<PAGE>
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 June 30, 1995 Commission file number 2-94054-LA
Leastec Income Fund 1985-1, A California Limited Partnership
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(Exact name of registrant as specified in its charter)
California 68-0050859
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2855 Mitchell Drive, Suite 215, Walnut Creek, California 94598
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 938-3443
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(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
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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>
June 30 December 31
1995 1994
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<S> <C> <C>
ASSETS:
Cash $398,351 $293,456
Accounts receivable 21,930 6,932
Net investment in direct financing leases 291,504 400,051
Equipment on operating leases, net of
accumulated depreciation of $-0-
in 1995 and $1,338,858 in 1994 -0- 78,984
-------- --------
Total assets $711,785 $779,423
======== ========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Payable to affiliates $ 26,024 $ 15,735
Accounts payable 36,002 67,972
Deposits 22,129 35,054
Prepaid rental income -0- 4,220
Distributions payable 150,000 120,000
Notes payable 4,343 115,580
-------- --------
Total liabilities 238,498 358,561
-------- --------
Partners' Capital:
Partners' capital 473,287 420,862
-------- --------
Total partners' capital 473,287 420,862
-------- --------
Total liabilities & partners' capital $711,785 $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>
Six Months Quarter
Ended Ended
June 30 June 30
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1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUE:
Rental income $155,530 $235,491 $ 75,223 $138,896
Direct financing lease income 20,459 45,406 9,455 20,334
Gain on sale of equipment 257,823 20,532 241,879 2,575
Interest income 3,146 8,531 1,294 3,625
Other income 5,826 926 5,770 183
-------- -------- -------- --------
Total revenues 442,784 310,886 333,621 165,613
-------- -------- -------- --------
EXPENSES:
Depreciation 78,186 79,559 31,110 45,721
Management fees 33,266 32,980 22,177 15,178
General & administrative 64,289 102,185 32,820 44,442
Data processing 8,783 13,938 3,088 8,825
Interest expense 5,835 19,333 2,053 9,149
-------- -------- -------- --------
Total expenses 190,359 247,995 91,248 123,315
-------- -------- -------- --------
Net Income $252,425 $ 62,891 $242,373 $ 42,298
======== ======== ======== ========
Net income per limited partnership unit $ 8.45 $ 2.11 $ 8.12 $ 1.42
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
3
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LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Ended
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 252,425 $ 62,891
Adjustments to reconcile net income to
net cash provided by operating activities:
Accumulated depreciation 78,186 79,559
Gain on disposition of equipment (257,823) (20,532)
Other income -0- (167)
Change in assets and liabilities:
(Increase) decrease in accounts receivable (14,998) 2,710
Decrease in notes receivable -0- 45,001
Increase in payable to affiliates 10,289 7,900
Decrease in accounts payable (31,970) (44,586)
Decrease in deposits (12,925) (40,188)
Decrease in prepaid rental income (4,220) (1,914)
Increase (decrease) in distributions payable 30,000 (70,400)
--------- ---------
Net cash provided by operating activities 48,964 20,274
--------- ---------
Cash flows from investing activities:
Proceeds from disposition of equipment 263,221 35,841
Decrease in net investment in direct financing
leases 103,947 271,137
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Net cash provided by investing activities 367,168 306,978
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Cash flows from financing activities:
Repayment of notes payable (111,237) (98,230)
Net distributions to partners (200,000) (239,591)
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Net cash used in financing activities (311,237) (337,821)
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Net increase (decrease) in cash 104,895 (10,569)
Cash at beginning of period 293,456 188,987
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Cash at end of period $ 398,351 $ 178,418
========= =========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
4
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LEASTEC INCOME FUND 1985-1
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995, JUNE 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 June 30, 1995,
June 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.
5
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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 related interest income fluctuate 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 Registrant reported a net income of $252,425 or $ 8.45 per Limited
Partnership Unit for the six months ended June 30, 1995 as compared to net
income of $62,891 or $2.11 per Limited Partnership Unit for the six months ended
June 30, 1994. The increase in net income reflects a decrease in general and
administrative expense from $102,185 for the six months ended June 30, 1994 to
$64,289 for the same period in 1995 and an increase in gain on sale of equipment
from $20,532 for first six months of 1994, compared to $257,823 for 1995. The
majority of the increase in the gain on sale of equipment was the sale of
equipment from a terminated operating lease, accounting for a gain on sale of
$222,944. Total revenues for the six months ended June 30, 1995 were $442,784
compared to $310,886 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 June 30, 1994 to June 30, 1995
($45,406 to $20,459 respectively). The net investment in direct financing leases
decreased from $563,198 at June 30, 1994 to $291,504 at June 30, 1995.
Interest income decreased because the Registrant held smaller cash balances
during the first six 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 six months ended June 30, 1995 were $190,359 compared
to $247,995 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 June 30, 1994 to June 30, 1995
($19,333 to $5,835 respectively). The note payable balance was $227,688 in the
first six months of 1994 compared to a note payable balance of $4,343 for the
same period in 1995.
6
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Equipment on operating leases, net of depreciation decreased from $78,984 at
December 31,1994 to $ 0 at June 30, 1995. A prior period adjustment to
depreciation was made in the first quarter 1994 causing depreciation to decrease
less than expected from $79,559 for the six months ended June 30, 1994 to
$78,186 for the six months ended June 30, 1995.
The gain on sale of equipment for the six months ended June 30, 1995 was
$257,823 an increase from $20,532 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 $102,185 for the first six
months of 1994 to $64,289 for the same period in 1995.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities for the six months ended June 30, 1995
was $48,964 compared to $20,274 for the same period in the prior year.
Cash provided by investing activities increased from $306,978 in the second
quarter of 1994 to $367,168 for the second 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 six months ended June 30, 1994 totaled
approximately $35,841 resulting in a $20,532 gain after depreciation expense was
taken compared to $263,221 resulting in a gain of $257,823 for the same period
this year.
Cash provided by investing activities was used to repay $111,237 of debt
during the six months ended June 30, 1995 as compared to $98,230 for the same
period in the prior year.
As of June 30,1995, the Fund's partners were allocated cash distributions of
$150,000 payable on July 14, 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.
The cash balance decreased from $188,987 at December 31, 1993 to $178,418 at
June 30, 1994 and increased to $293,456 at December 31, 1994 and to $398,351 at
June 30, 1995.
The cash position as of June 30,1995 was $398,351. 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
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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
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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
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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: August 11, 1995 By: ______________________________
Ernest V. Lavagetto, President
9
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 398,351
<SECURITIES> 0
<RECEIVABLES> 313,434
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 711,785
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 711,785
<CURRENT-LIABILITIES> 238,498
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 473,287
<TOTAL-LIABILITY-AND-EQUITY> 711,785
<SALES> 442,784
<TOTAL-REVENUES> 442,784
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 184,524
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,835
<INCOME-PRETAX> 252,425
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 252,425
<EPS-PRIMARY> 8.45
<EPS-DILUTED> 8.45
</TABLE>
