<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
--- ---
Commission File No. 814-124
TECHNOLOGY FUNDING MEDICAL PARTNERS I, L.P.
-------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 94-3166762
- ------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2000 Alameda de las Pulgas, Suite 250
San Mateo, California 94403
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(415) 345-2200
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
No active market for the units of limited partnership interests
("Units") exists, and therefore the market value of such Units cannot be
determined.
<PAGE>
I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
(unaudited)
June 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
ASSETS
Equity investments (cost basis of
$1,594,632 and $1,275,001 in
1995 and 1994, respectively) $1,583,695 1,275,001
Cash and cash equivalents 4,538,120 3,571,768
Organizational costs (net of
accumulated amortization of
$14,000 and $10,000 in 1995
and 1994, respectively) 26,000 30,000
--------- ---------
Total $6,147,815 4,876,769
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 9,088 19,216
Due to related parties 22,885 32,143
Distributions payable -- 45,924
--------- ---------
Total liabilities 31,973 97,283
Commitments (Notes 3 and 6)
Partners' capital:
Limited Partners (Units
outstanding of 79,716 and
60,640 in 1995 and 1994,
respectively) 6,130,161 4,780,868
General Partners (3,382) (1,382)
Net unrealized fair value decrease
from cost of equity investments (10,937) --
--------- ---------
Total partners' capital 6,115,842 4,779,486
--------- ---------
Total $6,147,815 4,876,769
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30 June 30
------------------ ---------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income $ 68,975 27,070 122,166 47,986
Costs and expenses:
Management fees 61,298 18,002 124,835 35,514
Individual general partners'
compensation 10,500 10,500 15,000 15,000
Amortization of organizational
costs 2,000 2,000 4,000 4,000
Operating expenses:
Administrative and investor
services 48,149 44,951 138,195 79,688
Investment operations 16,679 20,209 49,661 38,666
Professional fees 13,918 704 35,461 19,287
Computer services 5,502 3,415 15,482 6,698
Expenses absorbed by/
transferred to
General Partners (19,057) (54,551) (52,168) (54,551)
------- ------ ------- -------
Total operating expenses 65,191 14,728 186,631 89,788
------- ------ ------- -------
Total costs and expenses 138,989 45,230 330,466 144,302
------- ------ ------- -------
Net realized loss (70,014) (18,160) (208,300) (96,316)
Change in net unrealized fair
value of equity investments 1,129 -- (10,937) --
------- ------ ------- -------
Net loss $(68,885) (18,160) (219,237) (96,316)
======= ====== ======= =======
Net realized loss per Unit $ (1) -- (3) (2)
======= ====== ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF PARTNERS' CAPITAL (unaudited)
- -----------------------------------------
<TABLE>
<CAPTION>
Net unrealized
fair value
Limited General decrease from cost of
Partners Partners equity investments Total
-------- -------- --------------------- -----
<S> <C> <C> <C> <C>
Partners' capital,
December 31, 1994 $4,780,868 (1,382) -- 4,779,486
Sales of partnership interest 1,865,844 1,868 -- 1,867,712
Syndication fees (233,326) (1,007) -- (234,333)
Distributions of offering
period income (77,008) (778) -- (77,786)
Change in net unrealized fair
value of equity investments -- -- (10,937) (10,937)
Net realized loss (206,217) (2,083) -- (208,300)
--------- ----- ------ ---------
Partners' capital,
June 30, 1995 $6,130,161 (3,382) (10,937) 6,115,842
========= ===== ====== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 122,166 47,986
Cash paid to vendors (72,866) (46,067)
Cash paid to related parties (272,986) (136,906)
--------- ---------
Net cash used by operating activities (223,686) (134,987)
--------- ---------
Cash flows from investing activities:
Purchase of equity investments (319,631) (600,000)
--------- ---------
Net cash used by investing activities (319,631) (600,000)
--------- ---------
Cash flows from financing activities:
Proceeds from sale of limited partnership
interests 1,865,844 1,775,700
General Partners' capital contribution 1,868 1,777
Distribution of offering period income (123,710) (37,622)
Payments for syndication fees (234,333) (257,477)
--------- ---------
Net cash provided by financing activities 1,509,669 1,482,378
--------- ---------
Net increase in cash and cash equivalents 966,352 747,391
Cash and cash equivalents at beginning
of year 3,571,768 2,459,416
--------- ---------
Cash and cash equivalents at June 30 $4,538,120 3,206,807
========= =========
Reconciliation of net loss to net cash
used by operating activities:
Net loss $ (219,237) (96,316)
Adjustments to reconcile net loss
to net cash used by operating activities:
Amortization of organizational costs 4,000 4,000
Change in net unrealized fair value
of equity investments 10,937 --
Changes in:
Accounts payable and accrued expenses (10,128) 4,823
Due to/from related parties (9,258) (47,494)
--------- ---------
Net cash used by operating activities $ (223,686) (134,987)
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ----------------------------------------
1. General
-------
In the opinion of the Managing General Partners, the Balance Sheets as
of June 30, 1995 and December 31, 1994, and the related Statement of
Partners' Capital for the six months ended June 30, 1995, Statements of
Operations for the three and six months ended June 30, 1995 and
Statements of Cash Flows for the six months ended in June 30, 1995 and
1994, reflect all adjustments which are necessary for a fair
presentation of the financial position, results of operations and cash
flows for such periods. These statements should be read in conjunction
with the Annual Report on Form 10-K for the year ended December 31,
1994. The following notes to financial statements for activity through
June 30, 1995 supplement the notes 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. Net Realized Loss Per Limited Partner 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 of 70,619 and 39,269 for the six
months ended June 30, 1995 and 1994, respectively.
3. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations and Partners' Capital. Related party costs for
the six months ended June 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Management fees $124,835 35,514
Syndication fees 234,333 257,477
Individual general partners' compensation 15,000 15,000
Amortization of organizational costs 4,000 4,000
Reimbursable operating expenses 176,061 93,449
Expenses absorbed by/transferred to
General Partners (52,168) (54,551)
</TABLE>
In 1995 and 1994, pursuant to the Partnership Agreement, the Partnership
may not pay or reimburse the Managing General Partners for operational
costs that aggregate more than 3% of total Limited Partner capital
contributions of the Partnership. For the six months ended June 30,
1995, the Partnership recognized $55,975 of the $89,086 contingent
liability at December 31, 1994 based on additional Limited Partner
capital contributions received by the end of the offering period, May 3,
1995. The remaining balance of $33,111 including additional expenses of
$19,057 incurred during the second quarter of 1995 were absorbed by the
Managing General Partners. During the six months ended June 30, 1994,
operating expenses of $54,551 had been reflected as a contingent
liability and was transferred to the General Partners; this amount was
recognized as an expense in 1995 as discussed above.
Certain reimbursable expenses have been accrued based upon interim
estimates prepared by the Managing General Partners and are adjusted to
actual costs periodically. Amounts due to related parties for such
expenses were $10,180 and $21,480 at June 30, 1995 and December 31,
1994, respectively.
Amounts due to related parties for management fees were $12,705 and
$10,663 at June 30, 1995 and December 31, 1994, respectively.
During the six months ended June 30, 1995, the Partnership paid
Technology Funding Securities Corporation ("TFSC"), the dealer-manager,
commissions and fees of $133,618 of which $118,711 was reallowed to
participating broker-dealers. During the same period ended June 30,
1994, the Partnership paid $159,813 of which $131,472 was reallowed. In
addition, the Partnership also paid $7,424 and $8,880 for the six months
ended June 30, 1995 and 1994, respectively, to TFSC for due diligence
expenses which TFSC paid to unaffiliated broker-dealers.
4. Equity Investments
------------------
A complete listing of the Partnership's equity investments at December
31, 1994 is in the 1994 Annual Report. Activity from January 1 through
June 30, 1995 consisted of
<TABLE>
<CAPTION>
January 1 -
June 30, 1995
Principal -------------
Investment Amount or Cost Fair
Industry/Company Position Date Shares Basis Value
- ---------------- -------- ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $1,275,001 1,275,001
--------- ---------
Significant changes:
Biotechnology
- -------------
Acusphere, Inc. Series B
Preferred
shares 05/95 125,000 200,000 200,000
Prolinx, Inc. Series A
Preferred
shares 05/95 119,631 119,631 119,631
--------- ---------
Total significant changes during
the six months ended June 30, 1995 319,631 319,631
Other changes, net 0 (10,937)
--------- ---------
Total equity investments at June 30, 1995 $1,594,632 1,583,695
========= =========
</TABLE>
As of June 30, 1995, all equity investments are privately held and no
public market existed.
Acusphere, Inc.
- ---------------
In May 1995, the Partnership invested in Acusphere, Inc. by purchasing
125,000 Series B Preferred shares at a total cost of $200,000.
Prolinx, Inc.
- -------------
In May 1995, the Partnership invested in Prolinx, Inc. by purchasing
119,631 Series A Preferred shares at a total cost of $119,631.
5. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at June 30, 1995 and December 31, 1994
consisted of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Demand accounts $ 1,803 --
Money-market accounts 4,536,317 3,571,768
--------- ---------
Total $4,538,120 3,571,768
========= =========
</TABLE>
6. 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 commitments for future equity fundings, venture capital
limited partnership investments, equipment financing commitments, or
accounts receivable lines of credit that are outstanding but not
currently fully utilized. As they do not represent current outstanding
balances, these unfunded commitments are properly not recognized in the
financial statements. At June 30, 1995, the Partnership had unfunded
commitments of $485,369 related to equity investments.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership commenced the offering of limited partnership units
("Units") in May 1993. In October 1993, the minimum number of Units
required by the Partnership Agreement to commence operations were sold.
From inception through May 3, 1995, the sale of Units generated cash of
$7,929,844 and the Managing General Partners contributed cash of $7,934.
In connection with the capital raised, the Partnership expended
$1,073,613 in syndication fees and capitalized $40,000 in organizational
costs. Such fees are applied to the capital accounts of the partners
while organizational costs are amortized over a 60 month period.
During the six months ended June 30, 1995, net cash used by operations
totaled $223,686. The Partnership paid management fees of $122,793 to
the Managing General Partners and reimbursed related parties for
operating expenses of $135,193. In addition, $15,000 was paid to the
individual general partners as compensation for their services. Other
operating expenses of $72,866 were paid. The Partnership received
$122,166 in interest income.
During the six months ended June 30, 1995, distributions of $123,710 for
interest earned during the offering period were paid and equity
investments totaling $319,631 were purchased.
Cash and cash equivalents at June 30, 1995 were $4,538,120. At June 30,
1995, the Partnership was committed to fund additional investments
totaling $485,369. Interest income earned on short-term investments and
operating cash reserves are expected to be adequate to fund Partnership
operations through the next twelve months.
Results of Operations
- ---------------------
Current quarter compared to corresponding quarter in the preceding year
- -----------------------------------------------------------------------
Net loss was $68,885 for the three months ended June 30, 1995 compared
to $18,160 for the same period in 1994. The increase in net loss was
primarily due to a $50,463 increase in total operating expenses and a
$43,296 increase in management fees. These changes were partially
offset by a $41,905 increase in interest income.
Total operating expenses were $65,191 for the quarter ended June 30,
1995 compared to $14,728 for the same period in 1994. As explained in
Note 3, the Partnership may not pay or reimburse the General Partners
for annual operating expenses that aggregate more than 3% of total
Limited Partner capital contributions. The limitation is calculated
over an operating year beginning May 3. For the quarter ended June 30,
1995, the Managing General Partners absorbed $19,075. For the same
period in 1994, the Partnership transferred $54,551 to the General
Partners, which had been reflected as a contingent liability, as the
total limited partners capital contributions could not be determined
until the close of the offering period. Had the limitation not been in
effect in 1995 and the transfer not occurred in 1994, total operating
expenses for the quarters ended June 30, 1995 and 1994 would have been
$84,248 and $69,279, respectively.
The Partnership incurred management fees of $61,298 and $18,002 during
the three months ended June 30, 1995 and 1994, respectively. The
management fee as defined in the Partnership Agreement is equal to two
percent of the total Limited Partners' capital contributions for the
first year of Partnership operations through the sixth year. Pursuant
to the Partnership Agreement, a full first year fee is paid to the
Managing General Partners as each additional Limited Partner is admitted
to the Partnership, regardless of the date the Limited Partner is
admitted. Management fees increased proportionally in 1995 from the
sale of new Units.
The Partnership recorded interest income of $68,975 and $27,070 during
the three months ended June 30, 1995 and 1994, respectively. The
increase was primarily due to a higher cash and cash equivalents balance
from the sale of new Units.
Given the inherent risk associated with the business of the Partnership,
the future performance of the portfolio company investments may
significantly impact future operations.
Current Six Months Compared to Corresponding Six Months in the
- --------------------------------------------------------------
Preceding Year
- --------------
Net loss was $219,237 for the six months ended June 30, 1995 compared to
$96,316 during the same period in 1994. The increase in net loss was
primarily due to a $96,843 increase in total operating expenses as well
as an $89,321 increase in management fees. These changes were partially
offset by a $74,180 increase in interest income.
Total operating expenses were $186,631 and $89,788 for the six months
ended June 30, 1995 and 1994, respectively. As discussed in the above
section, the Partnership may not reimburse the General Partners for
annual operating expenses that aggregate more than 3% of total Limited
Partner capital contributions. For the six months ended June 30, 1995,
the Managing General Partners absorbed $52,168. For the same period in
1994, the Partnership transferred $54,551 to the General Partners as
discussed in the above section. Had the limitation not been in effect
in 1995 and the transfer not occurred in 1994, total operating expenses
for 1995 and 1994 would have been $238,799 and $144,339, respectively.
The increase was primarily due to the recognition of $55,975 of the
$89,086 contingent liability at December 31, 1994 based on additional
Units sold in 1995.
The Partnership recorded management fees of $124,835 and $35,514 during
the six months ended June 30, 1995 and 1994, respectively. As discussed
above, management fees increased proportionally in 1995 due to the sale
of new Units.
The Partnership recorded interest income of $122,166 and $47,986 for the
six months ended June 30, 1995 and 1994, respectively. The increase was
mainly due to higher cash and cash equivalents balance from the sale of
new Units.
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Partnership during the
quarter ended June 30, 1995.
(b) Financial Data Schedule for the six months ended and as of June 30,
1995 (Exhibit 27).
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TECHNOLOGY FUNDING MEDICAL PARTNERS I, L.P.
By: TECHNOLOGY FUNDING INC.
Managing General Partner
Date: August 11, 1995 By: /s/Frank R. Pope
-----------------------------------
Frank R. Pope
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
<INVESTMENTS-AT-COST> 1,594,632
<INVESTMENTS-AT-VALUE> 1,583,695
<RECEIVABLES> 0
<ASSETS-OTHER> 26,000
<OTHER-ITEMS-ASSETS> 4,538,120
<TOTAL-ASSETS> 6,147,815
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,973
<TOTAL-LIABILITIES> 31,973
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,126,779
<SHARES-COMMON-STOCK> 79,716
<SHARES-COMMON-PRIOR> 60,640
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (10,937)
<NET-ASSETS> 6,115,842
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 122,166
<OTHER-INCOME> 0
<EXPENSES-NET> 330,466
<NET-INVESTMENT-INCOME> (208,300)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (10,937)
<NET-CHANGE-FROM-OPS> (219,237)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (77,786)
<NUMBER-OF-SHARES-SOLD> 19,076
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,336,356
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 124,835
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 382,634
<AVERAGE-NET-ASSETS> 5,447,664
<PER-SHARE-NAV-BEGIN> 79
<PER-SHARE-NII> (3)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 77
<EXPENSE-RATIO> .06
<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>
