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 September 30, 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.
===============================================================================
(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
==============================================================================
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 449-1000
Not applicable
===============================================================================
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets as of September 30, 1997 (Unaudited) and December 31, 1996
Statements of Operations for the Three and Nine Months Ended September 30, 1997
and 1996 (Unaudited)
Statements of Cash Flows for the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Statement of Changes in Partners' Capital for the Nine Months Ended September
30, 1997 (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>
September 30,
1997 December 31,
(Unaudited) 1996
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 657,832 $ 218,215
Publicly traded securities (cost $1,125,000 as of September 30,
1997 and December 31, 1996) 1,686,506 1,388,888
U.S. Government securities, at amortized cost 7,483,000 -
Other equity investments, at cost - 73,043
Subordinated promissory note receivable 110,000 130,000
Receivable from securities sold 48,186 -
Other receivables 32,502 32,245
--------------- ---------------
TOTAL ASSETS $ 10,018,026 $ 1,842,391
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 42,127 $ 70,027
Due to Management Company 50,000 50,000
--------------- ---------------
Total liabilities 92,127 120,027
--------------- ---------------
Partners' Capital:
General Partner 624,096 16,042
Limited Partners (69,094 Units) 8,740,297 1,442,434
Unallocated net unrealized appreciation of investments 561,506 263,888
--------------- ---------------
Total partners' capital 9,925,899 1,722,364
--------------- ---------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 10,018,026 $ 1,842,391
=============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------------- ------------ ---------------- --------
INCOME
<S> <C> <C> <C> <C>
Royalty and licensing income $ 28,043 $ 30,742 $ 98,018 $ 104,313
Interest on accounts receivable - - - 49,716
Other interest income 65,923 10,407 115,805 77,784
-------------- ------------ ---------------- -------------
Total income 93,966 41,149 213,823 231,813
-------------- ------------ ---------------- -------------
EXPENSES
Management fee 50,000 50,000 150,000 150,000
Professional fees 10,542 11,691 80,248 125,694
Mailing and printing 9,168 8,060 25,715 35,588
Miscellaneous 332 230 1,825 1,280
-------------- ------------ ---------------- -------------
Total expenses 70,042 69,981 257,788 312,562
-------------- ------------ ---------------- -------------
NET OPERATING INCOME (LOSS) 23,924 (28,832) (43,965) (80,749)
Net realized gain from research and development
ventures - - - 618,843
Net realized gain (loss) from investments sold 1,109,431 - 13,184,276 (323,693)
-------------- ------------ ---------------- -------------
NET REALIZED GAIN 1,109,431 - 13,184,276 295,150
-------------- ------------ ---------------- -------------
NET INCOME (LOSS) - (allocable to Partners) $ 1,133,355 $ (28,832) $ 13,140,311 $ 214,401
============== ============ ================ =============
Net income (loss) per unit of Limited
Partnership interest $ 14.76 $ (.41) $ 180.62 $ 3.07
========= ====== ========== =======
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30,
<TABLE>
1997 1996
-------------- ---------
CASH FLOWS PROVIDED FROM (USED FOR) OPERATING
ACTIVITIES
<S> <C> <C>
Interest and other income received $ 168,263 $ 250,940
Other operating expenses paid (312,543) (387,475)
-------------- ---------------
Cash provided from (used for) operating activities (144,280) (136,535)
-------------- ---------------
CASH FLOWS PROVIDED FROM (USED FOR) INVESTING
ACTIVITIES
Purchase of equity investments (46,131) -
Net return (purchase) of investments in U.S. Government securities (7,425,625) 4,577,518
Proceeds from the sale or termination of research and
development ventures - 2,350,284
Proceeds from the repayment of subordinated note receivable 20,000 120,000
Proceeds from the sale of investments in stocks and warrants 13,270,047 420,908
-------------- ---------------
Cash provided from (used for) investing activities 5,818,291 7,468,710
-------------- ---------------
CASH FLOWS PROVIDED FROM (USED FOR) FINANCING
ACTIVITIES
Cash distributions:
General Partner (52,344) (80,691)
Limited Partners (5,182,050) (7,254,870)
-------------- ---------------
Cash provided from (used for) financing activities (5,234,394) (7,335,561)
-------------- ---------------
Increase (decrease) in cash and cash equivalents 439,617 (3,386)
Cash and cash equivalents at beginning of period 218,215 243,366
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 657,832 $ 239,980
============== ===============
Reconciliation of net income to cash provided from (used for) operating
activities:
Net income $ 13,140,311 $ 214,401
-------------- ---------------
Adjustments to reconcile net income to cash provided from (used for)
operating activities:
Net realized (gain) loss (13,184,276) (295,150)
(Increase) decrease in receivables (57,632) 24,815
Decrease in payables (42,683) (80,601)
-------------- ---------------
Total adjustments (13,284,591) (350,936)
-------------- ---------------
Cash provided from (used for) operating activities $ (144,280) $ (136,535)
============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
For the Nine Months Ended September 30, 1997
<TABLE>
Unallocated
Net Unrealized
General Limited Appreciation
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
Distribution, paid July 8, 1997 (52,344) (5,182,050) - (5,234,394)
Allocation of net income 660,398 12,479,913 - 13,140,311
Change in net unrealized appreciation
of investments - - 297,618 297,618
-------------- ---------------- -------------- ----------------
Balance at end of period $ 624,096 $ 8,740,297 $ 561,506 $ 9,925,899
============== ================ ============== ================
</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. The related
unrealized appreciation or depreciation of such securities is reflected as a
separate component of Partners' capital. 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 (90/10 ratio) 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 (80/20 ratio). 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. Commitments
The Partnership had a $388,957 non-interest obligation payable on demand to MLMS
Cancer Research, Inc., the general partner of ML/MS Associates, L.P. This
obligation was satisfied in November 1997 by making a final payment of $14,783
to MLMS Cancer Research, Inc.
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 received a management fee at an annual rate
of 2% of the aggregate capital contributions to the Partnership for its first
four years of operations and 1% of the aggregate capital contributions
thereafter, through December 31, 1995. On March 27, 1996, the General Partner
and the Management Company agreed to reduce the management fee payable by the
Partnership to $200,000 per annum. The reduction commenced with the quarterly
management fee paid for the quarter ended March 31, 1996. The management fee is
payable quarterly in arrears.
6. Investments in Equity Securities
As of September 30, 1997, the Partnership held 396,825 shares of common stock of
Photon Technology International, Inc., a public company, with a cost of
$1,125,000 and a market value of $1,686,506.
7. Net Realized Gains or Losses from Investments
During the nine months ended September 30, 1997, the Partnership received
501,096 common shares of IDEC Pharmaceuticals Corporation in two final
liquidating distribution payments from ML/MS Associates, L.P. and its general
partner, MLMS Cancer Research, Inc. As of September 30, 1997, the Partnership
had liquidated all of its IDEC shares for $13,318,233, of which $48,186 was a
receivable as of September 30, 1997. The receipt and subsequent sale of the
Partnership's IDEC shares resulted in a net realized gain of $13,184,276 for the
nine months ended September 30, 1997.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), continued
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. 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, of which $20,000 was received during the three months
ended September 30, 1997, is being recorded as a return of principal on the
note.
9. Subsequent Event - Cash Distribution
On October 17, 1997, the Partnership made a cash distribution to Partners
totaling $7,330,062; $6,909,400 or $100 per Unit, to Limited Partners of
record on October 1, 1997 and $420,662 to the General Partner.
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 September 30, 1997, and
for the three and nine 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
The Partnership is working toward a final liquidation of its assets and
termination of the Partnership by the end of calendar year 1998, if possible.
The Partnership's Photon Technology International, Inc. equity holdings and
promissory note and the Gen-Probe II royalties are its only remaining assets.
The timing of the liquidation of the Partnership's assets and its termination is
contingent upon, among other things, market conditions 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.
During the three months ended September 30, 1997, the Partnership sold its
remaining common shares of IDEC Pharmaceuticals Corporation for net proceeds of
$4,365,053, of which $48,186 was a receivable at September 30, 1997. The
Partnership's entire position in IDEC was sold during the nine months ended
September 30, 1997 for aggregate net proceeds of $13,318,233.
As of September 30, 1997, the Partnership had $7,483,000 invested in U.S.
Treasury Bills, with maturities of less than one year, and $657,832 in an
interest bearing cash account. For the three and nine months ended September 30,
1997, the Partnership earned interest of $65,923 and $115,805 from such cash
balances, respectively. Interest earned in future periods is subject to
fluctuations in short-term interest rates and amounts available for investment
in such securities.
On October 17, 1997, the Partnership made a cash distribution to Partners
totaling $7,330,062. Limited Partners of record on October 1, 1997 received
$6,909,400, or $100 per Unit, and the General Partner received $420,662.
It is anticipated that funds needed to cover future operating expenses will be
obtained from the Partnership's existing cash reserves, royalty income, interest
income and proceeds received from the sale of the Partnership's remaining
assets.
Results of Operations
For the three and nine months ended September 30, 1997, the Partnership had net
income of $1,133,355 and $13,140,311, respectively, as compared to a net loss of
$28,832 and net income of $214,401 for the three and nine months ended September
30, 1996, respectively. Net income or loss is comprised of 1) net operating
income or loss (interest, royalty and licensing income less operating expenses)
and 2) net realized gain or loss.
Net Operating Income or Loss - For the three months ended September 30, 1997 and
1996, the Partnership had net operating income of $23,924 and a net operating
loss of $28,832, respectively. The increase in net operating income for the 1997
period compared to the 1996 period, primarily was the result of a $55,516
increase in interest income, due to an increase of cash available for investment
in short-term securities during the 1997 period compared to the same period in
1996. Operating expenses remained relatively flat for the three months ended
September 30, 1997 as compared to the same period in 1996 with a slight decrease
in professional fees mostly offset by an increase in mailing and printing
expenses.
For the nine months ended September 30, 1997 and 1996, the Partnership had a net
operating loss of $43,965 and $80,749, respectively. The decrease in net
operating loss for the 1997 period compared to the 1996 period, primarily
resulted from a $54,774 decrease in operating expenses partially offset by a
$17,990 decrease in interest, royalty and licensing income. The decline of
$11,695 in interest income included a $49,716 reduction in interest earned on
the receivable balance due from United AgriSeeds, Inc., which was paid in full
in March 1996. This was partially offset by an increase of $38,021 in other
interest income, due to an increase of cash available for investment in
short-term securities during the 1997 period compared to the same period in
1996. Additionally, royalty and licensing income decreased by $6,295 for the
1997 period compared to the 1996 period. The decrease in operating expenses for
the 1997 period compared to the 1996 period resulted mainly from reduced legal
fees and mailing and printing expenses incurred during the 1997 period.
Realized Gains and Losses - In March 1997 and in May 1997, the Partnership
received 365,217 and 135,879 common shares of IDEC Pharmaceuticals Corporation,
respectively, from ML/MS Associates, L.P. and its general partner, MLMS Cancer
Research, Inc. ("MLMS"), representing the final liquidating distribution from
MLMS. The Partnership liquidated its entire position in IDEC during the nine
months ended September 30, 1997. The receipt and subsequent sale of the
Partnership's IDEC shares resulted in a return of $4,365,053 and $13,318,233 and
a realized gain of $1,109,431 and $13,184,276 for the three and nine months
ended September 30, 1997, respectively.
The Partnership had no realized gains or losses for the three months ended
September 30, 1996, however, the Partnership had a $295,150 net realized gain
for the nine months ended September 30, 1996. During March 1996, the Partnership
received the final $2,350,284 installment payment due from United AgriSeeds,
resulting in the recognition of a $618,843 realized gain. Additionally, during
the three months ended March 31, 1996, the Partnership sold its remaining common
shares of Ecogen, Inc. in the public market for $321,889, realizing a loss of
$323,693.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Partnership is not a party to any 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.(a)
(B) (i) Amendment dated August 20, 1985 to the
Amended and Restated Certificate and
Agreement of Limited Partnership of the
Partnership.(b)
(B) (ii) Amendment dated August 28, 1985 to the
Amended and Restated Certificate and
Agreement of Limited Partnership of the
Partnership.(c)
(10) (a) Management Agreement dated as of May 23,
1991 among the Partnership, Management
Company and the Managing General Partner.(d)
(10) (b) Sub-Management Agreement dated as of May
23, 1991 among the Partnership, Management
Company, the Managing General Partner and
the Sub-Manager.(d)
(10) (c) Amendment dated March 27, 1996 to the
Management Agreement among the Partnership,
Management Company and the Managing General
Partner.(e)
(10) (d) Amendment dated March 27, 1996 to the
Sub-Management Agreement among the
Partnership, Management Company, the
Managing General Partner and the
Sub-Manager.(e)
(27) Financial Data Schedule.
(b) The Registrant filed with the Commission a current report on
Form 8-K dated August 28, 1997. This current
report contained details with respect to the Partnership's
cash distribution paid to Partners on October 17, 1997.
- ------------------------------
(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) Incorporated by reference to the Partnership's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996 filed with the Securities and
Exchange Commission on May 14, 1996.
<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: November 14, 1997
<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
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 657,832
<SECURITIES> 9,169,506
<RECEIVABLES> 190,688
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,018,026
<CURRENT-LIABILITIES> 92,127
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,925,899
<TOTAL-LIABILITY-AND-EQUITY> 10,018,026
<SALES> 0
<TOTAL-REVENUES> 13,398,099
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 257,788
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,140,311
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,140,311
<EPS-PRIMARY> 180.62
<EPS-DILUTED> 180.62
</TABLE>
