EXCELSIOR VENTURE PARTNERS III LLC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 July 31, 2004

¨	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 000-29665

EXCELSIOR VENTURE PARTNERS III, LLC

(Exact Name of Registrant as Specified in Its Charter)


DELAWARE		13-4102528
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

225 High Ridge Road, Stamford, CT		06905
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code (203) 352-4400

114 West 47th Street, New York, NY 10036-1532

Former Name, Former Address and Former Fiscal Year, if Changed Since last Report.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Act). Yes ¨ No x

EXCELSIOR VENTURE PARTNERS III, LLC

The filing of the Registrant’s report is delayed pending clarification of information recently received by the Registrant from its independent accountants. This information relates to the status of such accountants as “independent” within the meaning of Rule S-X of the Securities and Exchange Commission. Registrant is informed that such accountants are seeking guidance from the accounting staff of the Commission on this issue. Consequently, the Registrant cannot determine that the requirements of Rule S-X applicable to financial statements included in this Report, and possibly certain prior reports, that such statements be reviewed by independent public accountants have been met.

This Quarterly Report on Form 10-Q contains historical information and forward-looking statements. Statements looking forward in time are included in this Form 10-Q pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. They involve known and unknown risks and uncertainties that may cause Excelsior Venture Partners III, LLC’s (the “Company’s”) actual results to differ from future performance suggested herein.


	INDEX	PAGE NO.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Summarized Portfolios of Investments	1

	Portfolios of Investments as of July 31, 2004 and October 31, 2003	2

	Statements of Assets and Liabilities at July 31, 2004 and October 31, 2003	7

	Statements of Operations for the nine-month periods ended July 31, 2004 and July 31, 2003	8

	Statements of Operations for the three-month periods ended July 31, 2004 and July 31, 2003	9

	Statements of Changes in Net Assets for the nine-month periods ended July 31, 2004 and July 31, 2003	10

	Statements of Cash Flows for the nine-month periods ended July 31, 2004 and July 31, 2003	11

	Financial Highlights for the nine-month periods ended July 31, 2004 and July 31, 2003	12

	Notes to Financial Statements	13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21

Item 4.	Controls and Procedures	21

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	21

Item 2.	Changes in Securities and Use of Proceeds	21

Item 3.	Defaults Upon Senior Securities	22

Item 4.	Submission of Matters to a Vote of Security Holders	22

Item 5.	Other Information	22

Item 6.	Exhibits and Reports on Form 8-K	22

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements.

Excelsior Venture Partners III, LLC

Summarized Portfolio of Investments (Unaudited)


	July 31, 2004
PORTFOLIO STRUCTURE	Value			Percent of Net Assets
SHORT-TERM INVESTMENTS:
AGENCY OBLIGATIONS	$	37,553,636		30.57	%
INVESTMENT COMPANIES		3,673,855		2.99	%
PRIVATE AND PUBLIC COMPANIES		77,634,663		63.20	%
PRIVATE INVESTMENT FUNDS		4,729,221		3.85	%

TOTAL INVESTMENTS		123,591,375		100.62	%
OTHER ASSETS & LIABILITIES (NET)		(756,231	)	(0.62	)%

NET ASSETS	$	122,835,144		100.00	%

Excelsior Venture Partners III, LLC

Summarized Portfolio of Investments


	October 31, 2003
PORTFOLIO STRUCTURE	Value		Percent of Net Assets
SHORT-TERM INVESTMENTS:
AGENCY OBLIGATIONS	$	52,994,406	43.27	%
INVESTMENT COMPANIES		519,599	0.42	%
PRIVATE COMPANIES		62,905,542	51.37	%
PRIVATE INVESTMENT FUNDS		3,080,766	2.52	%

TOTAL INVESTMENTS		119,500,313	97.58	%
OTHER ASSETS & LIABILITIES (NET)		2,957,540	2.42	%

NET ASSETS	$	122,457,853	100.00	%

Notes to Financial Statements are an integral part of these Financial Statements.

Excelsior Venture Partners III, LLC

Portfolio of Investments July 31, 2004 (Unaudited)


Principal Amount/Shares			Acquisition Date ##	Value (Note 1)
	AGENCY OBLIGATIONS — 30.57%
$	37,560,000	Federal National Mortgage Association, 1.22%, 08/05/04 (Cost $37,553,636)		$	37,553,636

	PUBLIC COMPANIES , # — 3.69%**
	Common Stocks — 3.69%
	Consumer Products — 1.47%

	428,572	Senomyx, Inc. *	06/04		1,812,003

	Semiconductor — 2.22%
	384,615	Netlogic Microsystems, Inc. *	07/04		2,721,922

		TOTAL PUBLIC COMPANIES (Cost $6,500,000)			4,533,925

	PRIVATE COMPANIES , #, @ — 59.51%**
	Common Stocks — 0.00%
	Capital Equipment — 0.00%
	157,396	MIDAS Vision Systems, Inc.	03/03		—

	Life Sciences — 0.00%
	46,860	Genoptix, Inc.	07/03		—

	Semiconductor — 0.00%
	708,955	Monterey Design Systems, Inc.	06/03		—

		TOTAL COMMON STOCKS (Cost $8,749,999)			—

	Preferred Stocks — 56.66%
	Capital Equipment — 0.00%
	933,593	MIDAS Vision Systems, Inc., Series A-1	03/03		—

	Consumer Electronics — 3.73%
	1,523,810	Gyration, Inc., Series C-2	03/03 & 07/04		4,584,054

	Enterprise Software — 9.29%
	19,995,000	***Datanautics, Inc. Series A Preferred	01/04		4,000,000
	7,454,720	LogicLibrary, Inc., Series A	01/02, 08/03, 05/04		3,408,450
	20,000,000	***Pilot Software Inc., Series A	05/02 & 04/03		4,000,000

					11,408,450

	Information Services — 0.00%
	4,425	Cenquest, Inc., Series 2	7/01		—

	Life Sciences — 6.30%
	647,948	Adeza Biomedical Corporation, Series 5	09/01		3,000,000
	1,999,999	Archemix Corporation, Inc., Series A	08/02, 01/03, 11/03		1,999,999
	233,333	Archemix Corporation, Inc., Series B	03/04		233,333
	942,481	Genoptix, Inc., Series B-1	12/01		1,253,500
	1,403,696	Genoptix, Inc., Series B-2	07/03, 09/03, 12/03		1,250,000

					7,736,832

	Medical Technology — 5.23%
	4,166,667	Tensys Medical, Inc., Series C	03/02		5,000,000
	1,187,500	Tensys Medical Inc., Series D	05/04		1,425,000

					6,425,000
	Optical — 11.52%
	4,330,504	LightConnect, Inc., Series B	07/01		5,000,000
	12,292,441	LightConnect, Inc., Series C	12/02		992,000
	956,234	NanoOpto Corporation, Series A-1	10/01 & 03/02		—
	3,023,399	NanoOpto Corporation, Series B	09/03, 11/03, 01/04, 07/04		1,655,118
	5,333,333	OpVista, Inc., Series B	07/01		1,500,000
	12,671,059	OpVista, Inc., Series C	09/03		5,000,000

					14,147,118
	Semiconductor — 15.18%
	7,000,000	Chips & Systems, Inc., Series A	03/04		3,500,000
	3,333,333	Monterey Design Systems, Inc., Series 2	06/03		5,400,000

	2,211,898	Silverback Systems, Inc., Series B-1	02/02		450,051
	34,364,257	Silverback Systems, Inc., Series C	03/03, 09/03, 04/04		4,298,896
	3,096,551	Virtual Silicon Technology, Inc., Series C	12/01		5,000,000

					18,648,947

Excelsior Venture Partners III, LLC

Portfolio of Investments July 31, 2004 (Unaudited) — (continued)


Principal Amount/Shares/ Percent Owned			Acquisition Date ##	Value (Note 1)
	PRIVATE COMPANIES **,#,@ (continued)
	Wireless — 5.41%
	4,433,333	Ethertronics, Inc., Series B	06/01, 09/02, 07/03, 05/04	$	6,650,000

		TOTAL PREFERRED STOCKS (Cost $72,790,187)			69,600,401

	Notes — 2.28%
	Consumer Electronics — 2.82%
$	2,797,200	Gyration, Inc., Bridge Note 12%, 6/2/2004	12/03		3,466,994

		TOTAL NOTES (Cost $2,797,200)			3,466,994

	Warrants — 0.03%
	Consumer Electronics — 0.03%
	1	Gyration, Inc.	12/03		33,343

	Wireless — 0.00%
	100,000	Ethertronics, Inc.	09/02		—
	115,000	Ethertronics, Inc.	07/03		—
	66,667	Ethertronics, Inc.	08/03		—

					—
		TOTAL WARRANTS (Cost $2,800)			33,343

		TOTAL — PRIVATE COMPANIES (Cost $84,340,186)			73,100,738

	PRIVATE INVESTMENT FUNDS , # — 3.85%**
	0.39%	Advanced Technology Ventures VII, LP	08/01-04/04		684,183
	1.38%	Burrill Life Sciences Capital Fund	12/02-03/04		532,762
	1.35%	CHL Medical Partners II, LP	01/02-02/04		509,860
	4.94%	CMEA Ventures Partners, LP	12/03-04/04		104,573
	0.36%	Morgenthaler Partners VII, LP	07/01-07/04		1,150,473
	0.59%	Prospect Venture Partners II, LP	06/01-07/04		1,105,337
	2.36%	Tallwood II, LP	12/02-06/04		455,128
	1.75%	Valhalla Partners II, LP	10/03-03/04		186,905

		TOTAL — PRIVATE INVESTMENT FUNDS (Cost $5,787,433)			4,729,221

	INVESTMENT COMPANIES — 2.99%
	3,673,855	Dreyfus Government Cash Management Fund Institutional Shares (Cost $3,673,855)			3,673,855

	TOTAL INVESTMENTS (Cost $137,855,110) – 100.62%				123,591,375
	OTHER ASSETS & LIABILITIES (NET) – (0.62)%				(756,231	)

	NET ASSETS—100.00%			$	122,835,144

*	Carrying value per unit reflects a 30% discount to the closing price.

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