<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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)
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis
of $22,140,627 and $21,000,400 at
1997 and 1996, respectively) $36,381,562 26,701,934
Secured notes receivable, net 6,820 29,142
Other investments (cost basis
$664,299 for both 1997 and 1996) 398,579 664,299
---------- ----------
Total investments 36,786,961 27,395,375
Cash and cash equivalents 622,616 1,617,085
Other assets 5,275 65,019
---------- ----------
Total $37,414,852 29,077,479
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 34,703 37,117
Due to related parties 37,796 59,246
---------- ----------
Total liabilities 72,499 96,363
Commitments and contingencies
(Notes 3 and 7)
Partners' capital:
Limited Partners
(Units outstanding of
400,000 in both 1997 and 1996) 23,367,104 23,337,188
General Partners 34 (57,606)
Net unrealized fair value increase
from cost of investments 13,975,215 5,701,534
---------- ----------
Total partners' capital 37,342,353 28,981,116
---------- ----------
Total $37,414,852 29,077,479
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
------------------------ -----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income:
Secured notes receivable interest $ 14,814 33,644 40,541 94,246
Short-term investment interest 5,080 7,350 23,996 67,058
Dividend income -- -- 280,010 --
--------- ------- --------- ---------
Total income 19,894 40,994 344,547 161,304
Costs and expenses:
Management fees 97,498 97,498 292,496 292,496
Individual General Partners'
compensation 8,206 7,827 26,800 25,376
Operating expenses:
Investment operations 90,870 90,735 209,621 410,281
Administrative and investor services 157,062 150,140 390,342 381,269
Professional fees 8,685 55,007 60,394 95,226
Computer services 43,777 28,383 96,295 110,158
Expenses absorbed by General Partners (103,318) (236,650) (103,318) (352,093)
Expenses previously absorbed by
General Partners -- -- -- 853,838
--------- ------- --------- ---------
Total operating expenses 197,076 87,615 653,334 1,498,679
--------- ------- --------- ---------
Total costs and expenses 302,780 192,940 972,630 1,816,551
--------- ------- --------- ---------
Net operating loss (282,886) (151,946) (628,083) (1,655,247)
Net realized gain from
sales of equity investments 204,104 -- 630,159 902,118
Realized losses from
investment write-downs -- -- -- (2,434,373)
Net realized gain from venture capital
limited partnership investments 66,432 -- 85,480 --
Recoveries from investments previously
written off -- 23,922 -- 23,922
--------- ------- --------- ---------
Net realized (loss) income (12,350) (128,024) 87,556 (3,163,580)
Change in net unrealized
fair value:
Equity investments 4,234,640 774,890 8,539,401 1,424,215
Other investments (265,720) -- (265,720) --
Secured notes receivable -- 277,000 -- 955,000
--------- ------- --------- ---------
Net income (loss) $3,956,570 923,866 8,361,237 (784,365)
========= ======= ========= =========
Net realized income (loss) per Unit $ -- -- -- (8)
========= ======= ========= =========
</TABLE>
See accompanying notes to financial statements
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
---------------------------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Interest and divided income received $ 320,450 160,210
Cash paid to vendors (237,807) (195,777)
Cash paid to related parties (759,154) (1,245,882)
--------- ---------
Net cash used by
operating activities (676,511) (1,281,449)
--------- ---------
Cash flows from investing activities:
Secured notes receivable issued (33,902) (208,334)
Purchase of equity investments (1,377,335) (4,463,764)
Proceeds from sales of
equity investments 883,097 1,017,678
Repayments of convertible and
secured notes receivable 92,645 539,933
Distributions from venture capital
limited partnership investments 117,537 6,291
--------- ---------
Net cash used by
investing activities (317,958) (3,108,196)
--------- ---------
Net decrease in cash and
cash equivalents (994,469) (4,389,645)
Cash and cash equivalents at
beginning of year 1,617,085 4,396,042
--------- ---------
Cash and cash equivalents
at September 30 $ 622,616 6,397
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited) (continued)
- -----------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
---------------------------------------
1997 1996
--------- ---------
<S> <C> <C>
Reconciliation of net income (loss) to net
cash used by operating activities:
Net income (loss) $8,361,237 (784,365)
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Realized gains from sales of
equity investments (630,159) (902,118)
Realized losses from investment
write-downs -- 2,434,373
Net realized gain from venture capital
limited partnership investments (85,480) --
Recoveries from investments
previously written off -- (23,922)
Change in net unrealized fair value:
Equity investments (8,539,401) (1,424,215)
Other investments 265,720 --
Secured notes receivable -- (955,000)
Other, net -- (1,867)
Changes in:
Due to related parties (21,450) 348,811
Other changes, net (26,978) 26,854
--------- ---------
Net cash used by operating activities $ (676,511) (1,281,449)
========= =========
Non-cash investing activities:
Reclassification of secured notes to
equity investments (subordinated
notes receivable) $ -- 1,275,000
========= =========
Reclassification of secured notes to
other investments $ -- 681,565
========= =========
</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
September 30, 1997, and December 31, 1996, and the related Statements of
Operations for the three and nine months ended September 30, 1997 and 1996,
and Statements of Cash Flows for the nine months ended September 30, 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 September
30, 1997, 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. 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 nine months ended
September 30, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Management fees $292,496 292,496
Reimbursable operating expenses 521,726 775,076
Individual General Partners' compensation 26,800 25,376
Expenses absorbed by General Partners (103,318) (352,093)
Expenses previously absorbed by General
Partners -- 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. There were $5,296 and $26,746 due to related
parties at September 30, 1997, and December 31, 1996, respectively, for
such reimbursable expenses.
Amounts payable for management fees were $32,500 at both September 30,
1997, and December 31, 1996.
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 was payable to related parties. For the nine months
ended September 30, 1997 and 1996, respectively, operating expenses
incurred by the Managing General Partners exceeded the limitation by
$103,318 and $352,093, resulting in this amount being absorbed by the
Managing General Partners.
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
September 30, 1997, consisted of:
<TABLE>
<CAPTION>
January 1 through
September 30, 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 Various 68,900 0 282,524
Prolinx, Inc. Series A
Preferred
shares Various 1,099,363 0 825,000
Prolinx, Inc. Series B
Preferred
shares 07/97 164,835 288,461 288,461
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 10/96-
shares 05/97 183,458 39,317 72,132
NetChannel, Inc. Convertible
note (1) 05/97 $11,279 11,691 11,691
NetChannel, Inc. Convertible
note (1) 09/97 $18,750 18,819 18,819
UT Starcom, Inc. Common
share
warrant
at $.6875;
expiring
05/99 03/95 148,456 0 200,730
UT Starcom, Inc. Series A
Preferred
shares 03/95 187,500 0 258,750
Wire Networks, Inc. Series A
Preferred
shares 02/96 78,553 0 132,754
Wire Networks, Inc. Series B
Preferred
shares 02/96 95,980 0 75,824
Computer Systems and Software
- -----------------------------
Pilot Network Series D
Services Preferred
shares 03/95 371,557 0 1,857,785
Pilot Network Series E
Services Preferred
shares 07/96 73,970 0 369,850
Environmental
- -------------
Conversion Series A
Technologies Private
International, Placement 08/97-
Inc. units (2) 09/97 .7875 78,750 78,750
Industrial/Business Automation
- ------------------------------
Avalon Imaging, Inc. Series A
Preferred
shares 12/94 144,509 0 (236,446)
Avalon Imaging, Inc. Series C
Preferred
shares 09/97 379,037 409,360 409,360
Bolder Common
Technologies shares
Corporation 05/96 24,000 (145,206) (960,981)
Portable Convertible
Energy note (1)
Products, Inc. 03/97 $98,398 102,531 102,531
Portable Convertible
Energy notes (1) 06/97-
Products, Inc. 07/97 $118,629 120,952 120,952
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 A
Preferred
shares 07/93 128,205 0 76,923
Biex, Inc. Series B
Preferred
shares 10/94 63,907 0 38,344
Biex, Inc. Series C
Preferred
shares Various 250,000 0 149,998
Biex, Inc. Series D
Preferred
shares 08/96 111,115 0 66,669
Biex, Inc. Series D
Preferred
shares 03/97 44,446 66,669 93,337
Biex, Inc. Series E
Preferred
shares 08/97 13,334 33,335 28,001
Megabios Common
Corporation shares Various 301,274 0 1,480,002
Pharmadigm, Series A
Inc. Preferred
shares 04/93 322,581 0 64,516
Pharmadigm, Series A
Inc. Preferred
shares 12/94 215,054 0 43,011
Pharmadigm, Series B
Inc. Preferred
shares 05/96 137,778 0 27,556
Pharmadigm, Series C
Inc. Preferred
shares 06/97 17,183 37,423 37,423
Pharmadigm, Series C
Inc. Preferred
share warrant
at $2.20;
expiring
06/00 06/97 1,203 378 378
Pharmos Common 04/95 &
Corporation shares 11/95 60,331 0 71,432
Physiometrix, Common
Inc. shares 04/96 287,021 0 (447,053)
Microelectronics
- ----------------
Tessera, Inc. Common
share
warrant
at $.72848
exercised
04/97 04/92 72,754 (3,500) (82,940)
Tessera, Inc. Series B
Preferred
shares 05/92 666,666 0 2,086,665
Tessera, Inc. Common
shares 04/97 72,754 56,500 72,754
Venture Capital Limited Partnership Investments
- -----------------------------------------------
Various Ltd.
Partnership
interests various $1,118,017 (13,481) 173,476
---------- ----------
Total significant changes during the nine
months ended September 30, 1997 1,101,749 9,610,636
Other changes, net 38,478 68,992
---------- ----------
Total equity investments at September 30, 1997 $22,140,627 36,381,562
========== ==========
(1) Convertible notes include accrued interest. The interest rate on notes issued in 1997
was 8%.
(2) Each private placement unit consists of 10,000 premium preferred shares with a stated
value of $10.00 per share.
</TABLE>
Marketable Equity Securities
- ----------------------------
At September 30, 1997, and December 31, 1996, marketable equity
securities had aggregate costs of $3,952,675 and $4,423,550,
respectively, and aggregate market values of $2,303,057 and $3,644,937,
respectively. The net unrealized losses at September 30, 1997, and
December 31, 1996, included gross gains of $302,642 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 the Partnership did not
participate. 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.
In July of 1997, the Partnership funded a bridge in the amount of
$35,000. In September of 1997, the Partnership converted bridge notes,
totaling $188,223 plus accrued interest of $6,137, to 179,963 Series C
Preferred shares. At the same time the Partnership also purchased
199,074 additional Series C Preferred shares for $215,000. The pricing
of this round, in which third parties participated, indicated a fair
value decrease of $198,992 for the Partnership's existing investment.
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.
In August of 1997, the Partnership purchased 13,334 Series E Preferred
shares for $33,335. The pricing of this round, in which third parties
participated, indicated a fair value increase of $367,394 for the
Partnership's existing investment.
Bolder Technologies Corporation
- -------------------------------
During the first nine months of 1997, the Partnership sold its entire
investment in the company for total proceeds of $786,195 and realized a
gain of $640,989.
Conversion Technologies International, Inc.
- -------------------------------------------
In August and September of 1997, the Partnership made an additional
investment of $78,750 in the company by purchasing .625 and .1625 units
of Series A private placement. Each unit consisted of 10,000 premium
preferred shares with a stated value of $10 per share.
Megabios Corporation
- --------------------
In September of 1997, 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 shares being converted to
301,274 common shares. At September 30, 1997, the Partnership recorded
an increase in the charge in fair value of $1,480,002 to reflect the
publicly-traded market price of its investments.
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. In March of 1997, the Partnership issued a $25,000
convertible note receivable to the company. The Partnership also
received an additional 27,272 Series B Preferred shares as a result of a
downward adjustment to the warrant exercise price.
In May of 1997, the company effected a 1-to-2.083 stock split. As a
result, the Partnership received an additional 78,762 Series B Preferred
shares. The Partnership also purchased 191,817 Series B Preferred
shares by converting $13,721 of the notes receivable discussed above
including accrued interest of $345 for a total cost of $14,066. The
remaining note principal of $11,279 was reissued as a new note. At
September 30, 1997, the Partnership recorded an increase in the change
in fair value of $32,815 for the above transactions.
In September of 1997, the Partnership funded bridge notes amounting to
$18,819, which included $69 of accrued interest. In addition, the
Partnership is entitled to receive warrants to purchase 25% of the
number of shares issued upon conversion at an exercise price equal to
the conversion price.
Pharmadigm, Inc.
- ----------------
In June of 1997, the Partnership made an additional investment in the
company by purchasing 17,183 Series C Preferred shares and received a
warrant to purchase 1,203 Series C Preferred shares for $37,801. The
pricing of this round, in which third parties participated, was adjusted
by Pharmadigm, Inc. in August 1997 and indicated a fair value increase
of $137,250 for the Partnership's existing investment.
Pilot Network Services, Inc.
- ----------------------------
In March of 1997, the company completed a round of financing in which
the Partnership did not participate. The pricing of this round
indicated a fair value increase of $2,227,635 for the Partnership's
existing investment.
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.
In July of 1997, the Partnership issued a $118,629 convertible note
receivable to the company and received a warrant to purchase 29,658
Common shares.
Prolinx, Inc.
- -------------
In July of 1997, the Partnership made an additional investment in the
company by purchasing 164,835 Series B Preferred shares for $288,461.
The pricing of this round, in which third parties participated,
indicated a fair value increase of $825,000 for the Partnership's
existing investment.
Redcell, Inc.
- -------------
During the second quarter of 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 September 30, 1997.
Tessera, Inc.
- -------------
In April of 1997, the Partnership exercised its warrant for common
shares and purchased 72,754 common shares of the company for $53,000.
In addition, the company completed a new round of financing in which the
Partnership did not participate. The pricing of this round indicated an
increase in the change in fair value of $2,023,479 for the Partnership's
existing investment.
UT Starcom, Inc.
- ----------------
During the first quarter of 1997, the company closed a Series C
Preferred share round of financing in which the Partnership did not
participate. The pricing of this round indicated a fair value increase
of $459,480 for the Partnership's existing investment.
In October, 1997, the Partnership exercised its common shares warrant
for $100,000 and received 148,456 common shares. The Partnership then
sold its entire investment in the company for total proceeds of
$3,625,891 and realized a gain of $3,150,891.
Wire Networks, Inc.
- -------------------
In July of 1997, the Partnership converted its $7,917 note receivable,
including accrued interest of $413, into 2,740 Series C Preferred shares
at a total cost of $8,330. The pricing of this round in which third
parties participated, indicated a $208,578 increase in the fair value of
the Partnership's existing investment.
Venture Capital Limited Partnership Investments
- -----------------------------------------------
The Partnership recorded a cost basis decrease of $13,481 in venture
capital limited partnership investments during the nine months ended
September 30, 1997. The decrease was a result of additional
contributions of $95,000, offset by a return of capital in the form of
cash and stock distributions of $23,133 and $10,648, respectively, and
the redemption of 1,200 shares of O,W&W Pacrim Investments Limited for
$74,700. The Partnership recorded a fair value increase of $173,476 as
a result of a net increase in fair value of the underlying investments,
partially offset by stock distributions from one venture capital limited
partnership investment.
During the first nine months of 1997, the Partnership received cash
distributions of $19,709 and common stock distributions of Informix
Software, Inc., with a fair value of $29,696 (of which $10,648
represented a distribution from a return of capital) and Metromail, Inc.
with a fair value of $46,723. These distributions were recorded as
realized gains from venture capital limited partnership investments.
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
may not sell its Megabios shares before March 1998. Portions of the
Partnership's Physiometrix shares are restricted.
Included in the September 30, 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 September 30, 1997, consisted of:
<TABLE>
<S> <C>
Balance at January 1, 1997 $29,142
1997 activity:
Secured notes receivable issued 33,902
Repayments of secured notes receivable (45,580)
Change in interest receivable and original issue discount (10,644)
------
Total secured notes receivable, net,
at September 30, 1997 $ 6,820
======
</TABLE>
The Partnership had accrued interest of $4,867 and $15,171 at September
30, 1997, and December 31, 1996, respectively.
6. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at September 30, 1997, and December 31, 1996,
consisted of:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Demand accounts $ 95 2,764
Money-market accounts 622,521 1,614,321
------- ---------
Total $622,616 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 September 30, 1997, the Partnership had
unfunded commitments as follows:
<TABLE>
<S> <C>
Type
- ----
Equity investments $ 55,624
Term notes 247,500
Venture capital limited partnership investments 151,345
-------
Total $454,469
=======
</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 nine months ended September 30, 1997, net cash used by
operating activities totaled $676,511. The Partnership paid management
fees of $292,496 to the Managing General Partners and reimbursed related
parties for operating expenses of $439,858. In addition, $26,800 was
paid to the Individual General Partners as compensation for their
services. Other operating expenses of $237,807 were paid and $320,450
in interest and dividend income was received.
During the nine months ended September 30, 1997, the Partnership funded
secured notes receivable totaling $33,902 to a portfolio company in the
industrial/business automation industry and equity investments of
$1,377,335 primarily to portfolio companies in the medical,
biotechnology and industrial/business automation industries. Proceeds
from sales of equity investments were $883,097, of which $60,211 related
to sales prior to December 31, 1996, which have been settled.
Distributions of $117,537 from venture capital limited partnership
investments were received. Repayments of convertible and secured notes
receivable provided cash of $47,065 and $45,580, respectively. As of
September 30, 1997, the Partnership was committed to fund additional
investments totaling $454,469 and has outstanding guarantees up to
$1,000,000 as discussed in Note 7 to the financial statements.
Cash and cash equivalents at September 30, 1997, were $622,616. 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 $3,956,570 and $923,866 for the three months ended
September 30, 1997 and 1996, respectively. The change was primarily due
to a $3,459,750 increase in the change in net unrealized fair value of
equity investments and a $204,104 increase in net realized gain from
equity investment sales. These changes were partially offset by
decreases of $277,000 and $265,720 in the change in net unrealized fair
value of secured notes receivable and other investments, respectively,
and a $109,461 increase in operating expenses.
During the three months ended September 30, 1997, the increase in fair
value of equity investments of $4,234,640 was primarily due to increases
in portfolio companies in the medical, computer systems and software,
and biotechnology industries. During the same period in 1996, the
increase of $774,890 was primarily due to decreases in portfolio
companies in the computer systems and software and industrial/business
automation industries, partially offset by decreases in the
environmental and medical industries.
For the quarter ended September 30, 1997, realized gains of $204,104
mainly related to the common stock sale of Bolder Technologies
Corporation. There were no sales of equity investments in the same
quarter of 1996.
During the three months ended September 30, 1996, the Partnership
recorded an increase in fair value of secured notes receivable of
$277,000 due to the reclassification of secured notes receivable to
other investments as these notes had been reflected with fair values
less than cost. There was no such reclassification for the same period
in 1997.
During the quarter ended September 30, 1997, the Partnership recorded a
$265,720 decrease in the fair value of other investments based on the
opinion of the Managing General Partners.
Total operating expenses were $197,076 and $87,615 for the quarters
ended September 30, 1997 and 1996, respectively. As explained in Note 3
to the financial statements, the Managing General Partners absorbed
$103,318 and $236,650 during the quarters ended September 30, 1997 and
1996, respectively. Had the limitation not been in effect, total
operating expenses would have been $300,394 and $324,265 in the third
quarters of 1997 and 1996, respectively. The decrease in operating
expenses in the current quarter over the comparative period in 1996 was
primarily due to a higher level of activity required for portfolio
management in 1996. This decrease was partially offset by the
relocation of the Partnership's administrative and investor service
operations to Santa Fe, New Mexico in the third quarter of 1997. This
relocation is expected to lower the future operational costs of the
Partnership sufficient to recoup the initial relocation expenses
incurred, and provide a meaningful reduction in ongoing operational
costs.
Given the inherent risk associated with the business of the Partnership,
the future performance of the portfolio company investments may
significantly impact future operations.
Current nine months compared to corresponding nine months in the
- -----------------------------------------------------------------
preceding year
- --------------
Net income was $8,361,237 for the nine months ended September 30, 1997,
compared to a net loss of $784,365 during the same period in 1996. The
change was primarily due to a $7,115,186 increase in the change in net
unrealized fair value of equity investments, a $2,434,373 decrease in
realized losses from investment write-downs, an $845,345 decrease in
total operating expenses, and a $183,243 increase in total income.
These changes were partially offset by a $955,000 decrease in the change
in net unrealized fair value of secured notes receivable, a $271,959
decrease in net realized gain from sales of equity investments, and a
$265,720 decrease in the fair value of other investments.
During the nine months ended September 30, 1997, the increase in fair
value of equity investments of $8,539,401 was primarily due to increases
in portfolio companies in the medical, microelectronics, biotechnology,
and computer systems and software industries, partially offset by
decreases in the biomedical and industrial/business automation
industries. During the same period in 1996, the increase of $1,424,215
was primarily due to increases in portfolio companies in the medical and
industrial/business automation industries, partially offset by decreases
in the computer systems and software and environmental industries.
The Partnership did not record any realized losses form investment
write-downs for the nine months ended September 30, 1997. During the
same period in 1996, realized losses of $2,434,373 mostly related to
equity investments in the computer systems and software industry.
Total operating expenses were $653,334 and $1,498,679 for the nine
months ended September 30, 1997 and 1996, respectively. As discussed in
Note 3 to the financial statements, the Managing General Partners
absorbed $103,318 and $352,093 for the nine months ended September 30,
1997 and 1996, respectively, and was reimbursed $853,838 in 1996 for
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 $756,652 and $996,934
during the nine months ended September 30, 1997 and 1996, respectively.
The decrease was mainly due to lower investment operations from lower
overall portfolio activities.
Total income was $344,547 and $161,304 for the nine months ended
September 30, 1997 and 1996, respectively. The increase was
substantially due to $280,010 in dividend income from Tessera, Inc.,
partially offset by a decrease in interest income due to lower cash
balances and lower secured notes receivable outstanding.
During the nine months ended September 30, 1996, the Partnership
recorded an increase in fair value of secured notes receivable of
$955,000 due to the reclassification of secured notes receivable
totaling $1,275,000 and $681,565 to equity investments and other
investments, respectively, as these notes had been reflected with fair
values less than cost. There was no such reclassification for the same
period in 1997.
For the nine months ended September 30, 1997, realized gains of $630,159
mainly related to the common stock sale of Bolder Technologies
Corporation. During the same period in 1996, realized gains of $902,118
mostly related to the common stock sale of TheraTx, Incorporated.
During the nine months ended September 30, 1997, the Partnership
recorded a $265,720 decrease in the fair value of other investments
based on the opinion of the Managing General Partners.
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Partnership during the
quarter ended September 30, 1997.
(b) Financial Data Schedule for the nine months ended and as of
September 30, 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: November 14, 1997 By: /s/Michael R. Brenner
------------------------------------
Michael R. Brenner
Controller
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-Q AS OF September 30, 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> SEP-30-1997
<PERIOD-TYPE> 9-MOS
<INVESTMENTS-AT-COST> 22,811,746
<INVESTMENTS-AT-VALUE> 36,786,961
<RECEIVABLES> 0
<ASSETS-OTHER> 5,275
<OTHER-ITEMS-ASSETS> 622,616
<TOTAL-ASSETS> 37,414,852
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72,499
<TOTAL-LIABILITIES> 72,499
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,367,138
<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> 13,975,215
<NET-ASSETS> 37,342,353
<DIVIDEND-INCOME> 280,010
<INTEREST-INCOME> 64,537
<OTHER-INCOME> 0
<EXPENSES-NET> (972,630)
<NET-INVESTMENT-INCOME> (628,083)
<REALIZED-GAINS-CURRENT> 715,639
<APPREC-INCREASE-CURRENT> 8,539,401
<NET-CHANGE-FROM-OPS> 8,361,237
<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> 8,361,237
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 292,496
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 974,832
<AVERAGE-NET-ASSETS> 33,161,734
<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> 58
<EXPENSE-RATIO> 2.9
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
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>
