<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 March 31, 1997
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)
March 31, December 31,
1997 1996
---------- -----------
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis
of $21,350,731 and $21,000,400 at
1997 and 1996, respectively) $28,617,174 26,701,934
Secured notes receivable, net 17,395 29,142
Other investments (cost basis
of $664,299 at both 1997
and 1996) 664,299 664,299
---------- ----------
Total investments 29,298,868 27,395,375
Cash and cash equivalents 1,216,912 1,617,085
Other assets 290,837 65,019
---------- ----------
Total $30,806,617 29,077,479
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 37,952 37,117
Due to related parties -- 59,246
---------- ----------
Total liabilities 37,952 96,363
Commitments, contingencies and
subsequent events (Notes 3, 4 and 7)
Partners' capital:
Limited Partners
(Units outstanding of
400,000 in both 1997 and 1996) 23,502,035 23,337,188
General Partners 187 (57,606)
Net unrealized fair value increase
from cost of equity investments 7,266,443 5,701,534
---------- ----------
Total partners' capital 30,768,665 28,981,116
---------- ----------
Total $30,806,617 29,077,479
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-----------------------------------
1997 1996
---- ----
<S> <C> <C>
Income:
Secured notes receivable interest $ 13,242 35,012
Short-term investment interest 9,147 42,794
Dividend income 280,010 --
--------- ---------
Total income 302,399 77,806
Costs and expenses:
Management fees 97,499 97,499
Individual General Partners'
compensation 5,483 4,613
Operating expenses:
Investment operations 64,205 144,715
Administrative and investor services 105,366 103,066
Professional fees 14,005 12,128
Computer services 29,227 22,175
--------- ---------
Total operating expenses 212,803 282,084
--------- ---------
Total costs and expenses 315,785 384,196
--------- ---------
Net operating loss (13,386) (306,390)
Net realized gain from
sales of equity investments 238,526 --
Realized losses from
investment write-downs (2,500) (77,091)
--------- ---------
Net realized income (loss) 222,640 (383,481)
Change in net unrealized
fair value:
Equity investments 1,564,909 1,954,485
Secured notes receivable -- (77,000)
--------- ---------
Net income $1,787,549 1,494,004
========= =========
Net realized loss per Unit $ -- (1)
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-----------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 16,877 53,280
Cash paid to vendors (51,917) (60,880)
Cash paid to related parties (328,298) (340,701)
--------- ---------
Net cash used by
operating activities (363,338) (348,301)
--------- ---------
Cash flows from investing activities:
Purchase of equity investments (436,914) (2,655,888)
Proceeds from sales of
equity investments 344,641 --
Secured notes receivable issued -- (188,334)
Repayments of equity investments 47,065 175,184
Repayments of secured notes receivable 6,635 74,604
Distributions from venture capital
limited partnership investments 1,738 --
--------- ---------
Net cash used by
investing activities (36,835) (2,594,434)
--------- ---------
Net decrease in cash
and cash equivalents (400,173) (2,942,735)
Cash and cash equivalents at
beginning of year 1,617,085 4,396,042
--------- ---------
Cash and cash equivalents at March 31 $1,216,912 1,453,307
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited) (continued)
- -----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-----------------------------------
1997 1996
---- ----
<S> <C> <C>
Reconciliation of net income to
net cash used by operating activities:
Net income $1,787,549 1,494,004
Adjustments to reconcile net income
to net cash used by
operating activities:
Change in net unrealized fair value:
Equity investments (1,564,909) (1,954,485)
Secured notes receivable -- 77,000
Net realized gain from sales of
equity investments (238,526) --
Realized losses from investment
write-downs 2,500 77,091
Change in other assets (286,029) 5,704
Other changes, net (63,923) (47,615)
------- ---------
Net cash used by operating activities $(363,338) (348,301)
======= =========
</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, 1997, and December 31, 1996, and the related Statements of
Operations and Statements of Cash Flows for the three months ended March
31, 1997 and 1996, 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, 1996. The following notes to financial statements for
activity through March 31, 1997, supplement those included in the Annual
Report on Form 10-K. Certain 1996 balances have been reclassified to
conform with the 1997 financial statement presentation.
2. Financing of Partnership Operations
-------------------------------------
The Managing General Partners expect cash received from the future
liquidation of Partnership investments and the collection of notes
receivable will provide the necessary liquidity to service Partnership
debt and fund Partnership operations. The Partnership may be dependent
upon the financial support of the Managing General Partners to fund
operations if future proceeds are not received timely. The Managing
General Partners have committed to support the Partnership's working
capital requirements through short-term advances as necessary.
3. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs for the three months
ended March 31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Management fees $ 97,499 97,499
Reimbursable operating expenses 166,070 216,896
Individual General Partners' compensation 5,483 4,613
</TABLE>
Certain reimbursable expenses have been accrued based upon interim
estimates prepared by the Managing General Partners and are adjusted to
actual cost periodically. There were $38,489 due from related parties
(included in other assets) and $26,746 due to related parties at March
31, 1997, and December 31, 1996, respectively, for such reimbursable
expenses.
Management fees payable were $32,500 at both March 31, 1997, and
December 31, 1996.
4. Equity Investments
------------------
A full listing of the Partnership's equity investments at December 31,
1996, is in the 1996 Annual Report. Activity from January 1 through
March 31, 1997, consisted of:
<TABLE>
<CAPTION>
January 1 -
March 31, 1997
Principal --------------
Investment Amount or Cost Fair
Industry/Company Position Date Shares Basis Value
- ---------------- -------- ---------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $21,000,400 26,701,934
---------- ----------
Significant changes:
Biomedical
- ----------
Redcell, Inc. Series B
Preferred
shares 12/94 797,872 (0) (750,000)
Biotechnology
- -------------
CV Therapeutics, Common
Inc. shares 11/96 68,900 0 221,686
Communications
- --------------
NetChannel, Inc. Series B
Preferred
share warrant
at $1.10;
expiring
10/99 10/96 22,727 (250) (250)
NetChannel, Inc. Series B
Preferred
shares 01/97 22,727 25,250 25,250
NetChannel, Inc. Series B
Preferred
shares 03/97 27,272 0 29,999
NetChannel, Inc. Convertible
note (1) 03/97 $25,000 25,139 25,139
UT Starcom, Inc. Common
share
warrant
at $.6875;
expiring
05/99 03/95 145,456 0 162,911
UT Starcom, Inc. Series A
Preferred
shares 03/95 187,500 0 210,000
Environmental
- -------------
Conversion Common
Technologies shares
International, Inc. 05/96 207,547 0 (63,086)
Industrial/Business Automation
- ------------------------------
Avalon Imaging, Inc. Convertible
notes (1) 03/97 $153,223 153,831 153,831
Bolder Common
Technologies shares
Corporation 05/96 37,499 (40,000) (446,307)
Portable Convertible
Energy note (1)
Products, Inc. 03/97 $ 98,398 98,573 98,573
Information Technology
- ----------------------
WorldRes, Inc. Series B
Preferred
shares 01/97 7,396 24,998 24,998
Medical
- -------
ADESSO Specialty Series A
Services Organization, Preferred
Inc. shares 07/95 400,000 0 1,180,000
ADESSO Specialty Series B
Services Organization, Preferred
Inc. shares 03/96 369,231 0 1,089,231
ADESSO Specialty Series A Preferred
Services Organization, share warrant at
Inc. $1.00; expiring
03/01 03/96 68,704 0 202,677
Biex, Inc. Series D
Preferred
shares 03/97 44,446 66,669 66,669
Endocare, Inc. Convertible
note (1) 08/96 $ 18,750 (19,817) (19,817)
Endocare, Inc. Common
shares 01/97 1,750 6,125 5,159
Endocare, Inc. Common
shares 01/97 8,300 20,750 24,468
Physiometrix, Common
Inc. shares 04/96 287,021 (0) (230,851)
---------- ----------
Total significant changes during the three
months ended March 31, 1997 361,268 2,010,280
Other changes, net (10,937) (95,040)
---------- ----------
Total equity investments at March 31, 1997 $21,350,731 28,617,174
========== ==========
(1) Convertible notes include accrued interest. The interest rate on notes issued in 1997
was 8%.
</TABLE>
Marketable Equity Securities
- ----------------------------
At March 31, 1997, and December 31, 1996, marketable equity securities
had aggregate costs of $3,665,720 and $4,423,550, respectively, and
aggregate market values of $2,569,173 and $3,644,937, respectively. The
net unrealized losses at March 31, 1997, and December 31, 1996, included
gross gains of $741,734 and $1,428,442, respectively.
ADESSO Specialty Services Organization, Inc.
- --------------------------------------------
During the first quarter of 1997, the company closed a Series C
Preferred share round of financing in which third parties participated
but the Partnership did not. The pricing of this round indicated a fair
value increase of $2,471,908 for the Partnership's existing investment.
Avalon Imaging, Inc.
- --------------------
In March of 1997, the Partnership issued $153,223 in convertible notes
receivable to the company and received warrants to purchase Series C
Preferred shares.
Biex, Inc.
- ----------
In March of 1997, the Partnership made an additional investment in the
company by purchasing 44,446 Series D Preferred shares for $66,669.
Bolder Technologies Corporation
- -------------------------------
In March of 1997, the Partnership sold 20,000 common shares of the
company for total proceeds of $276,666 and realized a gain of $236,666.
At March 31, 1997, the Partnership recorded a decrease in the change in
fair value of $406,307 to reflect the publicly-traded market price of
its investments. The decrease included a decrease of $294,260 due to
the sale mentioned above.
Endocare, Inc.
- --------------
In January of 1997, the Partnership made an additional investment in the
company by purchasing 1,750 common shares for $6,125. In addition, the
Partnership converted its $18,750 note receivable, including accrued
interest of $2,000, into 8,300 common shares at a total cost of $20,750.
At March 31, 1997, the Partnership recorded an increase in the change in
fair value of $2,752 to reflect the publicly-traded market price of its
investments above; a portion of the fair value of the Partnership's
investment was adjusted to reflect a discount for restricted securities.
NetChannel, Inc.
- ----------------
In January of 1997, the Partnership cash exercised its Series B
Preferred share warrant for $25,000 and received 22,727 Series B
Preferred shares. Then in March of 1997, the Partnership issued a
$25,000 convertible note receivable to the company and received 27,272
Series B Preferred shares. The Partnership also recorded a fair value
increase of $29,999 at March 31, 1997, for the Series B Preferred shares
received.
Portable Energy Products, Inc.
- ------------------------------
In March of 1997, the Partnership issued a $98,398 convertible note
receivable to the company and received a warrant to purchase 98,398
common shares.
Redcell, Inc.
- -------------
Subsequent to March 31, 1997, the company had a new round of financing
in which the Partnership did not participate. The pricing of this round
indicated a decrease in fair value of $750,000 for the Partnership's
existing investment at March 31, 1997.
UT Starcom, Inc.
- ----------------
During the first quarter of 1997, the company closed a Series C
Preferred share round of financing in which third parties participated
but the Partnership did not. The pricing of this round indicated a fair
value increase of $372,911 for the Partnership's existing investment.
WorldRes, Inc.
- --------------
In January of 1997, the Partnership invested in the company by
purchasing 7,396 Series B Preferred shares for $24,998.
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.
At March 31, 1997, the Partnership accrued $280,010 in dividends
receivable, included in Other Assets on the Balance Sheet, from its
Series B Preferred share investment in Tessera, Inc. This amount was
subsequently received in April of 1997.
Included in the March 31, 1997, and December 31, 1996, equity investment
fair values was a $1,000,000 reserve for unrealized loss from a
contingent liability. See Note 7 to the financial statements for
additional disclosure.
5. Secured Notes Receivable, Net
-----------------------------
Activity from January 1, 1997, through March 31, 1997, consisted of:
<TABLE>
<S> <C>
Balance at January 1, 1997 $29,142
1997 activity:
Repayments of secured notes receivable (6,635)
Change in interest receivable (5,112)
------
Total secured notes receivable, net, at March 31, 1997 $17,395
======
</TABLE>
The Partnership had accrued interest of $10,059 and $15,171 at March 31,
1997, and December 31, 1996, respectively.
There was no allowance for loan losses at March 31, 1997 and December
31, 1996.
6. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at March 31, 1997, and December 31, 1996,
consisted of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Demand accounts $ 3,640 2,764
Money-market accounts 1,213,272 1,614,321
---------- ----------
Total $ 1,216,912 1,617,085
========== ==========
</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 March 31, 1997, the Partnership had unfunded
commitments as follows:
<TABLE>
<S> <C>
Type
- ----
Term notes $ 28,350
Venture capital limited partnership investments 219,783
---------
Total $ 248,133
=========
</TABLE>
In 1996, the Partnership jointly guaranteed with two affiliated
partnerships a 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. If the portfolio company fails
to repay the line of credit, the Partnership may be liable up to the
guarantee amount. The Partnership has recorded a $1,000,000 reserve,
included in Equity Investments on the Balance sheet, in the event the
portfolio company fails to repay the line of credit.
<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, 1997, net cash used by
operations totaled $363,338. The Partnership paid management fees of
$97,499 to the Managing General Partners and reimbursed related parties
for operating expenses of $225,316. In addition, $5,483 was paid to the
Individual General Partners as compensation for their services. Other
operating expenses of $51,917 were paid and $16,877 in interest income
was received.
During the three months ended March 31, 1997, the Partnership funded
equity investments of $436,914 primarily to portfolio companies in the
medical and industrial/business automation industries. Proceeds from
equity investment sales were $344,641, of which $60,211 related to sales
prior to December 31, 1996, which have been settled, distributions of
$1,738 from venture capital limited partnership investments were
received, and repayments of notes receivable and equity investments
provided cash of $6,635 and $47,065, respectively. As of March 31,
1997, the Partnership was committed to fund additional investments
totaling $248,133 and has outstanding guarantees up to $1,000,000 as
discussed in Note 7 to the financial statements.
Cash and cash equivalents at March 31, 1997, were $1,216,912. Future
interest income on short-term investments, proceeds from investment
sales 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 income was $1,787,549 and $1,494,004 for the three months ended
March 31, 1997 and 1996, respectively. The increase in net income was
primarily due to a $238,526 increase in net realized gain from sales of
equity investments, and a $224,593 increase in total income, partially
offset by a $389,576 decrease in the change in net unrealized fair value
of equity investments.
Net realized gain from sales of equity investments was $238,526 for the
quarter ended March 31, 1997. The gain was substantially due to the
sale of Bolder Technologies Corporation common stock. No such gain was
recorded for the same period in 1996.
Total income was $302,399 and $77,806 for the quarters ended March 31,
1997 and 1996, respectively. The increase was substantially due to
$280,010 in divided income from Tessera, Inc.
During the quarter ended March 31, 1997, the increase in fair value of
equity investments of $1,564,909 was substantially due to an increase in
a portfolio company in the medical industry partially offset by a
decrease in a portfolio company in the biomedical industry. During the
same period in 1996, the increase of $1,954,485 was primarily due to
portfolio companies in the medical industry.
During the quarter ended March 31, 1996, the Partnership recorded a
decrease in fair value of secured notes receivable of $77,000 based upon
the level of loan loss reserves deemed adequate by the Managing General
Partners. No such decrease was recorded for the same period in 1997.
During the quarter ended March 31, 1997, the realized losses from
investment write-downs was $2,500. During the same period in 1996,
realized losses of $77,091 related to a portfolio company in the
communications industry.
Total operating expenses were $212,803 and $282,084 for the quarters
ended March 31, 1997 and 1996, respectively. The decrease was mainly
due to lower investment operation expenses from reduced overall
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.
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, 1997.
(b) Financial Data Schedule for the quarter ended and as of March 31,
1997 (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 9, 1997 By: /s/Debbie A. Wong
------------------------------------
Debbie A. Wong
Vice President
and Controller
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF MARCH 31, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<PERIOD-TYPE> 3-MOS
<INVESTMENTS-AT-COST> 22,032,425
<INVESTMENTS-AT-VALUE> 29,298,868
<RECEIVABLES> 0
<ASSETS-OTHER> 290,837
<OTHER-ITEMS-ASSETS> 1,216,912
<TOTAL-ASSETS> 30,806,617
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,952
<TOTAL-LIABILITIES> 37,952
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,502,222
<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> 7,266,443
<NET-ASSETS> 30,768,665
<DIVIDEND-INCOME> 280,010
<INTEREST-INCOME> 22,389
<OTHER-INCOME> 0
<EXPENSES-NET> (315,785)
<NET-INVESTMENT-INCOME> (13,386)
<REALIZED-GAINS-CURRENT> 236,026
<APPREC-INCREASE-CURRENT> 1,564,909
<NET-CHANGE-FROM-OPS> 1,787,549
<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> 1,787,549
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 97,499
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 316,175
<AVERAGE-NET-ASSETS> 29,874,891
<PER-SHARE-NAV-BEGIN> 58
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 59
<EXPENSE-RATIO> 1.06
<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>
