<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
--- ---
Commission File No. 0-13554
TECHNOLOGY FUNDING PARTNERS I
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0020778
----------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2000 Alameda de las Pulgas, Suite 250
San Mateo, California 94403
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(415) 345-2200
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
No active market for the units of limited partnership interests
("Units") exists, and therefore the market value of such Units cannot be
determined.
<PAGE>
I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
(unaudited)
June 30, December 31,
1995 1994
---------- -------------
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis
of $3,187,633 and $2,768,651 at
1995 and 1994, respectively) $11,668,911 12,622,577
Secured notes receivable, net
(cost basis of $0 and
$592,026 at 1995 and 1994, -- 483,026
respectively) ---------- ----------
Total investments 11,668,911 13,105,603
Cash and cash equivalents 211,698 421
Prepaid management fees 83,190 83,190
Due from related parties -- 3,051
---------- ----------
Total $11,963,799 13,192,265
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 14,882 27,194
Due to related parties 2,552 --
Interest payable 21,324 17,580
Short-term borrowings 3,300,000 2,871,422
---------- ----------
Total liabilities 3,338,758 2,916,196
Commitments and subsequent events
(Notes 3 and 4)
Partners' capital:
Limited Partners
(Units outstanding of
16,643 for both 1995 and 1994) 58,664 442,170
General Partners 85,099 88,973
Net unrealized fair value increase
(decrease) from cost:
Equity investments 8,481,278 9,853,926
Secured notes receivable -- (109,000)
---------- ----------
Total partners' capital 8,625,041 10,276,069
---------- ----------
Total $11,963,799 13,192,265
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- ------------------------------------
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
------------- ------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income $ 828 16,407 15,284 29,474
Costs and expenses:
Management fees 83,190 83,190 166,380 166,380
Operating expenses:
Administrative and investor services 20,101 34,862 39,877 72,381
Investment operations 1,645 5,561 3,213 13,568
Professional fees 11,078 5,675 16,616 12,645
Computer services 5,368 6,435 11,132 16,229
Interest expense 72,342 43,401 139,459 76,928
--------- --------- --------- ---------
Total operating expenses 110,534 95,934 210,297 191,751
--------- --------- --------- ---------
Total costs and expenses 193,724 179,124 376,677 358,131
--------- --------- --------- ---------
Net operating loss (192,896) (162,717) (361,393) (328,657)
Net realized gain from
sales of equity investments 144,184 -- 144,184 --
Realized losses from
investment write-downs (170,171) -- (170,171) --
--------- --------- --------- ---------
Net realized loss (218,883) (162,717) (387,380) (328,657)
Change in net unrealized fair value:
Equity investments 3,409,877 (5,761,641) (1,372,648) (3,998,751)
Secured notes receivable 105,000 -- 109,000 (35,000)
--------- --------- --------- ---------
Net income (loss) $3,295,994 (5,924,358) (1,651,028) (4,362,408)
========= ========= ========= =========
Net realized loss per Unit $ (13) (10) (23) (20)
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- ------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash paid to related parties $ (202,849) (244,311)
Cash paid to vendors (41,078) (41,015)
Interest received 2,468 1,564
Interest paid on short-term borrowings (135,715) (63,806)
--------- ---------
Net cash used by operating
activities (377,174) (347,568)
--------- ---------
Cash flows from investing activities:
Proceeds from sales of equity investments 159,873 --
--------- ---------
Net cash provided by investing
activities 159,873 --
--------- ---------
Cash flows from financing activities:
Proceeds from short-term borrowings,
net 428,578 279,201
--------- ---------
Net cash provided by financing
activities 428,578 279,201
--------- ---------
Net increase (decrease) in cash and
cash equivalents 211,277 (68,367)
Cash and cash equivalents at beginning
of year 421 68,512
--------- ---------
Cash and cash equivalents at June 30 $ 211,698 145
========= =========
Reconciliation of net loss to net
cash used by operating activities:
Net loss $(1,651,028) (4,362,408)
Adjustments to reconcile net loss to net
cash used by operating activities:
Net realized gain from sales
of equity investments (144,184) --
Realized losses from investment
write-downs 170,171 --
Change in net unrealized fair value:
Equity investments 1,372,648 3,998,751
Secured notes receivable (109,000) 35,000
Changes in:
Accrued interest on subordinated and
secured notes receivable (12,028) (27,610)
Accounts payable and accrued expenses (12,312) (9,085)
Interest payable 3,744 13,122
Due to/from related parties 5,603 4,962
Other, net (788) (300)
--------- ---------
Net cash used by operating activities $ (377,174) (347,568)
========= =========
Non-cash investing activities:
Conversion of secured notes receivable
to equity investments $ 475,000 --
========= ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
- -----------------------------------------
1. General
-------
In the opinion of the Managing General Partner, the Balance Sheets as of
June 30, 1995 and December 31, 1994 and the related Statements of
Operations for the three and six months ended June 30, 1995 and 1994,
and Statements of Cash Flows for the six months ended June 30, 1995 and
1994, reflect all adjustments which are necessary for a fair
presentation of the financial position, results of operations and cash
flows for such periods. These statements should be read in conjunction
with the Annual Report on Form 10-K for the year ended December 31,
1994. The following notes to financial statements for activity through
June 30, 1995 supplement those included in the Annual Report on Form 10-
K. Certain 1994 balances have been reclassified to conform with the
1995 financial statement presentation. Allocation of income and loss to
Limited and General Partners is based on cumulative income and loss.
Adjustments, if any, are reflected in the current quarter balances.
2. Financing of Partnership Operations
-----------------------------------
The Managing General Partner expects cash received from the liquidation
of Partnership investments will provide the necessary liquidity to
service Partnership debt and fund Partnership operations. Until such
future proceeds are received, the Partnership may be dependent upon the
financial support of the Managing General Partner to fund operations.
The Managing General Partner has committed to support the Partnership's
working capital requirements through advances as necessary.
3. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party expenses for the six months
ended June 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Management fees $166,380 166,380
Reimbursable operating expenses 42,072 82,893
</TABLE>
Certain reimbursable expenses have been accrued based upon interim
estimates prepared by the Managing General Partner and are adjusted to
actual costs periodically. At June 30, 1995 due to related parties for
such costs was $2,552 compared to due from related parties of $3,051 at
December 31, 1994.
Officers of the General Partners occasionally receive stock options as
compensation for serving on the Boards of Directors of portfolio
companies. At June 30, 1995, the Partnership had an indirect interest
in such options, worth approximately $8,599, in non-transferable
Viewlogic Systems, Inc. and Cytocare, Inc. options.
4. Equity Investments
------------------
A complete listing of the Partnership's equity investments at December
31, 1994 is in the 1994 Annual Report. Activity from January 1, 1995
through June 30, 1995 consisted of
<TABLE>
<CAPTION>
January 1 -
June 30, 1995
Principal ---------------
Investment Amount or Cost Fair
Industry/Company Position Date Shares Basis Value
- ---------------- -------- ---------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $2,768,651 12,622,577
--------- ----------
Significant changes:
Computer Systems and Software
- -----------------------------
Wasatch Education Series C
Systems Preferred
Corporation shares 06/95 475,000 475,000 475,000
Electronic Design Automation
- ----------------------------
Viewlogic Systems, Common
Inc. shares 12/91 555,460 0 (2,379,145)
Industrial/Business Automation
- ------------------------------
Acuity Imaging, Common
Inc. shares 03/88 11,842 (15,689) (35,890)
CogniSense Series A
Preferred
shares 09/92 26,723 (40,329) 0
Medical
- -------
Cardiac Science, Common 07/91-
Inc. shares 09/94 1,157,574 0 45,196
CEMAX, Inc. Common shares 06/86 6,242 0 (9,363)
CEMAX, Inc. Redeemable
Convertible
Series A,B,C,D
Preferred 05/92-
shares 10/94 398,479 (290,339) (283,795)
CEMAX-ICON, Inc. Common shares 06/95 169,819 290,339 594,366
Cytocare, Inc. Common shares 06/88 211,351 0 639,666
--------- ----------
Total significant changes during
the six months ended June 30, 1995 418,982 (953,965)
Other changes, net 0 299
--------- ----------
Total equity investments at June 30, 1995 $3,187,633 11,668,911
========= ==========
</TABLE>
Marketable Equity Securities
- ----------------------------
At June 30, 1995 and December 31, 1994, marketable equity securities had
aggregate costs of $996,044 and $656,330, respectively, and aggregate
fair values of $9,099,673 and $9,204,804, respectively. The net
unrealized gains at June 30, 1995 and December 31, 1994 included gross
gains of $8,103,629 and $8,548,474, respectively.
Acuity Imaging, Inc.
- --------------------
In June 1995, the Partnership sold 13,074 common shares of Acuity
Imaging, Inc. for total proceeds of $159,873 and realized a gain of
$144,184. In addition, the decrease in fair value of $35,890 reflected
the publicly-traded unrestricted market value of $139,147 at June 30,
1995.
In April 1995, the company announced a definitive agreement to merge
with Robotic Vision Systems Inc. ("RVSI"), a public company. A targeted
date for the completion of the merger has not been announced as the
merger is still subject to various conditions customary for transactions
of this nature. Upon consummation of the merger, the Partnership will
exchange its remaining common share holdings in Acuity for approximately
9,071 RVSI common shares; at August 4, 1995, these shares had an
approximate market value of $150,800.
CEMAX-ICON, Inc./CEMAX, Inc.
- ----------------------------
In June 1995, CEMAX, Inc. merged with ICON Medical Systems creating a
new entity named CEMAX-ICON, Inc. The Partnership's CEMAX, Inc.
investment holdings were exchanged for 169,819 shares of CEMAX-ICON,
Inc. common stock. Subsequent to the merger, the company completed a
new round of financing at a higher valuation resulting in an increase in
the change in fair value of $301,208 for the Partnership's investment.
CogniSense
- ----------
The company has sold its technology and will cease operations. Based on
the Managing General Partner's opinion, a write-off of $40,329 was
recorded in June 1995.
Viewlogic Systems, Inc.
- -----------------------
The Partnership recorded a decrease in fair value of $2,379,145 to
reflect the publicly-traded market price at June 30, 1995. The Managing
General Partner continues to believe that its investment is capable of a
higher future value.
Wasatch Education Systems Corporation
- -------------------------------------
In June 1995, the Partnership converted its secured notes receivable
totaling $475,000 into 475,000 Series C Preferred shares at $1.00 per
share. As part of the conversion, the Partnership wrote off or reversed
accrued interest totaling $139,499.
Other Equity Investments
- ------------------------
Other significant changes reflected above relate to market value
fluctuations and the elimination of a discount relating to selling
restrictions for publicly-traded portfolio companies. The Partnership's
investment in Cardiac Science, Inc. is partially restricted.
5. Secured Notes Receivable, Net
-----------------------------
Activity from January 1, 1995 through June 30, 1995 consisted of:
<TABLE>
<S> <C>
Balance at January 1, 1995 $ 483,026
1995 Activity:
Conversion of secured notes receivable
to equity investment (475,000)
Write-off of accrued interest (129,842)
Decrease in allowance for loan losses 109,000
Other, net 12,816
-------
Total secured notes receivable, net
at June 30, 1995 $ --
=======
</TABLE>
Refer to Note 4, Equity Investments, for disclosure regarding the note
conversion and interest write-off. The Partnership holds no other note
receivable.
There was no accrued interest at June 30, 1995, compared to $117,814 at
December 31, 1994. Also, the beginning of year allowance for loan
losses of $109,000 was eliminated.
6. Short-term Borrowings
---------------------
The Partnership maintains a line of credit with a financial institution,
which has been renewed with a maturity date of April 5, 1996. At June
30, 1995, the outstanding balance was $3,300,000; the Partnership may
not make additional draws as the maximum borrowing capacity has been
reached. The weighted-average interest rates during the six months
ended June 30, 1995 and 1994 were 9% and 6.45%, respectively. The
Partnership's shares in Viewlogic Systems, Inc. and Cytocare, Inc. are
pledged as collateral.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
During the six months ended June 30, 1995, net cash used by operating
activities totaled $377,174. The Partnership paid management fees of
$166,380 to the Managing General Partner and reimbursed related parties
for operating expenses of $36,469 during the six months ended June 30,
1995. Other operating expenses of $41,078 were paid and interest income
of $2,468 was received. The Partnership also paid $135,715 in interest
on short-term borrowings.
During the six months ended June 30, 1995, proceeds from sales of equity
investments were $159,873.
The Partnership has a line of credit account with a financial
institution. This line of credit has been renewed with a maturity date
of April 5, 1996. At June 30, 1995, the outstanding balance was
$3,300,000; the Partnership may not make additional draws as the maximum
borrowing capacity has been reached. Net proceeds from short-term
borrowings for the six months ended June 30, 1995 totaled $428,578. The
Partnership's investments in Viewlogic Systems, Inc. and Cytocare, Inc.
are pledged as collateral.
Cash and cash equivalents at June 30, 1995 were $211,698. Future
proceeds from the sale of investments and General Partner support are
expected to be adequate to fund Partnership operations through the next
twelve months.
Results of Operations
- ---------------------
Current quarter compared to corresponding quarter in the preceding year
- -----------------------------------------------------------------------
Net income was $3,295,994 compared to a net loss of $5,924,358 for the
three months ended June 30, 1995 and 1994, respectively. The change was
primarily due to a $9,171,518 increase in the change in net unrealized
fair value of equity investments.
During the quarter ended June 30, 1995, the increase in the fair value
of equity investments of $3,409,877 was primarily due to portfolio
companies in the electronic design automation and medical industries.
During the same quarter in 1994, the decrease of $5,761,641 was
primarily due to a portfolio company in the electronic design automation
industry.
In 1995, realized losses from investment write-downs totaled $170,171
related to the write-off of accrued interest on secured notes receivable
to Wasatch Education Systems Corporation as discussed in Note 4 to the
financial statements. No such write-down was recorded in 1994.
During the three months ended June 30, 1995, the Partnership realized a
gain of $144,184 from sales of equity investments in Acuity Imaging,
Inc. No such gain was realized for the same period in 1994.
The Partnership recorded an increase of $105,000 in the fair value of
secured notes receivable in 1995 in order to eliminate the allowance for
loan losses as there were no secured notes receivable outstanding. No
such increase was recorded in 1994.
Given the inherent risk associated with the business of the Partnership,
the future performance of the portfolio company investments may
significantly impact future operations.
Current six months compared to corresponding six months in the preceding
- ------------------------------------------------------------------------
year
- ----
Net loss totaled $1,651,028 and $4,362,408 for the six months ended June
30, 1995 and 1994, respectively. The decrease was primarily due to a
$2,626,103 increase in the change in net unrealized fair value of equity
investments, a $144,184 realized gain from sales of equity investments,
and a $144,000 increase in the change in net unrealized fair value of
secured notes receivable. These changes were partially offset by a
$170,171 increase in realized losses from investment write-downs.
During the six months ended June 30, 1995, the $1,372,648 decrease in
fair value of equity investments was primarily due to a portfolio
company in the electronic design automation industry, partially offset
by a portfolio company in the medical industry. During the same period
in 1994, the decrease of $3,998,751 was primarily due to portfolio
companies in the electronic design automation and medical industries.
During the six months ended June 30, 1995, the Partnership realized a
gain of $144,184 from sales of equity investments in Acuity Imaging,
Inc. No such gain was realized in 1994.
During the six months ended June 30, 1995, the Partnership recorded an
increase in the fair value of secured notes receivable of $109,000 in
order to eliminate the allowance for loan losses as there were no
secured notes receivable outstanding. A $35,000 decrease was recorded
for the same period in 1994.
In 1995, realized losses from investment write-downs totaled $170,171,
related to the write-off of accrued interest as discussed in the above
section. No such write-down was recorded in 1994.
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Partnership during the
quarter ended June 30, 1995.
(b) Financial Data Schedule for the quarter ended and as of June 30,
1995 (Exhibit 27).
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TECHNOLOGY FUNDING PARTNERS I
By: TECHNOLOGY FUNDING INC.
Managing General Partner
Date: August 11, 1995 By: /s/Frank R. Pope
-----------------------------------
Frank R. Pope
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
<INVESTMENTS-AT-COST> 3,187,633
<INVESTMENTS-AT-VALUE> 11,668,911
<RECEIVABLES> 0
<ASSETS-OTHER> 83,190
<OTHER-ITEMS-ASSETS> 211,698
<TOTAL-ASSETS> 11,963,799
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,338,758
<TOTAL-LIABILITIES> 3,338,758
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 143,763
<SHARES-COMMON-STOCK> 16,643
<SHARES-COMMON-PRIOR> 16,643
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,481,278
<NET-ASSETS> 8,625,041
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,284
<OTHER-INCOME> 0
<EXPENSES-NET> 376,677
<NET-INVESTMENT-INCOME> (361,393)
<REALIZED-GAINS-CURRENT> (25,987)
<APPREC-INCREASE-CURRENT> (1,263,648)
<NET-CHANGE-FROM-OPS> (1,651,028)
<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> (1,651,028)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 166,380
<INTEREST-EXPENSE> 139,459
<GROSS-EXPENSE> 377,027
<AVERAGE-NET-ASSETS> 9,450,555
<PER-SHARE-NAV-BEGIN> 27
<PER-SHARE-NII> (23)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4
<EXPENSE-RATIO> .04
<AVG-DEBT-OUTSTANDING> 3,085,711
<AVG-DEBT-PER-SHARE> 185
<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>
