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, 1999
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.)
CIBC 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, 1999 (Unaudited) and December 31, 1998
Schedule of Portfolio Investments at June 30, 1999 (Unaudited)
Statements of Operations for the Three and Six Months Ended June 30, 1999 and
1998 (Unaudited)
Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998
(Unaudited)
Statement of Changes in Partners' Capital for the Six Months Ended June 30,
1999 (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, 1999 December 31,
(Unaudited) 1998
ASSETS
Portfolio investments, at fair value
<S> <C> <C> <C> <C> <C>
(cost $851,210 as of December 31, 1998) $ - $ 942,164
Cash and cash equivalents 1,196,864 3,467,031
Receivable from securities sold 5,110 12,103
Prepaid insurance 29,235 42,382
Accrued interest receivable 555 1,420
---------------- ----------------
TOTAL ASSETS $ 1,231,764 $ 4,465,100
================ ================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Cash distribution payable $ - $ 3,042,227
Accounts payable and accrued expenses 41,209 58,120
Due to Managing General Partner 10,405 11,251
Due to Independent General Partners 5,000 10,000
---------------- ----------------
Total liabilities 56,614 3,121,598
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Partners' Capital:
Managing General Partner 11,754 13,438
Limited Partners (66,929 Units) 1,163,396 1,330,064
---------------- ----------------
Total Partners' Capital 1,175,150 1,343,502
---------------- ----------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,231,764 $ 4,465,100
================ ================
</TABLE>
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,
1999 1998 1999 1998
------------- ------------- ------------- --------------
INVESTMENT INCOME AND EXPENSES
Income:
<S> <C> <C> <C> <C>
Interest from short-term investments $ 5,339 $ 23,321 $ 15,825 $ 43,915
------------- ------------- ------------- --------------
Expenses:
Management fee 5,905 28,168 11,439 57,208
Professional fees 9,471 18,750 25,421 41,734
Insurance expense 6,610 14,532 13,147 28,894
Mailing and printing 5,930 9,303 12,539 17,146
Independent General Partners' fees 2,500 2,500 5,000 5,000
Custodial fees 103 713 195 1,140
Other 163 - 3,193 -
------------- ------------- ------------- --------------
Total investment expenses 30,682 73,966 70,934 151,122
------------- ------------- ------------- --------------
NET INVESTMENT LOSS (25,343) (50,645) (55,109) (107,207)
Net realized gain (loss) from portfolio investments 109,599 (617,296) (22,289) (617,296)
------------- ------------- ------------- --------------
NET REALIZED GAIN (LOSS) FROM
OPERATIONS 84,256 (667,941) (77,398) (724,503)
Change in unrealized appreciation or
depreciation of investments (10,387) 494,423 (90,954) 1,163,842
------------- ------------- ------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 73,869 $ (173,518) $ (168,352) $ 439,339
============= ============= ============= ==============
</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>
1999 1998
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CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C> <C>
Net investment loss $ (55,109) $ (107,207)
Adjustments to reconcile net investment loss to cash used for operating
activities:
Decrease (increase) in prepaid insurance and accrued interest receivable 14,012 (22,788)
Decrease in payables (22,757) (13,789)
-------------- ---------------
Cash used for operating activities (63,854) (143,784)
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CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES
Proceeds from the sale of portfolio investments 835,914 150,000
Cost of portfolio investments purchased - (99,356)
Cash distribution received - 30,107
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Cash provided from investing activities 835,914 80,751
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CASH FLOWS USED FOR FINANCING ACTIVITIES
Cash distribution paid to Partners (3,042,227) -
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Decrease in cash and cash equivalents (2,270,167) (63,033)
Cash and cash equivalents at beginning of period 3,467,031 1,725,666
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,196,864 $ 1,662,633
============== ===============
</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, 1999
<TABLE>
Managing
General Limited
Partner Partners Total
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1998 $ 13,438 $ 1,330,064 $ 1,343,502
Net decrease in net assets resulting
from operations (1,684) (166,668) (168,352)
------------- --------------- ----------------
Balance as of June 30, 1999 $ 11,754 $ 1,163,396 $ 1,175,150
============= =============== ================
</TABLE>
(A) The net asset value per unit of limited partnership interest was $17 as
of June 30, 1999. 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. Cumulative cash distributions paid to Limited Partners totaled
$278 per $500 Unit as of June 30, 1999.
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 CIBC Oppenheimer
Corp. ("Opco"). Opco is the successor corporation to Oppenheimer & Co., Inc.,
following the acquisition and subsequent merger of Oppenheimer & Co., Inc. and
CIBC Wood Gundy Corp. in November 1997. Opco is a subsidiary of Canadian
Imperial Bank of Commerce. The limited partners of the Managing General Partner
are Opco, 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, serves as the sub-manager of the Partnership pursuant to a
sub-management agreement between 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 certain of its
duties to the Partnership.
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's originally scheduled termination
date was December 31, 1997, with provision for extension for two additional two
year periods. The General Partners have determined not to extend the
Partnership's termination date. However, pursuant to the Partnership Agreement
(as hereinafter defined) and Delaware Law, the Managing General Partner will
continue to manage the Partnership through its date of liquidation, which will
occur when it has satisfied all liabilities and obligations to creditors and has
sold, distributed or otherwise disposed of its investments in portfolio
companies.
The Managing General Partner expects the Partnership to terminate prior to
September 30, 1999. See Notes 6 and 7 below.
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 accounting period discounted for sales restrictions, if any. Factors
considered in the determination of an
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
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 as of the date on
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 also 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. From inception to June 30, 1999, other
timing differences totaling $9.3 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 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
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
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, 1999, the
Partnership had a net realized loss of $8.1 million from its venture capital
investments, including 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 to 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 for the
six months ended June 30, 1999. Cumulative venture capital fees incurred from
inception to June 30, 1999 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.
The Managing General Partner also provides certain shareholder services and
database management support for the Limited Partners of the Partnership. For
such services, the Managing General Partner charges the Partnership $4,500 per
quarter. This amount is paid to the Managing General Partner in addition to the
regular management fee discussed above.
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. Portfolio Investments
As of June 30, 1999, the Partnership had liquidated all of its active
portfolio investments. During the quarter ended June 30, 1999, the Partnership
sold its remaining 145,977 common shares of UroCor, Inc. for $786,714, realizing
a gain of $528,295. Also during the quarter, the Partnership sold its remaining
201,973 common shares of MNI Group, Inc. for $6,353, realizing a loss of
$423,806. The Partnership also sold its holdings of Approgenex, Inc., a
portfolio investment previously written off, for a realized gain of $5,110.
<PAGE>
WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
6. Termination
The Partnership expects to complete the sale of its remaining assets, satisfy
its obligations to creditors and wind-up its affairs prior to September 30,
1999, at which time a final cash distribution will be paid to Partners.
7. Subsequent Event - Cash Distributions
In August 1999, the General Partners approved the termination of the Partnership
and final liquidating cash distribution to Partners. The distribution is
expected to be made in September 1999 to Limited Partners of record on June 30,
1999. After a reserve for final operating expenses, the distribution is expected
to total $1.04 million, with approximately $1.03 million, or $15.40 per Unit, to
be paid to the Limited Partners and approximately $10,000 to be paid to the
Managing General Partner.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
As of June 30, 1999, the Partnership held $1,196,864 in cash and cash
equivalents, including $299,920 in short-term securities with maturities of less
than one year and $896,944 in an interest-bearing cash account. For the three
and six months ended June 30, 1999, the Partnership earned interest from such
investments of $5,339 and $15,825, respectively.
During the six months ended June 30, 1999, the Partnership completed the
liquidation of its remaining active portfolio investments for net proceeds
totaling $828,921 as discussed below. The Partnership expects to complete the
sale of its remaining assets, satisfy its obligations to creditors and wind up
its affairs prior to September 30, 1999, at which time a final cash distribution
will be paid to Partners.
Cash Distributions
In August 1999, the General Partners approved the termination of the Partnership
and final liquidating cash distribution to Partners. The distribution is
expected to be made in September 1999 to Limited Partners of record on June 30,
1999. After a reserve for final operating expenses, the distribution is expected
to total $1.04 million, with approximately $1.03 million, or $15.40 per Unit, to
be paid to the Limited Partners and approximately $10,000 to be paid to the
Managing General Partner. Following payment of the final distribution to
Partners, the Partnership will be formally dissolved.
Results of Operations
For the three months ended June 30, 1999 and 1998, the Partnership had a net
realized gain from operations of $84,256 and a net realized loss from operations
of $667,941, respectively. For the six months ended June 30, 1999 and 1998, the
Partnership had a net realized loss from operations of $77,398 and $724,503,
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 the three months
ended June 30, 1999, the Partnership had a net realized gain from its portfolio
investments of $109,599. During the three month period, the Partnership sold its
remaining 201,973 shares of MNI Group Inc. common stock for $6,353, realizing a
loss of $423,806 and its remaining 145,977 shares of UroCor, Inc. common stock
for $786,714, realizing a gain of $528,295. The Partnership also sold its
holdings of Aprogenex, Inc., an investment that was previously written-off, for
$5,110, realizing a gain for the entire amount.
For the six months ended June 30, 1999, the Partnership had a net realized loss
from its portfolio investments of $22,289. During the six month period, the
Partnership sold its remaining portfolio investments as follows: 20,000 ordinary
shares of Xenova Group plc for $10,597, realizing a loss of $77,707; 7,359
common shares Cortex Pharmaceuticals, Inc. for $3,373, realizing a loss of
$49,657; 18,434 ordinary shares and options to purchase 18,434 ordinary shares
of Pharmaction Holdings, Ltd. for $1,428, realizing a gain for the entire
amount; 211,973 common shares of MNI Group Inc. for $6,699 realizing a loss of
$444,758: and 145,977 common shares of UroCor, Inc. for $786,714, realizing a
gain of $528,295. The Partnership also sold its holdings of Oncodiagnostics,
Inc. and Aprogenex, Inc., investments that had previously been written-off, for
realized gains of $15,000 and $5,110, respectively.
For both the three and six months ended June 30, 1998, the Partnership had a net
realized loss from its portfolio investments of $617,296 relating to the sale of
its investment in Exocell, Inc. for net proceeds of $150,000. Additionally,
during the first quarter of 1998, the Partnership received a liquidating cash
distribution of $30,107 from Argonaut Medical, Inc., resulting in no gain or
loss.
Investment Income and Expenses - Net investment loss for the three months ended
June 30, 1999 and 1998 was $25,343 and $50,645, respectively. The $25,032
favorable change in net investment loss for the 1999 period compared to the 1998
period, consisted of a $43,284 decrease in operating expenses partially offset
by a $17,982 decrease in investment income for the period. The reduction in
operating expenses included a $22,263 decrease in the management fee, as
discussed below, and a $9,279 decrease in professional fees, primarily due to
reduced legal and accounting expenses resulting from the reduced level of
activity as the Partnership completes its liquidation. The reduced operating
expenses also included a $7,922 reduction in insurance expense due to reduced
liability insurance premiums. The decrease in investment income resulted from a
decrease in interest income from short-term investments, primarily related to
the reduced amount of funds invested in such securities during the 1999 period
as compared to the same period in 1998.
Net investment loss for the six months ended June 30, 1999 and 1998 was $55,109
and $107,207, respectively. The $52,098 favorable change in net investment loss
for the 1999 period compared to the 1998 period, consisted of a $80,188 decrease
in operating expenses partially offset by a $28,090 decrease in investment
income for the period. The reduction in operating expenses included a $45,769
decrease in the management fee, as discussed below, and a $16,313 decrease in
professional fees, primarily due to reduced legal and accounting expenses
resulting from the reduced level of activity as the Partnership completes its
liquidation. The reduced operating expenses also included a $15,747 reduction in
insurance expense due to reduced liability insurance premiums. The decrease in
investment income resulted from a decrease in interest income from short-term
investments, primarily related to the reduced amount of funds invested in such
securities during the 1999 period as compared to the same period in 1998.
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, 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 the three months ended June 30, 1999 and 1998, the
management fee was $5,905 and $28,168, respectively. For the six months ended
June 30, 1999 and 1998, the management fee was $11,439 and $57,208,
respectively. The reduced management fee for the 1999 periods compared to the
same periods in 1998, reflects the reduced net asset value of the Partnership,
primarily resulting from the liquidation of the Partnership's portfolio
investments and subsequent cash distribution in January 1999. To the extent
possible, the management fee and other operating expenses are paid with funds
provided from operations. Funds provided from operations have been obtained from
interest received from short-term investments, interest and dividend income from
portfolio investments and proceeds received 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, 1999,
the Partnership had an $90,954 unfavorable net change in unrealized appreciation
of investments, primarily resulting from a $225,796 net downward revaluation of
its remaining portfolio investments during the six month period. This downward
revaluation was partially offset by the net transfer of $134,842 from unrealized
loss to realized loss in connection with portfolio investments liquidated during
the six month period, as discussed above.
For the six months ended June 30, 1998, the Partnership had a $1,163,842
favorable net change in unrealized appreciation of investments. During the six
month period, the Partnership increased the fair value of its portfolio
investments by $546,546 due to a net upward revaluation of its publicly-held
portfolio investments. Additionally, $617,296 was transferred from unrealized
loss to realized loss relating to the sale of the Partnership's investment in
Exocell, Inc., as discussed above.
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.
As of June 30, 1999, the Partnership's net assets were $1,175,150, reflecting a
decrease of $168,352 from net assets of $1,343,502 as of December 31, 1998. This
decrease was comprised of the $77,398 net realized loss from operations and the
$90,954 unfavorable change in net unrealized appreciation of investments for the
six months ended June 30, 1999.
As of June 30, 1998, the Partnership's net assets were $5,605,389, reflecting an
increase of $439,339 from net assets of $5,166,050 as of December 31, 1997. This
increase was comprised of the $1,163,842 favorable change in net realized
appreciation of investments partially offset by the $724,503 net realized loss
from operations for the six months ended June 30, 1998.
As of June 30, 1999 and December 31, 1998, the net asset value per $500 Unit,
including an allocation of net unrealized appreciation or depreciation of
portfolio investments, was $17 and $20, 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.
Year 2000 Issue - The Year 2000 ("Y2K") concern arose because many existing
computer programs use only the last two digits to refer to a year. Therefore,
these computer programs do not properly recognize a year that begins with "20"
instead of "19". If not corrected, many computer applications could fail or
create erroneous results. The impact of the Y2K concern on the Partnership's
operations is currently being assessed.
The Managing General Partner is responsible to provide or arrange for the
provision of administrative services necessary to support the Partnership's
operations. The Managing General Partner has arranged for Palmeri Fund
Administrators, Inc. (the "Administrator") to provide certain administrative and
accounting services for the Partnership, including maintenance of the books and
records of the Partnership, maintenance of the Limited Partner database,
issuance of financial reports and tax information to Limited Partners and
processing distribution payments to Limited Partners. Fees charged by the
Administrator are paid directly by the Managing General Partner.
The Administrator has assessed its computer hardware and software systems,
specifically as they relate to the operations of the Partnership. As part of
this investigation of potential Y2K concerns, the Administrator contracted with
an outside computer service provider to examine all of the Administrator's
computer hardware and software applications. This review and evaluation has been
completed and certain Y2K concerns were identified. The Administrator has
completed the purchase and installation of the necessary software upgrades and
patches and new computer hardware required for all of its computer systems to be
Y2K compliant. The Administrator expects to complete the testing of its systems
by October 1999.
Additionally, the Administrator has contacted the outside service providers used
to assist the Administrator or the Managing General Partner with the
administration of the Partnership's operations to ascertain whether these
entities are addressing the Y2K issue within their own operation. There can be
no guarantee that the Administrator's systems or that systems of other companies
providing services to the Partnership will be corrected in a timely manner. The
estimated costs to the Partnership relating to the investigation or correction
of Y2K problems affecting the Partnership's operations are expected to be
nominal.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The Partnership is subject to market risk arising from changes in the value of
its portfolio investments and interest-bearing cash equivalents, including
short-term securities, which may result from fluctuations in interest rates and
equity prices. The Partnership has calculated its market risk related to its
holdings of these investments based on changes in interest rates and equity
prices utilizing a sensitivity analysis. The sensitivity analysis estimates the
hypothetical change in fair values, cash flows and earnings based on an assumed
10% change (increase or decrease) in interest rates and equity prices. To
perform the sensitivity analysis, the assumed 10% change is applied to market
rates and prices on investments held by the Partnership as of the end of the
accounting period.
The Partnership had no remaining active portfolio investments as of June 30,
1999 and, therefore, was not subject to market risk arising from changes in the
value of its portfolio investments.
As of June 30, 1999, the Partnership held one short-term investment in a
discounted commercial paper instrument with a remaining maturity of less than 30
days. This short-term investment was carried at an aggregate amortized cost of
$299,920 as of June 30, 1999. An assumed 10% increase in the market interest
rate of such short-term investment held by the Partnership as of June 30, 1999,
would result in a reduction to the fair value of such investment and an
unrealized loss in an amount which is considered to be immaterial.
Market risk relating to the Partnership's other interest-bearing cash
equivalents held as of June 30, 1999 is also considered to be immaterial.
<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/ Gerald A. Rothstein
Gerald A. Rothstein
President and Principal Executive Officer
By: /s/ Ann Oliveri Fusco
Ann Oliveri Fusco
Vice President and Principal Financial
and Accounting Officer
Date: August 16, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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