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 June 30, 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 June 30, 1995 (Unaudited) and December 31, 1994
Statements of Operations for the Three and Six Months Ended June 30, 1995 and
1994 (Unaudited)
Statements of Cash Flows for the Six Months Ended June 30, 1995 and 1994
(Unaudited)
Statement of Changes in Partners' Capital for the Six Months Ended June 30, 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>
June 30, 1995 December 31,
(Unaudited) 1994
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 280,909 $ 359,001
Investments - Notes 2 and 6
U.S. Government securities, at amortized cost 2,497,746 1,748,819
Publicly traded securities, at market value (cost $1,089,850
at June 30, 1995 and $1,684,325 at December 31, 1994) 788,221 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
Accounts receivable (less unamortized discount of $271,268 at
June 30, 1995 and $443,878 at December 31, 1994) - Note 7 4,464,118 4,291,425
--------- ---------
TOTAL ASSETS $ 8,330,298 $ 7,943,503
= ========= = =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 8,500 $ 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 1,164,519 1,168,677
--------- ---------
Partners' Capital:
General Partner 82,139 79,354
Limited Partners (69,094 Units) 7,385,269 7,134,843
Unallocated net unrealized depreciation of investments - Note 2 (301,629) (439,371)
-------- --------
Total partners' capital 7,165,779 6,774,826
--------- ---------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 8,330,298 $ 7,943,503
= ========= = =========
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
INCOME
<S> <C> <C> <C> <C>
Royalty and licensing income $ 332,000 $ 336,170 $ 698,978 $ 653,923
Interest on accounts receivable 86,782 110,495 172,610 219,776
Other interest income 33,586 1,682 59,262 8,554
------ ----- ------ -----
Total income 452,368 448,347 930,850 882,253
------- ------- ------- -------
EXPENSES
Management fee - Note 5 174,656 174,656 349,312 349,312
Professional fees 6,332 13,921 81,195 88,359
Mailing and printing 9,838 11,980 24,270 79,175
Miscellaneous 810 - 1,181 1,050
--- - ----- -----
Total expenses 191,636 200,557 455,958 517,896
------- ------- ------- -------
NET OPERATING INCOME 260,732 247,790 474,892 364,357
Net realized loss from investments in stock
and warrants - (100) (221,681) (473,850)
- ---- -------- --------
NET INCOME (LOSS) (allocable to Partners)
- Note 3 $ 260,732 $ 247,690 $ 253,211 $ (109,493)
= ======= = ======= = ======= = ========
Net income (loss) per unit of limited
partnership interest $ 3.73 $ 3.55 $ 3.62 $ (1.57)
= ==== = ==== = ==== = =====
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30,
<TABLE>
1995 1994
---- ----
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
<S> <C> <C>
Interest and other income received $ 772,515 $ 651,998
Other operating expenses paid (461,949) (468,396)
--------- --------
Cash provided from operating activities 310,566 183,602
------- -------
CASH FLOWS PROVIDED FROM (USED FOR) INVESTING
ACTIVITIES
Net return (purchase) of investments in U.S. Government securities (761,452) 3,228,628
Proceeds from the sale of investments in stocks and warrants 372,794 -
------- -
Cash provided from (used for) investing activities (388,658) 3,228,628
--------- ---------
CASH FLOWS USED FOR FINANCING ACTIVITIES
Cash distributions:
General Partner - (38,424)
Limited Partners - (3,454,700)
- ----------
Cash used for financing activities - (3,493,124)
- ----------
Decrease in cash and cash equivalents (78,092) (80,894)
Cash and cash equivalents at beginning of period 359,001 461,955
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 280,909 $ 381,061
= ======= = =======
Reconciliation of net income (loss) to cash provided from operating activities:
Net income (loss) $ 253,211 $ (109,493)
- ------- - --------
Adjustments to reconcile net income (loss) to cash provided from
operating activities:
Net realized loss 221,681 473,850
Increase in receivables (160,168) (230,255)
Increase (decrease) in payables (4,158) 49,500
------ ------
Total adjustments 57,355 293,095
------ -------
Cash provided from operating activities $ 310,566 $ 183,602
= ======= = =======
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
For the Six Months Ended June 30, 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 income - Note 3 2,785 250,426 - 253,211
Change in net unrealized
depreciation of investments - - 137,742 137,742
- - ------- -------
Balance at end of period $ 82,139 $ 7,385,269 $ (301,629) $ 7,165,779
= ====== = ========= = ======== = =========
</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 been distributed to the Limited Partners an
aggregate amount, since the inception of the Partnership, equal to
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ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 June 30, 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>
Common Unrealized Market
Shares Cost Loss Value
Publicly Traded Securities:
<S> <C> <C> <C> <C>
Ecogen Inc. 322,682 $ 839,850 $ (194,486) $ 645,364
Photon Technology International, Inc. 190,476 250,000 (107,143) 142,857
------- -------- -------
Total $ 1,089,850 $ (301,629) $ 788,221
= ========= = ======== = =======
</TABLE>
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
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ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 June 30, 1995, the balance due from United
AgriSeeds, net of unamortized discount, was $4.1 million and the deferred gain
from the sale was $981,000. The cash payments due from United AgriSeeds total
$4.4 million at June 30, 1995.
8. Cash Distributions
Cash distributions paid to Partners during the periods presented and cumulative
cash distributions paid from inception of the Partnership through June 30, 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 as of June 30, 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 June 30, 1995, and for the
three and six month periods then ended, reflect all adjustments necessary for
the fair presentation of the results of the interim periods.
<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 June 30, 1995, the
Partnership's PTI's included $2.5 million in U.S. Treasury Bills with maturities
of less than one year and $281,000 in an interest-bearing cash account. For the
three and six months ended June 30, 1995, the Partnership earned $34,000 and
$59,000 of interest 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.
Cash payments due from United AgriSeeds, Inc. at June 30, 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 and six months ended June 30, 1995, the Partnership had net income
of $261,000 and $253,000, respectively. For the three and six months ended June
30, 1994, the Partnership had net income of $248,000 and a net loss of $109,000,
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 June 30, 1995 and
1994, the Partnership had net operating income of $261,000 and $248,000,
respectively. The $13,000 increase in net operating income was the result of a
$4,000 increase in total income and a $9,000 reduction in operating expenses for
the 1995 period compared to the 1994 period. Other interest income increased
$32,000 from $2,000 for the three months ended June 30, 1994 to $34,000 for the
three months ended June 30, 1995. This increase was the result of an increase in
amounts invested in PTI's and higher short-term interest rates for the 1995
period compared to the 1994 period. Interest earned from receivables declined
$24,000 for the 1995 period compared to the 1994 period due to a reduction in
the amount of receivable from United AgriSeeds during the 1995 period.
Net operating income for the six months ended June 30, 1995 and 1994 was
$475,000 and $364,000, respectively. The $111,000 increase resulted from a
$49,000 increase in total income and a $62,000 reduction in operating expenses
for the comparable periods. The increase in total income included a $51,000
increase in other interest income resulting from an increase in amounts
available for investment in PTI's and an increase in short-term interest rates
for the 1995 period. Additionally, a $47,000 decrease in interest earned on
receivables for the 1995 period was offset by a $45,000 increase in royalty and
licensing income for the 1995 period. The reduction in operating expenses
primarily resulted from a $55,000 decline in mailing and printing expenses for
the 1995 period. This was due to certain cost control measures implemented by
the Partnership during the 1995 period to reduce such expenses.
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. The Partnership had no realized
gains or losses for the three months ended June 30, 1995. For the six months
ended June 30, 1995, the Partnership realized a $222,000 loss resulting from the
sale of 72,368 shares of Interleaf, Inc. common stock in the public market
during March 1995 for $373,000.
For the three and six months ended June 30, 1994, the Partnership had a net
realized loss of $100 and $474,000, respectively. In May 1994, the Partnership's
warrants to purchase 212,710 shares of Bolt Beranek and Newman, Inc. expired
resulting in a realized loss of $100. During the three months ended March 31,
1994, the Partnership's warrants to purchase 500,000 shares of Photon Technology
International, Inc. expired resulting in a realized loss of $474,000.
<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.
None.
<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.***
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<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 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/ Diane T. Herte
Diane T. Herte
Vice President and Treasurer
(Principal Financial and Accounting Officer)
Date: August 11, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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
JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> JUNE-30-1995
<CASH> 280,909
<SECURITIES> 3,585,271
<RECEIVABLES> 4,464,118
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,330,298
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,330,298
<SALES> 0
<TOTAL-REVENUES> 930,850
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 455,958
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 253,211
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
