<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1996
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act For the
Transition period from _______________ to _______________
Commission File Number: 0-17600
Common Goal Health Care Participating Mortgage Fund L.P.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 52-1475268
- ------------------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6920 Donachie Road, #209
Baltimore, Maryland 21239
--------------------------------------
(Address of principal executive offices)
(410) 828-4344
--------------------------
(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
--- ---
<PAGE> 2
PART I - Financial Information
Item 1. Financial Statements
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
----------- ------------
<S> <C> <C>
Assets
Current Assets ------
Cash and cash equivalents $1,877,648 $1,010,659
Other receivables 6,650 23,885
Mortgage interest receivable 58,273 145,399
----------- ------------
Total current assets 1,942,571 1,179,943
Mortgage loans receivable 2,567,664 3,567,664
----------- ------------
$4,510,235 $4,747,607
=========== ============
Liabilities and Partners' Capital
---------------------------------
Current Liabilities
Accounts payable, accrued expenses and other $18,424 $5,070
----------- ------------
Total current liabilities 18,424 5,070
Partners' capital 4,491,811 4,742,537
----------- ------------
$4,510,235 $4,747,607
=========== ============
</TABLE>
See accompanying notes.
2
<PAGE> 3
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Earnings
(Unaudited)
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Income
- ------
<S> <C> <C> <C> <C>
Interest $ 120,394 $ 188,981 $ 55,000 $ ---
Misc. income --- --- 261,799 412,594
---------- ---------- ---------- ----------
120,394 188,981 316,799 412,594
---------- ---------- ---------- ----------
Expenses
- --------
Professional fees 11,802 22,244 32,064 102,394
Fees to affiliates:
Management 6,331 25,242 25,323 53,609
Mortgage servicing 2,229 5,168 4,459 10,335
Other 18,351 37,371 44,369 57,903
---------- ---------- ---------- ----------
38,713 90,025 106,215 224,241
---------- ---------- ---------- ----------
NET EARNINGS 81,681 98,956 210,584 188,353
========== ========== ========== ==========
Net earnings per limited
partner unit .04 .05 .11 .10
========== ========== ========== ==========
Weighted average limited
partner units outstanding $1,911,411 $1,911,411 $1,911,411 $1,911,411
========== ========== ========== ==========
</TABLE>
See accompanying notes.
3
<PAGE> 4
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Partners' Capital
(Unaudited)
<TABLE>
SIX MONTHS ENDED
JUNE 30,
1996 1995
----------------------------------- --------------------------------
TOTAL TOTAL
GENERAL LIMITED PARTNERS' GENERAL LIMITED PARTNERS'
PARTNERS PARTNERS CAPITAL PARTNERS PARTNERS CAPITAL
----------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $43,185 $4,699,352 $4,742,537 $147,246 $10,580,160 $10,727,406
Net earnings 4,212 206,372 210,584 3,767 184,586 188,353
Cash distributions to partners ( -) (461,310) (461,310) (111,830) (5,695,306) (5,807,136)
-------- ---------- ---------- --------- ----------- -----------
Balance at end of period $47,397 $4,444,414 $4,491,811 $39,183 $5,069,440 $5,108,623
======== ========== ========== ========= =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Cash Flows
(Unaudited)
<TABLE>
SIX MONTHS ENDED
----------------------
JUNE 30, JUNE 30,
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 210,584 $ 188,353
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Decrease in other receivables 17,235 -
Decrease in interest receivable 87,126 104,233
Increase (decrease) in accounts payable, accrued
expenses and other 13,339 (6,945)
Increase in due to affiliates 15 1,835
---------- -----------
Net cash provided by operating activities 328,299 287,476
---------- -----------
Cash from investing activities:
Proceeds from mortgage loan principal repayments 1,000,000 -
---------- -----------
Cash used in financing activities:
Distribution to general partner - (111,830)
Distribution to limited partners (461,310) (5,695,306)
---------- -----------
Net cash used in financing activities (461,310) (5,807,136)
----------- -----------
Net increase (decrease) in cash and cash equivalents: 866,989 (5,519,660)
Cash and cash equivalents, beginning of period 1,010,659 7,002,601
---------- -----------
Cash and cash equivalents, end of period $1,877,648 $1,482,941
========== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 6
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
June 30, 1996
(1) Organization and Summary of Significant Accounting Policies
Common Goal Health Care Participating Mortgage Fund L.P. (the
"Partnership") was formed on August 20, 1986 to invest in and make
mortgage loans to third-parties involved in health care. On February 20,
1987, the Partnership commenced a public offering of limited partner
units (the "Public Offering"). On July 21, 1987, the Partnership
commenced operations, having previously sold more than the specified
minimum of 116,000 units ($1,160,000). The Partnership's offering
terminated on February 20, 1989 with the Partnership having sold the
specified maximum of 1,912,911 units ($19,129,110).
The general partners are Common Goal Capital Group, Inc. as the managing
general partner and Common Goal Limited Partnership I as the minority
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 .75% per annum of adjusted contributions, as defined. Additionally, a
mortgage servicing fee equal to .25% per annum of the Partnership's
outstanding mortgage loan principal amount 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
dates of purchase of three months or less as cash equivalents.
An allowance for loan losses is provided at a level which the
Partnership's management considers adequate based upon an evaluation of
known and inherent risks in the loan portfolio. Management believed no
allowance was necessary as of June 30, 1996.
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No provision for income taxes has been recorded as the liability for such
taxes is that of the partners rather than the Partnership.
Earnings per limited partner unit are 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 six months ended June 30, 1996 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. Such adjustments are normal and
recurring.
(2) Mortgage Loans Receivable
Information concerning mortgage loans receivable as of June 30, 1996 is as
follows:
<TABLE>
<CAPTION>
Basic
Interest Maurity Prior Face and Carrying
Description Rate Date Liens Amount of Mortgages
- --------------- -------- --------------------- ------------- --------------------
<S> <C> <C> <C> <C>
Westwood loan 11.5% March 10, 1998 $ 3,200,000 $1,000,000
Honeybrook loan 13.7% January 1, 2000 8,810,000 1,567,664
------------- --------------------
$12,010,000 $2,567,664
============= ====================
</TABLE>
The loans are second mortgage loans secured by health-care related real
properties. Interest is payable monthly with the principal balance
generally due at maturity. The loans generally provide for the payment
of additional interest based upon gross revenues of the properties and
the payment of participation interests ranging from 6-30% of the increase
in the fair market value of the properties at maturity or redemption, as
defined.
The carrying value of the mortgage loans for tax purposes is the same as
that for financial reporting purposes. All properties are subject to a
first mortgage lien in each case held by unaffiliated third parties. As
of June 30, 1996, neither of the loans was delinquent as to regular
interest. Payment was received for Westwood annual gross revenue.
(3) Subsequent Event
On July 5, 1996, the Partnership declared and paid a quarterly
distribution of $236,840 to Unitholders of record at June 15, 1996.
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<PAGE> 8
Also on July 5, 1996, the Partnership distributed $500,000 as a return of
capital.
Item 2. Management's Discussion and Analysis or Plan of Operations
Liquidity and Capital Resources
Common Goal Health Care Participating Mortgage Fund L.P., a Delaware
limited partnership (the "Partnership"), was formed to make mortgage
loans secured by real property (the "Mortgage Loan") comprised of a mix
of first and junior Mortgage Loans, secured by health-care related
properties. The Public Offering commenced on February 20, 1987 and
continued through February 20, 1989, when the Public Offering terminated.
Total gross offering proceeds raised were $19,129,110.
Partnership assets decreased from $4,747,607 at December 31, 1995 to
$4,510,235 at June 30, 1996. The decrease ($237,372 or approximately
5.0%) resulted primarily from cash distributions on January 5 and April 5
to the Limited Partners that was offset by net earnings for the period.
As of June 30, 1996, the Partnership's loan portfolio consisted of two
mortgage loans, the aggregate outstanding principal balance of which was
$2,567,664.
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, to
pay normal operating expenses as they arise and, in the case of repayment
proceeds, may, subject to certain exceptions, be used to make additional
Mortgage Loans.
The Partnership's balance of cash and cash equivalents at June 30, 1996
and December 31, 1995 was $1,877,648 and $1,010,659, respectively, which
consisted of operating cash and working capital reserves. The increase
in cash and cash equivalents from December 31, 1995 resulted from net
earnings of $210,584, a decrease in interest and other receivables of
$104,361, an increase in reserve funds, and receipt of $1,000,000 as
pay-off of the Ifida loan; all of which were offset by a payments of
$461,310 ($.24 per Unit) in dividend distributions (which included
$250,726 [$.131 per Unit] return of capital), and a $13,354 increase in
accrued expenses and accounts payables. The net result was an increase
of cash and cash equivalents of $866,989. The Partnership is required to
maintain reserves not less than 1% of gross offering proceeds (not less
than $191,201), but currently maintains a reserve significantly in excess
of that amount. The amount of cash and cash equivalents currently
maintained by the Partnership is primarily the result of proceeds from
the payment of mortgage loans.
On February 12, 1996 the Partnership received $1,115,232 as a payoff on
the Winthrop Loan. $1,000,000 was applied to principal, $3,833 to basic
interest, $55,000 to a Prepayment Penalty, and $47,671 to Estimated Gross
Revenue. The remaining $8,728
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<PAGE> 9
will be applied to Legal Fees incurred by the transaction and the
Equity Participation owed in accordance with the loan documents.
The Managing General Partner continues to monitor the level of working
capital reserves and may adjust the reserves as necessary to meet the
Partnership's reserve requirements.
The Partnership's success and the resultant rate of return to Unitholders
is dependent upon, among other things, the continued ability of the
borrowers to pay the current interest, additional interest and principal
of the Mortgage Loans.
Since the Horizon Loan was charged off, the Riverview, SHALP, New Medico
and Winthrop Loans have been paid off, and the Joint Venture Loan and the
Westwood Loan have been paid down, the Partnership's rates of return have
been and will be adversely impacted. However, the Partnership will
continue to pursue its pending litigation against the original Horizon
borrower and its general partners and affiliates of the original lessee,
certain Adventist groups. Also, the additional funds representing
repayment of the above mentioned loans are being invested per Partnership
guidelines.
Results of Operations
The Partnership was organized in August, 1986. The Partnership funded
seven Mortgage Loans between 1987 and 1990, including a loan made by a
venture between the Partnership and Common Goal II in August, 1990. As
of June 30, 1996, the Partnership had two Mortgage Loans. Since
commencement of operations in July of 1987, the Partnership invested all
available funds (funds not invested in Mortgage Loans) in short-term,
temporary investments. The interest earned on these investments has been
and is expected to continue to be less than the interest rates achievable
on Mortgage Loans made by the Partnership. Although the Partnership's
earnings were expected to increase slowly once its portfolio of Mortgage
Loans was substantially completed and borrowers commenced payments of
Additional Interest, the default on the Partnership's $1,400,000 Horizon
Loan (made in July 1988) which occurred in July of 1990 (as described
above), has adversely impacted such expectation.
During the quarters ended June 30, 1996 and 1995, the Partnership had net
earnings of $81,681 and $98,956 based on total revenues of $120,394 and
$188,981 and total expenses of $38,713 and $90,025, respectively. The
decrease in net earnings is due to decreases in interest income because
of the Winthrop Payoff, but is offset partially by a decrease of $10,422
in professional fees, $18,911 in management fees and $2,939 in mortgage
servicing fees, and a $19,020 decrease in other expenses. The two
remaining Mortgage Loans were both current as to regular interest as of
June 30, 1996. The Westwood Loan is expected to pay off in the near
future.
On April 25, 1994 the Circuit Court of DuPage County entered an order
granting the Partnership's Motion to Dismiss the counterplaintiffs'
counterclaim with prejudice in the
9
<PAGE> 10
Horizon Loan Litigation. The court found that the counterplaintiffs
did not have standing to assert the claims against the Partnership.
Without determining the validity of any such claims, the Court
determined that the claims could only be asserted by HHC, Inc., the
successor to Horizon Healthcare (the original borrower) which filed a
bankruptcy petition in November 1990. Subsequently, Horizon moved to
have the above motion vacated. On July 5, 1994, the circuit Court denied
the Horizon Motion to vacate. Following the entry of this Order, the
parties engaged in substantial discovery. After the completion of
discovery, the Partnership filed an amended complaint on September 12,
1995. This pleading named the Lake Union Conference of Seventh-Day
Adventists ("Lake Union") as an additional defendant. Although Lake
Union objected to being added as a defendant, the Court ruled, on October
10, 1995, that it should be included in the case. However, the Court
granted Lake Union additional time to complete discovery. On April 30,
1996 the parties attended a case management conference at which the Court
set the trial date as September 9, 1996. In the interim, the parties
will complete discovery and continue to prepare for trial.
The Partnership is seeking $1.4 million (principal amount of the loan to
Horizon) plus interest owing and punitive damages. As the General
Partners cannot presently predict the outcome of the other actions being
considered in connection with the Horizon Loan default, they cannot
predict with any accuracy the impact thereof for future years.
Although the Partnership made quarterly dividend distributions of
$234,266, and $233,626 and $236,840 in January, April, and July of 1996,
the distributions may not remain at the present level (9.256% financial
capital) as a result of the Horizon Loan charge-off, the payoffs and the
pay downs mentioned above. The general partners are currently reviewing
the distribution policy. The Partnership receives a lesser rate of
return from its short-term investments than it would receive form the
Mortgage Loans, (were they not paid down) thereby reducing interest
income available for distribution.
10
<PAGE> 11
PART II - Other Information
Items 1 through 6 are omitted because of the absence of conditions under which
they are required.
11
<PAGE> 12
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 Participating Mortgage Fund L.P.
--------------------------------------------------------
(Registrant)
By: Common Goal Capital Group, Inc.,
Managing General Partner
DATED: July 31, 1996 /s/Albert E. Jenkins, III
----------------------------------
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,877,648
<SECURITIES> 0
<RECEIVABLES> 64,923
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,942,571
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,510,235
<CURRENT-LIABILITIES> 18,424
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 4,491,811
<TOTAL-LIABILITY-AND-EQUITY> 4,510,235
<SALES> 0
<TOTAL-REVENUES> 316,799
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 106,215
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 210,584
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 210,584
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
