<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
/ / 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 0-21464
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 13-3268435
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
440 Mission Court, Suite 250, Fremont, California
94539
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 656-1855
N/A
- --------------------------------------------------------------------------------
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 CK No _
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II
(a limited partnership)
STATEMENTS OF NET ASSETS
(in process of liquidation)
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 3,381,048 $ 4,718,876
Investments in equity securities 141,875 20,078,870
------------- ------------
Total assets 3,522,923 24,797,746
------------- ------------
Liabilities
Estimated liquidation costs 348,094 1,593,996
Accrued expenses and other liabilities -- 101,801
Accrued management fee -- 500,000
------------- ------------
Total liabilities 348,094 2,195,797
------------- ------------
Contingencies
Net assets in liquidation $ 3,174,829 $22,601,949
------------- ------------
------------- ------------
Net assets in liquidation
Limited partners (100,000 units issued and outstanding) $ 2,788,846 $20,273,254
General partner 385,983 2,328,695
------------- ------------
Total net assets in liquidation $ 3,174,829 $22,601,949
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in process of liquidation)
(unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNER TOTAL
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Net assets in liquidation--December 31, 1996 $ 20,273,254 $ 2,328,695 $ 22,601,949
Changes in estimated liquidation values of assets and
liabilities 1,515,592 168,399 1,683,991
Distributions (19,000,000) (2,111,111) (21,111,111)
------------ ----------- ------------
Net assets in liquidation--September 30, 1997 $ 2,788,846 $ 385,983 $ 3,174,829
------------ ----------- ------------
------------ ----------- ------------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
2
<PAGE>
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II
(a limited partnership)
STATEMENTS OF OPERATIONS
(going concern basis)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended Ended
September 30, 1996 September 30, 1996
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
REVENUES
Termination of royalty rights $3,472,000 $ --
Gain on sale of investment in equity securities 915,947 101,129
Royalty income 299,070 9,655
Interest and other income 567,682 63,510
------------------ -------------------
5,254,699 174,294
------------------ -------------------
EXPENSES
Management fee 1,500,000 500,000
General and administrative 343,278 165,466
------------------ -------------------
1,843,278 665,466
------------------ -------------------
Net income (loss) $3,411,421 $(491,172)
------------------ -------------------
------------------ -------------------
ALLOCATION OF NET INCOME (LOSS)
Limited partners $3,070,279 $(442,055)
------------------ -------------------
------------------ -------------------
General partner $ 341,142 $ (49,117)
------------------ -------------------
------------------ -------------------
Net income (loss) per limited partnership unit $ 30.70 $ (4.42)
------------------ -------------------
------------------ -------------------
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II
(a limited partnership)
STATEMENT OF CASH FLOWS
Nine Months Ended
September 30, 1996
(going concern basis)
(unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Royalty income received $ 441,630
Interest and other income received 291,340
General and administrative expenses paid (214,603)
Evaluation and monitoring expenses paid (27,781)
Management fee paid (1,500,000)
Cash received from affiliate, net 459,852
-----------------
Net cash used in operating activities (549,562)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the termination of royalty rights 3,472,000
Proceeds from the sale of investment in equity securities 1,362,874
Proceeds from the sale of stock and warrant rights 288,718
Collection of note receivable 19,031
Purchase of U.S. Treasury bills held in escrow (1,991,217)
Redemption of U.S. Treasury bills held in escrow 2,570,133
-----------------
Net cash provided by investing activities 5,721,539
-----------------
CASH FLOWS FROM FINANCING ACTIVITY
Distribution paid (4,444,444)
-----------------
Net increase in cash and cash equivalents 727,533
Cash and cash equivalents at beginning of period 2,936,616
-----------------
Cash and cash equivalents at end of period $ 3,664,149
-----------------
-----------------
- ---------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH
USED IN OPERATING ACTIVITIES
Net income $ 3,411,421
-----------------
Adjustments to reconcile net income to net cash
used in operating activities:
Gain on sale of investment in equity securities (915,947)
Gain on sale of stock and warrant rights (288,718)
Termination of royalty rights (3,472,000)
Changes in:
Due from affiliate 459,852
Royalties receivable 142,560
Interest receivable 12,376
Accrued expenses and other liabilities 100,894
-----------------
Total adjustments (3,960,983)
-----------------
Net cash used in operating activities $ (549,562)
-----------------
-----------------
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
Received 21,965 shares of Biocompatibles International plc ('Biocompatibles') common stock in July
1996 as a result of Biocompatibles' achievement of certain financial targets in 1995.
Received 17,360 shares of Optical Specialties, Inc. common stock for granting an extension of its
term loan.
Ecogen Inc. completed a 1:5 reverse stock split which resulted in the receipt of 102,165 shares of
common stock in exchange for 510,827 shares of common stock.
Silicon Valley Research, Inc. completed a 1:2 reverse stock split which resulted in the receipt of
146,806 shares of common stock in exchange for 293,612 shares of common stock.
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of this statement
</TABLE>
4
<PAGE>
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to fairly present the financial
statements of PruTech Research and Development Partnership II (the
'Partnership') as of September 30, 1997, subject to the effects of any further
liquidation accounting adjustments that would have been required had the
realizable values of certain assets been known when the Partnership first
adopted the liquidation basis of accounting. (See discussion below.)
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1996.
In September 1996, R&D Funding Corp (the 'General Partner') mailed to all
limited partners a Consent Solicitation Statement (the 'Statement') asking for
their written consent to approve a plan of dissolution and liquidation of the
Partnership (the 'Plan'), as more fully described in the Statement. On October
30, 1996, holders of 68.4% of the limited partnership units approved the Plan.
Accordingly, the Plan has been adopted.
In accordance with the terms of the Plan, the General Partner is proceeding
to sell or otherwise dispose of the Partnership's remaining investments and
distribute the resulting proceeds (reduced by a working capital reserve to
satisfy any liabilities or contingencies of the Partnership) to the partners in
accordance with the terms of the Agreement of Limited Partnership, as amended
(the 'Partnership Agreement'). It is not expected that the Partnership's
eventual total distributions will equal the partners' initial investment.
As a result of the adoption of the Plan, the Partnership adopted the
liquidation basis of accounting effective December 31, 1996, whereby assets are
valued at their estimated net realizable values and liabilities stated at their
estimated settlement amounts. However, due to the nature of certain of the
Partnership's remaining investments, the General Partner is not able to predict
with any degree of certainty the amounts which will be realized from these
investments and therefore, such assets continue to be carried at cost or have
been written off.
Accruals totaling approximately $1,594,000 were recorded as of December 31,
1996 for the estimated costs of liquidating the Partnership which include, but
are not limited to, costs of selling or otherwise disposing of the Partnership's
remaining investments and general and administrative costs through the estimated
conclusion of liquidation. The General Partner believes that the final
liquidation of the Partnership will occur by December 31, 1997 subject to the
liquidation of the Partnership's remaining investments and the settlement of
liabilities and contingencies, certain of which have ongoing discussions;
however, due to the nature of the remaining investments and contingencies to be
resolved, liquidation may take longer.
During the nine months ended September 30, 1997, the Partnership reflected an
increase of $1,684,000 in the estimated net liquidation value of its assets and
liabilities, of which $194,000 was recorded during the third quarter.
Approximately $1,282,000 of the nine month increase was attributed to the March
31, 1997 valuation of certain of the Partnership's remaining investments which
were previously carried at cost (see Notes B and C for additional discussion).
The remainder of the increase was principally attributed to a reduction in the
management fee (see Note D), market fluctuations in the Partnership's remaining
investments in equity securities, interest earned on the Partnership's cash and
cash equivalents and royalty income received.
5
<PAGE>
B. Royalties
Pursuant to an agreement dated as of March 31, 1997 between the Partnership
and Ecogen Inc. ('Ecogen'), the Partnership assigned to Ecogen its right, title
and interest in and to certain technologies, products and property licensed to
Ecogen and agreed to terminate all license agreements with Ecogen (the 'Ecogen
Rights') in exchange for 136,000 shares of Ecogen common stock with an estimated
net realizable value of $484,000 as of the date of the agreement. Prior to this
agreement, the Ecogen Rights were carried at zero. The Partnership was
restricted from selling such shares until the Securities and Exchange Commission
declared the registration of the shares effective on August 11, 1997. (The
shares were subsequently sold as further discussed in Note C). No further
royalty payments will be received by the Partnership from Ecogen as a result of
this agreement.
C. Investments in Equity Securities
Investments in equity securities include the following:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
----------------------------- -----------------------------
Estimated Estimated
net realizable net realizable
Shares value Shares value
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Ecogen Inc.--Common Stock 32,100 $ 91,531 102,165 $ 264,352
Synbiotics Corporation--Common Stock 12,586 50,344 293,003 1,042,291
Optical Specialties, Inc.--Common Stock* 274,628 -- 291,988 --
Optical Specialties, Inc.--Preferred Stock** 144,666 -- 144,666 43,400
Biocompatibles International plc--Common Stock -- -- 942,045 18,557,380
Navigation Technologies
Corporation--Common Stock** -- -- 2,284,541 2,218
Silicon Valley Research, Inc.--Common Stock -- -- 84,614 169,229
Texas Biotechnology Corporation--
Directors' Options** -- -- 7,980 --
-------------- --------------
$ 141,875 $ 20,078,870
-------------- --------------
-------------- --------------
</TABLE>
* Position carried at cost as of September 30, 1997 and December 31, 1996.
** Position carried at cost as of December 31, 1996.
As more fully discussed in Note F, the Partnership has fully realized the
September 30, 1997 $142,000 value from the sale of securities during the fourth
quarter through November 7, 1997. The Partnership's remaining positions are
carried at cost or have been determined to be permanently impaired (as further
discussed below) as of September 30, 1997.
Ecogen Inc.
During the first quarter of 1997, the Partnership sold 6,500 shares of Ecogen
common stock for approximately $25,000. The December 31, 1996 carrying amount
for Ecogen common stock reflected the net amount realized on these sales.
Additionally, pursuant to an agreement which closed March 31, 1997, the
Partnership received 136,000 shares of Ecogen common stock, as more fully
discussed in Note B. During the second quarter of 1997, the Partnership sold
95,665 shares of Ecogen common stock for approximately $300,000. During the
third quarter of 1997, the Partnership sold 103,900 shares of Ecogen common
stock for approximately $349,000. Between October 1 and October 10, 1997, the
Partnership sold its remaining 32,100 shares of Ecogen common stock for
approximately $92,000 as discussed in Note F.
Synbiotics Corporation
During the first quarter of 1997, the Partnership sold 167,500 shares of
Synbiotics Corporation common stock for approximately $655,000. The December 31,
1996 carrying amount for Synbiotics Corporation common stock reflected the net
amount of approximately $594,000 realized on the sales of 152,500 of such shares
through March 14, 1997. During the second quarter of 1997, the Partnership sold
108,900 shares of Synbiotics Corporation common stock for approximately
$396,000. During the third quarter of 1997, the Partnership exercised its
options to purchase 21,266 shares of Synbiotics Corporation common stock at
exercise prices ranging from $2.63 to $2.94 for a total cost of $59,000. Also
during the third quarter, the Partnership sold 25,283 shares of Synbiotics
Corporation common stock for approximately $104,000.
6
<PAGE>
Between October 1 and October 10, 1997, the Partnership sold its remaining
12,586 shares of Synbiotics Corporation common stock for approximately $50,000
as discussed in Note F.
Silicon Valley Research, Inc.
During the second quarter of 1997, the Partnership sold 77,000 shares of
Silicon Valley Research, Inc. common stock for approximately $82,000. During the
third quarter of 1997, the Partnership sold its remaining 7,614 shares of
Silicon Valley Research, Inc. for approximately $7,000.
Optical Specialties, Inc.
During June 1997, the Partnership sold 17,360 shares of Optical Specialties,
Inc. common stock, which had been carried at a cost basis of zero, for $700. At
September 30, 1997, the General Partner determined that the Partnership's
investment in Optical Specialties, Inc. preferred stock was permanently impaired
in value and therefore its $43,000 carrying value was written off.
Biocompatibles International plc
On February 7, 1997, the Partnership sold its remaining 942,045 shares of
Biocompatibles International plc common stock for approximately $18,557,000
representing the liquidation of the most significant remaining asset of the
Partnership. The December 31, 1996 carrying amount of this investment reflected
the net amount realized on this sale.
Navigation Technologies Corporation
During April 1997, the Partnership sold its remaining 2,284,541 shares of
Navigation Technologies Corporation ('Navigation Technologies') common stock,
which had been carried at a cost basis of $2,218 at December 31, 1996, for
approximately $800,000.
Texas Biotechnology Corporation
During July 1997, the Partnership exercised its options to purchase 7,980
shares of Texas Biotechnology Corporation common stock at exercise prices
ranging from $1.38 to $2.40 for a total cost of $16,000. On August 5, 1997, the
Partnership sold these shares of Texas Biotechnology Corporation common stock
for $46,000.
D. Related Parties
The General Partner and its affiliates perform certain services for the
Partnership (for which they are reimbursed through the management fee) which
include but are not limited to: accounting and financial management; registrar,
transfer and assignment functions; asset management; investor communications and
other administrative services. The Partnership also reimburses an affiliate of
the General Partner for printing services. These costs and expenses were
approximately $1,505,000 and $503,000 for the nine and three months ended
September 30, 1996.
Additionally, in conjunction with the adoption of the liquidation basis of
accounting, the Partnership recorded an accrual for the estimated future costs
expected to be incurred to liquidate the Partnership. Included in these
liquidation cost estimates as of December 31, 1996 are approximately $1,507,000
which were expected to be charged by the General Partner and its affiliates
during the anticipated liquidation period. Effective July 1, 1997, the General
Partner reduced its management fee to $125,000 per quarter which results in an
anticipated cost reduction from the December 31, 1996 estimate of $250,000. The
actual charges will depend primarily upon the length of the time required to
liquidate the Partnership and may differ from the amount accrued.
Prudential Securities Incorporated, an affiliate of the General Partner,
owned 340 limited partnership units at September 30, 1997.
The Partnership maintains an account with the Prudential Institutional
Liquidity Portfolio Fund, an affiliate of the General Partner, for investment of
its available cash in short-term instruments pursuant to the guidelines
established by the Partnership Agreement.
The Partnership has engaged in research and development co-investment
projects with PruTech Research and Development Partnership, PruTech Research and
Development Partnership III, and PruTech Project Development Partnership
(collectively, the 'PruTech R&D Partnerships'), for which R&D Funding
7
<PAGE>
Corp serves as the general partner. The allocation of the co-investment
projects' profits or losses among the PruTech R&D Partnerships is consistent
with the costs incurred to fund the research and development projects.
E. Contingencies
On April 15, 1994 a multiparty petition captioned Mack et al. v. Prudential
Securities Incorporated et al. (Cause No. 94-17695) was filed in the 80th
Judicial District Court of Harris County, Texas, purportedly on behalf of
investors in the Partnership against the Partnership, the General Partner,
Prudential Securities Incorporated, The Prudential Insurance Company of America
and a number of other defendants. The petition alleges common law fraud, fraud
in the inducement and negligent misrepresentation in connection with the
offering of the Partnership; negligence and breach of fiduciary duty in
connection with the operation of the Partnership; civil conspiracy; and
violations of the federal Securities Act of 1933 (sections 11 and 12), as
amended, and of the Texas Securities and Deceptive Trade Practices statutes. The
suit seeks, among other things, compensatory and punitive damages, costs and
attorneys' fees.
The General Partner, Prudential Securities Incorporated and the Partnership
believe they have meritorious defenses to the complaint and are vigorously
defending themselves against this action. The claims of most plaintiffs have
been settled or dismissed. It is currently expected that the remaining claims
will be resolved shortly. The Partnership has not contributed to any settlement
or paid any costs of the litigation, nor is it anticipated that it will.
Additionally, the General Partner believes that the litigation discussed above
will not have an adverse impact on its ability to liquidate the Partnership in
accordance with the Plan and in the time frame currently contemplated by the
General Partner.
F. Subsequent Events
During October 1997, the Partnership sold its remaining 32,100 shares of
Ecogen Inc. common stock for approximately $92,000. Also, during October 1997,
the Partnership sold its remaining 12,586 shares of Synbiotics Corporation
common stock for approximately $50,000. The September 30, 1997 carrying amount
for these investments reflects the net amount realized from these sales.
8
<PAGE>
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At September 30, 1997, the Partnership had cash and cash equivalents of
approximately $3,381,000 which is approximately $1,338,000 less than the
Partnership's cash balance at December 31, 1996. This decrease in cash was
primarily due to distributions made in excess of proceeds from the sales of
certain investments in equity securities as further discussed below, in addition
to the payment of management fees.
In September 1996, R&D Funding Corp (the 'General Partner') mailed to all
limited partners a Consent Solicitation Statement (the 'Statement') asking for
their written consent to approve a plan of dissolution and liquidation of the
Partnership (the 'Plan'), as more fully described in the Statement. Holders of
68.4% of the limited partnership units approved the Plan on October 30, 1996 and
accordingly, the Plan has been adopted.
In accordance with the terms of the Plan, the General Partner is proceeding
to sell or otherwise dispose of the Partnership's remaining investments and
distribute the resulting proceeds (reduced by a working capital reserve to
satisfy any liabilities or contingencies of the Partnership) to the partners in
accordance with the terms of the Partnership Agreement. As of September 30,
1997, the Partnership had investments in equity securities with an estimated net
realizable value of approximately $142,000, which has been fully realized from
the sale of securities in the fourth quarter through November 7, 1997 as
discussed below. The Partnership's remaining positions are carried at cost or
have been determined to be permanently impaired (as further discussed below) as
of September 30, 1997 and, as a result, the carrying value of these remaining
positions as of September 30, 1997 is zero. The Partnership also holds royalty
positions and technologies which have little or no value and such assets are
carried at zero. The General Partner believes that the final distribution and
liquidation of the Partnership will occur by December 31, 1997 subject to the
liquidation of the Partnership's remaining investments and the settlement of
liabilities and contingencies, certain of which have ongoing discussions;
however, due to the nature of the remaining investments and contingencies to be
resolved, liquidation may take longer. It is not expected that the Partnership's
eventual total distributions will equal the partners' initial investment.
During the nine months ended September 30, 1997, the Partnership reflected an
increase of $1,684,000 in the estimated net liquidation values of its assets and
liabilities, of which $194,000 was recorded during the third quarter.
Approximately $1,282,000 of the nine month increase was attributed to the March
31, 1997 valuation of the Partnership's remaining investments in Ecogen and
Navigation Technologies which were previously carried at cost as further
discussed below. The remainder of the increase was principally attributed to a
reduction in the management fee to $125,000 per quarter (as more fully discussed
in Note D to the accompanying financial statements), market fluctuations in the
Partnership's remaining investments in equity securities, interest earned on the
Partnership's cash and cash equivalents and royalty income received.
Pursuant to an agreement dated as of March 31, 1997 between the Partnership
and Ecogen Inc. ('Ecogen'), the Partnership assigned to Ecogen its right, title
and interest in and to certain technologies, products and property licensed to
Ecogen and agreed to terminate all license agreements with Ecogen (the 'Ecogen
Rights') in exchange for 136,000 shares of Ecogen common stock with an estimated
net realizable value of $484,000 as of the date of the agreement. Prior to this
agreement, the Ecogen Rights were carried at zero. The Partnership was
restricted from selling such shares until the Securities and Exchange Commission
declared the registration of the shares effective on August 11, 1997. The
Partnership sold these shares as discussed below. No further royalty payments
will be received by the Partnership from Ecogen as a result of this agreement.
In February 1997, the Partnership sold its remaining 942,045 share of
Biocompatibles International plc common stock for approximately $18,557,000
representing the liquidation of the most significant remaining asset of the
Partnership.
During the first quarter of 1997, the Partnership sold 6,500 shares of Ecogen
common stock and 167,500 shares of Synbiotics Corporation common stock for
approximately $25,000 and $655,000, respectively.
9
<PAGE>
In February 1997, the Partnership made distributions of $16,666,667 and
$4,444,444 of which $15,000,000 ($150 per unit) and $4,000,000 ($40 per unit),
respectively, were paid to the limited partners and the remainder to the General
Partner.
During the second quarter of 1997, the Partnership sold its remaining shares
of Navigation Technologies common stock, 95,665 shares of Ecogen common stock,
108,900 shares of Synbiotics Corporation common stock, 77,000 shares of Silicon
Valley Research, Inc. common stock, and 17,360 shares of Optical Specialties,
Inc. common stock for approximately $800,000, $300,000, $396,000, $82,000 and
$700, respectively.
During the third quarter of 1997, the Partnership exercised its options to
purchase 21,266 shares of Synbiotics Corporation common stock for a total cost
of $59,000. Also, during the third quarter, the Partnership sold 103,900 shares
of Ecogen common stock, 25,283 shares of Synbiotics Corporation common stock,
7,614 shares of Silicon Valley Research, Inc. common stock, and 7,980 shares of
Texas Biotechnology Corporation common stock for approximately $349,000,
$104,000, $7,000, and $46,000, respectively.
At September 30, 1997, the General Partner determined that the Partnership's
investment in Optical Specialties, Inc. preferred stock was permanently impaired
in value and therefore its $43,000 carrying value was written off.
Between October 1 and October 10, 1997, the Partnership sold its remaining
32,100 shares of Ecogen common stock and its remaining 12,586 shares of
Synbiotics Corporation common stock for approximately $92,000 and $50,000,
respectively. The September 30, 1997 carrying amount for these investments
reflects the net amount realized from these sales.
Results of Operations
The Partnership adopted the liquidation basis of accounting as of December
31, 1996 in accordance with generally accepted accounting principles and no
longer reports results of operations. As such, there is no management's
discussion comparing the corresponding 1997 and 1996 periods.
10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--This information is incorporated by reference to Note
E to the financial statements filed herewith in Item 1 of Part I of the
Registrant's Quarterly Report.
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits--
PruTech Research and Development Partnership II Agreement of Limited
Partnership (incorporated by reference to Exhibit 3.1 included with
Registrant's Form S-1 Registration Statement, File No. 2-94273, dated
November 9, 1984)
First Amendment to the Agreement of Limited Partnership of PruTech
Research and Development Partnership II (incorporated by reference to
Exhibit 3 included with Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991)
Financial Data Schedule (filed herewith)
b. Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by
this report, however, a report on Form 8-K dated October 9, 1997
was filed with the Securities and Exchange Commission on October
29, 1997, relating to Item 2 and the sale of Registrant's
remaining 136,000 shares of Ecogen Inc. common stock.
11
<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.
PruTech Research and Development Partnership II
By: R&D Funding Corp
A Delaware corporation, General Partner
By: /s/ Michael S. Hasley Date: November 14, 1997
----------------------------------------
Michael S. Hasley
President for the Registrant
By: R&D Funding Corp
A Delaware corporation, General Partner
By: /s/ Steven Carlino Date: November 14, 1997
----------------------------------------
Steven Carlino
Vice President
Chief Accounting Officer for the
Registrant
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for PruTech Research and
Development Partnership II and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000774560
<NAME> PruTech Research and Development Partnership II
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Sep-30-1997
<PERIOD-TYPE> 9-Mos
<CASH> 3,381,048
<SECURITIES> 141,875
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,522,923
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,522,923
<CURRENT-LIABILITIES> 348,094
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,174,829
<TOTAL-LIABILITY-AND-EQUITY> 3,522,923
<SALES> 0
<TOTAL-REVENUES> 0<F1>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0<F1>
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0<F1>
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>
Registrant adopted the liquidation basis of accounting
on December 31, 1996, and, accordingly, does not
reflect operations subsequent to 1996. See Note A to
the financial statements for further details.
</FN>
</TABLE>
