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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
/ X / AMENDMENT NUMBER 2 TO
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended Commission File Number
April 30, 1996 33-23211
EQUIPMENT LEASING CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
DELAWARE 23-2408914
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
501 SILVERSIDE ROAD, STE. 76, WILMINGTON, DE 19809
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (302) 798-2335
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / X /
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference
to the price at which the stock was sold, or the average bid and asked prices
of such stock, as of a specified date within 60 days prior to the date of
filing:
No voting stock is held by non-affiliates of the Registrant.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of June 30, 1996, there were 1,000 shares of the Registrant's common stock,
$1.00 par value, outstanding. The Registrant has no other classes of common
stock.
DOCUMENTS INCORPORATED BY REFERENCE - NONE
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I 1(a) AND (b)
OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
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PART I
ITEM 1. BUSINESS
Equipment Leasing Corporation of America ("ELCOA" or the "Company") was
incorporated in Delaware on May 6, 1986. The Company was organized primarily
to acquire general commercial and industrial equipment for lease throughout the
United States. The leases have durations of two to five years. As of April
30, 1996, the Company had 6,644 direct finance leases outstanding which have an
average initial term of approximately 37 months, and an average remaining lease
balance of approximately $2,406.
On May 23, 1986, ELCOA commenced operations through the issuance of all of
its outstanding common stock in exchange for approximately $1,000,000 of
equipment and related leases with its parent, Walnut Equipment Leasing Co.,
Inc. ("Walnut"). The Company has a right of first refusal to purchase new
equipment and related leases which Walnut wishes to sell under an Option
Agreement, dated May 23, 1986. The Option Agreement also provides that the
Company will pay Walnut an amount equal to 4% of the initial equipment cost as
a fee, and reimburse any commissions paid to outside independent brokers.
Walnut will reduce the purchase price by the amount of any funds received
through advance rentals, prepayments, or security deposits received from the
lessee of the equipment prior to the assignment of the lease and transfer of
title to the Company. ELCOA's primary business purpose differs from Walnut in
that ELCOA was formed to finance a portfolio of lease contracts and equipment
while Walnut is primarily engaged in the business of originating, selling, and
servicing equipment lease contracts.
Under a Servicing Agreement dated May 23, 1986, (the "Agreement"), Walnut
performs all invoicing, collection, processing and other administrative
functions relating to all rentals received on the Company's behalf. In
consideration for these services, the Company pays Walnut a monthly servicing
fee of $6.50 for each lease account administered which is outstanding at the
end of each calendar month. Walnut also retains any late charges collected
under terms of the leases to reimburse it for its legal costs associated with
collecting delinquent lease balances. Walnut does not guarantee, either
conditionally or unconditionally, the collectibility of rentals due from the
lessees. In addition, the Company pays Walnut $500 weekly to perform all
routine bookkeeping and accounting functions. Management believes these
transactions are on terms at least as favorable as those that the Company would
receive from unrelated parties, based on a comparison of the servicing and
administrative fees charged by non-related lease servicers.
ITEM 2. PROPERTIES
ELCOA leases office space and conference room facilities at 501 Silverside
Road, Wilmington, Delaware. The lease for this space terminates on August 31,
1996, has been renewed for an additional one year term, and may be extended
beyond that date on a month to month basis with 60 days notice by either
landlord or tenant required to terminate it.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not required in accordance with General Instruction I to Form 10-K.
1
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
None.
ITEM 6. SELECTED FINANCIAL DATA
Not required in accordance with General Instruction I to Form 10-K.
ITEM 7. MANAGEMENT'S NARRATIVE DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE YEARS ENDED APRIL 30, 1996
Management's discussion and analysis of financial condition and results of
operations should be read in conjunction with ELCOA's financial statements and
notes thereto appearing elsewhere herein. As regards transactions with
affiliates, see Note 8 to the Financial Statements.
ELCOA began operations on May 23, 1986 by the assignment of approximately
$1,000,000 in equipment and related leases from Walnut in exchange for all of
ELCOA's outstanding common stock. During the fiscal years ended April 30,
1996, 1995, and 1994, new equipment purchases for lease were $6,561,611,
$7,321,620, and $6,680,452, with earned revenues recognized from direct
finance leases totaling $2,610,450, $2,945,151, and $3,009,864, respectively.
Revenues decreased during the fiscal years ended April 30, 1996 and 1995 as a
result of the decrease in new leases generated during the year and a reduction
in the amount of leases outstanding in comparison to the prior year. During
the three fiscal years ended April 30, 1996 the Company's cost of operations
were funded from rentals collected. The increase in cash during the fiscal
year ended 1996 was attributed to a decrease in equipment purchases. Cash
increased during fiscal years ended 1995 and 1994 as a result of increased
sales of debt securities.
Lease origination expenses, which represent fees incurred in the
acquisition of new lease receivables from Walnut, are 4% of the equipment
costs acquired by ELCOA from Walnut, plus any commissions paid to vendors.
Such expenses were capitalized during the fiscal years ended April 30, 1996,
1995 and 1994, respectively. See Footnote 1 to the Financial Statements for a
discussion of Financial Accounting Standards Board Statement No. 91 and its
impact on operations, and for a discussion regarding the expenditures for
lease origination expenses for the years ended April 30, 1996, 1995 and 1994.
For the fiscal years ended April 30, 1996, 1995, and 1994, ELCOA incurred
$972,678, $1,054,460, and $1,031,825 in general and administrative expenses,
respectively. Monthly servicing and bookkeeping fees paid to Walnut in the
amounts of $592,638, $676,228, and $704,522, respectively, were a primary
component of general and administrative expenses. The $83,590 decrease from
the fiscal year ending April 30, 1995 in comparison to the fiscal year ending
April 30, 1996 is attributable to a reduction in the amount of finance leases
outstanding (6,644 at April 30, 1996 from 7,964 at April 30, 1995). This
decrease corresponds to the $81,782 or 7.8% overall reduction in general and
administration expenses. Also included in the general and administrative
2
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expenses were $241,323, $247,561, and $188,209, respectively, of amortization
of the deferred debt registration and solicitation expenses, including
commissions paid on account of sales of Demand and Fixed Rate, Certificates
(the "Debentures" or "Certificates"). Fees paid to Financial Data, Inc., a
registered transfer agent and affiliate of the Company, for transfer agent
services rendered in connection with the Demand, Fixed Rate, and previously
issued Money Market Thrift Certificates, were $106,589, $99,595, and $105,334
for the fiscal years ended April 30, 1996, 1995, and 1994, respectively. See
also Footnote 8 to the Financial Statements appearing herein. In the event
that Walnut should cease operations or be unable to fulfill its obligations in
originating and servicing of ELCOA's leases, ELCOA's costs to perform these
services from unaffiliated parties might increase, further increasing the
operating loss as reported.
An allowance for doubtful direct finance lease receivables is maintained
at a level management considers adequate to provide for estimated losses that
will be incurred in the collection of these receivables. The allowance is
increased by provisions charged to operating expenses and reduced by
chargeoffs. ELCOA recorded provisions for doubtful lease receivables of
$957,063, $1,057,634, and $613,907 for the fiscal years ended April 30, 1996,
1995, and 1994, respectively, resulting from increases in the aggregate amount
of lease receivables, equipment on lease, or delinquent accounts during these
fiscal years. During the twelve month period ended April 30, 1995, ELCOA
conducted an extensive review of the collectibility of all past due accounts,
and increased the amount of write-offs in those situations where further legal
costs in pursuit of collection were considered to be unwarranted. This
resulted in an extraordinary level of write-offs of older delinquent accounts
during the fiscal year ended April 30, 1995. Write-offs were reduced by
$525,229 or 41.8% during the current fiscal year ended April 30, 1996. ELCOA
believes that its loss experience and delinquency rate are reasonable for its
operations. ELCOA's rates charged on its leases tend to be higher than
industry averages due to the relative lack of competition in small-ticket
leasing. The higher rates are intended to offset the increased credit risks
and processing costs associated with small-ticket leases. Although ELCOA's
loss experience over the past five years measured as a percentage of net
charge-offs to average lease receivables outstanding is consistent with
industry averages, its delinquency rate is higher than industry averages
because of its market, i.e. primarily small to medium sized businesses. In
addition, delinquent receivable balances which are reported on a contractual
basis appear higher than industry average because of ELCOA's decision to
pursue delinquent lessees until all collection efforts have been completely
exhausted.
During the fiscal years ended April 30, 1996, 1995, and 1994, ELCOA
incurred $2,399,018, $2,056,162, and $1,937,063, in interest expense,
respectively, on average debt (including accrued interest thereon) of
$28,442,700, $25,258,751, and $22,287,797, respectively, based upon the
amounts of debt outstanding computed on a quarterly basis. Average interest
rates on average outstanding debt, including accrued interest, but excluding
income from interest on excess funds in the amounts of $1,016,596, $741,671,
and $374,025, respectively, were 8.4%, 8.1%, and 8.6%, respectively, during
these periods. Management attributes its current losses in large part to the
differential in rates it paid on its excess cash balances in relation to
interest income earned from these funds while awaiting investment in new
leases. During fiscal 1996 and 1995, excess funds were invested in short-term
U.S. Treasury bills with maturities of three months or less, yielding higher
3
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returns than those previously invested at bank money-market rates. Management
made an effort to decrease Certificate sales during fiscal 1996 in an effort
to minimize the creation of additional excess cash. As new lease volume
increases, ELCOA will utilize excess cash to fund new equipment purchases.
Total debt includes all of the outstanding Demand, Fixed Rate, and Money
Market Thrift Certificates issued by ELCOA, and accrued interest thereon.
During the fiscal years ended April 30, 1996, 1995, and 1994, ELCOA
recognized provisions for state income taxes in the amounts of $0, $360, and
$0, respectively, on its net income (loss). No provisions for federal income
taxes were necessary, as a result of the benefit of Walnut's net operating
loss carryforwards.
ELCOA's revenue is set at the time a given lease contract is executed.
Consequently, inflation is not expected to impact revenue subsequent to the
inception of any given lease. In addition, inflation does not have a material
effect on ELCOA's operating expenses as they are fixed based upon the
Agreement with Walnut.
As noted in the Statements of Cash Flows on page 11, sales of Demand and
Fixed Rate Certificates increased between fiscal years ended April 30, 1994
and 1995 then decreased during the current fiscal year ended April 30, 1996.
The $1,363,184 or 12.4% reduction in proceeds during the current year resulted
from management's efforts to reduce the solicitation of certificate sales in
light of the Company's excess cash. The $538,384 or 6.5% decrease in
certificate redemptions during the fiscal year ended April 30, 1996 is
attributable to a slight decrease in market rates in general. Under ELCOA's
trust indenture agreement, rates were unable to drop accordingly, thereby
making the rate on ELCOA certificates more attractive. In the event that
future redemptions of Certificates exceed future sales of the Certificates to
be offered, ELCOA may utilize its excess cash to repay such borrowings. ELCOA
believes that it has sufficient cash resources to meet its normal operating
requirements during the fiscal year ending April 30, 1997.
To the extent that ELCOA is able to obtain funds either through future
sales of Certificates or from other sources at fixed interest rates, inflation
will have no impact over the term of any given borrowing. However, to the
extent that the borrowings would be at variable interest rates, inflation may
have a significant adverse impact on ELCOA's operations through increased
costs of borrowing. The increased reliance on variable rate borrowings
resulting from sales of the Certificates subjects ELCOA to increased exposure
to inflation because of the risk of increased interest rates. Inflation has
not had any material effect on ELCOA's operations and financial conditions
during the three fiscal years ended April 30, 1996.
4
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<TABLE>
<CAPTION>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements. Page
----
<S> <C>
Independent Auditor's Report. 6-7
Balance Sheets as of April 30, 1996 and 1995. 8-9
Statements of Operations for the years ended April 30, 10
1996, 1995 and 1994.
Statement of Changes in Shareholder's Equity (Deficit) for
the years ended April 30, 1996, 1995 and 1994. 11
Statements of Cash Flows for the years ended April 12-13
30, 1996 and 1995, and 1994.
Notes to Financial Statements 14
</TABLE>
See Item 14 on page 22 for Index of Financial Statement Schedules
5
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INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholder
of Equipment Leasing Corporation of America
We have audited the accompanying balance sheets of Equipment Leasing
Corporation of America (a wholly-owned subsidiary of Walnut Equipment Leasing
Co., Inc.) as of April 30, 1996 and 1995 and the related statements of
operations, changes in shareholder's equity and cash flows for each of the
three years in the period ended April 30, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
The accompanying financial statements have been prepared from the separate
records maintained by Equipment Leasing Corporation of America. However,
these may not necessarily be indicative of the financial condition that would
have existed or the results of operations if the Company had been operated as
an unaffiliated entity. As discussed in Note 8 to the financial statements,
certain expenses represent allocations made from or transactions with related
parties.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Equipment Leasing Corporation
of America as of April 30, 1996 and 1995 and the results of its operations and
its cash flows for each of the three years in the period ended April 30, 1996
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Equipment Leasing Corporation of America will continue as a going concern, and
accordingly, contemplate the realization of assets and liquidation of
liabilities in the ordinary course of business. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses. In addition,
our opinion dated July 1, 1996 on the consolidated financial statements of
Walnut Equipment Leasing Co., Inc. (parent of the company) and subsidiaries
contained an explanatory paragraph which discussed the substantial doubt about
Walnut Equipment Leasing Co., Inc.'s ability to continue as a going concern
which raises an uncertainty as to the realization of the receivable from its
parent company. These uncertainties raise substantial doubt about the
entity's ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 1. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
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As described in Note 9 to the financial statements, Equipment Leasing
Corporation of America has restated the above mentioned financial statements
for information previously available which was not used in estimating the
allowance for doubtful lease receivables.
/s/ Cogen Sklar LLP
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
July 1, 1996, except for Note 9
as to which the date is
December 20, 1996
7
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<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(a Wholly-Owned Subsidiary of
Walnut Equipment Leasing Co., Inc.)
BALANCE SHEETS
-----------------
<CAPTION>
(Restated)
As of April 30,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Direct finance leases:
Aggregate future amounts
receivable under lease
contracts $16,667,226 $17,267,612
Estimated residual value
of equipment 1,577,174 1,831,613
Initial direct costs, net 393,897 414,426
Less:
Unearned income under
lease contracts ( 3,347,395) ( 3,587,139)
----------- -----------
15,290,902 15,926,512
Advance payments ( 516,658) ( 528,314)
----------- -----------
14,774,244 15,398,198
Allowance for doubtful
lease receivables ( 1,751,521) ( 1,526,287)
----------- -----------
13,022,723 13,871,911
Due from parent 6,078,559 3,991,986
Cash and cash equivalents 9,260,482 8,908,798
Other assets(includes $336,392 and
$331,180 paid to related parties) 452,783 423,511
----------- -----------
TOTAL ASSETS $28,814,547 $27,196,206
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES
8
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<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(a Wholly-Owned Subsidiary of
Walnut Equipment Leasing Co., Inc.)
BALANCE SHEETS - (continued)
-----------------
<CAPTION>
(Restated)
As of April 30,
1996 1995
----------- -----------
<S> <C> <C>
LIABILITIES
Amounts payable to
equipment suppliers $ 8,749 $ 8,749
Accrued expenses and
security deposits 65,809 72,289
Demand, Fixed Rate, and
Money Market Thrift
Certificates(includes $183,805
and $174,907 held by
related parties) 26,407,959 24,521,875
Accrued interest 2,767,158 2,326,708
----------- -----------
29,249,675 26,929,621
----------- -----------
SHAREHOLDER'S EQUITY (DEFICIT)
Common Stock $1 par value,
1,000 shares authorized,
issued and outstanding 1,000 1,000
Variable Rate Cumulative
Prefered Stock, Series A, $1
par value, 50,000 shares
authorized, none issued --- ---
Additional paid - in capital 999,000 999,000
Accumulated Deficit ( 1,435,128) ( 733,415)
----------- -----------
( 435,128) 266,585
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY (DEFICIT)$28,814,547 $27,196,206
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES
9
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<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(A Wholly-Owned Subsidiary of
Walnut Equipment Leasing Co., Inc.)
STATEMENTS OF OPERATIONS
--------------------------------
<CAPTION>
(Restated)
For the Years Ended April 30,
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Income earned under
direct finance lease
contracts $2,610,450 $2,945,151 $3,009,864
---------- ---------- ----------
Costs and expenses:
Interest expense, net of
interest income of $1,016,596,
$741,671 and $374,025,
respectively 1,382,422 1,314,491 1,563,038
General and administrative
expenses (includes
$881,382, $946,465 and $934,695,
respectively, paid to related
parties) 972,678 1,054,460 1,031,825
Provision for doubtful
lease receivables 957,063 1,057,634 613,907
---------- ---------- ----------
Total costs and expenses 3,312,163 3,426,585 3,208,770
---------- ---------- ----------
Loss before provision
for state income taxes (701,713) (481,434) (198,906)
Provision for state income taxes --- 360 ---
---------- ---------- ----------
Net Loss $( 701,713) $( 481,794) $( 198,906)
========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES
10
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<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(A Wholly-Owned Subsidiary of
Walnut Equipment Leasing Co., Inc.)
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (DEFICIT)
(Restated)
<CAPTION>
Common Stock
($1.00 Par Value)
1,000 shares
Authorized Additional Total
No. of shares Paid-In Accumulated Shareholder's
Issued Amount Capital Deficit Equity(Deficit)
---------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Balance,
April 30,
1993, previously
reported 1,000 $1,000 $999,000 $ (764,371) $1,764,371
Prior Year effect of
restatement of
provision for doubtful
lease receivables --- --- --- (817,086) (817,086)
----- ------ ------- ---------- ---------
Balance, May 1, 1993,
as restated 1,000 1,000 999,000 (52,715) 947,285
Net Loss for
the year ended
April 30, 1994 --- --- --- (198,906) (198,906)
----- ----- ------- ---------- ---------
Balance,
April 30, 1994 1,000 1,000 999,000 (251,621) (748,379)
Net Loss for the
year ended
April 30, 1995 --- --- --- (481,794) (481,794)
----- ------ -------- ---------- ---------
Balance,
April 30, 1995 1,000 1,000 999,000 (733,415) 266,585
Net Loss for
the year ended
April 30, 1996 --- --- --- (701,713) (701,713)
----- ------ -------- --------- ---------
Balance,
April 30, 1996 1,000 $1,000 $999,000 $(1,435,128) $ (435,128)
===== ====== ======== ============ ===========
</TABLE>
SEE ACCOMPANYING NOTES
11
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<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF
WALNUT EQUIPMENT LEASING CO., INC.)
STATEMENTS OF CASH FLOWS
-------------------
<CAPTION>
(Restated)
For the Years Ended April 30,
1996 1995 1994
---------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss $(701,713) $(481,794) $(198,906)
Adjustments to reconcile
net loss to net cash
provided by operating activites:
Amortization of
deferred debt expenses 241,323 247,561 188,209
Provision for doubtful
lease receivables 957,063 1,057,634 613,907
Effects of Changes
in other operating items:
Accrued expenses ( 6,480) (26,820) (22,691)
Accrued interest 440,450 232,378 422,646
Other assets (net) (270,595) (232,922) (252,895)
---------- ----------- -----------
Net cash provided by
operating activities 660,048 796,037 750,270
---------- ----------- -----------
INVESTING ACTIVITIES
Excess of cash received
over lease income recorded 6,263,312 6,447,111 6,207,106
Increase in
advance payments 190,424 179,692 119,765
Purchase of equipment
for direct finance leases (6,561,611) (7,321,620) (6,680,452)
---------- ----------- -----------
Net cash used in
investing activities $(107,875) $(694,817) $(353,581)
---------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES
12
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<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF
WALNUT EQUIPMENT LEASING CO., INC.)
STATEMENTS OF CASH FLOWS - (continued)
-------------------
<CAPTION>
(Restated)
For the Years Ended April 30,
1996 1995 1994
---------- ----------- -----------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuance
of Demand and Fixed Rate
Certificates $9,620,233 $10,983,417 $9,267,808
Net advances to parent (2,086,573) (1,491,170) (840,810)
Redemption of Demand, Fixed
Rate, and Money Market
Thrift Certificates (7,734,149) (8,272,533) (5,498,321)
---------- ----------- ----------
Net cash provided by (used in)
financing activities (200,489) 1,219,714 2,928,677
---------- ----------- ----------
Increase in
Cash and Cash Equivalents 351,684 1,320,934 3,325,366
Cash and Cash Equivalents,
Beginning of Year 8,908,798 7,587,864 4,262,498
Cash and Cash Equivalents, ---------- ----------- ----------
End of Year $9,260,482 $8,908,798 $7,587,864
========== =========== ==========
</TABLE>
SEE ACCOMPANYING NOTES
13
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EQUIPMENT LEASING CORPORATION OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF
WALNUT EQUIPMENT LEASING CO., INC.)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND NATURE OF OPERATIONS:
Equipment Leasing Corporation of America ("ELCOA") was incorporated as a
Delaware corporation on May 6, 1986 and commenced operations on May 23, 1986.
ELCOA is a wholly-owned subsidiary of Walnut Equipment Leasing Co., Inc.
("WALNUT"), a Delaware corporation. ELCOA was formed primarily to purchase
general commercial equipment for lease throughout the United States, utilizing
the proceeds of sale of certain debentures referred to as "Demand, Fixed Rate,
or Money Market Thrift Certificates." See Note 6.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements of the Company have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. Acccordingly, the financial
statements do not include any adjustments relating to the recoverability of
recorded assets, or the amount of liabilities that many be necessary should the
Company be unable to continue in the normal course of business.
During the years ended April 30, 1996, 1995 and 1994, the Company incurred
losses of $701,713, $481,794 and $198,906, respectively, and reported
accumulated deficits of $1,435,128 and $733,415 at April 30, 1996 and 1995,
respectively. The independent auditor's report for Walnut for each of the
three years ended April 30, 1996 contained an explanatory paragraph which
indicated that Walnut has suffered recurring losses from operations and has a
shareholder's deficit that raise substantial doubt about that entity's ability
to continue as a going concern. As a result of the transactions between the
Company and Walnut in the ordinary course of business, including but not
limited to advances to Walnut for future purchases of equipment for lease, a
receivable from Walnut is reflected on the Company's balance sheet. Walnut's
ability to continue as a going concern raises an uncertainty as to the
realization of the Company's receivable from its parent company.
The management of Walnut has initiated certain measures to refine its
marketing strategy during the fiscal year ended April 30, 1996 that it believes
may result in an increase in the levels of new leases to be generated in the
future. Walnut must increase the level of new leases and control its costs of
lease origination and administration in order to reduce its operating expenses
to continue as a going concern.
Management believes that should Walnut cease operations or be unable to
fulfill its obligations in the organization and servicing of the Company's
leases, that the Company could purchase leases of similar term and cost from
outside sources and could service its leases by contracting with outside
entities. In addition, the Company has financed, and anticipates that it will
continue to finance its new business primarily from the proceeds its sale of
14
<PAGE>
<PAGE>16
EQUIPMENT LEASING CORPORATION OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF
WALNUT EQUIPMENT LEASING CO., INC.)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
certificates, as well as from rentals received from lease contracts
outstanding. Management believes that its cash flow through the sale of
securities, anticipated renewal of existing indebtedness and collections from
outstanding lease receivables will be adequate to meet operating needs during
the ensuing year.
LEASE ACCOUNTING:
ELCOA is in the business of leasing commercial equipment which is
specifically acquired for each lease. For financial reporting purposes, ELCOA
primarily uses the direct financing method and records at the inception of the
lease (a) the estimated unguaranteed residual value of the leased equipment and
the aggregate amount of rentals due under the lease as the gross investment in
the lease and (b) the unearned income arising from the lease, represented by
the excess of (a) over the cost of the leased equipment. The unearned income
is recognized as income over the term of the lease on the effective (or
interest) method in accordance with the requirements of Statement of Financial
Accounting Standards No. 91 "Accounting for Non Refundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases" ("SFAS 91"). In addition, under this method a portion of the initial
direct costs as defined by SFAS 91 ($252,370, $281,531, and $256,940 for the
years ended April 30, 1996, 1995 and 1994, respectively) are accounted for as
part of the Investment in Direct Financing Leases. These expenses are 4% of
the original equipment cost. Unearned income is earned and initial direct
costs are amortized to reduce income using the effective method over the terms
of each respective lease.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's
knowledge of current events and actions it may undertake in the future, they
may ultimately differ from actual results.
ESTIMATED RESIDUAL VALUES OF EQUIPMENT UNDER DIRECT FINANCE LEASES:
ELCOA generally offers an option to purchase the leased equipment upon
expiration of the lease term at its then fair market value (usually not less
than 10% of the original equipment cost). Residual value of this equipment is
generally established at the purchase option price offered.
15
<PAGE>
<PAGE>17
EQUIPMENT LEASING CORPORATION OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF
WALNUT EQUIPMENT LEASING CO., INC.)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
ALLOWANCE FOR DOUBTFUL LEASE RECEIVABLES:
An allowance for doubtful direct finance lease receivables is maintained at
a level considered adequate to provide for estimated losses that will be
incurred in the collection of delinquent lease receivables. The allowance is
increased by provisions charged to operating expense and reduced by charge-offs
based upon a periodic evaluation, performed at least quarterly, of delinquent
finance lease receivables. Charge-offs totaled $731,829, $1,257,058, $496,088
for the years ended April 30, 1996, 1995 and 1994, respectively.
INCOME TAXES:
ELCOA computes and records income taxes currently payable based upon the
determination of taxable income using the "operating method" for all leases,
which is different from the method used for financial statement purposes (as
described above). Under the "operating method", ELCOA reports as income the
amount of rentals received and deducts the appropriate amount of depreciation
of the equipment over its estimated useful life.
The Company utilizes an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually for differences between the financial
statement and tax bases of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense
is the tax payable or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities.
The net deferred tax asset as of April 30, 1996 and 1995 includes deferred
tax assets (liabilities) attributable to the following temporary deductible
(taxable) differences:
16
<PAGE>
<PAGE>18
EQUIPMENT LEASING CORPORATION OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF
WALNUT EQUIPMENT LEASING CO. INC.)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Operating lease method vs.
direct financing method $1,467,000 $1,576,000
Provisions for doubtful
lease receivables 472,000 341,000
Other (32,000) (34,000)
---------- ----------
Net deferred tax asset 1,907,000 1,883,000
Valuation allowance (1,907,000) (1,883,000)
---------- ----------
Net deferred tax asset
after valuation allowance $ --- $ ---
========== ==========
</TABLE>
A valuation allowance was considered necessary since it is more likely
than not that the Company will not realize the tax benefits of the deductible
differences. There was no cumulative effect on income for prior years upon
the adoption of SFAS 109, for the year ended April 30, 1995 since there was no
existing deferred tax asset as of May 1, 1994.
The Company will be included in the consolidated federal income tax return
of its parent, Walnut Equipment Leasing Co., Inc.. Based on a tax allocation
agreement, current federal taxes otherwise refundable (payable) under a
separate company computation will be received from (paid to) its parent.
For the fiscal years ended April 30, 1996, 1995 and 1994 there was no
provision for either current or deferred federal income taxes.
CASH FLOW STATEMENTS:
The Company considers cash invested in short-term, highly liquid
investments with original maturities of three months or less to be cash
equivalents. At April 30, 1996 and 1995, cash equivalents consisting of U.S.
Government Securities amounted to $8,098,999 and 6,349,693, respectively. The
company had no cash equivalents at April 30, 1994. Amounts paid for interest
for the fiscal years ended April 30, 1996, 1995 and 1994 were $1,996,122,
$1,898,734, and $1,549,217, respectively. Amounts paid for income taxes for
the fiscal years ended April 30, 1996, 1995, and 1994 were $0, $0, and $411,
respectively.
17
<PAGE>
<PAGE>19
EQUIPMENT LEASING CORPORATION OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF
WALNUT EQUIPMENT LEASING CO., INC.)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
CONCENTRATION OF CREDIT RISK:
The concentration of credit risk is limited since the Company's small
ticket lease portfolio varies widely as to the diversity of equipment types,
lessees, and geographic location.
2. AGGREGATE FUTURE AMOUNTS RECEIVABLE UNDER LEASE CONTRACTS:
Receivables under direct finance lease contracts at April 30, 1996 are due as
follows:
<TABLE>
<CAPTION>
Year ending
April 30, Amount
----------- -----------
<S> <C>
1997 $ 9,133,987
1998 4,700,261
1999 2,110,727
2000 528,198
2001 & beyond 194,053
-----------
$16,667,226
===========
</TABLE>
3. OTHER ASSETS:
Other assets of $452,783 and $423,511 at April 30, 1996 and 1995,
respectively, include $452,495 and $423,223 in deferred expenses, net of
accumulated amortization, representing costs directly related to ELCOA's
registration and sale of Demand, Fixed Rate, and Money Market Thrift
Certificates. Such expenses are being amortized on a straight-line basis over
the estimated average lives of the debt issued, and to be issued under the
registration statement. Amortization of deferred expenses charged to income
during the years ended April 30, 1996, 1995 and 1994, were $241,323, $247,561,
and $188,209, respectively, which includes commissions paid for sale of these
certificates.
4. AMOUNTS PAYABLE TO EQUIPMENT SUPPLIERS
Amounts payable to equipment suppliers in the amount of $8,749 as of April
30, 1996 and 1995 represents holdbacks from suppliers of equipment as
additional security for performance by the underlying lessee on the related
lease contract, and are payable at the termination of the contracts based upon
the lessee's compliance with terms of the lease contract.
18
<PAGE>
<PAGE>20
EQUIPMENT LEASING CORPORATION OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF
WALNUT EQUIPMENT LEASING CO., INC.)
NOTES TO FINANCIAL STATEMENTS
5. INCOME TAXES
ELCOA will file a consolidated Federal income tax return with its parent,
Walnut. ELCOA has made no provision for Federal income tax expense for the
years ended April 30, 1996, 1995 and 1994 due to the benefit of Walnut's net
operating loss carryforwards.
ELCOA has provided for $0, $360, and $0 in state income tax expense for the
fiscal years ended April 30, 1996, 1995 and 1994, respectively.
6. DEMAND, FIXED RATE, AND MONEY MARKET THRIFT CERTIFICATES
The Demand, Fixed Rate, and Money Market Thrift Certificates outstanding at
April 30, 1996 bear interest at rates ranging from 7.0% to 12.75%, and are due
as follows:
<TABLE>
<CAPTION>
Year ending
April 30, Amount
----------- -----------
<S> <C>
1997 $15,203,974
1998 3,934,697
1999 2,815,391
2000 1,759,532
2001 & beyond 2,694,365
-----------
$26,407,959
===========
</TABLE>
Included in the amounts due in the year ended April 30, 1997 are $1,331,985
of certificates payable on demand. The accrued interest of $2,767,158 at April
30, 1996 is payable upon demand.
7. CAPITALIZATION
On May 23, 1986, ELCOA issued all of its authorized shares of common stock
(1,000 shares, $1.00 par value per share) in exchange for certain lease assets
from Walnut. These shares are fully paid and nonassessable. ELCOA has also
authorized the issuance of 50,000 shares of preferred stock, $1.00 par value.
At April 30, 1996, no shares of preferred stock have been issued.
8. TRANSACTIONS WITH RELATED PARTIES
Welco Securities, Inc. ("Welco"), a registered broker/dealer and affiliate
of ELCOA, has been engaged as underwriter to sell certain debt securities to
the public. Under the terms of the agreement with Welco, ELCOA pays a
commission to Welco of between 0.2% and 8.0% of the sale price of securities
sold by Welco on ELCOA's behalf, depending upon the term of each cerificate
sold. ELCOA also reimburses Welco for its out-of-pocket costs associated with
19
<PAGE>
<PAGE>21
EQUIPMENT LEASING CORPORATION OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF
WALNUT EQUIPMENT LEASING CO., INC.)
NOTES TO FINANCIAL STATEMENTS
8. TRANSACTIONS WITH RELATED PARTIES (Continued)
the offering of these securities. ELCOA amortizes the commissions paid to
Welco over the term of the certificates. Reimbursements for costs and
commissions paid to Welco for the years ended April 30, 1996, 1995 and 1994,
were $182,155, $170,642, and $165,581, respectively.
Outstanding Demand, Fixed Rate, and Money Market Thrift Certificates
including accrued interest, held by the President, members of his family or
companies in which he is the majority shareholder were $192,264 and $181,921 at
April 30, 1996 and 1995, respectively.
Walnut, ELCOA's parent, has been engaged to perform certain lease
origination functions (i.e. marketing, credit investigation, and documentation
processing) on behalf of ELCOA, for which it will be paid an amount equal to
four percent (4%) of the gross equipment purchased by ELCOA for lease. See
Footnote 1 to the Financial Statements. Since ELCOA has the right of selecting
which leases it is willing to purchase from Walnut, it has not given Walnut the
pre-approved authority to secure leases on its behalf. During the fiscal years
ended April 30, 1996, 1995, and 1994 these origination costs totaled $252,370,
$281,531, and $256,940, respectively, which includes reimbursement for
commissions paid to outside lease brokers. During the years ended April 30,
1996, 1995, and 1994, these costs were capitalized in accordance with SFAS No.
91. In addition, Walnut receives $6.50 per month per outstanding lease for
performing certain administrative functions for ELCOA, mainly, invoicing of
monthly rentals, collection of lease receivables and residual values,
management guidance, personnel, financing, and the furnishing of office and
computer facilities. Walnut also retains any late charges assessed delinquent
lessees as reimbursement for the legal costs of collection. ELCOA also pays
Walnut $500 per week for routine bookkeeping functions performed on ELCOA's
behalf. Servicing fees and bookeeping charges paid Walnut for the years ended
April 30, 1996, 1995 and 1994, were $592,638, $676,228, and $704,522,
respectively. As of April 30, 1996, the amount due ELCOA by Walnut of
$6,078,559 represents funds previously advanced mainly intended for the
purchase of equipment for lease subsequent to April 30, 1996. Walnut has
agreed to pay interest on these outstanding advances, at the prime rate of
interest plus 2%, which amounted to $536,334, $365,438, and $207,231 for the
fiscal years ended April 30, 1996, 1995 and 1994, respectively.
The law firm of William Shapiro, Esq., P.C. has been engaged by Walnut
Equipment Leasing Co., Inc. to collect overdue delinquent receivables 90 days
or longer in arrears, on a contingency basis, and was reimbursed by Walnut for
costs and expenses incurred in these efforts. No expenses were incurred by
ELCOA during the fiscal years ended April 30, 1996, 1995, and 1994. Under
terms of the servicing agreement between Walnut and ELCOA, Walnut retained late
charges in the approximate amounts of $388,000, $390,000, and $368,000 for the
three fiscal years ended April 30, 1996, 1995 and 1994, respectively, to offset
Walnut's contracted obligation for collection and litigation costs paid or
incurred on ELCOA's behalf. Neither Kenneth nor William Shapiro, attorneys
associated with the firm, received any compensation for services rendered by
20
<PAGE>
<PAGE>22
the law firm nor does the law firm report any net income from these activities.
For the three fiscal years ended April 30, 1996, the relationship between
amounts recovered by the law firm from delinquent lease receivables (on a
consolidated basis for Walnut and ELCOA) and the costs paid the law firm by
Walnut to reimburse it for these efforts was as follows:
For The Three Fiscal Years Ended April 30,
------------------------------------------
1996 1995 1994
---------- ---------- ----------
Amounts Collected and Remitted
by The Law Firm from Delinquent
Lease Receivables $1,508,000 $1,379,000 $1,626,000
- -------------------------------------------------------------------------------
Amounts Paid to the Law Firm by
Walnut For Legal Collection Efforts $ 407,160 $ 354,783 $ 342,186
Financial Data, Inc., a registered transfer agent and affiliate of ELCOA,
performs all transfer agent duties and disburses all interest payments on
behalf of ELCOA. Financial Data, Inc., is paid monthly, pursuant to its
agreement with ELCOA, an amount equal to $2.00 per certificate holder per
month, along with $1.00 per each certificate issued or redeemed during the
month, or a minimum monthly charge of $1,000, whichever is greater. Prior to
January 1, 1994, the charges were $2.50 monthly per account, and $2.00 per
certificate issued or redeemed. For the years ended April 30, 1996, 1995 and
1994, these expenses totaled $106,589, $99,595, and $105,334, respectively.
9. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Subsequent to the issuance of ELCOA's financial statements for the fiscal
year ended April 30, 1996, ELCOA established certain objective criteria by
which the allowance for doubtful lease receivables at April 30, 1996 and for
subsequent periods could be determined. Although this information was
previously available, it was not used in estimating the original allowance for
doubtful lease receivables at the end of the previous fiscal reporting periods.
Accordingly, the previously reported financial statements for the fiscal years
ended April 30, 1996, 1995 and 1994 have been restated as follows:
For the Fiscal Years Ended April 30,
1996 1995 1994
---- ---- ----
Net Loss as Previously Reported $(712,621) $(654,005) $(292,161)
Effect of Restatement for
provision for doubtful lease
receivables 10,908 172,211 93,255
--------- --------- ---------
Net Loss as Restated $(701,713) $(481,794) $(198,906)
========= ========= =========
As a result of this restatement, beginning Retained Earnings as originally
reported at April 30, 1993 of $764,371 has been restated to reflect an
adjustment of $817,086 resulting in a restated Accumulated Deficit of $52,715.
21
<PAGE>
<PAGE>23
Part II (continued)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Not required in accordance with General Instruction I to Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Not required in accordance with General Instruction I to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Not required in accordance with General Instruction I to Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not required in accordance with General Instruction I to Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 10-K
a) 1. FINANCIAL STATEMENTS
<TABLE>
Included in Part II of this report:
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Reports 6-7
Balance Sheets 8-9
Statements of Operations 10
Statement of Changes in Shareholder's Equity (Deficit) 11
Statements of Cash Flows 12-13
Notes to Financial Statements 14
2. FINANCIAL STATEMENT SCHEDULE
(a) Report on Schedule. 27
(b) Schedule VIII - Valuation and Qualifying Accounts. 28
</TABLE>
22
<PAGE>
<PAGE>24
All other schedules for which provisions are made in the applicable
regulation of the Securities and Exchange Commission have been omitted because
they are not required under the related instructions or are inapplicable.
3. EXHIBITS
3.1 - Articles of Incorporation, incorporated by reference to Exhibit 3.1
to Form 10-K filed by the registrant for the period ended April 30,
1987 (File No. 33-6259, Filed On July 28, 1987.)
3.2 - By-Laws, as amended, incorporated by reference to Exhibit 3.2 to
Registrant's Registration Statement on Form S-1. (File No. 33-6259,
Filed on June 6, 1986.)
4.1 - Specimen of Variable Rate Money Market Demand Thrift Certificate,
incorporated by reference to Exhibit 4.1 to Registrant's
Registration Statement on Form S-1. (File No. 33-6259; Filed on
September 26, 1986).
4.2 - Specimen of Fixed Term Money Market Thrift Certificate,
incorporated by reference to Exhibit 4.2 to Registrant's
Registration Statement on Form S-1. (File No. 33-6259; Filed on
September 26, 1986).
4.3 - Trust Indenture between Registrant and First Valley Bank, Trustee,
dated as of August 5, 1986 incorporated by reference to Exhibit 4.3
to Registrant's Registration Statement on Form S-1. (File No.
33-6259; Filed August 8, 1986).
4.4 - Specimen of Variable Rate Cumulative Preferred Stock, Series A
Certificate, incorporated by reference to Exhibit 4.4 to
Registrant's Registration Statement on Form S-1. (File No. 33-6259;
Filed June 6, 1986).
4.5 - Certificate of Designation, Relative Rights, Preferences and
Limitations of Variable Rate Cumulative Preferred Stock, Series A,
incorporated by reference to Exhibit 4.5 of Registrant's
Registration Statement on Form S-1. (File No. 33-6259; Filed June
6, 1986).
4.6 - First Supplemental Trust Indenture dated as of September 19, 1986
between Registrant and First Valley Bank, Trustee, incorporated by
reference to Exhibit 4.6 to Registrant's Registration Statement on
Form S-1. (File No. 33-6259; Filed September 26, 1986).
4.7 - Specimen of Variable Rate Money Market Demand Thrift Certificate,
incorporated by reference to Exhibit 4.5 to Registrant's
Registration Statement on Form S-1. (File No. 33-23211; Filed on
July 21, 1988).
4.8 - Specimen of Fixed Term Money Market Thrift Certificate incorporated
by reference to Exhibit 4.6 to Registrant's Registration Statement
on Form S-1. (File No. 33-23211; Filed on July 21, 1988.)
23
<PAGE>
<PAGE>25
4.9 - Second Supplement Trust Indenture dated September 20, 1988 between
Registrant and First Valley Bank, Trustee, incorporated by reference
to Exhibit 4.5 to Registrant's Registration Statement on Form S-1.
(File No. 33-23211 Filed July 21, 1988.)
4.10 - Specimen of Variable Rate Money Market Demand Thrift Certificate
incorporated by reference to Exhibit 4.9 to Registrant's
Registration Statement on Form S-1. (File No. 33-29703; Filed July
10, 1989.)
4.11 - Specimen of Fixed Term Money Market Thrift Certificate, incorporated
by reference to Exhibit 4.16 to Registrant's Registration Statement
on Form S-1 (File No. 33-29703; Filed July 10, 1989.)
4.12 - Third Supplemental Trust Indenture dated as of September 13, 1989
between Registrant and First Valley Bank, Trustee, incorporated by
reference to Exhibit 4.8 to Registrant's Registration Statement on
Form S-1. (File No. 33-29703; Filed July 10, 1989).
4.13 - Fourth Supplemental Trust Indenture dated as of August 17, 1990
between Registrant and First Valley Bank, Trustee, incorporated by
reference to Exhibit 4.11 to Registrant's Registration Statement on
Form S-2. (File No. 33-35664; Filed July 3, 1990).
4.14 - Specimen of Demand Certificate (File No. 33-35664; Filed July 3,
1990).
4.15 - Specimen of Fixed Rate Certificate (File No. 33-35664; Filed July 3,
1990).
4.16 - Fifth Supplemental Trust Indenture dated as of August 18, 1993
between Registrant and First Valley Bank, Bethlehem, Pennsylvania,
Trustee, incorporated by reference to Exhibit 4.14 to Registrant's
Registration Statement on Form S-2. (File No. 33-65814; Filed
August 25, 1993.)
4.17 - Form of Specimen of Demand Certificate; Incorporated by reference to
Exhibit 4.15 to Registrant's Registration Statement on Form S-2.
(File No. 33-65814; Filed July 9, 1993.)
4.18 - Form of Specimen of Fixed Rate Certificate; Incorporated by
reference to Exhibit 4.16 to Registrant's Registration Statement on
Form S-2. (File No. 33-65814; Filed July 9, 1993).
4.19 - Sixth Supplemental Trust Indenture dated as of May 15, 1996, between
Registrant and First Valley Bank, Bethlehem, Pennsylvania, Trustee,
incorporated by reference to Exhibit 4.17 to Registrant's
Registration Statement on Form S-2. (File No. 333-02497; Filed June
4, 1996)
4.20 - Form of Specimen of Demand Certificate; Incorporated by reference to
Exhibit 4.18 to Registrant's Registration Statement on Form S-2.
(File No. 333-02497; Filed April 15, 1996)
24
<PAGE>
<PAGE>26
4.21 - Form of Specimen of Fixed Rate Certificate; Incorporated by
reference to Exhibit 4.19 to Registrant's Registration Statement on
Form S-2. (File No. 333-02497; Filed April 15, 1996)
9. None.
10.1 - Specimen equipment lease agreement incorporated by reference to
Exhibit 10.1 to Registrant's Registration Statement on Form S-1.
(File No. 33-6259; Filed June 6, 1986).
10.2 - Specimen certificate of acceptance from lessee to registrant
incorporated by reference to Exhibit 10.2 to Registrant's
Registration Statement on Form S-1. (File No. 33-6259; Filed June
6, 1986).
10.3 - Specimen form of lessee guarantee incorporated by reference to
Exhibit 10.3 to Registrant's Registration Statement to Form S-1.
(File No. 33-6259; Filed June 6, 1986).
10.4 - Specimen form of Bill of Sale, and assignment for certain equipment
and leases to be purchased by registrant incorporated by reference
to Exhibit 10.4 to Registrant's Registration Statement on Form S-1.
(File No. 33-6259; Filed June 6, 1986).
10.5 - Service Contract dated May 23, 1986 between Walnut Equipment Leasing
Co., Inc. and Registrant incorporated by reference to Exhibit 10.5
to Registrant's Registration Statement on Form S-1. (File No.
33-6259; Filed June 6, 1986).
10.6 - Escrow agreement between Registrant and Walnut Equipment Leasing
Co., Inc. re: Segregation of Funds for the Company's benefit,
incorporated by reference to Exhibit 10.6 to Registrant's
Registration Statement on Form S-1. (File No. 33-6259; Filed June
6, 1986).
10.7 - Option Agreement between Registrant and Walnut Equipment Leasing
Co., Inc. re: right of first refusal for future purchases of
equipment and related leases, incorporated by reference to Exhibit
10.8 to Registrant's Registration Statement on Form S-1. (File No.
33-6259; Filed June 6, 1986).
11. - Inapplicable.
12. - Inapplicable.
13. - Inapplicable.
18. - None.
19. - None.
22. - Inapplicable. See General Instruction I to Form 10K.
23. - None.
25
<PAGE>
<PAGE>27
24. - Inapplicable.
25. - None.
*27.1 - Financial Data Schedule.
28. - None.
29. - Inapplicable.
* Filed with this Form 10-K.
b) Reports on Form 8-K
(1) There were no reports filed on Form 8-K during the three months ended
April 30, 1996.
26
<PAGE>
<PAGE>28
INDEPENDENT AUDITOR'S
REPORT ON FINANCIAL STATEMENT SCHEDULE
In connection with our audits of the financial statements of Equipment
Leasing Corporation of America at April 30, 1996 and 1995 and for each of the
three years in the period ended April 30, 1996, we have also audited the
financial statement schedule included in the Form 10-K as listed in Item
14(a)(2).
In our opinion, the financial statement schedule mentioned above presents
fairly the information required to be stated therein.
/s/ Cogen Sklar LLP
Cogen Sklar LLP
Bala Cynwyd, Pennsylvania
December 20, 1996
27
<PAGE>
<PAGE>29
<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions Deductions
Balance at --------- ----------
Beginning Charged Amounts
of to Costs Written Balance at
Description Period and Expenses Off End of Period
----------- ---------- ------------ -------- -------------
Allowance for Doubtful Lease
Receivables (A)
- ---------------
<S> <C> <C> <C> <C>
For the Fiscal Year
Ended April 30, 1994 $1,607,892 $ 613,907(B) $ 496,088(C) $1,725,711
For the Fiscal
Year Ended April
30, 1995 $1,725,711 $1,057,634(B) $1,257,058(C) $1,526,287
For the Fiscal
Year Ended April
30, 1996 $1,526,287 $ 957,063(B) $ 731,829(C) $1,751,521
<FN>
(A) Represents estimated losses that will be incurred in the collection of
receivables from direct finance leases.
(B) Provisions for estimated losses calculated on the basis of amounts
necessary to provide for anticipated losses on delinquent leases on an
impairment basis.
(C) Write-offs of bad-debts, net of recoveries.
</TABLE>
28
<PAGE>
<PAGE>30
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 as amended to
be duly signed on its behalf by the undersigned, thereunto duly authorized.
/s/ William Shapiro
----------------------------------------
William Shapiro, President
EQUIPMENT LEASING CORPORATION OF AMERICA
Date: December 20, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title
/s/ William Shapiro
- ----------------------- President, Chief Executive,
William Shapiro Financial and Accounting Officer
Date: December 20, 1996
/s/ Kenneth S. Shapiro
- ----------------------- Vice-President
Kenneth S. Shapiro
Date: December 20, 1996
/s/ Lester D. Shapiro
- ----------------------- Secretary, Treasurer
Lester D. Shapiro and Director
Date: December 20, 1996
/s/ Nathan Tattar
- ----------------------- Director
Nathan Tattar
Date: December 20, 1996
/s/ John B. Orr
- ----------------------- Director
John B. Orr
Date: December 20, 1996
/s/ Adam Varrenti, Jr.
- ----------------------- Director
Adam Varrenti, Jr.
Date: December 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR 10-K
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> APR-30-1996
<CASH> 9,260
<SECURITIES> 0
<RECEIVABLES> 16,667
<ALLOWANCES> 1,752
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,815
<CURRENT-LIABILITIES> 0
<BONDS> 26,408
<COMMON> 1,000
0
0
<OTHER-SE> (1,435)
<TOTAL-LIABILITY-AND-EQUITY> 28,815
<SALES> 2,610
<TOTAL-REVENUES> 2,610
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 973
<LOSS-PROVISION> 957
<INTEREST-EXPENSE> 1,382
<INCOME-PRETAX> (702)
<INCOME-TAX> 0
<INCOME-CONTINUING> (702)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (702)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
