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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 June 30, 2002
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. 814-139
TECHNOLOGY FUNDING VENTURE CAPITAL FUND VI, LLC.
------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 94-3266666
- ------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1107 Investment Boulevard, Suite 180
El Dorado Hills, California 95762
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(916) 947-1400
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(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
Liability Company Investor shares.
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 shares of the limited liability company exists,
and therefore the market value of such shares cannot be determined.
Forward-Looking Statements
- --------------------------
The Private Securities Litigation Reform Act of 1995 (the Act) provides
a safe harbor for forward-looking statements made by or on behalf of the
Fund. The Fund and its representatives may from time to time make
written or oral statements that are "forward-looking", including
statements contained in this report and other filings with the
Securities and Exchange Commission, and reports to the Fund's
shareholders and news releases. All statements that express
expectations, estimates, forecasts and projections are forward-looking
statements within the meaning of the Act. In addition, other written or
oral statements which constitute forward-looking statements may be made
by or on behalf of the Fund. Words such as "expects", "anticipates",
"intends", "plans", "believes", "seeks", "estimates", "projects",
"forecasts", "may", "should", variations of such words and similar
expressions are intended to identify such forward-looking statements.
These statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions which are difficult to
predict. Therefore, actual outcomes and results may differ materially
from what is expressed or forecasted in or suggested by such forward-
looking statements. The Fund undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
- --------------
(unaudited)
June 30, December 31,
2002 2001
----------- -----------
ASSETS
Equity investments (cost of $159,593
for June 30, 2002 and
December 31, 2001) $ 20,246 $ 28,204
Cash and cash equivalents 66 --
------- -------
Total assets $ 20,312 $ 28,204
======= =======
LIABILITIES AND MEMBERS' EQUITY
Accounts payable and accrued expenses $ 17,413 $ 20,771
Due to related parties 758,628 655,035
------- -------
Total liabilities 776,041 675,806
Commitments and contingencies
See Note 8.
Members' equity:
Investors (5,157 shares outstanding) -- --
Investment Managers (755,729) (647,602)
------- -------
Total members' equity (755,729 (647,602)
------- -------
Total liabilities and
members' equity $ 20,312 $ 28,204
======= =======
The accompanying notes are an integral part of these financial
statements.
STATEMENTS OF INVESTMENTS
- -------------------------
Shares June 30, 2002 December 31, 2001
as of ------------------- -------------------
Industry Investment June 30, Cost Fair Cost Fair
Company Position Date 2002 Basis Value Basis Value
- --------- -------- ---------- ----------- ------- ------- ------- -------
Equity Investments
- ------------------
Communications
- --------------
iVillage Inc. Common 1999-
(c) shares 2000 3,061 $ 62,093 $ 3,858 $ 62,093 $ 5,816
Information Technology
- ----------------------
WorldRes, Inc. (a) (b) Preferred
shares 1999 11,157 67,500 13,388 67,500 13,388
Medical/Biotechnology
- ---------------------
Resolution Sciences Preferred
Corporation (a) (b) shares 2000 15,000 30,000 3,000 30,000 9,000
------- ------ ------- ------
Total equity investments $159,593 $ 20,246 $159,593 $28,204
======= ====== ======= ======
Legend and footnotes:
(a) Equity security acquired in a private placement transaction; resale may be subject to certain
selling restrictions.
(b) Portfolio company is an affiliate of the Fund; resale may be subject to certain selling
restrictions.
(c) Marketable equity security.
(1) The Fund has no income-producing securities.
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF OPERATIONS (unaudited)
- ------------------------------------
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
--------------- --------------
2002 2001 2002 2001
------ ------ ------ ------
Investment expenses:
Management fees $ 2,278 $ 2,578 $ 3,957 $ 5,157
Independent Directors' compensation 8,224 17,067 21,000 26,134
Investment operations 725 1,998 2,520 2,781
Administrative and investor services 29,274 19,307 43,091 31,123
Professional fees 10,397 15,422 21,690 34,196
Computer services 4,507 5,439 7,911 9,218
------ ------ ------- -------
Total investment expenses 55,405 61,811 100,169 108,609
------ ------ ------- -------
Net investment loss (55,405) (61,811) (100,169) (108,609)
------ ------ ------- -------
Net realized gain from sale of equity investment -- 15 -- 15
Net (increase) decrease in unrealized
depreciation of equity investments (4,438) 45,271 (7,958) 44,395
------ ------ ------- -------
Net decrease in members' equity
resulting from operations $(59,843) $(16,525) $(108,127) $(64,199)
====== ====== ======= =======
Net decrease in members' equity
resulting from operations per Share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
====== ====== ======= =======
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF CASH FLOWS (unaudited)
- ------------------------------------
For the Six Months
Ended June 30,
--------------------
2002 2001
------ ------
Net decrease in members' equity
resulting from operations $(108,127) $ (64,199)
Adjustments to reconcile net decrease in
members' equity resulting from operations
to net cash used by operating activities:
Net realized gain from sale of equity
investment -- (15)
Net increase (decrease) in unrealized
depreciation of equity investments 7,958 (44,395)
Increase in due to related parties 103,593 63,241
Decrease in accounts payable and
accrued expenses (3,358) (9,410)
------ -------
Net cash provided (used) by operating
activities 66 (54,778)
------ -------
Cash flows from investing activities:
Proceeds from sale of equity investments -- 15
------ -------
Net cash provided by investing
activities -- 15
------ -------
Net increase (decrease) in cash and
cash equivalents 66 (54,763)
Cash and cash equivalents at beginning
of year -- 55,292
------ -------
Cash and cash equivalents at June 30 $ 66 $ 529
====== =======
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ----------------------------------------
1. Interim Financial Statements
----------------------------
The accompanying unaudited financial statements included herein have been
prepared in accordance with the requirements of Form 10-Q and, therefore,
do not include all information and footnotes which would be presented were
such financial statements prepared in accordance with generally accepted
accounting principles. These statements should be read in conjunction with
the Annual Report on Form 10-K for the year ended December 31, 2001. In
the opinion of the Investment Managers, the accompanying interim financial
statements reflect all adjustments necessary for the fair presentation of
the financial position, results of operations, and cash flows for the
interim periods presented. Allocation of income and loss to Investors and
Investment Managers is based on cumulative income and loss. Adjustments,
if any, are reflected in the current quarter balances. The results of
operations for such interim periods are not necessarily indicative of
results of operations to be expected for the full year.
2. Termination of the Offering and the Uncertain Future of the Fund
----------------------------------------------------------------
Technology Funding Securities Corporation suspended the offering of shares
of the Fund on April 25, 2000. In June 2001, the Independent Directors
terminated the offering because current market conditions and the small
size of the Fund would have made it unlikely that the Fund would ever
achieve its investment objectives and directed the Investment Mangers to
attempt to sell the Fund's assets to non-affiliates. On March 15, 2002,
the Independent Directors recommended a proxy be sent to the Fund's
Investors to allow them to vote on an early termination of the Fund before
the end of 2002. Should the Investors vote to dissolve the Fund, the
audited financial statements of the Fund will be prepared on a liquidation
basis rather than as a going concern. The accompanying interim financial
statements do not include any adjustments that might result from a change
to accounting on a liquidation basis. The Fund has been advised by its
independent public accountants that should the Investors approve the early
dissolution of the Fund, their report on those financial statements will be
modified for that matter.
3. Financing of Partnership Operations
-----------------------------------
The Investment Manager has agreed to support the Fund's operations through
the deferral of payments on the Fund's obligations. This support and cash
received from the sales of equity investments are expected to be adequate
to fund operations through the next twelve months.
4. Provision for Income Taxes
--------------------------
No provision for income taxes has been made by the Fund as the Fund has
elected to be treated as a partnership for income tax purposes, and,
therefore, the Fund is not directly subject to taxation. The Fund members
are to report their respective shares of Fund income or loss on their
individual tax returns.
The accompanying financial statements are prepared using accounting
principles generally accepted in the United States which may not equate to
tax accounting. The cost of investments on a tax basis at June 30, 2002
and December 31, 2001, was $159,593. At June 30, 2002 and December 31,
2001, gross unrealized depreciation on investments based on cost for
federal income tax purposes was $139,347 and $131,389, respectively.
5. Related Party Transactions
--------------------------
Related party costs are included in investment expenses shown on the
Statements of Operations. Related party costs for the six months ended
June 30, 2002 and 2001 were as follows:
2002 2001
------ ------
Management fees $ 3,957 $ 5,157
Independent Directors' compensation 21,000 26,134
Reimbursable operating expenses 30,039 32,632
Management fees due to the Investment Managers were $45,213 and $41,256 at
June 30, 2002 and December 31, 2001, respectively, and were included in due
to related parties.
Certain reimbursable expenses have been accrued based upon interim
estimates prepared by the Investment Managers and are adjusted to actual
costs periodically. At June 30, 2002 and December 31, 2001, due to related
parties for such expenses were $713,415 and $613,779, respectively.
6. Equity Investments
------------------
All investments are valued at fair value as determined in good faith by the
Investment Managers.
Restricted Securities
- ---------------------
At June 30, 2002 and December 31, 2001, restricted securities had aggregate
fair values of $16,388 and $22,388, respectively, representing 2.2 percent
and 3.5 percent, respectively, of the net liabilities of the Fund.
There were no significant purchases or sales of equity investments during
the six months ended June 30, 2002.
7. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at June 30, 2002 and December 31, 2001, consisted
of:
2002 2001
------ ------
Demand accounts $66 $--
-- --
Total cash and cash equivalents $66 $--
== ==
8. Commitments and Contingencies
-----------------------------
From time to time, the Partnership is subject to routine litigation
incidental to the business of the Partnership. Although there can be no
assurances as to the ultimate disposition of these matters, it is the
opinion of the Investment Managers, based upon the information available at
this time, that the expected outcome of these matters, individually or in
the aggregate, will not have a material adverse effect on the results of
operations and financial condition of the Partnership.
Item 2. Management's Discussion and Analysis of Financial
Condition
Technology Funding Securities Corporation suspended the offering of shares
of the Fund on April 25, 2000. In June 2001, the Independent Directors
terminated the offering because current market conditions and the small
size of the Fund would have made it unlikely that the Fund would ever
achieve its investment objectives and directed the Investment Mangers to
attempt to sell the Fund's assets to non-affiliates. On March 15, 2002,
the Independent Directors recommended a proxy be sent to the Fund's
Investors to allow them to vote on an early termination of the Fund before
the end of 2002. Should the Investors vote to dissolve the Fund, the
audited financial statements of the Fund will be prepared on a liquidation
basis rather than as a going concern. The accompanying interim financial
statements do not include any adjustments that might result from a change
to accounting on a liquidation basis. The Fund has been advised by its
independent public accountants that should the Investors approve the early
dissolution of the Fund, their report on those financial statements will be
modified for that matter.
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
The Fund operates as a business development company under the Investment
Company Act of 1940 and makes venture capital investments in new and
developing companies. The Fund's financial condition is dependent upon the
success of the portfolio companies. There is no ready market for many of
the Fund's investments. It is possible that some of its venture capital
investments may be a complete loss or may be unprofitable and that others
will appear likely to become successful, but may never realize their
potential. The valuation of the Fund's investments in securities for which
there are no available market quotes is subject to the estimate of the
Directors of the Fund in accordance with the valuation guidance described
in Note 1 to the financial statements included in the Fund's Form 10-K for
the year ended December 31, 2001. In the absence of readily obtainable
market values, the estimated fair value of the Fund's investments may
differ significantly from the values that would have been used had a ready
market existed.
Cash and cash equivalents at June 30, 2002, were $66. The Investment
Manager has agreed to support the Fund's operations through the deferral of
payments on the Fund's obligations. This support and cash received from
the sales of equity investments are expected to be adequate to fund
operations through the next twelve months.
Results of Operations
- ---------------------
Current quarter compared to corresponding quarter in the preceding year
- -----------------------------------------------------------------------
Net decrease in members' equity resulting from operations for the quarter
ended June 30, 2002 and June 30, 2001, were $59,843 and $16,525,
respectively.
Net unrealized depreciation on equity investments was $139,347 and $134,909
at June 30 and March 31, 2002, respectively. During the quarter ended June
30, 2002, the $4,438 increase in unrealized depreciation of equity
investments was attributable to a decrease in the publicly-traded price of
iVillage, Inc. The decrease in unrealized depreciation of $45,271 for the
quarter ended June 30, 2001, was attributable to an increase in the value
of the Fund's Sanarus Medical, Inc. shares.
Investment expenses totaled $55,405 and $61,811 for the quarters ended June
30, 2002 and 2001, respectively.
Given the inherent risk associated with the business of the Fund, 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 decrease in members' equity resulting from operations for the six
months ended June 30, 2002 and June 30, 2001, were $108,127 and $64,199,
respectively.
Net unrealized depreciation on equity investments was $139,347 and $131,389
at June 30, 2002 and December 31, 2001, respectively. During the six
months ended June 30, 2002, the $7,958 increase in unrealized depreciation
of equity investments was primarily attributable to a decrease in the fair
value of the Fund's Resolution Sciences Corporation shares. The decrease
in unrealized depreciation of $44,395 for the six months ended June 30,
2001, was attributable to an increase in the fair value of the Fund's
Sanarus Medical, Inc. shares.
Investment expenses totaled $100,169 and $108,609 for the six months ended
June 30, 2002 and 2001, respectively.
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) A report on Form 8-K was filed by the Registrant on June 28, 2002, to
report the appointment of Grant Thornton LLP as the Partnership's
public accountants. No financial statements were filed.
CERTIFICATION
-------------
The undersigned hereby certifies, to such officer's knowledge, that this
report fully complies with the requirements of Section 15(d) of the
Securities Exchange Act of 1934 and that the information contained in
the report fairly presents, in all material respects, the financial
condition and results of operation of the Partnership.
Date: August 14, 2002 By: /s/Charles R. Kokesh
--------------------------------
Charles R. Kokesh
President, Chief Executive
Officer, Chief Financial
Officer and Chairman of
Technology Funding Inc. and
Managing General Partner of
Technology Funding Limited
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 VENTURE CAPITAL FUND VI,LLC
By: TECHNOLOGY FUNDING INC.
TECHNOLOGY FUNDING LTD.
Investment Managers
Date: August 14, 2002 By: /s/Charles R. Kokesh
-----------------------------------
Charles R. Kokesh
President, Chief Executive
Officer, Chief Financial
Officer and Chairman of
Technology Funding Inc. and
Managing General Partner of
Technology Funding Limited