<PAGE>
<PAGE>1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended July 31, 1997
-------------
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ............... to .................
Commission File Number: 33-65814
EQUIPMENT LEASING CORPORATION OF AMERICA
----------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2408914
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Suite 76, 501 Silverside Road, Wilmington, Delaware 19809
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(302)-798-2335
--------------
(Toll Free: 1-800-523-5644)
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of August 31, 1997: $1.00 par value common stock - 1,000
shares.
<PAGE>
<PAGE>2
<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(DEBTOR-IN-POSSESSION)
INDEX
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ----------------------------- -----------
<S> <C>
Item 1. Financial Statements
Balance Sheets as of July 31, 1997
(unaudited) and April 30, 1997 1-2
Statements of Operations; For the
Three Months ended July 31, 1997 and 1996
(unaudited) 3
Statement of Changes in Shareholder's Deficit;
For the Three Months ended July 31, 1997 4
(unaudited)
Statements of Cash Flows For the
Three Months ended July 31, 1997 and 1996
(unaudited) 5-6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 13
Item 3. Defaults Upon Senior Securities 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
<PAGE>
<PAGE>3
<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(DEBTOR-IN-POSSESSION)
BALANCE SHEETS
--------------
<CAPTION>
July 31, 1997 April 30, 1997
------------- --------------
<S> <C> <C>
ASSETS
Direct finance leases:
Aggregate future amounts
receivable under lease
contracts $18,615,322 $18,409,854
Estimated residual value
of equipment 1,335,069 1,369,844
Initial direct costs, net 440,188 434,603
Less:
Unearned income under
lease contracts (3,940,976) (3,851,248)
---------- ----------
16,449,603 16,363,053
Advance payments (575,855) (562,777)
---------- ----------
15,873,748 15,800,276
Allowance for doubtful
lease receivables (1,759,324) (1,808,926)
---------- ----------
14,114,424 13,991,350
Cash and cash equivalents 87,270 532,710
Other assets 299 436,208
---------- ----------
TOTAL ASSETS $14,201,993 $14,960,268
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES
1
<PAGE>
<PAGE>4
<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(DEBTOR-IN-POSSESSION)
BALANCE SHEETS - (Continued)
<CAPTION>
July 31, 1997 April 30, 1997
------------- --------------
<S> <C> <C>
LIABILITIES
Amounts payable to
equipment suppliers $ 8,749 $ 8,749
Accrued expenses and
security deposits 81,250 76,317
Demand, Fixed Rate and
Money Market Thrift
Certificates 23,608,078 24,128,483
Accrued interest 3,301,244 2,994,427
---------- ----------
26,999,321 27,207,976
---------- ----------
SHAREHOLDER'S DEFICIT
Common stock $1 par value,
1,000 shares authorized,
issued and outstanding 1,000 1,000
Variable Rate Cumulative
Preferred Stock, Series A, $1
par value, 50,000 shares
authorized, none issued --- ---
Additional paid - in capital 999,000 999,000
Due from parent (8,546,056) (8,777,220)
Accumulated deficit (5,251,272) (4,470,488)
----------- -----------
(12,797,328) (12,247,708)
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDER'S DEFICIT $14,201,993 $14,960,268
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
<PAGE>5
<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(DEBTOR-IN-POSSESSION)
STATEMENTS OF OPERATIONS
<CAPTION>
For the Three Months Ended July 31,
1997 1996
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Revenue:
Income earned under
direct finance lease contracts $ 688,584 $ 612,570
---------- ----------
Total revenue 688,584 612,570
---------- ----------
Costs and expenses:
Interest expense, net 576,318 521,406
General and administrative expenses 209,601 227,215
Provision for doubtful lease receivables 278,523 284,366
Nonrecurring Item:
Charge-off of deferred solicitation and
registration expenses related to the sale
of Demand and Fixed Rate Certificates 404,926 ---
---------- ----------
Total costs and expenses 1,469,368 1,032,987
---------- ----------
Loss from operations before provision
for income tax expense (780,784) (420,417)
Provision for state income tax expense --- ---
---------- ----------
Net Loss $ (780,784) $ (420,417)
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
<PAGE>6
<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(DEBTOR-IN-POSSESSION)
STATEMENT OF CHANGES IN SHAREHOLDER'S DEFICIT
<CAPTION>
Common Stock
-----------------
($1.00 Par Value)
1,000 shares
Authorized Additional Total
No. of shares Paid-In Due From Accumulated Shareholder's
Issued Amount Capital Parent Deficit Deficit
------ ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1997, 1,000 $1,000 $999,000 $(8,777,220) $(4,470,488) $(12,247,708)
Net Loss for the
three month period
ended July 31, 1997
(unaudited) -- -- -- -- (780,784) (780,784)
Net repayment of
advances from parent 231,164 -- 231,164
----- ------ -------- ----------- ------------ ------------
Balance, July 31, 1997 1,000 $1,000 $999,000 $(8,546,056) $(5,251,272) $(12,797,328)
(unaudited) ===== ====== ======== =========== ============ ============
SEE ACCOMPANYING NOTES
4
</TABLE>
<PAGE>
<PAGE>7
<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(DEBTOR-IN-POSSESSION)
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Three Months Ended July 31,
1997 1996
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net Loss $ (780,784) $ (420,417)
Adjustment to Reconcile Net Loss
to Net Cash Provided by (Used in)
Operating Activities:
Nonrecurring Item 404,926 ---
Amortization of Deferred Debt Expenses 57,594 67,856
Provision for doubtful lease receivables 278,523 284,366
Effects of Changes
in other Operating Items:
Accrued Expenses 4,932 (7,345)
Accrued Interest 306,817 154,468
Other (net) (26,610) (95,533)
----------- -----------
Net Cash Provided by (Used in) Operating
Activities 245,398 (16,605)
----------- -----------
INVESTMENT ACTIVITIES
- ---------------------
Excess of Cash Received
Over Lease Income Recorded 1,618,515 1,438,674
Receipt of Advance Payments 63,065 60,069
Purchase of Equipment
for Direct Finance Leases (2,083,177) (1,913,455)
----------- -----------
Net Cash Used in
Investing Activities $ (401,597) $ (414,712)
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE>
<PAGE>8
<TABLE>
EQUIPMENT LEASING CORPORATION OF AMERICA
(DEBTOR-IN-POSSESSION)
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Three Months Ended July 31,
1997 1996
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
FINANCING ACTIVITIES
- --------------------
Proceeds from Issuance
of Demand and Fixed Rate Certificates $ 0 $ 2,363,448
Net Repayment From (Advances to) Parent 231,164 (414,911)
Redemption of Demand, Fixed
Rate, and Money Market Thrift
Certificates (520,405) (2,211,313)
----------- -----------
Net Cash Used in
Financing Activities (289,241) (262,776)
----------- -----------
Decrease in Cash
and cash equivalents (445,440) (694,093)
Cash and cash equivalents,
Beginning of Year 532,710 9,260,482
----------- -----------
Cash and cash equivalents,
End of Period $ 87,270 $ 8,566,389
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES
6
<PAGE>
<PAGE>9
EQUIPMENT LEASING CORPORATION OF AMERICA
(DEBTOR-IN-POSSESSION)
Notes to Interim Financial Statements
Three Months Ended July 31, 1997 and 1996
1. FINANCIAL STATEMENT PRESENTATION
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the audited
financial statements and notes thereto as of April 30, 1997. The
accompanying financial statements have not been audited by independent
accountants, but in the opinion of management, such financial statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to summarize fairly the results of operations and are not
necessarily indicative of the results to be expected for the full year.
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.
2. ACCOUNTING POLICIES
ACCOUNTING FOR LEASES
Equipment Leasing Corporation of America's ("ELCOA") lease contracts provide
for total noncancellable rentals which exceed the cost of leased equipment
and, accordingly, are accounted for as direct finance leases. At inception,
ELCOA records the gross lease receivable, the estimated residual value of the
leased equipment, and the unearned lease income. The unearned lease income
represents the excess of the gross lease receivable at inception of the
contract plus the estimated residual value over the cost of the equipment
being leased. ELCOA utilizes the "effective" or interest method in
recognizing the remainder of unearned income. For leases originated after
April 30, 1988, the Company has changed its method of accounting to conform
with the requirements of FAS No. 91 "Accounting for Non Refundable Fees and
Costs Associated with Originating or Acquiring Loans and Initial Direct Cost
of Leases". Under this method a portion of the initial direct costs as
defined by FAS No. 91 ($80,122 and $73,594 for the three months ended July
31, 1997 and 1996, respectively), were accounted for as part of the
Investment in Direct Financing Leases. Unearned income is earned and initial
direct costs are amortized to income using the effective method over the term
of the lease.
ELCOA provides a provision for doubtful accounts based upon a periodic review
(not less than quarterly) of its outstanding lease portfolio, and provides a
direct charge against operations to increase the amount of stated reserves
for uncollectable accounts. Any write-offs of uncollectable leases reduce
the stated amount of ELCOA's reserves. Write-offs of delinquent leases
totaled $328,125 and $290,101 during the three month periods ended July 31,
1997 and 1996, respectively, while ELCOA increased these reserves by charges
of $278,523 and $284,366 during the three month periods ended July 31, 1997
and 1996, respectively.
7
<PAGE>
<PAGE>10
INCOME TAXES
Effective May 1, 1993, the Company adopted Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" (SFAS 109), which requires 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 basis 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, 1997 includes deferred tax assets
(liabilities) attributable to the following temporary deductible (taxable)
differences:
Operating lease method vs. direct financing method $1,295,000
Provision for doubtful lease receivables 705,000
Other (42,000)
----------
Net deferred tax asset 1,958,000
Valuation allowance (1,958,000)
----------
Net deferred tax asset after valuation allowance $ ----
==========
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.
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 three months ended July 31, 1997 and 1996, the provision for federal
and state income taxes consists of:
Three Months Ended July 31,
1997 1996
-------- --------
Current $ 29,461 $212,685
Deferred ( 29,461) (212,685)
-------- --------
$ --- $ ---
======== ========
The deferred tax benefit is the change in the net deferred tax asset arising
from the available carry-back claim from its parent.
8
<PAGE>
<PAGE>11
OTHER ASSETS AND LIABILITIES
Amounts payable to equipment suppliers in the amount of $8,749 as of July 31,
1997 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.
3. BANKRUPTCY PROCEEDINGS
On August 8, 1997, ELCOA and Walnut filed separate voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. ELCOA and
Walnut are managing their businesses as debtors-in-possession subject to the
supervision and control of the Federal Bankruptcy Court for the Eastern
District of Pennsylvania. For further information in this regard, see Item 3
to Form 10-K as filed August 14, 1997 for the fiscal year ended April 30,
1997.
4. NONRECURRING ITEM
As a result of requests by certificate holders for redemptions which exceeded
ELCOA'S cash and cash equivalents, ELCOA was unable to meet requests for
redemption of its Demand, Fixed Rate and Money Market Thrift Certificates
beginning July 7, 1997 and thereafter. Management reviewed the Trust
Indentures covering the registered offering of these debt securities and
concluded that a default may have occurred in the redemption provision.
Prior to July 31, 1997, sales of ELCOA's debt securities had been suspended,
and were not expected to recommence in the future. Accordingly, during the
three month period ended July 31, 1997, ELCOA recognized as a nonrecurring
charge to operations the amount of $404,926, representing $258,482 of
capitalized commissions previously paid and $146,444 of capitalized
registration expenses as of July 31, 1997 related to the prior registration
and sales of Demand and Fixed Rate Thrift Certificates.
9
<PAGE>
<PAGE>12
EQUIPMENT LEASING CORPORATION OF AMERICA
(DEBTOR-IN-POSSESSION)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS, CHAPTER 11 PROCEEDING
As described in ELCOA's annual report on Form 10-K for the year ended April
30, 1997 (the "1997 10-K"), on August 8, 1997 ELCOA and Walnut filed
voluntary petitions for reorganization (the "Chapter 11 Petition") under
Chapter 11 of the Federal Bankruptcy Code (the "Chapter 11 Proceeding").
Both ELCOA and Walnut are managing their businesses as debtors-in-possession
subject to the supervision and control of the Federal Bankruptcy Court for
the Eastern District of Pennsylvania (the "Bankruptcy Court"). As a result
of these limitations ELCOA and Walnut have implemented a number of
cost-saving measures. Among other things, since the filing of the Chapter 11
Petitions, Walnut has (i) tightened the criteria under which it is willing to
originate new lease receivables (ii) received fewer new lease applications
for consideration and (iii) reduced its workforce. See Forms 10-K for the
fiscal years ended April 30, 1997 as filed by ELCOA and Walnut.
On September 26, 1997 the Bankruptcy Court, upon the motion of the United
States Trustee, entered an order authorizing the appointment of examiner to
(i) investigate the acts, conduct, assets, liabilities, and current financial
condition of the Company and ELCOA, and the operation of their businesses,
among other things, (ii) determine the appropriateness of substantive
consolidation, and (iii) the desirability of the Company and ELCOA continuing
with their ongoing businesses under current management. The examiner is
expected to file its statement of this investigation on or before December 4,
1997. Management intends to continue operations in the ordinary course of
business at least until that date.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JULY 31, 1997 AND 1996.
Revenues of $688,584 and $612,570 were recognized during the three months
ended July 31, 1997 and 1996 respectively. Revenues increased $76,014 or
12.4% as a result of the increase in average outstanding aggregate future
receivables during these periods. The Company utilizes the "effective"
method in recognizing income from deferred income on its direct finance lease
portfolio. For a more detailed discussion of the manner in which income is
computed and recognized, see Footnote 2 to the Financial Statements. During
the three month periods ended July 31, 1997 and 1996, $2,799,123 and
$2,540,777, respectively, in new gross finance lease receivables were added
to the portfolio of outstanding leases, corresponding to equipment purchases
of $2,083,177 and $1,913,455, respectively. Unearned income under direct
finance leases reflected a net increase of $89,728 during the three months
ended July 31, 1997 which resulted from an increase in new leases generated
during the current period ended July 31, 1997. During a period in which the
rate of growth of new lease volume increases, the growth rate of net lease
revenue in that period will be less than the rate of growth in new lease
volume, as income earned from new lease volume is recognized over the term of
each lease contract and not necessarily in the year the contract is entered.
10
<PAGE>
<PAGE>13
Amounts paid under the service contract for lease origination in the amounts
of $80,122 and $73,594 respectively, were capitalized in accordance with FAS
No. 91 during the three months ended July 31, 1997, and 1996. See Footnote 2
to the Financial Statements.
General and administrative expenses for the three month periods ended July
31, 1997 and 1996 were $209,601 and $227,215, respectively. Included in
these expenses were $113,217 and $124,417, respectively, in monthly servicing
fees which are to reimburse Walnut for the servicing and administration of
ELCOA's outstanding leases which are charged at $6.50 per account per month.
As of July 31, 1997 and 1996, there were 5,837 and 6,181 direct finance
leases outstanding, respectively. Also included in general and
administrative expenses for the three months ended July 31, 1997 and 1996 are
$57,594 and $67,856, respectively, which represents the amortization of the
deferred registration and solicitation expenses which are included in "Other
Assets" on the Balance Sheet as of April 30, 1997. See Footnote 3 to the
Financial Statements for a discussion of the write-off of capitalized
registration and solicitation expenses during the three months ended July 31,
1997. ELCOA paid Walnut $6,500 for the three month periods ended July 31,
1997 and 1996 for bookkeeping fees. These fees are to reimburse Walnut for
the routine bookkeeping functions performed for ELCOA and are charged at $500
per week. Also included in general and administrative expenses were $21,258
and $26,201, respectively, in transfer service fees paid to Financial Data,
Inc., an affiliate.
For the three months ended July 31, 1997 and 1996, ELCOA recognized expenses
of $278,523 and $284,366, respectively, for its doubtful lease receivable
provision. See Footnote 2 to the Financial Statements. This provision was
recognized in order to maintain an adequate allowance, based upon
management's belief and historical experience, for anticipated delinquencies
and impairments from doubtful direct finance lease receivables outstanding as
of July 31, 1997 and 1996. During the three months ended July 31, 1997,
ELCOA continued to conduct an extensive review of the collectibility of all
past due accounts, and wrote-off those situations where further costs in
pursuing legal remedies in collection were considered to be unwarranted.
As a result, past due accounts four or more monthly payments past due (on a
strict contractual basis) as of July 31, 1997 were $5,422,545 or 29.1% of the
$18,615,322 in aggregate future lease receivables outstanding at that date.
These delinquencies decreased $162,261 or 2.9% from the amount of $5,584,806
(30.3% of aggregate receivables) as of April 30, 1997. Management is
continuing its efforts in pursuit of collections of all past due lease
receivables.
During the three months ended July 31, 1997 and 1996, ELCOA incurred $576,318
and $521,406, respectively in interest expense (net) on the Demand, Fixed
Rate and Money Market Thrift Certificates. Accrued interest thereon of
$3,301,244 and $2,921,626, respectively, were outstanding at July 31, 1997
and 1996. These expenses were reduced by interest income of $3,832 and
$97,606, respectively during the three months ended July 31, 1997 and 1996.
During the three months ended July 31, 1996, ELCOA's excess cash was invested
in short-term U.S. Government Treasury Bills, having maturities of three
months. During the three months ended July 31, 1997, no cash was invested in
U.S. Treasury Bills. The average rates of interest paid on the Certificates
(including accrued interest thereon) were approximately 8.6% and 8.4%,
respectively, during the three month periods ended July 31, 1997 and 1996.
11
<PAGE>
<PAGE>14
During the three month period ended July 31, 1997, the Company recognized an
nonrecurring charge of $404,926 representing the charge-off of $258,482 of
capitalized commissions paid and $146,444 of capitalized registration
expenses related to the sale of Demand and Fixed Rate Thrift Certificates, as
a result of the Company's indefinite cease of sales of certificates. See
Note 3 to the Financial Statements for a more detailed discussion.
During the three month periods ended July 31, 1997 and 1996, no provisions
for either state or federal income taxes were necessary. See Footnote 2 to
the Financial Statements.
CAPITAL RESOURCES AND LIQUIDITY
ELCOA had financed its growth prior to April 30, 1997 primarily from the
proceeds of sale of its debt securities, as well as from rental receipts from
its outstanding lease portfolio. Prior to April 30, 1997, ELCOA had not
defaulted on any contractual payment of interest or principal on any Demand,
Fixed Rate and Money Market Thrift Certificates issued to the public, and
requests for early repayment of interest or principal had never been later
than five business days after demand for redemption was received. During the
month of June, 1997, as a result of reductions in the company's available
cash, requests for early redemption of Demand and Fixed Rate Certificates
prior to maturity were deferred to July 5, 1997. As a result of the requests
by certificate holders for redemptions which exceeded ELCOA's cash and cash
equivalents, ELCOA was unable to meet the requests for redemption of its
Demand, Fixed Rate and Money market Thrift Certificates beginning July 7,
1997 and thereafter. Management had reviewed the Trust Indentures covering
the registered offerings of these debt securities and has concluded that a
default may have occurred in the redemption provisions. On August 8, 1997,
ELCOA and Walnut filed voluntary petitions for reorganization under Chapter
11 of the U.S. Bankruptcy Code. ELCOA and Walnut are managing their
businesses as debtors-in-possession subject to the supervision and control of
the Federal Bankruptcy Court for the Eastern District of Pennsylvania.
Pending the resolution of this proceeding, no further redemptions of debt
securities or payments of interest will occur. In order to continue its
operation, ELCOA must generate additional sources of liquidity to fund new
business, of which there can be no assurance. See the Statement of Cash
Flows on page 5 of this report for an analysis of the sources and uses of
cash by ELCOA during the three month periods ended July 31, 1997 and 1996.
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, the matters
discussed in Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations or elsewhere in this quarterly report on
Form 10-Q, are forward looking statements that are dependent upon a number of
risks and uncertainties that could cause actual results to differ materially
from those in the forward looking statements. These risks and uncertainties
are more fully discussed in Note 1 to the Financial statements for the fiscal
year ended April 30, 1997 as contained in Form 10-K as filed , and elsewhere
in this Form 10-Q. ELCOA does not intend to provide updated information
about the matters referred to in these forward looking statements, other than
in the context of management's discussion and analysis in ELCOA's quarterly
and annual reports on Form 10-Q and 10-K.
12
<PAGE>
<PAGE>15
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Pursuant to an Order to Show Cause dated August 4, 1997 (the "Order"), the
Pennsylvania Securities Commission (the "PSC") instituted an Administrative
Proceeding regarding the Company, Walnut, WELCO Securities, Inc., a
registered broker-dealer, William Shapiro (President of the Company), Kenneth
S. Shapiro (Vice-President of the Company), and John J. McGarry, a registered
agent for First Allied Securities of Warren, Pennsylvania.
The Order alleges that the named parties (other than Walnut) violated
provisions of the Pennsylvania Securities Act of 1972 in connection with
certain offers and sales of the Company's Demand Certificates and Fixed Term
Certificates. The Order also alleges violations by the named parties (other
than the Company) of the Pennsylvania Securities Act of 1972 in conjunction
with certain offers and sales of Walnut Demand Senior Thrift Certificates and
Fixed Rate Certificates. The Company, ELCOA, William Shapiro and Kenneth S.
Shapiro have answered the Order by denying the PSC's allegations.
On August 8, 1997, ELCOA and Walnut filed separate voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. ELCOA and
Walnut are managing their businesses as debtors-in-possession subject to the
supervision and control of the Federal Bankruptcy Court for the Eastern
District of Pennsylvania. For further information in this regard, see Item 3
to Form 10-K as filed August 14, 1997 for the fiscal year ended April 30,
1997, as well as information contained elsewhere in this Form 10-Q.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Reference is made to "CAPITAL RESOURCES AND LIQUIDITY", appearing above, as
respects ELCOA's default in the terms and conditions of certain Trust
Indentures covering the issuance of its Demand, Fixed Rate, and Money Market
Thrift Certificates.
ITEM 5. OTHER INFORMATION
On August 8, 1997, ELCOA and Walnut filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. ELCOA and
Walnut are managing their businesses as debtors-in-possession subject to the
supervision and control of the Federal Bankruptcy Court for the Eastern
District of Pennsylvania.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) REPORTS ON FORM 8-K
ELCOA filed a Current Report on Form 8-K dated July 30, 1997 with respect to
the Company's inability to meet the requests for redemption of its Demand,
Fixed Rate and Money Market Thrift Certificates beginning July 7, 1997 and
thereafter and concluded that a default may have occurred in the redemption
provisions.
13
<PAGE>
<PAGE>16
SIGNATURES
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.
EQUIPMENT LEASING CORPORATION OF AMERICA
----------------------------------------
(Registrant)
/s/ William Shapiro
----------------------------------------
William Shapiro, President and
Chief Financial Officer
October 24, 1997
- ----------------
Date
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR 1ST QUARTER 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JUL-31-1997
<CASH> 87
<SECURITIES> 0
<RECEIVABLES> 18,615
<ALLOWANCES> 1,759
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,201
<CURRENT-LIABILITIES> 0
<BONDS> 23,608
<COMMON> 1,000
0
0
<OTHER-SE> (13,797)
<TOTAL-LIABILITY-AND-EQUITY> 14,201
<SALES> 689
<TOTAL-REVENUES> 689
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 615
<LOSS-PROVISION> 279
<INTEREST-EXPENSE> 576
<INCOME-PRETAX> (781)
<INCOME-TAX> 0
<INCOME-CONTINUING> (781)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (781)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
