SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
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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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of class)
<PAGE>
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the prospectus of the Registrant dated March 11, 1985, filed with
the Securities and Exchange Commission pursuant to Rule 424(b) under the
Securities Act of 1933, as supplemented by the supplement thereto dated May 28,
1985 filed pursuant to Rule 424(c) under the Securities Act of 1933,
(collectively the "Prospectus"), are incorporated by reference in Part I, Part
II and Part III hereof.
<PAGE>
PART I
Item 1. Business.
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Formation
ML Technology Ventures, L.P. (the "Partnership" or the "Registrant") is a
Delaware limited partnership formed on April 23, 1984. ML R&D Co., L.P., the
general partner of the Partnership (the "General Partner"), is a Delaware
limited partnership also formed on April 23, 1984. Merrill Lynch R&D Management
Inc. (the "Management Company"), an indirect subsidiary of Merrill Lynch & Co.,
Inc., is the general partner of ML R&D Co., L.P. DLJ Capital Management
Corporation (the "Sub-Manager"), an indirect subsidiary of Donaldson, Lufkin &
Jenrette, Inc., is the sub-manager for the Partnership, pursuant to a
sub-management agreement among the Partnership, the General Partner, the
Management Company and the Sub-Manager.
In 1985, the Partnership publicly offered, through Merrill Lynch, Pierce, Fenner
& Smith Incorporated, 100,000 units of limited partnership interest ("Units") at
$1,000 per Unit. The Units were registered under the Securities Act of 1933
pursuant to a Registration Statement on Form S-1 (File No. 2-91941), which was
declared effective on March 11, 1985. On August 28, 1985, the offering of the
Units was completed. A total of 69,094 Units were sold and the General Partner
admitted the limited partners (the "Limited Partners") to the Partnership. The
total capital contributed to the Partnership by the Limited Partners is
$69,094,000. Additionally, the General Partner contributed $768,488,
representing 1.1% of the total capital contributed to the Partnership.
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 ("R&D Ventures") for the development of new technology
through contracts, joint ventures and participation in development 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, with an emphasis on liquidating the remaining
assets as soon as practical, consistent with the goal of maximizing returns. In
addition to the liquid assets held as of December 31, 1999, 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. As
described below, the Partnership is party to active royalty agreements in
connection with its R&D Ventures with Gen Probe, Inc. ("Gen Probe") and Bolt
Beranek and Newman, Inc. ("BBN"). The timing of the liquidation of these
remaining assets is contingent upon, among other things, market conditions and
securities laws restrictions.
Research and Development Activities
Since its inception, the Partnership entered into 16 R&D Ventures with 14
companies, funding research and development commitments of approximately $60
million. The Partnership completed the funding of such research and development
commitments during 1991 and will not enter into any new R&D Ventures.
As of December 31, 1999, the Partnership had terminated its activities or sold
its proprietary technology or joint venture interest in all of its 16 R&D
Ventures. In exchange for each such sale or termination, the Partnership
received cash and/or equity securities of the acquiring company, resulting in
cash distributions to partners.
While the Partnership's R&D Ventures were active, the principal focus of the
General Partner and Sub-Manager was managing the progress of such ventures and
monitoring the related royalty arrangements. As of December 31, 1999, the
General Partner and the Sub-Manager are primarily focused on monitoring the
Partnership's remaining assets comprised of two active royalty agreements with
development companies associated with two of the original R&D Ventures. The two
active royalty agreements are with BBN and Gen-Probe. Both of these companies
have commercialized the technology developed through the respective R&D Venture
with the Partnership. During 1999, the Partnership received royalties totaling
$124,920 from Gen-Probe and $1,681 from BBN.
The development companies involved with the Partnership's 16 R&D Ventures were
U.S. companies, the majority of which were publicly-held at the time the R&D
Venture was formed. No single R&D Venture involved a commitment of more than
12.5% of the Partnership's total contributed capital. The General Partner and
the Sub-Manager closely monitored the research and development activities
related to the Partnership's R&D Ventures and negotiated and arranged for
modifications of research, budgets and other terms of the contracts, where
appropriate. Each contract provided for regular monitoring by the General
Partner and the Sub-Manager of the results from research and development
activities and subsequent commercial sales activities. The Partnership relies on
the technical and business expertise of the officers and employees of the
Sub-Manager for the continued monitoring and management of the Partnership's
royalty agreements, portfolio investments and remaining assets.
Seasonality
There are no seasonal trends which affect the Partnership's remaining
activities.
Competition
The information set forth under the heading "Substantial Competition, Technical
Advances of Others and Technological Obsolescence" of the section of the
Prospectus entitled "Risk and Other Important Factors" on pages 12 and 13 of the
Prospectus is incorporated herein by reference. As mentioned above, the
Partnership will not enter into any new R&D Ventures.
Employees
The Partnership has no employees. The Partnership Agreement provides that the
General Partner manages and controls the Partnership's R&D Ventures and
investment activities. The Sub-Manager, subject to the supervision of the
Management Company, provides the management services in connection with the
Partnership's R&D Ventures and investment activities under a sub-management
agreement. The Management Company is responsible for the management and
administrative services necessary for the operation of the Partnership and is
responsible for managing the Partnership's short-term investments in U.S.
Government securities.
<PAGE>
Item 2. Properties.
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The Partnership does not own or lease physical properties.
Item 3. Legal Proceedings.
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The Partnership is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
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Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
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The information with respect to the market for the Units set forth under the
caption "Transferability of Units" on pages 50 and 51 of the Prospectus is
incorporated herein by reference. There is no established public trading market
for the Units and it is not anticipated that such a market will develop in the
future. Accordingly, accurate information as to the market value of a Unit at
any given date is not available. There were approximately 6,211 Unit holders as
of March 15, 2000.
Merrill Lynch has implemented guidelines pursuant to which it reports estimated
values for limited partnership interests originally sold by Merrill Lynch (such
as Registrant's Units) two times per year. Such estimated values will be
provided to Merrill Lynch by independent valuation services based on financial
and other information available to the independent services on (i) the prior
August 15th for reporting on December year-end and subsequent client account
statements through the following May's month-end client account statements, and
on (ii) the prior March 31st for reporting on June month-end and subsequent
client account statements through the November month-end client account
statements of the same year. The estimated values provided by the independent
services are not market values and Unit holders may not be able to sell their
Units or realize the amount upon a sale of their Units. In addition, Unit
holders may not realize the independent estimated value upon the liquidation of
the Registrant.
Cash distributions paid to partners during the three years ended December 31,
1999 and cumulative cash distributions paid from inception of the Partnership to
December 31, 1999 are set forth in the following table:
<TABLE>
General Limited Per
Distribution Date Partner Partners $1,000 Unit
- ----------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Cumulative as of December 31, 1996 $ 671,660 $ 60,388,156 $ 874
July 8, 1997 52,344 5,182,050 75
October 17, 1997 420,662 6,909,400 100
October 21, 1999 46,063 414,564 6
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Cumulative as of December 31, 1999 $ 1,190,729 $ 72,894,170 $ 1,055
============= ================ =========
</TABLE>
<PAGE>
Item 6. Selected Financial Data.
-----------------------
<TABLE>
($ in thousands, except for per unit information)
Years Ended December 31,
1999 1998 1997 1996 1995
--------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Net (loss) income $ (138) $ (140) $ 13,153 $ 206 $ 1,374
Royalty and licensing income 127 127 133 138 762
Net realized gain from research and
development ventures - - - 619 1,321
Net realized gain (loss) from investments 2 - 13,184 (324) (317)
Total assets 353 1,300 1,884 1,842 8,974
Cash distributions paid to partners 461 - 12,564 7,336 -
Cumulative cash distributions paid to partners 74,085 73,624 73,624 61,060 53,724
PER UNIT OF LIMITED PARTNERSHIP INTEREST:
Net (loss) income $ (2) $ (2) $ 181 $ 3 $ 20
Cash distributions paid to partners 6 - 175 105 -
Cumulative cash distributions paid to partners 1,055 1,049 1,049 874 769
</TABLE>
<PAGE>
Item 7.Management's Discussion and Analysis of Financial Condition and Results
of Operations.
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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 (R&D
Ventures). This amount represents 95% of the original $62.5 million of net
capital contributed to the Partnership. The Partnership has no remaining
research and development commitments and will not enter into new R&D Ventures in
the future.
As of December 31, 1999, the Partnership had $108,819 in an interest-bearing
cash account. For the years ended December 31, 1999, 1998 and 1997, the
Partnership earned interest from its investments in U.S. Government securities
and interest-bearing cash account totaling $20,741, $33,520 and $140,562,
respectively. Interest earned in future periods is subject to fluctuations in
short-term interest rates and amounts invested.
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 December 31,
1999, 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. Additionally, the Partnership is 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 its
remaining assets in such time frame.
As provided in the Partnership's prospectus, the Partnership is obligated to
pay, and has paid, 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 calendar quarter of 1996. As a
result, the Partnership incurred management fees of $200,000 for the calendar
years ended December 31, 1999, 1998 and 1997.
In October 1999, the Partnership paid a cash distribution to Partners totaling
$460,627, of which $414,564 was paid to the Limited Partners and $46,063 was
paid to the General Partner. Cumulative cash distributions paid to Partners from
inception of the Partnership to December 31, 1999 total $74,084,899. Limited
Partners have received $72,894,170, or $1,055 per $1,000 Unit, and the General
Partner has received $1,190,729.
Results of Operations
For the year ended December 31, 1999, the Partnership had a net loss of
$137,588. For the years ended December 31, 1998 and 1997, the Partnership had a
net loss of $139,887 and net income of $13,152,922, 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 from
the sale of investments and other assets.
Net Operating Income or Loss - For the years ended December 31, 1999, 1998 and
1997, the Partnership had a net operating loss of $139,233, $139,887 and
$31,354, respectively.
The slight favorable change in net operating loss for 1999 compared to 1998
primarily was due to a $14,101 decrease in operating expenses offset by a
$13,447 decrease in operating income. The decline in operating income primarily
was attributable to a decrease in other interest income, resulting from a
decrease in funds available for investment in U.S. Government securities during
the 1999 period compared to the same period in 1998. The decline in operating
expenses primarily resulted from reduced professional fees as well as a
reduction in mailing and printing expenses for 1999 compared to 1998. These
lower operating expenses reflect the reduced operating activity of the
Partnership's operations as it moves closer to termination.
The increase in net operating loss for 1998 period compared to 1997 primarily
was due to a $112,493 decrease in operating income. The decline in operating
income primarily was attributable to a decrease in other interest income, which
resulted from a decrease in funds available for investment in U.S. Government
securities during the 1998 period compared to the same period in 1997. Operating
expenses declined slightly, by $3,960 during 1998 as compared to 1997. Such
reduced expenses primarily resulted from reduced professional fees which were
partially offset by increased mailing and printing expenses. The $16,775
decrease in professional fees reflects the Partnership's declining operating
activity. The $13,674 increase in mailing and printing expense primarily
resulted from increased mailings to limited partners and a general increase in
mailing and printing fees during 1998.
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.
During the year ended December 31, 1999, the Partnership realized a gain of
$1,645 from a final liquidation payment received from MLMS Cancer Research, Inc.
The Partnership had no realized gains or losses from investments or other asset
sales for the year ended December 31, 1998.
For the year ended December 31, 1997, the Partnership had a net realized gain of
$13,184,276. In March 1997 and in May 1997, the Partnership received 365,217 and
135,879 common shares of IDEC Pharmaceuticals Corporation ("IDEC"),
respectively, from ML/MS Associates, L.P. and its general partner, MLMS Cancer
Research, Inc. ("MLMS"), representing a liquidating distribution from MLMS. The
Partnership sold all of these IDEC shares during 1997. The receipt and
subsequent sale of the Partnership's IDEC shares resulted in a cash return of
$13,318,234 and a realized gain of $13,184,276 for the year ended December 31,
1997.
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 comprehensive 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 years ended December 31, 1999, 1998 and 1997, the Partnership had other
comprehensive loss of $355,655, $434,026 and $496,032, respectively. Such
amounts represent the change in unrealized depreciation of the Partnership's
investment in Photon Technology for the respective periods.
Item 7A. 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. Treasury Bills, 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 at the end of
the accounting period.
The Partnership's 396,825 common shares of Photon Technology was the only equity
investment held as of December 31, 1999. The per share market price of this
security was $0.26 as of December 31, 1999 and the fair value of the
Partnership's holdings was $103,175. An assumed 10% decline from the December
31, 1999 market price of this security would result in a reduction to the fair
value of the Partnership's holdings in Photon Technology and an unrealized loss
of $10,318.
Market risk with respect to Partnership's interest-bearing cash equivalents and
investments in U.S. Treasury Bills, if any, is considered to be immaterial.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
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ML TECHNOLOGY VENTURES, L.P.
INDEX
Independent Auditors' Report
Balance Sheets as of December 31, 1999 and 1998
Statements of Operations for the years ended December 31, 1999, 1998 and 1997
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997
Statements of Changes in Partners' Capital for the years ended December 31,
1997, 1998 and 1999
Notes to Financial Statements
NOTE - All other schedules are omitted because of the absence of conditions
under which they are required or because the required information is included in
the financial statements or notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
ML Technology Ventures, L.P.:
We have audited the accompanying balance sheets of ML Technology Ventures, L.P.
as of December 31, 1999 and 1998, and the related statements of operations, cash
flows, and changes in partners' capital for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of ML Technology Ventures, L.P. as of December
31, 1999 and 1998, and the results of its operations, cash flows and changes in
partners' capital for each of the three years in the period ended December 31,
1999, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
February 25, 2000
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
BALANCE SHEETS
<TABLE>
December 31,
1999 1998
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Assets
<S> <C> <C>
Cash and cash equivalents $ 108,819 $ 105,543
Investments:
U.S. Government securities, at amortized cost - 595,856
Publicly traded securities, at market value (cost of $1,125,000 as of
December 31, 1999 and 1998) 103,175 458,830
Subordinated promissory note 110,000 110,000
Accrued royalty receivable 31,386 30,017
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Total Assets $ 353,380 $ 1,300,246
============== ===============
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 16,365 $ 9,361
Due to Management Company 50,000 50,000
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Total liabilities 66,365 59,361
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Partners' Capital:
General Partner 130,884 190,706
Limited Partners (69,094 Units) 1,177,956 1,716,349
Accumulated unallocated other comprehensive loss
- unrealized depreciation of investments (1,021,825) (666,170)
-------------- ---------------
Total partners' capital 287,015 1,240,885
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Total Liabilities and Partners' Capital $ 353,380 $ 1,300,246
============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
For the Years Ended December 31,
1999 1998 1997
-------------- -------------- ----------
Income
<S> <C> <C> <C>
Royalty and licensing income $ 126,601 $ 127,269 $ 132,720
Other interest income 20,741 33,520 140,562
--------------- --------------- ---------------
Total operating income 147,342 160,789 273,282
--------------- --------------- ---------------
Expenses
Management fee 200,000 200,000 200,000
Professional fees 47,965 58,226 75,001
Mailing and printing 37,477 41,321 27,647
Miscellaneous 1,133 1,129 1,988
--------------- --------------- ---------------
Total operating expenses 286,575 300,676 304,636
--------------- --------------- ---------------
Net Operating Loss (139,233) (139,887) (31,354)
Net realized gain from investments 1,645 - 13,184,276
--------------- --------------- ---------------
Net (Loss) Income $ (137,588) $ (139,887) $ 13,152,922
=============== =============== ===============
Other Comprehensive Loss
Change in unrealized depreciation of investments (355,655) (434,026) (496,032)
--------------- --------------- ---------------
Comprehensive (Loss) Income $ (493,243) $ (573,913) $ 12,656,890
=============== =============== ===============
Net (loss) income per unit of limited partnership interest $ (1.79) $ (1.82) $ 180.79
========= ======= ========
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
For the Years Ended December 31,
1999 1998 1997
--------------- --------------- ---------
Cash Flows Used For Operating Activities
<S> <C> <C> <C>
Interest and other income received $ 148,489 $ 172,093 $ 274,679
Other operating expenses paid (279,571) (310,687) (368,280)
--------------- -------------- ----------------
Cash used for operating activities (131,082) (138,594) (93,601)
--------------- -------------- ----------------
Cash Flows Provided From (Used For) Investing Activities
Net return (purchase) of investments in U.S. Government
securities 593,340 (99,113) (494,227)
Purchase of equity investments - - (60,915)
Proceeds from repayment of subordinated promissory note - - 20,000
Proceeds from the sale of investments 1,645 - 13,318,234
--------------- -------------- ----------------
Cash provided from (used for) investing activities 594,985 (99,113) 12,783,092
--------------- -------------- ----------------
Cash Flows Used For Financing Activities
Cash distributions:
General Partner (414,564) - (473,006)
Limited Partners (46,063) - (12,091,450)
--------------- -------------- ----------------
Cash used for financing activities (460,627) - (12,564,456)
--------------- -------------- ----------------
Increase (decrease) in cash and cash equivalents 3,276 (237,707) 125,035
Cash and cash equivalents at beginning of year 105,543 343,250 218,215
--------------- -------------- ----------------
Cash and Cash Equivalents at End of Year $ 108,819 $ 105,543 $ 343,250
=============== ============== ================
Reconciliation of net (loss) income to cash used for operating activities:
Net (loss) income $ (137,588) $ (139,887) $ 13,152,922
--------------- -------------- ----------------
Adjustments to reconcile net (loss) income to cash
used for operating activities:
Net realized gain (1,645) - (13,184,276)
Decrease (increase) in receivables and other assets 1,147 11,304 (11,592)
Increase (decrease) in payables 7,004 (10,011) (50,655)
--------------- --------------- -----------------
Total adjustments 6,506 1,293 (13,246,523)
--------------- -------------- ----------------
Cash used for operating activities $ (131,082) $ (138,594) $ (93,601)
=============== ============== ================
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
For the Years Ended December 31, 1997, 1998 and 1999
Accumulated
Unallocated
Other
General Limited Comprehensive
Partner Partners Income (Loss) Total
<S> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1996 $ 16,042 $ 1,442,434 $ 263,888 $ 1,722,364
July 1997 cash distribution (52,344) (5,182,050) - (5,234,394)
October 1997 cash distribution (420,662) (6,909,400) - (7,330,062)
Allocation of net income 661,659 12,491,263 - 13,152,922
Change in other comprehensive loss
- unrealized depreciation of investments - - (496,032) (496,032)
------------ -------------- ----------------- ---------------
Balance as of December 31, 1997 204,695 1,842,247 (232,144) 1,814,798
Allocation of net loss (13,989) (125,898) - (139,887)
Change in other comprehensive loss
- unrealized depreciation of investments - - (434,026) (434,026)
------------ -------------- ----------------- ---------------
Balance as of December 31, 1998 190,706 1,716,349 (666,170) 1,240,885
October 1999 cash distribution (46,063) (414,564) - (460,627)
Allocation of net loss (13,759) (123,829) - (137,588)
Change in other comprehensive loss
- unrealized depreciation of investments - - (355,655) (355,655)
------------ -------------- ----------------- ---------------
Balance as of December 31, 1999 $ 130,884 $ 1,177,956 $ (1,021,825) $ 287,015
============ ============== ================= ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS
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
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 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 or 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.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
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.
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 December
31, 1999 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.
<PAGE>
ML TECHNOLOGY VENTURES, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
5. Investments in Equity Securities
As of December 31, 1999 and 1998, 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 $103,175 and $458,830 as of
December 31, 1999 and 1998, respectively.
6. Net Realized Gain (Loss) from Investments
During the year ended December 31, 1999, the Partnership realized a gain of
$1,645 from the final liquidation payment from MLMS Cancer Research, Inc. The
Partnership had no realized gains or losses from investments for the year ended
December 31, 1998. During the year ended December 31, 1997, the Partnership
realized a gain of $13,184,276 from the receipt and subsequent sale of 501,096
common shares of IDEC Pharmaceuticals Corporation.
7. Cash Distributions
Cash distributions paid to partners during the three years ended December 31,
1999 and cumulative cash distributions paid from inception to December 31, 1999
are listed below:
<TABLE>
General Limited Per
Distribution Date Partner Partners $1,000 Unit
- ----------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Cumulative as of December 31, 1996 $ 671,660 $ 60,388,156 $ 874
July 8, 1997 52,344 5,182,050 75
October 17, 1997 420,662 6,909,400 100
October 21, 1999 46,063 414,564 6
--------------- ---------------- ---------
Cumulative as of December 31, 1999 $ 1,190,729 $ 72,894,170 $ 1,055
=============== ================ =========
</TABLE>
8. Investments in U.S. Government Securities
The Partnership had no investments in U.S. Treasury Bills as of December 31,
1999. The Partnership had investments in U.S. Treasury Bills as of December 31,
1998 as detailed below.
<TABLE>
Maturity Purchase Amortized
Yield Date Price Cost Face Value
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1998 4.44% 2/25/99 $ 593,340 $ 595,856 $ 600,000
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
---------------------------------------------------------------
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
--------------------------------------------------
The Partnership
The information set forth under the subcaption "The General Partner" on page 23
of the section of the Prospectus entitled "Management of the Partnership" is
incorporated herein by reference.
The Management Company
Merrill Lynch R&D Management Inc. (the "Management Company") is responsible for
the management and administrative services necessary for the operation of the
Partnership pursuant to a Management Agreement, dated as of October 15, 1984,
between the Partnership and the Management Company. As of March 15, 2000, the
directors of the Management Company and the officers of the Management Company
involved in the administrative and operational support of the Partnership are:
<TABLE>
Served in Present
Name and Age Position Held Capacity Since
<S> <C> <C>
Kevin K. Albert (47) Director April 2, 1990
President July 5, 1991
James V. Caruso (48) Director November 20, 1998
Executive Vice President December 30, 1998
Michael Giobbe (41) Director February 17, 2000
Vice President February 2, 1993
James V. Bruno (33) Treasurer November 5, 1999
Vice President December 30, 1998
</TABLE>
The directors of the Management Company will serve as directors until their
successors are elected and qualify at the next annual meeting of stockholders.
The executive officers of the Management Company will hold office until their
successors are elected and qualify at the next annual meeting of the Board of
Directors.
<PAGE>
On May 23, 1991, the Management Company entered into a sub-management agreement
with DLJ Capital Management Corporation (the "Sub-Manager") pursuant to which
the Sub-Manager, an indirect wholly-owned subsidiary of Donaldson, Lufkin &
Jenrette, Inc., provides management and advisory services in connection with the
research and development activities (the "R&D Activities") and investments of
the Partnership.
Such arrangements provide that the Sub-Manager, subject to the overall
responsibility and control by the Management Company and the Partnership, will
make all decisions regarding the Partnership's R&D Activities and investments
and, among other things, structure, negotiate and monitor the status of the
Partnership's joint ventures and portfolio limited partnerships and exercise the
rights and fulfill the responsibilities of the Partnership under direct
development contracts or joint ventures and exercise any rights the Partnership
may have as a limited partner in portfolio limited partnerships. The Management
Company continues to serve as the management company for the Partnership. Fees
of the Sub-Manager are paid directly by the Management Company.
The Management Company has arranged for Palmeri Fund Administrators, Inc.,
an independent administrative services company, to provide administrative
services to the Partnership. Fees for such services are paid directly by the
Management Company.
Item 11. Executive Compensation.
----------------------
The information set forth under the heading "Allocations of Profits and Loss" of
Section 3.3 of Article 3 of the Restated Certificate and Agreement of Limited
Partnership attached as Exhibit A to the Prospectus is incorporated herein by
reference.
The information set forth in the fourth paragraph of the section of the
Prospectus entitled "The Management Company Fees" on page 23 is incorporated
herein by reference.
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
period beginning January 1, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------
As of March 15, 2000, no person or group is known by the Partnership to be the
beneficial owner of more than 5 percent of the Units. In addition, no director
or officer of the Management Company is known by the Partnership to be the
beneficial owner of any Units.
The Partnership is not aware of any arrangement which may, at a subsequent date,
result in a change of control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
Kevin K. Albert, a Director and President of the Management Company and a
Managing Director of Merrill Lynch Investment Banking Group ("ML Investment
Banking"), joined Merrill Lynch in 1981. James V. Caruso, a Director and
Executive Vice President of the Management Company and a Director of ML
Investment Banking, joined Merrill Lynch in 1975. Michael Giobbe, a Director and
Vice President of the Management Company and a Vice President of the ML
Investment Banking, joined Merrill Lynch in 1986. James V. Bruno, a Vice
President and Treasurer of the Management Company and a Vice President of ML
Investment Banking, joined Merrill Lynch in 1997. Messrs. Albert, Caruso,
Giobbe, and Bruno are involved with certain other entities affiliated with
Merrill Lynch or its affiliates.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
---------------------------------------------------------------
(a) 1. Independent Auditors' Report
Balance Sheets as of December 31, 1999 and 1998
Statements of Operations for the years ended December 31,
1999, 1998 and 1997
Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
Statements of Changes in Partners' Capital for the years ended
December 31, 1997, 1998 and 1999
Notes to Financial Statements
2. 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. (1)
(b) (i) Amendment dated August 20, 1985 to the Amended and
Restated Certificate and Agreement of Limited
Partnership of the Partnership. (2)
(b) (ii)Amendment dated August 28, 1985 to the Amended and
Restated Certificate and Agreement of Limited
Partnership of the Partnership. (3)
(10) (a) Management Agreement dated as of May 23, 1991
among the Partnership, Management Company and the
Managing General Partner. (4)
(10) (b) Sub-Management Agreement dated as of May 23, 1991
among the Partnership, Management Company, the
Managing General Partner and the Sub-Manager. (4)
(10) (c) Amendment dated March 27, 1996 to the Management
Agreement among the Partnership, Management Company
and the Managing General Partner. (5)
(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. (5)
(27) Financial Data Schedule.
(b) No reports on Form 8-K have been filed since the beginning of the last
quarter of the period covered by this report.
(1) 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.
(2) 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.
(3) 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.
(4) Incorporated by references 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.
(5) Incorporated by references 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 Section 13 or 15(d) 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 on the 30th day of March
2000.
ML TECHNOLOGY VENTURES, L.P.
By: ML R&D CO., L.P.
General Partner
By: MERRILL LYNCH R&D MANAGEMENT INC.
its General Partner
By: /s/ Kevin K. Albert
Kevin K. Albert
President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities indicated on the 30th day of March 2000.
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ML
TECHNOLOGY VENTURES, L.P.'S ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 108,819
<SECURITIES> 213,175
<RECEIVABLES> 31,386
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 353,380
<CURRENT-LIABILITIES> 66,365
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 287,015
<TOTAL-LIABILITY-AND-EQUITY> 353,380
<SALES> 0
<TOTAL-REVENUES> 147,342
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 286,575
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (137,588)
<EPS-BASIC> (1.79)
<EPS-DILUTED> (1.79)
</TABLE>
