United States
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended March 31, 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 33-35938
PAINEWEBBER R&D PARTNERS III, L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3588219
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1285 Avenue of the Americas, New York, New York 10019
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 713-2000
----------------------
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>
SPECIAL NOTE REGARDING
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Except for the historical information
contained herein, the matters discussed herein are forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of PaineWebber R&D Partners III, L.P. or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions; fluctuations in the
value of securities for which only a limited, or no, public market exists;
dependence on the development of new technologies; dependence on timely
development and introduction of new and competitively priced products; the need
for regulatory approvals; the Sponsor Companies (hereinafter defined) having
insufficient funds to commercialize products to their maximum potential; the
restructuring of Sponsor Companies; the dependence of PaineWebber R&D Partners
III, L.P. on the skills of certain scientific personnel; and the dependence of
PaineWebber R&D Partners III, L.P. on the General Partner (hereinafter defined).
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(a Delaware Limited Partnership)
Form 10-Q
March 31, 1999
Table of Contents
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Statements of Financial Condition (unaudited) at
March 31, 1999 and December 31, 1998 2
Statements of Operations
(unaudited) for the three months ended
March 31, 1999 and 1998 3
Statement of Changes in Partners' Capital
(unaudited) for the three months ended
March 31, 1999 3
Statements of Cash Flows
(unaudited) for the three months ended
March 31, 1999 and 1998 4
Notes to Financial Statements
(unaudited) 5-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
All schedules are omitted either because they are not applicable or the
information required to be submitted has been included in the financial
statements or notes thereto.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF FINANCIAL CONDITION
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Marketable securities, at market value $ 9,257,178 $ 9,147,266
Advances to product development projects 21,784 21,784
------------------ ------------------
Total assets $ 9,278,962 $ 9,169,050
================== ==================
Liabilities and partners' capital:
Accrued liabilities $ 108,517 $ 74,205
Partners' capital 9,170,445 9,094,845
------------------ ------------------
Total liabilities and partners' capital $ 9,278,962 $ 9,169,050
================== ==================
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
2
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31, 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Interest income $ 17,662 $ 13,478
Unrealized appreciation (depreciation) of
marketable securities and investments 101,094 (3,025,421)
------------------ ------------------
118,756 (3,011,943)
------------------ ------------------
Expenses:
General and administrative costs 43,156 37,739
------------------ ------------------
Net income (loss) $ 75,600 $ (3,049,682)
================== ==================
Net income (loss) per partnership unit:
Limited partners (based on 50,000 units) $ 1.50 $ (60.38)
General partner $ 756.00 $ (30,496.82)
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(unaudited)
<TABLE>
<CAPTION>
Limited General
For the three months ended March 31, 1999 Partners Partner Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1998 $ 9,002,361 $ 92,484 $ 9,094,845
Net income 74,844 756 75,600
------------------ ------------------ -----------------
Balance at March 31, 1999 $ 9,077,205 $ 93,240 $ 9,170,445
================== ================== =================
- --------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
3
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the three months March 31, 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 75,600 $ (3,049,682)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Unrealized (appreciation) depreciation
of marketable securities and investments (101,094) 3,025,421
(Increase) decrease in operating assets:
Marketable securities (8,818) 45,016
Prepaid expenses - (3,609)
Increase (decrease) in operating liabilities:
Accrued liabilities 34,312 (17,146)
------------------ ------------------
Cash provided by operating activities - -
------------------ ------------------
Increase in cash - -
Cash at beginning of period - -
------------------ ------------------
Cash at end of period $ - $ -
================== ==================
</TABLE>
- --------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
The Partnership paid no cash for interest or taxes during the three months ended
March 31, 1999 and 1998.
- --------------------------------------------------------------------------------
See notes to financial statements.
4
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Business
The financial information as of and for the periods ended March 31, 1999
and 1998 is unaudited. However, in the opinion of management of PaineWebber R&D
Partners III, L.P. (the "Partnership"), such information includes all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation. The results of operations reported for the interim period ended
March 31, 1999, are not necessarily indicative of results to be expected for the
year ended December 31, 1999. These financial statements should be read in
conjunction with the most recent annual report of the Partnership on Form 10-K
for the year ended December 31, 1998.
The Partnership is a Delaware limited partnership that commenced
operations on June 3, 1991. Paine Webber Development Corporation ("PWDC" or the
"General Partner"), an indirect, wholly-owned subsidiary of Paine Webber Group
Inc., is the general partner and manager of the Partnership. The Partnership
will terminate on December 15, 2015, unless its term is extended or reduced by
the General Partner.
The principal objective of the Partnership has been to provide long-term
capital appreciation to investors through investing in the development and
commercialization of new products with technology and biotechnology companies
("Sponsor Companies"), which have been expected to address significant market
opportunities. The Partnership has been engaged in diverse product development
projects (the "Projects") including product development contracts, participation
in other partnerships and investments in securities of Sponsor Companies. Once
the product development phase has been completed, the Sponsor Companies have the
option to license and commercialize the products resulting from the product
development project, and the Partnership has the right to receive payments based
upon the sale of such products. The Partnership obtained warrants to purchase
the common stock of Sponsor Companies to provide additional capital appreciation
to the Partnership which was not directly dependent upon the outcome of the
Projects (see Note 5).
5
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(Note 1 Continued)
All distributions from the Partnership to the General Partner and the
limited partners of the Partnership (the "Limited Partners"; collectively, the
"Partners") have been made pro rata in accordance with their respective capital
contributions. The table below sets forth the proportion of each distribution to
be received by the Limited Partners and the General Partner, respectively:
<TABLE>
<CAPTION>
Limited General
Partners Partner
-------- -------
<S> <C> <C>
I. Until the value of the aggregate distributions for each limited
partnership unit ("Unit") equals $1,000 plus simple interest on such
amount accrued at 5% per annum ("Contribution Payout"); At March 31,
1999, Contribution Payout was $1,388 per
Unit................................................................... 99% 1%
II. After Contribution Payout and until the value of the aggregate
distributions for each Unit equals $5,000 ("Final Payout")............. 80% 20%
III. After Final Payout..................................................... 75% 25%
</TABLE>
During the quarter ended March 31, 1999, the Partnership made no cash or
security distributions. At March 31, 1999, the Partnership has made cash and
security distributions, as valued on the dates of distribution, since inception
of $1,143 and $98 per Unit, respectively.
Profits and losses of the Partnership are allocated as follows: (i) until
cumulative profits and losses for each Unit equals Contribution Payout, 99% to
Limited Partners and 1% to the General Partner, (ii) after Contribution Payout
and until cumulative profits and losses for each unit equals Final Payout, 80%
to Limited Partners and 20% to the General Partner, and (iii) after Final
Payout, 75% to Limited Partners and 25% to the General Partner. As of March 31,
1999, the cumulative profits of the Partnership were $560 per Unit.
2. Summary of Significant Accounting Policies
The financial statements are prepared in conformity with generally
accepted accounting principles which require management to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("Statement No. 115"), the Partnership accounted for its investments
in restricted common stock (where the restriction period expires in one year or
less) at market value with unrealized gains and losses reflected in the
Statements of Operations during the period in which the change in value
occurred. Investments in restricted common stock, whereby the restriction period
exceeded one year, were accounted for at the lower of cost or fair value.
6
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(Note 2 Continued)
Marketable securities consist of a money market fund and common stock
which are recorded at market value. Marketable securities are not considered
cash equivalents for the Statements of Cash Flows.
The Partnership's investments in stock of non-public companies were
subject to fluctuations in value dependent on the underlying value of the
issuing company. Non-publicly traded securities were valued at cost. The
carrying value of these securities was adjusted when changes in their fair
values were readily ascertainable. Downward adjustments relating to such
securities were made in the event that the value as determined by the General
Partner's evaluations of the project technology or Sponsor Company was deemed
less than the carrying value. These evaluations of value were made based on
currently available information and did not necessarily represent the amount, if
any, which would ultimately be realized.
Realized and unrealized gains or losses are determined on a specific
identification method and are reflected in the Statements of Operations during
the period in which the change in value occurs.
The Partnership invests in product development contracts with Sponsor
Companies either directly or through product development limited partnerships.
The Partnership expenses product development costs when incurred by the Sponsor
Companies and such costs are reflected as expenditures under product development
projects in the accompanying Statements of Operations. Income received and/or
accrued from investments in Projects is reflected in the Statements of
Operations for the period in which the income is earned.
The Partnership's warrants are currently exercisable and the Sponsor
Company's stock is publicly traded, therefore, the warrants are carried at
intrinsic value (the excess of market price per share over the exercise price
per share), which approximates fair value.
7
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
3. Marketable Securities
The Partnership held the following marketable securities at:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
------------------------------- -------------------------------
Carrying Carrying
Value Cost Value Cost
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Money market fund $ 1,574,002 $ 1,574,002 $ 1,565,184 $ 1,565,184
Biocompatibles International plc
(815,000 common shares) 1,413,003 815,000 1,162,957 815,000
Gensia Sicor, Inc.
(137,772 common shares) 387,484 936,850 624,280 936,850
Genzyme Molecular Oncology
(713,091 common shares) 2,674,092 1,000,000 2,317,546 1,000,000
Medarex, Inc.
(281,708 restricted common shares) ---- ---- 853,927 ----
(722,915 and 441,207 unrestricted 2,304,292 ---- 1,337,409 ----
common shares at March 31, 1999 and
December 31, 1998, respectively)
Pharming Group N.V.
(129,555 ordinary shares) 904,305 3,500,000 1,285,963 3,500,000
------------- ------------- ------------- -------------
$ 9,257,178 $ 7,825,852 $ 9,147,266 $ 7,817,034
============= ============= ============= =============
</TABLE>
Biocompatibles International plc ("Biocompatibles") is a development stage
company engaged in the research, development and commercialization of coatings
and new materials which reduce compatibility problems associated with certain
medical devices. The market value of the shares at December 31, 1998,
approximated $1.427 per share as compared to $1.734 per share at March 31, 1999.
Accordingly, the Partnership recognized unrealized appreciation on its
investment of 815,000 shares for the three months ended March 31, 1999, of
$250,046. At March 31, 1998 the market value of the Partnership's investment was
$2,342,661 as compared to $6,620,596 at December 31, 1997 resulting in the
recognition of unrealized depreciation of $4,277,935 for the quarter ended March
31, 1998. (See Note 7 - Subsequent Events).
During 1997, the Partnership received 137,772 common shares of Gensia
Sicor, Inc. ("Gensia") with a market value on the date of distribution of $6.80
per share as a distribution from its limited partnership investment in Gensia
Clinical Partners, L.P. ("GCP"). As of March 31, 1999, the market value of
Gensia decreased to $2.8125 per share as compared to $4.53125 per share at
December 31, 1998 resulting in the recognition of unrealized depreciation of
$236,796 for the quarter ended March 31, 1999. The Partnership recognized
unrealized depreciation of $112,009 for the three months ended March 31, 1998
resulting from a decrease in the market value of the shares from $5.813 per
share at December 31, 1997 to $5.00 per share at March 31, 1998.
8
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(Note 3 Continued)
In November 1998, Genzyme Molecular Oncology ("GMO") commenced trading on
the Nasdaq National Market. The Partnership reclassified its investment of
713,091 non-publicly traded common shares (with a carrying value of $1,000,000)
from investments to marketable securities and recorded the investment at its
market value of $2,317,546 ($3.25 per share) at December 31, 1998. The market
value of the shares at March 31, 1999 was $2,674,092 ($3.75 per share) resulting
in unrealized appreciation of $356,546.
In 1997, upon the acquisition of GenPharm International, Inc. ("GenPharm")
by Medarex, Inc. ("Medarex"), the Partnership's investment of 1,000,000 GenPharm
convertible preferred shares was converted to 281,708 restricted shares of
Medarex which became saleable on or after January 1, 1999. In accordance with
Statement No. 115, at March 31, 1998 the Partnership recorded its investment in
Medarex shares at a market value of $1,364,523 ($4.84375 per share) and
recognized unrealized appreciation of this amount for the quarter ended March
31, 1998. In September 1998, the Partnership received 441,207 unrestricted
Medarex shares in connection with its remaining interest as a former GenPharm
shareholder. The Partnership recorded its total investment of 722,915 shares as
of December 31, 1998, at the aggregate market value of $2,191,336 ($3.03125 per
share). As of March 31, 1999, the Partnership recorded its total investment in
Medarex at $2,304,292 ($3.1875 per share) and recognized unrealized appreciation
of $112,956 for the quarter then ended.
A restructuring by GenPharm in 1995 resulted in the spin-off of its
European subsidiary, Pharming BV. In connection with this spin-off, the
Partnership (as a shareholder of GenPharm) received 14,395 shares of Pharming BV
Class A restricted stock which the General Partner valued at $1,150,000 based on
the current and future financial prospects of Pharming BV at that time. In
connection with an initial public offering in July 1998, the company was renamed
Pharming Group N.V. ("Pharming") and the Partnership's investment was converted
into 129,555 ordinary shares (after a 9:1 stock split) which became saleable on
January 1, 1999. At December 31, 1998, the market value of the investment was
$1,285,963 ($9.926 per share) as compared to $904,305 ($6.98 per share) at March
31, 1999. The Partnership recognized unrealized depreciation of $381,658 for the
quarter ended March 31, 1999. (See Note 7 - Subsequent Events).
4. Related Party Transactions
The General Partner is entitled to receive an annual management fee for
management and administrative services provided to the Partnership. As of
January 1, 1997, the General Partner elected to discontinue the management fee
charged to the Partnership
The money market fund invested in by the Partnership is managed by an
affiliate of PaineWebber Incorporated ("PWI").
PWDC and PWI, and its affiliates, have acted in an investment banking
capacity for several of the Sponsor Companies. In addition, PWDC and its
affiliates have direct limited partnership interests in some of the same product
development limited partnerships as the Partnership.
5. Product Development Projects
Of the Partnership's seven original Projects, the following two Projects
are currently active: a $6.0 million investment in Alkermes Clinical Partners,
L.P., a $46.0 million limited partnership formed to fund
9
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(Note 5 Continued)
the development, clinical testing, manufacturing and marketing of
Receptor-Mediated Permeabilizers for use in the treatment of diseases of the
brain and central nervous system by enabling the delivery of drugs across the
blood brain barrier; and a $6.0 million investment in Cephalon Clinical
Partners, L.P., a $45.0 million limited partnership formed to fund the
development, clinical testing, manufacturing and marketing of Myotrophin(TM) for
use in the treatment of amyotrophic lateral sclerosis and certain other
peripheral neuropathies.
If the Projects produce any product for commercial sale, the Sponsor
Companies have the option to license the Partnership's technology to manufacture
and market the products developed. In addition, the Sponsor Companies have the
option to purchase the Partnership's interest in the technology. In
consideration for granting such purchase options, the Partnership has received
warrants to purchase shares of common stock of certain of the Sponsor Companies.
At March 31, 1999, the Partnership owned warrants to purchase 133,000 shares and
252,700 shares of Repligen Corporation at an exercise price of $2.50 per share
and $3.50 per share, respectively. The exercise period expires March 2001. The
market price of Repligen Corporation stock at March 31, 1999 was $3.0625 per
share. The Partnership's warrant to purchase 35,512 shares of Cayenne Software,
Inc. at an exercise price of $25.91 per share expired in July 1998. The
Partnership did not exercise the warrant since, during the exercise period, the
market price of the stock never exceeded the exercise price.
6. Income Taxes
The Partnership is not subject to federal, state or local income taxes.
Accordingly, the individual partners are required to report their distributive
share of realized income or loss on their individual federal and state income
tax returns.
7. Subsequent Events
On April 23, 1999 the Partnership sold its investment of 129,555 shares of
Pharming for proceeds of $796,804 resulting in a realized loss of $107,501 and
$489,159 for the three months and six months ended June 30, 1999, respectively.
In May 1999, the Partnership sold its investment of 815,000 shares of
Biocompatibles for aggregate proceeds of $1,302,967 resulting in a realized gain
(loss) of $(110,036) and $140,010 for the three months and six months ended June
30, 1999.
10
<PAGE>
PAINEWEBBER R&D PARTNERS III, L.P.
(a Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
Partners' capital increased from $9.1 million at December 31, 1998, to $
9.2 million at March 31, 1999, resulting from the recognition of net income for
the three months ended March 31, 1999, of $0.1 million (as discussed in Results
of Operations below).
The Partnership's funds are invested in a money market fund and marketable
securities until cash is needed to pay for the ongoing management and
administrative expenses of the Partnership or upon the remittance of cash
distributions to the Partners. Liquid assets increased from $9.2 million at
December 31, 1998 to $9.3 million at March 31, 1999 resulting from a net
increase in the market values of marketable securities held as of these dates.
Results of Operations
Three months ended March 31, 1999 compared to the three months ended March 31,
1998:
Net income (loss) for the three months ended March 31, 1999 and 1998 was
$0.1 million and $(3.1) million, respectively resulting from a favorable change
in unrealized appreciation (depreciation) of marketable securities of $3.0
million.
For the quarters ended March 31, 1999 and 1998, unrealized appreciation
(depreciation) of marketable securities was $0.1 million and $(3.0) million,
respectively. For this period in 1999 the Partnership recognized unrealized
appreciation on the following investments: $0.35 million on 0.713 million shares
of GMO resulting from an increase in the market value from $3.25 per share at
December 31, 1998 to $3.75 per share at March 31, 1999; $0.25 million on 0.815
shares of Biocompatibles whereby the market value at December 31, 1998 and March
31, 1999 was $1.4272 per share and $1.73398 per share, respectively; $0.1
million on 0.722 shares of Medarex to reflect an increase in the market value
per share of $3.03125 to $3.18750 from December 31, 1998 to March 31, 1999.
Unrealized depreciation of $0.4 and $0.2 million was recognized on the
Partnership's investments of 0.129 million shares of Pharming and 0.138 shares
of Gensia. The market value of Pharming decreased form $9.926 per share at
December 31, 1998 to $6.98 per share at March 31, 1999. The market value of
Gensia as of December 31, 1998 and March 31, 1999 was $4.53125 per share and
$2.8125 per share, respectively. For the three months ended March 31, 1998, the
Partnership recognized net unrealized depreciation of $3.0 million resulting
from its investments of 0.815 million shares of Biocompatibles, 0.138 shares of
Gensia and 0.282 shares of Medarex. The market value of Biocompatibles decreased
from $8.124 per share at December 31, 1997 to $2.875 per share as of March 31,
1998, resulting in unrealized depreciation of the three months ended March 31,
1998 of $4.3 million. Likewise, the market value per share of Gensia decreased
as of these dated form $5.813 to $5.00 resulting in unrealized depreciation for
the quarter ended March 31, 1998 of $0.1 million. In accordance with Statement
No. 115, at March 31, 1998, the Partnership recorded its investment in Medarex
common stock at a market value of $4.84375 per share recognizing appreciation of
$1.4 million for the quarter then ended.
There were no material variances in expenses for the quarter ended March
31, 1999 as compared to the same period in 1998.
11
<PAGE>
(Item 2 Continued)
Year 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Calculations
performed with these abbreviated date fields may misinterpret the Year 2000 as
1900 resulting in erroneous calculations or program failures. Currently, the
Partnership utilizes computer programs, through services provided by a
third-party servicing agent, that can adversely affect the Partnership's
operations if they are not Year 2000 compliant. The servicing agent has informed
the Partnership that it is executing a plan to modify or replace significant
applications as necessary to ensure Year 2000 compliance. Programming changes
and initial testing are in progress and expected to be completed by year-end.
Final testing is expected to be completed by June 1999. Conversion of client
databases will commence in May 1999. The servicing agent has not quantified the
extent to which their plan has been completed to date. Incremental costs
associated with the development and implementation of the above plan have been,
and will continue to be, borne by the servicing agent. The status of the
Partnership's investments in Sponsor Companies could be adversely affected if
the computer systems of the Sponsor Companies are not Year 2000 compliant. Based
on the most recent available public disclosure of those Sponsor Companies in
which the Partnership has investments of value, the Sponsor Companies have
stated that they have undertaken programs to insure Year 2000 compliance. As of
the dates of disclosure, these Sponsor Companies do not expect that the Year
2000 Issue will adversely effect their future financial condition. However, they
cannot provide assurances that unanticipated problems or costs will not arise.
To date, the Partnership has no contingency plan in place but intends to
evaluate in June 1999 the status of the Year 2000 Issue with third parties to
determine whether such a plan is necessary.
12
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits:
None
b) Reports on Form 8-K:
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 17th day of May
1999.
PAINEWEBBER R&D PARTNERS III, L.P.
By: PaineWebber Development Corporation
(General Partner)
By: /s/ Dhananjay M. Pai
--------------------
Dhananjay M. Pai
President
By: /s/ Anthony M. DiIorio
----------------------
Anthony M. DiIorio
Principal Financial and Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000865936
<NAME> PAINEWEBBER R&D PARTNERS III, L.P.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 9,257,178
<RECEIVABLES> 21,784
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,278,962
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,278,962
<CURRENT-LIABILITIES> 108,517
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,170,445
<TOTAL-LIABILITY-AND-EQUITY> 9,278,962
<SALES> 0
<TOTAL-REVENUES> 118,756
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 43,156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 75,600
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,600
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
