<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 1995
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. 814-55
TECHNOLOGY FUNDING VENTURE PARTNERS IV, AN AGGRESSIVE GROWTH FUND, L.P.
- -----------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 94-3054600
------------------------------ ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2000 Alameda de las Pulgas, Suite 250
San Mateo, California 94403
- ------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(415) 345-2200
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
No active market for the units of limited partnership interests
("Units") exists, and therefore the market value of such Units cannot be
determined.
<PAGE>
I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis
of $28,392,691 and $26,617,314 for
1995 and 1994, respectively) $40,997,257 40,329,977
Notes receivable, net
(cost basis of $223,619 and
$289,339 for 1995 and 1994,
respectively) 189,619 240,339
---------- ----------
Total investments 41,186,876 40,570,316
Cash and cash equivalents 26,623 10,501
Other assets 22,224 25,978
---------- ----------
Total $41,235,723 40,606,795
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 20,563 24,979
Due to related parties 115,959 29,635
Promissory note 1,363,332 --
Short-term borrowings 2,744,780 2,167,868
Other liabilities 91,876 94,822
---------- ----------
Total liabilities 4,336,510 2,317,304
Commitments (Notes 3 and 7)
Partners' capital:
Limited Partners
(Units outstanding of 400,000
for both 1995 and 1994) 21,603,739 21,841,484
Managing General Partners 2,724,908 2,784,344
Net unrealized fair value increase
(decrease) from cost:
Equity investments 12,604,566 13,712,663
Notes receivable (34,000) (49,000)
---------- ----------
Total partners' capital 36,899,213 38,289,491
---------- ----------
Total $41,235,723 40,606,795
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-----------------------------------
1995 1994
---- ----
<S> <C> <C>
Income:
Notes receivable interest $ 41,376 77,074
Short-term investment interest 2,634 16,932
--------- ---------
Total income 44,010 94,006
Costs and expenses:
Management fees 101,517 154,388
Individual general partners'
compensation 7,500 7,500
Amortization of organizational costs -- 1,167
Operating expenses 232,003 301,462
--------- ---------
Total costs and expenses 341,020 464,517
--------- ---------
Net operating loss (297,010) (370,511)
Net realized gain from sales
of equity investments 829 --
Realized losses from
investment write-downs (1,000) (2,500)
--------- ---------
Net realized loss (297,181) (373,011)
Change in net unrealized
fair value:
Equity investments (1,108,097) (1,957,005)
Notes receivable 15,000 (4,000)
--------- ---------
Net loss $(1,390,278) (2,334,016)
========= =========
Net realized loss per Unit $ (1) (1)
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-----------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 36,360 43,972
Interest expense (69,367) --
Cash paid to vendors (43,825) (40,408)
Cash paid to related parties (221,423) (470,126)
Reimbursement of collection expenses
received from a portfolio company 21,311 --
--------- ---------
Net cash used by operating activities (276,944) (466,562)
--------- ---------
Cash flows from investing activities:
Notes receivable issued (62,500) --
Proceeds from the sales of
equity investments 19,253 --
Purchase of equity investments (425,000) (1,604,975)
Repayments of notes receivable 129,401 4,351
--------- ---------
Net cash used by investing activities (338,846) (1,600,624)
--------- ---------
Cash flows from financing activities:
Proceeds from short-term
borrowings, net 576,912 --
Short-term advances from Managing
General Partners 55,000 --
--------- ---------
Net cash provided by
financing activities 631,912 --
--------- ---------
Net increase (decrease) in cash
and cash equivalents 16,122 (2,067,186)
Cash and cash equivalents at
beginning of year 10,501 3,072,847
--------- ---------
Cash and cash equivalents at March 31 $ 26,623 1,005,661
========= =========
Reconciliation of net loss to net
cash used by operating activities:
Net loss $(1,390,278) (2,334,016)
Adjustments to reconcile net loss
to net cash used by
operating activities:
Change in net unrealized fair value
of equity investments 1,108,097 1,957,005
Other changes, net 5,237 (89,551)
--------- ---------
Net cash used by operating activities $ (276,944) (466,562)
========= =========
Non-cash investing activities:
Purchase of equity investments
financed by a promissory note $ 1,363,332 --
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ----------------------------------------
1. General
-------
In the opinion of the Managing General Partners, the Balance Sheets as
of March 31, 1995 and December 31, 1994, and the related Statements of
Operations and Statements of Cash Flows for the three months ended March
31, 1995 and 1994, reflect all adjustments which are necessary for a
fair presentation of the financial position, results of operations and
cash flows for such periods. These statements should be read in
conjunction with the Annual Report on Form 10-K for the year ended
December 31, 1994. The following notes to financial statements for
activity through March 31, 1995 supplement those included in the Annual
Report on Form 10-K.
2. Financing of Partnership Operations
-----------------------------------
The Managing General Partners expect cash received from the liquidation
of Partnership investments and the collection of notes receivable will
provide the necessary liquidity to service Partnership debt and fund
Partnership operations. Until such future proceeds are received, the
Partnership is dependent upon the financial support of the Managing
General Partners to fund operations. The Managing General Partners have
committed to support the Partnership's working capital requirements
through advances as necessary.
3. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs for the three months
ended March 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Management fees $101,517 154,388
Individual general partners' compensation 7,500 7,500
Amortization of organizational cost -- 1,167
Reimbursable operating expenses 143,730 247,453
</TABLE>
Certain reimbursable expenses have been accrued based upon interim
estimates prepared by the Managing General Partners and are adjusted to
actual periodically. Given the Partnership's low cash resources, the
Managing General Partner has deferred collections of reimbursable
operating expenses and made advances to the Partnership to pay other
operating expenses. There was $80,382 due to related parties at March
31, 1995 compared to $3,335 due from related parties at December 31,
1994 related to such expenses.
Amounts payable for management fees were $35,577 and $32,970 at March
31, 1995 and December 31, 1994, respectively. Pursuant to the
Partnership Agreement, beginning February 16, 1994, management fees
changed from two percent per annum of total Limited Partners' capital
contributions to a quarterly fee equal to one quarter of one percent of
the fair value of Partnership assets.
4. Equity Investments
------------------
A full listing of the Partnership's equity investments at December 31,
1994 is in the 1994 Annual Report. Activity from January 1 through
March 31, 1995 consisted of:
<TABLE>
<CAPTION>
January 1 -
March 31, 1995
Principal
Investment Amount or Cost Fair
Industry/Company Position Date Shares Basis Value
- ---------------- -------- --------- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $26,617,314 40,329,977
---------- ----------
Significant changes:
Communications
- --------------
Unitech Telecom, Inc. Convertible
note (1) 05/94 $100,000 (106,040) (106,040)
Unitech Telecom, Inc. Series A
Preferred shares 03/95 46,875 375,000 375,000
Computer Systems and Software
- -----------------------------
Velocity Incorporated Convertible
note (1) 03/95 $125,000 125,042 125,042
Medical/Biotechnology
- ---------------------
SyStemix, Inc. Common shares 1991-1992 133,972 0 (485,648)
Pharmaceuticals
- ---------------
Shaman Pharmaceuticals, Common shares
Inc. 01/93 1,245,194 0 (146,840)
Shaman Pharmaceuticals, Common shares
Inc. 02/95 340,833 1,363,332 907,468
---------- ----------
Total significant changes during the three
months ended March 31, 1995 1,757,334 668,982
Other changes, net 18,043 (1,702)
---------- ----------
Total equity investments at March 31, 1995 $28,392,691 40,997,257
========== ==========
(1) Convertible notes include accrued interest. The interest rate on convertible notes
issued during 1995 ranged from 10% to 12%.
</TABLE>
Marketable Equity Securities
- ----------------------------
At March 31, 1995 and December 31, 1994, marketable equity securities
had aggregate costs of $3,219,766 and $3,238,190, respectively, and
aggregate market values of $4,285,804 and $4,830,873, respectively. The
net unrealized gains at March 31, 1995 and December 31, 1994 included
gross gains of $1,621,816 and $2,153,132, respectively.
Shaman Pharmaceuticals, Inc.
- ----------------------------
In February 1995, the Partnership purchased 340,833 common shares of
Shaman Pharmaceuticals, Inc. at $4.00 per share from Eli Lilly and
Company ("Eli Lilly"). The purchase price of $1,363,332 was financed by
a two-year subordinated promissory note issued by Eli Lilly, secured by
the portfolio assets of the Partnership. The interest rate was 9% at
March 31, 1995; interest expense of $14,455 was recorded. The
Partnership also recorded a decrease in the change in fair value of
$602,704 to reflect the decline in market value at March 31, 1995 for
these marketable, restricted securities.
SyStemix, Inc.
- --------------
The Partnership recorded a decrease in fair value of $485,648 to reflect
the unrestricted market value at March 31, 1995.
Unitech Telecom, Inc.
- ---------------------
In March 1995, the Partnership purchased 46,875 Series A Preferred
shares from the company at a total cost of $375,000. The purchase price
consisted of $275,000 in cash and the conversion of a $100,000 note
issued in May 1994.
Velocity Incorporated
- ---------------------
In March 1995, the Partnership issued a convertible note of $125,000 to
the company and received warrants to purchase 12,500 common shares at an
exercise price of $1.00 per share.
5. Notes Receivable, Net
---------------------
Activity from January 1, 1995 through March 31, 1995 consisted of:
<TABLE>
<S> <C>
Balance at January 1, 1995 $ 240,339
1995 activity:
Notes receivable issued 62,500
Repayments of notes receivable (129,401)
Decrease in allowance for loan losses 15,000
Other activity, net 1,181
-------
Total notes receivable, net, at March 31, 1995 $189,619
=======
</TABLE>
The Partnership had accrued interest of $14,768 and $13,713 at March 31,
1995 and December 31, 1994, respectively.
Activity in the allowance for loan losses was as follows:
<TABLE>
<S> <C>
Balance at January 1, 1995 $ 49,000
Change in net unrealized fair value of
notes receivable (15,000)
------
Balance at March 31, 1995 $ 34,000
======
</TABLE>
The allowance for loan losses is adjusted quarterly based upon changes
to the portfolio size and risk profile. Although the allowance is
established by evaluating individual debtor repayment ability, the
allowance represents the Managing General Partners' assessment of the
portfolio as a whole.
6. Short-Term Borrowings
---------------------
The Partnership has borrowing accounts with two financial institutions.
At March 31, 1995, the outstanding balance was $2,744,780; the
Partnership may not make additional draws based on current collateral
values. The maximum and weighted-average amounts outstanding during the
quarter were $2,744,780 and $2,482,557, respectively. The interest
rates for the two accounts at March 31, 1995 were 8.5% and 9.5% with
weighted-average interest rates of 8.32% and 9.32%, respectively.
Interest expense of $54,912 was recorded. The Partnership's investments
in Shaman Pharmaceuticals, Inc. and SyStemix, Inc are pledged as
collateral.
7. Commitments
-----------
The Partnership is a party to financial instruments with off-balance-
sheet risk in the normal course of its business. Generally, these
instruments are commitments for future equity fundings, venture capital
limited partnership investments, equipment financing commitments, or
accounts receivable lines of credit that are outstanding but not
currently fully utilized. As they do not represent current outstanding
balances, these unfunded commitments are properly not recognized in the
financial statements. At March 31, 1995, the Partnership had unfunded
commitments of $331,150 related to venture capital limited partnership
investments.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
During the three months ended March 31, 1995, net cash used by
operations totaled $276,944. The Partnership paid management fees of
$98,910 to the Managing General Partners and reimbursed related parties
for operating expenses of $115,013. In addition, $7,500 was paid to the
individual general partners as compensation for their services. Other
operating expenses of $43,825 were paid and interest income of $36,360
was received. The Partnership also paid interest of $69,367 on
borrowings and received $21,311 in reimbursement from a portfolio
company for collection expenses. Given the Partnership's low cash
resources, the Managing General Partner has advanced $55,000 to the
Partnership to pay certain operating expenses; and collection by
Managing General Partners of reimbursable expenses has been deferred.
During the three months ended March 31, 1995, the Partnership issued
$62,500 in notes receivable to a portfolio company in the computer
systems and software industry and funded equity investments of $425,000
primarily to portfolio companies in the communications and computer
systems and software industries. Repayments of notes receivable
provided cash of $129,401 and proceeds from the sales of equity
investments were $19,253.
The Partnership had borrowing accounts with two financial institutions.
At March 31, 1995, the outstanding balance was $2,744,780; the
Partnership may not make additional draws based on current collateral
values. The maximum and weighted average amounts outstanding during the
first quarter of 1995 were $2,744,780 and $2,482,557, respectively. The
Partnership's investments in SyStemix, Inc. and Shaman Pharmaceuticals,
Inc. are pledged as collateral.
Cash and cash equivalents at March 31, 1995 were $26,623. At March 31,
1995, the Partnership was committed to fund venture capital limited
partnership investments totaling $331,150. Future interest income
earned on notes receivable, proceeds from investment sales and General
Partners support are expected to be adequate to fund Partnership
operations through the next twelve months.
Results of Operations
- ---------------------
Current quarter compared to corresponding quarter in the preceding year
- -----------------------------------------------------------------------
Net loss was $1,390,278 for the three months ended March 31, 1995
compared to $2,334,016 during the same period in 1994. The change was
primarily due to a $848,908 increase in the change in net unrealized
fair value of equity investments, a $69,459 decrease in operating
expenses, and a $52,871 decrease in management fees. These changes were
partially offset by a $49,996 decrease in total income.
During the quarter ended March 31, 1995, the decrease in fair value of
$1,108,097 was primarily attributable to portfolio companies in the
pharmaceuticals and medical/biotechnology industries. During the same
quarter in 1994, the decrease of $1,957,005 was primarily due to
portfolio companies in the pharmaceuticals and communications
industries, partially offset by a portfolio company in the computer
systems and software industry.
Total operating expenses were $232,003 and $301,462 for the quarters
ended March 31, 1995 and 1994, respectively. The decrease was primarily
due to decreases in administrative and investor services and investment
operations expenses from decreased overall portfolio activities,
partially offset by an increase in interest expense from short-term
borrowings.
The Partnership incurred management fees of $101,517 and $154,388 during
the three months ended March 31, 1995 and 1994, respectively. Pursuant
to the Partnership Agreement, management fees were two percent per annum
of total Limited Partner capital contributions until February 15, 1994.
Beginning February 16, 1994, quarterly management fees are equal to one
quarter of one percent of the fair value of Partnership assets.
Total income was $44,010 and $94,006 in 1995 and 1994, respectively.
The decrease was primarily due to lower outstanding convertible and
secured notes receivable balances.
Given the inherent risk associated with the business of the Partnership,
the future performance of the portfolio company investments may
significantly impact future operations.
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Partnership during the
quarter ended March 31, 1995.
(b) Financial Data Schedule for the quarter ended and as of March 31,
1995 (Exhibit 27).
<PAGE>
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 PARTNERS IV,
AN AGGRESSIVE GROWTH FUND, L.P.
By: TECHNOLOGY FUNDING INC.
Managing General Partner
Date: May 12, 1995 By: /s/Frank R. Pope
-------------------------------------------
Frank R. Pope
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<PERIOD-TYPE> 3-MOS
<INVESTMENTS-AT-COST> 28,616,310
<INVESTMENTS-AT-VALUE> 41,186,876
<RECEIVABLES> 0
<ASSETS-OTHER> 22,224
<OTHER-ITEMS-ASSETS> 26,623
<TOTAL-ASSETS> 41,235,723
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,336,510
<TOTAL-LIABILITIES> 4,336,510
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,328,647
<SHARES-COMMON-STOCK> 400,000
<SHARES-COMMON-PRIOR> 400,000
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,570,566
<NET-ASSETS> 36,899,213
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 44,010
<OTHER-INCOME> 0
<EXPENSES-NET> 341,020
<NET-INVESTMENT-INCOME> (297,010)
<REALIZED-GAINS-CURRENT> (171)
<APPREC-INCREASE-CURRENT> (1,093,097)
<NET-CHANGE-FROM-OPS> (1,390,278)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,390,278)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 101,517
<INTEREST-EXPENSE> 69,367
<GROSS-EXPENSE> 342,220
<AVERAGE-NET-ASSETS> 37,594,352
<PER-SHARE-NAV-BEGIN> 55
<PER-SHARE-NII> (1)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 54
<EXPENSE-RATIO> .01
<AVG-DEBT-OUTSTANDING> 3,133,927
<AVG-DEBT-PER-SHARE> 8
<FN>
<F1>
A zero value is used since the change in net unrealized fair value is
not allocated to General Partners and Limited Partners as it is not
taxable. Only taxable gains or losses are allocated in accordance with
the Partnership Agreement.
</FN>
</TABLE>
