SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended Sept 30, 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 (IRS Employer Identification
incorporation or organization) number)
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
<PAGE>
<TABLE>
Part 1. Financial Information
LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
September 30 December 31
1995 1994
------------- -----------
<S> <C> <C>
ASSETS:
Cash $292,765 $293,456
Accounts receivable 360 6,932
Net investment in direct financing 233,460 400,051
leases
Equipment on operating leases, net of
accumulated depreciation of $-0-
in 1995 and $ 1,338,858 in 1994 -0- 78,984
-------- --------
Total assets $526,585 $779,423
======== ========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Payable to affiliates $ 10,266 $ 15,735
Accounts payable 41,391 67,972
Deposits 16,726 35,054
Prepaid rental income -0- 4,220
Distributions payable 125,000 120,000
Notes payable -0- 115,580
-------- --------
Total liabilities 193,383 358,561
-------- --------
Partners' capital:
Partners' capital 333,202 420,862
-------- --------
Total partners' capital 333,202 420,862
-------- --------
Total liabilities & partners'capital $526,585 $779,423
======== ========
<FN>
The accompanying notes are an integral
part of these condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Nine Months Quarter
Ended Ended
September 30 September 30
1995 1994 1995 1994
----------------- ------------------
<S> <C> <C> <C> <C>
REVENUE:
Rental income $179,447 $346,177 $ 23,917 $110,686
Direct financing lease income 26,631 61,833 6,172 16,427
Gain on sale of equipment 257,823 40,792 -0- 20,260
Interest income 4,883 11,426 1,737 2,895
Other income (loss) (1,030) 5,453 (6,856) 4,527
-------- -------- -------- --------
Total revenues 467,754 465,681 24,970 154,795
-------- -------- -------- --------
EXPENSES:
Depreciation 78,186 128,886 -0- 49,327
Management fees 40,098 45,607 6,832 12,627
General & administrative 95,406 150,797 31,117 48,612
Data processing 10,890 17,258 2,107 3,320
Interest expens 5,835 49,154 -0- 29,821
-------- -------- ------- --------
Total expenses 230,415 391,702 40,056 143,707
-------- -------- ------- --------
Net Income (loss) $237,339 $ 73,979 $(15,086) $ 11,088
======== ======== ======== =======
Net income (loss) per limited
partnership unit $ 7.98 $ 2.48 $ (0.51) $ 0.37
======== ======== ======== ========
<FN>
The accompanying notes are an integral
part of these condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months
Ended
September 30
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 237,339 $ 73,979
Adjustments to reconcile net income
to net cash provided by operating activities:
Accumulated depreciation 78,186 128,886
Gain on disposition of equipment (257,823) (40,792)
Other income 0 (167)
Change in assets and liabilities:
Decrease (increase) in accounts receivable 6,572 (38,340)
Decrease in notes receivable 0 62,998
(Decrease) increase in payable to affiliates (5,469) 6,151
Decrease in accounts payable (26,581) (32,079)
Decrease (increase) in deposits (18,328) (44,054)
Decrease in prepaid rental income (4,200) (5,337)
Decrease in distributions payable 5,000 (60,000)
--------- ---------
Net cash provided by operating activities 14,676 51,245
--------- ---------
Cash flows from investing activities:
Proceeds from disposition of equipment 263,222 56,100
Decrease in net investment in direct
financing leases 161,991 340,411
--------- ---------
Net cash provided by investing activites 425,213 396,511
-------- ---------
Cash flows from financing activities:
Repayment of notes payable (115,580) (133,647)
Net distributions to partners (325,000) (329,991)
Net cash used in financing activities (440,580) (463,638)
--------- ---------
Net decrease in cash (691) (15,882)
Cash at beginning of period 293,456 188,987
--------- ---------
Cash at end of period $ 292,765 $ 173,105
========= =========
<FN>
The accompanying notes are an integral
part of these condensed financial statements.
</TABLE>
<PAGE>
LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995, SEPTEMBER 30, 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 September 30, 1995, September 30,
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
registrant's 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 tenth full year of operation, December 1995.
<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 Registrant's Partners. Although the
Registrant has until December 1997 to liquidate operations, the
Registrant intends to be fully liquidated by December 1995. In
order to complete the liquidation of all assets by the end of 1995,
it is the General Partner's policy to allow the early termination
of leases when requested as well as to seek the sale of leased
assets in which the lease may extend beyond December 1995. The
General Partner does not anticipate that the cash proceeds from
liquidation will return 100% of the investors original capital
contribution.
All the Registrant's operating leases have terminated and the
underlying equipment has been sold. The remaining balance of the
lease portfolio is invested in Direct Finance leases which
terminate with the lessee's 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 the related interest income fluctuates according to the cash
flow from rents and equipment and finance lease sales during each
quarter. Cash is distributed to the Partners according to their
respective tax basis capital accounts. The final liquidating
distribution will be paid by the Registrant in April of 1996 after
the final audit is completed.
The Registrant reported a net income of $237,339 or $ 7.95 per
Limited Partnership Unit for the nine months ended September 30,
1995 as compared to net income of $73,979 or $2.48 per Limited
Partnership Unit for the nine months ended September 30, 1994. The
increase in net income reflects a decrease in general and
administrative expense from $150,797 for the nine months ended
September 30, 1994 to $95,406 for the same period in 1995 and an
increase in gain on sale of equipment from $40,792 for first nine
months of 1994, compared to $257,823 for the same period in 1995.
The majority of the increase in the gain on sale of equipment was
the sale of equipment from a terminated operating lease which
accounted for a gain on sale of $222,944. Total revenues for the
nine months ended September 30, 1995 were $467,754 compared to
$465,681 for the same period in the prior year. Revenue derived
from the Fund's equipment management activities comprised 99% of
the total income for the period, with the remaining 1% being
interest income.
Direct financing lease income decreased from September 30, 1994
to September 30, 1995 ($61,833 to $26,631 respectively). The net
investment in direct financing leases decreased from $493,924 at
September 30, 1994 to $233,460 at September 30, 1995.
Interest income decreased because the Registrant held smaller
cash balances during the first nine 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.
As stated above the Registrant's final liquidating distribution
will be paid in April of 1996 after the final audit of the
Registrant is completed.
<PAGE>
Total expenses for the nine months ended September 30, 1995 were
$230,415 compared to $391,702 for the same period in the prior
year. Depreciation, management fees, interest, and general and
administrative costs comprised 95% of the total expenses. Interest
expense decreased from September 30, 1994 to September 30, 1995
($49,154 to $5,835 respectively). The note payable balance was
$192,271 in the first nine months of 1994 compared to a note
payable balance of $-0- for the same period in 1995.
Equipment on operating leases, net of depreciation decreased
from $78,984 at December 31,1994 to $ 0 at September 30, 1995. A
prior period adjustment to depreciation was made in the first
quarter 1994 causing depreciation to decrease less than expected
from $128,886 for the nine months ended September 30, 1994 to
$78,186 for the nine months ended September 30, 1995.
The gain on sale of equipment for the nine months ended
September 30, 1995, was $257,823 a substantial increase from
$40,792 for the same period in 1994. This was primarily from the
sale of a large terminated lease and certain leased assets.
General and administrative costs decreased from $150,797 for
the first nine months of 1994 to $95,406 for the same period in
1995.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities for the nine months ended
September 30, 1995, was $14,676 compared to $51,245 for the same
period in the prior year.
Cash provided by investing activities increased from $396,511 in
the third quarter of 1994 to $425,213 for the third quarter of
1995, reflecting the increase in sales of equipment and leases.
As rental payments on finance leases are received, the cash is
broken up into income and return of principal. As a finance lease
ages the income portion of the rental receipts decrease and the
return of principal portion increases.
Sales proceeds of equipment for the nine months ended September
30, 1994, totaled approximately $56,100 resulting in a $40,792 gain
after depreciation expense was taken compared to $263,222 resulting
in a gain of $257,823 for the same period this year.
Cash provided by investing activities was used to repay
$115,580 of debt during the nine months ended September 30, 1995,
as compared to $133,647 for the same period in the prior year.
As of September 30,1995, the Fund's partners were allocated cash
distributions of $125,000 payable on October 13, 1995. The size of
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 to be variable in amount from quarter to
quarter depending on the timing of rental receipts and direct
finance lease equipment sales.
<PAGE>
The cash balance decreased from $188,987 at December 31, 1993,
to $173,105 at September 30, 1994 and increased to $293,456 at
December 31, 1994, and decreased to $292,765 at September 30, 1995.
The cash position as of September 30, 1995, was $292,765. The
General Partner anticipates that funds from operations will be
adequate to cover all operating expenses and future needs of the
Partnership during 1995.
<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: November 1, 1995 By: Ernest V. Lavagetto
Ernest V. Lavagetto
President
<TABLE> <S> <C>
<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 STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 292,765
<SECURITIES> 0
<RECEIVABLES> 360
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 526,585
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 526,585
<CURRENT-LIABILITIES> 193,383
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 333,202
<TOTAL-LIABILITY-AND-EQUITY> 526,585
<SALES> 467,754
<TOTAL-REVENUES> 467,754
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 224,580
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,835
<INCOME-PRETAX> 237,339
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 237,339
<EPS-PRIMARY> 7.95
<EPS-DILUTED> 7.95
