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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1999
Commission file number 000-23037
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
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(Exact name of registrant as specified in its charter)
MISSOURI 43-1790352
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12555 Manchester Road
St. Louis, Missouri 63131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 515-2000
---------------------
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
--- ---
1
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COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Schedule of Portfolio Investments 3
Statement of Financial Condition 5
Statement of Income 6
Statement of Cash Flows 7
Statement of Changes in Partnership Capital 8
Notes to Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. OTHER INFORMATION <F*>
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 15
[FN]
<F*> Items 2,3,4 and 5 are omitted as they are not applicable
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF SEPTEMBER 30, 1999
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<CAPTION>
Company Nature of Business
Initial Investment Date Investment Cost Fair Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ATHEROGENICS, INC. Pharmaceutical company focused on
the discovery and development of
therapeutics for the treatment and
prevention of cardiovascular disease.
May 11, 1999 33,333 shares of Series C
Convertible Preferred Stock 99,999 99,999
ENDICOR MEDICAL, INC. Develops devices for the removal
of blood clots and occlusive tissue
from arteries.
June 18, 1999 43,248 shares of Series C
Preferred Stock 100,000 100,000
IMPLEMED, INC. Develops polymers that are used to
coat medical and other devices where
infection is a serious problem.
April 6, 1998 10,000 shares of Series D Convertible
Preferred Stock 100,000 100,000
May 17, 1999 3,337 shares of Series D
Convertible Preferred Stock 33 33
Bridge Note, convertible to Series E
Preferred Stock 8,750 8,750
LIPOMED, INC. Diagnostic testing and analytical
company that is pioneering new
medical applications of nuclear
magnetic resonance spectroscopy.
June 16, 1998 16,667 shares of Series B Convertible
Preferred Stock 100,002 100,002
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The accompanying notes are an integral part of these financial statements.
</TABLE>
3
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D.)
AS OF SEPTEMBER 30, 1999
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<CAPTION>
Company Nature of Business
Initial Investment Date Investment Cost Fair Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPTIMARK TECHNOLOGIES, Developed and patented a
INC. computer-based method for
structuring auction markets
that significantly improves
liquidity and efficiency, lowering
transaction costs in the process.
September 23, 1998 10,000 shares of Series B Convertible
Participating Preferred Stock 100,000 100,000
PROTEIN DELIVERY INC. Specializes in the development of
proprietary polymer-based systems for
the delivery and stabilization of protein
and peptide drugs.
April 6, 1998 44,445 shares of Series D
Preferred Stock 100,001 100,001
December 23, 1998 4,976 shares of Series E Preferred
Stock and Warrant to purchase
2,400 shares of common stock 12,440 12,440
UNITED THERAPEUTICS Develops innovative pharmaceutical
CORPORATION and biotechnological therapies for the
treatment of life threatening diseases.
March 31, 1998 33,333 shares of Common Stock $100,000 $ 762,493
-------- ----------
$721,225 $1,383,718
======== ==========
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The accompanying notes are an integral part of these financial statements.
</TABLE>
4
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENT OF FINANCIAL CONDITION
<CAPTION>
Unaudited
September 30, December 31,
1999 1998
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<S> <C> <C>
ASSETS
------
Investments at Fair Value
(cost $721,226 and $512,003, respectively) $1,383,718 $ 512,003
Cash and Cash Equivalents 520,172 742,439
Accrued Interest Receivable 1,700 --
---------- ----------
TOTAL ASSETS $1,905,590 $1,254,442
========== ==========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
Liabilities:
Accounts Payable and Accrued Expenses $ 26,365 $ 14,000
---------- ----------
TOTAL LIABILITIES 26,365 14,000
---------- ----------
Partnership Capital:
Capital - Limited Partners 1,860,433 1,228,038
Capital - General Partners 18,792 12,404
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TOTAL PARTNERSHIP CAPITAL 1,879,225 1,240,442
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TOTAL LIABILITIES AND
PARTNERSHIP CAPITAL $1,905,590 $1,254,442
========== ==========
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The accompanying notes are an integral part of these financial statements.
</TABLE>
5
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
================================================================================================
<S> <C> <C> <C> <C>
INCOME
------
Dividend and Interest Income $ 5,532 $ 120 $ 15,006 $ 120
-------- -------- -------- --------
TOTAL INCOME 5,532 120 15,006 120
-------- -------- -------- --------
EXPENSES
--------
Independent General Partners' Fees 3,000 3,000 9,000 9,000
Professional Fees 4,219 9,891 12,913 22,186
Amortization of Deferred
Organizational Costs -- 4,118 -- 9,609
Management Fees 5,766 2,206 15,169 3,162
Other 1,011 22 1,633 663
-------- -------- -------- --------
TOTAL EXPENSES 13,996 19,237 38,715 44,620
-------- -------- -------- --------
Net (Loss) before Unrealized Gains (8,464) (19,117) (23,709) (44,500)
Net Unrealized Gains on Investments 366,663 -- 662,492 --
-------- -------- -------- --------
NET INCOME (LOSS) $358,199 $(19,117) $638,783 $(44,500)
======== ======== ======== ========
Per Unit Information:
Net Income (Loss) $ 6.53 (.35) $ 11.64 $ (.81)
======== ======== ======== ========
Net Asset Value (as of Sept. 30, 1999
and December 31, 1998) $ 34.24 $ 22.60
======== ========
Units Outstanding:
Limited Partners 54,340 54,340
General Partners 549 549
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The accompanying notes are an integral part of these financial statements.
</TABLE>
6
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, 1999 September 30, 1998
===================================================================================================
<S> <C> <C>
CASH FLOWS USED BY OPERATING ACTIVITIES:
Net Income (Loss) $ 638,783 $ (44,500)
Adjustments to reconcile Net Loss to Net
Cash Used by Operating Activities -
Purchase of Portfolio Investments (209,222) (500,003)
Unrealized Gain on Investments (662,492) --
Amortization of Deferred Organization Costs -- 9,609
Increase in Deferred Organization Costs -- (73,832)
Increase in Accrued Interest Receivable (1,700) --
Increase in Accounts Payable and Accrued Expenses 12,364 10,495
Decrease in Payable to Affiliates -- (8,532)
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Total Cash Used by Operating Activities (222,267) (606,763)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Capital Contributions -- 685,011
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Total Cash Provided by Financing Activities -- 685,011
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Net (Decrease) Increase in Cash and Cash Equivalents (222,267) 78,248
CASH AND EQUIVALENTS, beginning of period 742,439 1,100
--------- ---------
CASH AND EQUIVALENTS, end of period $ 520,172 $ 79,348
========= =========
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The accompanying notes are an integral part of these financial statements.
</TABLE>
7
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENT OF CHANGES IN PARTNERSHIP CAPITAL
(UNAUDITED)
<CAPTION>
Nine Months Ended September 30, 1999 and 1998
Limited Partners General Partners Total
===================================================================================================
<S> <C> <C> <C>
Balance, December 31, 1997 $ 100 $ 1,000 $ 1,100
Contributions 679,150 5,861 685,011
Net Loss (44,055) (445) (44,500)
---------- ------- ----------
Balance, September 30, 1998 $ 635,195 $ 6,416 $ 641,611
========== ======= ==========
Balance, December 31, 1998 $1,228,038 $12,404 $1,240,442
Net Income 632,395 6,388 638,783
---------- ------- ----------
Balance, September 30, 1999 $1,860,433 $18,792 $1,879,225
========== ======= ==========
===================================================================================================
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The accompanying notes are an integral part of these financial statements.
</TABLE>
8
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
Community Investment Partners III, L.P., LLLP (CIP III) is a
limited liability limited partnership, established July 23, 1997, which
has elected to be a business development company under the Investment
Company Act of 1940, as amended. As a business development company, the
partnership is required to invest at least 70% of its total assets in
qualifying investments as specified in the Investment Company Act. CIP
Management, L.P., LLLP (Management), a limited liability limited
partnership, is the Managing General Partner of CIP III. Management is
responsible for making all decisions regarding CIP III's investment
portfolio.
All portfolio investments are carried at cost until significant
developments affecting an investment provide a basis for revaluation.
Thereafter, portfolio investments will be carried at fair value as
obtained from outside sources or at a value determined quarterly by the
Managing General Partner under the supervision of the Independent
General Partners. Due to the inherent uncertainty of valuation, those
estimated values for portfolio investments carried at cost may differ
significantly from the values that would have been used had a ready
market for the investment existed, and the differences could be material
to the financial statements. Investments in securities traded on a
national securities exchange will be valued at the latest reported sales
price on the last business day of the period. If no sale has taken
place, the securities will be valued at the last bid price. If no bid
price has been reported, or if no exchange quotation is available, the
securities will be valued at the quotation obtained from an outside
broker. Investment transactions are recorded on a trade date basis.
Income is recorded on an accrual basis.
9
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Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
MANAGEMENT'S FINANCIAL DISCUSSION
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1999 VERSUS QUARTER ENDED SEPTEMBER 30, 1998
Net income for the three months ended September 30, 1999 was
$358,199, compared to a net loss of $19,117 for the three months ended
September 30, 1998. Net income for the three months ended September 30,
1999 is primarily due to $5,532 interest income and a $366,663
unrealized gain on United Therapeutics Corporation common stock.
Interest income increased $5,412 from the prior year due to the opening
of an interest bearing money market account in March 1999.
Expenses for the three months ended September 30, 1999 were
$13,996, a decrease of $5,241 from the same period in 1998. The decrease
in expenses represents lower professional fees and amortization of
deferred organization costs, which were offset by higher management
fees. Management fees are calculated based on asset value and their
increase follows the growth in assets.
No gains or losses have been realized nor are they expected to be
realized in the near future due to the recent acquisition of investments
within the past year.
The future income or loss of the Partnership is contingent upon
the performance of the portfolio investments and the ability to find
suitable investment alternatives.
NINE MONTHS ENDED SEPTEMBER 30, 1999 VERSUS NINE MONTHS ENDED SEPTEMBER
30, 1998
Net income for the nine months ended September 30, 1999 was
$638,783, compared to a net loss of $44,500 for the same period in 1998.
The increase in net income is attributable to unrealized gains on United
Therapeutics Corporation common stock and money market interest income
received in the second and third quarters of 1999. United Therapeutics
Corporation completed a public offering in 1999.
Expenses of $38,715 at September 30, 1999 were slightly lower than
the $44,620 recorded at September 30, 1998. Within total expenses,
management fees increased by $12,007. Management fees are based on total
assets and became effective during the second quarter of 1998.
Professional fees decreased $9,273, attributable to lower legal fees.
Also within total expenses, amortization of deferred organization costs
decreased $9,609 (100%) as a result of expensing all organization costs
in the last quarter of 1998, in accordance with AICPA Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities".
10
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Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
INVESTMENT TRANSACTIONS
Following is a summary of portfolio investment transactions during the
period ended September 30, 1999.
<TABLE>
<CAPTION>
Type of
Company Transaction Cost
- ---------------------- --------------------------- ------------
Quarter 1 ended:
- ---------------
There were no investment transactions for the three months ended
March 31, 1999.
Quarter 2 ended:
- ---------------
<S> <C> <C>
PURCHASES:
Implemed, Inc. Purchase of
Series D Convertible
Preferred Stock 33
Purchase of Bridge Note,
convertible to Series E
Preferred Stock 8,750
AtheroGenics, Inc. Purchase of
Series C convertible
Preferred Stock 99,999
EndiCOR Medical, Inc. Purchase of
Series C
Preferred Stock 100,000
Protein Delivery, Inc. Conversion of Bridge
Note and Accrued
Interest to Series E
Preferred Stock $440<F*>
<CAPTION>
Quarter 3 ended:
- ---------------
There were no investment transactions for the three months ended
September 30, 1999.
<S> <C>
--------
Total $209,222
========
<FN>
<F*> During the quarter ended September 30, 1999, the $12,000 Bridge
Note formerly held by the Partnership, along with $440 of accrued
interest receivable, was automatically converted to 4,976 shares
of Series E Preferred Stock by the Issuer.
</TABLE>
11
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Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the partnership's total capital of
$1,879,225, consisted of $1,860,433 in limited partner capital and
$18,792 in general partner capital. Net income was allocated to the
limited partners in the amount of $632,395 and to the general partners
in the amount of $6,388.
The Partnership is actively reviewing potential portfolio
investments. Until the Partnership invests in portfolio investments, it
intends to invest its cash balances in a money market account. Due to
their short term nature, such investments provide the Partnership with
the liquidity necessary for investments as opportunities arise.
SUBSEQUENT EVENTS
None.
YEAR 2000 ISSUE
Although the Partnership has no Year 2000 issues that would result
from its own information systems, the Partnership has investments in
publicly and privately placed securities and loans. The Partnership may
be exposed to credit risk to the extent that the related borrowers are
materially adversely impacted by the Year 2000 issue.
12
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Part II. OTHER INFORMATION
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
Item 1: Legal Proceedings
The partnership is not a party to any material pending legal
proceedings.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ended September
30, 1999.
13
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SIGNATURES
Pursuant to the requirements 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.
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
By: CIP Management, L.P., LLLP, its Managing General Partner
By: CIP Management, Inc., its Managing General Partner
/s/ Daniel A. Burkhardt
------------------- President, Treasurer and Director November 15, 1999
Daniel A. Burkhardt
/s/ Ray L. Robbins, Jr.
------------------- Vice-President and Director November 15, 1999
Ray L. Robbins, Jr.
14
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for Community Investment Partners III, L.P., L.L.L.P.
for the quarter ended September 30, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 721,225
<INVESTMENTS-AT-VALUE> 1,383,718
<RECEIVABLES> 1,700
<ASSETS-OTHER> 520,172
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,905,590
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26,365
<TOTAL-LIABILITIES> 26,365
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 54,889
<SHARES-COMMON-PRIOR> 54,889
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,879,225
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,006
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 662,492
<NET-CHANGE-FROM-OPS> 0
<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> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 38,715
<AVERAGE-NET-ASSETS> 1,559,834
<PER-SHARE-NAV-BEGIN> 22.60
<PER-SHARE-NII> 11.64
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 34.24
<EXPENSE-RATIO> 0
</TABLE>
