-----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, GBjKCQEJQJha3Z9RP7M6FHyq/c6BNxJBRMMpP6U6RY6c3s7RRoH/Am4qR/ipcedu BGDDps/gDRc4+UZ/BVmzmA== 0000898733-99-000721.txt : 19990816 0000898733-99-000721.hdr.sgml : 19990816 ACCESSION NUMBER: 0000898733-99-000721 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUTECH RESEARCH & DEVELOPMENT PARTNERSHIP III CENTRAL INDEX KEY: 0000794357 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 770129484 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20081 FILM NUMBER: 99688968 BUSINESS ADDRESS: STREET 1: 440 MISSION COURT STE 250 CITY: FREMONT STATE: CA ZIP: 94539 BUSINESS PHONE: 5106561855 10-Q 1 PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP III UNITED STATES 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 June 30, 1999 / / 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 0-20081 PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP III - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) California 77-0129484 - -------------------------------------------------------------------------------- (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 III (a limited partnership) STATEMENTS OF FINANCIAL CONDITION (unaudited)
June 30, December 31, 1999 1998 - --------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $1,095,266 $1,157,931 Investments in equity securities -- 73,760 ---------- ------------ Total assets $1,095,266 $1,231,691 ---------- ------------ ---------- ------------ LIABILITIES AND PARTNERS' CAPITAL Liabilities Accrued expenses and other liabilities $ 27,679 $ 57,698 Accrued management fee -- 62,500 ---------- ------------ Total liabilities 27,679 120,198 ---------- ------------ Contingencies Partners' capital Unitholders (40,934 units issued and outstanding) 953,864 985,900 General partner 113,723 117,283 Accumulated other comprehensive income -- 8,310 ---------- ------------ Total partners' capital 1,067,587 1,111,493 ---------- ------------ Total liabilities and partners' capital $1,095,266 $1,231,691 ---------- ------------ ---------- ------------ - --------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
2 PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP III (a limited partnership) STATEMENTS OF OPERATIONS (unaudited)
Six months ended Three months ended June 30, June 30, --------------------- -------------------- 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------- REVENUES Interest income $ 24,486 $ 84,424 $12,630 $ 39,263 Gain (loss) on sale of investments in equity securities (6,723) 246,504 (7,230) 246,504 -------- -------- ------- -------- 17,763 330,928 5,400 285,767 -------- -------- ------- -------- EXPENSES Management fee 31,250 125,000 -- 62,500 General and administrative 22,109 43,435 6,113 17,204 -------- -------- ------- -------- 53,359 168,435 6,113 79,704 -------- -------- ------- -------- Net income (loss) $(35,596) $162,493 $ (713) $206,063 -------- -------- ------- -------- -------- -------- ------- -------- ALLOCATION OF NET INCOME (LOSS) Unitholders $(32,036) $146,244 $ (641) $185,457 -------- -------- ------- -------- -------- -------- ------- -------- General partner $ (3,560) $ 16,249 $ (72) $ 20,606 -------- -------- ------- -------- -------- -------- ------- -------- Net income (loss) per unit $ (.78) $ 3.57 $ (.02) $ 4.53 -------- -------- ------- -------- -------- -------- ------- -------- - ----------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (unaudited)
ACCUMULATED GENERAL OTHER COMPREHENSIVE UNITHOLDERS PARTNER INCOME (LOSS) TOTAL - ----------------------------------------------------------------------------------------------------- Partners' capital--December 31, 1998 $ 985,900 $117,283 $ 8,310 $1,111,493 Comprehensive loss: Net loss (32,036) (3,560) (35,596) Net unrealized losses on investments in equity securities (8,310) (8,310) ---------- Comprehensive loss (43,906) ----------- -------- ---------- ---------- Partners' capital--June 30, 1999 $ 953,864 $113,723 $ -- $1,067,587 ----------- -------- ---------- ---------- ----------- -------- ---------- ---------- - ----------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
3 PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP III (a limited partnership) STATEMENTS OF CASH FLOWS (unaudited)
Six months ended June 30, ------------------------- 1999 1998 - --------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Interest income received $ 24,486 $ 84,424 Management fee paid (93,750) (125,000) General and administrative expenses paid (52,128) (53,173) ---------- ---------- Net cash used in operating activities (121,392) (93,749) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from the sale of investments in equity securities 58,727 436,787 CASH FLOWS FROM FINANCING ACTIVITIES Distributions -- (2,728,933) ---------- ---------- Net decrease in cash and cash equivalents (62,665) (2,385,895) Cash and cash equivalents at beginning of period 1,157,931 3,668,595 ---------- ---------- Cash and cash equivalents at end of period $1,095,266 $1,282,700 ---------- ---------- ---------- ---------- RECONCILIATION OF NET INCOME (LOSS) TO NET CASH USED IN OPERATING ACTIVITIES Net income (loss) $ (35,596) $ 162,493 ---------- ---------- Adjustments to reconcile net income (loss) to net cash used in operating activities: Loss (gain) on sale of investments in equity securities 6,723 (246,504) Changes in accrued expenses and other liabilities (30,019) (9,738) Changes in accrued management fee (62,500) -- ---------- ---------- Total adjustments (85,796) (256,242) ---------- ---------- Net cash used in operating activities $ (121,392) $ (93,749) ---------- ---------- ---------- ---------- - --------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
4 PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP III (a limited partnership) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (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 present fairly the financial position of PruTech Research and Development Partnership III (the 'Partnership') as of June 30, 1999 and the results of its operations for the six and three months ended June 30, 1999 and 1998 and its cash flows for the six months ended June 30, 1999 and 1998. However, the operating results for the interim periods may not be indicative of the results expected for the full year. 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, 1998. At June 30, 1999, the Partnership has royalty positions with Forest Laboratories, Inc. ('Forest') and Creative BioMolecules, Inc., that will expire in December 1999. The Partnership's royalty position with Creative BioMolecules, Inc. is believed to have no value. At this time, Forest does not believe that Synapton, a drug developed by Forest for the treatment of Alzheimer's disease, will be approved by the Food and Drug Administration (the 'FDA'), if at all, in sufficient time prior to the expiration in December of the Partnership's royalty period in order to generate any royalty payments to the Partnership. The Partnership will continue to monitor this situation. At this time, it appears that R&D Funding Corp (the 'General Partner') will liquidate and distribute any remaining assets and dissolve the Partnership prior to December 31, 1999. B. Royalties At June 30, 1999 and December 31, 1998, the Partnership retains certain royalty rights with Forest and Creative BioMolecules, Inc. whose carrying values for financial reporting purposes are zero. The royalty rights with Forest relate to Synapton. Forest filed a new drug application with the FDA, seeking approval of Synapton, on November 18, 1997. On November 18, 1998, Forest announced that it was evaluating and would be preparing a response to a non-approvable letter received from the FDA on its new drug application for Synapton although it has not yet done so. The Partnership's royalty rights with Forest and Creative BioMolecules, Inc. will expire in December 1999. (Refer to Note A for further discussion.) C. Investments Investments in marketable equity securities available-for-sale include the following:
June 30, 1999 December 31, 1998 ------------------------------------------------------ ----------------------------------------------------- Gross unrealized Carrying Gross unrealized Carrying Shares Cost basis gain value Shares Cost basis gain value - ------------------------------------------------------------------------ ----------------------------------------------------- Creative BioMolecules, Inc.-Common Stock -- $ -- $ -- $ -- 20,000 $ 65,450 $8,310 $ 73,760 ---------- -------- ------------- ---------- ------- ------------ ---------- -------- ------------- ---------- ------- ------------
During the first quarter of 1999, the Partnership sold 5,000 shares of Creative BioMolecules, Inc. common stock for proceeds of approximately $17,000 resulting in a gain of approximately $500. During the second quarter of 1999, the Partnership sold its remaining 15,000 shares of Creative BioMolecules, Inc. common stock for proceeds of approximately $42,000 resulting in a loss of approximately $7,000. 5 The Partnership's net unrealized losses on investments in equity securities of $8,310 for the six months ended June 30, 1999 are comprised as follows: Unrealized holding losses $(15,033) Less: reclassification adjustment for realized loss included in net income (6,723) -------- Net unrealized losses on investments in equity securities $ (8,310) -------- -------- 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. The management fee and printing costs were:
Three months Six months ended ended June 30, June 30, -------------------- ----------------- 1999 1998 1999 1998 ---------------------------------------------------------------- Management fee $31,250 $125,000 $ -- $62,500 Printing 2,852 4,880 680 1,698 ------- -------- ----- ------- $34,102 $129,880 $ 680 $64,198 ------- -------- ----- ------- ------- -------- ----- -------
During the first quarter of 1999, the General Partner reduced its management fee to $31,250 and subsequently waived its management fee related to the second quarter of 1999. Printing costs payable to an affiliate of the General Partner (which are included in accrued expenses and other liabilities) as of June 30, 1999 and December 31, 1998 were $3,445 and $5,025, respectively. Prudential Securities Incorporated ('PSI'), an affiliate of the General Partner, owned 724 units in the Partnership at June 30, 1999. 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 II which was dissolved and liquidated in December 1998 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. 6 PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP III (a limited partnership) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources At June 30, 1999, the Partnership has royalty positions with Forest Laboratories, Inc. ('Forest') and Creative BioMolecules, Inc. ('Creative') that will expire in December 1999. The Partnership's royalty position with Creative is believed to have no value. At this time, Forest does not believe that Synapton, a drug developed by Forest for the treatment of Alzheimer's disease, will be approved by the Food and Drug Administration, if at all, in sufficient time prior to the expiration in December of the Partnership's royalty period in order to generate any royalty payments to the Partnership. The Partnership will continue to monitor this situation. At this time, it appears that the General Partner will liquidate and distribute any remaining assets and dissolve the Partnership prior to December 31, 1999. As of June 30, 1999, the Partnership had approximately $1,095,000 of cash and cash equivalents, which is a decrease of approximately $63,000 as compared to December 31, 1998. The decrease in cash and cash equivalents was primarily due to the payment of management fees and general and administrative expenses, offset by proceeds from the sale of the Partnership's remaining 20,000 shares of Creative common stock for approximately $59,000. The amount to be distributed by the Partnership in future quarters will be affected by the revenue stream from royalties, if any, and interest income. It is not expected that the Partnership's eventual total distributions will equal the Unitholders initial investments. During the first quarter of 1999, the Partnership sold 5,000 shares of Creative common stock for approximately $17,000. Additionally, during the second quarter of 1999, the Partnership sold its remaining 15,000 shares of Creative common stock for approximately $42,000. Results of Operations The Partnership recognized net losses of approximately $36,000 and $700 for the six and three months ended June 30, 1999 as compared to net income recognized of approximately $162,000 and $206,000 for the corresponding periods in 1998. The variances principally relate to gains recognized on the sale of investments in equity securities during 1998. During the six and three months ended June 30, 1999, losses totalling approximately $7,000 were recorded on the sale of Creative common stock as discussed in Liquidity and Capital Resources above. During the six and three months ended June 30, 1998, gains totalling approximately $247,000 were recorded on the sale of 13,310 shares of Kopin Corporation common stock and 17,465 shares of Cell Genesys Corporation common stock. Interest income decreased by approximately $60,000 and $27,000 during the six and three months ended June 30, 1999 as compared to the same periods in 1998. During the 1999 periods, fewer funds were invested in short-term instruments principally as a result of the distribution to Unitholders made in May 1998. During the first quarter of 1999, the General Partner reduced its management fee to $31,250 and subsequently waived its management fee related to the second quarter of 1999. General and administrative expenses decreased by approximately $21,000 and $11,000 for the six and three months ended June 30, 1999 as compared to the same periods in 1998. These decreases reflect lower costs incurred in monitoring the Partnership's remaining investments and in overall Partnership administration. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information regarding quantitative and qualitative disclosures about market risk is not required pursuant to Item 305(e) of Regulation S-K. 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings--There are no material legal proceedings pending by or against the Registrant or the General Partner. 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 III Agreement of Limited Partnership (incorporated by reference to Exhibit 3.1 included with Registrant's Form S-1 Registration Statement, File No. 33-6091, filed on June 3, 1986) First Amendment to the Agreement of Limited Partnership of PruTech Research and Development Partnership III (incorporated by reference to Exhibit 3 included with Registrant's Annual Report on Form 10-K filed March 28, 1992) Financial Data Schedule (filed herewith) (b) Reports on Form 8-K-- No reports on Form 8-K were filed during the quarter. 8 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 III By: R&D Funding Corp A Delaware corporation, General Partner By: /s/ Brian J. Martin Date: August 13, 1999 ---------------------------------------- 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: August 13, 1999 ---------------------------------------- Steven Carlino Vice President and Chief Accounting Officer for the Registrant 9 EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 The Schedule contains summary financial information extracted from the financial statements for PruTech Research and Development Partnership III and is qualified in its entirety by reference to such financial statements 0000794357 PruTech Research and Development Partnership III 1 Dec-31-1999 Jan-1-1999 Jun-30-1999 6-Mos 1,095,266 0 0 0 0 1,095,266 0 0 1,095,266 27,679 0 0 0 0 1,067,587 1,095,266 0 17,763 0 0 53,359 0 0 0 0 0 0 0 0 (35,596) (.78) 0
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