SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1995
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
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(Exact name of registrant as specified in its charter)
Oklahoma 73-1329487
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Meridian Tower, Suite 1060
5100 East Skelly Drive
Tulsa, Oklahoma 74135
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 663-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
================================================================================
(Title of class)
<PAGE>
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
At March 26, 1996, 10,248 units of limited partnership interest ("Units") were
held by non-affiliates of the Registrant. There is no established public trading
market for such Units.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Registrant dated December 1, 1988, filed with
the Securities and Exchange Commission, as supplemented by a supplement dated
April 25, 1989, are incorporated by reference in Part I, Part II and Part III
hereof.
Portions of the Registrant's Form 10-Q for the quarter ended March 31, 1995,
filed with the Securities and Exchange Commission on May 12, 1995, are
incorporated by reference in Part I hereof.
Portions of the Registrant's Form 10-Q for the quarter ended June 30, 1995,
filed with the Securities and Exchange Commission on August 14, 1995, are
incorporated by reference in Part I hereof.
Portions of the Registrant's Form 10-Q for the quarter ended September 30, 1995,
filed with the Securities and Exchange Commission on November 13, 1995, are
incorporated by reference in Part I hereof.
<PAGE>
PART I
Item 1. Business.
Formation
ML Oklahoma Venture Partners, Limited Partnership (the "Partnership" or the
"Registrant") was organized under the Revised Uniform Limited Partnership Act of
the State of Oklahoma on July 15, 1988. MLOK Co., Limited Partnership (the
"Managing General Partner") and four individuals (the "Individual General
Partners") are the general partners of the Partnership. The Managing General
Partner is an Oklahoma limited partnership in which Merrill Lynch Venture
Capital Inc. (the "Management Company") is the general partner. The Management
Company is an indirect subsidiary of Merrill Lynch & Co., Inc. and an affiliate
of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S").
The Partnership operates as a business development company under the Investment
Company Act of 1940. The Partnership's investment objective is to seek long-term
capital appreciation by making venture capital investments in new and developing
companies which the Managing General Partner believes offer significant
long-term growth potential. The Partnership considers this activity to
constitute the single industry segment of venture capital investing.
The Partnership was organized as a "qualified venture capital company" under
Oklahoma law and, therefore, invested over 55% of its capitalization in
companies which constitute "Oklahoma business ventures", as that term is defined
under Oklahoma law. Accordingly, the Partnership's limited partners (the
"Limited Partners") were entitled to a credit against their 1989 Oklahoma state
income tax in an amount equal to 20% of their original investment in the
Partnership. From its inception through December 31, 1995, the Partnership had
invested $9.1 million in 18 portfolio investments of which approximately $5.7
million or 62.8% represents investments in Oklahoma business ventures.
The Partnership publicly offered, through MLPF&S, 25,000 units of limited
partnership interest at $1,000 per unit (the "Units"). The Units were registered
under the Securities Act of 1933 pursuant to a Registration Statement on Form
N-2 (File No. 33-24547), which was declared effective on December 1, 1988. The
Partnership completed its offering on August 14, 1989. A total of 10,248 Units
were sold to the Limited Partners. Gross capital contributions to the
Partnership total $10,355,556; $10,248,000 from the Limited Partners, $103,556
from the Managing General Partner and $4,000 from the Individual General
Partners.
The information set forth under the captions "Risk and Other Important Factors"
(pages 11 through 18), "Investment Objective and Policies" (pages 21 through 26)
and "Oklahoma Considerations" (pages 26 through 28) in the 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 (the "Prospectus"), is incorporated herein by
reference.
<PAGE>
The Venture Capital Investments
During 1995, the Partnership purchased venture capital investments totaling
$213,000 in four existing portfolio companies. From August 14, 1989
(commencement of operations) to December 31, 1995, the Partnership had invested
$9.1 million in 18 portfolio companies, representing 99% of the $9.2 million of
net proceeds from the offering of Units. At December 31, 1995, the Partnership's
investment portfolio consisted of 11 active investments with a cost basis of
$5.8 million and a fair value of $8.8 million. From its inception to December
31, 1995, the Partnership had liquidated investments with an aggregate cost
basis of $3.3 million. These liquidated investments returned $3.1 million for a
cumulative net realized loss of $237,000 as of December 31, 1995.
Information with respect to exchange transactions affecting the Partnership's
security holdings of Data Critical Corp. set forth in Item 5 of Part II of the
Partnership's quarterly report on Form 10-Q for the quarter ended March 31, 1995
is incorporated herein by reference.
The description of the Partnership's follow-on investment in Americo Publishing
Inc. set forth in Item 5 of Part II of the Partnership's quarterly report on
Form 10-Q for the quarter ended June 30, 1995 is incorporated herein by
reference.
The descriptions of the Partnership's follow-on investments in Americo
Publishing Inc. and Silverado Foods, Inc. set forth in Item 5 of Part II of the
Partnership's quarterly report on Form 10-Q for the quarter ended September 30,
1995 is incorporated herein by reference.
In December 1995, the Partnership wrote-off its $325,000 investment in Great
Outdoors Publishing, Inc., due to business and financial difficulties at the
company.
In connection with a financial restructuring of Excel Energy Technologies, Ltd.
completed in December 1995, the Partnership exchanged its $150,000 note, $13,907
of accrued interest and 16,304 shares of preferred stock for 3,492 preferred
shares of Excel Energy. Additionally, as a result of a 1,000-for-1 reverse stock
split effected in connection with the restructuring, the Partnership exchanged
its 17,336 shares of common stock for 17 shares of common stock.
Competition
The Partnership encounters competition from other entities having similar
investment objectives, including other entities affiliated with Merrill Lynch &
Co., Inc. Primary competition for venture capital investments has been from
venture capital partnerships, venture capital affiliates of large industrial and
financial companies, small business investment companies and wealthy
individuals.
Employees
The Partnership has no employees. The Managing General Partner, subject to the
supervision of the Individual General Partners, manages and controls the
Partnership's venture capital investments. The Management Company performs, or
arranges for others to perform, the management and administrative services
necessary for the operation of the Partnership and is responsible for managing
the Partnership's short-term investments.
<PAGE>
Item 2. Properties.
The Partnership does not own or lease physical properties.
Item 3. Legal Proceedings.
The Partnership is not a party to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year covered by
this report to a vote of security holders.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The information with respect to the market for the Units set forth under the
subcaption "Substituted Limited Partners" on page 40 of the Prospectus, is
incorporated herein by reference. There is no established public trading market
for the Units as of March 26, 1996. The approximate number of holders of Units
as of March 26, 1996 is 1,150. The Managing General Partner and the four
Individual General Partners of the Partnership also hold interests in the
Partnership.
Effective November 9, 1992, Registrant was advised that Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") introduced a new limited
partnership secondary service available to its clients through Merrill Lynch's
Limited Partnership Secondary Transaction Department.
Beginning with the December 1994 client account statements, Merrill Lynch
implemented new guidelines for providing estimated values of limited
partnerships and other direct investments reported on client account statements.
As a result, Merrill Lynch no longer reports general partner estimates of
limited partnership net asset value on its client account statements, although
the Registrant may continue to provide its estimate of net asset value to Unit
holders. Pursuant to the guidelines, estimated values for limited partnership
interests originally sold by Merrill Lynch (such as Registrant's Units) will be
provided two times per year to Merrill Lynch by independent valuation services.
The estimated values will be based on financial and other information available
to the independent services on the prior August 15th for reporting on December
year-end client account statements, and on information available to the services
on March 31st for reporting on June month-end Merrill Lynch client account
statements.
The Managing General Partner's estimate of net asset value at December 31, 1995
is $888 per Unit, including an assumed allocation of net unrealized appreciation
of investments. The Managing General Partner's estimate of net asset value as
set forth above reflects the value of the Partnership's underlying assets
remaining at fiscal year-end, whereas the value provided by the independent
services reflects the estimated value of the Partnership Units themselves based
on information that was available on August 15th. Merrill Lynch clients may
contact their Merrill Lynch Financial Consultants or telephone the number
provided to them on their account statements to obtain a general description of
the methodology used by the independent valuation services to determine their
estimates of value. The estimated values provided by the independent services
and the Registrant's current net asset value are not market values and Unit
holders may not be able to sell their Units or realize either amount upon a
sale. In addition, Unit holders may not realize the independent estimated value
or the Registrant's current net asset value upon the liquidation of the
Registrant over its remaining life.
During 1995, the Partnership made cash distributions to Partners totaling
$2,588,889. The Limited Partners received $2,562,000, or $250 per Unit, and the
General Partners received $26,889. There were no cash distributions to Partners
during the period from August 14, 1989 (commencement of operations) to December
31, 1994. The information under the heading "Distributions" contained in the
section entitled "Partnership Distributions and Allocations" on pages 35 and 36
of the Prospectus is incorporated herein by reference.
<PAGE>
Item 6. Selected Financial Data.
($ in thousands, except for per Unit information)
<TABLE>
Years ended December 31,
1995 1994 1993 1992 1991
-------- ---------- --------- -------- ------
<S> <C> <C> <C> <C> <C>
Net investment income (loss) $ (289) $ (143) $ (159) $ (110) $ 55
Realized gain (loss) on investments 1,651 (272) (1,043) - (63)
Net change in unrealized appreciation
(depreciation) of investments (950) 3,424 (388) 1,167 (18)
Net assets 9,194 11,370 8,361 9,950 8,893
Net unrealized appreciation (depreciation)
of investments 2,974 3,924 500 888 (280)
Cash distributions to Partners 2,589 - - - -
Cost of portfolio investments purchased 213 1,121 2,543 2,400 1,654
Cumulative cost of portfolio investments 9,118 8,905 7,784 5,241 2,841
PER UNIT OF LIMITED
PARTNERSHIP INTEREST:
Net investment income (loss) $ (28) $ (14) $ (15) $ (11) $ 5
Realized gain (loss) on investments 159 (26) (101) - (6)
Cash distributions 250 - - - -
Net unrealized appreciation (depreciation)
of investments 287 379 48 86 (27)
Net asset value, including net unrealized
appreciation (depreciation) of investments 888 1,098 807 961 859
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
At December 31, 1995, the Partnership held $249,000 in short-term investments
with maturities of less than one year and $261,000 in an interest-bearing cash
account. Interest earned on such investments for the years ended December 31,
1995, 1994 and 1993 was $47,000, $40,000 and $93,000, respectively. 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.
During 1995, the Partnership purchased venture capital investments totaling
$213,000 in four existing portfolio companies. From August 14, 1989
(commencement of operations) to December 31, 1995, the Partnership had invested
$9.1 million in 18 portfolio companies, representing 99% of the original net
proceeds to the Partnership.
Also during 1995, the Partnership realized cash returns totaling $2.7 million
from the sale of certain portfolio investments, primarily BACE Manufacturing,
Inc. and Eckerd Corporation. As a result, the Partnership declared and paid cash
distributions to Partners during 1995 totaling $2.6 million. The Limited
Partners received $2,562,000, or $250 per Unit, and the General Partners
received $27,000.
The Partnership will not purchase any new portfolio investments and, in general,
will distribute to Partners all proceeds received from the sale of its existing
portfolio investments, after an adequate reserve for future operating expenses,
as soon as practicable after receipt. Funds needed to cover the Partnership's
future operating expenses and follow-on investments in existing companies is
expected to be obtained from existing cash reserves, interest and other
investment income and proceeds from the sale of portfolio investments.
Results of Operations
For the year ended December 31, 1995, the Partnership had a net realized gain
from operations of $1.4 million. For the years ended December 31, 1994 and 1993,
the Partnership had a net realized loss from operations of $415,000 and $1.2
million, respectively. Net realized gain or loss from operations is comprised of
(1) net realized gains or losses from portfolio investments and (2) net
investment income or loss (interest and dividend income less operating
expenses).
Realized Gains and Losses from Portfolio Investments - For the year ended
December 31, 1995, the Partnership had a $1.7 million net realized gain from its
portfolio investments. In February, the Partnership sold its investment in BACE
Manufacturing, Inc., for $2.1 million, realizing a gain of $1.6 million. In July
1995, the Partnership sold its 15,491 shares of Eckerd Corporation common stock
for $480,000, realizing a gain of $337,000. Additionally in September 1995, the
Partnership sold its 90,000 common stock warrants of Envirogen, Inc. for
$39,000, realizing a gain of $39,000. In December 1995, the Partnership
wrote-off its $325,000 investment in Great Outdoors Publishing Inc. due to
business and financial difficulties at the company.
For the year ended December 31, 1994, the Partnership had a $272,000 net
realized loss from its portfolio investments. In June 1994, the Partnership sold
10,000 common stock warrants of Envirogen, Inc. in the public market for $6,000,
realizing a gain of $6,000. Additionally during June 1994, the Partnership's
warrants to purchase common stock of C.R. Anthony Company expired, resulting in
a realized loss of $2,175. During 1994, Sports Tactics International, Inc.
ceased operations. In connection with the liquidation of the company, the
Partnership received payments totaling $19,000, resulting in a realized loss of
$81,000. Also during 1994, Symex Corp. ceased operations resulting in the
write-off of the Partnership's remaining $146,000 debt investment in the
company. In December 1994, the Partnership sold its investment in QuanTem
Laboratories, Inc. in a private transaction for $26,000, realizing a loss of
$49,000.
For the year ended December 31, 1993, the Partnership had a $1 million realized
loss from its portfolio investments. During 1993, the Partnership wrote-off its
$693,000 equity investment in Symex Corp. and wrote-off $350,000 of its $450,000
equity investment in Sports Tactics International, Inc. due to business and
financial difficulties at these companies.
Investment Income and Expenses - For the years ended December 31, 1995, 1994 and
1993, the Partnership had a net investment loss of $289,000, $143,000 and
$159,000, respectively. The $146,000 increase in net investment loss for 1995
compared to 1994, resulted from a $100,000 decline in investment income and a
$46,000 increase in operating expenses for 1995 compared to 1994. The decrease
in investment income primarily was the result of a decrease in interest and
dividend income from portfolio investments. Interest from portfolio investments
declined from $76,000 in 1994 to $48,000 in 1995 due to a decline in the amount
of portfolio debt instruments outstanding during 1995 compared to 1994. This is
a result of the conversion or liquidation of several portfolio debt securities
during 1995. Additionally, dividend income declined $79,000 for 1995 compared to
1994. The Partnership received $43,000 of dividend income in 1994 from its BACE
Manufacturing investment, which was sold in February 1995. Additionally, the
Partnership received a $36,000 one-time dividend from Diagnetics, Inc. in 1994.
The $46,000 increase in operating expenses for 1995 compared to 1994 resulted
from a $53,000 increase in professional fees and Independent General Partners'
fees partially offset by a $7,000 decrease in other expenses.
The $16,000 decrease in net investment loss for 1994 compared to 1993 primarily
was the result of a $39,000 decline in operating expenses for 1994, primarily
professional fees, partially offset by a $24,000 decline in investment income
for 1994. Professional fees declined $25,000 for 1994, from $78,000 in 1993 to
$53,000 in 1994, due to a reduction in the Partnership's legal expenses for
1994. Investment income declined $24,000 for 1994 compared to 1993. Interest
earned on short-term investments for 1994 declined $53,000, from $93,000 in 1993
to $40,000 in 1994. This decrease was offset by a $29,000 increase in interest
and other income from portfolio investments for 1994, from $126,000 in 1993 to
$155,000 in 1994. The decrease in interest earned from short-term investments
primarily was a result of a decline in the amount available for investments in
such securities during 1994. The increase in interest and other income from
portfolio investments for 1994 primarily was the result of an increase in the
amount invested in interest bearing debt securities of portfolio investments
during 1994 compared to 1993.
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 years ended
December 31, 1995, 1994 and 1993, was $200,000, $200,000 and $204,000,
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 of Portfolio
Investments - For the year ended December 31, 1995, the Partnership had a
$465,000 net unrealized gain resulting from the upward revaluation of certain
portfolio investments. Additionally during 1995, $1.4 million was transferred to
realized gain from unrealized gain resulting from portfolio investments sold or
written-off during 1995, as discussed above. The $1.4 million transfer from
unrealized loss to realized loss, offset by the $465,000 unrealized gain
resulted in a $950,000 decrease to net unrealized appreciation of investments
for 1995.
For the year ended December 31, 1994, the Partnership had a $3.1 million net
unrealized gain primarily resulting from the upward revaluation of its
investments in BACE Manufacturing, Inc. and Silverado Foods, Inc., which
completed its initial public offering in August 1994. Additionally during 1994,
a net $297,000 was transferred from unrealized loss to realized loss relating to
portfolio investments sold and written-off during 1994, as discussed above. The
$3.1 million unrealized gain and the $297,000 transfer from unrealized loss to
realized loss, resulted in a $3.4 million increase to net unrealized
appreciation of investments for 1994.
For the year ended December 31, 1993, the Partnership had a net unrealized loss
of $928,000 resulting from the net downward revaluation of certain portfolio
investments. Additionally during 1993, the Partnership transferred $540,000 from
unrealized loss to realized loss relating to portfolio investments written-off
in 1993, as discussed above. The $928,000 unrealized loss less the $540,000
transfer from unrealized loss to realized loss, resulted in a $388,000 decrease
to net unrealized appreciation of investments for 1993.
Net Assets - Changes to net assets resulting from operations are comprised of
(1) net realized gains and losses and (2) changes to net unrealized appreciation
of portfolio investments.
For the year ended December 31, 1995, the Partnership had a $412,000 increase in
net assets resulting from operations, comprised of the $1.4 million net realized
gain from operations partially offset by the $950,000 net decrease in unrealized
appreciation for 1995. At December 31, 1995, the Partnership's net assets were
$9.2 million, down $2.2 million from $11.4 million at December 31, 1994. This
decrease reflects the $2.6 million of cash distributions paid to Partners during
1995 exceeding the $412,000 increase in net assets resulting from operations for
1995.
At December 31, 1994, the Partnership's net assets were $11.4 million,
reflecting an increase of $3 million from $8.4 million at December 31, 1993.
This increase reflects the $3.4 million increase in net unrealized appreciation
of investments partially offset by the $415,000 net realized loss from
operations for 1994.
At December 31, 1993, the Partnership's net assets were $8.4 million, down $1.6
million from $10 million at December 31, 1992. This decrease reflects the $1.2
million net realized loss from operations and the $388,000 decrease to net
unrealized appreciation of investments for 1993.
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 December 31, 1995, 1994 and 1993 was $888, $1,098
and $807, respectively.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
INDEX
Independent Auditors' Report
Balance Sheets as of December 31, 1995 and 1994
Schedule of Portfolio Investments as of December 31, 1995 Schedule of Portfolio
Investments as of December 31, 1994
Statements of Operations for the years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Statements of Changes in Partners' Capital for the years ended December 31,
1993, 1994 and 1995
Notes to Financial Statements
NOTE - All other schedules are omitted because of the absence of conditions
under which they are required or because the required information is included in
the financial statements or the notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
ML Oklahoma Venture Partners, Limited Partnership:
We have audited the accompanying balance sheets of ML Oklahoma Venture Partners,
Limited Partnership (the "Partnership"), including the schedules of portfolio
investments, as of December 31, 1995 and 1994, and the related statements of
operations, cash flows, and changes in partners' capital for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1995 and 1994 by correspondence
with the custodian; where confirmation was not possible, we performed other
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership at December 31, 1995 and
1994, and the results of its operations, its cash flows and the changes in its
partners' capital for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
As explained in Note 2, the financial statements include securities valued at
$8,345,312 and $10,296,209 at December 31, 1995 and 1994, respectively,
representing 91% of net assets, respectively, whose values have been estimated
by the Managing General Partner in the absence of readily ascertainable market
values. We have reviewed the procedures used by the Managing General Partner in
arriving at its estimate of value of such securities and have inspected
underlying documentation, and, in the circumstances, we believe the procedures
are reasonable and the documentation appropriate. However, because of the
inherent uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready market for
the securities existed, and the differences could be material.
Deloitte & Touche LLP
New York, New York
February 19, 1996
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
BALANCE SHEETS
December 31,
<TABLE>
1995 1994
-------------- ----------
ASSETS
Investments - Note 2
Portfolio investments, at fair value (cost $5,787,960 at
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1995 and $6,582,245 at December 31, 1994) $ 8,762,012 $ 10,506,209
Short-term investments, at amortized cost - Note 8 249,327 597,738
Cash and cash equivalents 261,310 291,508
Accrued interest and other receivables 44,653 76,706
-------------- ----------------
TOTAL ASSETS $ 9,317,302 $ 11,472,161
============== ================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 39,353 $ 26,710
Due to Management Company - Note 4 69,423 62,032
Due to Independent General Partners - Note 6 15,000 13,000
-------------- ----------------
Total liabilities 123,776 101,742
-------------- ----------------
Partners' Capital:
Managing General Partner 62,194 74,464
Individual General Partners 2,405 2,878
Limited Partners (10,248 Units) 6,154,875 7,369,113
Unallocated net unrealized appreciation of investments - Note 2 2,974,052 3,923,964
-------------- ----------------
Total partners' capital 9,193,526 11,370,419
-------------- ----------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 9,317,302 $ 11,472,161
============== ================
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1995
<TABLE>
Initial Investment
Company / Position Date Cost Fair Value
Americo Publishing, Inc.
<C> <C> <C> <C>
10% Demand Promissory Note Feb. 1994 $ 225,000 $ 112,500
8% Demand Promissory Note 30,000 15,000
9% Demand Promissory Notes 59,000 54,500
- -------------------------------------------------------------------------------------------------------------------------------
C.R. Anthony Company
275,317 shares of Common Stock Oct. 1992 600,191 600,191
- -------------------------------------------------------------------------------------------------------------------------------
Data Critical Corp.*(B)(C)
637,500 shares of Preferred Stock April 1993 600,000 1,050,000
Warrant to purchase 875,000 shares of Common Stock
at $.40 per share, expiring 10/6/97 0 350,000
- -------------------------------------------------------------------------------------------------------------------------------
Diagnetics, Inc.*(B)(D)
314,807 shares of Preferred Stock April 1991 785,753 785,753
21,413 shares of Common Stock 27,857 27,857
- -------------------------------------------------------------------------------------------------------------------------------
Enerpro International, Inc.*
35,000 shares of Preferred Stock Aug. 1993 350,000 350,000
- -------------------------------------------------------------------------------------------------------------------------------
Envirogen, Inc.(A)(E)
150,000 shares of Common Stock Sept. 1991 525,000 416,700
- -------------------------------------------------------------------------------------------------------------------------------
Excel Energy Technologies, Ltd.*(B)(F)
3,492 shares of Preferred Stock Oct. 1993 663,907 538,907
17 shares of Common Stock 2,500 0
- -------------------------------------------------------------------------------------------------------------------------------
Independent Gas Company Holdings, Inc.*(G)
464 shares of Preferred Stock June 1993 464,000 464,000
5,192 shares of Common Stock 3,336 3,336
- -------------------------------------------------------------------------------------------------------------------------------
Silverado Foods, Inc.*(A)(B)(H)
705,681 shares of Common Stock June 1992 529,900 1,614,245
Warrant to purchase 12,121 shares of Common Stock
at $8.25 per share, expiring 6/2/99 0 0
- -------------------------------------------------------------------------------------------------------------------------------
UroCor, Inc.*
474,007 shares of Preferred Stock May 1991 921,305 2,370,035
Warrant to purchase 12,539 shares of Common Stock
at $4.30 per share, expiring 10/18/98 0 8,777
- -------------------------------------------------------------------------------------------------------------------------------
ZymeTx, Inc.
21,052 shares of Common Stock July 1994 211 211
- -------------------------------------------------------------------------------------------------------------------------------
Totals(I) $ 5,787,960 $ 8,762,012
===================================
</TABLE>
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS - continued
December 31, 1995
(A) Public company
(B) Qualifies as an "Oklahoma business venture" under Oklahoma law.
(C) During the year, Data Critical effected a 10-for-1 split of its common
stock. As a result, the Partnership exchanged its warrant to purchase
87,500 shares of common stock at $4.00 per share for a warrant to purchase
875,000 shares of common stock at $.40 per share. Additionally, in February
1995, the Partnership exchanged its $350,000 promissory note and $100,000
for 562,500 preferred shares of the company.
(D) The Partnership received 11,407 shares of Diagnetics, Inc. common stock as
a result of a stock distribution made by the company in December 1995.
(E) In September 1995, the Partnership sold its 90,000 warrants to purchase
common stock of Envirogen, Inc. for $39,344, realizing a gain of $39,344.
(F) In connection with a financial restructuring of Excel Energy Technologies,
Ltd. completed in December 1995, the Partnership exchanged its $150,000
note, $13,907 of accrued interest and 16,304 shares of preferred stock for
3,492 preferred shares of Excel Energy. Additionally, as a result of a
1,000-for-1 reverse stock split effected in connection with the
restructuring, the Partnership exchanged its 17,336 shares of common stock
for 17 shares of common stock.
(G) On December 31, 1995, the Partnership converted its $14,100 promissory note
due from Independent Gas Company Holdings, Inc. into 14 shares of preferred
stock and 406 shares of common stock of the company.
(H) In July 1995, the Partnership exercised its warrant to purchase 22,500
shares of Silverado Foods, Inc. common stock for $9,900, or $0.44 per
share.
(I) In February 1995, the Partnership sold its investment in BACE
Manufacturing, Inc. for $2,138,475, realizing a gain of $1,599,475. The
Partnership has $69,611 remaining in escrow relating to the sale of BACE,
the release of which is contingent upon certain events. The Partnership has
$69,611 remaining in escrow relating to the sale of BACE, the release of
which is contingent upon certain events. In July 1995, the Partnership sold
its investment in of Eckerd Corporation for $479,911, realizing a gain of
$336,919. On December 31, 1995, the Partnership wrote-off its $325,000
investment in Great Outdoors Publishing, Inc.
* May be deemed an affiliated person of the Partnership as defined in the
Investment Company Act of 1940.
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1994
<TABLE>
Initial Investment
Company / Position Date Cost Fair Value
Americo Publishing, Inc.
<C> <C> <C> <C>
10% Demand Promissory Notes Feb. 1994 $ 225,000 $ 225,000
- -------------------------------------------------------------------------------------------------------------------------------
BACE Manufacturing, Inc.*
1,078 shares of Preferred Stock Feb. 1992 539,000 1,931,200
- -------------------------------------------------------------------------------------------------------------------------------
C.R. Anthony Company
275,317 shares of Common Stock Oct. 1992 600,191 600,191
- -------------------------------------------------------------------------------------------------------------------------------
Data Critical Corp.*(B)
75,000 shares of Preferred Stock April 1993 150,000 150,000
8% Promissory Note due 4/6/95 350,000 350,000
Warrant to purchase 87,500 shares of Common Stock
at $4 per share, expiring 10/6/97 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Diagnetics, Inc.*(B)
314,807 shares of Preferred Stock April 1991 800,582 800,582
10,006 shares of Common Stock 13,028 13,028
- -------------------------------------------------------------------------------------------------------------------------------
Eckerd Corporation*(A)
15,491 shares of Common Stock July 1992 142,992 406,755
- -------------------------------------------------------------------------------------------------------------------------------
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 525,000 210,000
90,000 Warrants to purchase 45,000 shares of Common
Stock at $5.20 per share, expiring 10/13/98 0 12,645
- -------------------------------------------------------------------------------------------------------------------------------
Excel Energy Technologies, Ltd.*(B)
16,304 shares of Preferred Stock Oct. 1993 500,000 500,000
17,336 shares of Common Stock 2,500 2,500
9% Debenture due 12/8/95 150,000 150,000
- -------------------------------------------------------------------------------------------------------------------------------
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.*
450 shares of Preferred Stock June 1993 450,000 450,000
4,786 shares of Common Stock 3,336 3,336
10% Promissory Note due 2/20/95 14,100 14,100
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS - continued
December 31, 1994
<TABLE>
Initial Investment
Company / Position Date Cost Fair Value
Silverado Foods, Inc.*(A)(B)
<C> <C> <C> <C>
683,181 shares of Common Stock June 1992 $ 520,000 $ 2,017,775
Warrant to purchase 22,500 shares of Common Stock
at $0.44 per share, expiring 1/19/98 0 56,554
Warrant to purchase 12,121 shares of Common Stock
at $8.25 per share, expiring 6/2/99 0 0
- -------------------------------------------------------------------------------------------------------------------------------
UroCor, Inc.*(B)
474,007 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
- -------------------------------------------------------------------------------------------------------------------------------
ZymeTx, Inc.
21,052 shares of Common Stock July 1994 211 211
- -------------------------------------------------------------------------------------------------------------------------------
TOTALS $ 6,582,245 $ 10,506,209
===================================
</TABLE>
(A) Public company
(B) Qualifies as an "Oklahoma business venture" under Oklahoma law.
* May be deemed an affiliated person of the Partnership as defined in the
Investment Company Act of 1940.
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
<TABLE>
1995 1994 1993
------------- -------------- ---------
INVESTMENT INCOME AND EXPENSES
Income:
<S> <C> <C> <C>
Interest from short-term investments $ 46,514 $ 40,371 $ 93,067
Interest and other income from portfolio investments 48,342 75,684 48,648
Dividend income - 78,890 76,968
------------- -------------- ---------------
Total investment income 94,856 194,945 218,683
------------- -------------- ---------------
Expenses:
Management fee - Note 4 200,000 200,000 204,256
Professional fees 86,850 52,799 78,123
Independent General Partners' fees - Note 6 72,245 52,826 57,230
Mailing and printing 17,483 18,566 21,311
Amortization of deferred organizational costs - Note 2 - 5,964 9,544
Custodial fees 5,938 6,664 5,967
Miscellaneous 1,170 1,180 918
------------- -------------- ---------------
Total expenses 383,686 337,999 377,349
------------- -------------- ---------------
NET INVESTMENT LOSS (288,830) (143,054) (158,666)
Net realized gain (loss) from investments 1,650,738 (271,775) (1,042,899)
------------- -------------- ---------------
NET REALIZED GAIN (LOSS) FROM OPERATIONS
(allocable to Partners) - Note 3 1,361,908 (414,829) (1,201,565)
Net change in unrealized appreciation of investments (949,912) 3,424,316 (387,994)
------------- -------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 411,996 $ 3,009,487 $ (1,589,559)
============= ============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
<TABLE>
1995 1994 1993
-------------- ------------- --------
CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C> <C> <C>
Net investment loss $ (288,830) $ (143,054) $ (158,666)
Adjustments to reconcile net investment loss to cash
used for operating activities:
Amortization of deferred organizational costs - 5,964 9,544
Increase (decrease) in payables 22,034 (20,226) 9,237
Decrease in accrued interest on short-term investments 489 18 4,796
(Increase) decrease in receivables and other assets 5,866 (15,638) (20,671)
-------------- ------------- -------------
Cash used for operating activities (260,441) (172,936) (155,760)
-------------- ------------- -------------
CASH FLOWS PROVIDED FROM (USED FOR)
INVESTING ACTIVITIES
Cost of portfolio investments purchased (212,807) (1,121,489) (2,542,497)
Proceeds from the sale of portfolio investments 2,684,017 25,113 -
Net deposits released from escrow - - 70,295
Net return from short-term investments 347,922 399,987 2,979,364
Repayment of investments in notes - 280,000 5,000
-------------- ------------- -------------
Cash provided from (used for) investing activities 2,819,132 (416,389) 512,162
-------------- ------------- -------------
CASH FLOWS USED FOR FINANCING ACTIVITIES
Cash distributions to Partners (2,588,889) - -
-------------- ------------- -------------
Increase (decrease) in cash and cash equivalents (30,198) (589,325) 356,402
Cash and cash equivalents at beginning of period 291,508 880,833 524,431
-------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 261,310 $ 291,508 $ 880,833
============== ============= =============
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Years Ended December 31, 1993, 1994 and 1995
<TABLE>
Unallocated
Managing Individual Net Unrealized
General General Limited Appreciation
Partner Partners Partners of Investments Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ 90,629 $ 3,502 $ 8,968,718 $ 887,642 $ 9,950,491
Net investment loss (1,587) (61) (157,018) - (158,666)
Net realized loss from investments (10,429) (403) (1,032,067) - (1,042,899)
Net change in unrealized
appreciation of investments - - - (387,994) (387,994)
---------- -------- ------------- ------------- --------------
Balance at December 31, 1993 78,613 3,038 7,779,633(A) 499,648 8,360,932
Net investment loss (1,431) (55) (141,568) - (143,054)
Net realized loss from investments (2,718) (105) (268,952) - (271,775)
Net change in unrealized
appreciation of investments - - - 3,424,316 3,424,316
---------- -------- ------------- ------------- --------------
Balance at December 31, 1994 74,464 2,878 7,369,113(A) 3,923,964 11,370,419
Cash distribution, paid
April 17, 1995 - - (2,049,600) - (2,049,600)
Cash distribution, paid
October 19, 1995 (25,889) (1,000) (512,400) - (539,289)
Net investment loss (2,888) (111) (285,831) - (288,830)
Net realized gain from investments 16,507 638 1,633,593 - 1,650,738
Net change in unrealized
appreciation of investments - - - (949,912) (949,912)
---------- -------- ------------- ------------- --------------
Balance at December 31, 1995 $ 62,194 $ 2,405 $ 6,154,875(A) $ 2,974,052 $ 9,193,526
========== ======== ============= ============= ==============
</TABLE>
(A) The net asset value per unit of limited partnership interest, including an
assumed allocation of net unrealized appreciation of investments, was $888,
$1,098 and $807 at December 31, 1995, 1994 and 1993, respectively.
Cumulative cash distributions paid to Limited Partners totaled $250 per
Unit at December 31, 1995.
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
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
does 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 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.
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.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
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. The Partnership's net assets for financial reporting purposes differ
from its net assets for tax purposes. Net unrealized appreciation of $3 million
at December 31, 1995, which was recorded for financial statement purposes, was
not recognized for tax purposes. Additionally, from inception to December 31,
1995, other timing differences totaling $1.2 million relating to the 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.
Statements of Cash Flows - The Partnership considers its interest-bearing cash
account to be cash equivalents.
Organizational Costs - Organizational costs of $47,718 were 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.
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
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
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 $16,000 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. Cash Distributions
Cash distributions paid during the periods presented and cumulative cash
distributions to Partners from the inception of the Partnership through December
31, 1995 are listed below:
<TABLE>
General Limited Per $1,000
Distribution Date Partners Partners Unit
<S> <C> <C> <C> <C> <C>
April 17, 1995 $ 0 $ 2,049,600 $ 200
October 19, 1995 26,889 512,400 50
----------- -------------- ------
Cumulative totals at December 31, 1995 $ 26,889 $ 2,562,000 $ 250
=========== ============== ======
</TABLE>
8. Short-Term Investments
At December 31, 1995 and 1994, the Partnership's short-term securities consisted
of the following investments in commercial paper:
<TABLE>
Maturity Purchase Amortized
Issuer Yield Date Price Cost Face Value
December 31, 1995:
<S> <C> <C> <C> <C> <C> <C>
Golden Managers Acceptance Corp. 5.70% 1/17/96 $ 248,931 $ 249,327 $ 250,000
------------ ------------ ---------------
December 31, 1994:
First Brands Commercial Inc. 5.90% 1/23/95 $ 596,853 $ 597,738 $ 600,000
------------ ------------ ---------------
</TABLE>
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
9. Portfolio Investments
As of December 31, 1995, the Partnership's investments were categorized as
follows:
<TABLE>
% of
Type of Investments Cost Fair Value Net Assets*
- ------------------- ---------------- --------------- -----------
<S> <C> <C> <C>
Common Stock $ 1,688,995 $ 3,021,317 33%
Preferred Stock 3,784,965 5,558,695 60%
Debt Securities 314,000 182,000 2%
---------------- --------------- -------
$ 5,787,960 $ 8,762,012 95%
================ =============== =======
Country/Geographic Region
Oklahoma $ 4,348,558 $ 7,562,910 82%
Non-Oklahoma 1,439,402 1,199,102 13%
---------------- --------------- -------
$ 5,787,960 $ 8,762,012 95%
================ =============== =======
Industry
Publishing $ 314,000 $ 182,000 2%
Retail - Apparel 600,191 600,191 6%
Food Manufacturing + Distribution 529,900 1,614,245 18%
Energy/Natural Gas 1,133,743 1,006,243 11%
Data Communications 600,000 1,400,000 15%
Oil and Gas Equipment and Services 350,000 350,000 4%
Environmental Technology 525,000 416,700 4%
Healthcare/Biotechnology 921,516 2,379,023 26%
Measurement Instrumentation 813,610 813,610 9%
---------------- --------------- -------
$ 5,787,960 $ 8,762,012 95%
================ =============== =======
</TABLE>
* Percentage of net assets is based on fair value.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership
GENERAL PARTNERS
The five General Partners of the Partnership are responsible for the management
and administration of the Partnership. The General Partners consist of the four
Individual General Partners and the Managing General Partner. As required by the
Investment Company Act of 1940 (the "Investment Company Act"), a majority of the
General Partners must be individuals who are not "interested persons" of the
Partnership as defined in the Investment Company Act. In 1989, the Securities
and Exchange Commission issued an order declaring that the independent general
partners of the Partnership (the "Independent General Partners") are not
"interested persons" of the Partnership as defined in the Investment Company Act
solely by reason of their being general partners of the Partnership. The
Managing General Partner and the four Individual General Partners will serve as
the General Partners until successors have been elected or until their earlier
resignation or removal.
The Individual General Partners have full authority over the management of the
Partnership and provide overall guidance and supervision with respect to the
operations of the Partnership and perform the various duties imposed on the
directors of business development companies by the Investment Company Act. In
addition to general fiduciary duties, the Individual General Partners, among
other things, supervise the management arrangements of the Partnership and
supervise the activities of the Managing General Partner.
The Managing General Partner has exclusive power and authority to manage and
control the Partnership's venture capital investments subject to the supervision
of the Individual General Partners. Additionally, subject to the supervision of
the Individual General Partners, the Managing General Partner is authorized to
make all decisions regarding the Partnership's venture capital investment
portfolio including, among other things, find, evaluate, structure, monitor and
liquidate such investments and to provide, or arrange for the provision of,
managerial assistance to the portfolio companies in which the Partnership
invests.
<PAGE>
Individual General Partners
William C. Liedtke, III (1)
P.O. Box 54369
Oklahoma City, OK 73154
Age 44
Individual General Partner since 1988
0 Units of the Partnership beneficially owned at March 26, 1996 (3)
Energy consultant since 1991; Assistant to the Governor of the State of Oklahoma
from 1989 to 1991; an independent natural gas marketing consultant since
1984; an oil and gas marketing manager for Trigg Drilling Company, Inc.; a
member of the State Bar of Texas; a trustee of the Casady School.
Richard P. Miller (1)
7500 N. Mockingbird Lane
Paradise Valley, AZ 85253
Age 68
Individual General Partner since 1988
0 Units of the Partnership beneficially owned at March 26, 1996 (3)
Since1988 Director and Chief Financial Officer of Techlaw, Inc.; from 1983 to
1990, Executive Vice President of Private Sector Counsel; in 1983 and 1984,
Vice President, Corporate Finance, Union Bank of California; from 1968 to
1983, founder and Chief Executive Officer of Systems Control Inc.
George A. Singer (1)
2222 E. 25th Place
Tulsa, OK 74114
Age 48
Individual General Partner since 1995
0 Units of the Partnership beneficially owned at March 26, 1996 (3)
Since1978 General Partner of Singer Bros. and several related family entities;
Executive Vice President, Pedestal Oil Company, Inc.; Director of
Manchester Pipeline Corporation; a member of the Independent Petroleum
Association of America.
Bruce W. Shewmaker (2)
12 Briarwood Drive
Short Hills, NJ 07078
Age 50
Individual General Partner since 1988
0 Units of the Partnership beneficially owned at March 26, 1996 (3)
Since1992 President of New Century Management Inc., a venture capital
management and advisory firm; since 1991, a self-employed business
consultant; from 1990 to 1991, venture investment advisor with Vector
Securities International Inc., an investment banking firm specializing in
health care companies; from 1984 to 1990, President of Merrill Lynch R&D
Management Inc.; from 1982 to 1983 and from 1988 to 1990, Vice President of
Merrill Lynch Venture Capital Inc.
(1) Member of Audit Committee.
(2) Interested person, as defined in the Investment Company Act, of the
Partnership.
(3) Each Individual General Partner has contributed $1,000 to the capital of
the Partnership. Mr. Shewmaker is a limited partner of the Managing General
Partner of the Partnership. The Managing General Partner contributed
$103,556 to the capital of the Partnership. George A. Singer succeeded to
the interest of a prior Independent General Partner who contributed $1,000
to the capital of the Partnership.
The Managing General Partner
MLOK Co., Limited Partnership (the "Managing General Partner") is a limited
partnership organized on July 15, 1988 under the laws of the State of Oklahoma.
The Managing General Partner maintains its legal address at Meridian Tower, 5100
East Skelly Drive, Suite 1060, Tulsa, OK 74135. The Managing General Partner has
acted as the managing general partner of the Partnership since the Partnership
commenced operations on August 14, 1989. The Managing General Partner is engaged
in no other activities at the date hereof. The Managing General Partner has
contributed $103,556 to the capital of the Partnership, equal to 1% of the
aggregate capital contributions of all Partners of the Partnership.
The general partner of the Managing General Partner is Merrill Lynch Venture
Capital Inc. (the "Management Company") and the limited partners of the Managing
General Partner include Joe D. Tippens and C. James Bode, independent
contractors to the Management Company. Information concerning the Management
Company is set forth below.
The Management Company
Merrill Lynch Venture Capital Inc. (the "Management Company") has served as the
management company for the Partnership since the Partnership commenced
operations. The Management Company performs, or arranges for others to perform,
the management and administrative services necessary for the operation of the
Partnership pursuant to a Management Agreement between the Partnership and the
Management Company.
The Management Company is an indirect subsidiary of Merrill Lynch & Co., Inc.
The Management Company, which was incorporated under Delaware law on January 25,
1982, maintains its principal office at North Tower, World Financial Center, New
York, New York 10281-1326. Listed below is information concerning the directors
and officers of the Management Company. Unless otherwise noted, the address of
each such person is in North Tower, World Financial Center, New York, New York
10281.
Kevin K. Albert, Age 43, Director, President
Officer or Director since 1990
Managing Director of Merrill Lynch & Co. Investment Banking Division ("MLIBK")
since 1988; Vice President of MLIBK from 1983 to 1988.
<PAGE>
Robert F. Aufenanger, Age 42, Director and Executive Vice President
Officer or Director since 1990
Vice President of Merrill Lynch & Co. Corporate Credit and Director of the
Partnership Management Group since 1991; Director of MLIBK from 1990 to
1991; Vice President of MLIBK from 1984 to 1990.
Steven N. Baumgarten, Age 40, Vice President Officer or Director since 1993 Vice
President of MLPF&S since 1986.
Michael E. Lurie, Age 52, Director, Vice President
Officer or Director since 1995
FirstVice President of Merrill Lynch & Co. Corporate Credit and Director of the
Asset Recovery Management Department, joined Merrill Lynch in 1970. Prior
to his present position, Mr. Lurie was the Director of Debt and Equity
Markets Credit responsible for the global allocation of credit limits and
the approval and structuring of specific transactions related to debt and
equity products. Mr. Lurie also served as Chairman of the Merrill Lynch
International Bank Credit Committee.
Diane T. Herte
Vice President and Treasurer
Age 35
Officer or Director since 1995
Assistant Vice President of Merrill Lynch & Co. Corporate Credit since 1992 and
joined Merrill Lynch in 1984. Ms. Herte's responsibilities include
controllership and financial management functions for certain partnerships
for which subsidiaries of ML Leasing Equipment Corp., an affiliate of
Merrill Lynch, are general partners.
The directors of the Management Company will serve as directors until the next
annual meeting of stockholders and until their successors are elected and
qualify. The officers of the Management Company will hold office until the next
annual meeting of the Board of Directors of the Management Company and until
their successors are elected and qualify.
There are no family relationships among any of the Individual General Partners
of the Partnership and the officers and directors of the Management Company.
Item 11. Executive Compensation.
Compensation - The Partnership pays each Independent General Partner an annual
fee of $16,000 in quarterly installments, $1,000 per meeting of the Individual
General Partners attended and $500 for participating in each special meeting of
the Individual General Partners conducted by telephone conference call and pays
all non-interested Individual General Partners' actual out-of-pocket expenses
relating to attendance at meetings. The Independent General Partners receive
$1,000 for each meeting of the Audit Committee attended unless such committee
meeting is held on the same day as a meeting of the Individual General Partners.
In such case, the Independent General Partners receive $500 for each meeting of
the Audit Committee attended. The aggregate fees and expenses paid by the
Partnership to the Independent General Partners for the years ended December 31,
1995, 1994 and 1993, totaled $72,245, $52,826 and $57,230, respectively.
Allocations and Distributions - The information with respect to the allocation
and distribution of the Partnership's profits and losses to the Managing General
Partner set forth under the caption "Partnership Distributions and Allocations"
on pages 35 - 37 of the Prospectus is incorporated herein by reference.
For the year ended December 31, 1995 the Partnership had a net realized gain
from operations of $1,361,908. For the years ended December 31, 1994 and 1993,
the Partnership had a net realized loss from operations of $414,829 and
$1,201,565, respectively. In accordance with the Partnership's allocation
procedure, the Managing General Partner was allocated $13,619, $4,149 and
$12,016 such gains and losses. In March 1995, the General Partners approved a
cash distribution to the Limited Partners totaling $2 million, or $200 per Unit.
The distribution was paid in April 1995 to Limited Partners of record on March
31, 1995. Additionally, in September 1995, the General Partners approved a
$512,000 cash distribution to Limited Partners of record on September 30, 1995.
The distribution was paid in October 1995 to Limited Partners of record on
September 30, 1995.
The General Partners also received a distribution totaling $26,889.
Management Fee - The Management Agreement provides that as compensation for its
services to the Partnership, the Management Company will receive a fee at the
annual rate of 2.5% of the amount of the partners' gross capital contributions
(net of selling commissions and organizational and offering expenses paid by the
Partnership), reduced by capital distributed and realized capital losses, with a
minimum annual fee of $200,000. Such fee is determined and payable quarterly on
the basis of the amount of the partners' capital contributions at the end of the
preceding calendar quarter. For the years ended December 31, 1995, 1994 and
1993, the management fee was $200,000, $200,000 and $204,256, respectively.
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.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information concerning the security ownership of the Individual General
Partners set forth in Item 10 under the subcaption "Individual General Partners"
is incorporated herein by reference. As of March 26, 1996, no person or group is
known by the Partnership to be the beneficial owner of more than 5 percent of
the Units.
The Partnership is not aware of any arrangement which may, at a subsequent date,
result in a change of control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
Kevin K. Albert, a Director and President of the Management Company and a
Managing Director of Merrill Lynch Investment Banking Group ("ML Investment
Banking"), joined Merrill Lynch in 1981. Robert F. Aufenanger, a Director and
Executive Vice President of the Management Company, a Vice President of Merrill
Lynch & Co. Corporate Credit and a Director of the Partnership Management
Department, joined Merrill Lynch in 1980. Steven N. Baumgarten, a Vice President
of the Management Company and MLPF&S, joined Merrill Lynch in 1986. Messrs.
Albert, Aufenanger and Baumgarten are involved with certain other entities
affiliated with Merrill Lynch or its affiliates. Michael E. Lurie, a Director
and Vice President of the Management Company, a First Vice President of Merrill
Lynch & Co. Corporate Credit and the Director of the Asset Recovery Management
Department, joined Merrill Lynch in 1970. Diane T. Herte, a Vice President and
Treasurer of the Management Company and an Assistant Vice President of Merrill
Lynch & Co. Corporate Credit, joined Merrill Lynch in 1984.
<PAGE>
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) 1. Financial Statements
Independent Auditors' Report
Balance Sheets as of December 31, 1995 and 1994
Schedule of Portfolio Investments as of December 31, 1995
Schedule of Portfolio Investments as of December 31, 1994
<TABLE>
<S> <C> <C> <C> <C>
Statements of Operations for the years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Statements of Changes in Partners' Capital for the years ended December 31, 1993, 1994 and 1995
Notes to Financial Statements
2. (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.*
(13) (a) Page 15 of the Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
(13) (b) Page 15 of the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
(13) (c) Page 15 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 1995
(27) Financial Data Schedule.
(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.
</TABLE>
* 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 26th day of March, 1996.
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)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 26th day of March 1996.
By: MLOK Co., Limited Partnership
its Managing General Partner
By: Merrill Lynch Venture Capital Inc.
its General Partner
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
By: /s/ Kevin K. Albert By: /s/ Richard P. Miller
----------------------------------------------------- -----------------------
Kevin K. Albert Richard P. Miller
President General Partner
(Principal Executive Officer) ML Oklahoma Venture Partners, Limited Partnership
By: /s/ Diane T. Herte By: /s/ George A. Singer
----------------------------------------------------- ----------------------
Diane T. Herte George A. Singer
Treasurer General Partner
(Principal Financial and Accounting Officer) ML Oklahoma Venture Partners, Limited Partnership
By: /s/ William C. Liedtke, III By: /s/ Bruce W. Shewmaker
William C. Liedtke, III Bruce W. Shewmaker
General Partner General Partner
ML Oklahoma Venture Partners, Limited Partnership ML Oklahoma Venture Partners, Limited Partnership
</TABLE>
Exhibit 13(a)
During the quarter, Data Critical Corp. effected a 10-for-1 split of its common
stock. As a result, the Partnership exchanged its warrant to purchase 87,500
shares of common stock at $4.00 per share for a warrant to purchase 875,000
shares of common stock at $.40 per share. Additionally, in February 1995, the
Partnership exchanged $350,000 of Data Critical Corp. promissory notes and
$100,000 for 562,500 preferred shares of the company.
Exhibit 13(b)
During the quarter, the Partnership made two follow-on investments in Americo
Publishing, Inc. On May 5, 1995, the Partnership invested $30,000 in an 8%
Demand Promissory Note and $9,000 on June 19, 1995 in a 9% Demand Promissory
Note.
Exhibit 13(c)
In July 1995, the Partnership exercised its warrants to purchase 22,500 shares
of Silverado Foods, Inc. common stock for $9,900, or $.44 per share.
In August 1995, the Partnership invested $50,000 in an additional 9% demand note
of Americo Publishing, Inc.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ML OKLAHOMA
VENTURE PARTNERS, LIMITED PARTNERSHIP'S ANNUAL REPORT ON FORM 10-K FOR THE
PERIOD ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 6,036,891
<INVESTMENTS-AT-VALUE> 9,011,339
<RECEIVABLES> 44,653
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 261,310
<TOTAL-ASSETS> 9,317,302
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 123,776
<TOTAL-LIABILITIES> 123,776
<SENIOR-EQUITY> 0
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<NET-CHANGE-IN-ASSETS> (2,154,859)
<ACCUMULATED-NII-PRIOR> 0
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</TABLE>
