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, 2000
[ ] 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 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
RENAISSANCE CAPITAL PARTNERS II, LTD.
STATEMENTS OF ASSETS, LIABILITIES,
AND PARTNERS' EQUITY
(Unaudited)
Assets
December 31, September 30,
1999 2000
________ ________
Cash and cash equivalents $ 1,012,358 $ 595,350
Short term investments 100,000 -0-
Investments at fair value,
cost of $8,066,598 and $9,371,179 at
December 31, 1999 and September 30, 2000,
respectively 15,634,975 42,387,001
Interest receivable 2,315 614
Other Assets 30,898 25,094
_________ _________
Total Assets $ 16,780,546 $ 43,008,059
========== ==========
Liabilities and Partners' Equity
Liabilities:
Accounts payable $ 27,946 $ 23,781
Accrued liabilities 50,000 50,000
_________ _________
Total liabilities 77,946 73,781
_________ _________
Partners' equity:
General Partner -0- -0-
Limited Partners (43,254.01 units at
December 31, 1999 and 43,254.01 units
at September 30, 2000) 16,702,600 42,934,278
_________ _________
Total partners' equity 16,702,600 42,934,278
_________ _________
$ 16,780,546 $ 43,008,059
========== ==========
Limited partners' equity per limited
partnership unit $386 $993
See accompanying notes to financial statements.
RENAISSANCE CAPITAL PARTNERS II, LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1999 2000 1999 2000
Income:
Interest $17,028 3,880 $249,721 36,610
Dividends 7,890 5,164 24,321 22,851
Other Income 23,940 -0- 66,552 -0-
_______ _______ _______ _______
Total Income 48,858 9,044 340,594 59,461
Expenses:
Operating exps 40,711 43,451 214,725 158,887
Management fees 18,000 18,000 54,000 54,000
_______ _______ _______ _______
Total expenses 58,771 61,451 268,725 212,887
Net income
(loss) from
operations (9,913) (52,407) 71,869 (153,426)
Net realized and
unrealized gain
(loss) on
investments (2,513,416) 12,604,213 (848,290) 26,385,104
_______ _______ _______ _______
Net income
(loss) $ (2,523,329) $ 12,551,806 $ (776,421) $ 26,231,678
========== ========== ======= ==========
Net income (loss)
per limited
partnership unit $(58.34) $290.19 $(17.95) $606.46
======= ======= ======= =======
Weighted average limited
partnership units
43,254.01 43,254.01 43,254.01 43254.01
========= ========= ========= ========
See accompanying notes to financial statements.
RENAISSANCE CAPITAL PARTNERS II, LTD.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
Six Months Ended September 30, 2000
(Unaudited)
General Limited
Partner Partners Total
__________ __________ __________
Balance at December 31, 1999 -0- $ 16,702,600 $ 16,702,600
Net income -0- 26,231,678 26,231,678
__________ __________ __________
Balance at September 30, 2000 -0- 42,934,278 42,934,278
========== ========== ==========
See accompanying notes to financial statements.
RENAISSANCE CAPITAL PARTNERS II, LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1999 2000 1999 2000
____ ____ ____ ____
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(2,523,329) 12,551,806 (776,421) 26,231,678
Adjustments to reconcile net income
to net cash flows from operating
activities:
Net realized and unrealized (gain)
loss on investments 2,513,416 (12,604,213) 848,290 (26,385,104)
Decrease (Increase) in interest
receivable (813) 4,536 98,511 1,701
Decrease (Increase) in other assets (36,002) 4,840 (36,626) 5,804
Increase (Decrease) in accrued expenses 50,000 -0- 50,000 -0-
Increase (Decrease) in accounts payable (10,291) (4,291) (56,303) (4,166)
_________ _________ _________ _________
Net cash provided by (used in)
operating activities (7,019) (47,322) 127,451 (150,087)
_________ _________ _________ _________
Cash flows from investing activities:
Repayment of principal on investments 316,312 -0- 324,693 78,600
Purchase of investments -0- -0- (574,681) (1,393,946)
Proceeds from sale of investments -0- -0- -0- 948,425
Investments in short term
investments, net -0- -0- -0- 100,000
_________ _________ _________ _________
Net cash provided by (used in)
investing activities 316,312 -0- ( 249,988) (266,921)
_________ _________ _________ _________
Net increase (decrease) in cash 309,293 (47,322) (122,537) (417,008)
Cash and cash equivalents at the beginning
of the period 807,185 642,672 1,239,015 1,012,358
_________ _________ _________ _________
Cash and cash equivalents at the end
of the period $ 1,116,478 $ 595,350 $ 1,116,478 $ 595,350
========= ======= ========= =======
</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.
In the second quarter of 2000, the Partnership exercised its right to convert
a debenture in the principal amount of $490,050 to 363,000 shares of common
stock of Tutogen Medical, Inc.
See accompanying notes to financial statements.
RENAISSANCE CAPITAL PARTNERS II, LTD.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
1. Organization and Business Purpose
Renaissance Capital Partners II, Ltd. ( the "Partnership"), a Texas limited
partnership in the process of liquidation, 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 liquidating 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) Valuation of Investments
Portfolio investments are stated at quoted market or fair value as determined
by the Trustee in 2000 and 1999. Most securities held by the Partnership have
limited trading activity and their value does not necessarily represent the
amounts that may be realized from their immediate sale or disposition.
(b) Statements of Cash Flows
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 three months or less. The Partnership paid no interest
for the periods ended September 30, 2000 and 1999.
(c) 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.
(d) 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.
(e) Short Term Investments
Short term investments represent a bank certificate of deposit with a maturity
date of 6 months. Such investment was valued at cost, which approximates
market.
(f) 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.
(g) 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.
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 generally accepted
accounting principles, 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 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
nine months ended September 30, 2000, and 1999, were $54,000.
5. Partners' Equity
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, are 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 are 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.
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 $15,634,975 (93% of
total assets) and $42,387,001 (99% of total assets) as of December 31, 1999
and September 30, 2000, respectively, whose values have been estimated by the
Liquidation Trustee in cases in which there is no 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>
Tutogen Medical, Inc.
Common Stock 9,357,179 42,314,146 42,314,146
Global Data, Inc. (GDI)
Common Stock -0- 58,855 58,855
Consolidated Health Care
Associates
Promissory Note 14,000 14,000 14,000
__________ __________ __________
$ 9,371,179 $ 42,387,001 $ 42,387,001
========== ========== ==========
</TABLE>
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, are based on fair values as of this date 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.
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, 2000, total Partners' Equity
increased $12,551,806 due primarily to the increase in the valuation of the
common stock of Tutogen Medical, Inc. ("Tutogen") with value of $5.875 per
share.
The following portfolio transactions are noted for the quarter ended September
30, 2000 (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 took 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.
The Partnership's current lawsuit against former officers and directors of
Coded, seeking recovery for the improper conversion of a debenture, is
pending. Part of the case is proceeding forward towards an arbitration
hearing in California. In the third quarter of 1999, the Partnership accrued
expenses of $50,000 to cover anticipated legal fees.
Consolidated HealthCare Associates, Inc.
In the first quarter of 2000, the Partnership received proceeds of $4,826
related to the Promissory Note whose payments have been assigned to the
Partnership by Consolidated Health Care Associates, Inc. ("CHCA"). In March
2000, the Partnership received an additional payment of $65,000 in full
settlement of this Note.
CHCA filed for bankruptcy in Chapter 11 proceedings in Boston in the first
quarter of 2000. CHCA received funds in the amount of $14,000 in the form of
a 10% Promissory Note payable to the Partnership to cover the operational
costs of the company during the pending Chapter 11 proceedings.
GDI Global Data, Inc.
In the second quarter of 2000, the Partnership received 166,666 shares of
common stock of GDI Global Data, Inc. ("GDI") in exchange for its 8,333.33
shares of StarComm Products, Inc. ("StarComm") as a result of a merger between
GDI and StarComm. During the second quarter, the Partnership received
proceeds in the amount of $10,925 from the sale of 11,500 shares of common
stock of GDI, a Canadian Exchange stock.
Tutogen Medical, Inc.
In the first quarter of 2000, the Partnership received a principal payment in
the amount of $9,950 on the $500,000 Debenture.
On June 23, 2000, in a private transaction, the Partnership sold common stock
purchase warrants to purchase 250,000 shares at an exercise price of $1.25 per
share to Sulzer Medica USA Holding Co. The Partnership received proceeds in
the amount of $937,500 from the transfer of those warrants.
On June 28, 2000, the Partnership exercised its right to convert the
outstanding principal on this debenture in accordance with the terms of the
debenture, resulting in the issuance to the Partnership of 363,000 shares of
common stock of Tutogen. The Partnership also exercised common stock
purchase warrants to purchase 1,103,957 shares, at an exercise price of $1.25
per share.
As of June 30, 2000, the Partnership is the beneficial owner of 7,902,408
shares, representing approximately 56.30% of the outstanding shares of Tutogen
(including, for this purpose shares issued in transactions described above and
shares issuable upon exercise of warrants; all of the warrants are presently
exercisable.)
On August 17, 2000, the common stock was listed for trading on the American
Stock Exchange with the symbol TTG.
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, 2000, the Partnership recorded a net gain
of $12,551,806, which was primarily due to a increase in the closing price of
Tutogen's common stock which was $4.125 as of June 30, 2000, and $5.875 on
September 30, 2000. This valuation may fluctuate significantly due to the
limited trading market for Tutogen 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 10, 2000 By: /s/ Thomas W. Pauken
Thomas W. Pauken
Liquidation Trustee
