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 March 31, 1995
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 2-91941
ML TECHNOLOGY VENTURES, L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-3213176
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
World Financial Center, North Tower
New York, New York 10281-1327
(Address of principal executive offices) (Zip Code)
</TABLE>
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
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets as of March 31, 1995 (Unaudited) and December 31, 1994
Statements of Operations for the Three Months Ended March 31, 1995 and 1994
(Unaudited)
Statements of Cash Flows for the Three Months Ended March 31, 1995 and 1994
(Unaudited)
Statement of Changes in Partners' Capital for the Three Months Ended March 31,
1995 (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.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ML TECHNOLOGY VENTURES, L.P.
BALANCE SHEETS
<TABLE>
March 31, 1995 December 31,
(Unaudited) 1994
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 600,358 $ 359,001
Investments - Notes 2 and 6
Publicly traded securities (cost $1,089,850 at March 31, 1995
and $1,684,325 at December 31, 1994) 885,418 1,244,954
Other equity investments, at cost 49,304 49,304
Convertible subordinated note at 13%, due October 1, 1995 250,000 250,000
U.S. Government securities, at amortized cost 1,993,855 1,748,819
Accounts receivable (less unamortized discount of $358,050 at
March 31, 1995 and $443,878 at December 31, 1994) - Note 7 4,417,145 4,291,425
Receivable from securities sold 23,747 -
------ -
TOTAL ASSETS $ 8,219,827 $ 7,943,503
= ========= = =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 61,564 $ 12,658
Due to Management Company - Note 5 174,656 174,656
Deferred gain on sale of technology - Note 7 981,363 981,363
------- -------
Total liabilities 1,217,583 1,168,677
--------- ---------
Partners' Capital:
General Partner 79,271 79,354
Limited Partners (69,094 Units) 7,127,405 7,134,843
Unallocated net unrealized depreciation of investments - Note 2 (204,432) (439,371)
-------- --------
Total partners' capital 7,002,244 6,774,826
--------- ---------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 8,219,827 $ 7,943,503
= ========= = =========
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31,
<TABLE>
1995 1994
---- ----
INCOME
<S> <C> <C>
Royalty and licensing income $ 366,978 $ 317,753
Interest on accounts receivable 85,828 109,281
Other interest income 25,676 6,872
------ -----
Total income 478,482 433,906
------- -------
EXPENSES
Management fee - Note 5 174,656 174,656
Professional fees 74,863 74,438
Mailing and printing 14,432 67,195
Miscellaneous 371 1,050
--- -----
Total expenses 264,322 317,339
------- -------
NET OPERATING INCOME 214,160 116,567
Net realized loss from investments in stock and warrants (221,681) (473,750)
-------- --------
NET LOSS (allocable to Partners) - Note 3 $ (7,521) $ (357,183)
= ====== = ========
Net loss per unit of limited partnership interest $(.11) $ (5.11)
===== = =====
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31,
<TABLE>
1995 1994
---- ----
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
<S> <C> <C>
Interest and other income received $ 372,006 $ 332,563
Other operating expenses paid (217,249) (188,665)
-------- --------
Cash provided from operating activities 154,757 143,898
------- -------
CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES
Net return (purchase) of investments in U.S. Government securities (262,447) 3,228,628
Proceeds from the sale of investments in stock and warrants 349,047 -
------- -
Cash provided from investing activities 86,600 3,228,628
------ ---------
CASH FLOWS FOR FINANCING ACTIVITIES
Cash distributions:
General Partner - (38,424)
Limited Partners - (3,454,700)
- ----------
Cash used for financing activities - (3,493,124)
- ----------
Increase (decrease) in cash and cash equivalents 241,357 (120,598)
Cash and cash equivalents at beginning of period 359,001 461,955
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 600,358 $ 341,357
= ======= = =======
Reconciliation of net loss to cash provided from operating activities:
Net loss $ (7,521) $ (357,183)
- ------ - --------
Adjustments to reconcile net loss to cash provided from
operating activities:
Net realized loss 221,681 473,750
Increase in receivables (108,309) (101,343)
Increase in payables 48,906 128,674
------ -------
Total adjustments 162,278 501,081
------- -------
Cash provided from operating activities $ 154,757 $ 143,898
= ======= = =======
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
For the Three Months Ended March 31, 1995
<TABLE>
Unallocated
Net Unrealized
General Limited Depreciation
Partner Partners of Investments Total
<S> <C> <C> <C> <C>
Balance at beginning of period $ 79,354 $ 7,134,843 $ (439,371) $ 6,774,826
Allocation of net loss - Note 3 (83) (7,438) - (7,521)
Change in net unrealized
depreciation of investments - - 234,939 234,939
- - ------- -------
Balance at end of period $ 79,271 $ 7,127,405 $ (204,432) $ 7,002,244
= ====== = ========= = ======== = =========
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Purpose
ML Technology Ventures, L.P. (the "Partnership") is a Delaware limited
partnership formed in April 1984. ML R&D Co., L.P., the general partner of the
Partnership (the "General Partner"), is also a Delaware limited partnership
formed in April 1984, the general partner of which is Merrill Lynch R&D
Management Inc. (the "Management Company"), an indirect subsidiary of Merrill
Lynch & Co., Inc.
The objective of the Partnership is to achieve cash flow from the
commercialization of a broad range of technologies developed and owned by, or on
behalf of, the Partnership. The Partnership engages in research and development
activities for the development of new technology through contracts, joint
ventures and investments in other partnerships. The Partnership will terminate
no later than January 31, 2005.
2. Significant Accounting Policies
Research and Development Costs - In prior periods, the Partnership incurred
costs in connection with its research and development ventures, including patent
application costs, which were expensed in the period incurred. Research and
development expenses were shown net of value received for the granting of
options to purchase technology being developed.
Valuation of Investments - In accordance with the Statement of Financial
Accounting Standards No. 115, investments in available-for-sale securities
(publicly traded securities) are accounted for at market value based on the
closing public market price on the last day of the quarter. Non-publicly traded
securities are accounted for at cost. The cost of an investment is written down
to its fair value when the investment is determined to be other than temporarily
impaired.
Investment Transactions - Investment transactions are recorded on the accrual
method. 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 cash held in its
interest-bearing cash account to be cash equivalents.
3. Allocation of Partnership Profits and Losses
The Partnership Agreement provides that profits shall be allocated to all
Partners in proportion to their capital contributions until there have been
distributions to the Limited Partners equal to their capital contributions,
after which time 90% will be allocated to the Limited Partners and 10% to the
General Partner until there has
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
been distributed to the Limited Partners an aggregate amount, since the
inception of the Partnership, equal to twice their capital contributions and
thereafter 80% will be allocated to the Limited Partners and 20% to the General
Partner. Losses shall be allocated to all Partners in proportion to their
capital contributions provided, however, that to the extent profits have been
credited in the 90-10 or 80-20 ratio, losses shall be charged in the reverse
order in which profits were credited.
4. Commitment
The Partnership has a $412,696 commitment to fund MLMS Cancer Research, Inc. The
Partnership is a shareholder of MLMS Cancer Research which is the general
partner of ML/MS Associates, L.P., formerly a research and development joint
venture with IDEC Pharmaceuticals Corporation.
5. 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 a management fee at an annual rate
of 1% of the aggregate capital contributions to the Partnership payable
quarterly in arrears.
6. Investments in Equity Securities at March 31, 1995
Beginning on January 1, 1994, the Partnership adopted the statement of Financial
Accounting Standards No. 115 ("FAS 115"), "Accounting for Certain Investments in
Debt and Equity Securities". The effect on partners' capital of initially
applying FAS 115 is a change in accounting principle, and the unrealized gain or
loss for securities available for sale is reflected as a separate component of
partners' capital. In accordance with this statement, debt and equity securities
which do not have readily determinable market values are not marked to market
and the market values of these securities are not reflected in the balance
sheet.
<TABLE>
Unrealized Market
Shares Cost Gain (Loss) Value
Publicly Traded Securities:
<S> <C> <C> <C> <C>
Ecogen Inc. - common stock 322,682 $ 839,850 $ (73,480) $ 766,370
Photon Technology International, Inc.
- common stock 190,476 250,000 (130,952) 119,048
------- -------- -------
Total $ 1,089,850 $ (204,432) $ 885,418
= ========= = ======== = =======
</TABLE>
During March 1995, in a non-cash transaction, the Partnership exchanged its
warrant to purchase 275,000 shares of Interleaf, Inc. common stock at $3.50 per
share for 72,368 shares of Interleaf common stock. Such
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
shares were sold during March 1995 in the public market for $373,000, resulting
in a realized loss of $222,000.
In March 1995, the joint venture between IDEC Pharmaceuticals Corporation and
ML/MS Associates, L.P. was terminated. In connection with the termination and
cancellation of all future rights to royalties from the sale of commercialized
products, ML/MS Associates received 1,000,000 shares of unregistered IDEC common
stock and 69,375 shares of 10% dividend accumulating preferred stock of IDEC.
The Partnership owns a 36.2% limited partnership interest in ML/MS Associates
and 420,000 shares of MLMS Cancer Research, Inc. ("CRI") common stock, the
general partner of ML/MS Associates, representing a 36.5% ownership of CRI. CRI
has a 1% ownership interest in ML/MS Associates.
7. Accounts Receivable
In June 1988, the Partnership terminated its research and development joint
venture with United AgriSeeds, Inc. Under the terms of the termination
agreement, accounted for as an installment sale, the Partnership will receive
$10 million over an eight-year period which began in January 1989. The $10
million payment will result in a $4.1 million return of capital, a $2.2 million
gain from the sale of technology and $3.7 million of interest income to be
recorded over the payment period. At March 31, 1995, the balance due from United
AgriSeeds, net of unamortized discount, was $4 million and the deferred gain
from the sale was $981,000. The cash payments due from United AgriSeeds total
$4.4 million at March 31, 1995.
8. Cash Distributions
Cash distributions paid to Partners during the periods presented and cumulative
cash distributions paid from inception of the Partnership through March 31, 1995
are listed below:
<TABLE>
General Limited Per $1,000
Distribution Date Partner Partners Unit
<S> <C> <C> <C> <C> <C>
January 21, 1994 $ 38,424 $ 3,454,700 $ 50
Inception to December 31, 1993 552,545 49,678,586 719
------- ---------- ---
Cumulative totals at March 31, 1995 $ 590,969 $ 53,133,286 $ 769
= ======= = ========== = ===
</TABLE>
9. Interim Financial Statements
In the opinion of ML R&D Co., L.P., the managing general partner of the
Partnership, the unaudited financial statements as of March 31, 1995, and for
the three month period then ended, reflect all adjustments necessary for the
fair presentation of the results of the interim period.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
From 1985 to 1991, the Partnership funded $59.6 million of research and
development commitments to 16 individual research and development ventures (the
"R&D Ventures"). This amount represents 95% of the original $62.5 million of net
proceeds to the Partnership. The Partnership has no unfunded research and
development commitments and will not enter into new R&D Ventures in the future.
The Partnership invests its available cash in Permitted Temporary Investments
("PTIs") as defined in the Partnership Agreement. At March 31, 1995, the
Partnership's PTI's included $2 million in U.S. Treasury Bills with maturities
of less than one year and $600,000 in an interest-bearing cash account. For
three months ended March 31, 1995, the Partnership earned interest of $26,000
from its PTI's. Interest earned from PTI's in future periods will be subject to
fluctuations in short-term interest rates and changes in amounts available for
investment in PTI's.
Cash payments due from United AgriSeeds, Inc. at March 31, 1995 total $4.4
million. The Partnership is scheduled to receive $2 million in September 1995
and $2.4 million in September 1996. Such payments relate to the 1988 termination
of the Partnership's R&D Venture with United AgriSeeds.
It is anticipated that funds needed to cover future operating expenses will be
obtained from future royalty and licensing income, interest income from PTI's,
installment sale proceeds and proceeds received by the Partnership from the sale
of its technology, joint venture interests and equity securities.
The Partnership, through the authority of its General Partner, has the ability
to borrow funds. Such borrowing may be used for any Partnership purpose,
including working capital, follow-on expenditures for research and development
ventures or to exercise warrants. The Partnership is not permitted to borrow
more than 10% of the aggregate capital contributions to the Partnership. The
Partnership has made no such borrowings to date and does not expect to borrow
funds in the future.
Results of Operations
For the three months ended March 31, 1995 and 1994, the Partnership had a net
loss of $8,000 and $357,000, respectively. Net income or loss is comprised of 1)
net operating income or loss and 2) net realized gain or loss.
Net Operating Income or Loss - For the three months ended March 31, 1995 and
1994, the Partnership had net operating income of $214,000 and $117,000,
respectively. The increase in net operating income for the 1995 period compared
to the 1994 period primarily is the result of a $49,000 increase in royalty and
licensing income for the 1995 period and a $53,000 decrease in mailing and
printing expenses for the 1995 period. Mailing and printing expenses were
$14,000 and $67,000 for the three months ended March 31, 1995 and 1994,
respectively. The decrease in mailing and printing expenses for the 1995 period
was due to certain cost control measures implemented by the Partnership during
the period to reduce such expenses. Royalty and licensing income for the three
months ended March 31, 1995 and 1994 was $367,000 and $318,000, respectively.
The increase in royalty and licensing income for the 1995 period was due to an
increase in income earned from the two royalty agreements with Gen-Probe
Incorporated.
Realized Gains and Losses - The Partnership realizes gains and losses from the
sale of its joint venture interests or proprietary technology in R&D Ventures
and from the sale of its equity securities. For the three months ended March 31,
1995, the Partnership had a net realized loss of $222,000. During March 1995, in
a non-cash transaction, the Partnership exchanged its warrant to purchase
275,000 shares of Interleaf, Inc. common stock at $3.50 per share for 72,368
shares of Interleaf common stock. Also in March 1995, the Partnership sold such
shares in the public market for $373,000, realizing a loss of $222,000.
For the three months ended March 31, 1994, the Partnership had a net realized
loss of $474,000 resulting from the write-off of its warrants to purchase
500,000 shares of Photon Technology International, Inc., which expired in April
1994.
<PAGE>
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.
Not applicable.
Item 5. Other Information.
In March 1995, the joint venture between IDEC Pharmaceuticals Corporation and
ML/MS Associates, L.P. was terminated. In connection with the termination and
cancellation of all future rights to royalties from the sale of commercialized
products, ML/MS Associates received 1,000,000 shares of unregistered IDEC common
stock and 69,375 shares of 10% dividend accumulating preferred stock of IDEC.
The Partnership owns a 36.2% limited partnership interest in ML/MS Associates
and 420,000 shares of MLMS Cancer Research, Inc. ("CRI") common stock, the
general partner of ML/MS Associates, representing a 36.5% ownership of CRI. CRI
has a 1% ownership interest in ML/MS Associates.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(4) (A) Amended and Restated Certificate and
Agreement of Limited Partnership of the
Partnership dated as of April 23, 1984, as
amended through February 22, 1985, included
as Exhibit A to the Prospectus of the
Partnership dated March 11, 1985.*
(B) (i) Amendment dated August 20, 1985 to the
Amended and Restated Certificate and
Agreement of Limited Partnership of the
Partnership.**
(B) (ii) Amendment dated August 28, 1985 to the
Amended and Restated Certificate and
Agreement of Limited Partnership of the
Partnership.***
(10) (a) Management Agreement dated as of May 23, 1991 among
the Partnership, Management Company and the Managing
General Partner.****
(10) (b) Sub-Management Agreement dated as of May 23, 1991
among the Partnership, Management Company, the Managing
General Partner and the Sub-Manager.****
(27) Financial Data Schedule.
(b) No reports on Form 8-K have been filed since the beginning of
the period covered by this report.
- ------------------------------
* Incorporated by reference to the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1984 filed with the
Securities and Exchange Commission on August 12, 1985.
** Incorporated by reference to the Partnership's Quarterly Report on Form
10-Q for the quarter ended September 30, 1985 filed with the Securities
and Exchange Commission on November 12, 1985.
*** Incorporated by reference to the Partnership's Quarterly Report on Form
10-Q for the quarter ended March 31, 1986 filed with the Securities and
Exchange Commission on May 14, 1986.
**** Incorporated by reference to the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1991 filed with the
Securities and Exchange Commission on March 30, 1992.
<PAGE>
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 TECHNOLOGY VENTURES, L.P.
By: ML R&D Co., L.P.
its General Partner
By: Merrill Lynch R&D Management 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: May 11, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ML
TECHNOLOGY VENTURES, L.P.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> MAR-31-1995
<CASH> 600,358
<SECURITIES> 3,178,577
<RECEIVABLES> 4,440,892
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,219,827
<CURRENT-LIABILITIES> 236,220
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,219,827
<SALES> 0
<TOTAL-REVENUES> 478,482
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 264,322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,521)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
