<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
For the quarterly period ended SEPTEMBER 30, 1997 Commission file number 0-20213
</TABLE>
COMMUNITY INVESTMENT PARTNERS II, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-1609351
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12555 Manchester Road
St. Louis, Missouri 63131
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 515-2000
-------------------
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. (1) YES X NO (2) YES NO X
--- --- --- ---
<PAGE> 2
<TABLE>
COMMUNITY INVESTMENT PARTNERS II, L.P.
INDEX
<CAPTION>
Page
Number
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet 3
Schedule of Portfolio Investments 4
Income Statement 7
Statement of Cash Flows 8
Statement of Changes in Partnership Capital 9
Notes to Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. OTHER INFORMATION<F*>
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
<FN>
<F*> Items 2, 3,4 and 5 are omitted as they are not applicable
</TABLE>
2
<PAGE> 3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS II, L.P.
BALANCE SHEET
(UNAUDITED)
<CAPTION>
September 30, December 31,
1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
------
Investments at Fair Market Value
(cost $1,617,489 and $1,412,628, respectively) $1,682,968 $1,397,330
Cash and Cash Equivalents 284,805 540,528
Deferred Organizational Costs, net 9,170 36,683
Accrued Interest Receivable 16,513 17,835
Prepaid Expenses -- 2,449
---------- ----------
TOTAL ASSETS $1,993,456 $1,994,825
========== ==========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
Liabilities:
Accounts Payable and Accrued Expenses $ 28,230 $ 12,100
---------- ----------
TOTAL LIABILITIES 28,230 12,100
---------- ----------
Partnership Capital:
Capital - Limited Partners 1,945,454 1,962,730
Capital - General Partners 19,772 19,995
---------- ----------
TOTAL PARTNERSHIP CAPITAL 1,965,226 1,982,725
---------- ----------
TOTAL LIABILITIES AND PARTNERSHIP CAPITAL $1,993,456 $1,994,825
========== ==========
- -------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE> 4
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF SEPTEMBER 30, 1997
<CAPTION>
Fair Market
Company Nature of Business Value
Initial Investment Date Investment Cost Sept 30, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HOUGHTON ACQUISITION Organized for the purpose of
CORPORATION acquiring Hutchinson Foundry
Products, Inc.
January 2, 1997 8% Convertible Promissory Note,
due 1/2/99 77,400 77,400
Contingent EBITDA Promissory
Note 0 0
GLOBAL SURGICAL Formed to acquire the Urban
CORPORATION Microscope Division and the
Surgical Mechanical Research
subsidiary of Storz Medical
January 31, 1994 3,000 shares of Common Stock 300,000 300,000
June 30, 1995 7% Promissory Note, due 6/29/00 45,000 45,000
January 26, 1996 7% Promissory Note, due 1/25/01 67,500 67,500
COMPUTER MOTION, INC. Develops and supplies medical robotics
June 26, 1997 40,948 warrants, exercisable
at $4.569 per warrant,
through 5/2/03 8 8
August 12, 1997 16,208 shares of Common Stock 125,000 218,808
16,209 warrants, exercisable
at $7.712 per warrant,
through 12/31/03 250 250
FCOA ACQUISITION A chain of greeting card/
CORPORATION Party stores which offer
(D/B/A FACTORY CARD A full line of products at
OUTLET) Everyday value prices
July 30, 1996 26,063 Common Shares 249,865 221,536
The accompanying notes are an integral
part of these financial statements.
4
<PAGE> 5
<CAPTION>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY INVESTMENT PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (cont'd.)
Fair Market
Company Nature of Business Value
Initial Investment Date Investment Cost Sept 30, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PERMALOK CORPORATION Develops and sells steel
pipe joining system to the
domestic underground
utility construction industry
September 24, 1996 25,000 shares of Convertible
Preferred Stock 200,000 200,000
STEREOTAXIS, INC. Develops and markets a system
by which surgery can be conducted
remotely using computer
controlled magnets
December 30, 1996 138,889 shares of Preferred Stock 100,000 100,000
MEDICAL DEVICE
ALLIANCE, INC. Specializes in the development,
manufacture and marketing of
devices for ultrasound-assisted
lipoplasty
January 24, 1997 20,000 shares of Stock 100,000 100,000
ONLINE RESOURCES &
COMMUNICATIONS
CORPORATION Provides a variety of inter-
active banking and financial
services to end-users and
corporate customers in the
banking and financial
services industry
March 17, 1997 1,525 shares of Series C
Convertible Preferred Stock 152,466 152,466
Warrants to purchase
20,327 shares of Common
Stock, exercisable at $3.00 per
warrant, expiring 5/30/02 0 0
The accompanying notes are an integral
part of these financial statements.
5
<PAGE> 6
<CAPTION>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY INVESTMENT PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (cont'd.)
Fair Market
Company Nature of Business Value
Initial Investment Date Investment Cost Sept 30, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ADVANCED UROSCIENCE,
INC. Developing Acyst, an injectable
bulking agent, for the treatment
of stress urinary incontinence.
April 7, 1997 25,000 shares of Series A
Preferred Stock 100,000 100,000
NEOCRIN COMPANY Research and development
of minimally invasive,
encapsulated cellular transplants
for the treatment of diabetes.
September 3, 1997 50,000 shares of Series E
Preferred Stock 100,000 100,000
---------- ----------
$1,617,489 $1,682,968
========== ==========
The accompanying notes are an integral
part of these financial statements.
</TABLE>
6
<PAGE> 7
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS II, L.P.
INCOME STATEMENT
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
------
Interest and Dividend Income $ 6,817 $20,024 $ 29,493 $ 56,077
Gain on Sale of Investment 1,476 -- 511,898 --
-------- ------- -------- --------
TOTAL INCOME 8,293 20,024 541,391 56,077
-------- ------- -------- --------
EXPENSES
--------
Amortization of Deferred
Organizational Costs 9,171 9,171 27,512 27,512
Independent General Partners' Fees 3,000 3,000 9,000 9,000
Management Fees 7,285 7,593 21,679 22,784
Professional Fees 6,897 2,449 16,463 7,236
Other 515 515 2,363 1,587
-------- ------- -------- --------
TOTAL EXPENSES 26,868 22,728 77,017 68,119
-------- ------- -------- --------
Net (Loss) Income before Unrealized
Gains and Losses (18,575) (2,704) 464,374 (12,042)
Net Unrealized Gains on Investments 163,853 -- 80,777 --
-------- ------- -------- --------
NET INCOME (LOSS) $145,278 $(2,704) $545,151 $(12,042)
======== ======= ======== ========
Per Unit Information:
Net Income (Loss)
(as of September 30, 1997 and
September 30, 1996) $ 1.29 $ (.02) $ 4.84 $ (.11)
======== ======= ======== ========
Net Asset Value
(as of September 30, 1997 and
December 31, 1996) $ 17.46 $ 17.62
======== ========
Units Outstanding:
Limited Partners 111,395 111,395
General Partners 1,135 1,135
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The accompanying notes are an integral part of these financial statements.
</TABLE>
7
<PAGE> 8
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS II, L.P.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996
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<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING
ACTIVITIES:
Net Income (Loss) $ 545,151 $ (12,042)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities -
Purchase of Portfolio Investments (450,008) (767,615)
Amortization of Deferred Organization Costs 27,513 27,512
Decrease (Increase) in Accrued Interest Receivable 1,322 (1,186)
Decrease in Prepaid Expense 2,449 --
Increase in Accounts Payable and Accrued Expenses 16,130 10,684
Interest Rollover into Investments (2,466) --
Sale of Portfolio Investments 759,511 --
Unrealized Gains on Portfolio Investments (80,777) --
Net Realized Gains on Sale of Portfolio Investments (511,898) --
--------- ----------
Total Cash Provided (Used) by
Operating Activities 306,927 (742,647)
CASH FLOWS USED BY
FINANCING ACTIVITIES:
Capital Distributions (562,650) --
--------- ----------
Total Cash Used by Financing Activities (562,650) --
--------- ----------
Net Decrease in Cash and Cash Equivalents (255,723) (742,647)
CASH AND EQUIVALENTS, beginning of year 540,528 1,399,026
--------- ----------
CASH AND EQUIVALENTS, end of year $ 284,805 $ 656,379
========= ==========
- ------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
8
<PAGE> 9
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS II, L.P.
STATEMENT OF CHANGES IN PARTNERSHIP CAPITAL
(UNAUDITED)
<CAPTION>
Nine Months Ended September 30, 1997 and 1996
Limited Partners General Partners Totals
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1995 $1,994,572 $20,317 $2,014,889
Net Income (Loss) (11,920) (122) (12,042)
---------- ------- ----------
Balance, September 30, 1996 $1,982,652 $20,195 $2,002,847
==================================================================================================================
Balance, December 31, 1996 $1,962,730 $19,995 $1,982,725
Net Income 539,699 5,452 545,151
Capital Distribution (556,975) (5,675) (562,650)
---------- ------- ----------
Balance, September 30, 1997 $1,945,454 $19,772 $1,965,226
==================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
9
<PAGE> 10
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY INVESTMENT PARTNERS II, L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
Community Investment Partners II, L.P. (CIP II) is a limited partnership
which has elected to be a business development company under the Investment
Company Act of 1940, as amended. As a business development company, the
partnership is required to invest at least 70% of its total assets in
qualifying investments as specified in the Investment Company Act. CIP
Management L.P., LLLP (Management) is the Managing General Partner of CIP II.
Management is a Missouri limited liability limited partnership formed on
October 10, 1989, as a limited partnership and registered as a limited
liability limited partnership on July 23, 1997. Management is responsible
for making all decisions regarding CIP II's investment portfolio and is not
engaged in any other activities. CIP II pays CIP Management, L.P., LLLP a
management fee based on 1.5% of CIP II's total assets.
All portfolio investments are carried at cost until significant
developments affecting an investment provide a basis for revaluation.
Thereafter, portfolio investments are carried at fair value as obtained from
outside sources or at a value determined quarterly by the Managing General
Partner under the supervision of the Independent General Partners.
Investments in securities traded on a national securities exchange are valued
at the latest reported sales price on the last business day of the period.
If no sale has taken place, the securities are valued at the last bid price.
If no bid price has been reported, or if no exchange quotation is available,
the securities are valued at the quotation obtained from an outside broker.
10
<PAGE> 11
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
COMMUNITY INVESTMENT PARTNERS II, L.P.
MANAGEMENT'S FINANCIAL DISCUSSION
RESULTS OF OPERATIONS
Net income for the three months ended September 30, 1997, was $145,278,
compared to a net loss of $2,704 for the same period in 1996. Net income for
the quarter ended September 30, 1997, consists primarily of unrealized gains
on investments. FCOA Acquisition Corporation had a significant unrealized
gain due to the increase in its share price. In addition, Computer Motion,
Inc., participated in an initial public stock offering (IPO) and the
Partnership's investment was converted to common stock. An unrealized gain
on Computer Motion, Inc. was recorded, as the market value of the
Partnership's investment increased.
During the quarter, the Partnership received additional purchase price
consideration of $1,476 related to the sale of the Houghton Acquisition
Corporation (HAC) investment in January 1997, which resulted in an additional
gain on the sale of investment. Also, the Computer Motion Inc. Term Note was
paid off with interest.
In addition, during the quarter, the Partnership's 8% Promissory Note
plus accrued interest from Online Resources & Communications Corporation was
converted into 1,525 shares of Series C Convertible Preferred Stock. The
warrants that the Partnership held were exchanged for 20,327 warrants to
purchase shares of the Company's common stock, exercisable at $3.00 per
warrant, expiring May 30, 2002. The Series C Convertible Preferred Stock
either will be converted to common stock when the company has an IPO of at
least $30 million or redeemed for the greater of fair market value or $200
per share, at the earlier of a change in control or January 1, 2004.
The Partnership invested $100,000 in Neocrin Company and received 50,000
shares of Series E Preferred Stock. Neocrin Company specializes in research
and development of minimally invasive, encapsulated cellular transplants for
the treatment of diabetes.
Net loss for the quarter ended September 30, 1996, occurred as there
were no sales of investments and expenses were greater than revenues
generated from dividends and interest.
Net income for the nine months ended September 30, 1997, was $545,151,
compared to net loss of $12,042 for the same period in 1996. Net income for
the nine months ended September 30, 1997, was primarily attributable to
realized gains of $511,898 on the sale of investments. In addition, there
was a net unrealized gain of $80,777 on investments. Computer Motion, Inc.
participated in an IPO and an unrealized gain was recorded on the
Partnership's investment. There was a small decrease in the share price of
FCOA Acquisition Corporation since the beginning of the year, and an
unrealized loss was recorded.
Net loss for the nine months ended September 30, 1996, was attributable
to expenses that were greater than revenues generated from dividends and
interest.
11
<PAGE> 12
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
As of September 30, 1997, cumulative unrealized gains on the investments
totaled $65,479.
The future income or loss of the Partnership is contingent upon the
performance of the portfolio investments.
12
<PAGE> 13
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
INVESTMENT TRANSACTIONS
Following is a summary of portfolio investment transactions during the period
ending September 30, 1997:
<TABLE>
<CAPTION>
Type of Realized
Company Investment Cost Proceeds Gain (Loss)
------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C>
PURCHASES:
---------
Quarter 1:
---------
Medical Device Alliance, Inc. Stock $100,000 $ -- $ --
Online Resources &
Communications Promissory Note
Corporation & Warrants 150,000 -- --
-------- -------- --------
Quarter 2:
---------
Series A
Advanced UroScience, Inc. Preferred Stock 100,000 -- --
Computer Motion, Inc. Warrants 8 -- --
-------- -------- --------
Quarter 3:
---------
Series E
Neocrin Company Preferred Stock 100,000 -- --
-------- -------- --------
Total Purchases $450,008 $ -- $ --
======== ======== ========
SALES:
-----
Quarter 1:
---------
Class A Cumulative
Houghton Redeemable Preferred
Acquisition Corp. Stock $200,013 $690,779<Fa> $490,766
-------- -------- --------
Quarter 2:
---------
Class A Cumulative
Houghton Redeemable Preferred
Acquisition Corp. Stock -- 19,656<Fb> 19,656
-------- -------- --------
Quarter 3:
---------
Class A Cumulative
Houghton Redeemable Preferred
Acquisition Corp. Stock -- 1,476<Fb> 1,476
Computer Motion, Inc. Term Note 125,000 125,000 --
-------- -------- --------
Total Sales
$325,013 $836,911 $511,898
======== ======== ========
(Cont'd on next page)
13
<PAGE> 14
<FN>
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
<Fa> Proceeds included $613,379 in cash, a $77,400 Convertible Promissory
Note and a $25,800 Promissory Note contingent upon the future income of HAC
before interest, taxes, depreciation, amortization and corporate charges.
Due to the contingent nature of the $25,800 Promissory Note, a gain has not
been recorded. This note has been recorded at an original cost of $0, and
additional gain will be recorded if, or when, payments become due under terms
of the Note.
<Fb> Proceeds included additional purchase price consideration.
</TABLE>
FINANCIAL CONDITION
See Schedule of Portfolio Investments, page 4.
LIQUIDITY AND CAPITAL RESOURCES
The partnership's total capital of $1,965,226 as of September 30, 1997,
consisted of $1,945,454 in limited partner capital and $19,772 in general
partner capital. Net income was allocated to the limited partners in the
amount of $539,699 and to the general partners in the amount of $5,452.
Distributions in the amount of $562,650 were made to unit holders. Of this
amount, $556,975 went to limited partners and $5,675 went to general
partners.
The Partnership intends to invest its cash balances in a money market
account. At September 30, 1997, $88,100 was invested in the money market
account. This investment provides the Partnership with the liquidity
necessary for investments as opportunities arise.
SUBSEQUENT EVENTS
On October 14, 1997, the Partnership invested $100,000 in
BioSeparations, Inc. and received 50,000 shares of Series B Preferred Stock.
BioSeparations, Inc. is developing automated instrumentation that can isolate
and process cells for use in biotechnology, diagnostic, therapeutic, and
clinical research applications.
14
<PAGE> 15
Part II. OTHER INFORMATION
COMMUNITY INVESTMENT PARTNERS II, L.P.
Item 1: Legal Proceedings
The partnership is not a party to any material pending legal
proceedings.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ended September 30,
1997.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY INVESTMENT PARTNERS II, L.P.
By: CIP Management, L.P., LLLP, Managing General Partner
By: CIP Management, Inc., Its Managing General Partner
/s/ Daniel A. Burkhardt President, Treasurer
----------------------- and Director
Daniel A. Burkhardt November 12, 1997
/s/ Ray L. Robbins Vice-President
----------------------- and Director November 12, 1997
Ray L. Robbins
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Community Investment Partners II, L.P. for the
quarter ended September 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 1,617,489
<INVESTMENTS-AT-VALUE> 1,682,968
<RECEIVABLES> 16,513
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,993,456
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,230
<TOTAL-LIABILITIES> 28,230
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 112,530
<SHARES-COMMON-PRIOR> 112,530
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,965,226
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 29,493
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 511,898
<APPREC-INCREASE-CURRENT> 80,777
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (562,650)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 77,017
<AVERAGE-NET-ASSETS> 1,973,976
<PER-SHARE-NAV-BEGIN> 17.62
<PER-SHARE-NII> 4.84
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (5.00)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.46
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
