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, 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
September 30, December 31,
2001 2000
---- ----
(Unaudited)
Assets
------
Cash and cash equivalents $ 456,036 431,399
Due from affiliates 74,994
Accrued interest receivable 30,217 60,730
Mortgage loans receivable 1,250,000 1,250,000
Note receivable 46,731 -
----------- ----------
Total Assets $ 1,782,984 $1,817,123
=========== ==========
Liabilities and Partners' Capital
---------------------------------
Liabilities
-----------
Due to affiliates $ 52,634 $ 55,070
Accrued distributions 45,604 43,140
Deferred revenue 400,000 400,000
----------- ----------
Total Liabilities 498,238 498,210
Partners' capital:
------------------
General partner 56,358 53,752
Limited partner 1,228,388 1,265,161
----------- ----------
Total partners' capital 1,284,746 1,318,913
----------- ----------
Total Liabilities and Partners' Capital $ 1,782,984 $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)
NINE MONTHS ENDED THREE MONTHS ENDED
Sept 30, Sept 30, Sept 30, Sept 30,
2001 2000 2001 2000
---- ---- ---- ----
Revenue
- -------
Interest Income $175,157 $175,626 56,126 55,103
Other Income 11,427 - - -
-------- -------- -------- --------
Total Revenue 186,584 175,626 56,126 55,103
Expenses
- --------
Professional fees 76,038 43,088 34,759 9,732
Fees to affiliates:
Management 3,752 4,685 1,128 1,191
Mortgage Servicing 750 771 250 208
Other 1,798 2,252 546 402
-------- -------- -------- --------
Total Expenses 82,338 50,796 36,683 11,533
Net Income and
Comprehensive Income $104,246 $124,830 $ 19,443 $ 43,570
======== ======== ======== ========
Net Income allocated to
general partners - 2.5% $ 2,606 $ 3,121 486 1,089
Net Income allocated to
limited partners - 97.5% 101,640 121,709 18,957 42,481
-------- -------- -------- --------
$104,246 $124,830 $ 19,443 $ 43,570
======== ======== ======== ========
Basic earnings per limited
partner unit $ .20 $ .24 $ .04 $ .08
======== ======== -------- --------
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
-------------------------------------------------------------------------------------
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 2,606 101,640 104,246 3,121 121,709 124,830
Distributions to partners - (138,413) (138,413) (127,586) (127,586)
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of period $ 56,358 $ 1,228,388 $ 1,284,746 $ 52,721 $ 1,268,072 $ 1,320,793
=========== =========== =========== =========== =========== ===========
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
-----------------
Sept 30, Sept 30,
2001 2000
---- ----
Cash flows from operating activities:
Net income $ 104,246 $ 124,830
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease (increase) in due from affiliates 74,994 (58,957)
Decrease (increase) in interest receivable 30,513 (4,784)
Decrease (increase) in note receivable (46,731)
Increase (decrease) in due to affiliates (2,436) 2,706
Decrease (increase) in mortgage
loan receivable 57,945
--------- ---------
Net cash provided by operating activities 160,586 121,740
--------- ---------
Cash flows from financing activities:
Distributions to limited partners (135,949) (123,419)
--------- ---------
Net cash used in financing activities (135,949) (123,419)
--------- ---------
Net increase in cash and cash equivalents: 24,637 (1,679)
Cash and cash equivalents, beginning of period 431,399 423,207
--------- ---------
Cash and cash equivalents, end of period $ 456,036 $ 421,528
========= =========
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, 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 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 nine
months ended September 30, 2001 and 2000 are the representation of
management and reflect all adjustments that 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 September 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 September 30, 2001, the second and third Mortgage Loans were
current as to regular interest. On 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 (iii) adjust the applicable annual
interest rate payable under the third Mortgage Loans from and after
7
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.
The $10,500 extension fee was paid on August 31, 2001. As of September
30, 2001 the Partnership was owed $30,217 for interest accrued during
the third quarter for the second and third Mortgage Loans. The
Borrowers are current in their payments on the second and third
Mortgage Loans. Additionally, as of September 30, 2001, the
Partnership was owed $46,731 from St. Catherine's Care Centers
pursuant to the promissory note agreement entered into by the two
entities in connection with the refinancing of the Mortgage loans on
April 20, 2001. As of that April date, the Partnership was owed
$69,294 for all late interest and fees on the third mortgages. The
promissory note, signed April 20, 2001, bears interest at an annual
rate of 7% and is payable in monthly installments over twelve months.
The Borrowers are current in their payments on this note. As of
September 30, 2001, the Partnership has received principal and
interest payments of $22,563 and $1,420, respectively.
(3) Partner's Capital
-----------------
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. On October 15, 2001, the Partnership paid an accrued
distribution of $45,604 ($.09 per unit) to Limited Partner unitholders
of record at September 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 that 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 decreased from $1,817,123 at December 31, 2000 to
$1,782,984 at September 30, 2001. The decrease of $34,139 resulted
primarily from cash distributions during the period ($138,413), being
partially offset by net earning for the period ($104,246). As of
September 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 that 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 September 30, 2001. As of September 30, 2001 the
Partnership was owed $30,217 for interest accrued during the third
quarter for the second and third Mortgage Loans. The Borrowers are
current in their payments on the second and third Mortgage Loans.
Additionally, as of September 30, 2001, the Partnership was owed
$46,731 from St. Catherine's Care Centers pursuant to the promissory
note agreement entered into by the two entities in connection with the
refinancing of the Mortgage loans on April 20, 2001. As of that April
date, the Partnership was owed $69,294 for all late interest and fees
on the third mortgages. The promissory note, signed April 20, 2001,
bears interest at an annual rate of 7% and is payable in monthly
installments over twelve months. The Borrowers are current in their
payments on this note. As of September 30, 2001, the Partnership has
received principal and interest payments of $22,563 and $1,420,
respectively.
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 the maturity dates will coincide with 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
9
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 7% and
payable in monthly installments over the twelve months.
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 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
---------------------
During the three months ended September 30, 2001 and 2000, the
Partnership had net income of $19,443 and $43,570, based on total
revenue of $56,126 and $55,103 and total expenses of $36,683 and
$11,533, respectively. For the three months ended September 30, 2001
and 2000, the net earnings per limited partner unit were $.04 and $.08,
respectively.
The decrease in net income of $24,127 for the three months ended
September 30, 2001, compared to the three months ended September 30,
2000, is primarily due to an increase in professional fees related to
extending the second and third Mortgage Loans.
10
During the nine months ended September 30, 2001 and 2000, the
Partnership had net income of $104,246 and $124,830, based on total
revenue of $186,584 and $175,626 and total expenses of $82,338 and
$50,796. For the nine months ended September 30, 2001 and 2000, the net
earnings per limited partner unit was $.20 and $.24 respectively.
The decrease in net income of $20,584 for the nine months ended
September 30, 2001, compared to the nine months ended September 30,
2000, is due to an increase 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
(a) Exhibits
None
(b) Reports on Form 8-K
None
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: Nov 14, 2001 /s/Albert E. Jenkins, III
-------------------------
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer