<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Year Ended December 31, 1994
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. 0-15766
TECHNOLOGY FUNDING SECURED INVESTORS I
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-2944800
- ------------------------------- ------------------------------------
(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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited
Partnership Units
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
No active market for the units of limited partnership interests ("Units")
exists, and therefore the market value of such Units cannot be
determined.
Documents incorporated by reference: Portions of the Prospectus dated
May 5, 1986 forming a part of Registration Statement No. 2-96022 under
the Securities Act of 1993 are incorporated by reference in Parts I and
III, hereof. Portions of the Prospectus of Technology Funding Medical
Partners I, L.P., as modified by Cumulative Supplement No. 4 dated
January 4, 1995, forming a part of the May 3, 1993 Pre-Effective
Amendment No. 3 to the Form N-2 Registration Statement No. 33-54002 dated
October 30, 1992, is incorporated by reference in Part III hereof.
<PAGE>
PART I
Item 1. BUSINESS
- ------ --------
Technology Funding Secured Investors I (hereinafter referred to
as the "Partnership" or the "Registrant") was formed as a
California limited partnership on August 31, 1984. The business
of the Partnership is to provide secured loans and to acquire
equity interests in new and developing companies as described in
the "Summary of the Offering" and "Business of the Partnership"
sections of the Prospectus dated May 5, 1986, that forms a part
of Registrant's Form S-1 Registration Statement No. 2-96022,
which sections are incorporated herein by reference. Additional
characteristics of the Partnership's business are discussed in
the "Risk Factors" and "Conflicts of Interest" sections of the
Prospectus, which sections are also incorporated herein by
reference. The Partnership's Amended and Restated Limited
Partnership Agreement ("Partnership Agreement") provides that
the Partnership will continue until December 31, 2004, unless
dissolved earlier.
Item 2. PROPERTIES
- ------ ----------
The Registrant has no material physical properties.
Item 3. LEGAL PROCEEDINGS
- ------ -----------------
There are no material pending legal proceedings to which the
Registrant is party or of which any of its property is the
subject, other than ordinary routine litigation incidental to
the business of the Partnership.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
No matter was submitted to a vote of the holders of units of
limited partnership interests ("Units") during 1994.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------ -------------------------------------------------------------
MATTERS
-------
(a) There is no established public trading market for the
Units.
(b) At December 31, 1994, there were 6,497 record holders of
Units.
(c) The Registrant, being a partnership, does not pay
dividends. Cash distributions, however, may be made to the
partners in the Partnership pursuant to the Registrant's
Partnership Agreement.
Item 6. SELECTED FINANCIAL DATA
- ------ -----------------------
<TABLE>
<CAPTION>
For the Years Ended and As of December 31,
-----------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total income $ 156,925 376,496 1,312,184 1,967,331 2,076,238
Net realized (loss)
income (560,077) (5,649,860) 122,286 226,058 932,307
Change in net unrealized
fair value:
Equity investments (2,127,420) 2,295,838 (2,959,810) (142,460) 161,696
Secured notes receivable 549,000 660,000 (654,696) 81,984 (313,480)
Net (loss) income (2,138,497) (2,694,022) (3,492,220) 165,582 780,523
Net realized (loss)
income per Unit (5) (48) 1 2 8
Total assets 2,270,238 4,424,424 8,768,510 15,408,327 17,638,108
Distributions declared -- (900,092) (2,700,080) (2,602,793) (1,967,501)
</TABLE>
Refer to Notes 1 and 5 of the financial statements entitled
"Summary of Significant Accounting Policies" and "Allocation of
Profits and Losses" for a description of the method of
calculation of net realized (loss) income per Unit.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------ -----------------------------------------------------------
AND RESULTS OF OPERATIONS
- -------------------------
Liquidity and Capital Resources
- -------------------------------
In 1994, net cash used by operations totaled $469,191. The
Partnership paid management fees of $71,504 to the Managing
General Partner and reimbursed related parties for operating
expenses of $373,817, and paid $5,058 to affiliated partnerships
for net loan participations. In addition, other operating
expenses of $198,895 were paid. Interest income received for
secured notes receivable and short-term investments was
$180,083.
In 1994, the Partnership issued $347,000 in secured notes
receivable primarily to portfolio companies in the computers and
computer equipment industry. Repayments of notes receivable
provided cash of $406,773 and sales of investments provided cash
of $418,020. The Partnership purchased equity investments in a
portfolio company in the microelectronics industry totaling
$69,633. The Partnership also received $45,290 from investment
recoveries. As of December 31, 1994, the Partnership was
committed to fund an additional $129,000 on account receivable
lines of credit to borrowing companies.
All management fees which are due have been paid through
December 31, 1994. Management fees are paid to the extent that
the aggregate amount of all proceeds (including those from
warrants exercised without cash) received by the Partnership
from the sale or other disposition of borrowing company equities
plus the aggregate fair market value of any equity securities
distributed to the partners exceeded the total management fees
payable pursuant to the Partnership Agreement.
Beginning in the third quarter of 1991, the Partnership entered
the liquidation stage and began to distribute its available
cash. The Partnership has distributed a major portion of its
available cash and is now at the stage in its liquidation
process where distributions are primarily dependent on loan
repayments from borrowing companies. Distributions will
fluctuate in the future based upon loan repayments received by
the Partnership.
Cash and cash equivalents at December 31, 1994 were $534,644.
Operating cash reserves combined with interest income received
on short-term investments, proceeds from sales of investments
and repayments of secured notes receivable are expected to be
sufficient to fund the Partnership operations through the next
twelve months.
Results of Operations
- ---------------------
1994 compared to 1993
- ---------------------
Net loss was $2,138,497 and $2,694,022 in 1994 and 1993,
respectively. The decrease in net loss was primarily due to a
$4,806,101 decrease in realized losses from investment write-
downs, a $355,016 increase in net realized gain from sale of
investments and a $114,055 decrease in total operating expenses.
These changes were mostly offset by decreases of $4,423,258 and
$111,000 in the change in net unrealized fair values of equity
investments and secured notes receivable, respectively, and a
$217,451 decrease in secured notes receivable interest income.
In 1994 and 1993, the Partnership realized losses from
investment write-downs of $514,251 and $5,320,352, respectively.
Realized losses in 1994 primarily related to an equity
investment in a portfolio company in the medical industry.
Realized losses in 1993 primarily related to equity investments
as well as secured notes receivable for portfolio companies in
the computers and computer equipment, and retail/consumer
products industries.
During 1994, the Partnership recorded a net realized gain of
$355,016 mainly from the sale of equity investments in Micro
Decisionware, Inc. There was no such gain recorded in 1993.
Total operating expenses were $531,553 in 1994 compared to
$645,608 in 1993. The decrease was primarily due to lower
administrative and investor services and lending operations and
investment management expenses from reduced overall portfolio
activities.
In 1994, a decrease in the net unrealized fair value of equity
investments of $2,127,420 was primarily due to a portfolio
company in the medical industry. In 1993, the $2,295,838
increase was primarily due to the write-down for one portfolio
company in the computers and computer equipment industry as this
investment had been reflected with a change in fair value less
than cost of $2,292,636 in 1992. This was reversed in 1993 as a
result of the realized loss taken.
The Partnership recorded increases in the fair value of secured
notes receivable of $549,000 and $660,000 in 1994 and 1993,
respectively, based upon the level of loan loss reserves deemed
adequate by the Managing General Partner at the respective year
ends. The 1994 increase primarily related to a conversion of
notes receivable to equity investments for a portfolio company
in the medical industry; the 1993 increase was primarily due to
a similar conversion for a portfolio company in the
retail/consumer products industry.
Secured notes receivable interest income was $130,413 and
$347,864 in 1994 and 1993, respectively. The decrease was
primarily attributable to lower interest-bearing notes
receivable balances since the Partnership entered the
liquidation stage.
The Partnership also incurred management fees of $71,504 and
$140,753 during 1994 and 1993, respectively. As management fees
are computed on assets under management, the decrease is
consistent with the decrease in such assets.
The Partnership's portfolio of secured notes receivable is with
new and developing companies; therefore, there is no established
source of market value information. The value of the portfolio
has been estimated by the Managing General Partner in the
absence of readily ascertainable market values. Although
secured notes receivable are secured by specific assets of the
borrowing company, due to the inherent uncertainty of valuation,
estimated values may differ significantly from the values that
would have been used had a ready market of the investment
existed. The difference could be material.
Given the inherent risk associated with the business of the
Partnership, the future performance of the portfolio company
investments may significantly impact future operations.
1993 compared to 1992
- ---------------------
Net loss was $2,694,022 and $3,492,220 in 1993 and 1992,
respectively. The decrease in net loss was primarily due to
increases of $5,255,648 and $1,314,696 in the change in net
unrealized fair value of equity investments and secured notes
receivable, respectively, and a $316,060 decrease in total
operating expenses. These changes were partially offset by a
$4,604,477 increase in realized losses from investment write-
downs, a $881,772 decrease in notes receivable interest income,
and a $743,567 decrease in net realized gain from sale of
investments.
In 1993, the $2,295,838 increase in fair value of equity
investments was primarily due to the write-down for one
portfolio company in the computers and computer equipment
industry as this investment had been reflected with a change in
fair value less than cost of $2,292,636. This was reversed as a
result of the realized loss taken. In 1992, the decrease of
$2,959,810 was primarily due to portfolio companies in the
computers and computer equipment, and retail/consumer products
industries.
The Partnership recorded an increase in the change in fair value
of secured notes receivable of $660,000 and a decrease of
$654,646 in 1993 and 1992, respectively, based upon the level of
loan loss reserves deemed adequate by the Managing General
Partner at the respective year ends.
Total operating expenses were $645,608 in 1993 compared to
$961,668 in 1992. The decrease was primarily attributable to
lower overall portfolio activity as the Partnership is at its
liquidation stage.
In 1993 and 1992, the Partnership realized losses from
investment write-downs of $5,320,352 and $715,875, respectively.
Realized losses in 1993 primarily related to equity investments
and secured notes receivables to portfolio companies in the
computers and computer equipment, and retail/consumer products
industries. Realized losses in 1992 primarily related to
secured notes receivable for portfolio companies in the
microelectronics, medical, and computer software and systems
industries.
Secured notes receivable interest income was $347,864 and
$1,229,636 in 1993 and 1992, respectively. The decrease was
primarily attributable to lower interest-bearing notes
receivable balances since the Partnership entered the
liquidation stage in the third quarter of 1991.
There was no net realized gain from sale of investments recorded
in 1993. In 1992, the Partnership recorded a $743,567 gain
which was primarily attributable to investment sales in Catalina
Marketing, partially offset by a realized loss from the sale of
investments in Chyron Corporation.
The Partnership incurred management fees of $140,753 and
$255,922 in 1993 and 1992, respectively. As management fees are
computed based on assets under management, the decrease is
consistent with the decrease in such assets.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
The financial statements of the Registrant are set forth in Item
14.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------ -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
- ------------------------
Registrant has reported no disagreements with its accountants on
matters of accounting principles or practices or financial
statement disclosure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
As a partnership, the Registrant has no directors or executive
officers. Technology Funding Ltd., a California limited
partnership ("TFL"), and Technology Funding Inc., a California
corporation ("TFI") and wholly owned subsidiary of TFL, are the
General Partners of the Partnership. TFI is the Managing
General Partner. Information concerning the ownership of TFL
and the business experience of the key officers of TFI and the
partners of TFL is incorporated by reference from the sections
entitled "Management of the Partnership - The General Partners"
and "Management of the Partnership - Key Personnel" in the
Prospectus, which are incorporated herein by reference. Changes
in this information that have occurred since the date of the
Prospectus are included in the Technology Funding Medical
Partners I, L.P. Prospectus, as modified by Cumulative
Supplement No. 4 dated January 4, 1995, forming a part of the
May 3, 1993 Pre-Effective Amendment No. 3 to the Form N-2
Registration Statement No. 33-54002, dated October 30, 1992
which is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
- ------- ----------------------
As a partnership, the Registrant has no officers or directors.
In 1994, the Partnership incurred $71,504 in management fees.
The management fees are designed to compensate the General
Partners for General Partner Overhead incurred in performing
management duties for the Partnership through December 31, 1994.
General Partner Overhead includes rent, utilities, and certain
salaries and benefits paid by the General Partners.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- --------------------------------------------------------------
Not applicable. No Limited Partner beneficially holds more than
5% of the aggregate number of Units held by all Limited
Partners, and neither the General Partners nor any of their
officers, directors or partners own any Units. The General
Partners control the affairs of the Partnership pursuant to the
Partnership Agreement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The Registrant has engaged in no transactions with the General
Partners or their officers and partners other than as described
above, in the notes to the financial statements, or in the
Prospectus.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
- ------- -------------------------------------------------------
FORM 8-K
- --------
(a) List of Documents filed as part of this Annual Report on
Form 10-K
(1) Financial Statements - the following financial statements
are filed as a part of this Report:
Independent Auditors' Report
Balance Sheets as of December 31, 1994 and 1993
Statements of Operations for the years ended
December 31, 1994, 1993 and 1992
Statements of Partners' Capital for the years ended
December 31, 1994, 1993 and 1992
Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992
Notes to Financial Statements
(2) Financial Statement Schedules
All schedules have been omitted because they are not
applicable or the required information is included in the
financial statements or the notes thereto.
(3) Exhibits
Registrant's Amended and Restated Limited Partnership
Agreement (incorporated by reference to Exhibit A to
Registrant's Prospectus dated May 5, 1986 included in
Registration Statement No. 2-96022 filed pursuant to Rule
424(b) of the General Rules and Regulations under the
Securities Act of 1933).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during
the year ended December 31, 1994.
(c) Financial Data Schedule for the year ended and as of December
31, 1994 (Exhibit 27).
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Partners
Technology Funding Secured Investors I:
We have audited the accompanying balance sheets of Technology Funding
Secured Investors I (a California limited partnership) as of December 31,
1994 and 1993, and the related statements of operations, partners'
capital, and cash flows for each of the years in the three-year period
ended December 31, 1994. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of loans by
correspondence with the individual borrowing companies and a physical
examination of securities held as of December 31, 1994 and 1993. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Technology
Funding Secured Investors I as of December 31, 1994 and 1993, and the
results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1994 in conformity with generally
accepted accounting principles.
As explained in Notes 1, 6, and 7, the financial statements include
investments of $1,675,610 and $3,844,583 (78% and 89% of partners'
capital) as of December 31, 1994 and 1993, respectively, whose values, in
certain circumstances, have been estimated by the Managing General
Partner in the absence of readily ascertainable market values. We have
reviewed the procedures used by the Managing General Partner in arriving
at its estimate of value of such investments and have inspected
underlying documentation, and, in the circumstances, we believe the
procedures are reasonable and the documentation appropriate. However,
because of the inherent uncertainty of valuation, those estimated values
may differ significantly from the values that would have been used had a
ready market for the investments existed, and the difference could be
material.
San Francisco, California
March 17, 1995 KPMG Peat Marwick LLP
<PAGE>
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
December 31,
-------------------------------
1994 1993
---- ----
<S> <C> <C>
ASSETS
Investments:
Secured notes receivable, net
(cost basis of $995,227 and
$3,306,237 in 1994 and 1993,
respectively) $ 760,227 2,522,237
Equity investments (cost basis
of $3,196,958 and $1,476,501 in
1994 and 1993, respectively) 915,383 1,322,346
--------- ---------
Total investments 1,675,610 3,844,583
Cash and cash equivalents 534,644 568,130
Other assets 59,984 11,711
--------- ---------
Total $2,270,238 4,424,424
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 47,221 42,650
Due to affiliated partnerships -- 3,758
Due to related parties 1,136 3,909
Other liabilities 60,320 56,304
--------- ---------
Total liabilities 108,677 106,621
Commitments
(Notes 3 and 10)
Partners' capital:
Limited Partners
(Units outstanding of 115,501 and
116,008 in 1994 and 1993,
respectively) 4,866,951 5,439,172
General Partners (188,815) (183,214)
Net unrealized fair value decrease
from cost:
Secured notes receivable (235,000) (784,000)
Equity investments (2,281,575) (154,155)
--------- ---------
Total partners' capital 2,161,561 4,317,803
--------- ---------
Total $2,270,238 4,424,424
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS
- ------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Income:
Secured notes receivable
interest $ 130,413 347,864 1,229,636
Short-term investment interest 24,090 14,949 57,224
Other income 2,422 13,683 25,324
--------- --------- ---------
Total income 156,925 376,496 1,312,184
Costs and expenses:
Management fees 71,504 140,753 255,922
Operating expenses:
Administrative and investor
services 236,113 296,864 342,306
Lending operations and
investment management 184,121 216,478 428,276
Computer services 74,974 88,962 101,740
Professional fees 36,345 43,304 89,346
--------- --------- ---------
Total operating expenses 531,553 645,608 961,668
--------- --------- ---------
Total costs and expenses 603,057 786,361 1,217,590
--------- --------- ---------
Net operating (loss) income (446,132) (409,865) 94,594
Net realized gain from sale of
investments 355,016 -- 743,567
Realized losses from
investment write-downs (514,251) (5,320,352) (715,875)
Recovery from investments
previously written off 45,290 80,357 --
--------- --------- ---------
Net realized (loss) income (560,077) (5,649,860) 122,286
Change in net unrealized
fair value:
Equity investments (2,127,420) 2,295,838 (2,959,810)
Secured notes receivable 549,000 660,000 (654,696)
--------- --------- ---------
Net loss $(2,138,497) (2,694,022) (3,492,220)
========= ========= =========
Net realized (loss) income
per Unit $ (5) (48) 1
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF PARTNERS' CAPITAL
- -------------------------------
<TABLE>
<CAPTION>
For the years ended December 31, 1994, 1993 and 1992:
Net Unrealized Fair Value
Increase (Decrease) From Cost
-----------------------------
Limited General Equity Secured Notes
Partners Partners Investments Receivable Total
-------- -------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C>
Partners' capital,
December 31, 1991 $14,554,115 (91,937) 509,817 (789,304) 14,182,691
Distributions (2,673,080) (27,000) -- -- (2,700,080)
Repurchase of limited
partnership interests (9,930) -- -- -- (9,930)
Net realized income 121,063 1,223 -- -- 122,286
Change in net unrealized fair
value:
Equity investments -- -- (2,959,810) -- (2,959,810)
Secured notes receivable -- -- -- (654,696) (654,696)
---------- ------- --------- ---------- ----------
Partners' capital,
December 31, 1992 11,992,168 (117,714) (2,449,993) (1,444,000) 7,980,461
Distributions (891,091) (9,001) -- -- (900,092)
Repurchase of limited
partnership interests (68,544) -- -- -- (68,544)
Net realized loss (5,593,361) (56,499) -- -- (5,649,860)
Change in net unrealized fair
value:
Equity investments -- -- 2,295,838 -- 2,295,838
Secured notes receivable -- -- -- 660,000 660,000
---------- ------- --------- --------- ----------
Partners' capital,
December 31, 1993 5,439,172 (183,214) (154,155) (784,000) 4,317,803
Repurchase of limited
partnership interests (17,745) -- -- -- (17,745)
Net realized loss (554,476) (5,601) -- -- (560,077)
Change in net unrealized fair
value:
Equity investments -- -- (2,127,420) -- (2,127,420)
Secured notes receivable -- -- -- 549,000 549,000
---------- ------- --------- --------- ----------
Partners' capital,
December 31, 1994 $ 4,866,951 (188,815) (2,281,575) (235,000) 2,161,561
========== ======= ========= ========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS
- ------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operations:
Interest received $ 180,083 456,558 1,219,777
Cash paid to vendors (198,895) (240,228) (353,057)
Cash paid to related parties (445,321) (596,881) (1,033,677)
Cash (paid to) received from
affiliated partnerships (5,058) (129,265) 133,023
------- --------- ---------
Net cash used
by operations (469,191) (509,816) (33,934)
------- --------- ---------
Cash flows from investing activities:
Secured notes receivable issued (347,000) (1,916,949) (5,995,178)
Repayments of secured notes
receivable 406,773 3,155,060 6,220,656
Repayment from other investments -- 134,990 --
Proceeds from sale of investments 418,020 -- 1,189,731
Recovery from investments
previously written off 45,290 80,357 --
Purchase of equity investments (69,633) (112,801) (75,000)
------- --------- ---------
Net cash provided by investing
activities 453,450 1,340,657 1,340,209
------- --------- ---------
Cash flows from financing
activities:
Repurchase of limited
partnership interests (17,745) (68,544) (9,930)
Distributions to Limited and
General Partners -- (1,401,210) (3,048,961)
------- --------- ---------
Net cash used by financing
activities (17,745) (1,469,754) (3,058,891)
------- --------- ---------
Net decrease in cash
and cash equivalents (33,486) (638,913) (1,752,616)
Cash and cash equivalents at
beginning of year 568,130 1,207,043 2,959,659
------- --------- ---------
Cash and cash equivalents at
end of year $ 534,644 568,130 1,207,043
======= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (continued)
- -----------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Reconciliation of net loss
to net cash used by
operations:
Net loss $(2,138,497) (2,694,022) (3,492,220)
Adjustments to reconcile net
loss to net cash used
by operations:
Net realized gain from sale of
investments (355,016) -- (743,567)
Amortization of discount
related to warrants (1,042) (21,727) (56,312)
Realized losses from investment
write-downs 514,251 5,320,352 715,875
Recovery from investments
previously written off (45,290) (80,357) --
Change in net unrealized
fair value:
Equity investments 2,127,420 (2,295,838) 2,959,810
Secured notes receivable (549,000) (660,000) 654,696
Changes in:
Accrued interest on secured and
convertible notes receivable 24,200 101,789 (36,095)
Other assets (46,973) 297 52,585
Accounts payable and accrued
expenses 4,571 (15,867) (9,608)
Due to related parties (2,773) (41,308) (262,295)
Due to/from affiliated
partnerships (5,058) (129,265) 133,023
Other liabilities 4,016 6,130 50,174
--------- --------- ---------
Net cash used
by operations $ (469,191) (509,816) (33,934)
========= ========= =========
Non-cash investing activities:
Additions to equity investments $ 51,706 1,400 30,981
========= ========= =========
Conversion of secured notes
receivable to equity and
other investments $ 2,082,107 1,270,740 3,109,295
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
1. Summary of Significant Accounting Policies
------------------------------------------
Organization
- ------------
Technology Funding Secured Investors I (the "Partnership") is a limited
partnership organized under the laws of the State of California on August
31, 1984. The purpose of the Partnership is to provide secured loans to
new and developing companies and to acquire, hold, sell, trade, exchange
or otherwise dispose of warrants and/or capital stock acquired by the
Partnership in conjunction with these loans. The General Partners are
Technology Funding Ltd. ("TFL") and Technology Funding Inc. ("TFI"), a
wholly-owned subsidiary of TFL. TFI is the Managing General Partner.
The registration statement of the Partnership, filed with the Securities
and Exchange Commission, became effective and the Partnership commenced
selling units of limited partnership interest ("Units") on May 31, 1985.
On September 9, 1985, the minimum number of Units required to form the
Partnership (4,800) had been sold. On May 31, 1987, the offering
terminated with 117,496 Units sold, generating $29,372,475 in cash from
Limited Partners and $29,399 from the General Partners. The Partnership
Agreement provides that the Partnership will continue until December 31,
2004, unless terminated sooner.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents are principally comprised of cash invested in
demand accounts, accounts maintained with brokers, commercial paper and
money market instruments and are stated at cost plus accrued interest.
The Partnership considers all money market and short-term investments
with an original maturity of three months or less to be cash equivalents.
Provision for Income Taxes
- --------------------------
No provision for income taxes has been made by the Partnership, as the
Partnership is not directly subject to taxation. The partners are to
report their respective shares of Partnership income or loss on their
individual tax returns.
Since the accompanying financial statements are prepared using generally
accepted accounting principles which may not equate to tax accounting,
the Partnership's total tax basis in investments was higher than the
reported total cost basis of $4,192,185 by $1,407,716 as of December 31,
1994.
Net Realized Income (Loss) Per Unit
- -----------------------------------
Net realized income (loss) per Unit is calculated by dividing the
weighted average number of Units outstanding for the years ended December
31, 1994, 1993 and 1992, of 115,883, 116,824 and 117,290, respectively,
into the total net realized income (loss) allocated to the Limited
Partners. The General Partners contributed an amount equal to 0.1% of
the total limited partner capital contributions and did not receive any
Partnership Units.
Investments:
- -----------
The Partnership's method of accounting for investments, in accordance
with generally accepted accounting principles, is the fair value basis
used for investment companies. The fair value of Partnership investments
is their initial cost basis with changes as noted below:
Secured Notes Receivable, Net
-----------------------------
The secured notes receivable portfolio includes accrued interest less the
discount related to warrants and the allowance for loan losses. The
portfolio approximates fair value through inclusion of an allowance for
loan losses. Allowance for loan losses is reviewed quarterly by the
Managing General Partner and is adjusted to a level deemed adequate to
cover possible losses inherent in notes and unfunded commitments. Notes
receivable are placed on nonaccrual status when, in the opinion of the
Managing General Partner, the future collectibility of interest or
principal is in doubt.
In conjunction with certain secured notes granted, the Partnership has
received warrants to purchase certain shares of capital stock of the
borrowing company. The cost basis of such warrants and the resulting
discount has been estimated by the Managing General Partner to be 1% of
the principal balance of the original notes made to the borrowing
company. The discount is amortized to interest income on a straight-line
basis over the term of the loan. These warrants are included in the
equity investment portfolio.
Nonrefundable fees received in connection with loan fundings are deferred
and amortized to interest income over the contractual life of the loan
using the effective interest method or the straight-line method if it is
not materially different. Direct loan origination costs mainly consist
of third-party costs and generally are reimbursed by portfolio companies.
Equity Investments
------------------
The fair value for publicly-traded equity investments (marketable equity
securities) is based upon the five-day-average closing sales price or
bid/ask price that is available on a national securities exchange or
over-the-counter market. Certain publicly-traded equity investments may
not be marketable due to selling restrictions. For publicly-traded
equity investments with selling restrictions, an illiquidity discount of
25% is applied when determining the fair value. Sales of equity
investments are recorded on the trade date. The basis on which cost is
determined in computing realized gains or losses is generally specific
identification.
Other equity investments, which are not publicly traded, are generally
valued utilizing pricing obtained from the most recent round of third
party financings. Valuation is estimated quarterly by the Managing
General Partner. Included in equity investments are convertible or
subordinated notes receivable as repayment of these notes may occur
through conversion into equity investments.
Equity investments with temporary changes in fair value result in
increases or decreases to the unrealized fair value of equity
investments. The cost basis does not change. In the case of an other
than temporary decline in value below cost basis, an appropriate
reduction in the cost basis is recognized as a realized loss.
Adjustments to fair value basis are reflected as "Change in net
unrealized fair value of equity investments." Cost basis adjustments are
reflected as "Realized losses from investment write-downs" in the
Statements of Operations.
Other Investments
-----------------
At times, the Partnership will receive other assets in satisfaction of
secured notes receivable or equity investments in portfolio companies.
When the asset is received, existing investment balances in excess of the
fair value of the asset received are written off.
Non-cash Exercise of Warrants
- -----------------------------
Periodically, the Partnership may acquire stock through the non-cash
exercise of warrants. During 1994, net realized gain resulting from the
non-cash exercise of warrants totaled $15,378. This amount is included
in net realized gain from sale of investments. There was no such gain in
1993 and 1992.
Distributions
- -------------
Distributions made to the Limited Partners are made among such partners
in the proportion their respective capital accounts bear to the total of
all capital accounts of the group. Unnegotiated distribution checks, if
any, after a reasonable amount of time are recorded as other liabilities
on the Balance Sheets.
2. Change in Net Unrealized Fair Value of Equity Investments
---------------------------------------------------------
In accordance with the Partnership's accounting policy as stated in Note
1, the Statements of Operations include a line item entitled "Change in
net unrealized fair value of equity investments." The table below
discloses details of the changes:
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Increase in fair value from cost
of marketable equity securities $ 150,206 148,564 194,034
Decrease in fair value from
cost of non-marketable
equity securities (2,431,781) (302,719) (2,644,027)
--------- --------- ---------
Net unrealized fair value
decrease from cost
at end of year (2,281,575) (154,155) (2,449,993)
Net unrealized fair value
(decrease) increase from cost
at beginning of year (154,155) (2,449,993) 509,817
--------- --------- ---------
Change in net unrealized
fair value of equity
investments $(2,127,420) 2,295,838 (2,959,810)
========= ========= =========
</TABLE>
3. Related Party Transactions
--------------------------
Included in costs and expenses are related party costs as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Management fees $ 71,504 140,753 255,922
Reimbursable operating expenses:
Administrative and investor
services 190,587 202,979 208,849
Lending operations and
investment management 105,483 122,879 204,912
Computer services 74,974 88,962 101,700
</TABLE>
Management fees, payable quarterly, are equal to one-half of one percent
of the Partnership's assets under management. Management fees compensate
the Managing General Partner solely for General Partner Overhead (as
defined in the Partnership Agreement) incurred in supervising the
operation, management, and progress of Partnership loans to borrowing
companies and its portfolio of warrants and capital stock of borrowing
companies, as well as for the general administration of the Partnership.
Currently, management fees are only paid to the extent that the aggregate
amount of all proceeds (including warrants exercised without cash)
received by the Partnership from the sale or other disposition of
borrowing company equities plus the aggregate fair market value of any
equity securities distributed to the partners exceeds the total
management fee payable.
The Partnership reimburses the Managing General Partner and affiliates
for operating expenses incurred in connection with the business of the
Partnership. Reimbursable operating expenses include all expenses other
than Organizational and Offering Expenses and General Partner Overhead
(as defined in the Partnership Agreement). At December 31, 1994 and
1993, due to related parties included $1,136 and $3,909, respectively,
for reimbursable operating expenses.
Within the normal course of the business, the Partnership participates in
secured notes receivable granted to non-affiliated borrowing companies by
affiliated partnerships which are also managed by the General Partners.
At December 31, 1994, due from affiliated partnerships was $1,300
(included in other assets) compared to $3,758 due to affiliated
partnerships at December 31, 1993. The Partnership may also
reparticipate such secured notes receivable amongst affiliated
partnerships to meet business needs.
Under the terms of a computer support agreement, the Partnership
recognized charges from Technology Administrative Management, a division
of TFL, for its share of computer support costs. These amounts are
included in computer services expense.
TFL currently has a sublease rental agreement with a Partnership
portfolio company in the computers and computer equipment industry.
4. Distributions
-------------
Beginning in the third quarter of 1991, the Partnership entered the
liquidation stage and began to distribute available cash. As the
Partnership has distributed a significant portion of its available cash,
the Partnership is now at the point in the liquidation process where its
distributions are primarily dependent on loan repayments from borrowing
companies. Distributions will fluctuate in the future based upon loan
payoffs received by the Partnership.
5. Allocation of Profits and Losses
--------------------------------
Net realized loss of the Partnership is allocated 99% to the Limited
Partners as a group and 1% to the General Partners as a group.
Net realized profit of the Partnership is allocated based on the
beginning of year partners' capital balances as follows:
(A) 99% to the Limited Partners as a group and 1% to the General
Partners until conversion, which is defined as such time
when:
(i) the amount of cash plus the value of any securities
distributed to the Limited Partners equals the
aggregate initial capital contributions of all the
Limited Partners; and
(ii) an 8% per annum cumulative, compounded return on the
adjusted capital contributions (i.e., initial capital
contributions less all amounts distributed) of all
Limited Partners has been achieved.
(B) Thereafter (post conversion), 80% to the Limited Partners as
a group and 20% to the General Partners as a group, except
as provided below.
The Partnership Agreement defines adjusted capital contribution, with
respect to any Limited Partner, as the capital contribution as reduced,
but not below zero, by (i) all prior tax distributions of cash to such
Limited Partner and (ii) the aggregate value (determined at the time of
distribution) of any securities distributed to such Limited Partner.
Limited Partners that subscribed to the first 60,000 Units accepted by
the Partnership will be allocated all of the General Partners' post-
conversion profits in excess of a 1% minimum allocation until such time
as each such Limited Partner has received total distributions from the
Partnership equal to their capital contribution plus a specified annual
priority return, ranging between 9% and 18%, on their adjusted capital
contribution. Once the lowest priority return is met, the profits will
be allocated to those Limited Partners who have not yet received their
priority returns. Thereafter, the General Partners will receive their
full post-conversion profits.
6. Equity Investments
------------------
At December 31, 1994 and December 31, 1993, equity investments consisted
of:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
----------------- -----------------
Investment Cost Fair Cost Fair
Industry/Company Date Position Basis Value Basis Value
- ---------------- ---------- -------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
WARRANTS:
Biotechnology
- -------------
Biocircuits 01/91 10,000 Common
shares at $2.00;
expiring 01/96 $ 0 0 2,000 20,500
Hybridon, Inc. 03/91 3,572 Common
shares at $3.50;
expiring 03/97 1,250 16,074 1,250 33,799
Computers and Computer Equipment
- --------------------------------
Censtor Corporation 02/91 78,438 Common
shares at $.29;
expiring 5/95 15,000 173,191 15,000 173,191
Komag, Inc. 12/91 716 Common shares
at $21.61; exercised
08/94 -- -- 3,750 3,750
MARCorp 05/92 842,213 Series B
Preferred shares
at $1.00; expiring
05/97 0 0 0 0
Pinnacle Systems, 05/90 2,083 Common
Inc. shares at $8.00;
expiring 05/95 2,500 14,164 2,500 2,500
Computer Software and Systems
- -----------------------------
Logisticon 08/89 65,218 Common
shares at $.23;
expired 08/94 -- -- 0 0
Logisticon 02/90 48,912 Common
shares at $.23;
expired 08/94 -- -- 0 0
Wright Express 08/90 114,521 Common
Corporation shares at $.8732;
expiring 08/95 -- -- 20,000 20,000
Industrial/Business Automation
- ------------------------------
Cyclean, Inc. 09/87 75,591 Common
shares at $2.74;
expiring 04/01 7,000 0 7,000 27,213
Cyclean, Inc. 04/88 53,994 Common
shares at $2.74;
expiring 04/01 5,000 0 5,000 19,438
Cyclean, Inc. 01/89 10,799 Common
shares at $2.74;
expiring 04/01 1,000 0 1,000 3,888
Cyclean, Inc. 06/90 29,032 Common
shares at $3.10;
expiring 06/00 4,091 0 4,091 4,091
Cyclean, Inc. 03/91 6,451 Common
shares at $3.10;
expiring 04/01 909 0 909 909
Cyclean, Inc. 03/91 47,112 Common
shares at $3.10;
expiring 04/01 7,000 0 7,000 7,000
Cyclean, Inc. 07/92 6,643 Common
shares at $3.10;
expiring 07/02 148 0 148 148
Cyclean, Inc. 09/94 3,822 Common
shares at $4.00;
expiring 03/99 0 0 -- --
Medical
- -------
Ash Medical 03/90 2,400 Common
Systems, Inc. shares at $12.50;
expiring 03/95 0 0 0 0
Hemocleanse, Inc. 03/90 38,886 Common
shares at $.9167;
expiring 03/95 0 0 0 0
Hemocleanse, Inc. 01/92 47,526 Common
shares at $.50;
expiring 01/97 0 0 0 0
Microgon, Inc. 10/90 62,500 Common
shares at $.60;
expiring 10/95 0 0 0 0
Microgon, Inc. 09/91 14,583 Common
shares at $.60;
expiring 09/96 0 0 0 0
Microgon, Inc. 06/92 62,500 Common
shares at $.60;
expiring 06/97 0 0 0 0
Resonex, Inc. 10/91 600,000 Common
shares at $1.00;
expiring 10/96 -- -- 0 0
Resonex, Inc. 10/92 228,000 Common
shares at $1.00;
expiring 10/97 -- -- 0 0
Resonex, Inc. 04/93 680,000 Common
shares at $1.00;
expiring 01/98 -- -- 0 0
Microelectronics
- ----------------
Applied Micro 03/90 14,286 Common
Circuits, Inc. shares at $1.75;
expiring 03/95 5,000 5,000 5,000 5,000
Applied Micro 08/90 14,286 Common
Circuits, Inc. shares at $1.75;
expiring 08/95 5,000 5,000 5,000 5,000
Celeritek 05/89 9,231 Common
shares at $7.50;
exercised 05/94 -- -- 5,000 5,000
Semiconductor Equipment
- -----------------------
Etec Systems, Inc. 10/91 33 Series C Preferred
shares at $100;
expiring 10/96 -- -- 0 0
Photon Dynamics 04/87 47,619 Common
shares at $1.05;
exercised 05/94 -- -- 2,500 92,857
Photon Dynamics 04/88 35,644 Common
shares at $1.683;
exercised 05/94 -- -- 1,500 46,943
Telecommunications
- ------------------
Integrated Network 06/91 5,882 Common
Corporation shares at $17.00;
expiring 06/96 10,000 49,997 10,000 10,000
Primary Access 10/90 19,044 Common
shares at $2.25;
expiring 10/95 4,100 4,100 4,100 4,100
Primary Access 04/91 5,289 Common
shares at $2.25;
expiring 10/95 1,400 1,400 1,400 1,400
------- ------- ------- -------
Total warrants 69,398 268,926 104,148 486,727
------- ------- ------- -------
STOCKS:
Computers and Computer Equipment
- --------------------------------
MARCorp 12/89 1,177,438 Series A
Preferred shares 0 0 0 0
MARCorp 05/92 Convertible
Subordinated
Debenture,
$2,813,898
principal amount 0 0 0 0
MARCorp 02/93 368,119 Series A
Preferred shares 0 0 0 0
Computer Software
- -----------------
Micro Decisionware, 08/92 116,279 Common
Inc. shares -- -- 78,000 174,419
Electronic Design Automation
- ----------------------------
IKOS Systems, Inc. 07/90 84,765 Common
shares 23,613 162,155 23,613 153,677
Industrial/Business Automation
- ------------------------------
Cyclean, Inc. 09/94 18,532 Series D
Preferred shares 51,706 51,706 -- --
Medical
- -------
Adams Scientific, 03/91 12,500 Common
Inc. shares -- -- 0 0
Resonex Holdings 02/94 22,804 Common
Corporation shares 1,682,507 0 -- --
Microelectronics
- ----------------
Celeritek, Inc. 05/94 9,231 Common
shares 74,233 74,233 -- --
Retail/Consumer Products
- ------------------------
S-TRON 05/93 Subordinated note (1),
$390,000 principal
amount 392,015 130,316 390,000 203,148
S-TRON 05/93 390,000 Common
shares 0 0 0 0
S-TRON 05/93 897,000 Series 1
Preferred shares 295,740 0 295,740 0
S-TRON 05/93 2,340,000
Series 2
Preferred shares 585,000 191,473 585,000 304,375
Semiconductor Equipment
- -----------------------
Photon Dynamics 05/94 20,319 Common
shares 22,746 36,574 -- --
--------- ------- --------- ---------
Total stocks 3,127,560 646,457 1,372,353 835,619
--------- ------- --------- ---------
Total equity investments $3,196,958 915,383 1,476,501 1,322,346
========= ======= ========= =========
- -- No investment held at end of period.
0 Investment active with a carrying value or fair value of zero.
(1) Subordinated note includes accrued interest. The interest rate on the
subordinated note was 6%.
</TABLE>
Marketable Equity Securities
- ----------------------------
At December 31, 1994 and 1993, marketable equity securities had aggregate
costs of $26,113 and $29,363, respectively, and aggregate market values
of $176,319 and $177,927, respectively. The unrealized gains at December
31, 1994 and 1993 were $150,206 and $148,564, respectively.
Biocircuits Corporation
- -----------------------
Based on the Managing General Partner's opinion, there had been an other
than temporary decline in value of the Partnership's investment.
Accordingly, the Partnership has written off its warrant investment of
$2,000 and recorded a decrease in fair value of $20,500 at December 31,
1994.
Celeritek, Inc.
- ---------------
In May 1994, the Partnership exercised its warrant to purchase 9,231
common shares. The recorded cost basis and fair value of $74,233 for the
common shares included the warrant cash exercise price of $69,233 at
$7.50 per share (adjusted during 1994) and the warrant cost basis of
$5,000.
Cyclean, Inc.
- -------------
In September 1994, the Partnership restructured its secured notes
previously issued to Cyclean, Inc. In exchange for an extension of the
maturity date and certain interest rate changes, the Partnership received
a warrant for 3,822 shares of common stock exercisable at $4.00 per share
expiring March 1999 and 18,532 shares of Series D Preferred stock. The
Partnership recorded the cost basis and fair value at $51,706 for the
preferred stock received, and recorded a decrease in fair value of
$62,687 for the Partnership's existing warrants based on the Managing
General Partner's judgment. In addition, the expiration dates for the
Partnership's existing common stock warrants were extended as part of the
restructuring.
Integrated Network Corporation
- ------------------------------
In addition to the Partnership's right to exercise its warrant for common
stock, the Partnership has an option to sell its common share warrant
back to the company for $49,997. Accordingly, this amount is recorded as
the fair value as of December 31, 1994.
Micro Decisionware, Inc.
- ------------------------
In April 1994, Micro Decisionware, Inc. was acquired by Sybase, Inc. The
Partnership received 8,229 Sybase, Inc. common shares in exchange for the
Partnership's 116,279 common shares in Micro Decisionware, Inc. The
Partnership subsequently sold the Sybase, Inc. common shares for $417,622
and realized a gain of $339,622.
Photon Dynamics
- ---------------
In April 1994, Photon Dynamics completed a new round of financing at a
lower price than the previous round of financing. In May of 1994, the
Partnership exercised its warrants without cash and received 20,319
common shares. The recorded cost basis of $22,746 included a realized
gain of $18,746 and the warrant cost basis of $4,000. Based upon these
transactions, the Partnership recorded a decrease in fair value of
$121,972; the fair value reflected the April round pricing.
Pinnacle Systems, Inc.
- ----------------------
In November 1994, Pinnacle Systems, Inc. completed its initial public
offering at $8 per share. The Partnership recorded an increase in fair
value of $11,664 for its existing warrant investment at December 31, 1994
to reflect the publicly-traded market value for common stock.
Resonex, Inc./Resonex Holding Corporation
- -----------------------------------------
In February 1994, the Partnership, together with two affiliated
partnerships, assigned their Resonex, Inc. note holdings to Resonex
Holding Corporation ("RHC"), a new company wholly-owned by the
Partnership and the affiliated partnerships. RHC foreclosed on the
assets of Resonex, Inc. The partnerships' ownership of RHC is in
proportion to their respective Resonex, Inc. loan balances. The
Partnership received 22,804 common shares in RHC in exchange for $400
cash and its share of Resonex, Inc. secured notes totaling $2,082,107.
During 1994, a realized loss of $400,000 was recorded based on the
Managing General Partner's opinion, reducing the investment book value to
$1,682,507 with an estimated fair value of zero at December 31, 1994
pending the results of management action being taken. The Managing
General Partner's intention is to maximize the net realizable value on
this investment.
S-TRON
- ------
In late 1994, based on the Managing General Partner's estimate, the fair
value of the Partnership's investment had declined. Accordingly, the
Partnership recorded a change in fair value decrease of $187,749 on its
existing investments at December 31, 1994.
Wright Express Corporation
- --------------------------
In August 1994, Wright Express Corporation was acquired and the
Partnership's warrant was canceled as the price per share paid to equity
investment holders was lower than the warrant exercise price.
Accordingly, the warrant cost basis was written off.
Other Equity Investments
- ------------------------
Biocircuits, Ikos Systems, Inc. and Pinnacle Systems, Inc. are publicly-
traded companies. All other equity investments not specifically
discussed above are privately held and no public market for the sale of
these securities exists.
7. Secured Notes Receivable, Net
-----------------------------
At December 31, 1994 and 1993, secured notes receivable consisted of:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Secured notes receivable $1,047,637 3,263,946
Accrued interest 14,089 67,026
Unamortized discount related to warrants (66,499) (24,735)
--------- ---------
Total secured notes receivable,
net (cost basis) 995,227 3,306,237
Allowance for loan losses (235,000) (784,000)
--------- ---------
Total secured notes receivable,
net (fair value) $ 760,227 2,522,237
========= =========
</TABLE>
The 1994 notes were primarily from two portfolio companies in the
industrial/business automation, and computers and computer equipment
industries. The remaining loans were from five other companies in a
variety of industries. All notes are secured by specific assets of the
borrowing company. Interest rates on secured notes receivable at
December 31, 1994 ranged from 10% to 15%. During 1994, approximately
$26,000 of accrued interest was written off as a result of notes being
placed on nonaccrual status.
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Balance, beginning of year $ 784,000 1,444,000
------- ---------
Decrease in provision for loan losses (528,760) (98,517)
Secured notes receivable write-downs:
Computers and computer equipment (31,070) (300,000)
Medical (34,460) --
Retail/consumer products -- (276,776)
-------- ---------
Total write-offs (65,530) (576,776)
Recoveries of previous write-offs:
Semiconductor equipment -- 12,189
Microelectronics 45,290 1,980
Industrial/business automation -- 1,124
------- ---------
Total recoveries 45,290 15,293
------- ---------
Change in net unrealized fair value
of secured notes receivable (549,000) (660,000)
------- ---------
Balance, end of year $ 235,000 784,000
======= =========
</TABLE>
The decrease in provision for loan losses is generally comprised of
realized loan losses, net of recognized recoveries, and a change in net
unrealized fair value based upon the level of loan loss reserves deemed
adequate by the Managing General Partner at the respective year ends.
The allowance for loan losses is adjusted based upon changes to the
portfolio size and risk profile. Although the allowance for loan losses
is established by evaluating individual debtor repayment ability, the
allowance represents the Managing General Partner's assessment of the
portfolio as a whole.
Notes with a total cost basis of $782,274 and $2,422,890 were on
nonaccrual status due to uncertainties in the financial condition of the
borrowing companies at December 31, 1994 and 1993, respectively. During
1994, nonaccrual notes of approximately $2.1 million for a portfolio
company in the medical industry were predominantly converted into equity
investments resulting in a lower allowance for loan loss necessary at
December 31, 1994. The Managing General Partner continues to monitor the
progress of these companies. The fair value at December 31, 1994 is
based on the Managing General Partner's estimate of collectibility of
these notes.
The scheduled principal repayments remaining are:
<TABLE>
<CAPTION>
Year Ending Principal
December 31, Repayments
----------- ----------
<S> <C>
1995 $ 584,656
1996 462,981
---------
$1,047,637
=========
</TABLE>
Secured notes receivable which are due on demand are included as
principal repayments for the year ending December 31, 1995. In addition,
the Managing General Partner may at times need to restructure notes by
either extending maturity dates or converting notes to equity investments
to increase the ultimate collectibility of investments to the
Partnership.
8. Cash and Cash Equivalents
-------------------------
At December 31, 1994 and 1993, cash and cash equivalents consisted of:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Demand and brokerage accounts $ 1,994 54,792
Money market accounts 532,650 513,338
------- -------
Total $534,644 568,130
======= =======
</TABLE>
9. Repurchase of Limited Partnership Interests
-------------------------------------------
Each June, beginning in June 1987, Limited Partners may tender their
Units for repurchase by the Partnership. The amount available in any
year to repurchase tendered Units is limited to 10% of the aggregate
principal repayments received by the Partnership during the preceding
calendar year on notes to borrowing companies. The price paid for any
Units tendered is subject to the restrictions stated in the Partnership
Agreement. Units repurchased and the prices paid were 507 Units for
$17,745, 1,224 Units for $68,544, and 80 Units for $9,930 in 1994, 1993,
and 1992, respectively.
10. Commitments
-----------
The Partnership is a party to financial instruments with off-balance-
sheet risk in the normal course of its business. Generally, these
instruments are equipment financing commitments or accounts receivable
lines of credit that are outstanding but not currently fully utilized by
a borrowing company. As they do not represent current outstanding
balances, these unfunded commitments are properly not recognized in the
financial statements. At December 31, 1994, the Partnership had unfunded
commitments of $129,000 related to accounts receivable lines of credit.
The Partnership uses the same credit policies in making these commitments
and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend financing are agreements to lend to a company as
long as there are no violations of any conditions established in the
contract. The credit lines generally have fixed termination dates or
other termination clauses. Since many of the commitments are expected to
expire without being fully drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. All commitments
funded require collateral specified in the agreements.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TECHNOLOGY FUNDING SECURED INVESTORS I
By: TECHNOLOGY FUNDING INC.
Managing General Partner
Date: March 17, 1995 By: /s/Frank R. Pope
--------------------------------------
Frank R. Pope
Executive Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Capacity Date
--------- -------- ----
/s/Charles R. Kokesh President, Chief March 17, 1995
- ------------------------ Executive Officer
Charles R. Kokesh and Chairman of
Technology Funding Inc.
and Managing General
Partner of Technology
Funding Ltd.
/s/Frank R. Pope Executive Vice March 17, 1995
- ------------------------ President, Chief
Frank R. Pope Financial Officer,
Secretary and a
Director of Technology
Funding Inc. and a
General Partner of
Technology Funding Ltd.
/s/Gregory T. George Group Vice President March 17, 1995
- -------------------------- of Technology Funding
Gregory T. George Inc. and a General
Partner of Technology
Funding Ltd.
The above represents a majority of the Board of Directors of Technology
Funding Inc. and a majority of the General Partners of Technology Funding
Ltd.
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-K AS OF DECEMBER 31, 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 4,192,185
<INVESTMENTS-AT-VALUE> 1,675,610
<RECEIVABLES> 0
<ASSETS-OTHER> 59,984
<OTHER-ITEMS-ASSETS> 534,644
<TOTAL-ASSETS> 2,270,238
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 108,677
<TOTAL-LIABILITIES> 108,677
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,678,136
<SHARES-COMMON-STOCK> 115,501
<SHARES-COMMON-PRIOR> 116,008
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,516,575)
<NET-ASSETS> 2,161,561
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 154,503
<OTHER-INCOME> 2,422
<EXPENSES-NET> 603,057
<NET-INVESTMENT-INCOME> (446,132)
<REALIZED-GAINS-CURRENT> (113,945)
<APPREC-INCREASE-CURRENT> (1,578,420)
<NET-CHANGE-FROM-OPS> (2,138,497)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 507
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,156,242)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 71,504
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 653,176
<AVERAGE-NET-ASSETS> 3,239,682
<PER-SHARE-NAV-BEGIN> 47
<PER-SHARE-NII> (5)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 42
<EXPENSE-RATIO> .19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>
A zero value is used since the change in net unrealized fair value is not
allocated to General Partners and Limited Partners as it is not taxable.
Only taxable gains or losses are allocated in accordance with the
Partnership Agreement.
</FN>
</TABLE>
