<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 1995
Commission File Number 33-24159
Medical Equipment Income Fund, Limited Partnership
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(Name of small business issuer as specified in its charter)
Connecticut 13-3471888
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Whitehall Street, Suite 1500, New York, New York 10004
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(Address of principal executive office)
(212) 859-0200
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past twelve months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES: X NO:
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PART I
Item 1. Financial Statements
Statement of Financial Condition as of September 30, 1995 3
Statements of Operations for the nine month periods ended
September 30, 1995, and September 30, 1994 4
Statements of Operations for the three month periods ended
September 30, 1995, and September 30, 1994 5
Statement of Changes in Partnership Capital for the nine
months ended September 30, 1995, and September 30, 1994 6
Statement of Cash Flows for the nine months ended
September 30, 1995, and September 30, 1994 7
Notes to Financial Statements 8
2
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MEDICAL EQUIPMENT INCOME FUND, LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL CONDITION
AS OF September 30, 1995
Assets
------
Cash and Cash Equivalents (Note A) $ 565,628
Net Investment in Direct Financing Leases (Note C) 371,535
Other Assets (Note B) 195,325
----------
Total Assets $1,132,488
==========
Liabilities and Partners' Capital
---------------------------------
LIABILITIES:
Notes Payable--nonrecourse (Note F) $ 34,180
Accrued expenses and other liabilities 42,211
-----------
Total Liabilities 76,391
-----------
PARTNERS' CAPITAL: (Note G)
General Partner (30 Units) (150,507)
Limited Partners (7,121.92 Units) 1,206,604
-----------
Total Partners' Capital 1,056,097
-----------
Total Liabilities and Partners' Capital $1,132,488
===========
The accompanying notes are an integral part of these statements
3
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MEDICAL EQUIPMENT INCOME FUND, LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED
September 30, 1995, AND September 30, 1994
1995 1994
---- ----
REVENUES:
Leasing (Notes E and H) $ 192,460 $505,637
Interest Income 52,528 54,164
--------- --------
Total Revenues 244,988 559,801
EXPENSES:
Interest Expense 13,587 34,514
Depreciation & Amortization 40,362 109,179
Professional Fees (Note B) 26,250 94,486
Equipment Management Fees (Note B) 12,196 28,245
Loss on Sale of Equipment 268,651 --
Other Expenses 12,609 8,167
--------- --------
Total Expenses $373,655 $274,591
--------- --------
NET INCOME( LOSS) $(128,667) $285,210
========= ========
Net income per unit, based on the daily weighted
average numberof units outstanding:
$7,205.53 and $7,439.770, respectively.
General Partner Units (30.00) $ (214.45) $ 475.35
========= ========
Limited Partner Units (7175.53, 7409.77) $ (17.03) $ 36.57
========= ========
The accompanying notes are an integral part of these statements.
4
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MEDICAL EQUIPMENT INCOME FUND, LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
September 30, 1995, AND September 30, 1994
1995 1994
---- ----
REVENUES:
Leasing (Notes E and H) $ 95,690 $297,085
Interest Income 6,072 22,673
--------- --------
Total Revenues 101,762 319,758
EXPENSES:
Interest Expense 2,707 9,495
Depreciation & Amortization 1,633 25,460
Professional Fees (Note B) 8,750 26,300
Equipment Management Fees (Note B) 2,889 9,415
Loss on Sale of Equipment 268,651 --
Other Expenses 762 3,528
--------- --------
Total Expenses $ 285,392 $ 74,198
--------- --------
NET INCOME (LOSS) $(183,630) $245,560
========= ========
Net income per unit, based on the daily weighted
average number of units outstanding:
$7,196.716 and $7,439.01, respectively. $ 1.75 $ 1.04
========= ========
General Partner Units (30.00) $ (306.05) $ 409.27
========= ========
Limited Partnership (7,166.716 and 7,409.01) $ (24.34) $ 31.49
========= ========
The accompanying notes are an integral part of these statements.
5
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MEDICAL EQUIPMENT INCOME FUND, LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED
September 30, 1995, AND September 30, 1994
General Limited
Partner Partners Total
------- -------- -----
Balance, December 31, 1993 $(121,753) $4,080,628 $3,958,875
Redemption of Units 0 (108,885) (108,885)
Distribution to Partners (41,714) (735,636) (777,350)
Net Income for the Period 14,260 270,950 285,210
--------- ---------- ----------
Balance, September 30, 1994 $(139,712) $3,497,562 $3,357,850
========= ========== ==========
Balance, December 31, 1994 $(144,074) $3,244,888 $3,100,814
Redemption of Units -- (14,868) (14,868)
Distribution to Partners -- (1,901,180) (1,901,180)
Net Loss for the Period (6,433) (122,236) (128,669)
--------- ---------- ----------
Balance, September 30, 1995 $(150,507) $1,206,604 $1,056,097
========= ========== ==========
The accompanying notes are an integral part of these statements.
6
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MEDICAL EQUIPMENT INCOME FUND, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
September 30, 1995, AND September 30, 1994
For the Nine Months Ended September 30,
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (128,669) $285,210
Adjustments to reconcile net income to net cash
provided by (used in) operating expenses:
Depreciation and amortization 40,362 109,179
Decrease/(Increase) in other assets (3,313) 236,770
(Decrease)/Increase in accrued expenses (23,092) (77,006)
Amortization of unearned interest (56,055) (102,921)
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Total adjustments (42,098) 166,022
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NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (170,767) 451,232
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collection of net investment in direct
financing leases 385,218 812,646
Increase/(Decrease in net sales tax payable (17,988) (7,750)
Loss on Sale of Equipment (net of cash proceeds) 305,651 --
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 672,881 804,896
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid on notes payable (168,555) (180,418)
Partners' capital redemptions (14,868) (108,885)
Distributions paid to partners (2,061,347) (779,386)
---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (2,244,770) (1,068,689)
---------- ----------
NET INCREASE/(DECREASE) IN
CASH EQUIVALENTS (1,742,656) 187,439
CASH EQUIVALENTS, Beginning of Period 2,308,284 1,783,844
CASH EQUIVALENTS, End of Period $ 565,628 $1,971,283
========== ==========
The accompanying notes are an integral part of these statements
7
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MEDICAL EQUIPMENT INCOME FUND, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Business
MEDICAL EQUIPMENT INCOME FUND, LIMITED PARTNERSHIP (the "Partnership"), is a
Connecticut limited partnership organized in September 1988. The Partnership
was formed to acquire and lease equipment under operating or direct financing
leases with terms of two to eight years, concentrating in medical and
telecommunications equipment. Vision Limited Partnership is the General
Partner. Leases are with medical groups principally located in the Northeast
region of the United States. The Partnership commenced its operations in
September 1989.
2. Lease and Revenue Recognition
The Partnership leases equipment under both operating and direct financing
leases.
Revenues from operating leases are recognized monthly in accordance with the
lease provisions. These leases have terms of from two to five years.
Lease transactions that meet the relevant accounting criteria for treatment as
direct financing leases are recognized on the date the equipment is accepted
and, at that time, the Partnership records a gross receivable, net of unearned
income. Unearned income represents the excess of gross receivables over
equipment costs and is recorded as revenue over the term of the lease, based on
the interest method. The leases have terms of from four to seven years. On
certain direct financing leases, the Partnership earns contingent rentals based
upon equipment usage. Residual values are not material.
Under all lease agreements the Partnership retains title to the equipment. The
lessee bears the cost to maintain and insure the asset. At the end of the
lease, the lessee has the option of purchasing the asset at fair market value,
continuing the lease for an additional period of time, or returning the asset.
3. Property, Equipment, and Depreciation
Property and equipment held under operating leases or in inventory are recorded
at cost. Depreciation is provided for financial statement purposes on the
straight-line method. The estimated useful life in computing depreciation is
ten years.
4. Income Taxes
The Partnership is not subject to income taxes. The net income or loss of the
Partnership is reportable by each of the partners, as to their distributive
share.
5. Cash Equivalents
The Partnership considers all highly liquid investments with initial maturities
of three months or less
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to be cash equivalents.
NOTE B - RELATED PARTY TRANSACTIONS
The General Partner acts in the capacity of equipment manager for the
Partnership. During the nine months ended September 30, 1995 and 1994, the
General Partner earned fees, which are included in "equipment management fees"
in the financial statements, as follows:
1995 1994
---- ----
Equipment management fee, net 6,098 13,427
NOTE C - NET INVESTMENT IN DIRECT FINANCING LEASES
Net investment leases as of September 30, 1995, consists of:
Minimum lease payments receivable $411,817
Unearned income (40,282)
--------
Net investment in direct financing leases $371,535
========
Equipment financed under direct financing leases is primarily medical diagnostic
equipment.
Minimum lease payments, under direct financing leases due, are to be received as
follows:
1995 193,317
1996 114,000
1997 104,500
---------
$411,817
NOTE D - OFF-LEASE EQUIPMENT
There was no off-lease equipment held as of September 30, 1995.
NOTE E NOTES PAYABLE - NONRECOURSE
Notes payable to banks which mature between October 1, 1995, and December 31,
1995 consist of nonrecourse notes secured by equipment. The notes are payable
monthly together with fixed interest at rates from 13.01% to 13.02%. Future
minimum payments on the notes are as follows (including $1,569 in interest):
Oct. 1-December 31 1995 $35,749
-------
Securitized equipment consists of direct financing and property held in
inventory with a net book value of approximately $340,357 as of September 30,
1995.
9
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NOTE F - PARTNERSHIP AGREEMENT
The Partnership's profits and losses are generally allocated five percent to the
general partner and ninety-five percent to the limited partners and can change
upon certain returns on the Partnership capital balance.
The Partnership may make certain qualified redemptions, including redemptions of
units upon the death of a limited partner. No more than 10% of the outstanding
units may be redeemed in any one year and no more than 25% of the outstanding
units may be redeemed over the life of the Partnership.
The Partnership Agreement requires that the Partnership be terminated no later
than December 31, 2010, or earlier, at the occurrence of certain events as
defined in the Agreement.
NOTE G - MAJOR CUSTOMERS
The majority of the Partnership's customers are located in the northeastern
United States. Customers providing at least 10% of the lease revenue of the
Partnership for the nine months ended September 30, 1995, and September 30,
1994, were as follows:
Nine Months Ended September 30
------------------------------
1995 1994
---- ----
North Bronx Services Group -- 39.10%
Mary Immaculate Hospital 53.22% 19.90%
East Bergen Services Group 46.63% 37.10%
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
For the nine months ended September 30, 1995 and 1994, leasing revenues and
contingent rental income totalled $192,460 and $505,637, respectively, and
interest income totalled $52,528 and $54,164, respectively. Leasing revenues,
which include base rentals paid by lessees of medical equipment, decreased in
1995 primarily because of the continued liquidation of various leases of medical
equipment. In addition, due to the requirements of FASB 13, revenue is
recognized for direct financing leases in a manner which reduces book income
incrementally, relative to a constant lease payment stream. As a result,
reported leasing revenues can be expected to continue to decrease as the leases
mature or as equipment is sold off. Interest income was earned on funds not
invested in equipment. The decrease in interest income for the nine month
period ended September 30, 1995, as compared with the same period in 1994, is
due primarily to the decreased amount of cash and cash equivalents held by the
Partnership in the second half of 1995.
The Partnership experienced a loss of $268,651 on the sale of medical equipment
during the quarter ended September 30, 1995. Such losses can be attributed to
both technological obsolescence and a lack of demand for CT devices.
Net losses for the nine months ended September 30, 1995, was $128,667 or
$17.03 per Limited Partnership unit as compared with a net profit of $285,210 or
$ 36.57 per Limited Partner unit for the nine months ended September 30, 1994.
The decrease in leasing revenues and the loss on sale of equipment were
partially offset by reductions in the related expense items of depreciation
expense, and professional fees.
The Partnership's primary source of funds for the nine months ended September
30, 1995 and 1994, was the Partnership's leasing operations.
The Partnership has financed approximately 29.44% of the acquisition cost of its
existing equipment with nonrecourse promissory notes bearing annual interest
rates ranging from 13.01% to 13.02% due in monthly installments through 1995.
Such notes are secured by liens upon all or a portion of the equipment and
leases relating thereto.
Proceeds received from the sale of equipment generally will be distributed to
the partners based on their pro-rata unit holdings. Distributions in the amount
of $1,901,180 were made during the nine month period ended September 30, 1995.
The General partner anticipates that funds from operations in the remainder of
1995 will be adequate to cover operating expenses.
11
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is not aware of any pending legal proceedings or contemplated
governmental proceedings to which it is a party or to which any of its assets
are subject.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the quarter
ended September 30, 1995.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
No exhibits are required to be filed with this report.
b. Reports on Form 8-K
There were no reports on Form 8-K filed by the Partnership during the
quarter ended September 30, 1995.
12
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: November 20, 1995
MEDICAL EQUIPMENT INCOME FUND, LIMITED PARTNERSHIP
By: Vision Limited Partnership, General Partner
By: Vision Capital Management, Inc., General Partner
By: Howard Rothman
-----------------------------------
Howard M. Rothman, Executive Vice President,
Chief Operating Officer, Secretary, and
Director
Eric Gaffin
-----------------------------------
Eric Gaffin, Acting Controller
13
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