<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
--- ---
Commission File No. 814-82
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 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
No active market for the units of limited partnership interests
("Units") exists, and therefore the market value of such Units cannot be
determined.
<PAGE>
I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
(unaudited)
June 30, December 31,
1996 1995
---------- -----------
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis
of $22,459,363 and $20,607,017 at
1996 and 1995, respectively) $26,790,889 24,289,218
Secured notes receivable, net
(cost basis of $750,522 and
$1,954,572 at 1996 and 1995,
respectively) 473,522 999,572
---------- ----------
Total investments 27,264,411 25,288,790
Cash and cash equivalents 1,702,991 4,396,042
Other assets 6,182 13,804
---------- ----------
Total $28,973,584 29,698,636
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 16,616 25,950
Due to related parties 1,032,727 40,970
Other liabilities 756 --
---------- ----------
Total liabilities 1,050,099 66,920
Commitments and contingencies
(Notes 3 and 7)
Partners' capital:
Limited Partners
(Units outstanding of
400,000 in both 1996 and 1995) 23,920,672 26,925,872
General Partners (51,713) (21,357)
Net unrealized fair value increase
(decrease) from cost:
Equity investments 4,331,526 3,682,201
Secured notes receivable (277,000) (955,000)
---------- ----------
Total partners' capital 27,923,485 29,631,716
---------- ----------
Total $28,973,584 29,698,636
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
------------------------ --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Secured notes receivable interest $ 25,590 26,795 60,602 56,207
Short-term investments interest 16,914 151,629 59,708 327,428
--------- --------- --------- ---------
Total income 42,504 178,424 120,310 383,635
Costs and expenses:
Management fees 97,499 199,061 194,998 398,163
Individual General Partners'
compensation 12,936 12,349 17,549 16,849
Amortization of organizational costs -- 1,750 -- 3,500
Operating expenses:
Investment operations 174,831 148,583 319,546 282,952
Administrative and investor services 128,063 153,746 231,129 252,272
Professional fees 28,091 44,223 40,219 56,927
Computer services 59,600 29,032 81,775 56,471
Expenses absorbed by General Partners (115,443) -- (115,443) --
Expenses not subject to limitation 853,838 -- 853,838 --
--------- --------- --------- ---------
Total operating expenses 1,128,980 375,584 1,411,064 648,622
--------- --------- --------- ---------
Total costs and expenses 1,239,415 588,744 1,623,611 1,067,134
--------- --------- --------- ---------
Net operating loss (1,196,911) (410,320) (1,503,301) (683,499)
Realized gains from
sales of equity investments 902,118 -- 902,118 935,950
Realized losses from
investment write-downs (2,357,282) (635,920) (2,434,373) (639,920)
Recoveries from investments previously
written off -- 42,582 -- 42,582
--------- --------- --------- ---------
Net realized loss (2,652,075) (1,003,658) (3,035,556) (344,887)
Change in net unrealized
fair value:
Equity investments (1,305,160) 759,020 649,325 602,558
Secured notes receivable 755,000 (19,000) 678,000 (133,000)
--------- --------- --------- ---------
Net (loss) income $(3,202,235) (263,638) (1,708,231) 124,671
========= ========= ========= =========
Net realized loss per Unit $ (7) (3) (8) (1)
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 90,294 391,159
Cash paid to vendors (128,322) (166,280)
Cash paid to related parties (504,488) (842,973)
---------- ----------
Net cash used by
operating activities (542,516) (618,094)
---------- ----------
Cash flows from investing activities:
Secured notes receivable issued (208,334) --
Purchase of equity investments (3,460,818) (4,943,033)
Proceeds from sales of
equity investments 1,017,678 2,022,421
Repayments of convertible and
secured notes receivable 500,939 490,108
---------- ----------
Net cash used by investing activities (2,150,535) (2,430,504)
---------- ----------
Net decrease in cash and
cash equivalents (2,693,051) (3,048,598)
Cash and cash equivalents at
beginning of year 4,396,042 11,371,533
---------- ----------
Cash and cash equivalents at June 30 $ 1,702,991 8,322,935
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited) (continued)
- -----------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
Reconciliation of net (loss) income to net
cash used by operating activities:
Net (loss) income $(1,708,231) 124,671
Adjustments to reconcile net (loss)
income to net cash used by operating
activities:
Realized gains from sales of
equity investments (902,118) (935,950)
Realized losses from investment
write-downs 2,434,373 639,920
Recoveries from investments previously
written off -- (42,582)
Change in net unrealized fair value:
Equity investments (649,325) (602,558)
Secured notes receivable (678,000) 133,000
Other, net -- 2,279
Changes in:
Due to related parties 991,757 68,277
Other changes, net (30,972) (5,151)
--------- -------
Net cash used by operating activities $ (542,516) (618,094)
========= =======
Non-cash investing activities:
Reclassification of secured notes to
equity investments (subordinated
notes receivable) $ 1,275,000 --
========= =======
Common stock recovered from equity
investments previously written off $ -- 42,582
========= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ----------------------------------------
1. General
-------
In the opinion of the Managing General Partners, the Balance Sheets as
of June 30, 1996, and December 31, 1995, and the related Statements of
Operations for the three and six months ended June 30, 1996 and 1995,
and Statements of Cash Flows for the six months ended June 30, 1996 and
1995, reflect all adjustments which are necessary for a fair
presentation of the financial position, results of operations and cash
flows for such periods. These statements should be read in conjunction
with the Annual Report on Form 10-K for the year ended December 31,
1995. The following notes to financial statements for activity through
June 30, 1996, supplement those included in the Annual Report on Form
10-K. Allocation of income and loss to Limited and General Partners is
based on cumulative income and loss. Adjustments, if any, are reflected
in the current quarter balances.
2. 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 is 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.
3. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs for the six months ended
June 30, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Management fees $194,998 398,163
Amortization of organizational cost -- 3,500
Reimbursable operating expenses 545,303 497,264
Individual General Partners' compensation 17,549 16,849
Expenses absorbed by General Partners (115,443) --
Expenses not subject to limitation 853,838 --
</TABLE>
Certain reimbursable expenses have been accrued based upon interim
estimates prepared by the Managing General Partners and are adjusted to
actual cost periodically.
Amounts payable for management fees were $32,500 and $66,354 at June 30,
1996, and December 31, 1995, respectively. Pursuant to the Partnership
Agreement, beginning January 2, 1996, management fees changed from two
percent to one percent per annum of total Limited Partner capital
contributions.
Pursuant to the Partnership Agreement, the Partnership shall reimburse
the Managing General Partners for operational costs incurred by the
Managing General Partners in conjunction with the business of the
Partnership. The Partnership may not pay or reimburse the Managing
General Partners for operational costs that aggregate more than 1% of
total Limited Partner capital contributions. During 1996, it was
determined that operational costs paid directly by the Partnership are
not subject to this limitation; consequently, $853,838 is included in
due to related parties. For the six months ended June 30, 1996,
operating expenses incurred by the Managing General Partners exceeded
the limitation by $115,443, resulting in this amount being absorbed by
the Managing General Partners. At June 30, 1996, due to related parties
was $1,000,227 compared to due from related parties of $25,384 at
December 31, 1995.
4. Equity Investments
------------------
A full listing of the Partnership's equity investments at December 31,
1995, is in the 1995 Annual Report. Activity from January 1 through
June 30, 1996, consisted of:
<TABLE>
<CAPTION>
January 1 -
June 30, 1996
Principal --------------
Investment Amount or Cost Fair
Industry/Company Position Date Shares Basis Value
- ---------------- -------- ---------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $20,607,017 24,289,218
---------- ----------
Significant changes:
Biomedical
- ----------
RedCell, Inc. Convertible
note (1) 02/96 $179,932 185,209 185,209
Biotechnology
- -------------
Molecular Geriatrics Series B
Corporation Preferred
shares 09/93 500,000 (250,000) (250,000)
Molecular Geriatrics Common
Corporation shares 01/96 47,170 250,000 94,340
Communications
- --------------
Coded Communications Common
Corporation shares 04/93 145,454 (77,091) (87,999)
Positive Convertible
Communications, Inc. note (1) 03/96 $63,047 64,362 64,362
Positive Common share
Communications, Inc. warrant at $0.50;
expiring 03/01 03/96 3,709 4 13,909
Wire Networks, Inc. Series A Preferred
shares 02/96 78,553 106,047 106,047
Wire Networks, Inc. Series B Preferred
shares 02/96 95,980 215,955 215,955
Computer Systems and Software
- -----------------------------
Velocity Incorporated Series A
Preferred
shares 10/94 12,572,652 (2,000,000) (2,068,674)
Velocity Incorporated Subordinated 08/95-
notes (1) 10/95 $250,000 0 (250,000)
Velocity Incorporated Subordinated 11/95-
notes (1) 06/96 $1,295,000 1,295,000 361,667
Environmental
- -------------
Conversion Technologies Series A
International, Inc. Preferred
shares 05/95 600,000 (1,500,000) (1,500,000)
Conversion Technologies Convertible 09/95-
International, Inc. note (1) 11/95 $187,500 (190,011) (190,011)
Conversion Technologies Common
International, Inc. shares 05/96 207,547 1,500,000 800,716
SRG Products Convertible 07/94-
Corporation notes (1) 01/95 $178,242 (197,460) (197,460)
SRG Products Subordinated
Corporation note (1) 06/95 $122,547 (137,743) (137,743)
Industrial/Business Automation
- ------------------------------
Avalon Imaging, Inc. Redeemable
Series A Preferred
shares 12/94 144,509 0 183,526
Avalon Imaging, Inc. Redeemable
Series B Preferred 02/96&
shares 06/96 166,667 500,001 500,001
Avalon Imaging, Inc. Common
shares 04/96 125,000 250,000 250,000
Bolder Technologies Series C
Corporation Preferred
shares 09/94 250,000 (500,000) (1,000,000)
Bolder Technologies Series B
Corporation Preferred
shares 10/94 50,001 (50,001) (200,004)
Bolder Technologies Common
Corporation share warrant
at $.50;
expiring 03/00 03/95 8,694 (87) (30,429)
Bolder Technologies Series C
Corporation Preferred
shares 05/95 810 (1,622) (3,240)
Bolder Technologies Series D
Corporation Preferred
shares 05/95 17,366 (69,467) (69,464)
Bolder Technologies Common
Corporation shares 05/96 217,500 625,207 2,075,766
Medical
- -------
Acusphere, Inc. Series B Preferred
shares 05/95 250,000 0 135,000
Acusphere, Inc. Series C Preferred
shares 05/96 23,364 49,999 49,999
ADESSO Specialty Series A Preferred
Services Organization, shares
Inc. 07/95 400,000 0 900,000
ADESSO Specialty Series B Preferred
Services Organization, shares
Inc. 03/96 369,231 1,200,001 1,200,001
ADESSO Specialty Series A Preferred
Services Organization, share warrant at
Inc. $1.00; expiring
03/01 03/96 68,704 0 154,584
Biex, Inc. Series C Preferred
shares 04/96 83,333 83,333 83,333
Everest & Jennings Common
International, Ltd. shares 01/94 59,272 0 (72,606)
Paradigm Biosciences, Series A Preferred
Inc. shares 04/93 322,581 0 249,162
Paradigm Biosciences, Series A Preferred
Inc. shares 12/94 215,054 0 159,441
Paradigm Biosciences, Convertible
Inc. note (1) 10/95 $102,500 (104,544) (104,544)
Paradigm Biosciences, Series B Preferred
Inc. shares 05/96 137,778 275,556 275,556
Periodontix, Series A Preferred
Inc. shares 12/93 150,000 0 150,000
Periodontix, Series B Preferred
Inc. shares 02/96 100,500 201,000 201,000
PHERIN Corporation Series B Preferred
shares 08/91 200,000 0 200,000
Physiometrix, Common 01/94&
Inc. shares 05/94 337 (375,054) (1,685)
Physiometrix, Series D Preferred 01/94&
Inc. shares 02/94 338,151 (114,971) (1,690,755)
Physiometrix, Common share 01/94&
Inc. warrant at $6.60;
expiring 06/01 04/96 13,525 179 14,201
Physiometrix, Common
Inc. shares 04/96 287,021 668,557 1,722,126
R2 Technology, Series A-1 Preferred
Inc. shares 05/94 400,000 0 336,000
R2 Technology, Convertible
Inc. note (1) 11/95 $133,334 (135,044) (135,044)
R2 Technology, Series B-1 Preferred
Inc. shares 03/96 68,540 137,080 137,080
TheraTx, Common
Incorporated shares (2) 06/94 70,042 (105,063) (867,120)
Retail/Consumer Products
- ------------------------
YES! Entertainment Common
Corporation shares 06/95 55,555 0 347,497
Venture Capital Limited Partnership Investments
- -----------------------------------------------
Various Ltd. Partnership
Interests various $979,279 19,165 152,836
---------- ----------
Total significant changes during the six
months ended June 30, 1996 1,818,497 2,462,536
Other changes, net 33,849 39,135
---------- ----------
Total equity investments at June 30, 1996 $22,459,363 26,790,889
========== ==========
(1) Convertible and subordinated notes include accrued interest. Interest rates on notes
issued in 1996 ranged from 8% to 12%.
</TABLE>
Marketable Equity Securities
- ----------------------------
At June 30, 1996, and December 31, 1995, marketable equity securities
had aggregate costs of $3,698,567 and $937,645, respectively, and
aggregate market values of $5,006,153 and $1,425,196, respectively. The
net unrealized gains at June 30, 1996, and December 31, 1995, included
gross gains of $2,417,574 and $804,892, respectively.
Acusphere, Inc.
- ---------------
In May of 1996, the Partnership made an additional investment in
Acusphere, Inc., by purchasing 23,364 Series C Preferred shares for
$49,999. The pricing of this round indicated a fair value increase of
$135,000 for the Partnership's existing investment.
ADESSO Specialty Services Organization, Inc.
- --------------------------------------------
In early 1996, the Partnership funded $450,000 in convertible notes to
the company and received a warrant to purchase 68,704 Series A Preferred
shares at $1.00 per share. Then in March of 1996, the Partnership made
an additional investment in the company by purchasing 369,231 Series B
Preferred shares for $1,200,001. The purchase price included $925,185
in cash and the conversion of $274,816 in principal from the notes
discussed above. The remaining principal of $175,184 was repaid in
March of 1996 while interest was repaid in April of 1996. The pricing
of this round indicated an increase in the fair value of $1,054,584 for
the Partnership's existing investment.
Avalon Imaging, Inc.
- --------------------
During the first half of 1996, the Partnership made additional
investments in the company by purchasing 166,667 Redeemable Series B
Preferred shares for $500,001. The pricing of this round of financing
indicated an increase in fair value of $183,526 for the Partnership's
existing investment. The Partnership also purchased 125,000 common
shares of Avalon Imaging, Inc., for $250,000 in April of 1996.
Biex, Inc.
- ----------
In April of 1996, the Partnership made an additional investment in Biex,
Inc., by purchasing 83,333 Series C Preferred shares for a total cost of
$83,333.
Bolder Technologies Corporation
- -------------------------------
In May of 1996, the company completed its initial public offering
("IPO"). Prior to the IPO, the company effected a reverse stock split
resulting in the Partnership's preferred share investments being
converted into 212,118 common shares. In addition, the Partnership net
exercised its common share warrant and received 5,382 common shares and
realized a gain of $4,030.
At June 30, 1996, the Partnership recorded an increase in the change in
fair value of $768,599 to reflect the publicly-traded market price of
its investments; a portion of the fair value was adjusted to reflect a
25% discount for restricted securities.
Coded Communications Corporation
- --------------------------------
During the first quarter of 1996, the Managing General Partners
determined that there had been an other than temporary decline in fair
value of the Partnership's investment. As a result, the Partnership
realized a loss of $77,091. The Partnership also recorded a decrease in
fair value of $87,999 to reflect the unrestricted market value at June
30, 1996.
Conversion Technologies International, Inc.
- -------------------------------------------
In May of 1996, the company completed its IPO. Prior to the IPO, the
company effected a reverse stock split resulting in the Partnership's
Series A Preferred shares, Series A Preferred warrant and common share
warrant being converted into 207,547 common shares, a warrant to
purchase 51,884 common shares, and 93,750 Class A warrants,
respectively. The convertible note with a principal balance of $187,500
was repaid in full, including accrued interest. At June 30, 1996, the
Partnership recorded a decrease in the change in fair value of $699,284
to reflect the publicly-traded market price of its investments; a
portion of the fair value was adjusted to reflect a 25% discount for
restricted securities.
Molecular Geriatrics Corporation
- --------------------------------
In January of 1996, the company converted its Series B Preferred shares
into common shares and then effected a reverse stock split.
Consequently, the Partnership's Series B investment became 47,170 common
shares.
In June of 1996, the company completed a Series C Preferred round of
financing in which the Partnership did not participate. The pricing of
this round indicated a $155,660 fair value decrease in the Partnership's
investments.
Paradigm Biosciences, Inc.
- --------------------------
In February of 1996, the Partnership issued $86,666 in convertible notes
to the company and received a warrant to purchase 10,833 Series B
Preferred shares at $2.00 per share.
In May of 1996, the Partnership purchased 137,778 Series B Preferred
shares with $80,000 in cash and by converting two notes totaling
$189,166 including accrued interest of $6,390 for a total cost of
$275,556. The pricing of this conversion financing round in which third
parties participated indicated an increase in the change in fair value
of $408,603 for the Partnership's existing investment.
Periodontix, Inc.
- -----------------
In February of 1996, the Partnership made an additional investment in
the company by purchasing 100,500 Series B Preferred shares for
$201,000. The pricing of this round indicated an increase in fair value
of $150,000 for the Partnership's existing investment.
PHERIN Corporation
- ------------------
The Partnership recorded an increase in fair value of $200,000, based on
the valuation set at a prior round of financing in which third parties
participated.
Physiometrix, Inc.
- -----------------
In January of 1996, the Partnership issued $178,532 in convertible notes
to the company.
In April of 1996, the Partnership completed its IPO. Prior to the IPO,
the company effected a reverse stock split resulting in the
Partnership's common shares, preferred shares, and $178,532 note
receivable being converted into 287,021 common shares while the common
share warrant was canceled. The Partnership also received a warrant to
purchase 13,525 common shares. At June 30, 1996, the Partnership
recorded an increase in fair value of $43,887 to reflect the publicly-
traded market price of its investments; the fair value was adjusted to
reflect a 25% discount for restricted securities.
Positive Communications, Inc.
- -----------------------------
In March of 1996, the Partnership issued $63,047 in convertible notes to
the company and purchased a warrant to acquire 3,709 common shares.
R2 Technology, Inc.
- -------------------
In March of 1996, the Partnership purchased 68,540 Series B-1 Preferred
shares by converting the November 1995 $133,334 note (including accrued
interest of $3,746). The pricing of this conversion financing round in
which third parties participated indicated an increase in the change in
fair value of $336,000 for the Partnership's existing investment.
RedCell, Inc.
- -------------
In February of 1996, the Partnership issued $179,932 in convertible
notes to the company and received a warrant to purchase 26,990 Series C
Preferred shares at an exercise price to be determined at the next
financing round.
SRG Products Corporation/SRG Holdings, Inc.
- -------------------------------------------
During the second quarter of 1996, SRG Holdings, Inc., was acquired by
SRG Products Corporation whereby the Partnership's Series C Preferred
shares and common share warrant investments were canceled. In addition,
the Managing General Partners determined that there has been an other
than temporary decline in the value of the Partnership's note
investment. As a result, the Partnership realized a loss of $357,282
for its convertible and subordinated notes receivable including accrued
interest.
TheraTx, Incorporated
- ---------------------
In April of 1996, the Partnership sold its remaining holdings in the
company for total proceeds of $998,724 and a realized gain of $893,661.
Velocity Incorporated
- ---------------------
During the first six months of 1996, the Partnership issued $20,000 in
subordinated notes to continue the company operations and reclassified
secured notes receivable of $1,275,000 to subordinated notes.
During the second quarter of 1996, the Managing General Partners
determined that there has been an other than temporary decline in value
of the Partnership's preferred stock investment. As a result, a
realized loss of $2,000,000 was recorded. The Partnership also recorded
a decrease in fair value of $1,957,007 for its investment.
Wire Networks, Inc.
- -------------------
In February of 1996, the Partnership invested in the company by
purchasing 78,553 Series A Preferred shares and 95,980 Series B
Preferred shares for $106,047 and $215,955, respectively.
Venture Capital Limited Partnership Investments
- -----------------------------------------------
The Partnership recorded a cost basis increase of $19,165 in venture
capital limited partnership investments during the six months ended June
30, 1996. The increase was a result of additional contributions of
$70,938, partially offset by a stock distribution of $51,773. The
Partnership recorded a fair value increase of $152,836 as a result of a
net increase in fair value of the underlying investments and the effects
of the transaction described above.
In March of 1996, the Partnership received a common stock distribution
from Informix, Inc., with a fair value of $51,773. This distribution
represented a return of capital.
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. The Partnership's
YES! Entertainment Corporation shares are restricted.
5. Secured Notes Receivable, Net
-----------------------------
Activity from January 1, 1996, through June 30, 1996, consisted of:
<TABLE>
<S> <C>
Balance at January 1, 1996 $ 999,572
1996 activity:
Secured notes receivable issued 208,334
Repayments of secured notes receivable (138,255)
Decrease in allowance for loan losses 678,000
Change in interest receivable 871
Reclassification of secured notes receivable to equity
investments (subordinated notes receivable) (1,275,000)
---------
Total secured notes receivable, net, at June 30, 1996 $ 473,522
=========
</TABLE>
The Partnership had accrued interest of $27,618 and $26,747 at June 30,
1996, and December 31, 1995, respectively.
Activity in the allowance for loan losses was as follows:
<TABLE>
<S> <C>
Balance at January 1, 1996 $ 955,000
Change in net unrealized fair value of
secured notes receivable (678,000)
---------
Balance at June 30, 1996 $ 277,000
=========
</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 $686,636 and $1,835,279 were on
nonaccrual status due to uncertainties related to borrowers' financial
conditions at June 30, 1996, and December 31, 1995, respectively. The
Managing General Partners continue to monitor the progress of these
companies. The fair values at June 30, 1996, and December 31, 1995, are
based on the Managing General Partners' estimate of collectibility of
these notes.
Refer to Note 4, Equity Investments, for additional information
regarding the reclassification of notes.
6. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at June 30, 1996, and December 31, 1995,
consisted of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Demand accounts $ 2,417 152,033
Money-market accounts 1,700,574 4,244,009
---------- ----------
Total $ 1,702,991 4,396,042
========== ==========
</TABLE>
7. Commitments and Contingencies
-----------------------------
The Partnership is a party to financial instruments with off-balance-
sheet risk in the normal course of its business. Generally, these
instruments are commitments for future equity fundings, venture capital
limited partnership investments, equipment financing commitments, or
accounts receivable lines of credit that are outstanding but not
currently fully utilized. As they do not represent current outstanding
balances, these unfunded commitments are properly not recognized in the
financial statements. At June 30, 1996, the Partnership had unfunded
commitments as follows:
<TABLE>
<S> <C>
Type
- ----
Equity investments $ 735,250
Term notes 30,000
Venture capital limited partnership investments 375,721
---------
Total $1,140,971
=========
</TABLE>
In September of 1995, the Partnership jointly guaranteed with two
affiliated partnerships a $2,000,000 line of credit between a financial
institution and a portfolio company in the computer systems and software
industry of which the Partnership's share is $1,000,000. However, if
the affiliated partnerships are unable to finance their portion of the
guarantee, the Partnership's share may increase up to $2,000,000. While
the Partnership expects the portfolio company to repay the line of
credit, if the portfolio company fails to do so, the Partnership may be
liable up to the guarantee amount.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
During the six months ended June 30, 1996, net cash used by operating
activities totaled $542,516. The Partnership paid management fees of
$228,852 to the Managing General Partners and reimbursed related parties
for operating expenses of $258,087. In addition, $17,549 was paid to
the Individual General Partners as compensation for their services.
Other operating expenses of $128,322 were paid and $90,294 in interest
income was received.
During the six months ended June 30, 1996, the Partnership funded
secured notes receivable totaling $208,334 to a portfolio company in the
computer systems and software industry and equity investments of
$3,460,818 primarily to portfolio companies in the medical,
industrial/business automation, and communications industries. Proceeds
from sales of equity investments were $1,017,678. Repayments of
convertible and secured notes receivable provided cash of $500,939. As
of June 30, 1996, the Partnership was committed to fund additional
investments totaling $1,140,971 and has outstanding guarantees up to
$2,000,000 as discussed in Note 7 to the financial statements.
During the first half of 1996, Bolder Technologies, Inc., Conversion
Technologies International, Inc., and Physiometrix, Inc., completed
their initial public offerings ("IPOs"). Although the Partnership's
holdings in these companies are subject to selling restrictions, the
IPOs indicate potential future liquidity for these investments.
Cash and cash equivalents at June 30, 1996, were $1,702,991. Future
interest income on short-term investments and notes receivable, proceeds
from investment sales, operating cash reserves and Managing General
Partners' 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 $3,202,235 for the three months ended June 30, 1996,
compared to $263,638 for the same period in 1995. The increase in net
loss was primarily due to a $2,064,180 decrease in the change in net
unrealized fair value of equity investments, a $1,721,362 increase in
realized losses from investment write-downs, a $753,396 increase in
total operating expenses, and a $135,920 decrease in total income.
These changes were partially offset by a $902,118 increase in realized
gains from sales of equity investments, a $774,000 increase in the
change in net unrealized fair value of secured notes receivable, and a
$101,562 decrease in management fees.
During the three months ended June 30, 1996, the decrease in fair value
of equity investments of $1,305,160 was primarily due to decreases in
portfolio companies in the computer systems and software and
environmental industries, partially offset by increases in the
industrial/business automation industry. During the same period in
1995, increase in fair value of $759,020 was primarily due to portfolio
companies in the industrial/business automation and communications
industries, partially offset by decreases in the medical industry.
Realized losses from investment write-downs of $2,357,282 for the three
months ended June 30, 1996, mostly related to equity investments in the
computer systems and software industry. During the same period in 1995,
realized losses from investment write-downs of $635,920 primarily
related to the write-down of portfolio companies in the retail/consumer
products and communications industries.
Total operating expenses were $1,128,980 for the quarter ended June 30,
1996, compared to $375,584 for the same period in 1995. As explained in
Note 3 to the financial statements, the Managing General Partners
absorbed $115,443 during the quarter ended June 30, 1996, and will be
reimbursed $853,838 of prior year expenses not subject to the
limitation. Had this amount not been recorded as an expense in 1996 and
had the limitation not been in effect, total operating expenses would
have been $390,585 and $375,584 in the second quarters of 1996 and 1995,
respectively. The slight increase was primarily due to higher computer
services and investment operations expenses, partially offset by lower
administrative and investor services expenses.
Total income was $42,504 and $178,424 for the three months ended June
30, 1996 and 1995, respectively. The decrease was mainly due to lower
cash and cash equivalents balances as a result of new and follow-on
investments.
For the three months ended June 30, 1996, realized gains of $902,118
mostly related to the common stock sale of TheraTx, Incorporated. There
were no such gains recorded for the same period in 1995.
During the three months ended June 30, 1996, the Partnership recorded an
increase in fair value of secured notes receivable of $755,000 due to
the reclassification of secured notes receivable totaling $1,275,000 to
equity investments as these notes had been reflected with fair values
less than cost. A $19,000 decrease was recorded for the same period in
1995.
Management fees were $97,499 and $199,061 for the three months ended
June 30, 1996 and 1995, respectively. Pursuant to the Partnership
Agreement, management fees decreased from two percent to one percent per
annum beginning in January of 1996.
Given the inherent risk associated with the business of the Partnership,
the future performance of the portfolio company investments may
significantly impact future operations.
Current six months compared to corresponding six months in the preceding
- ------------------------------------------------------------------------
year
- ----
Net loss was $1,708,231 for the six months ended June 30, 1996, compared
to a net income of $124,671 during the same period in 1995. The change
was primarily due to a $1,794,453 increase in realized losses from
investment write-downs, a $762,442 increase in operating expenses, and a
$263,325 decrease in total income. These changes were partially offset
by a $811,000 increase in the change in net unrealized change in the
fair value of secured notes receivable and a $203,165 decrease in
management fees.
During the six months ended June 30, 1996, realized losses from
investment write-downs of $2,434,373 mostly related to equity
investments in the computer systems and software industry. In 1995,
realized losses of $639,920 primarily related to portfolio companies in
the retail/consumer products and communications industries.
Total operating expenses were $1,411,064 and $648,622 for the six months
ended June 30, 1996 and 1995, respectively. As discussed in the above
section, the Managing General Partners absorbed $115,443 for the six
months ended June 30, 1996, and will be reimbursed $853,838 of prior
year expenses not subject to the limitation. Had this amount not been
recorded as an expense in 1996 and had the limitation not been in
effect, total operating expenses would have been $672,669 and $648,622
during the six months ended June 30, 1996 and 1995, respectively. The
slight increase was primarily due to higher investment operations and
computer services expenses, partially offset by lower administrative and
investor services expenses.
Total income was $120,310 and $383,635 for the six months ended June 30,
1996 and 1995, respectively. The decrease was primarily due to lower
cash and cash equivalents balances resulting from new and follow-on
investments.
During the six months ended June 30, 1996, the Partnership recorded a
increase in fair value of secured notes receivable of $678,000 due to
the reclassification of secured notes receivable totaling $1,275,000 to
equity investments as these notes had been reflected with fair values
less than cost. A $133,000 decrease was recorded for the same period in
1995.
Management fees were $194,998 and $398,163 for the six months ended June
30, 1996 and 1995, respectively. As discussed above, management fees
decreased from two percent to one percent per annum beginning in January
of 1996.
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Partnership during the
quarter ended June 30, 1996.
(b) Financial Data Schedule for the six months ended and as of June 30,
1996 (Exhibit 27).
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TECHNOLOGY FUNDING VENTURE PARTNERS V,
AN AGGRESSIVE GROWTH FUND, L.P.
By: TECHNOLOGY FUNDING INC.
Managing General Partner
Date: August 9, 1996 By: /s/Debbie A. Wong
------------------------------------
Debbie A. Wong
Controller
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<INVESTMENTS-AT-COST> 23,209,885
<INVESTMENTS-AT-VALUE> 27,264,411
<RECEIVABLES> 0
<ASSETS-OTHER> 6,182
<OTHER-ITEMS-ASSETS> 1,702,991
<TOTAL-ASSETS> 28,973,584
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,050,099
<TOTAL-LIABILITIES> 1,050,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,868,959
<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> 4,054,526
<NET-ASSETS> 27,923,485
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 120,310
<OTHER-INCOME> 0
<EXPENSES-NET> (1,623,611)
<NET-INVESTMENT-INCOME> (1,503,301)
<REALIZED-GAINS-CURRENT> (1,532,255)
<APPREC-INCREASE-CURRENT> 1,327,325
<NET-CHANGE-FROM-OPS> (1,708,231)
<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> (1,708,231)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 194,998
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,625,611
<AVERAGE-NET-ASSETS> 28,777,601
<PER-SHARE-NAV-BEGIN> 67
<PER-SHARE-NII> (8)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 60
<EXPENSE-RATIO> 5.6
<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>
