<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 quarterly period ended June 30, 1996
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,
1996 1995
-------- ------------
<S> <C> <C>
ASSETS
Investments:
Secured notes receivable, net
(cost basis of $4,409,306 and
$4,535,031 at 1996 and 1995,
respectively) $ 2,129,306 2,352,031
Equity investments (cost basis
of $2,399,524 and $2,533,378 at
1996 and 1995, respectively) 2,559,328 2,805,177
---------- ----------
Total investments 4,688,634 5,157,208
Cash and cash equivalents 3,643,790 5,058,537
Restricted cash 139,586 50,000
Due from affiliated partnerships 2,666 --
Other assets 18,604 259
---------- ----------
Total $ 8,493,280 10,266,004
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 334,334 340,131
Due to related parties 17,239 872,822
Due to affiliated partnerships -- 2,047
Distributions payable -- 466,804
Other liabilities 47,727 47,116
---------- ----------
Total liabilities 399,300 1,728,920
Commitments and contingencies
(Notes 2 and 7)
Partners' capital:
Limited Partners
(Units outstanding of
157,829 for both 1996 and 1995) 10,360,521 10,592,289
General Partners (146,345) (144,004)
Net unrealized fair value (decrease)
increase from cost:
Secured notes receivable (2,280,000) (2,183,000)
Equity investments 159,804 271,799
---------- ----------
Total partners' capital 8,093,980 8,537,084
---------- ----------
Total $ 8,493,280 10,266,004
========== ==========
</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,
------------------------ ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Secured notes receivable interest $ 19,831 138,352 52,873 390,261
Short-term investment interest 44,614 9,344 98,973 18,024
--------- --------- --------- ---------
Total income 64,445 147,696 151,846 408,285
--------- --------- --------- ---------
Costs and expenses:
Management fees 42,638 36,485 85,323 73,880
Other investment expenses 9,581 120,654 39,581 151,260
Operating expenses:
Lending operations and investment
management 50,132 52,272 69,554 93,504
Administrative and investor
services 105,452 57,893 159,017 108,304
Computer services 26,972 16,815 39,517 34,997
Professional fees 19,026 18,822 27,990 27,916
--------- --------- ---------- ---------
Total operating expenses 201,582 145,802 296,078 264,721
--------- --------- ---------- ---------
Total costs and expenses 253,801 302,941 420,982 489,861
--------- --------- ---------- ---------
Net operating loss (189,356) (155,245) (269,136) (81,576)
Net realized gain from sales of
equity investments 16,049 155,025 48,824 170,840
Realized losses from
investment write-downs (10,000) (1,810,522) (125,104) (1,810,522)
Recoveries from investments
previously written off 30,071 117,103 111,307 133,750
--------- --------- --------- ---------
Net realized loss (153,236) (1,693,639) (234,109) (1,587,508)
Change in net unrealized
fair value:
Secured notes receivable (201,000) 109,000 (97,000) (182,000)
Equity investments (79,369) 1,665,802 (111,995) 1,668,804
--------- --------- --------- ---------
Net (loss) income $ (433,605) 81,163 (443,104) (100,704)
========= ========= ========= =========
Net realized loss per Unit $ (1) (10) (1) (10)
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Interest and other income received $ 150,474 275,133
Cash paid to vendors (118,847) (307,378)
Cash paid to related parties (1,211,294) (256,081)
Cash (paid to) received from
affiliated partnerships (4,713) 489
Reimbursement of collection expenses
from a portfolio company 30,045 --
--------- ---------
Net cash used by operating
activities (1,154,335) (287,837)
--------- ---------
Cash flows from investing activities:
Secured notes receivable issued (168,002) (645,866)
Repayments of secured notes receivable 295,099 266,256
Proceeds from sales of equity investments 57,574 151,840
Recoveries from investments previously
written off 111,307 133,750
Purchase of equity investments -- (3,278)
--------- ---------
Net cash provided (used) by
investing activities 295,978 (97,298)
--------- ---------
Cash flows from financing activities:
Distributions to Limited and General
Partners (466,804) --
--------- ---------
Net cash used by financing
activities (466,804) --
--------- ---------
Net decrease in cash and
restricted cash (1,325,161) (385,135)
Cash and restricted cash at
beginning of year 5,108,537 1,006,954
--------- ---------
Cash and restricted cash at June 30 $ 3,783,376 621,819
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited) (continued)
- ------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
Reconciliation of net loss to net
cash used by operating activities:
Net loss $ (443,104) (100,704)
Adjustments to reconcile net loss to net
cash used by operating activities:
Net realized gain from sales of
equity investments (48,824) (170,840)
Realized losses from investment
write-downs 125,104 1,810,522
Recoveries from investments previously
written off (111,307) (133,750)
Change in net unrealized fair value:
Secured notes receivable 97,000 182,000
Equity investments 111,995 (1,668,804)
Other, net (5,678) 857
Changes in:
Accounts payable and accrued expenses (5,797) (75,364)
Due to/from related parties (855,583) 11,230
Accrued interest on secured and
convertible notes receivable 4,306 (44,009)
Other assets (18,345) (108,784)
Other changes, net (4,102) 9,809
--------- ---------
Net cash used by operating activities $(1,154,335) (287,837)
========= =========
Non-cash investing activities:
Conversion of secured notes
receivable and interest to equity
investments $ -- 1,741,550
========= =========
</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, 1996, and December 31, 1995, and the related Statements of
Operations for the three and six months ended June 30, 1996 and 1995, and
Statements of Cash Flows for the six months ended June 30, 1996 and 1995,
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, 1995. The following
notes to financial statements for activity through June 30, 1996,
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. Certain 1995 balances have been reclassified to
conform with the 1996 financial statement presentation.
As set forth in the Partnership Agreement, the Partnership is scheduled
to be dissolved on December 31, 1996, (or such later date to which the
General Partners extend the Partnership up to a limit of two two-year
extensions). The General Partners intend to exercise their right to
extend the term of the Partnership to December 31, 1998.
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, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Management fees $ 85,323 73,880
Reimbursable operating expenses 270,388 193,431
</TABLE>
Certain reimbursable expenses have been allocated and accrued based upon
interim estimates prepared by the Managing General Partner and are
adjusted to actual cost periodically. As of June 30, 1996, and December
31, 1995, due to related parties for such expenses were $17,239 and
$872,822, respectively.
Within the normal course of business, the Partnership participates with
affiliated partnerships in secured notes receivable issued to
nonaffiliated borrowing companies. The Partnership may also
reparticipate such secured notes receivable amongst affiliated
partnerships to meet business needs. At June 30, 1996, due from
affiliated partnerships on such participations was $2,666 compared to
$2,047 due to affiliated partnerships at December 31, 1995. These
amounts were received from or paid to such affiliated partnerships in the
respective following quarters.
3. Net Realized Income (Loss) Per Unit
-----------------------------------
Net realized income (loss) per Unit is calculated by dividing total net
realized income (loss) allocated to the Limited Partners by the average
number of Units outstanding for the six months ended June 30, 1996 and
1995 of 157,829 and 159,006, respectively.
4. Equity Investments
------------------
A complete listing of the Partnership's equity investments at December
31, 1995, is included in the 1995 Annual Report. Activity from January 1
through June 30, 1996, consisted of
<TABLE>
<CAPTION>
January 1 -
June 30, 1996
-------------------
Investment Cost Fair
Industry/Company Date Position Basis Value
- ---------------- ---------- -------- ----- -----
<S> <C> <C> <C> <C>
Balance at January 1, 1996 $2,533,378 2,805,177
--------- ---------
Significant changes:
WARRANTS:
- --------
Biotechnology
- -------------
Hybridon, Inc. 03/91 3,572 Common
shares at $3.50;
exercised 01/96 (1,250) (16,074)
Computer Software and Systems
- -----------------------------
Wasatch Educations Systems 06/95 959,546 Common
Corporation shares at $0.50;
expiring 06/00 0 (179,915)
Medical
- -------
Hemocleasne, Inc. 01/92 12,474 Common
shares at $0.50;
expiring 01/97 0 31,185
STOCKS:
- ------
Computers and Computer Equipment
- --------------------------------
MTI Technology Corporation 04/94 20,928 Common
shares (115,104) 5,755
Industrial/Business Automation
- ------------------------------
Cyclean, Inc. 09/94- 225,088 Series D
04/96 Preferred shares 0 (242,988)
Cyclean of Los Angeles, 03/95 Class A LLC Unit-
LLC 45% ownership 0 (11,091)
Medical
- -------
Allegiant Physicians 08/94& 21,000 Common
Services, Inc. 11/95 shares (7,500) (35,000)
Hemocleanse, Inc. 03/95 5,512 Common
shares 0 11,465
Microelectronics
- ----------------
Celeritek, Inc. 05/94 47,219 Common
shares 0 174,833
Elantec, Inc. 05/94& 11,591 Common
07/95 shares 0 17,850
Retail/Consumer Products
- ------------------------
S-TRON 05/93 Subordinated
debenture, $220,000
principal amount (0) (0)
S-TRON 05/93 220,000 Common
shares (0) (0)
S-TRON 05/93 1,826,000 Series 1
& 2 Preferred
shares (0) (0)
--------- ---------
Total significant changes (123,854) (243,980)
Other changes, net (10,000) (1,869)
--------- ---------
Total equity investments at June 30, 1996 $2,399,524 2,559,328
========= =========
</TABLE
Marketable Equity Securities
- ----------------------------
At June 30, 1996, and December 31, 1995, marketable equity securities
had aggregate costs of $387,958 and $510,580, respectively, and
aggregate fair values of $764,191 and $603,264, respectively. The net
unrealized gains at June 30, 1996, and December 31, 1995, included gross
gains of $399,777 and $237,087, respectively.
Allegiant Physicians Services, Inc.
- -----------------------------------
During the first six months of 1996, the Partnership exercised its
option to sell all of its 21,000 common shares to the company for
$35,025 resulting in a realized gain of $27,525.
Cyclean, Inc./Cyclean of Los Angeles, LLC
- -----------------------------------------
During the second quarter of 1996, the Partnership received 25,495
Series D Preferred shares as a stock dividend while another 112,500
shares were received pursuant to a prior debt restructure.
Subsequently, the Managing General Partner determined that the fair
value of the Partnership's investment has declined and accordingly, the
Partnership recorded a $254,079 decrease in fair value at June 30, 1996.
Hemocleanse, Inc.
- -----------------
The Partnership recorded a total increase in fair value of $42,650 for
its warrant and stock investment, based on the valuation set at a prior
round of financing in which third parties participated.
Hybridon, Inc.
- --------------
In January of 1996, Hybridon, Inc., completed its initial public
offering. The Partnership exercised its warrant holdings without cash
and received 2,532 shares of common stock, which were subsequently sold
for total proceeds of $22,549. The total realized gain from these
transactions was $21,299.
MTI Technology Corporation
- --------------------------
During the first quarter of 1996, the Managing General Partner
determined that there had been an other than temporary decline in value
of the Partnership's investment. As a result, the Partnership realized
a loss of $115,104. The Partnership also recorded an increase in fair
value of $5,755 to reflect the unrestricted market value at June 30,
1996.
S-TRON
- ------
The company was unsuccessful in its efforts to obtain a major government
contract; as a result, company operations ceased during March of 1996.
This investment, which had previously been written off, is no longer
held by the Partnership.
Other Equity Investments
- ------------------------
Other significant changes reflected above relate to market value
fluctuations or the elimination of a discount relating to selling
restrictions for publicly-traded portfolio companies.
5. Secured Notes Receivable, Net
-----------------------------
Activity from January 1 through June 30, 1996, consisted of:
</TABLE>
<TABLE>
<S> <C>
Balance at January 1, 1996 $2,352,031
1996 activity:
Secured notes receivable issued 168,002
Repayments of secured notes receivable (295,099)
Increase in allowance for loan losses (97,000)
Other, net 1,372
---------
Total secured notes receivable, net,
at June 30, 1996 $2,129,306
=========
</TABLE>
The Partnership had accrued interest of $4,306 December 31, 1995. There
was no accrued interest at June 30, 1996.
Changes in the allowance for loan losses were as follows:
<TABLE>
<S> <C>
Balance at January 1, 1996 $2,183,000
Decrease in provision for loan losses (14,307)
Recoveries of previous write-offs:
Semiconductor equipment 59,404
Medical 51,903
---------
Total recoveries 111,307
---------
Change in net unrealized fair value of
secured notes receivable 97,000
---------
Balance at June 30, 1996 $2,280,000
=========
</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.
Secured notes receivable of $3,909,306 and $4,031,001 were on nonaccrual
status due to the uncertainty of certain borrowers' financial conditions
at June 30, 1996, and December 31, 1995, respectively. The Managing
General Partner continues to monitor the progress of these companies.
The fair value at June 30, 1996, reflected the Managing General
Partner's estimate of collectibility of these notes.
During the first quarter of 1996, the Partnership received approximately
$43,000 from a portfolio company in the medical industry to pay off its
principal balance. In addition, the Partnership was reimbursed $30,045
for legal, consulting, and other costs incurred in prior periods in the
defense of the Partnership's secured note rights through bankruptcy
court. The reimbursement was recorded as a reduction to lending
operations and investment management expense.
All notes are secured by specific assets of the borrowing company. The
interest rate on notes issued during the six months ended June 30, 1996,
ranged from 12% to 14%.
6. Cash and Cash Equivalents
-------------------------
At June 30, 1996, and December 31, 1995, cash and cash equivalents
consisted of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Demand and brokerage accounts $ 13,743 --
Money market accounts 3,630,047 5,058,537
--------- ---------
Total $3,643,790 5,058,537
========= =========
</TABLE>
7. Commitments and contingencies
-----------------------------
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, 1996, the Partnership had unfunded
commitments of $16,200 related to term note financings to an existing
borrowing company.
In June 1996, a lawsuit was filed by a third party in the Los Angeles
County Superior Court against the Partnership, the Managing General
Partner and certain of its officers, and Cyclean, Inc., a portfolio
company in the industrial/business automation industry. The third party
has asserted claims for interference with contractual relations against
the defendants. The plaintiff further alleges that the Partnership
agreed to purchase its interest in an entity partially owned by the
plaintiff and seeks unspecified damages against the Partnership and its
affiliates. The Managing General Partner believes that the Partnership
has adequate defenses and intends to pursue this matter vigorously. The
Managing General Partner believes the outcome will not have a material
adverse effect on the Partnership's financial position at June 30, 1996.
<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, 1996, net cash used by operating
activities totaled $1,154,335. The Partnership paid management fees of
$85,323 to the Managing General Partner, reimbursed related parties for
operating expenses of $1,125,971, and paid affiliated partnerships
$4,713 for net loan participations. Other operating expenses of
$118,847 were paid and interest and other income of $150,474 was
received. In addition, the Partnership received a collection expense
reimbursement of $30,045 from a portfolio company. Distributions
totaling $466,804 were paid to the Limited and General Partners.
During the six months ended June 30, 1996, the Partnership issued
$168,002 in secured notes receivable primarily to a portfolio company in
the computers and computer equipment industry. Repayments of notes
receivable provided cash of $295,099 and proceeds from investment sales
totaled $57,574. The Partnership also received $111,307 from investment
recoveries. As of June 30, 1996, the Partnership was committed to fund
$16,200 related to term notes to an existing borrowing company.
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, 1996,
requests to repurchase approximately 1,700 Units had been received. The
amount to be offered for the Unit repurchases will be determined in the
following quarter.
Cash and restricted cash at June 30, 1996 were $3,783,376. 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 loss was $433,605 compared to a net income of $81,163 for the three
months ended June 30, 1996 and 1995, respectively. The change was
substantially due to decreases of $1,745,171 and $310,000 in the change
in net unrealized fair values of equity investments and secured notes
receivable, respectively, a $138,976 decrease in net realized gain from
sales of equity investments, and a $118,521 decrease in secured notes
receivable interest income. These changes were mostly offset by a
$1,800,522 decrease in realized losses from investment write-downs.
During the quarter ended June 30, 1996, the $79,369 decrease in equity
investment fair value was mostly due to decreases in the
industrial/business automation industry, partially offset by increases
in the medical and microelectronics industries. In 1995, the increase
of $1,665,802 was primarily due to the $1,810,522 write-downs which were
mostly related to portfolio companies in the medical and retail/consumer
products industries as these investments had been reflected with fair
values less than cost. In 1996, the Integrated Network Corporation
warrant expired resulting in realized losses of $10,000.
The Partnership recorded a $201,000 decrease in secured notes receivable
fair value for the quarter ended June 30, 1996, compared to an increase
of $109,000 for the same period in 1995 based upon the levels of loan
loss reserves deemed adequate by the Managing General Partner at the
respective quarter ends.
Net realized gain from sales of equity investments totaled $16,049
during the three months ended June 30, 1996, related to the sales of
Allegiant Physicians Services, Inc., and Hybridon, Inc. In 1995, the
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.
Secured notes receivable interest income totaled $19,831 and $138,352
for the quarters ended June 30, 1996 and 1995, respectively. The 1995
amount included nonrecurring warrant income of $90,000 from the
Integrated Network Corporation warrant redemption. Secured notes
receivable interest income would have been $48,352 without such income.
The decrease was primarily due to lower interest-bearing notes
receivable balances.
Total operating expenses were $201,582 and $145,802 for the three months
ended June 30, 1996 and 1995, respectively. The increase was mostly
attributable to allocated overhead costs in 1996 as permitted by the
Partnership Agreement.
Other investment expenses of $9,581 and $120,654 for the quarters ended
June 30, 1996 and 1995, respectively, primarily reflected litigation
costs with a third party related to a portfolio company in the
retail/consumer products industry.
During the second quarter of 1996, a $30,071 recovery was recorded,
related to a portfolio company in the semiconductor equipment industry.
In 1995, the $117,013 recovery related to portfolio companies in the
computers and computer equipment, and semiconductor equipment
industries.
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 losses were $443,104 and $100,704 for the six months ended June 30,
1996 and 1995, respectively. The increase in net loss was substantially
due to a $1,780,799 decrease in the change in net unrealized fair value
of equity investments, a $337,388 decrease in secured notes receivable
interest income, and a $122,016 decrease in net realized gain from sales
of equity investments. These changes were partially offset by a
$1,685,418 decrease in realized losses from investment write-downs.
During the six months ended June 30, 1996, the decrease in equity
investment fair value of $111,995 mostly related to decreases in
portfolio companies in the industrial/business automation and computer
software and systems industries, partially offset by increases resulting
from write-downs totaling $125,104, substantially related to a company
in the computers and computer equipment industry as these investments
have been reflected with fair values less than cost. In 1995, the
$1,668,804 increase was primarily related to the write-downs totaling
$1,810,522 mentioned in above section, as well as an increase for a
portfolio company in the telecommunications industry.
Secured notes receivable interest income were $52,873 and $390,261
during the six months ended June 30, 1996 and 1995, respectively. The
1995 income was higher partially due to a cash collection of
approximately $166,000 in interest income from a portfolio company in
the computer software and systems industry that was previously on
nonaccrual status. In addition, the 1995 income included a nonrecurring
warrant income of $90,000 as mentioned in the above section. Had the
above cash collection and warrant redemption not occurred, secured notes
receivable interest income in 1995 would have been approximately
$134,000. The decrease was primarily due to lower interest-bearing
notes receivable balances.
During the six months ended June 30, 1996, the Partnership realized a
gain of $48,824 from sales of Hybridon, Inc., and Allegiant Physicians
Services, Inc. In 1995, the realized gain of $170,840 primarily related
to the sales of Datalogix International, Inc., and Pinnacle Systems,
Inc.
Total operating expenses were $296,078 and $264,721 for the six months
ended June 30, 1996 and 1995, respectively. The increase was mostly
attributable to allocated overhead costs in 1996 as mentioned in the
above section.
II. OTHER INFORMATION
Item 1. Legal Proceedings
As disclosed in Note 7 to the financial statements, there is pending
litigation to which the Partnership is a party.
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, 1996.
(b) Financial Data Schedule for the six months ended and as of June 30,
1996 (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 9, 1996 By: /s/Debbie A. Wong
------------------------------------
Debbie A. Wong
Controller
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<INVESTMENTS-AT-COST> 6,808,830
<INVESTMENTS-AT-VALUE> 4,688,634
<RECEIVABLES> 0
<ASSETS-OTHER> 21,270
<OTHER-ITEMS-ASSETS> 3,783,376
<TOTAL-ASSETS> 8,493,280
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 399,300
<TOTAL-LIABILITIES> 399,300
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,214,176
<SHARES-COMMON-STOCK> 157,829
<SHARES-COMMON-PRIOR> 157,829
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,120,196)
<NET-ASSETS> 8,093,980
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 151,846
<OTHER-INCOME> 0
<EXPENSES-NET> 420,982
<NET-INVESTMENT-INCOME> (269,136)
<REALIZED-GAINS-CURRENT> 35,207
<APPREC-INCREASE-CURRENT> (208,995)
<NET-CHANGE-FROM-OPS> (443,104)
<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> (443,104)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 85,323
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 468,825
<AVERAGE-NET-ASSETS> 8,315,532
<PER-SHARE-NAV-BEGIN> 67
<PER-SHARE-NII> (1)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 66
<EXPENSE-RATIO> 5
<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>
