<PAGE> 1
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 June 30, 1996 Commission file number 299435
Leastec Income Fund III
A California Limited Partnership
(Exact name of registrant as specified in its charter)
California 68-0066209
(State or other jurisdiction of (I.R.S. 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.
<PAGE> 2
Part 1. Financial Information
LEASTEC INCOME FUND III
A California Limited Partnership
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
------ -----------
<S> <C> <C>
ASSETS:
Cash $ 337,326 $ 706,443
Accounts receivable 0 87,417
Net investment in direct financing leases 235,660 541,980
Equipment on operating leases, net of
accumulated depreciation of $6,166
in 1996 and $6,166 in 1995 0 0
Equipment held for sale or lease, net of
accumulated depreciation of $-0- in
1996 and $-0- in 1995. 0 0
-------- ---------
Total assets $ 572,986 $1,335,840
======== =========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Payables to affiliates $ 6,090 $ 2,767
Accounts payable 44,349 64,323
Deposits 26,438 43,818
Prepaid rental income 0 2,944
Distributions payable 105,263 368,421
Notes payable 0 0
------- ---------
Total liabilities 182,140 482,273
------- ---------
Partners' capital:
Partners' capital 390,846 853,567
------- ---------
Total partners' capital 390,846 853,567
------- ---------
Total liabilities & partners' capital $ 572,986 $1,335,840
======== =========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
<PAGE> 3
LEASTEC INCOME FUND III
A California Limited Partnership
CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six Months Quarter
Ended Ended
June 30 June 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Rental income $ 78 $118,385 0 50,220
Direct financing lease income 16,831 191,120 6,655 103,572
Gain (loss) on sale of equipment 0 112,731 0 98,895
Interest income 4,754 8,840 1,777 4,064
Other income 6,601 124,963 0 121,976
------- ------- ------ -------
Total revenues 28,264 556,039 8,432 378,727
------- ------- ------ -------
Expenses:
Management fees 22,886 91,940 8,367 56,055
General & administrative 87,343 97,167 46,815 50,063
Data processing 12,335 16,946 5,537 8,273
lnterest expense 0 3,064 0 1,044
------- ------- ------ -------
Total expenses 122,564 209,117 60,719 115,435
------- ------- ------ -------
Net Income (loss) $(94,300) $346,922 $(52,287) $263,292
======= ======= ====== =======
Net income (loss) per limited
partnership unit $ (1.20) $ 4.40 $ (0.66) $ 3.34
======= ======= ====== =======
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
<PAGE> 4
LEASTEC INCOME FUND III
A California Limited Partnership
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (94,300) 346,922
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on disposition of equipment 0 (112,731)
Change in assets and liabilities:
Decrease (increase) in accounts receivable 87,417 (26,220)
Increase (decrease) in payable to affiliates 3,323 (11,508)
Decrease in accounts payable (19,974) (54,725)
Decrease in deposits (17,380) (67,303)
Decrease in prepaid rental income (2,944) (4,609)
(Decrease) increase in distributions payable (263,158) 163,153
------- ---------
Net cash (used) provided by operating activities (307,016) 232,979
------- ---------
Cash flows from investing activities:
Proceeds from disposition of equipment 0 126,364
Decrease in net investment in direct
financing leases 306,320 942,128
------- ---------
Net cash provided by investing activities 306,320 1,068,492
_______ _________
Cash flows from financing activities:
Repayment of notes payable 0 (44,864)
Net distributions to partners (368,421) (947,265)
------- ---------
Net cash used in financing activities (368,421) (992,129)
------- ---------
Net (decrease) increase in cash (369,117) 309,342
Cash at beginning of period 706,443 645,072
------- ---------
Cash at end of period $ 337,326 $ 954,414
======= =========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
<PAGE> 5
LEASTEC INCOME FUND III
A California Limited Partnership
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1996, June 30, 1995 and December 31, 1995
(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 III (the Partnership) as of
June 30, 1996, June 30, 1995 and December 31, 1995.
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 1996 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.
<PAGE> 6
LEASTEC INCOME FUND III
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 1996. This is the Registrant's final year of
operation.
All of the Registrant's operating leases have terminated. As operating
leases terminated the equipment was sold. The remaining lease portfolio is
invested in Direct Finance leases which terminate with the lessee's
contractually required purchase of equipment. The income of the Registrant
is rapidly declining as the lease portfolio size declines. The cash balances
and related interest income fluctuates according to the cash flow from rents
and finance lease terminations during each quarter. Cash is distributed to
the Partners according to their respective tax basis capital accounts. It is
anticipated that the Partners will receive a return of approximately 80% of
their original investment because of shortfalls in portfolio performance and
a difficult economic environment during the life of the Partnerhsip.
The Registrant reported a net loss of $94,300 or $1.20 per Limited
Partnership Unit for the six months ended June 30, 1996 as compared to net
income of $346,922 or $4.40 per Limited Partnership Unit for the six months
ended June 30, 1995.
Total revenues for the six months ended June 30, 1996, were $28,264
compared to $556,039 for the same period in the prior year. This decrease
reflects a reduced rental income from both operating and finance leases due to
the gradual liquidation of the Registrant's lease portfolio. Revenue derived
from the Fund's equipment management activities comprised 83% of the total
income for the period, with the remaining 17% being interest income.
Direct financing lease income decreased from June 30, 1995, to June 30,
1996, ($191,120 to $16,831 respectively). The net investment in direct
financing leases decreased from $1,345,006 at June 30, 1995, to $235,660 at
June 30, 1996.
Interest income decreased because the Registrant held lower cash balances
due to distributions to Partners and lease termination's during the first
six months of 1996 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.
<PAGE> 7
Total expenses for the six months ended June 30, 1996, were $122,564
compared to $209,117 for the same period in the prior year. Management fees,
interest, and general and administrative costs comprised 90% of the total
expenses. Interest expense decreased from June 30, 1995, to June 30, 1996,
($3,064 to $-0- respectively).
General and administrative costs decreased from $97,167 for the first
six months of 1995 to $87,343 for the same period in 1996. The variable
expenses of the Registrant have been reduced steadily as the liquidation
progressed. There are certain fixed expenses caused by the Partnership
Agreement's requirements for Regulatory and Partner reporting which will
continue at their current level until the Registrant's final close of
operations.
Liquidity and Capital Resources
_______________________________
Cash used by operating activities for the six months ended June 30,
1996, was $307,016 compared to cash provided of $232,979 for the same period
in the prior year. The decrease in cash provided by operating activities
reflects the continued winding down of the operating lease portfolio and large
decreases in distribution payable to Partners.
Cash provided by investing activities decreased from $1,068,492 in the
first half of 1995 to $306,320 for the first half of 1996, reflecting
the final sales of operating lease equipment in the first half of 1995, lease
terminations and fluctuation of 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 a finance lease ages
the income portion of the rental receipts decreases and the return of
principal portion increases.
Cash provided by investing activities was used to repay notes payable of
$44,864 in the first six months of 1995 compared to $-0- for the same period
in 1996.
As of June 30, 1996, the Fund's partners were allocated cash distributions
of $105,263 payable on July 15, 1996. The size of investor distributions
depend on the timing of lease terminations and collections of rents. As a
result of the decreasing portfolio of leases, the amount of each distribution
can be expected to gradually decrease during 1996.
The cash balance increased from $645,072 at December 31, 1994, to $954,414
at June 30, 1995, and decreased to $706,443 at December 31, 1995, then
decreased to $337,326 at June 30, 1996.
The cash position as of June 30, 1996, was $337,326. The General Partner
anticipates that funds from operations will be adequate to cover all operating
expenses of the Partnership during 1996.
<PAGE> 8
PART II. OTHER INFORMATION
Item 1. Legal Proceeding
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.
<PAGE> 8
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 III (Registrant)
LEASTEC CORPORATION,
General Partner
Date: July 29, 1996 By: _____________________________
Ernest V. Lavagetto, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 337,326
<SECURITIES> 0
<RECEIVABLES> 235,660
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 572,986
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 572,986
<CURRENT-LIABILITIES> 182,140
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 390,846
<TOTAL-LIABILITY-AND-EQUITY> 572,986
<SALES> 28,264
<TOTAL-REVENUES> 28,264
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 122,564
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (94,300)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94,300)
<EPS-PRIMARY> (1.20)
<EPS-DILUTED> (1.20)
</TABLE>