U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X) Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly period ended September 30, 2000
( ) Transition Report Under Section 13 or 15(d) of the Exchange
Act For the Transition period from ____________ to ___________
Commission File Number: 0-21604
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Common Goal Health Care Pension and Income Fund L.P. II
(Exact name of small business issuer as specified in its charter)
Delaware 36-3644837
- --------------------------------- ----------------------
(State or other Jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
215 Main Street
Penn Yan, New York 14527
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(Address of principal executive offices)
(315) 536-5985
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 1 - Financial Information
Item 1. Financial Statements
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Delaware Limited Partnership)
Balance Sheets
September 30 December 31
2000 1999
------------ -----------
(Unaudited)
Assets
------
Cash and cash equivalents $ 421,528 $ 423,207
Due from affiliates 74,995 16,038
Accrued interest receivable 69,910 65,126
Mortgage loans receivable 1,250,000 1,307,945
---------- ----------
Total Assets $1,816,433 $1,812,316
========== ==========
Liabilities and Partners' Capital
---------------------------------
Liabilities
-----------
Due to affiliates $ 53,487 $ 50,781
Accrued distributions 42,153 37,986
Deferred revenue 400,000 400,000
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Total Liabilities 495,640 488,767
Partners' capital:
------------------
General partner 52,721 49,600
Limited partner 1,268,072 1,273,949
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Total partners' capital 1,320,793 1,323,549
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Total Liabilities and Partners' Capital $1,816,433 $1,812,316
========== ==========
See accompanying notes
2
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Delaware Limited Partnership)
Statements of Income
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
Sept 30 Sept 30 Sept 30 Sept 30
2000 1999 2000 1999
-------- -------- -------- --------
Revenue
- -------
Interest Income $ 55,103 $ 50,818 $175,626 $165,210
-------- -------- -------- --------
Total Revenue 55,103 50,818 175,626 165,210
Expenses
- --------
Professional fees 9,732 27,446 43,088 59,258
Fees to affiliates:
Management 1,191 2,068 4,685 7,054
Mortgage Servicing 208 282 771 845
Other 402 391 2,252 1,430
-------- -------- -------- --------
Total Expenses 11,533 30,187 50,796 68,587
Net Income and
Comprehensive Income $ 43,570 $ 20,631 $124,830 $ 96,623
======== ======== ======== ========
Net Income allocated to
general partners - 2.5% $ 1,089 $ 516 $ 3,121 $ 2,415
Net Income allocated to
limited partners - 97.5% 42,481 20,115 121,709 94,208
-------- -------- -------- --------
$ 43,570 $ 20,631 $124,830 $ 96,623
======== ======== ======== ========
Basic earnings per limited
partner unit $ .08 $ .04 $ .24 $ .18
======== ======== -------- --------
Weighted average limited 522,116 522,116 522,116 522,116
partner units outstanding ======== ======== ======== ========
See accompanying notes.
3
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Delaware Limited Partnership)
Statements of Partners' Capital
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
---------------------------------------- ---------------------------------------
TOTAL TOTAL
GENERAL LIMITED PARTNERS' GENERAL LIMITED PARTNERS'
PARTNERS PARTNERS CAPITAL PARTNERS PARTNERS CAPITAL
---------------------------------------- ---------------------------------------
Balance at beginning of period $ 49,600 $ 1,273,949 $ 1,323,549 $ 45,308 $ 1,474,084 $ 1,519,392
Net income 3,121 121,709 124,830 2,415 94,208 96,623
Distributions to partners -- (127,586) (127,586) -- (329,530) (329,530)
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of period $ 52,721 $ 1,268,072 $ 1,320,793 $ 47,723 $ 1,238,762 $ 1,286,485
=========== =========== =========== =========== =========== ===========
See accompanying notes.
4
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Delaware Limited Partnership)
Statements of Cash Flows
(Unaudited)
NINE MONTHS ENDED
-----------------
September 30 September 30
2000 1999
----------- ------------
Cash flows from operating activities:
Net income $ 124,830 $ 96,623
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease (increase) in due from affiliates (58,957) (4,553)
Decrease (increase) in interest receivable (4,784) 2,882
Increase (decrease) in due to affiliates 2,706 3,144
Decrease (increase) in mortgage
loan receivable 57,945 --
--------- ---------
Net cash provided by operating activities 121,740 98,096
--------- ---------
Cash flows from investing activities:
Loan to affiliates -- --
--------- ---------
Net cash used in investing activities -- --
--------- ---------
Cash flows from financing activities:
Distributions to limited partners (123,419) (540,906)
--------- ---------
Net cash used in financing activities (123,419) (540,906)
--------- ---------
Net decrease in cash and cash equivalents: (1,679) (442,810)
Cash and cash equivalents, beginning of period 423,207 839,759
--------- ---------
Cash and cash equivalents, end of period $ 421,528 $ 396,949
========= =========
See accompanying notes.
5
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(A Delaware Limited Partnership)
Notes to Financial Statements
(Unaudited)
September 30, 2000
(1) Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
Common Goal Health Care Pension and Income Fund L.P. II (Partnership)
was formed on May 9, 1989, to invest in and make mortgage loans to
third parties and affiliates involved in health care. On July 2, 1990,
the Partnership commenced operations, having previously sold more that
the specified minimum of 117,650 units ($1,176,500). The Partnership's
offering terminated January 11, 1992 with the Partnership having sold
522,116 Units ($5,221,160).
The general partners are Common Goal Capital Group, Inc. II, the
managing general partner, and Common Goal Limited Partnership II, the
associate general partner. Under the terms of the Partnership's
agreement of limited partnership ("Partnership Agreement"), the general
partners are not required to make any additional capital contributions
except under certain limited circumstances upon termination of the
Partnership.
Under the terms of the Partnership Agreement, the Partnership is
required to pay a quarterly management fee to the managing general
partner equal to 1% per annum of adjusted contributions, as defined. A
mortgage servicing fee equal to .25% per annum of the Partnership's
outstanding mortgage loan receivable principal amount also is to be
paid to Common Goal Mortgage Company, an affiliate of the general
partners. Additionally, under the terms of the Partnership Agreement,
the Partnership is required to reimburse the managing general partner
for certain operating expenses.
The Partnership classifies all short-term investments with maturities
at date of purchase of three months or less as cash equivalents.
Mortgage loans that have virtually the same risk and potential rewards
as joint ventures are accounted for and classified as investments in
operating properties. Cash received related to investments in operating
properties is recognized as interest income to the extent that such
properties have earnings prior to the recognition of the distribution
of cash to the Partnership; otherwise, such cash is recorded as a
reduction of the related investments.
6
An allowance for loan losses will be provided, if necessary, at a level
which the Partnership's management considers adequate based upon an
evaluation of known and inherent risks in the loan portfolio. Currently
management believes no allowance for loan losses is necessary.
No provision for income taxes has been recorded as the liability of
such taxes is that of the partners rather than the Partnership.
Earnings per limited partner unit is computed based on the weighted
average limited partner units outstanding for the period.
The accompanying unaudited financial statements as of and for the three
and nine months ended September 30, 2000 and 1999 are the
representation of management and reflect all adjustments which are, in
the opinion of management, necessary to a fair presentation of the
financial position and results of operations of the Partnership. All
such adjustments are normal and recurring. These results are not
necessarily indicative of the results for the entire year.
These financial statements should be read in conjunction with the
Company's financial statements and notes included in the Annual Report
on Form 10-KSB filed by the Company with the Securities and Exchange
Commission on April 14, 2000.
(2) Mortgage Loans Receivable
-------------------------
The Joint Venture Loan
----------------------
This loan was repaid in full in May, 2000 including $7,355 of
participation interest.
St. Catherine's Loan.
--------------------
The principal balances outstanding for these loans as of September 30,
2000 were as follows:
Second Mortgage Loan Third Mortgage Loan
-------------------- -------------------
St. Catherine's of Tiffin $ 51,500 $ 51,281
St. Catherine's of Bloomville 36,000 173,425
St. Catherine's of Fostoria 102,000 113,550
St. Catherine's of Findlay 142,500 126,379
St. Catherine's of Washington
Court House 68,000 385,365
-------- ---------
400,000 $ 850,000
======== =========
7
As of September 30, 2000, the second Mortgage Loans were current as to
regular interest. The third Mortgage Loans were not current as to
regular interest as of September 30, 2000. The Partnership and the
Borrowers have agreed to extend the terms of the Second Mortgage Loans,
which matured on April 30, 2000 to April 20, 2001, so that the Second
Mortgage Loans would be coterminous with the underlying first mortgage.
The borrowers are paying additional interest at the penalty rate of 3%
per annum, in addition to Basic Interest, pending documentation. As of
September 30, 2000, the Partnership was owed $56,342 in interest on the
Third Mortgage Loans, of which $14,438 was at the 3% penalty rate. The
Partnership is working with the borrowers to bring the third Mortgage
Loans current. The Partnership and the Borrower have agreed to extend
the terms of the Third Mortgage Loans, which matured on August 31, 2000
to April 20, 2001, so that the Third Mortgage Loans would be
coterminous with the underlying First Mortgage and Second Mortgage
Loans. With regard to the Third Mortgage Loans, the Partnership has
waived any penalty rate of interest.
(3) Partners' Capital
-----------------
On April 14, 2000, the Partnership declared and paid a distribution of
$43,748 ($.08 per unit) to Limited Partner unitholders of record at
March 15, 2000. On July 10, 2000, the Partnership declared and paid an
accrued distribution of $ 41,685 ($.08 per unit) to Limited Partner
unitholders of record at June 15, 2000. On September 15, 2000, the
Partnership declared and accrued a distribution of $42,153 ($.08 per
unit) to Limited Partner unitholders which was paid October 5, 2000
subsequent to September 30, 2000.
Item 2. Managements Discussion and Analysis or Plan of Operations.
---------------------------------------------------------
General
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Some statements in this Form 10-QSB are forward looking and actual
results may differ materially from those stated. As discussed herein,
among the factors that may affect actual results are changes in the
financial condition of the borrower and/or anticipated changes in
expenses or capital expenditures.
Common Goal Health Care Pension and Income Fund L.P. II, a Delaware
limited partnership (the "Partnership"), was formed to make mortgage
loans secured by a mix of first and junior liens on health care-related
properties. The Partnership commenced its offering of Units to the
public on January 12, 1990, and commenced operations on July 2, 1990
(having sold the Minimum Number of Units as of that date). After having
raised $5,221,160 by selling Units to 483 investors, the Partnership
terminated the public offering on January 11, 1992.
The Partnership's Mortgage Loans pay Basic Interest which is payable at
higher rates than are being earned on temporary investments and provide
for payments of Additional Interest and Participations. The movement of
funds from Mortgage Loans to short-term investments has increased the
Partnership's overall liquidity, but has lowered expected interest
income. The Partnership has structured its Mortgage Loans to provide
for payment of quarterly distributions to Limited Partners from
investment income.
8
Liquidity and Capital Resources
-------------------------------
Partnership assets increased from $1,812,316 at December 31, 1999 to
$1,816,433 at September 30, 2000. The increase of $4,117 resulted
primarily from net earnings for the period that was partially offset by
cash distributions on January 15, 2000, April 14, 2000, and July 15,
2000, totaling $127,586 to the Limited Partners. The Partnership also
received $ 57,945 (including $7,355 of participation interest) in
payment of one of its mortgage loans. As of September 30, 2000 the
Partnership's loan portfolio consisted of five mortgage loans, the
aggregate outstanding principal balance of which was $ 1,250,000.
The Partnership has structured its Mortgage Loans to provide for
payment of quarterly distributions from investment income. The
interest derived from the Mortgage Loans, repayments of Mortgage Loans
and interest earned on short-term investments contribute to the
Partnership's liquidity. These funds are used to make cash
distributions to Limited Partners and to pay normal operating expenses
as they arise.
The Partnership intends to maintain working capital reserves equal to
approximately 2% of gross proceeds of the offering (approximately
$104,423 ), an amount which is anticipated to be sufficient to satisfy
liquidity requirements. The Managing General Partner continues
monitoring the level of working capital reserves.
The second Mortgage Loans were current as to regular interest as of
September 30, 2000. See Note 2 to the Financial Statements herein
regarding renegotiations of the Partnership's second Mortgage Loans.
The third Mortgage Loans were not current as to regular interest as of
September 30, 2000. The Partnership is working with the borrowers to
bring the third Mortgage Loans current. As of September 30, 2000 the
Partnership was owed $56,342 of interest. The borrowers are paying
additional interest at the penalty rate of 3% per annum plus Basic
Interest.
Results of Operations
---------------------
The Partnership commenced operations July 2, 1990, and funded its first
Mortgage Loan in November 1990. As of June 30, 1991, the Partnership
had completed its portfolio of Mortgage Loans. The interest earned on
these investments has stabilized on a tax accounting basis.
Accordingly, the General Partners expects the Partnership's earnings to
remain relatively constant.
During the nine months ended September 30, 2000 and 1999, the
Partnership had net earnings of $124,830 and $96,623, based on total
revenue of $175,626 and $165,210 and total expenses of $50,796 and
$68,587. For the nine months ended September 30, 2000 and 1999, the net
earnings per limited partner unit was $.24 and $.18 respectively.
9
During the three months ended September 30, 2000 and 1999, the
Partnership had net earnings of $43,570 and $20,631, based on total
revenue of $55,103 and $50,818, and total expenses of $11,533 and
$30,187, respectively.
The increase in net earnings of $28,207 for the nine months ended
September 30, 2000, compared to the nine months ended September 30,
1999, is due to an increase in interest income of $10,416, a decrease
in professional fees of $16,170, an increase in other expenses of $822
and a decrease in management fee of $2,369.
The Partnership's success and the resultant rate of return to Limited
Partners will be dependent upon, among other things, the ability of the
Managing General Partner to identify suitable opportunities for the
Partnership to reinvest its assets and the ability of the borrowers to
pay the current interest, additional interest and principal of the
Mortgage Loans.
PART II - OTHER INFORMATION
Items 1 through 5 are omitted because of the absence of conditions
under which they are required.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27, Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Common Goal Health Care Pension and Income Fund L.P. II
-------------------------------------------------------
(Registrant)
By: Common Goal Capital Group, Inc., II
Managing General Partner
DATED: November 14, 2000 /s/Albert E. Jenkins, III
-------------------------
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer
11