<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31,1995 Commission file number 2-94054-LA
Leastec Income Fund 1985-1, A California Limited Partnership
--------------------------------------- --------------------
(Exact name of registrant as specified in its charter)
California 68-0050859
---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2855 Mitchell Drive, Suite 215, Walnut Creek, California 94598
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 938-3443
________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __
-
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS: N/A
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS: N/A
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
1
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Part 1. Financial Information
-----------------------------
LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
---- ----
<S> <C> <C>
ASSETS:
Cash $ 176,385 $293,456
Accounts receivable 31,400 6,932
Net investment in direct financing leases 335,317 400,051
Equipment on operating leases, net of
accumulated depreciation of $1,204,928
in 1995 and $ 1,338,858 in 1994 31,110 78,984
--------- ---------
Total assets $ 574,212 $ 779,423
========= =========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Payables to affiliates $ 12,487 $ 15,735
Accounts payable 39,404 67,972
Deposits 28,536 35,054
Prepaid rental income 2,044 4,220
Distributions payable 50,000 120,000
Notes payable 60,826 115,580
--------- ---------
Total liabilities 193,297 358,561
--------- ---------
Partners' Capital:
Partners' capital 380,915 420,862
--------- ---------
Total partners capital 380,915 420,862
--------- ---------
Total liabilities & partners' capital $ 574,212 $ 779,423
========= =========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
2
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LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended
March 31
--------
1995 1994
---- ----
<S> <C> <C>
REVENUE:
Rental income $ 80,307 $ 96,595
Direct financing lease income 11,004 25,072
Gain on sale of equipment 15,944 17,957
Interest income 1,852 4,906
Other income 56 743
-------- --------
Total revenues 109,163 145,273
-------- --------
EXPENSES:
Depreciation 47,076 33,838
Management fees 11,089 17,802
General & administrative 31,469 57,743
Data processing 5,695 5,113
lnterest expense 3,782 10,184
-------- --------
Total expenses 99,111 124,680
-------- --------
Net income $ 10,052 $ 20,593
======== ========
Net income (loss)
per limited
partnership unit $ 0.34 $ 0.69
======== ========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
3
<PAGE>
LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,052 $ 20,593
Adjustments to reconcile net income
to net cash provided by operating activities:
Accumulated depreciation 47,076 33,838
Gain on disposition of equipment (15,944) (17,957)
Other income -0- (165)
Change in assets and liabilities:
Increase in accounts receivable (24,468) (1,426)
Decrease in notes receivable -0- 23,909
Increase (decrease) in payable to affiliates (3,248) 486
Decrease in accounts payable (28,568) (37,521)
Decrease in deposits (6,518) (5,418)
Increase (decrease) in prepaid rental income (2,176) 17,718
Increase (decrease) in distributions payable (70,000) 10,000
--------- ---------
Net cash provided (used) by operating activities (93,794) 44,057
--------- ---------
Cash flows from investing activities:
Proceeds from disposition of equipment 21,343 33,265
Decrease in net investment in direct
financing leases 60,134 129,210
--------- ---------
Net cash provided by investing activities 81,477 162,475
--------- ---------
Cash flows from financing activities:
Repayment of notes payable (54,754) (48,352)
Net distributions to partners (50,000) (159,591)
--------- ---------
Net cash used in financing activities (104,754) (207,943)
--------- ---------
Net decrease in cash (117,071) (1,411)
Cash at beginning of period 293,456 188,987
--------- ---------
Cash at end of period $ 176,385 $ 187,576
========= =========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
4
<PAGE>
LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1995, MARCH 31, 1994 AND DECEMBER 31, 1994
(UNAUDITED)
1. Basis of Condensed Financial Statement Preparation
--------------------------------------------------
In the opinion of the General Partner, the accompanying unaudited condensed
financial statements contain all adjustments (consisting principally of
normal, recurring accruals) necessary to present fairly the financial
position of Leastec Income Fund 1985-1 (the Partnership) as of March 31,
1995, March 31, 1994 and December 31, 1994.
As provided for in the Partnership agreement and offering document, the
Partnership engaged in leasing activities which intended to be completed in
approximately eleven years from its inception at which time all remaining
partnership assets will have been liquidated and cash proceeds distributed to
the registrants partners. The Partnership has presented its 1995 financial
statements to reflect its leasing activities on a basis consistent with prior
periods.
2. Wind Down Phase
---------------
The Registrant has ceased acquisition of new capital equipment and is in the
process of liquidating its lease portfolio. It is intended that the
Registrant will be fully liquidated at the end of its eleventh full year of
operation, December 1996.
5
<PAGE>
LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operation
- --------------------
The Registrant has been winding down operations since 1993 by discontinuing
new leasing activities and returning cash available from operations to the
Registrants Partners. Although the Registrant has until December 1997 to
liquidate operations, the Registrant intends to be fully liquidated by December
1996.
The majority of the Registrants operating leases have terminated. The
remaining leases will be fully depreciated in the first half of 1995. As
operating leases terminate, the equipment is sold. The remaining balance of the
lease portfolio is invested in Direct Finance leases which terminate with the
Lessees contractually required purchase of equipment. The income and expenses of
the Registrant are steadily declining as the lease portfolio size declines. The
cash balances and related interest income fluctuate according to the cash
amounts received from equipment sales and finance lease purchases during each
quarter. Cash is distributed to the Partners according to their respective tax
basis capital accounts.
The Registrant reported a net gain of $10,052 or $ 0.34 per Limited
Partnership Unit for the three months ended March 31, 1995 as compared to net
income of $20,593 or $ 0.69 per Limited Partnership Unit for the three months
ended March 31, 1994. The decrease in net income was caused by the decreasing
lease portfolio providing less income as the partnership leasing activities are
winding down.
Total revenues for the three months ended March 31, 1995 were $109,163
compared to $145,273 for the same period in the prior year. This decrease
reflects the gradual liquidation of the Registrant's lease portfolio. Revenue
derived from the Fund's equipment management activities comprised 98% of the
total income for the period, with the remaining 2% being interest income.
Direct financing lease income decreased from March 31, 1994 to March 31,
1995 ($25,072 to $11,004 respectively). The net investment in direct financing
leases decreased from $400,051 at March 31, 1994 to $335,317 at March 31, 1995.
Interest income decreased because the Registrant held smaller cash balances
during the first three months of 1995 as compared to the same period in the
prior year. All available cash is being paid out in distributions to the Fund's
partners on a quarterly basis.
Total expenses for the three months ended March 31, 1995 were $99,111
compared to $124,680 for the same period in the prior year. Depreciation,
management fees, interest, and general and administrative costs comprised 94% of
the total expenses. Interest expense decreased from March 31, 1994 to March 31,
1995 ($10,184 to $3,782 respectively). The note payable balance was $115,580 in
the first three months of 1994 compared to a note payable balance of $60,826 for
the same period in 1995.
6
<PAGE>
As leases are terminated during the year, the equipment was not re-leased
and was sold. Equipment on operating leases, net of depreciation decreased from
$78,984 at December 31,1994 to $31,110 at March 31, 1995. A prior period
adjustment to depreciation was made in the first quarter 1994 causing
depreciation to increase from $33,838 for the three months ended March 31, 1994
to $47,076 for the three months ended March 31, 1995.
The gain on sale of equipment for the three months ended March 31, 1995
was $15,944 a slight decrease from $17,957 for the same period in 1994.
General and administrative costs decreased from $57,743 for the first
three months of 1994 to $31,469 for the same period in 1995.
Liquidity and Capital Resources
- -------------------------------
Cash used by operating activities for the three months ended March 31, 1995
was $93,794 compared to cash provided by operating activities of $44,057 for the
same period in the prior year. The decrease in cash from operating activities
reflects the continued winding down of the operating lease portfolio.
Cash from investing activities decreased from $162,475 in the first quarter
of 1994 to $81,477 for the first quarter 1995, reflecting primarily the decline
in rental receipts from the direct finance lease portfolio.
As rental payment on finance leases are received, the cash is broken up into
income and return of principal. As finance leases are completed, the rental
payments received by the Registrant decline, and the related components of
income and return of principal is reflected as a smaller decrease in net
investment in direct financing leases from $400,051 at December 31, 1994 to
$335,317 at March 31, 1995.
Sales proceeds of equipment for the three months ended March 31, 1994 totaled
approximately $33,265 resulting in a $17,957 gain after depreciation expense was
taken compared to $21,343 resulting in a gain of $15,944 for the same period
this year.
Cash from investing activities was used to repay $54,754 of debt during the
three months ended March 31,1995 as compared to $48,352 for the same period in
the prior year.
As of March 31,1995, the Fund's partners were allocated cash distributions of
$50,000 payable on April 14, 1995. Investor distributions depend on the timing
of equipment sales and collections of rents. As a result this amount can be
expected to decrease during 1995 and 1996 and to be variable in amount from
quarter to quarter depending on the timing of equipment sales.
The cash balance decreased from $188,987 December 31, 1993 to $187,576 at
March 31, 1994 and increased to $293,456 at December 31, 1994 then decreased to
$176,385 at March 31, 1995.
The cash position as of March 31,1995 was $176,385. The General Partner
anticipates that funds from operations will be adequate to cover all operating
expenses and future needs of the Partnership during 1995.
7
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
8
<PAGE>
Pursuant to the requirements 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.
LEASTEC INCOME FUND 1985-1
(Registrant)
LEASTEC CORPORATION, General
Partner
Date: May 10, 1995 By: _______________________________ .
Ernest V. Lavagetto, President
9
<PAGE>
EXHIBIT INDEX
Exhiibit No. Description
- ------------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 176,385
<SECURITIES> 0
<RECEIVABLES> 366,717
<ALLOWANCES> 0
<INVENTORY> 31,110
<CURRENT-ASSETS> 574,212
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 574,212
<CURRENT-LIABILITIES> 193,297
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 380,915
<TOTAL-LIABILITY-AND-EQUITY> 574,212
<SALES> 0
<TOTAL-REVENUES> 109,163
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 95,329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,782
<INCOME-PRETAX> 10,052
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,052
<EPS-PRIMARY> .34
<EPS-DILUTED> 0
</TABLE>
