<PAGE>
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, 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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited
Partnership Units
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
No active market for the units of limited partnership interests
("Units") exists, and therefore the market value of such Units cannot
be determined.
Documents incorporated by reference: Portions of the Prospectus dated
February 24, 1989 forming a part of Registration Statement No. 33-
19201, filed pursuant to Rule 424(c) of the General Rules and
Regulations under the Securities Act of 1933, as modified by Post-
Effective Amendment No. 1 dated April 23, 1990, are incorporated by
reference in Parts I and III hereof. Portions of the Prospectus of
Technology Funding Medical Partners I, L.P., as modified by Cumulative
Supplement No. 4 dated January 4, 1995, forming a part of the May 3,
1993, Pre-Effective Amendment No. 3 to the Form N-2 Registration
Statement No. 33-54002 dated October 30, 1992, is incorporated by
reference in Part III hereof.
<PAGE>
PART I
Item 1. BUSINESS
- ------ --------
Technology Funding Venture Partners IV, An Aggressive Growth
Fund, L.P. (the "Partnership") is a limited partnership
organized under the laws of the State of Delaware on December
4, 1986 and was inactive until it commenced the sale of Units
on January 10, 1989. The purpose of the Partnership is to make
venture capital investments in new and developing companies, as
described in the "Introductory Statement" and "Business of the
Partnership" sections of the Prospectus dated February 24,
1989. The Partnership has elected to be a business development
company under the Investment Company Act of 1940, as amended
(the "Act"), and operates as a nondiversified investment
company as that term is defined in the Act. Additional
characteristics of the Partnership'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 Partnership's Amended and Restated Limited
Partnership Agreement ("Partnership Agreement") provides that
the Partnership will continue until December 31, 1997, subject
to the right of the Management Committee to extend the term for
up to two additional two-year periods.
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 ordinary routine litigation incidental to
the business of the Partnership.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
No matter was submitted to a vote of the holders of units of
limited partnership interests ("Units") during 1995.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------ -------------------------------------------------------------
MATTERS
-------
(a) There is no established public trading market for the
Units.
(b) At December 31, 1995, there were 7,821 record holders of
Units.
(c) The Registrant, being a partnership, does not pay
dividends. Cash distributions, however, may be made to
the partners in the Partnership pursuant to the
Registrant's Partnership Agreement.
Item 6. SELECTED FINANCIAL DATA
- ------ -----------------------
<TABLE>
<CAPTION>
For the Years Ended and As of December 31,
------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total income $ 130,779 296,948 678,321 555,324 1,395,698
Net operating loss (2,106,285) (1,314,484) (1,514,788) (1,736,601) (1,108,680)
Net realized loss from
venture capital limited
partnership investments -- -- (15,402) (25,726) (88,526)
Net realized (loss) gain
from sales of
investments equity (80,764) -- 25,856,978 25,399,530 --
Recoveries from investments
previously written off 145,248 -- -- -- --
Realized losses from
investment write-downs (2,532,447) (843,311) (1,377,494) (3,323,404) (599,900)
Net realized (loss) income (4,574,248) (2,157,795) 20,949,294 20,313,799 (1,797,106)
Change in net unrealized
fair value:
Equity investments 4,065,995 (2,854,255) (9,857,060) 14,857,889 12,428,330
Notes receivable 49,000 5,000 94,000 (138,391) (9,609)
Net (loss) income (459,253) (5,007,050) 11,186,234 35,033,297 10,621,615
Net realized (loss) income
per Unit (9) (4) 42 45 (4)
Total assets 43,065,771 40,606,795 43,520,755 63,032,147 39,214,887
Distributions declared -- -- (24,514,748)(17,433,949) --
</TABLE>
Refer to the financial statement notes entitled "Summary
of Significant Accounting Policies" and "Allocation of
Profits and Losses" for a description of the method of
calculation of net realized income (loss) per Unit.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Liquidity and Capital Resources
- -------------------------------
In 1995, net cash used by operations totaled $1,304,932.
The Partnership paid management fees of $424,146 to the
Managing General Partners and reimbursed related parties
for operating expenses of $491,677 in 1995. In
addition, $47,899 was paid to the individual general
partners as compensation for their services. Other
operating expenses of $210,162 were paid and interest
income of $97,362 was received. The Partnership also
paid interest of $318,125 on borrowings and received
$89,715 in reimbursements from portfolio companies for
collection expenses.
In 1995, the Partnership funded equity investments of
$1,331,665 mostly to portfolio companies in the
communications, microelectronics, and computer systems
and software industries and issued $62,500 in notes
receivable to a portfolio company in the computer
systems and software industry. Repayments of notes
receivable and equity investments provided cash of
$290,269 and $193,500, respectively. Proceeds from
sales of equity investments were $1,272,527. The
Partnership received $100,000 as recoveries from equity
investments previously written off and $372,522 in cash
distributions from venture capital limited partnership
investments.
The Partnership has borrowing accounts with two
financial institutions. The borrowing capacity of these
accounts, which fluctuates based on collateral value,
totaled $4,238,304 at December 31, 1995. The
outstanding balance at December 31, 1995 was $2,902,626
of which $734,758 was drawn in 1995. The Partnership's
investments in SyStemix, Inc. and Shaman
Pharmaceuticals, Inc. are pledged as collateral.
Subsequent to year end, the Partnership sold 575,000
common shares of Shaman Pharmaceuticals, Inc. for total
proceeds of $3,784,375; $1,735,784 of such proceeds was
used to pay off its outstanding balance with one
financial institution. The remaining borrowing capacity
for both accounts, which fluctuates based on collateral
value, was approximately $3.1 million as of March 12,
1996.
During 1995, AG Associates, Inc., YES! Entertainment
Corporation and Cardiometrics, Incorporated completed
their IPOs. Although the Partnership's holdings in YES!
Entertainment Corporation are subject to selling
restrictions, the IPO indicates potential future
liquidity for this investment; the Partnership's
investment in Cardiometrics, Incorporated is not
restricted. The Partnership has already sold its
holdings in AG Associates, Inc.
Cash and cash equivalents at December 31, 1995 were
$274,980. As of December 31, 1995, the Partnership was
committed to fund $1,393,233 in additional investments
and has an outstanding guarantee of $500,000 as
discussed in Note 9 to the financial statements. Future
interest income earned on notes receivable, remaining
capacity on the borrowing accounts, and proceeds from
investment sales are expected to be adequate to fund
Partnership operations through the next twelve months.
Results of Operations
- ---------------------
1995 compared to 1994
- ---------------------
Net loss was $459,253 in 1995 compared to $5,007,050 in
1994. The decrease in net loss was primarily due to a
$6,920,250 increase in the change in net unrealized fair
value of equity investments and a $145,248 increase in
recoveries from investments previously written off.
These changes were partially offset by a $1,689,136
increase in realized losses from investment write-downs,
a $647,394 increase in total operating expenses and a
$166,169 decrease in total income.
During 1995, the increase in fair value of equity
investments of $4,065,995 was primarily attributable to
increases in portfolio companies in the pharmaceuticals,
computer systems and software, and communications
industries, partially offset by decreases in the
medical/biotechnology industry. In 1994, the decrease
of $2,845,255 was primarily attributable to decreases in
portfolio companies in the pharmaceuticals and
microelectronics industries, partially offset by
increases in the communications and
medical/biotechnology industries.
In 1995, the Partnership recorded recoveries of $145,248
from investments previously written off related to
portfolio companies in the computer systems and
software, and medical/biotechnology industries. There
were no such recoveries in 1994.
During 1995, the Partnership recorded realized losses
from investment write-downs of $2,532,447 mainly
attributable to portfolio companies in the
microelectronics, retail/consumer products and
communications industries. There were $843,311 in
investment write-downs in 1994 primarily related to
equity investments in the medical/biotechnology and
microelectronics industries.
Total operating expenses were $1,759,642 and $1,112,248
in 1995 and 1994, respectively. As discussed in Note 3
to the financial statements, the 1995 total operating
expenses included additional administrative and
investors services expense of $812,580. If this amount
had been recorded in prior years, total operating
expenses would have been $1,018,228 and $1,196,527 in
1995 and 1994, respectively. The decrease was primarily
due to lower administrative and investor services, and
investment operations expenses from lower overall
portfolio activities, partially offset by higher
interest expense from short-term borrowings.
Total income was $130,779 and $296,948 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.
1994 compared to 1993
- ---------------------
Net loss was $5,007,050 in 1994 compared to a net income
of $11,186,234 in 1993. The change was primarily due to
a decrease in net realized gain from sales of equity
investments of $23,856,978 and a $338,587 decrease in
short-term investments interest income. These changes
were partially offset by a $7,002,805 decrease in the
change in net unrealized fair value of equity
investments, a $534,183 decrease in realized losses from
investment write-downs, a $343,881 decrease in
management fees, and a $235,846 decrease in operating
expenses.
There were no investment sales in 1994. Net realized
gain from sales of equity investments for 1993 of
$23,856,978 was mostly related to Pyxis Corporation.
Interest income from short-term investments totaled
$21,380 and $359,967 during 1994 and 1993, respectively.
The 1993 balance was primarily due to proceeds received
from the sale of investments in Pyxis Corporation, which
were subsequently distributed.
During 1994, the decrease in fair value of equity
investments of $2,854,255 was primarily attributable to
decreases in portfolio companies in the pharmaceuticals
and microelectronics industries, partially offset by
increases in communications and medical/biotechnology
industries. During 1993, the decrease of $9,857,060 was
primarily attributable to the realization of a
$23,843,217 gain from the disposition of Pyxis
Corporation investments, partially offset by increases
in portfolio companies in the environmental,
pharmaceuticals, microelectronics and retail/consumer
products industries.
During 1994 and 1993, the Partnership realized losses
from investment write-downs of $843,311 and $1,377,494,
respectively. The write-downs in 1994 primarily related
to equity investments in the medical/biotechnology and
microelectronics industries. In 1993, write-downs
primarily related to equity investments in the
microelectronics, medical/biotechnology, and
semiconductor industries.
The Partnership incurred management fees of $456,017 and
$799,898 during 1994 and 1993, respectively. Pursuant
to the Partnership Agreement, management fees were two
percent per annum of total Limited Partner capital
contributions until February 15, 1994. Beginning on
February 16, 1994, quarterly management fees are equal
to one quarter of one percent of the fair value of
Partnership assets.
Total operating expenses were $1,112,248 in 1994
compared to $1,348,094 in 1993. As discussed above, had
the additional expenses in 1995 been recorded in prior
years, total operating expenses would have been
$1,196,527 and $1,447,159 in 1994 and 1993,
respectively. The decrease of $250,632 was primarily
attributable to lower investment operations and
administrative and investor services expenses due to an
overall lower level of portfolio activities.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
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
-----------------------------------
Registrant has reported no disagreements with its
accountants on matters of accounting principles or
practices or financial statement disclosure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
As a partnership, the Registrant has no directors or
executive officers. The Management Committee is
responsible for the management and administration of the
Partnership. The members of the Management Committee
consist of the three individual general partners 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 Managing
General Partners. Information concerning the ownership
of TFL and the business experience of the key officers
of TFI and the partners of TFL is incorporated by
reference from the sections entitled "Management of the
Partnership - The General Partners" and "Management of
the Partnership - Key Personnel of the Managing General
Partners" in the Prospectus. Changes in this
information that have occurred since the date of the
Prospectus are included in the Technology Funding
Medical Partners I, L.P. Prospectus, as modified by
Cumulative Supplement No. 4 dated January 4, 1995,
forming a part of the May 3, 1993, Pre-Effective
Amendment No. 3 to the Form N-2 Registration Statement
No. 33-54002 dated October 30, 1992 which is
incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
- ------- ----------------------
As a partnership, the Registrant has no officers or
directors. In 1995, the Partnership incurred $429,523
in management fees. The fees are designed to compensate
the Managing General Partners for General Partner
Overhead incurred in performing management duties for
the Partnership through December 31, 1995. General
Partner Overhead (as defined in the Partnership
Agreement) includes the General Partners' share of rent
and utilities, and certain salaries and benefits paid by
the Managing General Partners in performing their
obligations to the Partnership. As compensation for
their services, the individual general partners each
receive $10,000 annually, plus $1,000 for each attended
meeting of the management committee and related
expenses. In 1995, $47,899 of such fees were paid.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- ------- ---------------------------------------------------
MANAGEMENT
- ----------
Not applicable. No Limited Partner beneficially holds
more than 5% of the aggregate number of Units held by
all Limited Partners, and neither the Managing General
Partners nor any of their officers, directors or
partners own any Units. The three individual general
partners each own 20 Units. The General Partners
control the affairs of the Partnership pursuant to the
Partnership Agreement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The Registrant, or its investee companies, have engaged
in no transactions with the Managing General Partners or
their officers and partners other than as described
above, in the notes to the financial statements, or in
the Partnership Agreement.
PART IV
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:
Independent Auditors' Report
Balance Sheets as of December 31, 1995
and 1994
Statements of Operations for the years
ended December 31, 1995, 1994 and 1993
Statements of Partners' Capital for the years
ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993
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 Amended and Restated Limited
Partnership Agreement (incorporated by
reference to Exhibit A to Registrant's
Prospectus dated February 24, 1989, included
in Registration Statement No. 33-19201 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, 1995.
(c) Financial Data Schedule for the year ended and as
of December 31, 1995 (Exhibit 27).
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Partners
Technology Funding Venture Partners IV, An Aggressive Growth
Fund, L.P.:
We have audited the accompanying balance sheets of Technology
Funding Venture Partners IV, An Aggressive Growth Fund, L.P. (a
Delaware limited partnership) as of December 31, 1995 and 1994,
and the related statements of operations, partners' capital, and
cash flows for each of the years in the three-year period ended
December 31, 1995. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. 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 confirmation of certain securities and loans
owned, by correspondence with the individual investee and
borrowing companies, and a physical examination of those
securities held by a safeguarding agent as of December 31, 1995
and 1994. 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 Partners IV, An Aggressive Growth
Fund, L.P. as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with
generally accepted accounting principles.
San Francisco, California KPMG Peat Marwick LLP
March 22, 1996
<PAGE>
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994
---- ----
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis of
$24,932,960 and $26,617,314 for 1995
and 1994, respectively) $42,711,618 40,329,977
Notes receivable, net
(cost basis of $67,826 and
$289,339 for 1995 and 1994,
respectively) 67,826 240,339
---------- ----------
Total investments 42,779,444 40,570,316
Cash and cash equivalents 274,980 10,501
Other assets 11,347 25,978
---------- ----------
Total $43,065,771 40,606,795
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 22,993 24,979
Due to related parties 856,733 29,635
Short-term borrowings 2,902,626 2,167,868
Promissory note 1,363,332 --
Interest payable 29,209 --
Other liabilities 60,640 94,822
---------- ----------
Total liabilities 5,235,533 2,317,304
Commitments, contingencies and subsequent events
(Notes 3, 5, 8 and 9)
Partners' capital:
Limited Partners
(Units outstanding of 400,000
for both 1995 and 1994) 18,182,086 21,841,484
Managing General Partners 1,869,494 2,784,344
Net unrealized fair value increase
(decrease) from cost:
Equity investments 17,778,658 13,712,663
Notes receivable -- (49,000)
---------- ----------
Total partners' capital 37,830,238 38,289,491
---------- ----------
Total $43,065,771 40,606,795
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS
- ------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income:
Notes receivable
interest $ 117,677 271,361 318,130
Short-term investments
interest 11,935 21,380 359,967
Other income 1,167 4,207 224
---------- ---------- ----------
Total income 130,779 296,948 678,321
Costs and expenses:
Management fees 429,523 456,017 799,898
Individual general
partners' compensation 47,899 42,000 38,117
Amortization of
organizational costs -- 1,167 7,000
Operating expenses:
Investment operations 132,665 433,926 558,864
Administrative and
investor services 1,106,796 445,707 518,317
Computer services 88,742 108,310 151,138
Professional fees 84,105 89,419 119,775
Interest expense 347,334 34,886 --
---------- ---------- ----------
Total operating
expenses 1,759,642 1,112,248 1,348,094
---------- ---------- ----------
Total costs and expenses 2,237,064 1,611,432 2,193,109
---------- ---------- ----------
Net operating loss (2,106,285) (1,314,484) (1,514,788)
Net realized loss
from venture
capital limited
partnership investments -- -- (15,402)
Net realized (loss) gain
from sales of equity
investments (80,764) -- 23,856,978
Recoveries from investments
previously written off 145,248 -- --
Realized losses from
investment write-downs (2,532,447) (843,311) (1,377,494)
---------- ---------- ----------
Net realized (loss) income (4,574,248) (2,157,795) 20,949,294
Change in net unrealized
fair value:
Equity investments 4,065,995 (2,854,255) (9,857,060)
Notes receivable 49,000 5,000 94,000
---------- ---------- ----------
Net (loss) income $ (459,253) (5,007,050) 11,186,234
========== ========== ==========
Net realized (loss)
income per Unit $ (9) (4) 42
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF PARTNERS' CAPITAL
- -------------------------------
<TABLE>
<CAPTION>
For the years ended December 31, 1995, 1994 and 1993:
Net Unrealized Fair Value
Increase (Decrease) From Cost
-----------------------------
Managing
Limited General Equity Notes
Partners Partners Investments Receivable Total
-------- -------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C>
Partners' capital,
December 31, 1992 $29,396,498 952,579 26,423,978 (148,000) 56,625,055
Net realized income 16,759,435 4,189,859 -- -- 20,949,294
Distributions (22,588,213) (1,926,535) -- -- (24,514,748)
Change in net unrealized
fair value:
Equity investments -- -- (9,857,060) -- (9,857,060)
Notes receivable -- -- -- 94,000 94,000
---------- --------- ---------- ------- ----------
Partners' capital,
December 31, 1993 23,567,720 3,215,903 16,566,918 (54,000) 43,296,541
Net realized loss (1,726,236) (431,559) -- -- (2,157,795)
Change in net unrealized
fair value:
Equity investments -- -- (2,854,255) -- (2,854,255)
Notes receivable -- -- -- 5,000 5,000
---------- --------- ---------- ------- ----------
Partners' capital,
December 31, 1994 21,841,484 2,784,344 13,712,663 (49,000) 38,289,491
Net realized loss (3,659,398) (914,850) -- -- (4,574,248)
Change in net unrealized
fair value:
Equity investments -- -- 4,065,995 -- 4,065,995
Notes receivable -- -- -- 49,000 49,000
---------- --------- ---------- ------- ----------
Partners' capital,
December 31, 1995 $18,182,086 1,869,494 17,778,658 -- 37,830,238
========== ========= ========== ======= ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF CASH FLOWS
- ------------------------
<TABLE>
<CAPTION>
For The Years Ended December 31,
------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating
activities:
Interest received $ 97,362 127,524 458,175
Cash paid to vendors (210,162) (267,943) (434,341)
Cash paid to related
parties (963,722) (1,349,828) (1,748,793)
Interest paid on short-
term borrowings (318,125) (34,886) --
Reimbursement of collection
expenses received from
portfolio companies 89,715 -- --
--------- --------- ----------
Net cash used by
operating activities (1,304,932) (1,525,133) (1,724,959)
--------- --------- ----------
Cash flows from investing
activities:
Notes receivable issued (62,500) -- (401,668)
Purchase of equity
investments (1,331,665) (3,758,976) (3,410,622)
Repayment of notes
receivable 290,269 24,766 67,345
Repayment of equity
investments 193,500 -- --
Recoveries from investments
previously written off 100,000 -- --
Proceeds from sales of
equity investments 1,272,527 -- 24,421,558
Distributions from venture
capital limited
partnership investments 372,522 29,129 38,399
--------- --------- ----------
Net cash provided
(used) by investing
activities 834,653 (3,705,081) 20,715,012
--------- --------- ----------
Cash flows from financing
activities:
Proceeds from short-term
borrowings, net 734,758 2,167,868 --
Distributions to Limited
and General Partners -- -- (30,715,623)
--------- --------- ----------
Net cash provided (used)
by financing activities 734,758 2,167,868 (30,715,623)
--------- --------- ----------
Net increase (decrease) in
cash and cash equivalents 264,479 (3,062,346) (11,725,570)
Cash and cash equivalents
at beginning of year 10,501 3,072,847 14,798,417
--------- --------- ----------
Cash and cash equivalents
at end of year $ 274,980 10,501 3,072,847
========= ========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (continued)
- -----------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Reconciliation of net
(loss) income to net cash
used by operating activities:
Net (loss) income $ (459,253) (5,007,050) 11,186,234
Adjustments to reconcile
net (loss) income to net cash
used by operating activities:
Net realized loss
from venture capital
limited partnership
investments -- -- 15,402
Net realized (loss) gain from
sales of equity investments 80,764 -- (23,856,978)
Realized losses from
investment write-downs 2,532,447 843,311 1,377,494
Recoveries from
investments previously
written off (145,248) -- --
Change in net unrealized
fair value:
Equity investments (4,065,995) 2,854,255 9,857,060
Notes receivable (49,000) (5,000) (94,000)
Other, net (1,292) 667 4,418
Changes in:
Accrued interest on
notes receivable (32,125) (168,924) (209,806)
Accounts payable and
accrued expenses (1,986) (37,701) 11,321
Due to/from related
parties 827,098 (56,112) (25,223)
Other, net 9,658 51,421 9,119
---------- ---------- ----------
Net cash used by
operating activities $(1,304,932) (1,525,133) (1,724,959)
========= ========== ==========
Non-cash investing
activities:
Purchase of equity
investments financed
by a promissory note $ 1,363,332 -- --
========= ========== ==========
Notes receivable and
accrued interest
converted to equity
investments $ -- -- 557,400
========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
1. Summary of Significant Accounting Policies
------------------------------------------
Organization
- ------------
Technology Funding Venture Partners IV, An Aggressive Growth
Fund, L.P. (the "Partnership") is a limited partnership organized
under the laws of the State of Delaware on December 4, 1986. The
purpose of the Partnership is to make venture capital investments
in new and developing companies. The Partnership elected to be a
business development company under the Investment Company Act of
1940, as amended (the "Act"), and operates as a nondiversified
investment company as that term is defined in the Act. The
Managing General Partners are Technology Funding Ltd. ("TFL") and
Technology Funding Inc. ("TFI"), a wholly-owned subsidiary of
TFL. There are also three individual general partners.
The Partnership's registration statement was declared effective
by the Securities and Exchange Commission on November 14, 1988,
and the Partnership commenced selling units of limited
partnership interests ("Units") on January 10, 1989.
On February 16, 1989, the minimum number of Units required to
commence Partnership operations (15,000) had been sold. On
September 14, 1990, the offering terminated with 400,000 Units
sold. The Partnership Agreement provides that the Partnership
will continue until December 31, 1997, unless further extended
for up to two additional two-year periods from such date if the
Managing General Partners so determine or unless sooner
dissolved.
Preparation of Financial Statements and Use of Estimates
- --------------------------------------------------------
These financial statements have been prepared on the accrual
basis of accounting in accordance with the generally accepted
accounting principles. This required management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The financial statements included non-marketable investments of
$28,249,933 and $35,739,443 (75% and 93% of partners' capital) as
of December 31, 1995 and 1994, respectively, whose values have
been estimated by the Managing General Partners in the absence of
readily ascertainable market values. Because of the inherent
uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a
ready market for investments existed, and the differences could
be material. In addition, for certain publicly traded
investments that may not be marketable due to selling
restrictions, the Managing General Partners have applied an
illiquidity discount of 25% in determining fair value as
mentioned below.
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 Partnership considers
all money market and short-term investments with an original
maturity of three months or less to be cash equivalents.
Organizational Costs
- --------------------
Organizational costs of $35,000 are amortized over 60 months,
using the straight-line method.
Provision for Income Taxes
- --------------------------
No provision for income taxes has been made by the Partnership,
as the Partnership is not directly subject to taxation. The
partners are to report their respective shares of Partnership
income or loss on their individual tax returns.
Since the accompanying financial statements are prepared using
generally accepted accounting principles which may not equate to
tax accounting, the Partnership's total tax basis in investments
was higher than the reported total cost basis of $25,000,786 by
$2,599,757 as of December 31, 1995.
Net Realized Income (Loss) Per Unit
- -----------------------------------
Net realized income (loss) per Unit is calculated by dividing the
number of Units outstanding (400,000) as of December 31, 1995,
1994 and 1993 into the total net realized income (loss) allocated
to the Limited Partners. The Managing General Partners
contributed an amount equal to 0.1% of total Limited Partner
capital contributions and did not receive any Partnership Units.
Investments:
- -----------
The Partnership's method of accounting for investments, in
accordance with generally accepted accounting principles, is the
fair value basis used for investment companies. The fair value
of Partnership investments is their initial cost basis with
changes as noted below:
Equity Investments
------------------
The fair value for publicly-traded equity investments (marketable
equity securities) is based upon the five-day-average closing
sales price or bid/ask price that is available on a national
securities exchange or over-the-counter market. Certain publicly-
traded equity investments may not be marketable due to selling
restrictions. For publicly-traded equity investments with
selling restrictions, an illiquidity discount of 25% is applied
when determining fair value. Sales of equity investments are
recorded on the trade date. The basis on which cost is
determined in computing realized gains or losses is generally
specific identification.
Other equity investments, which are not publicly traded, are
generally valued utilizing pricing obtained from the most recent
round of third-party financings. Valuation is determined
quarterly by the Managing General Partners. Included in equity
investments are convertible and subordinated notes receivable as
repayment of these notes generally occur through conversion into
equity investments.
Venture capital limited partnership investments are initially
recorded at cost and reduced for distributions that are a return
of capital. Distributions from limited partnership cumulative
earnings are reflected as realized gains by the Partnership.
Equity and venture capital limited partnership investments with
temporary changes in fair value result in increases or decreases
to the unrealized fair value of equity investments. The cost
basis does not change. In the case of an other than temporary
decline below cost basis, an appropriate reduction in the cost
basis is recognized as a realized loss with the fair value being
adjusted to match the new cost basis. Adjustments to fair value
basis are reflected as "Change in net unrealized fair value of
equity investments." Cost basis adjustments are reflected as
"Realized losses from investment write-downs" or "Net realized
gain (loss) from venture capital limited partnership investments"
in the Statements of Operations.
Notes Receivable, Net
---------------------
The notes receivable portfolio includes accrued interest less the
discount related to warrants and the allowance for loan losses.
The portfolio approximates fair value through inclusion of an
allowance for loan losses. Allowance for loan losses is reviewed
quarterly by the Managing General Partners and is adjusted to a
level deemed adequate to cover possible losses inherent in notes
and unfunded commitments. Notes receivable are placed on
nonaccrual status when, in the opinion of the Managing General
Partners, the future collectibility of interest or principal is
in doubt.
In conjunction with the notes granted to portfolio companies, the
Partnership has received warrants to purchase certain shares of
capital stock of the borrowing companies. The cost basis of the
warrants and the resulting discount has been estimated by the
Managing General Partners to be 1% of the principal balance of
the original notes made to the borrowing companies. The discount
is amortized to interest income on a straight-line basis over the
term of the loan. Warrants received in conjunction with
convertible notes are not assigned any additional costs. These
warrants are included in the equity investment portfolio.
Nonrefundable fees received in connection with loan fundings are
deferred and amortized to interest income over the contractual
life of the loan using the effective interest method or the
straight-line method if it is not materially different. Direct
loan origination costs mainly consist of third-party costs and
generally are reimbursed by portfolio companies.
2. Change in Net Unrealized Fair Value of Equity Investments
---------------------------------------------------------
In accordance with the accounting policy as stated in Note 1, the
Statements of Operations include a line item entitled "Change in
net unrealized fair value of equity investments." The table
below discloses details of the changes:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Increase in fair value
from cost of marketable
equity securities $ 5,167,115 1,592,683 5,990,109
Increase in fair value
from cost of non-marketable
equity securities 12,611,543 12,119,980 10,576,809
---------- ---------- ----------
Net unrealized fair
value increase from
cost at end of year 17,778,658 13,712,663 16,566,918
Net unrealized fair
value increase
from cost at
beginning of year 13,712,663 16,566,918 26,423,978
---------- ---------- ----------
Change in net unrealized
fair value of equity
investments $ 4,065,995 (2,854,255) (9,857,060)
========== ========== ==========
</TABLE>
3. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on
the Statements of Operations. Related party costs in 1995, 1994
and 1993 were as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Management fees $429,523 456,017 799,898
Individual general
partners' compensation 47,899 42,000 38,117
Amortization of
organizational costs -- 1,167 7,000
Reimbursable operating
expenses:
Investment operations 117,397 398,855 419,522
Administrative and
investor services 1,017,544 288,534 314,895
Computer services 88,742 108,310 151,138
</TABLE>
Management fees are equal to two percent for the third, fourth,
and fifth years of Partnership operations, and one quarter of one
percent of the fair value of Partnership assets for each quarter
in the sixth and subsequent years. The Partnership's sixth year
began in mid-February 1994. Management fees compensate the
Managing General Partners solely for General Partner Overhead (as
defined in the Partnership Agreement) incurred in supervising the
operation and management of the Partnership and the Partnership's
investments. Management fees due to the Managing General
Partners were $38,347 and $32,970 at December 31, 1995 and 1994,
respectively.
As compensation for their services, each of the individual
general partners receive $10,000 annually, plus $1,000 for each
attended meeting of the Management Committee and related
expenses. The three individual general partners each own 20
Units.
The Partnership reimburses the Managing General Partners for
operating expenses incurred in connection with the business of
the Partnership. Reimbursable operating expenses include
expenses (other than Organizational and Offering expenses and
General Partner Overhead) such as investment operations,
administrative and investor services and computer services.
During late 1995, operating cost allocations to the Partnership
were reevaluated. The Managing General Partners determined that
they had not fully recovered allocable overhead as permitted by
the Partnership Agreement. As a result, the Partnership was
charged additional administrative and investor services costs of
$812,580, which was not previously recognized by the Partnership;
this charge consisted of $71,166, $84,279, $99,065 and $558,070
related to 1995, 1994, 1993 and prior years, respectively. If
this charge had been recorded in prior years, total operating
expenses would have been $1,018,228, $1,196,527 and $1,447,159
for 1995, 1994 and 1993, respectively. At December 31, 1995,
there was $818,386 of such reimbursable expenses due to related
parties compared to $3,335 due from related parties at December
31, 1994.
Under the terms of a computer service agreement, the Partnership
recognized charges from Technology Administrative Management, a
division of TFL, for its share of computer support costs. These
amounts are included in computer services expense.
4. Allocation of Profits and Losses
--------------------------------
Net realized profit and loss of the Partnership are allocated
based on the beginning of year partners' capital balances as
follows:
(a). Profits:
(i) First, to those partners with deficit capital
account balances until such deficits have been
eliminated;
(ii) Second, to the partners as necessary to offset the
net loss and sales commissions previously
allocated under (b)(ii) below; then
(iii)75% to the Limited Partners as a group in
proportion to the number of Units held, 5% to the
Limited Partners in proportion to the Unit Months
of each Limited Partner, and 20% to the Managing
General Partners. Unit months are the number of
half months a Unit would be outstanding if held
from the date the original holder of such Unit was
deemed admitted into the Partnership until the
termination of the offering of Units.
(b). Losses:
(i) First, to the partners as necessary to offset the
net profits previously allocated to the partners
under (a)(iii) above; then
(ii) 99% to the Limited Partners and 1% to the Managing
General Partners.
Losses allocable to Limited Partners in excess of their capital
account balances will be allocated to the Managing General
Partners, with net profits thereafter otherwise allocable to
those Limited Partners being allocated to the Managing General
Partners to the extent of such losses.
Losses from unaffiliated venture capital limited partnership
investments are allocated pursuant to section (b) above. Gains
are allocated first to offset previously allocated losses
pursuant to (b)(i) above, and then 99% to the Limited Partners
and 1% to the Managing General Partners.
5. Equity Investments
------------------
At December 31, 1995 and 1994, equity investments consisted of:
<TABLE>
<CAPTION>
Original December 31, 1995 December 31, 1994
Principal ------------------ -----------------
Investment Amount or Cost Fair Cost Fair
Industry/Company Position Date Shares Basis Value Basis Value
- ---------------- -------- ---- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Communications
- --------------
Coded Common
Communications shares
Corporation 04/93 145,454 $ 149,818 143,999 396,000 171,781
Coded Common
Communications share
Corporation warrant
at $3.16;
expired
04/95 04/93 145,454 -- -- 4,000 0
Terrapin, Inc. Convertible
note (1) 05/95 $125,000 131,000 131,000 -- --
Terrapin, Inc. Convertible
note (1) 08/95 $125,000 128,448 128,448 -- --
Terrapin, Inc. Convertible
note (1) 12/95 $125,000 125,586 125,586 -- --
Unitech Telecom, Convertible
Inc. note (1) 05/94 $100,000 -- -- 106,040 106,040
Unitech Telecom, Common
Inc. share
warrant
at $2.75;
expiring
05/99 05/94 36,364 0 502,187 0 0
Unitech Telecom, Series A
Inc. Preferred
shares 03/95 46,875 375,000 776,250 -- --
Computer Systems and Software
- -----------------------------
Ascent Logic Common
Corporation share
warrant
at $.94;
expiring
03/97 03/92 31,915 2,500 0 2,500 0
Ascent Logic Series C
Corporation Preferred
shares 10/92 106,383 99,000 37,234 99,000 37,234
Ascent Logic Series D
Corporation Preferred
share
warrant
at $.35;
expired
01/95 10/92 142,857 -- -- 1,000 0
Multiport, Inc. Series A
Preferred 05/93 -
shares 08/93 2,440,000 797,400 2,528,905 797,400 2,629,636
Quintar Series A
Corporation Convertible
Preferred
shares 11/89 1,200,000 1,200,000 1,800,000 1,200,000 1,800,000
Quintar Convertible
Corporation secured
note (1) 10/93 $500,000 -- -- 554,201 554,201
Quintar Common
Corporation share
warrant
at $1.00;
expiring
10/98 10/93 145,000 0 72,500 0 72,500
Quintar Series A
Corporation Preferred
shares 05/95 384,178 576,267 576,267 -- --
Reflection Series F
Technology, Inc. Preferred
shares 01/94 28,572 50,001 88,573 50,001 60,001
Reflection Common
Technology, Inc. shares 05/94 19,567 22,502 60,658 22,502 41,091
Reflection Series D
Technology, Inc. Preferred
shares 11/94 869,565 1,000,000 2,695,652 1,000,000 1,826,086
Reflection Series G
Technology, Inc. Preferred
shares 11/94 172,877 312,500 535,918 312,500 363,041
Reflection Series D
Technology, Inc. Preferred
shares 11/94 163,043 187,498 505,433 187,498 342,391
Reflection Series I
Technology, Inc. Preferred
shares 11/95 40,322 124,998 124,998 -- --
Velocity Series A
Incorporated Preferred
shares 10/94 6,286,325 1,034,337 1,034,337 1,034,337 1,034,337
Velocity Common
Incorporated share
warrant
at $1.00;
expiring
03/00 03/95 12,500 0 0 -- --
Velocity Convertible 08/95-
Incorporated notes (1) 10/95 $125,000 125,000 125,000 -- --
Environmental
- -------------
SunPower Series A
Corporation Preferred
shares 09/90 210,000 210,000 323,400 210,000 323,400
SunPower Series B
Corporation Redeemable
Preferred
shares 06/91 420,000 457,800 646,800 457,800 646,800
SunPower Series B
Corporation Preferred
share
warrant
at $1.09;
expired
03/95 01/92 114,679 -- -- 0 51,606
SunPower Series B
Corporation Preferred
share
warrant
at $1.09;
expired
08/95 07/92 22,936 -- -- 0 10,321
SunPower Series B1
Corporation Preferred
shares 06/93 270,000 337,500 415,800 337,500 415,800
SunPower Series C
Corporation Preferred
shares 06/93 32,468 50,001 50,001 50,001 50,001
SunPower Convertible
Corporation note (1) 09/94 $25,000 -- -- 425 425
SunPower Series D
Corporation Preferred
shares 11/94 81,169 123,750 123,750 123,750 123,750
SunPower Series D
Corporation Preferred
share
warrant
at $1.54;
expiring
11/96 11/94 81,169 1,250 1,250 1,250 1,250
Thermatrix, Inc. Series B
Preferred
shares 04/91 1,756,204 1,318,453 4,390,510 1,318,453 4,390,510
Thermatrix, Inc. Common
shares 04/91 387 347 968 347 968
Thermatrix, Inc. Series B
Preferred
shares 12/92 1,272,967 1,272,967 3,182,418 1,272,967 3,182,418
Thermatrix, Inc. Common
shares 07/94 120 30 300 30 300
Thermatrix, Inc. Series D
Preferred
shares 11/94 323,120 807,800 807,800 807,800 807,800
TMC, Inc. Series A
Preferred
shares 12/95 50,000 25,000 25,000 -- --
Medical/Biotechnology
- ---------------------
Biex, Inc. Series A
Preferred
shares 07/93 128,205 83,333 128,205 83,333 128,205
Biex, Inc. Series B
Preferred
shares 10/94 63,907 63,907 63,907 63,907 63,907
Biex, Inc. Series B
Preferred
share
warrant
at $1.00;
expiring
10/99 10/94 23,540 8 0 8 0
Biex, Inc. Series C
Preferred
shares 06/95 83,334 83,334 83,334 -- --
Biex, Inc. Series C
Preferred
shares 12/95 83,333 83,333 83,333 -- --
Cardiometrics, Series A
Incorporated Preferred
shares 10/90 654,004 -- -- 657,759 3,270,020
Cardiometrics, Common
Incorporated shares 10/90 119,886 -- -- 1,543,221 599,430
Cardiometrics, Series A
Incorporated Preferred
shares 02/91 318,992 -- -- 318,992 1,594,960
Cardiometrics, Series B
Incorporated Preferred
shares 03/92 36,444 -- -- 145,778 182,220
Cardiometrics, Common
Incorporated shares 11/95 359,747 2,665,750 2,023,577 -- --
CV Therapeutics, Series D
Inc. Preferred
shares 03/94 312,500 625,000 625,000 625,000 625,000
Everest & Jennings Common
International shares
Ltd. 01/94 592,720 637,519 325,996 637,519 318,883
Inhale Therapeutic Common
Systems, Inc. shares 12/95 4,125 46,922 43,519 -- --
InnerDyne, Inc. Common
shares 12/92 4,606 -- -- 18,424 16,351
Intelliwire, Inc. Common
shares 02/93 8,715 436 6,536 436 12,027
Intelliwire, Inc. Series A
Preferred
shares 02/93 4,358 2,179 3,269 2,179 6,014
Molecular Series B
Geriatrics Preferred
Corporation shares 09/93 250,000 125,000 125,000 125,000 125,000
Oculon Corporation Series II
Senior
Preferred
shares 06/92 400,000 -- -- 0 0
Oculon Corporation Series III
Senior
Preferred
shares 01/94 106,796 -- -- 0 0
Pharmos Common
Corporation shares 04/95 60,331 45,248 88,083 -- --
Physiometrix, Common
Inc. share
warrant
at $1,750;
expiring
06/97 06/92 16 0 0 0 0
Physiometrix, Common 01/94-
Inc. shares 05/94 338 375,054 1,690 375,054 1,680
Physiometrix Series D
Inc. Preferred 01/94 &
shares 02/94 338,150 114,971 1,690,750 114,971 1,690,750
RedCell, Inc. Series B
Preferred
shares 12/94 132,979 125,000 125,000 125,000 125,000
SyStemix, Inc. Common 1991-
shares 1992 133,972 1,013,068 2,069,867 1,013,068 2,314,366
Microelectronics
- ----------------
Aprex Corporation Series D
Preferred
shares 12/90 30,000 -- -- 7,559 7,559
Aprex Corporation Series E
Preferred
shares 12/91 18,750 -- -- 4,724 4,724
Aprex Corporation Common
shares 08/92 3,500 -- -- 0 0
Aprex Corporation Common
shares 08/93 10,743 -- -- 0 0
Aprex Corporation Series F
Preferred 08/93-
shares 09/93 427,500 -- -- 107,717 107,717
KOR Electronics Series C
Convertible
Preferred
shares 11/89 177,778 0 0 100,000 62,222
KOR Electronics Common
share
warrant at
$.35;
canceled
07/95 11/89 360,000 -- -- 0 0
KOR Electronics Convertible
secured
note (1) 11/89 $348,000 313,393 313,393 722,368 722,368
KOR Electronics Series D
Preferred
shares 02/91 1,285,714 0 0 450,000 450,000
KOR Electronics Common
shares 01/94 670,036 0 0 869,263 506,500
KOR Electronics Series E
Preferred
shares 01/94 1,130,390 1,130,390 847,793 1,130,390 847,793
KOR Electronics Series E
Preferred
share
warrant
at $1.00;
expiring
01/98 01/94 55,000 0 0 0 0
KOR Electronics Common share
warrant at
$.35;
expiring
08/99 08/94 257,143 0 0 0 0
KOR Electronics Series D
Preferred
shares 07/95 977,142 0 0 -- --
Pharmaceuticals
- ---------------
Shaman
Pharmaceuticals, Common
Inc. shares 01/93 1,220,194 3,440,739 7,687,222 3,446,739 3,924,237
Shaman
Pharmaceuticals, Common
Inc. shares 02/95 340,833 1,363,332 2,147,248 -- --
Retail/Consumer Products
- ------------------------
Yes! Entertain- Series B
ment Corporation Preferred
shares 01/93 900,000 -- -- 600,000 450,000
Yes! Entertain- Common
ment Corporation shares 06/95 66,666 199,998 325,497 -- --
Semiconductor
- -------------
AG Associates, Common
Inc. (formerly shares
AG Processing
Technologies,
Inc.) 12/91 85,976 -- -- 1,187,039 790,984
IBIS Technology Common
Corp. shares 05/94 46,718 -- -- 100,893 89,372
Venture Capital Limited Partnership Investments
- -----------------------------------------------
El Dorado Ltd.
Ventures III Partnership
interests various $187,500 149,960 189,689 99,960 120,320
Medical Science Ltd.
Partners Partnership
interests various $500,000 437,225 601,028 444,109 644,888
Newtek Ventures II Ltd.
Partnership
interests various $713,764 423,924 473,368 578,625 772,853
Onset Enterprises Ltd.
Associates Partnership
interests various $455,000 296,061 490,664 373,951 489,335
Utah Ventures Ltd.
Partnership
interests various $250,000 41,123 187,708 197,026 221,604
---------- ---------- ---------- ----------
Total equity investments $24,932,960 42,711,618 26,617,314 40,329,977
========== ========== ========== ==========
- -- No investment held at end of period.
0 Investment active with a carrying value or fair value of zero.
(1) Convertible secured and convertible notes include accrued interest.
Interest rates on convertible notes range from 8% to 12%.
</TABLE>
Marketable Equity Securities
- ----------------------------
At December 31, 1995 and 1994, marketable equity securities had
aggregate costs of $9,362,396 and $3,238,190, respectively, and
aggregate market values of $14,529,511 and $4,830,873, respectively.
The net unrealized gains at December 31, 1995 and 1994 included gross
gains of $6,130,033 and $2,153,132, respectively.
AG Associates, Inc.(formerly AG Processing Technologies, Inc.)
- --------------------------------------------------------------
In March 1995, the company changed its name to AG Associates, Inc. and
effected a 1-for-4 reverse split of its common stock. Then in May
1995, the company completed its initial public offering ("IPO"). In
lieu of entering into an underwriter lockup as a result of the IPO,
the Partnership sold its investment in the company to a private third-
party for total proceeds of $756,590 and realized a loss of $430,449.
Aprex Corporation
- -----------------
In June 1995, Aprex Corporation filed for Chapter 11 protection under
the U.S. Bankruptcy Code. In the third quarter of 1995, the company
was acquired by a third party; the purchase price was used to pay off
senior debt holders. As a result, the Partnership has written off the
remaining cost basis of its equity investment totaling $120,000.
Biex, Inc.
- ----------
In June and December 1995, the Partnership made additional investments
in Biex, Inc. by purchasing 166,667 Series C Preferred shares at a
total cost of $166,667.
Cardiometrics Incorporated
- --------------------------
In November 1995, the company completed its IPO. As a result, the
Partnership's preferred and common stock holdings were converted into
359,747 shares of unrestricted common stock with a cost basis of
$2,665,750. The Partnership recorded a decrease in fair value of
$3,623,053 to reflect the market value at December 31, 1995.
Coded Communications, Inc.
- --------------------------
In 1995, the Managing General Partners determined that there had been
an other than temporary decline in value of the Partnership's
investments. As a result, the Partnership realized a loss of
$250,182. The Partnership also recorded a decrease in fair value of
$27,782 to reflect the unrestricted market value at December 31, 1995.
IBIS Technology Corp.
- ---------------------
In October 1995, the Partnership sold all of its holdings in the
company for total proceeds of $291,988 and realized a gain of
$191,095.
KOR Electronics
- ---------------
In July 1995, the Partnership restructured its convertible secured
note with the company. Of the $715,000 principal balance, $342,000
was converted into 977,142 Series D Preferred shares, $25,000 was
repaid and the maturity date of the remaining $348,000 was extended
until July 1997. In addition, several warrants to purchase common
shares were canceled.
Based on the Managing General Partners' opinion, there has been an
other than temporary decline in value for the Partnership's investment
as of December 31, 1995. Accordingly, the Partnership recorded a
realized loss of $1,761,263.
Pharmos Corporation/Oculon Corporation
- --------------------------------------
In March 1995, Oculon Corporation ("Oculon") was acquired by Pharmos
Corporation ("Pharmos"). The Partnership's Series II Senior Preferred
shares were canceled while the Series III Senior Preferred shares were
exchanged for 60,331 shares of marketable, unrestricted Pharmos common
stock. The Partnership recorded the $45,248 cost basis of the Pharmos
stock as a recovery from Oculon investments previously written off.
An increase in fair value of $42,835 reflected the market value of the
Pharmos stock at December 31, 1995.
Quintar Corporation
- -------------------
In May 1995, the Partnership converted its $500,000 convertible note
receivable including interest of $76,267 into 384,178 Series A
Preferred shares in accordance with the original convertible note
agreement.
Reflection Technology, Inc.
- ---------------------------
In November 1995, the Partnership made an additional investment in
Reflection Technology, Inc. by purchasing 40,322 Series I Preferred
shares at a total cost of $124,998. The pricing of this round
indicated an increase in the change in fair value of $1,253,624 in the
Partnership's existing investments.
Shaman Pharmaceuticals, Inc.
- ----------------------------
In February 1995, the Partnership purchased 340,833 common shares of
Shaman Pharmaceuticals, Inc. ("Shaman") 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 8.75% at December 31, 1995; interest expense of
$105,360 was recorded in 1995.
In December 1995, the Partnership sold 25,000 common shares of Shaman
for total proceeds of $168,750 and realized a gain of $162,750. The
Partnership also recorded an increase in the change in fair value of
$4,552,901 to reflect the unrestricted market value at December 31,
1995.
Subsequent to year end, the Partnership sold 575,000 additional common
shares of Shaman Pharmaceuticals, Inc. for total proceeds of
$3,784,375 and realized a gain of $1,423,291.
Terrapin, Inc.
- --------------
During 1995, the Partnership issued convertible notes totaling
$375,000 to Terrapin, Inc., a wholly-owned subsidiary of KOR
Electronics.
TMC, Inc.
- ---------
In December 1995, the Partnership made an investment in TMC, Inc. by
purchasing 50,000 Series A Preferred shares at a total cost of
$25,000.
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. Interest on the note was paid in cash.
In the fourth quarter of 1995, the company had a Series B round of
financing in which the Partnership did not participate. The pricing
of this round indicated an increase in the change in fair value of
$903,437 for the Partnership's existing investments.
Velocity Incorporated
- ---------------------
During the second half of 1995, the Partnership issued convertible
notes totaling $125,000 to the company.
YES! Entertainment Corporation
- ------------------------------
In June 1995, the company completed its IPO. Prior to the IPO, the
company effected a 1-for-15 reverse stock split. The Partnership's
Series B Preferred shares were converted into 66,666 common shares.
The Managing General Partners determined that there has been an other
than temporary decline in value of the Partnership's investment; as a
result, a realized loss of $400,002 was recorded. In addition, the
loss takes into consideration the fact that the stock will be
restricted for another one and one half years.
Venture Capital Limited Partnership Investments
- -----------------------------------------------
The Partnership recorded a cost basis decrease of $345,378 in venture
capital limited partnership investments during 1995. The decrease was
a result of distributions of cash totaling $372,522 and stock with a
fair value of $87,856, partially offset by additional contributions of
$115,000. The Partnership recorded a decrease in fair value of
$306,543 mainly due to the effect of the transactions described above,
partially offset by an increase in fair value of the underlying
investments of certain venture capital limited partnership
investments.
The Partnership received common stock distributions for three
companies with a total fair value of $87,856. These distributions
represented returns of capital. Subsequent to receipt, the
Partnership sold its common stock in two of the companies for proceeds
of $35,947 and realized a loss of $4,987. The remaining stock is
Inhale Therapeutic Systems, Inc., which is unrestricted.
Other Equity Investments
- ------------------------
Other significant changes during the year ended December 31, 1995
reflected above relate to market value fluctuations for unrestricted
stock or the elimination of a discount relating to selling
restrictions for publicly-traded portfolio companies.
6. Notes Receivable, Net
---------------------
At December 31, 1995 and 1994, notes receivable consisted of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Notes receivable $ 49,149 276,918
Accrued interest 18,677 13,713
Unamortized discount related to warrants -- (1,292)
------- -------
Total notes receivable,
net (cost basis) 67,826 289,339
Allowance for loan losses -- (49,000)
------- -------
Total notes receivable,
net (fair value) $ 67,826 240,339
======= =======
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance, beginning of year $ 49,000 54,000
------- -------
Decrease in provision
for loan losses (149,000) (5,000)
Recoveries of previous write offs:
Computer systems and software 100,000 --
------- -------
Change in net unrealized fair value of
notes receivable (49,000) (5,000)
------- -------
Balance, end of year $ -- 49,000
======= =======
</TABLE>
The increase (decrease) in provision for loan losses is generally
comprised of realized loan losses, net of recognized recoveries, and a
change in net unrealized fair value based upon the level of loan loss
reserves deemed adequate by the Managing General Partners at the
respective year ends.
The allowance for loan losses is adjusted based upon changes to the
portfolio size and risk profile. Although the allowance for loan
losses is established by evaluating individual debtor repayment
ability, the allowance represents the Managing General Partners'
assessment of the portfolio as a whole.
The interest rate on secured notes receivable at December 31, 1995 was
12.5%.
Principal balances of $35,185 and $13,964 are scheduled to be repaid
in 1996 and 1997, respectively.
7. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at December 31, 1995 and 1994 consisted of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Demand accounts $ 105,621 2,923
Money-market and brokerage accounts 169,359 7,578
------- ------
Total $ 274,980 10,501
======= ======
</TABLE>
8. Short-Term Borrowings
---------------------
The Partnership has borrowing accounts with two financial
institutions. The borrowing capacity of these accounts, which
fluctuates based on collateral value, totaled $4,238,304 at December
31, 1995. The outstanding balance at December 31, 1995 was
$2,902,626. In 1995 and 1994, the combined weighted-average interest
rates for the two accounts were 8.82% and 8.21%, respectively.
Interest expense of $241,974 was recorded in 1995. The Partnership's
investments in Shaman Pharmaceuticals, Inc. and SyStemix, Inc. are
pledged as collateral.
Subsequent to year end, the Partnership paid off its outstanding
balance of $1,735,784 to one financial institution with proceeds from
the sale of Shaman Pharmaceuticals, Inc. common stock. The remaining
borrowing capacity for both accounts, which fluctuates based on
collateral value, was approximately $3.1 million as of March 12, 1996.
9. Commitments and Contingent Liability
------------------------------------
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 December 31,
1995, the Partnership has unfunded commitments as follows:
<TABLE>
<CAPTION>
Type
- ----
<S> <C>
Equity investments $ 114,583
Venture capital limited partnership investments 253,650
Bridge note and accounts receivable lines of credit 1,025,000
---------
Total $1,393,233
=========
</TABLE>
The Partnership uses the same credit policies in making these
commitments and conditional obligations as it does for on-balance-
sheet instruments. Commitments to extend financing are agreements to
lend to a company as long as there are no violations of any conditions
established in the contract. The credit lines generally have fixed
termination dates or other termination clauses. Since many of the
commitments are expected to expire without being fully drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements.
In September 1995, the Partnership guaranteed a $500,000 line of
credit between a financial institution and a portfolio company in the
computer systems and software industry. 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>
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: March 22, 1996 By: /s/Debbie A. Wong
----------------------------------
Debbie A. Wong
Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report 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 22, 1996
- ------------------------ Executive Officer
Charles R. Kokesh and Chairman of
Technology Funding Inc.
and Managing General
Partner of Technology
Funding Ltd.
/s/Gregory T. George Group Vice President March 22, 1996
- -------------------------- of Technology Funding
Gregory T. George Inc. and a General
Partner of Technology
Funding Ltd.
The above represents a majority of the Board of Directors of
Technology Funding Inc. and a majority of the General Partners of
Technology Funding Ltd.
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FORM 10-K AS OF DECEMBER 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> DEC-31-1995
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 25,000,786
<INVESTMENTS-AT-VALUE> 42,779,444
<RECEIVABLES> 0
<ASSETS-OTHER> 11,347
<OTHER-ITEMS-ASSETS> 274,980
<TOTAL-ASSETS> 43,065,771
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,235,533
<TOTAL-LIABILITIES> 5,235,533
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,051,580
<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> 17,778,658
<NET-ASSETS> 37,830,238
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 129,612
<OTHER-INCOME> 1,167
<EXPENSES-NET> (2,237,064)
<NET-INVESTMENT-INCOME> (2,106,285)
<REALIZED-GAINS-CURRENT> (2,467,963)
<APPREC-INCREASE-CURRENT> 4,114,995
<NET-CHANGE-FROM-OPS> (459,253)
<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> (459,253)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 429,523
<INTEREST-EXPENSE> 347,334
<GROSS-EXPENSE> 2,330,729
<AVERAGE-NET-ASSETS> 38,059,865
<PER-SHARE-NAV-BEGIN> 55
<PER-SHARE-NII> (9)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 46
<EXPENSE-RATIO> 5.88
<AVG-DEBT-OUTSTANDING> 3,216,913
<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>
