10-Q 1 fm10q.txt QUARTERLY REPORT FOR PERIOD ENDED JUNE 30, 2002 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 June 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, June 30, 2001 2002 _______________ ______________ Cash $ 19,641 $ 5,419 Investments at fair value, cost of $35,176,143 at December 31, 2001, and June 30, 2002 24,149,847 29,363,052 _____________ _____________ Total Assets $ 24,169,488 $ 29,368,471 ============= ============= Liabilities Liabilities: Accounts Payable and Accrued Expenses $ 20,436 $ 3,445 Note Payable (see note 5) 800,000 668,504 _____________ _____________ Total liabilities 820,436 671,949 _____________ _____________ Net Assets in Liquidation 23,349,052 28,696,522 _____________ _____________ $ 24,169,488 $ 29,368,471 ============= ============= Net Assets in Liquidation per Unit of Beneficial Interest $540 $663 ============= ============= 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 Six months ended June 30, 2002 June 30, 2002 ____________ ____________ Expenses - Interest expense $ 4,071 $ 8,389 General and administrative 18,738 49,713 Trustee Fees 18,000 36,000 ____________ ____________ Total Expenses 40,809 94,102 ____________ ____________ Net operating loss (40,809) (94,102) ____________ ____________ Net unrealized appreciation (depreciation) on investments (10,062,663) 5,213,205 ____________ ____________ Net increase (decrease) in net assets from operations $(10,103,472) $ 5,119,103 ============ ============

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 Six months ended June 30, 2002 June 30, 2002 ____________ ____________ Change in net assets resulting from operations: Net operating gain (loss) $ (40,809) $ (94,102) Change in net unrealized appreciation or depreciation of portfolio investments (10,062,663) 5,213,205 Change in net assets resulting from contributions to corpus 48,931 228,367 ______________ ______________ Net increase (decrease) in net assets for the period (10,054,541) 5,347,470 Net assets in liquidation at beginning of period 38,751,063 23,349,052 ______________ ______________ Net assets in liquidation at end of period $ 28,696,522 $ 28,696,522 ============== ==============

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 Six months ended June 30, 2002 June 30, 2002 ______________ _____________ Cash flows from operating activities Net increase (decrease) in net assets from operations $ (10,103,472) $ 5,119,103 Adjustments to reconcile net assets from operations to net cash used in operating activities: Net unrealized (appreciation) depreciation on investments 10,062,663 (5,213,205) Increase (decrease) in accounts payable and accrued liabilities 7,030 (2,644) Decrease (increase) in other assets 6,459 -0- ______________ _____________ Net cash used in operating activities (27,320) (96,746) Cash flows from financing activities Contributions to corpus 32,621 82,524 ______________ _____________ Net cash provided from financing activities 32,621 82,524 ______________ _____________ Net increase (decrease) in cash and cash equivalents 5,301 (14,222) Cash and cash equivalents at beginning of period 118 19,641 ______________ _____________ Cash and cash equivalents at end of period $ 5,419 $ 5,419 ============== ============= Supplemental disclosure of noncash transactions: Note payable and accrued interest contributed to corpus $ 16,311 $ 145,843 ============== =============

See accompanying notes to financial statements. CAPITAL PARTNERS II, LTD. LIQUIDATING TRUST (Successor to Renaissance Capital Partners II, Ltd.) Notes to Financial Statements June 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 June 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 130,000 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 second quarter of 2002, Sulzer reimbursed the Trust $16,311 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 June 30, 2002, the remaining principal outstanding under this loan after giving effect for the 2002 contributions offsets was $668,504. 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 $29,363,052 (100% of total assets) as of December 31, 2001, and June 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 June 30, 2002, follows: FAIR COST VALUE ____________ ____________ Tutogen Medical, Inc. Common Stock $ 35,176,143 $ 29,327,209 GDI Global Data, Inc. Common Stock -0- 35,843 ____________ ____________ $ 35,176,143 $ 29,363,052 ============ ============ 7. Transactions with Renaissance Capital Partners II, Ltd. The Partnership paid operating expenses of $32,621 on behalf of the Trust for the three months ended June 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 June 30, 2002, and as of June 30, 2002, follows: Condensed Statement of Operations Income $ 1,672 ________ 1,672 ________ Expenses 339 ________ 339 ________ Net loss $ 1,333 ======== Condensed Statement of Assets and Liabilities Cash and cash equivalents $ 388,219 _________ 388,219 _________ Accounts payable and accrued expenses 20,385 _________ 20,385 _________ Partners' equity $ 367,834 =========

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 second quarter ended June 30, 2002, total Beneficiaries' interest decreased $10,054,541, due primarily to the decrease in the valuation of common stock of Tutogen Medical, Inc. from $4.98 per share on March 31, 2002, to $3.71 per share as of June 30, 2002. The following portfolio transactions are noted for the quarter ended June 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 June 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 June 30, 2002, the closing price of the GDI stock was $0.231 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 June 30, 2002, the Trust recorded net loss of $10,103,472, which was primarily due to a decrease in the closing price of Tutogen's common stock which was $4.98 on March 31, 2002, and $3.71 on June 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. 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 exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K. EXHIBIT NUMBER DESCRIPTION ---------------- -------------- 99.1 Certification of Periodic Report (b) We filed no reports on Form 8-K for the three months ended June 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: August 9, 2002 CAPITAL PARTNERS II, LTD. LIQUIDATING TRUST (Registrant) By: _____/s/____________ Thomas W. Pauken Liquidating Trustee EXHIBIT 99.1 ------------ 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. section 1350, that: (1) the Quarterly Report on Form 10-Q of the Trust for the quarterly period ended June 30, 2002 (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: August 9, 2002 ______/s/__________ Thomas W. Pauken Liquidating Trustee

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