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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, 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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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 I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF SEPTEMBER 30, 2000
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<CAPTION>
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. (AGIX) 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 Common Stock 99,999 287,330
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 100,694 100,694
1,678 warrants to purchase
common stock, exercisable
at $3.00 per share, through
March 3, 3005
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<CAPTION>
The accompanying notes are an integral part of these financial statements.
3
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D.)
AS OF SEPTEMBER 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
(fomerly 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 HOLDINGS, 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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<CAPTION>
The accompanying notes are an integral part of these financial statements.
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY INVESTMENT PARTNERS III, L.P., LLLP
SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D.)
AS OF SEPTEMBER 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 (UTHR) pharmaceutical and
biotechnological therapies
for the treatment of life
threatening diseases.
March 31, 1998 1,833 shares of
Common Stock $ 5,499 $ 160,168
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
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TOTAL INVESTMENTS $ 1,020,045 $ 1,366,045
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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,
2000 1999
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<S> <C> <C>
ASSETS
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Investments at Fair Value
(cost $1,020,045 and $688,442, respectively) $ 1,366,045 $ 1,777,760
Cash and Cash Equivalents 81,894 692,986
Accrued Interest Receivable -- 2,000
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TOTAL ASSETS $ 1,447,939 $ 2,472,746
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LIABILITIES AND PARTNERSHIP CAPITAL
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Liabilities:
Accounts Payable and Accrued Expenses $ 18,360 $ 21,386
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TOTAL LIABILITIES 18,360 21,386
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Partnership Capital:
Capital - Limited Partners 1,404,690 2,426,847
Capital - General Partners 24,889 24,513
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TOTAL PARTNERSHIP CAPITAL 1,429,579 2,451,360
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TOTAL LIABILITIES AND
PARTNERSHIP CAPITAL $ 1,447,939 $ 2,472,746
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The accompanying notes are an integral part of these financial statements.
</TABLE>
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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,
2000 1999 2000 1999
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INCOME
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<S> <C> <C> <C> <C>
Dividend and Interest Income $ 1,238 $ 5,532 $ 16,463 $ 15,006
----------- ----------- ----------- -----------
TOTAL INCOME 1,238 5,532 16,463 15,006
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EXPENSES
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Independent General Partners' Fees 3,000 3,000 9,000 9,000
Professional Fees 9,885 4,219 21,555 12,913
Management Fees 7,020 5,766 22,744 15,169
Other 40 1,011 1,024 1,633
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TOTAL EXPENSES 19,945 13,996 54,323 38,715
----------- ----------- ----------- -----------
Net (Loss) before Unrealized Gains
and Net Unrealized Gains (Losses) (18,707) (8,464) (37,860) (23,709)
Realized Gains on Sales of Investments 453,910 -- 1,733,362 --
Net Unrealized (Losses) Gains
on Investments (272,652) 366,663 (747,318) 662,492
----------- ----------- ----------- -----------
NET INCOME $ 162,551 $ 358,199 $ 948,184 $ 638,783
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Per Unit Information:
Net Income $ 2.96 $ 6.53 $ 17.27 $ 11.64
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Net Asset Value (as of September
30, 2000 and December 31, 1999) $ 26.04 $ 44.66
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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>
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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, 2000 September 30, 1999
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<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 948,184 $ 638,783
Adjustments to reconcile Net Income to Net
Cash Used by Operating Activities -
Purchase of Portfolio Investments (406,104) (209,222)
Proceeds from Sales of Portfolio Investments 1,803,863 --
Unrealized Losses (Gains) on Portfolio Investments 747,318 (662,492)
Realized Gains on Sale of Portfolio Investments (1,733,362) --
Decrease (Increase) in Accrued Interest Receivable 2,000 (1,700)
(Decrease) Increase in Accounts Payable and Accrued Expenses (3,026) 12,364
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Total Cash Provided by (Used in) Operating Activities 1,358,873 (222,267)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Capital Distributions (1,969,965) --
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Total Cash Used in Financing Activities (1,969,965) --
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Net Decrease in Cash and Cash Equivalents (611,092) (222,267)
CASH AND EQUIVALENTS, beginning of period 692,986 742,439
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CASH AND EQUIVALENTS, end of period $ 81,894 $ 520,172
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The accompanying notes are an integral part of these financial statements.
</TABLE>
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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, 2000 and 1999
Limited Partners General Partners Total
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<S> <C> <C> <C>
Balance, December 31, 1998 $ 1,228,038 $ 12,404 $ 1,240,442
Net Income 632,395 6,388 638,783
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Balance, September 30, 1999 $ 1,860,433 $ 18,792 $ 1,879,225
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Balance, December 31, 1999 $ 2,426,847 $ 24,513 $ 2,451,360
Net Income 879,743 68,441 948,184
Distributions (1,901,900) (68,065) (1,969,965)
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Balance, September 30, 2000 $ 1,404,690 $ 24,889 $ 1,429,579
=========== =========== ===========
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The accompanying notes are an integral part of these financial statements.
</TABLE>
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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.
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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, 2000 VERSUS QUARTER ENDED SEPTEMBER 30, 1999
Net income for the three months ended September 30, 2000 was $162,551,
a 55% decrease from net income for the three months ended September 30, 1999
of $358,199.
Interest income for the three months ended September 30, 2000 decreased
$4,294 (78%) compared to interest income for the three months ended September
30, 1999, due to a decrease in funds held in a money market account. Offering
proceeds were originally invested in a money market account until suitable
investments could be found. During the second quarter of 2000, all initial
investments were completed and the money market account was closed. Realized
gains for the three months ended September 30, 2000 were $453,910. The gains
were the result of the sale of 4,000 shares of United Therapeutics common
stock. There were no investment sales during the third quarter of 1999. The
$272,652 unrealized loss for the three months ended September 30, 2000
consisted of the reversal of $421,500 of unrealized gains on the 4,000 shares
of UTHR sold, a $38,483 unrealized loss on the 1,833 remaining shares of
UTHR, and a $187,331 unrealized gain on Atherogenics, Inc. (AGIX) common
stock. AGIX completed an initial public offering on August 9, 2000. The
$366,663 unrealized gain for the three months ended September 30, 1999
represented an increase in the share price of UTHR over the June 30, 1999
market price.
Total expenses for the three months ended September 30, 2000 were
$19,945, a $5,949 (43%) increase over total expenses for the three months
ended September 30, 1999. Within total expenses, trustee fees increased
100%, management fees increased 22%, and legal expenses increased 313% over
the third quarter of 2000. In 1999, trustee fees were expensed and paid for
in the second quarter. Management fees are up due to an increase in total
assets, and legal expenses are higher due to costs incurred for closing the
Partnership's final initial investments.
NINE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1999
Net income for the nine months ended Setember 30, 2000 was $948,184,
compared to net income for the nine months ended September 30, 1999 of
$638,783.
Interest income decreased $15,225 (92%) due to the use of cash formerly
held in a money market account to puchase Partnership investments during
early 2000. Realized gains on the sale of investments for the nine months
ended September 30, 2000 were $1,733,362, representing the sale of 23,500
shares of UTHR common stock. There were no investment sales during the nine
months ended September 30, 1999. Unrealized losses for the nine months ended
September 30, 2000 were $747,318, compared to unrealized gains of $662,492
during the nine months ended Spetember 30, 1999. The decrease is due to the
conversion of UTHR unrealized gains into realized gains upon the sale of the
investment.
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Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Total expenses of $54,323 for the nine months ended September 30, 2000
were 40% greater than total expenses of $38,715 for the nine months ended
September 30, 1999. A 50% increase in management fees and a 72% increase in
professional expenses led total expenses to increase year over year. The
increase in management fees follows the increase in total assets. Per the
Partnership Agreement, a quarterly management fee is paid to the general
partner based on 1.5% of total assets held at the end of the quarter.
Professional expenses are up due to an increase in legal fees.
INVESTMENT TRANSACTIONS
Following is a summary of portfolio investment transactions during the
period ended September 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:
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United Therapeutics Sold 2,000 shares
of common stock 6,000 151,742 145,742
Quarter 3 ended:
----------------
United Therapeutics Sold 4,000 shares
of common stock 12,000 465,910 453,910
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Total Sales $ 70,501 $1,803,863 $1,733,362
======== ========== ==========
PURCHASES:
----------
Quarter 1 ended:
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RenalTech International Purchase 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
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<CAPTION>
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
<S> <C> <C>
Quarter 2 ended:
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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>
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the partnership's total capital of
$1,429,579, consisted of $1,404,690 in limited partner capital and $24,889
in general partner capital. Net income was allocated to the limited partners
in the amount of $879,743 and to the general partners in the amount of
$68,441.
At September 30, 2000, the Partnership had $81,894 in cash and cash
equivalents.
During the first quarter of 2000, partnership capital accounts became
equal to two times the original contributions. As such, the Partnership
Agreement requires that a portion of 2000 net income now be allocated 90%
to the Limited Partners and 10% to the general partner. In the future,
profits will be allocated 90% to the Limited Partners and 10% to the General
Partner.
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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,
2000.
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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
<TABLE>
<S> <C> <C>
/s/ Daniel A. Burkhardt
------------------------ President, Treasurer and Director November 14, 2000
Daniel A. Burkhardt
/s/ Ray L. Robbins, Jr.
------------------------ Vice-President and Director November 14, 2000
Ray L. Robbins, Jr.
</TABLE>
15
