<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 quarterly period ended March 31, 1998
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)
(650) 345-2200
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(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)
March 31, December 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Investments:
Secured notes receivable, net
(cost basis of $725,224
in 1998 and 1997) $285,224 285,224
Equity investments (cost basis
of $233,029 and $261,196 in
1998 and 1997, respectively) 231,588 286,237
------- -------
Total investments 516,812 571,461
Cash and cash equivalents 88,836 68,068
Other assets 7,207 13,991
------- -------
Total assets $612,855 653,520
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 28,034 28,302
Due to related parties 166,863 111,334
Other liabilities 1,051 1,051
------- ---------
Total liabilities 195,948 140,687
Commitments and subsequent event
(Notes 3 and 6)
Partners' capital:
Limited Partners
(Units outstanding of
106,990 in 1998 and 1997) 907,658 976,408
General Partners (49,310) (48,616)
Net unrealized fair value (decrease)
increase from cost:
Secured notes receivable (440,000) (440,000)
Equity investments (1,441) 25,041
------- ---------
Total partners' capital 416,907 512,833
------- ---------
Total liabilities and
partners' capital $612,855 653,520
======= =========
</TABLE>
See accompanying notes to financial statements
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1998 1997
-------- --------
<S> <C> <C>
Income:
Short-term investment interest $ 154 3,009
------ -------
Total income 154 3,009
Costs and expenses:
Management fees 2,565 4,864
Other investment expenses -- 60,105
Operating expenses 60,338 67,094
------ -------
Total costs and expenses 62,903 132,063
------ -------
Net operating loss (62,749) (129,054)
Net realized (loss) gain from sales
of equity investments (6,695) 19,803
------ -------
Net realized loss (69,444) (109,251)
Change in net unrealized
fair value:
Equity investments (26,482) (53,038)
------ -------
Net loss $(95,926) (162,289)
====== =======
Net realized loss per Limited $ (1) (1)
Partner Unit ====== =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 154 3,009
Cash paid to vendors (10,167) (17,956)
Cash received from (paid to)
related parties 9,309 (88,484)
------ -------
Net cash used by operating
activities (704) (103,431)
------ -------
Cash flows from investing activities:
Proceeds from sales of equity investments 21,472 --
------ -------
Net cash provided by investing
activities 21,472 --
------ -------
Net increase (decrease) in cash
and cash equivalents 20,768 (103,431)
Cash and cash equivalents at beginning
of year 68,068 291,452
------ -------
Cash and cash equivalents
at March 31 $88,836 188,021
====== =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited) (continued)
- -----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1998 1997
-------- --------
<S> <C> <C>
Reconciliation of net loss
to net cash used by
operating activities:
Net loss $(95,926) (162,289)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Net realized loss (gain) from
sales of equity investments 6,695 (19,803)
Change in net unrealized fair
value of equity investments 26,482 53,038
Changes in:
Accounts payable and accrued
expenses (268) 56,162
Due to/from related parties 55,529 (30,119)
Other assets 6,784 2,143
Other liabilities -- (2,563)
------ -------
Net cash used by operating activities $ (704) (103,431)
====== =======
</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
March 31, 1998, and December 31, 1997, and the related Statements of
Operations for the three months ended March 31, 1998 and 1997, and
Statements of Cash Flows for the three months ended March 31, 1998 and
1997, 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, 1997. The following
notes to financial statements for activity through March 31, 1998,
supplement those included in the Annual Report on Form 10-K. 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 that cash received from liquidation of
Partnership investments will provide the necessary liquidity to fund
Partnership operations. Until such future proceeds are received, the
Partnership will be dependent upon the financial support of the Managing
General Partner to fund operations. The Managing General Partner has
committed to this support in the form of short-term cash advances.
3. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs for the three months ended
March 31, 1998 and 1997, were as follows:
<TABLE>
1998 1997
------ ------
<S> <C> <C>
Management fees $ 2,565 4,864
Reimbursable operating expenses 43,655 53,501
</TABLE>
Certain reimbursable expenses have been allocated and accrued based upon
interim estimates prepared by the Managing General Partner and are adjusted
to actual costs periodically. At March 31, 1998 and December 31, 1997, due
to related parties for such expenses were $153,891 and $100,928,
respectively.
At March 31, 1998 and December 31, 1997, management fees payable were
$8,632 and $6,066, respectively, and due to affiliated partnerships for
reparticipated secured notes receivable were $4,340 and $4,340,
respectively.
4. Net Realized Loss Per Unit
--------------------------
Net realized loss per Unit is calculated by dividing total net realized
loss allocated to the Limited Partners by the weighted average number of
Limited Partner Units outstanding for the three months ended March 31, 1998
and 1997, of 106,990 and 109,904, respectively.
5. Secured Notes Receivable, Net
-----------------------------
There were no secured notes receivable activities from January 1 through
March 31, 1998.
The Partnership's secured notes receivable portfolio was on nonaccrual
status due to the uncertainty of the financial conditions of certain
borrowers at March 31, 1998 and December 31, 1997. The Managing General
Partner continues to monitor the progress of these companies and intends to
manage these investments to maximize the Partnership's net realizable
value. The fair value at March 31, 1998, recognizes the Managing General
Partner's estimate of collectibility of these notes. All notes are secured
by specific assets of the borrowing company.
6. Equity Investments
------------------
<TABLE>
A complete listing of the Partnership's equity investments at December 31, 1997, is
included in the 1997 Annual Report. Activity from January 1 through March 31, 1998,
consisted of:
January 1 through March 31, 1998
--------------------------------
Investment Cost Fair
Industry/Company Date Position Basis Value
- ---------------- ---------- -------- -------- -------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $261,196 286,237
1998 activity:
STOCKS:
Microelectronics
- ----------------
Celeritek, Inc. 05/94- 10,000 Common
12/97 shares (28,167) (54,649)
------- -------
Total equity investments at March 31, 1998 $233,029 231,588
======= =======
</TABLE
Marketable Equity Securities
- ----------------------------
At March 31, 1998, and December 31, 1997, marketable equity securities had
aggregate costs of $55,120 and $83,287, respectively, and aggregate market
values of $110,380 and $165,029, respectively. The unrealized gains at
March 31, 1998, and December 31, 1997, did not include any gross losses.
Celeritek,Inc.
- --------------
In March 1998, the Partnership sold 1,847 common shares for total proceeds
of $21,472 and realized a loss of $6,695.
In April 1998, the Partnership sold its remaining investment in the company
for total proceeds of $117,500 and realized a gain of $62,380.
7. Other Investment Expenses
-------------------------
Other investment expenses, primarily legal fees, of $60,105 in 1997,
reflect the participated cost of litigation which was settled in the same
year. There were no such expenses in 1998.
8. Cash and Cash Equivalents
-------------------------
At March 31, 1998, and December 31, 1997, cash and cash equivalents
consisted of:
</TABLE>
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Demand and brokerage accounts $ 8,437 9,195
Money market accounts 80,399 58,873
------ ------
Total $88,836 68,068
====== ======
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
- -------------------------------
During the three months ended March 31, 1998, net cash used by operating
activities totaled $704. The Partnership received $9,309 from related
parties. Other operating expenses of $10,167 were paid and interest income
of $154 was received.
Cash and cash equivalents at March 31, 1998, were $88,836. Future
distributions will be dependent upon loan repayments from borrowing
companies, future proceeds from equity investment sales, and available
cash. Operating cash reserves, proceeds from sales of equity investments,
repayments of secured notes receivable, and the Managing General Partner's
support are expected to be sufficient to fund Partnership operations
through the next twelve months.
Results of Operations
- ---------------------
Current quarter compared to corresponding quarter in the preceding year
- -----------------------------------------------------------------------
Net losses were $95,926 and $162,289 for the three months ended March 31,
1998 and 1997, respectively. The decrease in net loss in the current
period was primarily due to a $60,105 decrease in other investment
expenses.
Other investment expenses, primarily legal fees, for the quarter ended
March 31, 1997 were $60,105. There were no such expenses in 1998. The
decrease was due to the settlement of the related litigation.
Total operating expenses were $60,338 and $67,094 for the three months
ended March 31, 1998 and 1997, respectively
Given the inherent risk associated with the business of the Partnership,
the future performance of the portfolio company investments may
significantly impact future operations.
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 March 31, 1998.
(b) Financial Data Schedule for the three months ended and as of March 31,
1998 (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 SECURED INVESTORS I
By: TECHNOLOGY FUNDING INC.
Managing General Partner
Date: May 14, 1998 By: /s/Michael R. Brenner
-----------------------------------
Michael R. Brenner
Controller
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<PERIOD-TYPE> 3-MOS
<INVESTMENTS-AT-COST> 958,253
<INVESTMENTS-AT-VALUE> 516,812
<RECEIVABLES> 0
<ASSETS-OTHER> 7,207
<OTHER-ITEMS-ASSETS> 88,836
<TOTAL-ASSETS> 612,855
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 195,948
<TOTAL-LIABILITIES> 195,948
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 858,348
<SHARES-COMMON-STOCK> 106,990
<SHARES-COMMON-PRIOR> 106,990
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (441,441)
<NET-ASSETS> 416,907
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 154
<OTHER-INCOME> 0
<EXPENSES-NET> 62,903
<NET-INVESTMENT-INCOME> (62,749)
<REALIZED-GAINS-CURRENT> (6,695)
<APPREC-INCREASE-CURRENT> (26,482)
<NET-CHANGE-FROM-OPS> (95,926)
<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> (95,926)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,565
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 63,153
<AVERAGE-NET-ASSETS> 464,870
<PER-SHARE-NAV-BEGIN> 9
<PER-SHARE-NII> (1)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8
<EXPENSE-RATIO> 13.5
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
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>
