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, 1998
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 0-17989
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
Registrant
California 68-0166383
- --------------------------------- ----------------------------------
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
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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
preceding requirements for the past 90 days.
Yes X No
----- -----
7,526 Units of Limited Partnership Interest were outstanding as of September 30,
1998.
Transitional small business disclosure format:
Yes No X
----- -----
Page 1 of 11
<PAGE>
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
September 30, December 31,
1998 1997
---- ----
ASSETS
Cash and cash equivalents $ 254 $ 496
Accounts receivable -- 37
Equipment on operating leases and held for lease
(net of accumulated depreciation of $0 and
$56 at September 30, 1998 and December 31,
1997, respectively) -- --
Investment in joint ventures 105 130
Other assets 2 2
----- -----
Total Assets $ 361 $ 665
===== =====
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 21 $ 20
----- -----
Total Liabilities 21 20
----- -----
Partners' Capital (Deficit)
General Partner (2) (15)
Limited Partners, 25,000 units authorized,
7,526 units issued and outstanding at
September 30, 1998 and December 31, 1997 342 660
----- -----
Total Partners' Capital (Deficit) 340 645
----- -----
Total Liabilities and Partners' Capital (Deficit) $ 361 $ 665
===== =====
The accompanying notes are an integral part of these statements.
2
<PAGE>
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
INCOME
Rental income $ 7 $ -- $ 7 $ --
Earned income, financing leases -- -- -- 5
Gain on sale of securities -- -- 111 51
Equity in earnings (losses) from joint
ventures, net 3 (3) (10) (10)
Interest income, notes receivable -- 47 4 49
Other income 4 7 11 23
------- ------- ------- -------
Total Income 14 51 123 118
------- ------- ------- -------
EXPENSES
Amortization of acquisition fees -- -- -- 4
Management fees to General Partner -- 2 4 7
Reimbursed administrative costs to
General Partner 3 2 8 7
Provision for losses on receivables 6 -- 6 --
Legal expenses -- 5 1 12
General and administrative expenses 5 5 20 16
------- ------- ------- -------
Total Expenses 14 14 39 46
------- ------- ------- -------
NET INCOME $ -- $ 37 $ 84 $ 72
======= ======= ======= =======
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ -- $ 4.82 $ 9.01 $ 7.87
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $ 51.26 $153.79
======= ======= ======= =======
ALLOCATION OF NET INCOME:
General Partner $ -- $ 1 $ 16 $ 13
Limited Partners -- 36 68 59
------- ------- ------- -------
$ -- $ 37 $ 84 $ 72
======= ======= ======= =======
The accompanying notes are an integral part of these statements.
3
<PAGE>
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
1998 1997
---- ----
Operating Activities:
- --------------------
Net income $ 84 $ 72
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of acquisition fees -- 4
Gain on sale of securities (111) (51)
Equity in losses from joint ventures, net 10 10
Provision for losses on accounts receivable 6 --
Decrease in accounts receivable 31 28
Increase (decrease) in accounts payable and
accrued expenses 1 (4)
Increase in other assets -- (2)
------- -------
Net cash provided by operating activities 21 57
------- -------
Investing Activities:
- --------------------
Principal payments, financing leases -- 99
Proceeds from sale of securities 111 51
Distributions from joint ventures 15 --
------- -------
Net cash provided by investing activities 126 150
------- -------
Financing Activities:
- --------------------
Distributions to partners (389) (1,170)
------- -------
Net cash used by financing activities (389) (1,170)
------- -------
Decrease in cash and cash equivalents (242) (963)
Cash and cash equivalents, beginning of period 496 1,499
------- -------
Cash and cash equivalents, end of period $ 254 $ 536
======= =======
The accompanying notes are an integral part of these statements.
4
<PAGE>
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. General.
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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.
The Partnership Agreement stipulates the methods by which income will
be allocated to the General Partner and the limited partners. Such allocations
will be made using income or loss calculated under Generally Accepted Accounting
Principles for book purposes, which varies from income or loss calculated for
tax purposes.
The calculation of items of income and loss for book and tax purposes
may result in book basis capital accounts that vary from the tax basis capital
accounts. The requirement to restore any deficit capital balances by the General
Partner will be determined based on the tax basis capital accounts. At
liquidation of the Partnership, the General Partner's remaining book basis
capital account will be reduced to zero through the allocation of income or
loss.
Note 2. Reclassification.
----------------
Reclassification - Certain 1997 amounts have been reclassified to
conform to the 1998 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.
Note 4. Net Income (Loss) and Distribution Per Limited Partnership Unit.
---------------------------------------------------------------
Net income and distributions per limited partnership unit were based on
the limited partners' share of net income and distributions, and the weighted
average number of units outstanding of 7,526 for the nine months ended September
30, 1998 and 1997. For purposes of allocating net income (loss) and
distributions to each individual limited partner, the Partnership allocates net
income (loss) and distributions based upon each respective limited partner's net
capital contributions.
5
<PAGE>
Note 5. Investment in Joint Ventures.
----------------------------
Foreclosed Cable System Joint Ventures
- --------------------------------------
The aggregate combined financial information of the foreclosed cable
systems joint ventures is presented as follows:
September 30, December 31,
1998 1997
---- ----
(Amounts in Thousands)
Assets $602 $909
Liabilities 71 240
Partners' Capital 531 669
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ 96 $ 104 $ 219 $ 307
Expenses 77 120 275 361
Net Income (Loss) 19 (16) (56) (54)
6
<PAGE>
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
Item 2. Management's Discussion and Analysis of Financial Condition and
-------------------------------------------------------------------
Results of Operations.
---------------------
Results of Operations
Phoenix High Tech/High Yield Fund, a California limited partnership ("the
Partnership") reported net income of $0 and $84,000 for the three and nine
months ended September 30, 1998, respectively, as compared to net income of
$37,000 and $72,000 for the same periods in 1997.
The decrease in net income for the three months ended September 30, 1998,
compared to the same period in 1997, is a result of an absence in interest
income from notes receivable compared to $47,000 in 1997. During the three
months ended September 30, 1997, the Partnership received additional settlement
proceeds from a defaulted note receivable with a net carrying value of $0. The
Partnership did not have such an occurrence during 1998.
The improvement in net income experienced for the nine months ended
September 30, 1998 compared to 1997, is attributable to an increase in gain on
sale of securities of $60,000. The gain on sale of securities, for which the
Partnership received proceeds of $111,000 during the nine months ended September
30, 1998, is due to the exercise and sale of stock warrants held by the
Partnership.
Total income decreased by $37,000 during the three months ended September
30, 1998, compared to the same period in the previous year, but increased by
$5,000 for the nine months ended September 30, 1998. The decrease in total
income experienced during the three months ended September 30, 1998, compared to
1997, is attributable to the absence of interest income from notes receivable,
as previously discussed. However, during the three months ended September 30,
1998, the Partnership did recognize rental income of $7,000 compared to $0 in
the previous year. The rental income is attributable to the write-off of rental
liabilities.
The increase in total income of $5,000 for the nine months ended September
30, 1998, compared to the same period in the previous year, is a result of an
increase in gain on sale of securities of $60,000, as previously discussed,
which was partially offset by decreases in interest income from notes receivable
of $45,000 and other income of $12,000. The decrease in other income is a result
of a decline in interest income due to a decrease in the amount of cash being
generated by the Partnership.
Total expenses remained the same for the three months ended September 30,
1998, compared to the same period in the prior year, but decreased by $7,000 for
the nine months ended September 30, 1998. The decline in total expenses for the
nine months ended September 30, 1998, compared to the same period in 1997, is a
result of an absence in amortization of acquisition fees compared to $4,000 in
the previous year, as well as, a reduction in legal expenses of $11,000. The
absence of amortization of acquisition fees and decrease in legal expenses are a
result of the Partnership's remaining equipment being sold and the remaining net
7
<PAGE>
investment in financing leases coming to the end of their term during the third
quarter of 1997. The absence of amortization of acquisition fees and the
decrease in legal expenses for the nine months ended September 30, 1998 is
partially offset by an increase in provision for losses on receivables of
$6,000.
Liquidity and Capital Resources
The cash generated by leasing and financing activities was $21,000 during
the nine months ended September 30, 1998, as compared to $156,000 during the
same period in 1997. The decrease in net cash generated by leasing and financing
activities for the nine months ended September 30, 1998 is due primarily to the
absence of principal payments from financing leases, compared to $99,000 for the
prior year.
The Partnership received distributions from joint ventures of $15,000 for
the nine months ended September 30, 1998, compared to $0 for the same period in
1997. The increase in distributions is a result of one foreclosed cable systems
joint venture making a final distribution.
The cash distributed to partners was $389,000 and $1,170,000 for the nine
months ended September 30, 1998 and 1997, respectively. In accordance with the
Partnership Agreement, the Limited Partners are entitled to 99% of the cash
available for distribution and the General Partner is entitled to 1%. As a
result, the Limited Partners received $385,000 and $1,158,000 in distributions
during the period ended September 30, 1998 and 1997, respectively. The
cumulative cash distributions to limited partners are $7,380,000 and $6,995,000
at September 30, 1998 and 1997, respectively. The General Partner received
$4,000 and $12,000 for its share of the cash distributions during the period
ended September 30, 1998 and 1997, respectively.
Distributions for the nine months ended September 30, 1997 were higher than
usual as a result of the receipt of a settlement payment on an impaired note
during the quarter ended September 30, 1996. The Partnership included these
proceeds in the January 15, 1997 distribution to partners. The Partnership
anticipates making a distribution to partners on or before December 31, 1998.
The General Partner currently anticipates that it may not be able to
liquidate the remaining assets by December 31, 1998, as previously reported. The
remaining assets of the Partnership consist primarily of an investment in
Phoenix Pacific Northwest J.V., a foreclosed cable television system joint
venture. The General Partner is continuing its efforts in marketing this cable
television system for sale.
Impact of the Year 2000 Issue
The "Year 2000 problem" arose because many existing computer programs use
only the last two digits to refer to a year. Therefore, these computers and
computer programs do not properly recognize a year that begins with "20" instead
of the familiar "19." If not corrected, many computer applications could fail or
create erroneous results.
The General Partner has performed an assessment of the computer programs
used to conduct the business of the Partnership that are subject to Year 2000
risk. The General Partner and its affiliates are currently in the process of
testing, upgrading, modifying and replacing existing computer programs that have
been determined not to be Year 2000 compliant. It is estimated that this project
will be completed in mid 1999. However, if this project is not completed in a
timely matter, the Year 2000 issue could have a material impact on the
Partnership's operations. The costs of these changes are being incurred by the
8
<PAGE>
General Partner or its affiliates. Costs incurred by the Partnership will be
expensed as incurred and are not currently anticipated to be material to the
Partnership's financial position or results of operations. The General Partner
currently does not have a contingency plan, but will continue to evaluate the
need for such plan as systems and programs are tested.
The Partnership's customers consist of lessees and borrowers. The
Partnership does not have exposure to any individual customer that would
materially impact the Partnership should the customer experience a significant
Year 2000 problem.
The assessments of the risks and costs of the Year 2000 issue are based on
management's best estimates. However, there can be no guarantee that these
estimates will be achieved and the actual results could differ materially from
those estimates.
9
<PAGE>
PHOENIX LEASING HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
September 30, 1998
Part II. Other Information
-----------------
Item 1. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint was filed against Phoenix
Leasing Incorporated, Phoenix Leasing Associates, II and III LP., Phoenix
Securities Inc. and Phoenix American Incorporated (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint seeks declaratory and other relief including accounting,
receivership, imposition of a constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships. Discovery has not commenced. The Companies intend to vigorously
defend the Complaint.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Marin Action"). Plaintiffs subsequently amended the Marin
Action on August 14, 1998. On October 23, 1998, the Companies filed a demurrer
to the Marin Action, seeking its dismissal. Discovery has not commenced. The
Companies intend to vigorously defend the Complaint.
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
10
<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.
PHOENIX HIGH TECH/HIGH YIELD FUND,
---------------------------------
A CALIFORNIA LIMITED PARTNERSHIP
--------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
November 11, 1998 Executive Vice President, /S/ GARY W. MARTINEZ
- ----------------- Chief Operating Officer --------------------
and a Director of (Gary W. Martinez)
Phoenix Leasing Incorporated
General Partner
November 11, 1998 Chief Financial Officer, /S/ HOWARD SOLOVEI
- ----------------- Treasurer and a Director of --------------------
Phoenix Leasing Incorporated (Howard Solovei)
General Partner
November 11, 1998 Senior Vice President, /S/ BRYANT J. TONG
- ----------------- Financial Operations ------------------
(Principal Accounting Officer) (Bryant J. Tong)
and a Director of
Phoenix Leasing Incorporated
General Partner
11
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 254
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 361
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 340
<TOTAL-LIABILITY-AND-EQUITY> 361
<SALES> 0
<TOTAL-REVENUES> 123
<CGS> 0
<TOTAL-COSTS> 39
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 84
<INCOME-TAX> 0
<INCOME-CONTINUING> 84
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84
<EPS-PRIMARY> 9.01
<EPS-DILUTED> 0
</TABLE>
