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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934
For the quarterly period ended September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________.
Commission file number 0-8868
------
PHOENIX LEASING INCOME FUND 1977
- --------------------------------------------------------------------------------
Registrant
California 94-2446904
- ------------------------------- ----------------------------------
State of Jurisdiction I.R.S. Employer Identification No.
2401 Kerner Boulevard, San Rafael, California 94901-5527
- --------------------------------------------------------------------------------
Address of Principal Executive Offices Zip Code
Registrant's telephone number, including area code: (415) 485-4500
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
preceding requirements for the past 90 days.
Yes __X__ No _____
16,521 Units of Limited Partnership Interest were outstanding as of September
30, 1997.
Transitional small business disclosure format:
Yes _____ No __X__
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Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX LEASING INCOME FUND 1977
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
September 30, December 31,
ASSETS 1997 1996
------ ------
Cash and cash equivalents $ 239 $ 369
Accounts receivable -- 17
Notes receivable (net of allowance for losses
on notes receivable of $274 at September 30,
1997 and December 31, 1996) 525 525
Equipment on operating leases and held for lease
(net of accumulated depreciation of $0 and $15
at September 30, 1997 and December 31, 1996,
respectively) -- --
Investment in joint ventures 20 44
Other assets 7 4
------ ------
Total Assets $ 791 $ 959
====== ======
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 23 $ 39
------ ------
Total Liabilities 23 39
------ ------
Partners' Capital (Deficit)
General Partners (44) (26)
Limited Partners, 20,000 units authorized
and issued, 16,521 units outstanding at
September 30, 1997 and December 31, 1996 811 945
Unrealized gains on available-for-sale securities 1 1
------ ------
Total Partners' Capital (Deficit) 768 920
------ ------
Total Liabilities and Partners' Capital (Deficit) $ 791 $ 959
====== ======
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING INCOME FUND 1977
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------ ------ ------ ------
INCOME
Rental income $ 1 $ 1 $ 4 $ 5
Equity in earnings (losses) from
joint ventures, net (12) 6 1 22
Interest income, notes receivable -- -- 4 --
Interest income 4 6 14 17
Other income -- -- 9 2
------ ------ ------ ------
Total Income (7) 13 32 46
------ ------ ------ ------
EXPENSES
Management fees to General Partner -- -- 2 1
Liquidation fees to General Partner -- -- -- 22
Legal expense 110 18 165 77
General and administrative expenses 4 8 17 26
------ ------ ------ ------
Total Expenses 114 26 184 126
------ ------ ------ ------
NET LOSS $ (121) $ (13) $ (152) $ (80)
====== ====== ====== ======
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(6.45) $ (.71) $(8.11) $(4.42)
====== ====== ====== ======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $ -- $ 9.95
====== ====== ====== ======
ALLOCATION OF NET LOSS:
General Partners $ (14) $ (2) $ (18) $ (7)
Limited Partners (107) (11) (134) (73)
------ ------ ------ ------
$ (121) $ (13) $ (152) $ (80)
====== ====== ====== ======
The accompanying notes are an integral part of these statements.
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PHOENIX LEASING INCOME FUND 1977
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1997 1996
------ ------
Operating Activities:
Net loss $ (152) $ (80)
Adjustments to reconcile net loss to net
cash used by operating activities:
Gain on sale of equipment (1) (1)
Equity in earnings from joint ventures, net (1) (22)
Decrease in accounts receivable 17 --
Decrease in accounts payable and accrued expenses (16) (6)
Gain on sale of securities -- (1)
Increase in other assets (3) (1)
------ ------
Net cash used by operating activities (156) (111)
------ ------
Investing Activities:
Proceeds from sale of equipment 1 1
Proceeds from sale of securities -- 2
Distributions from joint ventures 25 41
------ ------
Net cash provided by investing activities 26 44
------ ------
Financing Activities:
Distributions to partners -- (164)
------ ------
Net cash used by financing activities -- (164)
------ ------
Decrease in cash and cash equivalents (130) (231)
Cash and cash equivalents, beginning of period 369 595
------ ------
Cash and cash equivalents, end of period $ 239 $ 364
====== ======
The accompanying notes are an integral part of these statements.
<PAGE>
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PHOENIX LEASING INCOME FUND 1977
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. General.
The accompanying unaudited condensed financial statements have been
prepared by the Partnership in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Although management believes that the disclosures are adequate to make
the information presented not misleading, it is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes included in the Partnership's Financial Statement, as filed with the
SEC in the latest annual report on Form 10-K.
Note 2. Reclassification.
Reclassification - Certain 1996 amounts have been reclassified to
conform to the 1997 presentation.
Note 3. Income Taxes.
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the partners in their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.
Note 4. Notes Receivable.
Impaired Notes Receivable. At September 30, 1997, the recorded
investment in notes that are considered to be impaired was $798,000 for which
the related allowance for losses was $274,000. The average recorded investment
in impaired loans during the nine months ended September 30, 1997 and 1996 was
approximately $798,000.
The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:
1997 1996
------- --------
(Amounts in Thousands)
Beginning balance $ 274 $ 92
Provision for losses - -
Write downs - -
------- --------
Ending balance $ 274 $ 92
======= ========
Note 5. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net loss and distributions per limited partnership unit were based on
the limited partners' share of net loss and distributions, and the weighted
average number of units outstanding of 16,521 for the nine month periods ended
September 30, 1997 and 1996.
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Note 6. Investment in Joint Ventures.
Equipment Joint Ventures
The aggregate combined financial information of the equipment joint
ventures is presented below:
September 30, December 31,
1997 1996
------- -------
(Amounts in Thousands)
Assets $ 1,213 $ 2,700
Liabilities 155 372
Partners' Capital 1,058 2,328
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------- ------- ------- -------
(Amounts in Thousands)
Revenue $ 44 $ 535 $ 996 $ 1,786
Expenses 685 275 1,146 917
Net Income (Loss) (641) 260 (150) 869
Financing Joint Ventures
The aggregate combined financial information of the financing joint
ventures is presented below:
September 30, December 31,
1997 1996
------- -------
(Amounts in Thousands)
Assets $ 10 $ 17
Liabilities -- --
Partners' Capital 10 17
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------- ------- ------- -------
(Amounts in Thousands)
Revenue $ 4 $ 5 $ 11 $ 25
Expenses -- 5 1 6
Net Income 4 -- 10 19
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PHOENIX LEASING INCOME FUND 1977
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Phoenix Leasing Income Fund 1977 (the Partnership) reported a net loss of
$121,000 and $152,000 for the three and nine months ended September 30, 1997,
respectively, as compared to a net loss of $13,000 and $80,000 during the same
periods in 1996. The increased net loss for the three and nine months ended
September 30, 1997, compared to the prior year, is a result of an increase in
legal expenses.
Total revenues decreased by $20,000 and $14,000 for the three and nine
months ended September 30, 1997, respectively, compared to the same periods in
1996. The decrease in total revenues is due to a decrease in earnings from joint
ventures of $18,000 and $21,000 for the three and nine months ended September
30, 1997, as compared to the same period in 1996. This decrease is discussed
below under Joint Ventures.
The decrease in earnings from joint ventures is partially offset by an
increase in interest income from notes receivable for the nine months ended
September 30, 1997 of $4,000. During the nine months ended September 30, 1997,
the Partnership received a disbursement of proceeds which were held in escrow
for a note receivable which was paid off in 1995. In 1995, a portion of the
proceeds from the payoff of this note receivable was placed in escrow to cover
unanticipated liabilities which may have arisen after the payoff.
Because the Partnership is in its liquidation stage, it is not expected that
the Partnership will acquire additional equipment. As a result, revenues from
equipment leasing activities are expected to decline as the portfolio is
liquidated. The Partnership will reach the end of its term on December 31, 1997,
at which time it will liquidate its remaining assets, pay its remaining
liabilities and distribute the remaining cash, if any, to the limited partners.
At September 30, 1997, the Partnership owned equipment with an aggregate
original cost, excluding the Partnership's pro rata interest in joint ventures,
of $0 at September 30, 1997, compared to $47,000 at September 30, 1996.
Total expenses increased by $88,000 and $58,000 for the three and nine
months ended September 30, 1997, respectively, compared to the same periods in
1996. The increase in total expenses is a result of an increase in legal
expenses of $92,000 and $88,000 for the three and nine months ended September
30, 1997, respectively, as compared to the same periods in 1996. The
Partnership's legal expenses are primarily related to a default on the
Partnership's one remaining outstanding note receivable.
The increase in legal expenses for the nine months ended September 30, 1997,
compared to the same period in 1996, was partially offset by the absence of
liquidation fees to the General Partner compared to $22,000 in the prior year.
The absence of liquidation fees to the General Partner is a result of no further
distribution to partners being made until the termination of the Partnership.
Distributions in excess of the General Partner's capital account are considered
to be liquidation fees.
Joint Ventures
The Partnership has made investments in various equipment and financing
joint ventures along with other affiliated partnerships managed by the General
Partner for the purpose of spreading the risk of investing in certain equipment
leasing and financing transactions. These joint ventures are not currently
making any significant additional investments in new equipment leasing or
financing transactions. As a result, the earnings and cash flow from such
<PAGE>
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investments are anticipated to continue to decline as the portfolios are
re-leased at lower rental rates and eventually liquidated. Earnings from joint
ventures decreased by $18,000 and $21,000 for the three and nine months ended
September 30, 1997, compared to the same periods in 1996. The decrease in
earnings from joint ventures for the three and nine months ended September 30,
1997, as compared to 1996, is attributable to an equipment joint venture making
provisions for additional depreciation and losses on notes receivables.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from its contractual
obligations with lessees and borrowers for fixed terms at fixed payment amounts.
The Partnership also has investments in equipment leasing and financing joint
ventures in which it receives a share of the profits and receives cash
distributions. The future liquidity of the Partnership will depend upon the
General Partner's success in collecting contractual amounts owed.
The Partnership reported net cash used by leasing and financing activities
of $156,000 for the nine months ended September 30, 1997, as compared to
$111,000 for the same period in 1996. This increase in net cash used is due to a
decrease in accounts payable and accrued expenses. This is partially offset by a
decrease in accounts receivable.
Distributions from joint ventures decreased by $16,000 for the nine months
ended September 30, 1997, compared to the same period in 1996. The decline in
distributions is attributable to the closure of one equipment joint venture, and
a decline in rental income and proceeds from sale of equipment in another
equipment joint venture.
The Partnership owned equipment held for lease with a purchase price of $0
and $31,000 at September 30, 1997 and 1996, respectively, and a net book value
of $0 at September 30, 1997 and 1996. The General Partner is actively engaged,
on behalf of the Partnership, in remarketing and selling the Partnership's
off-lease equipment portfolio.
The Limited Partners received $0 and $164,000 in cash distributions during
the nine months ended September 30, 1997 and 1996, respectively. As a result,
the cumulative cash distributions to the Limited Partners are $28,604,000 as of
September 30, 1997 and 1996. The General Partner did not receive cash
distributions during the nine months ended September 30, 1997 and 1996.
Accordingly, the General Partner did not receive any payments of liquidation
fees during the nine months ended September 30, 1997, but did receive a payment
of liquidation fees of $22,000 during the nine months ended September 30, 1996.
Due to the decrease in the cash generated by leasing operations, the Partnership
is no longer making quarterly cash distributions to Partners. Distributions were
being made on an annual basis with the annual distribution date being January
15. However, since the Partnership is closing this year the next distribution to
partners is expected to be made at the termination of the Partnership. The
amount of the distribution will be dependent upon the amount of cash available
after the Partnership liquidates its remaining assets and liabilities. The
Partnership will reach the end of its term on December 31, 1997.
The General Partner is entitled to 11.688% of all cash distributions.
Distributions in excess of the General Partners' capital account are
characterized as liquidation fees. The total liquidation fee paid to the General
Partner will not exceed 11.688% of the sum of the net contributed capital and
cumulative net profits and losses. The fee represents an expense of the
Partnership and is specially allocated to the Limited Partners.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's on-going
operational expenses.
<PAGE>
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PHOENIX LEASING INCOME FUND 1977
September 30, 1997
Part II. Other Information.
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable
Item 3. Defaults Upon Senior Securities. Inapplicable
Item 4. Submission of Matters to a Vote of Securities Holders. Inapplicable
Item 5. Other Information. Inapplicable
Item 6. Exhibits and Reports on 8-K:
a) Exhibits:
(27) Financial Data Schedule
b) Reports on 8-K: None
<PAGE>
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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.
PHOENIX LEASING INCOME FUND 1977
--------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
November 12, 1997 Senior Vice President /S/ GARY W. MARTINEZ
- ----------------------- and a Director of ----------------------
Phoenix Leasing Incorporated (Gary W. Martinez)
General Partner
November 12, 1997 Chief Financial Officer, /S/ PARITOSH K. CHOKSI
- ----------------------- Senior Vice President, ----------------------
Treasurer and a Director of (Paritosh K. Choksi)
Phoenix Leasing Incorporated
General Partner
November 12, 1997 Senior Vice President, /S/ BRYANT J. TONG
- ----------------------- Financial Operations of ----------------------
(Principal Accounting Officer) (Bryant J. Tong)
Phoenix Leasing Incorporated
General Partner
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 239
<SECURITIES> 0
<RECEIVABLES> 799
<ALLOWANCES> 274
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 791
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 768
<TOTAL-LIABILITY-AND-EQUITY> 791
<SALES> 0
<TOTAL-REVENUES> 32
<CGS> 0
<TOTAL-COSTS> 184
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (152)
<INCOME-TAX> 0
<INCOME-CONTINUING> (152)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (152)
<EPS-PRIMARY> (8.11)
<EPS-DILUTED> 0
</TABLE>
