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, 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(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]
As of March 15, 2000, 10,243 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.
<PAGE>
PART I
Item 1. Business.
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Formation
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 Managing General Partner and four individuals (the "Individual General
Partners") are the general partners of the Partnership.
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 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, was required to invest over 55% of its
capitalization in companies that constitute "Oklahoma business ventures", as
that term is defined under Oklahoma law. Accordingly, the Partnership's limited
partners (the "Limited Partners") were entitled to an income tax credit against
their 1989 Oklahoma state income tax in an amount equal to 20% of their original
investment in the Partnership. From its inception to December 31, 1999, the
Partnership had invested $9,973,054 in portfolio investments, of which
$6,532,260, or 65.5%, represented investments in Oklahoma business ventures.
The Partnership publicly offered, through Merrill Lynch, 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; including $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.
The Venture Capital Investments
From its inception to December 31, 1999, the Partnership had invested $9,973,054
in 17 portfolio companies. The Partnership has fully invested its original net
proceeds from the offering of Units and will not make investments in any new
portfolio companies. However, the Partnership may make additional follow-on
investments in existing portfolio companies, if required. The Partnership made
no new or follow-on investments during the year ended December 31, 1999.
As of December 31, 1999, the Partnership's investment portfolio consisted of
four active investments with a cost of $1,935,622 and a fair value of
$7,528,215. During the year ended December 31, 1999, the Partnership liquidated
certain portfolio investments, realizing a net return of $1,286,568, resulting
in a net realized gain of $596,806. Portfolio investments sold and written-off
during 1999 and other transactions effecting the Partnership's portfolio
investments during 1999 are listed below:
o In November 1999, Data Critical Corp. completed its initial public
offering ("IPO") at $10.00 per share. As a result of the conversion
of its preferred stock holdings into common stock and a reverse
stock split completed in connection with the IPO, the Partnership
now owns 553,125 shares of Data Critical common stock.
o In March 1999, the Partnership wrote-off the remaining cost of a
bridge loan due from Silverado Foods, Inc., realizing a loss of
$228,740. Additionally, the Partnership's warrant to purchase 12,121
common shares of Silverado at $8.25 per share, expired unexercised
on June 2, 1999.
o During 1999, the Partnership sold 200,000 common shares of UroCor,
Inc. for $1,011,203, realizing a gain of $550,779.
o In September 1999, the Partnership sold 149,579 common shares
of ZymeTx, Inc. for $268,267, realizing a gain of $267,669.
o In February 1999, the Partnership received $4,909, representing an
escrow release payment in connection with the February 1995 sale of
Bace Manufacturing, Inc. The payment was comprised of a realized
gain of $3,898 and interest of $1,011.
o In December 1999, the Partnership received $3,200 in connection with
the 1998 sale of Excel Energy Technologies, Ltd. The payment
resulted in a realized gain for the full amount.
From its inception through December 31, 1999, the Partnership had fully or
partially sold or wrote-off investments with an aggregate cost basis of
$8,037,432. These liquidated investments returned $9,470,752 to the Partnership,
resulting in a net realized gain of $1,433,320. Additionally, the Partnership
earned interest, dividend and other income from its venture capital investments
totaling $398,756 from inception to December 31, 1999.
Subsequent to December 31, 1999 and through March 24, 2000, the Partnership sold
an additional 225,700 common shares of UroCor for $1,343,840, which will result
in a realized gain of $1,053,724 for the first quarter of 2000. Also subsequent
to December 31, 1999, the Partnership sold its remaining 130,000 common shares
of ZymeTx for $325,004, which will result in a realized gain of $324,484 for the
first quarter of 2000.
Termination
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. However, the Managing General Partner is working toward
liquidating the Partnership's remaining assets and terminating the Partnership
as soon as practicable with the goal of maximizing returns to partners.
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. Competition has also been from foreign investors and from large
industrial and financial companies investing directly rather than through
venture capital affiliates. The Partnership was frequently a co-investor with
other professional venture capital investors and these relationships generally
had expanded the Partnership's access to investment opportunities. However, as
discussed above, the Partnership will not make any new portfolio investments.
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 is responsible
for the management and administrative services necessary for the operation of
the Partnership including managing the Partnership's short-term investments.
Item 2. Properties.
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The Partnership does not own or lease physical properties.
Item 3. Legal Proceedings.
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The Partnership is not a party to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
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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.
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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. An established public market for Registrant's
Units does not now exist, and it is not anticipated that such a market will
develop in the future. Accordingly, accurate information as to the market value
of a Unit at any given date is not available. The approximate number of holders
of Units as of March 15, 2000 is 1,049. The Managing General Partner and the
four Individual General Partners of the Partnership also hold interests in the
Partnership.
Merrill Lynch has implemented guidelines pursuant to which it reports estimated
values for limited partnership interests originally sold by Merrill Lynch (such
as the Registrant's Units) two times per year. Such estimated values will be
provided to Merrill Lynch by independent valuation services based on financial
and other information available to the independent services on (i) the prior
August 15th for reporting on December year-end and subsequent client account
statements through the following May's Month-End client account statements, and
on (ii) the prior March 31st for reporting on June month-end and subsequent
client account statements through the November month-end client account
statements of the same year.
The Managing General Partner's estimate of net asset value of the Partnership as
of December 31, 1999 is $798 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 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 the prior August 15th, as
stated above. The estimated values provided by the independent services and
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 of their
Units. In addition, Unit holders may not realize the independent estimated value
or Registrant's current net asset value amount upon the liquidation of
Registrant.
Cash Distributions
Cash distributions paid during the periods presented and cumulative cash
distributions paid to partners from the inception of the Partnership through
December 31, 1999 are listed below:
<TABLE>
Managing Independent
General General Limited Per $1,000
Distribution Date Partner Partners Partners Unit
<S> <C> <C> <C> <C> <C> <C>
Inception to December 31, 1996 $ 25,889 $ 1,000 $ 2,562,000 $ 250
January 21, 1997 4,984 192 512,400 50
July 1, 1997 5,370 208 512,400 50
October 22, 1997 12,945 500 1,281,000 125
October 28, 1998 8,802 340 871,080 85
October 14, 1999 8,284 320 819,840 80
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Cumulative as of December 31, 1999 $ 66,274 $ 2,560 $ 6,558,720 $ 640
============ =========== ============== ========
</TABLE>
Subsequent to year-end, the General Partners approved an additional cash
distribution totaling $2,071,111 to be paid to partners in April 2000. Limited
Partners of record on March 31, 2000 will receive $2,049,600, or $200 per Unit,
the Individual General Partners will receive $800 and the Managing General
Partner will receive $20,711.
<PAGE>
Item 6. Selected Financial Data.
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<TABLE>
($ in thousands, except for per Unit information)
Years ended December 31,
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Net investment loss $ (265) $ (287) $ (251) $ (373) $ (289)
Net realized gain (loss) on investments 597 (236) 939 370 1,651
Change in unrealized appreciation of
investments 1,851 717 (1,995) 2,046 (950)
Total assets 8,478 7,128 7,784 11,427 9,317
Net unrealized appreciation of investments 5,593 3,742 3,025 5,020 2,974
Cash distributions to Partners 828 880 1,812 518 2,589
Cumulative cash distributions to Partners 6,627 5,799 4,919 3,107 2,589
Cost of portfolio investments purchased - 54 650 151 213
Cumulative cost of portfolio investments
purchased 9,973 9,973 9,919 9,269 9,118
PER UNIT OF LIMITED
PARTNERSHIP INTEREST:
Net investment loss $ (26) $ (28) $ (24) $ (37) $ (28)
Net realized gain (loss) on investments 58 (23) 91 36 159
Net increase (decrease) in net assets
resulting from operations 210 19 (126) 197 40
Cash distributions to Partners 80 85 175 50 250
Cumulative cash distributions to Partners 640 560 475 300 250
Net unrealized appreciation of investments 540 361 292 485 287
Net asset value, including net unrealized
appreciation of investments 798 668 734 1,035 888
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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Liquidity and Capital Resources
As of December 31, 1999, the Partnership held $747,585 in short-term investments
with maturities of less than one year and $202,075 in an interest-bearing cash
account. Interest earned on such cash balances and short-term investments for
the years ended December 31, 1999, 1998 and 1997 was $49,680, $25,886, and
$67,561, 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.
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. However, the Managing General Partner is working toward
liquidating the Partnership's remaining assets and terminating the Partnership
as soon as practicable with the goal of maximizing returns to partners.
The Partnership made no new or follow-on investments during 1999. The
Partnership has fully invested its original net proceeds and will not make
investments in new portfolio companies but may make follow-on investments in
existing companies, if required. Generally, the Partnership distributes to
partners all proceeds received from the sale of its portfolio investments, as
soon as practicable after establishing an adequate reserve for operating
expenses or follow-on investments in existing portfolio companies. Funds needed
to cover the Partnership's future operating expenses and follow-on investments,
if any, are expected to be obtained from existing cash reserves, interest and
other investment income and proceeds from the sale of portfolio investments.
In October 1999, the Partnership made a cash distribution to partners totaling
$828,444. Limited Partners of record on September 30, 1999 received $819,840, or
$80 per Unit, the Individual General Partners received $320, and the Managing
General Partner received $8,284. Cumulative cash distributions paid from
inception to December 31, 1999 total $6,627,554, consisting of $6,558,720, or
$640 per Unit, to the Limited Partners, $2,560 to the Individual General
Partners and $66,274 to the Managing General Partner.
Subsequent to year-end, the General Partners approved an additional cash
distribution totaling $2,071,111 to be paid to partners in April 2000. Limited
Partners of record on March 31, 2000 will receive $2,049,600, or $200 per Unit,
the Individual General Partners will receive $800 and the Managing General
Partner will receive $20,711.
Results of Operations
For the year ended December 31, 1999, the Partnership had a net realized gain
from operations of $331,881. For the years ended December 31, 1998 and 1997, the
Partnership had a net realized loss from operations of $523,607 and a net
realized gain from operations of $688,367, 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 year ended
December 31, 1999, the Partnership had a net realized gain from portfolio
investments of $596,806. During 1999, the Partnership sold 200,000 common shares
of UroCor, Inc., for $1,011,203, realizing a gain of $550,779 and 149,579 common
shares of ZymeTx, Inc. for $268,267, realizing a gain of $267,669. The
Partnership realized additional gains during 1999 resulting from the receipt of
$3,200 in connection with the 1998 sale of Excel Energy Technologies, Ltd. and
$3,898, representing an escrow release payment in connection with the February
1995 sale of Bace Manufacturing, Inc. Finally, in March 1999, the Partnership
wrote-off the remaining cost of a bridge loan due from Silverado Foods, Inc.,
realizing a loss of $228,740, due to continued financial and operating
difficulties at the company.
For the year ended December 31, 1998, the Partnership had a net realized loss of
$236,228 from the liquidation of several of its portfolio investments. In
connection with a recapitalization of Independent Gas Company Holdings, Inc.
completed during 1998, the Partnership sold its investment back to Independent
Gas for $1,278,800, realizing a gain of $811,464. Also during 1998, the
Partnership sold certain publicly traded portfolio securities including: its
remaining 118,000 common shares of Envirogen, Inc., for $160,708, realizing a
loss of $252,292; 30,000 common shares of UroCor, Inc. for $180,299, realizing a
gain of $60,702; and 25,000 common shares of ZymeTx, Inc. for $100,467,
realizing a gain of $100,174. In a private transaction completed during 1998,
the Partnership sold its investment in Excel Energy Technologies, Ltd.,
realizing a loss of $649,684. In December 1998, the Partnership wrote-off the
remaining cost of its investment in Americo Publishing Inc., due to continuing
operating and financial difficulties at the company, resulting in a realized
loss of $364,000. Finally, during 1998, the Partnership realized a gain of
$2,500 from the sale of its interest in QuanTEM Laboratories L.L.C., an
investment that had previously been written-off, and also realized a gain of
$54,908 from an escrow payment received in March 1998 in connection with the
February 1995 sale of the Partnership's investment in Bace Manufacturing, Inc.
For the year ended December 31, 1997, the Partnership had a net realized gain
from portfolio investments of $939,317. During 1997, the Partnership sold
275,317 shares of C.R. Anthony Company common stock in the public market for
$2,184,292, realizing a gain of $1,584,101. In December 1997, the Partnership
sold 100,000 shares of Data Critical Corp. common stock in a private transaction
for $100,000, realizing a gain of $60,000. In June 1997, Diagnetics, Inc. sold
its assets and liquidated, resulting in a return of $87,001 to the Partnership
and a realized loss of $726,609. Finally, during 1997, the Partnership
recognized a gain of $21,825, upon the receipt of the final escrow release in
connection with the 1996 acquisition of Enerpro International, Inc. by Energy
Ventures, Inc.
Investment Income and Expenses - For the years ended December 31, 1999, 1998 and
1997, the Partnership had a net investment loss of $264,925, $287,379 and
$250,950, respectively.
The $22,454 favorable change in net investment loss for 1999 compared to 1998
resulted from a $63,083 decline in operating expenses, partially offset by a
$40,629 reduction in investment income. The reduced investment income resulted
from a $23,794 increase in interest from short-term investments and a $64,423
unfavorable change in income from portfolio investments. The increase in
interest from short-term investments primarily was due to an increase in funds
available for such investments during 1999 compared to 1998. The Partnership
invests proceeds received from the sale of portfolio investments in short-term
securities until such funds are used for operations or distributed to partners.
The reduction in interest and other income from portfolio investments, primarily
resulting from $28,778 of interest accrued on the bridge loan due from Silverado
Foods, Inc. during 1998 that was reversed in 1999. As noted above, such bridge
loan was written-off in March 1999. The decrease in operating expenses for 1999
compared to 1998 includes a $40,000 reduction in the management fee, as
discussed below, and a $15,500 reduction in fees paid to the Independent General
Partners ("IGPs"), which primarily reflects the reduced annual fee paid to each
of the IGPs from $16,000 to $12,000 effective as of January 1, 1999. Other
operating expenses declined $7,583 for 1999 compared to 1998, primarily due to a
$7,965 reduction in professional fees for 1999.
The $36,429 increase in net investment loss for 1998 compared to 1997 resulted
from a $29,919 increase in operating expenses and a $6,510 decrease in
investment income. The increase in operating expenses for 1998 compared to 1997
primarily resulted from a $23,976 increase in professional fees. Professional
fees for the 1998 period include legal expenses incurred in connection with the
liquidation of the Partnership's investment in Americo Publishing, Inc.
Additionally, certain favorable accrual adjustments were made to professional
fees during the 1997 period. Mailing and printing expenses increased by $3,463
primarily due to a general increase in such expenses during 1998. The decrease
in investment income included a $41,675 decline in interest from short-term
investments, primarily due to a decrease in funds available for such investments
during 1998 compared to 1997. The Partnership invests proceeds received from the
sale of portfolio investments in short-term securities until such funds are used
for operations or distributed to partners. The decrease in interest from
short-term investments was partially offset by a $35,165 net increase in
interest and other income from portfolio investments, primarily resulting from
interest accrued on the bridge loan due from Silverado Foods, Inc. during 1998.
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
an original minimum fee of $200,000 annually. However, in connection with the
extension of the term of the Partnership, the Partnership and the Management
Company agreed to reduce the minimum annual management fee by the Partnership
from $200,000 to $160,000, effective January 1, 1999. Such fee is determined and
paid quarterly in arrears. The management fee for year ended December 31, 1999
was $160,000. The management fee for each of the years ended December 31, 1998
and 1997 was $200,000. To the extent possible, the management fee and other
expenses incurred directly by the Partnership are paid with funds provided from
operations, including proceeds from the sale of portfolio investments.
Unrealized Gains and Losses and Changes in Unrealized Appreciation of Portfolio
Investments - During the year ended December 31, 1999, the Partnership increased
the fair value of its portfolio investments on a net basis by $2,605,683,
primarily resulting from the net upward revaluation of the Partnership's
investment in Data Critical Corp., which completed its initial public offering
in November 1999. Offsetting this increase to the fair value of investments for
1999 was the net transfer of $754,854 from unrealized gain to realized gain
resulting from the sale of UroCor and ZymTex shares, as discussed above. As a
result, net unrealized appreciation of investments increased $1,850,829 for
1999.
During the year ended December 31, 1998, the Partnership reduced the fair value
of its portfolio investments on a net basis by $435,460, resulting from the net
downward revaluation of certain portfolio investments. These downward
revaluations primarily were due to declines in the public market prices of
Silverado Foods. and ZymeTx, partially offset by an upward revaluation of Data
Critical Corp. Offsetting this reduction to the fair value of investments for
1998 was the net transfer of $1,152,656 from unrealized loss to realized loss
resulting from portfolio investments sold or written-off during the 1998, as
discussed above. As a result, net unrealized appreciation of investments
increased $717,196 for 1998.
For the year ended December 31, 1997, the Partnership reduced the fair value of
its portfolio investments on a net basis by $1,679,349, resulting from the net
downward revaluation of certain portfolio investments. These downward
revaluations primarily were due to declines in the public market prices of
Silverado Foods and UroCor., partially offset by an upward revaluation of
ZymeTx, which completed its initial public offering in November 1997.
Additionally, during 1997 there was a net transfer of $315,767 from unrealized
gain to realized gain resulting from the liquidations of C.R. Anthony, Data
Critical and Diagnetics. As a result, net unrealized appreciation of investments
decreased $1,995,116 for 1997.
Net Assets - Changes to net assets resulting from operations are comprised of
(1) net realized gain or loss from operations and (2) changes to net unrealized
appreciation of portfolio investments. For the year ended December 31, 1999, the
Partnership had a $2,182,710 increase in net assets resulting from operations,
comprised of the $1,850,829 increase in net unrealized appreciation and the
$331,881 net realized gain from operations for 1999. As of December 31, 1999,
the Partnership's net assets were $8,267,654, up $1,354,266 from $6,913,388 as
of December 31, 1998. This increase reflects $2,182,710 increase in net assets
resulting from operations, partially offset by the cash distribution of $828,444
paid to partners in 1999.
For the year ended December 31, 1998, the Partnership had a $193,589 increase in
net assets resulting from operations, comprised of the $717,196 increase in net
unrealized appreciation partially offset by the $523,607 net realized loss from
operations for 1998. As of December 31, 1998, the Partnership's net assets were
$6,913,388, down $686,633 from $7,600,021 as of December 31, 1997. This decrease
reflects the cash distribution of $880,222 paid to partners in 1998 exceeding
the $193,589 increase in net assets from operations for 1998.
For the year ended December 31, 1997, the Partnership had a $1,306,749 decrease
in net assets resulting from operations, comprised of the $1,995,116 decrease in
net unrealized appreciation partially offset by the $688,367 realized gain from
operations for 1997. As of December 31, 1997, the Partnership's net assets were
$7,600,021, down $3,119,172 from $10,719,193 as of December 31, 1996. This
decrease reflects the $1,306,749 decrease in net assets from operations and the
cash distributions of $1,812,423 paid to partners during 1997.
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, 1999, 1998 and 1997 was $798, $668
and $734, respectively. Cumulative cash distributions paid to Limited Partners
totaled $640, $560 and $475 per Unit as of December 31, 1999, 1998 and 1997,
respectively.
<PAGE>
Item 7A. 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
$7,528,215 as of December 31, 1999. An assumed 10% decline from this December
31, 1999 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 an unrealized loss of
$752,822.
As of December 31, 1999, the Partnership held a short-term investment consisting
of a discounted commercial paper instrument with a remaining maturity of 20
days. Such short-term investment was carried at an aggregate amortized cost of
$747,585 as of December 31, 1999. An assumed 10% increase in the market interest
rates of such short-term investments held by the Partnership as of December 31,
1999, would result in a reduction to the fair value of such investments and an
unrealized loss that is considered to be immaterial.
Market risk relating to the Partnership's interest-bearing cash equivalents held
as of December 31, 1999 is also considered to be immaterial.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
INDEX
Independent Auditors' Report
Balance Sheets as of December 31, 1999 and 1998
Schedule of Portfolio Investments as of December 31, 1999
Schedule of Portfolio Investments as of December 31, 1998
Statements of Operations for the years ended December 31, 1999, 1998 and 1997
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997
Statements of Changes in Partners' Capital for the years ended December 31,
1997, 1998 and 1999
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, 1999 and 1998, 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, 1999. 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, 1999 and 1998 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 as of December 31, 1999 and
1998, 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,
1999 in conformity with generally accepted accounting principles.
As explained in Note 2, the financial statements include securities valued at
$6,411,681 and $6,367,148 as of December 31, 1999 and 1998, respectively,
representing 77.6% and 92.1% 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 29, 2000
(March 3, 2000 as to Note 9)
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
As of December 31, 1999 and 1998
<S> <C> <C>
1999 1998
-------------- ----------
ASSETS
Portfolio investments, at fair value (cost of $1,935,622 as of
December 31, 1999 and $2,625,384 as of December 31, 1998) $ 7,528,215 $ 6,367,148
Short-term investments at amortized cost 747,585 -
Cash and cash equivalents 202,075 731,956
Accrued interest receivable - 28,778
-------------- ---------------
TOTAL ASSETS $ 8,477,875 $ 7,127,882
============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 60,421 $ 61,845
Due to Management Company 139,300 137,649
Due to Independent General Partners 10,500 15,000
-------------- ---------------
Total liabilities 210,221 214,494
-------------- ---------------
Partners' Capital:
Managing General Partner 26,751 31,716
Individual General Partners 1,038 1,229
Limited Partners (10,248 Units) 2,647,272 3,138,679
Unallocated net unrealized appreciation of investments 5,592,593 3,741,764
-------------- ---------------
Total partners' capital 8,267,654 6,913,388
-------------- ---------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 8,477,875 $ 7,127,882
============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS
<TABLE>
As of December 31, 1999
<S> <C> <C> <C> <C> <C> <C>
Initial Investment
Investment Date Cost Fair Value
- --------------------------------------------------------------------------------------------------------------------------------
Data Critical Corp.*(A)(B)(C)
Wireless data transmission
553,125 shares of Common Stock April 1993 $ 1,010,000 $ 6,170,801
- -------------------------------------------------------------------------------------------------------------------------------
Silverado Foods, Inc.(A)(B)(D)
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)(E)
Urological disease management
279,174 shares of Common Stock May 1991 395,202 1,155,914
- -------------------------------------------------------------------------------------------------------------------------------
ZymeTx, Inc.(A)(B)(F)
Viral diagnostics and therapeutics
130,000 shares of Common Stock July 1994 520 201,500
- -------------------------------------------------------------------------------------------------------------------------------
Totals from Active Portfolio Investments $ 1,935,622 $ 7,528,215
============== ==============
Supplemental Information - Liquidated Portfolio Investments: (I)
Liquidation Realized
Company Date Cost Gain (Loss) Return
Americo Publishing, Inc. 1998 $ 364,000 $ (364,000) $ 0
Bace Manufacturing, Inc. (G) 1995 539,000 1,658,281 2,197,281
C.R. Anthony Company 1994-1997 602,366 1,581,926 2,184,292
Data Critical Corp. 1997 40,000 60,000 100,000
Diagnetics, Inc. 1997 813,610 (726,609) 87,001
Eckerd Corporation 1995 142,992 336,919 479,911
Energy Ventures, Inc./Enerpro International, Inc. 1996 350,000 388,037 738,037
Envirogen, Inc. 1994-1998 525,000 (203,002) 321,998
Excel Energy Technologies, Ltd.(H) 1998 716,407 (646,484) 69,923
Great Outdoors Publishing, Inc. 1995 325,000 (325,000) 0
Independent Gas Company Holdings, Inc. 1995-1998 467,436 811,464 1,278,900
QuanTEM Laboratories, Inc. 1990-1998 89,000 (46,213) 42,787
Silverado Foods, Inc.(D) 1994-1999 530,000 (228,740) 301,260
Sports Tactics International, Inc. 1993-1994 450,000 (430,884) 19,116
Tricon America Corporation 1990-1991 662,810 (572,800) 90,010
UroCor, Inc. (E) 1998-1999 580,021 611,481 1,191,502
ZymeTx, Inc./Symex Corporation (F) 1993-1999 839,790 (471,056) 368,734
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
SCHEDULE OF PORTFOLIO INVESTMENTS, continued
As of December 31, 1999
<TABLE>
Realized
Cost Gain (Loss) Return
<S> <C> <C> <C>
Totals from Liquidated Portfolio Investments $ 8,037,432 $ 1,433,320 $ 9,470,752
============== ============ ==============
Combined Combined
Unrealized and Fair Value
Cost Realized Gain and Return
Totals from Active & Liquidated Portfolio Investments $ 9,973,054 $ 7,025,913 $ 16,998,967
================== ============== ================
</TABLE>
(A) Public company
(B) Qualifies as an "Oklahoma business venture" under Oklahoma law.
(C) In November 1999, Data Critical Corp. completed its initial public offering
("IPO") at $10.00 per share. As a result of the conversion of its preferred
stock holdings into common stock and a reverse stock split completed in
connection with the IPO, the Partnership now owns 553,125 shares of Data
Critical common stock.
(D) In March 1999, the Partnership wrote-off the remaining cost of a bridge
loan due from Silverado Foods, Inc., realizing a loss of $228,740.
Additionally, the Partnership's warrant to purchase 12,121 common shares of
Silverado at $8.25 per share, expired unexercised on June 2, 1999.
(E) During 1999, the Partnership sold 200,000 common shares of UroCor, Inc.,
for $1,011,203, realizing a gain of $550,779. Subsequent to December 31,
1999 and through March 24, 2000, the Partnership sold an additional 225,700
common shares of UroCor for $1,343,840, which will result in a realized
gain of $1,053,724 for the first quarter of 2000.
(F) In September 1999, the Partnership sold 149,579 common shares of ZymeTx,
Inc. for $268,267, realizing a gain of $267,669. Subsequent to December 31,
1999, the Partnership sold its remaining 130,000 common shares of ZymeTx
for $325,004, which will result in a realized gain of $324,484 for the
first quarter of 2000.
(G) In February 1999, the Partnership received $4,909, representing an escrow
release payment in connection with the February 1995 sale of Bace
Manufacturing, Inc. The payment was comprised of a realized gain of $3,898
and interest of $1,011.
(H) In December 1999, the Partnership received $3,200 in connection with the
1998 sale of Excel Energy Technologies, Ltd. The payment resulted in a
realized gain for the full amount.
(I) Amounts provided for "Supplemental Information: Liquidated Portfolio
Investments" are cumulative from inception through December 31, 1999.
* 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
As of December 31, 1998
<TABLE>
Initial Investment
Investment Date Cost Fair Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Data Critical Corp.*(B)
Wireless data transmission
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)
Gourmet snacks and food products
705,681 shares of Common Stock June 1992 529,900 0
Warrant to purchase 12,121 shares of Common Stock
at $8.25 per share, expiring 6/2/99 0 0
Warrant to purchase 35,000 shares of Common Stock
at $.625 per share, expiring 12/19/02 0 0
14% Bridge Loan 228,740 228,740
- -------------------------------------------------------------------------------------------------------------------------------
UroCor, Inc. (A)(B)
Urological disease management
479,174 shares of Common Stock May 1991 855,626 3,034,750
- -------------------------------------------------------------------------------------------------------------------------------
ZymeTx, Inc.(A)(B)
Viral diagnostics and therapeutics
279,579 shares of Common Stock July 1994 1,118 891,158
- -------------------------------------------------------------------------------------------------------------------------------
Totals from Active Portfolio Investments $ 2,625,384 $ 6,367,148
============== ==============
Supplemental Information - Liquidated Portfolio Investments: (C)
Totals from Liquidated Portfolio Investments $ 7,347,670 $ 836,514 $ 8,184,184
============== ============== ==============
Combined Combined
Unrealized and Fair Value
Cost Realized Gain and Return
Totals from Active & Liquidated Portfolio Investments $ 9,973,054 $ 4,578,278 $ 14,551,332
================ ============== ==============
</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 December 31, 1998.
* 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>
1999 1998 1997
---------------- -------------- -----------
INVESTMENT INCOME AND EXPENSES
Income:
<S> <C> <C> <C>
Interest from short-term investments $ 49,680 $ 25,886 $ 67,561
Interest and other (loss) income from portfolio
investments (28,778) 35,645 480
---------------- -------------- -----------------
Total investment income 20,902 61,531 68,041
---------------- -------------- -----------------
Expenses:
Management fee 160,000 200,000 200,000
Professional fees 58,800 66,765 42,789
Independent General Partners' fees 44,500 60,000 60,000
Mailing and printing 16,776 17,949 14,486
Custodial fees 1,724 1,565 (1,638)
Miscellaneous 4,027 2,631 3,354
---------------- -------------- -----------------
Total investment expenses 285,827 348,910 318,991
---------------- -------------- -----------------
NET INVESTMENT LOSS (264,925) (287,379) (250,950)
Net realized gain (loss) from investments 596,806 (236,228) 939,317
---------------- -------------- -----------------
NET REALIZED GAIN (LOSS) FROM
OPERATIONS 331,881 (523,607) 688,367
Change in unrealized appreciation of investments 1,850,829 717,196 (1,995,116)
---------------- -------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,182,710 $ 193,589 $ (1,306,749)
================ ============== =================
</TABLE>
See notes to financial statements.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
<TABLE>
1999 1998 1997
-------------- ------------- --------
CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C> <C> <C>
Net investment loss $ (264,925) $ (287,379) $ (250,950)
Adjustments to reconcile net investment loss to cash
used for operating activities:
(Decrease) increase in payables, net (4,273) 30,455 (5,986)
(Increase) decrease in accrued interest on short-term investments (8,260) - 5,276
Decrease (increase) in accrued interest receivable 28,778 (28,298) (480)
-------------- ------------- -------------
Cash used for operating activities (248,680) (285,222) (252,140)
-------------- ------------- -------------
CASH FLOWS PROVIDED FROM INVESTING ACTIVITIES
Net (purchase of) return from short-term investments (739,325) - 493,461
Cost of portfolio investments purchased - (53,918) (650,000)
Proceeds from the sale of portfolio investments 1,286,568 1,794,405 2,443,646
Proceeds from the repayment of notes and bridge loan - 71,260 -
-------------- ------------- -------------
Cash provided from investing activities 547,243 1,811,747 2,287,107
-------------- ------------- -------------
CASH FLOWS USED FOR FINANCING ACTIVITIES
Cash distributions paid to Partners (828,444) (880,222) (2,329,999)
-------------- ------------- -------------
(Decrease) increase in cash and cash equivalents (529,881) 646,303 (295,032)
Cash and cash equivalents at beginning of year 731,956 85,653 380,685
-------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 202,075 $ 731,956 $ 85,653
============== ============= =============
</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, 1997, 1998 and 1999
<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 as of December 31, 1996 $ 57,186 $ 2,213 $ 5,640,110 $ 5,019,684 $ 10,719,193
Cash distributions, paid
July 1, 1997 and October 22, 1997 (18,315) (708) (1,793,400) - (1,812,423)
Net investment loss (2,510) (97) (248,343) - (250,950)
Net realized gain from investments 9,393 363 929,561 - 939,317
Change in unrealized
appreciation of investments - - - (1,995,116) (1,995,116)
---------- -------- ------------- ------------- --------------
Balance as of December 31, 1997 45,754 1,771 4,527,928(A) 3,024,568 7,600,021
Cash distribution, paid
October 28, 1998 (8,802) (340) (871,080) - (880,222)
Net investment loss (2,874) (111) (284,394) - (287,379)
Net realized loss from investments (2,362) (91) (233,775) - (236,228)
Change in unrealized
appreciation of investments - - - 717,196 717,196
---------- -------- ------------- ------------- -------------
Balance as of December 31, 1998 31,716 1,229 3,138,679(A) 3,741,764 6,913,388
Cash distribution, paid
October 14, 1999 (8,284) (320) (819,840) - (828,444)
Net investment loss (2,649) (102) (262,174) - (264,925)
Net realized gain from investments 5,968 231 590,607 - 596,806
Change in unrealized
appreciation of investments - - - 1,850,829 1,850,829
---------- -------- ------------- ------------- --------------
Balance as of December 31, 1999 $ 26,751 $ 1,038 $ 2,647,272(A) $ 5,592,593 $ 8,267,654
========== ======== ============= ============= ==============
</TABLE>
(A) The net asset value per unit of limited partnership interest ("Unit"),
including an assumed allocation of net unrealized appreciation of
investments, was $798, $668, and $734 as of December 31, 1999, 1998 and
1997, respectively. Cumulative cash distributions paid to Limited Partners
totaled $640, $560 and $475 per Unit as of December 31, 1999, 1998 and
1997, respectively.
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. 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.
However, the Managing General Partner is working toward liquidating the
Partnership's remaining assets and terminating the Partnership as soon as
practical with the goal of maximizing returns to Partners.
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 the Partnership's portfolio investments by applying consistent
guidelines. Publicly-held portfolio securities are valued at the closing public
market price on the valuation date, less an appropriate discount for sales
restrictions, the size of the Partnership's holdings and the public market
trading volume. Privately-held portfolio securities are valued at cost until
significant developments affecting the portfolio company provide a basis for
change in valuation. The fair value of private securities is adjusted to reflect
1) meaningful third-party transactions in the private market or 2) 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.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, continued
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
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 $5.6 million as of December 31, 1999, was recorded for financial
statement purposes but has not been recognized for tax purposes. Additionally,
from inception to December 31, 1999, other timing differences totaling $1.4
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.
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.
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 extension of the
term of the Partnership, the Individual General Partners agreed to reduce the
annual fee
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, continued
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.
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 not to exceed $203,720.
6. Classification of Portfolio Investments
The Partnership's portfolio investments, all of which are located in the state
of Oklahoma, except Data Critical Corp., which is located in the state of
Washington, were categorized as follows.
<TABLE>
As of December 31, 1999:
Type of Investments Cost Fair Value Net Assets*
- ------------------- ------------- ------------ -----------
<S> <C> <C> <C>
Common Stock $ 1,935,622 $ 7,528,215 91.06%
============= ============ =========
Industry
Healthcare/Biotechnology $ 395,722 $ 1,357,414 16.42%
Data Communications 1,010,000 6,170,801 74.64%
Food Manufacturing & Distribution 529,900 0 0.00%
------------- ------------ ---------
$ 1,935,622 $ 7,528,215 91.06%
============= ============ =========
As of December 31, 1998:
Type of Investments Cost Fair ValueNet Assets*
- ------------------- ------------- ---------------------
Common Stock $ 1,696,644 $ 4,700,908 68.00%
Preferred Stock 700,000 1,437,500 20.79%
Debt Securities 228,740 228,740 3.31%
------------- ------------ ---------
$ 2,625,384 $ 6,367,148 92.10%
============= ============ =========
Industry
Healthcare/Biotechnology $ 856,744 $ 3,925,908 56.79%
Data Communications 1,010,000 2,212,500 32.00%
Food Manufacturing & Distribution 758,640 228,740 3.31%
------------- ------------ ---------
$ 2,625,384 $ 6,367,148 92.10%
============= ============ =========
</TABLE>
*Represents fair value as a percentage of net assets.
<PAGE>
ML OKLAHOMA VENTURE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, continued
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, 1999 are listed below:
<TABLE>
Managing Independent
General General Limited Per $1,000
Distribution Date Partner Partners Partners Unit
<S> <C> <C> <C> <C> <C> <C>
Inception to December 31, 1996 $ 25,889 $ 1,000 $ 2,562,000 $ 250
January 21, 1997 4,984 192 512,400 50
July 1, 1997 5,370 208 512,400 50
October 22, 1997 12,945 500 1,281,000 125
October 28, 1998 8,802 340 871,080 85
October 14, 1999 8,284 320 819,840 80
------------ ----------- -------------- --------
Cumulative as of December 31, 1999 $ 66,274 $ 2,560 $ 6,558,720 $ 640
============ =========== ================ ========
</TABLE>
8. Short-Term Investments
As of December 31, 1999, the Partnership had a short-term investment in
commercial paper as detailed below. The Partnership had no short-term
investments as of December 31, 1998.
<TABLE>
Maturity Purchase Amortized Value at
Issuer Yield Date Price Cost Maturity
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lexington Parker Capital Corp. 6.10% 1/20/00 $ 739,325 $ 747,585 $ 750,000
</TABLE>
9. Subsequent Events
Subsequent to December 31, 1999 and through March 24, 2000, the Partnership sold
an additional 225,700 common shares of UroCor for $1,343,840, which will result
in a realized gain of $1,053,724 for the first quarter of 2000. Also subsequent
to December 31, 1999, the Partnership sold its remaining 130,000 common shares
of ZymeTx for $325,004, which will result in a realized gain of $324,484 for the
first quarter of 2000.
Subsequent to year-end, the General Partners approved an additional cash
distribution totaling $2,071,111 to be paid to partners in April 2000. Limited
Partners of record on March 31, 2000 will receive $2,049,600, or $200 per Unit,
the Individual General Partners will receive $800 and the Managing General
Partner will receive $20,711.
<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 General Partners of the Partnership consist of the four Individual General
Partners and the Managing General Partner. The five General Partners are
responsible for the management and administration of the Partnership. As
required by the Investment Company Act of 1940 (the "1940 Act"), a majority of
the General Partners are individuals who are not "interested persons" of the
Partnership as defined in the 1940 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 1940 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 of the
Partnership until their 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 under the 1940 Act. In addition to
general fiduciary duties, the Individual General Partners, among other things,
supervise the management arrangements of the Partnership and 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.
Individual General Partners
William C. Liedtke, III (1) P.O. Box 54369 Oklahoma City, OK 73154 Age 48
Individual General Partner since 1988 0 Units of the Partnership beneficially
owned as of March 15, 2000 (3) Effective February 1, 2000, Vice President and
General Counsel of Castle Energy Corporation; May 1, 1999 to February 1, 2000,
President of WCL III, Inc., operating Castle Energy Corporation's Redeco
subsidiary; 1st Quarter 1999, Vice President of Costillo Redeco Energy, L.L.C.,
a wholly owned subsidiary of Costillo Energy, Inc.; 1997 to 1999, Chief
Executive Officer of Redeco Energy, Inc.; from 1996 to 1997, Chief Operating
Officer of Redex Co. Ventures, Ltd.; from 1991 to 1996, Energy consultant; from
1989 to 1991, Assistant to the Governor of the State of Oklahoma; since 1984, an
independent natural gas marketing consultant; an oil and gas marketing manager
for Trigg Drilling Company, Inc.; a member of the State Bar of Texas.
Richard P. Miller (1)
7500 N. Mockingbird Lane
Paradise Valley, AZ 85253
Age 72
Individual General Partner since 1988
0 Units of the Partnership beneficially owned as of March 15, 2000 (3)
Since1988 Director 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.; from 1954 to 1976 Vice
Chairman of Wolf & Company CPA's.
George A. Singer (1) 2222 E. 25th Place Tulsa, OK 74114 Age 52 Individual
General Partner since 1995 0 Units of the Partnership beneficially owned as of
March 15, 2000 (3) Since 1978, Manager and Principal of Singer Bros. LLC and
General Partner of several related family entities; since 1978,
Executive Vice President, Pedestal Oil Company, Inc.; since 1999,
Director of Oklahoma National Bank; a member of the Independent Petroleum
Association of America.
Bruce W. Shewmaker (2)
12 Briarwood Drive
Short Hills, NJ 07078
Age 54
Individual General Partner since 1988
0 Units of the Partnership beneficially owned as of March 15, 2000 (3)
Sincethe beginning of 1999, Director and Advisor to Direct Stock Market, Inc.
and since April 1999, Managing Director of E*Offering Corp.; from 1997 to
December 1998, President, Director and Senior Advisor of The US Russia
Investment Fund; from 1991 to 1996, President of New Century Management,
Inc.; from 1984 to 1990, President of Merrill Lynch R&D Management, Inc.
(1) Independent General Partner and Member of Audit Committee.
(2) Interested person of the Partnership as defined in the Investment Company
Act.
(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,
10830 E. 45th Street, Suite 307, Tulsa, OK 74146. 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 activity. 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, C. James Bode and John Frick,
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 a wholly-owned subsidiary of ML
Leasing Equipment Corp., which 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.
The Management Company has arranged for Palmeri Fund Administrators, Inc.,
an independent administrative services company, to provide administrative
services to the Partnership. Fees for such services are paid directly by the
Management Company.
The following table sets forth information concerning the directors of the
Management Company and the executive officers of the Management Company involved
with the Partnership. The address of Mr. Albert is North Tower, World Financial
Center, New York, NY 10281-1326. The address of Messrs. Caruso, Giobbe and Bruno
is South Tower, World Financial Center, New York, NY 10080.
Kevin K. Albert, Age 47, Director and President
Officer or Director since 1990
Director and President of the Management Company; Managing Director of Merrill
Lynch & Co. Investment Banking Division ("MLIBK") since 1988; Vice
President of MLIBK from 1983 to 1988.
<PAGE>
James V. Caruso
Executive Vice President and Director
Age 48
Officer or Director since 1998
Director of MLIBK, joined Merrill Lynch in January 1975. Mr. Caruso is
the director of Technology for the Global Investment Banking Group. He
is responsible for ensuring that the business requirements of MLIBK are
supported by managing the development of new technologies and enhancing
existing systems.
Michael Giobbe
Vice President and Director
Age 41
Officer or Director since 2000
Vice President of MLIBK, joined Merrill Lynch in 1986. Mr. Giobbe's
responsibilities include the business management function for certain
partnerships and other entities for which subsidiaries of Merrill Lynch
are the general partner.
James V. Bruno
Vice President and Treasurer
Age 33
Officer or Director since 1998
Vice President of MLIBK, joined Merrill Lynch in 1997. Mr. Bruno's
responsibilities include controllership and financial management
functions for certain partnerships and other entities for which
subsidiaries of Merrill Lynch are the general partner or manager.
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 - For the year ended December 31, 1999, the Partnership paid each
of the Independent General Partner's an annual fee of $12,000 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 the actual
out-of-pocket expenses of the Independent General Partners' relating to
attendance at meetings. Additionally, 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. During 1998 and 1997, the annual fee paid to each
Independent General Partner was $16,000. The meeting fees paid to the
Independent General Partners have remained unchanged. The aggregate fees paid by
the Partnership to the Independent General Partners for the years ended December
31, 1999, 1998 and 1997 totaled $44,500, $60,000 and $60,000, 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, 1999, the Partnership had a net realized gain
from operations of $331,881. For the years ended December 31, 1998 and 1997 the
Partnership had a net realized loss from operations of $523,607 and a net
realized gain from operations of $688,367, respectively. In accordance with the
Partnership's allocation procedure, the Managing General Partner was allocated
$3,319, ($5,236) and $6,883 of such gains (losses) for the years ended December
31, 1999, 1998 and 1997, respectively.
During 1999, the Partnership made cash distributions to partners totaling
$828,444. Limited Partners received $819,840, or $80 per Unit, the Individual
General Partners received $320 and the Managing General Partner received $8,284.
During 1998, the Partnership made a cash distribution to partners totaling
$880,222. Limited Partners received $871,080, or $85 per Unit, the Individual
General Partners received $340, and the Managing General Partner received
$8,802. During 1997, the Partnership made cash distributions to partners
totaling $1,812,423. Limited Partners received $1,793,400, or $175 per Unit, the
Individual General Partners received $708 and the Managing General Partner
received $18,315. Cumulative cash distributions to partners from inception to
December 31, 1999 total $6,627,554; consisting of $6,558,720, or $640 per Unit,
to the Limited Partners, $2,560 to the Individual General Partners and $66,274
to the Managing General Partner.
Management Fee - 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 fee of $200,000 annually.
However, in connection with the extension of the term of the Partnership, the
Partnership and the Management Company agreed to reduce the minimum management
fee by the Partnership from $200,000 to $160,000, effective January 1, 1999.
Such fee is determined and paid quarterly. The management fee for year ended
December 31, 1999 was $160,000. The management fee for each of the years ended
December 31, 1998 and 1997 was $200,000. To the extent possible, the management
fee and other expenses incurred directly by the Partnership are paid with funds
provided from operations, including proceeds from the sale of portfolio
investments.
The Management Company has agreed to 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 15, 2000 no person or group is
known by the Partnership to be the beneficial owner of more than 5 percent of
the Units. Merrill Lynch, Pierce, Fenner & Smith Incorporated owned 5 Units as
of December 31, 1999.
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. James V. Caruso, a Director and
Executive Vice President of the Management Company and a Director of ML
Investment Banking, joined Merrill Lynch in 1975. Michael Giobbe, Director and
Vice President of the Management Company and a Vice President of ML Investment
Banking, joined Merrill Lynch in 1986. James V. Bruno, a Vice President and
Treasurer of the Management Company and a Vice President of ML Investment
Banking, joined Merrill Lynch in 1997. Messrs. Albert, Caruso, Giobbe and Bruno
are involved with certain other entities affiliated with Merrill Lynch or its
affiliates.
PART IV
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, 1999 and 1998
Schedule of Portfolio Investments as of December 31, 1999
Schedule of Portfolio Investments as of December 31, 1998
Statements of Operations for the years ended December 31,
1999, 1998 and 1997
Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
Statements of Changes in Partners' Capital for the years
ended December 31, 1997, 1998 and 1999
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.*
(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 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 30th day of March 2000.
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 30th day of March 2000.
By: MLOK Co., Limited Partnership By: /s/ William C. Liedtke, III
-----------------------------
its Managing General Partner William C. Liedtke, III
General Partner
By: Merrill Lynch Venture Capital Inc. ML Oklahoma Venture Partners, Limited
its General Partner Partnership
By: /s/ Kevin K. Albert By: /s/ Richard P. Miller
------------------------------------ -----------------------
Kevin K. Albert Richard P. Miller
President of Merrill Lynch Venture Capital, Inc. General Partner
(Principal Executive Officer) ML Oklahoma Venture
Partners, Limited Partnership
By: /s/ James V. Bruno By: /s/ George A. Singer
------------------------------------ ----------------------
James V. Bruno George A. Singer
V. P. & Treasurer of Merrill Lynch General Partner
Venture Capital, Inc. ML Oklahoma Venture Partners,
(Principal Financial and Accounting Officer) Limited Partnership
By: /s/ Michael Giobbe By: /s/ Bruce W. Shewmaker
------------------------------------ ------------------------
Michael Giobbe Bruce W. Shewmaker
Vice President of Merrill Lynch General Partner
Venture Capital Inc. ML Oklahoma Venture Partners,
Limited Partnership
<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, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 1,935,622
<INVESTMENTS-AT-VALUE> 7,528,215
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<OTHER-ITEMS-ASSETS> 949,660
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