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, 1999
[ ] 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
RENAISSANCE CAPITAL PARTNERS II, LTD.
(Exact name of registrant as specified in its charter)
Texas 75-2407159
(State or other jurisdiction (IRS Employer ID No.)
of incorporation or organization)
5646 Milton Street, Suite 900, Dallas, Texas 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 [ ]
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
RENAISSANCE CAPITAL PARTNERS II, LTD.
STATEMENTS OF ASSETS, LIABILITIES,
AND PARTNERS' EQUITY
(Unaudited)
Assets
<TABLE>
December 31, September 30,
1998 1999
_________ _________
<S> <C> <C>
Cash and cash equivalents $ 1,239,015 $ 1,116,478
Investments at fair value,
cost of $21,607,598 and $8,084,372 at
December 31, 1998 and September 30, 1999,
Respectively 6,568,982 5,970,680
Interest receivable 103,022 4,512
Other Assets 6,396 43,021
_________ _________
Total Assets $ 7,917,415 $ 7,134,691
========= =========
Liabilities and Partners' Equity
Liabilities:
Accounts payable $ 41,587 $ 22,880
Accounts payable - related parties 37,596 -0-
Accrued Expenses -0- 50,000
_________ _________
Total liabilities 79,183 72,880
_________ _________
Partners' equity:
General Partner -0- -0-
Limited Partners (43,254.01 units at
December 31, 1998 and 43,254.01 units
at September 30, 1999) 7,838,232 7,061,811
_________ _________
Total partners' equity 7,838,232 7,061,811
_________ _________
$ 7,917,415 $ 7,134,691
========= =========
Limited partners' equity per limited
partnership unit $181 $163
==== ====
</TABLE>
[FN]
See accompanying notes to financial statements.
</FN>
<PAGE>
RENAISSANCE CAPITAL PARTNERS II, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1998 1999 1998 1999
________ ________ ________ ________
<S> <C> <C> <C> <C>
Income:
Interest $ 113,291 $ 17,028 $ 314,460 $ 249,721
Dividends -0- 7,890 6,732 24,321
Other Income -0- 23,940 -0- 66,552
_________ _________ _________ _________
Total Income 113,291 48,858 321,192 340,594
_________ _________ _________ _________
Expenses:
Operating expenses 47,529 40,711 210,440 214,725
Management fees 54,781 18,000 251,199 54,000
_________ _________ _________ _________
Total expenses 102,310 58,771 461,639 268,725
_________ _________ _________ _________
Net income (loss)
from operations 10,981 (9,913) (140,447) 71,869
Net realized and
unrealized gain (loss)
on investments (5,321,510) (2,513,416) (3,418,540) (848,290)
_________ _________ _________ _________
Net
income (loss) $(5,310,529) $(2,523,329) $(3,558,987) $(776,421)
========= ========= ========= =========
Net income (loss)
per limited
partnership unit $(122.78) $(58.34) $(82.22) $(17.95)
======== ====== ====== ======
Weighted average
limited
partnership units 43,254.01 43,254.01 43,284.57 43,254.01
========= ========= ========= =========
</TABLE>
[FN]
See accompanying notes to financial statements.
</FN>
<PAGE>
RENAISSANCE CAPITAL PARTNERS II, LTD.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
Six Months Ended September 30, 1999
(Unaudited)
<TABLE>
General Limited
Partner Partners Total
_________ _________ _________
<S> <C> <C> <C>
Balance at December 31, 1998 -0- $ 7,838,232 $ 7,838,232
Net income (loss) -0- (776,421) (776,421)
_________ _________ _________
Balance at September 30, 1999 -0- $ 7,061,811 $ 7,061,811
========= ========= =========
</TABLE>
[FN]
See accompanying notes to financial statements.
</FN>
<PAGE>
RENAISSANCE CAPITAL PARTNERS II, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Nine Months Ended Sept. 30,
1998 1999
___________ ___________
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(3,558,987) $(776,421)
Adjustments to reconcile net income
to net cash flows from operating activities:
Net realized and unrealized (gain)
loss on investments 3,418,540 848,290
Decrease (Increase) in accounts receivable (177,107) 98,511
Increase (Decrease) in accounts payable (63,293) (56,303)
Increase (Decrease) in Accrued Expenses -0- 50,000
___________ ___________
Net cash provided by (used in)
operating activities (380,847) 164,077
___________ ___________
Cash flows from investing activities:
Repayment of principal on investments -0- 324,693
Purchase of investments (1,161,538) (574,681)
Proceeds from sale of investments 1,062,902 -0-
Decrease (Increase) in other assets -0- (36,626)
___________ ___________
Net cash provided by (used in)
investing activities (98,636) (286,614)
___________ ___________
Cash flows from financing activities:
Limited partner withdrawal (26,443) -0-
___________ ___________
Net cash from financing activities (26,443) -0-
___________ ___________
Net increase (decrease) in cash (505,926) (122,537)
Cash and cash equivalents at the beginning
of the period 755,755 1,239,015
___________ ___________
Cash and cash equivalents at the end of
the period $ 249,829 $ 1,116,478
=========== ===========
</TABLE>
Noncash investing transactions:
During 1999, $274,376 of interest receivable was capitalized to
investment in common stock.
In the first quarter of 1999, the Partnership exercised its right to
convert a debenture in the principal amount of $2,074,081 to 4,600,507 shares
of common stock of Tutogen Medical, Inc.
[FN]
See accompanying notes to financial statements.
</FN>
<PAGE>
RENAISSANCE CAPITAL PARTNERS II, LTD.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
1. Organization and Business Purpose
Renaissance Capital Partners II, Ltd. ( the "Partnership"), a Texas limited
partnership, was formed on January 14, 1991. The Partnership sought to
achieve current income and capital appreciation principally by making direct
investments primarily in private placement convertible debt securities of
small to medium size public companies.
The Partnership elected to be treated as a business development company under
the Investment Company Act of 1940, as amended. The Partnership will
terminate upon liquidation of all its investments, but no later than eight
years from the final closing of the sale of units, which was March 31, 1993,
subject to the right of the Independent General Partners to extend the term
for up to two additional one-year periods if they determine that such
extension is in the best interest of the Partnership. The Independent
General Partners and the Managing General Partner agreed to begin the
liquidation of the Partnership in 1998. Effective October 1, 1998,
Renaissance Group, Inc. ("Renaissance Group") withdrew as Managing General
Partner of the Partnership. Mr. Thomas W. Pauken, who had served as an
Independent General Partner agreed to become the Liquidation Trustee (the
"Trustee") pursuant to the Liquidation Trustee's Agreement which was filed as
an Exhibit to Form 10-Q for the period ending September 30, 1998, and is
incorporated for all purposes herein. The Trustee assumed all
responsibilities, and has the authority, of the Managing General Partner.
2. Summary of Significant Accounting Policies
a. Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents
include cash in checking and savings accounts and all instruments on hand
with original maturities of six months or less. The Partnership paid no
interest for the periods ended September 30, 1999 and 1998.
b. Federal Income Taxes
No provision has been made for federal income taxes as any liability for such
taxes is that of the partners rather than the Partnership.
c. Net Income (Loss) Per Limited Partnership Unit
Net income (loss) per limited partnership unit is based on the weighted
average of the limited partnership units outstanding during the period and
net income (loss) allocated to the limited partners.
d. Management Estimates
The financial statements have been prepared in conformity with generally
accepted accounting principles. The preparation of the accompanying
financial statements requires estimates and assumptions made by the
Liquidation Trustee of the Partnership that affect the reported amounts of
assets and liabilities as of the date of the statements of assets,
liabilities and partners' equity and income and expenses for the period
presented. Actual results could differ significantly from those estimates.
e. Interest Income
Interest income is accrued on all debt securities owned by the partnership on
a quarterly basis. When it is determined that the interest accrued will not
be collected, the income for that period is reduced to reflect the estimated
interest expected to be collected during the period.
<PAGE>
RENAISSANCE CAPITAL PARTNERS II, LTD.
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 1999
(Unaudited)
f. Financial Instruments
In accordance with the reporting requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments", the Company calculates the fair value of its financial
instruments and includes this additional information in the notes to the
financial statements when the fair value is different than the carrying value
of those financial instruments. When the fair value reasonably approximates
the carrying value, no additional disclosure is made.
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 do not include all disclosures normally required by generally
accepted accounting principles or those 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. Management Agreement and Fees
Renaissance Group withdrew as Managing General Partner effective October 1,
1998. Mr. Thomas W. Pauken, who had served as an Independent General Partner
agreed to become the Liquidation Trustee (the "Trustee") pursuant to the
Liquidation Trustee's Agreement which was filed as an Exhibit to Form 10-Q
for the period ending September 30, 1998, and is incorporated for all
purposes herein. The Trustee assumed all responsibilities, and has the
authority, of the Managing General Partner. Fees paid to the Liquidation
Trustee during the three months ended September 30, 1999, were $18,000.
5. Partnership Agreement
Pursuant to the terms of the Limited Partnership Agreement, all items of
income, gain, loss and deduction of the Partnership, other than any Capital
Transaction, as defined, will be allocated 1% to Renaissance Group (the
former Managing General Partner) and 99% to the Limited Partners. All items
of gain of the Partnership resulting from Capital Transactions shall be
allocated such that the Limited Partners receive a cumulative simple annual
return of 10% on their capital contributions and any remaining gains shall be
allocated 20% to Renaissance Group and 80% to the Limited Partners. All
items of loss resulting from Capital Transactions shall be allocated 1% to
Renaissance Group and 99% to the Limited Partners.
The above allocations resulted in the capital account of Renaissance Group
having a deficit balance of $197,969 at the time of the appointment of the
Liquidation Trustee. This appointment caused the end of Renaissance Group's
year as it relates to the Partnership's income and expense and the deficit
balance was allocated to the other partners in accordance with Section 4.8 of
the Limited Partnership Agreement.
6. Investments
Investments of the Partnership 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 Partnership 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.
<PAGE>
RENAISSANCE CAPITAL PARTNERS II, LTD.
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 1999
(Unaudited)
6. Investments (continued)
Generally debt securities will be valued at their face value. However, if
the debt is impaired, an appropriate valuation reserve will be established or
the investment discounted to estimated realizable value. Conversely, if the
underlying stock has appreciated in value and the conversion feature
justifies a premium value, such premium will of necessity be recognized.
The Liquidation Trustee will be responsible for determining fair value.
The financial statements include investments valued at $6,568,982 (83% of
total assets) and $5,970,680 (84% of total assets) as of December 31, 1998
and September 30, 1999, respectively, whose values have been estimated by the
Liquidation Trustee in the absence of readily ascertainable market values.
Because of the inherent uncertainty of valuation, those 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.
INVESTMENT VALUATION SUMMARY
<TABLE>
CONVERSION OR FAIR
COST FACE VALUE VALUE
<S> <C> <C> <C>
Consolidated Healthcare Associates, Inc.
Promissory Note 84,787 84,787 84,787
Tutogen Medical, Inc.
Convertible Debentures 500,000 500,000 500,000
Common Stock 7,499,585 5,385,893 5,385,893
__________ __________ __________
$8,084,372 $5,970,680 $5,970,680
========== ========== ==========
</TABLE>
[FN]
The fair value of debt securities convertible into common stock is the sum of
(a) the value of such securities without regard to the conversion feature,
and (b) the value, if any, of the conversion feature. The fair value of debt
securities without regard to conversion features is determined on the basis
of the terms of the debt security, the interest yield and the financial
condition of the issuer. The fair value of the conversion features of a
security, if any, is based on fair values less an allowance, as appropriate,
for costs of registration, if any, and selling expenses. Publicly traded
securities, or securities that are convertible into publicly-traded
securities, are valued at the last sale price, or at the average closing bid
and asked price, as of the valuation date. While these valuations are
believed to represent fair value, these values do not necessarily reflect
amounts which may be ultimately realized upon disposition of such securities.
</FN>
<PAGE>
RENAISSANCE CAPITAL PARTNERS II, LTD.
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 Partnership. 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, 1999, total Partners' Equity
decreased $2,523,329 due primarily to the decrease in valuation of common
stock of Tutogen Medical, Inc. with a value of $0.9375 per share.
The following portfolio transactions are noted for the quarter ended
September 30, 1999 (portfolio companies are herein referred to as the
"Company"):
CODED COMMUNICATIONS CORP. In the fourth quarter of 1998, Coded
Communications Corp. ("Coded") filed for bankruptcy in Chapter 11 proceedings
in Delaware, and was converted to Chapter 7 status in the first quarter of
1999. The Trustee has taken legal action to try to protect the Partnership's
secured position on the $311,060 Promissory Note and recover from the assets
of the Estate. In the third quarter ended September 30, 1999, the
Partnership received proceeds of $385,000 from the Estate of Coded for
payment in full of a Promissory Note. In the third quarter of 1999, the
Partnership accrued expenses of $50,000 to cover anticipated legal fees.
CONSOLIDATED HEALTHCARE ASSOCIATES, INC. In the third quarter, the
Partnership received proceeds of $7,240 related to Promissory Notes whose
payments have been assigned to the Partnership by Consolidated HealthCare
Associates, Inc.
TUTOGEN MEDICAL, INC. In the first quarter, the Partnership became the
majority shareholder of Tutogen Medical, Inc. ("Tutogen") pursuant to a
series of transactions involving the recapitalization of Tutogen. These
transactions included the conversion of a Tutogen debenture, the amendment of
stock purchase warrants held by the Partnership and the issuance of
additional common stock of Tutogen to the Partnership in exchange for assets
of the Partnership. Effective January 31, 1999, the Partnership and Tutogen
entered into several inter-related transactions, as follows: (i) the
Partnership exercised its right to convert the outstanding principal, accrued
interest and accrued expenses on a convertible debenture in the principal
amount of $2,074,081 in accordance with the terms of the debenture, resulting
in the issuance to the Partnership of 4,600,507 shares and, as additional
consideration for the agreement to convert the debenture, Tutogen issued to
the Partnership an additional 149,334 shares; (ii) warrants held by the
Partnership to purchase 1,353,957 shares were amended with an exercise price
of $1.25 per share if the warrants are exercised prior to June 30, 2000. If
not so exercised, prices will revert to the original exercise prices of the
warrants of $2.50 and $2.60 per share; and (iii) the Partnership acquired
300,000 shares, together with warrants to purchase an additional 300,000
shares at an exercise price of $1.50 per share, in exchange for $300,000
cash.
As of September 30, 1999, the Partnership is the beneficial owner of
8,169,277 shares, representing approximately 62.4% of the outstanding shares
of the Company (including for this purpose shares issued in transactions
described above and shares issuable upon exercise of warrants and upon
conversion of a debenture owned by the Partnership; all of the warrants and
the debenture are presently convertible or exercisable).
<PAGE>
RENAISSANCE CAPITAL PARTNERS II, LTD.
1. Material Changes in Financial Condition (continued)
As of October 5, 1999, the Company paid its interest obligation on the
$500,000 Debenture through September 30, 1999.
2. Material Changes in Operations
The Partnership 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, 1999, the Partnership recorded net loss
of $2,523,329, which was primarily attributed to a valuation change in the
Tutogen Medical, Inc. common stock issued in connection with the conversion
of the convertible debenture attributable to a decrease in the market price
of the stock. Interest income continued to decline as a result of not
accruing certain past-due payments from Portfolio companies because the
likelihood of receiving such payments appears to be in question. In
addition, income has declined in the past as a result of payment defaults and
as the Partnership has converted debentures into common and preferred stock
that traditionally have lower current yields in comparison to debentures.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None other than what has been previously disclosed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to the signed on its behalf by the
undersigned thereunto duly authorized.
RENAISSANCE CAPITAL PARTNERS II, LTD.
November 11, 1999 By: ____/S/________________________
Thomas W. Pauken
Liquidation Trustee
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 8084372
<INVESTMENTS-AT-VALUE> 5970680
<RECEIVABLES> 4512
<ASSETS-OTHER> 1159499
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7134691
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22880
<TOTAL-LIABILITIES> 72880
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38899583
<SHARES-COMMON-STOCK> 43254
<SHARES-COMMON-PRIOR> 43254
<ACCUMULATED-NII-CURRENT> 71869
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12213395)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15879590
<NET-ASSETS> 7134691
<DIVIDEND-INCOME> 24231
<INTEREST-INCOME> 249721
<OTHER-INCOME> 66552
<EXPENSES-NET> 268725
<NET-INVESTMENT-INCOME> 71869
<REALIZED-GAINS-CURRENT> (7316)
<APPREC-INCREASE-CURRENT> (840974)
<NET-CHANGE-FROM-OPS> (776421)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (776421)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (12206079)
<OVERDISTRIB-NII-PRIOR> 3925834
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 268725
<AVERAGE-NET-ASSETS> 7450022
<PER-SHARE-NAV-BEGIN> 181
<PER-SHARE-NII> 1.66
<PER-SHARE-GAIN-APPREC> (19.61)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 163
<EXPENSE-RATIO> .036
</TABLE>
