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 September 30, 1994
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission file number 0-16208
WESTFORD TECHNOLOGY VENTURES, L.P.
(Exact name of registrant as specified in its charter)
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Delaware 13-3423417
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
17 Academy Street, 5th Floor
Newark, New Jersey 07102-2905
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (201) 624-2131
Not applicable
Former name, former address and former fiscal year, if changed since last report
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
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INDEX
WESTFORD TECHNOLOGY VENTURES, L.P.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets as of September 30, 1994 (Unaudited) and December 31, 1993
Schedule of Portfolio Investments as of September 30, 1994 (Unaudited)
Statements of Operations for the Three and Nine Months Ended September 30, 1994
and 1993 (Unaudited)
Statements of Cash Flows for the Nine Months Ended September 30, 1994 and 1993
(Unaudited)
Statement of Changes in Partners' Capital for the Nine Months Ended September
30, 1994 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
WESTFORD TECHNOLOGY VENTURES, L.P.
BALANCE SHEETS
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September 30, 1994 December 31,
(Unaudited) 1993
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ASSETS
Investments - Note 2
Portfolio investments, at fair value (cost $7,189,630 at
September 30, 1994 and $6,856,330 at December 31, 1993) $ 7,015,087 $ 6,450,118
Short-term investments, at amortized cost 997,241 1,747,661
Cash and cash equivalents 317,892 744,390
Receivable from securities sold (net of unamortized discount
of $102,238 at September 30, 1994) 244,405 -
Accrued interest receivable 39,702 39,028
------ ------
TOTAL ASSETS $ 8,614,327 $ 8,981,197
= ========= = =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 17,178 $ 30,469
Due to Management Company - Note 4 26,375 8,500
Due to Independent General Partners - Note 5 10,500 10,500
------ ------
Total liabilities 54,053 49,469
------ ------
Partners' Capital:
Managing General Partner 86,453 92,423
Individual General Partners 3,037 3,250
Limited Partners (11,217 Units) 8,645,327 9,242,267
Unallocated net unrealized depreciation of investments - Note 2 (174,543) (406,212)
-------- --------
Total partners' capital 8,560,274 8,931,728
--------- ---------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 8,614,327 $ 8,981,197
= ========= = =========
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See notes to financial statements.
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WESTFORD TECHNOLOGY VENTURES, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
SEPTEMBER 30, 1994
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Initial
Investment
Company / Position Date Cost Fair Value
- - ------------------ ---- ---- ----------
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Cincinnati Bell Inc.(A)
41,673 shares of Common Stock Nov. 1989 $ 817,575 $ 781,369
- - ----------------------------- --------- - ------- - -------
Cybernetics Systems International Corp.*
1,000 shares of Common Stock Mar. 1990 224,970 224,970
3,680 shares of Preferred Stock 941,554 941,554
Warrants to purchase 75 shares of Common Stock
at $52.13 per share, expiring 3/23/00 375 375
Demand Notes at prime + 1% 170,000 170,000
- - -------------------------- ------- -------
Inn-Room Systems, Inc.*
1,127,691 shares of Common Stock Oct. 1989 1,136,286 563,855
Warrants to purchase 206,003 shares of Common Stock at
$0.01 per share, expiring between 12/31/97 and 6/30/98 74,603 100,940
------------------------------------------------------ ------ -------
Picture Productions, L.P.
1% Limited Partnership Interest Dec. 1991 10,000 10,000
- - ------------------------------- --------- ------ ------
Spectrix Corporation*
487,569 shares of Preferred Stock June 1989 2,492,411 1,950,276
274,862 shares of Common Stock 142,681 1,099,448
8% Promissory Notes due 12/31/94 300,000 300,000
8% Promissory Notes due 6/30/95 100,000 100,000
Warrants to purchase 160,000 shares of Common Stock
at $.50 per share, expiring 12/31/97 0 0
Options to purchase 5,000 shares of Common Stock at $4
per share, expiring 4/26/96 6,875 0
--------------------------- ----- -
Thunderbird Technologies, Inc.
581,533 shares of Preferred Stock Oct. 1992 581,533 581,533
Convertible Promissory Note at prime 190,767 190,767
- - ------------------------------------ ------- -------
TOTALS $ 7,189,630 $ 7,015,087
= ========= = =========
(A) Public company
* These companies may be deemed affiliated persons of the Partnership as defined in the Investment Company Act of 1940.
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See notes to financial statements.
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WESTFORD TECHNOLOGY VENTURES, L.P.
STATEMENTS OF OPERATIONS (UNAUDITED)
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Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
---- ---- ---- ----
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INVESTMENT INCOME AND EXPENSES
Income:
Interest from short-term investments $ 13,627 $ 19,234 $ 40,096 $ 70,373
Interest and other income from portfolio
investments 22,916 21,244 26,899 66,413
------ ------ ------ ------
Totals 36,543 40,478 66,995 136,786
------ ------ ------ -------
Expenses:
Management fee - Note 4 55,503 58,425 169,951 175,275
Professional fees 17,079 13,462 73,961 56,928
Mailing and printing 2,876 6,640 9,493 12,726
Independent General Partners' fees - Note 5 10,500 10,500 31,500 31,500
Amortization of deferred organizational costs
- Note 2 - 16,580 - 49,740
Miscellaneous - - 1,000 -
- - ----- -
Totals 85,958 105,607 285,905 326,169
------ ------- ------- -------
NET INVESTMENT LOSS (49,415) (65,129) (218,910) (189,383)
Net realized loss from portfolio investments sold
or written-off - - (384,213) -
- - -------- -
NET REALIZED LOSS FROM OPERATIONS
(allocable to Partners) - Note 3 (49,415) (65,129) (603,123) (189,383)
Net change in unrealized depreciation of investments 90,015 (98,433) 231,669 552,573
------ ------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 40,600 $ (163,562) $ (371,454) $ 363,190
= ====== = ======== = ======== = =======
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See notes to financial statements.
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WESTFORD TECHNOLOGY VENTURES, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
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1994 1993
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CASH FLOWS USED FOR OPERATING ACTIVITIES
Net investment loss $ (218,910) $ (189,383)
Adjustments to reconcile net investment loss to cash used for operating
activities:
Decrease in accrued interest on short-term investments 5,080 11,398
(Increase) decrease in accrued interest receivable (674) 60,782
Increase (decrease) in payables 4,584 (660)
Amortization of deferred organizational costs - 49,740
Decrease in other assets - 3,125
- -----
Cash used for operating activities (209,920) (64,998)
-------- -------
CASH FLOWS PROVIDED FROM (USED FOR)
INVESTING ACTIVITIES
Net return (purchase) of short-term investments 745,340 1,686,324
Purchase of portfolio investments (972,300) (1,357,939)
Repayment of demand notes - 220,000
Proceeds from the sale of portfolio investments 10,382 -
------ -
Cash provided from (used for) investing activities (216,578) 548,385
-------- -------
Increase (decrease) in cash and cash equivalents (426,498) 483,387
Cash and cash equivalents at beginning of period 744,390 82,184
------- ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 317,892 $ 565,571
= ======= = =======
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See notes to financial statements.
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WESTFORD TECHNOLOGY VENTURES, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
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Unallocated
Managing Individual Net Unrealized
General General Limited Depreciation of
Partner Partners Partners Investments Total
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Balance at beginning
of period $ 92,423 $ 3,250 $ 9,242,267 $ (406,212) $ 8,931,728
Allocation of net investment
loss - Note 3 (2,167) (77) (216,666) - (218,910)
Allocation of net realized
loss - Note 3 (3,803) (136) (380,274) - (384,213)
Net change in unrealized
depreciation of investments - - - 231,669 231,669
- - - ------- -------
Balance at end of period $ 86,453 $ 3,037 $ 8,645,327(A) $ (174,543) $ 8,560,274
= ====== = ===== = ========= = ======== = =========
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(A) The net asset value per $1,000 unit of limited partnership interest,
including an assumed allocation of net unrealized depreciation of
investments, is $755.
See notes to financial statements.
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WESTFORD TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Purpose
Westford Technology Ventures,
L.P. (the "Partnership") is a Delaware limited partnership formed on September
3, 1987. WTVI Co., L.P., the managing general partner of the Partnership (the
"Managing General Partner") and four individuals (the "Individual General
Partners") are the general partners of the Partnership. Hamilton Capital
Management Inc. (the "Management Company") is the general partner of the
Managing General Partner and the management company of the Partnership. The
Partnership began its principal operations on December 1, 1988.
The Partnership's objective is to achieve long-term capital appreciation by
making venture capital investments in new and developing companies and other
special investment situations. The Partnership will not engage in any other
business or activity. The Partnership will terminate on December 31, 1998,
subject to the right of the Individual General Partners to extend the term for
up to two additional two-year periods.
2. Significant Accounting Policies
Valuation of Investments - Short-term investments are carried at amortized cost
which approximates market. Portfolio investments are carried at fair value as
determined quarterly by the Managing General Partner under the supervision of
the Individual General Partners. The fair value of publicly-held portfolio
securities is adjusted to the average closing public market price for the last
five trading days of each quarter discounted by a factor of 0% to 50% for sales
restrictions. Factors considered in the determination of an appropriate discount
include, underwriter lock-up or Rule 144 trading restrictions, insider status
where the Partnership either has a representative serving on the Board of
Directors or is greater than a 10% shareholder, and other liquidity factors such
as the size of the Partnership's position in a given company compared to the
trading history of the public security. Privately-held portfolio securities are
carried at cost until significant developments affecting the portfolio company
provide a basis for change in valuation. The fair value of private securities is
adjusted 1) to reflect meaningful third-party transactions in the private market
or 2) to reflect significant progress or slippage in the development of the
company's business such that cost is clearly no longer reflective of fair value.
As a venture capital investment fund, the Partnership's portfolio investments
involve a high degree of business and financial risk that can result in
substantial losses. The Managing General Partner considers such risks in
determining the fair value of the Partnership's portfolio investments.
Investment Transactions - Investment transactions are recorded on the accrual
method. Portfolio investments are recorded on the trade date, the date the
Partnership obtains an enforceable right to demand the securities or payment
therefor. Realized gains and losses on investments sold are computed on a
specific identification basis. Income Taxes - No provision for income taxes has
been made since all income and losses are allocable to the Partners for
inclusion in their respective income tax returns.
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WESTFORD TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
Statements of Cash Flows - The Partnership considers cash held in its interest
bearing cash account to be cash equivalents. Organizational Costs -
Organizational costs of $331,596 were amortized over a sixty-month period which
commenced on December 1, 1988.
3. Allocation of Partnership Profits and Losses
The Partnership Agreement provides that the Managing General Partner
will be allocated, on a cumulative basis over the life of the Partnership, 20%
of the Partnership's aggregate investment income and net realized gains from
venture capital investments, provided that such amount is positive. All other
gains and losses of the Partnership are allocated among all the Partners,
including the Managing General Partner, in proportion to their respective
capital contributions to the Partnership.
4. Related Party Transactions
The Management Company provides, or arranges for others to provide, the
management and administrative services necessary for the operation of the
Partnership. For these services, the Management Company receives a management
fee at an annual rate of 2.5% of the gross capital contributions to the
Partnership (net of selling commissions and organizational expenses paid by the
Partnership), reduced by capital distributed and realized losses, with a minimum
fee of $200,000 per annum. Such fee is determined quarterly and paid monthly.
5. Independent General Partners' Fees
As compensation for services rendered to the Partnership, each of the three
Independent General Partners receives $10,000 annually in quarterly installments
and $1,000 for each meeting of the Independent General Partners attended, plus
out-of-pocket expenses.
6. Commitments
The Partnership and other investors of Inn-Room Systems, Inc. have guaranteed a
bank loan payable by the company. The Partnership's portion of the guarantee is
$72,000.
7. Interim Financial Statements
In the opinion of WTVI Co., L.P., the managing general partner of the
Partnership, the unaudited financial statements at September 30, 1994, and for
the three and nine month periods then ended, reflect all adjustments necessary
for the fair presentation of the results of the interim periods.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
During the quarter ended September 30, 1994, the Partnership invested $100,000
in Spectrix Corporation, an existing portfolio company. From December 1, 1988
(commencement of operations) to September 30, 1994, the Partnership had invested
$8.7 million in eight portfolio companies.
At September 30, 1994, the Partnership held $1.3 million in cash and short-term
investments: $997,000 in short-term securities with maturities of less than one
year and $318,000 in an interest-bearing cash account. The Partnership earned
$14,000 and $40,000 of interest on such investments for the three and nine
months ended September 30, 1994, respectively. Interest earned from short-term
investments in future periods is subject to fluctuations in short-term interest
rates and changes in amounts available for investment in such securities.
Funds needed to cover the Partnership's future investments and operating
expenses will be obtained from existing cash reserves, interest and other income
from portfolio investments and proceeds from the future sale of portfolio
investments.
Results of Operations
For the three and nine months ended September 30, 1994, the Partnership had a
net realized loss from operations of $49,000 and $603,000, respectively. For the
three and nine months ended September 30, 1993, the Partnership had a net
realized loss from operations of $65,000 and $189,000, respectively. Net
realized gain or loss from operations is comprised of 1) net realized gains or
losses from portfolio investments sold or written-off and 2) net investment
income or loss.
Realized Gains and Losses from Portfolio Investments - In April 1994, the
Partnership sold its investment in Eidetics Incorporated as part of a management
buyout of the company, for a small cash down payment and expected payments for
five years from the buyout date based on future cash receipts of the new
company. This transaction resulted in a $384,000 realized loss for the three and
nine months ended September 30, 1994.
There were no realized gains or losses from portfolio investments during the
three and nine months ended September 30, 1993.
Investment Income and Expenses - Net investment loss for the three months ended
September 30, 1994 and 1993 was $49,000 and $65,000, respectively. The reduced
net investment loss for the 1994 period as compared to the 1993 period primarily
resulted from the amortization of deferred organizational costs included in the
1993 period. Organizational costs of $332,000 were amortized over a five year
period which ended on December 1, 1993.
Net investment loss for the nine months ended September 30, 1994 and 1993 was
$219,000 and $189,000, respectively. The increase in net investment loss for the
1994 period as compared to the 1993 period primarily resulted from a reduced
amount of interest from short-term investments and income from portfolio
investments for the 1994 periods partially offset by operating expense
reductions, primarily the amortization of deferred organization costs, as
discussed above.
Interest earned from short-term investments for the nine months ended September
30, 1994 and 1993 was $40,000 and $70,000, respectively. This decrease can be
attributed to a reduction in amounts invested in short-term securities during
the 1994 period compared to the same period in 1993. Amounts available for
investment in short-term securities at September 30, 1994 and 1993 were $1.3
million and $2.6 million, respectively. Funds available for investment in
short-term securities declined as cash was used to make additional investments
in existing portfolio companies and to cover other net operating expenses.
Interest and other income from portfolio investments for the nine months ended
September 30, 1994 and 1993 was $27,000 and $66,000, respectively. The reduced
amount for the 1994 period primarily is the result of the reversal of $30,000 of
accrued interest receivable on promissory notes previously due from Eidetics.
The Management Company performs, or arranges for others to perform, the
management and administrative services necessary for the operation of the
Partnership. The Management Company receives a management fee at an annual rate
of 2.5% of the gross capital contributions to the Partnership (net of selling
commissions and organizational expenses paid by the Partnership), reduced by
capital distributed and realized losses, with a minimum annual fee of $200,000.
The management fee for the three months ended September 30, 1994 and 1993 was
$56,000 and $58,000, respectively. The management fee for the nine months ended
September 30, 1994 and 1993 was $170,000 and $175,000, respectively. To the
extent possible, the management fee and other expenses incurred by the
Partnership are paid with funds provided from operations. Funds provided from
operations primarily were obtained from interest received on short-term
investments and interest and other income earned from portfolio investments.
Unrealized Gains and Losses and Changes in Unrealized Appreciation or
Depreciation of Portfolio Investments - For the nine months ended September 30,
1994, the Partnership had a $7,000 net unrealized gain primarily resulting from
an increase in the public market price of Cincinnati Bell Inc.'s common stock.
Additionally for the nine month period, $225,000 was transferred from unrealized
loss to realized loss due to the sale of the Partnership's investment in
Eidetics, as discussed above. The $225,000 transfer from unrealized to realized
loss and the $7,000 unrealized gain resulted in a $232,000 decrease in net
unrealized depreciation of investments for the nine month period.
For the nine months ended September 30, 1993, the Partnership had a $553,000 net
unrealized gain primarily resulting from the upward revaluation of its
investment in Spectrix Corporation which reduced the Partnership's net
unrealized depreciation of portfolio investments by $553,000 for the nine month
period.
Net Assets - Changes to net assets resulting from operations are comprised of 1)
net realized gain or loss from operations and 2) changes to net unrealized
appreciation or depreciation of portfolio investments. For the nine months ended
September 30, 1994, the Partnership had a net decrease in net assets resulting
from operations of $371,000. For the nine months ended September 30, 1993, the
Partnership had a net increase in net assets resulting from operations of
$363,000.
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At September 30, 1994, the Partnership's net assets were $8.6 million, a
decrease of $371,000 from $8.9 million at December 31, 1993. The $371,000
decrease was the net result of the $603,000 net realized loss from operations
offset by the $232,000 net unrealized appreciation of investments for the nine
month period.
At September 30, 1993, the Partnership's net assets were $9.5 million, an
increase of $363,000 from $9.1 million at December 31, 1992. The $363,000
increase was the net result of the $553,000 unrealized gain offset by the
$189,000 net investment loss for the nine month period.
Gains and losses from investments are allocated to the Partners' capital
accounts when realized in accordance with the Partnership Agreement (see Note 3
of Notes to Financial Statements). However, for purposes of calculating the net
asset value per unit of limited partnership interest ("Unit"), net unrealized
depreciation of investments has been included as if the net depreciation had
been realized and allocated to the Limited Partners in accordance with the
Partnership Agreement. Pursuant to such calculation, the net asset value per
$1,000 Unit at September 30, 1994 and December 31, 1993 was $755 and $788,
respectively.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Partnership is not a party to any material pending legal proceedings.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the quarter covered
by this report.
Item 5. Other Information.
During the quarter, the Partnership purchased a $100,000 8% promissory note from
Spectrix Corporation and, in connection with the transaction, received warrants
to purchase 100,000 shares of Spectrix common stock at $.50 per share expiring
on December 31, 1997. This investment is in addition to the 487,569 shares of
preferred stock, 274,862 shares of common stock, $300,000 8% promissory note,
warrants to purchase 60,000 shares of common stock and options to purchase 5,000
shares of common stock previously owned by the Partnership.
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K
Report on Form 8-K dated September 12, 1994 reporting
the termination of the client-auditor relationship between
the Partnership and Deloitte & Touche LLP.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant, in the capacities, and on the dates indicated.
WESTFORD TECHNOLOGY VENTURES, L.P.
By: WTVI Co., L.P.
its managing general partner
By: Hamilton Capital Management Inc.
its general partner
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By: /s/ Jeffrey T. Hamilton President, Secretary and Director (Principal
Jeffrey T. Hamilton Executive Officer) of Hamilton Capital
Management Inc. and Individual General
Partner of Westford Technology Ventures, L.P.
By: /s/ Susan J. Trammell Treasurer and Director (Principal Financial
Susan J. Trammell and Accounting Officer) of Hamilton Capital
Management Inc.
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Date: November 11, 1994
