UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934
For the quarterly period ended June 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
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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
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7,526 Units of Limited Partnership Interest were outstanding as of June 30,
1998.
Transitional small business disclosure format:
Yes No X
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Page 1 of 10
Part I. Financial Information
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Item 1. Financial Statements
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
June 30, December 31,
1998 1997
---- ----
ASSETS
Cash and cash equivalents $ 237 $ 496
Accounts receivable, net 15 37
Equipment on operating leases and held
for lease (net of accumulated
depreciation of $0 and $56 at
June 30, 1998 and December 31, 1997,
respectively) -- --
Investment in joint ventures 117 130
Other assets 2 2
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Total Assets $ 371 $ 665
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 31 $ 20
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Total Liabilities 31 20
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Partners' Capital (Deficit)
General Partner (2) (15)
Limited Partners, 25,000 units
authorized, 7,526 units issued
and outstanding at June 30, 1998
and December 31, 1997 342 660
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Total Partners' Capital (Deficit) 340 645
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Total Liabilities and Partners'
Capital (Deficit) $ 371 $ 665
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The accompanying notes are an integral part of these statements.
2
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 Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
INCOME
Earned income, financing leases $ -- $ 1 $ -- $ 5
Gain on sale of securities 111 -- 111 50
Equity in losses from joint
ventures, net (11) (2) (13) (7)
Other income 8 8 11 19
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Total Income 108 7 109 67
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EXPENSES
Amortization of acquisition fees -- 2 -- 3
Management fees to General Partner 4 2 4 5
Reimbursed administrative costs to
General Partner 3 2 5 5
Legal expense -- 4 -- 7
General and administrative expenses 9 6 16 12
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Total Expenses 16 16 25 32
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NET INCOME (LOSS) $ 92 $ (9) $ 84 $ 35
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NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 10.10 $ (1.20) $ 9.01 $ 3.05
======= ======= ======= =======
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ -- $ -- $ 51.26 $153.79
======= ======= ======= =======
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 16 $ -- $ 16 $ 12
Limited Partners 76 (9) 68 23
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$ 92 $ (9) $ 84 $ 35
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The accompanying notes are an integral part of these statements.
3
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
1998 1997
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Operating Activities:
Net income $ 84 $ 35
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization of acquisition fees -- 3
Gain on sale of securities (111) (50)
Equity in losses from joint
ventures, net 13 7
Decrease in accounts receivable 22 31
Increase in accounts payable and
accrued expenses 11 7
Increase in other assets -- (1)
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Net cash provided by operating activities 19 32
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Investing Activities:
Principal payments, financing leases -- 87
Proceeds from sale of securities 111 50
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Net cash provided by investing activities 111 137
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Financing Activities:
Distributions to partners (389) (1,169)
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Net cash used by financing activities (389) (1,169)
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Decrease in cash and cash equivalents (259) (1,000)
Cash and cash equivalents, beginning of period 496 1,499
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Cash and cash equivalents, end of period $ 237 $ 499
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The accompanying notes are an integral part of these statements.
4
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.
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Reclassification - Certain 1997 amounts have been reclassified to
conform to the 1998 presentation.
Note 3. Income Taxes.
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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.
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Net income (loss) and distributions per limited partnership unit were
based on the limited partners' share of net income (loss) and distributions, and
the weighted average number of units outstanding of 7,526 for the six months
ended June 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
Note 5. Investment in Joint Ventures.
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Foreclosed Cable System Joint Ventures
- --------------------------------------
The aggregate combined financial information of the foreclosed cable
systems joint ventures is presented as follows:
June 30, December 31,
1998 1997
---- ----
(Amounts in Thousands)
Assets $ 832 $ 909
Liabilities 238 240
Partners' Capital 594 669
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
(Amounts in Thousands)
Revenue $ 22 $ 103 $ 123 $ 203
Expenses 87 118 198 241
Net Loss (65) (15) (75) (38)
6
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations.
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Results of Operations
Phoenix High Tech/High Yield Fund, a California limited partnership ("the
Partnership") reported net income of $92,000 for the three months ended June 30,
1998, as compared to net loss of $9,000 for the same period in 1997. For the six
months ended June 30, 1998, the Partnership reported net income of $84,000
compared to net income of $35,000 for the same period in 1997. The improvement
in earnings for both the three and six months ended June 30, 1998 compared to
1997 is attributable to a gain on sale of securities of $111,000. The gain on
sale of securities, for which the Partnership received proceeds of $111,000
during the quarter ended June 30, 1998, is due to the exercise and sale of stock
warrants held by the Partnership. The increase in management fees of $2,000 for
the quarter ended June 30, 1998 is a result of an increase in gross revenues
attributable to the proceeds received from the sale of securities.
The absence of an amortization of acquisition fees and legal expenses for
both the three and six months ended June 30, 1998, compared to the same periods
in 1997, also contributed to increasing net income. The absence of amortization
of acquisition fees and legal expenses are a result of the Partnership's
remaining equipment being sold and the remaining net investment in financing
leases coming to the end of their term during the third quarter of 1997.
Additionally as a result of the Partnership selling its remaining equipment
and the net investment in financing leases having reached the end of its term,
the Partnership is experiencing a decrease in cash generated from leasing and
financing activities for the six months ended June 30, 1998 compared to the same
period in 1997. This decrease in cash generated has resulted in a reduction in
interest income earned on the Partnership's cash balance. The decline in other
income of $8,000 for the six months ended June 30, 1998 is attributable to the
decrease in interest income.
The increase in loss from joint ventures of $9,000 and $6,000 for the
three and six months ended June 30, 1998, respectively, compared to the same
periods in 1997, is due to a loss on sale of assets in one of the foreclosed
cable system joint ventures in which the Partnership has an investment.
Liquidity and Capital Resources
The cash generated by leasing and financing activities was $19,000 during
the six months ended June 30, 1998, as compared to $119,000 during the same
period in 1997. The decrease in net cash generated by leasing and financing
activities for the six months ended June 30, 1998 is due primarily to the
absence of principal payments from financing leases, compared to $87,000 for the
prior year.
The cash distributed to partners was $389,000 and $1,169,000 for the six
months ended June 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 $1,157,000 in distributions
during the period ended June 30, 1998 and 1997, respectively. The cumulative
cash distributions to limited partners are $7,380,000 and $6,995,000 at June 30,
1998 and 1997, respectively. The General Partner received $4,000 and $12,000 for
7
its share of the cash distributions during the period ended June 30, 1998 and
1997, respectively.
Distributions for the six months ended June 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 term of the Partnership expires on December 31, 1999. However, the
General Partner anticipates liquidating the remaining assets by December 31,
1998.
8
PHOENIX LEASING HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
June 30, 1998
Part II. Other Information
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Item 1. Legal Proceedings.
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On October 28, 1997 a Class Action Complaint was filed against
Phoenix Leasing Incorporated, Phoenix Leasing Associates, II and III L.P.,
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 constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fidicuary
duty and breach of contract by the Companies as general partners of the
Partnerships. Plaintiffs are expected to serve an amended complaint on August
14, 1998. Discovery has not commenced. The Companies intend to vigorously defend
the Complaint.
Item 2. Changes in Securities. Inapplicable
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Item 3. Defaults Upon Senior Securities. Inapplicable
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Item 4. Submission of Matters to a Vote of Securities Holders.
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Inapplicable
Item 5. Other Information. Inapplicable
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Item 6. Exhibits and Reports on 8-K:
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a) Exhibits:
(27) Financial Data Schedule
b) Reports on 8-K: None
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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
---- ----- ---------
August 12, 1998 Executive Vice President, /S/ GARY W. MARTINEZ
- ----------------- Chief Operating Officer --------------------
and a Director of (Gary W. Martinez)
Phoenix Leasing Incorporated
General Partner
August 12, 1998 Chief Financial Officer, /S/ HOWARD SOLOVEI
- ----------------- Treasurer and a Director of --------------------
Phoenix Leasing Incorporated (Howard Solovei)
General Partner
August 12, 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
10