<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. 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)
(650) 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)
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Equity investments(cost basis of
$5,008,088 and $5,011,218 in
1998 and 1997, respectively) $6,224,747 6,481,986
Cash and cash equivalents 3,917 157,137
Organizational costs (net of
accumulated amortization of
$36,000 and $34,000 in 1998
and 1997, respectively) 4,000 6,000
Other assets 770 1,268
--------- ---------
Total assets $6,233,434 6,646,391
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 26,111 29,213
Due to related parties 15,516 31,958
--------- ---------
Total liabilities 41,627 61,171
Commitments (Note 2)
Partners' capital:
Limited Partners (Units
outstanding of 79,716
in both 1998 and 1997) 4,990,046 5,127,957
General Partners (14,898) (13,505)
Net unrealized fair value increase
from cost of equity investments 1,216,659 1,470,768
--------- ---------
Total partners' capital 6,191,807 6,585,220
--------- ---------
Total liabilities and
partners' capital $6,233,434 6,646,391
========= =========
</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:
Notes receivable interest $ -- 10,770
Short-term investment interest 224 22,116
Dividend income 4,449 --
-------- -------
Total income 4,673 32,886
Costs and expenses:
Management fees 39,649 39,649
Individual General Partners'
compensation 4,299 4,814
Amortization of organizational
costs 2,000 2,000
Operating expenses:
Administrative and investor
services 51,294 42,536
Investment operations 25,882 15,365
Professional fees 5,478 6,274
Computer services 14,975 9,870
-------- -------
Total operating expenses 97,629 74,045
-------- -------
Total costs and expenses 143,577 120,508
-------- -------
Net operating loss (138,904) (87,622)
Net realized (loss) gain from sales
of equity investments (400) 1,156
-------- -------
Net realized loss (139,304) (86,466)
Change in net unrealized fair
value of equity investments (254,109) 45,501
-------- -------
Net loss $(393,413) (40,965)
======== =======
Net realized loss per Unit $ (2) (1)
======== =======
</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 $ 224 22,116
Dividend income received 4,449 --
Cash paid to vendors (25,470) (14,615)
Cash paid to related parties (135,153) (111,653)
------- ---------
Net cash used by operating activities (155,950) (104,152)
------- ---------
Cash flows from investing activities:
Purchase of equity investments -- (306,500)
Proceeds from the sales of equity
investments 2,730 8,469
------- ---------
Net cash provided (used)
by investing activities 2,730 (298,031)
------- ---------
Net decrease in cash and
cash equivalents (153,220) (402,183)
Cash and cash equivalents at beginning
of year 157,137 1,985,053
------- ---------
Cash and cash equivalents at March 31 $ 3,917 1,582,870
======= =========
Reconciliation of net loss to
net cash used by operating activities:
Net loss $(393,413) (40,965)
Adjustments to reconcile net loss
to net cash used by operating activities:
Amortization of organizational costs 2,000 2,000
Change in net unrealized fair value
of equity investments 254,109 (45,501)
Net realized loss from sales of equity
investments 400 (1,156)
Changes in:
Accounts payable and accrued expenses (3,102) 0
Due to/from related parties (16,442) (9,405)
Other changes, net 498 (9,125)
------- ---------
Net cash used by operating activities $(155,950) (104,152)
======= =========
</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
March 31, 1998, and December 31, 1997, and the related Statements of
Operations 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. 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>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Management fees $ 39,649 39,649
Individual General Partners' compensation 4,299 4,814
Amortization of organizational costs 2,000 2,000
Reimbursable operating expenses 74,763 57,785
</TABLE>
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 from related parties for such
expenses were $10,917 at March 31, 1998 and at December 31, 1997 amounts
due to related parties totaled $5,525.
Pursuant to the Partnership Agreement, the Partnership shall reimburse the
Managing General Partners for operational costs incurred by the Managing
General Partners in conjunction with the business of the Partnership. 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 in each year through the first
five years of operations after the termination of unit sales and 1.5% in
any year thereafter. For purposes of this limitation, the Partnership's
operating year begins May 3rd. As of March 31, 1998 and 1997, no
operational expenses were absorbed by the General Partners.
Management fees payable were $26,433 at both March 31, 1998 and December
31, 1997.
<PAGE>
3. Equity Investments
------------------
<TABLE>
A complete listing of the Partnership's equity investments at December 31, 1997, is in the
1997 Annual Report. Activity from January 1 through March 31, 1998, consisted of:
<CAPTION>
January 1 through
March 31, 1998
------------------------
Principal
Investment Amount or Cost Fair
Industry/Company Position Date Shares Basis Value
- ---------------- -------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 $5,011,218 6,481,986
--------- ---------
Significant changes:
Endocare, Common
Inc. shares 01/97 150,400 0 (58,825)
Megabios Common 09/94-
Corporation shares 07/95 100,424 0 (223,643)
--------- ---------
Total significant changes $ 0 (282,468)
Other changes, net (3,130) 25,229
--------- ---------
Total equity investments at March 31, 1998 $5,008,088 6,224,747
========= =========
</TABLE>
<PAGE>
Marketable Equity Securities
- ----------------------------
As of March 31, 1998, and December 31, 1997, marketable equity securities
had aggregate costs of $1,472,350 and $1,084,621, respectively, and
aggregate fair values of $1,760,024 and $1,180,687, respectively. The net
unrealized gain and loss at March 31, 1998, and December 31, 1997, included
gross gains of $603,801 and $391,042, respectively.
Other Equity Investments
- ------------------------
Other significant changes reflected above relate to market value
fluctuations or the elimination of a discount relating to selling
restrictions for publicly traded portfolio companies.
4. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at March 31, 1998, and December 31, 1997,
consisted of:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Demand accounts $ 416 3,470
Money-market accounts 3,501 153,667
----- -------
Total $3,917 157,137
===== =======
</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 $155,950. The Partnership paid management fees of
$39,649 to the Managing General Partners and paid related parties $91,205
for operating expenses. In addition, $4,299 was paid to the Individual
General Partners as compensation for their services. The Partnership paid
other operating expenses of $25,470. Interest income of $224 and dividend
income of $4,449 was received.
During the three months ended March 31 1998 the Partnership received $2,730
from equity investment sales.
Cash and cash equivalents at March 31, 1998, were $3,917. Future proceeds
from investment sales, interest income earned on short-term investments and
operating cash reserves along with Managing General Partners' support 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 $393,413 for the three months ended March 31, 1998, compared
to a net loss of $40,965 for the same period in 1997. The increase in net
loss was primarily due to a $299,610 decrease in net unrealized fair value
of equity investments.
The Partnership recorded a decrease in equity investment fair value of
$254,109 for the three months ended March 31, 1998 compared to an increase
of $45,501 for the same period in 1997. The 1998 decrease was primarily
due to decreases in the pharmaceutical and medical/diagnostic equipment
industries.
Total operating expenses were $97,629 for the quarter ended March 31, 1998,
compared to $74,045 for the same period in 1997. The increase is
attributable to increased investment monitoring activities and related
administrative costs.
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 MEDICAL PARTNERS I, L.P.
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> 5,008,088
<INVESTMENTS-AT-VALUE> 6,224,747
<RECEIVABLES> 0
<ASSETS-OTHER> 4,770
<OTHER-ITEMS-ASSETS> 3,917
<TOTAL-ASSETS> 6,233,434
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 41,627
<TOTAL-LIABILITIES> 41,627
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,975,148
<SHARES-COMMON-STOCK> 79,716
<SHARES-COMMON-PRIOR> 79,716
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,216,659
<NET-ASSETS> 6,191,807
<DIVIDEND-INCOME> 4,449
<INTEREST-INCOME> 224
<OTHER-INCOME> 0
<EXPENSES-NET> 143,577
<NET-INVESTMENT-INCOME> (138,904)
<REALIZED-GAINS-CURRENT> (400)
<APPREC-INCREASE-CURRENT> (254,109)
<NET-CHANGE-FROM-OPS> (393,413)
<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> (393,413)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 39,649
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 143,627
<AVERAGE-NET-ASSETS> 6,388,513
<PER-SHARE-NAV-BEGIN> 65
<PER-SHARE-NII> (2)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 63
<EXPENSE-RATIO> 2.2
<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>
