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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2002
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____
Commission file number: 0-19232
Fidelity Leasing Income Fund VII, L.P.
____________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 23-2581971
____________________________________________________________________________
(State of organization) (I.R.S. Employer Identification No.)
1845 Walnut Street, Suite 1000, Philadelphia, Pennsylvania 19103
____________________________________________________________________________
(Address of principal executive offices) (Zip code)
(215) 574-1636
____________________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _____
Page 1 of 15
Part I: Financial Information
Item 1: Financial Statements
FIDELITY LEASING INCOME FUND VII, L.P.
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
June 30, December 31,
2002 2001
____________ ____________
Cash and cash equivalents $5,445,092 $3,877,912
Accounts receivable 180,368 254,207
Due from related parties 1,108 83,631
Net investment in direct financing leases 1,878,199 4,935,434
Equipment under operating leases
(net of accumulated depreciation
of $145,604 and $286,489,
respectively) 339,690 450,623
Equipment held for sale or lease 88,642 88,642
__________ __________
Total assets $7,933,099 $9,690,449
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 1,443 $ 64,745
Accounts payable and
accrued expenses 34,420 38,433
Due to related parties 14,474 23,591
__________ __________
Total liabilities 50,337 126,769
Partners' capital 7,882,762 9,563,680
__________ __________
Total liabilities and
partners' capital $7,933,099 $9,690,449
========== ==========
The accompanying notes are an integral part of these financial statements.
2
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2002 2001 2002 2001
____ ____ ____ ____
Income:
Earned income on direct
financing leases $110,931 $148,779 $201,154 $303,048
Rentals 47,941 27,377 106,432 52,881
Interest 32,132 25,109 57,945 45,624
Gain on sale of equipment,
net - 110 14,854 31,695
Other 2,679 2,166 16,462 3,806
________ ________ ________ ________
193,683 203,541 396,847 437,054
________ ________ ________ ________
Expenses:
Depreciation 42,875 18,435 90,787 36,870
General and administrative 44,382 34,429 82,336 58,262
General and administrative
to related party 38,366 36,722 83,280 75,129
Management fee to
related party 45,051 21,181 71,346 41,399
________ ________ ________ ________
170,674 110,767 327,749 211,660
________ ________ ________ ________
Net income $ 23,009 $ 92,774 $ 69,098 $225,394
======== ======== ======== ========
Net income per equivalent
limited partnership unit $ 0.47 $ 3.17 $ 1.99 $ 7.70
======== ======== ======== ========
Weighted average number of
equivalent limited
partnership units outstanding
during the period 25,510 28,810 26,242 28,866
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
3
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENT OF PARTNERS' CAPITAL
For the six months ended June 30, 2002
(Unaudited)
General Limited Partners
Partner Units Amount Total
_______ _____ ______ _____
Balance, January 1, 2002 $(23,422) 64,773 $9,587,102 $9,563,680
Cash distributions (17,500) - (1,732,516) (1,750,016)
Net income 17,000 - 52,098 69,098
________ ______ __________ __________
Balance, June 30, 2002 $(23,922) 64,773 $7,906,684 $7,882,762
======== ====== ========== ==========
The accompanying notes are an integral part of these financial statements.
4
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2002 and 2001
(Unaudited)
2002 2001
____ ____
Cash flows from operating activities:
Net income $ 69,098 $ 225,394
__________ __________
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 90,787 36,870
Write-down of equipment to net
realizable value - -
Gain on sale of equipment, net (14,854) (31,695)
(Increase) decrease in accounts receivable 73,839 38,756
(Increase) decrease in due from related
parties 82,523 (60,937)
Increase (decrease) in lease rents paid
in advance (63,302) 39,563
Increase (decrease) in accounts payable
and accrued expenses (4,013) (28,465)
Increase (decrease) in due to related
parties (9,117) (16,507)
Increase (decrease) in security deposits - (67,825)
__________ __________
155,863 (90,240)
__________ __________
Net cash provided by operating activities 224,961 135,154
__________ __________
Cash flows from investing activities:
Investment in direct financing leases - (652,894)
Proceeds from sale of equipment 35,000 31,695
Proceeds from direct financing leases,
net of earned income 3,057,235 1,633,098
__________ __________
Net cash provided by investing activities 3,092,235 1,011,899
__________ __________
Cash flows from financing activities:
Distributions (1,750,016) (300,000)
__________ __________
Net cash used in financing activities (1,750,016) (300,000)
__________ __________
Increase in cash and cash equivalents 1,567,180 847,053
Cash and cash equivalents, beginning
of period 3,877,912 2,055,814
__________ __________
Cash and cash equivalents, end of period $5,445,092 $2,902,867
========== ==========
The accompanying notes are an integral part of these financial statements.
5
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2002
(Unaudited)
The accompanying unaudited condensed financial statements have been prepared
by the Fund in accordance with accounting principles generally accepted in
the United States of America, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of Management, all ad-
justments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included.
1. EQUIPMENT LEASED
The Fund has equipment leased under the direct financing method in accor-
dance with Statement of Financial Accounting Standards No. 13. This
method provides for recognition of income (the excess of the aggregate
future rentals and estimated unguaranteed residuals upon expiration of
the lease over the related equipment cost) over the life of the lease
using the interest method. The Fund's direct financing leases are for
initial lease terms ranging from 7 to 60 months.
Unguaranteed residuals for direct financing leases represent the estimated
amounts recoverable at lease termination from lease extensions or disposi-
tion of the equipment. The Fund reviews these residual values quarterly.
If the equipment's fair market value is below the estimated residual value,
an adjustment is made.
The net investment in direct financing leases as of June 30, 2002 is as
follows (unaudited):
Minimum lease payments to be received $ 774,000
Unguaranteed residuals 1,146,000
Unearned rental income (19,000)
Unearned residual income (23,000)
__________
$1,878,000
==========
The Fund also has equipment under operating leases. The Fund's operating
leases are for initial lease terms of 21 to 58 months. Generally, operat-
ing leases will not recover all of the undepreciated cost and related
expenses of its rental equipment during the initial lease terms and the
Fund is prepared to remarket the equipment in future years. Fund policy
is to review quarterly the expected economic life of its rental equipment
in order to determine the recoverability of its undepreciated cost. Recent
and anticipated technological developments affecting the equipment and
competitive factors in the marketplace are considered among other things,
as part of this review. In accordance with accounting principles generally
accepted in the United States of America, the Fund writes down its rental
equipment to its estimated net realizable value when the amounts are
reasonably estimated and only recognizes gains upon actual sale of its
rental equipment.
6
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. EQUIPMENT LEASED (Continued)
The future approximate minimum rentals to be received on noncancellable
direct financing and operating leases as of June 30, 2002 are as follows:
Years Ending December 31 Direct Financing Operating
________________________ ________________ _________
2002 $662,000 $ 96,000
2003 112,000 129,000
________ ________
$774,000 $225,000
======== ========
2. RELATED PARTY TRANSACTIONS
The General Partner receives 5% of rental payments on equipment under
operating leases and 2% of rental payments (as opposed to earned income)
on full pay-out leases for administrative and management services per-
formed on behalf of the Fund. Full pay-out leases are noncancellable
leases for which the rental payments during the initial term are at least
sufficient to recover the purchase price of the equipment, including
acquisition fees. This management fee is paid monthly only if and when
the Limited Partners have received distributions for the period from
January 1, 1991 through the end of the most recent quarter equal to
a return for such period at a rate of 12% per year on the aggregate
amount paid for their units.
The General Partner may also receive up to 3% of the proceeds from the
sale of the Fund's equipment for services and activities to be performed
in connection with the disposition of equipment. The payment of this
sales fee is deferred until the Limited Partners have received cash
distributions equal to the purchase price of their units plus a 12%
cumulative compounded priority return. Based on current estimates, it
is not expected that the Fund will be required to pay this sales fee to
the General Partner.
Additionally, the General Partner and its parent company are reimbursed by
the Fund for certain costs of services and materials used by or for the
Fund except those items covered by the above-mentioned fees. Following
is a summary of fees and costs of services and materials charged by the
General Partner or its parent company during the three and six months
ended June 30, 2002 and 2001 (unaudited):
Three Months Ended Six Months Ended
June 30 June 30
2002 2001 2002 2001
____ ____ ____ ____
Management fee $45,051 $21,181 $71,346 $41,399
Reimbursable costs 38,366 36,722 83,280 75,129
7
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. REATED PARTY TRANSACTIONS (Continued)
During the first quarter of 2001, the Fund transferred its checking and
investment accounts from Hudson United Bank to The Bancorp.com, Inc.
(TBI). The son and the spouse of the Chairman of Resource America, Inc.
are the Chairman and Chief Executive Officer, respectively, of TBI. The
Fund maintains a normal banking relationship with TBI.
Amounts due from related parties at June 30, 2002 and December 31, 2001
represent monies due the Fund from the General Partner and/or other
affiliated funds for rentals and sales proceeds collected and not yet
remitted to the Fund.
Amounts due to related parties at June 30, 2002 and December 31, 2001
represent monies due to the General Partner for the fees and costs men-
tioned above, as well as, rentals and sales proceeds collected by the
Fund on behalf of other affiliated funds.
3. CASH DISTRIBUTION
The General Partner declared and paid a cash distribution of $50,000 in
June 2002 for the month ended April 30, 2002 to all admitted partners as
of April 30, 2002. Additionally, the General Partner declared and paid
cash distributions of $50,000 and $1,000,000 subsequent to June 30, 2002
for the months ended May 31 and June 30, 2002, respectively, to all ad-
mitted partners as of May 31 and June 30, 2002.
8
FIDELITY LEASING INCOME FUND VII, L.P.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Fidelity Leasing Income Fund VII, L.P. had revenues of $193,683 and
$203,541 for the three months ended June 30, 2002 and 2001, respectively,
and $396,847 and $437,054 for the six months ended June 30, 2002 and 2001
respectively. Earned income on direct financing leases and rental income
from the leasing of equipment accounted for 82% and 87% of total revenues
for the second quarter of 2002 and 2001, respectively and 78% and 81% of
total revenues for the first six months of 2002 and 2001, respectively.
The decrease in revenues was primarily attributable to a decrease in earned
income on direct financing leases. Earned income on direct financing leases
decreased by approximately $102,000 in 2002 because of the monthly amortiza-
tion of unearned income using the interest method. Additionally, the early
termination of certain direct financing leases in the last six months of 2001
and the first six months of 2002 also accounted for the decrease in earned
income on direct financing leases during the six months ended June 30, 2002.
Additionally, the Fund recognized approximately $14,854 of net gain on sale
of equipment during the first six months of 2002 compared to $31,695 during
the first six months of 2001. The decrease in this account also contributed
to the overall decrease in total revenues in 2002. The overall decrease in
revenues was mitigated by the increase in rental income. Rental income in-
creased by approximately $54,000 because of equipment under operating leases
purchased in the last quarter of 2001. Additionally, other income increased
from $3,806 for the six months ended June 30, 2001 to $16,462 for the six
months ended June 30, 2002 which also served to lower the overall decrease
in revenues in 2002. The increase in this account was a result of late fees
collected on delinquent rentals paid during the first six months of 2002.
Furthermore, the increase in interest income reduced the amount of the de-
crease in total revenues during the first six months of 2002. Interest
income increased because of larger cash balances available for investment
by the Fund in 2002 compared to 2001.
Expenses were $170,674 and $110,767 for the three months ended June 30,
2002 and 2001, respectively, and $327,749 and $211,660 for the six months
ended June 30, 2002 and 2001, respectively. Depreciation expense comprised
25% and 17% of total expenses during the quarter ended June 30, 2002 and 2001,
respectively and 28% and 17% of total expenses during the six months ended
June 30, 2002 and 2001, respectively. The increase in expenses was primarily
related to the increase in depreciation expense resulting from equipment
purchased in the last quarter of 2001. Additionally the increase in general
and administrative expense contributed to the overall increase in expenses in
2002. General and administrative expense increased because of the increase in
the various costs incurred to operate the Fund on a daily basis. Furthermore,
management fee to related party increased during the six months ended June 30,
2002 compared to June 30, 2001. This account increased in 2002 because of
rentals collected on the early termination of two direct financing leases
during the second quarter of 2002. Management fee to related party is
calculated as a percentage of rental receipts. The increase in this account
also accounted for the increase in total expenses in 2002.
9
FIDELITY LEASING INCOME FUND VII, L.P.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
The Fund's net income was $23,009 and $92,774 for the three months ended
June 30, 2002 and 2001, respectively, and $69,098 and $225,394 for the six
months ended June 30, 2002 and 2001, respectively. The income per equivalent
limited partnership unit was $0.47 and $3.17 based on a weighted average number
of equivalent limited partnership units outstanding of 25,510 and 28,810 for
the three months ended June 30, 2002 and 2001, respectively. The income per
equivalent limited partnership unit, after income allocated to the General
Partner, was $1.99 and $7.70 based on a weighted average number of equivalent
limited partnership units outstanding of 26,242 and 28,866 for the six months
ended June 30, 2002 and 2001, respectively.
The Fund generated $65,884 and $111,099 of cash from operations, for
the purpose of determining cash available for distribution, during the quarter
ended June 30, 2002 and 2001, respectively. The General Partner declared and
paid one cash distribution of $50,000 during the second quarter of 2002 for
the month of April 2002. Subsequent to June 30, 2002, the General Partner
declared and paid cash distributions of $50,000 and $1,000,000 for the months
ended May 31 and June 30, 2002, respectively. Subsequent to June 30, 2001,
the General Partner declared and paid three cash distributions of $50,000
each for a total of $150,000 for the three months ended June 30, 2001. For
the six months ended June 30, 2002 and 2001, the Fund generated $145,031 and
$230,569 of cash from operations, for the purpose of determining cash avail-
able for distribution. The General Partner declared cash distributions
totaling $1,700,016 and $300,0000 for the six months ended June 30, 2002
and 2001, respectively. The General Partner declared and paid three cash
distributions of $50,000 each and one cash distribution of $500,000 during
the first six months of 2002. Subsequent to June 30, 2002, the General Part-
ner declared and paid one cash distribution of $50,000 and one cash distri-
bution of $1,000,000 for the first six months of 2002. In addition, the Fund
paid three cash distributions totaling $1,100,016 during the first six months
of 2002 for the months of October, November and December 2001. For the six
months ended June 30, 2001, the General Partner declared and paid three cash
distributions of $50,000 each during the first six months of 2001 and three
cash distributions of $50,000 each subsequent to June 30, 2001. For financial
statement purposes, the Fund records cash distributions to partners on a cash
basis in the period in which they are paid.
ANALYSIS OF FINANCIAL CONDITION
The Fund is currently in the process of dissolution. As provided in the
Restated Limited Partnership Agreement, the assets of the Fund shall be liqui-
dated as promptly as is consistent with obtaining their fair value. During
this time, the Fund will continue to purchase equipment with cash available
from operations that was not distributed to partners in previous periods and
for lease terms consistent with the plan of dissolution. There were no invest-
10
FIDELITY LEASING INCOME FUND VII, L.P.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
ments made in direct financing leases for the six months ended June 30, 2002.
The Fund invested $652,894 in direct financing leases during the six months
ended June 30, 2001.
The cash position of the Fund is reviewed daily and cash is invested on a
short-term basis.
The Fund's cash from operations is expected to continue to be adequate to
cover all operating expenses and contingencies during the next twelve month
period.
11
Part II: Other Information
FIDELITY LEASING INCOME FUND VII, L.P.
June 30, 2002
Item 1. Legal Proceedings: Inapplicable.
Item 2. Changes in Securities: Inapplicable.
Item 3. Defaults Upon Senior Securities: Inapplicable.
Item 4. Submission of Matters to a Vote of Securities Holders: Inapplicable.
Item 5. Other Information: Inapplicable.
Item 6. Exhibits and Reports on Form 8-K:
a) Exhibits:
Exhibit No. Description
----------- -----------
99.1 Certification pursuant to 18 U.S.C.,
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley
Act of 2002
99.2 Certification pursuant to 18 U.S.C.,
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley
Act of 2002
b) Reports on Form 8-K: None
12
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fidelity Leasing Income Fund VII,
L.P. (the "Fund") on Form 10-Q for the period ended June 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Crit S. DeMent, Principal Executive Officer of LEAF Financial Corporation,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13 (a)
or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of opera-
tions of the Fund.
/s/ Crit S. DeMent
________________________
Crit S. DeMent
Principal Executive Officer
August 13, 2002
13
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fidelity Leasing Income Fund VII,
L.P. (the "Fund") on Form 10-Q for the period ended June 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Marianne T. Schuster, Principal Financial Officer of LEAF Financial Corpora-
tion, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13 (a)
or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of opera-
tions of the Fund.
/s/ Marianne T. Schuster
________________________
Marianne T. Schuster
Principal Financial Officer
August 13, 2002
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIDELITY LEASING INCOME FUND VII, L.P.
8-13-02 By: /s/ Crit S. DeMent
____________________________
Crit S. DeMent
Chairman of the Board of Directors
of LEAF Financial Corporation
(Principal Executive Officer)
8-13-02 By: /s/ Miles Herman
____________________________
Miles Herman
President and Director of
LEAF Financial Corporation
8-13-02 By: /s/ Freddie M. Kotek
____________________________
Freddie M. Kotek
Director of LEAF Financial Corporation
8-13-02 By: /s/ Marianne T. Schuster
____________________________
Marianne T. Schuster
Vice President of Accounting of
LEAF Financial Corporation
(Principal Financial Officer)
15