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 June 30, 1999
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)
10830 E 45th Street
Suite 307
Tulsa, Oklahoma 74146
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 663-2500
Not applicable
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Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets as of June 30, 1999 (Unaudited) and December 31, 1998
Schedule of Portfolio Investments as of June 30, 1999 (Unaudited)
Statements of Operations for the Three and Six Months Ended June 30, 1999 and
1998 (Unaudited)
Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998
(Unaudited)
Statement of Changes in Partners' Capital for the Six Months Ended June 30,
1999 (Unaudited)
Notes to Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities and Use of Proceeds.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
June 30, 1999 December 31,
(Unaudited) 1998
ASSETS
<S> <C>
Portfolio investments at fair value (cost $2,013,720 as of
June 30, 1999 and $2,625,384 as of December 31, 1998) $ 4,259,375 $ 6,367,148
Short-term investments, at amortized cost 298,861 -
Cash and cash equivalents 1,006,141 731,956
Accrued interest receivable - 28,778
---------------- -----------------
TOTAL ASSETS $ 5,564,377 $ 7,127,882
================ =================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 32,856 $ 61,845
Due to Management Company 69,650 137,649
Due to Independent General Partners 12,000 15,000
---------------- -----------------
Total liabilities 114,506 214,494
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Partners' Capital:
Managing General Partner 32,042 31,716
Individual General Partners 1,241 1,229
Limited Partners (10,248 Units) 3,170,933 3,138,679
Unallocated net unrealized appreciation of investments 2,245,655 3,741,764
---------------- -----------------
Total partners' capital 5,449,871 6,913,388
---------------- -----------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 5,564,377 $ 7,127,882
================ =================
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS (Unaudited)
As of June 30, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Initial Investment
Investment Date Cost Fair Value
Data Critical Corp.*(B)
Wireless data transmission
<C> <C> <C> <C>
762,500 shares of Preferred Stock April 1993 $ 700,000 $ 1,437,500
775,000 shares of Common Stock 310,000 775,000
- -------------------------------------------------------------------------------------------------------------------------------
Silverado Foods, Inc.(A)(B)(E)
Gourmet snacks and food products
705,681 shares of Common Stock June 1992 529,900 0
Warrant to purchase 35,000 shares of Common Stock
at $.625 per share, expiring 12/19/02 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
UroCor, Inc. (A)(B)(D)
Urological disease management
329,174 shares of Common Stock May 1991 472,702 1,599,549
- -------------------------------------------------------------------------------------------------------------------------------
ZymeTx, Inc.(A)(B)
Viral diagnostics and therapeutics
279,579 shares of Common Stock July 1994 1,118 447,326
- -------------------------------------------------------------------------------------------------------------------------------
Totals from Active Portfolio Investments $ 2,013,720 $ 4,259,375
============== ==============
Supplemental Information - Liquidated Portfolio Investments: (C) (D)
Realized
Cost Gain (Loss) Return
Totals from Liquidated Portfolio Investments $ 7,959,334 $ 1,028,713 $ 8,988,047
============== ============= ==============
Combined Combined
Unrealized and Fair Value
Cost Realized Gain and Return
Totals from Active and Liquidated Portfolio Investments $ 9,973,054 $ 3,274,368 $ 13,247,422
================== ================= ===============
</TABLE>
(A) Public company
(B) Qualifies as an "Oklahoma business venture" under Oklahoma law.
(C) Amounts provided for "Supplemental Information: Liquidated Portfolio
Investments" are cumulative from inception through June 30, 1999.
(D) During the quarter ended June 30, 1999, the Partnership sold 150,000
common shares of UroCor, Inc. for $799,965, realizing a gain
of $417,041.
(E) The Partnership's warrant to purchase 12,121 shares of Silverado Foods,
Inc. common stock expired on 6/2/99 unexercised.
*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 (Unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------------- -------------- -------------- -------------
INVESTMENT INCOME AND EXPENSES
Income:
<S> <C> <C> <C> <C>
Interest from short-term investments $ 7,430 $ 2,062 $ 16,960 $ 4,115
Interest and other income (loss) from portfolio
investments - 9,454 (28,778) 19,501
Other interest income - 3 - 7,295
------------- ------------- --------------- ------------
Total investment income 7,430 11,519 (11,818) 30,911
------------- ------------- --------------- ------------
Expenses:
Management fee 40,000 50,000 80,000 100,000
Professional fees 11,514 16,031 34,140 27,481
Independent General Partners' fees 12,000 15,453 23,500 29,843
Mailing and printing 3,071 4,775 7,717 8,129
Custodial fees 500 90 1,007 118
Miscellaneous 456 1,244 1,425 1,290
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Total expenses 67,541 87,593 147,789 166,861
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NET INVESTMENT LOSS (60,111) (76,074) (159,607) (135,950)
Net realized gain (loss) from portfolio investments 417,041 (765,846) 192,199 (844,568)
------------- ------------- --------------- ------------
NET REALIZED GAIN (LOSS) FROM
OPERATIONS 356,930 (841,920) 32,592 (980,518)
Change in unrealized appreciation of investments (394,134) 727,279 (1,496,109) 962,279
------------- ------------- --------------- ------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (37,204) $ (114,641) $ (1,463,517) $ (18,239)
============= ============= =============== =============
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (Unaudited)
For the Six Months Ended June 30,
<TABLE>
1999 1998
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CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C> <C>
Net investment loss $ (159,607) $ (135,950)
Adjustments to reconcile net investment loss to cash
used for operating activities:
Decrease in payables, net (99,988) (45,163)
Increase in accrued interest on short-term investments (1,220) -
Decrease (increase) in accrued interest receivable 28,778 (12,154)
-------------- ------------
Cash used for operating activities (232,037) (193,267)
-------------- ------------
CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES
Proceeds from the sale of portfolio investments 803,863 234,839
Proceeds from the repayment of note and bridge loan - 71,260
Net purchase of short-term investments (297,641) -
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Cash provided from investing activities 506,222 306,099
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Increase in cash and cash equivalents 274,185 112,832
Cash and cash equivalents at beginning of period 731,956 85,653
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,006,141 $ 198,485
============== ============
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Unaudited)
For the Six Months Ended June 30, 1999
<TABLE>
Unallocated
Managing Individual Net Unrealized
General General Limited Appreciation
Partner Partners Partners of Investments Total
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 31,716 $ 1,229 $ 3,138,679 $ 3,741,764 $ 6,913,388
Net investment loss (1,596) (62) (157,949) - (159,607)
Net realized gain from investments 1,922 74 190,203 - 192,199
Change in unrealized
appreciation of investments - - - (1,496,109) (1,496,109)
----------- ---------- -------------- --------------- ---------------
Balance at end of period $ 32,042 $ 1,241 $ 3,170,933(A) $ 2,245,655 $ 5,449,871
=========== ========== ============== =============== ===============
</TABLE>
(A) The net asset value per unit of limited partnership interest, including an
assumed allocation of net unrealized appreciation of investments, was $526.
Cumulative cash distributions paid to limited partners totaled $560 per
Unit as of June 30, 1999.
See notes to financial statements.
<PAGE>
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
does not engage in any other business or activity. The Managing General Partner
is working toward the ultimate termination of the Partnership, with an emphasis
on liquidating the remaining assets as soon as practical with the goal of
maximizing returns. The Partnership's originally scheduled termination date was
December 31, 1998. In November 1998, the Individual General Partners voted to
extend the term of the Partnership for an additional two-year period. The
Partnership is now scheduled to terminate no later than December 31, 2000. The
Individual General Partners have the right to extend the term of the Partnership
for an additional two-year period if they determine that such extension is in
the best interest of the Partnership.
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 closing public market price
for the last trading day of the accounting period 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 as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Transactions - Investment transactions are recorded on the accrual
method. Portfolio investments are recorded on the trade date, the date the
Partnership obtains an enforceable right to demand the securities
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
or payment thereof. 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
approximately $2.2 million as of June 30, 1999, which was recorded for financial
statement purposes, has not been recognized for tax purposes. Additionally, from
inception to June 30, 1999, other timing differences totaling $1.5 million,
including 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.
Reclassifications - Certain reclassifications have been made to the prior year's
financial statements to conform with the current year's presentation.
Statements of Cash Flows - The Partnership considers its interest-bearing cash
account to be cash equivalents.
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 is responsible for 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. In
connection with the extension of term of the Partnership, the Management Company
agreed to reduce the minimum management fee from $200,000 to $160,000 per annum
effective as of January 1, 1999. Such fee is determined and paid quarterly.
5. Independent General Partners' Fees
As compensation for services rendered to the Partnership, each of the three
Independent General Partners had received $16,000 annually in quarterly
installments through December 31, 1998. In connection with the
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Unaudited), continued
extension of the term of the Partnership, the Individual General Partners agreed
to reduce the annual fee paid to each Independent General Partner from $16,000
to $12,000 effective as of January 1, 1999. In addition, the Individual General
Partners receive $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.
6. 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 not to exceed $203,720.
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 June 30, 1999, and for
the three and six month periods then ended, reflect all adjustments necessary
for the fair presentation of the results of the interim period.
8. Classification of Portfolio Investments
<TABLE>
As of June 30, 1999, the Partnership's portfolio investments, all of which are
located in the state of Oklahoma, were categorized as follows:
Type of Investments Cost Fair Value Net Assets*
- ------------------- ---------------- --------------- -----------
<S> <C> <C> <C>
Common Stock $ 1,313,720 $ 2,821,875 51.78%
Preferred Stock 700,000 1,437,500 26.38%
---------------- --------------- -----------
$ 2,013,720 $ 4,259,375 78.16%
================ =============== ===========
Industry
Healthcare/Biotechnology $ 473,820 $ 2,046,875 37.56%
Data Communications 1,010,000 2,212,500 40.60%
Food Manufacturing & Distribution 529,900 0 0.00%
---------------- --------------- ----------
$ 2,013,720 $ 4,259,375 78.16%
================ =============== ==========
</TABLE>
*Represents fair value as a percentage of net assets.
9. Subsequent Events
Subsequent to the end of the quarter, in July 1999, the Partnership sold an
additional 30,000 common shares of UroCor, Inc. for $116,244, which resulted in
a realized gain of $69,744 for the quarter ending September 30, 1999.
In August 1999, the General Partners approved a cash distribution to Partners
totaling $828,444. The distribution will be paid in October 1999. Limited
Partners of record on September 30, 1999 will receive $819,840, or $80 per Unit.
Additionally, the Individual General Partners will receive $320 and the Managing
General Partner will receive $8,284.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
As of June 30, 1999, the Partnership held $298,861 in short-term investments
with maturities of less than one year and $1,006,141 in an interest-bearing cash
account. Interest earned from such investments for the three and six months
ended June 30, 1999 totaled $7,430 and $16,960, respectively. Interest earned
from such investments in future periods is subject to fluctuations in short-term
interest rates and changes in amounts available for investment in such
securities.
The Managing General Partner is working toward the termination of the
Partnership, with an emphasis on liquidating the remaining assets as soon as
practical with the goal of maximizing returns. The Partnership's originally
scheduled termination date was December 31, 1998. In November 1998, the
Individual General Partners voted to extend the term of the Partnership for an
additional two-year period. The Partnership is now scheduled to terminate no
later than December 31, 2000. However, the Individual General Partners have the
right to extend the term of the Partnership for an additional two-year period if
they determine that such extension is in the best interest of the Partnership.
The Partnership has fully invested its original net proceeds and will not make
investments in new portfolio companies. Generally, the Partnership will
distribute proceeds received from the sale of its portfolio investments, after
an adequate reserve for future operating expenses and follow-on investments, as
soon as practicable after receipt of such proceeds. Funds needed to cover future
operating expenses and follow-on investments in existing companies are expected
to be obtained from existing cash reserves, interest and other investment income
and proceeds from the sale of portfolio investments.
As discussed below, during the quarter the Partnership sold 150,000 common
shares of UroCor, Inc. for $799,965. Additionally, subsequent to the end of the
quarter, in July 1999, the Partnership sold an additional 30,000 common shares
of UroCor for $116,244.
In August 1999, the General Partners approved a cash distribution to Partners
totaling $828,444. The distribution will be paid in October 1999. Limited
Partners of record on September 30, 1999 will receive $819,840, or $80 per Unit.
Additionally, the Individual General Partners will receive $320 and the Managing
General Partner will receive $8,284.
Results of Operations
For the three and six months ended June 30, 1999, the Partnership had a net
realized gain from operations of $356,930 and $32,592, respectively. For the
three and six months ended June 30, 1998, the Partnership had a net realized
loss from operations of $841,920 and $980,518, respectively. Net realized gain
or loss from operations is comprised of (1) net realized gain or loss 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 three and six
months ended June 30, 1999, the Partnership had a net realized gain from
portfolio investments of $417,041 and $192,199, respectively. The realized gain
for the three months ended June 30, 1999, resulted from the sale of 150,000
common shares of UroCor, Inc. in the public market for net proceeds totaling
$799,965. During the three months ended March 31, 1999, the Partnership had a
net realized loss from portfolio investments of $224,842, consisting of a
$228,740 realized loss from the write-off of the remaining cost of the bridge
loan due from Silverado Foods, Inc., partially offset by a $3,898 realized gain
resulting from a payment received in connection with the February 1995 sale of
the Partnership's investment in Bace Manufacturing, Inc.
For the three and six months ended June 30, 1998, the Partnership had a net
realized loss from portfolio investments of $765,846 and $844,568, respectively.
The realized loss for the three months ended June 30, 1998, was comprised of a
realized loss of $118,662 from the sale of the Partnership's remaining 56,000
common shares of Envirogen, Inc., a realized loss of $649,684 from the sale of
the Partnership's remaining investment in Excel Energy Technologies, Inc., and
an offsetting gain of $2,500 from the sale of the Partnership's previously
written-off interest in QuanTEM Laboratories LLC. For the three months ended
March 31, 1998, the Partnership had a net realized loss of $78,722, comprised of
a realized loss of $133,630 from the sale of 62,000 common shares of Envirogen,
Inc., partially offset by a realized gain of $54,908 resulting from a payment
received in March 1998 in connection with the February 1995 sale of the
Partnership's investment in Bace Manufacturing, Inc.
Investment Income and Expenses - For the three months ended June 30, 1999 and
1998, the Partnership had a net investment loss of $60,111 and $76,074,
respectively. The $15,963 favorable change in net investment loss for the 1999
period compared to the 1998 period resulted from a $20,052 decrease in operating
expenses offset by a $4,089 decrease in investment income. The decrease in
investment income primarily consisted of a $9,454 decline in interest and other
income from portfolio investments, reflecting the elimination of interest income
due on the Silverado Foods bridge loan, which was written off in 1999. This
decrease was offset by a $5,368 increase in interest from short-term
investments, primarily due to an increase in funds available for such
investments during the 1999 period compared to the same period in 1998. The
decrease in operating expenses reflected the reduced annual management fee from
$200,000 to $160,000 effective January 1, 1999, as discussed below, as well as
the reduction of the annual fee paid to each Independent General Partner from
$16,000 to $12,000 also effective January 1, 1999. See Notes 4 and 5 of Notes to
Financial Statements. Professional fees, mailing and printing costs and other
expenses also declined for the three months ended June 30, 1999 compared to the
same period in 1998.
For the six months ended June 30, 1999 and 1998, the Partnership had a net
investment loss of $159,607 and $135,950, respectively. The $23,657 unfavorable
change in net investment loss for the 1999 period compared to the 1998 period
resulted from a $42,729 decrease in investment income partially offset by a
$19,072 decrease in operating expenses. The decrease in investment income
included a $48,279 decline in interest and other income from portfolio
investments, resulting from the elimination of interest income from the
Silverado Foods bridge loan and reversal, during 1999, of $28,778 of accrued
interest on such bridge loan. The Partnership had $7,295 of other interest
income during the 1998 period resulting from an escrow payment received from
Bace Manufacturing, Inc. during the 1998 period. This reduction to interest
income for the 1999 period was offset by a $12,845 increase in interest from
short-term investments. The increase in interest from short-term investments
primarily was due to the increase in funds available for such investments for
the 1999 period compared to the same period in 1998. The decrease in operating
expenses primarily resulted from the reduction in the management fee and fees
paid to each Independent General Partner, as discussed above. The decrease in
the management fee and Independent General Partners' fees was partially offset
by an increase in professional fees incurred during the six months ended June
30, 1999, reflecting legal costs incurred in connection with the Partnership's
investment in Americo Publishing, Inc. during the first quarter of 1999. The
Management Company is responsible for 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 annual
fee of $160,000, which was reduced from $200,000 effective January 1, 1999. See
Note 4 of Notes to Financial Statements. Such fee is determined and paid
quarterly in arrears. The management fee for the three and six months ended June
30, 1999 was $40,000 and $80,000, respectively. The management fee for the three
and six months ended June 30, 1998 was $50,000 and $100,000, respectively. To
the extent possible the management fee and other expenses incurred by the
Partnership are paid with funds provided from operations, which includes
proceeds from the sale of portfolio investments.
Unrealized Gains and Losses and Changes in Unrealized Appreciation of
Investments - For the six months ended June 30, 1999, the Partnership had a
$1,147,783 net unrealized loss resulting from the net downward revaluation of
its investment in UroCor, Inc. and ZymeTx, Inc. Unrealized appreciation was
further reduced for the period due to the transfer of $348,326 from unrealized
gain to realized gain resulting from the sale of 150,000 common shares of
UroCor, as discussed above. As a result, net unrealized appreciation of
investments declined by $1,496,109 for the six month period ended June 30, 1999.
For the six months ended June 30, 1998, the Partnership had a $112,263 net
unrealized gain, primarily resulting from the net upward revaluation of certain
portfolio investments. Unrealized appreciation was further increased for the
period due to the transfer of $850,016 from unrealized loss to realized loss
resulting from the sale of Envirogen and Excel Energy, as discussed above. As a
result, net unrealized appreciation of investments increased by $962,279 for the
six month period ended June 30, 1998.
Net Assets - Changes to net assets resulting from operations are comprised
of (1) net realized gain or loss and (2) changes to net unrealized appreciation
or depreciation of portfolio investments.
As of June 30, 1999, the Partnership's net assets were $5,449,871, reflecting a
decrease of $1,463,517 from net assets of $6,913,388 as of December 31, 1998.
This decrease was comprised of the $32,592 net realized gain from operations
offset by the $1,496,109 decrease in net unrealized appreciation of investments
for the six months ended June 30, 1999.
As of June 30, 1998, the Partnership's net assets were $7,581,782, reflecting a
decrease of $18,239 from net assets of $7,600,021 as of December 31, 1997. This
decrease was comprised of the $980,518 net realized loss from operations
partially offset by the $962,279 increase in net unrealized appreciation of
investments for the six months ended June 30, 1998.
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 as of June 30, 1999 and December 31, 1998 was $526
and $668, respectively.
Year 2000 Issue - The Year 2000 ("Y2K") concern arose because many existing
computer programs use only the last two digits to refer to a year. Therefore,
these computer programs do not properly recognize a year that begins with "20"
instead of "19". If not corrected, many computer applications could fail or
create erroneous results. The impact of the Y2K concern on the Partnership's
operations is currently being assessed.
The Management Company is responsible to provide or arrange for the provision of
administrative services necessary to support the Partnership's operations. The
Management Company has arranged for Palmeri Fund Administrators, Inc. (the
"Administrator") to provide certain administrative and accounting services for
the Partnership, including maintenance of the books and records of the
Partnership, maintenance of the limited partner database, issuance of financial
reports and tax information to limited partners and processing distribution
payments to limited partners. Fees charged by the Administrator are paid
directly by the Management Company.
The Administrator has assessed its computer hardware and software systems,
specifically as they relate to the operations of the Partnership. As part of
this investigation of potential Y2K concerns, the Administrator contracted with
an outside computer service provider to examine all of the Administrator's
computer hardware and software applications. This review and evaluation has been
completed. Additionally, the Administrator has completed the purchase and
installation of the necessary software upgrades and patches and new computer
hardware required for its computer systems to be Y2K compliant. The
Administrator expects to complete the testing of its systems by October 1999.
Additionally, the Administrator has contacted the outside service providers used
to assist the Administrator or the Management Company with the administration of
the Partnership's operations to ascertain whether these entities are addressing
the Y2K issue within their own operation. There can be no guarantee that the
Administrator's systems or that systems of other companies providing services to
the Partnership will be corrected in a timely manner.
Since the Partnership does not own any equipment and all of its administrative
needs are provided by the Management Company, any costs relating to the
investigation and correction of potential Y2K concerns affecting the
Partnership's operations will be incurred by the Administrator, the Management
Company or the outside service providers. Therefore, the Management Company and
the Managing General Partner do not expect the Partnership to incur any costs
relating to the investigation or correction of Y2K concerns.
Finally the Y2K issue is a global concern that may affect all business entities,
including the Partnership's portfolio companies. The General Partner is
continuing to assess the impact of Y2K concerns affecting its portfolio
companies. However, the extent to which any potential Y2K problems could affect
the valuations of these companies is presently unknown. At the time that
specific Y2K problems are identified, if any, the Managing General Partner will
take such issues into consideration in adjusting the fair value of the
Partnership's portfolio investments.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The Partnership is subject to market risk arising from changes in the value of
its portfolio investments, short-term investments and interest-bearing cash
equivalents, which may result from fluctuations in interest rates and equity
prices. The Partnership has calculated its market risk related to its holdings
of these investments based on changes in interest rates and equity prices
utilizing a sensitivity analysis. The sensitivity analysis estimates the
hypothetical change in fair values, cash flows and earnings based on an assumed
10% change (increase or decrease) in interest rates and equity prices. To
perform the sensitivity analysis, the assumed 10% change is applied to market
rates and prices on investments held by the Partnership at the end of the
accounting period.
The Partnership's portfolio investments had an aggregate fair value of
$4,259,375 as of June 30, 1999. An assumed 10% decline from this fair value,
including an assumed 10% decline of the per share market prices of the
Partnership's publicly traded securities, would result in a reduction to the
fair value of such investments and a corresponding unrealized loss of $425,938.
As of June 30, 1999, the Partnership held discounted commercial paper with a
remaining maturity of less than 30 days. This short-term investment was carried
at an aggregate amortized cost of $298,861 as of June 30, 1999. An assumed 10%
increase in the market interest rates of such short-term investments held by the
Partnership as of June 30, 1999, would result in a reduction to the fair value
of such investments and a corresponding unrealized loss which is considered to
be immaterial.
Market risk relating to the Partnership's interest-bearing cash equivalents
held as of June 30, 1999 is also considered to be immaterial.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Partnership is not a party to any material pending legal proceedings.
Item 2. Changes in Securities and Use of Proceeds.
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 period covered
by this report.
Item 5. Other Information.
None.
<PAGE>
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.*
(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.
- ------------------------------
* 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 June 30, 1989 filed with the Securities and
Exchange Commission on May 15, 1989.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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/ David G. Cohen
David G. Cohen
Vice President
By: /s/ Diane T. Herte
Diane T. Herte
Vice President and Treasurer
(Principal Financial and Accounting Officer)
Date: August 16, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
,
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ML OKLAHOMA
VENTURE PARTNERS, LIMITED PARTNERSHIP'S QUARTERLY REPORT ON FORM 10-Q FOR THE
PERIOD ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 2,013,720
<INVESTMENTS-AT-VALUE> 4,259,375
<RECEIVABLES> 0
<ASSETS-OTHER> 298,861
<OTHER-ITEMS-ASSETS> 1,006,141
<TOTAL-ASSETS> 5,564,377
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 114,506
<TOTAL-LIABILITIES> 114,506
<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 10,248
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<DIVIDEND-INCOME> 0
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<EXPENSES-NET> 147,789
<NET-INVESTMENT-INCOME> (159,607)
<REALIZED-GAINS-CURRENT> 192,199
<APPREC-INCREASE-CURRENT> (1,496,109)
<NET-CHANGE-FROM-OPS> (1,463,517)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<NET-CHANGE-IN-ASSETS> (1,463,517)
<ACCUMULATED-NII-PRIOR> 0
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<AVERAGE-NET-ASSETS> 6,181,630
<PER-SHARE-NAV-BEGIN> 668
<PER-SHARE-NII> (15)
<PER-SHARE-GAIN-APPREC> (127)
<PER-SHARE-DIVIDEND> 0
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<PER-SHARE-NAV-END> 526
<EXPENSE-RATIO> 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
