<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 September 30, 1999
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)
(650) 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)
September 30, December 31,
1999 1998
------------ -----------
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis
of $12,547,728 and $12,547,986 for
1999 and 1998, respectively) $15,319,392 15,647,313
Notes receivable (cost basis of
$194,861 and $202,777 for 1999 and
1998, respectively) 194,861 202,777
---------- ----------
Total investments 15,514,253 15,850,090
Cash and cash equivalents 16,895 1,188,918
Due from related parties 1,663 29,771
Other assets 6,517 5,179
---------- ----------
Total assets $15,539,328 17,073,958
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 100,770 48,922
Distributions payable 370,130 370,130
Short-term borrowings 82,291 --
Other liabilities 14,269 13,914
---------- ----------
Total liabilities 567,460 432,966
Commitments, contingencies and
subsequent events (Notes 3, 4, 7, 8,
and 9)
Partners' capital:
Limited Partners
(400,000 Units outstanding) 12,120,973 13,170,018
General Partners 79,231 371,647
Net unrealized fair value increase
from cost of equity investments 2,771,664 3,099,327
---------- ----------
Total partners' capital 14,971,868 16,640,992
---------- ----------
Total liabilities and
partners' capital $15,539,328 17,073,958
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
------------------------- ----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Notes receivable interest $ 6,368 4,954 27,488 4,954
Short-term investment interest 140 25,794 7,524 86,388
--------- --------- --------- ---------
Total income 6,508 30,748 35,012 91,342
Costs and expenses:
Management fees 43,205 57,293 126,275 164,392
Individual General Partners'
compensation 12,359 14,031 32,365 33,947
Operating expenses:
Administrative and investor services 154,343 292,926 473,484 609,451
Investment operations 58,956 90,001 203,325 283,676
Professional fees 13,949 37,796 75,698 69,191
Computer services 39,011 52,925 97,925 179,722
Interest expense 4,280 -- 4,280 --
--------- --------- --------- ---------
Total operating expenses 270,539 473,648 854,712 1,142,040
--------- --------- --------- ---------
Total costs and expenses 326,103 544,972 1,013,352 1,340,379
--------- --------- --------- ---------
Net operating loss (319,595) (514,224) (978,340) (1,249,037)
Realized (loss) gain from
sales of equity investments (457,010) 287,163 (487,474) 178,402
Net realized gain from venture
capital limited partnership
investments -- -- 126,968 --
Realized losses from investment
write-downs -- -- (2,615) --
Recoveries from investments
previously written off -- -- -- 3,650
--------- --------- --------- ---------
Net realized loss (776,605) (227,061) (1,341,461) (1,066,985)
Change in net unrealized
fair value of equity investments (1,016,111) (2,221,396) (327,663) 530,357
--------- --------- --------- ---------
Net loss $(1,792,716) (2,448,457) (1,669,124) (536,628)
========= ========= ========= =========
Net realized loss per Unit $ (1.55) (.45) (2.62) (2.13)
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 16,155 86,504
Cash paid to vendors (284,358) (162,608)
Cash paid to related parties (645,741) (1,290,173)
Interest paid for short-term borrowings (4,280) --
--------- ---------
Net cash used by operating activities (918,224) (1,366,277)
--------- ---------
Cash flows from investing activities:
Purchase of equity investments (698,868) (979,997)
Notes receivable issued (183,333) (16,598)
Repayments of notes receivable 198,844 204,848
Proceeds from sales of equity
investments 347,267 612,545
Recoveries from investments previously
written off -- 3,650
--------- ---------
Net cash used by
investing activities (336,090) (175,552)
--------- ---------
Cash flows from financing activities:
Distribution to partners -- (4,157,816)
Proceeds from short-term
borrowings, net 82,291 --
--------- ---------
Net cash provided (used) by
financing activities 82,291 (4,157,816)
--------- ---------
Net decrease in cash
and cash equivalents (1,172,023) (5,699,645)
Cash and cash equivalents at
beginning of year 1,188,918 8,821,077
--------- ---------
Cash and cash equivalents $ 16,895 3,121,432
at September 30 ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)(continued)
- -----------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Reconciliation of net loss to net
cash used by operating activities:
Net loss $(1,669,124) (536,628)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Net realized loss (gain) from sales
of equity investments 487,474 (178,402)
Realized gain from venture
capital limited partnership
investments (126,968) --
Realized losses from investment
write-downs 2,615 --
Recoveries from investments previously
written off -- (3,650)
Change in net unrealized fair value
of equity investments 327,663 (530,357)
Changes in:
Due to/from related parties 28,108 (120,160)
Other changes, net 32,008 2,920
--------- ---------
Net cash used by operating activities $ (918,224) (1,366,277)
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ----------------------------------------
1. General
-------
In the opinion of the Managing General Partners, the accompanying interim
financial statements reflect all adjustments necessary for a fair
presentation of the financial position, results of operations, and cash
flows for the interim periods presented. These statements should be read
in conjunction with the Annual Report on Form 10-K for the year ended
December 31, 1998. 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.
In April 1999, the Management Committee of the Partnership extended the
term of the Partnership to December 31, 2001.
2. Financing of Partnership Operations
-----------------------------------
The Managing General Partners expect cash received from the future
liquidation of Partnership investments and future short-term borrowings
will provide the necessary liquidity to fund Partnership operations. The
Partnership may be dependent upon the financial support of the Managing
General Partners to fund operations if future proceeds are not received
timely. The Managing General Partners have committed to support the
Partnership's working capital requirements through short-term advances as
necessary.
3. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs for the nine months ended
September 30, 1999 and 1998, were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C <C>
Management fees $126,275 164,392
Individual General Partners' compensation 32,365 33,947
Reimbursable operating expenses 515,209 971,674
</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 $17,945 and $40,957 due from related
parties at September, 30, 1999 and December 31, 1998 respectively, related
to such expenses.
Amounts payable for management fees were $16,282 and $11,186 at September
30, 1999, and December 31, 1998, respectively. Pursuant to the Partnership
Agreement, quarterly management fees are equal to one quarter of one
percent of the fair value of Partnership assets.
Officers of the Managing General Partners occasionally receive stock
options as compensation for serving on the Boards of Directors of portfolio
companies. At September 30, 1999, the Partnership had an indirect interest
in Endocare, Inc., Physiometrix, Inc., Thermatrix Inc., and UroGen Corp.,
non-transferable options with a total fair market value of $72,823.
<PAGE>
4. Equity Investments
------------------
<TABLE>
A full listing of the Partnership's equity investments at December 31, 1998, is in the 1998 Annual
Report on Form 10-K. Activity from January 1 through September 30, 1999, consisted of:
<CAPTION>
January 1 through
September 30, 1999
----------------------
Principal
Investment Amount or Cost Fair
Industry/Company Position Date Shares Basis Value
- ---------------- -------- ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $12,547,986 15,647,313
---------- ----------
Significant changes:
Communications
- --------------
Women.com Networks Series A
Preferred
shares 02/96 6,098 0 40,918
Women.com Networks Series B
Preferred
shares 02/96 7,452 0 50,003
Women.com Networks Series C
Preferred
shares 07/97 35,295 0 236,829
Women.com Networks Series D
Preferred
shares 06/98 91,185 0 611,851
Women.com Networks Series E
Preferred
shares 05/99 8,666 86,660 86,660
Computer Equipment Systems and Software
- ---------------------------------------
Pilot Network
Services, Inc. Common shares 02/99 & 4,367 56,689 39,766
05/99 3,393 60,692 30,897
Environmental
- -------------
Thermatrix Inc. Common shares 06/96 1,105,847 0 (1,554,448)
Triangle Biomedical
Sciences, Inc. Series A, B and
(formerly Naiad C Preferred
Technologies, Inc.) shares 12/95-11/97 161,832 (310,202) (525,955)
Triangle Biomedical
Sciences, Inc.
(formerly Naiad Common shares
Technologies, Inc.) and warrants 09/99 442 12,820 12,820
Information Technology
- ----------------------
WorldRes, Inc. Series B and C
Preferred shares 01/97-12/97 128,645 0 302,315
WorldRes, Inc. Series D
Preferred shares 03/99 27,273 165,002 165,002
Medical/Biotechnology
- ---------------------
Avalon Imaging, Inc. Series D
Preferred shares
and warrants 12/98-04/99 88,757 (61,603) (61,603)
Biex, Inc. Series A, B, C,
D and E Preferred
shares 07/93-08/97 629,794 0 109,942
Biex, Inc. Series F
Preferred shares 03/99 132,743 345,132 345,132
CV Therapeutics, Inc. Common shares Various 18,847 (376,920) 122,511
Endocardial Solutions,
Inc. Common shares 09/97 5,714 (80,710) (58,140)
Endocare, Inc. Common shares 08/96-04/98 46,014 0 193,259
UroGen Corp. Convertible note 06/98 $250,000 (260,401) (260,401)
UroGen Corp. Common shares 06/99 438,366 320,242 128,880
Microelectronics
- ----------------
KOR Electronics, Inc. Series E
Preferred
shares 01/94 1,130,390 0 (423,897)
Venture Capital Limited Partnerships
- ------------------------------------
Various Limited Partnership
interests Various $2,333,764 15,000 71,376
---------- ----------
Total significant changes during the nine
months ended September 30, 1999 (27,599) (336,283)
Other changes, net 27,341 8,362
---------- ----------
Total equity investments at September 30, 1999 $12,547,728 15,319,392
========== ==========
</TABLE>
Marketable Equity Securities
- ----------------------------
At September 30, 1999 and December 31, 1998, marketable equity securities
had aggregate costs of $2,966,804, and $3,204,508, respectively, and
aggregate market values of $2,635,755 and $2,967,543, respectively. The
net unrealized losses at September 30, 1999, and December 31, 1998,
included gross gains of $601,736 and $819,176, respectively.
Avalon Imaging, Inc.
- --------------------
In October 1999, the company agreed to sell its assets. The Partnership
valued its portion of the estimated sales proceeds at $28,468 and realized
a loss of $61,603 as of September 30, 1999.
Biex, Inc.
- ----------
In March 1999, the Partnership purchased 132,743 Series F Preferred shares
for $345,132. The pricing of this round, in which third parties
participated, indicated a $69,407 increase in the fair value of the
Partnership's investment in the company's preferred shares and warrants.
In May 1999, the Partnership received a stock dividend of 18,787 Preferred
shares with a fair value of $48,854.
CV Therapeutics, Inc.
- ---------------------
In August and September 1999, the Partnership sold a total of 18,847 common
shares for proceeds of $278,894 and realized a loss of $98,026.
Endocardial Solutions, Inc.
- ---------------------------
In March 1999, the Partnership sold its entire investment in the company
for proceeds of $50,246 and realized a loss of $30,464.
KOR Electronics, Inc.
- ---------------------
In March 1999, the Partnership recorded a $423,897 decrease in the fair
value of its investment in the company based upon the operating status of
the company.
Triangle Biomedical Sciences, Inc. (formerly Naiad Technologies, Inc.)
- ---------------------------------------------------------------------
In August 1999, Naiad Technologies, Inc. was acquired by Triangle
Biomedical Sciences, Inc., a privately held company. The Partnership
received 442 Triangle common shares and a warrant for 442 Triangle common
shares and realized a loss of $297,382 on the sale.
UroGen Corp.
- ------------
In April 1999, the Partnership issued a $50,000 convertible note to the
company. In June 1999, this note together with previously issued notes and
accrued interest thereon totaling $320,242 were converted to 438,366 common
shares.
Women.com Networks
- ------------------
In May 1999, the Partnership purchased 8,666 Series E Preferred shares for
$86,660. The pricing of this round, in which third parties participated,
indicated a $939,601 increase in the fair value of the Partnership's
existing investment.
In October 1999, the company completed an initial public offering priced at
$10 per common share and the Partnership's Preferred shares were converted
to 148,696 common shares. Based on the publicly-traded market price, the
fair value of the Partnership's investment increased from $1,486,960 at
September 30, 1999 to $2,880,985 on November 11, 1999.
WorldRes, Inc.
- --------------
In March 1999, the Partnership made an additional investment in the company
by purchasing 27,273 Series D Preferred shares for $165,002. The pricing
of this round, in which third parties participated, indicated a $318,165
increase in the fair value of the Partnership's investment in the company's
preferred shares and warrants.
In November 1999, the company completed an additional round of financing in
which the Partnership did not participate. The pricing of this round, in
which third parties participated, indicated an increase in the fair value
of the Partnership's investment from $959,228 at September 30, 1999 to
$2,426,789.
Venture Capital Limited Partnerships
- ------------------------------------
The Partnership made an additional investment of $15,000 in venture capital
limited partnerships during the nine months ended September 30, 1999. The
Partnership received stock distributions of Pilot Network Services, Inc.
and Rogue Wave Software, Inc. with fair values totaling $126,968. These
distributions were recorded as realized gains. The Partnership recorded a
$71,376 net increase in fair value as a result of an increase in the fair
value of the underlying investments, partially offset by decreases due to
distributions.
Other Equity Investments
- ------------------------
Other significant changes reflected above relate to market value
fluctuations or the elimination of a discount relating to selling
restrictions for publicly traded portfolio companies. Portions of the
Partnership's Physiometrix, Inc. and Thermatrix Inc. shares are
restricted.
5. Notes Receivable
----------------
Activity from January 1, 1999 through September 30, 1999, consisted of:
<TABLE>
<S> <C>
Balance at January 1, 1999 $202,777
1999 activity:
Notes issued 183,333
Repayments of notes (198,844)
Change in interest receivable 7,595
-------
Balance at September 30, 1999 $194,861
=======
</TABLE>
The interest rate on notes issued in 1999 is 12%.
6. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at September 30, 1999 and December 31, 1998
consisted of:
<TABLE>
1999 1998
------ ------
<S> <C> <C>
Demand accounts $ 1,475 30,009
Money-Market accounts 15,420 1,158,909
------ ---------
Total $16,895 1,188,918
====== =========
</TABLE>
7. Distributions
-------------
At September 30, 1999, distributions of $370,130, declared in 1998, were
payable to Limited Partners.
8. Short-Term Borrowings
---------------------
The Partnership has a borrowing account with a financial institution. At
September 30, 1999, the borrowing capacity of this account, which
fluctuates based on collateral value, was $529,042 and the outstanding
balance was $82,291; as of November 9, 1999, the borrowing capacity was
$538,506 and the outstanding balance was $241,444. Interest is charged at
the prime rate plus one-half percent. The Partnership's investments in
Adept Technology, Inc., Inhale Therapeutic Systems, Inc., Hybridon, Inc.
and Rogue Ware Software, Inc. are pledged as collateral.
9. 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 September 30, 1999, the Partnership had the following
unfunded commitments:
<TABLE>
<CAPTION>
TYPE
- ----
<S> <C>
Line of credit guarantees $615,720
Equity investments 50,000
Venture capital limited partnership investments 26,150
-------
Total $691,870
=======
</TABLE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
During the nine months ended September 30, 1999, net cash used by operating
activities totaled $918,224. The Partnership paid management fees of
$121,179 to the Managing General Partners and reimbursed related parties
for operating expenses of $492,197 in 1999. In addition, $32,365 was paid
to the Individual General Partners as compensation for their services.
Other operating expenses of $284,358 and interest expense of $4,280 were
paid and interest income of $16,155 was received.
During the nine months ended September 30, 1999, the Partnership funded
equity investments of $698,868 primarily to portfolio companies in the
communications, information technology and medical/biotechnology industries
and issued $183,333 in notes receivable to portfolio companies in the
environmental industry. Proceeds from the sales of equity investments were
$347,267 and repayments of notes receivable were $198,844. At September
30, 1999, the Partnership's unfunded commitments totaled $691,870.
The Partnership has a borrowing account with a financial institution. At
September 30, 1999, the borrowing capacity of this account, which
fluctuates based on collateral value, was $529,042 and the outstanding
balance was $82,291; as of November 9, 1999, the borrowing capacity was
$538,506 and the outstanding balance was $241,444. The Partnership's
investments in Adept Technology, Inc., Inhale Therapeutic Systems, Inc.,
Hybridon, Inc. and Rogue Ware Software, Inc. are pledged as collateral.
Cash and cash equivalents at September 30, 1999, were $16,895. Future
proceeds from investment sales and future short-term borrowings along with
Managing General Partner support are expected to be adequate to fund
Partnership operations through the next twelve months.
Results of Operations
- ---------------------
Current quarter compared to corresponding quarter in the preceding year
-----------------------------------------------------------------------
Net loss was $1,792,716 for the quarter ended September 30, 1999, compared
to net loss of $2,448,457 during the same period in 1998. The change was
primarily due to an increase of $1,205,285 in the net unrealized fair value
of equity investments and a $203,109 decrease in operating expenses,
partially offset by a $744,173 increase in realized losses from equity
sales.
During the quarter ended September 30, 1999, the decrease in equity
investment fair value of $1,016,111 was primarily attributable to a
decrease in a portfolio company in the environmental industry, partially
offset by increases in portfolio companies in the medical/biotechnology
industry. During the same period in 1998, the decrease in fair value of
equity investments of $2,221,396 was primarily attributable to a decrease
in a portfolio company in the environmental industry.
Total operating expenses were $270,539 and $473,648 for the quarters ended
September 30, 1999 and 1998, respectively. The decrease is primarily
attributable to decreased investment monitoring activity and administrative
overhead.
Realized losses from equity sales totaled $457,010 in the quarter ended
September 30, 1999 compared to a gain of $287,163 for the same period in
1998. The 1999 loss relates to the sale of the Partnership's investments
in Naiad Technologies, Inc., CV Therapeutics, Inc. and Avalon Imaging, Inc.
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 nine months compared to corresponding nine months in the
--------------------------------------------------------------
preceding year
--------------
Net loss was $1,669,124 for the nine months ended September 30, 1999,
compared to net loss of $536,628 during the same period in 1998. The change
was primarily due to a decrease of $858,020 in the net unrealized fair
value of equity investments and an increase of $665,876 in realized losses
from equity sales, partially offset by a $287,328 decrease in operating
expenses.
During the nine months ended September 30, 1999, the decrease in equity
investment fair value of $327,663 was mainly attributable to portfolio
companies in the environmental and microelectronics industries, partially
offset by increases in the communications and medical/biotechnology
industries. During the same period in 1998, the increase of $530,357 was
primarily attributable to a portfolio company in the environmental
industry.
Realized losses from equity sales totaled $487,474 for the nine months
ended September 30, 1999 as compared to a gain of $178,402 for the same
period in 1998. The 1999 loss primarily relates to the sale of the
Partnership's investments in Naiad Technologies, Inc., CV Therapeutics,
Inc. and Avalon Imaging, Inc.
Total operating expenses were $854,712 and $1,142,040 for the nine months
ended September 30, 1999 and 1998, respectively. The decrease is
attributable to decreased investment monitoring activities, administrative
overhead and computer expenses.
YEAR 2000
- ---------
Widespread use of computer programs that use two digits rather than four to
store, calculate, and display year values in dates may cause computer
systems to malfunction in the year 2000, resulting in significant business
delays and disruptions.
The Partnership's State of Readiness
------------------------------------
Computer services are provided to the Partnership by its Managing General
Partner, Technology Funding Inc. ("TFI"). For several years, TFI has
sought to use Year 2000 compliant storage formats and algorithms in its
internally-developed and maintained systems. TFI has also completed
initial evaluations of computer systems, software, and embedded
technologies. Those evaluations confirmed that certain components of its
network server hardware and operating systems, voice mail system, e-mail
system, and accounting software may have Year 2000 compliance issues.
These resources and several less-critical components of the systems
environment were all scheduled as part of normal maintenance and
replacement cycles to be replaced or upgraded as Year 2000 compatible
components became available from vendors during 1998 and 1999. That
program remains on schedule to provide Year 2000 capable systems timely
without significant expenditures or disruption of Partnership operations.
TFI has implemented and tested Year 2000 capable versions of all its
mission-critical systems. However, the risk remains that TFI may not be
able to verify whether Year 2000 compatibility claims by vendors are
accurate, or whether changes undertaken to achieve Year 2000 compatibility
will create other undetected problems in associated systems. Therefore,
TFI anticipates that Year 2000 compliance testing and maintenance of these
systems will continue as needed into the first quarter of 2000.
As part of Year 2000 evaluation, TFI has also assembled a database listing
its significant suppliers to assess the extent to which it needs to prepare
for any of those parties' potential failure to remediate their Year 2000
compliance issues. TFI reviewed public Year 2000 statements of those
suppliers and sent questionnaires to vendors whose public statements were
not adequate for assessment. All mission-critical vendors have responded
that they expect to be Year 2000 compliant barring any unforeseen
circumstances. TFI will continue to monitor its significant suppliers as
part of its Year 2000 evaluation. However, there can be no guarantee that
the systems of other companies on which TFI relies will be timely
converted, or that failure to convert will not have a material adverse
effect on the Partnership and its operations. TFI is also working with the
Partnership's portfolio companies to determine the extent to which their
operations are vulnerable to Year 2000 issues, and maintaining their
responses in the vendor database. There can be no guarantee that the
systems of portfolio companies in which the Partnership has invested will
be timely converted, or that their failure to convert will not have a
material adverse effect on the Partnership.
The Cost to Address Year 2000 Issues
------------------------------------
Expenditures in 1999 to date related to Year 2000 issues were not material
to the Partnership's financial statements. TFI expects that additional
expenditures for Year 2000 compliance will not be material to the
Partnership.
The Risks Associated with Year 2000 Issues
------------------------------------------
Any failure by the portfolio companies in which the Partnership has
invested, or by those portfolio companies' key suppliers or customers, to
anticipate and avoid Year 2000 related problems at reasonable cost could
have a material adverse effect on the value of and/or the timing of
realization of value from the Partnership's investments. If TFI's Year
2000 compliance issues have not been resolved correctly, internal system
failures or miscalculations could cause a temporary inability to process
transactions, loss of ability to send or receive e-mail and voice mail
messages, or disruptions in other normal business activities.
Additionally, failure of third parties on whom TFI relies to remediate
their Year 2000 issues timely could result in disruptions in the
Partnership's relationship with its financial institutions, temporary
disruptions in processing transactions, unanticipated costs, and problems
related to the Partnership's daily operations. While TFI continues to
address its internal Year 2000 issues, the overall risks associated with
the Year 2000 issue remain difficult to describe and quantify. There can
be no guarantee that the Year 2000 issue will not have a material adverse
effect on the Partnership and its operations.
TFI's Contingency Plan
----------------------
As part of its normal efforts to assure business continuation in the event
of natural disasters, systems failures, or other disruptions, TFI has
prepared contingency plans including an extensive Year 2000 contingency
plan. Taken together with TFI's Year 2000 remediation plan, it identifies
potential points of failure, approaches to correcting known Year 2000
problems, dates by which the preferred corrections are anticipated to be
made and tested, and alternative approaches if the corrections are not
completed timely or are later found to be inadequate. Although backup
systems and contingency approaches have been identified for most systems
and vendor dependencies, there remain some systems for which no good
alternative exists, and there may be some problems that prove more
intractable than currently anticipated.
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 September 30, 1999.
(b) Financial Data Schedule for the nine months ended and as of
September 30, 1999 (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: November 12, 1999 By: /s/Michael R. Brenner
-------------------------------------------
Michael R. Brenner
Controller
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<PERIOD-TYPE> 9-MOS
<INVESTMENTS-AT-COST> 12,742,589
<INVESTMENTS-AT-VALUE> 15,514,253
<RECEIVABLES> 0
<ASSETS-OTHER> 8,180
<OTHER-ITEMS-ASSETS> 16,895
<TOTAL-ASSETS> 15,539,328
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 567,460
<TOTAL-LIABILITIES> 567,460
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,200,204
<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> 2,771,664
<NET-ASSETS> 14,971,868
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 35,012
<OTHER-INCOME> 0
<EXPENSES-NET> 1,013,352
<NET-INVESTMENT-INCOME> (978,340)
<REALIZED-GAINS-CURRENT> (363,121)
<APPREC-INCREASE-CURRENT> (327,663)
<NET-CHANGE-FROM-OPS> (1,669,124)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,669,124)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 126,275
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,014,652
<AVERAGE-NET-ASSETS> 15,806,430
<PER-SHARE-NAV-BEGIN> 33
<PER-SHARE-NII> (3)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30
<EXPENSE-RATIO> 6.4
<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.
</FN>
</TABLE>
