<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
For the quarterly period ended MARCH 31, 1998 Commission file number 0-18042
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
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(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. YES X NO
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1
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COMMUNITY INVESTMENT PARTNERS II, L.P.
<TABLE>
INDEX
<CAPTION>
Page
Number
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet 3
Schedule of Portfolio Investments 4
Income Statement 8
Statement of Cash Flows 9
Statement of Changes in Partnership Capital 10
Notes to Financial Statements 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II. OTHER INFORMATION <F*>
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<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>
March 31, December 31,
1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
------
Investments at Fair Value
(cost $1,705,491 and $1,757,091, respectively) $1,801,773 $1,733,229
Cash and Cash Equivalents 162,108 112,496
Accrued Interest and Dividends Receivable 20,902 18,974
---------- ----------
TOTAL ASSETS $1,984,783 $1,864,699
========== ==========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
Liabilities:
Accounts Payable and Accrued Expenses $ 24,058 $ 15,804
---------- ----------
TOTAL LIABILITIES 24,058 15,804
---------- ----------
Partnership Capital:
Capital - Limited Partners 1,940,999 1,830,287
Capital - General Partners 19,726 18,608
---------- ----------
TOTAL PARTNERSHIP CAPITAL 1,960,725 1,848,895
---------- ----------
TOTAL LIABILITIES AND
PARTNERSHIP CAPITAL $1,984,783 $1,864,699
========== ==========
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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
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Company Nature of Business Fair Value
Initial Investment Date Investment Cost March 31, 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HAWK CORPORATION Designs, engineers, manufactures,
(Houghton Acquisition and markets friction products and precision
Corporation) engineered components
January 2, 1997 8% Convertible Promissory Note,
due 1/2/99 $ 25,800 $ 25,800
8% Contingent EBITDA Promissory
Note, due 4/30/00 0 0
GLOBAL SURGICAL Formed to acquire the Urban Microscope
CORPORATION 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
(RBOT)
June 26, 1997 40,948 warrants to purchase
common stock, exercisable at
$4.569 per warrant through 5/2/03 8 8
August 12, 1997 16,208 shares of Common Stock 124,993 168,158
16,209 warrants to purchase
common stock, 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) (FCPY) everyday value prices
July 30, 1996 26,063 Common Shares 249,865 302,982
<CAPTION>
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The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY INVESTMENT PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D)
- --------------------------------------------------------------------------------------------------------------------
Company Nature of Business Fair Value
Initial Investment Date Investment Cost March 31, 1998
- --------------------------------------------------------------------------------------------------------------------
<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
Warrant to purchase 25,000 shares
of Convertible Preferred Stock,
exercisable at $9.60 per share,
through 7/31/03
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 Series B
Preferred Stock 100,000 100,000
November 12, 1997 10% Convertible Promissory Note,
due 10/31/02 39,609 39,609
MEDICAL DEVICE Specializes in the development,
ALLIANCE, INC. manufacture and marketing of
devices for ultrasound-assisted lipoplasty
January 24, 1997 20,000 shares of Common Stock 100,000 100,000
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY INVESTMENT PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D)
- --------------------------------------------------------------------------------------------------------------------
Company Nature of Business Fair Value
Initial Investment Date Investment Cost March 31, 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ONLINE RESOURCES & Provides a variety of inter-
COMMUNICATIONS active banking and financial services
CORPORATION 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 at $3.00 per warrant,
expiring 6/1/02
0 0
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
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY INVESTMENT PARTNERS II, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONT'D)
- --------------------------------------------------------------------------------------------------------------------
Company Nature of Business Fair Value
Initial Investment Date Investment Cost March 31, 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BIOSEPARATIONS, INC. Develops automated instrumentation
that can isolate and process cells for
use in biotechnology, diagnostic,
therapeutic, and clinical research applications
October 14, 1997 50,000 shares of Series B
Preferred Stock 100,000 100,000
Warrant to purchase 9,091 shares
of Common Stock at $1.10 per
share, through 10/15/02 0 0
Warrant to purchase 50,000 shares
of Series B Preferred Stock at $0.20
per share, through 1/31/01 0 0
---------- ----------
$1,705,491 $1,801,773
========== ==========
- --------------------------------------------------------------------------------------------------------------------
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.
INCOME STATEMENT
(UNAUDITED)
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1998 March 31, 1997
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<S> <C> <C>
INCOME
------
Interest and Dividend Income $ 3,874 $ 8,168
---------- ----------
TOTAL INCOME 3,874 8,168
---------- ----------
EXPENSES
--------
Management Fees 7,092 7,140
Professional Fees 4,096 9,721
Independent General Partners' Fees 1,000 3,000
Amortization of Deferred Organizational Costs - 9,171
---------- ----------
TOTAL EXPENSES 12,188 29,032
---------- ----------
Net Loss before Realized Gains and Unrealized Gains (Losses) (8,314) (20,864)
Net Realized Gain on Sale of Investments - 490,766
Net Unrealized Gains (Losses) on Investments 120,144 (26,063)
---------- ----------
NET INCOME $ 111,830 $ 443,839
========== ==========
Per Unit Information:
Net Income (as of March 31, 1998 and
March 31, 1997) $ .99 $ 3.94
========== ==========
Net Asset Value (as of March 31, 1998 and
December 31, 1997) $ 17.42 $ 16.43
========== ==========
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>
8
<PAGE> 9
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS II, L.P.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1998 March 31, 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net Income $ 111,830 $ 443,839
Adjustments to reconcile Net Income to Net
Cash Provided by Operating Activities -
Amortization of Deferred Organization Costs - 9,171
Increase (Decrease) in Accrued Expenses 8,254 (4,960)
(Increase) Decrease in Accrued Interest and
Dividends Receivable (1,928) 2,955
Decrease in Prepaid Expense - 2,449
Purchase of Portfolio Investments - (250,000)
Sale of Portfolio Investments 51,600 613,379
Unrealized (Gains) Losses on Portfolio Investments (120,144) 26,063
Net Realized Gains on Sale of Portfolio Investments - (490,766)
---------- ----------
Total Cash Provided by Operating Activities 49,612 352,130
CASH FLOWS USED BY FINANCING ACTIVITIES:
Capital Distributions - (562,650)
---------- ----------
Total Cash Used by Financing Activities - (562,650)
---------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents 49,612 (210,520)
CASH AND EQUIVALENTS, beginning of year 112,496 540,528
---------- ----------
CASH AND EQUIVALENTS, end of year $ 162,108 $ 330,008
========== ==========
- --------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
9
<PAGE> 10
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMUNITY INVESTMENT PARTNERS II, L.P.
STATEMENT OF CHANGES IN PARTNERSHIP CAPITAL
(UNAUDITED)
<CAPTION>
Three Months Ended March 31, 1998 and 1997
Limited Partners General Partners Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1996 $ 1,962,730 $ 19,995 $ 1,982,725
Distribution (556,975) (5,675) (562,650)
Net Income 439,401 4,438 443,839
----------- ----------- -----------
Balance, March 31, 1997 $ 1,845,156 $ 18,758 $ 1,863,914
=========== =========== ===========
Balance, December 31, 1997 $ 1,830,287 $ 18,608 $ 1,848,895
Net Income 110,712 1,118 111,830
----------- ----------- -----------
Balance, March 31, 1998 $ 1,940,999 $ 19,726 $ 1,960,725
=========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
10
<PAGE> 11
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), a limited liability limited
partnership, is the Managing General Partner of CIP II. Management is
responsible for making all decisions regarding CIP II's investment portfolio.
CIP II is no longer making initial investments, but may continue to make
follow-on investments.
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. Due to the
inherent uncertainty of valuation, those estimated values for portfolio
investments carried at cost may differ significantly from the values that
would have been used had a ready market for the investment existed, and the
differences could be material to the financial statements. 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. Investment
transactions are recorded on a trade date basis. Income is recorded on an
accrual basis.
11
<PAGE> 12
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 quarter ended March 31, 1998 was $111,830, compared
to net income of $443,839 for the same period ended 1997. The decrease in net
income is primarily attributable to the absence of gains realized on the sale
of investments in the current period compared to $490,766 of gains realized
on the sale of investments in the quarter ended March 31, 1997. During the
first quarter of 1998, there was a net unrealized gain on investments of
$120,144 due to the unrealized gain recorded for FCOA Acquisition Corporation
of $122,170 offset by an unrealized loss of $2,026 recorded for Computer
Motion, Inc. Income was derived from dividends and interest. However,
dividend and interest income decreased approximately $4,294, or 53%, from the
prior period, due to fewer cash funds invested in certificates of deposit and
money market funds. Expenses decreased approximately $16,800 or 58%, from the
prior period primarily because no amortization expense was incurred for
deferred organizational costs, as these costs were fully amortized as of
December 31, 1997. In addition, the quarterly fee paid to the Independent
General Partners was eliminated, as the Partnership is no longer making
initial investments. There was however, an expense of $1,000 incurred for
payment to the Independent General Partners for attending a Board of
Director's meeting. Professional fees were $5,625 lower during the first
quarter of 1998 than during the first quarter of 1997.
As of March 31, 1998, unrealized gains on investments totaled $96,282.
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 quarter
ended March 31, 1998.
<TABLE>
<CAPTION>
Type of Realized
Company Transaction Cost Proceeds Gain (Loss)
- ----------------------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
Hawk Corp. (Houghton Payment of
Acquisition Corp.) Term Note $ 51,600 $ $51,600 $ 0
---------- ----------- ----------
Total $ 51,600 $ 51,600 $ 0
========== =========== ==========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The partnership's total capital of $1,960,725 as of March 31, 1998,
consisted of $1,940,999 in limited partner capital and $19,726 in general
partner capital. Net income was allocated to the limited partners in the
amount of $110,712 and to the general partners in the amount of $1,118.
At March 31, 1998, the Partnership had $162,108 in cash and cash
equivalents.
SUBSEQUENT EVENTS
There were no subsequent events.
13
<PAGE> 14
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 March 31, 1998.
14
<PAGE> 15
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
<TABLE>
<S> <C> <C>
/s/ Daniel A. Burkhardt
----------------------- President, Treasurer and Director May 15, 1998
Daniel A. Burkhardt
/s/ Ray L. Robbins, Jr.
----------------------- Vice-President and Director May 15, 1998
Ray L. Robbins, Jr.
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for Community Investment Partners II, L.P. for the quarter
ended March 31, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 1,705,491
<INVESTMENTS-AT-VALUE> 1,801,773
<RECEIVABLES> 20,902
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,984,783
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,058
<TOTAL-LIABILITIES> 24,058
<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> 1,960,725
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,874
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 120,144
<NET-CHANGE-FROM-OPS> 0
<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> 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> 12,188
<AVERAGE-NET-ASSETS> 1,904,810
<PER-SHARE-NAV-BEGIN> 16.43
<PER-SHARE-NII> .99
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.42
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
