U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 - 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
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(State or other Jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
215 Main Street
Penn Yan, New York 14527
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(Address of principal executive offices) (Zip Code)
(315) 536-5985
--------------
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Limited
Partnership Interests
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__
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this Form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements, incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. (X)
Issuer's revenues for the fiscal year ended December 31, 1996 were $1,072,159.
The aggregate sales price of the units of Limited Partnership Interest held
by non-affiliates of the Registrant as of March 31, 1997 was $3,343,626 (1,559
investors). As of March 31, 1997, there was no market for these Units and no
market is expected to develop. The aggregate sales price is accordingly not
necessarily indicative of the price at which these Units would trade.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Registrant dated February 20, 1987, and
filed pursuant to Rule 424(b) and Rule 424(c) under the Securities Act of 1933,
as amended, are incorporated by reference into Part III of this Annual Report on
Form 10-KSB.
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . .1
Item 2. Description of Property. . . . . . . . . . . . . . . . . . . . 14
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 14
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . 14
PART II
Item 5. Market for Units of Limited Partnership Interest and Related
Security Holder Matters. . . . . . . . . . . . . . . . . . . . 15
Item 6. Management's Discussion and Analysis or Plan of Operation. . . 15
Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . 19
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . 19
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance With Section 16(a) of the Exchange Act. . . . . . . 20
Item 10. Executive Compensation. . . . . . . . . . . . . . . . . . 21
Item 11. Security Ownership of Certain Beneficial Owners
and Management .......................................... 22
Item 12. Certain Relationships and Related Transactions. . . . . . 22
Item 13. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 22
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . .F-1
SIGNATURES
(i)
<PAGE>
PART-I
Item 1 Description of Business.
General.
Common Goal Health Care Participating Mortgage Fund L.P. (the
"Partnership") was organized on August 20, 1986 as a limited partnership under
the Delaware Revised Uniform Limited Partnership Act. The Partnership's general
partners are Common Goal Capital Group, Inc. ("Common Goal" or the "Managing
General Partner") and Common Goal Limited Partnership I (the "Minority General
Partner") (collectively, the "General Partners"). With limited exceptions,
Common Goal has exclusive control over the business of the Partnership,
including the right to manage the Partnership's assets. The Partnership
commenced operations on July 21, 1987 after having accepted subscriptions for
more than the requisite minimum of 116,000 depositary units representing
beneficial assignments of limited partnership interests (the "Depositary Units")
in a public offering registered with the U.S. Securities and Exchange Commission
on Form S-11 (the "Public Offering"). The Partnership raised a total of
$19,129,110 in the Public Offering which terminated on February 20, 1989. On
June 25, 1990, the Managing General Partner caused all holders of Depositary
Units to be admitted to the Partnership as Limited Partners holding units of
limited partnership interests (the "Units").
The Partnership's primary business has been to invest in or make mortgage
loans (the "Mortgage Loans"), comprised of a mix of first and junior Mortgage
Loans, secured by health care-related real properties owned by unaffiliated
entities. The Partnership does not intend to own or acquire real property,
except in the event of foreclosure when the Managing General Partner deems such
acquisition to be in the best interest of the Partnership. The Partnership has
one Mortgage Loan which remained outstanding as of March 31, 1997. See "Existing
Mortgage Loan" below.
The Partnership's objectives in making investments of the type described
above were: (i) to preserve and protect the Partnership's capital; (ii) to
provide quarterly distributions from investment income; and (iii) to provide for
potential long-term appreciation of its Mortgage Loan investments, principally
through participation payable at maturity of the Mortgage Loan or upon the sale
or refinancing of the underlying property (the "Participation"). Because
Participation in facility appreciation are paid only upon maturity of a Mortgage
Loan or a sale of the underlying facility, cash distributions as a result of
Participation on the one remaining Mortgage Loan are not expected to commence
until repayment or maturity. It is not an objective of the Partnership to
provide tax-sheltered income.
Funds held pending distribution may be invested by the Partnership, at the
direction of the Managing General Partner, in United States government
securities, certificates of deposit of United States banks with a net worth of
at least $20,000,000, repurchase agreements covering the securities of the
United States government or governmental agencies, bankers' acceptances,
commercial paper rated A-1 or better by Moody's Investors Service, Inc., money
market funds
1
<PAGE>
having assets in excess of $100,000,000, interest-bearing time deposits in
banks and thrift institutions or any combination of these investments.
The Partnership is conducting and intends to continue to conduct its
operations so that it will not become subject to regulation under the Investment
Company Act of 1940. Generally, the term "investment company" might include the
Partnership if, after a one-year period, the Partnership, among other things,
were to be engaged primarily, or were to hold itself out as being engaged
primarily, or were to propose to engage primarily, in the business of investing,
reinvesting or trading in securities, or if it were to have more than 40% of its
total assets, excluding cash and government securities, invested in "investment
securities" as that term is defined in the Investment Company Act of 1940. The
Partnership does not currently meet this test.
Basic Policies for Mortgage Loan Investments.
----------------------------------------------
In making Mortgage Loans, the Managing General Partner considers such
relevant factors as (1) the geographic area and type of facility (nursing home
or intermediate care or a mix of both); (2) the location, construction, quality,
condition and design of the facility; (3) the current and anticipated cash flow
from the facility and its ability to sufficiently cover debt service (including
the Partnership's Mortgage Loan), meet operational needs and generate revenues
sufficient to provide investors with significant Additional Interest, as defined
in the Partnership's prospectus, and potential value to the Partnership's
Participation; (4) the growth, tax and regulatory environment of the community
in which a facility is located; (5) occupancy and demand for similar health care
facilities with which the facility would compete; (6) the mix of private and
government pay patients; and (7) the quality and experience of the management
operating the facility. As a general rule, the Partnership will not make
Mortgage Loans on facilities which are located in states which do not restrict
the issuance of certificates of need, unless supported by additional factors,
such as borrower guarantees. Further, it is intended that Mortgage Loans will be
made in various geographic locations in order to achieve portfolio
diversification, thereby minimizing potential effects of changes in local
economic conditions and similar risks.
Types of Mortgage Loans.
----------------------------
The Partnership makes Mortgage Loans on fee interests (or other beneficial
interests essentially equivalent to a mortgage on real property). All real
estate underlying Mortgage Loans is used in the health care industry,
particularly real estate used as nursing home and intermediate care facilities.
The Partnership will not make construction loans except in connection with
renovation or additions to existing facilities. The Partnership may also make
Mortgage Loans to enable borrowers to acquire newly constructed properties and
may commit to invest in or make Mortgage Loans with respect to properties under
construction or prior to construction, provided any such commitment is subject
to satisfactory completion of construction (and licensure by regulatory
agencies, as applicable) by a specified date. However, in no event will such
construction loans, other than those made in connection with renovations or
additions to existing facilities, in the aggregate, exceed 20% of the gross
proceeds received from the Public Offering.
Other Operating and Investment Policies.
-----------------------------------------
Affiliates of the General Partners (including partners, officers and
directors investing for their own account or that of others) have formed, and
may in the future form, limited partnerships or other entities with the same
investment objectives and policies as the Partnership. The Managing General
Partner will attempt to resolve any conflicts of interest that may arise with
respect to the Joint Venture Loan (See "Existing Mortgage Loan" below) between
the Partnership and others by exercising the good faith required of fiduciaries.
Such conflicts will be resolved in the best judgment of the Managing General
Partner. In connection therewith, in 1990, Common Goal Health Care Pension and
Income Fund L.P. II ("Common Goal II"), an affiliated, publicly-offered limited
partnership with investment objectives that are substantially identical to those
of the Partnership and the Partnership participated in a ten-year second
mortgage loan in the original principal amount of $3,430,114 to an unaffiliated
third party through a joint venture between the Partnership and Common Goal II
(the "Joint Venture Loan"). At December 31, 1996 and 1995, the Partnership's
mortgage loans receivable included $1,567,000 representing the Partnership's
participation in the remaining $1,618,254 of the loan. See "Existing Mortgage
Loan" below.
Federal Income Taxes.
-----------------------
The Partnership is not subject to federal income taxes as the liability for
such taxes is that of the Partners rather than the Partnership.
Closed Mortgage Loans.
----------------------
SHALP Loan. The Partnership made its initial mortgage loan (the "SHALP
Loan") on August 12, 1987 and funded it in three phases through December 15,
1987 for a total outstanding loan principal of $3,300,000. The borrowers were
Stamford Health Associates Limited Partnership, PersonaCare of Connecticut,
Inc., Homestead Health Center, Inc., Courtland Gardens Residence Homes, Inc. and
Courtland Health Center, Inc., all of which are affiliates of PersonaCare, Inc.,
("PersonaCare"). The SHALP Loan was secured by a second mortgage on three
separate long term care facilities containing a total of 267 beds in two nursing
care facilities and 68 rooms at a residential facility, all located in Stamford,
Connecticut. The SHALP Loan had a term of 10 years (maturing in August 1997). 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.
Income received on the SHALP Loan from inception through repayment was
$2,412,788 in basic interest, $900,885 in additional interest based upon gross
revenues, and a $132,000 prepayment penalty (a total of $3,445,673 earned on
$3,300,000 over six years and nine months).
<PAGE>
The Westwood Loan.
--------------------
On March 10, 1988, the Partnership funded a $1,300,000 mortgage loan
secured by a second mortgage on a 120-bed long term nursing care facility (the
"Westwood Facilities") in Poplar Bluff, Missouri (the "Westwood Loan"). When the
Westwood Loan was funded, the loan-to-value ratio was approximately 91%. The
Westwood Loan had a term of 10 years (maturing in March 1998). The Westwood Loan
was supported by two separate guarantees; the first provided by Westwood Hills
Health Care Center, Inc. (the "Westwood Loan Borrower") and Health Services
Management Corporation (which manages the Westwood Facility) and the second
provided by John Rothert and R. William Brece, Jr. (principals of the Westwood
Loan Borrower). The guarantees were required to be maintained until certain
loan- to-value ratios and debt service coverage ratios were met. As of November
30, 1992, the conditions for release of the guarantees were met and the
guarantees were released. The guarantees by Messrs. Rothert and Brece were
subject to reinstatement at any time during the loan term if the State of
Missouri or other regulatory agencies adjusted the reimbursement rates such that
debt service coverage was reduced to less than 1.3:1.0. Any reinstated guarantee
would have remained effective until the debt service ratio returned to the level
it was prior to the adjustment and maintained or exceeded that level for 12
consecutive months. During 1994, $300,000 of the Westwood Loan was paid down. On
October 25, 1996, the borrower on the Westwood Loan repaid the principal balance
of $1,000,000, and paid the related prepayment penalty of $40,000, additional
interest of $1,594 based on remaining 1995 gross revenues and $58,135 based on
1996 gross revenues through October 1996, and $4,792 in basic interest. In
addition, the borrowers paid $110,550 in additional equity interest, $3,650 in
appraisal fees and $4,000 in estimated legal fees. The October 25, 1996 Westwood
Loan repayment totaled $1,222,720.
The Winthrop Loan.
--------------------
On March 25, 1988, the Partnership funded a mortgage loan in the principal
amount of $1,000,000 (the "Winthrop Loan") which was secured by a second
mortgage on a 142-bed nursing care facility in Medford, Massachusetts (the
"Medford Facility"). The Partnership has also received additional collateral in
the form of a second mortgage on a 170-bed nursing care facility owned by an
affiliate of the borrower in Bryn Mawr, Pennsylvania (the "Bryn Mawr Facility").
The Winthrop Loan had a term of 10 years (maturing in March 1998). When the
Winthrop Loan was funded, the loan-to-value ratio was approximately 91%. The
Winthrop Loan was the subject of a guarantee of payment of principal and
interest by Hardie Beloff (a principal of the borrower) and the Winthrop House
Associates Limited Partnership (the "Winthrop Borrower"). This guarantee was to
terminate upon the achievement of debt service coverage of at least 1.3:1.0 for
36 consecutive months.
In December of 1991, the Partnership learned that state Medicare
authorities had notified the Winthrop Borrower that the state had discovered a
series of overpayments to the Winthrop Borrower in connection with the Medford
Facility. The Winthrop Borrower entered into an agreement with the senior lender
on the Medford Facility, the Partnership and the state Medicare authorities
whereby such funds would be repaid to the state. Pursuant to the agreement, the
Winthrop Borrower paid all past due amounts of Additional Interest. The Winthrop
Loan, which had been performing according to its original terms, was repaid in
full in February 1996. The borrower on the Winthrop Loan repaid the principal
balance of $1,000,000, and the related prepayment penalty of $55,000, $3,833 in
basic interest due, and $47,671 in interest to estimated gross revenue, and
$8,728 in fees.
Horizon Loan.
---------------
On July 8, 1988, the Partnership funded a $1,400,000, ten year mortgage
loan (the "Horizon Loan") to Horizon Healthcare, an Oregon general partnership
(the "Horizon Borrower"), secured by a second lien on a 150-bed nursing facility
in Moore, Oklahoma and an 89-bed nursing facility and a 200-bed nursing facility
each in Norman, Oklahoma (the "Horizon Facilities"). At the time of funding, the
Horizon Facilities were leased on a triple-net basis to a significant
not-for-profit corporation. In November of 1989, an issue arose between the
Horizon Borrower (who is also the landlord) and the tenant (the not-for-profit
corporation), whereby the tenant sought a reduction in lease payments and, as a
counter-measure, the Horizon Borrower sought possession. The landlord was
granted an order for possession of the Horizon Facilities pursuant to which it
took possession on approximately February 1, 1990. On or about July 25, 1990,
the Partnership notified the Horizon Borrower that it was in default on this
loan for failure to make payments and that the Partnership intended to pursue
all available remedies against the borrower unless the loan was brought current.
On September 7, 1990, the Partnership sent the Horizon Borrower a notice of
intent to foreclose. The Partnership was advised that the Horizon Borrower also
had been in default on the first mortgage on the Horizon Facilities since
approximately July of 1990 and that the first mortgagee (the "Senior Lender")
also sent the borrower a "notice of intent of non-judicial foreclosure." On
September 21, 1990, the Senior Lender filed a petition in the District Court of
Cleveland County, Oklahoma, against the Horizon Borrower, seeking, among other
relief, monetary damages in the amount owed to it and against the Horizon
Borrower, the Partnership and others, seeking to foreclose its lien on the
Horizon Facilities. On or about November 20, 1990, the Horizon Borrower
transferred legal title to the Horizon Facilities to an affiliated corporation
("New Owner") allegedly in violation of the mortgages of the Partnership and of
the Senior Lender, and immediately thereafter, the New Owner instituted
bankruptcy proceedings for reorganization under Chapter 11 in Federal Bankruptcy
Court in Cleveland County, Oklahoma. A plan of reorganization was approved by
all creditors of the New Owner and confirmed on May 29, 1991 (the "Plan"). Under
the terms of the Plan, the Partnership received monthly payments of $15,475.08
which was calculated by amortizing the principal amount of $1,469,000 at 12% per
annum over 25 years. After the Plan was confirmed, the Partnership received the
modified payments due it under the Plan through February, 1992. At June 30,
1992, the Horizon Loan was four months delinquent as to the principal and
interest payments required by, and therefore in default under, the Plan. On June
18, 1992, the Partnership, together with two other creditors of HHC, Inc., filed
an involuntary petition in bankruptcy against HHC, Inc., the successor in
interest to the assets of the Horizon Borrower. Common Goal intended to submit a
plan of reorganization to the bankruptcy court that would vest title to the
Horizon Facilities in an affiliate of Common Goal. On July 13, 1992, the Board
of Directors of Common Goal met and decided to proceed no further with attempts
to obtain control of the three properties collateralizing the Horizon Loan. The
decision was made because of the high risk involved, the low probability of
success and the amount of new investment required if the Partnership were to
obtain the properties. This action enabled the Senior Lender to proceed with its
foreclosure proceedings on the properties. Management of the Partnership
evaluated the exposure with respect to this mortgage loan receivable and
provided an allowance for loss of $993,495 in 1992 in order to fully reserve
against a loan balance of $1,393,495. As of December 31, 1992, the entire
mortgage loan receivable and the outstanding allowance for loss were charged
off.
At the time the Partnership entered into its loan agreement with the
Horizon Borrower in June of 1988, the Partnership received tenant estoppel
letters executed by certain officers of Adventist Living Centers, Inc., a
Wisconsin not-for-profit corporation ("ALC"). In these letters, ALC made
representations to the Partnership concerning certain leases then in effect
between the Horizon borrower and ALC.
On November 14, 1990, ALC filed a Chapter 11 bankruptcy petition in the
United States Bankruptcy Court for the Northern District of Illinois. On May 20,
1991, a proof of claim was filed on behalf of the Partnership in the ALC
bankruptcy case alleging that at the time ALC's petition was filed, ALC was
indebted to the Partnership in the amount of $1,629,404.56 based on ALC's breach
of its tenant estoppel letters. In March of 1993, the Partnership reached a
settlement of this claim and on March 19, 1993, the Partnership received final
payment of $42,500. Future settlements in the pending state court action may
require a return of funds to the creditors committee formed under the federal
bankruptcy court.
On October 23, 1991, a complaint was filed on behalf of the Partnership in
the Circuit Court of DuPage County, Illinois. Named as defendants in that
complaint were ALC, the Horizon Borrower and certain individuals and entities
either currently or formerly affiliated with ALC or the Horizon Borrower,
including the Horizon Borrower's general partners. The complaint alleged that
the defendants made false representations of material fact to the Partnership.
The complaint sought recovery of damages in the amount of $1,400,000 plus
interest, costs and attorneys' fees.
On January 5, 1994, the DuPage County Circuit Court granted the Horizon
Borrower and its general partners leave to file an amended answer and
counterclaim against the Partnership. The Partnership was granted until February
2, 1994 to answer or otherwise respond to the counterclaim. The counterclaim
asserted that after ALC defaulted on lease payments to Horizon, the Partnership
interfered with Horizon's attempts to renegotiate its leases with ALC for three
Oklahoma nursing home facilities for which the Partnership provided second
mortgage financing, and also interfered with the Horizon Borrower's negotiations
with an entity the Horizon Borrower proposed as a substitute tenant for ALC. The
counterclaim also asserted that the Partnership misrepresented certain
information regarding a proposal to operate the nursing home facilities, and
breached its loan agreement with Horizon by withholding consent from proposed
rent reductions to ALC. The counterclaim sought damages from the Partnership in
the amount of approximately $6.8 million. 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.
In its complaint, the Partnership sought $1,400,000 (principal amount of
the loan to Horizon) plus interest owing and punitive damages. During 1996, the
Partnership settled the Horizon loan litigation for a total of $480,000. In
December 1996 the Partnership received $353,530 as settlement to this suit, net
of $126,470 in attorneys' fees.
Existing Mortgage Loan.
-----------------------
The Joint Venture Loan.
-------------------------
On September 7, 1989, the Partnership funded a short-term mortgage loan
(the "Honeybrook Loan") in the original principal amount of $3,370,000, to two
Tennessee limited partnerships (individually, a "Borrower" and collectively, the
"Borrowers"). One of the Tennessee limited partnerships owns a 100-bed skilled
care and intermediate care facility and the other limited partnership owns a
101-bed retirement and assisted care facility, both of which are located in
Honeybrook, Pennsylvania (collectively, the "Facilities"). The Honeybrook Loan
was originally secured by a second mortgage on the skilled and intermediate care
facility and by collateral assignments of 100% of the general partners' and
limited partners' interests in each Borrower. The security interest was taken in
the Borrower that owns the retirement and assisted care facility insofar as the
facility is subject to a HUD regulatory agreement which prohibits junior
encumbrances on the facility. The security interest is subject and subordinate
to all applicable HUD regulations. When the Honeybrook Loan was funded, the
loan-to-value ratio was approximately 89%. The Partnership elected to extend the
original term of the Honeybrook Loan and assigned its obligation to make the
long-term loan to a newly created joint venture with Common Goal II (the "Joint
Venture Loan"). The Joint Venture Loan was made on or about August 1, 1990, with
the Partnership making a $3,430,114 contribution at that time to fund the Joint
Venture Loan. In 1991, Common Goal II contributed $95,600, thereby decreasing
the Partnership's contribution by that amount. The Borrowers made a $30,000
repayment of principal in 1991, bringing the Partnership's contribution down to
$3,304,514 at December 31, 1991 and in December 1992 made a principal paydown of
$211,514 to bring the balance to $3,093,000 on December 31, 1992. The $211,514
was received on January 7, 1993 and reclassified as a short term receivable for
year end 1992. An additional $70,000 was paid down on the principal on March 29,
1993.
On November 3, 1993, Life Care Centers of America, Inc. ("Life Care") paid
a total of $1,746,790 in a restructuring of the Joint Venture Loan. Of the
$1,691,477 allocated to the Partnership, $1,455,336 was applied to principal and
$145,534 to a Prepayment Penalty. A Refinance Fee of $72,750 was negotiated,
while Gross Revenue, Basic Interest and Additional Interest were taken as set
forth in the loan documents. The Partnership's balance has been paid down to
$1,567,664 while the Common Goal II balance has also been paid down to $50,590.
In connection with the repayment of principal, the Partnership agreed to release
its mortgage on the skilled care and intermediate care facility. Life Care or
its affiliates operate the retirement and assisted care facility, which secures
the Joint Venture Loan.
The Joint Venture Loan is guaranteed by Life Care and by one of the
beneficial owner of the Borrowers. In connection with the negotiation of the
Refinance Fee, two individual guarantors who are no longer employees of the
Borrowers were released from their guaranty obligations. As of December 31,
1996, Life Care had an audited net worth of in excess of $67,000,000, a
substantial amount of which was illiquid. A substantial portion of the net worth
of the individual guarantor is also illiquid.
The table set forth below provides information concerning the basic terms
and conditions of the Mortgage Loan made and currently held by the Partnership
as of the date of this report.
<PAGE>
Common Goal Existing Mortgage Loans
Joint Venture
Loan
----
Date of Loan 8/1/90
Type of Loan Second Mortgage on
Facility
Outstanding 1,567,664 (1)
Principal
Amount
Base 13.7% (2)
Interest Rate
Maturity 1/1/2000
Type of Property/ Collateral assignment
Location of Property of interest in 101-bed
Securing Loan retirement and assisted
care facility in Honeybrook, PA
<PAGE>
Notes
(1) This amount reflects the funding provided to the Joint Venture by
the Partnership.
(2) This loan currently requires payment of additional interest at a
rate of 1.95% of gross revenues from the Facilities in excess of $1,694,000
per annum. This provision is currently the subject of negotiation as a
result of the refinancing of this loan and the release of the Joint
Venture's lien on one of the Facilities. The Partnership believes that the
negotiations will not have a material effect on the amount of additional
interest received. The loan also provides for payment of a participation
equal to 30% of the first $1,000,000 of increase in the fair market value
(or gross sales price) of the Facilities over aggregate secured
indebtedness (including the Joint Venture Loan) as of the date of funding
of the Joint Venture Loan and 17% of the balance of any such increase. As a
result of the refinancing of this loan, the fair market value of the
retirement and assisted care facility has been deemed to be $6,400,000 for
the purpose of calculating the participation. The participation would be
payable upon sale, refinancing of a senior mortgage loan or at maturity of
the Joint Venture Loan with the fair market values to be determined at that
time.
<PAGE>
Partnership Allocation of Income and Loss and Distribution.
- -----------------------------------------------------------
Net Income and Net Loss.
--------------------------
Net income (except with respect to a Disposition, which includes any
Partnership transaction not in the ordinary course of its business, including,
without limitation, collections of principal payments, equity participation
payments, prepayments, prepayment penalties, sales, exchanges, foreclosures or
other dispositions of Mortgage Loans held by the Partnership, recoveries of
damage awards and insurance proceeds (other than the receipt of subscriptions
for Units, all forms of interest payments when due on Mortgage Loans or business
or rental interruption insurance proceeds)) and net loss of the Partnership are
allocated 98% to Limited Partners and 2% to the General Partners. Net income
arising from a Disposition is allocated 98% to Limited Partners and 2% to the
General Partners to the extent of any negative balances in the capital accounts
of the Limited Partners, and then 100% to Limited Partners in an amount
necessary to bring the Limited Partners' capital accounts up to an amount equal
to their Original Contributions, which means the amount of $10.00 for each Unit
less the return of any amount of uninvested funds returned, as defined in the
prospectus, plus the 11% per annum preferred cumulative return thereon (less
previous distributions to the Limited Partners in repayment of such amounts).
The remainder of such net income shall be allocated 85% to the Limited Partners
and 15% to the General Partners.
Distributions of Cash From Operations.
---------------------------------------
Distributions of Adjusted Cash From Operations, defined as all receipts of
interest payments on Mortgage Loans less cash receipts used to pay operating
expenses and to repurchase any Units (Cash Flow) less any amount set aside for
the restoration or creation of working capital reserves, are distributed 98% to
the Limited Partners and 2% to the General Partners, and are apportioned
quarterly among Limited Partners of record as of the record date declared within
30 days after the end of each quarter and are paid quarterly. No distributions
of Adjusted Cash From Operations with respect to any calendar year are made to
the General Partners until the following occurs:
First, distributions to the Limited Partners equal to the 8% annual
cumulative return on their Adjusted Contributions, defined as Original
Contributions attributable to a Unit, reduced by the total of cash
distributed from Disposition Proceeds and from working capital reserves,
for such year (plus any amounts accrued from prior years) have been made to
the Limited Partners; and
Second, payment of all previously subordinated management fees, if
any, have been made.
Thereafter, all previously subordinated amounts payable to the General
Partners with respect to their 2% interest are paid in full to the extent funds
are available, and if not available, are deferred and paid out of Disposition
Proceeds, defined as receipts from Dispositions net of related expenses, amounts
necessary for the payment of debts and obligations of the Partnership and any
amount set aside for working capital reserves. The Partnership has been making
distributions to the Limited Partners in excess of the 8% annual cumulative
return on Adjusted Contributions.
Distributions of Disposition Proceeds.
- -----------------------------------------
The Managing General Partner has the right to reinvest or distribute all
Disposition Proceeds, through the end of the eleventh year after the date of the
Prospectus. Non-liquidating distributions of Disposition Proceeds are
distributed in the following order of priority, except as otherwise required by
law:
First, 100% to the Limited Partners until the Limited Partners have
received an amount which, when added to prior distributions of Disposition
Proceeds and cash from reserves attributable thereto, equals the Original
Contributions of the Limited Partners;
Second, 100% to the Limited Partners until each Limited Partner has
received an amount which, when added to all prior distributions to Limited
Partners from all sources (including prior distributions in satisfaction of
the 8% annual cumulative return but excluding distributions pursuant to
above), equals the 11% per annum preferred cumulative return on their
Adjusted Contributions, (calculated from the first day of the calendar
quarter succeeding the quarter in which Capital Contributions are
received);
Third, 100% to the General Partners until they have been paid 100% of
the subordinated portion, if any, of (a) the Partnership Management Fee, if
any, and then (b) their 2% interest in Adjusted Cash From Operations; and
Fourth, the remainder, 85% to the Limited Partners and 15% to the
General Partners.
Dissolution.
- ------------
Since it was the intention of the Managing General Partner to liquidate the
Partnership's assets between 1999 and 2004, the Managing General Partner has
commenced an orderly liquidation and will not reinvest loan proceeds in new
Mortgage Loans. The Partnership's last remaining Mortgage Loan, the Joint
Venture Loan, will mature on January 1, 2000.
Proceeds from the liquidation shall be applied and distributed in the
following order:
First, to the payment of creditors of the Partnership but excluding
secured creditors whose obligations will be assumed or otherwise
transferred on the liquidation of Partnership assets; and
Second, after allowance for the expenses of liquidation and the
setting up of any reserves for contingencies which the Managing General
Partner considers necessary, to the General Partners and Limited Partners
in proportion to and to the extent of the positive balances in their
capital accounts, after net income or loss arising from a Disposition has
been allocated, with any excess being distributed in accordance with the
order of priority for non-liquidating distributions.
Notwithstanding anything to the contrary, the Managing General Partner has
the right to defer liquidation if, in the opinion of the Managing General
Partner, the sale of Partnership assets in liquidation would result in a
material underrealization on the Partnership's assets. The Managing Partner also
has the right to determine the rate at which returns of principal (returns of
Original Contribution) are distributed to the limited partners.
<PAGE>
Item 2. Description of Property.
The Partnership owned no real property as of December 31, 1996.
Item 3. Legal Proceedings.
The Partnership settled certain legal proceedings in connection with the
default of the Horizon Borrower on the Horizon Loan in 1996. See "Item 1.
Description of Business - Closed Mortgage Loans- Horizon Loan."
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the last
quarter of 1996.
<PAGE>
PART-II
Item 5. Market for Units of Limited Partnership Interest and Related
Security Holder Matters.
The Partnership originally caused depositary receipts representing units of
limited partnership interest to be issued in its public offering which continued
from February of 1987 to February of 1989, pursuant to the terms of such
depositary receipts. On June 25, 1990, the Managing General Partner caused all
holders of depositary units to be admitted to the Partnership as Limited
Partners and distributed to such Limited Partners the units of limited
partnership interests (the "Units") represented by their depositary receipts.
The Units are not readily transferable. There is no public market for the Units
and it is not currently expected that any will develop. There are restrictions
upon the transferability of Units, including the requirement that the General
Partners consent to any transferee becoming a substituted Unitholder (which
consent may be granted or withheld at the sole discretion of the General
Partners). In addition, restrictions on transfer may be imposed under state
securities laws.
The Revenue Act of 1987 contains provisions which may have an adverse
impact on investors in certain "publicly traded partnerships." If the
Partnership were to be classified as a "publicly traded partnership," income
attributable to the Units would be characterized as portfolio income and the
gross income attributable to Units acquired by tax-exempt entities after
December 17, 1987 would be unrelated business income, with the result that the
Units could be less marketable. The General Partners will, if necessary, take
appropriate steps to ensure that the Partnership will not be deemed a "publicly
traded partnership."
At March 31, 1997, 1,911,411 Units were outstanding and were held by
approximately 1559 holders of record.
The Partnership made distributions to Limited Partners of $922,965, or $.48
per unit during 1996, $1,261,461 or $.66 per Unit during 1995, $1,777,746 or
$.93 per Unit during 1994, $1,866,722 or $.98 per Unit during 1993, $1,824,848
or $.95 per Unit during 1992, $1,913,781 or $1.00 per Unit during 1991,
$2,031,742 or $1.06 per Unit during 1990, $1,812,715 or $.96 per Unit during
1989, and $843,048 or $.73 per Unit during 1988. In addition, principal
distributions of $1,000,000 ($.52 per Unit), $3,000,000 ($1.57 per Unit),
$5,000,000 ($2.62 per Unit) and $500,000 ($.26 per Unit) were disbursed in
December 1993, July 1994, May 1995 and July 1996, respectively. The Partnership
does not intend to make additional Mortgage Loans.
Item 6. Management's Discussion and Analysis or Plan of Operation.
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 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 to $4,236,513 at December 31, 1996 from
$4,747,607 at December 31, 1995. The decrease from 1995 to 1996 ($511,094 or
approximately 10.77%) resulted primarily from an increase of cash and cash
equivalents by $1,643,208, ($500,000 of which was returned to the Limited
Partners as a principal pay back), a decrease of accrued interest receivable by
$133,081, a decrease of $23,319, in other receivables and repayment of
$2,000,000 in Mortgage Loan receivables. As of December 31, 1996, the
Partnership's loan portfolio consisted of one mortgage loan, the aggregate
outstanding principal balance of which was $1,567,664. .
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. Reference is made to
"Item 1. Description of Business" and the "Notes to the Financial Statements" in
"Item 7. Financial Statements" for further information regarding such Mortgage
Loan investments.
The Partnership's balance of cash and cash equivalents at December 31, 1996
and 1995 was $2,653,867 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 income of $893,250,
Mortgage Loan payoffs of $2,337,952, and a decrease in interest and other
receivables of $156,400; which were offset by a payment of $922,965 ($.48 per
Unit) in dividend distributions (which included $29,715 ($.02 per Unit) return
of capital), and $500,000 ($.26 per Unit) return of principal, and an increase
in accrued expenses and payables of $18,621. Dividend distributions noted as a
return of capital represent those distributions which are in excess of current
year earnings. The Partnership is required to maintain reserves not less than 1%
of gross offering proceeds (not less than $191,291), but currently maintains a
reserve significantly in excess of that amount, $2,653,867 at December 31, 1996.
The amount of cash and cash equivalents currently maintained by the Partnership
is primarily the result of proceeds from the repayment 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 was used for legal fees incurred by the
transaction and to the equity participation owed in accordance with the loan
documents. At the time of payoff, the parties 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. In
November 1996, the partnership received $29,500 including $7,000 for
reimbursement of legal fees, of additional gross revenue from the escrowed
funds, which were agreed to by the parties. On October 25, 1996, the Partnership
received $1,222,720 as a payoff on the Westwood Loan. $1,000,000 was applied to
principal, $4,792 to basic interest, $40,000 to a prepayment penalty, and
$59,729 to gross revenue. In addition, the borrowers paid $110,550 in additional
equity interest, $3,650 in appraisal fees, and $4,000 in estimated legal fees.
The Partnership's success and the resultant rate of return to Unitholders
is dependent upon, among other things, the continued ability of the remaining
borrowers to pay the current interest, additional interest and principal on the
Mortgage Loans.
As a result of the loan payoffs to date (see "Item 1. Description of
Business"), the Partnership's rates of return have been and will continue to be
impacted.
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 December 31, 1996, the
Partnership had one remaining Mortgage Loan. 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 years ended December 31, 1996, 1995, and 1994, the Partnership
had net income of $893,250, $388,420, and $827,967, based on total revenues of
$1,072,159, $727,059, and $1,215,181, and total expenses of $178,909, $338,639,
and $387,214, respectively. The Partnership's net income per Limited Partner
Unit was $.46 per Unit in 1996, $.20 per Unit in 1995, and $.42 per Unit in
1994. The Partnership's distributions, including returns of principal, to
Limited Partners were $.74 per unit in 1996, $3.28 per Unit in 1995 and $2.50
per Unit in 1994. The 1996 distribution included a $500,000 principal repayment
($.26 per Unit), the 1995 distribution included a $5,000,000 principal repayment
($2.62 per Unit), and the 1994 distribution included a $3,000,000 principal
repayment ($1.57 per Unit). Eliminating the effect of the principal repayments
to the Limited Partners, the dividend distributions to Limited Partners were
$.48 per Unit in 1996, $.66 per Unit in 1995 and $.93 per Unit in 1994. The 1996
dividend distributions included a return of capital of $.03 per Unit. The 1995
dividend distributions included a return of capital of $.46 per Unit. The 1994
dividend distributions included a return of capital of $.51 per Unit.
The distributions may not remain at the present level (9.256% financial
capital) as a result of loan payoffs. The General Partners are currently
reviewing the distribution policy and the matters of the additional reserves now
being held. The Partnership receives a lesser rate of return from its short-term
investments than it would receive from the loans, (were they not paid down)
thereby reducing funds available for distribution.
Expenses decreased in 1996 by $159,730 primarily because of a decrease in
professional fees of $102,365. In addition, there was a decrease of $44,740 in
management fees and a decrease in mortgage servicing fees of $13,435 caused by a
drop in mortgage balances being serviced.
Additionally, under the terms of the Partnership agreement, the Partnership
is required to reimburse the Managing General Partner for certain operating
expenses. In 1996, 1995 and 1994, the Managing General Partner was reimbursed by
the Partnership for $105,655, $47,785, and $41,067 of these expenses,
respectively. The Managing General Partner believes that such charges have not
adversely affected the current yield to the Limited Partners.
<PAGE>
Item 7. Financial Statements.
Independent Auditors' Report
The Partners
Common Goal Health Care
Participating Mortgage Fund L.P.:
We have audited the accompanying balance sheets of Common Goal Health Care
Participating Mortgage Fund L.P. (a limited partnership) as of December 31, 1996
and 1995, and the related statements of operations, partners' capital, and cash
flows for each of the years in the three-year period ended December 31, 1996.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Common Goal Health Care
Participating Mortgage Fund L.P. as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick
---------------------
Denver, Colorado KPMG Peat Marwick LLP
March 31, 1997, except as to
paragraph 2 of Note 4,
which is as of April 4, 1997
F-1
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
<TABLE>
<CAPTION>
Balance Sheets
December 31, 1996 and 1995
- --------------------------------------------------------------------------------
1996 1995
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents ...................... $2,653,867 1,010,659
Due from affiliates ............................ 2,664 566
Accrued interest receivable .................... 12,318 145,399
Other receivables .............................. -- 23,319
Mortgage loans receivable (note 2) ............ 1,567,664 3,567,664
--------- ---------
$4,236,513 4,747,607
========== =========
Liabilities and Partners' Capital
Accounts payable and accrued expenses$ ......... 11,150 5,070
Due to affiliates .............................. 12,541 --
------ --------
Total liabilities .......................... 23,691 5,070
Partners' capital (Note 4):
General partners ............................. 61,050 43,185
Limited partners ............................. 4,151,772 4,699,352
--------- ---------
Total partners' capital .................... 4,212,822 4,742,537
--------- ---------
$4,236,513 4,747,607
========== =========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
<TABLE>
<CAPTION>
Statements of Operations
Years ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Interest income ............................. $ 513,079 727,059 1,083,181
Other income:
Loan prepayment penalties ................. 95,000 -- 132,000
Equity participation received in pay-off of
mortgage loan receivable ................ 110,550 -- --
Recovery of loan receivable previously
written off ............................. 353,530 -- --
-------
Total other income ...................... 559,080 -- 132,000
------- -------- -------
1,072,159 727,059 1,215,181
Expenses:
Professional fees ........................... 59,847 162,212 135,698
Fees to affiliates:
Management ................................ 46,853 91,593 126,593
Mortgage servicing ........................ 6,255 19,690 21,044
Other ....................................... 65,954 65,144 103,879
------ ------ -------
178,909 338,639 387,214
------- ------- -------
Net income .............................. $ 893,250 388,420 827,967
========== ======= =======
Net income allocated to general partners $ 17,865 7,768 16,559
Net income allocated to limited partners 875,385 380,652 811,408
------- ------- -------
$ 893,250 388,420 827,967
========== ======= =======
Net income per limited partner unit$ ..... 0.46 0.20 0.42
== ==== ==== ====
Weighted average limited partner units
outstanding .......................... 1,911,411 1,911,411 1,911,411
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
<TABLE>
<CAPTION>
Statements of Partners' Capital
Years ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Total
General Limited Partners'
partners partners capital
-------- -------- -------
<S> <C> <C> <C>
Balance at December 31, 1993 .......... $ 145,688 14,546,499 14,692,187
Net income ............................ 16,559 811,408 827,967
Distributions to limited partners
($.93 per unit) ..................... -- (1,777,746) (1,777,746)
Distributions to general partners ..... (15,000) -- (15,000)
Return of principal to limited partners
($1.57 per unit) .................... -- (3,000,000) (3,000,000)
-------- ---------- ----------
Balance at December 31, 1994 .......... 147,247 10,580,161 10,727,408
Net income ............................ 7,768 380,652 388,420
Distributions to limited partners
($.66 per unit) ..................... -- (1,261,461) (1,261,461)
Distributions to general partners ..... (111,830) -- (111,830)
Return of principal to limited partners
($2.62 per unit) .................... -- (5,000,000) (5,000,000)
-------- ---------- ----------
Balance at December 31, 1995 .......... 43,185 4,699,352 4,742,537
Net income ............................ 17,865 875,385 893,250
Distributions to limited partners
($.48 per unit) ..................... -- (922,965) (922,965)
Return of principal to limited partners
($.26 per unit) ..................... -- (500,000) (500,000)
----- -------- ------- -------
Balance at December 31, 1996 .......... $ 61,050 4,151,772 4,212,822
=== ==== =========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
<TABLE>
<CAPTION>
Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ...................................... $ 893,250 388,420 827,967
Adjustments to reconcile net income to
net cash provided by operating activities:
Decrease (increase) in due from affiliate .. (2,098) -- 5,668
Decrease in interest and other receivables .. 156,400 10,830 158,076
Increase (decrease) in accounts
payable and accrued expenses ................ 6,080 (17,903) (20,848)
Increase (decrease) in due to affiliates .... 12,541 -- (430)
------ ------- -------
Net cash provided by operating activities 1,066,173 381,347 970,433
--------- ------- -------
Cash flows from investing activities:
Proceeds from mortgage loan principal
repayments .................................... 2,000,000 -- 3,600,000
--------- -------- ---------
Net cash provided by investing activities 2,000,000 -- 3,600,000
--------- -------- ---------
Cash flows from financing activities:
Distributions and returns of principal to partners (1,422,965) (6,373,291) (4,792,746)
---------- ---------- ----------
Net cash used in financing activities ... (1,422,965) (6,373,291) (4,792,746)
---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents ..................................... 1,643,208 (5,991,944) (222,313)
Cash and cash equivalents, beginning of year ...... 1,010,659 7,002,603 7,224,916
--------- --------- ---------
Cash and cash equivalents, end of year ............ $ 2,653,867 1,010,659 7,002,603
=========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
(1) Organization and Summary of Significant Accounting Policies
(a) Organization
Common Goal Health Care Participating Mortgage Fund L.P. (the
Partnership), a Delaware Limited Partnership, was formed on August 20, 1986
to invest in and make mortgage loans to third-parties and affiliates
involved in health care. Having sold more than the specified minimum of
116,000 units ($1,160,000), the Partnership commenced operations on July
21, 1987. 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). There is no active public trading market for the units. At
December 31, 1996, there were 1,559 unit holders.
The General Partners include Common Goal Capital Group, Inc., the
Managing General Partner, and Common Goal Limited Partnership I, the
Minority General Partner. Under the terms of 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
reimbursed the General Partners for certain offering and organizational
expenses incurred in connection with the issuance and distribution of the
units in an amount fixed at 3.5% of gross offering proceeds. These offering
and organizational expenses excluded broker/dealer selling commissions and
included accountable due diligence expense reimbursements. Broker/dealer
selling commissions of 9.5% of gross proceeds were paid by the Partnership.
Common Goal Securities, Inc. (CGSI), an affiliate acting as managing
dealer, received selling commissions of 2% of the gross offering proceeds
and an additional 7.5% of the purchase price of all units sold directly by
CGSI. Additionally, CGSI was reimbursed for all expenses incurred in
connection with the offering and also received an amount equal to .5% of
the gross offering proceeds for accountable expenses. Offering and
organizational expenses were recorded as a reduction of partners' capital.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
F-6 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) Continued
For entities investing in and making mortgage loans to businesses in
the health care industry, certain inherent risks may increase the
possibility of actual results differing from management's estimates. These
inherent risks include, among other things, the following:
Substantial dependence on revenues derived from reimbursement by
the Federal Medicare and state Medicaid programs;
Government regulation, government budgetary constraints and
proposed legislative and regulatory changes; and
Lawsuits alleging malpractice and related claims.
(c) Partnership Management Fees and Operating Expenses
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. In 1996, 1995 and 1994, the Managing
General Partner was reimbursed by the Partnership for $105,655,
$47,785, and $41,067 of these expenses, respectively. The Managing
General Partner believes that such charges have not adversely affected
the current yield to the Limited Partners.
(d) Partnership Allocation of Income and Loss and Distributions
Net Income and Net Loss
-------------------------
Net income (except with respect to a Disposition, as defined,
which includes any Partnership transaction not in the ordinary course
of its business, including, without limitation, collections of
principal payments, equity participation payments, prepayments,
prepayment penalties, sales, exchanges, foreclosures or other
dispositions of Mortgage Loans held by the Partnership, recoveries of
damage awards and insurance proceeds (other than the receipt of
subscriptions for Units, all forms of interest payments when
F-7 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) Continued
due on Mortgage Loans or business or rental interruption insurance
proceeds)) and net loss of the Partnership is allocated 98% to Limited
Partners and 2% to the General Partners. Net income arising from a
Disposition is allocated 98% to Limited Partners and 2% to the General
Partners to the extent of any negative balances in the capital accounts of
the Limited Partners, and then 100% to Limited Partners in an amount
necessary to bring the Limited Partners' capital accounts up to an amount
equal to their Original Contributions, as defined, which means the amount
of $10.00 for each unit less the return of any amount of uninvested funds
returned, as defined, plus the 11% per annum preferred cumulative return
thereon (less previous distributions to the Limited Partners in repayment
of such amounts). Remaining net income is allocated 85% to the Limited
Partners and 15% to the General Partners.
Net income (loss) per limited partner unit are computed based on the
weighted average limited partner units outstanding for the year divided
into the net income (loss) applicable to the Limited Partners.
Distributions of Cash From Operations
---------------------------------------
Distributions of Adjusted Cash From Operations, defined as all
receipts of interest payments on Mortgage Loans less cash receipts used to
pay operating expenses and to repurchase any Units (Cash Flow) less any
amount set aside for the restoration or creation of working capital
reserves, are distributed 98% to the Limited Partners and 2% to the General
Partners, and are apportioned quarterly among Limited Partners of record as
of the record date declared within 30 days after the end of each quarter
and are paid quarterly. No distributions of Adjusted Cash From Operations
with respect to any calendar year are made to the General Partners until
the following occurs:
First, distributions to the Limited Partners equal to the 8% annual
cumulative return on their Adjusted Contributions, defined as Original
Contributions attributable to a Unit, reduced by the total of cash
distributed from Disposition Proceeds and from working capital reserves,
for such year (plus any amounts accrued from prior years) have been made to
the Limited Partners; and
Second, payment of all previously subordinated management fees, if
any, have been made.
Thereafter, all previously subordinated amounts payable to the General
Partners with respect to their 2% interest are paid in full to the extent
funds are available, and if not available, are deferred and paid out of
Disposition Proceeds, defined as receipts from
F-8 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) Continued
Dispositions net of related expenses, amounts necessary for the payment of
debts and obligations of the Partnership and any amount set aside for working
capital reserves. The Partnership has been making distributions to the Limited
Partners in excess of the 8% annual cumulative return on Adjusted Contributions.
Distributions of Disposition Proceeds
-------------------------------------
The Managing General Partner has the right to reinvest or distribute
all Disposition Proceeds, through the end of the eleventh year after the
date of the Prospectus. Non- liquidating distributions of Disposition
Proceeds are distributed in the following order of priority, except as
otherwise required by law:
First, 100% to the Limited Partners until the Limited Partners
have received an amount which, when added to prior distributions of
Disposition Proceeds and cash from reserves attributable thereto,
equals the Original Contributions of the Limited Partners;
Second, 100% to the Limited Partners until each Limited Partner
has received an amount which, when added to all prior distributions to
Limited Partners from all sources (including prior distributions in
satisfaction of the 8% annual cumulative return but excluding
distributions pursuant to above), equals the 11% per annum preferred
cumulative return on their Adjusted Contributions, (calculated from
the first day of the calendar quarter succeeding the quarter in which
capital contributions are received);
Third, 100% to the General Partners until they have been paid
100% of the subordinated portion, if any, of (a) the Partnership
Management Fee, if any, and then (b) their 2% interest in Adjusted
Cash From Operations; and
Fourth, the remainder, 85% to the Limited Partners and 15% to the
General Partners.
Dissolution and Returns of Principal
------------------------------------
Since it was the intention of the Managing General Partner to
liquidate the Partnership's assets between 1999 and 2004, the Managing
General Partner has commenced an orderly liquidation and will not
reinvest loan proceeds in new Mortgage Loans. The Partnership's last
remaining Mortgage Loan, the Joint Venture Loan, will mature on
January 1, 2000.
F-9 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) Continued
Proceeds from the liquidation will be applied and distributed in the
following order:
First, to the payment of creditors of the Partnership but excluding
secured creditors whose obligations will be assumed or otherwise
transferred on the liquidation of Partnership assets; and
Second, after allowance for the expenses of liquidation and the
setting up of any reserves for contingencies which the Managing General
Partner considers necessary, to the General Partners and Limited Partners
in proportion to and to the extent of the positive balances in their
capital accounts, after net income or loss arising from a Disposition has
been allocated, with any excess being distributed in accordance with the
order of priority for non-liquidating distributions.
Notwithstanding anything to the contrary, the Managing General Partner
has the right to defer liquidation if, in the opinion of the Managing
General Partner, the sale of Partnership assets in liquidation would result
in a material underrealization on the Partnership's assets. The Managing
General Partner also has the right to determine the rate at which returns
of principal (returns of Original Contributions) are distributed to the
limited partners.
(e) Allowance for Losses An allowance for loan losses is 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.
There is no allowance for losses necessary at December 31, 1996 and 1995.
(f) Federal Income Taxes No provision for federal income taxes has
been recorded as the liability for such taxes is that of the partners
rather than the Partnership.
(g) Cash and Cash Equivalents The Partnership classifies all
short-term investments with maturities of three months or less at the date
of purchase as cash equivalents. At December 31, 1996 and 1995, cash
equivalents primarily consist of money market securities.
(h) Reclassifications Certain 1995 and 1994 amounts have been
reclassified to conform with the 1996 presentation.
F-10
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(2) Mortgage Loans Receivable
<TABLE>
<CAPTION>
Information concerning mortgage loans receivable as of December 31 is
as follows:
Face and carrying
Basic amount of mortgages
interest MaturityPrior
Description rate date liens 1996
1995
<S> <C> <C> <C> <C> <C>
Westwood loan .. 11.50% March 10, 1998 $ 3,200,000 - 1,000,000
Winthrop loan .. 11.50% March 25, 1998 7,200,000 - 1,000,000
Honey Brook loan 13.70% January 1, 2000 8,810,000 1,567,664 1,567,664
--------- --------- ---------
$19,210,000 1,567,664 3,567,664
=========== =========== ===========
</TABLE>
The loans are second mortgage loans secured by health care-related
real properties. Interest is payable monthly and the principal balances are
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% to 30% of the increase in the fair
value of the properties at maturity or redemption, or pursuant to any sale
of the facilities, as defined. Participation interests are recorded as
revenue when they are determinable, generally at maturity or redemption of
the loan or pursuant to any sale of the facilities. All properties are
subject to a first mortgage lien.
In 1990, Common Goal Health Care Pension and Income Fund L.P. II
("Common Goal II"), an affiliated, publicly-offered limited partnership
with investment objectives that are substantially identical to those of the
Partnership and the Partnership participated in a ten- year second mortgage
loan in the original principal amount of $3,430,114 to an unaffiliated
third party through a joint venture between the Partnership and Common Goal
II (the "Joint Venture Loan"). At December 31, 1996 and 1995, the
Partnership's mortgage loans receivable included $1,567,664, representing
the Partnership's participation in the remaining $1,618,254 of the loan.
During 1994, $300,000 of the Westwood loan was paid down. During 1996,
the Westwood and Winthrop loans were paid off. Prepayment penalties of
$40,000 and $55,000, were received on the Westwood and Winthrop loans,
respectively. In addition, the Westwood borrowers paid $110,550 as a result
of equity participation interest. Another mortgage loan, the SHALP loan,
was paid off during 1994. A prepayment penalty of $132,000 was received on
the SHALP loan.
F-11 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(2) Continued
<TABLE>
<CAPTION>
A summary of activity in mortgage loans receivable for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<S> <C>
Balance at December 31, 1993 $7,167,664
Repayment of mortgage loans (3,600,000)
----------
Balance at December 31, 1994 3,567,664
Repayment of mortgage loans -
----------
Balance at December 31, 1995 3,567,664
Repayment of mortgage loans (2,000,000)
----------
Balance at December 31, 1996 $1,567,664
=== ==== ==========
</TABLE>
All property securing the Partnership's mortgage loans at December 31,
1996 is located in Pennsylvania.
<TABLE>
<CAPTION>
The fair value of the Partnership's mortgage loans receivable differed
from the carrying value of the mortgage loans receivable as follows:
Carrying Fair
Value Value
----- -----
<S> <C> <C>
December 31, 1996 $ 1,567,664 1,699,963
December 31, 1995 3,567,664 3,779,201
</TABLE>
The Partnership estimates the fair value of its mortgage loans
receivable by discounting future cash flows using an appropriate interest
rate.
The carrying amounts at December 31, 1996 and 1995 for cash and cash
equivalents, accrued interest receivable, other receivables, due from and
to affiliates, and accounts payable and accrued expenses approximated their
fair values due to the short maturity of these instruments.
In 1996, the Partnership settled certain litigation relating to a
previously charged-off mortgage loan in the amount of $480,000. Such amount
was recorded in 1996, net of attorney fees of $126,470.
(3) Federal Income Tax Information (Unaudited)
Net income for financial reporting purposes did not differ from net
income for federal income tax purposes for the years ended December 31,
1996, 1995 and 1994.
(4) Subsequent Events
On January 8, 1997, the Partnership declared and paid a
distribution of $224,567 ($.12 per Unit) to Limited Partner
unitholders of record at December 15, 1996. Additionally, a return of
principal to the Limited Partners of $611,360 ($.32 per unit) was also
declared and paid by the Partnership on January 8, 1997.
On April 4, 1997, the Partnership declared and paid a
distribution of $206,343 ($.11 per unit) to Limited Partner
unitholders of record at March 15, 1997. Additionally, a return of
principal to the Limited Partners of $500,000 ($.26 per nit) was also
declared and paid by the Partnership on April 4, 1997.
F-12
<PAGE>
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. None.
<PAGE>
PART-III
Item 9. Directors Executive Officers, Promoters and Control Persons,
Compliance With Section 16(a) of the Exchange Act.
The Partnership does not have directors or officers. The following is a
list of the officers and directors of the Managing General Partner as of March
31, 1997:
Name Age Position
---- --- --------
Albert E. Jenkins III 50 Chairman of the Board, Chief Executive
Officer, President, Treasurer and
Director
Richard R. Wood 74 Director
William Jasper 81 Director
Albert E. Jenkins III is the President and Chief Executive Officer of the
Managing General Partner as well as the Executive Vice President and
Secretary/Treasurer of Common Goal Mortgage Company. He is also President and
Chief Executive Officer of Common Goal Capital Group, Inc. II ("CG Capital Group
II"), the managing general partner of Common Goal Health Care Pension and Income
Fund L.P. II, a Delaware limited partnership which commenced a public offering
of its securities in January 1990. Mr. Jenkins also serves on the boards of
directors of the above-referenced corporations. Mr. Jenkins is a co-general
partner of Common Goal Limited Partnership I and Common Goal Management Company.
Mr. Jenkins is also President, Chief Executive Officer and a director of St.
Catherine's of Seneca, Inc., St. Catherine's Care Center of Tiffin, St.
Catherine's Care Center of Bloomville and St. Catherine's Care Centers of
Fostoria. In addition, Mr. Jenkins is President and a director of St.
Catherine's Health Care Management, Inc. and St. Catherine's Care Centers of
Washington Court House Inc. Mr. Jenkins has been a licensed securities salesman
since 1971 and an investment advisor registered under the Investment Advisers
Act of 1940 since 1978.
Richard R. Wood is a director of the Managing General Partner and is
president, a director and owner of 80% of the outstanding stock of Renwood
Properties, Inc. Mr. Wood is also a co-general partner of Common Goal Limited
Partnership I and a director of Common Goal Capital Group Inc. II, the managing
general partner of Common Goal II. In addition, Mr. Wood is a member of the
board of directors of the St Catherine's affiliated companies which currently
own five health care facilities in Ohio. Mr. Wood has, either individually or
together with or through Renwood, sponsored 31 prior private limited
partnerships which have acquired real estate. These partnerships have raised
approximately $30,762,525, with approximately 81% of the properties acquired
being government-subsidized low income housing projects for families and the
elderly and handicapped. In addition, Mr. Wood is a controlling shareholder of
Renwood, Inc. and several of the Renwood companies, which act as co-general
partners of certain of the above-referenced syndications. He is currently a
member of the National Leased Housing Association, Council for Rural Housing and
the Real Estate Investment Association. Mr. Wood received a B.A. from Harvard
University in 1943 and attended Massachusetts Institute of Technology from
1947-1948.
William E. Jasper, Jr. is a director of Common Goal Capital Group, Inc. II
and has been a member of the Board of Directors of Madison Square Federal
Savings Bank since 1964. Prior to 1980, when Mr. Jasper retired, he had served
as president of a multi-line insurance agency and brokerage. Mr. Jasper is a
Deputy Regional Director for a fraternal organization that is dedicated to the
Maryland Special Olympics which provides health-care training and specialized
sports for the mentally handicapped. Mr. Jasper attended Baltimore City College
and has taken numerous extended courses at Loyola College and Johns Hopkins
University in real estate, appraisals, inspections, financial planning,
mortgages and management.
Item 10. Executive Compensation.
The Partnership has no executive officers or directors. The Partnership is
not required to pay the officers and directors of the General Partners any
current nor any proposed compensation in such capacities. However, the
Partnership is required to pay certain fees, make distributions and allocate a
share of the profits or losses of the Partnership to the General Partners as
described under the caption "Management Compensation" on pages 9 through 13 of
the Partnership's Prospectus, which description is incorporated herein by
reference. Set forth below are the fees, compensation and other reimbursements
paid or accrued to Common Goal and its Affiliates for the year ended December
31, 1996.
Capacities in
Which Compensation
Name of Affiliate was Received Remuneration
----------------- ------------ ------------
Common Goal Management fee $46,853
Common Goal Mortgage Mortgage loan $ 6,255
Company servicing fees
No form of non-cash remuneration was paid by the Partnership.
For further information on compensation paid to Common Goal and its
Affiliates, see "Management Compensation" on pages 9-13 of the Prospectus.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The Partnership, as an entity, does not have any directors or officers. The
following is information concerning Unit ownership as of December 31, 1996.
To the best knowledge of the Partnership, no person owns more than 5% of
the outstanding Units. Messrs. Jenkins and Wood each own less than 1% of the
total outstanding Units and all officers and directors of the Managing General
Partner, as a group, own less than 1% of the total outstanding Units. No other
officer or director of the Managing General Partner owns any Units.
Item 12. Certain Relationships and Related Transactions.
The Partnership has entered into the joint Venture Loan with Common Goal
II, an affiliated, publicly-offered limited partnership. On August 1, 1990, the
joint venture made a $3,430,114 loan to an unaffiliated third party, which loan
had a remaining principal balance of $1,618,254 at December 31, 1996. For
further information concerning this Mortgage Loan, see "Item 1. Description of
Business - "Existing Mortgage Loan" - " Joint Venture Loan."
The Partnership engages the services of Common Goal Mortgage Company, an
affiliate of the General Partners, in connection with servicing Mortgage Loans
for which Common Goal Mortgage Company is paid a fee. See Item 11, Executive
Compensation, for the information concerning such fees.
Item 13. Exhibits and Reports on Form 8-K.
(a) (1) Financial Statements
The response to this portion of Item 13 is submitted as a separate section
of this report, commencing on page F-1.
(2) Financial Statement Schedules
Not applicable.
(3) Exhibits
See response to Item (c), below.
(b) Reports on Form 8-K
The Partnership did not file any reports on Form 8-K during
the quarter ended December 31, 1996.
(c) Exhibits
The following exhibits are included herein or incorporated
by reference:
Number
------
3.1 Second Amended and Restated Agreement of Limited
Partnership of Registrant dated as of February 1, 1987
(incorporated by reference from the Registrants Registration
Statement (File No. 33- 8531) on Form S-11 filed under the
Securities Act of 1933, as amended)
3.2 Pages 9-13 of the Registrant's final prospectus dated
February 20, 1987, as filed with the Securities and Exchange
Commission pursuant to Rule 424(b) under the Securities Act of
1933, as amended.
(d) Financial Statement Schedules
Not applicable.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
By: Common Goal Capital Group, Inc.,
General Partner
By: /s/ Albert E. Jenkins
--------------------------
Albert E. Jenkins III
Chairman and Chief Executive Officer
Date: April 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Position Date
---- -------- ----
/s/ Albert E. Jenkins Chairman (Principal April 14, 1997
- ------------------------
Albert E. Jenkins III Executive Officer),
President, Principal
Financial and
Accounting Officer
and Director of
Managing General
Partner
/s/ Richard R. Wood Director of Managing April 14, 1997
- -----------------------
Richard R. Wood General Partner
/s/ William E. Jasper, Jr. Director of Managing April 14, 1997
- ---------------------------
William E. Jasper, Jr. General Partner
(A Majority of the Board of Directors of the Managing General Partner)
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
By: Common Goal Capital Group, Inc.,
General Partner
By: ______________________________________
Albert E. Jenkins III
Chairman and Chief Executive Officer
Date: April 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Position
_______________________ Chairman (Principal April 14, 1997
Albert E. Jenkins III Executive Officer),
President, Principal
Financial and
Accounting Officer
and Director of
Managing General
Partner
______________________ Director of Managing April 14, 1997
Richard R. Wood General Partner
______________________ Director of Managing April 14, 1997
William E. Jasper, Jr. General Partner
(A Majority of the Board of Directors of the Managing General Partner)
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,653,867
<SECURITIES> 0
<RECEIVABLES> 2,668,849
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,236,513
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,236,513
<CURRENT-LIABILITIES> 23,691
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,212,822
<TOTAL-LIABILITY-AND-EQUITY> 4,236,513
<SALES> 0
<TOTAL-REVENUES> 1,072,159
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 178,909
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 893,250
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 893,250
<EPS-PRIMARY> 0
<EPS-DILUTED> .46
</TABLE>
