<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly period ended June 30, 1996
[] Transition Report Under Section 13 or 15 (d) of the Exchange Act
For the Transition period from to .
---------------- ---------------
Commission File Number: 0-21604
Common Goal Health Care Pension and Income Fund L.P. II
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(Exact name of small business issuer as specified in its charter)
Delaware 36-3644837
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6920 Donachie Road, #209
Baltimore, Maryland 21239
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(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 PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
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Assets
- ------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $3,614,473 $3,774,001
Accrued interest receivable 11,500 12,254
----------- ------------
Total Current Assets 3,626,023 3,786,255
Mortgage loan receivable 450,590 450,590
----------- ------------
Total Assets $4,076,613 $4,236,845
=========== ============
Liabilities and Partners' Capital
- ------------------------------------------------------------------
Current Liabilities:
Deferred revenue $ 400,000 $ 400,000
Accrued expenses 1,011 7,422
Due to affiliate 1,547 491
Total Current Liabilities 402,558 407,913
Partners' Capital 3,674,055 3,828,932
----------- ------------
Total Liabilities and Partners' Capital $4,076,613 $4,236,845
=========== ============
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Statements of Earnings
(Unaudited)
THREE MONTHS ENDED
June 30, June 30,
1996 1995
------------------------ -----------------------
<S> <C> <C>
Income
Interest $ 65,887 $ 143,093
Gain on Sale of Investment in
Operating Properties --- 1,532,085
------------------------ -----------------------
TOTAL INCOME $ 65,887 $ 1,675,178
Expenses
Professional fees (800) 128,679
Fees to affiliates:
Management 5,351 13,053
Mortgage Company 282 1,188
Other 8,381 12,470
------------------------ -----------------------
TOTAL EXPENSES 13,214 155,390
------------------------ -----------------------
NET EARNINGS $ 52,673 $ 1,519,788
======================== =======================
Net earnings per limited partner unit $ 10 $ 2.91
======================== =======================
Weighted average limited partner
units outstanding $ 522,116 $ 522,116
======================== =======================
See accompanying notes.
SIX MONTHS ENDED
June 30, June 30,
1996 1995
------------------ ----------------
<S> <C> <C>
Income
Interest $ 134,048 $ 214,499
Gain on Sale of Investment in
Operating Properties --- 1,532,085
------------------ ----------------
TOTAL INCOME $ 134,048 $ 1,746,584
Expenses
Professional fees 11,876 146,121
Fees to affiliates:
Management 18,404 26,106
Mortgage Company 563 3,640
Other 18,539 21,423
------------------- ----------------
TOTAL EXPENSES 49,382 197,290
------------------- ----------------
NET EARNINGS $ 84,666 $ 1,549,294
=================== ================
Net earnings per limited partner unit $ .16 $ 2.97
=================== ================
Weighted average limited partner
units outstanding $ 522,116 $ 522,116
=================== ================
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Statements of Partners' Capital
(Unaudited)
SIX MONTHS ENDING
JUNE 30,
1996 1995
------------------------------------ ----------------------------------------
TOTAL TOTAL
GENERAL LIMITED PARTNERS' GENERAL LIMITED PARTNERS'
PARTNERS PARTNERS CAPITAL PARTNERS PARTNERS CAPITAL
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of period $30,299 3,798,633 3,828,932 ($691) 2,603,753 2,603,062
Net earnings 2,117 82,549 84,666 38,732 1,510,562 1,549,294
Unclaimed distributions - 945 945 - 1,107 1,107
Cash distributions to
partners _ (240,488) (240,488) (10,000) (187,711) (197,711)
---------- ----------- ----------- ------------ ------------ ------------
Balance at end of period $32,416 3,641,639 3,674,055 28,041 3,927,711 3,955,752
========== =========== =========== ============ ============ ============
See accompanying notes.
</TABLE>
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<PAGE> 5
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
1996 1995
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<S> <C> <C>
Cash flows from operating activities: $84,666 $1,549,294
Net earnings
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Gain on sale of investment in operating
properties - (1,532,085)
Decrease (increase) in interest receivable 704 (6,595)
Increase (decrease) in accrued expenses (6,411) (4,093)
Increase (decrease) in due to affiliates 1,056 506
Increase in due from affiliates - (1,636)
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Net cash provided by operating activities 80,015 5,391
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Cash flows from investing activities:
Proceeds from sale of investment in
operating properties - 3,905,280
Distributions received from operating
properties - 67,646
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Net cash used in investing activities - 3,972,926
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Cash flows from financing activities:
Unclaimed distributions 945 1,107
Distributions to limited partners (240,488) (197,711)
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Net cash used in financing activities (239,543) (196,604)
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Net Increase (decrease) in cash and cash
equivalents (159,528) 3,781,713
Cash and cash equivalents - beginning of
period 3,774,001 113,197
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Cash and cash equivalents - end of period $3,614,473 $3,894,910
========== ==========
See accompanying notes.
</TABLE>
5
<PAGE> 6
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
June 30, 1996
(1) Organization and Summary of Significant Accounting Policies
Common Goal Health Care Pension and Income Fund L.P. II (Partnership) was
formed on May 9, 1989, to invest in and make mortgage loans to third
parties and affiliates involved in health care. On July 2, 1990, the
Partnership commenced operations, having previously sold more than the
specified minimum of 117,650 units ($1,176,500). The Partnership's
offering terminated January 11, 1992 with the Partnership having sold
522,116 Units ($5,221,160).
The general partners are Common Goal Capital Group, Inc. II, the managing
general partner, and Common Goal Limited Partnership II, the associate
general partner. Under the terms of the Partnership's agreement of
limited partnership ("Partnership Agreement"), the general partners are
not required to make any additional capital contributions except under
certain limited circumstances upon termination of the Partnership.
Under the terms of the Partnership Agreement, the Partnership is required
to pay a quarterly management fee to the managing general partner equal
to 1% per annum of adjusted contributions, as defined. A mortgage
servicing fee equal to .25% per annum of the Partnership's outstanding
mortgage loan receivable principal amount also is to be paid to Common
Goal Mortgage Company, an affiliate of the general partners.
Additionally, under the terms of the Partnership Agreement, the
Partnership is required to reimburse the managing general partner for
certain operating expenses.
The Partnership classifies all short-term investments with maturities at
date of purchase of three months or less as cash equivalents.
Mortgage loans that have virtually the same risk and potential rewards as
joint ventures are accounted for and classified as investments in
operating properties. Cash received related to investments in operating
properties is recognized as interest income to the extent that such
properties have earnings prior to the recognition of the distribution of
cash to the Partnership; otherwise, such cash is recorded as a reduction
of the related investments.
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An allowance for loan losses will be provided, if necessary, at a level
which the Partnership's management considers adequate based upon an
evaluation of known and inherent risks in the loan portfolio.
No provision for income taxes has been recorded as the liability of such
taxes is that of the partners rather than the Partnership.
Earnings per limited partner unit is computed based on the weighted
average limited partner units outstanding for the period.
The accompanying unaudited financial statements as of and for the three
and six months ended June 30, 1996 and 1995 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. All such adjustments are
normal and recurring.
(2) Mortgage Loan Receivable
Unless otherwise specified, all references to outstanding principal
balances should refer to the carrying value for tax purposes.
The Joint Venture Loan. The amount of $50,590 represents the amount of
outstanding principal remaining in the Partnership's participation in a
second mortgage loan made by an affiliated joint venture (with a total
outstanding principal balance of $1,618,254). The loan, which was
originally secured by two nursing home facilities in Pennsylvania, bears
interest at a rate of 13.7% per annum and provides for participation
interest based on the increase in the fair value of the facilities to be
paid at maturity or pursuant to any sale of the facilities. The loan
also provides for the payment of additional interest based upon the gross
revenues of the facilities. On November 3, 1993, the borrower, Life
Care, restructured the Joint Venture Loan and paid down the balance. The
Partnership received $52,314 allocated to its share. Of that amount,
$45,010 was applied to principal while the remainder was applied to a
prepayment penalty, interest and a refinancing fee. The entire remaining
principal balance is due at the maturity date of January 1, 2000.
St. Catherine's Loan. As a result of the refinancing of the senior debt
by the St. Catherine's, Court House and Findlay facilities, the
Partnership's mortgage loans for these same facilities were refinanced on
April 13, 1995 and the outstanding principal and Additional Interest were
subsequently paid off. The refinancing of the senior debt did not
provide sufficient proceeds to allow payment in cash of the
participations owing under the St. Catherine's, Court House and Findlay
Loans (the "SC Participations") which totaled $840,500 in the
aggregation. The St. Catherine's borrowers paid the SC Participations
through (i) the issuance of notes in the total amount of $400,000,
bearing an interest rate of 11.00% per annum (a) maturing on the earlier
of the sale or refinancing of the Tiffin, Bloomville, Fostoria,
Washington Court House and Findlay Facilities (the
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<PAGE> 8
"SC Facilities") or the maturity of the refinanced senior debt (August,
2000) and (b) cross-collateralized by second mortgage liens on the SC
Facilities; and (ii) the issuance of a contingent payment obligation by
St. Catherine's of Seneca, Inc. in the amount of $202,500 and a
contingent payment obligation by St. Catherine's Care Centers of
Fostoria, Inc. in the amount of $238,000 (collectively, the "CPOs").
The CPOs bear interest at an annual rate of 11.00%, which is due
quarterly, and mature on the earlier of the sale or refinancing of the SC
Facilities or the maturity of the senior debt with South Trust (August
2000). The CPOs provide that interest is payable on a current basis
provided that the debt service coverage ratios on each of the SC
Facilities is 1.2 to 1.0. In the event these debt service ratios are not
maintained, the interest shall accrue until the debt coverage ratio is at
least 1.2 to 1.0 or maturity. The CPOs further provide that principal is
payable only to the extent that upon a resale or refinancing of the SC
Facilities, there are sufficient proceeds to repay the senior debt and
the amounts owing under the CPOs. The CPOs are being assumed by an
affiliated entity, Will Care of Ohio, Inc., and will be secured, to the
extent they become payable and are not paid, by a pledge of 30 shares of
St. Catherine's of Seneca, Inc. common stock.
In accordance with FASB Statement of Standards No. 66, "Accounting for
Sales of Real Estate", the $840,500 participation cannot be recognized as
income at this time. The Partnership has recorded $400,000 of the
participation amount, related to the mortgage loan receivable, as
Deferred Revenue, and the interest thereon will be recognized as it is
earned. Due to the contingent nature of the $440,500 in participation
income due to the partnership and the participation income and interest
earned on the CPOs will be recognized only when received.
The principal balances outstanding for these loans as of June 30, 1996
were as follows:
Joint Venture $50,590
St. Catherine's of Tiffin 51,500
St. Catherine's of Bloomville 36,000
St. Catherine's of Fostoria 102,000
St. Catherine's of Findlay 142,500
St. Catherine's of Washington
Court House 68,000
--------
$450,590
========
(3) Subsequent Events
On July 5, 1996, the Partnership declared and paid a quarterly
distribution of $121,732 to Unitholders of record as of June 15, 1996.
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Item 2. Management's Discussion and Analysis or Plan of Operations.
Liquidity and Capital Resources
Common Goal Health Care Pension and Income Fund L.P. II, a Delaware
limited partnership (the "Partnership"), was formed to make mortgage
loans secured by a mix of first and junior liens on health
care-related properties. The Partnership commenced its offering of
Units to the public on January 12, 1990, and commenced operations on
July 2, 1990 (having sold the Minimum Number of Units as of that
date). After having raised $5,221,160 by selling Units to 483
investors, the Partnership terminated the public offering on January
11, 1992.
The Partnership's Mortgage Loans pay Basic Interest which is payable
at higher rates than are being earned on temporary investments and
provide for payments of Additional Interest and Participations. The
interest derived from the Mortgage Loans and repayments of Mortgage
Loans contribute to the Partnership's liquidity. These funds are used
to make cash distributions to the 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 movement of funds from Mortgage Loans
to short-term investments has increased the Partnership's overall
liquidity, but has lowered expected interest income. The Partnership
has structured its Mortgage Loans to provide for payment of quarterly
distributions to Limited Partners from investment income.
The Partnership intends to maintain working capital reserves equal to
approximately 2% of gross proceeds of the offering (approximately
$104,423 at December 31, 1995 and at June 30, 1996), an amount which
is anticipated to be sufficient to satisfy liquidity requirements.
The Managing General Partner continues monitoring of the level of
working capital reserves.
Results of Operations
The Partnership commenced operations July 2, 1990, and funded its
first Mortgage Loan in November 1990. As of June 30, 1991, the
Partnership had completed its portfolio of Mortgage Loans. The
interest earned on these investments has stabilized on a tax
accounting basis. Accordingly, the General Partners expect the
Partnership's earnings to remain relatively constant.
During the quarters ended June 30, 1996 and 1995, the Partnership had
net earnings of $52,673 and $1,519,788, based on total revenue of
$65,887 and $1,675,178 and total expenses of $13,214 and $155,390.
The large decrease in net earnings is due to the 1995 pay-off of the
Partnership's mortgage loans which were designated as investments in
the operating properties from which the Partnership recognized a
substantial gain in 1995. The decrease was partially offset by a
large decrease in professional fees (1995 had a one-
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<PAGE> 10
time $116,093 consultant fee in conjunction with the properties
transaction). For the three months ended June 30, 1996 and 1995,
the net earnings per limited partner unit was $.10 and $2.91,
respectively. The net earnings per unit for the six month period
ending June 30, 1996 and 1995 was $.16 and $2.97, respectively.
The Partnership made distributions totalling $240,488 in January and
April 1996 of which $155,822 represents a return of capital for
financial accounting purposes, as well as for federal tax accounting
purposes.
The Partnership's success and the resultant rate of return to Limited
Partners will be dependent upon, among other things, the ability of
the Managing General Partner to identify suitable opportunities for
the Partnership to reinvest its assets and the ability of the
borrowers to pay the current interest, Additional Interest and
principal of the Mortgage Loans.
The General Partners expect to reinvest some of the excess reserves
resulting from the refinancing of the operating properties in loans to
new operating properties.
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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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<PAGE> 12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Common Goal Health Care Pension and Income Fund L.P. II
(Registrant)
By: Common Goal Capital Group, Inc.,
Managing General Partner
DATED: July 31, 1996 /s/ Albert E. Jenkins, III
-----------------------------------
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,614,473
<SECURITIES> 0
<RECEIVABLES> 11,550
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,626,023
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,076,613
<CURRENT-LIABILITIES> 402,558
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 3,674,055
<TOTAL-LIABILITY-AND-EQUITY> 4,076,613
<SALES> 0
<TOTAL-REVENUES> 134,048
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 49,382
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 84,666
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,666
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
</TABLE>
