Form 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                  |X|    Quarterly Report Pursuant to Section 13 or 15(d) of
                         the Securities Exchange Act of 1934.
                         For the quarterly period ended September 30, 1998

                  |_|    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 000-17631

                  ATEL Cash Distribution Fund II, a California
                       Limited Partnership (Exact name of
                     registrant as specified in its charter)

California                                                      94-3051991
(State or other jurisdiction of                               (I. R. S. Employer
incorporation or organization)                               Identification No.)

           235 Pine Street, 6th Floor, San Francisco, California 94104
                    (Address of principal executive offices)

        Registrant's telephone number, including area code (415) 989-8800

Former name, former address and former fiscal year, if changed since last report

Indicate  by a 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  |_|

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

<PAGE>

                          Part I FINANCIAL INFORMATION

            Item 1.             Financial Statements.


<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS

                               SEPTEMBER 30, 1998
                                   (Unaudited)

                                     ASSETS


Cash and cash equivalents                                              $830,667

Accounts receivable                                                     707,846

Investment in equipment and leases                                    1,557,988
                                                                  --------------
                                                                     $3,096,501
                                                                  ==============

                        LIABILITIES AND PARTNERS' CAPITAL

Non-recourse debt                                                      $481,073
Accrued interest                                                          4,510
Accounts payable:
     General Partners                                                    17,128
     Other                                                               91,880
Unearned lease income                                                    73,559
                                                                  --------------
Total liabilities                                                       668,150

Partners' capital:
     General Partners                                                    93,838
     Limited Partners                                                 2,334,513
                                                                  --------------
Total partners' capital                                               2,428,351
                                                                  --------------
                                                                     $3,096,501
                                                                  ==============


                             See accompanying notes.

<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                INCOME STATEMENTS

                       NINE AND THREE MONTH PERIODS ENDED
                           SEPTEMBER 30, 1998 AND 1997

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         Nine Months Ended                    Three Months Ended
                                                                           September 30,                        September 30,
Revenues:                                                      1998              1997              1998              1997
                                                               ----              ----              ----              ----
<S>                                                            <C>                <C>                 <C>               <C>    
Lease income:
     Operating                                                  $422,324           $695,748          $139,103          $178,166
     Direct financing                                            180,531            120,782            56,531            33,779
     Leveraged                                                    30,550             14,161                 -             2,023
     Gain on disposition of assets                               680,418            150,984           423,532               867
Interest income                                                   18,322             20,681             5,746             7,716
Other                                                              8,763             64,298             7,031               546
                                                          ---------------   ----------------  ----------------  ----------------
                                                               1,340,908          1,066,654           631,943           223,097
                                                          ---------------   ----------------  ----------------  ----------------
Expenses:
Depreciation                                                     191,239            291,868            50,946            74,075
Administrative cost reimbursements                                86,397             99,420            30,201            34,552
Management fees                                                   68,551             63,963            30,797            14,048
Interest expense                                                  46,479             96,282            14,029            24,964
Other expense                                                     24,288             28,987             5,948             2,916
Taxes                                                             18,806             20,641                 -                 -
Professional fees                                                 18,020             21,052             8,975            12,602
Provision for losses                                               4,995              4,162                 -                 -
                                                          ---------------   ----------------  ----------------  ----------------
                                                                 458,775            626,375           140,896           163,157
                                                          ---------------   ----------------  ----------------  ----------------
Net income                                                      $882,133           $440,279          $491,047           $59,940
                                                          ===============   ================  ================  ================
Net income:
     General Partners                                             $8,821             $4,403            $4,910              $599
     Limited Partners                                            873,312            435,876           486,137            59,341
                                                          ---------------   ----------------  ----------------  ----------------
                                                                $882,133           $440,279          $491,047           $59,940
                                                          ===============   ================  ================  ================
Net income per Limited Partnership unit                           $12.48              $6.23             $6.95             $0.85
Weighted average number of units
   outstanding                                                    69,979             69,979            69,979            69,979
</TABLE>

                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                      NINE MONTHS ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
                                                                          Limited Partners        General
                                                              Units             Amount           Partners            Total
<S>                                                               <C>            <C>                  <C>            <C>       
Balance December 31, 1997                                         69,979         $2,825,061           $85,017        $2,910,078
Net income                                                                          873,312             8,821           882,133
Distributions to limited partners                                                (1,363,860)                -        (1,363,860)
                                                          ---------------   ----------------  ----------------  ----------------
Balance September 30, 1998                                        69,979         $2,334,513           $93,838        $2,428,351
                                                          ===============   ================  ================  ================
</TABLE>
                             See accompanying notes.
<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS

                       NINE AND THREE MONTH PERIODS ENDED
                           SEPTEMBER 30, 1998 AND 1997

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         Nine Months Ended                    Three Months Ended
                                                                           September 30,                        September 30,
                                                               1998              1997              1998              1997
                                                               ----              ----              ----              ----
Operating activities:
<S>                                                            <C>                <C>               <C>                 <C>    
Net income                                                      $882,133           $440,279          $491,047           $59,940
Adjustments to reconcile net income to net
   cash provided by operations:
     Depreciation                                                191,239            291,868            50,946            74,075
     Revenues from leveraged leases                              (30,550)           (14,161)                -            (2,023)
     Gain on dispositions of assets                             (680,418)          (150,984)         (423,532)             (867)
     Provision for losses                                          4,995              4,162                 -                 -
Changes in operating assets and liabilities:
   Accounts receivable                                          (672,135)           (89,363)         (673,404)          (26,286)
   Accounts payable, General Partner                               6,236             (1,165)           15,154            18,576
   Accounts payable, other                                        17,594              3,714            27,909            (1,583)
   Accrued interest                                               (2,107)           (17,485)             (496)           (5,663)
   Customer deposit                                                    -            (60,000)                -                 -
   Unearned operating lease income                                63,847              8,989           (10,472)           14,807
                                                          ---------------   ----------------  ----------------  ----------------
Net cash (used in) provided by operations                       (219,166)           415,854          (522,848)          130,976
                                                          ---------------   ----------------  ----------------  ----------------

Investing activities:
Proceeds from sales of equipment                               1,600,029            768,223         1,164,589           204,259
Reductions of net investment in direct
   financing leases                                               97,146            639,725            20,661           216,916
                                                          ---------------   ----------------  ----------------  ----------------
Net cash provided by investing activities                      1,697,175          1,407,948         1,185,250           421,175
                                                          ---------------   ----------------  ----------------  ----------------
</TABLE>



                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS

                       NINE AND THREE MONTH PERIODS ENDED
                           SEPTEMBER 30, 1998 AND 1997

                                   (Unaudited)
                                   (Continued)

<TABLE>
<CAPTION>
                                                                         Nine Months Ended                    Three Months Ended
                                                                           September 30,                        September 30,
                                                                           -------------                        -------------
                                                               1998              1997              1998              1997
                                                               ----              ----              ----              ----
<S>                                                           <C>                <C>                 <C>               <C>      
Financing activities:
Repayment of non-recourse debt                                  (175,639)          (825,532)          (52,908)         (240,258)
Distributions to limited partners                             (1,363,860)        (1,018,348)         (545,545)         (272,772)
                                                          ---------------   ----------------  ----------------  ----------------
Net cash used in financing activities                         (1,539,499)        (1,843,880)         (598,453)         (513,030)
                                                          ---------------   ----------------  ----------------  ----------------

Net (decrease) increase in cash and cash
   equivalents                                                   (61,490)           (20,078)           63,949            39,121
Cash and cash equivalents at beginning of
   period                                                        892,157            989,337           766,718           930,138
                                                          ---------------   ----------------  ----------------  ----------------
Cash and cash equivalents at end of
   period                                                       $830,667           $969,259          $830,667          $969,259
                                                          ===============   ================  ================  ================


Supplemental disclosures of cash flow information:

Cash paid for interest                                           $46,479            $96,282           $14,029           $24,964
                                                          ===============   ================  ================  ================

Supplemental schedule of non-cash transactions:

Operating lease assets reclassified to equipment
   held for lease                                                                $1,131,256                             $85,102
Less accumulated depreciation                                                      (865,387)                            (62,762)
                                                                            ----------------                    ----------------
                                                                                   $265,869                             $22,340
                                                                            ================                    ================

Assets held for lease reclassified as operating
   lease assets                                                                  $1,045,766                          $1,045,766
Less accumulated depreciation                                                      (802,625)                           (802,625)
                                                                            ----------------                    ----------------
                                                                                   $243,141                            $243,141
                                                                            ================                    ================
</TABLE>

                             See accompanying notes.


<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1998
                                   (Unaudited)


1.  Interim financial statements:

The unaudited interim financial statements reflect all adjustments which are, in
the opinion of the general partners,  necessary to a fair statement of financial
position and results of operations for the interim periods  presented.  All such
adjustments are of a normal recurring nature.  These unaudited interim financial
statements  should be read in  conjunction  with the most recent  report on Form
10K.


2. Investment in leases:

The Partnership's investment in leases consists of the following:

<TABLE>
<CAPTION>
                                                                               Depreciation
                                                                              Expense or         Reclass-
                                         December 31,                        Amortization      ifications &       September 30,
                                              1997          Additions          of Leases       Dispositions          1998
                                              ----          ---------          ---------      --------------         ----
<S>                                           <C>                <C>              <C>               <C>              <C>       
Net investment in operating leases            $1,749,575                          ($191,239)        ($413,999)       $1,144,337
Net investment in direct
   financing leases                              944,264                            (97,146)         (369,688)          477,430
Net investment in leveraged
   leases                                        118,208                             30,550          (148,758)                -
Assets held for sale                                 388                                  -              (388)                -
Reserve for losses                               (72,006)        ($4,995)                 -            13,222           (63,779)
                                         ---------------- ---------------   ----------------  ----------------  ----------------
                                              $2,740,429         ($4,995)         ($257,835)        ($919,611)       $1,557,988
                                         ================ ===============   ================  ================  ================
</TABLE>

The following  schedule provides an analysis of the Partnership's  investment in
equipment on operating leases by major  classifications as of December 31, 1997,
dispositions  during  the  three  month  periods  ended  March  31,  June 30 and
September 30, 1998 and as of September 30, 1998:

<TABLE>
<CAPTION>
                                          December 31,     -------- Reclassifications & Dispositions --------     September 30,
        Equipment type                        1997         1st Quarter        2nd Quarter       3rd Quarter          1998
        --------------                        ----         -----------        -----------       -----------          ----
<S>                                           <C>               <C>                <C>             <C>              <C>       
Aircraft                                      $2,354,533                                                             $2,354,533
Other                                            183,599                                                                183,599
Materials handling                               432,139        ($54,592)                           ($350,720)           26,827
Mining                                         1,546,341        (186,232)          ($21,866)       (1,338,243)                -
Communications                                   445,877               -                  -          (445,877)                -
                                         ---------------- ---------------   ----------------  ----------------  ----------------
                                               4,962,489        (240,824)           (21,866)       (2,134,840)        2,564,959
Less accumulated depreciation                 (3,212,914)        142,180            (52,198)        1,702,310        (1,420,622)
                                         ---------------- ---------------   ----------------  ----------------  ----------------
                                              $1,749,575        ($98,644)          ($74,064)        ($432,530)       $1,144,337
                                         ================ ===============   ================  ================  ================
</TABLE>

<PAGE>

                         ATEL CASH DISTRIBUTION FUND II
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1998
                                   (Unaudited)


2. Investment in leases (continued):

At September 30, 1998,  the aggregate  amounts of future  minimum lease payments
are as follows:

<TABLE>
<CAPTION>
                                          Direct
                                         Financing          Operating           Total
<S>                                          <C>                <C>             <C>       
Three months ending December 31, 1998         $58,405            $69,766          $128,171
        Year ending December 31, 1999         224,000            269,732           493,732
                                 2000         224,000            202,299           426,299
                                 2001         224,000                  -           224,000
                                 2002         224,000                  -           224,000
                                       ---------------   ----------------  ----------------
                                             $954,405           $541,797        $1,496,202
                                       ===============   ================  ================
</TABLE>


3. Non-recourse debt:

Notes payable to financial  institutions are due in varying  monthly,  quarterly
and semi-annual installments of principal and interest. The notes are secured by
assignments  of lease  payments and pledges of the assets  which were  purchased
with the proceeds of the particular notes. Interest rates on the notes vary from
9.43% to 12.86%.

Future  minimum  principal  payments  of debt as of  September  30,  1998 are as
follows:

<TABLE>
<CAPTION>
                                         Principal          Interest            Total
<S>                                          <C>                 <C>              <C>     
Three months ending December 31, 1998         $54,410            $13,023           $67,433
        Year ending December 31, 1999         233,530             36,202           269,732
                                 2000         193,133              9,166           202,299
                                       ---------------   ----------------  ----------------
                                             $481,073            $58,391          $539,464
                                       ===============   ================  ================
</TABLE>


4. Commitments, management and report of fees:

The terms of the  Agreement  of Limited  Partnership  provide  that the  General
Partners  and/or  Affiliates are entitled to receive  certain fees for equipment
acquisition, management and resale and for management of the Partnership.

The General Partners and/or  Affiliates  earned the following fees,  commissions
and reimbursements, pursuant to the Limited Partnership Agreement as follows:

                                              1998              1997
                                              ----              ----
Reimbursement of administrative costs            $86,397           $99,420
Incentive and equipment management fees           68,551            63,963
                                         ----------------  ----------------
                                                $154,948          $163,383
                                         ================  ================

<PAGE>

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

Capital Resources and Liquidity

The  Partnership's  primary  source of liquidity is cash  received from sales of
lease assets and from lease rentals.  The liquidity of the Partnership will vary
in the future,  increasing to the extent cash flows from leases exceed  expenses
and decreasing as lease assets are acquired,  as  distributions  are made to the
Limited Partners and to the extent expenses exceed cash flows from leases.

The Partnership currently has available adequate reserves to meet contingencies.

As  of  September  30,  1998,  the   Partnership   had  borrowed   approximately
$21,700,000.  The remaining unpaid balance on those borrowings was approximately
$481,000. The borrowings are non-recourse to the Partnership,  that is, the only
recourse of the lender will be to the equipment or corresponding  lease acquired
with the loan  proceeds.  The  Agreement  of  Limited  Partnership  limits  such
borrowings to 40% of the total cost of equipment, in aggregate.

No commitments of capital have been or are expected to be made.

The Partnership made distributions of cash from 1998 first quarter operations in
April 1998,  from second quarter  operations in July 1998 and from third quarter
operations in October 1998. The amounts of each of the distributions  were $7.50
per Unit. These distributions represent an annualized distribution rate of 6.0%.

If  inflation  in the general  economy  becomes  significant,  it may affect the
Partnership  inasmuch as the residual  (resale) values and rates on re-leases of
the  Partnership's  leased  assets may  increase as the costs of similar  assets
increase.  However,  the  Partnership's  revenues from existing leases would not
increase,  as such rates are generally fixed for the terms of the leases without
adjustment for inflation.

If interest rates increase or decrease  significantly,  the lease rates that the
Partnership can obtain on future leases will be expected to increase or decrease
in  parallel  as the cost of capital is a  significant  factor in the pricing of
lease  financing.  Leases  already  in place,  for the most  part,  would not be
affected by changes in interest rates.

As of September 30, 1998,  the  Partnership  sold a  significant  portion of its
portfolio of leases and lease assets to an  unrelated  third party.  The gain on
the sale of these assets is included in the  operations of the  Partnership  for
the three and nine month  periods  ended  September  30, 1998.  In October 1998,
additional sales of lease assets were completed. The General Partner anticipates
that all of the  Partnership's  lease assets will have been sold by December 31,
1998 and that the Partnership will have ceased operations by that date.

Cash flows, nine months, 1998 vs. 1997

Proceeds from the sales of lease assets was the primary  source of cash in 1998.
Lease  revenues,  the  Partnership's  second  most  important  source  of  cash,
decreased by $197,286  compared to 1997.  Lease revenues have declined as leases
have matured and the underlying assets have been sold.

Cash flows provided by investing activities increased by $289,227 primarily as a
result of increased  asset sales.  The increase in sales  proceeds was partially
offset by a decrease in cash flows from direct financing leases.

There were no financing sources of cash in 1998 or 1997. Debt principal payments
have decreased due to scheduled debt payments.


<PAGE>

Cash flows, three months, 1998 vs. 1997

For the  third  quarter,  lease  rents  were the  primary  source  of cash  from
operations for the  Partnership.  Lease rents  decreased by $18,334  compared to
1997. As noted above,  the decrease is the result of assets coming off lease and
being subsequently sold.

Cash flows provided by investing activities increased by $764,065 due largely to
increased asset sales.  This was partially offset by decreased rents from direct
financing leases ($196,255).

There were no financing sources of cash in 1998 or 1997. Debt principal payments
decreased due to the causes noted above for the nine month  period.  In both the
nine  and  three  month  periods,   distributions  increased  as  the  per  Unit
distribution rate was increased effective with the distribution in April 1998.


Results of Operations

The results of operations in future  periods are expected to vary  significantly
from those of the first nine months of 1998 as the Partnership's lease portfolio
of capital equipment  matures.  As noted above, the General Partners  anticipate
that all of the Partnership's assets will have been sold prior to the end of the
current year and that  operations  will have been  concluded  by that date.  The
effect on net income is not  determinable as it will depend to a large degree on
the amounts received from the sales of assets.

1998 vs. 1997

Operating  lease  revenues  decreased  by $273,424 for the nine month period and
$39,063  for the three month  period due to lease  terminations  and  subsequent
asset sales.  Direct financing lease revenues  increased by $59,749 for the nine
month period and  increased  by $22,752 for the three month  period  compared to
1997. The increases  resulted from lease renewals which are classified as direct
finance  leases.  The assets had previously  been leased under  operating  lease
agreements. In 1997, sales of assets resulted in gains of $150,984 (nine months)
and $867 (three months).  In 1998, sales of assets resulted in gains of $680,418
for the nine month period and $423,532  for the three month  period.  Such gains
are not  expected  to be  comparable  from one period to  another.  Depreciation
expense  declined by $100,629  (nine  months)  and $23,129  (three  months) as a
result of asset sales.  Interest expense  continues to decline in both the three
and nine month periods in relation to the declining balances of debt. There have
been no new borrowings in the current year.






<PAGE>

                           PART II. OTHER INFORMATION

Item 1.                        LEGAL PROCEEDINGS.

                                Inapplicable.

Item 2.                        CHANGES IN SECURITIES.

                                Inapplicable.

Item 3.                        DEFAULTS UPON SENIOR SECURITIES.

                                Inapplicable.

Item 4.                        SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                               HOLDERS.
                                Inapplicable.

Item 5.                        OTHER INFORMATION.

                                Inapplicable.

Item 6.                        EXHIBITS AND REPORTS ON FORM 8-K.

                           (a) Documents filed as a part of this report

                             1  Financial Statements.

                                Included in Part I of this report:

                                Balance sheet, September 30, 1998.
                                Income  statements  for the nine and three month
                                   periods ended September 30, 1998 and 1997.
                                Statement of changes in  partners'  capital  for
                                   the nine months ended September 30, 1998.
                                Statements  of cash flows for the nine and three
                                   month  periods  ended  September 30, 1998 and
                                   1997.
                                Notes to the financial statements

                             2  Financial Statement Schedules.

                                All other  schedules for which provision is made
                                in the applicable accounting  regulations of the
                                Securities  and  Exchange   Commission  are  not
                                required under the related  instructions  or are
                                inapplicable, and therefore have been omitted.

                           (b)  Report on Form 8-K
                                None


<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

            Date:
      November 10, 1998
                         ATEL Cash Distribution Fund II,
                        a California Limited Partnership
                                  (Registrant)





                                     By:  /s/ A.  J.  BATT
                                         --------------------------------------
                                         A. J. Batt
                                         General Partner of registrant



                                     By:   /s/ DEAN L. CASH
                                         --------------------------------------
                                         Dean L. Cash
                                         General Partner of registrant



                                     By:   /s/ F. RANDALL BIGONY
                                         --------------------------------------
                                         F. RANDALL BIGONY
                                         Principal financial officer
                                         of registrant



                                     By:   /s/ DONALD E.  CARPENTER
                                         --------------------------------------
                                         Donald E.  Carpenter,
                                         Principal accounting
                                         officer of registrant