UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934:
For quarterly period ended September 30, 2002
[ ] 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: 038593
CAPITAL PARTNERS II, LTD. LIQUIDATING TRUST
(Successor in interest to Renaissance Capital Partners II, Ltd.)
_____________________________________________________________________________
(Exact name of registrant as specified in its charter)
Texas 75-6590369
_____________________________________________________________________________
(State or other jurisdiction (IRS Employer ID No.)
of incorporation or organization)
5646 Milton Street, Suite 900, Dallas TX 75206
_____________________________________________________________________________
(Address of principal executive offices) (Zip code)
(214) 378-9340
______________________________________________________________________________
(Registrant's telephone number, including area code)
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 [ ]
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CAPITAL PARTNERS II, LTD. LIQUIDATING TRUST
(Successor to Renaissance Capital Partners II, Ltd.)
STATEMENTS OF ASSETS AND LIABILITIES
(Unaudited)
Assets
December 31, September 30,
2001 2002
___________ ___________
<s> <c> <c>
Cash $ 19,641 $ 5,398
Investments at fair value,
cost of $35,176,143 at December 31, 2001,
and September 30, 2002 24,149,847 21,835,235
___________ ___________
Total Assets $ 24,169,488 $ 21,840,633
=========== ===========
Liabilities
Liabilities:
Accounts Payable and Accrued Expenses $ 20,436 $ 4,086
Note Payable (see note 5) 800,000 653,018
___________ ___________
Total liabilities 820,436 657,104
___________ ___________
Net Assets in Liquidation 23,349,052 21,183,529
___________ ___________
$ 24,169,488 $ 21,840,633
=========== ===========
Net Assets in Liquidation per Unit
of Beneficial Interest $540 $490
==== ====
Number of Units of Beneficial
Interest Outstanding 43,254.01 43,254.01
========= =========
See accompanying notes to financial statements.
CAPITAL PARTNERS II, LTD. LIQUIDATING TRUST
(Successor to Renaissance Capital Partners II, Ltd.)
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
Sept. 30, 2002 Sept. 30, 2002
___________ ___________
<s> <c> <c>
Expenses -
Interest expense $ 4,042 $ 12,431
General and administrative 21,719 71,432
Trustee Fees 18,000 54,000
___________ ___________
Total Expenses 43,761 137,863
___________ ___________
Net operating loss (43,761) (137,863)
___________ ___________
Net unrealized appreciation
(depreciation) on investments (7,527,817) (2,314,612)
___________ ___________
Net increase (decrease)
in net assets
from operations $(7,571,578) $ 2,452,475
=========== ===========
See accompanying notes to financial statements.
CAPITAL PARTNERS II, LTD. LIQUIDATING TRUST
(Successor to Renaissance Capital Partners II, Ltd.)
STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(Unaudited)
Three months Nine months
ended ended
Sept. 30, 2002 Sept. 30, 2002
___________ ___________
<s> <c> <c>
Change in net assets resulting
from operations:
Net operating gain (loss) $ (43,761) $ (137,863)
Change in net unrealized appreciation or
depreciation of portfolio investments (7,527,817) (2,314,612)
Change in net assets resulting from
contributions to corpus 58,585 286,952
___________ ___________
Net increase (decrease) in net assets
for the period (7,512,993) (2,165,523)
Net assets in liquidation at
beginning of period 28,696,522 23,349,052
___________ ___________
Net assets in liquidation at
end of period $ 21,183,529 $ 21,183,529
=========== ===========
See accompanying notes to financial statements.
CAPITAL PARTNERS II, LTD. LIQUIDATING TRUST
(Successor to Renaissance Capital Partners II, Ltd.)
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months Nine months
ended ended
Sept. 30, 2002 Sept. 30, 2002
____________ ____________
<s> <c> <c>
Cash flows from operating activities
Net increase (decrease)
in net assets from operations $ (7,571,578) $ (2,452,475)
Adjustments to reconcile net assets
from operations to net cash used
in operating activities:
Net unrealized (appreciation)
depreciation on investments 7,527,817 2,314,612
Increase (decrease) in accounts
payable and accrued liabilities 4,684 2,040
____________ ____________
Net cash used in operating activities (39,077) (135,823)
Cash flows from financing activities
Contributions to corpus 39,056 121,580
____________ ____________
Net cash provided from
financing activities 39,056 121,580
____________ ____________
Net increase (decrease) in
cash and cash equivalents (21) (14,243)
Cash and cash equivalents at
beginning of period 5,419 19,641
____________ ____________
Cash and cash equivalents at
end of period $ 5,398 $ 5,398
============ ============
Supplemental disclosure of noncash
transactions:
Note payable and accrued interest
contributed to corpus $ 19,528 $ 165,371
============ ============
See accompanying notes to financial statements.
CAPITAL PARTNERS II, LTD. LIQUIDATING TRUST
(Successor to Renaissance Capital Partners II, Ltd.)
Notes to Financial Statements
September 30, 2002
1. Organization and Purpose
Capital Partners II, Ltd. Liquidating Trust (the "Trust"), a liquidating trust
established under the laws of the State of Texas on November 17, 2000, is the
successor entity to Renaissance Capital Partners II, Ltd. (the "Partnership").
Pursuant to the Liquidating Trust Agreement, the Trust will terminate no later
than November 17, 2002. The Partnership, which was a Texas limited partnership
formed in 1991, was organized as a diversified, closed-end management
investment partnership and operated as a business development company under
the Investment Act of 1940. The Partnership's investment objective was to
achieve current income and capital appreciation potential by investing
primarily in private placement convertible debt investments of small and
medium size companies which the Managing General Partner believed offered the
opportunity for growth. On October 1, 1998, the Managing General Partner and
the Independent General Partners agreed to commence liquidation of the
Partnership. The Managing General Partner withdrew from the Partnership and
the Partnership appointed an independent general partner as Liquidation
Trustee (the "Trustee"). The Trustee, pursuant to a Liquidation Trustee
Agreement, assumed all responsibilities and has the authority of the Managing
General Partner.
On November 17, 2000, the limited partners of the Partnership authorized the
Trustee to transfer the investment assets of the Partnership to the Trust.
Upon formation of the Trust and transfer of investment assets to the Trust,
holders of the 43,254 limited partnership units of the Partnership,
outstanding on November 17, 2000, were deemed to become holders of 43,254
units of beneficial interest in the Trust ("Units").
2. Significant Accounting Policies
(a) Valuation of Investments
Portfolio investments are carried at fair value as determined quarterly by the
Trustee. The fair value of each publicly-held portfolio security is adjusted
to the closing public market price on the last day of the calendar quarter.
Most securities held by the Trust are thinly traded and their value as of a
particular date does not necessarily represent the amounts that may be
realized from their immediate sale or disposition.
(b) Federal Income Taxes
The Trust is a pass-through entity for federal income tax purposes and,
accordingly, is not subject to income tax. Instead, each beneficiary of the
Trust is required to take into account, in accordance with such beneficiary's
method of accounting, such beneficiary's pro rata share of the Trust's income,
gain, loss, deduction or expense, regardless of the amount or timing of
distributions to beneficiaries.
(c) Management 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 at 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.
3. Basis of Presentation
The accompanying financial statements have been prepared without audit, in
accordance with the rules and regulations of the Securities and Exchange
Commission and include all disclosures normally required by accounting
principles generally accepted in the United States of America, but do not
include all disclosures normally made in annual reports on Form 10-K. All
material adjustments, consisting only of those of a normal recurring nature,
which, in the opinion of management, were necessary for a fair presentation of
the results for the interim period have been made.
4. Trustee and Management Fees
In 1998, the Partnership entered into an agreement with the Trustee, whereby
the Trustee provided management services to the Partnership in connection with
its liquidation and has continued to provide such services to the Trust during
its liquidation. For services rendered under the agreement, the Trustee
receives $6,000 per month plus up to $4,000 per month for reimbursement of
administrative personnel. Fees paid to the Trustee during the three months
ended September 30, 2002, was $18,000.
The Trustee serves as Chairman of the Board of Tutogen Medical, Inc., a
portfolio investment of the Trust, and the Trustee is the beneficial owner of
178,040 shares of common stock of Tutogen Medical, Inc. with stock options to
purchase an additional 140,000 shares of common stock.
5. Tender Offer and Note Payable
Sulzer Medica USA Holding Co. (the "Sulzer") entered into a tender offer
agreement (the "Tender Offer") on November 17, 2000, with the Trust to
purchase up to 21,627 units at a price of $1,387 per trust unit. Upon final
closing of the tender offer on December 26, 2000, Sulzer acquired 21,627 trust
units (representing 50% of the trust units outstanding at December 31, 2000)
from the beneficial owners.
The Trust purchased 700,000 shares of common stock of Tutogen Medical, Inc.
for $950,000 through the exercise of warrants on December 20, 2000. The
purchase of common stock was funded through a loan agreement (the "loan") with
Sulzer. The loan is due on November 17, 2002, with accrued interest at the
rate of one-year LIBOR as reported in the Wall Street Journal on the date of
the funding (2.3988% at December 20, 2001) and thereafter on the anniversary
date of funding. The loan is secured by 700,000 shares of common stock of
Tutogen Medical, Inc.
During the third quarter of 2002, Sulzer reimbursed the Trust $19,528 to cover
50% of all administrative expenses and trustee fees incurred by the Trust
since its inception. In lieu of a cash payment, the reimbursement was offset
against the principal and interest accrued on the loan to Sulzer and recorded
as a contribution to corpus in the accompanying financial statements.
As of September 30, 2002, the remaining principal outstanding under this loan
after giving effect for the 2002 contributions offsets was $653,018.
6. Investments
Investments of the Trust are carried in the statements of assets, liabilities
and partners' equity at quoted market or fair value, as determined in good
faith by the Liquidation Trustee.
For securities that are publicly traded and for which quotations are
available, the Trust will value the investments based on the closing sale as
of the last day of the fiscal quarter, or in the event of an interim
valuation, as of the date of the valuation. If no sale is reported on such
date, the securities will be valued at the average of the closing bid and
asked prices.
The financial statements include investments valued at $24,149,847 (100% of
total assets) and $21,835,235 (100% of total assets) as of December 31,
2001, and September 30, 2002, respectively, whose values have been estimated
by the Liquidation Trustee. Because of the limited trading market, the
estimate values may differ significantly from the values that would have been
used had a ready market for the investments existed and the difference could
be material. Summarized valuation of investments as of September 30, 2002,
follows:
FAIR
COST VALUE
<s> <c> <c>
Tutogen Medical, Inc.
Common Stock $ 35,176,143 $ 21,817,546
GDI Global Data, Inc.
Common Stock -0- 17,689
____________ ____________
$ 35,176,143 $ 21,835,235
============ ============
7. Transactions with Renaissance Capital Partners II, Ltd.
The Partnership paid operating expenses of $39,056 on behalf of the Trust for
the three months ended September 30, 2002. These cash payments have been
recorded as a contribution to corpus in the accompanying financial statements.
Summarized financial information for the Partnership for the three months
ended September 30, 2002, and as of September 30, 2002, follows:
Condensed Statement of Operations
Income $ 1,408
________
1,408
________
Expenses 195
________
195
________
Net loss $ 1,213
========
Condensed Statement of Assets and Liabilities
Cash and cash
equivalents $ 350,376
_________
350,376
_________
Accounts payable and
accrued expenses 20,385
_________
20,385
_________
Partners'
equity $ 329,991
=========
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion set forth herein contains certain forward looking statements
with respect to the financial condition, results of operations and business of
the Trust. These forward looking statements are subject to certain risks and
uncertainties, not all of which can be predicted or anticipated. Factors that
may cause actual results to differ materially from those contemplated by the
forward looking statements herein include, but are not limited to, changes in
economic conditions; competitive conditions in the markets in which portfolio
companies conduct their operations, including competition from companies with
substantially greater resources than those of the portfolio companies; and the
results of litigation, which cannot be predicted with certainty. Readers of
this Discussion should not place undue reliance on forward looking statements.
1. Material Changes in Financial Condition
For the third quarter ended September 30, 2002, total Beneficiaries' interest
decreased $7,512,993, due primarily to the decrease in the valuation of common
stock of Tutogen Medical, Inc. from $3.71 per share on June 30, 2002, to $2.76
per share as of September 30, 2002.
The following portfolio transactions are noted for the quarter ended September
30, 2002 (portfolio companies are herein referred to as the "Company"):
Tutogen Medical, Inc.
At the close of business on November 17, 2000, the Partnership transferred all
of its interest in Tutogen consisting of 7,202,408 shares of common stock and
700,000 shares of common stock purchase warrants, to the Trust. The
Partnership also exercised common stock options plan to purchase 2,500 shares,
at an exercise price of $2.22. Upon issue these shares of common stock were
transferred to the Trust.
The Trust exercised common stock purchase warrants to purchase 400,000 and
300,000 shares, at an exercise price of $1.25 and $1.50 per share,
respectively, on December 20, 2000. The Trust borrowed the funds required to
exercise the warrants ($950,000) from Sulzer Medica USA Holding Co. As of
September 30, 2002, the Trust was the beneficial owner of 7,904,908 shares
representing approximately 52.26% of the outstanding shares of Tutogen.
The Trustee serves as Chairman of the Board of Directors of Tutogen. The
value of the Trust units ultimately will be determined primarily by the value
of the Trust's interest in Tutogen and, accordingly, the Trustee continues to
participate actively in efforts to improve the shareholder value of Tutogen.
During the second quarter of 2002, the Trustee was re-elected Chairman of the
Board of Tutogen during the company's Annual Meeting held in April, 2002, in
New York.
GDI Global Data, Inc.
At the close of business on November 17, 2000, the Partnership transferred all
of its interest in GDI consisting of 155,166 shares of common stock to the
Trust. On September 30, 2002, the closing price of the GDI stock was $0.114
per share.
2. Material Changes in Operations
The Trust currently is under liquidation and not actively considering
additional Portfolio Investments. Therefore, no significant further amount of
income from closing fees and commitment fees is anticipated.
For the quarter ended September 30, 2002, the Trust recorded net loss of
$7,571,578, which was primarily due to a decrease in the closing price of
Tutogen's common stock which was $3.71 on June 30, 2002, and $2.76 on
September 30, 2002. The price of Tutogen as of December 31, 2001, was $3.05
per share. This valuation may fluctuate significantly due to the limited
trading market for Tutogen stock. The Trust receives no income from the
investments.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Trust was formed solely for the purpose of conducting the orderly
liquidation of the assets of the Partnership and does not invest in or hold
instruments to which this Item is applicable.
ITEM 4: CONTROLS AND PROCEDURES
The Trustee, who performs the functions of the Trust's chief
executive officer and chief financial officer, has within the preceding
90 days evaluated the effectiveness of the Trust's "disclosure controls
and procedures" (as defined in rules 13a-14(c) and 15d-14(c) under the
Securities and Exchange Act of 1934). Based upon that evaluation, the
Trustee concluded that the Trust's disclosure controls and procedures
were effective as of the date of the evaluation. There have been no
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of the
evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None other than what has been previously disclosed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None.
(b) We filed no reports on Form 8-K for the three months
ended September 30, 2002.
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Registrant had duly caused this report to be signed on its
behalf by the undersigned, there unto duly authorized.
Date: November 4, 2002 CAPITAL PARTNERS II, LTD. LIQUIDATING TRUST
(Registrant)
By: ___/s/____________________
Thomas W. Pauken
Liquidating Trustee
CERTIFICATION REQUIRED BY RULES 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Thomas W. Pauken, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Capital Partners II,
Ltd. Liquidating Trust;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: November 4, 2002 _______/s/______________
Thomas W. Pauken
Liquidating Trustee
CERTIFICATION OF PERIODIC REPORT
I, Thomas W. Pauken, Liquidating Trustee of Capital Partners II, Ltd.
Liquidating Trust (the "Trust"), certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Sec. 1350, that:
(1) the Quarterly Report on Form 10-Q of the Trust for the quarterly period
ended September 30, 2002 (the "Report") fully complies with the requirements
of Sec. 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Trust.
Dated: November 4, 2002 _____/s/__________________
Thomas W. Pauken
Liquidating Trustee