UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995 Commission File No. 33-18859
Wellesley Lease Income Limited Partnership IV
(Exact Name of Registrant as Specified in its Charter)
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Massachusetts 04-2985041
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
One Financial Center, 21st Floor, Boston, MA 02111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 482-8000
Securities registered pursuant to Section 12(b) of the Act None
Securities registered pursuant to Section 12(g) of the Act Units of Limited Partnership Interests
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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
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 1996: Not applicable, since securities are
non-voting.
Documents incorporated by reference: None.
Exhibit Index on Page: 40
Page 1 of 41
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Graphic image depicting the corporate organization as discussed in Part I, Item
1 Business as follows:
Continental Information Systems Corporation ("Continental") controls CIS
Corporation ("CIS") which controls CMI Holding Co. ("Holding"). Holding controls
TLP Leasing Programs, Inc. ("TLP"), CMI Corporation ("CMI"), and TLP Securities,
Inc. TLP controls TLP Columbia Management Corp. ("TCMC") which serves as General
Partner to the Columbia Lease Income Funds. CMI controls CIS Management Services
Corp. ("CISMS"). Torchmark Corporation ("Torchmark") controls TMK/United, Inc.
which controls Waddell and Reed Financial Services, Inc. ("Waddell And Reed").
Through various dealer-manager arrangements, TLP, CISMS, and Waddell and Reed
serve as corporate general partners to the Wellesley Leasing Partnership
("Wellesley General Partner") and the Hanover Leasing Partnership. The Wellesley
General Partner is the general partner for the Wellesley Lease Income Limited
Partnership. Hanover Leasing Partnership serves as the General Partner for
Hanover Lease Income Limited Partnership with BOT Financial Corporation serving
as agent.
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Part I
Item 1. Business.
Wellesley Lease Income Limited Partnership IV (the "Partnership") is a limited
partnership organized under the provisions of the Massachusetts Uniform Limited
Partnership Act on November 9, 1987. As of December 31, 1995, the Partnership
consisted of a General Partner and 1,696 Limited Partners owning 27,226 Units of
Limited Partnership Interests of $500 each (the "Units") except that employees
of the Corporate General Partners of the General Partner and employees and
securities representatives of its affiliates purchased 148 Units for a net price
of $460 per Unit and the Partnership incurred no obligation to pay any sales
commissions with respect to such sales. The Units were sold commencing March 3,
1988, pursuant to a Registration Statement on Form S-1 under the Securities Act
of 1933. As set forth more fully at Item 10. Directors and Executive Officers of
the Partnership. of this Report, the General Partner is Wellesley Leasing
Partnership and the General Partner has three Corporate General Partners (the
"Corporate General Partners"): TLP Leasing Programs, Inc. ("TLP") and CIS
Management Services Corporation ("CISMS"), both Massachusetts corporations and
Waddell & Reed Financial Services, Inc. ("Waddell & Reed", formerly TUP
Services, Inc., "TUPS"), a Missouri corporation.
The Partnership was organized to engage in the business of acquiring
income-producing computer peripheral equipment for investment purposes,
principally International Business Machines, Incorporated ("IBM") equipment. The
Partnership's principal objectives are as follows:
1. To acquire and lease equipment, primarily through operating leases,
to generate income during its entire useful life;
2. To provide quarterly distributions of cash to the Limited Partners
from leasing revenues and from the proceeds of sales
or other disposition of Partnership equipment; and
3. To reinvest a portion of lease revenues and a substantial portion of
cash from sales and refinancings in additional equipment during the
first seven years of the Partnership's operations.
The Partnership was formed primarily for investment purposes and not as a "tax
shelter".
The Partnership shall terminate on December 31, 2012, unless sooner dissolved or
terminated as provided in Section 11 of the Amended Agreement of Limited
Partnership.
The Partnership has had a total of five closings. The closings occurred on May
18, 1988, July 11, 1988, September 16, 1988, October 31, 1988, and December 1,
1988 with 9,104, 5,545, 5,657, 3,640 and 3,280 units, respectively. Equipment
purchased through December 31, 1995 is $33,181,762. At the end of 1995, there
are 155 leases in place with 135 lessees. The acquisition of these leases and
equipment is described more fully in Item 2. Properties. of this report and
notes 3 and 4 to the financial statements included in Item 8. Financial
Statements and Supplementary Data.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP from
CMI Holding Co. Under the new ownership, TLP will continue to operate in the
same manner of business as described below.
Under the Partnership Agreement, the General Partner, Wellesley Leasing
Partnership, is solely responsible for the operation of the Partnership and its
equipment. As discussed above, the General Partner has three Corporate General
Partners: TLP, CISMS and Waddell & Reed. TLP was formed in December 1982 and is
a wholly-owned subsidiary of CMI Holding Co. ("Holding"), the capital stock of
which was acquired in August 1987 by Continental Information Systems Corporation
("CISC"), in Syracuse, New York (a New York Stock Exchange-listed corporation).
Through this acquisition, CISC became the ultimate parent of TLP and CISMS. On
July 20, 1993, Holding became a wholly-owned subsidiary of CIS Corporation
("CIS") pursuant to a court ordered settlement (see note 9 to the financial
statements included in Item 8. Financial Statements and Supplementary Data).
While Holding and its subsidiaries have retained their separate corporate
identities since the acquisition, their operations (except those of TLP and the
limited partnerships it manages) have been effectively integrated into those of
CIS Corporation ("CIS") and its affiliates. These operations include buying,
selling, financing, leasing, sub-leasing new and used computer equipment and
their services include securing, financing, collecting rentals, supervising
equipment maintenance and service. CISMS was formed in May 1983 and is a
wholly-owned subsidiary of CMI Corporation ("CMI"), which is another
wholly-owned subsidiary of Holding and an affiliate of TLP. CMI is engaged in
equipment leasing, primarily involving computer equipment and aircraft. Waddell
& Reed (formerly TUPS) was formed in May 1986 and is an affiliate of Waddell &
Reed, Inc., which was one of the Soliciting Brokers for this offering. Both
Waddell & Reed and Waddell & Reed, Inc. are wholly-owned subsidiaries of
TMK/United, Inc., which itself is an indirect 85% owned subsidiary of Torchmark
Corporation ("Torchmark").
The General Partnership Agreement between TLP and CISMS (the "General
Partnership Agreement"), provides that CISMS will propose to the Partnership
equipment acquisitions, leasing, financing and re-financing transactions and
sale transactions, for approval by the Executive Committee and will oversee the
operation, management and use of the Partnership's equipment and that TLP will
oversee the marketing of the Units, all administrative functions of the
Partnership and, together with Waddell & Reed, will supply substantially all of
the General Partner's capital resources. All of the Partnership's equipment to
date has been acquired and all dispositions of Partnership equipment have been
made, through CISMS, using the personnel and resources of CMI, another
Continental affiliate, both of which emerged from protection under Chapter 11 of
the United States Bankruptcy Code on December 21, 1994, and several outside
equipment leasing brokers the General Partner believes would be most
advantageous for the Partnership; see Item 8. Financial Statements and
Supplementary Data. of this report.
The Partnership's investment policy provides for the acquisition of diversified
types of computer equipment and the leasing of such equipment to others on a
short-term basis under operating leases. The Partnership generally purchases
equipment for which a lease exists, or is entered into at the time of the
Partnership's acquisition of the equipment. This equipment is recorded and
depreciated at the Partnership cost (purchase price plus the acquisition fee).
If at any time the General Partner deems the equipment to be obsolete or related
maintenance and storage costs to be in excess of its fair market value, the
equipment is scrapped or sold at the current fair market value, which ever is
most advantageous for the Partnership.
Pursuant to its leasing policies, the General Partner performs a credit analysis
of potential lessees to determine their creditworthiness. The General Partner
leases all of its equipment to third parties by means of operating leases with
fixed base lease rates. Rents are payable monthly or quarterly. Operating leases
generally do not have terms greater than five years in duration and the
aggregate noncancelable rental payments during the term of the lease (on a net
present value basis), are not sufficient to permit the lessor to recover the
purchase price of the equipment.
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At the termination of the lease, the General Partner arranges for the equipment
to be re-leased (either to the same lessee or a new lessee) if it determines
that re-leasing is in the Partnership's best interests. Generally, equipment is
re-leased at least once and possibly several times during the Partnership's
life, unless it is determined that the equipment is not marketable and therefore
may be sold. The General Partner provides, or arranges for the installation,
removal, maintenance and modification of the Partnership's equipment. Also, the
General Partner will purchase and maintain, or cause to be purchased and
maintained, appropriate insurance coverage to protect the interests of the
Partnership.
At December 31, 1995, the Partnership owned various computer equipment with an
original cost basis of $7,388,216. Listed below is a breakdown of the various
types of computer equipment owned:
Computer peripherals $ 3,250,815
Processors & upgrades 1,994,818
Telecommunications 221,646
Other 1,920,937
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$ 7,388,216
===============
Of the leases in place at December 31, 1995, the average lease term is 34 months
and the average monthly lease rate as a percentage of original equipment cost is
2.61%.
The Partnership's investments in computer peripheral equipment are and will
continue to be subject to various risk factors. The principal business risk
associated with ownership of the equipment is the inability to keep it fully
leased at rentals which, after payment of operating expenses and debt service on
Partnership borrowings, provide, together with any anticipated sales proceeds or
salvage value, an acceptable rate of return. Other risk factors include:
1. Technological and economic equipment obsolescence, physical
deterioration, malfunction and risks attendant upon defaults by
lessees and credit losses.
2. Residual Values of Equipment. The Partnership's return on its
investment in equipment will depend in part upon the continuing value
of such equipment which in turn, depends upon, among other things: (1)
the quality of the equipment; (2) the condition of the equipment; (3)
the timing of the equipment's acquisition; (4) the cost of comparable
new equipment; (5) the technological obsolescence of the equipment; (6)
the General Partner's ability to forecast technological changes which
may reduce the value of the equipment; and (7) market factors.
3. Competition from Full Payout Lessors. In connection with operating
leases, the Partnership will encounter considerable competition from
those offering full payout leases, which are written for a longer term
and a lower rate than the Partnership's operating leases.
4. Competition from Manufacturers. Leases offered by the Partnership will
compete with operating leases and full payout leases offered by
equipment manufacturers in their own lease programs. In addition to
attractive financial terms, manufacturers may also provide certain
ancillary services which the Partnership cannot offer directly, such as
maintenance service (including possible equipment substitution rights),
warranty services and trade-in privileges.
5. Other Competition. There are numerous other potential investors,
including limited partnerships organized and managed similarly to the
Partnership, seeking to purchase equipment subject to either operating
leases or full payout leases, many of which will have greater financial
resources than the Partnership and more experience than the General
Partner. The Partnership will compete in the computer leasing
marketplace with many non-manufacturing firms, including other
equipment dealers, brokers and leasing companies, as well as, with
financial institutions.
6. Changes in Marketing Policies. IBM's current marketing policy of
offering accrual discounts (i.e., applying lease payments as a credit
toward the purchase of equipment) and volume discounts enables certain
customers to obtain IBM equipment at a cost lower than its fair market
value. In the case of accrual discounts, lessees of IBM equipment
who have earned a purchase credit toward that equipment can purchase
the equipment from IBM and arrange a cost-effective sale and leaseback
arrangement with CMI or the Partnership. The sale price to the
Partnership will typically be less than the fair market value of the
equipment. The Partnership may be able to participate in volume
discounts through purchases arranged by lessees of CMI. The
Partnership's lower equipment costs in turn should enable the
Partnership to offer lower lease rates to customers and help offset the
risk of early obsolescence. If IBM were to eliminate these policies,
raise its prices, lower its lease rates, or become more active as a
lessor, the Partnership might find it more difficult to compete
successfully as a lessor of IBM equipment.
7. Defaults by Lessees. Default by a lessee may cause equipment to be
returned to the Partnership at a time when the General Partner may
be unable to promptly arrange for its re-leasing (at the rental rate
previously received or otherwise) or sale (with or without a loss),
thus resulting in the loss of anticipated revenues and the inability
to recover the Partnership's investment and repay related debt. Any
related debt may be secured by the returned equipment and, in some
cases, by the Partnership's other equipment. If the debt is not paid
in a timely manner, the lender may foreclose and assume ownership
of all equipment securing the debt, resulting in economic loss
and adverse tax consequences to the Partnership's partners. Four
lessees, American Freightways, Incorporated, Cincinnati Gas & Electric
Company, Halliburton Company and Hughes Aircraft Company, Incorporated,
lease equipment in excess of 10% of the total equipment portfolio. At
December 31, 1995, American Freightways, Incorporated, Cincinnati
Gas & Electric Company, Halliburton Company and Hughes Aircraft
Company, Incorporated lease equipment comprising 10.23%, 2.06%, 9.94%
and 6.72% of the total equipment portfolio. The related rental payments
comprise 14.14%, 16.68%, 17.22% and 10.40% of total rental income for
the year ended December 31, 1995.
8. Changes in Technology. The General Partner intends to offer lease rates
to the Partnership's lessees which take into account the risk of
technological advances which may reduce the value of such equipment
owned by the Partnership. However, the introduction of an entirely new
technology could lead to a radical reduction in the fair market value
of certain equipment and make such equipment difficult to re-lease.
The Partnership considers itself to be engaged in only one industry segment, the
business of investing in computer peripheral equipment and leasing the equipment
to major national corporations on an operating lease basis; therefore, industry
segment information has not been provided.
For information regarding the settlements between the Partnership and the
Liquidating Estate of CIS Corporation, et al, arising out of the emergence from
bankruptcy of CIS and CMI, see Item 3. Legal Proceedings.
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Item 2. Properties.
At December 31, 1995, the Partnership owned computer equipment with a
depreciated cost basis of $1,444,837, subject to 155 existing leases with 135
different lessees and equipment held in inventory, awaiting re-lease or sale,
with a depreciated cost basis of $268,820. All purchases of computer equipment
are subject to a 3% acquisition fee paid to the General Partner.
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Item 3. Legal Proceedings:
There are no material pending legal proceedings that the Partnership is a party
or of which any of its equipment or leases is the subject, except as described
below and in note 9 to the financial statements herein in Item 8. Financial
Statements and Supplementary Data.
On January 13, 1989 (the "Petition Date"), Continental Information Systems
Corporation ("Continental"), CIS Corporation ("CIS"), CMI Holding Co.
("Holding"), CMI Corporation ("CMI") and certain of its affiliates
(collectively, the "Debtors"), voluntarily petitioned for relief under Chapter
11 of the United States Bankruptcy Code ("Chapter 11"), and thereafter continued
in the management and operation of their businesses and property as Debtors In
Possession until October 25, 1989, when the United States Bankruptcy Court (the
"Court") confirmed the appointment of James P. Hassett as Chapter 11 trustee
(the "Trustee") of the Debtors. Holding is the parent of TLP and CMI is the
parent of CISMS. TLP and CISMS, neither of which filed under Chapter 11, are the
two Corporate General Partners of Wellesley Leasing Partnership, the General
Partner of the Partnership. Both before and after the Petition Date, CIS and CMI
have acted as agents for the Partnership in selling, leasing and remarketing
Partnership equipment. Holding became a wholly-owned subsidiary of CIS pursuant
to a Court ordered settlement on July 20, 1993.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP from
Holding. Under the new ownership, it is expected that TLP will continue to
operate in the same manner of business as it has in the past.
As of the Petition Date, there were a number of unsettled transactions between
CIS and CMI and the Partnership and other affiliated partnerships (the
Partnership and such other partnerships are herein collectively referred to as
the "Partnerships"), including outstanding accounts receivable and accounts
payable between each of the Partnerships and CIS and CMI and their affiliates,
sales of equipment and related leases from CIS and CMI to each of the
Partnerships for which not all documentation had been completed as of the
Petition Date, and sales of equipment and related leases from which CIS had
failed to remove prior third-party liens. In addition, accounts receivable and
accounts payable continued to accrue and be paid between each of the
Partnerships and CIS and CMI and their affiliates subsequent to the Petition
Date.
On February 28, 1992, the Court granted an order implementing a settlement of
the outstanding issues between each of the Partnerships and the Debtors. The
settlement occurred on March 13, 1992. In the order the Court approved a set-off
on a partnership-by-partnership basis of pre-petition amounts owed by each
affected Debtor to each Partnership to the extent of pre-petition amounts owed
by that Partnership to that Debtor. As a result of the set-off, the Partnership
had a net unsecured pre-petition claim of $37,470 against CMI as of December 31,
1993 which had been fully reserved.
On November 29, 1994, the Court confirmed the Trustee's proposed Joint Plan of
Reorganization ("the Plan") dated October 4, 1994, and the Debtors emerged from
Chapter 11 bankruptcy protection on December 21, 1994. In accordance with the
Plan projections, 100% of each CMI claim would be paid in full, of which 75%
would be cash and 25% would be common stock of the reorganized Continental
Information Systems Corporation ("CISC"), based on a per share price of $4.29.
<PAGE>
On December 27, 1994, the Partnership received the first distribution from the
Trustee (now Trustee of the Liquidating Estate of CIS Corporation, et al) with
respect to the net unsecured pre-petition claim described above. The
distribution consisted of cash proceeds of $22,808 and 1,844 shares of common
stock in CISC. During the second quarter of 1995, the stock of CISC began
trading, thereby providing an objective valuation method for establishing the
cost basis of $2.50 per share, which approximated fair value at June 30, 1995. A
charge off was made in 1995 in relation to the difference between the Trustee's
original prescribed value of the CISC stock at $4.29 per share and the cost
basis established by the Partnership. On July 20, 1995, the Partnership received
the second and final distribution from the Trustee, consisting of cash proceeds
of $5,294 and 341 shares of CISC. Following the Trustee's second distribution
and the charge off made during the year, the Partnership's net unsecured
pre-petition claim was settled and there are no other outstanding receivable
balances.
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Item 4. Submission of Matters to a Vote of Security Holders.
None.
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Part II
Item 5. Market for the Partnership's Securities and Related Security Holder
Matters.
(a) Market Information
The Partnership's outstanding securities consist of Limited Partnership
Interests in Units of $500 each. As of December 31, 1995, 27,226 Units had been
sold to the public at a price of $500 per Unit (except for 148 Units which were
sold for a net price of $460 per Unit to employees of the Corporate General
Partners of the General Partner and employees and securities representatives of
its affiliates).
There is no public market for the Units, and it is not anticipated that such a
public market will develop.
(b) Approximate Number of Security Holders
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Number of Unit Number of Units
holders on Record as of
Title of Class as of 12/31/95 12/31/95
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Units of
Limited
Partnership
Interests 1,696 27,226
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(c) Dividend History and Restrictions
During the fiscal period ended December 31, 1988, the Partnership had five
closings with 27,226 Units. Pursuant to Section 8 of the Partnership Agreement,
the Partnership's "Distributable Cash From Operations" for each year will be
determined and then distributed to the Partners. Upon reaching the end of its
reinvestment period (the seventh anniversary of the Partnership's final closing
date), the Partnership will also distribute to the Partners "Distributable Cash
From Sales or Refinancings", if any. The Partnership distributed $1,157,104 to
the Limited Partners in 1995, $1,633,561 in 1994 and $1,633,560 in 1993 and
distributed $60,899 to the General Partner in 1995, $85,976 in 1994 and $85,976
in 1993. The cumulative cash distributions to the Limited Partners through
December 31, 1995, are $11,198,512 as compared with the contributed Limited
Partners' net capital of $12,148,459.
"Cash From Operations" and "Cash From Sales or Refinancing" means the net cash
provided by the Partnership's normal operations or as a result of any sales,
refinancings or other dispositions of equipment, respectively, after the general
expenses and current liabilities of the Partnership (other than the equipment
management fee) are paid, as reduced by any reserves for working capital and
contingent liabilities to the extent deemed reasonable by the General Partner
and as increased by any portion of such reserves then deemed by the General
Partner not to be required for Partnership operations. "Distributable Cash From
Operations" and "Distributable Cash From Sales or Refinancings" means Cash From
Operations or Cash From Sales or Refinancings, respectively, reduced by amounts
which the General Partner determines shall be reinvested (through the seventh
anniversary of the Partnership's final closing date) in additional Equipment and
by payments of all accrued but unpaid equipment management fees.
For rendering services in connection with the normal operations of the
Partnership, the Partnership will pay to the General Partner a Partnership
management fee equal to 7% of the monthly rental billings collected.
Each distribution of Distributable Cash From Operations of the Partnership shall
be allocated 95% to the Limited Partners and 5% to the General Partner. Any
Distributable Cash From Sales or Refinancings from gains and losses shall be
allocated 99% to the Limited Partners and 1% to the General Partner until
"Payout" has occurred. "Payout" means the time when the aggregate amount of all
distributions to the Limited Partners of Distributable Cash From Operations and
of Distributable Cash From Sales or Refinancings equals the aggregate amount of
the Limited Partners' original invested capital plus a cumulative 10% annual
return (compounded daily) on their aggregate unreturned invested capital
(calculated from the beginning of the first full fiscal quarter following the
Partnership's closing date). Including the distribution for the fourth quarter
of 1995 made February 29, 1996, cumulative distributions to date are $414.63 per
unit. This cumulative distribution per unit amount represents 15.74% of
"Payout". After Payout has occurred, any Distributable Cash From Sales or
Refinancings will be distributed 15% (plus an additional 1% for each 1% by which
the total of all Limited Partners' original Capital Contributions actually paid
or allocated to the Partnership's investment in equipment exceeds the greater of
(i) 80% of the gross proceeds of the Partnership's offering of Units, reduced by
0.0625% for each 1% of leverage encumbering Partnership equipment, or (ii) 75%
of the gross proceeds of such offering) to the General Partner and the remainder
to the Limited Partners. It is not anticipated that Payout will occur as of the
liquidation of this Partnership.
Distributable Cash, if any, will be distributed within 60 days after the
completion of each of the first three fiscal quarters of each Partnership fiscal
year and within 120 days after the completion of each fiscal year, beginning
after the first full fiscal quarter following the Partnership's closing date.
Each such distribution will be described in a statement sent to the Limited
Partners.
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Item 6. Selected Financial Data.
The following table sets forth selected financial information regarding the
Partnership's financial position and operating results. This information should
be read in conjunction with the financial statements and notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included in Items 8. and 7., respectively of this report.
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For the Years Ended December 31,
1995 1994 1993 1992 1991
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Operating Data
Rental Income $ 1,697,214 $ 2,759,929 $ 3,997,157 $ 4,692,969 $ 4,117,860
Interest Income 23,035 30,708 34,787 54,809 83,701
Net (Loss) Income (347,598) (614,313) 203,727 774,516 (1,604,040)
Net (Loss) Income Per Limited
Partnership Unit (12.64) (24.02) 4.33 18.16 (58.33)
Balance Sheet Data
Cash and Cash Equivalents $ 336,360 $ 843,110 $ 959,487 $ 1,363,767 $ 1,252,822
Computer Equipment at Cost 7,388,216 8,169,287 13,518,961 17,078,290 18,675,789
Total Assets 2,239,549 3,064,038 5,366,699 7,672,897 10,310,738
Long-term Debt 960,503 668,195 648,751 1,172,460 2,204,980
Distributions to Partners 1,218,003 1,719,537 1,719,536 1,719,533 1,719,539
Distributions Per Limited
Partnership Unit 42.50 60.00 60.00 60.00 60.00
Partners' Equity 592,951 2,159,371 4,493,221 6,009,030 6,954,047
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The Partnership had five closings as of December 31, 1988. These closings
occurred on May 18, 1988, July 11, 1988, September 16, 1988, October 31, 1988
and December 1, 1988. Total subscriptions received from these closings were
$4,548,920, $2,771,260, $2,828,500, $1,818,600 and $1,639,800, respectively,
representing 27,226 Units of Limited Partnership Interest. Included in these
amounts were proceeds from the sale of 148 Units at a price net of sales
commissions for employees of an affiliate of the General Partner, who were
allowed to purchase units at a net price of $460 per unit.
Results of Operations
The following discussion relates to Partnership's operations for the year ended
December 31, 1995, in comparison to the years ended December 31, 1994 and 1993.
The Partnership realized a net loss of $347,598 and $614,313 and net income of
$203,727, for the years ended December 31, 1995, 1994, and 1993, respectively.
Rental income decreased $1,062,715 or 39% and $1,237,228 or 31% in 1995 and
1994, respectively. The decrease in rental income each year is due to lower
rental rates obtained on equipment lease extensions and remarketings and a net
reduction in the overall size of the equipment portfolio. The other income
balance of $31,147 in 1995 represents the net settlement proceeds relating to a
dispute between the Partnership and Gemini Equities, Incorporated ("Gemini")
with regard to ownership rights of equipment. The Partnership had the rights to
purchase equipment at a bargain purchase option at the expiration of a lease
with a French corporation that commenced in 1989. However, during the lease term
the equipment owner was sold to Gemini. Upon lease expiration in 1992, Gemini
denied the Partnership's request to purchase the equipment. In response, the
Partnership pursued the title rights to the equipment, resolving the dispute in
a settlement of cash proceeds during the current year. Interest income decreased
$7,673 and $4,079 in 1995 and 1994, respectively, as result of lower average
short-term investment balances held during each year. The recovery of net
unsecured pre-petition claim of $10,757 and $22,808 for the years ended December
31, 1995 and 1994, respectively, was the result of the receipt of the Trustee's
distributions on the fully reserved net unsecured pre-petition receivable, in
the original amount of $37,470 (for further discussion refer to note 9 to the
financial statements). The current year recovery relates to the receipt of the
second and final Trustee's distribution comprised of cash and stock, along with
the second quarter of 1995 establishment of the carrying value of the stock
received in the December 27, 1994 distribution. Accordingly, the prior year
recovery amount represents the cash portion of the Trustee's first distribution.
The $6,188 net gain on sale of equipment in the current year can be attributed
to the overall sale of equipment carrying low net book values. In comparison,
1994 reflected a $582,152 net loss on sale of equipment due to a number of large
equipment sales carrying high net book values.
Total costs and expenses decreased $729,667 or 26% and $891,352 or 24% in 1995
and 1994, respectively, compared to prior periods. The decrease in costs and
expenses each year is primarily the result of lower depreciation expense, which
accounted for a decrease of $652,660 and $813,946 for the years ended December
31, 1995 and 1994, respectively. The decrease in depreciation expense each year
is due to a large portion of the equipment portfolio becoming fully depreciated
and a reduction in the overall equipment portfolio. Included in depreciation
expense in 1995, 1994 and 1993, is a provision for $700,541, $500,000 and
$500,000, respectively, to properly reflect the equipment portfolio's net
realizable value for each year. The above-mentioned decrease more than offsets
the increase in depreciation expense resulting from the Partnership's policy
with regard to the equipment portfolio's net realizable value. Interest expense
increased by $8,908 in 1995 due to the current year receipt of long-term debt
versus the decrease of $22,853 in 1994 as a result of the principal paydown of
the outstanding debt balance that year. Such debt was used to finance equipment
lease transactions. The decline in management fees expense each year reflects
the decline in rental income. General and administrative expenses increased 6%
and 13% for the years ended December 31, 1995 and 1994, respectively. A major
factor contributing to the increase each year is that salaries and expenses of
the partnership accounting and reporting personnel, of the General Partner,
which are reimbursable by the various partnerships under management are being
allocated over a diminishing number of partnerships. The General Partner managed
15 partnerships in 1995, 19 partnerships in 1994 and 21 partnerships in 1993.
The large number of equipment acquisitions in the current and prior year also
had an impact on the increases in general and administrative expenses. The
Partnership decreased its provision for doubtful accounts by $26,706 in 1995 due
to successful collection efforts on delinquent accounts, as compared to the
establishment of the provision in the amount of $33,251 in the prior year.
The Partnership recorded a net (loss) income per Limited Partnership Unit of
$(12.64), $(24.02) and $4.33 for the years ended December 31, 1995, 1994 and
1993, respectively. The allocation for the year ended December 31, 1994 includes
a cost recovery allocation of profit and loss among the General and Limited
Partners which results in an allocation of net loss to the Limited Partners.
This cost recovery allocation is required to maintain capital accounts
consistent with the distribution provisions of the Partnership Agreement. In
certain periods, the cost recovery of profit and loss may result in an
allocation of net loss to the Limited Partners in instances when the
Partnership's operations were profitable for the period.
Liquidity and Capital Resources
For the year ended December 31, 1995, rental revenue generated from operating
leases was the primary source of funds for the Partnership. As equipment leases
terminate, the General Partner determines if the equipment will be extended to
the same lessee, remarketed to another lessee, or if it is less remarketable,
sold. This decision is made upon analyzing which option would derive the most
favorable results.
Rental income will continue to decrease due to two factors. The first factor is
the rate obtained when the original leases expire and are remarketed. Typically
the remarketed rates are lower due to the decrease in useful life of the
equipment. Secondly, the increasing change of technology in the computer
industry usually decreases the demand for older equipment, thus increasing the
possibility of obsolescence. Both of these factors together will cause
remarketed rates to be lower than original rates and will cause certain leases
to terminate upon expiration. This decrease, however, should not affect the
Partnership's ability to meet its future cash requirements, including long-term
debt obligations. To the extent that future cash flows should be insufficient to
meet the Partnership's operating expenses and liabilities, additional funds
could be obtained through the sale of equipment, or a reduction in the rate of
cash distributions. Future rental revenues amount to $2,690,165 and are to be
received over the next six years (for further discussion, refer to note 4 to the
financial statements).
The Partnership's investing activities resulted in equipment purchases of
$1,747,497, and sales of equipment with a depreciated cost basis of $270,892,
generating $277,080 in proceeds. The Partnership has capital expenditure
commitments of approximately $390,000, which are expected to be consummated
during the first quarter of 1996. The Partnership will not purchase equipment in
the future, except as described above, as the Partnership has reached the end of
its reinvestment period.
The Partnership's financing activities resulted in proceeds from borrowing on
long-term debt of $645,188. Such long-term debt bears interest rates ranging
from 5.75% to 8.25% and the paydown on long-term debt of $352,880 with
installments to be paid monthly. Total debt assumed by the Partnership from
inception is $14,080,163, for a total leverage of 42%.
Cash distributions paid in the first quarter of 1996 are currently at an annual
level of 6% per Limited Partnership Unit, or $7.50 per Limited Partnership Unit
on a quarterly basis. During 1995, the Partnership distributed a total of $42.50
per Limited Partnership Unit which represents a return of capital. For the
quarter ended December 31, 1995, the Partnership declared a cash distribution of
$214,942, of which $10,747 was distributed to the General Partner and $204,195
was distributed to the Limited Partners. The distribution subsequently occurred
on February 29, 1996. The Partnership expects to continue paying distributions
at or near this level in the future. The effects of inflation have not been
significant to the Partnership and are not expected to have any material impact
in future periods.
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP from
CMI Holding Co. Under the new ownership, it is expected that TLP will continue
to operate in the same manner of business as it has in the past.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
The Partners of Wellesley Lease Income Limited Partnership IV:
We have audited the accompanying balance sheets of Wellesley Lease Income
Limited Partnership IV (a Massachusetts Limited Partnership) as of December 31,
1995 and 1994, and the related statements of operations, partners' equity
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1995. In connection with our audits of the financial statements, we
have also audited the accompanying financial statement schedule II for each of
the years in the three-year period ended December 31, 1995. These financial
statements and this financial statement schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and this financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those 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 Wellesley Lease Income Limited
Partnership IV as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Boston, Massachusetts
March 15, 1996
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets
1995 1994
---------------- ----------------
<S> <C> <C>
Investment property, at cost (notes 3 & 4):
Computer equipment $ 7,388,216 $ 8,169,287
Less accumulated depreciation 5,674,559 6,115,213
---------------- ----------------
Investment property, net 1,713,657 2,054,074
Cash and cash equivalents 336,360 843,110
Rents receivable, net (notes 2 & 4) 125,765 52,870
Account receivable - affiliates, net (notes 2 & 9) 43,054 -
Sales receivable, net (note 2) 16,069 113,984
Marketable securities (notes 2 & 8) 4,644 -
---------------- ----------------
Total assets $ 2,239,549 $ 3,064,038
================ ================
Liabilities and Partners' Equity
Liabilities:
Current portion of long-term debt (note 7) $ 491,254 $ 289,005
Accounts payable and accrued expenses - affiliates (note 5) 420,457 32,092
Accounts payable and accrued expenses 237,953 109,857
Unearned rental revenue 27,685 94,523
Long-term debt, less current portion (note 7) 469,249 379,190
---------------- ----------------
Total liabilities 1,646,598 904,667
---------------- ----------------
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 476,748 480,224
Cumulative cash distributions (588,414) (527,515)
Unrealized losses on marketable securities (note 8) (8) -
---------------- ----------------
(110,674) (46,291)
---------------- ----------------
Limited Partners (27,226 units):
Capital contribution, net of offering costs 12,148,459 12,148,459
Cumulative net income (245,511) 98,611
Cumulative cash distributions (11,198,512) (10,041,408)
Unrealized losses on marketable securities (note 8) (811) -
---------------- ----------------
703,625 2,205,662
---------------- ----------------
Total partners' equity 592,951 2,159,371
---------------- ----------------
Total liabilities and partners' equity $ 2,239,549 $ 3,064,038
================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Statements of Operations
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- ---------------
<S> <C> <C> <C>
Revenue:
Rental income $ 1,697,214 $ 2,759,929 $ 3,997,157
Other income 31,147 - -
Interest income 23,035 30,708 34,787
Recovery of net unsecured pre-petition
claim (note 9) 10,757 22,808 -
Net gain (loss) on sale of equipment 6,188 (582,152) (91,259)
--------------- -------------- ---------------
Total revenue 1,768,341 2,231,293 3,940,685
--------------- -------------- ---------------
Costs and expenses:
Depreciation 1,817,022 2,469,682 3,283,628
Interest 51,258 42,350 65,203
Related party expenses (note 5):
Management fees 111,231 178,265 279,978
General and administrative 129,883 122,058 108,149
Provision for doubtful accounts 6,545 33,251 -
--------------- -------------- ---------------
Total costs and expenses 2,115,939 2,845,606 3,736,958
--------------- -------------- ---------------
Net (loss) income $ (347,598) $ (614,313) $ 203,727
=============== ============== ===============
Net (loss) income per
Limited Partnership Unit $ (12.64) $ (24.02) $ 4.33
=============== ============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Statements of Partners' Equity (Deficit)
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
----------------- ---------------- ------------------
<S> <C> <C> <C>
Equity at
December 31, 1992 $ - $ 6,009,030 $ 6,009,030
Net income 85,976 117,751 203,727
Cash distributions (85,976) (1,633,560) (1,719,536)
----------------- ---------------- ------------------
Equity at
December 31, 1993 - 4,493,221 4,493,221
Net income (loss) 39,685 (653,998) (614,313)
Cash distributions (85,976) (1,633,561) (1,719,537)
----------------- ---------------- ------------------
Equity (deficit) at
December 31, 1994 (46,291) 2,205,662 2,159,371
Net loss (3,476) (344,122) (347,598)
Cash distributions (60,899) (1,157,104) (1,218,003)
Unrealized loss on marketable
securities (note 8) (8) (811) (819)
----------------- ---------------- ------------------
Equity (deficit) at
December 31, 1995 $ (110,674) $ 703,625 $ 592,951
================= ================ ==================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (347,598) $ (614,313) $ 203,727
--------------- ---------------- ----------------
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 1,817,022 2,469,682 3,287,547
Provision for doubtful accounts 6,545 33,251 -
Net (gain) loss on sale of equipment (6,188) 582,152 91,259
Net increase in current assets (30,042) (87,070) (30,854)
Net increase (decrease) in current liabilities 449,623 11,745 (266,680)
--------------- ---------------- ----------------
Total adjustments 2,236,960 3,009,760 3,081,272
--------------- ---------------- ----------------
Net cash provided by operating activities 1,889,362 2,395,447 3,284,999
--------------- ---------------- ----------------
Cash flows from investing activities:
Purchase of investment property (1,747,497) (1,571,470) (2,065,486)
Proceeds from sale of investment property 277,080 759,739 619,452
--------------- ---------------- ----------------
Net cash used in investing activities (1,470,417) (811,731) (1,446,034)
--------------- ---------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings under long-term debt 645,188 685,709 99,660
Principal payments on long-term debt (352,880) (666,265) (623,369)
Cash distributions to partners (1,218,003) (1,719,537) (1,719,536)
--------------- ---------------- ----------------
Net cash used in financing activities (925,695) (1,700,093) (2,243,245)
--------------- ---------------- ----------------
Net (decrease) increase in cash and cash equivalents (506,750) (116,377) (404,280)
Cash and cash equivalents at beginning of year 843,110 959,487 1,363,767
--------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 336,360 $ 843,110 $ 959,487
=============== ================ ================
Supplemental cash flow information:
Interest paid during the year $ 51,258 $ 45,231 $ 68,511
=============== ================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(1) Organization and Partnership Matters
Wellesley Lease Income Limited Partnership IV ("the Partnership") was organized
under the Massachusetts Uniform Limited Partnership Act on November 9, 1987. In
exchange for a capital contribution of $1,000, the Partnership has issued all of
its General Partner interests to Wellesley Leasing Partnership, a Massachusetts
Limited Partnership.
The Amended Agreement of Limited Partnership authorizes the issuance of up to
150,000 Limited Partnership units at a gross price per unit of $500, and up to
50 additional units to affiliates.
The Partnership has entered into a Sales Agent Agreement with TLP Securities
Corporation ("TLP Securities"), an affiliate of the General Partner, which acted
as a Dealer/Manager for the offering of Limited Partnership Interests. On March
3, 1988, pursuant to the Dealer/Manager agreement, the Partnership began the
marketing and sale of the units. The Partnership has had a total of five
closings. The closings occurred on May 18, 1988, with 9,104 units, July 11,
1988, with 5,545 units, September 16, 1988, with 5,657 units, October 31, 1988,
with 3,640 units and December 31, 1988, with 3,280 units.
Pursuant to the terms of the Amended Agreement of Limited Partnership,
Distributable Cash From Operations and Profits for federal income tax and
financial reporting purposes from normal operations of the Partnership shall be
allocated 95% to the Limited Partners and 5% to the General Partner. Further,
gains on sales of equipment occurring after the reinvestment period end shall be
allocated first to eliminate negative capital accounts, if any, and second 99%
to the Limited Partners and 1% to the General Partner until "Payout". "Payout"
means the time when the aggregate amount of all distributions to the Limited
Partners of Distributable Cash From Operations and of Distributable Cash From
Sales or Refinancings equals the aggregate amount of the Limited Partners'
original invested capital plus a cumulative 10% annual return (compounded daily)
on their aggregate unreturned invested capital (calculated from the beginning of
the first full fiscal quarter following the Partnership's closing date). Losses
for federal income tax and financial reporting purposes from normal operations
and any Distributable Cash From Sales or Refinancings from gains and losses
shall be allocated 99% to the Limited Partners and 1% to the General Partner
until Payout has occurred, and 85% to the Limited Partners and 15% to the
General Partner thereafter. In addition, special cost recovery allocations may
be required to reflect the differing initial capital contributions of the
General Partner and the Limited Partners. The Partnership's books and records
are in accordance with the terms of the Amended Agreement of Limited
Partnership. Including the distribution for the fourth quarter of 1995 made
February 29, 1996, cumulative distribution to date is $414.63 per unit. This
cumulative distribution per unit amount represents 15.74% of Payout. It is not
anticipated that Payout will occur as of the liquidation of this Partnership.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(2) Summary of Significant Accounting Policies
General
The Partnership's records are maintained on the accrual basis of accounting so
that revenues are recognized as earned and expenses are recognized as incurred.
Assets and liabilities are those of the Partnership and do not include any
assets and liabilities of the individual partners. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Depreciation on investment property purchased prior to January 1, 1993 is
provided using a straight-line basis, generally over a five year period. For
equipment purchased on or after January 1, 1993, depreciation is provided using
a straight-line basis, over a four year period. The Partnership's policy is to
periodically review the estimated fair market value of its equipment to assess
the recoverability of its undepreciated cost. In accordance with this policy,
the Partnership records a charge to depreciation expense in instances when the
net book value of equipment exceeds its net realizable value. Included in
depreciation expense in 1995, 1994 and 1993, is a provision for $700,541,
$500,000 and $500,000, respectively, to properly reflect the equipment
portfolio's net realizable value. Routine maintenance and repairs are expensed
as incurred. Major betterments and enhancements are capitalized and depreciated
in accordance with the Partnership's depreciation policy.
Cash and Cash Equivalents
The Partnership considers cash and short-term investments with original
maturities of three months or less to be cash and cash equivalents.
Allowance for Doubtful Accounts
The financial statements include an allowance for estimated losses on receivable
balances. The allowance for doubtful accounts is based on past write off
experience and an evaluation of potential uncollectible accounts within the
current receivable balances. Receivable balances which are determined to be
uncollectible are charged against the allowance and subsequent recoveries, if
any, are credited to the allowance. At December 31, 1995 and 1994, the allowance
for doubtful accounts included in rents receivable was $34,889 and $33,251,
respectively, and the allowance for doubtful accounts included in sales
receivable was $4,906 and $0, respectively. The allowance for doubtful accounts
- - - affiliates at December 31, 1995 and 1994, was $0 and $6,750, respectively,
which pertained to the outstanding net unsecured pre-petition claim balance.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Marketable Securities
The marketable securities are stated at fair value at the balance sheet date and
consist of 2,185 shares of common stock in Continental Information Systems
Corporation ("CISC") received by the Partnership in the distributions made
December 27, 1994 and July 20, 1995 by the Trustee of the Liquidating Estate of
CIS Corporation, et al, ("the Trustee"), with respect to the outstanding net
unsecured pre-petition claim. During the second quarter of 1995, the stock began
trading, thereby providing an objective valuation measure for establishing the
cost basis. Unrealized gains and losses are recorded directly in partners'
equity except those gains and losses that are deemed to be other than temporary,
which would be reflected in income (see note 8).
Income Taxes
No provision for federal income taxes has been made as the liability for such
taxes is that of the Partners rather than that of the Partnership. Taxable
(loss) income, as reported on Schedule K-1, Form 1065 "Partner's Share of
Income, Credits, Deductions, etc.", was $(381,970), $(480,112) and $967,836 in
1995, 1994 and 1993, respectively (see note 6).
Reclassifications
Certain prior year financial statement items have been reclassified to conform
with the current year's financial statement presentation.
(3) Investment Property
At December 31, 1995, the Partnership owned computer equipment with a
depreciated cost basis of $1,444,837, subject to existing leases and equipment
with a depreciated cost basis of $268,820 in inventory awaiting re-lease or
sale. All purchases of computer equipment are subject to a 3% acquisition fee
paid to the General Partner.
(4) Leases
Description of leasing arrangements:
Operations consist primarily of leasing computer equipment. All equipment leases
are classified as operating leases and expire over the next six years.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Minimum lease payments scheduled to be received in the future under existing
noncancelable operating leases are as follows:
1996 $ 1,272,934
1997 816,853
1998 401,651
1999 105,382
2000 67,335
2001 26,010
---------------
$ 2,690,165
===============
The following schedule provides an analysis of the cost of capital equipment by
major classes as of December 31, 1995:
Computer peripherals $ 3,250,815
Processors & upgrades 1,994,818
Telecommunications 221,646
Other 1,920,937
---------------
$ 7,388,216
===============
Four lessees, American Freightways, Incorporated, Cincinnati Gas & Electric
Company, Halliburton Company and Hughes Aircraft Company, Incorporated, lease
equipment in excess of 10% of the total equipment portfolio. At December 31,
1995, American Freightways, Incorporated, Cincinnati Gas & Electric Company,
Halliburton Company and Hughes Aircraft Company, Incorporated lease equipment
comprising 10.23%, 2.06%, 9.94% and 6.72% of the total equipment portfolio. The
related rental payments comprise 14.14%, 16.68%, 17.22% and 10.40% of total
rental income for the year ended December 31, 1995.
(5) Related Party Transactions
Fees, commissions and other expenses paid or accrued by the Partnership to the
General Partner or affiliates of the General Partner for the years ended
December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Equipment acquisition fees $ 50,898 $ 45,732 $ 60,160
Management fees 111,231 178,265 279,978
Reimbursable expenses paid 119,878 105,601 94,031
------------ ------------ ------------
$ 282,007 $ 329,598 $ 434,169
============ ============ ============
</TABLE>
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Under the terms of the Partnership Agreement, the General Partner is entitled to
an equipment acquisition fee of 3% of the purchase price paid by the Partnership
for the equipment. The General Partner is also entitled to a management fee
equal to 7% of the monthly rental billings collected. Also, the Partnership
reimburses the General Partner and their affiliates for certain expenses
incurred by them in connection with the operations of the Partnership.
(6) Reconciliation of Financial Statement Net (Loss) Income to Taxable (Loss)
Income to Partners
A reconciliation of financial statement net (loss) income to taxable (loss)
income to partners is as follows for the years ended December 31, 1995, 1994 and
1993:
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------- -------------
<S> <C> <C> <C>
Net (loss) income per financial statements $ (347,598) $ (614,313) $ 203,727
Provision for doubtful accounts expense for financial
statement purposes (less than) in excess of provision
for doubtful accounts expense for tax purposes (8,118) 10,444 -
Depreciation expense for financial statement purposes
in excess of depreciation expense for tax purposes 500,855 500,000 764,109
Net loss on sale of equipment for financial statement
purposes less than net loss on sale of equipment
for tax purposes (527,109) (376,243) -
-------------- ------------- -------------
Taxable (loss) income to partners $ (381,970) $ (480,112) $ 967,836
============== ============= =============
</TABLE>
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
Losses for federal tax purposes from normal operations are allocated 99% to the
Limited Partners and 1% to the General Partner. Profits for federal tax purposes
from normal operations are allocated 95% to the Limited Partners and 5% to the
General Partner. In addition, special cost recovery allocations may be required
to reflect the differing initial capital contribution of the General Partner and
the Limited Partners.
(7) Long-term Debt
Long-term debt at December 31, 1995, consisted of two loans for $19,181 and
$12,707 from Randolph Computer Company, each with an interest rate of 6.00% and
one loan for $332,485 from Pioneer Bank and Trust Company with an interest rate
of 8.15%, one loan for $295,463 from Pullman Capital Corporation with an
interest rate of 8.00% and three loans totaling $300,667 from Liberty Bank, each
bearing interest at a rate of 8.125%. The total outstanding debt balance is
collateralized by equipment with a net book value of $1,081,619, and assignment
of the related leases.
The annual maturities of long-term debt for the next three years are as follows:
Year Ending December 31,
1996 $ 491,254
1997 357,786
1998 111,463
--------------
$ 960,503
==============
(8) Fair Values of Financial Instruments
Pursuant to Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which requires investments
in debt and equity securities other than those accounted for under the equity
method to be carried at fair value or amortized cost for debt securities
expected to be held to maturity, the Partnership has classified its investments
in equity securities as available for sale. Accordingly, the net unrealized
gains and losses computed in marking these securities to market are reported as
a component of partners' equity. At December 31, 1995 the difference between the
fair value and the cost basis of these securities is an unrealized loss of $819.
The fair value is based on currently quoted market prices. The cost basis and
estimated fair value of the Partnership's marketable securities at December 31,
1995 are as follows:
<TABLE>
<CAPTION>
1995
Cost Fair
Basis Value
<S> <C> <C>
Investment in Continental Information
Systems Corporation Stock $ 5,463 $ 4,644
======= =======
</TABLE>
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
As was discussed in note 2, Marketable Securities, the Partnership received
stock in CISC as part of the December 27, 1994 and July 20, 1995 distributions
from the Trustee, with respect to the outstanding net unsecured pre-petition
claim. The receivables comprising the net unsecured pre-petition claim had been
fully reserved during prior years; thus, during the second quarter of 1995 when
the stock began actively trading, the carrying amount for the stock was
established to be $2.50 per share which approximated fair value at June 30,
1995.
(9) Bankruptcy of Continental Information Systems Corporation
On January 13, 1989 (the "Petition Date"), Continental Information Systems
Corporation ("Continental"), CIS Corporation ("CIS"), CMI Holding Co.
("Holding"), CMI Corporation ("CMI") and certain of its affiliates
(collectively, the "Debtors"), voluntarily petitioned for relief under Chapter
11 of the United States Bankruptcy Code ("Chapter 11"), and thereafter continued
in the management and operation of their businesses and property as Debtors In
Possession until October 25, 1989, when the United States Bankruptcy Court (the
"Court") confirmed the appointment of James P. Hassett as Chapter 11 trustee
(the "Trustee") of the Debtors. Holding is the parent of TLP and CMI is the
parent of CISMS. TLP and CISMS, neither of which filed under Chapter 11, are the
two Corporate General Partners of Wellesley Leasing Partnership, the General
Partner of the Partnership. Both before and after the Petition Date, CIS and CMI
have acted as agents for the Partnership in selling, leasing and remarketing
Partnership equipment. Holding became a wholly-owned subsidiary of CIS pursuant
to a Court ordered settlement on July 20, 1993.
As of the Petition Date, there were a number of unsettled transactions between
CIS and CMI and the Partnership and other affiliated partnerships (the
Partnership and such other partnerships are herein collectively referred to as
the "Partnerships"), including outstanding accounts receivable and accounts
payable between each of the Partnerships and CIS and CMI and their affiliates,
sales of equipment and related leases from CIS and CMI to each of the
Partnerships for which not all documentation had been completed as of the
Petition Date, and sales of equipment and related leases from which CIS had
failed to remove prior third-party liens. In addition, accounts receivable and
accounts payable continued to accrue and be paid between each of the
Partnerships and CIS and CMI and their affiliates subsequent to the Petition
Date.
On February 28, 1992, the Court granted an order implementing a settlement of
the outstanding issues between each of the Partnerships and the Debtors. The
settlement occurred on March 13, 1992. In the order the Court approved a set-off
on a partnership-by-partnership basis of pre-petition amounts owed by each
affected Debtor to each Partnership to the extent of pre-petition amounts owed
by that Partnership to that Debtor. As a result of the set-off, the Partnership
had a net unsecured pre-petition claim of $37,470 against CMI as of December 31,
1993 which had been fully reserved.
On November 29, 1994, the Court confirmed the Trustee's proposed Joint Plan of
Reorganization ("the Plan") dated October 4, 1994, and the Debtors emerged from
Chapter 11 bankruptcy protection on December 21, 1994. In accordance with the
Plan projections, 100% of each CMI claim would be paid in full, of which 75%
would be cash and 25% would be common stock of the reorganized Continental
Information Systems Corporation ("CISC"), based on a per share price of $4.29.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Notes to Financial Statements
On December 27, 1994, the Partnership received the first distribution from the
Trustee (now Trustee of the Liquidating Estate of CIS Corporation, et al) with
respect to the net unsecured pre-petition claim described above. The
distribution consisted of cash proceeds of $22,808 and 1,844 shares of common
stock in CISC. During the second quarter of 1995, the stock of CISC began
trading, thereby providing an objective valuation method for establishing the
cost basis of $2.50 per share, which approximated fair value at June 30, 1995. A
charge off was made in 1995 in relation to the difference between the Trustee's
original prescribed value of the CISC stock at $4.29 per share and the cost
basis established by the Partnership. On July 20, 1995, the Partnership received
the second and final distribution from the Trustee, consisting of cash proceeds
of $5,294 and 341 shares of CISC. Following the Trustee's second distribution
and the charge off made during the year, the Partnership's net unsecured
pre-petition claim was settled and there are no other outstanding receivable
balances.
(10) Subsequent Events
On January 9, 1996, TLP Holding LLC purchased all the common stock of TLP from
Holding. Under the new ownership, it is expected that TLP will continue to
operate in the same manner of business as it has in the past.
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Schedule II - Valuation and Qualifying Accounts and Reserves
<TABLE>
<CAPTION>
Additions charged
Balance at to (recoveries Balance
beginning credited from) at end
Classification of year costs and expenses Charge-offs of year
<S> <C> <C> <C> <C>
Year ended
December 31, 1993 $ 37,470 $ - $ - $ 37,470
================ ================ ================ =================
Year ended
December 31, 1994 $ 37,470 $ 10,443 $ - $ 47,913
================ ================ ================ =================
Year ended
December 31, 1995 $ 47,913 $ (4,212) $ 3,906 $ 39,795
================ ================ ================ =================
</TABLE>
<PAGE>
WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Computer Equipment Portfolio (Unaudited)
December 31, 1995
Lessee
American Freightways, Incorporated American Telephone and Telegraph Company,
Incorporated Bassin Distributors, Incorporated Blue Cross of Western New York
Burroughs Welcome Company, Incorporated Carr Separation, Incorporated Case
Corporation Chrysler Corporation Cincinnati Gas & Electric Company Comdisco,
Incorporated Coulter Corporation Delphi Internet, Incorporated FAX
International, Incorporated First National Bank of Boston Halliburton Company
H.J. Meyers Company, Incorporated Hughes Aircraft Company, Incorporated Internet
Access Company, Incorporated Mastercard, Incorporated ON Technology Corporation
Sports & Recreation, Incorporated
Equipment Description Acquisition Price
Computer peripherals $ 3,250,815
Processors & upgrades 1,994,818
Telecommunications 221,646
Other 1,920,937
----------------
$ 7,388,216
================
<PAGE>
Exhibit 11 WELLESLEY LEASE INCOME LIMITED PARTNERSHIP IV
(A Massachusetts Limited Partnership)
Computation of Net (Loss) Income per Limited Partnership Unit
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ---------------- ----------------
<S> <C> <C> <C>
Net (loss) income $ (347,598) $ (614,313) $ 203,727
Gain on sale (8,470) (237,777) (248,042)
Loss on sale 2,282 819,929 339,301
Special cost recovery allocation - (46,291) -
-------------- ---------------- ----------------
Available income from operations (353,786) (78,452) 294,986
-------------- ---------------- ----------------
Allocations to General Partner:
(Loss) income from operations (3,538) (785) 14,749
Gain on sale 85 2,378 74,620
Loss on sale (23) (8,199) (3,393)
Special cost recovery allocation - 46,291 -
-------------- ---------------- ----------------
(Loss) income allocated to General Partner (3,476) 39,685 85,976
-------------- ---------------- ----------------
(Loss) income allocated to Limited Partners $ (344,122) $ (653,998) $ 117,751
============== ================ ================
Number of Limited Partnership Units 27,226 27,226 27,226
Net (loss) income per Limited Partnership Unit $ (12.64) $ (24.02) $ 4.33
============== =============== ================
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Statement Disclosures.
None.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1. of this
report, the General Partner of the Partnership is Wellesley Leasing Partnership.
Under the Partnership Agreement, the General Partner is solely responsible for
the operation of the Partnership's properties, and the Limited Partners have no
right to participate in the control of such operations. The General Partner has
three Corporate General Partners: TLP and CISMS, both Massachusetts corporations
and Waddell & Reed (formerly TUPS), a Missouri corporation. The names and ages
of the Directors and Executive Officers of the Corporate General Partners are as
follows:
<TABLE>
<CAPTION>
TLP
<S> <C> <C>
Name Title Age
Arthur P. Beecher * President and Director 59
Thomas J. Prinzing * Director 49
Frank J. Corcoran Director, Vice President, Treasurer 45
and Clerk
CISMS
Name Title Age
Arthur P. Beecher * President and Assistant Secretary 59
Thomas J. Prinzing * Director 49
Frank J. Corcoran Vice President, Treasurer and Clerk 45
* Executive Committee Member
Waddell & Reed
Name Title Age
Keith A. Tucker President, Chief Executive Officer 51
and Director
Robert L. Hechler Vice President, Chief Operations Officer, 59
Treasurer and Director
Henry J. Herrmann Vice President, Chief Investment Officer 54
and Director
George L. Wirkkula Vice President, National Sales Manager 59
and Director
Sharon K. Pappas Vice President, Secretary 37
and General Counsel
</TABLE>
<PAGE>
(c) Identification of certain significant persons
See Item 10. (a-b)
(d) Family relationship
No family relationship exists between any of the foregoing Directors or
Officers.
(e) Business experience
Arthur P. Beecher is President and Director of TLP. He is also President and
Assistant Secretary of CISMS. Prior to joining TLP in October 1983, Mr. Beecher
was an Officer of Computer Systems of America, Inc., in Boston, Massachusetts,
most recently as Vice President, Finance and Administration since 1975. Mr.
Beecher holds a B.S. from Boston University and is a Certified Public
Accountant.
Thomas J. Prinzing is a Director of TLP and CISMS. On December 18, 1995, Mr.
Prinzing was elected President, Chief Executive Officer and Director of
Continental Information Systems Corporation ("CISC"). Mr. Prinzing is also the
President of CIS Air Corporation, a position he has held since 1991. From 1984
to 1991 he was Senior Vice President and Chief Financial Officer of CIS. Mr.
Prinzing has an Honors Bachelor of Commerce degree of the University of Windsor
and is a Certified Public Accountant.
Frank J. Corcoran is Director, Vice President, Treasurer and Clerk of TLP, and
is also Vice President, Treasurer and Clerk of CISMS. Mr. Corcoran is Senior
Vice President, Chief Financial Officer, Treasurer and Director of CIS and a
Vice President and Treasurer of Holding. Prior to joining CIS in November 1994,
he was with Unisys Finance Corporation, from 1985 to 1994, most recently as the
Vice President and General Manager. Mr. Corcoran holds a B.S. from Wayne State
University, a M.S. in Taxation from Walsh College and is a Certified Public
Accountant.
Keith A. Tucker is President, Chief Executive Officer and Director of Waddell &
Reed; Chairman of the Board of Directors of WRIMCO, Waddell & Reed, Inc.,
Waddell & Reed Services Company, Waddell & Reed Asset Management Company and
Torchmark Distributors, Inc., an affiliate of Waddell & Reed, Inc.; Vice
Chairman of the Board of Directors, Chief Executive Officer and President of
United Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; and President of each of the funds in the United, Waddell
& Reed and TMK/United mutual fund groups. He is also Director of Southwestern
Life Corporation. Prior to joining Torchmark Corporation in 1991, Mr. Tucker was
with Trivest, Inc. and Trivest Securities Corporation in Miami, Florida since
1987, most recently as the Senior Vice President and President, respectively.
Prior to Trivest, Inc., he was Director of Atlantis Group, Inc., a diversified
company. Mr. Tucker holds a B.B.A. and a J. D. both from the University of
Texas.
Robert L. Hechler is Vice President, Chief Operations Officer, Director and
Treasurer of Waddell & Reed; Executive Vice President, Principal Financial
Officer, Director and Treasurer of WRIMCO; President, Chief Executive Officer,
Principal Financial Officer, Director and Treasurer of Waddell & Reed, Inc.;
Director and Treasurer of Waddell & Reed Services Company; Vice President,
Treasurer and Director of Torchmark Distributors, Inc.; and Vice President and
Principal Financial Officer of each of the funds in the United, Waddell & Reed
and TMK/United mutual fund groups. He has been employed by Waddell & Reed and
its affiliates since 1977. Mr. Hechler holds a B.S. from the University of
Illinois and an M.B.A. from the University of Chicago.
Henry J. Herrmann is Vice President, Chief Investment Officer and Director of
Waddell & Reed; Director of Waddell & Reed, Inc.; President, Chief Executive
Officer, Chief Investment Officer and Director of WRIMCO and Waddell & Reed
Asset Management Company; Senior Vice President and Chief Investment Officer of
United Investors Management Company; and Vice President of each of the funds in
the United, Waddell & Reed and TMK/United mutual fund groups. He has been
employed by Waddell & Reed and its affiliates since 1971. Mr. Herrmann holds a
B.S. from New York University.
George L. Wirkkula is Vice President, National Sales Manager and Director of
Waddell & Reed; Executive Vice President, National Sales Manager and a Director
of Waddell & Reed, Inc.; and President and Director of Waddell & Reed Leasing,
Inc. He is also a member of the Investment Committee for Hanover Lease Income
Limited Partnership. He has been employed by Waddell & Reed and its affiliates
since 1973. Mr. Wirkkula holds a B.S. from Macalester College.
Sharon K. Pappas is Vice President, Secretary and General Counsel of Waddell &
Reed; Senior Vice President, Secretary and General Counsel of WRIMCO and Waddell
& Reed, Inc.; Director, Senior Vice President, Secretary and General Counsel of
Waddell & Reed Services Company; Director, Secretary and General Counsel of
Waddell & Reed Asset Management Company; Vice President, Secretary and General
Counsel of Torchmark Distributors, Inc.; formerly, Assistant General Counsel of
WRIMCO, Waddell & Reed Financial Services, Inc., Waddell & Reed, Inc., Waddell &
Reed Asset Management Company and Waddell & Reed Services Company. She is Vice
President, Secretary and General Counsel of each of the funds in the United,
Waddell & Reed and TMK/United mutual fund groups. Prior to joining Waddell &
Reed and its affiliates in 1989, Ms. Pappas was employed with Stinson, Mag &
Fizzell in Kansas City, Missouri. Ms. Pappas holds a B.S. from Kansas State
University and a J.D. from the University of Kansas.
(f) Involvement in certain legal proceedings
The Partnership is not aware of any legal proceedings against any Director or
Executive Officer of the Corporate General Partners which may be important for
the evaluation of any such person's ability and integrity.
<PAGE>
Item 11. Management Remuneration and Transactions.
(a), (b), (c), (d), and (e): The Officers and Directors of the Corporate General
Partners receive no current or proposed direct remuneration in such capacities,
pursuant to any standard arrangements or otherwise, from the Partnership. In
addition, the Partnership has not paid and does not propose to pay any options,
warrants or rights to the Officers and Directors of the Corporate General
Partners. There exists no remuneration plan or arrangement with any Officer or
Director of the Corporate General Partners resulting from the resignation,
retirement or any other termination. See note 5 to the financial statements
included in Item 8. of this report for a description of the remuneration paid by
the Partnership to the General Partner and its affiliates during 1995, 1994 and
1993.
<PAGE>
Item 12. Security Ownership of Certain Owners and Management.
By virtue of its organization as a limited partnership, the Partnership has
outstanding no securities possessing traditional voting rights. However, as
provided for in Section 13.2 of the Amended Agreement of Limited Partnership
(subject to Section 13.3), a majority interest of the Limited Partners have
voting rights with respect to:
1. Amendment of the Limited Partnership Agreement;
2. Termination of the Partnership;
3. Removal of the General Partner; and
4. Approval or disapproval of the sale of substantially all the assets of the
Partnership.
No person or group is known by the General Partner to own beneficially more than
5% of the Partnership's 27,226 outstanding Limited Partnership Units as of
December 31, 1995.
By virtue of its organization as a limited partnership, the Partnership has no
Officers or Directors. See also note 1 to the financial statements included in
Item 8. and Item 10. of this report.
<PAGE>
Item 13. Certain Relationships and Related Transactions.
(a), (b), and (c): The General Partner of the Partnership is Wellesley Leasing
Partnership, a Massachusetts general partnership which in turn has three
Corporate General Partners: TLP and CISMS, both Massachusetts corporations and
Waddell & Reed, a Missouri corporation. The Corporate General Partners'
Directors and Executive Officers are identified in Item 10. of this report. The
Partnership was not involved in any transaction involving any of these Directors
or Officers or any member of the immediate family of these individuals, nor did
any of these persons provide services to the Partnership for which they received
direct or indirect remuneration. Similarly, there exists no business
relationship between the Partnership and any of the Directors or Officers of the
Corporate General Partners, nor were any of the individuals indebted to the
Partnership.
The General Partner is responsible for acquiring, financing, leasing and selling
equipment for the Partnership. CISMS proposes for the Partnership equipment
acquisitions, leasing transactions, financing and refinancing transactions and
sale transactions, for approval by the Executive Committee and oversees the
operation, management and use of each Partnership's equipment. TLP oversaw the
marketing of the Units and oversees all administrative functions of the
Partnership and, together with Waddell & Reed, provides substantially all of the
General Partner's capital resources. In consideration of such services and
capital commitments, TLP receives 30%, Waddell & Reed receives 10% and CISMS
receives 60% of all compensation received by the General Partner in connection
with the formation and operation of the Partnership (including equipment
management fees, acquisition fees, subordinated remarketing fees and the General
Partner's share of Distributable Cash From Sales or Refinancings), except for
acquisition fees, as to which TLP receives 15%, Waddell & Reed receives 10% and
CISMS receives 75%. The General Partner also was reimbursed in an amount equal
to 3% of the gross proceeds of the Partnership's offerings for organizational
and offering expenses; all such expenses in excess of that amount were borne by
TLP. See note 5 to the financial statements included in Item 8 of this report
for a description of payments made by the Partnership to the General Partner.
For information regarding the settlements between the Partnership and the
Liquidating Estate of CIS Corporation, et al, arising out of the emergence from
bankruptcy of CIS and CMI, see Item 3. Legal Proceedings.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K: None.
(a) 1. Financial Statements Page No.
Independent Auditors' Report 17
Balance Sheets at December 31, 1995 and 1994 18
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 19
Statements of Partners' Equity (Deficit) for
the Years Ended December 31, 1995, 1994 and 1993 20
Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993 21
Notes to Financial Statements 22 - 29
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and Reserves 30
All other financial statement schedules are omitted because they are
not applicable, the data is not significant, or the required
information is shown elsewhere in this report.
Computer Equipment Portfolio (Unaudited) 31
3. Exhibit Index
11 Statement regarding computation of net (loss) income per Limited Partnership Unit 32
(b) Report on Form 8-K
N/A
</TABLE>
<PAGE>
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 to be signed on its
behalf by the undersigned, thereunto duly authorized.
WELLESLEY LEASE INCOME LIMITED
PARTNERSHIP IV
(Registrant)
By: Wellesley Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General
Partners
Date: March 28, 1996
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000825851
<NAME> WELLESLEY IV 12/31/95
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 336,360
<SECURITIES> 4,644
<RECEIVABLES> 224,683
<ALLOWANCES> 39,795
<INVENTORY> 0
<CURRENT-ASSETS> 525,892
<PP&E> 7,388,216
<DEPRECIATION> 5,674,559
<TOTAL-ASSETS> 2,239,549
<CURRENT-LIABILITIES> 686,095
<BONDS> 960,503
<COMMON> 12,149,459
0
0
<OTHER-SE> (11,556,508)
<TOTAL-LIABILITY-AND-EQUITY> 2,239,549
<SALES> 1,697,214
<TOTAL-REVENUES> 1,768,341
<CGS> 0
<TOTAL-COSTS> 111,231
<OTHER-EXPENSES> 1,946,905
<LOSS-PROVISION> 6,545
<INTEREST-EXPENSE> 51,258
<INCOME-PRETAX> (347,598)
<INCOME-TAX> 0
<INCOME-CONTINUING> (347,598)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (347,598)
<EPS-PRIMARY> (12.64)
<EPS-DILUTED> 0
</TABLE>
