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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 JUNE 30, 2000
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
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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
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1
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Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
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 6
Statement of Income 7
Statement of Cash Flows 8
Statement of Changes in Partnership Capital 9
Notes to Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
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Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF JUNE 30, 2000
<CAPTION>
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Company Nature of Business
Initial Investment Date Investment Cost Fair Value
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<S> <C> <C> <C>
ATAIRGIN TECHNOLOGIES, INC. Develops diagnostic blood tests
for ovarian and breast cancer
May 10, 2000 80,000 shares of Series D
Preferred Stock $100,000 $100,000
ATHEROGENICS, INC. Pharmaceutical company
focused on the discovery and
development of therapeutics
for the treatments 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 46,801 shares of Series C
Preferred Stock 100,000 100,000
March 14, 2000 4,730 shares of common stock 4,021 4,021
March 23, 2000 1,110 shares of common stock 1,388 1,388
INTELLIWORXX, INC. A Florida technology corporation
that creates, designs and delivers
products worldwide that offer
specific solutions for individual
customer needs
December 31, 1999 28,769 shares of common stock and
1,678 warrants to purchase common 100,694 100,694
stock, exercisable at $3.00 per
share, through March 3, 3005
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The accompanying notes are an integral part of these financial statements.
3
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Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<CAPTION>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D.)
AS OF JUNE 30, 2000
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Company Nature of Business
Initial Investment Date Investment Cost Fair Value
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<S> <C> <C> <C>
LIPOMED, INC. A diagnostic testing and
analytical company that is
pioneering new medical applications
of nuclear magnetic resonance
(NMR) spectroscopy.
June 16, 1998 16,667 shares of Series B
Convertible Preferred Stock $100,002 $100,002
NOBEX Drug delivery company specializing
(formerly Protein in proprietary polymer-based systems
Delivery Inc.) 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 a warrant
to purchase 2,400 shares of
common stock 12,440 12,440
OPTIMARK TECHNOLOGIES, INC. Developed and patented a
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
PARTNER COMMUNICATIONS Provider of internet,
telecommunications and
e-commerce services to
apartment residents.
June 5, 2000 57,143 shares of Series A
Preferred Stock 100,000 100,000
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The accompanying notes are an integral part of these financial statements.
4
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Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<CAPTION>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D.)
AS OF JUNE 30, 2000
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Company Nature of Business
Initial Investment Date Investment Cost Fair Value
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<S> <C> <C> <C>
RENALTECH INTERNATIONAL Develops technology
for treating blood during
kidney dialysis
March 7, 2000 21,053 units of ownership 100,000 100,000
UNITED THERAPEUTICS Develops innovative
CORPORATION pharmaceutical and
biotechnological therapies
for the treatment of life
threatening diseases.
March 31, 1998 5,833 shares of
Common Stock $ 17,499 $ 632,151
ZYCOS, INC. Creates products that activate
the immune defense to destroy
viral or cancer transformed cells.
June 28, 2000 28,736 shares of Series G / G-1
Preferred Stock 100,001 100,001
---------- ----------
TOTAL INVESTMENTS $1,036,045 $1,650,697
========== ==========
</TABLE>
5
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Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENT OF FINANCIAL CONDITION
<CAPTION>
(Unaudited)
June 30, December 31,
2000 1999
===========================================================================================
<S> <C> <C>
ASSETS
------
Investments at Fair Value
(cost $1,036,045 and $688,442, respectively) $1,650,697 $1,777,760
Cash and Cash Equivalents 221,520 692,986
Accrued Interest Receivable - 2,000
---------- ----------
TOTAL ASSETS $1,872,217 $2,472,746
========== ==========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
Liabilities:
Accounts Payable and Accrued Expenses $ 7,450 $ 21,386
---------- ----------
TOTAL LIABILITIES 7,450 21,386
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Partnership Capital:
Capital - Limited Partners 1,801,793 2,426,847
Capital - General Partners 62,974 24,513
---------- ----------
TOTAL PARTNERSHIP CAPITAL 1,864,767 2,451,360
---------- ----------
TOTAL LIABILITIES AND
PARTNERSHIP CAPITAL $1,872,217 $2,472,746
========== ==========
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The accompanying notes are an integral part of these financial statements.
6
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Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
</TABLE>
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLL
STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
=========================================================================================================================
<S> <C> <C> <C> <C>
INCOME
------
Dividend and Interest Income $ 5,517 $ 9,474 $ 15,225 $ 9,474
-------- -------- ---------- --------
TOTAL INCOME 5,517 9,474 15,225 9,474
-------- -------- ---------- --------
EXPENSES
--------
Independent General Partners' Fees 3,000 3,000 6,000 6,000
Professional Fees 7,911 3,955 11,671 8,694
Management Fees 6,451 4,699 15,724 9,403
Other 418 622 984 622
-------- -------- ---------- --------
TOTAL EXPENSES 17,780 12,276 34,379 24,719
-------- -------- ---------- --------
Net (Loss) before Realized Gains and
Net Unrealized Gains (Losses) (12,263) (2,802) (19,154) (15,245)
Realized Gains on Sales of Investments 145,742 - 1,279,452 -
Net Unrealized Gains (Losses)
on Investments 32,073 295,829 (474,666) 295,829
-------- -------- ---------- --------
NET INCOME $165,552 $293,027 $ 785,632 $280,584
======== ======== ========== ========
Per Unit Information:
Net Income $ 3.01 $ 5.34 $ 14.31 $ 5.11
======== ======== ========== ========
Net Asset Value (as of June 30, 2000
and December 31, 1999) $ 33.97 $ 44.66
========== ========
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>
7
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Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 2000 June 30, 1999
============================================================================================
<S> <C> <C>
CASH FLOWS USED BY OPERATING ACTIVITIES:
Net income (loss) $ 785,632 $ 280,584
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Decrease (increase) in accrued interest receivable 2,000 (1,700)
Purchase of portfolio investments (406,104) (209,222)
Proceeds from sales of portfolio investments 1,337,953 -
Unrealized losses (gains) on portfolio investments 474,666 (295,829)
Net realized gains on sale/liquidation of
portfolio investments (1,279,452) -
(Decrease) increase in accounts payable
and accrued expenses (13,936) 2,524
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Net cash provided by (used in) operating activities 900,759 (223,643)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Capital distributions (1,372,225) -
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Net cash used in financing activities (1,372,225) -
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Net decrease in cash and cash equivalents (471,466) (223,643)
CASH AND CASH EQUIVALENTS, beginning of period 692,986 742,439
----------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 221,520 $ 518,796
=========== =========
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The accompanying notes are an integral part of these financial statements.
8
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Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
</TABLE>
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
STATEMENT OF CHANGES IN PARTNERSHIP CAPITAL
(UNAUDITED)
<CAPTION>
Six Months Ended June 30, 2000 and 1999
Limited Partners General Partners Total
================================================================================================================
<S> <C> <C> <C>
Balance, December 31, 1998 $ 1,228,038 $ 12,404 $ 1,240,442
Net Income 277,778 2,806 280,584
----------- -------- -----------
Balance, June 30, 1999 $ 1,505,816 $ 15,210 $ 1,521,026
=========== ======== ===========
Balance, December 31, 1999 $ 2,426,847 $ 24,513 $ 2,451,360
Net Income 733,446 52,186 785,662
Distributions (1,358,500) (13,725) (1,372,225)
----------- -------- -----------
Balance, June 30, 2000 $ 1,801,793 $ 62,974 $ 1,864,767
=========== ======== ===========
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The accompanying notes are an integral part of these financial statements.
</TABLE>
9
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<PAGE>
Part 1. 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 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.
10
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<PAGE>
Part 1. 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 JUNE 30, 2000 VERSUS QUARTER ENDED JUNE 30, 1999
Net income for the three months ended June 30, 2000 was
$165,552, compared to net income of $293,027 for the three months
ended June 30, 1999.
Total revenues for the three months ended June 30, 2000 of
$183,332 consisted of $5,417 interest income, $145,742 realized
gains on sales of investments, and $32,073 unrealized gains on
publicly traded investments. Total revenues for the three months
ended June 30, 1999 of $305,303 consisted of $9,474 interest income
and $295,829 unrealized gains on publicly traded investments. The
42% decrease in interest income is due to the closing of a money
market account which was used to temporarily invest offering
proceeds until suitable investments could be found. The account was
closed in May 2000 after substantially all proceeds had been used to
purchase investments. The $145,742 of realized gains for the quarter
ended June 30, 2000 represented gains from the sale of 2,000 shares
of United Therapeutics Corporation (UTHR). There were no sales for
the quarter ended June 30, 1999. Unrealized gains decreased 89% from
the same quarter in 1999 because the Partnership held 5,833 shares
of UTHR at June 30, 2000, compared to 33,333 at June 30, 1999.
During the past year 27,500 shares of UTHR were sold and the
unrealized gains were converted to realized gains.
Total expenses for the three months ended June 30, 2000 were
$17,780, a 45% increase from total expenses for the three months
ended June 30, 1999 of $12,276. A 100% increase in professional fees
and a 37% increase in management fees drove the increase in
expenses. Professional fees were higher due to legal expenses
related to an 8-K filed for a change in the Partnership's certifying
accountant, and review of investment alternatives. Management fees
increased due to an increase in total assets. The management fee is
based on 1.5% of total assets, computed on a quarterly basis.
SIX MONTHS ENDED JUNE 30, 2000 VERSUS SIX MONTHS ENDED JUNE 30, 1999
Net income for the six months ended June 30, 2000 was
$785,632, compared to net income of $280,584 for the six months
ended June 30, 1999.
Revenues, including interest income, realized gains, and
unrealized gains, increased from $305,303 for the period ended June
30, 1999 to $820,011 for the period ended June 30, 2000. Revenues
increased largely due to $1,279,452 of realized gains on sales of
UTHR during 2000, offset by unrealized losses of $474,666. The
unrealized losses represent a reversal of the perviously recorded
unrealized gains on the shares of UTHR sold.
Total expenses for the six months ended June 30, 2000 were
$34,979, a 42% increase from total expenses of $24,719 for the six
months ended June 30, 1999. Within total expenses, professional fees
increased 34% and management fees increased 67% from the same period
in 1999. Professional fees were higher due to increased legal fees,
and management fees increased due to an increase in total assets
from June 30, 1999.
11
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<PAGE>
Part 1. 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 six months ended June 30, 2000.
<TABLE>
<CAPTION>
Type of Realized
Company Transaction Cost Proceeds Gain (Loss)
------------------------------- ----------------------------- -------- ---------- -----------
<S> <C> <C> <C> <C>
SALES:
------
Quarter 1 ended:
----------------
United Therapeutics Sold 17,500 shares of
common stock $ 52,501 $1,186,211 $1,133,710
Quarter 2 ended:
----------------
United Therapeutics Sold 2,000 shares of
common stock 6,000 151,742 145,742
-------- ---------- ----------
Total Sales $ 58,501 $1,337,953 $1,279,452
======== ========== ==========
PURCHASES:
----------
Quarter 1 ended:
----------------
RenalTech International Purchase of 21,053
units of ownership $100,000
EndiCOR Medical, Inc. Purchase 5,841
shares of
common stock 5,409
Inteliworxx, Inc. Conversion of
accrued interest to
common stock 694
Quarter 2 ended:
----------------
Atairgin Technologies, Inc. Purchase of 80,000
shares of Series D
Preferred Stock 100,000
Partner Communications Purchase of 57,143
shares of Series A
Preferred Stock 100,000
Zycos, Inc. Purchase of 28,736
shares of Series G / G-1
Preferred Stock 100,001
--------
TOTAL PURCHASES $406,104
========
</TABLE>
12
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<PAGE>
Part 1. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, the partnership's total capital of
$1,864,767, consisted of $1,801,793 in limited partner capital and
$62,974 in general partner capital. Net income was allocated to the
limited partners in the amount of $733,446 and to the general
partners in the amount of $52,186. During the first quarter of 2000,
partnership capital accounts became equal to two times the original
contributions. As such, the Partnership Agreement required that a
portion of the net income be allocated 90% to the limited partners
and 10% to the general partner. In the future, profits will be
allocated 90% to limited partners and 10% to the general partner.
At June 30, 2000, the Partnership had $221,520 in cash and
cash equivalents.
13
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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
27 Financial Date Schedule
(b) Reports on Form 8-K
An 8-K, dated April 28, 2000, was filed on May 4, 2000 to
report a change in the Partnership's certifying accountant.
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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 August 11, 2000
Daniel A. Burkhardt
/s/ Ray L. Robbins, Jr.
------------------------- Vice-President and Director August 11, 2000
Ray L. Robbins, Jr.
15
