<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Year Ended December 31, 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
incorporation or organization) No.)
2000 Alameda de las Pulgas, Suite 250
San Mateo, California 94403
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(415) 345-2200
--------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited
Partnership Units
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
No active market for the units of limited partnership interests
("Units") exist, and therefore the market value of such Units cannot
be determined.
Documents incorporated by reference: Portions of the Prospectus dated
January 22, 1992, forming a part of Registration Statement No. 33-
31237 filed pursuant to Rule 424(c) of the General Rules and
Regulations under the Securities Act of 1933, as modified by Post-
Effective Amendment No. 1 dated April 23, 1990, are incorporated by
reference in Parts I and III hereof. Portions of the Prospectus of
Technology Funding Medical Partners I, L.P., as modified by Cumulative
Supplement No. 4 dated January 4, 1995, forming a part of the May 3,
1993, Pre-Effective Amendment No. 3 to the Form N-2 Registration
Statement No. 33-54002 dated October 30, 1992, are incorporated by
reference in Part III hereof.
<PAGE>
PART I
Item 1. BUSINESS
- ------ --------
Technology Funding Venture Partners V, An Aggressive Growth
Fund, L.P. (the "Partnership") is a limited partnership
organized under the laws of the State of Delaware on June 26,
1989 and was inactive until it commenced the sale of Units in
May of 1990. The purpose of the Partnership is to make
venture capital investments in emerging growth companies as
described in the "Introductory Statement" and "Business of
the Partnership" sections of the Prospectus dated January 22,
1992. The Partnership has elected to be a business
development company under the Investment Company Act of 1940,
as amended (the "Act"), and operates as a nondiversified
investment company as that term is defined in the Act.
Additional characteristics of the Partnership's business are
discussed in the "Risk Factors" and "Conflicts of Interest"
sections of the Prospectus, which sections are also
incorporated herein by reference. The Partnership's Amended
and Restated Limited Partnership Agreement ("Partnership
Agreement") provides that the Partnership will continue until
December 31, 1998, subject to the right of the Individual
General Partners to extend the term for up to two additional
two-year periods.
Item 2. PROPERTIES
- ------ ----------
The Registrant has no material physical properties.
Item 3. LEGAL PROCEEDINGS
- ------ -----------------
There are no material pending legal proceedings to which the
Registrant is party or of which any of its property is the
subject, other than ordinary routine litigation incidental to
the business of the Partnership.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
No matter was submitted to a vote of the holders of units of
limited partnership interests ("Units") during 1996.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------ -------------------------------------------------------------
MATTERS
-------
(a) There is no established public trading market for the
Units.
(b) At December 31, 1996, there were 6,564 record holders of
Units.
(c) The Registrant, being a partnership, does not pay
dividends. Cash distributions, however, may be made to
the partners pursuant to the Registrant's Partnership
Agreement.
Item 6. SELECTED FINANCIAL DATA
- ------ -----------------------
<TABLE>
<CAPTION>
For the Years Ended and As of December 31,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total interest income $ 177,557 620,711 943,311 1,130,936 731,451
Net operating loss (1,796,650) (1,095,815) (689,890) (503,124) (3,511,985)
Net realized gain from
sales of equity
investments 2,174,495 935,950 3,209,979 65,814 --
Realized losses from
investment write-downs (4,049,697) (3,137,377) (541,125) (187,887) --
Recoveries from investments
previously written-off 23,922 45,248 -- -- --
Net realized gain (loss) from
venture capital limited
partnership investments 22,997 -- -- (3,712) (4,657)
Net realized (loss) income (3,624,933) (3,251,994) 1,978,964 (628,909) (3,516,642)
Change in net unrealized
fair value:
Equity investments 2,019,333 765,254 (314,082) 1,933,993 1,297,036
Secured notes receivable 955,000 (395,000) (443,000) (44,000) (73,000)
Net (loss) income (650,600) (2,881,740) 1,221,882 1,261,084 (2,292,606)
Net realized (loss)
income per Unit (9) (8) 5 (2) (16)
Total assets 29,077,479 29,698,636 32,599,849 31,415,262 30,583,609
Distributions declared -- -- -- -- 592,693
Distributions declared
per unit (1) -- -- -- -- 3
(1) Calculation is based on distributions declared to Limited Partners divided by the weighted
average number of Units outstanding during the year.
</TABLE>
Refer to the financial statement notes entitled "Summary of
Significant Accounting Policies" and "Allocation of Profits
and Losses" for a description of the method of calculation
of net realized income (loss) per Unit.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Liquidity and Capital Resources
- -------------------------------
During 1996, net cash used by operating activities totaled
$1,770,131. The Partnership paid management fees of
$423,849 to the Managing General Partners and reimbursed
related parties for operating expenses of $1,201,708. In
addition, $34,331 was paid to the Individual General
Partners as compensation for their services. Other
operating expenses of $276,630 were paid. The Partnership
received $166,387 in interest income.
In 1996, the Partnership issued $208,334 in secured notes
receivable to a portfolio company in the computer systems
and software industry. Equity investments of $4,843,447
were funded primarily to portfolio companies in the medical
and industrial/business automation industries. Repayments
of secured and convertible notes receivable during 1996
provided cash of $547,440. Proceeds from the sale of
equity investments were $3,466,227 and distributions of
$29,288 were received from venture capital limited
partnership investments. At December 31, 1996, the
Partnership had commitments to fund additional investments
totaling $542,294 and had an outstanding guarantee of
$1,000,000 as discussed in Note 10 to the financial
statements.
During 1996, Bolder Technologies Corporation, CV
Therapeutics, Inc., Conversion Technologies International,
Inc., and Physiometrix, Inc., completed their initial
public offerings ("IPOs"). Although a portion of the
Partnership's holdings are subject to selling restrictions,
these IPOs indicate potential future liquidity for the
Partnership's investments.
Cash and cash equivalents at December 31, 1996, were
$1,617,085. Future proceeds from investment sales along
with Managing General Partners' support are expected to be
adequate to fund Partnership operations through the next
twelve months.
Results of Operations
- ---------------------
1996 compared to 1995
- ---------------------
Net loss was $650,600 in 1996, compared to $2,881,740 in
1995. The decrease in net loss was primarily due to
increases of $1,350,000 and $1,254,079 in the changes in
net unrealized fair value of secured notes receivable and
equity investments, respectively, a $1,238,545 increase in
net realized gain from sales of equity investments, and a
$406,289 decrease in management fees. These changes were
partially offset by a $912,320 increase in realized losses
from investment write-downs, a $688,552 increase in total
operating expenses and a $443,154 decrease in total
interest income.
During 1996, the Partnership recorded a $955,000 increase
in secured notes receivable fair value. The increase was
due to the reclassification of secured notes receivable of
$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. A $395,000
decrease was recorded in 1995.
During 1996, the increase in fair value of equity
investments of $2,019,333 was primarily due to portfolio
companies in the medical, computer systems and software,
and communications industries, partially offset by
decreases in the biotechnology and environmental
industries. The 1996 increase was offset by a $1,000,000
reserve for a contingent liability as disclosed in Note 10
of the financial statements. During 1995, the increase of
$765,254 was primarily due to portfolio companies in the
communications, microelectronics, and retail/consumer
products industries, partially offset by decreases in the
medical industry.
During 1996, net realized gain from sales of equity
investments of $2,174,495 was mostly due to the sales of
common stock of Bolder Technologies Corporation, and
TheraTx, Incorporated. During 1995, net realized gain of
$935,950 was mostly due to the partial sales of common
stock of UroMed Corporation and TheraTx, Incorporated.
Management fees were $389,995 and $796,284 for 1996 and
1995, respectively. As discussed in Note 4 to the
financial statements, management fees decreased from two
percent to one percent per annum of total Limited Partner
capital contributions beginning in January of 1996.
During 1996, realized losses from investment write-downs of
$4,049,697 primarily related to portfolio companies in the
computer systems and software and environmental industries.
During 1995, realized losses of $3,317,377 primarily
related to portfolio companies in the environmental,
medical and retail/consumer products industries.
Total operating expenses were $1,549,881 and $861,329 for
1996 and 1995, respectively. As disclosed in Note 4 to the
financial statements, the Partnership may not reimburse the
General Partners for expenses that aggregate more than one
percent of total Limited Partner capital contributions. As
a result, operating expenses of $531,571 and $770,116 were
absorbed by the General Partners in 1996 and 1995,
respectively. During 1996, it was determined that certain
operational costs paid directly by the Partnership were not
subject to the limitation. Consequently, in 1996, $853,838
of direct Partnership expenses previously absorbed by the
General Partners were recognized as additional expenses.
Also disclosed in Note 4, 1995 expenses included expenses
of $453,884 not previously recognized by the Partnership of
which $316,543 related to prior years. Had the limitation
not been in effect and had the additional expenses been
recorded in prior years, total operating expenses would
have been $1,227,614 and $1,314,902 in 1996 and 1995,
respectively.
Total interest income was $177,557 and $620,711 for 1996
and 1995, respectively. The decrease was primarily due to
lower cash and cash equivalents balances resulting from new
and follow-on investments.
Given the inherent risk associated with the business of the
Partnership, the future performance of the portfolio
company investments may significantly impact future
operations.
1995 compared to 1994
- ---------------------
Net loss was $2,881,740 in 1995 compared to a net income of
$1,221,882 in 1994. The decrease was primarily due to a
$2,274,029 decrease in net realized gain from sales of
equity investments, a $2,596,252 increase in realized
losses from investment write-downs and a $322,600 decrease
in interest income. These changes were partially offset by
a $1,079,336 increase in the change in net unrealized fair
value of equity investments.
Net realized gain from sales of equity investments of
$935,950 for 1995 related to the partial sales of UroMed
Corporation and TheraTx, Incorporated. During 1994
$3,209,979 in net realized gain related to the sales of
TheraTx, Incorporated, UroMed Corporation, Erox
Corporation, and Orthologic Corporation.
Realized losses from investment write-downs of $3,137,377
during 1995 primarily related to portfolio companies in the
environmental, medical and retail/consumer products
industries. In 1994, the Partnership realized losses from
investment write-downs of $541,125 related to portfolio
companies in the medical and environmental industries.
Total interest income was $620,711 and $943,311 during 1995
and 1994, respectively. The decrease was primarily due to
lower secured notes receivable interest income resulting
from notes placed on nonaccrual status.
During 1995, the increase in fair value of equity
investments of $765,254 was primarily due to portfolio
companies in the communications, microelectronics, and
retail/consumer products industries, partially offset by
decreases in portfolio companies in the medical industry.
During 1994, the decrease of $314,082 was primarily due to
decreases in portfolio companies in the biomedical,
retail/consumer products and communications industries,
partially offset by increases in portfolio companies in the
medical industry.
Total operating expenses were $861,329 and $800,000 in 1995
and 1994, respectively. Pursuant to the Partnership
Agreement, the Partnership may not reimburse the General
Partners for expenses that aggregate more than 2% of total
Limited Partner capital contributions. As a result,
operating expenses of $770,116 and $287,129 were absorbed
by the General Partners in 1995 and 1994, respectively. In
addition, as disclosed above, 1995 operating expenses
included additional administrative and investor services
expenses of $453,884 of which $61,329 related to a prior
year in which the limitation was not in effect. Had the
limitation not been in effect and had the additional
expenses been recorded in prior years, total operating
expenses in 1995 and 1994 would have been $1,314,902 and
$1,179,542, respectively. The increase of $135,360 was
primarily due to higher investment operations and
administrative and investor services expenses resulting
from higher overall portfolio activities.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
The financial statements of the Registrant are set forth in
Item 14.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------ ------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
Registrant has reported no disagreements with its
accountants on matters of accounting principles or
practices or financial statement disclosure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
As a partnership, the Registrant has no directors or
executive officers. The Management Committee is
responsible for the management and administration of the
Partnership. The members of the Management Committee
consist of the three Individual General Partners and a
representative from each of Technology Funding Ltd., a
California limited partnership ("TFL"), and its wholly-
owned subsidiary, Technology Funding Inc., a California
corporation ("TFI"). TFL and TFI are the Managing General
Partners. Information concerning the ownership of TFL and
the business experience of the key officers of TFI and the
partners of TFL is incorporated by reference from the
sections entitled "Management of the Partnership - The
Managing General Partners" and "Management of the
Partnership - Key Personnel of the Managing General
Partners" in the Prospectus, which are incorporated herein
by reference. Changes in this information that have
occurred since the date of the Prospectus are included in
the Technology Funding Medical Partners I, L.P. Prospectus,
as modified by Cumulative Supplement No. 4 dated January 4,
1995, forming a part of the May 3, 1993 Pre-Effective
Amendment No. 3 to the Form N-2 Registration Statement No.
33-54002 dated October 30, 1992 which are incorporated
herein by reference.
Item 11. EXECUTIVE COMPENSATION
- ------- ----------------------
As a partnership, the Registrant has no officers or
directors. In 1996, the Partnership incurred $389,995 in
management fees. The fees are designed to compensate the
Managing General Partners for General Partner Overhead
incurred in performing management duties for the
Partnership through December 31, 1996. General Partner
Overhead (as defined in the Partnership Agreement) includes
the General Partners' share of rent and utilities, and
certain salaries and benefits paid by the Managing General
Partners in performing their obligations to the
Partnership. As compensation for their services, the
Individual General Partners each receive $6,000 annually,
plus $1,000 for each attended meeting of the Individual
General Partners and related expenses. For the year ended
December 31, 1996, $34,331 of such fees were incurred.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- ------- ---------------------------------------------------
MANAGEMENT
----------
Not applicable. No Limited Partner beneficially holds more
than 5% of the aggregate number of Units held by all
Limited Partners, and neither the Managing General Partners
nor any of their officers, directors or partners own any
Units. Two of the three Individual General Partners each
own 20 Units and the third owns 70 Units. The Managing
General Partners control the affairs of the Partnership
pursuant to the Partnership Agreement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The Registrant, or its investee companies, have engaged in
no transactions with the Managing General Partners or their
officers and partners other than as described above, in the
notes to the financial statements, or in the Partnership
Agreement.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
- ------- ------------------------------------------------------
FORM 8-K
--------
(a) List of Documents filed as part of this Annual Report
on Form 10-K
(1) Financial Statements - the following financial
statements are filed as a part of this Report:
Independent Auditors' Report
Balance Sheets as of December 31, 1996
and 1995
Statements of Operations for the years
ended December 31, 1996, 1995 and 1994
Statements of Partners' Capital for the years
ended December 31, 1996, 1995 and 1994
Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
(2) Financial Statement Schedules
All schedules have been omitted because they are
not applicable or the required information is
included in the financial statements or the notes
thereto.
(3) Exhibits
Registrant's Amended and Restated Limited
Partnership Agreement (incorporated by reference
to Exhibit A to Registrant's Prospectus dated
January 22, 1992 included in Registration
Statement No. 33-31237 filed pursuant to Rule
424(b) of the General Rules and Regulations under
the Securities Act of 1933).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant
during the year ended December 31, 1996.
(c) Financial Data Schedule for the year ended and as of
December 31, 1996 (Exhibit 27).
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Partners
Technology Funding Venture Partners V, An Aggressive Growth Fund,
L.P.:
We have audited the accompanying balance sheets of Technology
Funding Venture Partners V, An Aggressive Growth Fund, L.P. (a
Delaware limited partnership) as of December 31, 1996 and 1995, and
the related statements of operations, partners' capital, and cash
flows for each of the years in the three-year period ended December
31, 1996. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures
included confirmation of certain securities and loans owned, by
correspondence with the individual investee and borrowing companies,
and a physical examination of those securities held by a
safeguarding agent as of December 31, 1996 and 1995. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Technology Funding Venture Partners V, An Aggressive Growth Fund,
L.P. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-
year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
San Francisco, California /S/KPMG Peat Marwick LLP
March 21, 1997
<PAGE>
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis of
$21,000,400 and $20,607,017
for 1996 and 1995, respectively) $26,701,934 24,289,218
Secured notes receivable, net
(cost basis of $29,142 and
$1,954,572 for 1996 and 1995,
respectively) 29,142 999,572
Other investments (cost basis of 664,299 --
$664,299 for 1996) ---------- ----------
Total investments 27,395,375 25,288,790
Cash and cash equivalents 1,617,085 4,396,042
Other assets 65,019 13,804
---------- ----------
Total $29,077,479 29,698,636
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 37,117 25,950
Due to related parties 59,246 40,970
---------- ----------
Total liabilities 96,363 66,920
Commitments, contingencies and
subsequent events
(Notes 4, 6 and 10)
Partners' capital:
Limited Partners
(Units outstanding of
400,000 in both 1996 and 1995) 23,337,188 26,925,872
General Partners (57,606) (21,357)
Net unrealized fair value increase
(decrease) from cost:
Equity investments 5,701,534 3,682,201
Secured notes receivable -- (955,000)
---------- ----------
Total partners' capital 28,981,116 29,631,716
---------- ----------
Total $29,077,479 29,698,636
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS
- ------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest Income:
Secured notes
receivable $ 106,108 106,723 385,438
Short-term investments 71,449 513,988 557,873
--------- --------- ---------
Total interest income 177,557 620,711 943,311
Costs and expenses:
Management fees 389,995 796,284 796,201
Individual General Partners'
compensation 34,331 51,913 30,000
Amortization of
organizational costs -- 7,000 7,000
Operating expenses:
Administrative and
investor services 466,439 874,536 461,546
Investment operations 487,139 551,937 457,622
Professional fees 113,891 81,538 62,666
Computer services 160,145 123,434 105,295
Expenses absorbed by
General Partners (531,571) (770,116) (287,129)
Expenses previously
absorbed by General
Partners 853,838 -- --
--------- --------- ---------
Total operating
expenses 1,549,881 861,329 800,000
--------- --------- ---------
Total costs and expenses 1,974,207 1,716,526 1,633,201
--------- --------- ---------
Net operating loss (1,796,650) (1,095,815) (689,890)
Net realized gain from
sales of equity
investments 2,174,495 935,950 3,209,979
Realized losses from
investment write-downs (4,049,697) (3,137,377) (541,125)
Recoveries from
investments previously
written off 23,922 45,248 --
Net realized gain from
venture capital limited
partnership investments 22,997 -- --
--------- --------- ---------
Net realized (loss) income (3,624,933) (3,251,994) 1,978,964
Change in net unrealized
fair value:
Equity investments 2,019,333 765,254 (314,082)
Secured notes receivable 955,000 (395,000) (443,000)
--------- --------- ---------
Net (loss) income $ (650,600) (2,881,740) 1,221,882
========= ========= =========
Net realized (loss) income
per Unit $ (9) (8) 5
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF PARTNERS' CAPITAL
- -------------------------------
<TABLE>
<CAPTION>
For the years ended December 31, 1996, 1995 and 1994:
Net Unrealized Fair Value
Increase (Decrease) From Cost
-----------------------------
Limited General Equity Secured Notes
Partners Partners Investments Receivable Total
-------- -------- ----------- ------------- -----
<S> <C> <C> <C> <C> <C>
Partners' capital,
December 31, 1993 $28,216,611 (39,066) 3,231,029 (117,000) 31,291,574
Net realized income 1,928,735 50,229 -- -- 1,978,964
Change in net unrealized
fair value:
Equity investments -- -- (314,082) -- (314,082)
Secured notes receivable -- -- -- (443,000) (443,000)
---------- -------- --------- -------- ----------
Partners' capital,
December 31, 1994 30,145,346 11,163 2,916,947 (560,000) 32,513,456
Net realized loss (3,219,474) (32,520) -- -- (3,251,994)
Change in net unrealized
fair value:
Equity investments -- -- 765,254 -- 765,254
Secured notes receivable -- -- -- (395,000) (395,000)
---------- -------- --------- -------- ----------
Partners' capital,
December 31, 1995 26,925,872 (21,357) 3,682,201 (955,000) 29,631,716
Net realized loss (3,588,684) (36,249) -- -- (3,624,933)
Change in net unrealized
fair value:
Equity investments -- -- 2,019,333 -- 2,019,333
Secured notes receivable -- -- -- 955,000 955,000
---------- -------- --------- -------- ----------
Partners' capital,
December 31, 1996 $23,337,188 (57,606) 5,701,534 -- 28,981,116
========== ======== ========= ======== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF CASH FLOWS
- ------------------------
<TABLE>
<CAPTION>
For The Years Ended December 31,
------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating
activities:
Interest received $ 166,387 620,712 903,296
Cash paid to vendors (276,630) (231,037) (246,871)
Cash paid to related
parties (1,659,888) (1,495,100) (1,399,806)
--------- ---------- ----------
Net cash used by
operating activities (1,770,131) (1,105,425) (743,381)
--------- ---------- ----------
Cash flows from investing
activities:
Secured notes receivable
issued (208,334) (1,066,666) (128,812)
Purchase of equity
investments (4,843,447) (7,414,638) (8,513,620)
Repayment of secured and
convertible notes
receivable 547,440 588,817 1,247,037
Proceeds from sales of
investments 3,466,227 2,022,421 3,287,569
Distributions from venture
capital limited partnership
investments 29,288 -- 35,451
--------- ---------- ----------
Net cash used by
investing activities (1,008,826) (5,870,066) (4,072,375)
--------- ---------- ----------
Net decrease in cash
and cash equivalents (2,778,957) (6,975,491) (4,815,756)
Cash and cash equivalents
at beginning of year 4,396,042 11,371,533 16,187,289
--------- ---------- ----------
Cash and cash equivalents
at end of year $ 1,617,085 4,396,042 11,371,533
========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (continued)
- -----------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Reconciliation of net
(loss) income to net cash
used by operating activities:
Net (loss) income $ (650,600) (2,881,740) 1,221,882
Adjustments to reconcile
net (loss) income to net
cash used by operating
activities:
Amortization of
organizational costs -- 7,000 7,000
Change in net unrealized
fair value:
Equity investments (2,019,333) (765,254) 314,082
Secured notes
receivable (955,000) 395,000 443,000
Realized losses from
investment write-downs 4,049,697 3,137,377 541,125
Net realized gain from
sales of equity
investments (2,174,495) (935,950) (3,209,979)
Net realized gain from
venture capital limited
partnership investments (22,997) -- --
Recoveries from investments
previously written off (23,922) (45,248) --
Other, net (1,867) (5,992) (11,072)
Changes in:
Accrued interest on
convertible and secured
notes (9,303) 5,993 (28,943)
Other assets 8,996 3,710 16,819
Accounts payable and
accrued expenses 10,417 (3,801) (16,826)
Due to/from related
parties 18,276 (14,811) (18,148)
Other liabilities -- (1,709) (2,321)
--------- --------- ---------
Net cash used by operating
activities $(1,770,131) (1,105,425) (743,381)
========= ========= =========
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 -- --
========= ========= =========
Common stock recovered
from equity investment
previously written off $ -- 45,248 --
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
1. Summary of Significant Accounting Policies
------------------------------------------
Organization
- ------------
Technology Funding Venture Partners V, An Aggressive Growth Fund,
L.P. (the "Partnership") is a limited partnership organized under the
laws of the State of Delaware on June 26, 1989. The purpose of the
Partnership is to make venture capital investments in emerging growth
companies. The Partnership elected to be a business development
company under the Investment Company Act of 1940, as amended (the
"Act"), and operates as a nondiversified investment company as that
term is defined in the Act. The Managing General Partners are
Technology Funding Ltd. ("TFL") and Technology Funding Inc. ("TFI"),
a wholly-owned subsidiary of TFL. There are also three Individual
General Partners.
The Partnership offering commenced in May of 1990. On January 2,
1991, the minimum number of Units required to commence Partnership
operations (15,000) had been sold. The offering terminated with
400,000 Units sold on December 31, 1992. The Partnership Agreement
provides that the Partnership will continue until December 31, 1998,
unless further extended for up to two additional two-year periods
from such date if the Managing General Partners so determine or
unless sooner dissolved.
Preparation of Financial Statements and Use of Estimates
- --------------------------------------------------------
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting
principles. This required management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure on contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
The financial statements included marketable and non-marketable
investments of $27,395,375 and $25,288,790 (95% and 85% of partners'
capital) as of December 31, 1996 and 1995. For the non-marketable
investments, the Managing General Partners have estimated the fair
value of such investments in the absence of readily ascertainable
market values. Because of the inherent uncertainty of valuation,
those estimated values may differ significantly from the values that
would have been used had a ready market for investment existed, and
the differences could be material. In addition, for certain publicly
traded investments that may not be marketable due to selling
restrictions, the Managing General Partners have applied an
illiquidity discount of up to 33% in determining fair value as
discussed below.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents are principally comprised of cash invested
in demand accounts, money market instruments, and commercial paper
and are stated at cost plus accrued interest. The Partnership
considers all money market and short-term investments with an
original maturity of three months or less to be cash equivalents.
Organizational Costs
- --------------------
Organizational costs of $35,000 are amortized over 60 months using
the straight-line method.
Provision for Income Taxes
- --------------------------
No provision for income taxes has been made by the Partnership as the
Partnership is not directly subject to taxation. The partners are to
report their respective shares of Partnership income or loss on their
individual tax returns.
Since the accompanying financial statements are prepared using
generally accepted accounting principles which may not equate to tax
accounting, the Partnership's total tax basis in investments was
higher than the reported total cost basis of $21,029,542 by
$2,397,762 as of December 31, 1996.
Net Realized Income (Loss) Per Unit
- -----------------------------------
Net realized income (loss) per Unit is calculated by dividing the
weighted average number of Units outstanding (400,000) at December
31, 1996, 1995 and 1994 into total net realized income (loss)
allocated to the Limited Partners. The Managing General Partners
contributed an amount equal to 0.1% of total Limited Partner capital
contributions and did not receive any Partnership Units.
Investments:
- -----------
In accordance with generally accepted accounting principles, the
Partnership's method of accounting for investments is the fair value
basis used for investment companies. The fair value of Partnership
investments is their initial cost basis with changes as noted below:
Equity Investments
------------------
The fair value for publicly-traded equity investments (marketable
equity securities) is based upon the five-day-average closing sales
price or bid/ask price that is available on a national securities
exchange or over-the-counter market. Certain publicly-traded equity
investments may not be marketable due to selling restrictions. For
publicly-traded equity investments with selling restrictions, an
illiquidity discount of up to 33% is applied when determining the
fair value; the actual discount percentage is based on the type and
length of the restrictions. Sales of equity investments are recorded
on the trade date. The basis on which cost is determined in
computing realized gains or losses is generally specific
identification.
Other equity investments, which are not publicly traded, are
generally valued utilizing pricing obtained from the most recent
round of third-party financings. Valuation is estimated quarterly by
the Managing General Partners. Included in equity investments are
convertible and subordinated notes receivable as repayment of these
notes generally occur through conversion into equity investments.
Venture capital limited partnership investments are initially
recorded at cost and reduced for distributions that are a return of
capital. Distributions from limited partnership cumulative earnings
are reflected as realized gains by the Partnership.
Equity and venture capital limited partnership investments with
temporary changes in fair value result in increases or decreases to
the unrealized fair value of equity investments. The cost basis does
not change. In the case of an other than temporary decline in value
below cost basis, an appropriate reduction in the cost basis is
recognized as a realized loss with the fair value being adjusted to
match the new cost basis. Adjustments to fair value basis are
reflected as "Change in net unrealized fair value of equity
investments." Cost basis adjustments are reflected as "Realized
losses from investment write-downs" or "Net realized loss from
venture capital limited partnership investments" on the Statements of
Operations.
Secured Notes Receivable, net
-----------------------------
The secured notes receivable portfolio includes accrued interest less
the discount related to warrants and the allowance for loan losses.
The portfolio approximates fair value through inclusion of an
allowance for loan losses. The allowance for loan losses is reviewed
quarterly by the Managing General Partners and is adjusted to a level
deemed adequate to cover possible losses inherent in notes and
unfunded commitments. Notes receivable are placed on nonaccrual
status when, in the opinion of the Managing General Partners, the
future collectibility of interest or principal is in doubt.
In conjunction with the secured notes issued to portfolio companies,
the Partnership has received warrants to purchase certain shares of
capital stock of the borrowing companies. The cost basis of the
warrants and the resulting discount has been estimated by the
Managing General Partners to be 1% of the principal balance of the
original notes made to the borrowing companies. The discount is
amortized to interest income on a straight-line basis over the term
of the loan. Warrants received in conjunction with convertible notes
are not assigned any additional costs. These warrants are included
in the equity investment portfolio.
Nonrefundable fees received in connection with loan fundings are
deferred and amortized to interest income over the contractual life
of the loan using the effective interest method or the straight-line
method if it is not materially different. Direct loan origination
costs mainly consist of third-party costs and generally are
reimbursed by portfolio companies.
Other Investments
-----------------
At times, the Partnership may receive other assets in satisfaction of
secured notes receivable or equity investments in portfolio
companies. When the asset is received, existing investment balances
in excess of the estimated fair value of the asset received are
written off.
Non-cash Exercise of Warrants
- -----------------------------
Periodically, the Partnership may acquire stock through the non-cash
exercise of warrants. Upon the non-cash exercise of warrants, the
Partnership recorded net realized gains of $4,030 and $156,494 in
1996 and 1994, respectively, as a result of the underlying stock
prices at the date of exercise. These amounts are included in net
realized gain from sales of equity investments. During 1995, there
were no such transactions.
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. Change in Net Unrealized Fair Value of Equity Investments
---------------------------------------------------------
In accordance with the accounting policy as stated in Note 1, the
Statements of Operations include a line item entitled "Change in net
unrealized fair value of equity investments." The table below
discloses details of the changes:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
(Decrease)increase in
fair value from
cost of marketable
equity securities $ (778,613) 487,551 1,465,476
Increase in fair value from
cost of non-marketable
equity securities 6,480,147 3,194,650 1,451,471
--------- --------- ---------
Net unrealized fair
value increase from
cost at end of year 5,701,534 3,682,201 2,916,947
Net unrealized fair
value increase from
cost at beginning of year 3,682,201 2,916,947 3,231,029
--------- --------- ---------
Change in net unrealized
fair value of equity
investments $2,019,333 765,254 (314,082)
========= ========= =========
</TABLE>
4. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. For the years ended December 31, 1996,
1995 and 1994, related party costs were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Management fees $ 389,995 796,284 796,201
Individual General
Partners' compensation 34,331 51,913 30,000
Amortization of organi-
zational costs -- 7,000 7,000
Reimbursable operating
expenses:
Administrative and
investor services 341,641 758,167 308,321
Investment operations 429,785 520,607 428,970
Computer services 160,145 123,434 105,295
Expenses absorbed by
General Partners (531,571) (770,116) (287,129)
Expenses previously
absorbed by General
Partners 853,838 -- --
</TABLE>
Management fees compensate the Managing General Partners solely for
General Partner Overhead (as defined in the Partnership Agreement)
incurred in supervising the operation and management of the
Partnership and the Partnership's investments. Pursuant to the
Partnership Agreement, beginning January 2, 1996, management fees
changed from two percent to one percent per annum of adjusted Capital
contributions. Such amounts due to related parties were $32,500 and
$66,354 at December 31, 1996 and 1995, respectively.
The Partnership reimburses the Managing General Partners for
operating expenses incurred in connection with the business of the
Partnership. Reimbursable operating expenses paid by the Managing
General Partners include expenses (other than Organizational and
Offering Expenses and General Partner Overhead) such as
administrative and investor services, investment operations, and
computer services. At December 31, 1996, amounts due to related
parties related to such expenses were $26,746 compared to $25,384 due
from related parties at December 31, 1995. During late 1995,
operating cost allocations to the Partnership were reevaluated. The
Managing General Partners determined that they had not fully
recovered allocable overhead as permitted by the Partnership
Agreement. As a result, the Partnership was charged additional
administrative and investor services expenses of $453,884 that was
not previously recognized by the Partnership; however, during 1995,
$392,555 of this amount was absorbed by the Managing General
Partners. The $453,884 consisted of $137,341, $92,413 and $224,130
for 1995, 1994 and prior years, respectively.
Pursuant to the Partnership Agreement, 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
in 1996 and 2% in prior years. During 1996, it was determined that
certain operational costs paid directly by the Partnership were not
subject to this limitation; consequently, $853,838 was reimbursed to
the Managing General Partners. In 1996, 1995 and 1994, operating
expenses incurred by the Managing General Partners exceeded the
limitation by $531,571, $770,116 and $287,129, respectively,
resulting in these amounts being absorbed by the Managing General
Partners.
Had the limitation not been in effect and had the additional expenses
been recorded in prior years, total operating expenses would have
been $1,227,614, $1,314,902 and 1,179,542 for 1996, 1995, and 1994,
respectively.
During 1996, the Managing General Partners provided cash advances
totaling $984,521 to fund Partnership operations. Interest of
$7,267, calculated at the prevailing prime rate, was incurred. All
advances including accrued interest were repaid prior to year end.
As compensation for their services, the Individual General Partners
each receives $6,000 annually, plus $1,000 for each attended meeting
of the Individual General Partners and related expenses. Two of the
three Individual General Partners each own 20 Units and the third
owns 70 Units.
Under the terms of a computer service agreement, the Partnership
recognized charges from Technology Administrative Management, a
division of TFL, for its share of computer support costs. These
amounts are included in computer services expense.
Officers of the Managing General Partners occasionally receive stock
options as compensation for serving on the Boards of Directors of
portfolio companies. It is the Managing General Partners' policy
that all such compensation be transferred to the investing
partnerships. If the options are non-transferable, they are not
recorded as an asset of the Partnership. Any profit from the
exercise of such options will be transferred if and when the options
are exercised and the underlying stock is sold by the officers. At
December 31, 1996, the Partnership had an indirect interest in non-
transferable Conversion Technologies International, Inc., options at
an exercise price higher than the current market value.
In 1996 and 1995, TFL had a sublease rental agreement with a
Partnership portfolio company in the medical industry. The terms of
this agreement was similar to those which would apply to an unrelated
party.
5. Allocation of Profits and Losses
--------------------------------
Net realized profit and loss of the Partnership are allocated based
on the beginning of year partners' capital balances as follows:
(a) Profits:
(i) First, to those partners with deficit capital account
balances until such deficits have been eliminated;
(ii) Second, to the partners as necessary to offset net loss
and sales commissions previously allocated under (b)(ii)
below; then
(iii)75% to the Limited Partners as a group in proportion to
the number of Units, 5% to the Limited Partners in
proportion to the Unit Months of each Limited Partner,
and 20% to the Managing General Partners. Unit months
are the number of half months a Unit would be
outstanding if held from the date the original holder of
such Unit was deemed admitted into the Partnership until
the termination of the offering of Units.
(b) Losses:
(i) First, to the partners as necessary to offset the net
profits previously allocated to the partners under
(a)(iii) above; then
(ii) 99% to the Limited Partners and 1% to the Managing
General Partners.
Losses allocable to Limited Partners in excess of their capital
account balances will be allocated to the Managing General Partners.
Net profit thereafter, otherwise allocable to those Limited Partners,
is allocated to the Managing General Partners to the extent of such
losses. For allocation purposes, the Units held by the Individual
General Partners will be treated as Units held by Limited Partners.
Interest income earned on funds held in escrow was allocated 100% to
the Limited Partners. Income earned on short-term investments during
the Offering Period was allocated monthly 99% to the Limited Partners
and 1% to the Managing General Partners.
Losses from unaffiliated venture capital limited partnership
investments are allocated pursuant to section (b) above. Gains are
allocated first to offset previously allocated losses pursuant to
(b)(i) above, and then 99% to the Limited Partners and 1% to the
Managing General Partners.
Given the inherent risk associated with the business of the
Partnership, the future performance of the portfolio company
investments may significantly impact future operations.
6. Equity Investments
------------------
At December 31, 1996 and 1995, equity investments consisted of:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Principal ------------------ -----------------
Investment Amount or Cost Fair Cost Fair
Industry/Company Position Date Shares Basis Value Basis Value
- ---------------- -------- ---- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Biomedical
- ----------
Arcturus Common
Pharmaceutical share
Corporation warrant
at $3.62;
expiring
08/97 08/92 16,549 $ 0 0 0 0
Arris Common
Pharmaceuticals,shares
Inc. 12/95 37,855 500,000 520,052 500,000 400,317
Redcell, Inc. Series B
Preferred
shares 12/94 797,872 750,000 750,000 750,000 750,000
Redcell, Inc. Convertible
note (1) 02/96 $179,932 192,563 192,563 -- --
Redcell, Inc. Series C
Preferred
share warrant
exercise price to $26,990
be determined; aggregate
expiring purchase
02/01 02/96 price 0 0 -- --
Redcell, Inc. Convertible
note (1) 07/96 $17,993 18,673 18,673 -- --
Redcell, Inc. Series C
Preferred
Share warrant
exercise
price to be $2,699
determined; aggregate
expiring purchase
07/01 07/96 price 0 0 -- --
Biotechnology
- -------------
CV Therapeutics, Series D
Inc. Preferred
shares 03/94 625,000 -- -- 1,250,000 1,250,000
CV Therapeutics, Series E
Inc. Preferred
shares 09/95 64,000 -- -- 126,720 126,720
CV Therapeutics, Series E
Inc. Preferred
share warrant
at $2.00;
expiring
09/00 09/95 32,000 -- -- 1,280 1,280
CV Therapeutics, Common
Inc. share
warrant
at $20.00;
expiring
09/00 11/96 3,200 1,280 0 -- --
CV Therapeutics, Common
Inc. Shares 11/96 68,900 1,376,720 333,304 -- --
Molecular Series B
Geriatrics Preferred
Corporation shares 09/93 500,000 -- -- 250,000 250,000
Molecular Common
Geriatrics shares
Corporation 01/96 47,170 250,000 94,340 -- --
Prolinx, Inc. Series A
Preferred
shares 05/95 328,929 328,929 328,929 328,929 328,929
Prolinx, Inc. Series A
Preferred
shares 12/95 342,071 342,071 342,071 342,071 342,071
Prolinx, Inc. Series A
Preferred
shares 09/96 429,000 429,000 429,000 -- --
Communications
- --------------
Coded Common
Communications shares
Corporation 04/93 145,454 -- -- 149,818 143,999
NetChannel, Inc. Series B
Preferred
shares 10/96 22,727 24,750 24,750 -- --
NetChannel, Inc. Series B
Preferred
share warrant
at $1.10;
expiring
10/99 10/96 22,727 250 250 -- --
Positive Series E
Communications, Preferred
Inc. shares 09/94 285,714 1,000,000 1,214,285 1,000,000 1,214,285
Positive Series G
Communications, Preferred
Inc. shares 08/95 17,885 76,011 76,011 76,011 76,011
Positive Convertible
Communications, note (1)
Inc. 03/96 $63,047 66,942 66,942 -- --
Positive Common
Communications, share
Inc. warrant
at $.50;
expiring
03/01 03/96 3,709 4 13,909 -- --
Positive Convertible
Communications, note (1)
Inc. 10/96 $47,065 47,870 47,870 -- --
Positive Common
Communications, share
Inc. warrant
at $0.50;
expiring
10/01 10/96 5,537 6 20,764 -- --
UT Starcom, Inc. Common
(formerly share
Unitech warrant
Telecom, Inc.) at $.6875;
expiring
05/99 03/95 145,456 0 900,736 0 502,187
UT Starcom, Inc. Series A
(formerly Preferred
Unitech shares
Telecom, Inc.) 03/95 187,500 375,000 1,290,000 375,000 776,250
Wire Networks, Series A
Inc. Preferred
shares 02/96 78,553 106,047 106,047 -- --
Wire Networks, Series B
Inc. Preferred
shares 02/96 95,980 215,955 215,955 -- --
Wire Networks, Convertible
Inc. note (1) 11/96 $7,917 7,990 7,990 -- --
Computer Systems and Software
- -----------------------------
Ascent Logic Common
Corporation share
warrant
at $.94;
expiring
03/97 03/92 31,915 2,500 0 2,500 0
Ascent Logic Series C
Corporation Preferred
shares 10/92 425,532 396,000 148,936 396,000 148,936
Informix Common
Software, Inc. shares 03/96 1,534 51,773 32,329 -- --
Lynk Systems, Common
Inc. share
warrant
at $0.33;
expiring
07/98 07/93 105,000 3,500 369,600 3,500 140,700
Pilot Network Series D
Services, Inc. Preferred
shares 03/95 371,557 650,225 1,486,228 650,225 650,225
Pilot Network Series E
Services, Inc. Preferred
shares 07/96 73,970 295,880 295,880 -- --
Velocity Series A
Incorporated Preferred
shares 10/94 12,572,652 0 0 2,068,674 2,068,674
Velocity Common
Incorporated share
warrant
at $1.00;
expiring
03/00 03/95 25,000 0 0 0 0
Velocity Subordinated 08/95-
Incorporated notes (1) 10/95 $250,000 0 0 250,000 250,000
Velocity Subordinated 11/95-
Incorporated notes (1) 09/96 $1,296,650 0 0 -- --
Environmental
- -------------
Conversion Series A
Technologies Preferred
International, shares
Inc. 05/95 600,000 -- -- 1,500,000 1,500,000
Conversion Series A
Technologies Preferred
International, share warrant
Inc. at $3.00;
expiring
05/00 05/95 82,969 -- -- 0 0
Conversion Convertible
Technologies note (1)
International, 09/95-
Inc. 11/95 $187,500 -- -- 190,011 190,011
Conversion Common share
Technologies warrant
International, at $4.00; 12/98 -
Inc. expiring 12/95 93,750 -- -- 0 0
Conversion Common
Technologies shares
International,
Inc. 05/96 207,547 1,500,000 357,085 -- --
Conversion Class A
Technologies warrant
International, at $5.85; 05/01 -
Inc. expiring 05/96 93,750 0 0 -- --
Conversion Common share
Technologies warrant
International, at $5.28;
Inc. expiring 05/00
51,884 in
total, fully
vested in
01/98 05/96 38,184 0 0 -- --
Naiad Series A
Technologies,Inc.Preferred
(formerly TMC, shares
Inc.) 12/95 50,000 25,000 100,000 25,000 25,000
Naiad Series B
Technologies,Inc.Preferred
(formerly TMC, shares
Inc.) 11/96 15,102 30,204 30,204 -- --
SRG Products Series C
Corporation Preferred
shares 09/93 6,666,667 -- -- 0 0
SRG Products Convertible
Corporation note (1) 07/94 $56,880 0 0 63,465 63,465
SRG Products Convertible
Corporation note (1) 09/94 $116,261 0 0 128,507 128,507
SRG Products Convertible
Corporation note (1) 01/95 $5,101 0 0 5,488 5,488
SRG Products Common share
Corporation warrant at
$.0526; 03/05 -
expiring 03/95 1,389,302 -- -- 0 0
SRG Products Subordinated
Corporation note (1) 04/95 $56,880 57,271 57,271 60,656 60,656
SRG Products Subordinated
Corporation note (1) 06/95 $122,547 0 0 137,743 137,743
Transphase Common
Systems, Inc. share
warrant
at $12.57;
expiring 11/92-
11/97-02/98 02/93 25,269 -- -- 0 0
Transphase Common
Systems, Inc. share
warrant
at $12.57;
expiring
11/99 02/93 1,710 -- -- 0 0
Transphase Common
Systems, Inc. share
warrant
at $12.57;
expiring
11/99 04/94 10,263 -- -- 0 0
Transphase Common
Systems, Inc. share
warrant
at $12.57;
expiring
11/99 11/94 1,710 -- -- 0 0
Industrial/Business Automation
- ------------------------------
Avalon Imaging, Redeemable
Inc. Series A
Preferred
shares 12/94 144,509 250,001 433,527 250,001 250,001
Avalon Imaging, Redeemable
Inc. Series B
Preferred 02/96&
shares 06/96 166,667 500,001 500,001 -- --
Avalon Imaging, Common
Inc. shares 04/96 125,000 250,000 250,000 -- --
Bolder Series C
Technologies Preferred
Corporation shares 09/94 250,000 -- -- 500,000 1,000,000
Bolder Series B
Technologies Preferred
Corporation shares 10/94 50,001 -- -- 50,001 200,004
Bolder Common
Technologies share
Corporation warrant
at $0.50;
expiring
03/00 03/95 8,694 -- -- 87 30,429
Bolder Series C
Technologies Preferred
Corporation shares 05/95 810 -- -- 1,622 3,240
Bolder Series D
Technologies Preferred
Corporation shares 05/95 17,366 -- -- 69,467 69,464
Bolder Common
Technologies shares
Corporation 05/96 57,499 145,207 960,981 -- --
Portable Series A
Energy Preferred
Products, Inc. shares 06/95 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000
Portable Convertible
Energy note (1)
Products, Inc. 10/96 $202,508 205,388 205,388 -- --
Portable Common
Energy share
Products, Inc. warrant
at $1.00;
expiring
09/01 10/96 155,804 0 0 -- --
Portable Series A
Energy Preferred
Products, Inc. share
warrant
at $0.10;
expiring
09/01 10/96 186,816 0 168,134 -- --
Medical
- -------
Acusphere, Inc. Series B
Preferred
shares 05/95 250,000 400,000 535,000 400,000 400,000
Acusphere, Inc. Series C
Preferred
shares 05/96 23,364 49,999 49,999 -- --
ADESSO Specialty Series A
Services Preferred
Organization, shares
Inc. 07/95 400,000 400,000 1,300,000 400,000 400,000
ADESSO Specialty Series B
Services Preferred
Organization, shares
Inc. 03/96 369,231 1,200,001 1,200,001 -- --
ADESSO Specialty Series A
Services Preferred
Organization, share warrant
Inc. at $1.00;
expiring
03/01 03/96 68,704 0 154,584 -- --
Biex, Inc. Series A
Preferred
shares 07/93 128,205 83,333 192,308 83,333 128,205
Biex, Inc. Series B
Preferred
shares 10/94 63,907 63,907 95,861 63,907 63,907
Biex, Inc. Series B
Preferred
share warrant
at $1.00;
expiring
10/99 10/94 23,540 8 11,770 8 0
Biex, Inc. Series C
Preferred
shares 06/95 83,334 83,334 125,001 83,334 83,334
Biex, Inc. Series C
Preferred
shares 12/95 83,333 83,333 125,000 83,333 83,333
Biex, Inc. Series C
Preferred
shares 04/96 83,333 83,333 125,000 -- --
Biex, Inc. Series D
Preferred
shares 08/96 111,115 166,673 166,673 -- --
CareCentric Series A
Solutions, Inc. Preferred
shares 10/95 166,667 250,000 283,333 250,000 250,000
CareCentric Series B
Solutions, Inc. Preferred
shares 09/96 12,794 21,750 21,750 -- --
Circadian, Inc. Series A
Preferred
shares 12/92 500,000 -- -- 0 0
Circadian, Inc. Series B
Preferred
shares 12/93 21,333 -- -- 0 0
Circadian, Inc. Convertible 09/95 &
notes (1) 11/95 $141,980 -- -- 0 0
Circadian, Inc. Series C
Preferred
share warrant
at $0.10
expiring
12/99 11/95 1,419,794 -- -- 0 0
Endocare, Inc. Common
shares 08/96 250 750 603 -- --
Endocare, Inc. Common
share
warrant
at $3.00;
expiring
08/01 08/96 3,750 0 1,508 -- --
Endocare, Inc. Convertible
note (1) 08/96 $18,750 19,817 19,817 -- --
Endovascular Common
Technologies shares 12/96 647 5,904 6,066 -- --
Graham-Field Common
Health Products,shares
Inc. (formerly
Everest &
Jennings
International,
Ltd.) 01/94 592,720 -- -- 637,516 325,994
Intella Common
Interventional shares
Systems, Inc.
(formerly
Intelliwire,
Inc.) 02/93 8,715 436 13,944 436 6,536
Intella Series A
Interventional Preferred
Systems, Inc. shares
(formerly
Intelliwire,
Inc.) 02/93 4,358 2,179 6,973 2,179 3,269
Megabios Corp. Series C
Preferred
shares 09/94 579,375 750,001 1,448,438 750,001 750,001
Megabios Corp. Series C
Preferred
shares 12/94 173,812 225,000 434,530 225,000 225,000
Megabios Corp. Series C
Preferred
shares 07/95 150,637 195,000 376,593 195,000 195,000
Oxford Common
GlycoSystems shares
Group PLC 08/93 533,867 999,927 464,464 999,927 427,094
Periodontix, Series A
Inc. Preferred
shares 12/93 150,000 150,000 300,000 150,000 150,000
Periodontix, Series B
Inc. Preferred
shares 02/96 100,500 201,000 201,000 -- --
Pharmadigm Series A
Biosciences, Preferred
Inc. (formerly shares
Paradigm
Biosciences,
Inc.) 04/93 322,581 396,000 645,162 396,000 396,000
Pharmadigm Series A
Biosciences, Preferred
Inc. (formerly shares
Paradigm
Biosciences,
Inc.) 12/94 215,054 270,667 430,108 270,667 270,667
Pharmadigm Convertible
Biosciences, note (1)
Inc. (formerly
Paradigm
Biosciences,
Inc.) 10/95 $102,500 -- -- 104,544 104,544
Pharmadigm Series B
Biosciences, Preferred
Inc. (formerly share warrant
Paradigm at $2.50;
Biosciences, expiring
Inc.) 10/00 10/95 10,250 0 0 0 0
Pharmadigm Series B
Biosciences, Preferred
Inc. (formerly share warrant
Paradigm at $2.00;
Biosciences, expiring
Inc.) 02/01 02/96 10,833 0 0 -- --
Pharmadigm Series B
Biosciences, Preferred
Inc. (formerly shares
Paradigm
Biosciences,
Inc.) 05/96 137,778 275,556 275,556 -- --
Pharmos Common
Corporation shares 04/95 60,331 45,248 85,790 45,248 88,083
PHERIN Series B
Corporation Preferred
shares 08/91 200,000 200,000 400,000 200,000 200,000
Physiometrix, Common
Inc. share
warrant
at $1,750;
expiring
06/97 06/92 16 -- -- 0 0
Physiometrix, Common 01/94 &
Inc. shares 05/94 337 -- -- 375,054 1,685
Physiometrix, Series D
Inc. Preferred 01/94 &
shares 02/94 338,151 -- -- 114,971 1,690,755
Physiometrix, Common
Inc. share warrant
at $6.60;
expiring
06/01 04/96 13,525 179 0 -- --
Physiometrix, Common
Inc. shares 04/96 287,021 668,557 1,112,577 -- --
R2 Technology, Series A-1
Inc. Preferred
shares 05/94 400,000 400,000 736,000 400,000 400,000
R2 Technology, Convertible
Inc. note (1) 11/95 $133,334 -- -- 135,044 135,044
R2 Technology, Series B
Inc. Preferred
share warrant
at $2.00;
expiring
11/00 11/95 9,667 0 0 0 0
R2 Technology, Series B-1
Inc. Preferred
shares 03/96 68,541 137,080 137,080 -- --
TheraTx, Common
Incorporated shares (2) 06/94 70,042 -- -- 105,063 867,120
Microelectronics
- ----------------
Tessera, Inc. Common
share
warrant
at $.73;
expiring
04/97 04/92 72,754 3,500 82,940 3,500 82,940
Tessera, Inc. Series B
Preferred
shares 05/92 666,666 500,000 1,246,665 500,000 1,246,665
Retail/Consumer Products
- ------------------------
PETsMART, Inc. Common
shares 12/95 454 -- -- 14,528 13,756
YES! Common
Entertainment shares
Corporation 06/95 55,555 166,665 279,706 166,665 271,247
Venture Capital Limited Partnership Investments
- -----------------------------------------------
Colorado Venture Ltd.
Management Partnership
Equity Fund IV interests various $150,000 150,000 132,851 150,000 129,588
El Dorado Ltd.
Ventures III Partnership
interests various $225,000 187,460 224,122 149,960 189,689
OW & W Pacrim Ltd.
Investments Partnership
Limited interests various $250,000 250,000 250,000 250,000 247,508
Spectrum Equity Ltd.
Investors Partnership
interests various $330,525 330,144 448,612 200,144 186,761
Trinity Ventures Ltd.
IV, L.P. Partnership
interests various $142,192 10,648 64,544 98,879 90,901
---------- ---------- ---------- ----------
$21,000,400 27,701,934 20,607,017 24,289,218
Reserve for unrealized loss
from contingent liability (3) -- (1,000,000) -- --
---------- ---------- ---------- ----------
Total equity investments 21,000,400 26,701,934 20,607,017 24,289,218
========== ========== ========== ==========
- -- No investment held at end of period.
0 Investment active with a carrying value or fair value of zero.
(1) Convertible and subordinated notes include accrued interest. Interest rates on
such notes range from 8% to 18%.
(2) Common stockholders have a right to purchase one Preferred share for each share
of common stock held, subject to certain conditions.
(3) Refer to Note 10, Commitments and Contingencies, for information regarding reserve for
contingent liability.
</TABLE>
Marketable Equity Securities
- ----------------------------
At December 31, 1996, and 1995, marketable equity securities had
aggregate costs of $4,423,550 and $937,645, respectively, and
aggregate market values of $3,644,937 and $1,425,196, respectively.
The net unrealized (loss) gain at December 31, 1996 and 1995, included
gross gains of $1,428,442 and $804,892, respectively.
Acusphere, Inc.
- ---------------
In May of 1996, the Partnership made an additional investment in the
company by purchasing 23,364 Series C Preferred shares for $49,999.
The pricing of this round, in which third parties participated,
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,
including interest, was repaid in 1996. The pricing of this Series B
financing round indicated a fair value increase 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, in which third parties participated, indicated an increase
in fair value of $183,526 for the Partnership's existing investment.
The Partnership also purchased 125,000 common shares for $250,000 in
April of 1996.
Biex, Inc.
- ----------
In April of 1996, the Partnership purchased an additional 83,333
Series C Preferred shares for $83,333. Then in August of 1996, the
Partnership purchased 111,115 Series D Preferred shares for $166,673.
The pricing of the Series D financing round, in which third parties
participated, indicated an increase in the change in fair value of
$232,828 for the Partnership's existing investments.
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 212,117 common shares. In addition, the Partnership
exercised its common share warrant without cash and received 5,382
common shares and realized a gain of $4,030. In November of 1996, the
Partnership sold 160,000 common shares for total proceeds of
$2,215,875 and realized a gain of $1,735,875.
At December 31, 1996, the Partnership recorded an increase in the
change in fair value of $133,814. The change included a decrease of
$480,000 due to the sales mentioned above, which was more than offset
by an increase in market price at December 31, 1996, for its remaining
unrestricted shares.
CareCentric Solutions, Inc.
- ---------------------------
In September of 1996, the Partnership made an additional investment in
the company by purchasing 12,794 Series B Preferred shares for
$21,750. The pricing of this round, in which third parties
participated, indicated an increase in fair value of $33,333 for the
Partnership's existing investment.
Coded Communications Corporation
- --------------------------------
During the first quarter of 1996, the Managing General Partners
determined that there had been an other than temporary decline in the
value of the Partnership's investment. As a result, the Partnership
wrote down its investment by $77,091. In December of 1996, the
Partnership sold its holdings for $56,580 and realized a loss on sale
of $16,147.
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, including accrued interest, was repaid in full. At December
31, 1996, the Partnership recorded a decrease in the change in fair
value of $1,142,915 to reflect the publicly-traded market price of its
investments; a portion of the fair value was adjusted to reflect a
discount for restricted securities.
CV Therapeutics, Inc.
- ---------------------
In November 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 shares being converted into
68,900 common shares. The Partnership's Preferred share warrant was
also converted into a common share warrant.
At December 31, 1996, the Partnership recorded a decrease in the
change in fair value of $1,044,696 to reflect the publicly-traded
market price of its investments; a portion of the fair value was
adjusted to reflect a discount for the restricted securities.
Endocare, Inc.
- --------------
In August of 1996, the Partnership issued $18,750 in convertible notes
receivable to the company and received a warrant to purchase 3,750
common shares. The Partnership also received 250 common shares of
Endocare, Inc., in lieu of loan fees. At December 31, 1996, the
Partnership recorded an increase in the change in fair value of $1,361
to reflect the publicly-traded market price of its common stock and
warrant investments; the fair value of which was adjusted to reflect a
discount for restricted securities.
Graham-Field Health Products, Inc. (formerly Everest & Jennings
- ---------------------------------------------------------------
International, Ltd.)
- --------------------
In November of 1996, Everest & Jennings International, Ltd. (E&J) was
acquired by Graham-Field Health Products, Inc. (GFI). The
Partnership's 592,720 E&J common shares were converted into 20,744
common shares of GFI. These shares were then sold in December of 1996
for total proceeds of $179,127 and a realized loss of $458,389.
$60,211 of the sales price was an unsettled trade at December 31,
1996, and was included in "Other Assets" on the Balance Sheet.
Megabios Corp.
- --------------
During the fourth quarter of 1996, the company closed a Series E
Preferred share round of financing in which the Partnership did not
participate. The pricing of this round, in which third parties
participated, indicated an increase in the fair value of $1,089,560
for the Partnership's existing investment.
Lynk Systems, Inc.
- ------------------
During the fourth quarter of 1996, the company closed a Series D
Preferred share round of financing in which the Partnership did not
participate. The pricing of this round indicated a fair value
increase of $228,900 for the Partnership's existing investment.
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 lower
pricing of this round indicated that the fair value of the
Partnership's investment had declined by $155,660.
Naiad Technologies, Inc. (formerly TMC, Inc.)
- ---------------------------------------------
In July of 1996, the Partnership issued a $6,250 convertible note to
the company.
Then in November of 1996, the Partnership purchased 15,102 Series B
Preferred shares with $23,750 in cash and by converting the note
discussed above, including accrued interest of $204, for a total cost
of $30,204. The pricing of this round, in which third parties
participated, indicated an increase in the fair value of $75,000 for
the Partnership's existing investment.
NetChannel, Inc.
- ----------------
In October of 1996, the Partnership invested in the company by
purchasing 22,727 Series B Preferred shares and a warrant to purchase
22,727 Series B Preferred shares for $25,000.
Oxford GlycoSystems Group PLC
- -----------------------------
During the first quarter of 1996, the company had a private round of
financing in which the company did not participate. The pricing of
this round indicated a fair value increase of $37,370 for the
Partnership's existing investment.
Pharmadigm Biosciences, Inc. (formerly 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 financing round indicated a fair value
increase of $150,000 for the Partnership's existing investment.
PETsMART, Inc.
- --------------
In May of 1996, the Partnership sold its entire investment in the
company for total proceeds of $18,955 and realized a gain of $4,427.
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 December 31, 1996, the
Partnership recorded a decrease in fair value of $758,574 to reflect
the publicly-traded market price of its investments; the fair value
was adjusted to reflect a discount for restricted securities.
Pilot Network Services, Inc.
- ----------------------------
In July of 1996, the Partnership made an additional investment in the
company by purchasing 73,970 Series E Preferred shares for $295,880.
The pricing of this round, in which third parties participated,
indicated an increase in fair value of $836,003 for the Partnership's
existing investment.
Portable Energy Products, Inc.
- ------------------------------
In October of 1996, the Partnership issued $202,508 in convertible
notes to the company and received warrants to purchase 155,804 common
shares and 186,816 Series A Preferred shares. The Partnership
recorded a fair value increase of $168,134 for its Preferred share
warrant investment based on the valuation set at the latest financing
round.
Positive Communications, Inc.
- -----------------------------
During 1996, the Partnership issued convertible notes totaling
$110,112 to the company and purchased warrants to acquire 9,246 common
shares.
Prolinx, Inc.
- -------------
In September of 1996, the Partnership made an additional investment in
the company by purchasing 429,000 Series A Preferred shares for
$429,000.
R2 Technology, Inc.
- -------------------
In March of 1996, the Partnership purchased 68,541 Series B-1
Preferred shares by converting the November, 1995, $133,334 note and
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.
- -------------
During 1996, the Partnership issued $197,925 in convertible notes
receivable to the company.
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.
UT Starcom, Inc. (formerly Unitech Telecom, Inc.)
- -------------------------------------------------
During the fourth quarter of 1996, 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 $912,299 for the Partnership's existing investment.
Velocity Incorporated
- ---------------------
In 1996, the Managing General Partners determined that there has been
an other than temporary decline in the value of the Partnership's
existing investments. As a result, the Partnership recorded a
realized loss of $3,615,324; $2,068,674 from Series A Preferred shares
and $1,546,650 from subordinated notes of which $1,275,000 was
reclassified from secured notes receivable.
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.
Then in November of 1996, the Partnership issued $7,917 in convertible
notes to the company.
Venture Capital Limited Partnership Investments
- -----------------------------------------------
The Partnership recorded a cost basis increase of $79,269 in venture
capital limited partnership investments in 1996. The increase was a
result of additional contributions of $189,376, partially offset by
returns of capital in the form of stock and cash distributions of
$103,816 and $6,291, respectively. The Partnership recorded a fair
value increase of $275,682 as a result of a net increase in fair value
of the underlying investments and the effects of the transactions
described above.
During 1996, the Partnership received common stock distributions of
Informix, Inc., Forte Software, Inc., and Endovascular Technologies
with fair values of $51,773, $46,139, and $5,904, respectively. These
distributions of marketable stock represented returns of capital. In
addition, the Partnership received cash distributions of $22,997,
which were from profits and were recorded as net realized gain from
venture capital limited partnership investments.
In 1996, the Partnership also sold its common stock in Forte Software,
Inc. for total proceeds of $57,178 and a realized gain of $11,039.
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. Arris
Pharmaceuticals, Inc., Pharmos Corporation, and YES! Entertainment
Corporation are publicly traded companies.
Included in the fair value of equity investments is a $1,000,000
reserve for unrealized loss from a contingent liability. See Note 10
to the financial statements for additional disclosure.
7. Secured Notes Receivable, Net
-----------------------------
At December 31, 1996 and 1995, secured notes receivable consisted of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Secured notes receivable $ 13,971 1,946,958
Accrued interest 15,171 26,747
Unamortized discount related to warrants -- (19,133)
--------- ---------
Total secured notes receivable,
at cost basis 29,142 1,954,572
Allowance for loan losses -- (955,000)
--------- ---------
Total secured notes receivable,
net fair value $ 29,142 999,572
========= =========
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Balance, beginning of year $ 955,000 560,000
--------- -------
(Decrease) increase in provision
for loan losses (978,922) 1,076,565
Recoveries from investments
previously written-off:
Biomedical 23,922 --
Secured notes receivable write-offs:
Environmental -- (681,565)
---------- -------
Change in net unrealized fair value
of secured notes receivable (955,000) 395,000
--------- -------
Balance, end of year $ -- 955,000
========= =======
</TABLE>
These notes are secured by specific assets of the borrowing companies.
The interest rate on secured notes receivable at December 31, 1996,
was 12.5%.
The (decrease) increase in provision for loan losses is generally
comprised of realized loan losses, net of recognized recoveries, and a
change in net unrealized fair value based upon the level of loan loss
reserves deemed adequate by the Managing General Partners at the
respective year ends.
The allowance for loan losses is evaluated quarterly by the Managing
General Partners and is adjusted based upon changes to the portfolio
size and risk profile. Although the allowance for loan losses is
established by evaluating individual debtor repayment ability, the
allowance represents the Managing General Partners' assessment of the
portfolio taken as a whole.
Refer to Note 6, Equity Investments, for information regarding the
reclassification of notes to equity investments.
The principal balance of $13,971 is scheduled to be repaid in 1997.
8. Other Investments
-----------------
During 1996, the Partnership reclassified $681,565 in secured notes
receivable and $17,266 in unamortized warrant discounts related to a
portfolio company in the environmental industry to other investments
as the notes were sold to a third party in exchange for a portion of
the net proceeds collectible from the portfolio company.
9. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at December 31, 1996 and 1995, consisted of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Demand accounts $ 2,764 152,033
Money-market accounts 1,614,321 4,244,009
---------- ----------
Total $ 1,617,085 4,396,042
========== ==========
</TABLE>
10. 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 by a borrowing company.
As they do not represent current outstanding balances, these unfunded
commitments are properly not recognized in the financial statements.
As of December 31, 1996, the Partnership had unfunded commitments as
follows:
<TABLE>
<CAPTION>
Type
- ----
<S> <C>
Equity investments $ 262,911
Venture capital limited partnership investments 257,283
Term notes 22,100
---------
Total $ 542,294
=========
</TABLE>
The Partnership uses the same credit policies in making these
commitments and conditional obligations as it does for on-balance-
sheet instruments. Commitments to extend financing are agreements to
lend to a company as long as there are no violations of any conditions
established in the contract. The credit lines generally have fixed
termination dates or other termination clauses. Since many of the
commitments are expected to expire without being fully drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. All convertible and secured note commitments funded
require collateral specified in the agreements.
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.
In October of 1996, the $2,000,000 guarantee was reduced to $1,000,000
as the affiliated partnerships have assumed a portion of the financial
institution's line of credit. The remaining $1,000,000 is guaranteed
by the Partnership but the affiliated partnerships remain joint
guarantors. 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>
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: March 21, 1997 By: /s/Debbie A. Wong
----------------------------------
Debbie A. Wong
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
Signature Capacity Date
--------- -------- ----
/s/Charles R. Kokesh President, Chief March 21, 1997
- ------------------------ Executive Officer,
Charles R. Kokesh Chief Financial officer
and Chairman of
Technology Funding Inc.
and Managing General
Partner of Technology
Funding Ltd.
/s/Gregory T. George Group Vice President March 21, 1997
- ------------------------ of Technology Funding
Gregory T. George Inc. and a General
Partner of Technology
Funding Ltd.
The above represents the Board of Directors of Technology Funding Inc.
and the General Partners of Technology Funding Ltd.
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FORM 10-K AS OF DECEMBER 31, 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> DEC-31-1996
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 21,693,841
<INVESTMENTS-AT-VALUE> 27,395,375
<RECEIVABLES> 0
<ASSETS-OTHER> 65,019
<OTHER-ITEMS-ASSETS> 1,617,085
<TOTAL-ASSETS> 29,077,479
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 96,363
<TOTAL-LIABILITIES> 96,363
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,279,582
<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> 5,701,534
<NET-ASSETS> 28,981,116
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 177,557
<OTHER-INCOME> 0
<EXPENSES-NET> (1,974,207)
<NET-INVESTMENT-INCOME> (1,796,650)
<REALIZED-GAINS-CURRENT> (1,828,283)
<APPREC-INCREASE-CURRENT> 2,974,333
<NET-CHANGE-FROM-OPS> (650,600)
<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> (650,600)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 389,995
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,509,570
<AVERAGE-NET-ASSETS> 29,306,416
<PER-SHARE-NAV-BEGIN> 67
<PER-SHARE-NII> (9)
<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> 6.7
<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>
