SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarterly Period Ended June 30, 1996
Commission file number 0-15681
WESTMED VENTURE PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3443230
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(State of organization) (I.R.S. Employer Identification No.)
Oppenheimer Tower, World Financial Center
New York, New York 10281
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 667-7000
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>
WESTMED VENTURE PARTNERS, L.P.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets as of June 30, 1996 (Unaudited) and December 31, 1995
Schedule of Portfolio Investments at June 30, 1996 (Unaudited)
Statements of Operations for the Three and Six Months Ended June 30, 1996 and
1995 (Unaudited)
Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995
(Unaudited)
Statement of Changes in Partners' Capital for the Six Months Ended June 30, 1996
(Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
WESTMED VENTURE PARTNERS, L.P.
BALANCE SHEETS
<TABLE>
June 30, 1996 December 31,
(Unaudited) 1995
ASSETS
Portfolio investments, at fair value
(cost $9,477,568 at June 30, 1996 and $11,690,534
<S> <C> <C> <C> <C> <C> <C>
at December 31, 1995) - Notes 2 and 4 $ 12,074,819 $ 13,668,256
Cash and cash equivalents - Note 2 6,310,548 2,310,697
Accrued interest receivable and other assets 11,154 39,088
--------------- ----------------
TOTAL ASSETS $ 18,396,521 $ 16,018,041
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 104,044 $ 64,979
Due to Managing General Partner - Note 4 97,619 82,705
Due to Independent General Partners - Note 4 7,377 15,000
--------------- ----------------
Total liabilities 209,040 162,684
--------------- ----------------
Partners' Capital:
Managing General Partner 181,878 158,557
Limited Partners (66,929 Units) 18,005,603 15,696,800
--------------- ----------------
Total Partners' capital 18,187,481 15,855,357
--------------- ----------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 18,396,521 $ 16,018,041
=============== ================
</TABLE>
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
June 30, 1996
Active Portfolio Investments:
<TABLE>
Initial Investment
Company / Position Date Cost Fair Value
Aprogenex, Inc.(A)
<C> <C> <C> <C>
476,739 shares of Common Stock Jan. 1989 $ 1,471,807 $ 446,943
10% convertible promissory note due 5/29/98 ` 212,120 212,120
Warrant to purchase 16,458 shares of Common Stock
at $7.39 per share, expiring 10/15/98 0 0
Warrant to purchase 13,000 shares of Common Stock
at $1.10 per share, expiring 5/29/99 0 0
--------------- ---------------
1,683,927 659,063
- -------------------------------------------------------------------------------------------------------------------------------
Bellara Medical Products Ltd.(A)
442,430 shares of Common Stock Sept. 1987 250,000 39,051
- -------------------------------------------------------------------------------------------------------------------------------
Cortex Pharmaceuticals, Inc.(A)
140,833 shares of Common Stock May 1988 504,038 523,723
75,000 shares of Preferred Stock 53,030 27,366
--------------- ---------------
557,068 551,089
- -------------------------------------------------------------------------------------------------------------------------------
Exocell, Inc.*
598,083 shares of Preferred Stock Feb. 1988 714,266 464,266
Convertible note due 3/31/97 53,030 53,030
--------------- ---------------
767,296 517,296
- -------------------------------------------------------------------------------------------------------------------------------
HBO & Co.(A)(B)
3,926 shares of Common Stock Dec. 1987 165,934 265,987
- -------------------------------------------------------------------------------------------------------------------------------
MNI Group Inc.(A)
211,973 shares of Common Stock Sept. 1987 451,457 90,089
- -------------------------------------------------------------------------------------------------------------------------------
Nimbus Medical, Inc.
200,709 shares of Common Stock Apr. 1988 380,431 192,374
Nimbus Medical, L.P.
38,340 units of limited partnership interest 635 30,289
--------------- ---------------
381,066 222,663
- -------------------------------------------------------------------------------------------------------------------------------
Oclassen Pharmaceuticals, Inc.
292,955 shares of Preferred Stock Jan. 1989 1,351,405 2,705,842
- -------------------------------------------------------------------------------------------------------------------------------
Somatogen, Inc.(A)
125,404 shares of Common Stock Dec. 1988 657,194 1,771,332
- -------------------------------------------------------------------------------------------------------------------------------
Ultramed, Inc.
954,545 shares of Preferred Stock Oct. 1987 333,410 0
18% Convertible Promissory Notes 159,090 150,000
12% Promissory Note 7,500 7,500
Warrant to purchase 7,500 shares of Common Stock
at $.05 per share, expiring 2/1/97 0 0
-------------- ---------------
500,000 157,500
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) - continued
June 30, 1996
Active Portfolio Investments:
<TABLE>
Initial Investment
Company / Position Date Cost Fair Value
UroCor, Inc.(A)(C)
<C> <C> <C> <C>
384,982 shares of Common Stock May 1991 $ 1,097,258 $ 3,537,022
Warrant to purchase 8,000 shares of Common Stock
at $1.25 per share, expiring 2/13/01 0 63,500
Warrant to purchase 8,995 shares of Common Stock
at $4.30 per share, expiring 10/18/98 0 43,963
Warrant to purchase 9,000 shares of Common Stock
at $5.00 per share, expiring 6/2/00 0 37,688
--------------- ---------------
1,097,258 3,682,173
- -------------------------------------------------------------------------------------------------------------------------------
Xenova Group plc(A)
304,403 Ordinary shares Aug. 1988 1,614,963 1,412,734
- -------------------------------------------------------------------------------------------------------------------------------
Totals From Active Portfolio Investments $ 9,477,568 $ 12,074,819
=================================
</TABLE>
SUPPLEMENTAL INFORMATION: LIQUIDATED PORTFOLIO INVESTMENTS(E)
<TABLE>
Cost Realized Loss Return
<S> <C> <C> <C>
Totals From Liquidated Portfolio Investments(D) $ 19,141,346 $ (7,758,452) $ 11,382,894
=====================================================
Combined Combined
Unrealized and Fair Value
Cost Realized Loss and Return
Totals From Active and Liquidated Portfolio Investments $ 28,618,914 $ (5,161,201) $ 23,457,713
=====================================================
</TABLE>
(A) Public company
(B) On June 10, 1996, HBO & Co. declared a 100% stock distribution. As a
result, the Partnership received an additional 1,963 shares of HBO & Co.
common stock.
(C) In May 1996, UroCor, Inc. completed its initial public offering at $11 per
share. In connection with the offering, the Partnership exchanged its
368,930 preferred shares for 384,982 common shares of the company.
(D) During May 1996, Corvita Corporation merged with a wholly-owned subsidiary
of Pfizer Inc. In connection with the merger, a cash tender offer was made
for all of the outstanding common shares of Corvita Corporation at a price
of $10.25 per share. The Partnership received $4.33 million for its Corvita
holdings, realizing a gain of $1.94 million.
(E) Amounts provided for "Supplemental Information: Liquidated Portfolio
Investments" are cumulative from inception through June 30, 1996.
* May be deemed an affiliated person of the Partnership as defined in the
Investment Company Act of 1940.
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
-------------- ------------ -------------- -------
INVESTMENT INCOME AND EXPENSES
Income:
<S> <C> <C> <C> <C>
Interest from short-term investments $ 41,960 $ 34,532 $ 68,409 $ 68,521
Interest, dividends and other income from
portfolio investments 79 - 158 55,593
-------------- ------------ -------------- ------------
Total 42,039 34,532 68,567 124,114
-------------- ------------ -------------- ------------
Expenses:
Management fee - Note 4 85,529 70,822 163,932 106,311
Professional fees 35,250 6,961 58,233 21,561
Mailing and printing 6,768 6,368 16,514 19,912
Insurance expense 18,251 23,093 39,517 48,926
Custodial fees 1,279 1,600 2,706 3,376
Independent General Partners' fees - Note 4 3,627 3,750 7,377 7,500
Miscellaneous 1,212 803 3,214 1,253
-------------- ------------ -------------- ------------
Total 151,916 113,397 291,493 208,839
-------------- ------------ -------------- ------------
NET INVESTMENT LOSS (109,877) (78,865) (222,926) (84,725)
Net realized gain from portfolio investments 1,935,521 - 1,935,521 -
-------------- ------------ -------------- ------------
NET REALIZED GAIN (LOSS) FROM
OPERATIONS 1,825,644 (78,865) 1,712,595 (84,725)
Net change in unrealized appreciation or
depreciation of investments 759,711 761,632 619,529 298,485
-------------- ------------ -------------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS
(allocable to Partners) - Note 3 $ 2,585,355 $ 682,767 $ 2,332,124 $ 213,760
============== ============ ============== ============
</TABLE>
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30,
<TABLE>
1996 1995
-------------- ---------
CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C> <C>
Net investment loss $ (222,926) $ (84,725)
Adjustments to reconcile net investment loss to cash used for operating
activities:
Decrease in accrued interest receivable and other assets 27,934 30,455
Increase (decrease) in payables 46,356 (30,698)
-------------- ---------------
Cash used for operating activities (148,636) (84,968)
-------------- ---------------
CASH FLOWS PROVIDED FROM (USED FOR)
INVESTING ACTIVITIES
Proceeds from the sale of portfolio investments 4,330,318 -
Cost of portfolio investments purchased (212,120) (238,635)
Cash distribution from Nimbus Medical, L.P. 30,289 -
-------------- ---------------
Cash provided from (used for) investing activities 4,148,487 (238,635)
-------------- ---------------
Increase (decrease) in cash and cash equivalents 3,999,851 (323,603)
Cash and cash equivalents at beginning of period 2,310,697 2,609,028
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,310,548 $ 2,285,425
============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
For the Six Months Ended June 30, 1996
<TABLE>
Managing
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at beginning of period $ 158,557 $ 15,696,800 $ 15,855,357
Net increase in net assets resulting
from operations - Note 3 23,321 2,308,803 2,332,124
------------- --------------- ----------------
Balance at end of period $ 181,878 $ 18,005,603(A) $ 18,187,481
============= =============== ================
</TABLE>
(A) The net asset value per unit of limited partnership interest, including
the allocation of net unrealized appreciation of investments, was $269 at
June 30, 1996. Such per unit amount is based on average allocations to
all limited partners and does not reflect specific limited partner
allocations, which are determined by the original closing date associated
with the units of limited partnership interest held by each limited
partner.
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Purpose
WestMed Venture Partners, L.P. (the "Partnership") was formed under Delaware law
on February 5, 1987. The Partnership operates as a business development company
under the Investment Company Act of 1940, as amended. The Partnership is a
closed-end investment fund and accordingly its units of limited partnership
interest ("Units") are not redeemable. A total of 66,929 Units were sold to
limited partners ("Limited Partners" and together with the Managing General
Partner (as hereinafter defined), the "Partners") at $500 per Unit.
The general partners of the Partnership include two individuals (the
"Independent General Partners") and the managing general partner, WestMed
Venture Management, L.P., a Delaware limited partnership (the "Managing General
Partner" and collectively with the Independent General Partners, the "General
Partners"). The general partner of the Managing General Partner is Medical
Venture Holdings, Inc., a Delaware corporation affiliated with Oppenheimer &
Co., Inc. ("Opco"). The limited partners of the Managing General Partner are
Oppenheimer Holdings, Inc., MVP Holdings, Inc. and BSW, Inc., a Delaware
corporation owned by John A. Balkoski, Philippe L. Sommer and Howard S.
Wachtler. Alsacia Venture Management, Inc. (the "Sub-Manager"), a corporation
controlled by Philippe L. Sommer, is the sub-manager of the Partnership pursuant
to a sub-management agreement among the Partnership, the Managing General
Partner and the Sub-Manager. The Sub-Manager has been retained by the Managing
General Partner to assist the Managing General Partner in the performance of its
duties to the Partnership.
Opco, a member firm of the New York Stock Exchange, the National Association of
Securities Dealers, Inc., and all principal United States securities exchanges,
is a diversified investment banking and securities firm and registered
investment advisor, providing a broad range of services to individual,
corporate, and institutional clients. Opco operates in the capacity of broker
and dealer for its customers, as well as trader for its own account. The
services provided by Opco and its subsidiaries, and the activities in which it
is engaged, include securities brokerage, securities research, customer
financing, securities trading, corporate finance, mergers and acquisitions,
underwriting and investment advisory services.
The Partnership's objective is to achieve long-term capital appreciation from
its portfolio of venture capital investments, consisting of companies engaged in
the health care industry. The Partnership is scheduled to terminate on December
31, 1997. However, the General Partners can extend the term for up to two
additional two-year periods, if they determine that such extensions are in the
best interest of the Partnership.
2. Summary of Significant Accounting Policies
Valuation of Investments - Portfolio investments are carried at fair value as
determined quarterly by the Managing General Partner under the supervision of
the Independent General Partners. The fair value of publicly-held portfolio
securities is adjusted to the closing public market price for the last trading
day of the
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
accounting period discounted for sales restrictions. Factors considered in the
determination of an appropriate discount include underwriter lock-up or Rule 144
trading restrictions, insider status where the Partnership either has a
representative serving on the board of directors of the portfolio company under
consideration or is greater than a 5% shareholder thereof, and other liquidity
factors such as the size of the Partnership's position in a given company
compared to the trading history of the public security. Privately-held portfolio
securities are carried at cost until significant developments affecting the
portfolio company provide a basis for change in valuation. The fair value of
private securities is adjusted (i) to reflect meaningful third-party
transactions in the private market and (ii) to reflect significant progress or
slippage in the development of the company's business such that cost no longer
reflects fair value. As a venture capital investment fund, the Partnership's
portfolio investments involve a high degree of business and financial risk that
can result in substantial losses. The Managing General Partner considers such
risks in determining the fair value of the Partnership's portfolio investments.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Transactions - Investment transactions are recorded on the accrual
method. For portfolio investments, transactions are recorded on the date which
the Partnership obtains an enforceable right to demand the securities or payment
thereof. Realized gains and losses on investments sold are computed on a
specific identification basis.
Statements of Cash Flows - Cash and cash equivalents include short-term
interest-bearing investments in commercial paper and other money market
investments. The Partnership considers its interest-bearing cash account to be
cash equivalents.
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. The Partnership's net assets for financial reporting purposes differ
from its net assets for tax purposes. Net unrealized appreciation of $2.6
million at June 30, 1996, which was recorded for financial statement purposes,
was not recognized for tax purposes. Additionally, from inception to June 30,
1996, other timing differences totaling $7.9 million, relating to net realized
losses, original sales commissions paid and other costs of selling the Units,
have been recorded on the Partnership's financial statements but have not yet
been deducted for tax purposes.
3. Allocations of Partnership Profits and Losses
Pursuant to the Partnership's agreement of limited partnership, as amended (the
"Partnership Agreement"), the Partnership's net income and net realized gains
from all sources are allocated to all Partners, in proportion to
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
their capital contributions, until all Partners have been allocated an amount
equal to 6% per annum, simple interest, on their total Adjusted Invested
Capital; i.e., original capital contributions reduced by previous distributions
(the "Priority Return"). Thereafter, net income and net realized gains from
venture capital investments in excess of the amount used to cover the Priority
Return are allocated 20% to the Managing General Partner and 80% to all Partners
in proportion to their capital contributions. Any net income from non-venture
capital investments in excess of the amount used to cover the Priority Return is
allocated to all Partners in proportion to their capital contributions. Realized
losses are allocated to all Partners in proportion to their capital
contributions. However, if realized gains had been previously allocated in the
80-20 ratio, then losses are allocated in the reverse order in which profits
were allocated. From its inception to June 30, 1996, the Partnership had a $7.3
million net loss from its venture capital investments including cumulative
interest and other income from portfolio investments totaling $493,000.
4. Related Party Transactions
Pursuant to the Partnership Agreement, the Managing General Partner is entitled
to receive a one-time venture capital fee equal to 5% of the gross proceeds from
the sale of Units. Such fee is incurred as portfolio investments are made in the
proportion of the cost of each portfolio investment to the net proceeds from the
sale of Units. Venture capital fees incurred are recorded as a cost of acquiring
the portfolio investments. Venture capital fees of $12,120 were incurred during
the three months ended June 30, 1996. Cumulative venture capital fees incurred
from inception to June 30, 1996 totaled $1.6 million.
Pursuant to a management agreement between the Partnership and the Managing
General Partner, the Managing General Partner is responsible for the management,
administrative and certain investment advisory services necessary for the
operation of the Partnership. For such services, the Managing General Partner
receives a management fee at the annual rate of 2% of the lesser of the net
assets of the Partnership or the net contributed capital of the Partnership;
i.e., gross capital contributions to the Partnership (net of selling commissions
and organizational expenses) reduced by capital distributed. Such fee is
determined and payable quarterly. The compensation of the Sub-Manager is paid
directly by the Managing General Partner.
For services rendered to the Partnership, each of the two Independent General
Partners receives a $5,000 annual fee and reimbursement for all out-of-pocket
expenses relating to attendance at meetings of the General Partners.
5. Cash Distributions
No cash distributions were paid to Partners during the three months ended June
30, 1996. Cumulative cash distributions paid to Partners from inception through
June 30, 1996 total $5.71 million; $5.65 million, or approximately $85 per $500
Unit, to the Limited Partners, and $57,000 to the Managing General Partner.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
6. Classification of Investments
As of June 30, 1996, the Partnership's investments were categorized as follows:
<TABLE>
Type of Investments Cost Fair Value % of Net Assets*
- ------------------- --------------- --------------- ----------------
<S> <C> <C> <C>
Common Stock $ 6,805,202 $ 8,636,526 47.48%
Preferred Stock 2,452,111 3,197,474 17.58%
Debt Securities 219,620 210,530 1.16%
Limited Partnerships 635 30,289 .17%
--------------- --------------- --------
$ 9,477,568 $ 12,074,819 66.39%
=============== =============== ========
Country/Geographic Region
United States $ 7,612,605 $ 10,623,034 58.42%
United Kingdom 1,614,963 1,412,734 7.76%
Australia 250,000 39,051 .21%
--------------- --------------- --------
$ 9,477,568 $ 12,074,819 66.39%
=============== =============== ========
Industry
Biotechnology $ 9,477,568 $ 12,074,819 66.39%
=============== =============== ========
</TABLE>
* Percentage of net assets is based on fair value.
7. Interim Financial Statements
In the opinion of the Managing General Partner, the unaudited financial
statements as of June 30, 1996, and for the three and six month periods then
ended, reflect all adjustments necessary for the fair presentation of the
results of the interim period.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
In May 1996, the Partnership received proceeds totaling $4.3 million from the
sale of its investment in Corvita Corporation. At June 30, 1996, the Partnership
held $6.3 million in cash and short-term investments: $6.0 million in short-term
securities with maturities of less than one year and $304,000 in an
interest-bearing cash account. For the three and six months ended June 30, 1996,
the Partnership earned $42,000 and $68,000 of interest from such investments,
respectively. Interest earned from short-term investments in future periods is
subject to fluctuations in short-term interest rates and changes in funds
available for investment.
During the three months ended June 30, 1996, the Partnership invested $212,120
(including venture capital fees of $12,120) in Aprogenex, Inc., an existing
portfolio company. At June 30, 1996, the Partnership had invested an aggregate
of $28.6 million in 23 portfolio companies (including acquisition costs and
venture capital fees totaling $2 million) representing approximately 95% of the
original $30 million of net proceeds to the Partnership.
The Partnership does not expect to make additional investments in new portfolio
companies. It is anticipated that funds needed to cover the Partnership's future
follow-on investments in existing companies and operating expenses will be
obtained from existing cash reserves, interest from short-term investments and
proceeds received from the sale of portfolio investments.
Results of Operations
For the three and six months ended June 30, 1996, the Partnership had a $1.8
million and a $1.7 million net realized gain from operations, respectively. For
the three and six months ended June 30, 1995, the Partnership had a net realized
loss from operations of $79,000 and $85,000, respectively. Net realized gain or
loss from operations is comprised of (i) net realized gain or loss from
portfolio investments and (ii) net investment income or loss.
Realized Gains and Losses from Portfolio Investments - For the three and six
months ended June 30, 1996, the Partnership had a net realized gain from its
portfolio investments of $1.9 million. During May 1996, in connection with the
merger of Corvita Corporation and a wholly-owned subsidiary of Pfizer Inc., the
Partnership sold its investment in Corvita for $4.3 million, realizing a gain of
$1.9 million. The Partnership had no realized gains or losses from its portfolio
investments for the three and six months ended June 30, 1995.
Investment Income and Expenses - Net investment loss for the three months ended
June 30, 1996 and 1995 was $110,000 and $79,000, respectively. The increase in
net investment loss for the 1996 period compared to the 1995 period resulted
from a $39,000 increase in operating expenses, offset by an $8,000 increase in
interest from short-term investments. The increase in operating expenses
included a $28,000 increase in professional fees and a $15,000 increase in the
management fee, as discussed below. The increase in professional fees for the
1996 period, primarily was due to legal fees incurred in connection with the
preparation of a proxy statement relating to the Special Meeting of Limited
Partners held on June 21, 1996. Net investment loss for the six months ended
June 30, 1996 and 1995 was $223,000 and $85,000, respectively. The increase in
net investment loss for the 1996 period compared to the 1995 period includes a
$56,000 decrease in investment income, primarily due to a decrease in income
from portfolio investments reflecting the receipt of a dividend from Nimbus
Medical, L.P. in February 1995. Such increase in net investment loss also
includes a $138,000 increase in operating expenses for the 1996 period compared
to the same period in 1995. The increase in operating expenses includes a
$58,000 increase in management fees, as discussed below, and a $36,000 increase
in professional fees, primarily due to legal fees relating to the preparation of
a proxy statement in connection with the Special Meeting of Limited Partners
held on June 21, 1996 and an adjustment to accrued outside accounting and tax
fees for the six months ended June 30, 1996.
Pursuant to a management agreement between the Partnership and the Managing
General Partner, the Managing General Partner is responsible for the management,
administrative and certain investment advisory services necessary for the
operation of the Partnership. For such services, the Managing General Partner
receives a management fee at the annual rate of 2% of the lesser of the net
assets of the Partnership or the net contributed capital of the Partnership;
i.e., gross capital contributions to the Partnership (net of selling commissions
and organizational expenses) reduced by capital distributed. Such fee is
determined and payable quarterly. The compensation of the Sub-Manager is paid
directly by the Managing General Partner. Additionally, the Managing General
Partner has agreed to reduce the management fee payable by the Partnership for
any director's fees earned by the Managing General Partner from any of the
Partnership's portfolio companies. For the three months ended June 30, 1996 and
1995, the management fee was $86,000 and $71,000, respectively. For the six
months ended June 30, 1996 and 1995, the management fee was $164,000 and
$106,000, respectively. The increase in the management fee for the three month
period in 1996 compared to the 1995 period primarily resulted from increased net
asset value of the Partnership. The increased management fee for the six month
period in 1996 compared to the same period in 1995, also reflects the
Partnership's increased net asset value and also reflects a $38,000 reduction to
the management fee reflecting director's fees received by the Managing General
Partner during the 1995 period.
To the extent possible, the management fee and other operating expenses are paid
with funds provided from operations. Funds provided from operations are obtained
from interest received from short-term investments, interest and dividend income
from portfolio investments and proceeds from the sale of portfolio investments.
Unrealized Gains and Losses and Changes in Unrealized Appreciation or
Depreciation of Portfolio Investments - For the six months ended June 30, 1996,
the Partnership had a $936,000 net unrealized gain primarily due to the net
upward revaluation of its investment in UroCor, Inc. due to the completion of
that company's initial public offering in May 1996. Additionally, during the six
month period, $317,000 was transferred from unrealized gain to realized gain
relating to the sale of the Partnership's investment in Corvita, as discussed
above. The $936,000 unrealized gain, partially offset by the $317,000 transfer
from unrealized gain, to realized gain resulted in a $619,000 increase to net
unrealized appreciation of investments for the six month period.
For the six months ended June 30, 1995, the Partnership had a $298,000 net
unrealized gain resulting from the net upward revaluation of its publicly-held
portfolio investments. As a result, net unrealized appreciation of investments
increased $298,000 for the six month period.
Net Assets - Changes to net assets resulting from operations are comprised of
(i) net realized gain or loss from operations and (ii) changes to net unrealized
appreciation or depreciation of portfolio investments.
At June 30, 1996, the Partnership's net assets were $18.2 million, reflecting an
increase of $2.3 million from $15.9 million at December 31, 1995. The $2.3
million increase was comprised of the $619,000 increase to net unrealized
appreciation of investments and the $1.7 million net realized gain from
operations for the six month period.
At June 30, 1995, the Partnership's net assets were $14.7 million, reflecting an
increase of $214,000 from $14.5 million at December 31, 1994. The $214,000
increase was comprised of the $298,000 increase to net unrealized appreciation
of investments partially offset by the $85,000 net realized loss from operations
for the six month period.
The net asset value per $500 Unit, including an allocation of net unrealized
appreciation or depreciation of portfolio investments, at June 30, 1996 and
December 31, 1995 was $269 and $235, respectively. Such per Unit amounts are
based on average allocations to all Limited Partners and do not reflect specific
Limited Partner allocations, which are determined by the original closing date
associated with the Units held by each Limited Partner.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Partnership is not a party to any material pending legal proceedings.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
A Special Meeting of Limited Partners was held on June 21, 1996 with respect to
1) a proposal to allow the Managing General Partner to retain the services of a
Sub-Manager to assist the Managing General Partner in the performance of its
duties to the Partnership and 2) a proposal to amend the Partnership Agreement
to reduce the minimum number of Individual General Partners from three to two.
At the meeting, both such proposals were approved.
<TABLE>
Affirmative Negative
Votes Votes Abstentions
<S> <C> <C> <C> <C>
Proposal 1 28,056 3,624 3,409
Proposal 2 29,124 2,864 3,101
</TABLE>
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule.
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
<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.
WESTMED VENTURE PARTNERS, L.P.
By: WestMed Venture Management, L.P.
The Managing General Partner
By: MEDICAL VENTURE HOLDINGS, INC.
General Partner
By: /s/ Stephen McGrath
Stephen McGrath
Executive Vice President
By: /s/ Ann Oliveri Fusco
Ann Oliveri Fusco
Vice President and Principal Financial
and Accounting Officer
Date: August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WESTMED
VENTURE PARTNERS, L.P.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 11,690,534
<INVESTMENTS-AT-VALUE> 13,497,785
<RECEIVABLES> 1,500
<ASSETS-OTHER> 28,287
<OTHER-ITEMS-ASSETS> 2,239,950
<TOTAL-ASSETS> 15,761,540
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 165,396
<TOTAL-LIABILITIES> 165,396
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 66,929
<SHARES-COMMON-PRIOR> 66,929
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,837,540
<NET-ASSETS> 15,602,126
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,528
<OTHER-INCOME> 0
<EXPENSES-NET> 139,577
<NET-INVESTMENT-INCOME> (113,049)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (140,182)
<NET-CHANGE-FROM-OPS> (253,231)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (250,519)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 15,728,742
<PER-SHARE-NAV-BEGIN> 235
<PER-SHARE-NII> (2)
<PER-SHARE-GAIN-APPREC> (2)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 231
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
