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 March 31, 2001
( ) Transition Report Under Section 13 or 15(d) of the Exchange Act For the
Transition period from ________________ to ________________
Commission File Number: 0-21604
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)
1100 Ocean Shore Blvd., Suite 10
Ormond Beach, FL 32176
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(Address of principal executive offices)
(904) 441-6633
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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
March 31, December 31,
2001 2000
---------- ----------
(Unaudited)
Assets
------
Cash and cash equivalents $ 436,874 431,399
Due from affiliates 74,994 74,994
Accrued interest receivable 76,164 60,730
Mortgage loans receivable 1,250,000 1,250,000
---------- ----------
Total Assets $1,838,032 $1,817,123
========== ==========
Liabilities and Partners' Capital
---------------------------------
Liabilities
-----------
Due to affiliates $ 58,439 $ 55,070
Accrued distributions 43,687 43,140
Deferred revenue 400,000 400,000
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Total Liabilities 502,126 498,210
Partners' capital:
------------------
General partner 55,269 53,752
Limited partner 1,280,637 1,265,161
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Total partners' capital 1,335,906 1,318,913
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Total Liabilities and Partners' Capital $1,838,032 $1,817,123
========== ==========
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
March 31, March 31,
2001 2000
-------- --------
Revenue
- -------
Interest Income $ 70,986 $ 63,335
-------- --------
Total Revenue 70,986 63,335
Expenses
- --------
Professional fees 8,111 2,430
Fees to affiliates:
Management 1,374 1,802
Mortgage Servicing 250 282
Other 571 5,031
-------- --------
Total Expenses 10,306 9,545
Net Income and
Comprehensive Income $ 60,680 $ 53,790
======== ========
Net Income allocated to
general partners - 2.5% $ 1,517 $ 1,345
Net Income allocated to
limited partners - 97.5% 59,163 52,445
-------- --------
$ 60,680 $ 53,790
======== ========
Basic earnings per limited
partner unit $ .12 $ .10
======== ========
Weighted average limited 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)
THREE MONTHS ENDED
MARCH 31,
------------------------------------------------------------------------------------
2001 2000
----------------------------------------- ----------------------------------------
TOTAL TOTAL
GENERAL LIMITED PARTNERS' GENERAL LIMITED PARTNERS'
PARTNERS PARTNERS CAPITAL PARTNERS PARTNERS CAPITAL
-------- -------- ------- -------- -------- -------
Balance at beginning of period $ 53,752 $ 1,265,161 $ 1,318,913 $ 49,600 $ 1,273,949 $ 1,323,549
Net income 1,517 59,163 60,680 1,345 52,445 53,790
Distributions to partners -- (43,687) (43,687) -- (43,748) (43,748)
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of period $ 55,269 $ 1,280,637 $ 1,335,906 $ 50,945 $ 1,282,646 $ 1,333,591
=========== =========== =========== =========== =========== ===========
See accompanying notes.
4
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Delaware Limited Partnership)
Statements of Cash Flows
(Unaudited)
THREE MONTHS ENDED
------------------
March 31, March 31,
2001 2000
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Cash flows from operating activities:
Net income $ 60,680 $ 53,790
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease (increase) in due from affiliates (59,463)
Decrease (increase) in interest receivable (15,434) (3,887)
Increase (decrease) in due to affiliates 3,369 3,871
Decrease (increase) in mortgage
loan receivable 57,945
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Net cash provided by operating activities 48,615 52,256
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Cash flows from financing activities:
Distributions to limited partners (43,140) (37,986)
--------- ---------
Net cash used in financing activities (43,140) (37,986)
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Net increase in cash and cash equivalents: 5,475 14,270
Cash and cash equivalents, beginning of period 431,399 423,207
--------- ---------
Cash and cash equivalents, end of period $ 436,874 $ 437,477
========= =========
See accompanying notes.
5
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(A Delaware Limited Partnership)
Notes to Financial Statements
(Unaudited)
March 31, 2001
(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 (the "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
months ended March 31, 2001 and 2000 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 16, 2001.
(2) Mortgage Loans Receivable
-------------------------
St. Catherine's Loans.
---------------------
The principal balances outstanding for these loans as of March 31, 2001
were as follows:
Second Mortgage Loans Third Mortgage Loans
--------------------- --------------------
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
========= =========
As of March 31, 2001, the second Mortgage Loans were current as to
regular interest. The third Mortgage Loans were not current as to
regular interest as of March 31, 2001. The Partnership and the
Borrowers agreed to extend the terms of the second and third Mortgage
Loans, which matured on April 20, 2001, so that the second and third
Mortgage Loans would be coterminous with the underlying first mortgage.
As of March 31, 2001, the Partnership was owed $65,316 in late interest
and fees on the third Mortgage Loans. The Partnership is working with
the borrowers to bring the third Mortgage Loans current.
7
(3) Partners' Capital
-----------------
On April 13, 2001, the Partnership declared and paid an accrued
distribution of $43,687 ($.08 per unit) to Limited Partner unitholders
of record at March 15, 2001.
Item 2. Management's Discussion and Analysis or Plan of Operation.
---------------------------------------------------------
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
holds ten mortgage loans (the "Mortgage Loans"), consisting of second
and third positions, secured by properties owned by affiliated entities
(the "St. Catherine's Care Centers").
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.
Liquidity and Capital Resources
-------------------------------
Partnership assets increased from $1,817,123 at December 31, 2000 to
$1,838,032 at March 31, 2001. The increase of $20,909 resulted
primarily from net earnings for the period partially offset by cash
distributions on January 15, 2001. As of March 31, 2001 the
Partnership's loan portfolio consisted of ten mortgage loans secured by
properties owned by affiliated entities (the "St. Catherine's Care
Centers"), the aggregate outstanding principal balance of which was $
1,250,000.
8
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
March 31, 2001. The third Mortgage Loans were not current as to regular
interest as of March 31, 2001. The Partnership is working with the
borrowers to bring the third Mortgage Loans current. As of March 31,
2001 the Partnership was owed $76,164 of interest and fees.
The maturity date of the senior debt secured by the St. Catherine's
Care Centers' properties (the "Senior Debt"), as well as of the
Partnership's Mortgage Loans, was April 20, 2001.
The St. Catherine's Care Centers have refinanced the Senior Debt. The
effective date of such refinancing is April 20, 2001. The refinanced
Senior Debt has a term of three years and a fixed interest rate of
8.25% per year (the "Senior Debt Rate"). The Partnership is in the
process of documenting an agreement with the St. Catherine's Care
Centers providing for the extension of the maturity dates of all the
Partnership's outstanding loans to the St. Catherine's Care Centers.
The effective date of such extensions is expected to be April 20,
2001. The maturity dates will coincide with the maturity date of
refinanced Senior Debt (April 20, 2004). Under the terms of the
Partnership's extension, the annual interest rate on its loans will be
equal to, in the case of the second mortgage loans, 9.75% (or 1.5%
above the Senior Debt Rate) and, in the case of the third mortgage
loans, 10.75% (or 2.5% above the Senior Debt Rate). The aggregate
principal amount of the refinanced second and third mortgage loans
held by the Partnership will be $1,250,000. The Partnership intends to
require the St. Catherine's borrowers to pay extension fees totaling
approximately $10,500. In connection with the refinancings of the
Mortgage Loans, the St. Catherine's Care Centers have agreed to pay
accrued late interest and fees with respect to the third mortgages
totaling approximately $69,000 through delivery of a promissory note
that will have an interest rate of 7% per year and amortize over the
next twelve months.
The facilities underlying the Partnership's Mortgage Loans were leased
to an unaffiliated third party in November 1998 (the "Lessee"). The
Lessee continues to lease the facilities. The Lessee did not assume the
St. Catherine's Loans.
Results of Operations
---------------------
As of March 31, 2001 the Partnership's loan portfolio consisted of ten
mortgage loans secured by properties owned by the St. Catherine's Care
Centers.
9
The maturity date of the Senior Debt secured by the St. Catherine's
Care Centers' properties, as well as the Partnership's mortgage loans,
was April 20, 2001. The St. Catherine's Care Centers have refinanced
the Senior Debt secured by their properties, and the Partnership is in
the process of documenting an agreement with the St. Catherine's Care
Centers providing for the extension of the maturity dates of all the
Partnership's outstanding loans to the St. Catherine's Care Centers,
as discussed in "Liquidity and Capital Resources," above.
During the three months ended March 31, 2001 and 2000, the Partnership
had net income of $60,680 and $53,790, based on total revenue of
$70,986 and $63,335 and total expenses of $10,306 and $9,545. For the
three months ended March 31, 2001 and 2000, the net earnings per
limited partner unit was $.12 and $.10 respectively.
The increase in net income of $6,890 for the three months ended March
31, 2001, compared to the three months ended March 31, 2000, is due an
increase in interest income of $7,651 partially offset by an increase
of $761 in other expenses.
The Partnership's success and the resultant rate of return to Limited
Partners will be dependent upon, among other things, the completion of
the documentation of the refinancing of the St. Catherine's Care
Centers' loans , 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
None
(b) Reports on Form 8-K
None
10
SIGNATURES
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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: May 21, 2001 /s/Albert E. Jenkins, III
-------------------------
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer