<PAGE>
 
                      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


    For the Quarter ended             Commission File Number
     September 30, 1998                      33-19038



                   PERSHING LEASE INCOME LIMITED PARTNERSHIP
            (Exact name of registrant as specified in its charter)



                                   MISSOURI
        (State or other jurisdiction of incorporation or organization)


                                  43-1463913
                     (I.R.S. Employer Identification No.)


           6300 Lamar, Shawnee Mission, Kansas 66202 (913) 236-2000
      (Address, including zip code, and telephone number, including area
              code, of registrant's principal executive offices)


  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 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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                   PERSHING LEASE INCOME LIMITED PARTNERSHIP
                       (A Missouri Limited Partnership)

                               Table of Contents


          Part I - Financial Information

Item 1.   Financial Statements:                                   Page

          Balance Sheet - September 30, 1998 and
          December 31, 1997                                       3

          Statements of Income for the Quarters and Nine
          Months Ended September 30, 1998 and 1997                4

          Statement of Cash Flows for the Nine Months
          Ended September 30, 1998 and 1997                       5

          Notes to Financial Statements                         6-8

Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations        9-10


          PART II - OTHER INFORMATION

          Item 5.  Other Information.                            11

          Item 6.  Exhibits and Reports on Form 8-K.
                   (a) Exhibits                                  11
                   (b) Reports on Form 8-K                       11

Signatures                                                       12

                                       2
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   Part 1. Financial Information
   Item 1. Financial Statements

                   Pershing Lease Income Limited Partnership
                       (A Missouri Limited Partnership)

                                Balance Sheets

                                                  September 30,     December 31,
                                                      1998              1997
                                                  -------------     ------------
                                                    (Unaudited)
       Assets                                     
       Investment property:
         Cost                                     $          -    $    801,339
         Accumulated depreciation                            -        (791,882)
                                                  ------------    ------------ 
           Investment property, net                          -           9,457
       Cash and cash equivalents                       346,492         137,247
       Rents and other receivables                       6,241           9,227
       Prepaid insurance                                     -           1,270
                                                  ------------    ------------  
            Total assets                          $    352,733    $    157,201
                                                  ============    ============
       Liabilities and Partners' Equity
       Liabilities:
         Due to affiliates                               3,207    $      4,562
                                                   ------------    ------------ 
             Total liabilities                           3,207           4,562
                                                  ------------    ------------  
       Partners' Equity (Deficit):
         General Partner:
           Capital contribution                          1,000           1,000
           Cumulative net income                     1,328,079       1,104,430
           Cumulative cash distributions            (1,316,611)     (1,316,610)
                                                  ------------    ------------ 
                                                        12,468        (211,180)
                                                  ------------    ------------ 
         Limited Partners (62,840 units):
           Capital contributions, net of
             offering costs                         27,738,501      27,738,501
           Cumulative net income                     5,560,873       5,587,634
           Cumulative cash distributions           (32,962,316)    (32,962,316)
                                                  ------------    ------------ 
                                                       337,058         363,819
                                                  ------------    ------------ 
             Total partners' equity                    349,526         152,639
                                                  ------------    ------------ 
             Total liabilities and partners'
               equity                             $    352,733    $    157,201
                                                  ============    ============



              See accompanying notes to the financial statements.

                                       3
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                   PERSHING LEASE INCOME LIMITED PARTNERSHIP
                       (A Missouri Limited Partnership)

                             Statements of Income
                                  (Unaudited)
                       For the Quarters and Nine Months
                       Ended September 30, 1998 and 1997
 
 
                                 Nine Months Ended       Quarters Ended
                                   September 30           September 30
                                --------------------   -------------------
                                 1998        1997        1998       1997
                                 ----        ----        ----       ----
     Revenue:
       Rental income            $116,805    $227,381   $      -   $ 12,736
       Interest income             3,334      16,313      2,709      5,816
       Net gain on
        sale of equipment        125,215     602,900    125,215    447,000
                                --------    --------   --------   --------
          Total revenue          245,354     846,594    127,924    465,552
                                --------    --------   --------   --------
     Expenses:
       Depreciation                7,172      85,824          -     28,608
       General and
         administrative           41,294      69,547     16,099     12,723
                                --------    --------   --------   --------
          Total expenses          48,466     155,371     16,099     41,331
                                --------    --------   --------   --------
     Net income                 $196,888    $691,223   $111,825   $424,221
                                ========    ========   ========   ========

                See accompanying notes to financial statements.

                                       4
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                   PERSHING LEASE INCOME LIMITED PARTNERSHIP
                       (A Missouri Limited Partnership)

                            Statement of Cash Flows
                                  (Unaudited)
             For the Nine Months Ended September 30, 1998 and 1997
 
                                               1998         1997
                                            ---------    --------- 
Cash flows from operating activities:
 Net income                                 $ 196,888    $ 691,223
 Adjustments to reconcile net income
  to net cash provided by
  (used in) operating activities:
   Depreciation and amortization                7,172       85,824
   Net gain on sale of investment
    property                                 (125,215)    (602,900)
 Changes in assets and liabilities:
  Receivables                                   2,985       (4,183)
  Prepaid insurance                             1,270        1,636
  Due to affiliates                            (1,355)      (4,867)
  Accounts payable                                  -           26
  Unearned rental revenue                           -          686
                                            ---------    ---------
 Net cash provided by operating
  activities                                   81,745      167,445
Cash flows from investing activities:
 Disposition of investment property           127,500      602,899
Cash flows from financing activities:
 Cash distributions to Partners                     -     (784,330)
                                            ---------    --------- 
Net increase (decrease) in cash and
 cash equivalents                             209,245      (13,986)
Cash and cash equivalents at beginning
  of period                                   137,247      639,226
                                            ---------    ---------
Cash and cash equivalents at end of
  period                                    $ 346,492    $ 625,240
                                            =========    =========
 
                See accompanying notes to financial statements.

                                       5
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                   PERSHING LEASE INCOME LIMITED PARTNERSHIP
                       (A Missouri Limited Partnership)

                         Notes to Financial Statements
                                  (Unaudited)
 
    In the opinion of the General Partner, the accompanying unaudited
financial statements contain all adjustments necessary to present fairly the
financial position, results of operations and cash flows.
 
(1) Summary of Significant Accounting Policies
 
    Organization
 
    Pershing Lease Income Limited Partnership (the "Partnership") was organized
under the Missouri Revised Uniform Limited Partnership Act on November 30, 1987.
The Partnership was formed to invest primarily in equipment to be leased to
third parties. The Amended Agreement of Limited Partnership authorized the
issuance of up to 60,000 Limited Partnership units at a price of $500 per unit
and up to 20,000 additional units. The Partnership had an initial closing and
thirteen subsequent closings. The closings occurred on May 3, 1988, June 3,
1988, July 8, 1988, August 5, 1988, September 8, 1988, October 7, 1988, November
7, 1988, December 7, 1988, January 9, 1989, February 7, 1989, March 7, 1989,
April 7, 1989, May 5, 1989, and June 14, 1989 with 10,732, 6,712, 3,984, 4,268,
5,011, 3,822, 2,562, 2,701, 4,001, 3,256, 3,604, 4,014, 3,592, and 4,581 units,
respectively.
 
    Pursuant to the terms of the Amended Agreement of Limited Partnership,
distributable cash from operations and profits for federal income tax purposes
from normal operations, as defined, are to be allocated 95% to the Limited
Partners and 5% to the General Partner until payout has occurred, and 85% to the
Limited Partners and 15% to the General Partner thereafter. Special allocations
of taxable income may be required to reduce or eliminate the deficit account
balances of Partners according to Treasury Regulations and the partnership
agreement. "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 refinancing equals the aggregate amount of
the Limited Partners' original invested capital plus a cumulative 8% annual
return on their aggregate unreturned invested capital (calculated from the
beginning of the first full fiscal quarter following each Limited Partner's
admission to the Partnership). Losses for federal income tax purposes from the
normal operations of the Partnership will be allocated 99% to the Limited
Partners and 1% to the General Partner. 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.

                                       6
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                   Pershing Lease Income Limited Partnership
                       (A Missouri Limited Partnership)
 
                   Notes to Financial Statements, Continued
                                  (Unaudited)
 
    The General Partner, Waddell & Reed Leasing, Inc., contributed $1,000 for
its General Partnership interest. The General Partner is not required to make
any other capital contributions except under certain limited circumstances upon
termination of the Partnership.

    Basis of Presentation

    The Partnership financial statements are presented on the accrual basis of
accounting.

    Cash and Cash Equivalents

    Cash and cash equivalents in the accompanying statements of cash flows
include cash on hand and short-term investments with original maturities of less
than ninety days.

    Investment Property

    At September 30, 1998 the Partnership had sold it's remaining equipment. At
December 31, 1997, the Partnership owned mining equipment, with a depreciable
cost basis of $801,339. The depreciable cost basis at December 31, 1997,
included acquisition fees of $36,337, which were paid to the General Partner.
Depreciation was provided using an accelerated method.
 
    Income Taxes
 
    The Partnership is a pass-through entity and, accordingly, taxes on income,
if any, are the responsibility of the individual partners. Partners' equity at
September 30, 1998 as reported herein has been reduced by sales commissions and
other costs of the offering, which will not be deductible by the partners until
the Partnership is liquidated or the partners' units are otherwise disposed of.

                                       7
<PAGE>
 
                   Pershing Lease Income Limited Partnership
                       (A Missouri Limited Partnership)

                   Notes to Financial Statements, Continued
                                  (Unaudited)

(2) Related Party Transactions

    Fees, commissions and other expenses paid or payable by the Partnership to
the General Partner or affiliates of the General Partner for the quarter ending
September 30, 1998, are as follows:

    Reimbursable operating expenses                   $13,957

    The  following  costs were due to affiliates  as of September  30,
  1998:

    Reimbursable operating expenses                   $ 3,207

(3) Subsequent Event

    Proceeds from the sale of the last piece of equipment that the Partnership
owned in the amount of $127,500 were received on July 31, 1998.

                                       8
<PAGE>
 
                   Pershing Lease Income Limited Partnership
                       (A Missouri Limited Partnership)

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND  RESULTS OF OPERATIONS.

Partnership Operations

    There was no rental income for the third quarter of 1998. This was a $12,736
decrease over the same period in 1997. Rental income for the first nine months
of 1998 was $116,805, a decrease of $110,576 from 1997 due to lease expirations.
The Partnership sold its last piece of equipment during the third quarter of
1998. As a result, the net gain from sales of equipment for the third quarter
and the first nine months of 1998 was $127,500, lower than $602,900 and $447,000
the amounts for the same periods in 1997.
 
    The use of accelerated depreciation methods combined with the sale of some
of the equipment resulted in a decline in depreciation of $28,608 from the third
quarter of 1998 as compared to 1997. Depreciation for the first nine months of
1998 was $7,172, a decrease of $78,652 from 1997. General and administrative
expenses for the quarter were $16,099, a increase of $3,376 compared to the
third quarter of 1997 due primarily to aircraft insurance and printing costs.
General and administrative expenses for the first nine months of 1998 were
$41,294, a decrease of $28,253 from 1997. Most of the decrease is related to
lower management fees and accounting fees.
 
    Proceeds from the sale of the Partnership's last piece of equipment in the
amount of $127,500 were received on July 31, 1998. The Partnership plans to make
its final distribution of cash and cease operations by December 31, 1998.

Liquidity and Capital Resources

    Management believes the Partnership has sufficient cash to fund operations
until it ceases operations and provide for a final cash distribution to the
partners.

                                       9
<PAGE>
 
                   Pershing Lease Income Limited Partnership
                       (A Missouri Limited Partnership)

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                     CONDITION AND RESULTS OF OPERATIONS.


Cash and Distributable Cash from Operations and Sales

    Shown below is the calculation of Cash and Distributable Cash from
Operations and Sales for the quarter ended September 30, 1998 as defined by
Section 17 of the Amended Agreement of Limited Partnership:


    Interest income                                   $  2,709
    Cash from sales                                    125,215
                                                      --------
       Total cash inflow                               127,924

       Operating expenses                              (16,099)
                                                      --------
       Cash from operations and sales                  111,825

    Reserve for distributions and operations           111,825
    Partnership management fee                               -
                                                      --------
       Distributable cash from operations and sales   $      -
                                                      ========

  There were no distributions made to the Limited Partners of record on
  June 30, 1998.

                                       10
<PAGE>
 
                   Pershing Lease Income Limited Partnership
                       (A Missouri Limited Partnership)


  PART II - OTHER INFORMATION

  Item 5.  Other Information.

      The  Partnership disposed of the last of its equipment on July
      31, 1998.  This equipment consisted of mining equipment for
      which the Partnership received $125,215 from an unrelated
      third party.   The Partnership plans to make its final distri-
      bution of cash and cease operations by December 31, 1998.

  Item 6.  Exhibits and Reports on Form 8-K.

      (a) Exhibits  

          27.1 Financial Data Schedule (electronic filing only).

      (b) Form 8-K - There have been no reports on 
          Form 8-K.

                                       11
<PAGE>
 
                   Pershing Lease Income Limited Partnership
                       (A Missouri Limited Partnership)


                                  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.


                                 PERSHING LEASE INCOME LIMITED PARTNERSHIP
                                               (Registrant)



                                 By: /s/ Michael D. Strohm
                                     -------------------------------------------
                                     Michael D. Strohm, Executive Vice
                                     President and Assistant Treasurer
                                     of the General Partner

                                 Date:   November 12, 1998


                                 By: /s/ Robert L. Hechler
                                     -------------------------------------------
                                     Robert L. Hechler, as President and
                                     Treasurer of the General Partner
                                     (Principal Accounting and Financial
                                     Officer)

                                 Date:  November 12, 1998

                                       12