SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended December 31, 1993
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 0-10179
ML VENTURE PARTNERS I, L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3115686
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
World Financial Center, North Tower
New York, New York 10281-1327
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 449-1000
Not applicable
Former name, former address and former fiscal year, if changed since last
report
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
INDEX
ML VENTURE PARTNERS I, L.P.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets as of December 31, 1993 (Unaudited) and September 30, 1993
Schedule of Portfolio Investments as of December 31, 1993 (Unaudited)
Statements of Operations for the Three Months Ended December 31, 1993 and
1992 (Unaudited)
Statements of Cash Flows for the Three Months Ended December 31, 1993 and
1992 (Unaudited)
Statement of Changes in Partners' Capital for the Three Months Ended
December 31, 1993 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ML VENTURE PARTNERS I, L.P.
BALANCE SHEETS
December 31, 1993 September 30,
(Unaudited) 1993
ASSETS
Investments - Note 2
Portfolio investments, at fair value
(cost $3,507,256 at December 31, 1993 and
$3,566,707 at September 30, 1993) $ 2,638,824 $ 2,696,280
Money market investments, at amortized cost 1,298,092 953,907
Cash and cash equivalents 557,078 579,164
Note receivable - 47,273
Receivable from securities sold 65,866 332,480
Accrued interest receivable 1,131 -
TOTAL ASSETS $ 4,560,991 $ 4,609,104
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Cash distribution payable - Note 6 $ 1,552,300
Accounts payable 32,494 $ 31,697
Due to Management Company - Note 4 14,795 22,801
Due to Independent General Partners - Note 5 17,250 17,250
Total liabilities 1,616,839 71,748
Partners' Capital:
Managing General Partner 878,407 1,227,489
Individual General Partners 227 2,530
Limited Partners (12,000 Units) 2,933,950 4,177,764
Unallocated net unrealized depreciation
of investments - Note 2 (868,432) (870,427)
Total partners' capital 2,944,152 4,537,356
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 4,560,991 $ 4,609,104
See notes to financial statements.
ML VENTURE PARTNERS I, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
DECEMBER 31, 1993
ACTIVE PORTFOLIO INVESTMENTS:
Initial
Investment Fair
Company / Position Date Cost Value
Alpharel, Inc.(A)
239,608 shares of Common Stock Apr. 1984 $ 314,487 $ 327,568
6% Promissory Notes due 9/24/95 146,852 146,852
Inference Corporation*
951,671 shares of Preferred Stock Feb. 1984 1,820,983 1,808,670
Warrants to purchase 30,000 shares of Preferred Stock
at $1.05 per share expiring on 12/16/97 0 2,000
Warrants to purchase 41,959 shares of Preferred Stock
at $1.00 per share expiring on 4/19/99 4,934 4,934
Itran Corp.*
151,572 shares of Common Stock Aug. 1985 600,000 262,000
Qume Corporation*
620,000 shares of Common Stock Feb. 1986 620,000 86,800
TOTALS FROM ACTIVE PORTFOLIO INVESTMENTS $ 3,507,256 $ 2,638,824
(A) During the quarter, the Partnership sold 45,000 common shares of
Alpharel, Inc. for $66,000, realizing a gain of $7,000.
* These companies may be deemed affiliated persons of the Partnership
as defined in the Investment Company Act of 1940.
See notes to financial statements.
SUPPLEMENTAL INFORMATION: LIQUIDATED PORTFOLIO INVESTMENTS (B)
Net
Realized
Cost Gain Return
TOTALS FROM LIQUIDATED PORTFOLIO
INVESTMENTS $ 51,167,673 $ 20,545,382 $ 71,713,055
Combined Combined
Net Unrealized Fair Value
Cost and Realized Gain and Return
TOTALS FROM ACTIVE AND LIQUIDATED
PORTFOLIO INVESTMENTS $ 54,674,929 $ 19,676,950 $ 74,351,879
(B) Amounts provided for "Supplemental Information: Liquidated Portfolio
Investments" are cumulative from inception through December 31, 1993.
ML VENTURE PARTNERS I, L.P.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31,
1993 1992
INVESTMENT INCOME
Interest and dividends $ 15,097 $ 54,634
Expenses:
Management fee - Note 4 14,795 40,570
Professional fees 24,504 17,379
Mailing and printing 7,200 27,844
Independent General Partners' fees - Note 5 17,250 17,250
Custodial fees 800 1,400
Miscellaneous 250 -
Total expenses 64,799 104,443
NET INVESTMENT LOSS (49,702) (49,809)
NET REALIZED GAIN FROM INVESTMENTS SOLD
AND WRITTEN-OFF 6,803 6,001,617
NET REALIZED GAIN (LOSS) FROM OPERATIONS
(allocable to Partners) - Note 3 (42,899) 5,951,808
NET CHANGE IN UNREALIZED APPRECIATION OR
DEPRECIATION OF INVESTMENTS 1,995 (3,584,041)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (40,904) $ 2,367,767
See notes to financial statements.
ML VENTURE PARTNERS I, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31,
1993 1992
CASH FLOWS PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net investment loss $ (49,702) $ (49,809)
Adjustments to reconcile net investment
loss to cash provided from (used for)
operating activities:
(Increase) decrease in receivables (1,131) 503,472
Increase in accrued interest on money
market investments (3,627) (4,832)
Increase (decrease) in payables (7,209) 15,780
Total (61,669) 464,611
Net proceeds from the sale of portfolio
investments 380,141 6,751,718
Net return (purchase) of money market
investments (340,558) (3,956,198)
Cash provided from (used for) operating activities(22,086) 3,260,131
CASH FLOWS FOR FINANCING ACTIVITIES
Cash distributions to Limited Partners
- Note 6 - (3,000,000)
Increase (decrease) in cash and cash equivalents (22,086) 260,131
Cash and cash equivalents at beginning
of period 579,164 433,676
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 557,078 $ 693,807
See notes to financial statements.
ML VENTURE PARTNERS I, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1993
Unallocated
Managing Individual Net Unrealized
General General Limited Depreciation
Partner Partners Partners of Investments Total
Balance at
beginning of
period $ 1,227,489 $ 2,530 $ 4,177,764 $ (870,427) $ 4,537,356
Accrued cash distribution
paid January 20, 1994
- - Note 6 (350,000) (2,300) (1,200,000) - (1,552,300)
Allocation of
net investment
loss - Note 3 (497) (3) (49,202) - (49,702)
Allocation of
net realized
gain on invest-
ments - Note 3 1,415 0 5,388 - 6,803
Net change in
unrealized
depreciation
of investments - - - 1,995 1,995
Balance at end
of period $ 878,407 $ 227 $ 2,933,950(A)$ (868,432) $ 2,944,152
(A) The net asset value per Unit of limited partnership interest, including
an assumed allocation of net unrealized depreciation, is $187. Each
Unit represents an original capital contribution of $5,000. Cumulative
cash distributions paid or accrued through December 31, 1993 total
$5,750 per Unit.
See notes to financial statements.
ML VENTURE PARTNERS I, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Purpose
ML Venture Partners I, L.P. (the "Partnership") is a Delaware limited
partnership formed on February 12, 1982. The Partnership's operations
commenced on October 15, 1982. Merrill Lynch Venture Capital Co., L.P.,
the managing general partner of the Partnership (the "Managing General
Partner"), is a New York limited partnership formed on February 12, 1982,
the general partner of which is Merrill Lynch Venture Capital Inc. (the
"Management Company"), an indirect subsidiary of Merrill Lynch & Co., Inc.
The Partnership's objective is to realize long-term capital appreciation
from its portfolio of venture capital investments. From 1982 to 1986, the
Partnership assembled a portfolio of 34 venture capital investments in new
and developing companies and other special investment situations. The
Partnership does not engage in any other business or activity. At
December 31, 1993, 30 of the 34 investments had been fully liquidated.
The Partnership will not make investments in new companies and will not
reinvest the proceeds from the sale of its remaining investments, except
to make follow-on investments in existing companies, if necessary.
The Partnership's scheduled termination date is December 31, 1994.
Pursuant to the Partnership Agreement, the Individual General Partners can
extend the term of the Partnership for an additional two-year period if
they determine that such extension would be in the best interest of the
Partnership.
2. Significant Accounting Policies
Valuation of Investments - Portfolio investments are carried at cost until
significant developments affecting an investment provide a basis for
valuation. Thereafter, portfolio investments are carried at fair value as
determined quarterly by the Managing General Partner under the supervision
of the Individual General Partners. The venture capital portfolio
investments held by the Partnership involve a high degree of business and
financial risk that can result in substantial losses. The Managing
General Partner considers such risks in determining the valuation of the
Partnership's portfolio investments. Money market investments are carried
at amortized cost which approximates market.
Investment Transactions - Investment transactions are recorded on the
accrual method. Portfolio investments are recorded on the trade date, the
date on which the Partnership obtains an enforceable right to demand the
securities or payment therefor. Realized gains and losses on investments
sold are computed on a specific identification basis.
Income Taxes - No provision for income taxes has been made since all
income and losses are allocable to the Partners for inclusion in their
respective tax returns.
Statements of Cash Flows -The Partnership considers its interest-bearing
cash account to be cash equivalents.
3. Allocation of Partnership Profits and Losses
The Partnership Agreement provides that the Managing General Partner will
be allocated, on a cumulative basis over the life of the Partnership, 20%
of net realized capital gains or 10% of net realized capital losses. The
Partnership's net realized gains or losses in excess of this allocation to
the Managing General Partner, as well as all other income, losses,
deductions and credits, if any, will be allocated among all the Partners,
including the Managing General Partner, in the proportion of their capital
contributions to the Partnership. For the period from October 15, 1982
(commencement of operations) to December 31, 1993, the Partnership had a
cumulative net realized gain of $20.5 million.
4. Related Party Transactions
The Management Company performs, or arranges for others to perform, the
management and administrative services necessary for the operation of the
Partnership. The Management Company receives compensation at the annual
rate of 2% of the net assets of the Partnership. Such fee is determined
and payable quarterly.
ML VENTURE PARTNERS I, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
5. Independent General Partners' Fees
As compensation for services rendered to the Partnership, each of the
three Independent General Partners receives $15,000 annually in quarterly
installments, $1,000 for each meeting of the General Partners attended or
for each other meeting, conference or engagement in connection with
Partnership activities at which attendance by an Independent General
Partner is required and $1,000 for each committee meeting attended ($500
if a committee meeting is held on the same day as a meeting of the General
Partners).
6. Cash Distributions
Cash distributions paid or accrued during fiscal 1994 and 1993 and
cumulative cash distributions paid or accrued through December 31, 1993
are listed below:
General Limited Per
Date Approved Date Paid Partners Partners $5,000 Unit
11/4/92 1/26/93 $ 0 $ 3,300,000 $ 275
2/8/93 4/12/93 0 4,200,000 350
11/3/93 1/20/94 352,000 1,200,000 100
Cumulative totals 3,960,000 69,000,000 5,750
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
During its first four years of operations, from 1982 to 1986, the
Partnership completed the selection of its 34 portfolio investments.
During that time, the Partnership invested a majority of the $54.7 million
of net proceeds received from its 1982 public offering. Since 1986, the
Partnership made additional follow-on investments in certain existing
portfolio companies. As of December 31, 1993, the Partnership had fully
invested its original net proceeds. The Partnership will not make
additional investments in new portfolio companies and expects that follow-
on investments in existing portfolio companies will be nominal, if any.
At December 31, 1993, 30 of the Partnership's 34 portfolio investments had
been fully liquidated. Portfolio investments liquidated through December
31, 1993 had a cost of $51.2 million and returned $71.7 million, for a
cumulative net realized gain of $20.5 million. Generally, all cash
received from the sale of portfolio investments, after an adequate reserve
for operating expenses, is distributed to Partners as soon as practicable
after receipt.
On January 20, 1994, the Partnership made a cash distribution to Partners
totaling $1,552,000: $1.2 million, or $100 per Unit, to Limited Partners
of record on December 31, 1993 and $352,000 to the General Partners. From
its inception through December 31, 1993 the Partnership has made or accrued
cash distributions to its Partners totaling $73 million: $4 million to the
General Partners and $69 million to the Limited Partners representing
$5,750 per $5,000 Unit.
At December 31, 1993, the Partnership held $1.9 million in cash and short-
term investments: $1.3 million invested in money market investments with
maturities of less than one year and $557,000 in an interest-bearing cash
account. As discussed above, $1,552,000 million of the $1.9 million held
in cash and short-term investments at December 31, 1993 was paid to
Partners on January 20, 1994.
On November 4, 1992, the Individual General Partners, in accordance with
the Partnership Agreement, voted to extend the Partnership's termination
date to December 31, 1994. Pursuant to the Partnership Agreement, the
Individual General Partners can extend the term of the Partnership for an
additional two-year period if they determine that such an extension would
be in the best interest of the Partnership.
Results of Operations
Net realized gain or loss from operations is comprised of 1) net realized
gains and losses from portfolio investments sold and written-off and 2) net
investment income or loss. For the three months ended December 31, 1993
and 1992, the Partnership had a net realized loss from operations of
$43,000 and a net realized gain from operations of $6 million,
respectively.
Realized Gains and Losses from Portfolio Investments - For the three months
ended December 31, 1993, the Partnership had a $7,000 net realized gain
from portfolio investments sold and written-off. In December 1993, the
Partnership sold 45,000 common shares of Alpharel, Inc. in the public
market for $66,000, realizing a gain of $7,000.
For the three months ended December 31, 1992, the Partnership had a $6
million net realized gain from investments sold and written-off. During
the quarter, the Partnership sold its remaining 423,082 common shares of
Viewlogic Systems, Inc. in the public market for $6.7 million, realizing a
gain of $6 million.
Investment Income and Expenses - Net investment loss (investment income
less operating expenses) for the three months ended December 31, 1993 and
the three months ended December 31, 1992 was $49,700 and $49,800,
respectively. The Partnership's operating expenses declined during the
1993 period compared to the 1992 period due to the reduced volume of
transaction activity as the Partnership continues to liquidate its
portfolio investments. This decrease was offset by a decrease in interest
income earned from the Partnership's short-term investments during the 1993
period compared to the 1992 period due to a reduction in the amount
available for investment in short-term securities.
The Management Company receives compensation at the annual rate of 2% of
the net assets of the Partnership. Such fee is determined and payable on
the basis of the Partnership's net assets at the end of each calendar
quarter. The management fee for the three months ended December 31, 1993
and 1992 was $15,000 and $41,000, respectively. The reduced management fee
for the 1993 period compared to the 1992 period is the result of a
reduction to the Partnership's net assets during the 1993 period. Such
reductions primarily were due to the sale of the Partnership's portfolio
investments and subsequent cash distributions to Partners. It is expected
that the management fee will continue to decline in future periods as the
Partnership's remaining portfolio investments are liquidated and cash
distributions to
Partners are approved. The management fee and other expenses incurred
directly by the Partnership are paid with funds provided from operations.
Funds provided from operations are obtained from interest earned from short-
term investments and proceeds received from the sale of certain portfolio
investments.
Unrealized Gains and Losses from Portfolio Investments - For the three
months ended December 31, 1993, the Partnership had a net unrealized gain
from its portfolio investments of $3,000, primarily resulting from an
upward revaluation of its investment in Alpharel. Additionally, for the
three month period, the Partnership transferred $1,000 from unrealized gain
to realized gain related to the sale of Alpharel common shares during the
quarter, as discussed above. As a result, the Partnership's net unrealized
depreciation declined $2,000 for the quarter.
For the three months ended December 31, 1992, the Partnership had an
unrealized loss from its portfolio investments of $40,000 resulting from a
downward revaluation of its investment in Qume Corporation. Additionally,
for the three month period, the Partnership transferred $3.5 million from
unrealized gain to realized gain related to the sale of Viewlogic common
shares during the quarter, as discussed above. As a result, the
Partnership's net unrealized appreciation declined $3.6 million for the
quarter.
Net Assets - Changes to net assets resulting from operations are comprised
of 1) net realized gains and losses from operations and 2) net changes in
unrealized appreciation or depreciation of investments. For the three
months ended December 31, 1993 and 1992, the Partnership's net assets from
operations decreased $41,000 and increased $2.4 million, respectively.
At December 31, 1993, the Partnership's net assets were $2.9 million, down
$1.6 million from $4.5 million at September 30, 1993. This decrease
resulted from the $1,552,000 accrued cash distribution (paid to Partners
during January 1994) and the $41,000 net decrease in net assets resulting
from operations for the period.
At December 31, 1992, the Partnership's net assets were $8.1 million, down
$932,000 from $9 million at September 30, 1992. This decrease resulted
from the $3.3 million accrued cash distribution (paid to Limited Partners
during January 1993) offset by the $2.4 million net increase in net assets
resulting from operations for the period.
Gains and losses from investments are allocated to the Partners' capital
accounts when realized in accordance with the Partnership Agreement (see
Note 3 of Notes to Financial Statements). However, for purposes of
calculating the net asset value per unit of limited partnership interest,
net unrealized appreciation or depreciation of investments has been
included as if it had been realized and allocated to the Limited Partners
in accordance with the Partnership Agreement. Pursuant to such
calculation, the net asset value per $5,000 Unit at December 31, 1993 and
September 30, 1993 was $187 and $291, respectively. The Partnership's net
assets and net asset value will continue to decline as portfolio
investments are liquidated and cash distributions are declared and paid to
Partners.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Partnership is not a party to any material pending legal proceedings.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the fiscal
quarter covered by this report.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(3) Amended and Restated Certificate and Agreement of
Limited Partnership of the Partnership, dated as of
February 12, 1982, and amended through October 6, 1982*
(10) Management Agreement dated as of July 12, 1982 between
the Partnership and the Management Company.*
(28) (a) Prospectus of the Partnership dated June 18, 1982
filed with the Securities and Exchange Commission
pursuant to Rule 424(b) under the Securities Act of
1933, as supplemented by supplements thereto dated July
13, 1982 and September 28, 1982 filed pursuant to Rule
424 (c) under the Securities Act of 1933.*
(28) (b) Custody Agreement dated May 31, 1983 between the
Partnership and Chemical Bank.**
(b) No reports on Form 8-K have been filed during the period
covered by this report.
______________________________
* Incorporated by reference to the Partnership's Annual Report on Form
10-K for the fiscal year ended September 30, 1982 filed with the
Securities and Exchange Commission on December 29, 1982.
** Incorporated by reference to the Partnership's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1983 filed with the
Securities and Exchange Commission on August 15, 1983.
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.
ML VENTURE PARTNERS I, L.P.
/s/ Kevin K. Albert
By: Kevin K. Albert
General Partner
By: Merrill Lynch Venture Capital Co., L.P.
its Managing General Partner
By: Merrill Lynch Venture Capital Inc.
its General Partner
By: /s/ Kevin K. Albert
Kevin K. Albert
President
(Principal Executive Officer)
By: /s/ Joseph W. Sullivan
Joseph W. Sullivan
Treasurer
(Principal Financial and Accounting Officer)
Date: February 14, 1994
Exhibit Index
Exhibits Page
(3) Amended and Restated Certificate and Agreement of
Limited Partnership of the Partnership, dated as
of February 12, 1982 and amended through October
6, 1982.*
(10) Management Agreement dated as of July 12, 1982
between the Partnership and the Management
Company.*
(28) (a) Prospectus of the Partnership dated June 18, 1982
filed with the Securities and Exchange Commission
pursuant to Rule 424(b) under the Securities Act
of 1933, as supplemented by supplements thereto
dated July 13, 1982 and September 28, 1982 filed
pursuant to Rule 424(c) under the Securities Act
of 1933.*
(28) (b) Custody Agreement dated May 31, 1983 between the
Partnership and Chemical Bank.**
_______________________
* Incorporated by reference to the Partnership's Annual Report on Form
10-K for the fiscal year ended September 30, 1982 filed with the
Securities and Exchange Commission on December 29, 1982.
** Incorporated by reference to the Partnership's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1983 filed with the
Securities and Exchange Commission on August 15, 1983.
