10-Q 1 e901146_r2.txt QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 000-28405 MEVC DRAPER FISHER JURVETSON FUND I, INC. (Exact name of the registrant as specified in its charter) DELAWARE 94-3346760 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 991 Folsom Street San Francisco, California 94107-1020 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (877) 474-6382 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock New York Stock Exchange ------------------- -------------------------------- Securities registered pursuant to Section 12(g) of the Act: None 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 [ ] As of September 14, there were 16,500,000 shares of Registrant's common stock, $.01 par value (the "Shares"), outstanding. The net asset value of a share at July 31, 2001 was $16.95. meVC Draper Fisher Jurvetson Fund I, Inc. (A Delaware Corporation) Index
Part I. Financial Information Page Item 1. Financial Statements Balance Sheets - July 31, 2001 and October 31, 2000................................................... 01 Statement of Operations - For the Period November 1, 2000 to July 31, 2001 and the Period March 31, 2000 to July 31, 2000........................................... 02 Statements of Operations - For the quarter ended July 31, 2001 and the quarter ended July 31, 2000.................................................................. 03 Statements of Cash Flows - For the Period November 1, 2000 to July 31, 2001 and the Period March 31, 2000 to July 31, 2000 .......................................... 04 Statement of Shareholders' Equity - Period ended July 31, 2001........................................................... 05 Selected Per Share Data and Ratios - July 31, 2001 and October 31, 2000................................................... 06 Schedule of Investments - July 31, 2001........................................................................ 07 Notes to Financial Statements........................................................... 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................... 17 Item 3. Quantitative and Qualitative Disclosure about Market Risk............................... 19 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders..................................... 20 Item 6. Exhibits and Reports on Form 8-K........................................................ 20 SIGNATURE................................................................................................ 21
Part I. Financial Information ITEM 1. FINANCIAL STATEMENTS meVC Draper Fisher Jurvetson Fund I, Inc. Balance Sheets
ASSETS July 31, October 31, 2001 2000 (Unaudited) Investments in preferred stocks, at fair value (cost $148,879,632 and $112,554,476, respectively).......... $ 115,837,103 $ 107,554,476 Investments in short-term securities, at market value (cost $94,135,056 and $88,073,112, respectively)............ 94,184,917 88,159,616 Cash and cash equivalents (cost $69,988,066 and $115,759,680, respectively)............ 69,988,066 115,760,166 Interest receivable............................................... 362,573 640,620 ---------------- --------------- Total Assets...................................................... 280,372,659 312,114,878 ================ =============== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Payable For Investments Purchased................................. 100,000 -- Management fee payable............................................ 612,137 668,139 ---------------- --------------- Total Liabilities 712,137 668,139 ---------------- --------------- Shareholders' Equity: Common Stock, $0.01 par value; 150,000,000 shares authorized and 16,500,000 outstanding.................... 165,000 165,000 Additional paid in capital.................................... 311,485,000 311,485,000 Retained deficit.............................................. (31,989,478) (203,261) ---------------- --------------- Total Shareholders' Equity........................................ 279,660,522 311,446,739 ---------------- --------------- Total Liabilities and Shareholders' Equity........................ $ 280,372,659 $ 312,114,878 ================ =============== Net Asset Value Per Share......................................... $ 16.95 $ 18.88 ================ ===============
The accompanying notes are an integral part of these financial statements. meVC Draper Fisher Jurvetson Fund I, Inc. Statements of Operations (Unaudited)
For the period For the period November 1, 2000 March 31, 2000* to July 31, 2001 to July 31, 2000 Investment Income: Interest income.......................................... $ 7,577,387 $ 5,879,046 ----------------- ----------------- Operating Expenses: Management fees.......................................... 5,643,591 2,632,928 ----------------- ---------------- Net investment income............................................. 1,933,796 3,246,118 ----------------- ---------------- Net Realized and Unrealized Gain (Loss) on Investment Transactions: Net realized gain (loss) on investment transactions.................................. 4,295 (42) ----------------- ---------------- Net unrealized appreciation (depreciation) on investment transactions.................................. (28,079,658) 10,268 ----------------- ---------------- Realized and unrealized gain (loss) on investment transactions.................................. (28,075,363) 10,226 ----------------- ---------------- Net increase (decrease) in net assets resulting from operations................................................... $ (26,141,567) $ 3,256,344 ================= ================ Net decrease in net assets resulting from operations per share......................................... $ (1.59) $ 0.20 ================= ================ Dividends declared per Share...................................... $ 0.34 $ -- ================= ================
* Commencement of operations. The accompanying notes are an integral part of these financial statements. 2 meVC Draper Fisher Jurvetson Fund I, Inc. Statements of Operations (Unaudited)
For the For the quarter ended quarter ended July 31, 2001 July 31, 2000 Investment Income: Interest income............................. $ 1,799,202 $ 4,244,988 ---------------- ---------------- Operating Expenses: Management fees............................. 1,845,235 1,971,996 ---------------- ---------------- Net investment income (loss)......................... (46,033) 2,272,992 ---------------- ---------------- Net Realized and Unrealized Gain (Loss) on Investment Transactions: Net realized gain (loss) on investment transactions..................... 4,398 (42) Net unrealized appreciation (depreciation) on investment transactions..................... (16,569,793) 14,752 ---------------- ---------------- Realized and unrealized gain (loss) on investment transactions..................... (16,565,395) 14,710 ---------------- ---------------- Net increase (decrease) in net assets resulting from operations...................................... $ (16,611,428) $ 2,287,702 ================= ================ Net increase (decrease) in net assets resulting from operations per share............................ $ (1.01) $ 0.14 ================ ================ Dividends declared per Share......................... $ -- $ -- ================ ================
The accompanying notes are an integral part of these financial statements. 3 meVC Draper Fisher Jurvetson Fund I, Inc. Statements of Cash Flows (Unaudited)
For the period For the period November 1, 2000 March 31, 2000* to July 31, 2001 to July 31, 2000 Cash Flows from Operating Activities: Net (decrease) increase in net assets resulting from operations $ (26,141,567) $ 3,256,344 Adjustments to reconcile net cash provided by operations: Realized (gain).............................................. (4,295) -- Unrealized depreciation (appreciation)....................... 28,079,658 (10,268) Changes in assets and liabilities: Management fee payable.................................. (56,002) 666,110 Interest receivable..................................... 278,047 (388,076) Investment purchased payable............................ 100,000 - Purchases of preferred stock................................. (36,325,157) (100,504,475) Purchases of short-term investments.......................... (106,432,239) (45,355,418) Purchases of cash equivalents................................ (820,953,502) (2,007,432,920) Sales/Maturities of short-term investments................... 102,946,261 - Sales/Maturities of cash equivalents......................... 818,381,346 2,007,432,920 --------------- ---------------- Net cash used by operating activities........................ (40,127,450) (142,335,783) --------------- ---------------- Cash Flows from Financing Activities: Gross proceeds from initial public offering.................. -- 330,000,000 Sales load................................................... -- (16,500,000) Advisory fee, Prudential Securities Incorporated............. -- (1,500,000) Deferred offering costs...................................... -- (350,000) Redemption of seed money..................................... -- (5,000) Distributions................................................ (5,644,650) -- --------------- ---------------- Net cash used for financing activities....................... (5,644,650) 311,645,000 --------------- ---------------- Net change in cash and cash equivalents for the period................ (45,772,100) 169,309,217 --------------- ---------------- Cash and cash equivalents, beginning of period........................ 115,760,166 5,000 --------------- ---------------- Cash and cash equivalents, end of the period.......................... $ 69,988,066 $ 169,314,217 =============== ================
* Commencement of operations. The accompanying notes are an integral part of these financial statements. 4 meVC Draper Fisher Jurvetson Fund I, Inc. Statement of Shareholders' Equity (Unaudited)
Additional Total Common Paid in Retained Shareholders' Stock Capital Deficit Equity ---------- ------------- ------------ --------------- Balance at March 31, 2000* $ 3 $ 4,997 $ -- $ 5,000 Issuance of 16,500,000 shares through Initial public offering (Net of Offering Costs) 165,000 311,485,000 -- 311,650,000 Redemption of seed shares (3) (4,997) -- (5,000) Net decrease in net assets from operations -- - (203,261) (203,261) ---------- ------------- ------------ -------------- Balance at October 31, 2000 $ 165,000 $ 311,485,000 $ (203,261) $ 311,446,739 ---------- ------------- ------------ -------------- Distributions from net investment income -- -- (5,644,650) (5,644,650) Net decrease in net assets from operations -- -- (26,141,567) (26,141,567) ---------- ------------- ------------ -------------- Balance at July 31, 2001 $ 165,000 $ 311,485,000 $(31,989,478) $ 279,660,522 ---------- ------------- ----------- --------------
* Commencement of operations. The accompanying notes are an integral part of these financial statements. 5 meVC Draper Fisher Jurvetson Fund I, Inc. Selected per Share Data and Ratios
For the Period For the Period November 1, 2000 March 31, 2000* to July 31, 2001 to October 31, 2000 (Unaudited) Net asset value, beginning of period................................... $ 18.88 $ 18.89 (a) Income (loss) from investment operations: Net investment income............................................... 0.12 0.29 Net realized and unrealized loss on investments..................... (1.71) (0.30) ------------ ------------- Total from investment operations.................................... (1.59) (0.01) ------------ ------------- Less distributions from and in excess of: Net investment income............................................... (0.34) -- Net realized and unrealized gain.................................... -- -- ------------ ------------- Total distributions................................................. (0.34) -- ------------ ------------- Net asset value, end of period ........................................ $ 16.95 $ 18.88 =========== ============ Market Value, end of period ........................................... $ 10.97 $ 11.50 =========== ============ Total Return - At NAV (b)............................................... (7.70)% (0.05)% Total Return - At Market (b)............................................ (1.88)% (42.50)% (c) Ratios and Supplemental Data: Net assets, end of period (in thousands)................................ $ 279,661 $ 311,447 Ratios to average net assets: Expenses (d)........................................................... 2.50% 2.50% Net investment income (d).............................................. 0.86% 1.49%
* Commencement of operations. (a) Initial public offering, net of initial sales load, underwriting and offering costs of $1.11 per share. (b) Total return is historical and assumes changes in share price, reinvestments of all dividends and distributions, and no sales charge. Total return for periods of less than one year is not annualized. (c) For the period June 26, 2000 (commencement of trading on the NYSE) to October 31, 2000. (d) Annualized. The accompanying notes are an integral part of these financial statements. 6 meVC Draper Fisher Jurvetson Fund I, Inc. Schedule of Investments July 31, 2001 (Unaudited)
Date of Initial Description Shares/Principal Investment Cost Value -------------------------------------------------------------------------------------------------------------------------------- Preferred Stocks-41.42% (a, b) (Note 2, 3) Actelis Networks Inc., Series A ........... 1,506,025 May 2001 $5,000,003 $5,000,003 Annuncio Software Inc., Series E .......... 625,000 July 2000 5,000,000 3,750,000 AuctionWatch.com, Inc., Series C .......... 1,047,619 June 2000 5,500,000 3,100,952 *BlueStar Solutions (Formerly eOnline, Inc.): Series C.............................. 1,360,544 May 2000 9,999,998 9,999,998 Series C Warrants, expire 5/25/03..... 136,054 May 2000 - - Cidera, Inc., Series D .................... 857,192 Aug. 2000 7,500,001 3,750,044 DataPlay, Inc., Series D .................. 2,500,000 June 2001 7,500,000 7,500,000 *Endymion Systems, Inc., Series A .......... 7,156,760 June 2000 7,000,000 7,000,027 *EXP Systems, Inc., Series C ............... 1,748,252 June 2000 10,000,001 7,500,001 *Foliofn, Inc., Series C ................... 5,802,259 June 2000 15,000,000 11,250,000 InfoImage, Inc.: Series C ............................ 432,000 June 2000 2,004,480 1,002,240 Series C Warrants, expire 6/2/10 .... 259,200 June 2000 - - Convertible Promissory Note.......... 345,533 June 2001 345,533 345,533 *infoUSA.com, Inc., Series B ............... 2,145,922 June 2000 9,999,997 9,999,997 Ishoni Networks, Inc, Series C ............ 2,003,607 Nov. 2000 10,000,003 7,499,501 *IQdestination, Series B.................... 1,150,000 Sep. 2000 2,300,000 816,500 *IQdestination, Series C.................... 1,295,775 June 2001 920,000 920,000 Lumeta Corporation, Series A .............. 384,615 Oct. 2000 250,000 250,000 *MediaPrise, Inc., Series A ................ 2,196,193 Sep. 2000 2,000,000 2,000,000 *Pagoo.com, Inc., Series C ................. 3,412,969 July 2000 9,999,999 7,542,661 *Pagoo.com, Inc., Series D ................. 2,098,636 Feb. 2001 4,000,000 4,000,000 Personic Software, Inc., Series F ......... 512,296 May 2000 10,000,000 -
The accompanying notes are an integral part of these financial statements. 7 meVC Draper Fisher Jurvetson Fund I, Inc. Schedule of Investments July 31, 2001 (Unaudited)
Date of Initial Description Shares/Principal Investment Cost Value -------------------------------------------------------------------------------------------------------------------------------- Preferred Stocks (cont.) Personic Software, Inc.: Series G-1 ........................... 38,958 Nov. 2000 $760,460 $ - Series G-1 Warrants, expire 10/31/05.. 973,950 Nov. 2000 - - ProcessClaims, Inc., Series C .............. 6,250,000 June 2001 2,000,000 2,000,000 Safestone Technologies PLC, Series A........ 650,401 Dec. 2000 3,499,157 3,499,157 *ShopEaze Systems, Inc., Series B ........... 2,097,902 May 2000 6,000,000 4,510,489 *Sonexis, Inc. (Formerly eYak, Inc.), Series C 2,590,674 June 2000 10,000,000 10,000,000 Yaga, Inc., Series A ....................... 300,000 Nov. 2000 300,000 600,000 Yaga, Inc.: Series B.............................. 1,000,000 June 2001 2,000,000 2,000,000 Series B Warrants, expire 6/4/08...... 100,000 June 2001 - ----------- ------------ Total Preferred Stocks..................................................... 148,879,632 115,837,103 ----------- ------------ Short-Term Securities-33.68% (b) Corporate Bonds-1.27% Ford Motor Credit Corp. 6.500%, 02/28/2002 ................... 2,500,000 Mar. 2001 2,519,505 2,533,813 General Motors Acceptance Corp. 5.350%, 12/07/2001 ................... 1,000,000 June 2001 1,004,701 1,004,701 ----------- -------------- Total Corporate Bonds 3,524,206 3,538,514 ----------- -------------- Certificates of Deposit-1.93% Commerica BK 5.240%, 01/11/2002 ................... 4,000,000 Jan. 2001 4,000,344 4,003,440 Ontario Province 8.000%, 10/17/2001 ................... 1,400,000 June 2001 1,411,738 1,411,738 ----------- -------------- Total Certificates of Deposit ........................................ 5,412,082 5,415,178 ------------ --------------
The accompanying notes are an integral part of these financial statements. 8 meVC Draper Fisher Jurvetson Fund I, Inc. Schedule of Investments July 31, 2001 (Unaudited)
Date of Initial Description Shares/Principal Investment Cost Value -------------------------------------------------------------------------------------------------------------------------------- U.S. Government & Agency Securities-14.47% Federal Home Loan Banks 6.55%, 09/28/2001 .................... 5,000,000 Oct. 2000 $4,999,944 $5,022,360 Federal Home Loan Banks 5.005%, 12/04/2001 ................... 2,000,000 June 2001 2,007,922 2,009,190 Federal Home Loan Mortgage Corp. 0.00%, 08/16/2001 .................... 6,400,000 Feb. 2001 6,386,800 6,389,760 Federal Home Loan Mortgage Disc. Cons. 0.00%, 09/13/2001 .................... 5,100,000 Mar. 2001 5,072,770 5,077,703 Federal Home Loan Mortgage Disc. Cons. 0.000%, 09/26/2001 ................... 2,700,000 May 2001 2,684,124 2,684,124 Federal Home Loan Mortgage Disc. Cons. 0.000%, 11/16/2001 ................... 6,022,000 July 2001 5,959,354 5,959,353 Federal Home Loan Mortgage Disc. Cons. 0.000%, 11/16/2001 ................... 7,800,000 July 2001 7,697,625 7,698,506 Federal National Mortgage Association 0.000%, 03/05/02 ..................... 5,750,000 July 2001 5,623,040 5,623,040 ------------- ------------- Total U.S. Government & Agency ................ 40,431,579 40,464,036 ------------- ------------- Commercial Paper-16.01% Diageo Cap PLC 3.560%, 10/16/2001 ................... 6,900,000 June 2001 6,848,143 6,848,143 General Electric Cap Corp. 3.940%, 09/10/2001 ................... 7,000,000 May 2001 6,969,356 6,969,356 General Motors Corp. 3.750%, 03/04/02 ..................... 3,500,000 July 2001 3,421,615 3,421,615 Gillette Co. 3.950%, 08/15/2001 ................... 8,450,000 May 2001 8,437,020 8,437,020 International Leasing Finance Corp. 3.530%, 10/19/2001 ................... 3,595,000 July 2001 3,566,600 3,566,600 M&I Marshall & Ilsley Bank 4.320%, 05/02/2002 ................... 7,200,000 May 2001 7,199,475 7,199,475 Paccar Financial Corp. 3.900%, 08/20/2001 ................... 4,050,000 May 2001 4,041,664 4,041,664
The accompanying notes are an integral part of these financial statements. 9 meVC Draper Fisher Jurvetson Fund I, Inc. Schedule of Investments July 31, 2001 (Unaudited)
Date of Initial Description Shares/Principal Investment Cost Value -------------------------------------------------------------------------------------------------------------------------------- Commercial Paper (cont.) UBS Finance, Inc. 3.880%, 09/06/2001 ................... 4,300,000 May 2001 $4,283,316 $4,283,316 ------------ -------------- Total Commercial Paper 44,767,189 44,767,189 ------------ -------------- Total Short Term Securities ............... 94,135,056 94,184,917 ------------ -------------- Cash and Cash Equivalents-25.02% (b) U.S. Government & Agency Securities-2.92% Federal Home Loan Banks Disc. Cons. 0.000%, 08/24/2001.................... 3,385,000 May 2001 3,376,782 3,376,782 Federal Home Loan Mortgage Disc. Cons. 0.000%, 09/20/2001 ................... 4,800,000 July 2001 4,775,600 4,775,600 -------------- --------------- Total U.S. Government & Agency .......... 8,152,382 8,152,382 -------------- --------------- Commercial Paper-22.10% ABB Treasury Centre (USA), Inc. 3.900%, 08/01/2001 ................... 6,154,000 July 2001 6,154,000 6,154,000 American Express Co. 3.540%, 09/20/2001 ................... 6,345,000 May 2001 6,257,027 6,257,027 BellSouth Corp. 3.740%, 08/24/2001 ................... 6,000,000 June 2001 5,985,663 5,985,663 CDC Commercial 3.720%, 08/07/2001.................... 4,880,000 July 2001 4,876,974 4,876,974 Citicorp 3.670%, 08/15/2001.................... 8,050,000 June 2001 8,038,511 8,038,511 Coca Cola Co. 3.800%, 08/20/2001 ................... 5,050,000 June 2001 5,039,872 5,039,872
The accompanying notes are an integral part of these financial statements. 10 meVC Draper Fisher Jurvetson Fund I, Inc. Schedule of Investments July 31, 2001 (Unaudited)
Date of Initial Description Shares/Principal Investment Cost Value -------------------------------------------------------------------------------------------------------------------------------- Commercial Paper (cont.) Harvard University 3.650%, 09/13/2001 ................... 3,135,000 July 2001 $3,121,332 $3,121,332 International Leasing Finance Corp. 3.530%, 10/23/2001 ................... 4,000,000 July 2001 3,967,446 3,967,446 Paccar Financial Corp. 3.850%, 08/13/2001.................... 3,575,000 May 2001 3,570,412 3,570,412 Verizon Global Funding 3.600%, 10/10/2001 ................... 5,000,000 July 2001 4,965,000 4,965,000 Verizon Global Funding 3.540%, 10/23/2001.................... 2,550,000 July 2001 2,529,188 2,529,188 Wells Fargo Financial, Inc. 3.800%, 08/01/2001 ................... 7,325,000 June 2001 7,325,000 7,325,000 ------------- ------------ Total Commercial Paper 61,830,425 61,830,425 ------------- ------------ Money Market Funds-0.00% SSgA Money Market Fund 3.657% ............................... 107 July 2001 107 107 ------------- ------------ Cash-0.00% Cash ................................................................. 5,152 5,152 ------------- ------------ Total Cash and Cash Equivalents ........................................ 69,988,066 69,988,066 ------------- ------------ Total Investments ....................................................... $ 313,002,754 $280,010,086 ============= ============
(a) These securities are restricted from public sale without prior registration under the Securities Act of 1933. The Fund negotiates certain aspects of the method and timing of the disposition of these investments, including registration rights and related costs. (b) Percentages are based on net assets of $279,660,522. * Affiliated Issuers (Total Market Value of $75,539,673): companies in which the Fund owns at least 5% of the voting securities. The accompanying notes are an integral part of these financial statements. 11 meVC Draper Fisher Jurvetson Fund I, Inc. Notes to Financial Statements July 31, 2001 (Unaudited) 1. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended October 31, 2000, as filed with the Securities and Exchange Commission (File No. 814-00201). 2. Concentration of Market Risk Financial instruments that subject the Fund to concentrations of market risk consist principally of preferred stocks, which represent approximately 41.42% of the Fund's net assets. The preferred stocks, as discussed in Note 3, consist of investments in companies with no readily determinable market values and as such are valued in accordance with the Fund's fair value policies. The Fund's investment strategy represents a high degree of business and financial risk due to the fact that the investments include entities with little operating history or entities that possess operations in new or developing industries. These investments are subject to restrictions on resale because they were acquired from the issuer in private placement transactions. 3. Portfolio Investments During the nine months ended July 31, 2001, the Fund invested approximately $28,200,000 in six companies and made five follow-on investments in InfoImage, Inc., IQdestination, Inc., Pagoo.com, Inc., Personic Software, Inc., and Yaga, Inc. of approximately $8,025,000. Changes to and additions to the Fund's individual equity and equity-linked security investments, during the nine months ended July 31, 2001, were comprised of the following: Ishoni Networks, Inc. On November 6, 2000 the Fund entered into approximately a $10,000,000 investment in Ishoni Networks, Inc. ("Ishoni Networks"). The Fund's investment then consisted of 2,003,607 shares of Series C Convertible Preferred Stock (Series C Preferred Stock") at $4.991 per share. The Series C Preferred Stock ranks pari passu, with respect to liquidation preference, to any series of Preferred Stock issued prior to the Series C and senior to the Common Stock. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series C Preferred Stock, as converted to common stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. On July 25, 2001, the Valuation Committee of the Board of Directors marked down the valuation of the Fund's approximately $10,000,000 investment in the Series C Preferred Stock issue of Ishoni Networks by 25%. The Fund's investment now consists of 2,003,607 shares of Series C Preferred Stock at a valuation of $3.743 per share. Personic Software, Inc. On November 28, 2000, the Fund entered into a follow-on investment of approximately $760,000 of Series G1 Convertible Preferred Stock of Personic Software, Inc. ("Personic") The Fund's investment then consisted of 38,958 shares of Series G1 Convertible Preferred Stock ("Series G1 Preferred Stock") at $19.52 per share. The Fund also received 973,950 warrants to purchase 973,950 shares of Common Stock. The warrants expire on October 31, 2005. 12 In conjunction with the Fund's investment in Series G1 Preferred Stock, the outstanding capital stock of Personic, including the Fund's investment in Series G Convertible Preferred Stock ("Series G Preferred Stock") and Series G Warrants, was automatically converted into 0.125 shares of capital stock of the same class or series, with fractional shares being rounded up (the "Recapitalization"). Subsequent to the Recapitalization, the 310,174 shares of Series G Preferred Stock and the 125,000 Series G Warrants, in total, were exchanged for 512,296 shares of Series F Convertible Preferred Stock ("Series F Preferred Stock"). Due to (i) the Valuation Committee of the Board of Directors 50% marked down, on October 27, 2000, of the valuation of the Fund's $10,000,010 investment in the Series G Preferred Stock issue, (ii) the Recapitalization, and (iii) the Exchange, the Fund's investment in Series F Preferred Stock consists of 512,296 shares at a valuation of $9.76 per share. The Series F Preferred Stock ranks equally ("pari passu") to the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock, prior to and in preference to the Common Stock, and junior to the Series AA Preferred Stock and the Series G1 Preferred Stock with respect to Liquidation Preference. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series F Preferred Stock, as converted to Common Stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. The Series G1 Preferred Stock ranks senior to the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and Series F Preferred Stock and the Common Stock, and junior to the Series AA Preferred Stock with respect to liquidation preference. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series G1 Preferred Stock, as converted to Common Stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. On June 13, 2001, the Valuation Committee of the Board of Directors marked down the valuation of the Fund's approximately $10,000,000 investment in the Series F Convertible Preferred Stock issue of Personic by the remaining 50% and marked down the valuation of the Fund's approximately $760,000 investment in the Series G1 Preferred Stock issue of Personic by 100%. The Fund's investment now consists of 512,296 shares of Series F Preferred Stock at a valuation of $0.00 per share, 38,958 shares of Series G1 Preferred Stock at a valuation of $0.00 per share, and 973,950 warrants at a valuation of $0.00 per share. Yaga, Inc. On November 30, 2000 the Fund entered into a $200,000 investment in Yaga, Inc. ("Yaga"). The Fund's investment then consisted of 200,000 shares of Series A Convertible Preferred Stock ("Series A Preferred Stock") at $1.00 per share. The Series A Preferred Stock ranks senior, with respect to liquidation preference, to the Common Stock and any series of Junior Preferred Stock. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series A Preferred Stock, as converted to common stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. On June 8, 2001 the Fund entered into a $2,000,000 investment in Yaga. The Fund's investment consists of 1,000,000 shares of Series B Convertible Preferred Stock ("Series B Preferred Stock") at $2.00 per share. The Fund also received 100,000 warrants to purchase 100,000 shares of Series B Preferred Stock. The warrants expire on June 8, 2004. The Series B Preferred Stock ranks pari passu, with respect to liquidation preference, to the Series A Preferred Stock and senior to the Common Stock and any series of Junior Preferred Stock. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series B Preferred Stock, as converted to common stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. Due to the investment in Series B Preferred Stock at a higher price per share than the Series A Preferred Stock, the value of the Series A Preferred Stock was subsequently marked up in accordance with the valuation policies as set forth in the Fund's Registration Statement. On July 31, 2001, the Fund entered into a $100,000 of Series A Preferred Stock of Yaga. The Fund's investment then consisted of 300,000 shares of Series A Convertible Preferred Stock ("Series A Preferred Stock") at $2.00 per share. 13 Safestone Technologies PLC On December 22, 2000, the Fund entered into approximately $3,500,000 investment in Safestone Technologies PLC ("Safestone"), a UK-incorporated company. The Fund's investment consists of 650,401 shares of Series A Convertible Preferred Stock (Series A Preferred Stock") at $5.38 per share. The Fund's investment also consists of a warrant for the right to subscribe at par for Series A preference shares of (pound)0.01 each in accordance with the terms of the Warrant Agreement dated December 21, 2000. The Series A Preferred Stock ranks senior, with respect to liquidation preference, to the Common Stock and any series of Junior Preferred Stock. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series A Preferred Stock, as converted to common stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. InfoImage, Inc. On January 29, 2001, the Valuation Committee of the Board of Directors marked down the valuation of the Fund's $2,004,480 investment in the Series C Convertible Preferred Stock ("Series C Preferred Stock") issue of InfoImage, Inc. ("InfoImage") by 50%. The Fund's Series C investment then consisted of 432,000 shares of Series C Preferred Stock at a valuation of $2.32 per share and warrants at a valuation of $0.00 per share. On June 8, 2001, the Fund entered into a $345,533 investment in InfoImage. The Fund's investment consists of a Convertible Promissory Note with a face value of $345,533. In connection with the financing, InfoImage has agreed to issue warrants to purchase either (i) a series of preferred stock or (ii) additional shares of common stock, $0.001 par value per share, in connection with future equity financings. Pagoo.com, Inc. On February 26, 2001, the Fund entered into a follow-on investment of approximately $4,000,000 of Series D Convertible Preferred Stock of Pagoo.com, Inc ("Pagoo"). The Fund's investment consists of 2,098,636 shares of Series D Convertible Preferred Stock ("Series D Preferred Stock") at $1.906 per share. The Series D Preferred Stock ranks equally ("pari passu"), with respect to liquidation preference, to the Series A Preferred Stock, the Series B Preferred Stock, and the Series C Preferred Stock and senior to the Common Stock and any series of Junior Preferred Stock. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series D Preferred Stock, as converted to common stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. Due to the investment in Series D Preferred Stock at a lower price per share than the Series C Convertible Preferred Stock ("Series C Preferred Stock"), the value of the Series C Preferred Stock was subsequently marked down. The markdown considers the anti-dilutive covenants of the Series C Preferred Stock as contained in Pagoo's Articles of Incorporation. AuctionWatch.com, Inc. On April 20, 2001, the Valuation Committee of the Board of Directors marked down the valuation of the Fund's $5,500,000 investment in the Series C Convertible Preferred Stock issue of AuctionWatch.com, Inc. ("AuctionWatch") by 25%. The Fund's investment then consisted of 1,047,619 shares of Series C Convertible Preferred Stock at a valuation of $3.94 per share. On July 25, 2001, the Valuation Committee of the Board of Directors marked down the valuation of the Fund's $5,500,000 investment in the Series C Convertible Preferred Stock issue of AuctionWatch.com, Inc. ("AuctionWatch") by another 25%. The Fund's investment now consists of 1,047,619 shares of Series C Convertible Preferred Stock at a valuation of $2.625 per share. Cidera, Inc. On April 20, 2001, the Valuation Committee of the Board of Directors marked down the valuation of the Fund's $7,500,001 investment in the Series D Convertible Preferred Stock issue of Cidera, Inc. ("Cidera") by 14 50%. The Fund's investment now consists of 857,192 shares of Series D Convertible Preferred Stock at a valuation of $4.3748 per share. EXP Systems, Inc. (Formerly EXP.com, Inc.) On April 20, 2001, the Valuation Committee of the Board of Directors marked down the valuation of the Fund's $10,000,001 investment in the Series C Convertible Preferred Stock issue of EXP.com, Inc. ("EXP") by 25%. The Fund's investment now consists of 1,748,252 shares of Series C Convertible Preferred Stock ("Series C Preferred Stock") at a valuation of $4.29 per share. EXP.com, Inc. has changed its name to EXP Systems, Inc. Sonexis, Inc. (Formerly eYak, Inc.) On May 8, 2001 and as a result of its acquisition of Brooktrout Software, eYak, Inc. said that the combined company has changed its name to Sonexis, Inc. Actelis Networks, Inc On May 21, 2001, the Fund entered into an approximately $5,000,000 investment in Actelis Networks, Inc. ("Actelis"). The Fund's investment consists of 1,506,025 shares of Series C Convertible Preferred Stock ("Series C Preferred Stock") at $3.32 per share. The Series C Preferred Stock ranks senior, with respect to liquidation preference, to any series of Preferred Stock issued prior to the Series C and senior to the Common Stock. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series C Preferred Stock, as converted to common stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. DataPlay, Inc On June 4, 2001, the Fund entered into a $7,500,000 investment in DataPlay, Inc. ("DataPlay"). The Fund's investment consists of 2,500,000 shares of Series D Convertible Preferred Stock ("Series D Preferred Stock") at $3.00 per share. The Series D Preferred Stock ranks pari passu, with respect to liquidation preference, to the Series B Preferred Stock and the Series C Preferred Stock and senior the Series A Preferred Stock and Common Stock. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series D Preferred Stock, as converted to common stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. BlueStar Solutions, Inc. (Formerly eOnline, Inc.) On June 13, 2001, eOnline, Inc., changed its name to BlueStar Solutions, Inc. ProcessClaims, Inc. On June 13, 2001, the Fund entered into a $2,000,000 investment in ProcessClaims, Inc. ("ProcessClaims"). The Fund's investment consists of 6,250,000 shares of Series C Convertible Preferred Stock ("Series C Preferred Stock") at $0.32 per share. The Series C Preferred Stock ranks senior, with respect to liquidation preference, to the Series A Preferred Stock and the Series B Preferred Stock and senior the Common Stock. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series C Preferred Stock, as converted to common stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. 15 IQdestination, Inc. On June 27, 2001, the Fund entered into a follow-on investment of $920,000 of Series C Convertible Preferred Stock in IQdestination, Inc. ("IQdestination"). The Fund's investment consists of 1,295,775 shares of Series C Convertible Preferred Stock ("Series C Preferred Stock") at $0.71 per share. The Series C Preferred Stock ranks pari passu, with respect to liquidation preference, to the Series B Preferred Stock and senior the Common Stock and any Junior Preferred Stock. In the event of a Qualified Initial Public Offering ("Qualified IPO"), the Series C Preferred Stock, as converted to common stock, will not be transferred in a public distribution prior to one hundred and eighty days after the date of the final prospectus used in such Qualified IPO. Due to the investment in Series C Preferred Stock at a lower price per share than the Series B Convertible Preferred Stock ("Series B Preferred Stock"), the value of the Series B Preferred Stock was subsequently marked down. Annuncio Software, Inc. On July 25, 2001, the Valuation Committee of the Board of Directors marked down the valuation of the Fund's $5,000,000 investment in the Series E Convertible Preferred Stock issue of Annuncio Software, Inc. ("Annuncio") by 25%. The Fund's investment now consists of 625,000 shares of Series E Convertible Preferred Stock at a valuation of $6.00 per share. Foliofn, Inc. On July 25, 2001, the Valuation Committee of the Board of Directors marked down the valuation of the Fund's $15,000,000 investment in the Series C Convertible Preferred Stock issue of Foliofn, Inc. ("Foliofn") by 25%. The Fund's investment now consists of 5,802,259 shares of Series C Convertible Preferred Stock at a valuation of $1.9389 per share. ShopEaze Systems, Inc. (Formerly ShopEaze.com, Inc.) On July 25, 2001, the Valuation Committee of the Board of Directors marked down the valuation of the Fund's $6,000,000 investment in the Series B Convertible Preferred Stock issue of ShopEaze by 25%. The Fund's investment now consists of 2,097,902 shares of Series B Convertible Preferred Stock at a valuation of $2.15 per share. ShopEaze.com, Inc. has changed its name to ShopEaze Systems, Inc. ("ShopEaze"). 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company and its investment portfolio companies. Words such as may, will, expect, believe, anticipate, intend, could, estimate, might and continue, and the negative or other variations thereof or comparable terminology, are intended to identify forward-looking statements. Forward-looking statements are included in this report pursuant to the "Safe Harbor" provision of the Private Securities Litigation Reform Act of 1995. Such statements are predictions only, and the actual events or results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those relating to investment capital demand, pricing, market acceptance, the effect of economic conditions, litigation and the effect of regulatory proceedings, competitive forces, the results of financing and investing efforts, the ability to complete transactions and other risks identified below or in the Company's filings with the Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. The following analysis of the financial condition and results of operations of the Company should be read in conjunction with the Financial Statements, the Notes thereto and the other financial information included elsewhere in this report. Results of Operations The Fund began operations upon the completion of an initial public offering on March 31, 2000. Its principal investment objective is the realization of long-term capital appreciation from investing primarily in equity and equity-linked debt securities of private companies. Pending the completion of equity and equity-linked debt security investments that meet the Fund's investment objective, available funds are invested in short-term securities. Due to the Company's limited operating history, the financial performance at July 31, 2001, is composed primarily of interest on temporary investments, net of the management fee accrual. Liquidity and Capital Resources At July 31, 2001, the Fund had $115,837,103 of its net assets (the value of total assets less total liabilities) of $279,660,522 invested in portfolio securities of 22 companies and $164,167,831 of its net assets invested in temporary investments consisting of Certificates of Deposit, commercial paper, money market funds, and U.S. government and agency securities. Current balance sheet resources are believed to be sufficient to finance any future commitments. Net cash provided by operating activities was $40,127,450 for the nine months ended July 31, 2001. Net investment income and net realized gains from the sales of portfolio investments are intended to be distributed at least annually. Management believes that its cash reserves and the ability to sell its temporary investments in publicly traded securities are adequate to provide payment for any expenses and contingencies of the Fund. The Fund reserves the right to retain net long-term capital gains in excess of net short-term capital losses for reinvestment or to pay contingencies and expenses. Such retained amounts, if any, will be taxable to the Fund as long-term capital gains, and shareholders will be able to claim their proportionate share of the federal income taxes paid by the Fund on such gains as a credit against their own federal income-tax liabilities. Shareholders will also be entitled to increase the adjusted tax basis of their Fund shares by the difference between their undistributed capital gains and their tax credit. 17 Investment Income and Expenses Net investment income after all operating expenses amounted to $(46,033) for the three months ended July 31, 2001, and $1,933,796 for the nine months ended July 31, 2001. The Adviser receives management fee compensation at an annual rate of 2.5 percent of the average weekly net assets of the Fund, paid monthly in arrears. Such fees amounted to $1,845,235 for the three months ended July 31, 2001, and $5,643,591 for the nine months ended July 31, 2001. Unrealized Appreciation and Depreciation of Portfolio Securities For the nine months ended July 31, 2001, the Fund had a net unrealized depreciation of $28,079,658. Such depreciation resulted mainly from the Board of Directors' decision to mark down the value of the Fund's investments in Annuncio Software, Inc.; AuctionWatch.com, Inc.; Cidera, Inc.; EXP Systems, Inc.; Foliofn, Inc.; InfoImage, Inc.; IQdesination, Inc. (Series B); Ishoni Networks, Inc.; Pagoo.com, Inc. (Series C); Personic Software, Inc. (Series F and G1) and ShopEaze Systems, Inc. Dividends On December 5, 2000, the Fund announced an ordinary income cash dividend of $0.34210 per share, payable on January 3, 2001, to stockholders of record at the close of business on December 8, 2000. The Fund went ex-dividend on December 6, 2000. Distributions can be made payable by the Fund in the form of either a cash distribution or a stock dividend. On the Fund's ex-dividend date, the Fund was trading on the New York Stock Exchange (the "NYSE") at a discount to net asset value. In accordance with the Dividend Reinvestment Plan, the Dividend Distribution Agent purchased shares on the open market of the NYSE for those shareholders electing to take their distributions in the form of stock dividends. Portfolio Investments At July 31, 2001, the cost of equity and equity-linked security investments made by the Fund to date was $148,879,632, and their aggregate market value was estimated to be $115,837,103. Management believes that the companies identified have significant potential for long-term growth in sales and earnings. The Sub-Adviser continuously evaluates opportunities to maximize the valuation of its investments. In that regard the Sub-Adviser will periodically evaluate potential acquisitions, financing transactions, initial public offerings, strategic alliances and sale opportunities involving the Fund's portfolio companies. These transactions and activities are generally not disclosed to the Fund's shareholders and the investing public until such time as the transactions are publicly announced or completed, as the case may be. Any such pending transaction could have an impact on the valuation of an investment, however, which may be adjusted prior to the transaction's being publicly announced or completed. 18 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Fund is subject to financial market risks, including changes in interest rates with respect to its investments in debt securities as well as changes in marketable equity security prices. The Fund does not use derivative financial instruments to mitigate any of these risks. The return on the Fund's investments is generally not affected by foreign-currency fluctuations. The Fund's investment in portfolio securities consists of some fixed-rate debt securities. Because the debt securities are generally priced at a fixed rate, changes in interest rates do not have a direct impact on interest income. The Fund's debt securities are generally held to maturity, and their fair values are determined on the basis of the terms of the debt security and the financial condition of the issuer. Concentrations of market and credit risk exist with respect to debt and equity investments in portfolio companies that are subject to significant risk typical of companies in various stages of start-up. In general, there is no ready market for the Fund's Preferred Stock investments, as they are closely held, they are generally not publicly traded or, in circumstances where an investment is publicly traded, the Fund may be subject to certain trading restrictions for a specified period of time. 19 Part II. Other Information ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On April 12, 2001, the Fund held its Annual Meeting of Shareholders. Of the 16,500,000 shares outstanding and entitled to vote, 13,435,125 were represented at the meeting by proxy or in person. At the meeting the shareholders were asked to re-elect John Grillos and Peter Freudenthal to serve on the Fund's Board of Directors for three-year terms. For John Grillos, 12,797,723 shares voted for his reelection, with 637,401 share votes withheld. For Peter Freudenthal, 12,778,793 shares voted for his reelection, with 656,331 share votes withheld. Both of the directors received a majority of the votes cast and were subsequently reelected as directors of the Fund until 2004. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The required Exhibits are included in this Form 10-Q or have been previously filed in the Company's Registration Statement on Form N-2 (Reg. No. 333-92287). (b) Reports on Form 8-K No reports on Form 8-K were filed by the Fund during the period for which this report is filed. 20 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed by the undersigned, thereunto duly authorized. MEVC DRAPER FISHER JURVETSON FUND I, INC. Date: September 14, 2001 /s/ JOHN M GRILLOS --------------------------------------------- John M. Grillos Chairman, Chief Executive Officer, Director Date: September 14, 2001 /s/ PAUL WOZNIAK --------------------------------------------- Paul Wozniak Vice President, Treasurer, Chief Financial Officer 21