<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 quarterly period ended June 30, 1996
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 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
No active market for the 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)
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis
of $23,115,555 and $24,932,960 for
1996 and 1995, respectively) $43,329,866 42,711,618
Secured notes receivable, net
(cost basis of $49,906 and
$67,826 for 1996 and 1995,
respectively) 49,906 67,826
---------- ----------
Total investments 43,379,772 42,779,444
Cash and cash equivalents 41,052 274,980
Other assets 9,748 11,347
---------- ----------
Total $43,430,572 43,065,771
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 42,484 22,993
Due to related parties 91,755 856,733
Promissory notes 1,605,332 1,363,332
Short-term borrowings 266,639 2,902,626
Interest payable 6,860 29,209
Other liabilities 54,977 60,640
---------- ----------
Total liabilities 2,068,047 5,235,533
Commitments and contingencies
(Notes 2 and 7)
Partners' capital:
Limited Partners
(Units outstanding of 400,000
for both 1996 and 1995) 19,059,393 18,182,086
Managing General Partners 2,088,821 1,869,494
Net unrealized fair value increase
from cost of equity investments 20,214,311 17,778,658
---------- ----------
Total partners' capital 41,362,525 37,830,238
---------- ----------
Total $43,430,572 43,065,771
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
------------------------------ --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Notes receivable interest $ 20,872 39,306 49,756 80,682
Short-term investment interest 966 3,224 2,078 5,858
--------- --------- --------- ----------
Total income 21,838 42,530 51,834 86,540
Costs and expenses:
Management fees 101,515 103,089 209,179 204,606
Individual General Partners'
compensation 15,186 14,977 22,995 22,477
Operating expenses 360,190 306,770 590,871 538,773
--------- --------- --------- ----------
Total costs and expenses 476,891 424,836 823,045 765,856
--------- --------- --------- ----------
Net operating loss (455,053) (382,306) (771,211) (679,316)
Net realized gain (loss) from
sales of equity investments 1,521,645 (430,449) 2,944,936 (429,620)
Recoveries from investments
previously written off -- 42,582 -- 42,582
Realized losses from
investment write-downs (1,000,000) (770,184) (1,077,091) (771,184)
--------- --------- --------- ----------
Net realized income (loss) 66,592 (1,540,357) 1,096,634 (1,837,538)
Change in net unrealized
fair value:
Equity investments 3,696,991 4,272,576 2,435,653 3,164,479
Secured notes receivable 372,000 25,000 -- 40,000
--------- --------- --------- ----------
Net income $ 4,135,583 2,757,219 3,532,287 1,366,941
========= ========= ========= ==========
Net realized (loss) income per Unit $ -- (3) 2 (4)
========= ========= ========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 16,697 69,416
Interest expense (158,001) (162,145)
Cash paid to vendors (74,093) (125,629)
Cash paid to related parties (1,362,851) (512,156)
Reimbursement of collection expenses
received from a portfolio company -- 21,311
--------- ---------
Net cash used by operating activities (1,578,248) (709,203)
--------- ---------
Cash flows from investing activities:
Secured notes receivable issued (640,000) (62,500)
Purchase of equity investments (1,444,276) (663,334)
Repayments of secured notes receivable 19,419 239,376
Repayments of equity investments 58,000 125,000
Proceeds from sales of equity
investments 5,727,476 775,842
Distributions from venture capital
limited partnerships 17,688 --
--------- ---------
Net cash provided by
investing activities 3,738,307 414,384
--------- ---------
Cash flows from financing activities:
Short-term advances from Managing
General Partners -- 282,000
Repayment of short-term advances from
Managing General Partners -- (282,000)
(Repayments of) proceeds from short-
term borrowings, net (2,393,987) 639,099
--------- ---------
Net cash (used) provided by
financing activities (2,393,987) 639,099
--------- ---------
Net (decrease) increase in cash
and cash equivalents (233,928) 344,280
Cash and cash equivalents at
beginning of year 274,980 10,501
--------- ---------
Cash and cash equivalents at June 30 $ 41,052 354,781
========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)(continued)
- -----------------------------------------------
<TABLE>
<CAPTION> For the Six Months Ended June 30,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
Reconciliation of net income to net
cash used by operating activities:
Net income $ 3,532,287 1,366,941
Adjustments to reconcile net income
to net cash used by
operating activities:
Realized losses from investment
write-downs 1,077,091 771,184
Net realized gain (loss) from sales
of equity investments (2,944,936) 429,620
Recoveries from investments
previously written off -- (42,582)
Change in net unrealized fair value:
Equity investments (2,435,653) (3,164,479)
Secured notes receivable -- (40,000)
Other, net -- (250)
Changes in:
Accrued interest on secured and
convertible notes receivable (35,137) (16,874)
Due to related parties (764,978) (2,810)
Other changes, net (6,922) (9,953)
--------- ---------
Net cash used by operating activities $(1,578,248) (709,203)
========= =========
Non-cash investing activities:
Reclassification of secured notes to
equity investments (subordinated
notes) $ 640,000 --
========== =========
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 June 30, 1996, and December 31, 1995, and the related Statements of
Operations for the three and six months ended June 30, 1996 and 1995,
and Statements of Cash Flows for the six months ended June 30, 1996 and
1995, 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,
1995. The following notes to financial statements for activity through
June 30, 1996, supplement those included in the Annual Report on Form
10-K. Certain 1995 balances have been reclassified to conform with the
1996 financial statement presentation. Allocation of income and loss to
Limited and General Partners is based on cumulative income and loss.
Adjustments, if any, are reflected in the current quarter balances.
2. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs for the six months ended
June 30, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Management fees $209,179 204,606
Individual General Partners' compensation 22,995 22,477
Reimbursable operating expenses 365,699 282,263
</TABLE>
Certain reimbursable expenses have been accrued based upon interim
estimates prepared by the Managing General Partners and are adjusted to
actual periodically. There were $57,917 and $818,386 due to related
parties at June 30, 1996, and December 31, 1995, respectively, related
to such expenses.
Amounts payable for management fees were $33,838 and $38,347 at June 30,
1996, and December 31, 1995, respectively. Pursuant to the Partnership
Agreement, quarterly management fees are equal to one quarter of one
percent of the fair value of Partnership assets.
3. Equity Investments
------------------
A full listing of the Partnership's equity investments at December 31,
1995, is in the 1995 Annual Report. Activity from January 1 through
June 30, 1996, consisted of:
<TABLE>
<CAPTION>
January 1 -
June 30, 1996
--------------
Principal
Investment Amount or Cost Fair
Industry/Company Position Date Shares Basis Value
- ---------------- -------- --------- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $24,932,960 42,711,618
---------- ----------
Significant changes:
Communications
- --------------
Coded Communications Common
Corporation shares 04/93 145,454 (77,091) (87,999)
Pinterra Corporation Convertible
note (1) 03/96 $125,000 128,194 128,194
Wire Networks, Inc. Series A
Preferred shares 02/96 6,098 8,232 8,232
Wire Networks, Inc. Series B
Preferred shares 02/96 7,452 16,767 16,767
Computer Systems and Software
- -----------------------------
Clarify, Inc. Common 02/96&
shares 06/96 1,509 54,864 71,564
Reflection Technology, Series F
Inc. Preferred shares 01/94 28,572 0 (30,000)
Reflection Technology, Common
Inc. shares 05/94 19,567 0 (20,546)
Reflection Technology, Series D
Inc. Preferred shares 11/94 869,565 0 (913,044)
Reflection Technology, Series G
Inc. Preferred shares 11/94 172,877 0 (158,130)
Reflection Technology, Series D
Inc. Preferred shares 11/94 163,043 0 (171,195)
Reflection Technology, Series I
Inc. Preferred shares 11/95 40,322 (124,998) (124,998)
Reflection Technology, Common share
Inc. warrant at $.50;
expiring 04/01 04/96 359,750 0 557,613
Reflection Technology, Series J
Inc. Preferred shares 05/96 547,918 1,123,232 1,123,232
Velocity Series A
Incorporated Preferred shares 10/94 6,286,325 (1,000,000) (1,034,337)
Velocity Subordinated 08/95-
Incorporated notes (1) 10/95 $125,000 0 (125,000)
Velocity Subordinated 01/96-
Incorporated notes (1) 06/96 $760,000 760,000 760,000
Environmental
- -------------
Thermatrix, Inc. Series B
Preferred shares 04/91 1,756,204 (1,318,453) (4,390,510)
Thermatrix, Inc. Common
shares 04/91 387 (347) (968)
Thermatrix, Inc. Series B
Preferred shares 12/92 1,272,967 (1,272,967) (3,182,418)
Thermatrix, Inc. Common
shares 07/94 120 (30) (300)
Thermatrix, Inc. Series D
Preferred shares 11/94 323,120 (807,800) (807,800)
Thermatrix, Inc. Common
shares 06/96 1,163,764 3,399,597 10,965,275
Medical/Biotechnology
- ---------------------
Biex, Inc. Series C
Preferred shares 04/96 83,333 83,333 83,333
Cardiometrics, Common
Incorporated shares 11/95 359,748 0 125,917
CV Therapeutics, Inc. Series G
Preferred shares 03/96 31,722 27,279 62,810
CV Therapeutics, Inc. Common share
warrant at $.25;
expiring 03/99 03/96 47,583 36,165 83,270
Everest & Jennings Common
International Ltd. shares 01/94 59,272 0 (72,608)
Inhale Therapeutic Common
Systems, Inc. shares 03/96 6,270 105,023 111,920
Molecular Geriatrics Series B
Corporation Preferred shares 09/93 250,000 (125,000) (125,000)
Molecular Geriatrics Common
Corporation shares 01/96 23,585 125,000 47,170
Physiometrix, Inc. Common 01/94-
shares 05/94 338 (375,054) (1,690)
Physiometrix, Inc. Series D 01/94 &
Preferred shares 02/94 338,150 (114,971) (1,690,750)
Physiometrix, Inc. Common
shares 04/96 270,791 490,025 1,624,746
SyStemix, Inc. Common shares 1991-1992 130,972 (54,690) 260,649
Pharmaceuticals
- ---------------
Shaman Pharmaceuticals, Common
Inc. shares 01/93 409,167 (2,689,338) (4,086,552)
Shaman Pharmaceuticals, Common
Inc. shares 02/95 340,833 0 852,052
Retail/Consumer Products
- ------------------------
YES! Entertainment Common
Corporation shares 06/95 66,666 0 416,996
Venture Capital Limited Partnership Investments
- -----------------------------------------------
Various Limited Partnership
Interests various $2,148,764 (211,903) 282,225
---------- ----------
Total significant changes during the six
months ended June 30, 1996 (1,814,931) 558,120
Other changes, net (2,474) 60,128
---------- ----------
Total equity investments at June 30, 1996 $23,115,555 43,329,866
========== ==========
(1) Convertible and subordinated notes include accrued interest. The interest rates on such notes
issued during 1996 ranged from 8% to 12%.
</TABLE>
Marketable Equity Securities
- ----------------------------
At June 30, 1996, and December 31, 1995, marketable equity securities
had aggregate costs of $7,873,443 and $9,362,396, respectively, and
aggregate market values of $15,463,349 and $14,529,511, respectively.
The net unrealized gains at June 30, 1996, and December 31, 1995,
included gross gains of $8,511,260 and $6,130,033, respectively.
Biex, Inc.
- ----------
In April of 1996, the Partnership made an additional investment in Biex,
Inc. by purchasing 83,333 Series C Preferred shares for a total cost of
$83,333.
Coded Communications Corporation
- --------------------------------
During the first quarter of 1996, the Managing General Partners
determined that there had been an other than temporary decline in fair
value of the Partnership's investment. As a result, the investment was
written down by $77,091. The Partnership also recorded a decrease in
fair value of $87,999 to reflect the unrestricted market value at June
30, 1996.
CV Therapeutics, Inc.
- ---------------------
In March of 1996, the Partnership made an additional investment in the
company by purchasing 31,722 Series G Preferred shares and a warrant for
47,583 common shares for a total cost of $63,444. The fair values above
reflect the valuation of this financing, which resulted in an increase
in the change in fair value of $82,636.
Molecular Geriatrics Corporation
- --------------------------------
In January of 1996, the company converted its Series B Preferred shares
into common shares and then effected a reverse stock split.
Consequently, the Partnership's Series B investment became 23,585 common
shares.
In June of 1996, the company completed a Series C Preferred round of
financing in which the Partnership did not participate. The pricing of
this round indicated a $77,830 fair value decrease in the Partnership's
investments.
Physiometrix, Inc.
- ------------------
In April of 1996, the Partnership completed its initial public offering
("IPO"). Prior to the IPO, the company effected a reverse stock split
resulting in the Partnership's common and Preferred shares being
converted into 270,791 common shares while the common share warrant was
canceled. At June 30, 1996, the Partnership recorded a decrease in the
change in fair value of $67,694 to reflect the publicly-traded market
price of its investments; the fair value was adjusted to reflect a 25%
discount for restricted securities.
Pinterra Corporation (formerly Terrapin, Inc.)
- ----------------------------------------------
In June of 1996, the Partnership issued a $125,000 convertible note to
the company.
Reflection Technology, Inc.
- ---------------------------
During the first quarter of 1996, the Partnership issued $961,500 in
convertible notes receivable to the company and received a warrant to
purchase 359,750 common shares at $.50 per share.
Then in April of 1996, the Partnership purchased 486,943 Series J
Preferred shares with $23,500 in cash and by converting the notes
discussed above including accrued interest of $13,234 for a total cost
of $998,234. The Partnership's Series I Preferred shares were also
exchanged for 60,975 Series J Preferred shares.
The pricing of the Series J Preferred round resulted in a $735,302
decrease in the change in fair value of the Partnership's investments.
Shaman Pharmaceuticals, Inc.
- ----------------------------
During the first half of 1996, the Partnership sold 811,027 common
shares of Shaman Pharmaceuticals, Inc., for total proceeds of $5,635,825
and realized a gain of $2,946,487. The Partnership recorded a decrease
in the change in fair value of $545,162. The change included a decrease
of $2,420,132 due to the sale mentioned above, partially offset by an
increase in market price at June 30, 1996, for its remaining
unrestricted shares valued at $6,599,970.
SyStemix, Inc.
- --------------
In May of 1996, the Partnership sold 3,000 SyStemix common shares for
total proceeds of $57,195 and realized a gain of $2,505. The
Partnership also recorded an increase in fair value of $260,649 to
reflect the unrestricted market value of $2,330,516 at June 30, 1996,
for its remaining shares.
Thermatrix, Inc.
- ----------------
In June of 1996, the company completed its IPO. Prior to the IPO, the
company effected a reverse stock split resulting in the Partnership's
common and Preferred shares being converted into 1,163,764 common
shares. At June 30, 1996, the Partnership recorded an increase in the
change in fair value of $2,583,279 to reflect the publicly-traded market
price of its investments; the fair value was adjusted to reflect a 25%
discount for restricted securities.
Velocity Incorporated
- ---------------------
During the first six months of 1996, the Partnership issued $120,000 in
subordinated notes to continue company operations and reclassified
secured notes receivable of $640,000 to subordinated notes.
During the second quarter of 1996, the Managing General Partners
determined that there has been an other than temporary decline in value
for the Partnership's preferred stock investment. As a result, a
realized loss of $1,000,000 was recorded. The Partnership also recorded
a decrease in fair value of $339,337 for its investment.
Wire Networks, Inc.
- -------------------
In February of 1996, the Partnership invested in the company by
purchasing 6,098 Series A Preferred shares and 7,452 Series B Preferred
shares for $8,232 and $16,767, respectively.
Venture Capital Limited Partnership Investments
- -----------------------------------------------
The Partnership recorded a cost basis decrease of $211,903 in venture
capital limited partnership investments during the six months ended June
30, 1996. The decrease was a result of returns of capital in the form
of stock and cash distributions of $236,715 and $17,688, respectively,
partially offset by additional contributions of $42,500. The
Partnership recorded a fair value increase of $282,225 as a result of a
net increase in the fair value of the underlying investments, partially
offset by the effects of the transactions described above.
The stock distributions in the first half of 1996 consisted of Clarify,
Inc., Conceptus, Inc., Euphonix, Inc., Inhale Therapeutic Systems, Inc.,
and Mylex, Inc. with fair values of $54,864, $38,513, $37,125, $105,023
and $1,190, respectively. In June of 1996, the Partnership sold its
position in Conceptus, Inc. for total proceeds of $34,456.
Other Equity Investments
- ------------------------
Other significant changes during the six months ended June 30, 1996,
reflected above relate to market value fluctuations or the elimination
of a discount relating to selling restrictions for publicly-traded
portfolio companies. The Partnership's YES! Entertainment Corporation
shares are restricted.
4. Secured Notes Receivable, Net
-----------------------------
Activity from January 1, 1996, through June 30, 1996, consisted of:
<TABLE>
<S> <C>
Balance at January 1, 1996 $ 67,826
1996 activity:
Secured notes receivable issued 640,000
Repayments of secured notes receivable (19,419)
Reclassification of secured notes to
equity investments (640,000)
Increase in accrued interest 1,499
-------
Total secured notes receivable, net, at June 30, 1996 $ 49,906
=======
</TABLE>
The Partnership had accrued interest of $20,176 and $18,677 at June 30,
1996, and December 31, 1995, respectively.
There was no allowance for loan loss recorded at June 30, 1996.
Refer to Note 3, Equity Investments, for additional information
regarding the reclassification of notes.
5. Promissory Notes
----------------
At June 30, 1996, and December 31, 1995, the Partnership had promissory
notes to unaffiliated private parties of $1,605,332 and $1,363,332,
respectively. The 1996 balance consisted of two notes with outstanding
balances of $1,363,332 and $242,000 and maturity dates of February,
1997, and December, 1996, respectively. The $1,363,332 note is
subordinated to the Partnership's short-term borrowings and is
collateralized by the Partnership's assets. The combined weighted
average interest rate for the two notes during the quarter ended June
30, 1996, was 7.13%. Interest expense of $63,803 was recorded in 1996.
6. Short-Term Borrowings
---------------------
The Partnership has borrowing accounts with two financial institutions.
During the first half of 1996, the Partnership made a net repayment of
$2,393,987 to both financial institutions with proceeds from the sale of
Shaman Pharmaceuticals, Inc., common stock. At June 30, 1996, the
combined outstanding balance was $266,639. The borrowing capacity of
these accounts, which fluctuates based on collateral value, totaled
$4,414,998 at June 30, 1996. The combined weighted average interest
rate for the two accounts during the six months ended June 30, 1996, was
7.55%. Interest expense of $71,849 was recorded in 1996. The
Partnership's investments in Shaman Pharmaceuticals, Inc., and SyStemix,
Inc., are pledged as collateral.
7. Commitments and Contingencies
-----------------------------
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 June 30, 1996, the Partnership had unfunded
commitments as follows:
<TABLE>
<S> <C>
Type
- ----
Equity investments $ 6,250
Term notes 140,000
Venture capital limited partnership investments 211,150
-------
Total $357,400
=======
</TABLE>
In September of 1995, the Partnership jointly guaranteed with two
affiliated partnerships a $2,000,000 line of credit between a financial
institution and a portfolio company in the computer systems and software
industry of which the Partnership's share is $500,000. However, if the
affiliated partnerships are unable to finance their portion of the
guarantee, the Partnership's share may increase up to $2,000,000. While
the Partnership expects the portfolio company to repay the line of
credit, if the portfolio company fails to do so, the Partnership may be
liable up to the guarantee amount.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
During the six months ended June 30, 1996, net cash used by operating
activities totaled $1,578,248. The Partnership paid management fees of
$213,688 to the Managing General Partners and reimbursed related parties
for operating expenses of $1,126,168. In addition, $22,995 was paid to
the Individual General Partners as compensation for their services.
Other operating expenses of $74,093 were paid and interest income of
$16,697 was received. The Partnership also paid interest of $158,001 on
borrowings.
During the six months ended June 30, 1996, the Partnership issued
$640,000 in secured notes receivable to a portfolio company in the
computer systems and software industry and funded equity investments of
$1,444,276 mostly to portfolio companies in the computer systems and
software, communications, and medical/biotechnology industries.
Repayments of secured notes receivable and equity investments provided
cash of $19,419 and $58,000, respectively. Proceeds from the sales of
equity investments were $5,727,476. At June 30, 1996, the Partnership
was committed to fund $357,400 in additional investments and has
outstanding guarantees up to $2,000,000 as disclosed in Note 7 to the
financial statements.
The Partnership had borrowing accounts with two financial institutions.
The borrowing capacity of these accounts, which fluctuates based on
collateral value, totaled $4,414,998 at June 30, 1996. At June 30,
1996, the combined outstanding balance was $266,639. The Partnership's
investments in SyStemix, Inc., and Shaman Pharmaceuticals, Inc., are
pledged as collateral. The Partnership also has two promissory notes
payable totaling $1,605,332 with maturity dates in December, 1996, and
February, 1997. The Partnership's assets are pledged as collateral for
one of the promissory notes, which is subordinate to the Partnership's
short-term borrowings.
During the first half of 1996, Physiometrix, Inc., and Thermatrix, Inc.,
completed their IPOs. Although the Partnership's holdings in these
companies are subject to selling restrictions, the IPOs indicate
potential future liquidity for these investments.
Cash and cash equivalents at June 30, 1996, were $41,052. Future
interest income earned on notes receivable, proceeds from investment
sales, and remaining borrowing capacity on borrowing accounts 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 income was $4,135,583 for the quarter ended June 30, 1996, compared
to $2,757,219 during the same period in 1995. The increase in net
income was primarily due to a $1,952,094 increase in net realized gain
from sales of equity investments and a $347,000 increase in the change
in net unrealized fair value of secured notes receivable. These changes
were was partially offset by a $575,585 decrease in the change net
unrealized fair value of equity investments and a $229,816 increase in
realized losses from investment write-downs.
During the quarter ended June 30, 1996, net realized gain from sales of
equity investments of $1,521,645 was mostly due to the common stock sale
of Shaman Pharmaceuticals, Inc. A $430,449 realized loss recorded for
the same period in 1995 related to the sale of AG Associates, Inc.
The Partnership recorded an increase in the fair value of secured notes
receivable of $372,000 and $25,000 for the quarters ended June 30, 1996
and 1995, respectively, based upon the level of loan loss reserves
deemed adequate by the Managing General Partners at the respective
quarter ends.
During the quarter ended June 30, 1996, the increase in equity
investment fair value of $3,696,991 was primarily attributable to a
portfolio company in the environmental industry. During the same period
in 1995, the increase of $4,272,576 was primarily attributable to a
portfolio company in the pharmaceuticals industry.
The Partnership recorded $1,000,000 in realized losses from investment
write-downs for the quarter ended June 30, 1996, related to a portfolio
company in the computer systems and software industry. A $770,184
realized loss was recorded for the same period in 1995 related to
portfolio companies in the retail/consumer products and communications
industries.
Total operating expenses were $360,190 and $306,770 for the quarters
ended June 30, 1996 and 1995, respectively. The increase is primarily
due to higher administrative and investor services expenses as well as
investment operation expenses from increases overall portfolio
activities.
Given the inherent risk associated with the business of the Partnership,
the future performance of the portfolio company investments may
significantly impact future operations.
Current six months compared to corresponding six months in the preceding
- ------------------------------------------------------------------------
year
- ----
Net income was $3,532,287 for the six months ended June 30, 1996,
compared to $1,366,941 during the same period in 1995. The increase in
net income was primarily due to a $3,374,556 increase in net realized
gain from sales of equity investments. This increase was partially
offset by a $728,826 decrease in the change in net unrealized fair value
of equity investments, and a $305,907 increase in realized losses from
investment write-downs.
During the six months ended June 30, 1996, net realized gain from sales
of equity investments of $2,944,936 was mostly due to the common stock
sale of Shaman Pharmaceuticals, Inc. A $429,620 net realized loss
recorded for the same period in 1995 mainly related to the sale of AG
Associates, Inc.
During the six months ended June 30, 1996, the increase in equity
investment fair value of $2,435,653 was primarily attributable to a
portfolio companies in the environmental and retail/consumer products
industries as well as venture capital limited partnership investments,
partially offset by decreases in portfolio companies in the computer
systems and software and pharmaceuticals industries. During the same
period in 1995, the increase of $3,164,479 was substantially
attributable to increases in a portfolio company in the pharmaceuticals
industry.
The Partnership recorded $1,077,091 in realized losses from investment
write-downs for the six months ended June 30, 1996, mostly related to a
portfolio company in the computer systems and software industry. A
$771,184 realized loss was recorded for the same period in 1995
primarily related to portfolio companies in the retail/consumer product
and communications industries.
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 June 30, 1996.
(b) Financial Data Schedule for the six months ended and as of June 30,
1996 (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: August 9, 1996 By: /s/Debbie A. Wong
-------------------------------------------
Debbie A. Wong
Controller
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<INVESTMENTS-AT-COST> 23,165,461
<INVESTMENTS-AT-VALUE> 43,379,772
<RECEIVABLES> 0
<ASSETS-OTHER> 9,748
<OTHER-ITEMS-ASSETS> 41,052
<TOTAL-ASSETS> 43,430,572
<PAYABLE-FOR-SECURITIES> 1,612,192
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 455,855
<TOTAL-LIABILITIES> 2,068,047
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,148,214
<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> 20,214,311
<NET-ASSETS> 41,362,525
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 51,834
<OTHER-INCOME> 0
<EXPENSES-NET> (823,045)
<NET-INVESTMENT-INCOME> (771,211)
<REALIZED-GAINS-CURRENT> 1,867,845
<APPREC-INCREASE-CURRENT> 2,435,653
<NET-CHANGE-FROM-OPS> 3,532,287
<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> 3,532,287
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 209,179
<INTEREST-EXPENSE> 135,652
<GROSS-EXPENSE> 824,695
<AVERAGE-NET-ASSETS> 39,596,382
<PER-SHARE-NAV-BEGIN> 46
<PER-SHARE-NII> 2
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 48
<EXPENSE-RATIO> 2.1
<AVG-DEBT-OUTSTANDING> 3,068,965
<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>
