10-K 1 vc6q401.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Year Ended December 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from N/A to N/A --- --- Commission File No. 814-139 TECHNOLOGY FUNDING VENTURE CAPITAL FUND VI, LLC. ------------------------------------------------ (Exact name of Registrant as specified in its charter) Delaware 94-3266666 ------------------------------- --------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1035 Suncast Lane, Suite 122 El Dorado Hills, California 95762 --------------------------------------- -------- (Address of principal executive offices) (Zip Code) (916) 941-7550 -------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Liability Company Investor shares. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- 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 registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] No active market for the shares of the limited liability company investor shares (Shares) exists, and therefore the market value of such Shares cannot be determined. Documents incorporated by reference: Portions of the Prospectus of Technology Funding Venture Capital Fund VI, LLC, as revised June 4, 1998 (accession number 0000950133-98-002220), forming a part of the December 5, 1997 Pre-effective Amendment No. 1 to the Form N-2 Registration Statement No. 333-23913 dated July 11, 1997, filed pursuant to Rule 424(c) of the General Rules and Regulations under the Securities Act of 1933 are incorporated by reference in Parts I and III hereof. PART I Item 1. BUSINESS ------ -------- Technology Funding Venture Capital Fund VI, LLC (the Fund or the Registrant) is a limited liability company organized under the laws of the State of Delaware in February 1997. Through April 25, 2000, the Fund was offering 1,000,000 shares in an aggregate amount of up to $100,000,000. The offering commenced on January 22, 1998, (the Commencement Date). The shares were being offered and sold through Technology Funding Securities Corporation (TFSC), a wholly owned subsidiary of TFI, and a registered member of the National Association of Securities Dealers, Inc. TFSC suspended the offering of shares of the Fund on April 25, 2000 with a total of 5,157 shares sold. The Fund's original contributed capital was $516,216, consisting of $515,700 from investors and $516 from Investment Managers, Technology Funding Ltd. (TFL) and Technology Funding Inc. (TFI). The Investment Managers do not own any shares. In June 2001, the Independent Directors terminated the offering because current market conditions and the small size of the Fund would have made it unlikely that the Fund would ever achieve its investment objectives and directed the Investment Mangers to attempt to sell the Fund's assets to non-affiliates. On March 15, 2002, the Independent Directors recommended a proxy be sent to the Fund's investors requesting immediate dissolution of the Fund. The uncertainties arising from these circumstances raise substantial doubt about the Fund's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. The original purpose of the Fund was to make venture capital investments in emerging growth companies and preserve investor capital through risk management and active involvement with such companies as described in the "Summary of the Offering" and "Business of the Fund" sections of the Prospectus dated June 4, 1998. The Fund has elected to be a business development company under the Investment Company Act of 1940, as amended (the Act), and operates as a non-diversified investment company as that term is defined in the Act. Additional characteristics of the Fund's business are discussed in the "Risk Factors" and "Conflicts of Interest" sections of the Prospectus, which sections are also incorporated herein by reference. The Fund will continue until December 31, 2007, subject to the right of the Independent Directors to extend the term for up to two additional two-year periods, or until dissolution prior thereto. Item 2. PROPERTIES ------ ---------- The Registrant has no material physical properties. Item 3. LEGAL PROCEEDINGS ------ ----------------- There are no material pending legal proceedings to which the Registrant is party or of which any of its property is the subject, other than routine litigation incidental to the business of the Fund. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------ --------------------------------------------------- No matter was submitted to a vote of the holders of Shares of the Fund during 2001. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED ------ ------------------------------------------------- STOCKHOLDER MATTERS ------------------- (a) There is no established public trading market for the Shares. (b) At December 31, 2001, there were 153 shareholders of record. (c) The Registrant, does not pay dividends. Distributions of cash and securities, however, may be made to the investors in the Fund pursuant to the Registrant's Operating Agreement. Item 6. SELECTED FINANCIAL DATA ------ -----------------------

For the Years Ended and as of December 31, ---------------------------- 2001 2000 1999 1998 -------- -------- -------- -------- Investment income $ -- $ -- $ 1,313 $ 5,109 Net investment loss (211,514) (316,362) (250,014) (96,994) Realized losses from impairment write-downs -- (59,997) -- -- Increase (~~Decrease~~decrease) ~~increase~~ in unrealized appreciation (depreciation) of equity investments 45,722 (244,370) 67,209 -- Net decrease in members' equity resulting from operations before cumulative effect of change in accounting principle (165,727) (620,729) (182,805) (96,994) Cumulative effect of change in accounting principle -- -- (40,000) -- Net decrease in members' equity resulting from operations (165,727) (620,729) (222,805) (96,994) Net decrease in members' equity resulting from operations per Share before cumulative effect of change in accounting principle -- (39.31) (44.77) (38.70) Cumulative effect per Share of change in accounting principle -- -- (9.79) -- Net decrease in members' equity resulting from operations per Share -- (39.31) (54.56) (38.70) Total assets 28,204 97,724 349,515 214,692 See Notes 2 and 5 ofto the financial statements for a description of the method of calculation of net decrease in members' equity resulting from operations per Share. See Note 3 for a description of the change in accounting principle.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------ ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- Technology Funding Securities Corporation suspended the offering of shares of the Fund on April 25, 2000. In June 2001, the Independent Directors terminated the offering because current market conditions and the small size of the Fund would have made it unlikely that the Fund would ever achieve its investment objectives and directed the Investment Managers to attempt to sell the Fund's assets to non-affiliates. On March 15, 2002, the Independent Directors recommended a proxy be sent to the Fund's investors requesting immediate dissolution of the Fund. The uncertainties arising from these circumstances raise substantial doubt about the Fund's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Financial Condition, Liquidity and Capital Resources ---------------------------------------------------- The Fund operates as a business development company under the Investment Company Act of 1940 and makes venture capital investments in new and developing companies. The Fund's financial condition is dependent upon the success of the portfolio companies. There is no ready market for many of the Fund's investments. It is possible that some of its venture capital investments may be a complete loss or may be unprofitable and that others will appear likely to become successful, but may never realize their potential. The valuation of the Fund's investments in securities for which there are no available market quotes is subject to the estimate of the Directors of the Fund in accordance with the valuation guidance described in Note 2 to the financial statements. In the absence of readily obtainable market values, the estimated fair value of the Fund's investments may differ significantly from the values that would have been used had a ready market existed. For the year ended December 31, 2001, net cash used by operating activities totaled $115,307. The Fund received advances from the Investment Managers for operating expenses totaling $20,578 and paid $54,643 in compensation to Independent Directors. Payments to vendors for operating expenses totaled $81,242. The Fund had no cash at December 31, 2001. The Investment Managers have made loans to the Fund to finance its recurring losses from on-going operations. The Fund has no cash resources and primarily illiquid assets. The Investment Managers are under no obligation to continue financing the Fund's operation and may elect to discontinue such support at any time during the remaining life of the Fund. Results of Operations --------------------- 2001 compared to 2000 --------------------- The net decrease in members' equity resulting from operations for the years ended December 31, 2001 and 2000, was $165,727 and $620,729, respectively. The decreased loss is primarily due to a decrease in the net unrealized depreciation of equity investments, decreased investment expenses and a decrease in realized losses from impairment write-downs. Unrealized depreciation on equity investments was $131,389 and $177,161 at December 31, 2001 and 2000, respectively. During the year ended December 31, 2001, the $45,772 decrease in unrealized depreciation was primarily attributable to the sale of the Fund's investment in Sanarus Medical, Inc. During the year ended December 31, 2000, the $244,370 decrease in unrealized appreciation of equity investments was primarily attributable to decreases in the value of the Fund's marketable equity securities and the fair value of the Fund's investments in restricted securities. During 2000, the Fund recorded realized losses from impairment write-downs on investments of $59,997, which represents the Fund's total investment in Biex, Inc. Biex, Inc. suspended operations in November 2000 after it was unable to obtain additional financing. There were no impairment write-downs in 2001. Investment expenses totaled $211,514 and $316,362 for the years ended December 31, 2001 and 2000, respectively. The decrease is primarily due to decreased administrative and investor services and decreased professional fees. Given the inherent risk associated with the business of the Fund, the performance of portfolio company investments may significantly impact future operations. 2000 compared to 1999 --------------------- The net decrease in members' equity resulting from operations for the years ended December 31, 2000 and 1999, was $620,729 and $222,805, respectively. The increased loss is primarily due to an increase in the net unrealized depreciation of equity investments, an increase in realized losses from impairment write-downs on investments and increased operating expenses. Unrealized depreciation on equity investments was $177,161 at December 31, 2000, compared to unrealized appreciation on equity investments of $67,209 at December 31, 1999. During the year ended December 31, 2000, the $244,370 decrease in unrealized appreciation of equity investments was primarily attributable to decreases in the value of the Fund's marketable equity securities and the fair value of the Fund's investments in restricted securities. During 1999, the $67,209 increase in unrealized appreciation of equity investments was due to increases in portfolio companies in the communications and information technology industries. During 2000, the Fund recorded realized losses from impairment write-downs on investments of $59,997, which represents the Fund's total investment in Biex, Inc. Biex, Inc. suspended operations in November 2000 after it was unable to obtain additional financing. Investment expenses totaled $316,362 and $251,327 for the years ended December 31, 2000 and 1999, respectively. The increase is primarily due to increased professional fees. Item 7A. 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 and interest bearing cash equivalents 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 does not have a significant exposure to modest public market price fluctuations as the Fund primarily invests in private business enterprises. However, should significant changes in market equity prices occur, there could be a longer-term effect on valuations of private companies, which could affect the carrying value and the amount and timing of gains realized on these investments. Since there is typically no public market for the Fund's investments in private companies, the valuation of the investments is subject to the estimate of the Fund's Directors. In the absence of a readily ascertainable market value, the estimated value of the Fund's investments in private companies may differ significantly from the values that would be placed on the portfolio if a ready market existed. The Fund's portfolio also includes common stocks in publicly traded companies. These investments are directly exposed to equity price risk, in that a hypothetical ten percent change in these equity prices would result in a similar percentage change in the fair value of these securities. Item 8. FINANCIAL STATEMENTS ------ -------------------- The financial statements of the Registrant are set forth in Item 14. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ------ ------------------------------------------------ ACCOUNTING AND FINANCIAL DISCLOSURE ----------------------------------- None PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ------- -------------------------------------------------- The Directors are responsible for the management and administration of the Fund. The Directors consist of three Independent Directors and a representative from each of Technology Funding Ltd., a California limited partnership (TFL), and its wholly owned subsidiary, Technology Funding Inc., a California corporation (TFI). TFL and TFI are the Investment Managers. The Fund has no executive officers. Information concerning the ownership of TFL and the business experience of the key officers of TFI, the partners of TFL and the Independent Directors is incorporated by reference from the sections entitled "Management of the Fund-The Investment Managers", "Management of the Fund-Key Personnel of the Investment Managers" and "Management of the Fund- The Fund Directors" on pages 23 to 25 of the Prospectus as revised June 4, 1998, forming a part of the December 5, 1997 Pre-effective Amendment No 1 to the Form N-2 Registration Statement No 333-23913 dated July 11, 1997. Item 11. EXECUTIVE COMPENSATION ------- ---------------------- The Registrant has no officers. The Fund pays the Investment Managers a management fee for supervising the venture capital operations of the Fund. In 2001, the Fund incurred $10,314 in management fees. As compensation for their services, the Independent Directors each receive $10,000 annually beginning on the Commencement Date as defined in the Partnership Agreement, $1,000 and related expenses for each attended meeting of the Directors and $1,000 and related expenses for each attended committee meeting unless such committee meeting is held on the same day as a meeting of the Directors. For the year ended December 31, 2001, $54,643 of such fees were incurred. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND ------- --------------------------------------------------- MANAGEMENT ---------- Not applicable. No investor beneficially holds more than 5 percent of the aggregate number of shares offered for sale, and neither the Investment Managers nor any of their officers, directors or partners own any shares. None of the Independent Directors own any shares. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ------- ---------------------------------------------- The Registrant, has engaged in no transactions with the Investment Managers or their officers and partners other than as described above, in the notes to the financial statements, or in the Fund's Operating Agreement. Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON ------- ------------------------------------------------------- FORM 8-K -------- (a) List of Documents filed as part of this Annual Report on Form 10-K (1) Financial Statements - the following financial statements are filed as a part of this Report: Report of Independent Public Accountants as of and for the years ended December 31, 2001 and 2000 Independent Auditors' Report for the year ended December 31, 1999 Balance Sheets as of December 31, 2001 and 2000 Statements of Investments as of December 31, 2001 and 2000 Statements of Operations for the years ended December 31, 2001, 2000 and 1999 Statements of Members' Equity for the years ended December 31, 2001, 2000 and 1999 Statements of Cash Flow for the years ended December 31, 2001, 2000 and 1999 Notes to Financial Statements (2) Financial Statement Schedules All schedules have been omitted because they are not applicable or the required information is included in the financial statements or the notes thereto. (3) Exhibits Registrant's Operating Agreement (incorporated by reference to Exhibit A to Registrant's Prospectus dated June 4, 1998 (accession number 0000950133-98-002220), forming a part of the December 5, 1997 pre-effective Amendment No. 1 to the Form N-2 Registration Statement No. 333-23913 dated July 11, 1997 filed pursuant to Rule 424(b) of the General Rules and Regulations under the Securities Act of 1933). (b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the year ended December 31, 2001. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Members of Technology Funding Venture Capital Fund VI, LLC: We have audited the accompanying balance sheets of Technology Funding Venture Capital Fund VI, LLC (a Delaware limited liability company) (the Fund), including the statements of investments, as of December 31, 2001 and 2000, and the related statements of operations, members' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Fund'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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included physical inspection of securities owned as of December 31, 2001 and 2000. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Technology Funding Venture Capital Fund VI, LLC as of December 31, 2001 and 2000, and the results of its operations, changes in members' equity and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming that the Fund will continue as a going concern. As discussed in Note 1 to the financial statements, the small size of the Fund and the termination of the offering of shares raise substantial doubt about its ability to continue as a going concern. The Director's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Los Angeles, California /S/ARTHUR ANDERSEN LLP March 15, 2002 INDEPENDENT AUDITORS' REPORT ---------------------------- The Members Technology Funding Venture Capital Fund VI, LLC: We have audited the accompanying statements of operations, members' equity, and cash flows of Technology Funding Venture Capital Fund VI, LLC (a Delaware limited liability company) for the year ended December 31, 1999. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Technology Funding Venture Capital Fund VI, LLC for the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States of America. Albuquerque, New Mexico /S/KPMG LLP March 29, 2000 BALANCE SHEETS --------------

December 31, ------------------ 2001 2000 ~~1999~~ ---- ---- ASSETS Equity investments (cost basis of $~~219~~159,593 and $~~247~~219,~~977~~593 for ~~2000~~2001 and ~~1999~~2000, respectively) $ 28,204 $ 42,432 ~~315,186~~ Cash and cash equivalents ~~55,292 10,829 Restricted cash~~ -- 2355,~~500~~292 ------- ------- Total assets $ 28,204 $ 97,724 ~~349,515~~ ======= ======= LIABILITIES AND MEMBERS' EQUITY Accounts payable and accrued expenses $ 20,771 $ 19,247 ~~26,734~~ Due to related parties 655,035 559,352 ~~644,455~~ Other liabilities -- 1,000 -- ------- ------- Total liabilities 675,806 579,599 ~~671,189~~ Commitments and contingencies Members' equity (~~Shares outstanding of~~ 5,157 ~~and~~shares ~~4,456~~outstanding) ~~in 2000 and 1999~~(647, ~~respectively~~602) (481,875) ~~(321,674)~~ ------- ------- Total liabilities and members' equity $ 28,204 $ 97,724 ~~349,515~~ ======= =======

The accompanying notes are an integral part of these financial statements. STATEMENTS OF INVESTMENTS -------------------------

Shares December 31, ~~2000~~2001 December 31, ~~1999~~2000 as of ------------------- ------------------- Industry Investment December 31, Cost Fair Cost Fair Company Position Date ~~2000~~2001 Basis Value Basis Value --------- -------- ---------- ----------- ------- ------- ------- ------- Equity Investments ------------------ Communications -------------- ~~Women~~iVillage Inc.~~com~~ ~~Networks,~~ Common 1999- ~~Inc.~~ (c) shares 2000 93,~~345~~061 $ 62,093 2$ 5,~~044~~816 60$ 62,~~480~~093 65$ 2,~~545~~044 Information Technology ---------------------- WorldRes, Inc. (a) (b) Preferred shares 1999 11,157 67,500 13,388 67,500 ~~129~~13,~~644~~388 Medical/Biotechnology --------------------- ~~Biex, Inc. (a) (b) Preferred shares 1999 -- -- -- 59,997 59,997~~ Resolution Sciences Preferred Corporation (a) (b) shares 2000 15,000 30,000 9,000 --30,000 --9,000 Sanarus Medical, Preferred Inc. (a) (b) shares 1999 ~~40,000~~-- ~~60,000~~-- ~~18,000~~-- 60,000 6018,000 ------- ------ ------- ------- Total equity investments $~~219~~159,593 42$28,~~432~~204 ~~247~~$219,~~977~~593 ~~315~~$42,~~186~~432 ======= ====== ======= ======= Legend and footnotes: -- No investment held at end of period. (a) Equity security acquired in a private placement transaction; resale may be subject to certain selling restrictions. (b) Portfolio company is an affiliate of the Fund; resale may be subject to certain selling restrictions. (c) Marketable equity security. (1) The Fund has no income-producing securities.

The accompanying notes are an integral part of these financial statements. STATEMENTS OF OPERATIONS ------------------------

For the Years Ended December 31, ------------------------------- 2001 2000 1999 ~~1998~~ ---- ---- ---- Investment income: Interest income $ -- $ -- $ 1,313 ~~5,109~~ -------- ------- ------- Total investment income -- -- 1,313 ~~5,109~~Investment ~~Costs and~~ expenses: Management fees 10,314 13,118 10,404 ~~7,420~~ Independent Directors' compensation 54,643 47,358 37,526 ~~44,206 Amortization of organizational costs -- -- 10,000 Operating expenses:~~ Investment operations 4,124 33,449 24,969 -- Administrative and investor services 64,635 115,495 113,812 ~~4,068~~ Professional fees 59,276 84,736 44,482 ~~36,409~~ Computer services 18,522 22,206 20,134 -- -----~~---~~ ------- ------- Total ~~operating~~investment expenses ~~255~~211,~~886~~514 ~~203~~316,~~397~~362 40251,~~477~~327 -------- ------- ------- ~~Total~~Net ~~costs~~investment ~~and~~loss ~~expenses~~(211,514) (316,362) ~~251~~(250,~~327~~014) ~~102,103~~ -------- ------- ------- Net ~~investment~~realized ~~loss~~gain ~~(316,362)~~from ~~(250,014)~~sale ~~(96,994)~~of ~~--------~~equity investment 15 --~~-----~~ --~~-----~~ Realized loss from impairment write-downs -- (59,997) -- -- -----~~---~~ ------- ------- Net realized income (loss) 15 (59,997) -- -- -----~~---~~ ------- ------- Net increase (decrease) ~~increase~~ in unrealized appreciation (depreciation) of equity investments 45,772 (244,370) 67,209 -- -----~~---~~ ------- ------- Net decrease in members' equity resulting from operations before cumulative effect of change in accounting principle (165,727) (620,729) (182,805) ~~(96,994)~~ Cumulative effect of change in accounting principle (Note 23) -- -- (40,000) -- -----~~---~~ ------- ------- Net decrease in members' equity resulting from operations $(165,727)$(620,729) $(222,805) ~~(96,994)~~ ======== ======= ======= STATEMENTS OF OPERATIONS (continued) ----------------------------------- For the Years Ended December 31, ------------------------------- 2001 2000 1999 ---- ---- ---- Net decrease in members' equity resulting from operations per Share before cumulative effect of change in accounting principle $ -- $ (39.31)$ (44.77) ~~(38.70)~~ Cumulative effect per Share of change in accounting principle (Note 23) -- -- (9.79) -- -----~~---~~ ------- ------- Net decrease in members' equity resulting from operations per Share $ -- $ (39.31)$ (54.56) ~~(38.70)~~ ======== ======= =======

The accompanying notes are an integral part of these financial statements. STATEMENTS OF MEMBERS' EQUITY ----------------------------

For the years ended December 31, ~~2000~~2001, ~~1999~~2000 and ~~1998~~1999: Deferred Investment Distribution Investors Managers Costs Total --------- ---------- ------------ ----- Members' equity, January 1, ~~1998~~1999 $ 0 0 0 0 Sales of Fund shares 371,000 -- -- 371,000 Investment Managers' capital contributions -- 371 -- 371 Deferred distribution costs -- -- (372,252) (372,252) Net investment loss (96,024) (970) -- (96,994) ------- ------- ------- ------- Members' equity, December 31, 1998 274,976 $ (599) $(372,252) $(97,875) Sales of Fund shares 74,600 -- -- 74,600 Investment Managers' capital contributions -- 80 -- 80 Deferred distribution costs -- -- (75,674) (75,674) Net investment loss (287,114) (2,900) -- (290,014) Net ~~increase~~decrease in unrealized appreciation 66,537 672 -- 67,209 ------- ------- ------- ------- Members' equity, December 31, 1999 128,999 (2,747) (447,926) (321,674) Sales of Fund shares 70,100 -- -- 70,100 Investment Managers' capital contributions -- 65 -- 65 Deferred distribution costs -- -- 390,363 390,363 Net investment loss (101,474) (214,888) -- (316,362) Net realized loss (19,244) (40,753) -- (59,997) Net decrease in unrealized appreciation (78,381) (165,989) -- (244,370) ------- ------- ------- ------- Members' equity, December 31, 2000 $-- 0 (424,312) (57,563) (481,875) Net investment loss -- (211,514) -- (211,514) Net realized income -- 15 -- 15 Net decrease in unrealized depreciation -- 45,772 -- 45,772 ------- ------- ------- ------- Members' equity, December 31, 2001 $ -- $(590,039) $ (57,563) $(647,602) ======= ======= ======= =======

The accompanying notes are an integral part of these financial statements. STATEMENTS OF CASH FLOWS ------------------------

For the years ended December 31, ----------------------------- 2001 2000 1999 ~~1998~~ ---- ---- ---- ~~Cash~~Net ~~flows~~decrease in members' equity resulting from operations $(165,727) $(620,729) $(222,805) Adjustments to reconcile net decrease in members' equity resulting from operations to net cash used by operating activities: ~~Interest~~Net ~~received~~realized $gain from sale of equity investment (15) -- ~~1,313~~-- ~~5,109~~Realized ~~Cash~~losses ~~paid~~from toimpairment ~~vendors~~write-downs ~~(138~~-- 59,~~424~~997 -- Net (decrease) increase in net unrealized depreciation of equity investments (9845,~~470~~772) 244,370 (567,~~304~~209) ~~Cash~~Cumulative ~~paid~~effect toof ~~related~~change ~~parties~~in accounting principle -- -- 40,000 Increase (25decrease) in accounts payable and accrued expenses 524 (6,~~232~~487) ~~Cash~~(8,439) ~~advances~~Increase ~~received~~in ~~from~~due to related parties 95,683 ~~net 105~~289,~~222~~647 64225,~~165~~461 -- -----~~---~~ ------- ------- Net cash used by operating activities (115,307) (33,202) (32,992) ~~(25,427)~~ -------- ------- ------- Cash flows from investing activities: Purchase of equity investments -- (31,613) (247,977) Proceeds from sale of equity investments 60,015 -- -- ------- ------- ------- Net cash provided (used) by investing activities 60,015 (31,613) (247,977) -- -----~~---~~ ------- ------- Cash flows from financing activities: Proceeds from sale of investor shares -- 70,100 74,600 ~~371,000~~ Investment Managers' capital contributions -- 65 80 ~~371~~ Payments for organizational and distribution costs -- (1,087) (1,074) ~~(171,252)~~ Payments from (to) restricted cash -- 23,500 (2,500) ~~(21,000)~~ Proceeds from Investment Manager for investment purchases -- 16,700 67,000 -- -----~~---~~ ------- ------- Net cash provided by financing activities -- 109,278 138,106 ~~179,119~~ -------- ------- ------- ~~Net~~STATEMENTS ~~increase~~OF ~~(decrease)~~CASH inFLOWS ~~cash and cash equivalents 44,463~~ (~~142,863~~continued) ~~153,692 Cash and cash equivalents at beginning of year 10,829 153,692~~ -- -------- ------- ------------------ ~~Cash~~For ~~and~~the ~~cash~~years ~~equivalents~~ended atDecember ~~end of year $ 55~~31,~~292~~ ~~10,829 153,692 ======== ======= ======= STATEMENTS OF CASH FLOWS (continued)~~ -----------------------------~~------~~ ~~Reconciliation~~2001 of2000 ~~net~~1999 decrease in members' equity resulting from operations to net cash used by operating activities: Net decrease in members' equity resulting from operations $(620,729) (222,805) (96,994) Adjustments to reconcile net decrease in members' equity resulting from operations to net cash used by operating activities: Amortization of organizational costs -- -- ~~10,000 Cumulative effect of change in accounting principle~~ -- ~~40,000~~ -- ~~Realized losses from impairment write~~-~~downs 59,997~~ -- -- Net (decrease) (increase) in ~~net~~cash ~~unrealized~~and ~~appreciation~~cash equivalents (~~depreciation~~55,292) ~~of equity investments 244~~44,~~370~~463 (67142,~~209~~863) --Cash ~~Changes~~and incash ~~assets~~equivalents ~~and~~at ~~liabilities~~beginning ~~net~~ of ~~effects~~year ~~from noncash financing activities: Accounts payable and accrued expenses (6~~55,~~487)~~292 (810,~~439)~~829 35153,~~173~~692 ~~Due to related parties 289,647 225,461 26,394~~ -------- ------- ------- ~~Net~~Cash and cash ~~used~~equivalents byat ~~operating~~end ~~activities~~of year $ ~~(33,202)~~-- ~~(32~~$ 55,~~992)~~292 ~~(25~~$ 10,~~427)~~829 ======== ======= ======= Noncash financing activities: (Decrease)increase in deferred distribution costs due to Investment Managers $ -- $ (325,600) $ 74,600 ~~251,000~~ ======== ======= =======

The accompanying notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS ----------------------------- 1. General ------- Technology Funding Venture Capital Fund VI, LLC (the Fund or the Registrant) is a Delaware limited liability company organized in February 1997. The Fund has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the Act). The Fund operates as a nondiversified investment company as defined in the Act. The Fund's investment original objectives were long-term capital appreciation from venture capital investments in emerging growth companies and preservation of investor capital through risk management and active involvement with such companies. The Fund's Investment Managers are Technology Funding Ltd. (TFL) and Technology Funding Inc. (TFI), a wholly owned subsidiary of TFL. Three Independent Directors and two persons affiliated with the Investment Managers (Affiliated Directors) serve as Directors of the Fund. The Investment Managers are responsible for the Fund's investments, subject to the supervision of the Directors. From February 1997 through January 22, 1998, the Fund was inactive. The offering commenced on January 22, 1998, (the Commencement Date). Through April 25, 2000, the Fund was offering 1,000,000 shares in an aggregate amount of up to $100,000,000. The shares were being offered and sold through Technology Funding Securities Corporation (TFSC), a wholly owned subsidiary of TFI, and a registered member of the National Association of Securities Dealers, Inc. TFSC suspended the offering of shares of the Fund on April 25, 2000 with a total of 5,157 shares sold. The Fund's original contributed capital was $516,216, consisting of $515,700 from investors and $516 from Investment Managers, Technology Funding Ltd. (TFL) and Technology Funding Inc. (TFI). The Investment Managers do not own any shares. In June 2001, the Independent Directors terminated the offering because current market conditions and the small size of the Fund would have made it unlikely that the Fund would ever achieve its investment objectives and directed the Investment Mangers to attempt to sell the Fund's assets to non-affiliates. On March 15, 2002, the Independent Directors recommended a proxy be sent to the Fund's investors requesting immediate dissolution of the Fund. The uncertainties arising from these circumstances raise substantial doubt about the Fund's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Fund's fiscal year-end is December 31. The Fund will continue until December 31, 2007, subject to the right of the Directors to extend the term for up to two additional two-year periods, unless dissolved prior thereto. 2. General Summary of Significant Accounting Policies -------------------------------------------------- Preparation of Financial Statements ----------------------------------- The accompanying financial statements have been prepared on the accrual basis of accounting. The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results could differ from those estimates. Estimates include the estimate of fair value of investments, liabilities and contingencies. Because of the inherent uncertainty of valuation, the estimated fair value of investments may differ significantly from the values that would have been used had a ready market for investments existed, and the differences could be material. Valuation of Investments ------------------------- Investments are carried at fair value. Under the direction and control of the Board of Directors, the Management Committee is delegated the authority to establish valuation procedures and periodically apply such procedures to the Fund's investment portfolio. In fulfilling this responsibility, the Management Committee periodically updates and revises the valuation procedures used to determine fair value in order to reflect new events, changing market conditions, more experience with investee companies, or additional information, any of which may require the revision of previous estimating procedures. Unrestricted publicly traded securities are valued at the closing sales price or bid price that is available on a national securities exchange or over-the-counter market. Valuation discounts of 5 percent to 50 percent are applied to public traded securities subject to resale restrictions resulting from Rule 144 or contractual lock-ups, such as those commonly associated with underwriting agreements or knowledge of material non- public information. The fair value of all other investments is determined in good faith by the Management Committee under the delegated authority of the Board of Directors after consideration of available relevant information. There is no ready market for the Fund's investments in private companies or unregistered securities of public companies. Fair value is generally defined as the amount the Fund could reasonably expect to receive for an investment in an orderly disposition based on a current sale. Significant factors considered in the estimation of fair value include the inherent illiquidity of and lack of marketability associated with venture capital investments in private companies or unregistered securities, the investee company's enterprise value established in the last round of venture financing, changes in market conditions since the last round of venture financing or since the last reporting period, the value of a minority interest in the investee company, contractual restrictions on resale typical of venture financing instruments, the investee company's financial position and ability to obtain any necessary additional financing, the investee company's performance as compared to its business plan, and the investee company's progress towards initial public offering. The values determined for the Fund's investments in these securities are based upon available information at the time the good faith valuations are made and do not necessarily represent the amount which might ultimately be realized which could be higher or lower than the reported fair value. At December 31, 2001 and December 31, 2000, the investment portfolio included investments totaling $22,388 and $40,388, respectively, whose fair values were established in good faith by the Management Committee in the absence of readily ascertainable market values. There were no restrictions on publicly traded securities held at December 31, 2001 or 2000. Because of the inherent uncertainty in the valuation, the values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. In the case of an other than temporary decline in value below cost basis, an appropriate reduction in the cost basis is recognized as a realized loss with the new cost basis being adjusted to equal the fair value of the investment. Cost basis adjustments are reflected as "Realized losses from impairment write-downs" on the Statements of Operations. Sales of equity investments are recorded on the trade date. The basis on which cost is determined in computing realized gains or losses is specific identification. Cash and Cash Equivalents ------------------------- Cash and cash equivalents are principally comprised of cash invested in demand accounts and money market instruments and are stated at cost plus accrued interest. The Fund considers all money market and short-term investments with an original maturity of three months or less to be cash equivalents. Deferred Distribution Costs --------------------------- The Fund reimbursed the Investment Managers and Distributors for distribution costs. Distribution costs are limited to 10.5 percent of the offering proceeds. Distribution costs were originally charged to the Fund to the extent capital was raised; such costs charged by related parties were $0 and $70,100 in the years ended December 31, 2001 and 2000, respectively, and $515,700 from inception of the Fund through the suspension of the offering (see Note 1.) Distribution costs charged to the Fund were reduced by $461,550 subsequent to the suspension of the offering since the Directors did not expect additional proceeds to be raised. With the termination of the offering in June 2001, no additional distribution costs will be incurred by the Distributors nor will any additional distribution costs be payable by the Fund. Distribution costs are reflected as a reduction of Members' Equity. Provision for Income Taxes -------------------------- No provision for income taxes has been made by the Fund as the Fund has elected to be treated as a partnership for income tax purposes, and, therefore, the Fund is not directly subject to taxation. The Fund members are to report their respective shares of Fund income or loss on their individual tax returns. The accompanying financial statements are prepared using accounting principles generally accepted in the United States which may not equate to tax accounting. The cost of investments on a tax basis at December 31, 2001 and 2000, was $159,593 and $219,593, respectively. At December 31, 2001 and 2000, gross unrealized appreciation and depreciation on investments based on cost for federal income tax purposes were as follows:

December 31, December 31, 2001 2000 ~~1999~~ ------------ ------------ Unrealized appreciation $ -- ~~67,209~~$ -- Unrealized depreciation (131,389) (177,161) -- ------- ------ Net unrealized (depreciation $(131,389) ~~appreciation~~ $(177,161) ~~67,209~~ ======= =======

Net Decrease in Members' Equity Resulting from ---------------------------------------------- Operations Per Share -------------------- Net decrease in members' equity resulting from operations per share is calculated by dividing the weighted average number of investor shares outstanding for the years ended December 31, 2001, 2000 and 1999, of 5,157, 5,065 and 4,043 shares, respectively, into total net decrease in members' equity resulting from operations allocated to investors. The Investment Managers contributed an amount equal to 0.1 percent of investors' capital contributions and did not receive any shares. 3. Change in Accounting Principle for Organizational Costs ------------------------------------------------------- Effective January 1, 1999, the Fund adopted the provisions of the American Institute of Certified Public Accountants' Statement of Position 98-5, "Reporting on the Costs of Start-up Activities" (SOP 98-5.) SOP 98-5 specifies that organizational costs should be expensed as incurred rather than capitalized and subsequently amortized. The effect of adopting SOP 98-5 on net loss before the cumulative effect of the change in accounting principle for the year ended December 31, 1999 was to reduce the loss by $10,000, or $2.45 per Share. The effect on net loss (including a non-cash charge of $40,000, or $9.79 per share, for the cumulative effect as of January 1, 1999) was an increase of $30,000, or $7.34 per Share. The cumulative effect of this change on the Fund's balance sheet as of January 1, 1999 was to reduce organizational costs by $40,000. The pro forma effect of retroactive application of this accounting principle would have resulted in net loss for the year ended December 31, 1999, of $182,805 and net loss per Share of $44.77. 4. Related Party Transactions -------------------------- Related party costs are included in costs and expenses shown on the Statement of Operations. Related party costs were as follows:

For the Years Ended December 31, -------------------------------- 2001 2000 1999 ------- ------- ------- Management fees $10,314 $13,118 $10,404 Independent Directors' compensation 54,643 47,358 37,526 Reimbursable operating expenses: Investment operations 739 30,379 23,329 Administrative and investor services 45,530 71,364 69,903 Computer services 18,522 22,206 20,134

Management fees are equal to 2 percent of total investor capital contributions for each of the years of Fund operation during the offering period. In subsequent years, the management fees are 2 percent of adjusted capital contributions. Management fees compensate the Investment Managers solely for Investment Manager Overhead (as defined in the Operating Agreement) incurred in supervising the investment operations of the Fund. Management fees due to the Investment Managers were $41,256 and $30,942 at December 31, 2001 and 2000, respectively, and were included in due to related parties. Pursuant to the Operating Agreement, the Fund shall reimburse the Investment Managers for operational costs incurred by the Investment Managers in conjunction with the business of the Fund. Amounts due to related parties for operational costs and cash advances for investment purchases were $613,779 and $528,410 at December 31, 2001 and 2000, respectively. The Fund reimbursed the Investment Managers and Distributors for distribution costs. Distribution costs are limited to 10.5 percent of the offering proceeds. Distribution costs were originally charged to the Fund to the extent capital was raised; such costs charged by related parties were $0 and $70,100 in the years ended December 31, 2001 and 2000, respectively, and $515,700 from inception of the Fund through the suspension of the offering (see Note 1.) Distribution costs charged to the Fund were reduced by $461,550 subsequent to the suspension of the offering since the Directors did not expect additional proceeds to be raised. With the termination of the offering in June 2001, no additional distribution costs will be incurred by the Distributors nor will any additional distribution costs be payable by the Fund. Distribution costs are reflected as a reduction of Members' Equity. As compensation for their services, the Independent Directors each receive $10,000 annually beginning on the Commencement Date plus $1,000 for each of the Directors meetings attended. For the periods ended December 31, 2001, 2000 and 1999, such fees incurred by the Fund were $54,643, $47,358 and $37,526, respectively. Under the terms of a computer service agreement, Technology Administrative Management, a division of TFL, charges the Fund for its share of computer support costs. These amounts are included in computer services expenses. 5. Allocation of Profits and Losses -------------------------------- Net profits and losses of the Fund are allocated as follows: (a) Profits i) First, to those investors and Investment Managers with deficit capital account balances until the deficits have been eliminated; then, ii) Second, to those investors and Investment Managers as necessary to offset net loss previously allocated under (b)(ii) below; then, iii) Third, 80 percent to the investors in proportion to capital account balances, and 20 percent to the Investment Managers. (b) Losses i) First, to the investors and Investment Managers as necessary to offset net profit previously allocated to the investors under (a)(iii) above; then, ii) Second, 99 percent to the investors and 1 percent to the Investment Managers. Losses allocable to investors in excess of their capital account balances are allocated to investors that have positive balances in their capital accounts in proportion to the respective amounts of such positive balances until all such balances have been reduced to zero and thereafter solely to the Investment Managers. Net profit thereafter otherwise allocable to the investors will be allocated to the Investment Managers to the extent of such allocated losses. In no event shall the Investment Managers be allocated less than 1 percent of the net profit of the Fund, plus their pro rata share based on capital contributed. 6. Equity Investments ------------------ All investments are valued at fair value as determined in good faith by the Investment Managers. See Note 2-Valuation of Investments. Restricted Securities --------------------- At December 31, 2001 and 2000, restricted securities had aggregate market values of $22,388 and $40,388, respectively, representing 3.5 percent and 8.4 percent, respectively, of the net liabilities of the Fund. Significant events during 2001 are as follows: iVillage Inc. (formerly Women.com Networks, Inc.) ------------------------------------------------- Effective June 18, 2001, iVillage Inc. acquired Women.com Networks, Inc. In connection with this transaction, the Fund's Women.com shares were exchanged for 3,061 iVillage common shares. The Fund realized a gain of $15 on the sale of fractional shares. Sanarus Medical, Inc. --------------------- In accordance with the directive discussed in Note 1, the Investment Managers sold the Fund's Sanarus shares to an unaffiliated co-investor for their original cost of $60,000 in July 2001. 7. Net Increase (Decrease) in Unrealized Appreciation (Depreciation) ---------------------------------------------------------------- of Equity Investments --------------------- In accordance with the accounting policy as stated in Note 2, the Statements of Operations includes a line item entitled "Net increase (decrease) in unrealized appreciation (depreciation) of equity investments." The table below discloses details of the changes:

For the ~~Year~~Years Ended December 31, -------------------------------- 2001 2000 1999 ------ ------ S>------ Unrealized depreciation from cost of marketable equity ~~securties~~securities $ (56,277) $ (60,049) $ -- Unrealized (depreciation) appreciation from cost of non-marketable equity securities (75,112) (117,112) 67,209 ------- ------- ------ Unrealized (depreciation) appreciation from cost at end of year (131,389) (177,161) 67,209 Unrealized (depreciation) appreciation from cost at beginning of year (177,161) 67,209 -- ------- ------- ------ Net increase (decrease) ~~increase~~ in unrealized appreciation (depreciation) of equity investments $ 45,772 $(244,370) $67,209 ======= ======= ======

8. Cash and Cash Equivalents ------------------------- There were no cash and cash equivalents at December 31, 2001. Cash and cash equivalents at December 31, 2000 consisted of:

2000 ~~1999~~ ------ ~~------~~ Demand account $54,779 ~~9,966~~ Money-market account 513 ~~863~~ ------ ~~------~~ Total cash and cash equivalents $55,292 ~~10,829~~ ====== ~~======~~

9. Commitments and Contingencies ----------------------------- The Fund is involved in various claims and legal actions incident to its operations, which in the opinion of Investment Managers, based upon advice of counsel, will not materially affect the financial position or results of operations of the Fund. 10. Financial Highlights --------------------

SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. TECHNOLOGY FUNDING VENTURE CAPITAL FUND VI, LLC By: TECHNOLOGY FUNDING INC. TECHNOLOGY FUNDING LTD. Investment Managers Date: March 20, 2002 By: /s/Charles R. Kokesh -------------------------------- Charles R. Kokesh President, Chief Executive Officer, Chief Financial Officer and Chairman of Technology Funding Inc. and Managing General Partner of Technology Funding Ltd. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Capacity Date --------- -------- ---- /s/Charles R. Kokesh President, Chief March 20, 2002 ------------------------ Executive Officer, Charles R. Kokesh Chief Financial Officer and Chairman of Technology Funding Inc. and Managing General Partner of Technology Funding Ltd. The above represents a majority of the Board of Directors of Technology Funding Inc. and the General Partners of Technology Funding Ltd.

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