<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 September 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)
September 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
ASSETS
Equity investments (cost basis of
$1,769,764 and $1,275,001 in
1995 and 1994, respectively) $1,758,827 1,275,001
Cash and cash equivalents 4,321,565 3,571,768
Organizational costs (net of
accumulated amortization of
$16,000 and $10,000 in 1995
and 1994, respectively) 24,000 30,000
Other assets 1,343 --
--------- ---------
Total $6,105,735 4,876,769
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 14,721 19,216
Due to related parties 21,038 32,143
Distributions payable -- 45,924
--------- ---------
Total liabilities 35,759 97,283
Commitments (Notes 3 and 6)
Partners' capital:
Limited Partners (Units
outstanding of 79,716 and
60,640 in 1995 and 1994,
respectively) 6,084,754 4,780,868
General Partners (3,841) (1,382)
Net unrealized fair value decrease
from cost of equity investments (10,937) --
--------- ---------
Total partners' capital 6,069,976 4,779,486
--------- ---------
Total $6,105,735 4,876,769
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30 September 30
------------------ ---------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income $ 64,523 38,483 186,689 86,469
Costs and expenses:
Management fees 39,649 12,572 164,484 48,086
Individual general partners'
compensation 9,022 7,500 24,022 22,500
Amortization of organizational
costs 2,000 2,000 6,000 6,000
Operating expenses:
Administrative and investor
services 33,971 47,392 172,166 127,080
Investment operations 12,952 15,683 62,613 54,349
Professional fees 5,871 10,519 41,332 29,806
Computer services 6,921 4,497 22,403 11,195
Expenses absorbed by/
transferred to
General Partners -- (59,233) (52,168) (113,784)
------- ------ ------- -------
Total operating expenses 59,715 18,858 246,346 108,646
------- ------ ------- -------
Total costs and expenses 110,386 40,930 440,852 185,232
------- ------ ------- -------
Net realized loss (45,863) (2,447) (254,163) (98,763)
Change in net unrealized fair
value of equity investments -- -- (10,937) --
------- ------ ------- -------
Net loss $(45,863) (2,447) (265,100) (98,763)
======= ====== ======= =======
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 (77,011) (778) -- (77,789)
Change in net unrealized fair
value of equity investments -- -- (10,937) (10,937)
Net realized loss (251,621) (2,542) -- (254,163)
--------- ----- ------ ---------
Partners' capital,
September 30, 1995 $6,084,754 (3,841) (10,937) 6,069,976
========= ===== ====== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
---------------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 186,689 86,469
Cash paid to vendors (83,016) (67,070)
Cash paid to related parties (368,779) (110,814)
--------- ---------
Net cash used by operating activities (265,106) (91,415)
--------- ---------
Cash flows from investing activities:
Purchase of equity investments (494,763) (850,000)
--------- ---------
Net cash used by investing activities (494,763) (850,000)
--------- ---------
Cash flows from financing activities:
Proceeds from sale of limited partnership
interests 1,865,844 2,404,300
General Partners' capital contribution 1,868 2,406
Distribution of offering period income (123,713) (64,692)
Payments for syndication fees (234,333) (348,624)
--------- ---------
Net cash provided by financing activities 1,509,666 1,993,390
--------- ---------
Net increase in cash and cash equivalents 749,797 1,051,975
Cash and cash equivalents at beginning
of year 3,571,768 2,459,416
--------- ---------
Cash and cash equivalents at September 30 $4,321,565 3,511,391
========= =========
Reconciliation of net loss to net cash
used by operating activities:
Net loss $ (265,100) (98,763)
Adjustments to reconcile net loss
to net cash used by operating activities:
Amortization of organizational costs 6,000 6,000
Change in net unrealized fair value
of equity investments 10,937 --
Changes in:
Accounts payable and accrued expenses (4,495) 5,637
Due to/from related parties (11,105) (4,289)
Other assets (1,343) --
--------- ---------
Net cash used by operating activities $ (265,106) (91,415)
========= =========
</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 September 30, 1995 and December 31, 1994, and the related Statement
of Partners' Capital for the nine months ended September 30, 1995,
Statements of Operations for the three and nine months ended September
30, 1995 and Statements of Cash Flows for the nine months ended
September 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 September 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 73,008 and 41,818 for the nine
months ended September 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 nine months ended September 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Management fees $164,484 48,086
Syndication fees 234,333 348,624
Individual general partners' compensation 24,022 22,500
Amortization of organizational costs 6,000 6,000
Reimbursable operating expenses 221,336 149,723
Expenses absorbed by/transferred to
General Partners (52,168) (113,784)
</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 nine months ended September
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 nine months ended September
30, 1994, operating expenses of $113,784 had been reflected as a
contingent liability and was transferred to the General Partners; a
portion of 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 $7,822 and $21,480 at September 30, 1995 and December 31,
1994, respectively.
Amounts due to related parties for management fees were $13,216 and
$10,663 at September 30, 1995 and December 31, 1994, respectively.
During the nine months ended September 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 September
30, 1994, the Partnership paid $216,387 of which $179,967 was reallowed.
In addition, the Partnership also paid $7,424 and $12,024 for the nine
months ended September 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
September 30, 1995 consisted of
<TABLE>
<CAPTION>
January 1 -
September 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
CV Therapeutics, Inc. Series E
Preferred
shares 09/95 38,400 76,032 76,032
CV Therapeutics, Inc. Series E
Preferred
share warrant
at $2.00;
expiring
09/00 09/95 19,200 768 768
Prolinx, Inc. Series A
Preferred
shares 05/95 119,631 119,631 119,631
Pharmaceuticals
- ---------------
Megabios Corp. Series C
Preferred
shares 07/95 50,212 64,999 64,999
--------- ---------
Total significant changes during
the nine months ended September 30, 1995 461,430 461,430
Other changes, net 33,333 22,396
--------- ---------
Total equity investments at September 30, 1995 $1,769,764 1,758,827
========= =========
</TABLE>
As of September 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.
CV Therapeutics, Inc.
- ---------------------
In September 1995, the Partnership made an additional investment in CV
Therapeutics, Inc. by purchasing 38,400 Series E Preferred shares and
receiving a warrant to purchase 19,200 Series E Preferred shares for a
total cost of $76,800.
Megabios Corp.
- --------------
In July 1995, the Partnership made an additional investment in Megabios
Corp. by purchasing 50,212 Series C Preferred shares at a total cost of
$64,999.
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 September 30, 1995 and December 31, 1994
consisted of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Demand accounts $ 3,110 --
Money-market accounts 4,318,455 3,571,768
--------- ---------
Total $4,321,565 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 September 30, 1995, the Partnership had
unfunded commitments of $472,036 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 nine months ended September 30, 1995, net cash used by
operating activities totaled $265,106. The Partnership paid management
fees of $161,931 to the Managing General Partners and reimbursed related
parties for operating expenses of $182,826. In addition, $24,022 was
paid to the individual general partners as compensation for their
services. Other operating expenses of $83,016 were paid. The
Partnership received $186,689 in interest income.
During the nine months ended September 30, 1995, distributions of
$123,713 for interest earned during the offering period were paid and
equity investments totaling $494,763 were purchased.
Cash and cash equivalents at September 30, 1995 were $4,321,565. At
September 30, 1995, the Partnership was committed to fund additional
investments totaling $472,036. 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 $45,863 for the three months ended September 30, 1995
compared to $2,447 for the same period in 1994. The increase in net
loss was primarily due to a $40,857 increase in total operating
expenses.
Total operating expenses were $59,715 for the quarter ended September
30, 1995 compared to $18,858 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 September
30, 1995, no operating expenses were absorbed by the Managing General
Partners as operating expenses did not exceed the limitation. For the
same period in 1994, the Partnership transferred $59,233 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 transfer not occurred
in 1994, total operating expenses for the quarter ended September 30,
1994 would have been $78,091.
The Partnership incurred management fees of $39,649 and $12,572 during
the three months ended September 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 $64,523 and $38,483 during
the three months ended September 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 nine months compared to corresponding nine months in the
- ----------------------------------------------------------------
preceding year
- --------------
Net loss was $265,100 for the nine months ended September 30, 1995
compared to $98,763 during the same period in 1994. The increase in net
loss was primarily due to a $137,700 increase in total operating
expenses as well as a $116,398 increase in management fees. These
changes were partially offset by a $100,220 increase in interest income.
Total operating expenses were $246,346 and $108,646 for the nine months
ended September 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 nine months ended
September 30, 1995, the Managing General Partners absorbed $52,168. For
the same period in 1994, the Partnership transferred $113,784 to the
General Partners. 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 $298,514 and $222,430, 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 $164,484 and $48,086 during
the nine months ended September 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 $186,689 and $86,469 for the
nine months ended September 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 September 30, 1995.
(b) Financial Data Schedule for the nine months ended and as of
September 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: November 10, 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 SEPTEMBER 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> SEP-30-1995
<PERIOD-TYPE> 9-MOS
<INVESTMENTS-AT-COST> 1,769,764
<INVESTMENTS-AT-VALUE> 1,758,827
<RECEIVABLES> 0
<ASSETS-OTHER> 25,343
<OTHER-ITEMS-ASSETS> 4,321,565
<TOTAL-ASSETS> 6,105,735
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35,759
<TOTAL-LIABILITIES> 35,759
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,080,913
<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> 6,069,976
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 186,689
<OTHER-INCOME> 0
<EXPENSES-NET> (440,852)
<NET-INVESTMENT-INCOME> (254,163)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (10,937)
<NET-CHANGE-FROM-OPS> (265,100)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (77,789)
<NUMBER-OF-SHARES-SOLD> 19,076
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,290,490
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 164,484
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 493,070
<AVERAGE-NET-ASSETS> 5,424,731
<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> 76
<EXPENSE-RATIO> 8.13
<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>
