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 June 30, 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
------------------------------
(Address of principal executive offices)
(904) 441-6633
--------------
(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
June 30, December 31,
2001 2000
----------- ----------
(Unaudited)
Assets
------
Cash and cash equivalents $ 491,238 431,399
Due from affiliates -- 74,994
Accrued interest receivable 78,905 60,730
Mortgage loans receivable - related party 1,250,000 1,250,000
Accounts receivable-other 10,500 --
---------- ----------
Total Assets $1,830,643 $1,817,123
========== ==========
Liabilities and Partners' Capital
---------------------------------
Liabilities
Due to affiliates $ 70,612 $ 55,070
Accrued distributions 49,124 43,140
Deferred revenue 400,000 400,000
---------- ----------
Total Liabilities 519,736 498,210
Partners' capital:
General partner 55,872 53,752
Limited partner 1,255,035 1,265,161
---------- ----------
Total partners' capital 1,310,907 1,318,913
---------- ----------
Total Liabilities and Partners' Capital $1,830,643 $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)
SIX MONTHS ENDED THREE MONTHS ENDED
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
-------- -------- -------- --------
Revenue
- -------
Interest Income $119,958 $120,522 48,972 56,237
Other Income 10,500 -- 10,500 --
-------- -------- -------- --------
Total Revenue 130,458 120,522 59,472 56,237
Expenses
- --------
Professional fees 41,279 33,356 33,168 20,295
Fees to affiliates:
Management 2,624 3,494 1,250 2,180
Mortgage Servicing 500 563 250 281
Other 1,252 1,849 681 783
-------- -------- -------- --------
Total Expenses 45,655 39,262 35,349 23,539
Net Income and
Comprehensive Income $ 84,303 $ 81,260 $ 24,123 $ 32,698
======== ======== ======== ========
Net Income allocated to
general partners - 2.5% $ 2,120 $ 2,032 $ 603 $ 817
Net Income allocated to
limited partners - 97.5% 82,683 79,228 23,520 31,881
-------- -------- -------- --------
$ 84,803 $ 81,260 $ 24,123 $ 32,698
======== ======== ======== ========
Basic earnings per limited
partner unit $ .16 $ .15 $ .05 $ .06
======== ======== ======== ========
Weighted average limited 522,116 522,116 522,116 523,116
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)
SIX MONTHS ENDED
JUNE 30,
------------------------------------------------------------------------------------
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 2,120 82,683 84,803 2,032 79,228 81,260
Distributions to partners -- (92,809) (92,809) -- (85,433) (85,433)
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of period $ 55,872 $ 1,255,035 $ 1,310,907 $ 51,632 $ 1,267,744 $ 1,319,376
=========== =========== =========== =========== =========== ===========
See accompanying notes.
4
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Delaware Limited Partnership)
Statements of Cash Flows
(Unaudited)
SIX MONTHS ENDED
---------------------
June 30, June 30,
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 84,803 $ 81,260
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease (increase) in due from affiliates 74,994 (60,475)
Decrease (increase) in interest receivable (18,175) (13,067)
Decrease(increase) in accounts receivable-other (10,500)
Increase (decrease) in due to affiliates 15,542 9,716
Decrease (increase) in mortgage
loans receivable 57,945 -
--------- ---------
Net cash provided by operating activities 146,664 75,379
--------- ---------
Cash flows from financing activities:
Distributions to limited partners (86,825) (81,734)
--------- ---------
Net cash used in financing activities (86,825) (81,734)
--------- ---------
Net increase in cash and cash equivalents: 59,839 (6,355)
Cash and cash equivalents, beginning of period 431,399 423,207
--------- ---------
Cash and cash equivalents, end of period $ 491,238 $ 416,852
========= =========
See accompanying notes.
5
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(A Delaware Limited Partnership)
Notes to Financial Statements
(Unaudited)
June 30, 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 than
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 paid
quarterly 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 six
months ended June 30, 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-Related Party
---------------------------------------
St. Catherine's Loans.
---------------------
The principal balances outstanding for these loans as of June 30, 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 June 30, 2001, the second and third Mortgage Loans were current
as to regular interest. As of April 20, 2001, the Partnership and the
Borrowers agreed to: (i) extend the terms of the second and third
Mortgage Loans, which matured on April 20, 2001 to April 20, 2004, so
that the second and third Mortgage Loans would be coterminous with the
underlying first mortgage; (ii) adjust the applicable annual interest
rate payable under the second Mortgage Loans from and after April 20,
2001, to 9.75%; and
7
(iii) adjust the applicable annual interest rate payable under the
third Mortgage Loans from and after April 20, 2001, to 10.75% and (iv)
require the St. Catherine's Care Centers to pay extension fees to the
Partnership totalling $10,500. As of June 30, 2001, the Partnership
was owed $78,905 on the second and third Mortgage Loans. Included in
this amount is $69,294 representing all late interest and fees on the
third Mortgage Loans outstanding as of April 20, 2001. The Borrowers
agreed to pay the Partnership such amount in the form of a promissory
note dated as of April 20, 2001, bearing interest at an annual rate of
seven percent (7%) and payable in monthly installments over twelve
months. As of August 10, 2001, the Partnership received payment of
$17,987 on this note.
(3) Partners' Capital
-----------------
On April 13, 2001 the Partnership paid an accrued distribution of
$43,687 ($.08 per unit) to Limited Partner unitholders of record at
March 15, 2001. On July 15, 2001, the Partnership paid an accrued
distribution of $49,124 ($.09 per unit) to Limited Partner unitholders
of record at June 15, 2001.
Item 2. Management's Discussion and Analysis or Plan of Operation.
---------------------------------------------------------
General
-------
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
$1,830,643 at June 30, 2001.
8
The increase of $13,520 resulted primarily from net earnings for the
period partially offset by cash distributions on April 15, 2001 and a
transfer from Common Goal Fund I for payment on accounts receivable. As
of June 30, 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.
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 and third Mortgage Loans were current as to regular
interest as of June 30, 2001. As of June 30, 2001 the Partnership was
owed $78,905 of interest and fees. Included in this amount is $69,294
representing all late interest and fees on the third Mortgage Loans
outstanding as of April 20, 2001. The Borrowers agreed to pay the
partnership such amount in the form of a promissory note dated as of
April 20, 2001, bearing interest at an annual rate of seven percent
(7%) and payable in monthly installments over twelve months. As of
August 10, 2001, the Partnership received payment of $17,987 on this
note.
The April 20, 2001 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 has been extended to April 20, 2004 as
further described below.
The St. Catherine's Care Centers have refinanced the Senior Debt. The
refinanced Senior Debt has a term of three years and a fixed interest
rate of 8.25% per year (the "Senior Debt Rate"). As of April 20, 2001,
the Partnership and the St. Catherine's Care Centers entered into
agreements to: (i) extend the terms of the second and third Mortgage
Loans, so that he maturity dates will coincide with the maturity date
of refinanced Senior Debt (April 20, 2004); (ii) adjust the applicable
annual interest rate payable under the second Mortgage Loans from and
after April 20, 2001, to 9.75% (or 1.5% above the Senior Debt Rate);
(iii) adjust the applicable annual interest rate payable under the
third Mortgage Loans from and after April 20, 2001, to 10.75% (or 2.5%
above the Senior Debt Rate); and (iv) require the St. Catherine's Care
Centers to pay extension fees to the Partnership totaling $10,500. The
adjustment to the interest rates of the second and third Mortgage
Loans reflect current market rates that the General Partner believes
should be applicable to the Mortgage Loans, as extended. The aggregate
principal amount of the refinanced second and third Mortgage Loans
held by the Partnership equals $1,250,000. In connection with the
refinancings of the Mortgage Loans, the St. Catherine's Care Centers
additionally agreed as of April 20, 2001, to pay the Partnership
$69,294 representing all late interest and fees on the third Mortgage
Loans outstanding as of April 20, 2001. The Borrowers agreed to pay
the Partnership such amount in the form of a promissory note dated as
of April 20, 2001, bearing interest at an annual rate of seven percent
(7%) and payable in monthly installments over twelve months. As of
August 10, 2001, the Partnership received payment of $17,987 on this
note.
In addition to the second and third Mortgage Loans, there is a
contingent payment obligation by St. Catherine's of Seneca, Inc. in the
amount of $202,500 and a contingent payment obligation by
9
St. Catherine's Care Centers of Fostoria, Inc. in the amount of
$238,000 (collectively the "CPOs"). Due to the contingent nature of
the $440,500 in participation income due to the Partnership related to
the CPOs, such amount has not been recorded as an asset of the
Partnership and the participation income and interest earned on the
CPOs will be recognized only when received.
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 June 30, 2001 the Partnership's loan portfolio consisted of
ten mortgage loans secured by properties owned by the St. Catherine's
Care Centers.
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 has
entered into agreements 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 June 30, 2001 and 2000, the Partnership
had net income of $24,123 and $32,698, based on total revenue of
$59,472 and $56,237 and total expenses of $35,349 and $23,539,
respectively. For the three months ended June 30, 2001 and 2000, the
net earnings per limited partner unit were $.05 and $.06,
respectively.
The decrease in net income of $8,575 for the three months ended June
30, 2001, compared to the three months ended June 30, 2000, is
primarily due to an increase in professional fees related to extending
the second and third Mortgage Loans.
During the six months ended June 30, 2001 and 2000, the Partnership had
net income of $84,803 and $81,260, based on total revenue of $130,458
and $120,522 and total expenses of $45,655 and $39,262. For the six
months ended June 30, 2001 and 2000, the net earnings per limited
partner unit were $.16 and $.15 respectively.
The increase in net income of $3,543 for the six months ended June 30,
2001, compared to the six months ended June 30, 2000, is due to an
increase of $10,500 in other income partially offset by an increase of
$7,923 in professional fees.
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
10
(a) Exhibits
None
(b) Reports on Form 8-K
The Partnership filed Reports on Form 8-K on May 4, 2001
and on May 15, 2001 regarding the refinancing of the
senior debt secured by the St. Catherine's Care Centers'
properties and the extensions of the Morgage Loans.
11
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: August 14, 2001 /s/Albert E. Jenkins, III
-------------------------
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer
12