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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 1994
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
incorporation or organization) Identification No.)
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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
No active market for the units of limited partnership interests
("Units") exists, and therefore the market value of such Units
cannot be determined.
Documents incorporated by reference: Portions of the Prospectus
dated May 3, 1993 forming a part of Registration Statement No. 33-
54002 and as modified by Cumulative Supplement No. 4 dated January
4, 1995 and filed pursuant to Rule 424(c) of the General Rules and
Regulations under the Securities Act of 1933 are incorporated by
reference in Parts I and III hereof.
PART I
Item 1. BUSINESS
- ------ --------
Technology Funding Medical Partners I, L.P. (the
"Partnership") is a limited partnership organized under
the laws of the State of Delaware in September 1992 and
was inactive until it commenced the sale of Units in May
1993. The purpose of the Partnership is to make venture
capital investments in emerging growth companies as
described in the "Introductory Statement" and "Business of
the Partnership" sections of the Prospectus dated May 3,
1993. The Partnership has elected to be a business
development company under the Investment Company Act of
1940, as amended (the "Act"), and operates as a
nondiversified investment company as that term is defined
in the Act. Additional characteristics of the
Partnership's business are discussed in the "Risk Factors"
and "Conflicts of Interest" sections of the Prospectus,
which sections are also incorporated herein by reference.
The Partnership Agreement provides that the Partnership
will terminate December 31, 2002, subject to the right of
the individual general partners to extend the term for up
to two additional two-year periods.
Item 2. PROPERTIES
- ------ ----------
The Registrant has no material physical properties.
Item 3. LEGAL PROCEEDINGS
- ------ -----------------
There are no pending legal proceedings to which the
Registrant is party or of which any of its property is the
subject, other than ordinary routine litigation incidental
to the business of the Partnership.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
No matter was submitted to a vote of the holders of Units
in 1994.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
- ------ -------------------------------------------------
STOCKHOLDER MATTERS
-------------------
(a) There is no established public trading market for the
Units.
(b) At December 31, 1994, there were 643 record holders
of Units.
(c) The Registrant, being a partnership, does not pay
dividends. Cash distributions, however, may be made
to the partners in the Partnership pursuant to the
Registrant's Partnership Agreement.
Item 6. SELECTED FINANCIAL DATA
- ------ -----------------------
All selected financial data as of December 31, 1994 and
1993 and for the years then ended may be found in the
financial statements. See Item 14.
Item 7. 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 December 31, 1994, the sale of Units
generated cash of $6,064,000 and the Managing General
Partners contributed cash of $6,066. In connection with
the capital raised, the Partnership expended $839,280 in
syndication fees and $40,000 in organizational costs.
Syndication fees are applied directly to the capital
accounts of the partners while organizational costs are
amortized over a 60 month period. Unit sales are
scheduled to terminate at the end of April 1995.
During 1994, net cash used by operations totaled $161,124.
The Partnership paid management fees of $77,198 to the
Managing General Partners and paid related parties for
operating expenses of $112,762. In addition, $29,000 was
paid to the individual general partners as compensation
for their services. Other operating expenses of $74,558
were paid. The Partnership received $132,394 in interest
income.
During 1994, the Partnership purchased $1,175,001 in
equity investments in the diagnostic equipment,
pharmaceuticals and biotechnology industries, and a
venture capital limited partnership.
During 1994, distributions of $103,176 for interest earned
during the offering period were paid. Distributions
payable of $45,924 at December 31, 1994 were paid in
January 1995.
At December 31, 1994, the Partnership was committed to
fund an additional $125,000 to a venture capital limited
partnership.
Cash and cash equivalents at December 31, 1994 were
$3,571,768. Proceeds from the sale of Units, future
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
- ---------------------
1994 compared to 1993
- ---------------------
Net loss was $188,769 in 1994 compared to $113,431 in
1993. The increase in net loss was mostly due to a
$140,327 increase in operating expenses, and a $26,199
increase in management fees, partially offset by a
$115,688 increase in interest income.
The primary reason for the above income and expense
increases was due to a full year of Partnership operations
in 1994 compared to only a quarter year of operations in
1993 as the Partnership's commencement date was October 8,
1993. Discussion of additional increases follow.
Operating expenses were $196,302 in 1994 compared to
$55,975 in 1993. Such expenses are expected to increase
as the Partnership increases investment activities and its
number of partners.
Management fees totaled $87,861 in 1994 compared to
$61,662 in 1993. Management fees are 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 are expected to increase as the
Partnership continues to sell Units.
Interest income was $132,394 in 1994 compared to $16,706
in 1993. The increase was due to higher cash and cash
equivalents balances in 1994 as the Partnership sold more
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.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
The financial statements of the Registrant are set forth
in Item 14.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------ ------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
Registrant has reported no disagreements with its
accountants on matters of accounting principles or
practices or financial statement disclosure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
As a partnership, the Registrant has no directors or
executive officers. Subject to the supervision of the
individual general partners, the Managing General Partners
(Technology Funding Ltd., a California limited partnership
("TFL") and Technology Funding Inc., a California
corporation ("TFI") and wholly-owned subsidiary of TFL)
are responsible for management of the Partnership,
negotiation and structuring of financing arrangements,
overseeing activities of the portfolio companies, and day-
to-day administration of the Partnership affairs.
Information concerning the ownership of TFL and the
business experience of the key officers of TFI and the
partners of TFL is incorporated by reference from the
sections entitled "Management of the Partnership - The
Managing General Partners" and "Management of the
Partnership - Key Personnel of the Managing General
Partners" in the Prospectus as modified by Cumulative
Supplement No. 4 dated January 4, 1995, which are
incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
- ------- ----------------------
As a partnership, the Registrant has no officers or
directors. In 1994, the Partnership incurred $87,861 in
management fees. The fees are designed to compensate the
Managing General Partners for General Partner Overhead
incurred in performing management duties for the
Partnership through December 31, 1994. General Partner
Overhead (as defined in the Partnership Agreement)
includes rent, utilities, and certain salaries and
benefits paid by the Managing General Partners. As
compensation for their services, the individual general
partners receive $6,000 annually beginning on the
Commencement Date plus $1,000 for each attended meeting of
the individual general partners. For the year ended
December 31, 1994, $29,000 of such fees were paid.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- ------- ---------------------------------------------------
MANAGEMENT
- ----------
Not applicable. No limited partner beneficially holds
more than 5% of the aggregate number of Units held by all
limited partners, and neither the General Partners nor any
of their officers, directors or partners own any Units.
The three individual general partners each own 20 Units.
The General Partners control the affairs of the
Partnership pursuant to the Partnership Agreement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The Registrant has engaged in no transactions with the
General Partners or their officers and partners other than
as described above, in the notes to the financial
statements, or in the Prospectus.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
- ------- -------------------------------------------------------
FORM 8-K
--------
(a) List of Documents filed as part of this Annual Report
on Form 10-K
(1) Financial Statements - the following financial
statements are filed as a part of this Report:
Independent Auditors' Report
Balance Sheets as of December 31, 1994
and 1993
Statements of Operations for the years
ended December 31, 1994 and 1993
Statements of Partners' Capital for the years
ended December 31, 1994 and 1993
Statements of Cash Flows for the years
ended December 31, 1994 and 1993
Notes to Financial Statements
(2) Financial Statement Schedules
All schedules have been omitted because they are
not applicable or the required information is
included in the financial statements or the notes
thereto.
(3) Exhibits
Registrant's Amended and Restated Limited
Partnership Agreement (incorporated by reference
to Exhibit A to Registrant's Prospectus dated May
3, 1993 included in Registration Statement No.
33-54002 filed pursuant to Rule 424(b) of the
General Rules and Regulations under the
Securities Act of 1933).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant
during the year ended December 31, 1994.
(c) Financial Data Schedule for the year ended and as of
December 31, 1994 (Exhibit 27).
INDEPENDENT AUDITORS' REPORT
----------------------------
The Partners
Technology Funding Medical Partners I, L.P.:
We have audited the accompanying balance sheets of Technology
Funding Medical Partners I, L.P. (a Delaware limited partnership)
as of December 31, 1994 and 1993, and the related statements of
operations, partners' capital, and cash flows for each of the years
in the two-year period ended December 31, 1994. These financial
statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of certain securities owned by
correspondence with the individual investee companies and a
physical examination of those securities held by a safeguarding
agent as of December 31, 1994. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Technology Funding Medical Partners I, L.P. as of December 31, 1994
and 1993, and the results of its operations and its cash flows for
each of the years in the two-year period ended December 31, 1994 in
conformity with generally accepted accounting principles.
As explained in Notes 1 and 4, the financial statements include
investments of $1,275,001 and $100,000 (27% and 4% of partners'
capital) as of December 31, 1994 and 1993, respectively, whose
values, in certain circumstances, have been estimated by the
Managing General Partners in the absence of readily ascertainable
market values. We have reviewed the procedures used by the
Managing General Partners in arriving at their estimate of value of
such securities and have inspected underlying documentation, and,
in the circumstances, we believe the procedures are reasonable and
the documentation appropriate. However, because of the inherent
uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready
market for the investments existed, and the differences could be
material.
San Francisco, California KPMG Peat Marwick LLP
March 17, 1995
BALANCE SHEETS
- --------------
December 31,
----------------------
1994 1993
---- ----
ASSETS
Equity investments (cost basis of
$1,275,001 and $100,000 in 1994
and 1993, respectively) $1,275,001 100,000
Cash and cash equivalents 3,571,768 2,459,416
Organizational costs (net of accumulated
amortization of $10,000 and $2,000
in 1994 and 1993, respectively) 30,000 38,000
--------- ---------
Total $4,876,769 2,597,416
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 19,216 18,006
Due to related parties 32,143 13,708
Distributions payable 45,924 16,706
-------- ---------
Total liabilities 97,283 48,420
Commitments (Notes 2 and 7)
Partners' capital:
Limited Partners
(Units outstanding of 60,640 and
30,831 in 1994 and 1993, respectively) 4,780,868 2,548,510
General Partners (1,382) 486
--------- ---------
Total partners' capital 4,779,486 2,548,996
--------- ---------
Total $4,876,769 2,597,416
========= =========
See accompanying notes to financial statements.
STATEMENTS OF OPERATIONS
- ------------------------
For the Years Ended December 31,
--------------------------------
1994 1993
---- ----
Interest income $ 132,394 16,706
Costs and expenses:
Management fees 87,861 61,662
Individual general
partners' compensation 29,000 10,500
Amortization of organizational costs 8,000 2,000
Operating expenses:
Administrative and
investor services 118,544 29,499
Investment operations 48,581 4,067
Computer services 10,357 4,409
Professional fees 18,820 18,000
------- -------
Total operating expenses 196,302 55,975
------- -------
Total costs and expenses 321,163 130,137
------- -------
Net loss $(188,769) (113,431)
======= =======
Net loss per Unit $ (4) (12)
======= =======
See accompanying notes to financial statements.
STATEMENTS OF PARTNERS' CAPITAL
- -------------------------------
For the years ended December 31, 1994 and 1993:
Limited General
Partners Partners Total
-------- -------- --------
Partners' capital,
December 31, 1992 $ 100 2 102
Sales of partnership
interests 3,083,000 3,081 3,086,081
Syndication fees (405,754) (1,296) (407,050)
Distributions of Offering
Period income (16,539) (167) (16,706)
Net loss (112,297) (1,134) (113,431)
--------- ----- ---------
Partners' capital,
December 31, 1993 2,548,510 486 2,548,996
Sales of partnership
interests 2,980,900 2,983 2,983,883
Syndication fees (430,591) (1,639) (432,230)
Distributions of Offering
Period income (131,070) (1,324) (132,394)
Net loss (186,881) (1,888) (188,769)
--------- ----- ---------
Partners' capital,
December 31, 1994 $4,780,868 (1,382) 4,779,486
========= ===== =========
See accompanying notes to financial statements.
STATEMENTS OF CASH FLOWS
- ------------------------
For the Years Ended December 31,
--------------------------------
1994 1993
---- ----
Cash flows from operations:
Interest received $ 132,394 16,706
Cash paid to vendors (74,558) (1,094)
Cash paid to related parties (218,960) (95,329)
--------- ---------
Net cash used by operations (161,124) (79,717)
--------- ---------
Cash flows from investing activities:
Purchase of equity investment (1,175,001) (100,000)
--------- ---------
Net cash used by investing activities (1,175,001) (100,000)
--------- ---------
Cash flows from financing activities:
Proceeds from sale of limited
partnership interests 2,980,900 3,083,000
General Partners' capital contribution 2,983 3,081
Distribution of offering period income (103,176) --
Payments for syndication fees and
organizational costs (432,230) (447,050)
--------- ---------
Net cash provided by financing
activities 2,448,477 2,639,031
--------- ---------
Net increase in cash and
cash equivalents 1,112,352 2,459,314
Cash and cash equivalents
at beginning of year 2,459,416 102
--------- ---------
Cash and cash equivalents
at end of year $ 3,571,768 2,459,416
========= =========
Reconciliation of net loss to net cash
used by operations:
Net loss $ (188,769) (113,431)
Adjustments to reconcile net loss
to net cash used by operations:
Amortization of organizational costs 8,000 2,000
Changes in:
Accounts payable and accrued expenses 1,210 18,006
Due to related parties 18,435 13,708
--------- ---------
Net cash used by operations $ (161,124) (79,717)
========= =========
See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
1. Summary of Significant Accounting Policies
------------------------------------------
Organization
- ------------
Technology Funding Medical Partners I, L.P. (the "Partnership") is
a limited partnership organized under the laws of the State of
Delaware in September 1992. The purpose of the Partnership is to
make venture capital investments in emerging growth companies. The
Partnership elected to be a business development company under the
Investment Company Act of 1940, as amended (the "Act"), and
operates as a nondiversified investment company as that term is
defined in the Act. The Managing General Partners are Technology
Funding Ltd. ("TFL"), and Technology Funding Inc. ("TFI"), a
wholly-owned subsidiary of TFL. There are also three individual
general partners. A wholly-owned subsidiary of TFI, Technology
Funding Securities Corporation ("TFSC") is the dealer-manager for
the offering.
For the period from September 1992 through May 3, 1993, the
Partnership was inactive. The Partnership's registration statement
was declared effective by the Securities and Exchange Commission on
May 3, 1993, and the Partnership began selling units of limited
partnership interests ("Units") in May 1993. Unit sales are
scheduled to terminate at the end of April 1995.
On October 8, 1993, the Commencement Date, the minimum number of
Units required to begin Partnership operations (12,000) had been
sold. The Partnership Agreement provides that the Partnership will
continue until December 31, 2002, unless further extended for up to
two additional two-year periods from such date if the Managing
General Partners so determine or unless sooner dissolved.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents are principally comprised of cash
invested in demand accounts, money market instruments and
commercial paper and are stated at cost plus accrued interest. The
Partnership considers all money market, commercial paper and short-
term investments with an original maturity of three months or less
to be cash equivalents.
Syndication Fees
- ----------------
Syndication fees, which consist of commissions and certain
organizational and offering costs, are deducted from the partners'
capital accounts. Pursuant to the Partnership Agreement, selling
commissions are allocated solely to the limited partners. All
other syndication fees are allocated 99% to the limited partners
and 1% to the Managing General Partners. Syndication fees are not
deductible for income tax purposes. Such fees may result in a
reduction of any gain (or an increase in any loss) realized for tax
purposes by the partners upon dissolution of the Partnership or a
transfer of their interests.
Organizational Costs
- --------------------
Organizational costs of $40,000 are amortized over 60 months, using
the straight-line method.
Provision for Income Taxes
- --------------------------
No provision for income taxes has been made by the Partnership, as
the Partnership is not directly subject to taxation. The partners
are to report their respective shares of Partnership income or loss
on their individual tax returns.
The accompanying financial statements are prepared using generally
accepted accounting principles which may not equate to tax
accounting, however, the difference in the total book and tax cost
basis as of December 31, 1994 is not material.
Net Loss Per Unit
- -----------------
Net loss per limited partner Unit is calculated by dividing the
weighted average number of limited partner Units outstanding for
the years ended December 31, 1994 and 1993 of 44,272 and 9,589,
respectively, into total net loss allocated to the limited
partners. The Managing General Partners contributed 0.1% of total
limited partners capital contribution and did not receive any
Partnership units.
Equity Investments
- ------------------
The Partnership's method of accounting for investments, in
accordance with generally accepted accounting principles, is the
fair value basis used for investment companies. The fair value of
Partnership equity investments is their initial cost basis with
changes as noted below:
Equity investments which are not publicly traded are generally
valued utilizing pricing obtained from the most recent round of
third-party financings. Valuation is estimated quarterly by the
Managing General Partners.
Venture capital limited partnership investments are initially
recorded at cost and reduced for distributions that are a return of
capital. Distributions from limited partnership cumulative
earnings are reflected as realized gains by the Partnership.
Equity and venture capital limited partnership investments with
temporary changes in fair value will result in increases or
decreases to the unrealized fair value of equity investments. The
cost basis will not change. In the case of an other than temporary
decline in value below cost basis, an appropriate reduction in the
cost basis is recognized as a realized loss with the fair value
being adjusted to match the new cost basis. Adjustments to fair
value basis will be reflected as "Change in net unrealized fair
value of equity investments." Cost basis adjustments will be
reflected as "Realized losses from investment write-downs" or "Net
realized loss from venture capital limited partnership investments"
on the Statements of Operations.
2. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations and Partners' Capital. For the years
ended December 31, 1994 and 1993, related party costs were as
follows:
1994 1993
---- ----
Management fees $ 87,861 61,662
Syndication fees 432,230 407,050
Individual general partners' compensation 29,000 10,500
Amortization of organizational costs 8,000 2,000
Reimbursable operating expenses:
Administrative and investor services 66,165 28,399
Investment operations 44,012 4,067
Computer services 10,357 4,409
Management fees are equal to two percent of the total limited
partners' capital contributions for the first year of Partnership
operations through the sixth year. Beginning in the seventh year,
the management fee will decline by ten percent per year from the
initial two percent. Management fees compensate the Managing
General Partners solely for General Partner overhead (as defined in
the Partnership Agreement) incurred in supervising the operation
and management of the Partnership and the Partnership's
investments. 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 payable were $10,663 at December 31, 1994. There were no such
payables at December 31, 1993.
The Partnership reimburses the Managing General Partners for
organizational and offering expenses (up to five percent of the
total limited partners' capital contributions) incurred in
connection with organizing the Partnership and the offering of
Units thereof. Such reimbursements have been reflected in the
Statements of Partners' Capital as syndication fees except for
$40,000 of organizational costs which have been capitalized.
Also included in the syndication fees are commissions and fees paid
to TFSC, the dealer-manager. During the year ended December 31,
1994, the Partnership paid commissions and fees of $268,281 of
which $227,035 was reallowed to participating broker-dealers; in
1993, the Partnership paid $277,479 of which $232,715 was
reallowed. In addition, the Partnership also paid $14,907 and
$15,416 in 1994 and 1993, respectively, to TFSC for due diligence
expenses (up to one-half of one percent of total limited partners'
capital contributions) that TFSC paid to unaffiliated broker-
dealers.
As compensation for their services, the individual general partners
each received $6,000 annually beginning on the Commencement Date
plus $1,000 for each of the management committee meetings attended.
In 1994 and 1993, such fees were $29,000 and $10,500, respectively.
The three individual general partners each own 20 Units.
The Partnership reimburses the Managing General Partners for
operating costs incurred in connection with the business of the
Partnership. Reimbursable operating costs include all costs other
than organizational and offering expenses and General Partner
overhead, such as administrative and investor services, investment
operations, and computer services. Amounts due to related parties
related to such expenses were $21,480 and $13,708 at December 31,
1994 and 1993, respectively.
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 in each year through the first
five years of operations after the termination of Unit sales, and
1.5% in any year thereafter. Since the total limited partner
capital contributions cannot be determined until the close of the
offering period, additional 1994 operating expenses of $89,086 have
not been reflected in current year expenses. This amount is a
contingent liability of the Partnership and may be recorded as an
expense in 1995 based upon future limited partner capital
contributions received up to the close of the offering period.
Based on capital contributions as of February 28, 1995,
approximately $26,010 of the contingent liability will be recorded
as an expense in 1995.
Under the terms of a computer service agreement, the Partnership
recognized charges from Technology Administrative Management, a
division of TFL, for its share of computer support costs. These
amounts are included in computer services expense.
3. Allocation of Profits and Losses
--------------------------------
Net realized profit and loss of the Partnership are allocated based
on the beginning of year partners' capital balances as follows:
(a). Profits:
(i) first, to those partners with deficit capital account
balances in proportion to such deficits until the
deficits have been eliminated; then
(ii) second, to the partners as necessary to offset net
losses and sales commissions previously allocated to
such partners; then
(iii)third, 75% to the Limited Partners as a group in
proportion to the number of Units, 5% to the Limited
Partners in proportion to the Unit months of each
Limited Partner, and 20% to the Managing General
Partners.
(b). Losses:
(i) first, to the partners as necessary to offset net
profits previously allocated to the partners under
(a)(iii) above plus losses from unaffiliated venture
capital limited partnership investments; then
(ii) 99% to the Limited Partners as a group and 1% to the
Managing General Partners.
Losses allocable to Limited Partners in excess of their capital
account balances will be allocated to the Managing General
Partners, with net profits thereafter otherwise allocable to those
Limited Partners being allocated to the Managing General Partners
to the extent of such losses.
As indicated above, losses from unaffiliated venture capital
limited partnership investments are allocated pursuant to section
(b). Gains are allocated first to offset previously allocated
losses pursuant to (b)(i) above, and then 99% to Limited Partners
and 1% to the Managing General Partners.
Income earned from short-term investments during the Offering
Period shall be allocated monthly, 99% to the Limited Partners and
1% to the Managing General Partners.
In no event shall the General Partners' interest in profits and
losses be less than 1%.
4. Equity Investments
------------------
At December 31, 1994 and 1993, equity investments consisted of:
December 31, 1994 December 31, 1993
Principal ----------------- -----------------
Investment Amount or Cost Fair Cost Fair
Industry/Company Position Date Shares Basis Value Basis Value
- ---------------- -------- ---- ------ ----- ----- ----- -----
Biotechnology
- -------------
CV Therapeutics, Series D
Inc. Preferred
shares 03/94 187,500 $375,000 375,000 -- --
Redcell, Inc. Funds held
in escrow for
Series B
Preferred
shares 12/94 132,979 125,000 125,000 -- --
Diagnostic Equipment
- --------------------
R2 Technologies Series A-1
Preferred
shares 05/94 100,000 100,000 100,000 -- --
Pharmaceuticals
- ---------------
Khepri Series C
Pharmaceuticals, Preferred
Inc. shares 11/94 83,333 125,000 125,000 -- --
Megabios Corp. Series C
Preferred
shares 09/94 193,125 250,000 250,000 -- --
Megabios Corp. Series C
Preferred
shares 12/94 57,938 75,001 75,001 -- --
Periodontix, Series A
Inc. Preferred
shares 12/93 100,000 100,000 100,000 100,000 100,000
Venture Capital Limited Partnership Investments
- -----------------------------------------------
Medical Science Limited
Partners II Partnership
Interest 02/94 $125,000 125,000 125,000 -- --
--------- --------- ------- -------
Total Equity Investments $1,275,001 1,275,001 100,000 100,000
========= ========= ======= =======
- -- No investment held at end of period.
As of December 31, 1994, all equity investments were privately
held and no public market existed.
CV Therapeutics, Inc.
- ---------------------
In March 1994, the Partnership invested in CV Therapeutics, Inc.
by purchasing 187,500 Series D Preferred shares at a total cost
of $375,000.
Khepri Pharmaceuticals, Inc.
- ----------------------------
In November 1994, the Partnership invested in Khepri
Pharmaceuticals, Inc. by purchasing 83,333 Series C Preferred
shares at a total cost of $125,000.
Megabios Corp.
- --------------
In 1994, the Partnership invested in Megabios Corp. by purchasing
251,063 Series C Preferred shares at a total cost of $325,001.
R2 Technologies
- ---------------
In May 1994, the Partnership invested in R2 Technologies by
purchasing 100,000 Series A-1 Preferred shares at a total cost of
$100,000.
Redcell, Inc.
- -------------
In December 1994, the Partnership deposited $125,000 into an
escrow fund to purchase 132,979 Series B Preferred shares upon
the final close of the financing round, which occurred in late
February 1995.
Venture Capital Limited Partnership Investments
- -----------------------------------------------
In February 1994, the Partnership made a capital contribution of
$125,000 to Medical Science Partners II.
5. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at December 31, 1994 and 1993 consisted
of:
1994 1993
---- ----
Demand accounts $ -- 7,294
Money-market accounts 3,571,768 2,452,122
--------- ---------
Total $3,571,768 2,459,416
========= =========
6. Distributions Payable
---------------------
At December 31, 1994 and 1993, distributions of $45,924 and
$16,706 were payable to the partners. Pursuant to the
Partnership Agreement, income earned during the Offering Period
on short-term investments are to be distributed quarterly. These
distributions were paid in January of the respective subsequent
years.
The Offering Period, as defined by the Partnership Agreement, is
that period commencing with the effective date of the Prospectus
when the Partnership began offering Units and will end when such
offering is terminated.
7. 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 December 31, 1994, the Partnership had unfunded
commitments of $125,000 related to venture capital limited
partnership investments.
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: March 17, 1995 By: /s/Frank R. Pope
------------------------------
Frank R. Pope
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated:
Signature Capacity Date
--------- -------- ----
/s/Charles R. Kokesh President, Chief March 17, 1995
- ------------------------ Executive Officer
Charles R. Kokesh and Chairman of
Technology Funding Inc.
and Managing General
Partner of Technology
Funding Ltd.
/s/Frank R. Pope Executive Vice March 17, 1995
- ------------------------ President, Chief
Frank R. Pope Financial Officer,
Secretary and a
Director of Technology
Funding Inc. and a
General Partner of
Technology Funding Ltd.
/s/Gregory T. George Group Vice President March 17, 1995
- -------------------------- of Technology Funding
Gregory T. George Inc. and a General
Partner of Technology
Funding Ltd.
The above represents a majority of the Board of Directors of
Technology Funding Inc. and a majority of the General Partners of
Technology Funding Ltd.