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, 2003
[ ] 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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
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,
2002 2003
_____________ _____________
<s> <c> <c>
Cash $ 51,201 $ 87,513
Investments at fair value,
cost of $16,348,874 at December 31, 2002,
and $16,325,422 at June 30, 2003 12,124,401 18,640,124
____________ ____________
Total Assets $ 12,175,602 $ 18,727,637
============ ============
Liabilities
Liabilities:
Accounts Payable and Accrued Expenses
$ 78,606 $ 128,435
Note Payable (see note 5) 50,000 150,000
____________ ____________
Total liabilities 128,606 278,435
____________ ____________
Net Assets in Liquidation 12,046,996 18,449,201
____________ ____________
$ 12,175,602 $ 18,727,637
============ ============
Net Assets in Liquidation per Unit
of Beneficial Interest $601 $925
============ ============
Number of Units of Beneficial
Interest Outstanding 20,054 19,948
============ ============
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, 2003 Sept. 30, 2003
______________ ______________
<s> <c> <c>
Income -
Interest income $ 110 $ 266
____________ ____________
110 266
____________ ____________
Expenses -
Interest expense 3,031 6,223
General and administrative 12,875 53,560
Trustee Fees 18,000 54,000
____________ ____________
Total Expenses 33,906 113,783
____________ ____________
Net operating loss (33,796) (113,517)
Net unrealized appreciation
on investments 6,213,375 6,572,338
____________ ____________
Net increase in net assets
from operations $ 6,719,579 $ 6,458,821
============ ============
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 ended Nine months ended
Sept. 30, 2003 Sept. 30, 2003
__________ __________
<s> <c> <c>
Change in net assets resulting
from operations:
Net operating loss $ (33,796) $ (113,517)
Change in net unrealized
appreciation or depreciation
of portfolio investments 6,213,375 6,572,338
Change in net unrealized loss
on distribution of investment (20,439) (31,653)
____________ ____________
Net increase in net assets resulting
from operations 6,159,140 6,427,168
Change in net assets resulting from
distribution of investments to
withdrawing beneficiaries (12,725) (24,963)
____________ ____________
Net increase (decrease) in net
assets for the period 6,146,415 6,402,205
Net assets in liquidation at
beginning of period 12,302,786 12,046,996
____________ ____________
Net assets in liquidation at
end of period $ 18,449,201 $ 18,449,201
============ ============
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 ended Nine months ended
Sept. 30, 2003 Sept. 30, 2003
________ ________
<s> <c> <c>
Cash flows from operating activities
Net increase (decrease)
in net assets from operations $ 6,179,579 $ 6,458,821
Adjustments to reconcile net assets
from operations to net cash used in
operating activities:
Net unrealized (appreciation)
depreciation on investments (6,213,375) (6,572,338)
Increase (decrease) in accounts payable
and accrued liabilities 21,687 49,828
Increase in note payable 50,000 100,000
___________ ___________
Net cash used in operating activities 37,892 36,312
___________ ___________
Net increase (decrease) in cash and
cash equivalents 37,892 36,312
Cash and cash equivalents at
beginning of period 49,621 51,201
___________ ___________
Cash and cash equivalents at
end of period $ 87,513 $ 87,513
=========== ===========
Supplemental disclosure of
cash flow information:
Interest paid $ 3,301 $ 6,223
=========== ===========
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, 2003
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").
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.
Pursuant to the Liquidating Trust Agreement, the Trust was to terminate no
later than November 17, 2002. 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").
On November 4, 2002, the Trustee amended the Trust to extend the term for one
year to November 17, 2003. Beneficiaries were given the option to elect out
of the Trust and receive their proportionate interests in the Trust's single
remaining portfolio investment, shares of common stock of Tutogen Medical,
Inc. ("Tutogen"). 120 beneficiaries elected to withdraw prior to the deadline
of December 19, 2002. The Trust distributed 4,230,847 shares of Tutogen
common stock to the withdrawing beneficiaries, of which Centerpulse USA
Holding Co. (formerly known as Sulzer Medica USA Holding Co.) accounted for
3,952,454 shares withdrawing from the Trust.
As of December 31, 2002, the Trustee transferred the remaining cash out of the
partnership into the Trust. As the Partnership has no remaining assets, it
dissolved as of December 31, 2002. All of the Tutogen shares are held in the
Trust.
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 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. Effective January 1, 2003, the Trustee has deferred
his compensation of $6,000 per month and will be paid only if the value of
Tutogen stock has increased by 50% or more above the closing price of $2.65,
based on the market price of Tutogen when the Trust is terminated or the price
realized by the Trust from a sale of Tutogen common stock prior to the
termination of the Trust. Because of the price of Tutogen common stock has
increased by more than 50% above $2.65 price, the Trust's financial statements
now include an accrued amount which will be payable to the Trustee, assuming
that the price realized from the sale of Tutogen or the prevailing price at
the time of termination of the Trust remains above the required level.
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. Notes Payable
On December 19, 2002, the Trust entered into a Loan Agreement with Garvon,
Inc. Profit Sharing Plan ("Garvon"). Garvon is the holder of 9 units of
beneficial interest in the Trust. Garvon agreed to lend the Trust up to
$100,000 in two instalments of $50,000 with collateral up to 500,000 shares of
Tutogen common stock. The loan bears interest at the rate of 10%, payable
quarterly and is due on December 19, 2003. On May 9, 2003, Garvon funded the
Trust the second instalment in the amount of $50,000. The proceeds of the
loan were used to provide working capital for the Trust.
On June 30, 2003, the Trust paid interest accrued on this note to Garvon in
the amount of $1,959.
Subsequent to the end of the second quarter of 2003, the Trust repaid the
principal and interest accrued on this note in the amount of $100,336.
On July 10, 2003, the Trust entered into a Loan Agreement with the James E.
Brandon Family Trust ("Brandon"), which does not own any units of the Trust.
Brandon agreed to lend the Trust $150,000 with collateral of 150,000 shares of
Tutogen common stock. The loan bears interest rate of 8%, payable monthly and
is due on December 31, 2003. The proceeds of this loan were used to repay the
loan from Garvon and provide working capital for the Trust.
For the third quarter 2003, the Trust paid interest accrued on this note to
Brandon in the amount of $2,696.
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 $12,124,401 (100% of
total assets) and $18,640,124 (100% of total assets) as of December 31, 2002,
and September 30, 2003, 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, 2003,
follows:
FAIR
COST VALUE
______ ________
<s> <c> <c>
Tutogen Medical, Inc.
Common Stock $ 16,325,422 $ 18,640,124
____________ ____________
$ 16,325,422 $ 18,640,124
============ ============
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, 2003, total Beneficiaries' interest
increased $6,146,415, due primarily to the increase in the valuation of common
stock of Tutogen Medical, Inc. with a value of $5.10 per share as of September
30, 2003.
The following portfolio transactions are noted for the quarter ended September
30, 2003 (portfolio companies are herein referred to as the "Company"):
TUTOGEN MEDICAL, INC.
As of September 30, 2003, the Trust was the beneficial owner of 3,654,926
shares representing approximately 24.24% of the outstanding shares of Tutogen.
The Trustee serves as Chairman of the Board of Directors of Tutogen and,
during the quarter ended September 30, 2003, he continued to assist Tutogen's
efforts to develop new products and markets and to increase its profitability.
The value of the Trust units will ultimately be determined primarily by the
value of the Trust's interest in Tutogen and, accordingly, the Trustee expects
to participate actively in providing guidance and support to Tutogen's
management.
During the second quarter of 2003, the Trustee was re-appointed Chairman of
the Board of Tutogen during the company's Annual Meeting held in April, 2003,
in New York.
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, 2003, the Trust recorded net gain of
$6,179,579, which was primarily due to an increase in the closing price of
Tutogen's common stock which was $3.40 as of June 30, 2003, and $5.10 on
September 30, 2003. This valuation may fluctuate significantly due to the
limited trading market for Tutogen stock. The Trust receives no income from
the investments.
As described in Note 4 to the Trust's Financial Statements, the increased
market price of Tutogen common stock has resulted in an accrual of the
potential costs of contingent compensation payable to the Trustee.
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) The exhibit is numbered in accordance with the Exhibit Table of Item 601
of Regulation S-K.
Exhibit No. Description
__________ _______________________________
31 Section 302 Certification
32 Section 906 Certification
(b) We filed no reports on Form 8-K for the three months ended September 30,
2003.
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 7, 2003 CAPITAL PARTNERS II, LTD. LIQUIDATING TRUST
(Registrant)
By: ____/s/____________________________
Thomas W. Pauken
Liquidating Trustee
Exhibit 31
SECTION 302 CERTIFICATION
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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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-15(e) and 15d-15(e)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Dated: November 7, 2003 ____/s/___________________________
Thomas W. Pauken
Liquidating Trustee
A signed original of this written statement required by Exchange
Act Rules 13a-15(e) and 15d-15(e) has been provided to Capital Partners II,
Ltd. Liquidating Trust and will be retained by Capital Partners II, Ltd.
Liquidating Trust and furnished to the Securities and Exchange Commission or
its staff upon request.
Exhibit 32
SECTION 906 CERTIFICATION
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. section 1350, that:
(1) the Quarterly Report on Form 10-Q of the Trust for the quarterly period
ended September 30, 2003 (the "Report") fully complies with the requirements
of section 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 7, 2003 ____/s/__________________
Thomas W. Pauken
Liquidating Trustee
A signed original of this written statement required by Section 906
has been provided to Capital Partners II, Ltd. Liquidating Trust and will be
retained by Capital Partners II, Ltd. Liquidating Trust and furnished to the
Securities and Exchange Commission or its staff upon request.