<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1998 Commission File Number 33-6122-02
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 59-2726599
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(State of Organization) (IRS Employer Identification Number)
1100 Abernathy Road, Building 500, Suite 715
--------------------------------------------
Atlanta, Georgia 30328
----------------------
(Address of Principal Executive Office)
(770) 668-1080
--------------
Registrant's Telephone Number, Including Area Code
Indicate by check 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
--------- ----------
The number of limited partnership units outstanding at March 31, 1998 was
10,907.
<PAGE> 2
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Item 1. Financial Information ............................ 3 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .... 10
PART II
Item 6. Exhibits and Reports on Form 8-K ................. 11
Signatures ....................................... 11
</TABLE>
2
<PAGE> 3
PART I
ITEM 1.
FINANCIAL INFORMATION
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Balance Sheets, March 31, 1998 and December 31, 1997....................... 4
Statements of Operations for the three
months ended March 31, 1998 and 1997....................................... 5
Statements of Partners' Capital for the three
months ended March 31, 1998 and December 31, 1997.......................... 6
Statements of Cash Flows for the three months ended
March 31, 1998 and 1997.................................................... 7
Notes to Financial Statements.............................................. 8-10
</TABLE>
3
<PAGE> 4
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Balance Sheets
March 31, 1998 and December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 970,606 $ 1,014,047
Estimated settlements due from third parties 29,964 29,964
Prepaid expenses and other assets -- 4,472
----------- -----------
Total current assets 1,000,570 1,048,483
Investment in joint ventures 10,339,765 10,349,719
----------- -----------
Total assets $11,340,335 $11,398,202
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable 61,869 82,003
Accrued insurance 120,000 120,000
Other accrued liabilities 132,110 147,821
Estimated third party payor settlements 58,292 58,292
Due to affiliates 9,591,548 9,600,409
----------- -----------
Total current liabilities 9,963,819 10,008,525
Partners' capital
Limited partners 1,376,516 1,389,677
----------- -----------
Total liabilities and partners' capital $11,340,335 $11,398,202
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Statements of Operations
For the three months ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Revenues
Net patient service revenue $ -- $1,036,811
Other revenue -- 1,190
-------- ----------
Total revenue -- 1,038,001
-------- ----------
Operating expenses
Professional care of patients -- 590,924
Dietary -- 69,332
Household and plant -- 88,921
General and administrative -- 266,090
Employee health and welfare -- 49,958
Depreciation and amortization -- 36,078
-------- ----------
Total operating expenses -- 1,101,303
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Operating income (loss) -- (63,302)
-------- ----------
Other income (expenses)
Interest expense, net 12,994 (12,067)
Provider fees -- (16,200)
Partnership share of joint
venture income (9,954) 195,086
-------- ----------
Total other income (expenses) 3,040 166,819
-------- ----------
Net income before recognition of gain on sales
of properties and loss from discontinued operations 3,040 103,517
Gain on sales of properties -- 2,343,467
Loss from discontinued operations (16,201) --
-------- ----------
Net income (loss) $(13,161) $2,446,984
======== ==========
Net income (loss) per limited partnership
unit outstanding $ (1.21) $ 223.69
======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Statements of Partners' Capital
For the Three Months Ended March 31, 1998 and December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners
Unit Amount
------ ----------
<S> <C> <C>
Partners' capital,
December 31, 1997 10,907 $1,389,677
Net income (loss) (13,161)
------ ----------
Partners' capital,
March 31, 1998 10,907 $1,376,516
====== ==========
</TABLE>
6
<PAGE> 7
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Statements of Cash Flow
Three Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Cash received from patient care $ -- $ 1,026,856
Cash paid to suppliers and employees (47,574) (1,044,586)
Interest (paid) received 12,994 (12,068)
Provider fees -- (16,200)
Cash from other operating activities -- 1,190
---------- -----------
Net cash provided (used) by operating activities (34,580) (44,808)
---------- -----------
Cash flows from investing activities:
Distributions from joint ventures -- 32,726
Purchase of property -- --
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Net cash provided from investing activities -- 32,726
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Cash flows from financing activities:
Principal payments on long term debt -- (10,227)
Net borrowings (payments) to related parties (8,861) 38,022
Distributions to partners -- (117,280)
---------- -----------
Net cash used by financing activities (8,861) (89,485)
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Net increase (decrease) in cash and equivalents (43,441) (101,567)
Cash and equivalents, beginning of period 1,014,047 269,249
---------- -----------
Cash and equivalents, end of period $ 970,606 $ 167,682
========== ===========
Reconciliation of net income to net cash
provided by operating activities:
Net income $ (13,161) $ 2,446,984
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization -- 36,078
Partnership share of joint venture (income) 9,954 (195,086)
Gain on sale of property -- (2,343,467)
(Increase) decrease in:
Accounts receivable -- 35,508
Estimated settlements -- (45,463)
Prepaid expenses and other assets 4,472 (7,397)
Increase (decrease) in:
Accounts payable and accrued expenses (35,845) 28,035
---------- -----------
Net cash provided (used) by operating activities $ (34,580) $ (44,808)
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP
Notes to Financial Statements
(Unaudited)
(1) Financial Statements
These financial statements have been prepared in accordance with
generally accepted accounting principles. The financial information
included in these financial statements is unaudited, however, in
management's opinion, all normal recurring adjustments necessary for a
fair presentation of the results of operations for the periods included
have been made.
Footnote disclosures which would substantially duplicate those contained
in the December 31, 1997 audited financial statements have been omitted
from this report.
(2) Sale of Properties
On March 31, 1997, Medical Income Properties 2B Limited Partnership (the
"Partnership") closed the sale of its interest in its four remaining
long-term care facilities in Alabama, Texas and Illinois, and the
personal property and intangible assets related to the operation of those
facilities (the "Properties"). The Properties in Alabama and Texas were
sold to Omega Healthcare Investors, Inc., a Maryland corporation
("Omega"), pursuant to the asset Purchase and Sale Agreement dated as of
February 3, 1997 (the "Sale Agreement"), by and among the Partnership,
Qualicorp Management, Inc., the managing general partner of the
Partnership, and Omega previously reported by the Partnership. The
Properties in Illinois were sold to OHI (Illinois), Inc. an Illinois
corporation ("OHI"), because of an assignment of certain rights of Omega
to OHI under the Sale Agreement.
Aggregate net proceeds from the sale of the Properties was $8,974,614,
which was held by the escrow agent at March 31, 1997. The net proceeds
and other assets of the Partnership will be distributed to the Limited
Partners of the Partnership in the anticipated liquidation of the
Partnership as described in the Partnership's Current Report on Form 8-K
dated February 18, 1997.
In connection with the closing of the sale of the Properties, the
Partnership entered into an interim lease of the Properties pursuant to
the terms of the Sale Agreement and under which the Partnership will
provide for management and operation of the Properties for an interim
period. The interim lease was terminated on May 31, 1997.
(3) Investment in Joint Venture
The condensed financial information for the investments in joint ventures
as of March 31, 1998 and December 31, 1997 is as follows:
Texas Joint Venture (owned 50% by Partnership)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Current assets $ 1,783,169 $ 2,075,238
Long term assets 11,252,814 11,267,814
----------- -----------
Total assets $13,035,983 $13,343,052
=========== ===========
Current liabilities $ 440,776 $ 737,741
Equity 12,595,207 12,605,311
----------- -----------
Total liabilities and equity $13,035,983 $13,343,052
=========== ===========
Partnership's investment at March 31, 1998
and December 31, 1997 $ 6,297,604 $ 6,302,656
=========== ===========
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenues $ -- $4,041,346
Expenses -- 3,947,564
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Net operating income before other income,
gain on sales of properties and discontinued
operations -- 93,783
Interest income 14,767 122,223
Loss from discontinued operations (24,871) --
Gain on sales of properties -- 2,251,762
---------- ----------
Net income (loss) $ (10,104) $2,467,767
========== ==========
</TABLE>
Medical Park (owned 45.45% by Partnership)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Current assets $ 238,343 $ 246,970
Long term assets 9,029,540 9,029,540
---------- ----------
Total assets $9,267,883 $9,276,510
========== ==========
Current liabilities $ 375,102 $ 372,943
Equity 8,892,781 8,903,567
---------- ----------
Total liabilities and equity $9,267,883 $9,276,510
========== ==========
Partnership's investment at March 31, 1998
and December 31, 1997 $4,041,769 $4,046,671
========== ==========
Revenues $ -- $2,734,494
Expenses -- 2,691,860
---------- ----------
Net operating income before other income,
gain on sales of properties and discontinued
operations -- 42,634
Interest income 1,149 35,885
Loss from discontinued operations (11,935) --
Gain on sale of property -- 4,786,089
---------- ----------
Net income (loss) $ (10,786) $4,864,608
========== ==========
</TABLE>
(6) Related Party Transactions
Through March 31, 1998 and 1997, QualiCorp, Inc. the parent of Qualicorp
Management, Inc. (the Managing General Partner of the Partnership)
charged $13,106 and $24,739 respectively, to the Partnership for
reimbursement of administrative expenses. In addition, Qualicorp, Inc.
charged $55,539 for property management services during the quarter ended
March 31, 1997.
9
<PAGE> 10
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash and equivalent balances totaled $970,606 at March 31, 1998, a decrease of
$43,441 from December 31, 1997. This decrease was primarily due to settlement of
various outstanding liabilities.
The Partnership will make a final distribution of remaining funds following the
expiration of the periods with which claims for breach of representation and
warranties, other claims by Medicare, Medicaid or other third parties may be
made against the Partnership letter by contract or under applicable law.
Operations
The Partnership's net loss for the quarter ended March 31, 1997 was $13,161.
Interest income totaled $12,994 while the joint venture partners recorded a loss
of $9,954 and discontinued operation expenses totaled $16,201. Comparisons to
the quarter ended March 31, 1997 show substantial differences primarily due to
the Partnership suspending all business operations on May 31, 1997.
10
<PAGE> 11
PART II
Item 6. Exhibits and reports on 8K
A. Exhibits - 27 Financial Data Schedule (for SEC purposes only).
B. No reports on Form 8-K were filed during the first quarter ended
March 31, 1998.
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.
MEDICAL INCOME PROPERTIES 2B
LIMITED PARTNERSHIP
Registrant
By: /s/ John H. Stoddard Date: May 6, 1998
---------------------------------------- -----------
John H. Stoddard
President and Chief Financial Officer
QualiCorp Management, Inc.
Managing General Partner
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MEDICAL INCOME PROPERTIES 2B LIMITED PARTNERSHIP 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
<CASH> 970,606
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,000,570
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,340,355
<CURRENT-LIABILITIES> 9,963,819
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,376,516<F1>
<TOTAL-LIABILITY-AND-EQUITY> 11,340,355
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (12,994)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,040
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (16,201)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,161
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>REPRESENT TOTAL PARTNERSHIP CAPITAL INCLUDING NET INCOME NET OF
DISTRIBUTIONS.
</FN>
</TABLE>
