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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, 1994
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
and filed pursuant to Rule 424(c) of the General Rules and Regulations
under the Securities Act of 1933, and 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.
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
- ------ ---------------------------------------------------
The Annual Meeting of the Limited Partners of the Partnership
was held on September 19, 1994 pursuant to a Notice of Meeting
dated July 11, 1994. At that meeting, proxies submitted by
limited partners, documented that the limited partners elected
three individual general partners, elected the two Managing
General Partners, and ratified the selection of KPMG Peat
Marwick LLP as independent certified public accountants for the
fiscal year ended December 31, 1994. In addition, proxies
submitted by limited partners documented that a majority vote
was received to pass a proposed amendment to the Partnership
Agreement to add a new Section 14.10 which provides that the
Management Committee shall be required to call a meeting only
once every three years of Limited Partners if the only purpose
of the meeting is to seek Limited Partner consent of existing
Managing General Partners and the approval of existing
independent certified public accountants for the Partnership;
there were 200,028 Units voting in favor, 12,149 Units voting
against, and 21,478 Units abstaining.
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, 1994, there were 7,815 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
- ------ -----------------------
For the Years Ended and As of December 31,
------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Total income $ 296,948 678,321 555,324 1,395,698 1,773,987
Net operating loss (1,314,484) (1,514,788) (1,736,601) (1,108,680) (1,737,709)
Net realized loss from
venture capital limited
partnership investments -- (15,402) (25,726) (88,526) (38,714)
Net realized gain from
sale of investments -- 23,856,978 25,399,530 -- --
Realized losses from
investment write-downs (843,311) (1,377,494) (3,323,404) (599,900) --
Net realized (loss) income (2,157,795) 20,949,294 20,313,799 (1,797,106) (1,776,423)
Change in net unrealized
fair value:
Equity investments (2,854,255) (9,857,060) 14,857,889 12,428,330 (842,241)
Notes receivable 5,000 94,000 (138,391) (9,609) --
Net (loss) income (5,007,050) 11,186,234 35,033,297 10,621,615 (2,618,664)
Net realized (loss) income
per Unit (4) 42 45 (4) (5)
Total assets 40,606,795 43,520,755 63,032,147 39,214,887 28,803,721
Distributions declared -- (24,514,748)(17,433,949) -- (714,280)
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 (loss) income per Unit.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Liquidity and Capital Resources
- -------------------------------
In 1994, net cash used by operations totaled $1,525,133.
The Partnership paid management fees of $489,705 to the
Managing General Partners and reimbursed related parties
for operating expenses of $818,123 in 1994. In
addition, $42,000 was paid to the individual general
partners as compensation for their services. Other
operating expenses of $267,943 were paid and interest
income of $127,524 was received. The Partnership also
paid interest of $34,886 on short-term borrowings.
In 1994, the Partnership funded equity investments of
$3,758,976 mostly to portfolio companies in the
medical/biotechnology, environmental, and computer
systems and software industries. Repayments of notes
receivable provided cash of $24,766. The Partnership
also received $29,129 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 $3,164,565 at December 31, 1994. The
outstanding balance at December 31, 1994 was $2,167,868.
The maximum and weighted average amounts during 1994
were $2,633,000 and $558,294, respectively. The
Partnership's investments in SyStemix, Inc. and Shaman
Pharmaceuticals, Inc. are pledged as collateral.
During 1994, IBIS Technology, Inc. completed its
initial public offering (IPO). The IPO indicates
potential future liquidity for this investment.
Cash and cash equivalents at December 31, 1994 were
$10,501. As of December 31, 1994, the Partnership was
committed to fund $728,650 in additional investments.
Future interest income earned on notes receivable,
remaining capacity on the borrowing accounts, proceeds
from investment sales and General Partner support are
expected to be adequate to fund Partnership operations
through the next twelve months.
Results of 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 gains from sale of
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 sale of 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 investments 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 partners' 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. The decrease was
primarily attributable to lower investment operations
and administrative and investor services expenses due to
an overall lower level of portfolio activities.
Given the inherent risk associated with the business of
the Partnership, the future performance of the portfolio
company investments may significantly impact future
operations.
1993 compared to 1992
- ---------------------
Net income was $11,186,234 in 1993 compared to
$35,033,297 in 1992. The decrease in income was
primarily due to a $24,714,949 decrease in the change in
net unrealized fair value of equity investments and a
$1,542,552 decrease in net realized gain from sale of
investments. These changes were partially offset by a
$1,945,910 decrease in realized losses from investment
write-downs, a $232,391 increase in the change in net
unrealized fair value of secured notes receivable and a
$125,856 increase in interest income.
In 1993, the decrease in fair value of equity
investments 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. In 1992, the
increase of $14,857,889 was primarily due to the initial
public offering of Pyxis Corporation and an increase in
a portfolio company in the pharmaceuticals industry,
partially offset by decreases in the
medical/biotechnology industry.
Net realized gain from sale of investments was
$23,856,978 in 1993 compared to $25,399,530 in 1992.
The net gain in 1993 mostly related to the sale of Pyxis
Corporation. In 1992, the net gain predominately
related to the sale of Pyxis Corporation and SyStemix,
Inc.
In 1993 and 1992, the Partnership realized losses from
investment write-downs of $1,377,494 and $3,323,404,
respectively. Investment write-downs in 1993 primarily
related to equity investments in portfolio companies in
the microelectronics, medical/biotechnology, and
semiconductor industries. Realized losses in 1992
related to portfolio companies in the computer systems
and software, and semiconductor industries.
In 1993, the Partnership recorded a change in fair value
of secured notes receivable of $94,000 based upon the
level of loan loss reserves deemed adequate by the
Managing General Partners. The 1993 increase was
primarily due to a reduction in the loan loss reserve
resulting from the conversion of $557,400 in notes
receivable to equity investments. A $138,391 decrease
was recorded for the same period in 1992.
Total interest income earned was $678,097 and $552,241
in 1993 and 1992, respectively. The increase was
primarily due to higher short-term investment interest
from higher cash and cash equivalent balances resulting
from the sale of Pyxis Corporation investments,
partially offset by a decrease in notes receivable
interest due to lower average outstanding balances on
interest-bearing convertible and promissory notes.
Total operating expenses were $1,348,094 in 1993
compared to $1,443,027 in 1992. The decrease was
primarily attributable to lower investment operations
and computer services expenses due to an overall lower
level of portfolio activities, partially offset by
higher expenses related to efforts to increase
investment returns for one portfolio company.
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 three individual general partners and a
representative from each of Technology Funding Ltd., a
California limited partnership ("TFL") and Technology
Funding Inc., a California corporation ("TFI"), a
wholly-owned subsidiary of TFL. TFI and TFL 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 1994, the Partnership incurred $456,017
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, 1994. General
Partner Overhead (as defined in the Partnership
Agreement) includes rent, utilities, and certain
salaries and benefits paid by the Managing General
Partners. 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. In 1994, $42,000 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 has 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 Prospectus.
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, 1994
and 1993
Statements of Operations for the years
ended December 31, 1994, 1993 and 1992
Statements of Partners' Capital for the years
ended December 31, 1994, 1993 and 1992
Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992
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, 1994.
(c) Financial Data Schedule for the year ended and as
of December 31, 1994 (Exhibit 27).
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, 1994 and 1993,
and the related statements of operations, partners' capital, and
cash flows for each of the years in the three-year period ended
December 31, 1994. 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 owned by
correspondence with the individual investee companies and a
physical examination of those securities held by a safeguarding
agent as of December 31, 1994 and 1993. 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, 1994 and 1993, and the results of
its operations and its cash flows for each of the years in the
three-year period ended December 31, 1994 in conformity with
generally accepted accounting principles.
As explained in Notes 1, 6 and 7, the financial statements
include investments of $40,570,316 and $40,388,377 (106% and 93%
of partners' capital) as of December 31, 1994 and 1993,
respectively, whose values, in certain circumstances, have been
estimated by the Managing General Partners in the absence of
readily ascertainable market values. We have reviewed the
procedures used by the Managing General Partners in arriving at
their estimate of value of such investments and have inspected
underlying documentation, and, in the circumstances, we believe
the procedures are reasonable and the documentation appropriate.
However, 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 the investments
existed, and the differences could be material.
San Francisco, California KPMG Peat Marwick LLP
March 17, 1995
BALANCE SHEETS
- --------------
December 31,
----------------------
1994 1993
---- ----
ASSETS
Investments:
Equity investments (cost basis of
$26,617,314 and $23,569,151 for 1994
and 1993, respectively) $40,329,977 40,136,069
Notes receivable, net
(cost basis of $289,339 and
$306,308 for 1994 and 1993,
respectively) 240,339 252,308
---------- ----------
Total investments 40,570,316 40,388,377
Cash and cash equivalents 10,501 3,072,847
Other assets 25,978 59,531
---------- ----------
Total $40,606,795 43,520,755
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 24,979 62,680
Due to related parties 29,635 85,747
Short-term borrowings 2,167,868 --
Other liabilities 94,822 75,787
---------- ----------
Total liabilities 2,317,304 224,214
Commitments and subsequent events
(Notes 3, 6 and 10)
Partners' capital:
Limited Partners
(Units outstanding of 400,000
for both 1994 and 1993) 21,841,484 23,567,720
Managing General Partners 2,784,344 3,215,903
Net unrealized fair value increase
(decrease) from cost:
Equity investments 13,712,663 16,566,918
Notes receivable (49,000) (54,000)
---------- ----------
Total partners' capital 38,289,491 43,296,541
---------- ----------
Total $40,606,795 43,520,755
========== ==========
See accompanying notes to financial statements.
STATEMENTS OF OPERATIONS
- ------------------------
For the Years Ended December 31,
------------------------------------
1994 1993 1992
---- ---- ----
Income:
Notes receivable
interest $ 271,361 318,130 406,706
Short-term investments
interest 21,380 359,967 145,535
Other income 4,207 224 3,083
---------- ---------- ----------
Total income 296,948 678,321 555,324
Costs and expenses:
Management fees 456,017 799,898 799,898
Individual general partners'
compensation 42,000 38,117 42,000
Amortization of
organizational costs 1,167 7,000 7,000
Operating expenses:
Investment operations 433,926 558,864 609,536
Administrative and
investor services 445,707 518,317 534,934
Computer services 108,310 151,138 175,780
Professional fees 89,419 119,775 122,777
Interest expense 34,886 -- --
---------- ---------- ----------
Total operating
expenses 1,112,248 1,348,094 1,443,027
---------- ---------- ----------
Total costs and expenses 1,611,432 2,193,109 2,291,925
---------- ---------- ----------
Net operating loss (1,314,484) (1,514,788) (1,736,601)
Net realized loss
from venture
capital limited
partnership investments -- (15,402) (25,726)
Net realized gain from
sale of investments -- 23,856,978 25,399,530
Realized losses from
investment write-downs (843,311) (1,377,494) (3,323,404)
---------- ---------- ----------
Net realized (loss) income (2,157,795) 20,949,294 20,313,799
Change in net unrealized
fair value:
Equity investments (2,854,255) (9,857,060) 14,857,889
Notes receivable 5,000 94,000 (138,391)
---------- ---------- ----------
Net (loss) income $(5,007,050) 11,186,234 35,033,297
========== ========== ==========
Net realized (loss)
income per Unit $ (4) 42 45
========== ========== ==========
See accompanying notes to financial statements.
STATEMENTS OF PARTNERS' CAPITAL
- -------------------------------
For the years ended December 31, 1994, 1993 and 1992:
Net Unrealized Fair Value
Increase (Decrease) From Cost
-----------------------------
Managing
Limited General Equity Notes
Partners Partners Investments Receivable Total
-------- -------- ----------- ---------- -----
Partners' capital,
December 31, 1991 $ 27,514,947 (45,720) 11,566,089 (9,609) 39,025,707
Net realized income 18,020,337 2,293,462 -- -- 20,313,799
Distributions (16,138,786) (1,295,163) -- -- (17,433,949)
Change in net unrealized
fair value:
Equity investments -- -- 14,857,889 -- 14,857,889
Notes receivable -- -- -- (138,391) (138,391)
--------- --------- ---------- ------- ----------
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
========== ========= ========== ======= ==========
See accompanying notes to financial statements.
STATEMENTS OF CASH FLOWS
- ------------------------
For The Years Ended December 31,
------------------------------------
1994 1993 1992
---- ---- ----
Cash flows from operations:
Interest received $ 127,524 458,175 264,947
Cash paid to vendors (267,943) (434,341) (287,617)
Cash paid to related
parties (1,349,828) (1,748,793) (1,993,493)
Interest paid on short-
term borrowings (34,886) -- --
---------- ---------- ----------
Net cash used by
operations (1,525,133) (1,724,959) (2,016,163)
---------- ---------- ----------
Cash flows from investing
activities:
Notes receivable issued -- (401,668) (401,410)
Purchase of equity
investments (3,758,976) (3,410,622) (5,138,015)
Repayment of notes
receivable 24,766 67,345 911,443
Proceeds from sale of
investments -- 24,421,558 27,554,494
Distributions from venture
capital limited
partnership investments 29,129 38,399 --
---------- ---------- ----------
Net cash (used)
provided by investing
activities (3,705,081) 20,715,012 22,926,512
---------- ---------- ----------
Cash flows from financing
activities:
Proceeds from short-term
borrowings, net 2,167,868 -- --
Distributions to limited
and General Partners -- (30,715,623) (11,233,074)
---------- ---------- ----------
Net cash provided (used)
by financing activities 2,167,868 (30,715,623) (11,233,074)
---------- ---------- ----------
Net (decrease) increase in
cash and cash equivalents (3,062,346) (11,725,570) 9,677,275
Cash and cash equivalents
at beginning of year 3,072,847 14,798,417 5,121,142
---------- ---------- ----------
Cash and cash equivalents
at end of year $ 10,501 3,072,847 14,798,417
========== ========== ==========
See accompanying notes to financial statements.
STATEMENTS OF CASH FLOWS (continued)
- -----------------------------------
For the Years Ended December 31,
--------------------------------------
1994 1993 1992
---- ---- ----
Reconciliation of net
(loss) income to net cash
used by operations:
Net income $(5,007,050) 11,186,234 35,033,297
Adjustments to reconcile
net income to net cash
used by operations:
Net realized loss
from venture capital
limited partnership
investments -- 15,402 25,726
Net realized gain from
sale of investments -- (23,856,978) (25,399,530)
Realized losses from
investment write-downs 843,311 1,377,494 3,323,404
Change in net unrealized
fair value:
Equity investments 2,854,255 9,857,060 (14,857,889)
Notes receivable (5,000) (94,000) 138,391
Other, net 667 4,418 6,375
Changes in:
Accrued interest on
notes receivable (168,924) (209,806) (289,752)
Accounts payable and
accrued expenses (37,701) 11,321 12,682
Due to/from related
parties (56,112) (25,223) (39,533)
Other liabilities 19,035 31,899 43,888
Other assets 32,386 (22,780) (13,222)
---------- ---------- ----------
Net cash used by operations$(1,525,133) (1,724,959) (2,016,163)
========= ========== ==========
Non-cash investing activities:
Notes receivable and accrued
interest converted to equity
investments $ -- 557,400 183,683
========== ========== ==========
Equity investments converted
into notes receivable $ -- -- 557,400
========== ========== ==========
Non-cash exercise of
warrants $ -- -- 269,712
========== ========== ==========
See accompanying notes to financial statements.
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.
For the period from December 4, 1986 through January 10, 1989,
the Partnership was inactive. 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.
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 $26,906,653 by
$2,333,376 as of December 31, 1994.
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, 1994,
1993 and 1992 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 or subordinated notes receivable as
repayment of these notes may 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:
For the Years Ended December 31,
--------------------------------
1994 1993 1992
---- ---- ----
Increase in fair value
from cost of marketable
equity securities $ 1,592,683 5,990,109 20,333,380
Increase in fair value
from cost of non-marketable
equity securities 12,119,980 10,576,809 6,090,598
---------- ---------- ----------
Net unrealized fair
value increase from
cost at end of year 13,712,663 16,566,918 26,423,978
Net unrealized fair
value increase
from cost at
beginning of year 16,566,918 26,423,978 11,566,089
---------- ---------- ----------
Change in net unrealized
fair value of equity
investments $(2,854,255) (9,857,060) 14,857,889
========== ========== ==========
3. Related Party Transactions
--------------------------
Included in costs and expenses are related party costs as
follows:
For the Years Ended December 31,
-------------------------------------
1994 1993 1992
---- ---- ----
Management fees $456,017 799,898 799,898
Individual general
partners' compensation 42,000 38,117 42,000
Amortization of organi-
zational costs 1,167 7,000 7,000
Reimbursable operating
expenses:
Investment operations 398,855 419,522 590,191
Administrative and
investor services 288,534 314,895 346,183
Computer services 108,310 151,138 175,688
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 $32,970 and $66,658 at December 31, 1994 and 1993,
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. In 1994, 1993, and
1992, $42,000, $38,117 and $42,000, respectively, of such fees
were incurred and paid. The three individual general partners
each own 20 Units.
The Partnership reimburses the Managing General Partners for
operating expenses incurred by them in connection with the
business of the Partnership. Reimbursable operating expenses
include all expenses other than Organizational and Offering
Expenses and General Partner Overhead. At December 31, 1994,
there were $3,335 due from related parties compared to $19,089
due to related parties at December 31, 1993.
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. Financing of Partnership Operations
-----------------------------------
The Managing General Partners expect cash received from the
liquidation of Partnership investments and the collection of
notes receivable will provide the necessary liquidity to service
Partnership debt and fund Partnership operations. Until such
future proceeds are received, the Partnership may be dependent
upon the financial support of the Managing General Partners to
fund operations. The Managing General Partners have committed to
support the Partnership's working capital requirements through
advances as necessary.
5. 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.
(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.
Beginning in 1992, a portion of the net realized profit was
allocated 80% to the Limited Partners and 20% to the General
Partners pursuant to (a)(iii) above as all previously allocated
net realized loss and sales commissions had been offset by
profit.
6. Equity Investments
------------------
At December 31, 1994 and 1993, equity investments consisted of:
Original December 31, 1994 December 31, 1993
Principal ----------------- -----------------
Investment Amount or Cost Fair Cost Fair
Industry/Company Position Date Shares Basis Value Basis Value
- ---------------- -------- ---- ------ ----- ----- ----- -----
Communications
- --------------
Coded Common
Communications shares 04/93 145,454 $ 396,000 171,781 396,000 672,725
Corporation
Coded Common
Communications share
Corporation warrants
at $3.16;
expiring
04/95 04/93 145,454 4,000 0 4,000 204,545
Terrapin, Inc. Series A
Preferred
shares 06/92 1,107,340 -- -- 869,263 506,500
Terrapin, Inc. Convertible
secured
note (1) 06/92 $50,000 -- -- 54,201 54,201
Terrapin, Inc. Convertible
secured
note (1) 07/92 $50,000 -- -- 54,201 54,201
Unitech Telecom, Convertible
Inc. note (1) 05/94 $100,000 106,040 106,040 -- --
Unitech Telecom, Common
Inc. share
warrants
at $2.75;
expiring
05/99 05/94 36,364 0 0 -- --
Computer Systems and Software
- -----------------------------
Ascent Logic Common
Corporation share
warrants
at $.94;
expiring
03/97 03/92 31,915 2,500 0 2,500 2,500
Ascent Logic Series C
Corporation Preferred
shares 10/92 106,383 99,000 37,234 99,000 99,000
Ascent Logic Series D
Corporation Preferred
share
warrants
at $.35;
expiring
01/95 10/92 142,857 1,000 0 1,000 1,000
Multiport, Inc. Series A
Preferred 05/93 -
shares 08/93 2,440,000 797,400 2,629,636 797,400 0
Quintar Series A
Corporation Convertible
Preferred
shares 11/89 1,200,000 1,200,000 1,800,000 1,200,000 1,200,000
Quintar Convertible
Corporation secured
note (1) 10/93 $500,000 554,201 554,201 508,334 508,334
Quintar Common
Corporation share
warrants
at $1.00;
expiring
10/98 10/93 145,000 0 72,500 0 0
Reflection Convertible
Technology, Inc. note (1) 08/90 $1,000,000 -- -- 1,052,083 1,052,083
Reflection Redeemable
Technology, Inc. convertible
Series D
Preferred
shares 07/91 108,695 -- -- 124,999 124,999
Reflection Redeemable
Technology, Inc. convertible
Series D
Preferred
shares 07/92 108,695 -- -- 124,999 124,999
Reflection Redeemable
Technology, Inc. convertible
Series D
Preferred
shares 07/93 108,695 -- -- 125,000 125,000
Reflection Series F
Technology, Inc. Preferred
shares 01/94 28,572 50,001 60,001 -- --
Reflection Common
Technology, Inc. shares 05/94 19,567 22,502 41,091 -- --
Reflection Series D
Technology, Inc. Preferred
shares 11/94 869,565 1,000,000 1,826,086 -- --
Reflection Series G
Technology, Inc. Preferred
shares 11/94 172,877 312,500 363,041 -- --
Reflection Series D
Technology, Inc. Preferred
shares 11/94 163,043 187,498 342,391 -- --
Velocity Convertible
Incorporated note (1) 09/93 $125,000 -- -- 128,472 128,472
Velocity Warrants
Incorporated for common
shares at
$.25;
expiring
09/98 09/93 50,000 -- -- 0 0
Velocity Convertible
Incorporated note (1) 11/93 $62,500 -- -- 63,490 63,490
Velocity Warrants
Incorporated for common
shares at
$.25;
expiring
11/98 11/93 25,000 -- -- 0 0
Velocity Convertible
Incorporated note (1) 12/93 $62,500 -- -- 62,920 62,920
Velocity Warrants
Incorporated for common
shares at
$.25;
expiring
12/98 12/93 25,000 -- -- 0 0
Velocity Series A
Incorporated Preferred
shares 10/94 6,286,325 1,034,337 1,034,337 -- --
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
warrant
at $1.09;
expiring
03/95 01/92 114,679 0 51,606 0 51,606
SunPower Series B
Corporation Preferred
share
warrant
at $1.09;
expiring
08/95 07/92 22,935 0 10,321 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 -- --
SunPower Series D
Corporation Preferred
share warrants
at $1.54;
expiring
11/96 11/94 81,169 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 -- --
Thermatrix, Inc. Series D
Preferred
shares 11/94 323,120 807,800 807,800 -- --
Medical/Biotechnology
- ---------------------
Biex, Inc. Series A
Preferred
shares 07/93 128,205 83,333 128,205 83,333 83,333
Biex, Inc. Series B
Preferred
shares 10/94 63,907 63,907 63,907 -- --
Biex, Inc. Series B
Preferred
share
warrants at
$1.00;
expiring
10/97 10/94 23,540 8 0 -- --
Cardiometrics, Series A
Incorporated Preferred
shares 10/90 654,003 657,759 3,270,020 657,759 2,616,016
Cardiometrics, Common
Incorporated shares 10/90 119,886 1,543,221 599,430 1,543,221 479,544
Cardiometrics, Series A
Incorporated Preferred
shares 02/91 318,992 318,992 1,594,960 318,992 1,275,968
Cardiometrics, Series B
Incorporated Preferred
shares 03/92 36,444 145,778 182,220 145,778 145,778
CV Therapeutics, Series D
Inc. Preferred
shares 03/94 312,500 625,000 625,000 -- --
Everest & Jennings Common
International shares 01/94 592,720 637,519 318,883 -- --
Ltd.
InnerDyne, Inc. Common
shares 12/92 4,606 18,424 16,351 0 0
Intelliwire, Inc. Common
shares 02/93 8,715 436 12,027 436 436
Intelliwire, Inc. Series A
Preferred
shares 02/93 4,358 2,179 6,014 2,179 2,179
Medical Composite Series C
Technology, Inc. Preferred
shares 03/92 153,846 -- -- 500,000 500,000
Medical Composite Convertible 01/93 -
Technology, Inc. notes (1) 07/93 $127,172 -- -- 137,190 137,190
Medical Composite Series C
Technology, Inc. Preferred
share
warrants
at $3.25;
expiring
01/98 - 01/93 -
07/98 07/93 9,781 -- -- 0 0
Molecular Series B
Geriatrics, Inc. Preferred
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 0 350,000 350,000
Oculon Corporation Series III
Senior
Preferred
shares 01/94 106,796 0 0 -- --
Physiometrix, Series B
Inc. & C
Preferred 05/92 &
shares 05/93 180,125 -- -- 375,002 0
Physiometrix, Warrants
Inc. for common
shares at
$1,750;
expiring
06/97 06/92 16 0 0 2,500 0
Physiometrix, Common 01/94-
Inc. shares 05/94 338 375,054 1,680 -- --
Physiometrix Series D
Inc. Preferred 01/94 &
shares 02/94 338,150 114,971 1,690,750 -- --
RedCell, Inc. Funds held
in escrow for
Series B
Preferred
shares 12/94 132,979 125,000 125,000 -- --
SyStemix, Inc. Common 1991-
shares 1992 133,972 1,013,068 2,314,366 1,013,068 2,411,557
Microelectronics
- ----------------
Aprex Corporation Series D
Preferred
shares 12/90 30,000 7,559 7,559 30,000 30,000
Aprex Corporation Series E
Preferred
shares 12/91 18,750 4,724 4,724 18,750 18,750
Aprex Corporation Common
shares 08/92 3,500 0 0 0 3,500
Aprex Corporation Common
shares 08/93 10,743 0 0 10,743 10,743
Aprex Corporation Series F
Preferred 08/93-
shares 09/93 427,500 107,717 107,717 427,500 427,500
KOR Electronics Series C
Convertible
Preferred
shares 11/89 177,778 100,000 62,222 100,000 62,222
KOR Electronics Common
share
warrants at
$.35; expiration
date being
negotiated 11/89 360,000 0 0 0 0
KOR Electronics Convertible
secured
note (1) and
1,208,570
Common share
warrants at
$.35;
expiring
12/95-
08/99 11/89 $900,000 722,368 722,368 722,388 722,388
KOR Electronics Series D
Preferred
shares 02/91 1,285,714 450,000 450,000 450,000 450,000
KOR Electronics Convertible
secured
note (1) 10/92 $100,000 -- -- 108,808 108,808
KOR Electronics Convertible
secured
note (1) 04/93 $250,000 -- -- 262,008 262,008
KOR Electronics Convertible
note (1) 09/93 $100,000 -- -- 102,353 102,353
KOR Electronics Common
shares 01/94 670,036 869,263 506,500 -- --
KOR Electronics Series E
Preferred
shares 01/94 1,130,390 1,130,390 847,793 -- --
KOR Electronics Series E
Preferred
share
warrants
at $1.00;
expiring
01/98 01/94 55,000 0 0 -- --
Pharmaceuticals
- ---------------
Shaman Common
Pharmaceuticals, shares 01/93 1,245,194 3,446,739 3,924,237 3,446,739 12,118,278
Inc.
Retail/Consumer Products
- ------------------------
Yes! Entertain- Series B
ment Corporation Preferred
shares 01/93 900,000 600,000 450,000 600,000 1,035,000
Semiconductor
- -------------
AG Processing Common
Technologies shares 12/91 343,906 1,187,039 790,984 1,187,039 790,984
Inc.
IBIS Technology Class B
Corp. Preferred 08/89 &
shares 06/91 7,548 -- -- 45,892 45,892
IBIS Technology Class C
Corp. Preferred
shares 03/92 20,371 -- -- 55,001 55,001
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 $137,500 99,960 120,320 79,089 79,365
Medical Science Ltd.
Partners Partnership
interests various $500,000 444,109 644,888 444,109 602,004
Newtek Ventures II Ltd.
Partnership
interests various $683,764 578,625 772,853 488,625 513,909
Onset Enterprises Ltd.
Associates partnership
interests various $420,000 373,951 489,335 253,951 309,224
Utah Ventures Ltd.
Partnership
interests various $250,000 197,026 221,604 166,768 204,346
---------- ---------- ---------- ----------
Total equity investments $26,617,314 40,329,977 23,569,151 40,136,069
========== ========== ========== ==========
- -- 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 12.5%.
Marketable Equity Securities
- ----------------------------
At December 31, 1994 and 1993, marketable equity securities had
aggregate costs of $3,238,190 and $2,252,298, respectively, and
aggregate market values of $4,830,873 and $8,242,407, respectively.
The net unrealized gain at December 31, 1994 and 1993 included gross
gains of $2,153,132 and $5,990,109, respectively.
Aprex Corporation
- -----------------
Based on the Managing General Partners' opinion, there has been a
decline in the Partnership's investment value. Accordingly, a write-
down of $366,993 was recorded in late 1994.
Biex, Inc.
- ----------
In October 1994, the Partnership purchased 63,907 Series B Preferred
shares in the company at a total cost of $63,907. The purchase price
consisted of $31,395 in cash and the conversion of a note issued in
June 1994, including interest, of $32,512. The Partnership also
received warrants to purchase 23,540 Series B Preferred shares at an
exercise price of $1.00 per share. The pricing of the Series B
financing in which other investors participated indicated an increase
in fair value of $44,872 for the Partnership's existing investments.
Cardiometrics, Incorporated
- ---------------------------
During the fourth quarter of 1994, the company had a new round of
financing in which the Partnership did not participate. The pricing
of this round which included new investors indicated a fair value
increase of $1,129,324 for the Partnership's existing investment.
CV Therapeutics, Inc.
- ---------------------
In March 1994, the Partnership invested in CV Therapeutics, Inc. by
purchasing 312,500 Series D Preferred shares at a total cost of
$625,000.
Everest & Jennings International Ltd./Medical Composite
- --------------------------------------------------------
Technology, Inc.
- ----------------
In January 1994, Medical Composite Technology, Inc. ("MCT") was
acquired by Everest & Jennings International Ltd. ("E & J"). The
Partnership's Series C Preferred shares in MCT as well as convertible
notes including accrued interest were exchanged for 592,720 shares of
unrestricted E & J common stock while the warrants for the Series C
Preferred shares were canceled. The Partnership recorded a decrease
in fair value of $318,636 to reflect the market value at December 31,
1994.
IBIS Technology, Inc.
- ---------------------
In May 1994, IBIS Technology, Inc. completed its initial public
offering. As a result, the Partnership's preferred stock holdings
were converted into 46,718 shares of unrestricted common stock. The
Partnership recorded a decrease in fair value of $11,521 to reflect
the market value at December 31, 1994.
KOR Electronics/Terrapin, Inc.
- ------------------------------
In January 1994, KOR acquired Terrapin, Inc. The Partnership received
670,036 common shares of KOR in exchange for its Terrapin, Inc. Series
A Preferred shares. In addition, the Partnership invested $550,000
and converted Terrapin and KOR convertible secured notes and interest,
net of repayments, totaling $580,390 for 1,130,390 Series E Preferred
shares of KOR. These transactions were recorded at cost.
In late 1994, the Partnership recorded a fair value decrease of
$282,597 pursuant to the conversion agreement to reflect a downward
adjustment in Series E Preferred price per share. The agreement
provided for a downward adjustment in Series E Preferred price per
share if another financing round had not taken place by year end.
Multiport, Inc.
- ---------------
In May 1994, Multiport, Inc. and the Partnership entered into an
agreement with a third party to sell the assets of Multiport, Inc.
The company will receive a stream of payments beginning May 1995
through July 1997. The year end estimated fair value of $2,629,636
represents the present value of the net proceeds to be received.
Oculon Corporation
- ------------------
In late 1994, the company suspended its clinical trials due to
unexpected negative test results on its lead compound. As a result of
this outcome, the Managing General Partners have determined that there
has been a decline in value of the Partnership's investment.
Accordingly, the Partnership has written off its investment of
$460,000 of which $350,000 was outstanding as of January 1, 1994.
Physiometrix, Incorporated
- --------------------------
In January 1994, the company had a 1,000 to 1 reverse stock split
followed by a conversion of its preferred shares to common shares.
During the six months ended June 30, 1994, the Partnership's existing
preferred share holdings were converted to 182 common shares and the
Partnership purchased an additional 156 common shares from other
investors at a nominal price. The Partnership's common warrants were
written off due to a decline in value. In early 1994, the Partnership
participated in an equity financing by purchasing 338,150 Series D
Preferred shares at a total cost of $114,971.
In June 1994, the company had a Series E Preferred round of equity
financing in which the Partnership did not participate. The pricing
of this round indicated a change in fair value increase of $1,579,907
for the Partnership's existing investment.
Quintar Corporation
- -------------------
In October 1994, the company had a new round of equity financing in
which the Partnership did not participate. This round of financing
resulted in a $672,500 increase in fair value for the Partnership's
existing investment.
RedCell, Inc.
- -------------
In December 1994, the Partnership deposited $125,000 into an escrow
fund to purchase 132,979 Series B Preferred shares upon the final
close of the financing round, which occurred in late February 1995.
Reflection Technology, Inc.
- ---------------------------
In January 1994, the Partnership made an additional investment by
purchasing 28,572 Series F Preferred shares at a total cost of
$50,001. In May 1994, the Partnership cash exercised a warrant for
$22,502 and received 19,567 shares of common stock. Related to a
Series G Preferred share round of financing with a new investor at
$2.10 per share in November 1994, the Partnership converted its
existing $1,000,000 convertible note into 869,565 Series D Preferred
shares at $1.15 per share and received 59,523 Series G Preferred
shares at $2.10 per share in lieu of interest totaling $125,000. In
addition, half of the existing redeemable convertible Series D
Preferred shares (with investment dates of July 1991, 1992, and 1993)
were converted into 113,354 Series G Preferred shares while the
remaining half was exchanged for 163,043 newly issued Series D
Preferred shares.
The Series G round of financing resulted in an increase in the fair
value of $1,060,109 for the Partnership's investments.
Shaman Pharmaceuticals, Inc.
- ----------------------------
At December 31, 1994, the fair value of this investment decreased to
$3,924,237. The fair value reflected a 25% discount on shares which
were restricted. The Managing General Partners continue to believe
the company is capable of a higher future value and, subsequent to
year end, purchased 340,833 common shares in a private transaction for
$1,363,332. The purchase price was financed by a two-year promissory
note from the seller.
SunPower Corporation
- --------------------
In September 1994, the Partnership issued a convertible note of
$25,000 to SunPower Corporation. Subsequently, in November 1994, the
Partnership purchased 81,169 Series D Preferred shares at a total cost
of $123,750, which consisted of $100,000 in cash and the conversion of
the September 1994 note principal (interest will be repaid by the
company). The Partnership also received warrants to purchase 81,169
Series D Preferred shares at $1.54 per share, expiring November 1996.
The Partnership's existing investment fair value did not change as a
result of the November 1994 purchase as the price per share remained
unchanged.
Thermatrix, Inc.
- ----------------
In August and September 1994, the Partnership issued convertible notes
totaling $395,800 to Thermatrix, Inc. Then in November 1994, the
Partnership converted these notes, including interest, and paid
$405,333 in cash to receive 323,120 Series D Preferred shares for a
total cost of $807,800. The Partnership's existing investment fair
value did not change as a result of the November 1994 purchase as the
price per share remained unchanged.
Unitech Telecom, Inc.
- ---------------------
In May 1994, the Partnership issued a $100,000 convertible note
receivable to the company. As a result of this transaction, the
Partnership received warrants to purchase 36,364 common shares at an
exercise price of $2.75 per share, expiring in May 1999.
Velocity Incorporated
- ---------------------
During the first nine months of 1994, the Partnership issued $250,000
in convertible notes to the company and received various warrants to
purchase common shares of the company. Then, in late 1994, the
Partnership made an additional $500,000 investment. This investment,
together with all the existing convertible notes, including interest,
were used to purchase 6,286,325 Series A Preferred shares with a total
cost basis of $1,034,337. All existing warrants were canceled as part
of the conversion.
YES! Entertainment
- ------------------
In May 1994, the company had a new round of equity financing in which
the Partnership did not participate. The investment fair value has
been adjusted to reflect the valuation from this round of financing.
Venture Capital Limited Partnership Investments
- -----------------------------------------------
The Partnership recorded a cost basis increase of $261,129 in venture
capital limited partnership investments in 1994. The increase
consisted of additional contributions of $322,500, partially offset by
cash distributions of $29,129 and stock distributions of $32,242. The
Partnership also recorded a fair value increase of $540,152 based on
the above transactions and a net increase in the fair value of the
underlying investments of certain venture capital limited
partnerships.
Other Equity Investments
- ------------------------
Other significant changes during the year ended December 31, 1994
reflected above relate to market value fluctuations and the
elimination of a discount relating to selling restrictions for
publicly-traded portfolio companies.
7. Notes Receivable, Net
---------------------
At December 31, 1994 and 1993, notes receivable consisted of:
1994 1993
---- ----
Notes receivable $276,918 301,684
Accrued interest 13,713 6,416
Unamortized discount related to warrants (1,292) (1,792)
------- -------
Total notes receivable,
net (cost basis) 289,339 306,308
Allowance for loan losses (49,000) (54,000)
------- -------
Total notes receivable,
net (fair value) $240,339 252,308
======= =======
Changes in the allowance for loan losses
were as follows:
1994 1993
---- ----
Balance, beginning of year $ 54,000 148,000
------- -------
(Decrease) increase in
provision for loan losses (5,000) 6,000
Notes receivable write-downs:
Computer systems and software -- (100,000)
------- -------
Change in net unrealized fair value of
notes receivable (5,000) (94,000)
------- -------
Balance, end of year $ 49,000 54,000
======= =======
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.
Interest rates on secured notes receivable at December 31, 1994 ranged
from 10% to 12.5%.
The scheduled principal repayments remaining are:
Year Ending Principal
December 31, Repayments
----------- ----------
1995 $230,464
1996 32,491
1997 13,963
-------
Total $276,918
=======
8. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at December 31, 1994 and 1993 consisted of:
1994 1993
---- ----
Demand accounts $ 2,923 64,691
Money-market accounts 7,578 3,008,156
------ ---------
Total $10,501 3,072,847
====== =========
9. Short-Term Borrowings
---------------------
The Partnership has borrowing accounts with two financial
institutions. At December 31, 1994, the borrowing capacity of these
accounts, which fluctuate based on collateral value, totaled
$3,164,565. The outstanding balance at December 31, 1994 was
$2,167,868. The maximum and weighted-average amounts outstanding
during 1994 were $2,633,000 and $558,294, respectively. The interest
rates for the two accounts at December 31, 1994 were 8% and 9%. In
1994, the weighted-average interest rate was 6.24%; interest expense
of $34,886 was recorded. The Partnership's investments in Shaman
Pharmaceuticals, Inc. and Systemix, Inc. are pledged as collateral.
10. Commitments
-----------
The Partnership is a party to financial instruments with off-balance-
sheet risk in the normal course of its business. Generally, these
instruments are commitments for future equity fundings, venture
capital limited partnership investments, equipment financing
commitments, or accounts receivable lines of credit that are
outstanding but not currently fully utilized. As they do not
represent current outstanding balances, these unfunded commitments are
properly not recognized in the financial statements. At December 31,
1994, the Partnership has unfunded commitments as follows:
Type
- ----
Equity financings $175,000
Venture capital limited partnership investments 368,650
Accounts receivable lines of credit 185,000
-------
Total $728,650
=======
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.
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 17, 1995 By: /s/Frank R. Pope
----------------------------------
Frank R. Pope
Executive Vice President and
Chief Financial Officer
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 17, 1995
- ------------------------ Executive Officer
Charles R. Kokesh and Chairman of
Technology Funding Inc.
and Managing General
Partner of Technology
Funding Ltd.
/s/Frank R. Pope Executive Vice March 17, 1995
- ------------------------ President, Chief
Frank R. Pope Financial Officer,
Secretary and a
Director of Technology
Funding Inc. and a
General Partner of
Technology Funding Ltd.
/s/Gregory T. George Group Vice President March 17, 1995
- -------------------------- 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.