<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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)
(650) 345-2200
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
No active market for the units of limited partnership interests
("Units") exists, and therefore the market value of such Units cannot be
determined.
<PAGE>
I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
- --------------
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Investments:
Equity investments (cost basis
of $22,968,258 and $22,803,180 at
1998 and 1997, respectively) $36,415,510 37,077,544
Notes receivable 2,427 4,479
Other investments (cost basis
$664,299 for both 1998 and 1997) 398,579 398,579
---------- ----------
Total investments 36,816,516 37,480,602
Cash and cash equivalents 1,074,840 1,839,535
Due from related parties 116,084 86,078
Other assets 8,499 9,655
---------- ----------
Total $38,015,939 39,415,870
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 34,994 45,893
---------- ----------
Total liabilities 34,994 45,893
Commitments, contingencies and
subsequent event
(Notes 3, 4 and 7)
Partners' capital:
Limited Partners
(Units outstanding of
400,000 in both 1998 and 1997) 24,802,741 25,359,042
General Partners (3,328) 2,291
Net unrealized fair value increase
from cost of:
Equity investments 13,447,252 14,274,364
Other investments (265,720) (265,720)
---------- ----------
Total partners' capital 37,980,945 39,369,977
---------- ----------
Total liabilities and
partners' capital $38,015,939 39,415,870
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31
-----------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Income:
Notes receivable interest $ -- 13,242
Short-term investment interest 8,191 9,147
Dividend income -- 280,010
--------- ---------
Total income 8,191 302,399
Costs and expenses:
Management fees 97,499 97,499
Individual General Partners'
compensation 5,197 5,483
Operating expenses:
Investment operations 184,593 64,205
Administrative and investor services 174,150 105,366
Professional fees 12,301 14,005
Computer services 76,006 29,227
--------- ---------
Total operating expenses 447,050 212,803
--------- ---------
Total costs and expenses 549,746 315,785
--------- ---------
Net operating loss (541,555) (13,386)
Net realized (loss) gain from
sales of equity investments (26,379) 238,526
Realized losses from
investment write-downs -- (2,500)
Net realized gain from venture capital
limited partnership investments 6,014 --
--------- ---------
Net realized (loss) income (561,920) 222,640
Change in net unrealized
fair value of equity
investments (827,112) 1,564,909
--------- ---------
Net (loss) income $(1,389,032) 1,787,549
========= =========
Net realized loss per Unit $ (1) --
========= =========
</TABLE>
See accompanying notes to financial statements
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Interest income received $ 11,016 16,877
Cash paid to vendors (47,931) (51,917)
Cash paid to related parties (541,564) (328,298)
--------- ---------
Net cash used by
operating activities (578,479) (363,338)
--------- ---------
Cash flows from investing activities:
Purchase of equity investments (245,000) (436,914)
Notes receivable issued (2,766) --
Proceeds from sales of
equity investments -- 344,641
Repayments of convertible notes
receivable 57,378 47,065
Repayments of notes receivable -- 6,635
Distributions from venture capital
limited partnership investments 4,172 1,738
--------- ---------
Net cash used by
investing activities (186,216) (36,835)
--------- ---------
Net decrease in cash and
cash equivalents (764,695) (400,173)
Cash and cash equivalents at
beginning of year 1,839,535 1,617,085
--------- ---------
Cash and cash equivalents
at March 31 $1,074,840 1,216,912
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (unaudited) (continued)
- -----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Reconciliation of net (loss)
income to net cash used by
operating activities:
Net (loss) income $(1,389,032) 1,787,549
Adjustments to reconcile net (loss)
income to net cash used by operating
activities:
Realized loss (gain) from sales of
equity investments, net 26,379 (238,526)
Realized losses from investment
write-downs -- 2,500
Net realized gain from venture capital
limited partnership investments (6,014) --
Change in net unrealized fair value of
equity investments 827,112 (1,564,909)
Changes in:
Other assets 1,156 (286,029)
Accounts payable and accrued
expenses (10,899) 835
Due to/from related parties (30,006) (59,246)
Accrued interest on notes receivable 2,825 (5,512)
--------- ---------
Net cash used by operating activities $ (578,479) (363,338)
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
- ----------------------------------------
1. General
-------
In the opinion of the Managing General Partners, the Balance Sheets as of
March 31, 1998, and December 31, 1997, and the related Statements of
Operations and Statements of Cash Flows for the three months ended March
31, 1998 and 1997, 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, 1997.
The following notes to financial statements for activity through March 31,
1998, supplement those included in the Annual Report on Form 10-K.
Allocation of income and loss to Limited and General Partners is based on
cumulative income and loss. Adjustments, if any, are reflected in the
current quarter balances.
2. Financing of Partnership Operations
-----------------------------------
The Managing General Partners expect cash received from the future
liquidation of Partnership investments and the collection of notes
receivable will provide the necessary liquidity to fund Partnership
operations. The Partnership may be dependent upon the financial support of
the Managing General Partners to fund operations if future proceeds are not
received timely. The Managing General Partners have committed to support
the Partnership's working capital requirements through short-term advances
as necessary.
3. Related Party Transactions
--------------------------
Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs for the three months ended
March 31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Management fees $ 97,499 97,499
Reimbursable operating expenses 408,862 166,070
Individual General Partners' compensation 5,197 5,483
</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 $148,584 and $151,077 due from
related parties at March 31, 1998, and December 31, 1997, respectively, for
such reimbursable expenses.
Amounts payable for management fees were $32,500 and $64,999 at March 31,
1998, and December 31, 1997.
<PAGE>
4. Equity Investments
------------------
<TABLE>
A full listing of the Partnership's equity investments at December 31, 1997, is in the 1997
Annual Report. Activity from January 1 through March 31, 1998, consisted of:
<CAPTION>
January 1 through
March 31, 1998
-------------------
Principal
Investment Amount or Cost Fair
Industry/Company Position Date Shares Basis Value
- ---------------- -------- ---------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 $22,803,180 37,077,544
---------- ----------
Significant changes:
Communications
- --------------
NetChannel, Series B
Inc. Preferred 10/96-
shares 05/97 183,458 (26,380) (59,196)
Industrial/Business Automation
- ------------------------------
Avalon Imaging, Inc. Series C
Preferred
shares 03/98 138,888 149,999 149,999
Medical
- -------
Megabios Common 09/94-
Corporation shares 07/95 301,274 0 (670,938)
Periodontix, Series C
Inc. Preferred
shares 02/98 26,531 65,001 65,001
Pharmos Common 04/95-
Corporation shares 11/95 60,331 0 66,906
Physiometrix, Common
Inc. shares 04/96 287,021 0 (202,455)
---------- ----------
Total significant changes during the three
months ended March 31, 1998 188,620 (650,683)
Other changes, net (23,542) (11,351)
---------- ----------
Total equity investments at March 31, 1998 $22,968,258 36,415,510
========== ==========
</TABLE>
Marketable Equity Securities
- ----------------------------
At March 31, 1998, and December 31, 1997, marketable equity securities had
aggregate costs of $5,126,481 and $3,948,418, respectively, and aggregate
market values of $4,535,887 and $1,703,410, respectively. The net
unrealized losses at March 31, 1998, and December 31, 1997, included gross
gains of $175,107 and $103,141, respectively.
Avalon Imaging, Inc.
- --------------------
In March 1998, the Partnership purchased 138,888 Series C Preferred shares
for $149,999.
NetChannel, Inc.
- ----------------
In May 1998, the company was acquired by America Online, Inc. The
Partnership has realized a loss of $26,380 based on expected sales proceeds
of $72,159 from the sale of this investment.
Periodontix, Inc.
- ----------------
In February 1998, the Partnership made an additional investment in the
company by purchasing 26,531 Series C Preferred shares for $65,001.
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. Portions of the
Partnership's Conversion Technologies International, Inc. and Physiometrix,
Inc. investments are restricted.
5. Notes Receivable
----------------
Activity from January 1, 1998 through March 31, 1998, consisted of:
<TABLE>
<S> <C>
Balance at January 1, 1998 $4,479
1998 activity:
Notes receivable issued 2,766
Change in interest receivable (4,818)
-----
Total notes receivable
at March 31, 1998 $2,427
=====
</TABLE>
There was no allowance for loan losses at March 31, 1998 and December 31,
1997.
The Partnership had accrued interest of $4,818 at December 31, 1997. There
was no accrued interest at March 31, 1998.
6. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents at March 31, 1998, and December 31, 1997
consisted of:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Demand accounts $ 5,000 4,221
Money-market accounts 1,069,840 1,835,314
--------- ---------
Total $1,074,840 1,839,535
========= =========
</TABLE>
7. Commitments and Contingencies
-----------------------------
The Partnership is a party to financial instruments with off-balance-sheet
risk in the normal course of its business. Generally, these instruments
are commitments for future equity fundings, venture capital limited
partnership investments, equipment financing commitments, or accounts
receivable lines of credit that are outstanding but not currently fully
utilized. As they do not represent current outstanding balances, these
unfunded commitments are properly not recognized in the financial
statements. At March 31, 1998 the Partnership had unfunded commitments for
venture capital limited partnership investments of $111,345.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
During the three months ended March 31, 1998, net cash used by operating
activities totaled $578,479. The Partnership paid management fees of
$129,998 to the Managing General Partners and reimbursed related parties
for operating expenses of $406,369. In addition, $5,197 was paid to the
Individual General Partners as compensation for their services. Other
operating expenses of $47,931 were paid and $11,016 in interest income was
received.
During the three months ended March 31, 1998, the Partnership funded equity
investments of $245,000 primarily to portfolio companies in the medical and
industrial/business automation industries. Repayments of convertible notes
receivable provided cash of $57,378. As of March 31, 1998, the Partnership
was committed to fund additional investments totaling $111,345 as discussed
in Note 7 to the financial statements.
Cash and cash equivalents at March 31, 1998, were $1,074,840. 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 loss was $1,389,032 for the three months ended March 31, 1998, as
compared to net income of $1,787,549 for the three months ended March 31,
1997. The change was primarily due to a $2,392,021 decrease in the change
in net unrealized fair value of equity investments, a $280,010 decrease in
dividend income, a $264,905 decrease in net realized gain from equity
investment sales, and a $234,247 increase in operating expenses.
During the three months ended March 31, 1998, the decrease in fair value of
equity investments of $827,112 was primarily due to decreases in portfolio
companies in the medical industry. During the same period in 1997, the
increase in fair value of equity investments of $1,564,909 was primarily
due to an increase in a portfolio company in the medical industry partially
offset by a decrease in a portfolio company in the biomedical industry.
During the three months ended March 31, 1997, the Partnership earned a
$280,010 dividend from Tessera, Inc. There was no dividend income in the
same period in 1998.
For the quarter ended March 31, 1998, realized losses of $26,379 mainly
related to the sale of NetChannnel, Inc. During the same period in 1997,
realized gains of $238,526, related mainly to the common stock sale of
Bolder Technologies Corporation.
Total operating expenses were $447,050 and $212,803 for the quarters ended
March 31, 1998 and 1997, respectively. The increase is attributable to
increased investment monitoring activities, administrative costs and
development costs associated with enabling investors to access on-line
account information.
Given the inherent risk associated with the business of the Partnership,
the future performance of the portfolio company investments may
significantly impact future operations.
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed by the Partnership during the
quarter ended March 31, 1998.
(b) Financial Data Schedule for the three months ended and as of March 31,
1998 (Exhibit 27).
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TECHNOLOGY FUNDING VENTURE PARTNERS V,
AN AGGRESSIVE GROWTH FUND, L.P.
By: TECHNOLOGY FUNDING INC.
Managing General Partner
Date: May 14, 1998 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 MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<PERIOD-TYPE> 3-MOS
<INVESTMENTS-AT-COST> 23,634,984
<INVESTMENTS-AT-VALUE> 36,816,516
<RECEIVABLES> 0
<ASSETS-OTHER> 124,583
<OTHER-ITEMS-ASSETS> 1,074,840
<TOTAL-ASSETS> 38,015,939
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34,994
<TOTAL-LIABILITIES> 34,994
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,799,413
<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> 13,181,532
<NET-ASSETS> 37,980,945
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,191
<OTHER-INCOME> 0
<EXPENSES-NET> (549,746)
<NET-INVESTMENT-INCOME> (541,555)
<REALIZED-GAINS-CURRENT> (20,365)
<APPREC-INCREASE-CURRENT> (827,112)
<NET-CHANGE-FROM-OPS> (1,389,032)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,389,032)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 97,499
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 550,196
<AVERAGE-NET-ASSETS> 38,675,461
<PER-SHARE-NAV-BEGIN> 63
<PER-SHARE-NII> (1)
<PER-SHARE-GAIN-APPREC> 0 <F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 62
<EXPENSE-RATIO> 1.4
<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>
