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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 September 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 Blvd., Suite 180
Eldorado Hills, California 95762
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(916)941-1400
--------------------------------------------------
(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 fair 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
Partnership. The Partnership 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 Partnership'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 Partnership. 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 that 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 Partnership 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)
September 30, December 31,
2002 2001
------------ -----------
ASSETS
Equity investments (cost basis of
$159,593 at September 30, 2002,
and December 31, 2001) $ 14,817 $ 28,204
Cash and cash equivalents 66 --
------- -------
Total assets $ 14,883 $ 28,204
======= =======
LIABILITIES AND MEMBERS' EQUITY
Accounts payable and accrued expenses $ 5,048 $ 20,771
Due to related parties 801,073 655,035
------- -------
Total liabilities 806,121 675,806
Commitments and contingencies
See Note 7.
Members' equity:
Investors (5,157 shares outstanding) -- --
Investment Managers (791,238) (647,602)
------- -------
Total members' equity (791,238) (647,602)
------- -------
Total liabilities and
members' equity $ 14,883 $ 28,204
======= =======
The accompanying notes are an integral part of these financial
statements.
STATEMENTS OF INVESTMENTS
- -------------------------
Shares September 30, 2002 December 31, 2001
as of ------------------ ------------------
Industry Investment September 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 $ 1,776 $ 62,093 $ 5,816
Information Technology
- ----------------------
WorldRes, Inc. (a) (b) Preferred
shares 1999 11,157 67,500 10,041 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 $14,817 $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 Nine
Months Ended Months Ended
September 30, September 30,
--------------- --------------
2002 2001 2002 2001
------ ------ ------ ------
Investment expenses:
Management fees $ 2,279 $ 2,578 $ 6,236 $ 7,735
Independent Directors' compensation 9,500 14,594 30,500 40,728
Investment operations 716 609 3,236 3,390
Administrative and investor services 14,033 21,457 57,124 52,580
Professional fees 1,232 6,952 22,922 41,148
Computer services 2,320 5,404 10,231 14,622
------ ------ ------- -------
Total investment expenses 30,080 51,594 130,249 160,203
------ ------ ------- -------
Net investment loss (30,080) (51,594) (130,249) (160,203)
------ ------ ------- -------
Net realized gain from sale of equity investment -- -- -- 15
Net (increase) decrease in unrealized
depreciation of equity investments (5,429) (1,684) (13,387) 42,711
------ ------ ------- -------
Net decrease in members' equity
resulting from operations $(35,509) $(53,278) $(143,636) $(117,477)
====== ====== ======= =======
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 Nine Months
Ended September 30,
--------------------
2002 2001
------ ------
Net decrease in members' equity
resulting from operations $(143,636) $(117,477)
Adjustments to reconcile net decrease in
members' equity resulting from operations
to net cash provided (used) by operating
activities:
Net realized gain from sale of equity
investment -- (15)
Net increase (decrease) in unrealized
depreciation of equity investments 13,387 (42,711)
Increase in due to related parties 146,038 49,430
Decrease in accounts payable and
accrued expenses (15,723) (4,005)
------- -------
Net cash provided (used) by operating
activities 66 (114,778)
------- -------
Cash flows from investing activities:
Proceeds from sale of equity investments 60,015
------- -------
Net cash provided by investing
activities -- 60,015
------- -------
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 September 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 that 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
Managers 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. 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.
Should the Fund not be terminated by the end of 2002, the uncertainties
arising from the timing of future liquidation events raise substantial
doubt about the Fund's ability to continue as a going concern. The
accompanying interim financial statements do not include any adjustments
that might result from the outcome of these uncertainties. The Fund has
been advised by its independent public accountants that should the
uncertainties surrounding the Fund's future operations remain unresolved
at year-end, their report on those financial statements will be modified
for that contingency.
3. 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 September
30, 2002 and December 31, 2001, were $159,593. At September 30, 2002,
and December 31, 2001, gross unrealized depreciation on investments
based on cost for federal income tax purposes was $144,776 and $131,389,
respectively.
4. Related Party Transactions
--------------------------
Related party costs are included in investment expenses shown on the
Statements of Operations. Related party costs for the nine months ended
September 30, 2002 and 2001 were as follows:
2002 2001
------ ------
Management fees $ 6,236 $ 7,735
Independent Directors' compensation 30,500 40,728
Reimbursable operating expenses 47,933 52,625
Management fees due to the Investment Managers were $47,492 and $41,256
at September 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 September 30, 2002 and December 31, 2001, due to
related parties for such expenses were $753,581 and $613,779,
respectively.
5. Equity Investments
------------------
All investments are valued at fair value as determined in good faith by
the Investment Managers.
Restricted Securities
- ---------------------
At September 30, 2002 and December 31, 2001, restricted securities had
aggregate fair values of $13,041 and $22,388, respectively, representing
1.6 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 nine months ended September 30, 2002.
6. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at September 30, 2002 and December 31, 2001,
consisted of:
2002 2001
------ ------
Demand accounts $66 $--
-- --
Total cash and cash equivalents $66 $--
== ==
7. 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
Managers 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. 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.
Should the Fund not be terminated by the end of 2002, the uncertainties
arising from the timing of future liquidation events raise substantial
doubt about the Fund's ability to continue as a going concern. The
accompanying interim financial statements do not include any adjustments
that might result from the outcome of these uncertainties. The Fund has
been advised by its independent public accountants that should the
uncertainties surrounding the Fund's future operations remain unresolved
at year-end, their report on those financial statements will be modified
for that contingency.
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 September 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 September 30, 2002 and September 30, 2001, were $35,509
and $53,278, respectively.
Investment expenses totaled $30,080 and $51,594 for the quarters ended
September 30, 2002 and 2001, respectively. The decrease is due to
decreased administrative costs and investment monitoring activity, along
with decreased professional fees.
Net unrealized depreciation on equity investments was $144,776 and
$139,347 at September 30 and June 30, 2002, respectively. During the
quarter ended September 30, 2002, the $5,429 increase in unrealized
depreciation of equity investments was attributable to a decrease in the
publicly-traded price of iVillage, Inc. and the fair value of WorldRes,
Inc., a private portfolio company in the information technology
industry. There was an increase in unrealized depreciation of $1,684
for the quarter ended September 30, 2001.
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 nine months compared to corresponding nine months in the
- ----------------------------------------------------------------
preceding year
- --------------
Net decrease in members' equity resulting from operations for the nine
months ended September 30, 2002 and September 30, 2001, was $143,636 and
$117,477, respectively.
Net unrealized depreciation on equity investments was $144,776 and
$131,389 at September 30, 2002 and December 31, 2001, respectively.
During the nine months ended September 30, 2002, the $13,387 increase in
unrealized depreciation of equity investments was primarily attributable
to decreases in the fair value of private portfolio companies in the
information technology and medical industries and a decrease in the
publicly-traded price of iVillage.com. The decrease in unrealized
depreciation of $42,711 for the nine months ended September 30, 2001,
was attributable to the sale of the Fund's Sanarus Medical, Inc. shares.
Investment expenses totaled $130,249 and $160,203 for the nine months
ended September 30, 2002 and 2001, respectively. The decrease is
primarily due to decreased professional fees, partially offset by
increased personnel costs.
Item 4. Procedures and Controls
The undersigned is responsible for establishing and maintaining
disclosure controls and procedures for Technology Funding Venture
Capital Fund VI, LLC. Such officer has concluded (based upon his
evaluation of these controls and procedures as of a date within 90 days
of the filing of this report) that Technology Funding Venture Capital
Fund VI, LLC's disclosure controls and procedures are effective to
ensure that information required to be disclosed by Technology Funding
Venture Capital Fund VI, LLC in this report is accumulated and
communicated to Technology Funding Venture Capital Fund VI, LLC's
management, including its principal executive officers as appropriate,
to allow timely decisions regarding required disclosure.
The certifying officer also has indicated that there were no significant
changes in Technology Funding Venture Capital Fund VI, LLC's internal
controls or other factors that could significantly affect such controls
subsequent to the date of their evaluation, and there were no corrective
actions with regard to significant deficiencies and material weaknesses.
CERTIFICATION
-------------
I, Charles R. Kokesh, President, Chief Executive Officer, Chief
Financial Officer and Chairman of Technology Funding Inc. and Managing
General Partner of Technology Funding Limited, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Technology
Funding Venture Capital Fund VI, LLC.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and I have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to me by
others within the entity, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and
c) presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 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
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Fund during the quarter
ended September 30, 2002.
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: November 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
CERTIFICATION
-------------
In connection with the Technology Funding Venture Capital Fund VI, LLC
(the Fund) Quarterly Report on Form 10-Q for the period ending September
30, 2002, as filed with the Securities and Exchange Commission (the
Report), I Charles, R. Kokesh, President, Chief Executive Officer, Chief
Financial Officer and Chairman of Technology Funding Inc. and Managing
General Partner of Technology Funding Limited, certify, pursuant to 18
U.S.C. Section 1350, as added Section 906 of the Sarbanes-Oxley Act of
2002, that:
1. The Report fully complies with the requirements of Section 15(d)
of the Securities Exchange Act of 1934; and
2. To my knowledge, the information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Fund as of and for the period covered
by the Report.
Date: November 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