UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 0-28332 Brauvin Net Lease V, Inc. (Exact name of small business issuer as specified in its charter) Maryland 36-3913066 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 150 South Wacker Drive, Chicago, Illinois 60606 (Address of principal executive offices) (Zip Code) (312) 443-0922 (Issuer's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 . The aggregate market value of Common Stock held by nonaffiliates as of August 13, 1996 was $12,991,510. As of August 13, 1996, the issuer had 1,299,151 shares of common stock outstanding. Transitional Small Business Disclosure Format: Yes No X . INDEX Page PART I Financial Information Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . .3 Balance Sheet at June 30, 1996 . . . . . . . . . . . . . . . .4 Statements of Income for the Six Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . .5 Statements of Income for the Three Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . .6 Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . .7 Notes to Financial Statements. . . . . . . . . . . . . . . . .8 Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . . 12 PART II Other Information Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 15 Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . 15 Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . 15 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . 16 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 16 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements The following Balance Sheet as of June 30, 1996, Statements of Income for the six and three months ended June 30, 1996 and 1995 and Statements of Cash Flows for the six months ended June 30, 1996 and 1995 for Brauvin Net Lease V, Inc. (the "Fund") are unaudited but reflect, in the opinion of the management, all adjustments necessary to make the financial statements not misleading. All such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund's 1995 Annual Report on Form 10-K. BALANCE SHEET (Unaudited) June 30, 1996 ASSETS Investment in real estate, at cost: Land $ 3,175,991 Buildings 6,064,255 9,240,246 Less: accumulated depreciation (165,085) Net investment in real estate 9,075,161 Cash and cash equivalents 2,793,968 Organization costs (net of accumulated amortization of $16,333) 18,667 Tenant receivables 42,282 Prepaid expenses and deferred acquisition costs 66,942 Total Assets $11,997,020 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $ 12,000 Prepaid rent 27,842 Total Liabilities 39,842 Stockholders' Equity: Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued -- Common stock, $.01 par value, 9,000,000 shares authorized; 1,303,172 shares issued and outstanding 13,032 Additional paid-in capital 11,940,169 Retained earnings 3,977 Total Stockholders' Equity 11,957,178 Total Liabilities and Stockholders' Equity $11,997,020 See notes to financial statements. STATEMENTS OF INCOME For the Six Months Ended June 30, 1996 and 1995 (Unaudited) 1996 1995 INCOME Rental $481,795 $224,420 Interest 85,435 79,319 Total Income 567,230 303,739 EXPENSES Directors fees 11,998 12,002 Advisory fees 38,590 23,515 Management fees 4,667 2,248 General and administrative 63,967 25,915 Acquisition costs 30,902 12,155 Depreciation and amortization 71,980 35,338 Total Expenses 222,104 111,173 Net Income $345,126 $192,566 Net Income Per Share $ 0.27 $ 0.26 See notes to financial statements. STATEMENTS OF INCOME For the Three Months Ended June 30, 1996 and 1995 (Unaudited) 1996 1995 INCOME Rental $253,565 $144,897 Interest 44,251 42,850 Total Income 297,816 187,747 EXPENSES Directors fees 4,999 6,001 Advisory fees 19,542 13,052 Management fees 2,536 1,699 General and administrative 47,636 14,824 Acquisition costs 88 3,426 Depreciation and amortization 37,819 22,501 Total Expenses 112,620 61,503 Net Income $185,196 $126,244 Net Income Per Share $ 0.14 $ 0.15 See notes to financial statements. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1996 and 1995 (Unaudited) 1996 1995 Cash flows from operating activities Net income $ 345,126 $ 192,566 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of organization costs 3,500 3,500 Depreciation 68,480 31,838 Acquisition costs charged off 30,902 12,155 Changes in operating assets and liabilities: Decrease in prepaid expenses 4,998 4,002 Increase in tenant receivables (42,282) -- Decrease in accounts payable and accrued expenses (6,500) (13,253) Increase in prepaid rent 8,550 12,292 Decrease in due to affiliates (20) (16) Net cash provided by operating activities 412,754 243,084 Cash flows from investing activities Purchase of properties (1,455,560) (5,957,370) Acquisition costs (42,572) (10,370) Cash used in investing activities (1,498,132) (5,967,740) Cash flows from financing activities Issuance of stock 1,353,714 4,313,644 Selling commissions and other offering costs (120,519) (397,239) Dividends (412,353) (114,680) Net cash provided by financing activities 820,842 3,801,725 Net decrease in cash and cash equivalents (264,536) (1,922,931) Cash and cash equivalents at beginning of period 3,058,504 3,455,715 Cash and cash equivalents at end of period $2,793,968 $1,532,784 See notes to financial statements. NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. Organization and Business Brauvin Net Lease V, Inc. (the "Fund") is a Maryland corporation formed on October 14, 1993, which operates as a real estate investment trust ("REIT") under federal tax laws. The Fund acquires properties that are leased to creditworthy corporate operators of nationally or regionally established businesses primarily in the retail and family restaurant sectors. Substantially all of the leases are on a long-term "triple net" basis generally requiring the corporate tenant to pay both base annual rent with mandatory escalation clauses and all operating expenses. The advisory agreement provides for Brauvin Realty Advisors V, L.L.C. (the "Advisor"), an affiliate of the Fund, to be the advisor to the Fund. The Fund registered the sale of up to 5,000,000 shares of common stock at $10.00 per share in an initial public offering filed with the Securities and Exchange Commission ("Registration Statement") and the issuance of 500,000 shares pursuant to the Fund's dividend reinvestment plan. On August 8, 1994, the Fund sold the minimum 120,000 shares required under its Registration Statement and commenced its real estate activities. The offering period for the sale of common stock terminated on February 25, 1996. 2. Significant Accounting Policies Federal Income Taxes The Fund intends to be treated as a REIT under the Internal Revenue Code Sections 856-860. A REIT will generally not be subject to federal income taxation to the extent that it distributes at least 95% of its taxable income to its stockholders and meets certain asset and income tests as well as other requirements. Accordingly, no provision has been made for Federal income taxes in the financial statements. Earnings Per Share For the six months ended June 30, 1996 and 1995, net income per share is based on the average shares outstanding of 1,268,348 and 737,351, respectively, and net income of $345,126 and $192,566, respectively. For the three months ended June 30, 1996 and 1995, net income per share is based on the average shares outstanding of 1,302,089 and 839,873, respectively, and net income of $185,196 and $126,244, respectively. Reclassifications Certain amounts in the 1995 financial statements have been reclassified to conform to the 1996 presentation. This has not affected the previously reported results of operations. 3. Related Party Transactions Fees, commissions and other expenses incurred and payable to the Advisor or its affiliates for the six months ended June 30, 1996 and 1995 were as follows: 1996 1995 Payable Payable Incurred (Receivable) Incurred (Receivable) Selling commissions$ 76,214 $ -- $246,495 $17,089 Due diligence fees 11,820 -- 6,555 (7,333) Advisory fees 38,590 -- 23,515 4,549 Dividend Reinvestment fees 844 -- -- -- Management fees 4,667 -- 2,248 -- Nonaccountable fees 32,485 -- 104,165 1,125 Acquisition fees and expenses 116,750 -- 227,907 -- $281,370 $ -- $610,885 $15,430 4. Dividends Below is a table summarizing the dividends declared: Declaration Record Payment Dividend Date(a) Dates Date Rate (b) Amount 11/1/94 7/1/94-9/30/94 11/15/94 .08525% $ 13,566 2/3/95 10/1/94-12/31/94 2/15/95 .01096 36,000 5/4/95 1/1/95-3/31/95 5/15/95 .01370 78,681 8/3/95 4/1/95-6/30/95 8/15/95 .01781 136,467 11/2/95 7/1/95-9/30/95 11/15/95 .01918 169,235 1/25/96 10/1/95-12/31/95 2/15/96 .01918 196,106 5/2/96 1/1/96-3/31/96 5/15/96 .01918 216,247 8/1/96 4/1/96-6/30/96 8/15/96 .01918 227,068 (a) Dividends were declared on a daily basis. (b) The dividend rate is presented on a per day basis. The dividend reinvestment plan ("Reinvestment Plan") is available to the stockholders so that stockholders, if they so elect, may have their distributions from the Fund invested in shares and make additional cash contributions. The price per share purchased through the Reinvestment Plan shall equal $10 per share with the purchase of partial shares allowed. Funds raised through the Reinvestment Plan will be utilized to (i) purchase shares from existing stockholders who have notified the Fund of their desire to sell their shares or held for subsequent redemptions or (ii) purchase additional properties. The stockholders electing to participate in the Reinvestment Plan will be charged a service charge, in an amount equal to 1% of their distributions, which will be paid to an affiliate of the Advisor to defray the administrative costs of the Reinvestment Plan. As of June 30, 1996, there were approximately 17,670 shares purchased through the Reinvestment Plan. In order to qualify as a REIT, the Fund is required to distribute dividends to its stockholders in an amount at least equal to 95% of REIT taxable income of the Fund. The Fund intends to make quarterly distributions to satisfy all annual distribution requirements. 5. Subsequent Events On August 1, 1996, the Fund declared an ordinary income dividend on a per share basis of $0.0001918 per day for each day investors were admitted between April 1, 1996 and June 30, 1996. The dividend aggregated $227,068 payable to stockholders of record on June 30, 1996 and will be paid on August 15, 1996. Item 2. Management's Discussion and Analysis or Plan of Operation. Liquidity and Capital Resources The Fund commenced an offering to the public on February 25, 1994 of 5,500,000 shares, 500,000 of which were available through the dividend reinvestment plan (the "Reinvestment Plan"). The offering closed on February 25, 1996 having received $12,865,680 in gross proceeds with an additional $133,861 of shares purchased by stockholders through the Reinvestment Plan. As of June 30, 1996, the Fund had received $11,953,201 in connection with the sale of shares, net of selling commissions and other offering costs, including $200,000 paid by the Advisor for a share of stock as disclosed in the Prospectus. The Fund purchased one property during the six months ended June 30, 1996. Except for certain acquisition costs related to the foregoing property, at June 30, 1996 the Fund had no material capital commitments. In the opinion of management of the Fund, each property is adequately covered by insurance. At June 30, 1996, approximately $2,500,000 of proceeds from the sale of common stock and from the Reinvestment Plan is available and is intended for investment in real estate. Cash Flows The Fund's cash flows during the six months ended June 30, 1996 resulted principally from financing activities relating to the issuance of stock, which generated $1,353,714 less costs related thereto such as selling commissions and other costs aggregating $120,519 and dividends to stockholders of $412,353. Cash flows provided by operating activities were $412,754 due principally to cash generated from property operations. Cash flows used in investing activities were $1,498,132 relating principally to the acquisition of the Pier One Imports store purchased during the six months ended June 30, 1996. The Fund anticipates that operating activities will continue to provide sources of cash as the Fund invests available proceeds in real estate. The Fund's cash flows during the six months ended June 30, 1995, resulted principally from financing activities relating to the issuance of stock, which generated $4,313,644, less costs related thereto such as selling commissions and other costs aggregating $397,239 and dividends to stockholders of $114,680. Cash flows provided by operating activities were $243,084 due principally to cash generated from property operations. Cash flows used in investing activities were $5,967,740 relating principally to the acquisition of an On The Border restaurant, a Blockbuster Video store, a Chili's restaurant and a Just For Feet store. Results of Operations Results of operations for the six months ended June 30, 1996 reflected rental income of $481,795. Rental income for the six properties held for the entire six months was $456,963. Total income was $567,230 which consisted primarily of rental income and interest income earned on cash and cash equivalents in interest bearing accounts. Total expenses were $222,104 and net income was $345,126. Results of operations for the six months ended June 30, 1995 reflected rental income of $224,420. Total rental income for the single property held for the entire six months was $50,628. Total income was $303,739 which consisted primarily of rental income and interest income earned on cash and cash equivalents in interest bearing accounts. Total expenses were $111,173 and net income was $192,566 at June 30, 1995. Results of operations for the three months ended June 30, 1996 reflected rental income of $253,565. Rental income for the six properties held for the entire three months was $228,481. Total income was $297,816 which consisted primarily of rental income and interest income earned on cash and cash equivalents in interest bearing accounts. Total expenses were $112,620 and net income was $185,196. Results of operations for the three months ended June 30, 1995 reflected rental income of $144,897. Total rental income for the properties held for the entire three months was $92,952. Total income was $187,747 which consisted primarily of rental income and interest income earned on cash and cash equivalents in interest bearing accounts. Total expenses were $61,503 and net income was $126,244 at June 30, 1995. On May 3, 1996, the Fund purchased a 10,843 square foot building and the underlying land which is occupied by a Pier One Imports store (the "Pier One Property") located in Sioux Falls, South Dakota, from an unaffiliated party, for $1,375,000 plus closing costs. The Pier One Property is leased to Pier One Imports, Inc. under a triple net lease, for ten years with two five-year extension options. The lease requires a minimum base rent each month in the amount of $13,046. On May 6, 1996, the Fund received a notice, dated April 30, 1996, which stated that the On The Border restaurant, located in Stafford, Texas, would discontinue its operations on May 29, 1996. However, Brinker Texas, L.P., the property's lease guarantor (and a wholly-owned subsidiary of Brinker International) has stated its intention to honor the lease and work with the Fund to remedy this situation. The Fund will contemplate various alternatives including subleasing the facility or "swapping" the asset for an operating property. At this point in time, the Fund does not anticipate that this situation will adversely effect the Fund's cash flow, as rent is currently paid on the lease. On January 25, 1996, the Fund declared an ordinary income dividend on a per share basis of $0.0001918 per day for each day investors were admitted between October 1, 1995 and December 31, 1995. The dividend aggregated $196,106 payable to stockholders of record on December 31, 1995 and was paid on February 15, 1996. On May 2, 1996, the Fund declared an ordinary income dividend on a per share basis of $0.0001918 per day for each day investors were admitted between January 1, 1996 and March 31, 1996. The dividend aggregated $216,247 payable to stockholders of record on March 31, 1996 and was paid on May 15, 1996. On August 1, 1996, the Fund declared an ordinary income dividend on a per share basis of $.0001918 per day for each day investors were admitted between April 1, 1996 and June 30, 1996. The dividend aggregated $227,068 payable to stockholders of record on June 30, 1996 and will be paid on August 15, 1996. The Fund qualifies as a REIT under Sections 856-860 of the Internal Revenue Code, as amended (the "Code"). In order to qualify, the Fund is required to make distributions of an amount not less than 95% of its REIT taxable income during the year. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings. None. ITEM 2. Changes in Securities. None. ITEM 3. Defaults Upon Senior Securities. None. ITEM 4. Submission of Matters to a Vote of Security Holders. (a) The Fund held an annual meeting of Stockholders on June 13, 1996. (b) The names of all Directors of the Fund are set forth in (c) below. Each of the Directors set forth in (c) below were Directors of the Fund during the previous year and will continue as Directors for the upcoming year. (c) Two matters were voted upon and approved by the stockholders. The presentation below briefly describes the matters voted upon and results of stockholders' votes. 1. Election of Directors: By Nominee Votes For Votes Withheld Jerome J. Brault 673,858.599 7,641.065 James L. Brault 673,858.599 7,641.065 Jeff A. Jacobson 673,858.599 7,641.065 Gregory S. Kobus 673,858.599 7,641.065 Kenneth S. Nelson 673,858.599 7,641.065 Hugh K. Zwieg 673,858.599 7,641.065 2. Ratification of Auditors The Board of Directors has approved and the stockholders have ratified the selection of Ernst & Young LLP, independent public accountants, as auditors of the Fund for the year ended December 31, 1996. Votes For Votes Against Abstentions 674,845.688 900 5,753.976 ITEM 5. Other Information. None. ITEM 6. Exhibits and Reports On Form 8-K. Exhibit 27. Financial Data Schedule The Fund filed the following report on Form 8-K during the three months ended June 30, 1996: 1. On May 17, 1996, the Fund filed Form 8-K dated May 3, 1996 which reported as Item 2 the closing of its purchase of the Pier One Property and included as Item 7 the pro forma financial statements. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BRAUVIN NET LEASE V, INC. BY: /s/ James L. Brault James L. Brault Executive Vice President and Secretary DATE: August 13, 1996 BY: /s/ B. Allen Aynessazian B. Allen Aynessazian Chief Financial Officer DATE: August 13, 1996