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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, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-16208
WESTFORD TECHNOLOGY VENTURES, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3423417
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
17 Academy Street, 5th Floor
Newark, New Jersey 07102-2905
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 624-2131
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
- --------------------------------------------------------------------------------
(Title of class)
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. [X]
As of March 15, 2001, 11,204 units of limited partnership interest ("Units")
were held by non-affiliates of the registrant. There is no established public
trading market for such Units.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement relating to the 2001 Annual Meeting
of the Limited Partners of the Registrant, to be held on June 29, 2001 (the
"Annual Meeting Proxy Statement") are incorporated herein by reference in Part
III hereof. The Annual Meeting Proxy Statement will be filed with the Commission
no later than 120 days after the close of the fiscal year ended December 31,
2000.
PART I
Item 1. Business.
--------
Formation
Westford Technology Ventures, L.P. (the "Partnership") is a Delaware
limited partnership formed on September 3, 1987. WTVI Co., L.P., the managing
general partner of the Partnership (the "Managing General Partner"), and four
individuals (the "Individual General Partners") are the general partners of the
Partnership. Hamilton Capital Management Inc. (the "Management Company") is the
general partner of the Managing General Partner and the Partnership's management
company. The Partnership began its principal operations on December 1, 1988.
The Partnership operates as a business development company under the Investment
Company Act of 1940. The Partnership's investment objective is to achieve
long-term capital appreciation by making venture capital investments in new and
developing companies and other special investment situations. The Partnership
considers this activity to constitute the single industry segment of venture
capital investing.
In 1988 and 1989, the Partnership publicly offered 35,000 units of limited
partnership interest ("Units") at $1,000 per Unit. The Units were sold through
The Stuart-James Company, Incorporated (the "Selling Agent"). The Units were
registered under the Securities Act of 1933 pursuant to a Registration Statement
on Form N-2 (File No. 33-16891), which was declared effective on May 12, 1988.
The Partnership held its initial and final closing on November 25, 1988 and
January 31, 1989, respectively. A total of 11,217 Units were sold to limited
partners (the "Limited Partners"). Gross capital contributions to the
Partnership totaled $11,333,170, comprised of $11,217,000 from the Limited
Partners, $112,170 from the Managing General Partner and $4,000 from the
Individual General Partners.
The Partnership's originally scheduled termination date was December 31, 1998.
In November 2000, the Individual General Partners approved the final two-year
extension of the Partnership's term. The Partnership is now scheduled to
terminate no later than December 31, 2002.
Portfolio Investments
During its investment phase, Partnership made investments in eight portfolio
companies. The aggregate cost of such investments is $14,634,449, including
non-cash investments of $3,639,405. The Partnership will not make investments in
new portfolio companies. However, the Partnership may make additional follow-on
investments in existing portfolio companies, if required. Portfolio transactions
completed during 2000 are listed below.
o In January 2000, SER Systems AG completed its acquisition of EIS
International, Inc. at $6.25 per share. The Partnership received
$1,429,623 for its remaining 228,682 shares of EIS, resulting in a
realized loss of $1,667,334 for accounting purposes. The Partnership's
total investment of $1,392,981 in Cybernetics Systems, Inc., which was
acquired by EIS in 1996, returned $1,898,675 resulting in a cumulative
realized gain of $505,694 from this investment.
o During 2000, the Partnership completed a follow-on investment in
Thunderbird Technologies, Inc. totaling $60,769, acquiring an
interest-bearing demand promissory note at prime.
As of December 31, 2000, the Partnership had three active portfolio investments
with an aggregate cost of $7,733,952 and a fair value of $4,065,739. As of
December 31, 2000, the Partnership had liquidated investments with an aggregate
cost of $3,796,462. These liquidated investments returned $3,808,375, resulting
in a cumulative net realized gain of $11,913. Additionally, from its inception
to December 31, 2000, the Partnership had earned $780,057 of interest and
dividend income from its portfolio investments. As a result, from its inception
to December 31, 2000, the Partnership had a cumulative net realized gain from
its portfolio investments of $791,970.
Competition
The Partnership encounters competition from other entities having similar
investment objectives. Primary competition for venture capital investments has
been from venture capital partnerships and corporations, venture capital
affiliates of large industrial and financial companies, small business
investment companies and wealthy individuals. Competition also may develop from
foreign investors and from large industrial and financial companies investing
directly rather than through venture capital affiliates. The Partnership has
been a co-investor with other professional venture capital investors and these
relationships have generally expanded the Partnership's access to investment
opportunities. However, as discussed above, the Partnership will not make
investments in any new portfolio companies.
Employees
The Partnership has no employees. The Managing General Partner, subject to the
supervision of the Individual General Partners, manages and controls the
Partnership's venture capital investments. The Management Company is responsible
for the management and administrative services necessary for the operation of
the Partnership, including managing the Partnership's idle cash balances which
are invested in short-term securities.
Item 2. Properties.
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The Partnership does not own or lease physical properties.
Item 3. Legal Proceedings.
----------------
The Partnership is not a party to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
No matter was submitted to a vote of security holders during the fourth quarter
of the calendar year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
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There is no established public trading market for the Units and it is not
anticipated that any public market for the Units will develop. Consequently,
Limited Partners cannot easily liquidate their investment. Several independent
broker/dealers provide an informal secondary market for limited partnership
interests. Transfers of Units are subject to certain restrictions pursuant to
the Partnership Agreement and also may be affected by restrictions on resale
imposed by the laws of certain states.
The approximate number of holders of Units as of March 15, 2001 is 1,603. The
Managing General Partner and the four Individual General Partners of the
Partnership also hold interests in the Partnership. Information contained in
Item 12 of this report "Security Ownership of Certain Beneficial Owners and
Management" is incorporated herein by reference.
The Partnership did not make any cash distributions to its Partners during the
three-year period ended December 31, 2000 and has not made any cash
distributions to Partners since the inception of the Partnership.
Item 6. Selected Financial Data.
-----------------------
($ in thousands, except for per unit information)
Years Ended December 31,
2000 1999 1998 1997 1996
--------- --------- --------- -------- ----------
Total assets $ 5,047 $ 5,594 $ 5,397 $ 6,655 $ 9,077
Net assets 4,609 4,935 5,054 6,578 9,013
Net unrealized depreciation of investments (3,668) (5,220) (5,421) (4,162) (1,980)
Net investment loss (210) (273) (197) (222) (257)
Net realized (loss) gain from investments (1,667) (46) (68) (32) 2,923
Change in unrealized depreciation of investments 1,551 201 (1,259) (2,181) (4,428)
Decrease in net assets from operations (326) (119) (1,524) (2,435) (1,762)
Per unit of limited partnership interest:
Net asset value $ 407 $ 435 $ 446 $ 580 $ 790
Net investment loss (19) (25) (20) (22) (24)
Net realized (loss) gain from investments (118) (3) (5) (2) 219
Change in unrealized depreciation of investments 109 17 (109) (186) (325)
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
----------------------------------------------------------------
Liquidity and Capital Resources
The Partnership sold its investment in EIS International, Inc. in connection
with the acquisition of EIS by SER Systems AG completed in January 2000. The
Partnership received net proceeds of $1,429,623, or $6.25 for each of its
228,682 common shares of EIS.
As of December 31, 2000, the Partnership had $919,613 in an interest-bearing
cash account. Interest earned on such cash balances and other short-term
investments for the years ended December 31, 2000, 1999 and 1998 totaled
$22,567, $187 and $415, respectively. Interest earned from cash balances and
short-term investments in future periods is subject to fluctuations in
short-term interest rates and changes in cash balances and amounts available for
investment in short-term securities.
The Partnership has fully invested the net proceeds received from the offering
of Units and will not make investments in new portfolio companies. However, the
Partnership may make additional follow-on investments in existing portfolio
companies, if required. During 2000, the Partnership made one follow-on
investment in Thunderbird Technologies, Inc. totaling $60,769.
As of December 31, 2000, the Partnership's current liabilities of $437,971
included $401,304 due to the Management Company. The amount due to the
Management Company represents unpaid management fees that had been temporarily
suspended. Funds needed to cover current liabilities, future follow-on
investments, if any, and operating expenses will be obtained from current cash
reserves and from proceeds from the sale of the Partnership's remaining
portfolio investments.
In November 2000, the Individual General Partners approved the final two-year
extension of the term of the Partnership. The Partnership is now scheduled to
terminate no later than December 31, 2002.
Results of Operations
For the years ended December 31, 2000, 1999 and 1998 the Partnership had a net
realized loss from operations of $1,877,487, $319,698 and $264,993,
respectively. Net realized gain or loss from operations is comprised of (i) net
realized gain or loss from portfolio investments and (ii) net investment income
or loss (interest and dividend income less operating expenses).
Realized Gains and Losses from Portfolio Investments - For the year ended
December 31, 2000, the Partnership had a net realized loss of $1,667,334 from
its portfolio investments. As discussed above, in January 2000, SER Systems AG
completed its acquisition of EIS International, Inc. at $6.25 per share. The
Partnership received $1,429,623 for its EIS shares, compared to a cost of
$3,096,597, resulting in a realized loss of $1,667,334.
For the year ended December 31, 1999, the Partnership had a net realized loss
from its portfolio investments of $46,223 resulting from the write-off of the
remaining receivable balance due from the 1994 sale of Eidetics Incorporated.
Eidetics Incorporated was sold in 1994 in a management buyout for a $4,190 cash
down payment and potential future payments determined by the actual cash
receipts of the acquiring company for five years from the buyout date. In 1994,
the Partnership recorded a $250,597 receivable related to such expected future
payments. At the end of the five-year period actual cash payments received
against the receivable balance totaled $204,374. The Partnership also received
interest payments totaling $72,965 over the five-year period.
For the year ended December 31, 1998, the Partnership had a net realized loss
from its portfolio investments of $68,190, resulting from the sale of 6,600
common shares of EIS International, Inc. in June 1998. Such shares were sold for
$40,832 compared to a cost of $109,022.
Investment Income and Expenses - Net investment loss for the years ended
December 31, 2000, 1999 and 1998 was $210,153, $273,475 and $196,803,
respectively.
The $63,322 favorable change in net investment loss for 2000 compared to 1999
resulted from a $26,410 increase in investment income and a $36,912 decrease in
operating expenses. The increase in investment income for 2000 is comprised of a
$22,380 increase in interest from short-term investments and a 4,030 increase in
interest income from portfolio investments. The increase in interest from
short-term investments primarily resulted from the increased cash balance held
by the Partnership during 2000 as compared to 1999. As discussed above, the
Partnership received $1.4 million in January 2000 from the sale of its remaining
shares of EIS. The increase in interest income from portfolio investments
primarily resulted from the additional promissory notes of Thunderbird
Technologies held by the Partnership during 2000 as compared to 1999. The
decrease in operating expenses included a $50,000 decline in the management fee,
as discussed below, and a $15,000 decline in fees paid to the Independent
General Partners. Effective on January 1, 2000, the Independent General Partners
voluntary agreed to waive of all future meeting fees, which were previously paid
at $1,000 per meeting. Reductions due to the management fee and fees paid to the
Independent General Partners were partially offset by increases in other
operating expenses, primarily professional fees and mailing and printing
expenses. Professional fees increased $23,812 for 2000 compared to 1999,
primarily due to additional accounting fees relating to the quarterly financial
statement review, which is now required for all business development companies
filing SEC Form 10-Q. Mailing and printing expenses increased by $4,115 for 2000
compared to 1999 due to additional proxy costs and certain accrual adjustments
made in the 1999 period.
The $76,672 unfavorable change in net investment loss for 1999 compared to 1998
is comprised of a $152,447 decrease in investment income offset by a $75,775
reduction in operating expenses. The decrease in investment income primarily
resulted from the reduced interest income related to promissory notes due from
Spectrix Corporation, which were exchanged for additional equity holdings of the
company in March 1999. The decrease in expenses for 1999 was due to the reduced
management fees, as discussed below, as well as a reduction in Independent
General Partner's fees, reflecting the reduced annual fee paid to each
Independent General Partner from $10,000 to $5,000 effective as of January 1,
1999.
The Management Company is responsible for the management and administrative
services necessary for the operation of the Partnership. For these services, the
Management Company received a management fee through December 31, 1999 at an
annual rate of 2.5% of the gross capital contributions to the Partnership (net
of selling commissions and organizational expenses paid by the Partnership),
reduced by capital distributed and realized losses, with a minimum fee of
$200,000 per annum. The Management Company voluntarily agreed to reduce the
minimum management fee payable by the Partnership to $150,000 per annum,
effective January 1, 2000. The management fee for the years ended December 31,
2000, 1999 and 1998 was $150,000, $200,000 and $222,302, respectively. To the
extent possible, the management fee and other expenses incurred by the
Partnership are paid with funds provided from operations. Funds provided from
operations primarily are obtained from interest received from short-term
investments, interest and other income earned from portfolio investments and
proceeds received from the sale of portfolio investments.
Unrealized Gains and Losses and Changes in Unrealized Depreciation of Portfolio
Investments - For the year ended December 31, 2000, the Partnership had a
$1,551,346 favorable change in net unrealized depreciation of investments,
resulting from the transfer of $1,774,541 from unrealized loss to realized loss
relating to the sale of the Partnership's investment in EIS International, Inc.,
as discussed above, partially offset by a $223,195 downward revaluation of the
Partnership's investment in Inn-Room Systems, Inc.
For the year ended December 31, 1999, the Partnership had $201,080 favorable net
change in unrealized depreciation of investments, resulting from a $921,862
upward revaluation its investment in EIS International, Inc. and a $720,782
downward revaluation of its investment in Spectrix Corporation during 1999.
For the year ended December 31, 1998, the Partnership had a $1,259,082
unfavorable net change in unrealized depreciation of investments, primarily
resulting from a $1,312,829 net downward revaluation of its investment in EIS
International, Inc. and Inn-Room Systems, Inc. during 1998. Partially offsetting
this unfavorable change was a $53,747 transfer from unrealized loss to realized
loss resulting from the sale of 6,600 common shares of EIS, as discussed above.
Net Assets - Changes in net assets resulting from operations are comprised of
(1) net realized gain or loss from operations and (2) changes in net unrealized
appreciation or depreciation of portfolio investments. As of December 31, 2000,
the Partnership's net assets were $4,609,282, reflecting a decrease of $326,141
from net assets of $4,935,423 as of December 31, 1999. This decline reflects the
decrease in net assets resulting from operations, comprised of the $1,877,487
net realized loss from operations partially offset by the $1,551,346 favorable
change in net unrealized depreciation for 2000.
As of December 31, 1999, the Partnership's net assets were $4,935,423,
reflecting a decrease of $118,618 from net assets of $5,054,041 as of December
31, 1998. This decline reflects the decrease in net assets resulting from
operations, comprised of the $201,080 favorable change in net unrealized
deprecation of investments offset by the $319,698 net realized loss from
operations for 1999.
As of December 31, 1998, the Partnership's net assets were $5,054,041,
reflecting a decrease of $1,524,075 from net assets of $6,578,116 as of December
31, 1997. This decline reflects the decrease in net assets resulting from
operations, comprised of the $1,259,082 unfavorable change in net unrealized
depreciation and the $264,993 net realized loss from operations for 1998.
Gains and losses from investments are allocated to the Partners' capital
accounts when realized in accordance with the Partnership Agreement (see Note 3
of Notes to Financial Statements). However, for purposes of calculating the net
asset value per unit of limited partnership interest ("Unit"), net unrealized
appreciation or depreciation of investments has been included as if it had been
realized and allocated to the Limited Partners in accordance with the
Partnership Agreement. Pursuant to such calculation, the net asset value per
$1,000 Unit as of December 31, 2000, 1999 and 1998 was $407, $435, and $446,
respectively.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is subject to market risk arising from changes in the value of
its portfolio investments, short-term investments and interest-bearing cash
equivalents, which may result from fluctuations in interest rates and equity
prices. The Partnership has calculated its market risk related to its holdings
of these investments based on changes in interest rates and equity prices
utilizing a sensitivity analysis. The sensitivity analysis estimates the
hypothetical change in fair values, cash flows and earnings based on an assumed
10% change (increase or decrease) in interest rates and equity prices. To
perform the sensitivity analysis, the assumed 10% change is applied to market
rates and prices on investments held by the Partnership at the end of the
accounting period.
The Partnership's portfolio investments had an aggregate fair value of
$4,065,739 as of December 31, 2000. An assumed 10% decline from this December
31, 2000 fair value would result in a reduction to the fair value of such
investments and an unrealized loss of $406,574.
The Partnership had no short-term investments as of December 31, 2000. Market
risk relating to the Partnership's interest-bearing cash equivalents held as of
December 31, 2000 is considered to be immaterial.
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
WESTFORD TECHNOLOGY VENTURES, L.P.
INDEX
Report of Independent Certified Public Accountants - BDO Seidman, LLP
Balance Sheets as of December 31, 2000 and 1999
Schedule of Portfolio Investments as of December 31, 2000
Schedule of Portfolio Investments as of December 31, 1999
Statements of Operations for the years ended December 31, 2000, 1999 and 1998
Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998
Statements of Changes in Partners' Capital for the years ended December 31,
1998, 1999 and 2000
Notes to Financial Statements
NOTE - All schedules are omitted because of the absence of conditions under
which they are required or because the required information is included in the
financial statements or the notes thereto.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Partners
Westford Technology Ventures, L.P.
Newark, New Jersey
We have audited the accompanying balance sheets of Westford Technology Ventures,
L.P. (the "Partnership"), including the schedule of portfolio investments, as of
December 31, 2000 and 1999, and the related statements of operations, changes in
partners' capital, and cash flows for each of the three years in the period
ended December 31, 2000. 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 auditing standards generally accepted
in the United States of America. 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. 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 Westford Technology Ventures,
L.P. at December 31, 2000 and 1999, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.
As explained in Note 2, the financial statements include investments valued at
$4,065,739 and $4,228,165, as of December 31, 2000 and 1999, respectively,
representing 88% and 86% of partners' capital, respectively, whose values have
been estimated by the managing general partner in the absence of readily
ascertainable market values. We have reviewed the procedures used by the
managing general partner in arriving at its estimates of value of such
investments and have inspected underlying documentation and, in the
circumstances, we believe the procedures are reasonable and the documentation
appropriate. However, 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.
BDO Seidman, LLP
New York, New York
March 14, 2001
WESTFORD TECHNOLOGY VENTURES, L.P.
BALANCE SHEETS
December 31,
2000 1999
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ASSETS
Portfolio investments at fair value (cost of $7,733,952 as of
December 31, 2000 and $10,769,780 as of December 31, 1999) $ 4,065,739 $ 5,550,221
Cash and cash equivalents 919,613 603
Accrued interest receivable 61,901 43,048
--------------- ----------------
TOTAL ASSETS $ 5,047,253 $ 5,593,872
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 36,667 $ 35,645
Due to Management Company 401,304 540,304
Due to Independent General Partners - 82,500
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Total liabilities 437,971 658,449
--------------- ----------------
Partners' Capital:
Managing General Partner 238,751 584,100
Individual General Partners 2,821 3,367
Limited Partners (11,217 Units) 8,035,923 9,567,515
Unallocated net unrealized depreciation of investments (3,668,213) (5,219,559)
--------------- ----------------
Total partners' capital 4,609,282 4,935,423
--------------- ----------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 5,047,253 $ 5,593,872
=============== ================
See notes to financial statements.
WESTFORD TECHNOLOGY VENTURES, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 2000
Initial
Investment
Investment Description Date Cost Fair Value
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Inn-Room Systems, Inc.* (A)
Automated in-room vending units for the lodging industry
15,485 shares of Common Stock Oct. 1989 $ 1,320,349 $ 76,805
Convertible Demand Note at prime plus 1% 102,940 102,940
-------------- ----------------
1,423,289 179,745
- --------------------------------------------------------------------------------------------------------------------------------
Spectrix Corporation*
Infrared data transfer technology for networks
60,547 shares of Series A Preferred Stock June 1989 784,319 60,547
2,216,626 shares of Series B Preferred Stock 4,261,901 2,216,626
699,256 shares of Common Stock 354,878 699,256
Warrants to purchase 50,000 shares of Common Stock at
$4.00 per share, expiring 04/30/03 0 0
-------------- ----------------
5,401,098 2,976,429
- --------------------------------------------------------------------------------------------------------------------------------
Thunderbird Technologies, Inc.
Designer of high performance, low power integrated
circuit products
788,796 shares of Series A Preferred Stock Oct. 1992 788,796 788,796
Convertible Demand Notes at prime 120,769 120,769
-------------- ----------------
909,565 909,565
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL PORTFOLIO INVESTMENTS (A) $ 7,733,952 $ 4,065,739
============== ================
* May be deemed an affiliated person of the Partnership as defined by the
Investment Company Act of 1940.
(A) As a result of two separate 1 for 10 reverse stock splits completed by
Inn-Room Systems, Inc., the Partnership exchanged its 1,548,494 common
shares for 15,485 common shares.
(B) In January 2000, SER Systems AG completed its acquisition of EIS
International, Inc. at $6.25 per share. The Partnership received $1,429,623
for its EIS shares, resulting in a realized loss of $1,667,334.
See notes to financial statements.
WESTFORD TECHNOLOGY VENTURES, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1999
Initial
Investment
Investment Description Date Cost Fair Value
- --------------------------------------------------------------------------------------------------------------------------------
EIS International, Inc.
Systems for call center telephone operators
228,682 shares of Common Stock Mar. 1990 $ 3,096,597 $ 1,322,056
- --------------------------------------------------------------------------------------------------------------------------------
Inn-Room Systems, Inc.*
Automated, in-room vending units for the lodging industry
1,548,494 shares of Common Stock Oct. 1989 1,320,349 300,000
Demand Promissory Note at prime plus 1% 102,940 102,940
---------------- ---------------
1,423,289 402,940
- --------------------------------------------------------------------------------------------------------------------------------
Spectrix Corporation*
Infrared data transfer technology for networks
60,547 shares of Series A Preferred Stock June 1989 784,319 60,547
2,216,626 shares of Series B Preferred Stock 4,261,901 2,216,626
699,256 shares of Common Stock 354,878 699,256
Warrants to purchase 50,000 shares of Common Stock at
$4.00 per share, expiring 04/30/03 0 0
---------------- ---------------
5,401,098 2,976,429
- --------------------------------------------------------------------------------------------------------------------------------
Thunderbird Technologies, Inc.
Designer of high performance, low power integrated
circuit products
788,796 shares of Series A Preferred Stock Oct. 1992 788,796 788,796
Demand Promissory Notes at prime 60,000 60,000
---------------- ---------------
848,796 848,796
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL PORTFOLIO INVESTMENTS $ 10,769,780 $ 5,550,221
================ ===============
* May be deemed an affiliated person of the Partnership as defined by the
Investment Company Act of 1940.
See notes to financial statements.
WESTFORD TECHNOLOGY VENTURES, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
2000 1999 1998
------------- -------------- -------------
INVESTMENT INCOME AND EXPENSES
Income:
Interest from short-term investments $ 22,567 $ 187 $ 415
Interest and other income from portfolio investments 17,170 13,140 165,359
------------- ------------- ---------------
Total investment income 39,737 13,327 165,774
------------- ------------- ---------------
Expenses:
Management fee 150,000 200,000 222,302
Professional fees 52,297 28,485 65,024
Independent General Partners' fees 15,000 30,000 42,000
Mailing and printing 25,730 21,615 24,901
Custody fees 6,025 6,000 6,225
Other expenses 838 702 2,125
------------- ------------- ---------------
Total expenses 249,890 286,802 362,577
------------- ------------- ---------------
NET INVESTMENT LOSS (210,153) (273,475) (196,803)
Net realized loss from portfolio investments (1,667,334) (46,223) (68,190)
------------- ------------- ---------------
NET REALIZED LOSS FROM OPERATIONS (1,877,487) (319,698) (264,993)
Change in unrealized depreciation of investments 1,551,346 201,080 (1,259,082)
------------- ------------- ---------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (326,141) $ (118,618) $ (1,524,075)
============= ============= ===============
See notes to financial statements.
WESTFORD TECHNOLOGY VENTURES, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2000 1999 1998
------------- ------------- -------------
CASH FLOWS USED FOR OPERATING ACTIVITIES
Net investment loss $ (210,153) $ (273,475) $ (196,803)
Adjustments to reconcile net investment loss to cash
used for operating activities:
Increase in accrued interest receivable (18,853) (3,429) (133,510)
(Decrease) increase in liabilities (220,478) 315,144 266,316
------------- ------------- -------------
Cash (used for) provided from operating activities (449,484) 38,240 (63,997)
------------- ------------- -------------
CASH PROVIDED FROM (USED FOR) INVESTING
ACTIVITIES
Cost of portfolio investments purchased (60,769) (60,000) (40,815)
Proceeds from the sale of portfolio investments 1,429,263 14,365 96,749
------------- ------------- -------------
Cash provided from (used for) investing activities 1,368,494 (45,635) 55,934
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents 919,010 (7,395) (8,063)
Cash and cash equivalents at beginning of period 603 7,998 16,061
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 919,613 $ 603 $ 7,998
============= ============= =============
Supplemental disclosure of non-cash investing and
financing activities:
Purchase of Inn Room Systems, Inc. common stock
through reduction of notes $ - $ - $ 680
Conversion of accrued interest into cost of portfolio
investment - Spectix Corporation $ - $ 249,566 $ -
See notes to financial statements.
WESTFORD TECHNOLOGY VENTURES, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Years Ended December 31, 1998, 1999 and 2000
Unallocated
Managing Individual Net Unrealized
General General Limited Depreciation
Partner Partners Partners of Investments Total
------------ ---------- --------------- --------------- ---------------
Balance as of December 31, 1997 $ 577,197 $ 3,577 $ 10,158,899 $ (4,161,557) $ 6,578,116
Net investment loss 30,797 (81) (227,519) - (196,803)
Net realized loss from portfolio
investments (14,178) (19) (53,993) - (68,190)
Change in unrealized
depreciation of investments - - - (1,259,082) (1,259,082)
------------ ---------- --------------- --------------- ---------------
Balance as of December 31, 1998 593,816 3,477 9,877,387(A) (5,420,639) 5,054,041
Net investment loss (105) (97) (273,273) - (273,475)
Net realized loss from portfolio
investments (9,611) (13) (36,599) - (46,223)
Change in unrealized
depreciation of investments - - - 201,080 201,080
------------ ---------- --------------- --------------- ---------------
Balance as of December 31, 1999 584,100 3,367 9,567,515(A) (5,219,559) 4,935,423
Net investment loss 1,320 (75) (211,398) - (210,153)
Net realized loss from portfolio
investments (346,669) (471) (1,320,194) - (1,667,334)
Change in unrealized
depreciation of investments - - - 1,551,346 1,551,346
------------ ---------- --------------- --------------- ---------------
Balance as of December 31, 2000 $ 238,751 $ 2,821 $ 8,035,923 (A) $ (3,668,213) $ 4,609,282
============ ========== ============== ============== ===============
(A) The net asset value per unit of limited partnership interest, including an
assumed allocation of net unrealized depreciation of investments, was $407,
$435 and $446 as of December 31, 2000, 1999 and 1998, respectively.
See notes to financial statements.
WESTFORD TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Purpose
Westford Technology Ventures, L.P. (the "Partnership") is a Delaware
limited partnership formed on September 3, 1987. WTVI Co., L.P., the managing
general partner of the Partnership (the "Managing General Partner") and four
individuals (the "Individual General Partners") are the general partners of the
Partnership. Hamilton Capital Management Inc. (the "Management Company") is the
general partner of the Managing General Partner and the management company of
the Partnership. The Partnership began its principal operations on December 1,
1988.
The Partnership's objective is to achieve long-term capital appreciation by
making venture capital investments in new and developing companies and other
special investment situations. The Partnership will not engage in any other
business or activity. In November 2000, the Individual General Partners approved
the final two-year extension of the Partnership's term. The Partnership is now
scheduled to terminate no later than December 31, 2002.
2. Significant Accounting Policies
Valuation of Investments - Short-term investments are carried at amortized cost,
which approximates market. Portfolio investments are carried at fair value, as
determined quarterly by the Managing General Partner under the supervision of
the Individual General Partners. Publicly held portfolio securities are valued
at the closing public market price on the valuation date discounted by a factor
of 0% to 50% for sales restrictions. Factors considered in the determination of
an appropriate discount include, underwriter lock-up or Rule 144 trading
restrictions, insider status where the Partnership either has a representative
serving on the Board of Directors or is greater than a 10% shareholder, and
other liquidity factors such as the size of the Partnership's position in a
given company compared to the trading history of the public security. Privately
held portfolio securities are valued at cost until significant developments
affecting the portfolio company provide a basis for change in valuation. The
fair value of private securities is adjusted to reflect 1) meaningful
third-party transactions in the private market or 2) significant progress or
slippage in the development of the company's business such that cost is no
longer reflective of fair value. As a venture capital investment fund, the
Partnership's portfolio investments involve a high degree of business and
financial risk that can result in substantial losses. The Managing General
Partner considers such risks in determining the fair value of the Partnership's
portfolio investments.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Transactions - Investment transactions are recorded on the accrual
method. Portfolio investments are recorded on the trade date, the date the
Partnership obtains an enforceable right to demand the securities or payment
therefore. Realized gains and losses on investments sold are computed on a
specific identification basis.
WESTFORD TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
Income Taxes - No provision for income taxes has been made since all income and
losses are allocable to the Partners for inclusion in their respective income
tax returns. The Partnership's net assets for financial reporting purposes
differ from its net assets for tax purposes. Net unrealized depreciation of $3.7
million as of December 31, 2000, was recorded for financial statement purposes
but has not been recognized for tax purposes. Additionally, from inception to
December 31, 2000, other timing differences relating to the sale of Units
totaling $1.2 million were charged to partners' capital on the financial
statements but have not been deducted or charged against partners' capital for
tax purposes.
Cash Equivalents - The Partnership considers all highly liquid debt instruments
(primarily money market funds) to be cash equivalents.
3. Allocation of Partnership Profits and Losses
The Partnership Agreement provides that the Managing General Partner will be
allocated, on a cumulative basis over the life of the Partnership, 20% of the
Partnership's aggregate investment income and net realized gains from venture
capital investments, provided that such amount is positive. All other gains and
losses of the Partnership are allocated among all the Partners, including the
Managing General Partner, in proportion to their respective capital
contributions to the Partnership.
4. Related Party Transactions
The Management Company is responsible for the management and administrative
services necessary for the operation of the Partnership. For these services, the
Management Company received a management fee through December 31, 1999 at an
annual rate of 2.5% of the gross capital contributions to the Partnership (net
of selling commissions and organizational expenses paid by the Partnership),
reduced by capital distributed and realized losses, with a minimum fee of
$200,000 per annum. The Management Company voluntarily agreed to reduce the
minimum management fee payable by the Partnership to $150,000 per annum,
effective January 1, 2000.
The Management Company also directly provides certain shareholder services and
database management support for the Limited Partners of the Partnership. For
such services, the Management Company had charged the Partnership an additional
fee of $8,500 per quarter through December 31, 1998. This amount was paid to the
Management Company in addition to the regular management fee discussed above.
Effective January 1, 1999, however, the Management Company agreed to provide
such services for no additional fee.
From inception of the Partnership to December 31, 1998, each of the three
Independent General Partners received an annual fee of $10,000 and $1,000 for
each meeting of the Independent General Partners attended, plus out-of-pocket
expenses. Effective January 1, 1999, the annual fee paid to each Independent
General Partner was reduced to $5,000. Additionally, effective January 1, 2000,
the Independent General Partners voluntarily waived all future meeting fees.
WESTFORD TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
5. Classification of Portfolio Investments
As of December 31, 2000 and 1999 the Partnership's portfolio investments were
categorized as follows:
As of December 31, 2000:
- ----------------------- Percentage of
Investment Type Cost Fair Value Net Assets*
- --------------- --------------- --------------- -----------
Preferred Stock $ 5,835,016 $ 3,065,969 66.52%
Common Stock 1,675,227 776,061 16.84%
Debt Securities 223,709 223,709 4.85%
---------------- -------------- -------
Total $ 7,733,952 $ 4,065,739 88.21%
================ ============== ======
Country/Geographic Region
Midwestern U.S. $ 6,824,387 $ 3,156,174 68.48%
Eastern U.S. 909,565 909,565 19.73%
---------------- -------------- ------
Total $ 7,733,952 $ 4,065,739 88.21%
================ ============== ======
Industry
Wireless Communications $ 5,401,098 $ 2,976,429 64.58%
Vending Equipment 1,423,289 179,745 3.90%
Semiconductors 909,565 909,565 19.73%
---------------- -------------- -------
Total $ 7,733,952 $ 4,065,739 88.21%
================ ============== ======
As of December 31, 1999:
- ----------------------- Percentage of
Investment Type Cost Fair Value Net Assets*
- --------------- --------------- --------------- -----------
Preferred Stock $ 5,835,016 $ 3,065,969 62.12%
Common Stock 4,771,824 2,321,312 47.04%
Debt Securities 162,940 162,940 3.30%
---------------- -------------- --------
Total $ 10,769,780 $ 5,550,221 112.46%
================ ============== ========
Country/Geographic Region
Midwestern U.S. $ 6,824,387 $ 3,379,369 68.47%
Eastern U.S. 3,945,393 2,170,852 43.99%
---------------- -------------- --------
Total $ 10,769,780 $ 5,550,221 112.46%
================ ============== ========
Industry
Wireless Communications $ 5,401,098 $ 2,976,429 60.32%
Computer Software 3,096,597 1,322,056 26.78%
Vending Equipment 1,423,289 402,940 8.16%
Semiconductors 848,796 848,796 17.20%
---------------- -------------- --------
Total $ 10,769,780 $ 5,550,221 112.46%
================ ============== ========
* Fair value as a percentage of net assets.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
---------------------------------------------------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
--------------------------------------------------
The Partnership
The information set forth under the caption "Election of General Partners" in
the Annual Meeting Proxy Statement is incorporated herein by reference.
The Management Company
The Management Company is responsible for the management and administrative
services necessary for the operation of the Partnership pursuant to the
Management Agreement between the Partnership and the Management Company. As of
March 15, 2001, the directors and executive officers of the Management Company
are:
Name and Age Position Held Director Since
Jeffrey T. Hamilton (63) President, Secretary and September 3, 1987
Chairman of the Board of
Directors
Louise M. Hamilton (60) Director August 23, 1991
Susan J. Trammell (46) Treasurer and Director February 27, 1991
The directors of the Management Company will serve as directors until the next
annual meeting of stockholders and until their successors are elected and
qualified. The officers of the Management Company will hold office until the
next annual meeting of the Board of Directors of the Management Company and
until their successors are elected and qualified.
The information with respect to Mr. Hamilton, the sole shareholder of the
Management Company, set forth under the subcaption "Election of Individual
General Partners" in the Annual Meeting Proxy Statement is incorporated herein
by reference.
There are no family relationships among any of the Individual General Partners
of the Partnership. Jeffrey T. Hamilton and Louise M. Hamilton, President,
Secretary and Chairman of the Board of Directors and Director of the Management
Company, respectively, are husband and wife.
Item 11. Executive Compensation.
----------------------
The information with respect to the compensation of the Individual General
Partners set forth under the subcaption "Election of Individual General
Partners" in the Annual Meeting Proxy Statement is incorporated herein by
reference.
The information with respect to the allocation and distribution of the
Partnership's profits and losses to the Managing General Partner set forth under
the subcaption "Election of Managing General Partner" in the Annual Meeting
Proxy Statement is incorporated herein by reference.
The information with respect to the management fee payable to the Management
Company set forth under the caption "The Terms of the Current Management
Agreement and the Proposed Management Agreement" in the Annual Meeting Proxy
Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------
The information concerning the security ownership of the Individual General
Partners set forth under the subcaption "Election of Individual General
Partners" in the Annual Meeting Proxy Statement is incorporated herein by
reference.
As of March 15, 2001, no person or group is known by the Partnership to be the
beneficial owner of more than 5 percent of the Units. Mr. Ames, an Individual
General Partner of the Partnership, owns 10 Units and Ms. Trammell, the
Treasurer and Director of the Management Company, owns 3 Units. The Individual
General Partners and the directors and officers of the Management Company as a
group own 13 Units or less than one percent of the total Units outstanding.
The Partnership is not aware of any arrangement that may, at a subsequent date,
result in a change of control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
Not applicable.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
-----------------------------------------------------------------
(a) 1. Financial Statements
Report of Independent Certified Public Accountants - BDO
Seidman, LLP
Balance Sheets as of December 31, 2000 and 1999
Schedule of Portfolio Investments as of December 31, 2000
Schedule of Portfolio Investments as of December 31, 1999
Statements of Operations for the years ended December 31,
2000, 1999 and 1998
Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
Statements of Changes in Partners' Capital for the years ended
December 31, 2000, 1999 and 1998
Notes to Financial Statements
2. Exhibits
3.1 Amended and Restated Certificate of Limited Partnership
of the Registrant (filed as Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991 and incorporated herein by
reference).
3.2 Amended and Restated Agreement of Limited Partnership
of the Registrant (filed as Exhibit 1(c) to the
Registrant's Registration Statement on Form N-2 (No.
33-16891) and incorporated herein by reference).
10 Management Agreement dated as of February 28, 1991
between the Registrant and the Management Company
(filed as Exhibit A to the Registrant's definitive
proxy statement in connection with the 1991 Annual
Meeting of Limited Partners and incorporated herein by
reference).
(b) No reports on Form 8-K have been filed during the fourth
quarter of the fiscal year covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant, in the capacities indicated on the 30th day of March
2001.
WESTFORD TECHNOLOGY VENTURES, L.P.
By: WTVI Co., L.P.
its managing general partner
By: Hamilton Capital Management Inc.
its general partner
By: /s/ Jeffrey T. Hamilton President, Secretary and Director
---------------------------- (Principal Executive Officer) of
Jeffrey T. Hamilton Hamilton Capital Management Inc.
and Individual General Partner of
Westford Technology Ventures, L.P.
By: /s/ Susan J. Trammell Treasurer and Director (Principal
---------------------------- Financial and Accounting Officer)
Susan J. Trammell of Hamilton Capital Management Inc.
By: /s/ Robert S. Ames Individual General Partner of
---------------------------- Westford Technology Ventures, L.P.
Robert S. Ames
By: /s/ Alfred M. Bertocchi Individual General Partner of
----------------------------- Westford Technology Ventures, L.P.
Alfred M. Bertocchi
By: /s/ George M. Weimer Individual General Partner of
----------------------------- Westford Technology Ventures, L.P.
George M. Weimer