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, 1997
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, 1997 (Unaudited) and December 31, 1996
Schedule of Portfolio Investments at June 30, 1997 (Unaudited)
Statements of Operations for the Three and Six Months Ended June 30, 1997 and
1996 (Unaudited)
Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996
(Unaudited)
Statement of Changes in Partners' Capital for the Six Months Ended June 30, 1997
(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, 1997 December 31,
(Unaudited) 1996
ASSETS
Portfolio investments, at fair value (cost $6,545,709 at
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 1997 and $9,247,669 at December 31, 1996) $ 6,164,399 $ 11,533,351
Cash and cash equivalents 3,039,161 6,135,508
Receivable from securities sold 3,896,333 -
Accrued interest receivable 25,538 13,659
Prepaid assets 10,554 39,419
----------------- -----------------
TOTAL ASSETS $ 13,135,985 $ 17,721,937
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Cash distribution payable $ - $ 4,529,538
Accounts payable and accrued expenses 109,866 120,823
Due to Managing General Partner 63,226 63,428
Due to Independent General Partners 5,000 10,000
----------------- -----------------
Total Liabilities 178,092 4,723,789
----------------- -----------------
Partners' Capital:
Managing General Partner 129,582 129,985
Limited Partners (66,929 Units) 12,828,311 12,868,163
----------------- -----------------
Total Partners' Capital 12,957,893 12,998,148
----------------- -----------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 13,135,985 $ 17,721,937
================= =================
</TABLE>
See notes to financial statements.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
June 30, 1997
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 $ 0
10% convertible promissory note due 5/29/98 ` 212,120 0
Warrant to purchase 21,450 shares of Common Stock
at $5.67 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 0
- -------------------------------------------------------------------------------------------------------------------------------
Cortex Pharmaceuticals, Inc.(A)
140,833 shares of Common Stock May 1988 504,038 440,103
75,000 shares of Preferred Stock(C) 53,030 22,997
--------------- ---------------
557,068 463,100
- -------------------------------------------------------------------------------------------------------------------------------
Exocell, Inc.*
598,083 shares of Preferred Stock Feb. 1988 714,266 464,265
Convertible note due 9/30/97 53,030 53,030
--------------- ---------------
767,296 517,295
- -------------------------------------------------------------------------------------------------------------------------------
MNI Group Inc.(A)
211,973 shares of Common Stock Sept. 1987 451,457 90,089
- -------------------------------------------------------------------------------------------------------------------------------
Argonaut Medical, Inc.
200,709 shares of Common Stock Apr. 1988 30,107 30,107
Nimbus Medical, L.P.
38,340 units of limited partnership interest 0 0
--------------- ---------------
30,107 30,107
- -------------------------------------------------------------------------------------------------------------------------------
Ultramed, Inc.
1,886,704 shares of Common Stock Oct. 1987 500,000 157,500
- -------------------------------------------------------------------------------------------------------------------------------
UroCor, Inc.(A) (D)
334,982 shares of Common Stock May 1991 839,532 3,140,456
Warrant to purchase 8,000 shares of Common Stock
at $1.25 per share, expiring 2/13/01 0 65,000
Warrant to purchase 8,995 shares of Common Stock
at $4.30 per share, expiring 10/18/98 0 45,650
Warrant to purchase 9,000 shares of Common Stock
at $5.00 per share, expiring 6/2/00 0 39,375
--------------- ---------------
839,532 3,290,481
- -------------------------------------------------------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc. (A) (D)
8,124 shares of Common Stock Jan. 1989 101,359 257,429
- -------------------------------------------------------------------------------------------------------------------------------
Xenova Group plc* (A)
304,403 Ordinary shares Aug. 1988 1,614,963 1,358,398
- -------------------------------------------------------------------------------------------------------------------------------
Totals From Active Portfolio Investments $ 6,545,709 $ 6,164,399
=================================
</TABLE>
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) - continued
June 30, 1997
SUPPLEMENTAL INFORMATION: LIQUIDATED PORTFOLIO INVESTMENTS(B)
<TABLE>
Cost Realized Loss Return
<S> <C> <C> <C>
Totals From Liquidated Portfolio Investments(D) $ 22,073,205 $ (5,206,459) $ 16,866,746
======================================================
Combined Combined
Unrealized and Fair Value
Cost Realized Net Loss and Return
Totals From Active and Liquidated Portfolio Investments $ 28,618,914 $ (5,587,769) $ 23,031,145
======================================================
</TABLE>
(A) Public company
(B)Amounts provided for "Supplemental Information: Liquidated Portfolio
Investments" are cumulative from inception through June 30, 1997.
(C) The 75,000 preferred shares of Cortex Pharmaceuticals, Inc. held by the
Partnership are convertible into 7,359 shares of the company's common stock.
(D)During the quarter, the Partnership sold the following portfolio investments:
40,000 common shares of UroCor for $379,982, realizing a gain of $167,862.
125,404 common shares of Somatogen for $666,660, realizing a gain of $9,466.
100,197 common shares of Watson Pharmaceuticals (Oclassen) for $3,896,375,
realizing a gain of $2,646,329.
* 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,
1997 1996 1997 1996
-------------- ------------ -------------- -------
INVESTMENT INCOME AND EXPENSES
Income:
<S> <C> <C> <C> <C>
Interest from short-term investments $ 24,448 $ 41,960 $ 62,177 $ 68,409
Interest, dividends and other income from
portfolio investments 5,436 79 10,526 158
------------- -------------- ------------ ---------------
Total 29,884 42,039 72,703 68,567
------------- -------------- ------------ ---------------
Expenses:
Management fee 63,226 85,529 128,871 163,932
Professional fees 15,813 35,250 34,164 58,233
Mailing and printing 5,463 6,768 18,133 16,514
Insurance expense 18,892 18,251 40,182 39,517
Custodial fees (73) 1,279 1,258 2,706
Independent General Partners' fees 2,500 3,627 5,000 7,377
Miscellaneous - 1,212 250 3,214
------------- -------------- ------------ ---------------
Total 105,821 151,916 227,858 291,493
------------- -------------- ------------ ---------------
NET INVESTMENT LOSS (75,937) (109,877) (155,155) (222,926)
Net realized gain from portfolio investments 2,823,657 1,935,521 2,781,892 1,935,521
------------- -------------- ------------ ---------------
NET REALIZED GAIN FROM
OPERATIONS 2,747,720 1,825,644 2,626,737 1,712,595
Net change in unrealized appreciation or
depreciation of investments (2,853,237) 759,711 (2,666,992) 619,529
------------- -------------- ------------ ---------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS $ (105,517) $ 2,585,355 $ (40,255) $ 2,332,124
============= ============== ============ ===============
</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>
1997 1996
-------------- ---------
CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C> <C>
Net investment loss $ (155,155) $ (222,926)
Adjustments to reconcile net investment loss to cash used for operating
activities:
Decrease in accrued interest receivable and other assets 16,986 27,934
(Decrease) increase in payables (16,159) 46,356
-------------- ---------------
Cash used for operating activities (154,328) (148,636)
-------------- ---------------
CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES
Proceeds from the sale of portfolio investments 1,437,572 4,330,318
Cost of portfolio investments purchased - (212,120)
Cash distribution received 149,947 30,289
-------------- ---------------
Cash provided from investing activities 1,587,519 4,148,487
-------------- ---------------
CASH FLOWS USED FOR FINANCING ACTIVITIES
Cash distribution paid to Partners (4,529,538) -
-------------- ---------------
(Decrease) increase in cash and cash equivalents (3,096,347) 3,999,851
Cash and cash equivalents at beginning of period 6,135,508 2,310,697
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,039,161 $ 6,310,548
============== ===============
</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, 1997
<TABLE>
Managing
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at beginning of period $ 129,985 $ 12,868,163 $ 12,998,148
Net decrease in net assets resulting
from operations (403) (39,852) (40,255)
------------- --------------- ----------------
Balance at end of period $ 129,582 $ 12,828,311(A) $ 12,957,893
============= =============== ================
</TABLE>
(A) The net asset value per unit of limited partnership interest, including
the allocation of net unrealized appreciation of investments, was $192 at
June 30, 1997. 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 (the "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, subject to the right of the General Partners to 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) - continued
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 depreciation of $381,310 at
June 30, 1997, which was recorded for financial statement purposes, was not
recognized for tax purposes. Additionally, from inception to June 30, 1997,
other timing differences totaling $8.2 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) - continued
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, 1997, the Partnership had a $4.7
million net loss from its venture capital investments including interest and
other income from portfolio investments totaling $515,000.
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. There were no venture capital fees incurred during
the six months ended June 30, 1997. Cumulative venture capital fees incurred
from inception to June 30, 1997 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.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - continued
5. Subsequent Event - Cash Distribution
In August 1997, the General Partners approved a cash distribution to Partners
totaling $5,543,614. Limited Partners will receive $5,488,178, or $82 per Unit,
and the General Partners will receive $55,436. The distribution will be paid in
October 1997 to Limited Partners of record on September 30, 1997.
6. Classification of Investments
As of June 30, 1997, the Partnership's investments were categorized as follows:
<TABLE>
Percentage of
Type of Investments Cost Fair Value of Net Assets*
- ------------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
Common Stock $ 5,513,263 $ 5,624,107 43.40%
Preferred Stock 767,296 487,262 3.76%
Debt Securities 265,150 53,030 .41%
---------------- --------------- -------
$ 6,545,709 $ 6,164,399 47.57%
================ =============== ======
Country/Geographic Region
Eastern U.S. $ 1,718,753 $ 764,884 5.90%
Midwestern U.S. 839,532 3,290,481 25.40%
Southern U.S. 1,683,927 0 0.00%
Western U.S. 688,534 750,636 5.79%
United Kingdom 1,614,963 1,358,398 10.48%
---------------- --------------- -------
$ 6,545,709 $ 6,164,399 47.57%
================ =============== ======
Industry
Biotechnology $ 4,623,254 $ 2,338,793 18.05%
Medical Devices 530,107 187,607 1.45%
Medical Services 839,532 3,290,481 25.39%
Nutritional Products 451,457 90,089 .69%
Pharmaceuticals 101,359 257,429 1.99%
---------------- --------------- -------
$ 6,545,709 $ 6,164,399 47.57%
================ =============== ======
</TABLE>
* Percentage of net assets is based on fair value.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
At June 30, 1997, the Partnership held $3.0 million in cash and cash
equivalents, consisting of $1.3 million in short-term securities with maturities
of less than one year and $1.7 in an interest-bearing cash account. For the
three and six months ended June 30, 1997, the Partnership earned $24,400 and
$62,200 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.
As discussed below, during the six months ended June 30, 1997, the Partnership
liquidated certain portfolio investments for net proceeds totaling $5.5 million.
Approximately $1.6 million of such proceeds had been collected as of June 30,
1997, with the remaining $3.9 million received in July 1997.
Subsequent to the end of the quarter, in August 1997, the General Partners
approved a cash distribution to Partners totaling $5,543,614. Limited Partners
will receive $5,488,178, or $82 per Unit, and the General Partners will receive
$55,436. The distribution will be paid in October 1997 to Limited Partners of
record on September 30, 1997.
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, 1997, the Partnership had a $2.7
million and a $2.6 million net realized gain from operations, respectively. For
the three and six months ended June 30, 1996, the Partnership had a net realized
gain from operations of $1.8 million and $1.7 million, 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 (interest
and dividend income less operating expenses).
Realized Gains and Losses from Portfolio Investments - For both the three and
six months ended June 30, 1997, the Partnership had a net realized gain from its
portfolio investments of $2.8 million. During the second quarter of 1997, the
Partnership sold 40,000 common shares of UroCor, Inc. for $379,982, realizing a
gain of $167,862, its remaining 125,404 common shares of Somatogen, Inc. for
$666,660, realizing a gain of $9,466, and 100,197 common shares of Watson
Pharmaceuticals, Inc. for $3,896,375, realizing a gain of $2,646,329. During the
first quarter of 1997, the Partnership sold its remaining 3,926 shares of HBO &
Co., Inc. common stock for $244,385, realizing a gain of $78,451, 10,000 common
shares of UroCor, Inc. for $109,994, realizing a gain of $64,388, and its
remaining 294,953 ordinary shares of Pharmaction Holding, Ltd for $36,509,
realizing a loss of $213,491. Additionally during the quarter, the Partnership
received cash distributions from Argonaut Medical, Inc. and Nimbus Medical, LP.
totaling $149,947, resulting in a realized gain of $28,887.
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.
Investment Income and Expenses - Net investment loss for the three months ended
June 30, 1997 and 1996 was $75,900 and $109,900, respectively. The decrease in
net investment loss for the 1997 period compared to the 1996 period resulted
from a $46,100 decrease in operating expenses, offset by a $12,100 decrease in
investment income. The decrease in operating expenses includes a $19,400
decrease in professional fees and a $22,300 decrease in the management fee, as
discussed below. Professional fees were higher for the 1996 period, primarily
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. The decrease in investment income primarily resulted from a $17,500
reduction in interest earned from short-term investments for the 1997 period
compared to the same period in 1996 due to a reduction of cash available for
investment in such securities during the 1997 period. The reduced amount of cash
invested in short-term securities during the 1997 period reflects the $4.5
million cash distribution paid to Partners in January 1997.
Net investment loss for the six months ended June 30, 1997 and 1996 was $155,200
and $222,900, respectively. The decrease in net investment loss for the 1997
period compared to the 1996 period includes a $63,600 decrease in operating
expenses and a $4,100 increase in investment income. The decrease in operating
expenses includes a $35,000 decrease in management fees, as discussed below, and
a $24,000 decrease in professional fees for the 1997 period compared to the same
period in 1996. As discussed above, 1996 professional fees include legal fees
relating to the preparation of a proxy statement in connection with the Special
Meeting of Limited Partners held on June 21, 1996. Professional fees in 1996
also include certain adjustments to accrued audit 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, 1997 and
1996, the management fee was $63,000 and $86,000, respectively. For the six
months ended June 30, 1997 and 1996, the management fee was $129,000 and
$164,000, respectively. The reduced management fee for the 1997 periods compared
to the 1996 periods reflects the reduced net asset value of the Partnership,
primarily resulting from the cash distribution accrued at December 31, 1996 and
paid to Partners in January 1997. 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, 1997,
the Partnership had a $207,100 net unrealized loss, resulting from the net
downward revaluation of certain portfolio investments during the period.
Additionally, $2.5 million was transferred from unrealized gain to realized gain
relating to the Partnership's investment sales during the period, as discussed
above. As a result, net unrealized appreciation of investments declined $2.7
million for the six month period.
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.
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, 1997, the Partnership's net assets were $13.0 million, reflecting a
decline of only $40,000 from net assets at December 31, 1996. This $40,000
decrease resulted from the $2.67 million decrease to net unrealized appreciation
of investments exceeding the $2.63 million net realized gain from operations for
the six month period.
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.
The net asset value per $500 Unit, including an allocation of net unrealized
appreciation or depreciation of portfolio investments, was unchanged at $192 for
both June 30, 1997 and December 31, 1996. 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.
No matter was submitted to a vote of security holders during the quarter covered
by this report.
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 14, 1997
<PAGE>
<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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 6,545,709
<INVESTMENTS-AT-VALUE> 6,164,399
<RECEIVABLES> 3,921,871
<ASSETS-OTHER> 10,554
<OTHER-ITEMS-ASSETS> 3,039,161
<TOTAL-ASSETS> 13,135,985
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 178,092
<TOTAL-LIABILITIES> 178,092
<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
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (381,310)
<NET-ASSETS> 12,957,893
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 72,703
<OTHER-INCOME> 0
<EXPENSES-NET> 227,858
<NET-INVESTMENT-INCOME> (155,155)
<REALIZED-GAINS-CURRENT> 2,781,892
<APPREC-INCREASE-CURRENT> (2,666,992)
<NET-CHANGE-FROM-OPS> (40,255)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<SHARES-REINVESTED> 0
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<AVERAGE-NET-ASSETS> 12,978,021
<PER-SHARE-NAV-BEGIN> 192
<PER-SHARE-NII> (2)
<PER-SHARE-GAIN-APPREC> 2
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<PER-SHARE-NAV-END> 192
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
