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 March 31, 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 May 14, 1996 was $12,999,531. As of May 14, 1996, the issuer had 1,299,954 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 March 31, 1996. . . . . . . . . . . . . . . .4 Statements of Income for the three months ended March 31, 1996 and 1995. . . . . . . . . . . . . . . . .5 Statements of Cash Flows for the three months ended March 31, 1996 and 1995. . . . . . . . . . . . . . . . .6 Notes to Financial Statements. . . . . . . . . . . . . . . . .7 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. Submissions of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . 15 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 15 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements The following Balance Sheet as of March 31, 1996, Statements of Income for the three months ended March 31, 1996 and 1995 and Statements of Cash Flows for the three months ended March 31, 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) March 31, 1996 ASSETS Investment in real estate, at cost: Land $ 2,622,337 Buildings 5,185,796 7,808,133 Less: accumulated depreciation (129,016) Net investment in real estate 7,679,117 Cash and cash equivalents 4,195,922 Organization costs (net of accumulated amortization of $14,583) 20,417 Tenant receivables 19,074 Prepaid expenses and deferred acquisition costs 74,465 Total Assets $11,988,995 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses $ 6,508 Prepaid rent 16,292 Due to affiliates 6,500 Total Liabilities 29,300 Stockholders' Equity: Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued -- Common stock, $.01 par value, 9,000,000 shares authorized; 1,299,954 shares issued and outstanding 13,000 Additional paid-in capital 11,911,667 Retained earnings 35,028 Total Stockholders' Equity 11,959,695 Total Liabilities and Stockholders' Equity $11,988,995 See notes to financial statements. STATEMENTS OF INCOME For the Three Months Ended March 31, 1996 and 1995 (Unaudited) 1996 1995 INCOME Rental $228,230 $79,523 Interest 41,184 36,469 Total Income 269,414 115,992 EXPENSES Directors fees 6,999 6,001 Advisory fees 19,048 10,463 Management fees 2,131 549 General and administrative 16,331 11,091 Acquisition costs 30,814 8,729 Depreciation and amortization 34,161 12,837 Total Expenses 109,484 49,670 Net Income $159,930 $66,322 Net Income Per Share $ 0.13 $ 0.10 See notes to financial statements. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1996 and 1995 (Unaudited) 1996 1995 Cash flows from operating activities Net income $ 159,930 $ 66,322 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of organization costs 1,750 1,750 Depreciation 32,411 11,087 Acquisition costs charged off 30,814 8,729 Changes in operating assets and liabilities: Decrease (increase) in prepaid expenses 3,999 (199) Increase in tenant receivables (19,074) -- Decrease in accounts payable and accrued expenses (11,992) (9,753) (Decrease) increase in prepaid rent (3,000) 12,292 Increase in due to affiliates 6,480 10,531 Net cash provided by operating activities 201,318 100,759 Cash flows from investing activities Purchase of properties (23,447) (2,585,681) Acquisition costs (49,008) (74,493) Cash used in investing activities (72,455) (2,660,174) Cash flows from financing activities Issuance of stock 1,321,538 2,992,756 Selling commissions and other offering costs (116,877) (274,272) Dividends (196,106) (36,000) Net cash provided by financing activities 1,008,555 2,682,484 Net increase in cash and cash equivalents 1,137,418 123,069 Cash and cash equivalents at beginning of period 3,058,504 3,455,715 Cash and cash equivalents at end of period $4,195,922 $3,578,784 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 For the year ended December 31, 1996, 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 three months ended March 31, 1996 and 1995, net income per share is based on the average shares outstanding of 1,237,518 and 634,907, respectively, and net income of $159,930 and $66,322, 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. Subscription Contingency During the period from February 15, 1995 through March 2, 1995 (the "Supplement Period") the Fund sold approximately $221,100 of shares to a total of eight investors pursuant to a prospectus dated February 25, 1994 which contained audited financial statements dated October 14, 1993 and Prospectus Supplements Numbers 1 and 2 dated December 9, 1994 and February 6, 1995. Federal securities laws require that when a prospectus is used more than nine months after the effective date of the registration statement of which it is a part, information contained therein shall be as of a date no more than sixteen months prior to such use. Investors who purchased shares in the Fund during the Supplement Period were not afforded access to the Fund's updated audited financial statements (the "Updated Financial Information") as of December 31, 1994 and 1993 and for the year ended December 31, 1994. The Fund had no operations during 1993 and acquired its first property in late November 1994. A possibility exists that any or all of the eight investors could request a return of their investment, in which event such amounts, aggregating $221,100, would be required to be paid from the Fund's available cash resources. The Fund believes that the possibility that such investors would request their investment returned is remote because the Fund has since provided such investors (as well as other stockholders during the relevant period) with the Updated Financial Information, the Fund has conducted its operations in a manner consistent with the terms of the prospectus and the Fund has had no such request from any of the investors. The Fund believes that the return of such amounts would not adversely affect the financial condition or liquidity of the Fund. 4. Related Party Transactions Fees, commissions and other expenses incurred and payable to the Advisor or its affiliates for the three months ended March 31, 1996 and 1995 were as follows: 1996 1995 Payable Payable Incurred (Receivable) Incurred (Receivable) Selling commissions $73,856 $ -- $167,578 $ -- Due diligence fees 11,606 -- 2,900 (7,333) Advisory fees 19,048 6,500 10,463 18,734 Dividend reinvestment fees 411 -- 68 84 Management fees 2,131 -- 549 -- Nonaccountable fees 31,413 -- 74,649 988 Acquisition fees and expenses 67,875 -- 105,713 -- $206,340 $6,500 $361,920 $12,473 5. 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 (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. 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 March 31, 1996, there were approximately 13,400 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. 6. Subsequent Events On May 2, 1996, the Fund declared an ordinary income dividend on a per share basis of $0.00001918 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 will be paid on May 15, 1996. 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, intends to 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. 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 March 31, 1996, the Fund had received $11,924,667 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 did not acquire any property during the three months ended March 31, 1996. Subsequent to March 31, 1996, the Fund purchased a property, from an unaffiliated party, for $1,375,000 plus closing costs. Except for certain acquisition costs related to the foregoing property, at March 31, 1996 the Fund had no material capital commitments. In the opinion of management of the Fund, each property is adequately covered by insurance. At March 31, 1996, approximately $3,900,000 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 three months ended March 31, 1996 resulted principally from financing activities relating to the issuance of stock, which generated $1,321,538 less costs related thereto such as selling commissions and other costs aggregating $116,877 and dividends to stockholders of $196,106. Cash flows provided by operating activities were $201,318 due principally to cash generated from property operations. Cash flows used in investing activities were $72,455 relating principally to the acquisition of the property purchased subsequent to March 31, 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 three months ended March 31, 1995, resulted principally from financing activities relating to the issuance of stock, which generated $2,992,756, less costs related thereto such as selling commissions and other costs aggregating $274,272 and dividends to stockholders of $36,000. Cash flows provided by operating activities were $100,759 due principally to cash generated from property operations. Cash flows used in investing activities were $2,660,174 relating principally to the acquisition of an On The Border restaurant and a Blockbuster Video store. Results of Operations Results of operations for the three months ended March 31, 1996 reflected rental income of $228,230. Rental income represented three months of rental income for the six properties held for the entire three months. Total income was $269,414 which consisted primarily of rental income and interest income earned on subscriptions invested in interest bearing accounts. Total expenses were $109,484 and net income was $159,930. Results of operations for the three months ended March 31, 1995 reflected rental income of $79,523. Total rental income for the single property held for the entire three months was $25,313. Total income was $115,992 which consisted primarily of rental income and interest income earned on subscriptions invested in interest bearing accounts. Total expenses were $49,670 and net income was $66,322 at March 31, 1995. 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, intends to 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 results of operations. On January 25, 1996, the Fund declared an ordinary income dividend on a per share basis of $0.00001918 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 which was paid on February 15, 1996. On May 2, 1996, the Fund declared an ordinary income dividend on a per share basis of $0.00001918 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 will be paid on May 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. None. ITEM 5. Other Information. None. ITEM 6. Exhibits and Reports On Form 8-K. Exhibit 27. Financial Data Schedule 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: May 14, 1996 BY: /s/ Thomas J. Coorsh Thomas J. Coorsh Chief Financial Officer DATE: May 14, 1996