SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 2000
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)
4 World Financial Center, 26th floor
New York, New York 10080
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(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 March 31, 2000 (Unaudited) and December 31, 1999
Statements of Operations for the Three Months Ended March 31, 2000 and 1999
(Unaudited)
Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999
(Unaudited)
Statement of Changes in Partners' Capital for the Three Months Ended March 31,
2000 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
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>
<S> <C> <C> <C> <C> <C> <C>
March 31, 2000 December 31,
(Unaudited) 1999
Assets
Cash and cash equivalents $ 131,082 $ 108,819
Investments:
Publicly traded securities, at market value (cost of $1,125,000 as of
March 31, 2000 and December 31, 1999) 1,587,300 103,175
Subordinated promissory note 110,000 110,000
Accrued royalty receivable 30,932 31,386
-------------- ---------------
Total Assets $ 1,859,314 $ 353,380
============== ===============
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 37,430 $ 16,365
Due to Management Company 100,000 50,000
-------------- ---------------
Total liabilities 137,430 66,365
-------------- ---------------
Partners' Capital:
General Partner 125,958 130,884
Limited Partners (69,094 Units) 1,133,626 1,177,956
Accumulated unallocated other comprehensive loss
- unrealized appreciation (depreciation) of investments 462,300 (1,021,825)
-------------- ---------------
Total partners' capital 1,721,884 287,015
-------------- ---------------
Total Liabilities and Partners' Capital $ 1,859,314 $ 353,380
============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended March 31,
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
2000 1999
-------------- ------------
Income
Royalty and licensing income $ 31,232 $ 32,630
Interest income 571 6,880
--------------- ------------
Total income 31,803 39,510
--------------- ------------
Expenses
Management fee 50,000 50,000
Professional fees 17,407 9,068
Mailing and printing 13,552 11,804
Miscellaneous 100 -
--------------- ------------
Total expenses 81,059 70,872
--------------- ------------
Net Loss (49,256) (31,362)
Other Comprehensive Income (Loss)
Change in unrealized appreciation (depreciation) of investments 1,484,125 (12,401)
--------------- ------------
Comprehensive Income (Loss) $ 1,434,869 $ (43,763)
=============== ============
Net loss per unit of limited partnership interest $ (0.64) $(0.41)
======= ======
</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>
<S> <C> <C> <C> <C> <C> <C>
2000 1999
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Cash Flows Provided From (Used For) Operating Activities
Interest and other income received $ 32,420 $ 38,604
Other operating expenses paid (10,157) (60,433)
------------ -------------
Cash provided from (used for) operating activities 22,263 (21,829)
------------ -------------
Cash Flows Provided From Investing Activities
Net return of U.S. Government Securities - 99,053
------------ -------------
Cash provided from investing activities - 99,053
------------ -------------
Increase in cash and cash equivalents 22,263 77,224
Cash and cash equivalents at beginning of period 108,819 105,543
------------ -------------
Cash and Cash Equivalents at End of Period $ 131,082 $ 182,767
============ =============
Reconciliation of net loss to cash provided from (used for) operating
activities:
Net loss $ (49,256) $ (31,362)
------------ -------------
Adjustments to reconcile net loss to cash provided from (used for)
operating activities:
Decrease (increase) in accrued royalty receivable 454 (1,288)
Increase in accounts payable and accrued expenses 21,065 10,439
Increase in due to Management Company 50,000 -
Increase in accrued interest on U.S. Government Securities - 382
------------ -------------
Total adjustments 71,519 9,533
------------ -------------
Cash provided from (used for) operating activities $ 22,263 $ (21,829)
============ =============
</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, 2000
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Unallocated
Other
General Limited Comprehensive
Partner Partners Income (Loss) Total
Balance as of beginning of period $ 130,884 $ 1,177,956 $ (1,021,825) $ 287,015
Allocation of net loss (4,926) (44,330) - (49,256)
Change in other comprehensive income
(loss) - unrealized appreciation of
investments - - 1,484,125 1,484,125
------------ ---------------- ---------------- ----------------
Balance as of end of period $ 125,958 $ 1,133,626 $ 462,300 $ 1,721,884
============ ================ ================ ================
</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 ventures for the development of new technology through contracts,
joint ventures and participation in other partnerships.
Although the Partnership Agreement provides that the Partnership will terminate
no later than January 31, 2005, the General Partner is working toward the
termination of the Partnership as soon as practical, consistent with the goal of
maximizing returns.
2. Significant Accounting Policies
Valuation of Investments - In accordance with Statement of Financial Accounting
Standards ("SFAS") 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 valuation date. The related unrealized
appreciation (depreciation) of such securities is included in other
comprehensive income (loss) and 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.
Comprehensive Income (Loss) - In accordance with SFAS No. 130, "Reporting
Comprehensive Income", the statements of operations include an amount for other
comprehensive income (loss). Other comprehensive income (loss) consists of
revenues, expenses, gains and losses that have affected partners' capital but
which are excluded from net income (loss). Other comprehensive income (loss) in
the accompanying statements of operations resulted from a net unrealized gain
(loss) on investments. Accumulated other comprehensive income (loss) in the
accompanying balance sheets reflects the cumulative net unrealized appreciation
(depreciation) of investments in equity securities.
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 as of 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.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
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 (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. Cumulative cash distributions paid to partners through March 31,
2000 total $74,084,899, representing approximately 106% of capital contributed
to the Partnership.
4. Related Party Transactions
The Management Company is responsible for the management and administrative
services necessary for the operation of the Partnership. The Management Company
had 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.
Commencing with the management fee due for the quarter ended March 31, 1996, the
General Partner and the Management Company agreed to reduce the management fee
payable by the Partnership to $200,000 per annum. The management fee is payable
quarterly in arrears.
5. Investments in Equity Securities
As of March 31, 2000 and December 31, 1999, the Partnership held 396,825 common
shares of Photon Technology International, Inc., a public company, with a cost
of $1,125,000. Such securities had a market value of $1,587,300 and $103,175 as
of March 31, 2000 and December 31, 1999, respectively.
6. Interim Financial Statements
In the opinion of the General Partner, the unaudited financial statements as of
March 31, 2000, 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.
As of March 31, 2000, the Partnership held $131,082 in an interest bearing cash
account. The Partnership earned $571 of interest from cash balances held during
the quarter ended March 31, 2000. Interest earned in future periods is subject
to fluctuations in short-term interest rates and interest bearing cash balances
on hand.
It is anticipated that funds needed to cover future operating expenses will be
obtained from the Partnership's existing cash reserves, future royalty income
and proceeds from the sale of its remaining assets.
Although the Partnership Agreement provides that the Partnership will terminate
no later than January 31, 2005, the General Partner is working toward the
termination of the Partnership as soon as practical, consistent with the goal of
maximizing returns. In addition to the liquid assets held as of March 31, 2000,
the Partnership also holds 396,825 common shares of Photon Technology
International Inc. and a promissory note due from Photon Technology with a face
value of $110,000. The Partnership is also party to active royalty agreements in
connection with its R&D Ventures with Gen Probe, Inc. and Bolt Beranek and
Newman, Inc. The timing of the liquidation of these remaining assets is
contingent upon, among other things, market conditions and securities laws
restrictions. Therefore, although it is anticipated that the Partnership will
terminate during calendar year 2000, no assurances can be given that the
Partnership will be able to complete all steps necessary to liquidate the
remaining assets in such time frame.
As provided in the Partnership's prospectus delivered to limited partners in
connection with their initial investment in the Partnership, 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, reduced the annual management fee from $698,624 to $200,000,
commencing with the management fee for the first quarter of 1996. As a result,
the Partnership incurred a management fee of $50,000 for each of the three-month
periods ended March 31, 2000 and 1999.
Results of Operations
For the three months ended March 31, 2000 and 1999, the Partnership had a net
loss of $49,256 and $31,362, respectively.
<PAGE>
Net Operating Income or Loss - For the three months ended March 31, 2000 and
1999, the Partnership had a net operating loss of $49,256 and $31,362,
respectively. The $17,894 increase in net operating loss for the 2000 period
compared to the 1999 period was the result of a $10,187 increase in operating
expenses and a $7,707 decrease in royalty, licensing and interest income. The
increase in operating expenses for the three months ended March 31, 2000
compared to the same period in 1999, primarily resulted from an $8,339 increase
in professional fees for the period. The decline in operating income primarily
was attributable to a decrease in interest income, which reflected a decrease in
funds available for investment in short-term securities during the 2000 period
compared to the same period in 1999.
Other Comprehensive Income (Loss) - The Partnership has adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting compressive income
(loss), which consists of revenues, expenses, gains and losses that have
affected partners' capital but are excluded from net income (loss). The
Partnership's other comprehensive income (loss) consists of changes to
unrealized appreciation (depreciation) of its investments in equity securities.
For the three months ended March 31, 2000 and 1999, the Partnership had other
comprehensive income (loss) of $1,484,125 and ($12,401), respectively. Such
amounts represent the change in unrealized depreciation of the Partnership's
investment in Photon Technology International, Inc. for the respective periods.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
-----------------------------------------------------------
The Partnership is subject to market risk arising from changes in the value of
its equity investments, interest-bearing cash equivalents and investments in
U.S. Government securities, if any, which may result from fluctuations in
interest rates and equity prices. The Partnership has calculated its market risk
related to its holdings of these investments based on changes in interest rates
and equity prices utilizing a sensitivity analysis. The sensitivity analysis
estimates the hypothetical change in fair values, cash flows and earnings based
on an assumed 10% change (increase or decrease) in interest rates and equity
prices. To perform the sensitivity analysis, the assumed 10% change is applied
to market rates and prices on investments held by the Partnership as of the end
of the accounting period.
The 396,825 common shares of Photon Technology International, Inc. was the only
equity investment held by the Partnership as of March 31, 2000. The per share
market price of this security was $4.00 as of March 31, 2000 and the fair value
of the Partnership's holdings was $1,587,300. An assumed 10% decline from the
March 31, 2000 market price of this security would result in a reduction to the
fair value of the Partnership's holdings in Photon Technology and a
corresponding unrealized loss of $158,730.
Market risk associated with the Partnership's interest-bearing cash
equivalents and investments in U.S. Government securities, if any, is
considered to be immaterial.
<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) No reports on Form 8-K have been filed since the beginning of
the period covered by this report.
- ------------------------------
(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/ James V. Bruno
James V. Bruno
Vice President & Treasurer
(Principal Financial and Accounting Officer)
By: /s/ Michael Giobbe
Michael Giobbe
Vice President
Date: May 15, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ML
TECHNOLOGY VENTURES, L.P.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 131,082
<SECURITIES> 1,697,300
<RECEIVABLES> 30,932
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,859,314
<CURRENT-LIABILITIES> 137,430
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,721,884
<TOTAL-LIABILITY-AND-EQUITY> 1,859,314
<SALES> 0
<TOTAL-REVENUES> 31,803
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 81,059
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,256)
<EPS-BASIC> (0.64)
<EPS-DILUTED> (0.64)
</TABLE>
