SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1997
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.
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(Exact name of registrant as specified in its charter)
Delaware 13-3213176
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
World Financial Center, North Tower
New York, New York 10281-1326
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 449-1000
Not applicable
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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.
Amendment to Form 10-Q
For the Quarterly Period Ended March 31, 1997
The last sentence of the second paragraph of Note 9 to the Notes To Financial
Statements on page 9 of Form 10-Q of ML Technology Ventures, L.P. for the
quarterly period ended March 31, 1997, filed with the Securities and Exchange
Commission on May 15, 1997 is replaced with the following:
The distribution will be paid in July 1997 to Limited Partners of record on July
1, 1997.
Additionally, the last sentence of paragraph four of the Management's Discussion
and Analysis of Financial Condition and Results of Operations under the
sub-caption "Liquidity and Capital Resources" on page 10 of Form 10-Q of ML
Technology Ventures, L.P. for the quarterly period ended March 31, 1997, filed
with the Securities and Exchange Commission on May 15, 1997, is replaced with
the following:
The distribution will be paid in July 1997 to Limited Partners of record on July
1, 1997.
Item 1 "Financial Statements" and Item 2 "Management's Discussion and Analysis
of Financial Condition and Results of Operations" as revised are included in
this amendment in their entirety.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ML TECHNOLOGY VENTURES, L.P.
BALANCE SHEETS
<TABLE>
March 31, 1997 December 31,
(UNAUDITED) 1996
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 134,595 $ 218,215
Publicly traded securities (cost $5,339,662 as of March 31, 1997
and $1,125,000 as of December 31, 1996) 5,419,094 1,388,888
Other equity investments, at cost 19,810 73,043
Subordinated promissory note 130,000 130,000
Receivable from securities sold 5,456,077 -
Other assets 44,881 32,245
--------------- ---------------
TOTAL ASSETS $ 11,204,457 $ 1,842,391
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 89,004 $ 70,027
Due to Management Company 50,000 50,000
--------------- ---------------
Total liabilities 139,004 120,027
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Partners' Capital:
General Partner 120,845 16,042
Limited Partners (69,094 Units) 10,865,176 1,442,434
Unallocated net unrealized appreciation of investments 79,432 263,888
--------------- ---------------
Total partners' capital 11,065,453 1,722,364
--------------- ---------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 11,204,457 $ 1,842,391
=============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31,
<TABLE>
1997 1996
---------------- --------
INCOME
<S> <C> <C>
Royalty and licensing income $ 37,187 $ 36,004
Interest on accounts receivable - 49,716
Other interest income 1,097 22,195
---------------- -------------
Total income 38,284 107,915
---------------- -------------
EXPENSES
Management fee 50,000 50,000
Professional fees 65,500 108,349
Mailing and printing 11,694 14,814
Miscellaneous 1,051 1,050
---------------- -------------
Total expenses 128,245 174,213
---------------- -------------
NET OPERATING LOSS (89,961) (66,298)
---------------- -------------
Net realized gain from research and development ventures - 618,843
Net realized gain (loss) from investments 9,617,506 (323,693)
---------------- -------------
NET REALIZED GAIN 9,617,506 295,150
---------------- -------------
NET INCOME (allocable to Partners) $ 9,527,545 $ 228,852
================ =============
Net income per unit of limited partnership interest $ 136.51 $ 3.28
========= =======
</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>
1997 1996
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CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C> <C>
Interest and other income received $ 35,527 $ 117,109
Other operating expenses paid (119,147) (221,559)
------------ -------------
Cash used for operating activities (83,620) (104,450)
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CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES
Net return of investments in U.S. Treasury Bills - 1,066,927
Proceeds from the sale or termination of research and development
ventures - 2,350,284
Proceeds from the repayment of subordinated note - 100,000
Proceeds from the sale of investments in equity securities - 420,908
------------ -------------
Cash provided from investing activities - 3,938,119
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CASH FLOWS USED FOR FINANCING ACTIVITIES
Cash distributions:
General Partner - (42,267)
Limited Partners - (3,800,170)
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Cash used for financing activities - (3,842,437)
------------ -------------
Decrease in cash and cash equivalents (83,620) (8,768)
Cash and cash equivalents at beginning of period 218,215 243,366
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 134,595 $ 234,598
============ =============
Reconciliation of net income to cash used for operating activities:
Net income $ 9,527,545 $ 228,852
------------ -------------
Adjustments to reconcile net income to cash used for
operating activities:
Net realized gain (9,617,506) (295,150)
(Increase) decrease in receivables (12,636) 10,037
Increase (decrease) in payables, net 18,977 (48,189)
------------ -------------
Total adjustments (9,611,165) (333,302)
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Cash used for operating activities $ (83,620) $ (104,450)
============ =============
</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, 1997
<TABLE>
Unallocated
Net Unrealized
Appreciation
General Limited (Depreciation)
Partner Partners of Investments Total
<S> <C> <C> <C> <C>
Balance at beginning of period $ 16,042 $ 1,442,434 $ 263,888 $ 1,722,364
Allocation of net income 104,803 9,422,742 - 9,527,545
Change in net unrealized appreciation
(depreciation) of investments - - (184,456) (184,456)
------------ ---------------- -------------- ----------------
Balance at end of period $ 120,845 $ 10,865,176 $ 79,432 $ 11,065,453
============ ================ ============== ================
</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. DLJ Capital Management Corporation (the "Sub-Manager"), an
indirect subsidiary of Donaldson, Lufkin & Jenrette, Inc., is the sub-manager of
the Partnership, pursuant to a sub-management agreement among the Partnership,
the Management Company, the General Partner and the Sub-Manager.
The objective of the Partnership has been 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 has been engaged in research and
development activities for the development of new technology through contracts,
joint ventures and investments in other partnerships. The Partnership is in the
process of liquidation and 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.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), continued
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 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 $388,957 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 (see Note 9 below).
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. On March 27, 1996, the General Partner and the Management
Company agreed to reduce the management fee payable by the Partnership from 1%
of the aggregate capital contributions to the Partnership, or $698,624 per
annum, to $200,000 per annum. The reduction commenced with the quarterly
management fee paid for the quarter ended March 31, 1996.
6. Investments in Equity Securities
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 was 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.
The cost and market value of the Partnership's publicly-held securities as of
March 31, 1997 are as follows:
<TABLE>
Market
Cost Value
Photon Technology International, Inc.
<S> <C> <C>
396,825 shares of common stock $ 1,125,000 $ 1,661,903
IDEC Pharmaceuticals Corporation
157,779 shares of common stock 4,214,662 3,757,191
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$ 5,339,662 $ 5,419,094
============= =============
</TABLE>
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), continued
7. Net Realized Gains or Losses from Investments
During the quarter ended March 31, 1997, the Partnership received 365,217 common
shares of IDEC Pharmaceuticals Corporation from ML/MS Associates, L.P. and MLMS
Cancer Research, Inc. and sold 207,438 of these shares during the quarter for
$5,456,077, which was a receivable as of March 31, 1997 and collected in April
1997. These transactions resulted in a net realized gain for the quarter of
$9,617,506.
In March 1996, the Partnership received the final installment payment of $2.4
million from United AgriSeeds, Inc. which was due in September 1996. The $2.4
million payment resulted in a $1,731,441 return of capital, $49,716 of interest
income and a $618,843 realized gain. The $618,843 realized gain included the
recognition of an additional $83,554 gain due to the early receipt of the
payment from the United AgriSeeds.
8. Subordinated Promissory Note
In December 1995, the R&D venture between the Partnership and Photon Technology
International, Inc. was terminated. In connection with the termination, Photon
agreed to pay the Partnership $770,761 to satisfy its $500,000 subordinated note
obligation and related accrued interest. The $770,761 was scheduled to be paid
in installments through December 1997. Such installment payments were suspended
in June 1996 and had not resumed as of March 31, 1997. Since the Partnership had
written-off $250,000 of the principal amount of such note in 1994, the first
$250,000 paid under the new arrangement is being recorded as a return of
principal on the note.
9. Subsequent Events
On May 1, 1997, ML/MS Associates, L.P. made a final liquidating distribution of
372,048 common shares of IDEC Pharmaceuticals Corporation. As a result, the
Partnership received an additional 135,879 common shares of IDEC
Pharmaceuticals, which had a fair market value of $19.00 per share on May 1,
1997.
In April 1997, the General Partner approved a cash distribution to Partners
totaling $5,234,394; $5,182,050, or $75 per Unit, to the Limited Partners and
$52,344 to the General Partner. The distribution will be paid in July 1997 to
Limited Partners of record on July 1, 1997.
10. 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, 1997, 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 is working toward a final liquidation of its assets and
termination of the Partnership in 1998 or earlier, if possible. The timing of
such liquidation of the Partnership's assets and termination of the Partnership
is contingent upon, among other things, market conditions and contractual and
securities laws restrictions and no assurances can be given that the Partnership
will be able to complete all steps necessary to liquidate its assets and
terminate in such time-frame.
As of March 31, 1997, the Partnership had $135,000 in an interest-bearing cash
account. The Partnership earned $1,097 of interest from its cash balances for
the quarter ended March 31, 1997. Interest earned in future periods is subject
to fluctuations in short-term interest rates and changes in the Partnership's
available cash balances.
During the three months ended March 31, 1997, the Partnership sold 207,438
common shares of IDEC Pharmaceuticals Corporation for $5.5 million, realizing a
net gain of $9.6 million. Such proceeds were received in April 1997. As a
result, subsequent to the end of the quarter, in April 1997, the General Partner
approved a cash distribution to Partners totaling $5,234,394; $5,182,050, or $75
per Unit, to the Limited Partners and $52,344 to the General Partner. The
distribution will be paid in July 1997 to Limited Partners of record on July 1,
1997.
It is anticipated that funds needed to cover future operating expenses primarily
will be obtained from the Partnership's existing cash reserves and proceeds from
the sale of its remaining assets.
As was provided in the Partnership's prospectus delivered to Limited Partners in
connection with their investment, and as disclosed in subsequent filings and
reports, the Partnership is obligated to pay, and has paid accordingly, an
annual management fee equal to 2% of aggregate capital contributions during the
four years subsequent to its closing ($1,397,250 annually) and, thereafter, 1%
of aggregate capital contributions ($698,624 annually). The original objectives
of the Partnership anticipated that the bulk of the Partnership's revenues would
be earned between 1988 and 1996. Therefore, in consideration of the
Partnership's originally contemplated objectives, the reduction of assets under
management and the anticipated termination of the Partnership, the General
Partner and the Management Company, while not required to do so, have reduced
the annual management fee payable by the Partnership from $698,624 to $200,000.
The reduction commenced with the quarterly management fee paid for the quarter
ended March 31, 1996.
<PAGE>
Results of Operations
For the three months ended March 31, 1997 and 1996, the Partnership had net
income of $9.5 million and $229,000, 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, 1997 and
1996, the Partnership had a net operating loss of $90,000 and $66,000,
respectively. The increase in net operating loss for the 1997 period compared to
the 1996 period primarily was the result of a $70,000 decrease in total income,
partially offset by a $46,000 decrease in operating expenses. The decrease in
total income primarily resulted from a $50,000 reduction in interest earned on
the receivable balance due from United AgriSeeds, Inc., which was paid in full
in March 1996. Other income decreased by $21,000, primarily due to a decrease in
interest earned from short-term investments, due to a reduction of cash
available for investment in such securities during the 1997 period compared to
the same period in 1996. The decline in operating expenses for the 1997 period
compared to the 1996 period resulted mainly from a $43,000 decrease in of
professional fees.
Realized Gains and Losses - For the three months ended March 31, 1997, the
Partnership had a net realized gain of $9.6 million resulting from the receipt
of 365,217 common shares and subsequent sale of 207,438 shares of IDEC
Pharmaceuticals in the public market.
For the three months ended March 31, 1996, the Partnership had a net realized
gain totaling $295,000. During March 1996, the Partnership received the final
$2.4 million installment payment due from United AgriSeeds, as discussed above,
resulting in the recognition of a $619,000 realized gain during the quarter.
Additionally, the Partnership sold its remaining common shares of Ecogen, Inc.
for $322,000, realizing a loss of $324,000.
<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: May 27, 1997
