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, 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.
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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)
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
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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.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets as of June 30, 2000 (Unaudited) and December 31, 1999
Statements of Operations for the Three and Six Months Ended June 30, 2000 and
1999 (Unaudited)
Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999
(Unaudited)
Statement of Changes in Partners' Capital for the Six Months Ended June 30,
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 and Use of Proceeds.
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>
June 30, 2000 December 31,
(Unaudited) 1999
ASSETS
Cash and cash equivalents $ 111,904 $ 108,819
Investments:
Publicly traded securities, at market value (cost of $1,125,000 as of
June 30, 2000 and December 31, 1999) 793,650 103,175
Subordinated promissory note 110,000 110,000
Accrued royalty receivable 12,222 31,386
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TOTAL ASSETS $ 1,027,776 $ 353,380
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 21,450 $ 16,365
Due to Management Company 150,000 50,000
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Total liabilities 171,450 66,365
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Partners' Capital:
General Partner 118,768 130,884
Limited Partners (69,094 Units) 1,068,908 1,177,956
Accumulated unallocated other comprehensive loss
- unrealized depreciation of investments (331,350) (1,021,825)
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Total partners' capital 856,326 287,015
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,027,776 $ 353,380
============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------------- ------------ -------------- --------
INCOME
Royalty and licensing income $ 12,343 $ 33,122 $ 43,575 $ 65,752
Interest income 484 6,352 1,055 13,232
------------- --------------- ------------- ----------------
Total income 12,827 39,474 44,630 78,984
------------- --------------- ------------- ----------------
EXPENSES
Management fee 50,000 50,000 100,000 100,000
Professional fees 25,120 35,375 42,527 44,443
Mailing and printing 8,815 10,340 22,367 22,144
Miscellaneous 800 900 900 900
------------- --------------- ------------- ----------------
Total expenses 84,735 96,615 165,794 167,487
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NET OPERATING LOSS (71,908) (57,141) (121,164) (88,503)
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Net realized gain from investments - 1,645 - 1,645
------------- --------------- ------------- ----------------
NET LOSS (71,908) (55,496) (121,164) (86,858)
OTHER COMPREHENSIVE (LOSS) INCOME
Change in unrealized (depreciation) appreciation
of investments (793,650) (272,818) 690,475 (285,219)
------------- --------------- ------------- ----------------
COMPREHENSIVE (LOSS) INCOME $ (865,558) $ (328,314) $ 569,311 $ (372,077)
============= =============== ============= ================
Net loss per unit of limited partnership interest $ (0.94) $ (0.72) $ (1.58) $ (1.13)
========= ========= ========== ==========
</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>
<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 $ 63,957 $ 77,981
Other operating expenses paid (60,872) (159,733)
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Cash provided from (used for) operating activities 3,085 (81,752)
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CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES
Net return of U.S. Government Securities - 96,731
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Cash provided from investing activities - 96,731
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Increase in cash and cash equivalents 3,085 14,979
Cash and cash equivalents at beginning of period 108,819 105,543
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 111,904 $ 120,522
============== ===============
Reconciliation of net operating loss to cash provided from (used for) operating
activities:
Net operating loss $ (121,164) $ (88,503)
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Adjustments to reconcile net operating loss to cash provided from
(used for) operating activities:
Net realized gain - 1,645
Decrease (increase) in accrued royalty receivable 19,164 (3,105)
Increase in accounts payable and accrued liabilities 5,085 7,754
Increase in due to Management Company 100,000 -
Decrease in accrued interest on U.S. Government Securities - 457
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Total adjustments 124,249 6,751
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Cash provided from (used for) operating activities $ 3,085 $ (81,752)
============== ===============
</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, 2000
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Unallocated
Other
General Limited Comprehensive
Partner Partners Loss Total
Balance as of beginning of period $ 130,884 $ 1,177,956 $ (1,021,825) $ 287,015
Allocation of net loss (12,116) (109,048) - (121,164)
Change in other comprehensive loss -
unrealized depreciation of investments - - 690,475 690,475
------------ ---------------- ---------------- ---------------
Balance as of end of period $ 118,768 $ 1,068,908 $ (331,350) $ 856,326
============ ================ ================ ===============
</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.
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 in the United States of America
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 June 30,
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 June 30, 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 $793,650 and $103,175 as of
June 30, 2000 and December 31,1999, respectively.
6. Interim Financial Statements
In the opinion of the General Partner, the unaudited financial statements as of
June 30, 2000, and for the six- 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.
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Liquidity and Capital Resources
As of June 30, 2000, the Partnership held $111,904 in an interest bearing cash
account. The Partnership earned $484 and $1,055 of interest from its cash
balances for the three and six months ended June 30, 2000, respectively.
Interest earned in future periods is subject to fluctuations in short-term
interest rates and interest bearing cash balances on hand.
As of June 30, 2000, the Partnership's current liabilities exceeded its cash
balance by approximately $60,000. Current liabilities as of June 30, 2000
include $150,000 due to the Management Company. 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. As a result of the current cash shortage,
payments to the Management Company have been temporarily suspended.
Although the Partnership Agreement provides that the Partnership will terminate
no later than January 31, 2005, the General Partner is working toward the
liquidation of the Partnership's remaining assets and termination of the
Partnership as soon as practical, consistent with the goal of maximizing returns
to partners. In May 2000, the Partnership's royalty agreement with Gen Probe,
Inc. terminated, leaving only one remaining active royalty agreement with Bolt
Beranek and Newman, Inc. The Partnership continues to hold its 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 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 within 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 Partnership 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). 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 payable by the Partnership from $698,624 to $200,000, commencing with the
management fee payment due for the first quarter of 1996. As a result, the
Partnership incurred a management fee of $100,000 for the six months ended June
30, 2000 and 1999.
Results of Operations
For the three and six months ended June 30, 2000, the Partnership had a net loss
of $71,908 and $121,164, respectively, as compared to a net loss of $55,496 and
$86,858 for the three and six months ended June 30, 1999, 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, 2000 and
1999, the Partnership had a net operating loss of $71,908 and $57,141,
respectively. The $14,767 unfavorable change in net operating loss for the 2000
period compared to the same period in 1999 was the result of a $26,647 decrease
in operating income, partially offset by an $11,880 decrease in operating
expenses. The decline in operating income included a $20,779 decrease in royalty
income resulting from the February 2000 expiration of the Partnership's royalty
agreement with Gen-Probe, Inc. Additionally, interest income declined by $5,868
for the three months ended June 30, 2000 compared to the same period in 1999.
The decline in interest income primarily resulted from the lower cash balances
held by the Partnership during the three months ended June 30, 2000 compared to
the same period in 1999. The decline in operating expenses for the 2000 period
was due to a $10,255 decline in professional fees and a $1,625 decrease in
mailing and printing and other operating expenses. The decrease in professional
fees primarily resulted from adjustments to current and prior period accruals.
The decrease in mailing and printing expenses primarily resulted from decreased
mailings to partners during the three months ended June 30, 2000.
For the six months ended June 30, 2000 and 1999, the Partnership had a net
operating loss of $121,164 and $88,503, respectively. The $32,661 unfavorable
change in net operating loss for the 2000 period compared to the 1999 period
resulted from a $34,354 decrease in operating income, partially offset by a
$1,693 decrease in operating expenses. The decline in operating expenses
primarily was attributable to a small decrease in professional fees for the 2000
period reflecting reduced accounting and legal costs as the Partnership's
activity declines during its liquidation period. The decline in operating income
included a $22,177 decrease in royalty income resulting from the February 2000
expiration of the Partnership's royalty agreement with Gen-Probe, Inc., as noted
above. Additionally, interest income declined by $12,177 for the six months
ended June 30, 2000 compared to the same period in 1999, primarily due to the
lower cash balances held by the Partnership during the six months ended June 30,
2000 compared to the same period in 1999.
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 six months ended June
30, 2000.
For the six months ended June 30, 1999, the Partnership had a net realized gain
of $1,645 resulting from the receipt of a final liquidating distribution from
MLMS Cancer Research Inc.
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 June 30, 2000 and 1999, the Partnership had other
comprehensive (loss) of ($793,650) and ($272,818), respectively. For the six
months ended June 30, 2000 and 1999, the Partnership had other comprehensive
income (loss) of $690,475 and ($285,219), respectively. Such amounts represent
the change in the fair market value of the Partnership's investment in Photon
Technology International, Inc. for the respective periods.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
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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 Partnership's 396,825 common shares of Photon Technology International, Inc.
was the only equity investment held as of June 30, 2000. The per share market
price of this security was $2.00 as of June 30, 2000 and the fair value of the
Partnership's holdings was $793,650. An assumed 10% decline from the June 30,
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 $79,365.
Market risk associated with the Partnership's interest-bearing cash equivalents
and investments in U.S. Government securities is considered to be immaterial.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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The Partnership is not a party to any legal proceedings.
Item 2. Changes in Securities and Use of Proceeds.
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Not applicable.
Item 3. Defaults Upon Senior Securities.
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Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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Not applicable.
Item 5. Other Information.
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None.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
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(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.
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(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 and Treasurer
(Principal Financial and Accounting Officer)
By: /s/ Diane T. Herte
Diane T. Herte
Vice President
Date: August 14, 2000
