<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
--- ---
Commission File No. 0-16683
TECHNOLOGY FUNDING SECURED INVESTORS II
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-3034262
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2000 Alameda de las Pulgas, Suite 250
San Mateo, California 94403
- -------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(415) 345-2200
--------------------------------------------------
(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
--- ---
No active market for the units of limited partnership interests ("Units")
exists, and therefore the market value of such Units cannot be
determined.
<PAGE>
I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
(unaudited)
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
ASSETS
Investments:
Secured notes receivable, net
(cost basis of $5,879,202 and
$7,528,512 at 1995 and 1994,
respectively) $3,168,202 4,999,512
Equity investments (cost basis
of $3,210,392 and $2,936,564 at
1995 and 1994, respectively) 3,546,320 1,603,688
--------- ----------
Total investments 6,714,522 6,603,200
Cash and cash equivalents 621,819 1,006,954
Other assets 159,317 51,198
--------- ----------
Total $7,495,658 7,661,352
========= ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 55,992 131,356
Due to related parties 10,565 --
Due to affiliated partnerships 735 246
Other liabilities 50,098 50,778
--------- ----------
Total liabilities 117,390 182,380
Commitments and subsequent event
(Notes 2, 4, and 7)
Partners' capital:
Limited Partners
(Units outstanding of
159,006 for both 1995 and 1994) 9,877,539 11,449,172
General Partners (124,199) (108,324)
Net unrealized fair value (decrease)
increase from cost:
Secured notes receivable (2,711,000) (2,529,000)
Equity investments 335,928 (1,332,876)
--------- ----------
Total partners' capital 7,378,268 7,478,972
--------- ----------
Total $7,495,658 7,661,352
========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
------------------------ ------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Secured notes receivable interest $ 138,157 319,873 385,811 478,550
Short-term investment interest 9,344 7,496 18,024 19,498
Other income 195 6,867 4,450 9,087
--------- --------- --------- ---------
Total income 147,696 334,236 408,285 507,135
--------- --------- --------- ---------
Costs and expenses:
Management fees 36,485 56,147 73,880 113,894
Other investment expenses 120,654 110,824 151,260 129,585
Operating expenses:
Lending operations and investment
management 52,272 (51,933) 93,504 61,715
Administrative and investor
services 57,893 80,634 108,304 166,662
Computer services 16,815 18,215 34,997 46,170
Professional fees 18,822 11,707 27,916 35,693
--------- --------- ---------- ---------
Total operating expenses 145,802 58,623 264,721 310,240
--------- --------- ---------- ---------
Total costs and expenses 302,941 225,594 489,861 553,719
--------- --------- ---------- ---------
Net operating (loss) income (155,245) 108,642 (81,576) (46,584)
Net realized gain from sales of
equity investments 155,025 30,303 170,840 30,303
Realized losses from
investment write-downs (1,810,522) (2,271,819) (1,810,522) (2,274,930)
Recoveries from investments
previously written off 117,103 -- 133,750 --
--------- --------- --------- ---------
Net realized loss (1,693,639) (2,132,874) (1,587,508) (2,291,211)
Change in net unrealized
fair value:
Secured notes receivable 109,000 199,000 (182,000) 705,000
Equity investments 1,665,802 307,740 1,668,804 (59,931)
--------- --------- --------- ---------
Net loss $ 81,163 (1,626,134) (100,704) (1,646,142)
========= ========= ========= =========
Net realized loss per Unit $ (10) (13) (10) (14)
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Interest and other income received $ 275,133 329,408
Cash paid to vendors (307,378) (378,798)
Cash paid to related parties (256,081) (480,068)
Cash received from (paid to)
affiliated partnerships 489 (40,781)
Reimbursement of collection expenses
received from a portfolio company -- 187,441
--------- ---------
Net cash used by operating
activities (287,837) (382,798)
--------- ---------
Cash flows from investing activities:
Secured notes receivable issued (645,866) (1,831,766)
Repayments of secured notes receivable 266,256 1,900,314
Proceeds from sales of equity investments 151,840 --
Recoveries from investments previously
written off 133,750 --
Purchase of equity investments (3,278) (236,293)
--------- ---------
Net cash used by investing
activities (97,298) (167,745)
--------- ---------
Cash flows from financing activities:
Distributions to Limited and General
Partners -- (300,003)
--------- ---------
Net cash used by financing
activities -- (300,003)
--------- ---------
Net decrease in cash and
cash equivalents (385,135) (850,546)
Cash and cash equivalents at beginning
of year 1,006,954 2,400,854
--------- ---------
Cash and cash equivalents at June 30 $ 621,819 1,550,308
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited) (continued)
- ------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1995 1994
---- ----
<S> <C> <C>
Reconciliation of net loss to net
cash used by operating activities:
Net loss $ (100,704) (1,646,142)
Adjustments to reconcile net loss to net
cash used by operating activities:
Net realized gain from sales of
equity investments (170,840) (30,303)
Realized losses from investment
write-downs 1,810,522 2,274,930
Recoveries from investments previously
written off (133,750) --
Change in net unrealized fair value:
Secured notes receivable 182,000 (705,000)
Equity investments (1,668,804) 59,931
Other, net 857 (3,221)
Changes in:
Accounts payable and accrued expenses (75,364) (19,796)
Due to/from related parties 11,230 (38,060)
Due to/from affiliated partnerships 489 (40,781)
Accrued interest on secured and
convertible notes receivable (44,009) (174,506)
Other assets (108,784) (64,897)
Other, net 9,320 5,047
--------- ---------
Net cash used by operating activities $ (287,837) (382,798)
========= =========
Non-cash investing activities:
Conversion of secured notes
receivable and interest to equity
and other investments $ 1,741,550 1,041,054
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ----------------------------------------
1. General
-------
In the opinion of the Managing General Partner, the Balance Sheets as of
June 30, 1995 and December 31, 1994, and the related Statements of
Operations for the three and six months ended June 30, 1995 and 1994, and
Statements of Cash Flows for the six months ended June 30, 1995 and 1994,
reflect all adjustments which are necessary for a fair presentation of
the financial position, results of operations and cash flows for such
periods. These statements should be read in conjunction with the Annual
Report on Form 10-K for the year ended December 31, 1994. The following
notes to financial statements for activity through June 30, 1995
supplement those included in the Annual Report on Form 10-K. Allocation
of income and loss to Limited and General Partners is based on cumulative
income and loss. Adjustments, if any, are reflected in the current
quarter balances.
2. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs for the six months ended
June 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Management fees $ 73,880 113,894
Reimbursable operating expenses 193,431 328,114
</TABLE>
Certain reimbursable expenses have been accrued and allocated based upon
interim estimates prepared by the Managing General Partner and are
adjusted to actual cost periodically. As of June 30, 1995, due to
related parties for such expenses were $10,565 compared to $665 due from
related parties included in other assets at December 31, 1994.
Within the normal course of business, the Partnership participates with
affiliated partnerships in secured notes receivable granted to
nonaffiliated borrowing companies. The Partnership may also
reparticipate such secured notes receivable amongst affiliated
partnerships to meet business needs. At June 30, 1995 and December 31,
1994, the amounts due to affiliated partnerships on such participations
were $735 and $246, respectively. These amounts were paid to such
affiliated partnerships in the respective following quarters.
3. Net Realized Loss Per Unit
--------------------------
Net realized loss per Unit is calculated by dividing total net realized
loss allocated to the Limited Partners by the average number of Units
outstanding for the six months ended June 30, 1995 and 1994 of 159,006
and 159,390, respectively.
4. Equity Investments
------------------
A complete listing of the Partnership's equity investments at December
31, 1994 is included in the 1994 Annual Report. Activity from January 1
through June 30, 1995 consisted of
<TABLE>
<CAPTION>
January 1 -
June 30, 1995
-------------------
Investment Cost Fair
Industry/Company Date Position Basis Value
- ---------------- ---------- -------- ----- -----
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $2,936,564 1,603,688
--------- ---------
Significant changes:
WARRANTS:
- --------
Computers and Computer Equipment
- --------------------------------
Censtor Corporation 02/91 16,808 Common
shares at $.29;
exercised 05/95 (7,500) (37,112)
Pinnacle Systems, Inc. 05/90 2,083 Common
shares at $8.00;
exercised 02/95 (2,500) (14,164)
Computer Software and Systems
- -----------------------------
Datalogix International, 01/92 17,787 Common
Inc. shares at $1.87;
exercised 06/95 (10,000) (10,000)
Telecommunications
- ------------------
Integrated Network 06/91 5,882 Common
Corporation shares at $17.00;
expiring 06/96 (10,000) (100,002)
Primary Access 10/90- 15,100 Common
Corporation 04/91 shares at $2.25;
exercised 06/95 (3,500) (3,500)
STOCKS:
- ------
Computers and Computer Equipment
- --------------------------------
Censtor Corporation 05/95 4,538 Common
shares 2,395 2,395
MTI Technology Corporation 04/94 20,928 Common
shares 0 (17,851)
Wasatch Education Systems 06/95 1,741,550 Series C
Corporation Preferred shares 1,741,550 1,741,550
Industrial/Business Automation
- ------------------------------
Cyclean, Inc. 01/95 27,475 Series D
Preferred shares 76,656 76,656
Cyclean of Los Angeles, LLC 03/95 Class A LLC Unit -
45% ownership 11,091 11,091
Medical
- -------
Resonex Holding Corporation 02/94 11,402 Common
shares (841,254) 0
Retail/Consumer Products
- ------------------------
S-Tron 05/93 Subordinated
debenture,
$220,000 principal
amount (221,136) (73,511)
S-Tron 05/93 1,826,000 Series 1
and 2 Preferred
shares (496,827) (110,853)
Telecommunications
- ------------------
Primary Access Corporation 11/93 22,000 Common
shares (52,250) (52,250)
3Com Corporation 06/95 7,186 Common
shares 75,379 481,531
3Com Corporation 06/95 798 Common
shares in
escrow account 8,375 53,503
--------- ---------
Total significant changes 270,479 1,947,483
Other changes, net 3,349 (4,851)
--------- ---------
Total equity investments at June 30, 1995 $3,210,392 3,546,320
========= =========
</TABLE>
Marketable Equity Securities
- ----------------------------
At June 30, 1995 and December 31, 1994, marketable equity securities had
aggregate costs of $287,106 and $205,852, respectively, and aggregate
fair values of $636,749 and $143,567, respectively. The unrealized gain
(loss) at June 30, 1995 and December 31, 1994 included gross gains of
$481,280 and $51,501, respectively.
Censtor Corporation
- -------------------
In May 1995, the Partnership exercised its warrant without cash and
received 4,538 common shares. The recorded common share cost basis was
$2,395, which is net of a realized loss.
Cyclean, Inc./Cyclean of Los Angeles, LLC
- -----------------------------------------
In January 1995, the Partnership obtained the right to receive 51,051
Series D Preferred shares with a twelve month vesting schedule in
exchange for a one year maturity date extension of secured notes
receivable. At June 30, 1995, 27,475 shares were fully vested with a
recorded cost basis and fair value of $76,656.
In March 1995, Cyclean, Inc. ("Cyclean") formed Cyclean of Los Angeles,
LLC ("Cyclean LLC") and contributed certain assets and contracts to the
new entity. Cyclean LLC is completing a new round of financing through
the offering of Class A LLC Units. As a result of this transaction, one
of the Partnership's secured notes receivable was transferred from
Cyclean to Cyclean LLC with modified terms; Cyclean has guaranteed note
repayments. The Partnership received a participated percentage of one
Class A LLC Unit in exchange for certain interest payments and late
charges totaling $11,091. The Partnership is also entitled to royalty
payments and additional Series D Preferred shares based on the total
proceeds raised from the Cyclean LLC offering, which is expected to be
completed by late 1995.
Datalogix International, Inc.
- -----------------------------
In June 1995, Datalogix International, Inc. completed its initial public
offering. The Partnership exercised its warrant without cash and sold
all of its resulting common shares in the company for total proceeds of
$114,392 and a realized gain of $104,392. Approximately $14,320 of the
sale proceeds were recorded as an unsettled trade at June 30, 1995 and
were included in "other assets" on the Balance Sheets.
Integrated Network Corporation
- ------------------------------
During June 1995, the Partnership exercised its option to sell half of
its warrant holdings to the company for $100,000, and realized warrant
income of $90,000, which was included in "secured notes receivable
interest income" on the Statements of Operations. As the cash was
received subsequent to the quarter end, the $100,000 was included in
"other assets" on the Balance Sheets at June 30, 1995. The Partnership
does not have this option for its remaining warrant.
MTI Technology Corporation
- --------------------------
The Partnership recorded a decrease in fair value of $17,851 to reflect
the publicly-traded market price at June 30, 1995. The Partnership's
investment is unrestricted.
Pinnacle Systems, Inc.
- ----------------------
In February 1995, the Partnership exercised its warrant without cash and
received 1,971 common shares. The recorded cost basis of $13,244
included a realized gain of $10,744 and a warrant cost basis of $2,500.
In May 1995, the Partnership sold the common shares for total proceeds
of $37,449 and realized a gain of $24,205.
Primary Access Corporation/3Com Corporation
- -------------------------------------------
In June 1995, Primary Access Corporation ("Primary Access") was acquired
by 3Com Corporation ("3Com"), a public company. Immediately prior to
the acquisition, the Partnership exercised its Primary Access common
warrant holdings without cash and received 12,686 shares of Primary
Access common stock with a cost basis of $31,504, which reflects a
realized gain of $28,004 and a warrant cost basis of $3,500. Upon the
acquisition, these shares, along with the existing 22,000 Primary Access
common shares held by the Partnership, were then exchanged for 7,984
3Com common shares, of which 798 shares are held in an escrow account
until March 31, 1996 to indemnify 3Com for any loss it may incur as a
result of any contractual breach of the merger agreement by Primary
Access. The Partnership recorded an increase in the change in fair
value of $451,280 to reflect this transaction and the market value at
June 30, 1995.
Subsequent to June 30, 1995, the Partnership sold 7,186 common shares
for total proceeds of $495,016 and a realized gain of $419,637.
Resonex Holding Corporation
- ---------------------------
Resonex Holding Corporation is currently obtaining bids from potential
acquirers as this is determined to be the best option for the company.
Based on the opinion of the Managing General Partner, there has been a
decline in Partnership's investment value and accordingly, the common
stock cost basis of $841,254 was written off.
S-Tron
- ------
The company was unsuccessful in its recent efforts to obtain a major
government contract; as a result, operations will likely cease by year
end. Based on the Managing General Partner's opinion, the fair value of
the Partnership's investment has declined. Accordingly, the partnership
has written off the cost basis of its Preferred stock investment of
$496,827 and recorded a write-down of $221,136 on its subordinated note
investment.
Wasatch Education Systems Corporation
- -------------------------------------
In June 1995, the Partnership converted its secured notes receivable
totaling $1,741,550 into 1,741,550 Series C Preferred shares at $1.00
per share. As part of the conversion, the Partnership wrote off or
reversed accrued interest totaling $357,495.
5. Secured Notes Receivable, Net
-----------------------------
Activity from January 1 through June 30, 1995 consisted of:
<TABLE>
<S> <C>
Balance at January 1, 1995 $ 4,999,512
1995 activity:
Secured notes receivable issued 645,866
Repayments of secured notes receivable (266,256)
Secured notes receivable converted
to equity investments (1,741,550)
Write-off or reversal of accrued interest (357,495)
Increase in interest receivable 95,831
Increase in allowance for loan losses (182,000)
Other, net (25,706)
---------
Total secured notes receivable, net,
at June 30, 1995 $3,168,202
=========
</TABLE>
The Partnership had accrued interest of $17,550 and $279,214 at June 30,
1995 and December 31, 1994, respectively.
Refer to Note 4, Equity Investments, for disclosure regarding secured
notes receivable converted to equity investments and write-off or
reversal of accrued interest.
Changes in the allowance for loan losses were as follows:
<TABLE>
<S> <C>
Balance at January 1, 1995 $2,529,000
Provision for loan losses 48,250
Recoveries of previous write-offs:
Semiconductor equipment 53,132
Industrial/business automation 22,045
Computers and computer equipment 58,573
---------
Total recoveries 133,750
---------
Change in net unrealized fair value of
secured notes receivable 182,000
---------
Balance at June 30, 1995 $2,711,000
=========
</TABLE>
The provision for loan losses is generally comprised of realized loan
losses, net of recognized recoveries, and a change in net unrealized
fair value based upon the level of loan loss reserves deemed adequate by
the Managing General Partner.
The allowance for loan losses is adjusted quarterly based upon changes
to the portfolio size and risk profile. Although the allowance is
established by evaluating individual debtor repayment ability, the
allowance represents the Managing General Partner's assessment of the
portfolio as a whole.
Notes aggregating $4,983,420 and $4,321,823 were on nonaccrual status
due to uncertainties of the borrowers' financial condition at June 30,
1995 and December 31, 1994, respectively. The Managing General Partner
continues to monitor the progress of companies with nonaccrual notes.
The fair value at June 30, 1995 recognizes the Managing General
Partner's estimate of collectibility of these notes.
All notes are secured by specific assets of the borrowing company.
Interest rates on notes issued during the six months ended June 30, 1995
ranged from 10% to 14%.
6. Cash and Cash Equivalents
-------------------------
At June 30, 1995 and December 31, 1994, cash and cash equivalents
consisted of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Demand accounts $ 2,175 2,334
Money-market accounts 619,644 1,004,620
------- ---------
Total $621,819 1,006,954
======= =========
</TABLE>
7. Commitments
-----------
The Partnership is a party to financial instruments with off-balance-
sheet risk in the normal course of its business. Generally, these
instruments are equipment financing commitments or accounts receivable
lines of credit that are outstanding but not currently fully utilized by
a borrowing company. As they do not represent current outstanding
balances, these unfunded commitments are properly not recognized in the
financial statements. At June 30, 1995, the Partnership had unfunded
commitments of $192,799 related to bridge and term note financings.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
During the six months ended June 30, 1995, net cash used by operating
activities totaled $287,837. The Partnership paid management fees of
$73,880 to the Managing General Partner, reimbursed related parties for
operating expenses of $182,201, and received $489 from affiliated
partnerships for net loan participations. In addition, other operating
expenses of $307,378 were paid. Interest and other income received
totaled $275,133.
During the six months ended June 30, 1995, the Partnership issued
$645,866 in secured notes receivable primarily to portfolio companies in
the computers and computer equipment and medical industries. Fundings
of equity investments totaled $3,278. Repayments of notes receivable
provided cash of $266,256 and proceeds from investment sales totaled
$151,840. The Partnership also received $133,750 from investment
recoveries. As of June 30, 1995, the Partnership was committed to fund
$192,799 on bridge and term notes to existing borrowing companies.
All management fees which are due have been paid through June 30, 1995.
Management fees are paid to the extent that the aggregate amount of all
proceeds (including those from warrants exercised without cash) from the
sale or other disposition of borrowing company equities, plus the
aggregate fair market value of any equity securities distributed to the
partners, exceeds the total management fee payable as defined in the
Partnership Agreement.
Subsequent to June 30, 1995, the Partnership sold 7,186 3Com Corporation
common shares for total proceeds of $495,016.
Each June, Limited Partners may tender their Units for repurchase by the
Partnership. The price paid for any Units tendered is subject to the
restrictions stated in the Partnership Agreement. As of June 30, 1995,
requests to repurchase approximately 1,500 units had been received. The
amount to be offered for the unit repurchases will be determined in the
following quarter.
Cash and cash equivalents at June 30, 1995 were $621,819. Future
distributions will be dependent upon loan repayments from borrowing
companies and available cash, and are expected to fluctuate. Operating
cash reserves combined with proceeds from the sale of investments,
interest income received on short-term investments and repayments of
secured notes receivable are expected to be sufficient to fund
Partnership operations and the loan requirements of existing borrowing
companies through the next twelve months.
Results of Operations
- ---------------------
Current quarter compared to corresponding quarter in the preceding year
- -----------------------------------------------------------------------
Net income was $81,163 compared to a net loss of $1,626,134 for the
three months ended June 30, 1995 and 1994, respectively. The change was
substantially due to a $1,358,062 increase in the change in net
unrealized fair value of equity investments and a $461,297 decrease in
realized losses from investment write-downs. These changes were
partially offset by a $181,716 decrease in secured notes receivable
interest income.
During the quarter ended June 30, 1995, the increase in fair value of
$1,665,802 was primarily due to the write-downs of portfolio companies
in the medical and retail/consumer products industries as these
investments had been reflected with a fair value less than cost. During
the quarter ended June 30, 1994, the increase in fair value of $307,740
was primarily attributable to a portfolio company in the computers and
computer equipment industry as well as the write-down of a portfolio
company in the medical industry as this investment had also been
reflected with a fair value less than cost.
During the quarter ended June 30, 1995, the Partnership realized losses
from investments write-downs of $1,810,522 primarily related to equity
investments in portfolio companies in the medical and retail/consumer
products industries. Realized losses of $2,271,819 in 1994 primarily
related to secured notes receivable to a portfolio company in the
computers and computer equipment industry.
In 1995, the secured notes receivable interest income of $138,157
included nonrecurring warrant income of $90,000 from the Integrated
Network Corporation warrant redemption. Secured notes receivable
interest income would have been $48,157 without such income, compared to
$319,873 during the quarter ended June 30, 1994. The decrease was
primarily due to the reversal of 1995 interest accrual on secured notes
receivable from Wasatch Education Systems Corporation as discussed in
Note 4 to the financial statements. Also, the 1994 income was higher
partially due to a cash collection of approximately $158,000 in interest
income from a portfolio company in the computer software and systems
industry that was previously on nonaccrual status.
In 1995, the Partnership recorded a net realized gain of $155,025
primarily related to the sale of Datalogix International, Inc. and the
non-cash exercise of the Primary Access Corporation warrant. In 1994,
the gain of $30,303 related to the non-cash exercise of a Elantec, Inc.
warrant.
During the quarter ended June 30, 1995, the $117,103 recovery related
mainly to portfolio companies in the computers and computer equipment
and semiconductor equipment industries. No such recovery was recorded
in the same period in 1994.
The Partnership recorded an increase in the fair value of secured notes
receivable of $109,000 for the quarter ended June 30, 1995 compared to
an increase of $199,000 for the same period in 1994 based upon the
levels of loan loss reserves deemed adequate by the Managing General
Partner at the respective quarter ends.
Total operating expenses were $145,802 and $58,623 for the three months
ended June 30, 1995 and 1994, respectively. The 1994 amount was lower
primarily due to a reimbursement of $187,441 in collection expenses from
a portfolio company in the computers and computer equipment industry, of
which $130,000 related to expenses incurred prior to December 31, 1993.
Lending operations and investment management expenses have been reduced
by this amount. Had there been no recovery of prior period costs, total
operating expenses would have been $186,990 in 1994.
Given the inherent risk associated with the business of the Partnership,
the future performance of the portfolio company investments may
significantly impact future operations.
Current six months compared to corresponding six months in the preceding
- ------------------------------------------------------------------------
year
- ----
Net loss was $100,704 and $1,646,142 for the six months ended June 30,
1995 and 1994, respectively. The decrease in net loss was substantially
due to a $1,728,735 increase in the change in net unrealized fair value
of equity investments and a $464,408 decrease in realized losses from
investment write-downs. These changes were partially offset by a
$887,000 decrease in the change in net unrealized fair value of secured
notes receivable.
During the six months ended June 30, 1995, the increase in equity
investment fair value of $1,668,804 was primarily related to the write-
downs of portfolio companies in the medical and retail/consumer products
industries as these investments had been reflected with a fair value
less than cost, as well as an increase for a portfolio company in the
telecommunications industry. During the six months ended June 30, 1994,
the decrease in fair value was $59,931.
During the six months ended June 30, 1995 and 1994, the Partnership
realized losses from investments write-downs of $1,810,522 and
$2,274,930, respectively, as discussed in the above section.
The Partnership recorded a decrease in the fair value of secured notes
receivable of $182,000, compared to an increase of $705,000 for the six
months ended June 30, 1995 and 1994, respectively, based upon the level
of loan loss reserves deemed adequate by the Managing General Partner at
the respective quarter ends.
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Partnership during the
quarter ended June 30, 1995.
(b) Financial Data Schedule for the six months ended and as of June 30,
1995 (Exhibit 27).
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TECHNOLOGY FUNDING SECURED INVESTORS II
By: TECHNOLOGY FUNDING INC.
Managing General Partner
Date: August 11, 1995 By: /s/Frank R. Pope
------------------------------------
Frank R. Pope
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
<INVESTMENTS-AT-COST> 9,089,594
<INVESTMENTS-AT-VALUE> 6,714,522
<RECEIVABLES> 0
<ASSETS-OTHER> 159,317
<OTHER-ITEMS-ASSETS> 621,819
<TOTAL-ASSETS> 7,495,658
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117,390
<TOTAL-LIABILITIES> 117,390
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,753,340
<SHARES-COMMON-STOCK> 159,006
<SHARES-COMMON-PRIOR> 159,006
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,375,072)
<NET-ASSETS> 7,378,268
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 403,835
<OTHER-INCOME> 4,450
<EXPENSES-NET> 489,861
<NET-INVESTMENT-INCOME> (81,576)
<REALIZED-GAINS-CURRENT> (1,505,932)
<APPREC-INCREASE-CURRENT> 1,486,804
<NET-CHANGE-FROM-OPS> (100,704)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (100,704)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 73,880
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 518,257
<AVERAGE-NET-ASSETS> 7,428,620
<PER-SHARE-NAV-BEGIN> 72
<PER-SHARE-NII> (10)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 62
<EXPENSE-RATIO> .07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>
A zero value is used since the change in net unrealized fair value is
not allocated to General Partners and Limited Partners as it is not
taxable. Only taxable gains or losses are allocated in accordance with
the Partnership Agreement.
</FN>
</TABLE>
