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, 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: 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 628, 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,
2003 2004
___________ ___________
<s> <c> <c>
Cash $ 78,686 $ 37,191
Other current assets 3,038 2,870
Investments at fair value,
cost of $16,094,685 at December 31, 2003,
and $12,480,922 at September 30, 2004 16,348,417 8,745,642
___________ ___________
Total Assets $16,430,141 $ 8,785,703
=========== ===========
Liabilities
Liabilities:
Accounts payable and accrued expenses $ 174,904 $ 120,557
___________ ___________
Total liabilities 174,904 120,557
___________ ___________
Net Assets in Liquidation 16,255,237 8,665,146
___________ ___________
$16,430,141 $ 8,785,703
=========== ===========
Net Assets in Liquidation per Unit
of Beneficial Interest $815 $535
=========== ===========
Number of Units of Beneficial
Interest Outstanding 19,947 16,191
=========== ===========
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, 2004 Sept. 30, 2004
__________ __________
<s> <c> <c>
Income -
Interest income $ 5 $ 211
___________ ___________
5 211
___________ ___________
Expenses -
Interest expense 1,545 4,471
General and administrative 13,108 80,008
Trustee Fees 18,000 54,000
___________ ___________
Total Expenses 32,653 138,479
___________ ___________
Net operating loss (32,648) (138,268)
Net unrealized appreciation (depreciation)
on investments (3,238,213) (4,873,189)
Net realized gain 85,068 85,068
___________ ___________
Net increase (decrease) in net assets
from operations $ (3,185,793) $ (4,926,389)
=========== ===========
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, 2004 Sept. 30, 2004
______________ ______________
<s> <c> <c>
Change in net assets resulting
from operations:
Net operating loss $ (32,648) $ (138,268)
Change in net unrealized appreciation or
depreciation of portfolio investments (3,238,213) (4,873,189)
Change in net unrealized loss on
distribution of investment -0- (1,816,415)
Change in net assets from net realized gain 85,068 85,068
___________ ___________
Net increase in net assets
resulting from operations (3,185,793) (6,742,804)
Change in net assets resulting
from contribution to corpus -0- 425
Change in net assets resulting from
distribution of investments to
withdrawing beneficiaries -0- (847,712)
___________ ___________
Net increase (decrease) in net
assets for the period (3,185,793) (7,590,091)
Net assets in liquidation at
beginning of period 11,850,939 16,255,237
___________ ___________
Net assets in liquidation at
end of period $ 8,665,146 $ 8,665,146
=========== ===========
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, 2004 Sept. 30, 2004
___________ ___________
<s> <c> <c>
Cash flows from operating activities
Net increase (decrease) in net assets
from operation $ (3,185,793) $ (4,926,389)
Adjustments to reconcile net
assets from operations to net cash
used in operating activities:
Net unrealized (appreciation)
depreciation on investments 3,153,145 4,788,121
Increase (decrease) in accounts
payable and accrued liabilities 23,743 (54,347)
Increase in other current assets -0- 168
Increase (decrease) in note payable (150,000) -0-
___________ ___________
Net cash used in operating activities (158,905) (192,447)
Cash flows from financing activities
Contributions to corpus -0- 425
Payments made on note payable 150,527 150,527
___________ ___________
Net increase (decrease) in cash
and cash equivalents (8,378) (41,495)
Cash and cash equivalents at
beginning of period 45,569 78,686
___________ ___________
Cash and cash equivalents at
end of period $ 37,191 $ 37,191
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $1,019 $3,945
=========== ===========
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, 2004
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 was to 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 had 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"). The Trust had an
original term of two years and was to terminate on November 17, 2002.
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 had no remaining assets, it
dissolved as of December 31, 2002. All of the Tutogen shares are held in the
Trust.
In early November of 2003, Tutogen entered into a non-binding letter agreement
with a third-party private equity firm to sell the stock at $6 per share.
Pending the outcome of this transaction the Trust was extended for an
additional year, until November 17, 2004. However, negotiations between
Tutogen and the private equity firm ceased on December 28, 2003.
In early January 2004, beneficiaries were given the opportunity 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. 336
beneficiaries elected to withdraw prior to the deadline of February 26, 2004.
The Trust distributed 649,787 shares of Tutogen common stock to the
withdrawing beneficiaries. 1,380 beneficiaries remained in the Trust, which
continued to hold 2,975,139 shares of Tutogen at March 31, 2004.
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.
The 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. The $6,000 a month payment to the Trustee will cease
once the liquidation of the Trust has been finalized and the Tutogen stock
distributed to the beneficiaries. It is anticipated that this process will be
completed by the end of December 2004. There were and will continue to be,
expenses associated with the keeping of the records of those who withdrew from
the Trust previously and all other beneficiaries who will be receiving their
Tutogen stock as part of this final liquidation. The Trustee's office will
maintain the records of all beneficiaries for tax and other purposes for the
next three years. The Trustee intends to set aside $25,000 to cover such
costs, including administrative staff support, for the next three years
following distribution of the Tutogen stock to the beneficiaries.
The Trustee serves on 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. Note Payable
In April 2004, the Trust entered into a Loan Agreement with Edith M. Brandon
("Brandon"). Brandon does not hold any units of beneficial interest in the
Trust. Brandon agreed to loan the Trust $150,000 with collateral of 150,000
shares of Tutogen common stock. The loan bears an interest at the rate of 8%,
payable monthly and is due on December 31, 2004. The proceeds of this loan
were used to provide working capital for the Trust.
On August 16, 2004, the Trust paid off this loan in full by issuing 50,175
shares of Tutogen Medical, Inc. to Brandon in payment of the outstanding
principal and interest in the amount of $150,526.03. The Trust owned
2,924,964 shares of Tutogen Medical, Inc. as of September 30, 2004.
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 $16,348,417 (100% of
total assets) and $8,745,643 (100% of total assets) as of December 31, 2003,
and September 30, 2004, 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, 2004,
follows:
FAIR
COST VALUE
<s> <c> <c>
Tutogen Medical, Inc.
Common Stock $ 12,480,922 $ 8,745,643
____________ ____________
$ 12,480,922 $ 8,745,643
============ ============
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 Tutogen
conducts its operations, including competition from companies with
substantially greater resources than those of Tutogen; 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 quarter ended September 30, 2004, total Beneficiaries' interest
decreased $3,185,793, due primarily to the decrease in the valuation of common
stock of Tutogen Medical, Inc. with a value of $2.99 per share as of September
30, 2004.
The following portfolio transactions are noted for the quarter ended
September 30, 2004:
TUTOGEN MEDICAL, Inc.
As of September 30, 2004, the Trust was the beneficial owner of 2,924,964
shares representing approximately 18.59% of the outstanding shares of Tutogen.
During the second quarter of 2004, the Trustee was re-elected as a member of
the Board of Directors of Tutogen. During the quarter ended September 30,
2004, he continued to assist in Tutogen's efforts to increase its shareholder
value. 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. Subsequent to the conclusion of the second quarter, Tutogen
announced that Dr. Roy Crowninshield was elected its new Chairman and CEO.
Manfred Krueger remains with the company as President and Chief Operating
Officer.
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, 2004, the Trust recorded net loss of
$3,185,793, which was primarily due to a decrease in the closing price of
Tutogen's common stock which was $4.05 on June 30, 2004 and $2.99 on September
30, 2004. 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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
(a) We filed no reports on Form 8-K for the three months ended
September 30, 2004.
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 12, 2004 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 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 12, 2004 _____/s/______________________
Thomas W. Pauken
Liquidating Trustee
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, 2004 (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 12, 2004 ________________________
Thomas W. Pauken
Liquidating Trustee