SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1994
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)
Registrant's telephone number, including area code: (212) 449-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of class)
<PAGE>
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the prospectus of the Registrant dated March 11, 1985, filed with
the Securities and Exchange Commission pursuant to Rule 424(b) under the
Securities Act of 1933, as supplemented by the supplement thereto dated May 28,
1985 filed pursuant to Rule 424(c) under the Securities Act of 1933,
(collectively the "Prospectus"), are incorporated by reference in Part I, Part
II and Part III hereof.
<PAGE>
PART I
Item 1. Business.
Formation
ML Technology Ventures, L.P., (the "Partnership" or the "Registrant") is a
Delaware limited partnership formed on April 23, 1984. ML R&D Co., L.P., the
general partner of the Partnership (the "General Partner"), is a Delaware
limited partnership formed on April 23, 1984, the general partner of which is
Merrill Lynch R&D Management Inc. (the "Management Company"), an indirect
subsidiary of Merrill Lynch & Co., Inc. DLJ Capital Management Corporation (the
"Sub-Manager") acts as the sub-manager for the Partnership pursuant to a
sub-management agreement, dated May 23, 1991, among the Partnership, the General
Partner, the Management Company and the Sub-Manager.
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 will terminate no later than January
31, 2005.
In 1985, the Partnership publicly offered, through Merrill Lynch, Pierce, Fenner
& Smith Incorporated, 100,000 units of limited partnership interest ("Units") at
$1,000 per Unit. The Units were registered under the Securities Act of 1933
pursuant to a Registration Statement on Form S-1 (File No. 2-91941) which was
declared effective on March 11, 1985. On August 28, 1985, the offering of the
Units was completed. A total of 69,094 Units were sold and the General Partner
admitted the additional limited partners (the "Limited Partners") to the
Partnership. The total capital contributed to the Partnership by the Limited
Partners is $69,094,000. Additionally, the General Partner contributed $768,488,
representing 1.1% of the total capital contributions to the Partnership.
Research and Development Activities
The Partnership engages in research and development ventures ("R&D Ventures")
for the development of new technology through contracts, joint ventures and
investments in other partnerships. The Partnership's principal focus is managing
the progress of its R&D Ventures, monitoring its royalty arrangements and
maximizing cash returns to the Partnership. Since its inception, the Partnership
entered into 16 R&D Ventures with 14 companies representing research and
development commitments of approximately $60 million. The Partnership completed
the funding of its research and development commitments during 1991. The
Partnership will not enter into new R&D Ventures and does not expect to fund
additional research and development relating to any of its existing R&D
Ventures.
As of December 31, 1994, the Partnership had terminated its activities or sold
its proprietary technology or joint venture interest in 14 of the 16 R&D
Ventures. In exchange for such sales or terminations, the Partnership received
cash and/or equity securities of the acquiring company. At December 31, 1994,
the Partnership had royalty agreements covering payments from the potential
future commercial sales of products developed from eight of the 16 R&D Ventures.
The eight R&D Ventures with active royalty agreements with the Partnership at
December 31, 1994 are: Berlex Biosciences, Inc., Calgene, Inc., Bolt Beranek and
Newman Inc., Wyse Technology Inc., Photon Technology International, Inc.,
Gen-Probe Incorporated (R&D Venture I), Gen-Probe Incorporated (R&D Venture II)
and IDEC Pharmaceuticals Corporation. Two of the eight R&D Ventures (Berlex and
Photon) have products still in the developmental stage and the sponsoring
development companies are using their own resources to complete such research
and development activities. One of the R&D Ventures (IDEC) has products that are
past the development stage and into clinical trials. The remaining five R&D
Ventures have commercialized the developed technology.
The development companies of each of the Partnership's 16 R&D Ventures are U.S.
companies, the majority of which are publicly-held. No single R&D Venture
involved a commitment of more than 12.5% of the Partnership's original
contributed capital. The Partnership closely monitors the research and
development activities related to its R&D Ventures. The Partnership negotiates
and arranges for modifications of research, budgets and other terms of its R&D
Venture contracts. Each R&D venture contract provides for regular monitoring by
the Partnership of the results from research and development activities and
subsequent commercial sales activities. The Partnership relies on the technical
and business expertise of the officers and employees of the Sub-Manager to
monitor and manage the Partnership's R&D Ventures and portfolio of investments.
Where appropriate, the Partnership also engages outside experts or consultants.
The Partnership may have entered into R&D Ventures with companies subject to
environmental legislation. Earnings from the developed technology and products
of such R&D Ventures with such companies may be affected in future periods.
Seasonality
There are no seasonal trends which affect the Partnership's activities.
Patents, Trademarks, Licenses
At December 31, 1994, the Partnership owned certain patents, trademarks or trade
names and owns a number of patent applications. The Partnership obtains licenses
or sublicenses of both patented and unpatented background technology for
purposes of developing new technology through its R&D Ventures. Access to this
background technology may be important to the Partnership's ability to develop
or commercialize its technology. The Partnership believes that its technology
licenses are adequate for its purposes. If patentable technology is developed by
the Partnership, whether the Partnership is able to obtain patents on such
technology could affect the income or value the Partnership will be able to
derive from such technology.
Competition
The information set forth under the heading "Substantial Competition, Technical
Advances of Others and Technological Obsolescence" of the section of the
Prospectus entitled "Risk and Other Important Factors" on pages 12 and 13 is
incorporated herein by reference.
<PAGE>
Employees
The Partnership has no employees. The Partnership Agreement provides that the
General Partner manages and controls the Partnership's R&D Ventures and
investment activities. The Sub-Manager, subject to the supervision of the
Management Company, provides the management services in connection with the
Partnership's R&D Ventures and investment activities under a sub-management
agreement. The Management Company performs, or arranges for others to perform,
the management and administrative services necessary for the operation of the
Partnership and is responsible for managing the Partnership's short-term
investments in U.S. Government securities ("Permitted Temporary Investments").
Item 2. Properties.
The Partnership does not own or lease physical properties.
Item 3. Legal Proceedings.
The Partnership is not a party to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The information with respect to the market for the Units set forth under the
caption "Transferability of Units" on pages 50 and 51 of the Prospectus is
incorporated herein by reference. There is no established public trading market
for the Units. The approximate number of holders of Units as of March 17, 1995
is 6,600.
Beginning with December 1994 client account statements, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S") implemented new guidelines for valuing
limited partnerships and other direct investments reported on client account
statements. As a result, MLPF&S no longer reports general partner estimates of
limited partnership net asset value on its client account statements, although
the Partnership's managing general partner may continue to provide its estimate
of net asset value in quarterly reports to unit holders. Pursuant to the new
guidelines, estimated values for limited partnership investments will be
provided annually to MLPF&S by independent valuation services. The estimated
values will be based on financial and other information available to the
independent services on the prior August 15th. MLPF&S clients may contact their
Merrill Lynch Financial Consultants or telephone the number provided to them on
their account statements to obtain a general description of the methodology used
by the independent valuation services to determine their estimates of value. The
estimated values provided by the independent services are not market values and
unit holders may not be able to sell their units or realize the amounts shown on
their MLPF&S statements upon a sale. In addition, unit holders may not realize
the amount shown on their account statements upon the liquidation of the
Registrant over its remaining life.
The Partnership makes cash distributions to its Partners as soon as practicable
after proceeds are received. Cash distributions paid to Partners during the
years ended December 31, 1994, 1993 and 1992 and cumulative cash distributions
paid from inception to December 31, 1994 are set forth below:
<TABLE>
Distribution General Limited Per
Date Partner Partners $1,000 Unit
---- ------- -------- -----------
<S> <C> <C> <C>
March 31, 1992 $ 46,000 $ 4,146,000 $ 60
June 26, 1992 $ 257,000 $ 23,146,000 $ 335
March 26, 1993 $ 85,000 $ 7,600,000 $ 110
January 21, 1994 $ 38,000 $ 3,455,000 $ 50
Cumulative totals $591,000 $ 53,133,000 $ 769
</TABLE>
<PAGE>
Item 6. Selected Financial Data.
($ In Thousands, Except For Per Unit Information)
<TABLE>
Years Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income $ 222 $ 2,417 $ 20,825 $ 9,768 $ 5,910
Research and development expenses, net - - - 883 2,957
Royalty and licensing income 1,300 1,193 1,002 573 969
Net realized gain from research and
development ventures 335 1,117 1,599 7,721 3,900
Net realized gain (loss) from investments (952) 492 17,971 2,429 4,231
Total assets 7,943 11,992 18,378 26,181 17,042
Cash distributions paid to Partners 3,493 7,685 27,596 2,096 11,038
Cumulative cash distributions paid to Partners 53,724 50,231 42,546 14,950 12,854
PER UNIT OF LIMITED
PARTNERSHIP INTEREST:
Net income $ 3 $ 35 $ 298 $ 140 $ 85
Net realized gain from research and
development ventures 5 16 23 111 56
Net realized gain (loss) from investments (14) 7 257 35 61
Cash distributions paid to Limited Partners 50 110 395 30 158
Cumulative cash distributions paid to
Limited Partners 769 719 609 214 184
</TABLE>
<PAGE>
Item 7. 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 remaining 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 December 31, 1994, the
Partnership PTI's included $1.7 million in U.S. Treasury Bills with maturities
of less than one year and $359,000 in an interest-bearing cash account. For the
years ended December 31, 1994, 1993 and 1992, the Partnership earned interest of
$33,000, $4,000 and $590,000 from its PTI's, respectively. 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.
In June 1988, the Partnership terminated its interest in its R&D Venture with
United AgriSeeds, Inc. The Partnership has been receiving cash payments related
to this transaction in installments since 1988. During October 1994, the
Partnership received a $1.5 million installment payment from United AgriSeeds.
The remaining cash payments due from United AgriSeeds at December 31, 1994 total
$4.4 million.
It is anticipated that funds needed to cover future operating expenses will be
obtained first from the Partnership's existing cash reserves, then from
operating income, installment sale payments and asset sales.
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 years ended December 31, 1994, 1993 and 1992, the Partnership had net
income of $222,000, $2.4 million and $20.8 million, respectively. Net income or
loss is comprised of net operating income or loss and net realized gain or loss.
Net Operating Income or Loss - For the years ended December 31, 1994, 1993 and
1992, the Partnership had net operating income of $840,000, $808,000 and $1.3
million, respectively. The increase in net operating income for the 1994 period
compared to the 1993 period was the result of increases in royalty and licensing
income and other interest income which were partially offset by a decrease in
interest on accounts receivable. Royalty and licensing income increased $107,000
for the 1994 period, from $1.2 million in 1993 to $1.3 million in 1994. The
increase in royalty and licensing income was due to an increase in royalties
received from the Partnership's two R&D Ventures with Gen-Probe Incorporated.
Other interest income, primarily consisting of interest earned from PTI's, was
$33,000 and $4,000 for the years ended December 31, 1994 and 1993, respectively.
The increase in other interest income for the 1994 period was due to an increase
in interest earned from PTI's for the 1994 period compared to the 1993 period.
The increase in interest earned from PTI's for 1994 was a result of an increase
in funds invested in PTI's during the 1994 period compared to the 1993 period.
Interest on accounts receivable was $419,000 and $524,000 for the years ended
December 31, 1994 and 1993, respectively. The decrease in interest earned on
accounts receivable for the 1994 period compared to the 1993 period resulted
from the receipt of final installment payments related to the sale of
proprietary technology to Interleaf, Inc. during 1993 and a reduction in
interest earned during the 1994 period from the lower outstanding receivable
balance due from United AgriSeeds.
The decrease in net operating income for the 1993 period compared to the 1992
period was due to a $586,000 decrease in other interest income and a $112,000
decrease in interest earned on accounts receivable for the 1993 period compared
to the 1992 period. These decreases were partially offset by a $191,000 increase
in royalty and licensing income for the 1993 period compared to the 1992 period.
The decrease in other interest income was due to a reduced amount of funds
invested in the 1993 period compared to the 1992 period. During the 1992 period,
the Partnership sold equity positions resulting in proceeds of $27.4 million to
the Partnership. These funds were invested in PTI's until distributions were
made to Partners in March and June of 1992. The decrease in interest on accounts
receivable for the 1993 period compared to the 1992 period was due to a reduced
amount of interest earned from the lower outstanding receivable balance due from
United AgriSeeds and Interleaf. The increase in royalty income for the 1993
period compared to the 1992 period was due to an increase in royalties from
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 year ended December 31,
1994, the Partnership had a net realized loss of $618,000. For the years ended
December 31, 1993 and 1992, the Partnership had a net realized gain of $1.6
million and $19.6 million, respectively.
During the year ended December 31, 1994, the Partnership realized a $228,000
loss from the write-off of its warrants to purchase common shares of IDEC
Pharmaceuticals Corporation, which expired in February 1995. Also at December
31, 1994, the Partnership wrote-off $250,000 of its $500,000 subordinated note
due from Photon Technology International, Inc. ("PTI") due to uncertainty
regarding repayment of the note. Additionally, the Partnership realized a
$474,000 loss due to the expiration of its warrants to purchase common shares of
Photon Technology International, Inc. and Bolt Beranek and Newman Inc. during
April 1994 and May 1994, respectively. Also during 1994, the Partnership
realized a gain of $335,000 from the installment sale of proprietary technology
to United AgriSeeds.
During the year ended December 31, 1993, the Partnership recorded realized gains
of $871,000 and $245,000 relating to the installment sale of proprietary
technology to Interleaf, Inc. and United AgriSeeds, Inc., respectively. Also
during 1993, the Partnership realized a gain of $492,000 from the receipt of a
settlement payment relating to its participation as a plaintiff in a class
action suit. The class action suit was filed on behalf of former shareholders of
Gen-Probe who contended that they did not receive fair and adequate compensation
for their Gen-Probe shares in connection with the 1989 Chugai Pharmaceutical
Company acquisition of Gen-Probe. In connection with the merger, in 1989, the
Partnership sold its warrants to purchase 1,175,000 common shares of Gen-Probe.
During the year ended December 31, 1992, the Partnership sold its joint venture
interest with Gen-Probe, related to the Gen-Probe II R&D Venture, for $600,000
and potential future royalties. In 1992, the Partnership also recorded realized
gains totaling $799,000 and $201,000 from the installment sale of proprietary
technology to Interleaf and United AgriSeeds, respectively. Also during 1992,
the Partnership sold the following equity securities in the public market:
562,500 common shares of Advanced Magnetics, Inc. realizing a gain of $8.2
million, 268,251 common shares of IDEXX Laboratories, Inc. realizing a gain of
$5.2 million, 356,696 common shares of Calgene, Inc. realizing a gain of $3.4
million, 105,000 common shares of Ecogen Inc. realizing a gain of $1 million and
44,900 shares of Bolt Beranek and Newman Inc. realizing a gain of $179,000.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
ML TECHNOLOGY VENTURES, L.P.
INDEX
Independent Auditors' Report
Balance Sheets as of December 31, 1994 and 1993
Statements of Operations for the years ended December 31, 1994, 1993 and 1992
Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992
Statements of Changes in Partners' Capital for the years ended December 31,
1992, 1993 and 1994
Notes to Financial Statements
NOTE - All other schedules are omitted because of the absence of conditions
under which they are required or because the required information is included in
the financial statements or the notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
ML Technology Ventures, L.P.:
We have audited the accompanying balance sheets of ML Technology Ventures, L.P.
(the "Partnership") as of December 31, 1994 and 1993, and the related statements
of operations, cash flows, and changes in partners' capital for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of ML Technology Ventures, L.P. at December 31,
1994 and 1993, and the results of its operations, its cash flows and the changes
in its partners' capital for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in Notes 2 and 6 to the financial statements, the Partnership
changed its method of accounting for certain investments in debt and equity
securities as of January 1, 1994 to conform with Statement of Financial
Accounting Standard No.
115.
As discussed in Notes 2 and 6, the 1993 financial statements include securities
valued at the lower of cost or market value, whose values were estimated by the
General Partner in the absence of readily ascertainable market values. We
reviewed the procedures used by the General Partner in arriving at its estimate
of value of such securities and inspected underlying documentation, and, in the
circumstances, we believe the procedures were reasonable and the documentation
appropriate. However, because of the inherent uncertainty of valuation, those
estimated values may have differed significantly from the values that were used
had a ready market for the securities existed, and the differences could have
been material.
Deloitte & Touche LLP
New York, New York
January 27, 1995
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
BALANCE SHEETS
December 31,
<TABLE>
1994 1993
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 359,001 $ 461,955
Investments - Notes 2 and 6
U.S. Government securities, at amortized cost - Note 11 1,748,819 3,246,547
Publicly traded securities (cost $1,684,325 at December 31, 1994) 1,244,954 2,386,436
Other equity investments, at cost 49,304 49,304
Convertible subordinated note at 13%, due October 1, 1995 250,000 500,000
Accounts receivable (less unamortized discount of $443,878 at
December 31, 1994 and $863,099 at December 31, 1993) - Note 7 4,291,425 5,347,469
--------- ---------
TOTAL ASSETS $ 7,943,503 $ 11,991,711
= ========= = ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 12,658 $ 15,968
Due to Management Company - Note 5 174,656 174,656
Deferred gain on sale of technology - Note 7 981,363 1,315,919
------- ---------
Total liabilities 1,168,677 1,506,543
--------- ---------
Partners' Capital:
General Partner 79,354 115,334
Limited Partners (69,094 Units) 7,134,843 10,369,834
Unallocated net unrealized depreciation of investments - Note 2 (439,371) -
-------- -
Total partners' capital 6,774,826 10,485,168
--------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 7,943,503 $ 11,991,711
= ========= = ==========
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
<TABLE>
1994 1993 1992
---- ---- ----
INCOME
<S> <C> <C> <C>
Royalty and licensing income $ 1,300,178 $ 1,192,510 $ 1,001,935
Interest on accounts receivable 419,221 523,832 635,628
Other interest income 33,059 3,933 590,248
------ ----- -------
Total income 1,752,458 1,720,275 2,227,811
--------- --------- ---------
EXPENSES
Management fee - Note 5 698,624 698,624 698,624
Professional fees 122,124 116,254 180,197
Mailing and printing 90,952 97,578 93,781
Miscellaneous 1,050 171 450
----- --- ---
Total expenses 912,750 912,627 973,052
------- ------- -------
NET OPERATING INCOME 839,708 807,648 1,254,759
------- ------- ---------
Net realized gain from research and development
ventures - Note 9 334,556 1,116,577 1,599,278
Net realized gain (loss) from investments - Note 10 (952,111) 492,438 17,970,608
-------- ------- ----------
NET REALIZED GAIN (LOSS) (617,555) 1,609,015 19,569,886
-------- --------- ----------
NET INCOME (allocable to Partners) - Note 3 $ 222,153 $ 2,416,663 $ 20,824,645
= ======= = ========= = ==========
Net income per unit of limited partnership interest $ 3.18 $ 34.59 $ 298.08
= ==== = ===== = ======
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
<TABLE>
1994 1993 1992
---- ---- ----
CASH FLOWS PROVIDED FROM OPERATING
ACTIVITIES
<S> <C> <C> <C>
Interest and other income received $ 1,748,825 $ 1,764,427 $ 1,950,681
Other operating expenses paid (916,060) (901,318) (1,012,365)
-------- -------- ----------
Cash provided from operating activities 832,765 863,109 938,316
------- ------- -------
CASH FLOWS PROVIDED FROM INVESTING
ACTIVITIES
Purchase of equity investments - (7,304) (388,459)
Deposits released from escrow - - 124,811
Net return (purchase) of investments in U.S.
Treasury Bills 1,500,599 4,963,204 (8,191,832)
Proceeds from the sale or termination of research
and development ventures 1,056,806 1,518,441 2,884,658
Proceeds from the sale of investments in stock - 492,438 27,412,020
- ------- ----------
Cash provided from investing activities 2,557,405 6,966,779 21,841,198
--------- --------- ----------
CASH FLOWS FOR FINANCING ACTIVITIES
Cash distributions:
General Partner (38,424) (84,534) (303,554)
Limited Partners (3,454,700) (7,600,340) (27,292,130)
---------- ---------- -----------
Cash used for financing activities (3,493,124) (7,684,874) (27,595,684)
---------- ---------- -----------
Increase (decrease) in cash and cash equivalents (102,954) 145,014 (4,816,170)
Cash and cash equivalents at beginning of period 461,955 316,941 5,133,111
------- ------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 359,001 $ 461,955 $ 316,941
= ======= = ======= = =======
Reconciliation of net income to cash provided from operating activities:
Net income $ 222,153 $ 2,416,663 $ 20,824,645
- ------- - --------- - ----------
Adjustments to reconcile net income to cash
provided from operating activities:
Net realized (gain) loss 617,555 (1,609,015) (19,569,886)
(Increase) decrease in receivables (3,633) 56,934 (284,107)
Decrease in payables (3,310) (1,473) (32,336)
------ ------ -------
Total adjustments 610,612 (1,553,554) (19,886,329)
------- ---------- -----------
Cash provided from operating activities $ 832,765 $ 863,109 $ 938,316
= ======= = ======= = =======
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Years Ended December 31, 1992, 1993 and 1994
<TABLE>
Unallocated
Net Unrealized
Appreciation
General Limited (Depreciation)
Partner Partners of Investments Total
<S> <C> <C> <C> <C>
Balance at December 31, 1991 $ 247,768 $ 22,276,650 $ 22,524,418
Cash distributions paid:
March 31, 1992 - Note 8 (46,110) (4,145,640) (4,191,750)
June 26, 1992 - Note 8 (257,444) (23,146,490) (23,403,934)
Allocation of net income - Note 3 229,071 20,595,574 20,824,645
------- ---------- ----------
Balance at December 31, 1992 173,285 15,580,094 15,753,379
Cash distribution, paid
March 26, 1993 - Note 8 (84,534) (7,600,340) (7,684,874)
Allocation of net income 26,583 2,390,080 2,416,663
------ --------- ---------
Balance at December 31, 1993 115,334 10,369,834 10,485,168
Valuation adjustment - Note 6 - - $ 1,188,818 1,188,818
Cash distribution, paid
January 21, 1994 - Note 8 (38,424) (3,454,700) - (3,493,124)
Allocation of net income 2,444 219,709 - 222,153
Change in net unrealized appreciation
or depreciation of investments - - (1,628,189) (1,628,189)
- - ---------- ----------
Balance at December 31, 1994 $ 79,354 $ 7,134,843 $ (439,371) $ 6,774,826
= ====== = ========= = ======== = =========
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS
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. In prior years,
investments in equity securities were accounted for at the lower of aggregate
cost or fair market value as determined in good faith by the General Partner.
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 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
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS
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 such
ratios in 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., 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 December 31, 1994 and 1993
As of January 1, 1994, the Partnership adopted Financial Accounting Standards
Board No. 115 ("FASB" 115) ("Accounting for Certain Investments in Debt and
Equity Securities"). The effect on partners' capital of initially applying this
FASB is a change in accounting principle, and the unrealized gain 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. At December
31, 1993, the Partnership's investments in equity securities were carried at the
lower of aggregate cost or fair market value. There were no sales or purchases
of securities in the current period.
<TABLE>
1994 1993
---- ----
Lower of
Aggregate
Shares/ Unrealized Market Shares/ Cost or
Warrants Cost Gain (Loss) Value Warrants Market
<S> <C> <C> <C> <C> <C> <C>
Publicly Traded Securities:
Ecogen Inc. - common stock 322,682 $ 839,850 $ 309,866 $ 1,149,716 322,682 $ 839,850
Interleaf, Inc. - warrant 275,000 594,475 (594,475) 0 275,000 594,475
Photon Technology International, Inc.
- common stock 190,476 250,000 (154,762) 95,238 190,476 250,000
- warrants - - - 500,000 473,750
Bolt Beranek and Newman Inc. - warrants - - - 212,710 100
IDEC Pharmaceuticals Corporation - warrant - - - 399,000 228,261
- - -------
Total $ 1,684,325 $ (439,371) $ 1,244,954 $ 2,386,436
= ========= = ======== = ========= = =========
</TABLE>
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS
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 December 31, 1994, 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 December 31, 1994.
8. Cash Distributions
Cash distributions paid to Partners during fiscal 1994, 1993 and 1992 and
cumulative cash distributions paid from inception of the Partnership through
December 31, 1994 are listed below:
<TABLE>
Distribution General Limited Per $1,000
Date Partner Partners Unit
---- ------- -------- ----
<S> <C> <C> <C> <C> <C>
March 31, 1992 $ 46,000 $ 4,146,000 $ 60
June 26, 1992 $ 257,000 $ 23,146,000 $ 335
March 26, 1993 $ 85,000 $ 7,600,000 $ 110
January 21, 1994 $ 38,000 $ 3,455,000 $ 50
Cumulative totals $ 591,000 $ 53,133,000 $ 769
</TABLE>
9. Net Realized Gains from Research and Development Ventures
For the year ended December 31, 1994, the Partnership realized a $335,000 gain
relating to the receipt of an installment sale payment from United AgriSeeds,
Inc. For the years ended December 31, 1993 and 1992, the Partnership realized
gains of $1.1 million and $1.0 million, respectively, relating to the receipt of
installment sale payments from United AgriSeeds, Inc. and Interleaf, Inc.
Additionally, in 1992, the Partnership realized a $600,000 gain from the sale of
its joint venture interest in the Gen-Probe II research and development venture.
10. Net Realized Gains or Losses from Investments
For the year ended December 31, 1994, the Partnership realized a $702,000 loss
from the expiration or write-off of warrants to purchase common stock of Photon
Technology International, Inc., IDEC Pharmaceuticals Corporation and Bolt
Beranek and Newman, Inc. Additionally during the year, the Partnership wrote-off
$250,000 of its $500,000 subordinated note due from Photon Technology
International, Inc. For the year
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS
ended December 31, 1993, the Partnership realized a gain of $492,000 from the
settlement of a class action lawsuit related to the 1989 acquisition of
Gen-Probe Incorporated by Chugai Pharmaceutical Company. For the year ended
December 31, 1992, the Partnership realized a gain of $18 million from the sale
of equity positions in Advanced Magnetics, Inc., IDEXX Laboratories, Inc.,
Ecogen Inc. and Calgene, Inc.
11. Investments in U.S. Government Securities
At December 31, 1994 and 1993, the Partnership had investments in U. S.
Government securities as detailed below.
<TABLE>
Maturity Purchase Amortized
Issuer Yield Date Price Cost Face Value
<S> <C> <C> <C> <C> <C>
At December 31, 1994:
U.S. Treasury Bill 4.86% 1/5/95 $ 1,728,029 $ 1,748,819 $ 1,750,000
- --------- - --------- - ---------
At December 31, 1993:
U.S. Treasury Bill 2.97% 1/13/94 $ 2,479,994 $ 2,497,319 $ 2,500,000
U.S. Treasury Bill 2.85% 1/13/94 748,634 749,228 750,000
------- ------- -------
Total $ 3,228,628 $ 3,246,547 $ 3,250,000
= ========= = ========= = =========
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership
The information set forth under the subcaption "The General Partner" on page 23
of the section of the Prospectus entitled "Management of the Partnership" is
incorporated herein by reference.
The Management Company
Merrill Lynch R&D Management Inc. (the "Management Company") performs, or
arranges for others to perform, the management and administrative services
necessary for the operation of the Partnership pursuant to a Management
Agreement, dated as of October 15, 1984, between the Partnership and the
Management Company. As of March 17, 1995, the directors of the Management
Company and the officers of the Management Company involved in the
administrative and operational support of the Partnership are:
<TABLE>
Served in Present
Name and Age Position Held Capacity Since
<S> <C> <C>
Kevin K. Albert (42) Director April 2, 1990
President July 5, 1991
Robert F. Aufenanger (41) Director April 2, 1990
Executive Vice President February 2, 1993
Robert W. Seitz (48) Director February 1, 1993
Vice President February 2, 1993
Joseph W. Sullivan (37) Treasurer February 2, 1993
</TABLE>
The directors of the Management Company will serve as directors until their
successors are elected and qualify at the next annual meeting of stockholders.
The executive officers of the Management Company will hold office until their
successors are elected and qualify at the next annual meeting of the Board of
Directors of the Management Company.
<PAGE>
On May 23, 1991, the Management Company entered into a sub-management agreement
with DLJ Capital Management Corporation ("DLJ Management") pursuant to which DLJ
Management, an indirect wholly-owned subsidiary of Donaldson, Lufkin & Jenrette,
Inc., provides management and advisory services in connection with the research
and development activities (the "R&D Activities") and investments of the
Partnership.
Such arrangements provide that DLJ Management, subject to the overall
responsibility and control of the Management Company and the Partnership, will
make all decisions regarding the Partnership's R&D Activities and investments
and, among other things, structure, negotiate and monitor the status of the
Partnership's joint ventures and portfolio limited partnerships and exercise the
rights and fulfill the responsibilities of the Partnership under direct
development contracts or joint ventures and exercise any rights the Partnership
may have as a limited partner in portfolio limited partnerships. The Management
Company continues to serve as the management company for the Partnership. Fees
of DLJ Management are paid directly by the Management Company.
The Management Company has arranged for Palmeri Fund Administrators, Inc., an
independent administrative services company, to provide administrative services
to the Partnership. Fees for such services are paid directly by the Management
Company.
Item 11. Executive Compensation.
The information set forth under the heading "Allocations of Profits and Loss" of
Section 3.3 of Article 3 of the Restated Certificate and Agreement of Limited
Partnership attached as Exhibit A to the Prospectus is incorporated herein by
reference.
The information set forth in the fourth paragraph of the section of the
Prospectus entitled "The Management Company Fees" on page 23 is incorporated
herein by reference.
Under the sub-management agreement with DLJ Management, the Management Company
pays DLJ Management 95% of the compensation which it receives under its
management agreement with the Partnership. Additionally, DLJ Management and an
affiliated entity, DLJ Associates VI L.P., have been admitted as limited
partners of ML R&D Co., L.P., the general partner of the Partnership, and will
be reallocated a percentage of the profits previously allocable to the
Management Company as the general partner of ML R&D Co., L.P.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 17, 1995, no person or group is known by the Partnership to be the
beneficial owner of more than 5 percent of the Units. In addition, no director
or officer of the Management Company is known by the Partnership to be the
beneficial owner of any Units.
The Partnership is not aware of any arrangement which may, at a subsequent date,
result in a change of control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
Kevin K. Albert, a Director and President of the Management Company and a
Managing Director of Merrill Lynch Investment Banking Group ("ML Investment
Banking"), joined Merrill Lynch in 1981. Robert F. Aufenanger, a Director and
Executive Vice President of the Management Company, a Vice President of Merrill
Lynch & Co. Corporate Strategy, Credit and Research and a Director of the
Partnership Management Department, joined Merrill Lynch in 1980. Messrs. Albert
and Aufenanger are involved with certain other entities affiliated with Merrill
Lynch or its affiliates. Robert W. Seitz, a Director and Vice President of the
Management Company, a First Vice President of Merrill Lynch & Co. Corporate
Strategy, Credit and Research and a Managing Director within the Corporate
Credit Division of Merrill Lynch, joined Merrill Lynch in 1981. Joseph W.
Sullivan, a Treasurer of the Management Company and a Vice President of ML
Investment Banking, joined Merrill Lynch in 1990. From 1988 to 1990, Mr.
Sullivan was an Assistant Vice President with Standard & Poor's Debt Rating
Group.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Independent Auditors' Report
Balance Sheets as of December 31, 1994 and 1993
Statements of Operations for the years ended December 31,
1994, 1993 and 1992
Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992
Statements of Changes in Partners' Capital for the years
ended December 31, 1992, 1993 and 1994
Notes to Financial Statements
2. 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.***
<TABLE>
<S> <C> <C> <C>
(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.
</TABLE>
(27) Financial Data Schedule.
(b) No reports on Form 8-K have been filed since the beginning of the last
quarter 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 30th day of March
1995.
ML TECHNOLOGY VENTURES, L.P.
By: ML R&D CO., L.P.
General Partner
By: MERRILL LYNCH R&D MANAGEMENT INC.
its General Partner
By: /s/ Kevin K. Albert
Kevin K. Albert
President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities indicated on the 30th day of March 1995.
By: /s/ Kevin K. Albert
Kevin K. Albert
President
(Principal Executive Officer and Director)
By: /s/ Joseph W. Sullivan
Joseph W. Sullivan
Treasurer
(Principal Financial and Accounting Officer)
<PAGE>
Exhibit Index
Exhibits Page
(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.*
(4) (B) (i) Amendment dated August 20, 1985 to the Amended and
Restated Certificate and Agreement of Limited Partnership of
the Partnership.**
(4) (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.
* 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ML
TECHNOLOGY VENTURES, L.P.'S ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED
DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<CASH> 359,001
<SECURITIES> 3,293,077
<RECEIVABLES> 4,291,425
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,943,503
<CURRENT-LIABILITIES> 1,168,677
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,943,503
<SALES> 0
<TOTAL-REVENUES> 1,752,458
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 912,750
<LOSS-PROVISION> (617,555)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 222,153
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
