<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
--- ---
Commission File No. 814-82
TECHNOLOGY FUNDING VENTURE PARTNERS V, AN AGGRESSIVE GROWTH FUND, L.P.
----------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 94-3094910
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2000 Alameda de las Pulgas, Suite 250
San Mateo, California 94403
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(415) 345-2200
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
No active market for the units of limited partnership interests
("Units") exists, and therefore the market value of such Units cannot be
determined.
<PAGE>
I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
1995 1994
---------- -----------
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis
of $17,133,642 and $16,068,778 at
1995 and 1994, respectively) $19,894,127 18,985,725
Secured notes receivable, net
(cost basis of $1,856,850 and
$1,995,190 at 1995 and 1994,
respectively) 1,182,850 1,435,190
---------- ----------
Total investments 21,076,977 20,420,915
Cash and cash equivalents 11,953,344 11,371,533
Other assets 22,165 807,401
---------- ----------
Total $33,052,486 32,599,849
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 25,137 29,751
Due to related parties 123,153 55,781
Other liabilities 2,431 861
---------- ----------
Total liabilities 150,721 86,393
Commitments (Notes 2 and 6)
Partners' capital:
Limited Partners
(Units outstanding of
400,000 in both 1995 and 1994) 30,804,117 30,145,346
Managing General Partners 11,163 11,163
Net unrealized fair value increase
(decrease) from cost:
Equity investments 2,760,485 2,916,947
Secured notes receivable (674,000) (560,000)
---------- ----------
Total partners' capital 32,901,765 32,513,456
---------- ----------
Total $33,052,486 32,599,849
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-----------------------------------
1995 1994
---- ----
<S> <C> <C>
Income:
Secured notes receivable interest $ 29,412 138,116
Short-term investments interest 174,113 125,265
Other income 1,686 2,393
------- ---------
Total income 205,211 265,774
Costs and expenses:
Management fees 199,102 199,056
Individual general partners'
compensation 4,500 4,500
Amortization of organizational costs 1,750 1,750
Operating expenses:
Investment operations 134,369 125,167
Administrative and investor services 98,526 119,205
Professional fees 12,704 17,570
Computer services 27,439 35,710
------- ---------
Total operating expenses 273,038 297,652
------- ---------
Total costs and expenses 478,390 502,958
------- ---------
Net operating loss (273,179) (237,184)
Realized gains from
sales of equity investments 935,950 92,015
Realized losses from
investment write-downs (4,000) (2,500)
------- ---------
Net realized income (loss) 658,771 (147,669)
Change in net unrealized
fair value:
Equity investments (156,462) (894,712)
Secured notes receivable (114,000) 6,000
------- ---------
Net income (loss) $ 388,309 (1,036,381)
======= =========
Net realized income per Unit $ 2 --
======= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-----------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 214,657 233,219
Cash paid to vendors (50,748) (63,542)
Cash paid to related parties (361,813) (458,975)
---------- ----------
Net cash used by
operating activities (197,904) (289,298)
---------- ----------
Cash flows from investing activities:
Secured notes receivable issued -- (84,958)
Purchase of equity investments (1,372,903) (1,487,476)
Proceeds from sales of
equity investments 2,022,421 212,516
Repayments of secured notes receivable 130,197 212,511
---------- ----------
Net cash provided (used) by
investing activities 779,715 (1,147,407)
---------- ----------
Net increase (decrease) in cash
and cash equivalents 581,811 (1,436,705)
Cash and cash equivalents at
beginning of year 11,371,533 16,187,289
---------- ----------
Cash and cash equivalents at March 31 $11,953,344 14,750,584
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited) (continued)
- -----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-----------------------------------
1995 1994
---- ----
<S> <C> <C>
Reconciliation of net income (loss) to
net cash used by operating activities:
Net income (loss) $ 388,309 (1,036,381)
Adjustments to reconcile net income
(loss) to net cash used by
operating activities:
Change in net unrealized fair value:
Equity investments 156,462 894,712
Secured notes receivable 114,000 (6,000)
Realized gains from sale of
equity investments (935,950) (92,015)
Other changes, net 5,039 1,928
Changes in:
Due to related parties 67,372 (11,806)
Other, net 6,864 (39,736)
------- ---------
Net cash used by operating activities $(197,904) (289,298)
======= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ----------------------------------------
1. General
-------
In the opinion of the Managing General Partners, the Balance Sheets as
of March 31, 1995 and December 31, 1994, and the related Statements of
Operations and Statements of Cash Flows for the three months ended March
31, 1995 and 1994, reflect all adjustments which are necessary for a
fair presentation of the financial position, results of operations and
cash flows for such periods. These statements should be read in
conjunction with the Annual Report on Form 10-K for the year ended
December 31, 1994. The following notes to financial statements for
activity through March 31, 1995 supplement those included in the Annual
Report on Form 10-K.
2. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs for the three months
ended March 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Management fees $199,102 199,056
Amortization of organizational cost 1,750 1,750
Reimbursable operating expenses 226,609 243,613
Individual general partners' compensation 4,500 4,500
</TABLE>
Certain reimbursable expenses have been accrued based upon interim
estimates prepared by the Managing General Partners and are adjusted to
actual cost periodically. Due to related parties were $56,799 at March
31, 1995 compared to due from related parties of $10,568 at December 31,
1994 for reimbursable operating expenses.
Amounts payable for management fees were $66,354 and $66,349 at March
31, 1995 and December 31, 1994, respectively.
3. Equity Investments
------------------
A full listing of the Partnership's equity investments at December 31,
1994 is in the 1994 Annual Report. Activity from January 1 through
March 31, 1995 consisted of:
<TABLE>
<CAPTION>
January 1 -
March 31, 1995
Principal --------------
Investment Amount or Cost Fair
Industry/Company Position Date Shares Basis Value
- ---------------- -------- ---------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $16,068,778 18,985,725
---------- ----------
Significant changes:
Communications
- --------------
Unitech Telecom, Inc. Convertible
note (1) 05/94 $100,000 (106,039) (106,039)
Unitech Telecom, Inc. Series A Preferred
shares 03/95 46,875 375,000 375,000
Computer Systems and Software
- -----------------------------
Pilot Network Series D Preferred
Services, Inc. shares 03/95 371,557 650,225 650,225
Velocity Incorporated Convertible note (1) 03/95 $250,000 250,083 250,083
Environmental
- -------------
SRG Holdings, Inc. Convertible 01/95 -
notes (1) 03/95 $78,124 78,805 78,805
Industrial/Business Automation
- ------------------------------
Bolder Technologies Convertible
Corporation note (1) 03/95 $69,467 69,977 69,977
Bolder Technologies Common share
Corporation warrants at $0.50;
expiring 03/00 03/95 8,694 87 87
Oxford GlycoSystems Common
Group PLC shares 08/93 533,867 0 (572,833)
Medical
- -------
TheraTx, Incorporated Common shares 06/94 70,042 (16,500) (345,177)
UroMed Corporation Common shares 03/94 179,828 (286,236) (831,705)
Microelectronics
- ----------------
Tessera, Inc. Common warrants
at $0.73;
expiring 04/97 04/92 72,754 0 128,775
Tessera, Inc. Series B
Preferred share 05/92 666,666 0 1,166,665
---------- ----------
Total significant changes during the three
months ended March 31, 1995 1,015,402 863,863
Other changes, net 49,462 44,539
---------- ----------
Total equity investments at March 31, 1995 $17,133,642 19,894,127
========== ==========
(1) Convertible notes include accrued interest. Interest rates on notes issued in 1995
ranged from 8% to 12%.
</TABLE>
Marketable Equity Securities
- ----------------------------
At March 31, 1995 and December 31, 1994, marketable equity securities
had aggregate costs of $1,142,579 and $1,445,315, respectively, and
aggregate market values of $1,724,986 and $2,910,791, respectively. The
net unrealized gains at March 31, 1995 and December 31, 1994 included
gross gains of $1,138,183 and $2,012,329, respectively.
Bolder Technologies
- -------------------
In March 1995, the Partnership issued an unsecured convertible note for
$69,467 and purchased 8,694 warrants for common shares with an exercise
price of $0.50 per share for $87.
Oxford GlycoSystems
- -------------------
In March 1995, the company had a new round of equity financing in which
the Partnership did not participate. The pricing of this round
indicated a decrease in the change in fair value of $572,833 for the
Partnership's existing investments.
Pilot Network Services, Inc.
- ----------------------------
In March 1995, the Partnership purchased 371,557 Series D Preferred
shares from the company at a total cost of $650,225.
SRG Holdings, Inc.
- ------------------
During the first quarter of 1995, the Partnership issued convertible
notes totaling $78,124 to SRG Holdings, Inc.
Tessera, Inc.
- -------------
In February 1995, the company had a Series C round of equity financing
in which the Partnership did not participate. The pricing of this
financing indicated an increase in the change in fair value of
$1,295,440 for the Partnership's existing investments.
TheraTx, Inc.
- -------------
In January 1995, the Partnership sold 11,000 shares of TheraTx, Inc. for
proceeds of $214,719 and a realized gain of $198,219. The Partnership
also received proceeds of $127,750 from sales prior to December 31,
1994, which have been settled. The Partnership recorded a decrease in
unrealized fair value of $345,177 during the first quarter of 1995, a
portion was realized related to the sale mentioned above, with the
remainder due to a change in the market value of the remaining
unrestricted shares at March 31, 1995.
Unitech Telecom, Inc.
- ---------------------
In March 1995, the Partnership purchased 46,875 Series A Preferred
shared from the company at a total cost of $375,000. The purchase price
consisted of $275,000 in cash and the conversion of a $100,000 note
issued in May 1994.
UroMed Corporation
- ------------------
In January 1995, the Partnership sold its remaining holdings in the
company for total proceeds of $1,023,967 and a realized gain of
$737,731. The Partnership also received proceeds of $655,985 from sales
prior to December 31, 1994, which have been settled.
Velocity Incorporated
- ---------------------
In March 1995, the Partnership issued a convertible note of $250,000 to
the company and received warrants to purchase 25,000 common shares at an
exercise price of $1.00 per share.
4. Secured Notes Receivable, Net
-----------------------------
Activity from January 1, 1995 through March 31, 1995 consisted of:
<TABLE>
<S> <C>
Balance at January 1, 1995 $1,435,190
1995 activity:
Repayments of secured notes receivable (130,197)
Increase in allowance for loan losses (114,000)
Change in interest receivable (8,854)
Other activity, net 711
---------
Total secured notes receivable, net, at March 31, 1995 $1,182,850
=========
</TABLE>
The Partnership had accrued interest of $110,787 and $119,641 at March
31, 1995 and December 31, 1994, respectively.
Activity in the allowance for loan losses was as follows:
<TABLE>
<S> <C>
Balance at January 1, 1995 $560,000
Change in net unrealized fair value of
secured notes receivable 114,000
-------
Balance at March 31, 1995 $674,000
=======
</TABLE>
The allowance for loan losses is adjusted quarterly based upon changes
to the portfolio size and risk profile. Although the allowance is
established by evaluating individual debtor repayment ability, the
allowance represents the Managing General Partners' assessment of the
portfolio as a whole.
Notes with a total cost basis of $1,367,004 were on nonaccrual status
due to uncertainties related to a borrower's financial condition at
March 31, 1995. The Managing General Partners continue to monitor the
progress of this company. The fair value at March 31, 1995 is based on
the Managing General Partners' estimate of collectibility of these
notes.
5. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at March 31, 1995 and December 31, 1994
consisted of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Demand accounts $ -- 2,241
Money-market accounts 11,953,344 11,369,292
---------- ----------
Total $11,953,344 11,371,533
========== ==========
</TABLE>
6. Commitments
-----------
The Partnership is a party to financial instruments with off-balance-
sheet risk in the normal course of its business. Generally, these
instruments are commitments for future equity fundings, venture capital
limited partnership investments, equipment financing commitments, or
accounts receivable lines of credit that are outstanding but not
currently fully utilized. As they do not represent current outstanding
balances, these unfunded commitments are properly not recognized in the
financial statements. At March 31, 1995, the Partnership had unfunded
commitments as follows:
<TABLE>
<S> <C>
Type
- ----
Equity investments $1,640,000
Secured promissory notes (term loan and other financing) 47,207
Venture capital limited partnership investments 631,560
---------
Total $2,318,767
=========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
During the three months ended March 31, 1995, net cash used by
operations totaled $197,904. The Partnership paid management fees of
$199,097 to the Managing General Partners and reimbursed related parties
for operating expenses of $158,216. In addition, $4,500 was paid to the
individual general partners as compensation for their services. Other
operating expenses of $50,748 were paid and $214,657 in interest income
was received.
During the three months ended March 31, 1995, the Partnership funded
equity investments of $1,372,903 primarily to portfolio companies in the
computer systems and software, and communications industries. Proceeds
from sales of equity investments were $2,022,421 of which $783,735
related to sales prior to December 31, 1994, which have been settled.
Repayments of notes receivable provided cash of $130,197. As of March
31, 1995, the Partnership was committed to fund additional investments
totaling $2,318,767.
Cash and cash equivalents at March 31, 1995 were $11,953,344. Future
interest income on short-term investments and notes receivable, and
operating cash reserves are expected to be adequate to fund Partnership
operations through the next twelve months.
Results of Operations
- ---------------------
Current quarter compared to corresponding quarter in the preceding year
- -----------------------------------------------------------------------
Net income was $388,309 for the three months ended March 31, 1995
compared to a net loss of $1,036,381 during the same period in 1994.
The change was primarily due to an $843,935 increase in realized gains
from sales of equity investments and a $738,250 increase in the change
in net unrealized fair value of equity investments. These changes were
partially offset by a $120,000 decrease in the change in net unrealized
fair value of secured notes receivable and a $60,563 decrease in total
income.
Realized gains from sales of equity investments were $935,950 and
$92,015 during the quarters ended March 31, 1995 and 1994, respectively.
The 1995 gain primarily relate to sales of UroMed Corporation and
TheraTx, Incorporated. The 1994 gain related to sales of EROX
Corporation and OrthoLogic Corporation.
During the quarter ended March 31, 1995, the decrease in fair value of
$156,462 was primarily attributable to a decrease due to realized gains
from investment sales related to UroMed Corporation and TheraTx,
Incorporated and a decrease in a portfolio company in the
industrial/business automation industry, partially offset by an increase
in a portfolio company in the microelectronics industry. During the
same period in 1994, the decrease of $894,712 was primarily due to
portfolio companies in the communications, medical and microelectronics
industries.
During the three months ended March 31, 1995, the Partnership recorded a
decrease in fair value of secured notes receivable of $114,000 based
upon the level of loan loss reserves deemed adequate by the Managing
General Partners. A $6,000 increase was recorded for the same period in
1994.
Total income was $205,211 and $265,774 for the quarters ended March 31,
1995 and 1994, respectively. The decrease was primarily related to
lower notes receivable interest income due to additional notes placed on
nonaccrual status, partially offset by higher short-term investment
income due to higher interest rates.
Given the inherent risk associated with the business of the Partnership,
the future performance of the portfolio company investments may
significantly impact future operations.
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Partnership during the
quarter ended March 31, 1995.
(b) Financial Data Schedule for the quarter ended and as of March 31,
1995 (Exhibit 27).
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TECHNOLOGY FUNDING VENTURE PARTNERS V,
AN AGGRESSIVE GROWTH FUND, L.P.
By: TECHNOLOGY FUNDING INC.
Managing General Partner
Date: May 12, 1995 By: /s/Frank R. Pope
------------------------------------
Frank R. Pope
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<PERIOD-TYPE> 3-MOS
<INVESTMENTS-AT-COST> 18,990,492
<INVESTMENTS-AT-VALUE> 21,076,977
<RECEIVABLES> 0
<ASSETS-OTHER> 22,165
<OTHER-ITEMS-ASSETS> 11,953,344
<TOTAL-ASSETS> 33,052,486
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 150,721
<TOTAL-LIABILITIES> 150,721
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,815,280
<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> 2,086,485
<NET-ASSETS> 32,901,765
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 203,525
<OTHER-INCOME> 1,686
<EXPENSES-NET> 478,390
<NET-INVESTMENT-INCOME> (273,179)
<REALIZED-GAINS-CURRENT> 931,950
<APPREC-INCREASE-CURRENT> (270,462)
<NET-CHANGE-FROM-OPS> 388,309
<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> 388,309
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 199,102
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 479,190
<AVERAGE-NET-ASSETS> 32,707,611
<PER-SHARE-NAV-BEGIN> 75
<PER-SHARE-NII> 2
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 77
<EXPENSE-RATIO> .01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>
A zero value is used since the change in net unrealized fair value is
not allocated to General Partners and Limited Partners as it is not
taxable. Only taxable gains or losses are allocated in accordance with
the Partnership Agreement.
</FN>
</TABLE>
