-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NgD1JMTFcM+iUe9ojg6ptIEWjJKAzg8oE+hlaGXAlB5Zo+IVJLswSoqnU3tJnuka IKM59zCA9OlHRSp7WexJeQ== 0000898733-98-000773.txt : 19981118 0000898733-98-000773.hdr.sgml : 19981118 ACCESSION NUMBER: 0000898733-98-000773 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUTECH RESEARCH & DEVELOPMENT PARTNERSHIP II CENTRAL INDEX KEY: 0000774560 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 133268435 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21464 FILM NUMBER: 98750482 BUSINESS ADDRESS: STREET 1: 440 MISSION CT STE 250 CITY: FREMONT STATE: CA ZIP: 94539 BUSINESS PHONE: 5106561855 MAIL ADDRESS: STREET 1: 440 MISSION CT STREET 2: SUITE 250 CITY: FREMONT STATE: CA ZIP: 10292-0116 10-Q 1 PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 / / 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 0-21464 PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 13-3268435 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One Seaport Plaza, 28th Floor, New York, NY 10292 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 214-3500 N/A - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes CK No _ Part I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II (a limited partnership) STATEMENTS OF NET ASSETS (in process of liquidation) (unaudited)
September 30, December 31, 1998 1997 - ----------------------------------------------------------------------------------------------------- Assets Cash and cash equivalents $ 3,294,761 $ 3,452,809 Liabilities Estimated liquidation costs 366,683 873,549 ------------- ------------- Contingencies Net assets in liquidation $ 2,928,078 $ 2,579,260 ------------- ------------- ------------- ------------- Net assets in liquidation Limited partners (100,000 units issued and outstanding) $ 2,566,770 $ 2,252,834 General partner 361,308 326,426 ------------- ------------- Total net assets in liquidation $ 2,928,078 $ 2,579,260 ------------- ------------- ------------- ------------- - -----------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (in process of liquidation) (unaudited)
LIMITED GENERAL PARTNERS PARTNER TOTAL - --------------------------------------------------------------------------------------------------- Net assets in liquidation--December 31, 1997 $2,252,834 $326,426 $2,579,260 Changes in estimated liquidation values of assets and liabilities 313,936 34,882 348,818 ---------- -------- ---------- Net assets in liquidation--September 30, 1998 $2,566,770 $361,308 $2,928,078 ---------- -------- ---------- ---------- -------- ---------- - --------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
2 PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II (a limited partnership) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998 (unaudited) A. General These financial statements have been prepared without audit. In the opinion of management, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to fairly present the financial statements of PruTech Research and Development Partnership II (the 'Partnership') as of September 30, 1998, subject to the effects of any further liquidation accounting adjustments that would have been required had the realizable values of certain assets and the settlement amounts of certain liabilities been known when the Partnership first adopted the liquidation basis of accounting. (See discussion below.) Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1997. In accordance with the terms of the plan of dissolution and liquidation of the Partnership (the 'Plan'), R&D Funding Corp (the 'General Partner') has sold or otherwise disposed of all of the Partnership's remaining investments of value. The Partnership has a few remaining assets (which are estimated to have little or no value), and outstanding and potential liabilities and contingencies to be resolved before the final liquidation of the Partnership. The final liquidation of the Partnership will occur upon the resolution of the Partnership's remaining liabilities and contingencies, certain of which are involved in ongoing discussions. Due to the nature of the remaining contingencies to be resolved, the date of liquidation is uncertain. However, the Partnership has utilized a December 31, 1998 date for purposes of estimating costs through the conclusion of liquidation. If, however, the Partnership is unable to liquidate by December 31, 1998, additional costs will be incurred. Upon liquidation, the General Partner intends to distribute the assets of the Partnership (reduced by a reserve to satisfy any liabilities or contingencies of the Partnership) to the partners by making a single, final distribution in accordance with the terms of the Agreement of Limited Partnership, as amended. It is expected that the Partnership's eventual total distributions will not equal the partners' initial investment. As a result of the adoption of the Plan, the Partnership adopted the liquidation basis of accounting effective December 31, 1996, whereby assets are valued at their estimated net realizable values and liabilities stated at their estimated settlement amounts. As of September 30, 1998, the Partnership's estimated liquidation costs were $367,000. These estimated costs include, but are not limited to, costs of selling or otherwise disposing of the Partnership's remaining investments, costs of achieving resolution to remaining contingencies and general and administrative costs through the estimated conclusion of liquidation. During the nine months ended September 30, 1998, the Partnership reflected an increase of $349,000 in the estimated net liquidation value of its assets and liabilities, of which $49,000 was recorded during the third quarter. The nine-month increase is primarily due to the sale of certain royalty rights with Optical Specialties, Inc. (see Note B) which was reflected in the first quarter, a reduction in the management fee (see Note D) and to interest earned on the Partnership's cash and cash equivalents. B. Royalties In March 1998, the Partnership reached an agreement to sell to Nanometrics Incorporated ('Nanometrics') its right, title and interest in and to certain technologies which had been licensed to Optical Specialties, Inc. (hereinafter referred to as the 'Metra Technologies') in exchange for approximately $144,000 which was received in April 1998. Prior to this agreement, the Metra Technologies had a carrying value of zero on the Partnership's financial statements. No further royalty payments will be received by the Partnership for Metra Technologies as a result of this agreement. At September 30, 1998, the Partnership continues to retain certain royalty rights for other technologies licensed to Optical Specialties, Inc., which have a carrying value of zero. 3 C. Investments in Equity Securities At September 30, 1998 and December 31, 1997, the Partnership's remaining investments in equity securities consist of 274,628 shares of Optical Specialties, Inc. common stock and 144,666 shares of its preferred stock. The carrying value of these remaining positions as of September 30, 1998 and December 31, 1997 is zero. D. Related Parties The General Partner and its affiliates perform certain services for the Partnership (for which they are reimbursed through the management fee) which include but are not limited to: accounting and financial management; registrar, transfer and assignment functions; asset management; investor communications and other administrative services. The Partnership also reimburses an affiliate of the General Partner for printing services. In conjunction with the adoption of the liquidation basis of accounting (see Note A), the estimated costs expected to be incurred through the complete liquidation of the Partnership are reflected in the Statements of Net Assets. Included within these estimated liquidation costs as of September 30, 1998 and December 31, 1997 are approximately $155,000 and $644,000 expected to be charged by the General Partner and its affiliates during the remaining anticipated liquidation period. Effective April 1, 1998, the General Partner reduced its management fee from $125,000 per quarter to $75,000 per quarter which resulted in an anticipated cost reduction from the December 31, 1997 estimate of $150,000. The actual charges will depend primarily upon the length of the time required to liquidate the Partnership and may differ from the amount accrued. Prudential Securities Incorporated ('PSI'), an affiliate of the General Partner, owned 340 limited partnership units at September 30, 1998. The Partnership maintains an account with the Prudential Institutional Liquidity Portfolio Fund, an affiliate of the General Partner, for investment of its available cash in short-term instruments pursuant to the guidelines established by the Partnership Agreement. The Partnership engaged in research and development co-investment projects with PruTech Research and Development Partnership which was dissolved and liquidated in December 1996, PruTech Research and Development Partnership III, and PruTech Project Development Partnership (collectively, the 'PruTech R&D Partnerships'), for which R&D Funding Corp serves as the general partner. The allocation of the co-investment projects' profits or losses among the PruTech R&D Partnerships is consistent with the costs incurred to fund the research and development projects. E. Contingencies On April 15, 1994 a multiparty petition captioned Mack et al. v. Prudential Securities Incorporated et al. (Cause No. 94-17695) was filed in the 80th Judicial District Court of Harris County, Texas, purportedly on behalf of investors in the Partnership against the Partnership, the General Partner, PSI, The Prudential Insurance Company of America and a number of other defendants. The petition alleges common law fraud, fraud in the inducement and negligent misrepresentation in connection with the offering of the Partnership; negligence and breach of fiduciary duty in connection with the operation of the Partnership; civil conspiracy; and violations of the federal Securities Act of 1933 (sections 11 and 12), as amended, and of the Texas Securities and Deceptive Trade Practices statutes. The suit seeks, among other things, compensatory and punitive damages, costs and attorneys' fees. The General Partner, PSI and the Partnership believe they have meritorious defenses to the complaint and are vigorously defending themselves against this action. The claims of most plaintiffs have been settled or dismissed. It is currently expected that the remaining claims will be resolved shortly. The Partnership has not contributed to any settlement or paid any costs of the litigation, nor is it anticipated that it will. Additionally, the General Partner believes that the litigation discussed above will not have an adverse impact on its ability to liquidate the Partnership in accordance with the Plan and in the time frame currently contemplated by the General Partner. 4 PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II (a limited partnership) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources At September 30, 1998, the Partnership had cash and cash equivalents of approximately $3,295,000 which is approximately $158,000 less than the Partnership's balance at December 31, 1997. This decrease was primarily due to the payment of management fees which was offset, in part, by proceeds from the sale of certain royalty rights with Optical Specialties, Inc. and interest received on the Partnership's cash and cash equivalents. In September 1996, R&D Funding Corp (the 'General Partner') mailed to all limited partners a Consent Solicitation Statement (the 'Statement') asking for their written consent to approve a plan of dissolution and liquidation of the Partnership (the 'Plan'), as more fully described in the Statement. Holders of 68.4% of the limited partnership units approved the Plan on October 30, 1996 and accordingly, the Plan was adopted. In accordance with the terms of the Plan, the General Partner has sold or otherwise disposed of all of the Partnership's remaining investments of value. The Partnership has a few remaining assets (which are estimated to have little or no value), and outstanding and potential liabilities and contingencies to be resolved before the final liquidation of the Partnership. The final liquidation of the Partnership will occur upon the resolution of the Partnership's remaining liabilities and contingencies, certain of which are involved in ongoing discussions. Due to the nature of the remaining contingencies to be resolved, the date of liquidation is uncertain. However, the Partnership has utilized a December 31, 1998 date for purposes of estimating costs through the conclusion of liquidation. If, however, the Partnership is unable to liquidate by December 31, 1998, additional costs will be incurred. Upon liquidation, the General Partner intends to distribute the assets of the Partnership (reduced by a reserve to satisfy any liabilities or contingencies of the Partnership) to the partners by making a single, final distribution in accordance with the terms of the Agreement of Limited Partnership, as amended. It is expected that the Partnership's eventual total distributions will not equal the partners' initial investment. During the nine months ended September 30, 1998, the Partnership reflected an increase of $349,000 in the estimated net liquidation value of its assets and liabilities primarily due to the sale of certain royalty rights with Optical Specialties, Inc. (as more fully discussed in Note B to the accompanying financial statements), a reduction in the management fee (as more fully discussed in Note D to the accompanying financial statements) and to interest earned on the Partnership's cash and cash equivalents. Results of Operations The Partnership adopted the liquidation basis of accounting as of December 31, 1996 in accordance with generally accepted accounting principles and no longer reports results of operations. As such, there is no management's discussion regarding the results of operations. 5 PART II. OTHER INFORMATION Item 1. Legal Proceedings--This information is incorporated by reference to Note E to the financial statements filed herewith in Item 1 of Part I of the Registrant's Quarterly Report. Item 2. Changes in Securities--None Item 3. Defaults Upon Senior Securities--None Item 4. Submission of Matters to a Vote of Security Holders--None Item 5. Other Information--None Item 6. Exhibits and Reports on Form 8-K a. Exhibits-- PruTech Research and Development Partnership II Agreement of Limited Partnership (incorporated by reference to Exhibit 3.1 included with Registrant's Form S-1 Registration Statement, File No. 2-94273, dated November 9, 1984) First Amendment to the Agreement of Limited Partnership of PruTech Research and Development Partnership II (incorporated by reference to Exhibit 3 included with Registrant's Annual Report on Form 10-K for the year ended December 31, 1991) Financial Data Schedule (filed herewith) b. Reports on Form 8-K-- No reports on Form 8-K were filed during the quarter. 6 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PruTech Research and Development Partnership II By: R&D Funding Corp A Delaware corporation, General Partner By: /s/ Brian J. Martin Date: November 16, 1998 ---------------------------------------- Brian J. Martin President, Chief Executive Officer, Chairman of the Board of Directors and Director for the Registrant By: R&D Funding Corp A Delaware corporation, General Partner By: /s/ Steven Carlino Date: November 16, 1998 ---------------------------------------- Steven Carlino Vice President Chief Accounting Officer for the Registrant 7 EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 The Schedule contains summary financial information extracted from the financial statements for PruTech Research and Development Partnership II and is qualified in its entirety by reference to such financial statements 0000774560 PruTech Research and Development Partnership II 1 Dec-31-1998 Jan-1-1998 Sep-30-1998 9-Mos 3,294,761 0 0 0 0 3,294,761 0 0 3,294,761 366,683 0 0 0 0 2,928,078 3,294,761 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Registrant adopted the liquidation basis of accounting on December 31, 1996, and, accordingly, has not reflected operations subsequent to 1996. See Note A to the financial statements for further details.
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