued interest) and the three principals of New Era were paid a total of
$1.0 million (plus accrued interest) for their agreement not to compete with the
business of the Datronic Partnerships for two years. The Partnership's share of
these payments was $830,304, which is included in the 1996 Statement of Revenue
and Expenses as part of the Management fees - New Era. Under the terms of the
Management Agreement, New Era and its principals were entitled to minimum
aggregate annual compensation of $2 million plus all operating expenses incurred
in connection with the management of all Partnerships.


                                       35
<PAGE>   36
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED

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 Statement of Revenue and Expenses as part
of General Partner's expense reimbursement.


NOTE 10 - 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 participate 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 April 12, 1995, 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 participate 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) does 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.

Distributions to Class A Limited Partners were suspended after payment of the
July 1, 1995 distribution and to Class B and C Limited Partners after payment of
the April 1, 1996 distribution. If the Partnership obtains funds from pending
litigation or cash is otherwise available after providing for the orderly
liquidation of the Partnership, additional distributions will be made at the
appropriate time.


                                       36
<PAGE>   37
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED

Concurrent with the beginning of the Liquidating Phase on April 12, 1995, 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.

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, 1997:

<TABLE>
<CAPTION>
                                                 Year ended December 31,
                                         -------------------------------------
                                             1997           1996        1995
                                             ----           ----        ----
<S>                                      <C>            <C>         <C>       
1% Distribution                          $   21,233     $  104,304  $  600,440
Expense Reimbursement in excess
   of the 1% Distribution                 5,369,846      2,955,260   1,261,078
                                          ---------     ----------   ---------

Total                                    $5,391,079     $3,059,564  $1,861,518
                                         ==========     ==========  ==========
</TABLE>


                                       37
<PAGE>   38
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONTINUED


The Partnership's share of these payments were:

<TABLE>
<CAPTION>
                                                 Year ended December 31,
                                          --------------------------------------
                                             1997           1996        1995
                                             ----           ----        ----
<S>                                       <C>           <C>           <C>       
1% Distribution                           $     --      $    8,570    $  103,661
Expense Reimbursement in excess
   of the 1% Distribution                  1,254,994       712,459       528,905
                                          ----------    ----------    ----------

Total                                     $1,254,994    $  721,029    $  632,566
                                          ==========    ==========    ==========
</TABLE>


NOTE 11 - CONCENTRATION OF CREDIT RISK:

Leasing activity is conducted throughout the United States, with emphasis in
certain states such as California, Florida, Nevada, New York, and Texas. The
cost of equipment under lease typically ranges from $15,000 to $30,000. Such
equipment includes, but is not limited to: general purpose plant/office
equipment, printing and photo processing equipment, machine tool and
manufacturing equipment, computers and terminals for management information
systems, telecommunications equipment, medical equipment, and automotive repair
equipment. At December 31, 1997, 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.


                                       38
<PAGE>   39
                   DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.
                  NOTES TO THE FINANCIAL STATEMENTS - CONCLUDED


NOTE 12 - 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, 1997.


<TABLE>
<CAPTION>
                                            Liquidating  Continuing
                                 General      Limited      Limited
                                 Partner      Partners     Partners      Total
                                 -------    -----------  ----------      -----
<S>                            <C>          <C>          <C>          <C>      
Net earnings (loss) per
  accompanying statements      $     122    $ (22,570)   $  34,631    $  12,183

Effect of leases treated as
  operating leases for tax
  purposes                        (1,507)     (33,188)    (116,038)    (150,733)
Effect of principal
  repayments treated as
  income for tax purposes          7,121      157,469      547,502      712,092
Provision for recovery of
  Diverted and other assets       (5,497)    (121,018)    (423,129)    (549,644)
Provision for Class Counsel
  fees and expenses, net            --        (58,850)    (205,739)    (264,589)

Other, net                          (370)      (7,239)     (29,422)     (37,031)
                               ---------    ---------    ---------    ---------

Loss for Federal income
  tax purposes in total        $    (131)   $ (85,396)   $(192,195)   $(277,722)
                               =========    =========    =========    =========
</TABLE>


                                       39
<PAGE>   40
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. The directors and executive officers of LRC,
together with pertinent information concerning each of them are as follows:

     Directors and Executive Officers of Lease Resolution Corp.

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 59, 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 service portfolio of $4.6 billion
with branches in the United States, Canada, the United


                                       40
<PAGE>   41
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 71, 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 61, 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.


                                       41
<PAGE>   42
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
10 to the Partnership's financial statements included in Item 8.

Compensation paid to the Chief Executive Officer of LRC during 1997 was as
follows:

<TABLE>
<CAPTION>
   Chairman of the
   Board and Chief                                            All Other
   Executive Officer                      Salary            Compensation(b)
   -----------------                      ------            ---------------
<S>                                      <C>                <C>      
   Donald D. Torisky                     $458,644             $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
       1997.

(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, was 23.28%.


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.

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
10 to the Partnership's financial statements included in Item 8.


                                       42
<PAGE>   43
                                     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


                                       43
<PAGE>   44
                                   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 27th day of March
1998.


            DATRONIC EQUIPMENT INCOME FUND XVIII, L.P.

March 27, 1998      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 27, 1998
     ------------------------------
     Donald D. Torisky
     Chairman and Chief Executive Officer, 
     Lease Resolution Corporation, 
     General Partner of Datronic 
     Equipment Income Fund XVIII, L.P.


By:   /s/ Robert P. Schaen                                       March 27, 1998
     ------------------------------
     Robert P. Schaen
     Vice-Chairman and
     Chief Financial Officer, 
     Lease Resolution Corporation, 
     General Partner of Datronic 
     Equipment Income Fund XVIII, L.P.


By:   /s/ Arthur M. Mintz                                        March 27, 1998
     ------------------------------
     Arthur M. Mintz 
     Vice-Chairman and General Counsel, 
     Lease Resolution Corporation, 
     General Partner of Datronic 
     Equipment Income Fund XVIII, L.P.


                                       44
<PAGE>   45
                                  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.


                                       45