Page 1 of 12



                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   -----------

                                   FORM 10-QSB

  X     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-----   ACT OF 1934

                For the quarterly period ended September 30, 1997

                                       OR

        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----   EXCHANGE ACT OF 1934

            For the transition period from __________ to __________.



                         Commission File Number 0-12593
                                                --------



                         PHOENIX LEASING INCOME FUND VII
--------------------------------------------------------------------------------
                                   Registrant

           California                                      68-0001202
-----------------------------                 ----------------------------------
      State of Jurisdiction                   I.R.S. Employer Identification No.


2401 Kerner Boulevard, San Rafael, California                 94901-5527
--------------------------------------------------------------------------------
    Address of Principal Executive Offices                     Zip Code

       Registrant's telephone number, including area code: (415) 485-4500
                                                           --------------

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 _____

345,974 Units of Limited  Partnership  Interest were outstanding as of September
30, 1997.

Transitional small business disclosure format:

                               Yes _____ No __X__


<PAGE>


                                                                    Page 2 of 12

                          Part I. Financial Information
                          -----------------------------
                          Item 1. Financial Statements
                 PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                 (Amounts in Thousands Except for Unit Amounts)
                                   (Unaudited)
                                                    September 30,   December 31,
ASSETS                                                   1997           1996
                                                        ------         ------

Cash and cash equivalents                               $  329         $2,155

Accounts receivable (net of allowance for losses
   on accounts receivable of $39 and $41 at
   September 30, 1997 and December 31, 1996,
   respectively)                                            28             30

Notes receivable (net of allowance for losses on
   notes receivable of $276 and $359 at September
   30, 1997 and December 31, 1996, respectively)           272            302

Equipment on operating leases and held for lease
   (net of accumulated depreciation of $726 and
   $1,316 at September 30, 1997 and December 31,
   1996, respectively)                                    --                2

Property, cable systems and equipment (net of
   accumulated depreciation of $451 and $358 at
   September 30, 1997 and December 31, 1996,
   respectively)                                           781            841

Cable subscriber lists and franchise rights (net
   of accumulated amortization of $633 and $512
   at September 30, 1997 and December 31, 1996,
   respectively)                                           659            780

Investment in joint ventures                               471            730

Other assets                                               167            151
                                                        ------         ------

     Total Assets                                       $2,707         $4,991
                                                        ======         ======

LIABILITIES AND PARTNERS' CAPITAL

Liabilities

   Accounts payable and accrued expenses                $  355         $  397

   Liquidation fees payable to General Partner             953            953
                                                        ------         ------

     Total Liabilities                                   1,308          1,350
                                                        ------         ------

Partners' Capital

   General Partner                                         321            322

   Limited Partners, 480,000 units authorized,
     366,432 units issued and 345,974 units
     outstanding at September 30, 1997 and
     December 31, 1996                                   1,071          3,312

   Unrealized gains on available-for-sale securities         7              7
                                                        ------         ------

     Total Partners' Capital                             1,399          3,641
                                                        ------         ------

     Total Liabilities and Partners' Capital            $2,707         $4,991
                                                        ======         ======

        The accompanying notes are an integral part of these statements.

<PAGE>


                                                                    Page 3 of 12

                 PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (Amounts in Thousands Except for Per Unit Amounts)
                                   (Unaudited)

                                         Three Months Ended   Nine Months Ended
                                            September 30,       September 30,
                                            1997      1996      1997      1996
                                          -------   -------   -------   -------
INCOME

   Rental income                          $    36   $    73   $   117   $   256
   Cable subscriber revenues                  156       145       456       438
   Equity in earnings (losses) from
    joint ventures, net                      (125)       60       (17)      193
   Interest income, notes receivable         --          16        17        16
   Other income                                 7        27        42       124
                                          -------   -------   -------   -------

     Total Income                              74       321       615     1,027
                                          -------   -------   -------   -------

EXPENSES

   Depreciation and amortization               72        77       216       325
   Lease related operating expenses          --           2         1        15
   Program service, cable system               37        35       117       106
   Management fees to General Partner          15        12        37        45
   Provision for (recovery of) losses
    on receivables                              8        28        11        (3)
   General and administrative expenses        130       102       312       305
                                          -------   -------   -------   -------

     Total Expenses                           262       256       694       793
                                          -------   -------   -------   -------

Net income (loss) before income taxes        (188)       65       (79)      234
Income tax benefit (expense)                   (3)        2      --           1
                                          -------   -------   -------   -------

NET INCOME (LOSS)                         $  (191)  $    67   $   (79)  $   235
                                          =======   =======   =======   =======



NET INCOME (LOSS) PER LIMITED
   PARTNERSHIP UNIT                       $  (.04)  $   .17   $   .23   $   .58
                                          =======   =======   =======   =======

DISTRIBUTIONS PER LIMITED
   PARTNERSHIP UNIT                       $  2.47   $  3.74   $  6.25   $  7.52
                                          =======   =======   =======   =======

ALLOCATION OF NET INCOME (LOSS):
   General Partner                        $   (18)  $    10   $    (1)  $    36
   Limited Partners                          (173)       57       (78)      199
                                          -------   -------   -------   -------

                                          $  (191)  $    67   $   (79)  $   235
                                          =======   =======   =======   =======

        The accompanying notes are an integral part of these statements.

<PAGE>


                                                                    Page 4 of 12

                 PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in Thousands)
                                   (Unaudited)
                                                           Nine Months Ended
                                                             September 30,
                                                             1997      1996
                                                           -------   -------
Operating Activities:
   Net income (loss)                                       $   (79)  $   235

     Adjustments to reconcile net income(loss) to net
       cash provided by operating activities:
         Depreciation and amortization                         216       325
         Loss (gain) on sale of equipment                      (13)       26
         Equity in losses (earnings) from joint
          ventures, net                                         17      (193)
         Recovery of early termination, financing leases      --         (34)
         Provision for losses on accounts receivable            11        31
         Gain on sale of marketable securities                --          (5)
         Increase (decrease) in accounts receivable             (9)        9
         Decrease in accounts payable and accrued expenses     (42)     (209)
         Decrease in deferred income tax asset                --          (1)
         Increase in other assets                              (16)       (3)
                                                           -------   -------

Net cash provided by operating activities                       85       181
                                                           -------   -------

Investing Activities:
   Principal payments, financing leases                       --          34
   Principal payments, notes receivable                         30        15
   Proceeds from sale of equipment                              13        24
   Proceeds from sale of securities                           --          11
   Distributions from joint ventures                           242       367
   Property, cable systems and equipment                       (33)      (38)
                                                           -------   -------

Net cash provided by investing activities                      252       413
                                                           -------   -------

Financing Activities:
   Distributions to partners                                (2,163)   (2,600)
                                                           -------   -------

Net cash used by financing activities                       (2,163)   (2,600)
                                                           -------   -------

Decrease in cash and cash equivalents                       (1,826)   (2,006)

Cash and cash equivalents, beginning of period               2,155     3,940
                                                           -------   -------

Cash and cash equivalents, end of period                   $   329   $ 1,934
                                                           =======   =======


        The accompanying notes are an integral part of these statements.

<PAGE>


                                                                    Page 5 of 12


                 PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1.       General.

         The accompanying  unaudited  condensed  financial  statements have been
prepared by the  Partnership in accordance  with generally  accepted  accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of Management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included. Although management believes that the disclosures are adequate to make
the information  presented not misleading,  it is suggested that these condensed
financial  statements be read in conjunction  with the financial  statements and
the notes included in the Partnership's  Financial Statement,  as filed with the
SEC in the latest annual report on Form 10-K.

Note 2.       Reclassification.

         Reclassification  - Certain  1996  amounts  have been  reclassified  to
conform to the 1997 presentation.

Note 3.       Income Taxes.

         Federal  and state  income tax  regulations  provide  that taxes on the
income  or loss of the  Partnership  are  reportable  by the  partners  in their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.

         Phoenix  Cablevision of Oregon,  Inc. (the Subsidiary) is a corporation
subject to state and  federal tax  regulations.  The  Subsidiary  reports to the
taxing  authority on the accrual basis.  When income and expenses are recognized
in  different  periods  for  financial  reporting  purposes  than for income tax
purposes,  deferred taxes are provided for such differences  using the liability
method.

Note 4.       Notes Receivable.

         Impaired  Notes   Receivable.   At  September  30,  1997  the  recorded
investment in notes that are  considered to be impaired was $549,000,  for which
the related allowance for losses is $224,000. The average recorded investment in
impaired  loans  during the nine months  ended  September  30, 1997 and 1996 was
approximately $624,000 and $610,000, respectively.

         The activity in the allowance for losses on notes receivable during the
nine months ended September 30, is as follows:

                                              1997           1996
                                            --------       --------
                                             (Amounts in Thousands)

         Beginning balance                  $    359       $    359
              Provision for losses                -              -
              Write downs                        (83)            -
                                            --------       --------
         Ending balance                     $    276       $    359
                                            ========       ========


<PAGE>


                                                                    Page 6 of 12

Note 5.       Net Income (Loss) and Distributions per Limited Partnership Unit.

         Net income (loss) and distributions  per limited  partnership unit were
based on the limited  partner's share of net income and  distributions,  and the
weighted  average  number of units  outstanding  of 345,974  for the nine months
ended September 30, 1997 and 1996. For purposes of allocating  income (loss) and
distributions to each individual limited partner, the Partnership  allocates net
income (loss) and  distributions  based upon each respective  limited  partner's
ending capital account balance.  The use of this method accurately reflects each
limited  partner's  participation  in  the  partnership  including  reinvestment
through the Capital  Accumulation  Plan.  As a result,  the  calculation  of net
income (loss) and distributions  per limited  partnership unit is not indicative
of per unit income (loss) and  distributions  due to  reinvestments  through the
Capital Accumulation Plan.

Note 6.       Investment in Joint Ventures.

Equipment Joint Ventures

         The aggregate financial  information of the equipment joint ventures is
presented below:

                                           September 30, December 31,
                                                1997        1996
                                              -------     -------
                                             (Amounts in Thousands)

        Assets                                $ 1,213     $ 2,700
        Liabilities                               155         372
        Partners' Capital                       1,058       2,328

                                    Three Months Ended    Nine Months Ended
                                       September 30,        September 30,
                                       1997     1996        1997     1996
                                     -------  -------     -------  -------
                                             (Amounts in Thousands)

        Revenue                      $    44  $   535     $   996  $ 1,784
        Expenses                         685      275       1,146      912
        Net Income (Loss)               (641)     260        (150)     872



<PAGE>


                                                                    Page 7 of 12

Financing Joint Ventures

         The aggregate financial  information of the financing joint ventures is
presented below:

                                           September 30, December 31,
                                                1997        1996
                                              -------     -------
                                             (Amounts in Thousands)

        Assets                                $    37     $    44
        Liabilities                                11          10
        Partners' Capital                          26          34

                                    Three Months Ended    Nine Months Ended
                                       September 30,        September 30,
                                       1997     1996        1997     1996
                                     -------  -------     -------  -------
                                             (Amounts in Thousands)

        Revenue                      $    21  $    15     $    40  $    56
        Expenses                           1        3           5       11
        Net Income                        20       12          35       45

Foreclosed Cable Systems Joint Ventures

         The aggregate financial  information of the financing joint ventures is
presented below:

                                           September 30, December 31,
                                                1997        1996
                                              -------     -------
                                             (Amounts in Thousands)

        Assets                                $ 1,653     $ 1,635
        Liabilities                               317         265
        Partners' Capital                       1,336       1,370

                                    Three Months Ended    Nine Months Ended
                                       September 30,        September 30,
                                       1997     1996        1997     1996
                                     -------  -------     -------  -------
                                             (Amounts in Thousands)

        Revenue                      $   224  $   229     $   660  $   655
        Expenses                         234      214         682      640
        Net Income (Loss)                (10)      15         (22)      15


<PAGE>


                                                                    Page 8 of 12

                 PHOENIX LEASING INCOME FUND VII AND SUBSIDIARY


Item 2.       Management's  Discussion  and  Analysis of Financial Condition and
              Results of Operations.

Results of Operations

         Phoenix  Leasing  Income  Fund  VII and  Subsidiary  (the  Partnership)
reported a net loss of  $191,000  and  $79,000  during the three and nine months
ended September 30, 1997, respectively, as compared to net income of $67,000 and
$235,000  during the same periods in the  preceding  year.  The net loss for the
three and nine months ended  September 30 1997, as compared to net income in the
prior year, is attributable to a decline in total revenues.

         Total  revenues  decreased  by $247,000  and $412,000 for the three and
nine months  ended  September  30, 1997,  respectively,  as compared to the same
periods  in the  previous  year.  This  decrease  is  primarily  the result of a
decrease in rental  income,  equity in earnings  from joint  ventures  and other
income.  The decrease in earnings from joint  ventures  will be discussed  under
"Joint  Ventures".  The decline in rental income of $37,000 and $139,000 for the
three and nine months ended  September 30, 1997,  respectively,  compared to the
same periods in the prior year, as well as the decrease in depreciation expense,
is the result of an overall reduction in the size of the equipment portfolio due
to ongoing sales. The aggregate original cost of equipment owned directly by the
Partnership  is $1.1 million at September  30, 1997, as compared to $2.8 million
at September 30, 1996.

         The  decrease in other  income of $20,000 and $82,000 for the three and
nine months ended September 30, 1997, respectively, compared to the same periods
in the prior year,  also  contributed  to the reduction in total  revenues.  The
decline in other income is a result of a decrease in interest  income  generated
from the Partnership's cash account.  This decrease is due to a reduction in the
amount of cash held at September 30, 1997 compared to the prior year.

         Total expenses for the three months ended  September 30, 1997 increased
by $6,000 but decreased for the nine months ended September 30, 1997 by $99,000,
as compared to the same periods in 1996.  The increase in total expenses for the
three months ended  September  30, 1997 is due to a $28,000  increase in general
and administrative  expenses.  This increase is a result of an increase in legal
fees incurred during the three months ended September 30, 1997,  compared to the
same period in 1996. This increase was partially offset by a decrease of $20,000
in provision for losses on receivables, due to a decrease in provision for early
terminations  of financing  leases  during the three months ended  September 30,
1997 compared to 1996, and a decrease of $5,000 in depreciation and amortization
expense.

         The decline in total  expenses for the nine months ended  September 30,
1997 is primarily  attributable  to decreases in depreciation  and  amortization
expense of  $109,000,  compared to the same periods in the  previous  year.  The
decrease in  depreciation  expense,  with respect to the  Partnership's  leasing
activities,  as discussed  previously,  is a result of the  declining  equipment
portfolio.

         Because Phoenix Leasing Income Fund VII is in its liquidation stage, it
is not expected that the Partnership  will acquire any additional  equipment for
its leasing  activities.  As a result,  revenues  from  leasing  activities  are
expected to continue to decline as the portfolio is liquidated.

Cable System

         The Partnership acquired ownership of a cable system in satisfaction of
a defaulted  note  receivable  held by the  Partnership on October 28, 1993. The
Partnership reported cable subscriber revenues of $156,000 and $456,000 for  the


<PAGE>


                                                                    Page 9 of 12

three and nine  months  ended  September  30,  1997,  respectively,  and program
services  expense of  $37,000  and  $117,000  for the same  periods in 1997,  as
compared to cable subscriber revenues of $145,000 and $438,000 for the three and
nine months ended September 30, 1996, respectively, and program services expense
of $35,000 and $106,000 during the same periods in 1996.  Both cable  subscriber
revenue and program services expense remained  relatively the same for the three
and nine months ended September 30, 1997 compared to 1996.

Joint Ventures

         The Partnership has made investments in various equipment and financing
joint ventures along with other affiliated  partnerships  managed by the General
Partner for the purpose of spreading the risk of investing in certain  equipment
leasing and  financing  transactions.  These joint  ventures  are not  currently
making  any  significant  additional  investments  in new  equipment  leasing or
financing  transactions.  As a  result,  the  earnings  and cash  flow from such
investments  are  anticipated  to  continue  to  decline as the  portfolios  are
re-leased at lower rental rates and eventually liquidated.

         The decrease in earnings from equipment  joint ventures of $185,000 and
$210,000 for the three and nine months ended  September 30, 1997,  respectively,
as compared to the same periods in 1996, is the result of the closure of several
equipment  joint  ventures  during  the fourth  quarter of 1996,  as well as one
equipment joint venture  recording  provisions for additional  depreciation  and
losses for notes receivable during the three and nine months ended September 30,
1997.

Liquidity and Capital Resources

         The  Partnership's  primary  source of liquidity  comes from  equipment
leasing and financing  activities.  The Partnership has contractual  obligations
with lessees for fixed lease terms at fixed rental amounts and will also receive
payments on its outstanding notes receivable. The Partnership's future liquidity
is dependent  upon receiving  payment of such  contractual  obligations.  As the
initial lease terms expire, the Partnership will continue to renew,  remarket or
sell the equipment.  The future liquidity in excess of the remaining contractual
obligations  will depend upon the General  Partner's  success in re-leasing  and
selling the Partnership's  equipment as it comes off lease. The Partnership also
owns a cable  television  system and has  investments  in equipment  leasing and
foreclosed cable television system joint ventures.

         During the nine months ended  September 30, 1997, the net cash provided
by leasing, financing and cable television activities was $115,000,  compared to
$230,000  for the same  period  in the  prior  year.  The net  decrease  in cash
generated is due to a decrease in rental income.

         Distributions from joint ventures has become one of the primary sources
of  cash  generated  by  the  Partnership.  Distributions  from  joint  ventures
decreased  for the nine months  ended  September  30, 1997  compared to the same
period in the prior year.  The  Partnership  received  distributions  from joint
ventures of $242,000 for the nine months ended  September 30, 1997,  compared to
$367,000 for the same period in 1996. The decline in distributions  for the nine
months ended September 30, 1997, compared to 1996, is due to one equipment joint
venture  experiencing a decline in cash available for  distributions as a result
of a reduction in rental income and sales proceeds received.

         As of September 30, 1997,  the  Partnership  owned  equipment  held for
lease with a purchase price of $1,048,000 and a net book value of $0 compared to
$1,540,000 and $2,000,  respectively  at September 30, 1996. The General Partner
is actively  engaged,  on behalf of the Partnership,  in remarketing and selling
the Partnership's off-lease equipment portfolio.

         The  Limited   Partners   received   distributions  of  $2,163,000  and
$2,600,000 for the nine months ended September 30, 1997 and 1996,  respectively.


<PAGE>


                                                                   Page 10 of 12

As a result,  the  cumulative  cash  distributions  to the Limited  Partners are
$84,744,000  and $82,581,000 at September 30, 1997 and 1996,  respectively.  The
General  Partner did not  receive  distributions  during the nine  months  ended
September 30, 1997 and 1996.

         As the Partnership's  asset portfolio  continues to decline as a result
of the ongoing  liquidation  of assets,  it is expected that the cash  generated
from leasing operations will also decline. Due to the decrease in cash generated
by  leasing  and  financing  activities,  the  Partnership  is no longer  making
quarterly distributions to partners.  Distributions are being made semi-annually
in January and July. The Partnership  will reach the end of its term on December
31, 1998.

         Cash on hand  and  cash  generated  from  cable  television,  equipment
leasing and financing  operations  has been and is anticipated to continue to be
sufficient to meet the Consolidated Partnership's ongoing operational expenses.


<PAGE>


                                                                   Page 11 of 12

                         PHOENIX LEASING INCOME FUND VII

                               September 30, 1997

                           Part II. Other Information.


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 8-K:

            a)  Exhibits:

                (27)   Financial Data Schedule

            b)  Reports on 8-K:  None


<PAGE>


                                                                   Page 12 of 12

                                   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.

                                          PHOENIX LEASING INCOME FUND VII
                                          -------------------------------
                                                   (Registrant)



        Date                        Title                       Signature
        ----                        -----                       ---------



 November 12, 1997      Senior Vice President             /S/ GARY W. MARTINEZ
-------------------     and a Director of                 ----------------------
                        Phoenix Leasing Incorporated      (Gary W. Martinez)
                        General Partner


 November 12, 1997      Chief Financial Officer,          /S/ PARITOSH K. CHOKSI
-------------------     Senior Vice President,            ----------------------
                        Treasurer and a Director of       (Paritosh K. Choksi)
                        Phoenix Leasing Incorporated
                        General Partner


 November 12, 1997      Senior Vice President,            /S/ BRYANT J. TONG
-------------------     Financial Operations of           ----------------------
                        (Principal Accounting Officer)    (Bryant J. Tong)
                        Phoenix Leasing Incorporated
                        General Partner