<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 March 31, 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.
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(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
----- -----
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PART I - Financial Information
Item 1. Financial Statements
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited) (Audited)
------------ ----------
Assets
<S> <C> <C>
Current Assets
Cash and cash equivalents $1,984,646 1,010,659
Other Receivables --- 23,885
Mortgage interest receivable 98,939 145,399
---------- ----------
Total current assets 2,083,585 1,179,943
Mortgage loans receivable 2,567,664 3,567,664
---------- ----------
$4,651,249 $4,747,607
========== ==========
Liabilities and Partners' Capital
Current Liabilities
Accounts payable and accrued
expenses and other $ 13,736 $ 5,070
---------- ----------
Total current liabilities 13,736 $ 5,070
Partners' capital 4,637,513 4,742,537
---------- ----------
$4,651,249 4,747,607
========== ==========
</TABLE>
See accompanying notes.
2
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COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995
---- ----
<S> <C> <C>
Income
Interest $ 141,405 $ 223,613
Misc. income 55,000 ---
---------- ----------
196,405 223,613
---------- ----------
Expenses
Professional fees 20,262 80,150
Fees to affiliates:
Management 18,992 28,367
Mortgage servicing 2,230 5,167
Other 26,018 20,532
---------- ----------
67,502 134,216
---------- ----------
NET EARNINGS $ 128,903 $ 89,397
---------- ----------
Net earnings per limited
partner unit $ .07 $ .05
---------- ----------
Weighted average limited
partner units outstanding 1,911,411 1,911,411
========== ==========
</TABLE>
See accompanying notes.
3
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COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Partners' Capital
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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 2,578 126,325 128,903 1,788 87,609 89,397
Cash distributions to
partners ( ---) ( 233,927) ( 233,927) (11,209) ( 349,574) ( 360,783)
--------- ---------- ---------- -------- ---------- ----------
Balance at end of period $ 45,763 4,591,750 4,637,513 137,825 10,318,195 10,456,020
========= ========== ========== ======== ========== ==========
</TABLE>
See accompanying notes.
4
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COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995
----------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 128,903 89,397
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Decrease in other receivables 23,885 ---
Decrease in interest receivable 46,460 18,140
Increase (decrease) in accounts
payable, accrued expenses and other 8,666 ( 5,656)
Increase in due to affiliates --- 8,078
----------- -----------
Net cash provided by operating
activities 207,914 109,959
----------- -----------
Cash from investing activities -
Proceeds from mortgage loan
principal repayments 1,000,000 ---
----------- -----------
Cash used in financing activities:
Distribution to general partner --- ( 11,209)
Distribution to limited partners ( 233,927) ( 349,574)
------------ -----------
Net Cash used in Financing Activities ( 233,927) ( 360,783)
----------- -----------
Net increase (decrease) in cash
and cash equivalents 973,987 ( 250,824)
Cash and cash equivalents,
beginning of period 1,010,659 7,002,603
----------- -----------
Cash and cash equivalents,
end of period $ 1,984,646 $ 6,751,779
=========== ===========
</TABLE>
See accompanying notes.
5
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COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
March 31, 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 began operations, having previously sold more than the
specified minimum of 116,000 units ($1,160,000). The Public 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 March 31, 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 months and nine months ended March 31, 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 March 31, 1996
is as follows:
<TABLE>
<CAPTION>
Face and
Basic carrying
interest Maturity Prior amount of
Description rate date liens 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.
On July 7, 1994, the borrowers on the SHALP Loan repaid the principal
balance of $3,300,000, and paid the related prepayment penalty of
$132,000, additional interest of $60,752 based on 1994 gross revenues
through May, 1994, and $23,421 in basic interest. Since there was no
appreciation in the value of the property securing the SHALP Loan, the
Partnership did not receive any additional income.
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
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held by unaffiliated third parties. As of March 31, 1996, neither of
the loans was delinquent as to regular interest. However, the annual
gross revenue interest from Westwood has not been paid. Payment is
expected at the time of the anticipated pay off of the loan.
(3) Subsequent Event
On April 5, 1996, the Partnership declared and paid a quarterly
distribution of $233,626 to Unitholders of record at March 31, 1996.
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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 $4,651,249 at March 31, 1996. The decrease ($96,358
or approximately 2.0%) resulted primarily from a cash
distribution on January 5 to the Limited Partners that was
offset by net earnings for the period. As of March 31, 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
March 31, 1996 and December 31, 1995 was $1,984,646 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 $128,903, a decrease in interest and other receivables of
$70,345, 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 payment of $233,927 ($.122 per Unit) in dividend
distributions (which included $105,024 [$.055 per Unit] return
of capital), and a $62 decrease in accrued expenses and
accounts payables. The net result was an increase of cash and
cash equivalents of $973,987. 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
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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 will be applied to Legal Fees incurred by the
transaction and the Equity Participation owed in accordance
with the loan documents. At the time of payoff, the partners
were not able to determine if any additional Gross Revenue and
Equity Participation were owed. Therefore, the parties
entered into two separate escrow arrangements whereby funds
were withheld pending further determination of whether said
funds are owed.
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 March 31, 1996, the
Partnership had two Mortgage Loans. Since commencement of
operations in July 1987, the Partnership invested all
available funds (funds not yet invested in Mortgage Loans) in
short-term, temporary investments. The interest earned on
these investments
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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 March 31, 1996 and 1995, the
Partnership had net earnings of $128,903 and $89,397 based on
total revenues of $196,405 and $223,613 and total expenses of
$67,502 and $134,216, respectively. The increase in net
earnings is due to decreases of $59,888 in professional fees,
$9,375 in management fees and $2,937 in mortgage servicing
fees, offset by a $5,486 increase in other expenses. The
$66,714 reduction in expenses is partially offset by a $27,208
reduction in income (caused by pay off of the SHALP Loan in
1995). The two remaining Mortgage Loans were both current as
to regular interest as of March 31, 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 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.
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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 in January and April of 1996, the
distribution 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.
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PART II - Other Information
Items 1 through 6 are omitted because of the absence of conditions
under which they are required.
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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: May 3, 1996 /s/Albert E. Jenkins, III
-------------------------
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,984,646
<SECURITIES> 0
<RECEIVABLES> 98,939
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,083,585
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,651,249
<CURRENT-LIABILITIES> 13,736
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,637,513
<TOTAL-LIABILITY-AND-EQUITY> 4,651,249
<SALES> 0
<TOTAL-REVENUES> 196,405
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 67,502
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 128,903
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,903
<EPS-PRIMARY> .07
<EPS-DILUTED> 0
</TABLE>
