SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant To Section 13 Or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1994
Or
[ ] Transition Report Pursuant To Section 13 Or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-17198
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Oklahoma 73-1329487
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Meridian Tower, Suite 1060
5100 East Skelly Drive
Tulsa, Oklahoma 74135
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 663-2500
Not applicable
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
INDEX
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets as of March 31, 1994 (Unaudited) and December 31, 1993
Schedule of Portfolio Investments as of March 31, 1994 (Unaudited)
Statements of Operations for the Three Months Ended March 31, 1994 and 1993
(Unaudited)
Statements of Cash Flows for the Three Months Ended March 31, 1994 and 1993
(Unaudited)
Statement of Changes in Partners' Capital for the Three Months Ended March
31, 1994 (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.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
BALANCE SHEETS
March 31, 1994 December 31,
(Unaudited) 1993
ASSETS
Investments - Note 2
Portfolio investments, at fair value
(cost $6,351,527 at March 31, 1994 and
$6,063,931 at December 31, 1993) $ 7,730,907 $ 6,563,579
Short-term investments, at amortized cost 748,631 997,743
Cash and cash equivalents 641,833 880,833
Accrued interest and other receivables 54,934 34,781
Deferred organizational costs, net of accumulated
amortization of $44,140 at March 31, 1994
and $41,754 at December 31, 1993 - Note 2 3,578 5,964
TOTAL ASSETS $ 9,179,883 $ 8,482,900
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 84,201 $ 60,264
Due to Management Company - Note 4 50,000 46,704
Due to Independent General Partners - Note 6 12,000 15,000
Total liabilities 146,201 121,968
Partners' Capital:
Managing General Partner 76,543 78,613
Individual General Partners 2,958 3,038
Limited Partners (10,248 Units) 7,574,801 7,779,633
Unallocated net unrealized appreciation
of investments - Note 2 1,379,380 499,648
Total partners' capital 9,033,682 8,360,932
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 9,179,883 $ 8,482,900
See notes to financial statements.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED)
MARCH 31, 1994
Initial
Investment Fair
Company / Position Date Cost Value
Americo Publishing, Inc.
10% Demand Promissory Note Feb. 1994 $ 200,000 $ 200,000
BACE Manufacturing, Inc.*
1,078 shares of Preferred Stock Feb. 1992 539,000 898,000
C.R. Anthony Company
275,317 shares of Common Stock Oct. 1992 600,191 600,191
Warrants to purchase 48,045 shares of Common Stock
at $3.75 per share, expiring 6/3/94 2,175 2,175
CytoDiagnostics, Inc.*(B)(C)
497,054 shares of Preferred Stock May 1991 921,305 2,137,332
Warrant to purchase 12,539 shares of Common Stock
at $4.30 per share, expiring 10/18/98 0 0
Data Critical Corp.*(B)
75,000 shares of Preferred Stock April 1993 150,000 150,000
8% Promissory Note due 6/30/94 100,000 100,000
Diagnetics, Inc.*(B)
100,000 shares of Preferred Stock April 1991 500,000 500,000
10,006 shares of Common Stock 13,028 13,028
Warrant to purchase 25,000 shares of Common Stock
at $5 per share, expiring 4/11/95 1,000 1,000
Warrant to purchase 393,000 shares of Common Stock
at $0.01 per share, expiring 12/31/96 1,000 1,000
Convertible Subordinated Promissory Note
due 6/30/94, Prime + 1.75% 200,000 200,000
Eckerd Corporation*(A)
15,491 shares of Common Stock July 1992 142,992 257,344
Enerpro International, Inc.
35,000 shares of Preferred Stock Aug. 1993 350,000 350,000
Envirogen, Inc.(A)
150,000 shares of Common Stock Sept. 1991 525,000 532,500
Warrants to purchase 50,000 shares of Common Stock
at $5.20 per share, expiring 10/13/98 0 37,500
Excel Energy Technologies, Ltd.(B)
9% Debentures due 10/14/94 Oct. 1993 500,000 500,000
17,336 shares of Common Stock 2,500 2,500
Great Outdoors Publishing, Inc.*(B)
275,000 shares of Preferred Stock Aug. 1992 275,000 75,000
8% Demand Promissory Notes 50,000 50,000
Independent Gas Company Holdings, Inc.*
400 shares of Preferred Stock June 1993 400,000 400,000
3,336 shares of Common Stock 3,336 3,336
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS (UNAUDITED) - CONTINUED
MARCH 31, 1994
Initial
Investment Fair
Company / Position Date Cost Value
QuanTem Laboratories, Inc.*(B)
42,589 shares of Preferred Stock Jan. 1990$ 75,000 $ 20,000
Silverado Foods, Inc.*(B)
267,144 shares of Preferred Stock June 1992 500,000 500,000
9% Senior Note 180,000 180,000
9% Convertible Subordinated Note 20,000 20,000
Warrant to purchase 10,000 shares of Common Stock
at $7 per share, expiring 1/19/98 0 0
Sports Tactics International, Inc.*
10,000 shares of Preferred Stock Mar. 1992 100,000 1
TOTALS $ 6,351,527 $ 7,730,907
(A) Public company
(B) Qualifies as an "Oklahoma business venture" under Oklahoma law.
(C) During the quarter, the Partnership converted its $100,000 note due
from CytoDiagnostics, Inc. and $3,596 of accrued interest into 24,092
shares of preferred stock of the company. Also, under the terms of an
earlier financing, the Partnership received an additional 23,047
preferred shares of the company during the quarter.
* These companies may be deemed affiliated persons of the Partnership as
defined in the Investment Company Act of 1940.
See notes to financial statements.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
1994 1993
INVESTMENT INCOME AND EXPENSES
Income:
Interest from short-term investments $ 10,718 $ 33,037
Interest and other income from portfolio investments 34,829 32,501
Totals 45,547 65,538
Expenses:
Management fee - Note 4 50,000 53,776
Professional fees 31,819 30,180
Independent General Partners' fees - Note 6 12,467 12,449
Mailing and printing 7,992 9,986
Amortization of deferred organizational costs - Note 2 2,386 2,386
Custodial fees 1,615 1,289
Miscellaneous 250 -
Totals 106,529 110,066
NET INVESTMENT LOSS (60,982) (44,528)
Net realized loss from investments sold or written-off(146,000) -
NET REALIZED LOSS FROM OPERATIONS
(allocable to Partners) - Note 3 (206,982) (44,528)
Net change in unrealized appreciation of investments 879,732 (239,062)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 672,750 $ (283,590)
See notes to financial statements.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
1994 1993
CASH FLOWS USED FOR OPERATING ACTIVITIES
Net investment loss $ (60,982) $ (44,528)
Adjustments to reconcile net investment loss to cash
used for operating activities:
Amortization of deferred organizational costs 2,386 2,386
Increase in payables 24,233 35,067
Decrease in accrued interest on short-term investments 219 4,651
Increase in receivables and other assets (20,153) (13,947)
Cash used for operating activities (54,297) (16,371)
CASH FLOWS PROVIDED FROM (USED FOR)
INVESTING ACTIVITIES
Purchase of portfolio investments (433,596) (641,661)
Net deposits released from escrow - 70,295
Net return (purchase) of short-term investments 248,893 985,321
Cash provided from (used for) investing activities (184,703) 413,955
Increase (decrease) in cash and cash equivalents (239,000) 397,584
Cash and cash equivalents at beginning of period 880,833 524,431
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 641,833 $ 922,015
See notes to financial statements.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1994
Unallocated
Managing Individual Net Unrealized
General General Limited Appreciation
Partner Partners Partners of Investments Total
Balance at
beginning of
period $ 78,613 $ 3,038 $ 7,779,633 $ 499,648 $ 8,360,932
Allocation of
net investment
loss - Note 3 (610) (24) (60,348) - (60,982)
Allocation of net
realized loss
on investments
- - - Note 3 (1,460) (56) (144,484) - (146,000)
Net change in
unrealized
appreciation of
investments - - - 879,732 879,732
Balance at end
of period $ 76,543 $ 2,958$ 7,574,801(A) $ 1,379,380 $ 9,033,682
(A)The net asset value per unit of limited partnership interest, including
an assumed allocation of net unrealized appreciation or depreciation of
investments, was $872.
See notes to financial statements.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Purpose
ML Oklahoma Venture Partners, Limited Partnership (the "Partnership") was
formed on July 15, 1988 under the Revised Uniform Limited Partnership Act
of the State of Oklahoma. The Partnership's operations commenced on August
14, 1989. MLOK Co., Limited Partnership, the managing general partner of
the Partnership (the "Managing General Partner"), is an Oklahoma limited
partnership formed on July 15, 1988, the general partner of which is
Merrill Lynch Venture Capital Inc. (the "Management Company"), an indirect
subsidiary of Merrill Lynch & Co., Inc.
The Partnership's objective is to achieve long-term capital appreciation by
making venture capital investments in new or developing companies,
primarily Oklahoma companies, and other special investment situations. The
Partnership shall not engage in any other business or activity. The
Partnership will terminate on December 31, 1998, subject to the right of
the Individual General Partners to extend the term for up to two additional
two-year periods.
2. Significant Accounting Policies
Valuation of Investments - Short-term investments are carried at amortized
cost which approximates market. Portfolio investments are carried at fair
value as determined quarterly by the Managing General Partner under the
supervision of the Individual General Partners. The Managing General
Partner determines the fair value of its portfolio investments by applying
consistent guidelines. The fair value of public securities is adjusted to
the average closing public market price for the last five trading days of
the quarter less an appropriate discount for sales restrictions, the size
of the Partnership's holdings and the public market trading volume.
Private securities are carried at cost until significant developments
affecting a portfolio investment provide a basis for change in valuation.
The fair value of private securities is adjusted 1) to reflect meaningful
third-party transactions in the private market or 2) to reflect significant
progress or slippage in the development of the company's business such that
cost is clearly no longer reflective of 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.
Investment Transactions - Investment transactions are recorded on the
accrual method. Portfolio investments are recorded on the trade date, the
date the Partnership obtains an enforceable right to demand the securities
or payment therefor. Realized gains and losses on investments sold are
computed on a specific identification basis.
Income Taxes - No provision for income taxes has been made since all income
and losses are allocable to the Partners for inclusion in their respective
tax returns.
Statements of Cash Flows - The Partnership considers its interest-bearing
cash account to be cash equivalents.
Organizational Costs - Organizational costs of $47,718 are being amortized
over a sixty-month period which commenced August 14, 1989.
3. Allocation of Partnership Profits and Losses
Pursuant to the Partnership Agreement, profits from venture capital
investments are allocated to all Partners in proportion to their capital
contributions until all Partners have been allocated a 10% Priority Return
from liquidated investments. Profits in excess of this amount are
allocated 30% to the Managing General Partner and 70% to all Partners in
proportion to their capital contributions until the Managing General
Partner has been allocated 20% of the total profits from venture capital
investments. Thereafter, profits from venture capital investments are
allocated 20% to the Managing General Partner and 80% to all Partners in
proportion to their capital contributions. Profits from other sources are
allocated to all Partners in proportion to their capital contributions.
Losses are allocated to all Partners in proportion to their capital
contributions. However, if profits had been previously allocated in the 70-
30 or 80-20 ratios as discussed above, then losses will be allocated in the
reverse order in which profits were allocated.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
4. Related Party Transactions
The Management Company performs, or arranges for others to perform, the
management and administrative services necessary for the operation of the
Partnership. The Management Company receives a management fee at an annual
rate of 2.5% of the gross capital contributions to the Partnership, reduced
by selling commissions and organizational and offering expenses paid by the
Partnership, capital distributed and realized losses, with a minimum annual
fee of $200,000. Such fee is determined and paid quarterly.
5. Limitation on Operating Expenses
The Management Company has undertaken to the Partnership that it will
reduce its management fee or otherwise reimburse the Partnership in order
to limit the annual operating expenses of the Partnership, exclusive of the
management fee, to an amount equal to $203,720.
6. Independent General Partners' Fees
As compensation for services rendered to the Partnership, each of the three
Independent General Partners receives $12,000 annually in quarterly
installments, $1,000 for each meeting of the General Partners attended,
$1,000 for each committee meeting attended ($500 if a committee meeting is
held on the same day as a meeting of the General Partners) and $500 for
meetings held by telephone conference.
7. Interim Financial Statements
In the opinion of MLOK Co., Limited Partnership, the managing general
partner of the Partnership, the unaudited financial statements as of March
31, 1994, and for the three month period then ended, reflect all
adjustments necessary for the fair presentation of the results of the
interim periods.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
During the quarter ended March 31, 1994, the Partnership invested $434,000
in portfolio companies; $200,000 in one new portfolio company and $234,000
in four existing portfolio companies. From August 14, 1989 (commencement
of operations) to March 31, 1994, the Partnership had invested $8.2 million
in 17 portfolio companies. Approximately $1 million of the original net
proceeds of $9.2 million remains available for investment.
At March 31, 1994, the Partnership held $1.4 million in cash and short-term
investments; $749,000 in short-term investments with maturities of less
than one year and $642,000 in an interest-bearing cash account. Interest
earned on such investments for the quarter ended March 31, 1994 was
$11,000. Interest earned from short-term investments in future periods is
subject to fluctuations in short-term interest rates and changes in amounts
available for investment in such securities.
Funds needed to cover the Partnership's future investments and operating
expenses will be obtained from existing cash reserves, interest and other
investment income and proceeds from the future sale of portfolio
investments.
Results of Operations
Investment Income and Expenses - For the three months ended March 31, 1994
and 1993, the Partnership had a net investment loss of $61,000 and $45,000,
respectively. The increase in net investment loss for the 1994 period
compared to the 1993 period primarily is due to a decrease in interest
earned on the Partnership's short-term investments for the 1994 period.
Interest earned on short-term investments for the three months ended March
31, 1994 and 1993, was $11,000 and $33,000, respectively. This decrease
can be attributed to a decrease in the amount available for investment in
short-term securities during the 1994 period. Funds available for
investment in short-term securities in the future will decline as
additional follow-on investments are made in existing portfolio companies.
At March 31, 1994 and 1993, the Partnership had $1.4 million and $3.9
million, respectively, invested in short-term securities.
The Management Company performs, or arranges for others to perform, the
management and administrative services necessary for the operation of the
Partnership. The Management Company receives a management fee of 2.5% of
the gross capital contributions to the Partnership, reduced by selling
commissions and organizational and offering expenses paid by the
Partnership, capital distributed and realized losses, with a minimum fee of
$200,000 annually. Such fee is determined and paid quarterly. The
management fee for the three months ended March 31, 1994 and 1993 was
$50,000 and $54,000, respectively. To the extent possible, the management
fee and other expenses incurred directly by the Partnership are paid with
funds provided from operations.
Unrealized Gains and Losses and Changes in Unrealized Appreciation or
Depreciation of Portfolio Investments - For the quarter ended March 31,
1994, the Partnership had a $734,000 unrealized gain, primarily resulting
from the upward revaluation of its investment in CytoDiagnostics, Inc. for
the period. As a result, net unrealized appreciation of the Partnership's
portfolio investments increased by $734,000 for the three month period
ended March 31, 1994.
For the quarter ended March 31, 1993, the Partnership had a $239,000
unrealized loss resulting from the downward revaluation of its investment
in Envirogen, Inc. for the period. As a result, net unrealized
appreciation of the Partnership's portfolio investments decreased by
$239,000 for the three month period ended March 31, 1993.
Realized Gains and Losses from Portfolio Investments - During the three
months ended March 31, 1994, the Partnership had a $146,000 net realized
loss due to the write off of its remaining investment in Symex Corp. There
were no realized gains or losses during the three months ended March 31,
1993.
Net Assets - At March 31, 1994, the Partnership's net assets were $9
million, an increase of $673,000 from $8.4 million at December 31, 1993.
This increase resulted from the $734,000 net unrealized gain from the
Partnership's portfolio investments offset by the $61,000 net investment
loss for the quarter.
At March 31, 1993, the Partnership's net assets were $9.7 million, a
decrease of $284,000 from $10 million at December 31, 1992. This decrease
resulted from the $239,000 net unrealized loss from the Partnership's
portfolio investments and the $45,000 net investment loss for the quarter.
Gains or losses from investments are allocated to the Partners' capital
accounts when realized in accordance with the Partnership Agreement (see
Note 3 of Notes to Financial Statements). However, for purposes of
calculating the net asset value per unit of limited partnership interest,
net unrealized appreciation or depreciation of investments has been
included as if the net appreciation or depreciation had been realized and
allocated to the Limited Partners in accordance with the Partnership
Agreement. Pursuant to such calculation, the net asset value per $1,000
Unit at March 31, 1994 and December 31, 1993 was $872 and $807,
respectively.
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.
On January 18, 1994, the Partnership purchased an 8% promissory note from
Data Critical Corp. for $100,000. This investment is in addition to the
75,000 shares of preferred stock previously owned by the Partnership.
On January 18, 1994, the Partnership purchased an 8% demand note from
Great Outdoors Publishing, Inc. for $30,000. This investment is in
addition to the 275,000 shares of preferred stock and 8% demand note
previously owned by the Partnership.
On February 28, 1994, the Partnership purchased a 10% demand note from
Americo Publishing, Inc. for $200,000. Americo, located in Tulsa,
Oklahoma, is a publisher of outdoor recreational magazines.
On March 16 and March 31, 1994, the Partnership purchased 9% debentures
from Excel Energy Technologies, Ltd. totaling $100,000. This investment
is in addition to the 17,336 shares of common stock and 9% debenture
previously owned by the Partnership.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(3) (a) Amended and Restated Certificate of Limited
Partnership of the Partnership dated as of
November 29, 1988.*
(b) Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of
November 29, 1988.*
(c) Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of August
14, 1989.**
(10) Management Agreement dated as of November
29, 1988 between the Partnership and the
Management Company.*
(28) (a) Prospectus of the Partnership dated December
1, 1988 filed with the Securities and Exchange
Commission pursuant to Rule 497 (b) under the
Securities Act of 1933, as supplemented by a
supplement dated April 25, 1989 filed pursuant to
Rule 497 (d) under the Securities Act of 1933.***
(b) No reports on Form 8-K have been filed during the
quarter for which this report is filed.
______________________________
* Incorporated by reference to the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1988 filed with the
Securities and Exchange Commission on April 3, 1989.
** Incorporated by reference to the Partnership's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1989 filed with the
Securities and Exchange Commission on November 14, 1989.
*** Incorporated by reference to the Partnership's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1989 filed with the
Securities and Exchange Commission on May 15, 1989.
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.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
By: MLOK Co., Limited Partnership
its Managing General Partner
By: Merrill Lynch Venture Capital Inc.
its General Partner
By: /s/ Kevin K. Albert
Kevin K. Albert
President
(Principal Executive Officer)
By: /s/ Joseph W. Sullivan
Joseph W. Sullivan
Treasurer
(Principal Financial and Accounting Officer)
Date: May 13, 1994
Exhibit Index
Exhibits Page
(3) (a) Amended and Restated Certificate of Limited
Partnership of the Partnership dated as of November
29, 1988.*
(3) (b) Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of November
29, 1988.*
(3) (c) Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of August
14, 1989.**
(10) Management Agreement dated as of November 29, 1988
between the Partnership and the Management
Company.*
(28) (a) Prospectus of the Partnership dated December 1,
1988 filed with the Securities and Exchange
Commission pursuant to Rule 497(b) under the
Securities Act of 1933, as supplemented by a
supplement dated April 25, 1989 filed pursuant to
Rule 497(d) under the Securities Act of 1933.***
______________________________
* Incorporated by reference to the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1988 filed with the
Securities and Exchange Commission on April 3, 1989.
** Incorporated by reference to the Partnership's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1989 filed with the
Securities and Exchange Commission on November 14, 1989.
*** Incorporated by reference to the Partnership's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1989 filed with the
Securities and Exchange Commission on May 15, 1989.
