- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 1997
( ) 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
(Exact name of small business issuer as specified in its charter)
Delaware 36-3644837
-------- ----------
(State or other Jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
215 Main Street
Penn Yan, New York 14527
------------------------
(Address of principal executive offices)
(315) 536-5985
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES _X_ NO ___
<PAGE>
PART 1 - Financial Information
Item 1. Financial Statements
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
<TABLE>
<CAPTION>
Balance Sheets
Sep. 30, Sep. 30,
1997 1996
(Unaudited) (Unaudited)
----------- -----------
Assets
------
<S> <C> <C>
Current Assets
Cash and cash equivalents ....................................... $2,361,008 $3,536,382
Due from affiliates ............................................. -- --
Accrued interest receivable ..................................... 66,504 11,976
Other assets .................................................... -- 4,478
--------- ---------
Total current assets ....................................... 2,427,512 3,552,836
Mortgage loans receivable ................................................ 1,050,590 450,590
--------- ---------
Total Assets .................................... $3,478,102 $4,003,426
========== ==========
Liabilities and Partners' Capital
Current Liabilities
Accounts payable and accrued expenses ........................... $ -- $ --
Due to affiliates ............................................... 10,032 --
Deferred revenue ................................................ 400,000 400,000
------- -------
Total Current Liabilities .................................. 410,032 400,000
Partners' capital:
General partner ................................................. 71,456 33,693
Limited partner ................................................. 2,996,614 3,569,733
--------- ---------
Total partners' capital ................................ 3,068,070 3,603,426
--------- ---------
Total Liabilities and Partners' Capital ........... $3,478,102 $4,003,426
========== ==========
</TABLE>
See accompanying notes
2
<PAGE>
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
<TABLE>
<CAPTION>
Statements of Earnings
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income
Interest ............................................. $ 67,847 $ 69,533 $213,716 $203,581
Miscellaneous income ................................. -- -- -- --
------ ------ ------- -------
Total Income ...................................... 67,847 69,533 213,716 203,581
Expenses
Professional fees .................................... 6,783 540 35,226 12,416
Fees to affiliates:
Management .......................................... 7,585 8,923 23,846 27,327
Mortgage Servicing .................................. 656 282 1,220 845
Other ................................................ 978 8,684 6,952 27,224
--- ----- ----- ------
Total Expenses .................................... 16,002 18,429 67,244 67,812
------ ------ ------ ------
Net Income ........................................... $ 51,845 $ 51,104 $146,472 $135,769
======== ======== ======== ========
Net earnings per limited
partner unit ................................................. $ .10 $ .10 $ .28 $ .26
======== ======== ======== ========
Weighted average limited ...................................... 522,116 522,116 522,116 522,116
======= ======= ======= =======
partner units outstanding
</TABLE>
See accompanying notes
3
<PAGE>
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
<TABLE>
<CAPTION>
Statements of Partners' Capital
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
------------------------------------------ -----------------------------------
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 $ 34,838 $ 3,493,147 $ 3,527,985 $ 30,299 $ 3,798,633 $ 3,828,932
Net income ................... 36,618 109,854 146,472 3,394 132,375 135,769
Unclaimed distributions ...... -- -- -- -- 945 945
Cash distributions to partners -- (606,387) (606,387) ( -- ) (362,220) (362,220)
-------- -------- -------- ------ ------- --------
Balance at end of period ..... $ 71,456 $ 2,996,614 $ 3,068,070 $ 33,693 $ 3,569,733 $ 3,603,426
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes .......
4
<PAGE>
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
<TABLE>
<CAPTION>
Statements of Cash Flows
(Unaudited)
NINE MONTHS ENDED
--------------------
SEP. 30, SEP. 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................... $ 146,472 $ 135,769
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Decrease (increase) in due from affiliates .. 2,205 --
Decrease (increase) in interest receivable .. (55,416) 278
Decrease (increase) in other assets ......... -- (4,478)
Increase (decrease) in accounts payables
and accrued expenses ...................... -- (7,422)
Increase (decrease) in due to affiliates .... 10,032 (491)
------ ----
Net cash provided by operating activities 103,293 123,656
------- -------
Cash flows from investing activities:
Proceeds from sale of investment
in operating properties ..................... -- --
Distribution received from operating
properties .................................. -- --
------- -------
Net cash used in investing activities .... -- --
------- -------
Cash flows from financing activities:
Loan to affiliates ................................... (600,000) --
Unclaimed distributions .............................. -- 945
Distributions to limited partners .................... (606,387) (362,220)
-------- --------
Net cash used in financing activities ..... (1,206,387) (361,275)
---------- --------
Net increase (decrease) in cash and cash equivalents: ......... (1,103,094) (237,619)
Cash and cash equivalents, beginning of period ................ 3,464,102 3,774,001
--------- ---------
Cash and cash equivalents, end of period ...................... $ 2,361,008 $ 3,563,382
=========== ===========
</TABLE>
See accompanying notes
5
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
September 30, 1997
(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 that
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.
6
<PAGE>
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 nine months ended September 30, 1997 and 1996 are the
representation of management and reflect all adjustments which are, in
the opinion of management, necessary to a fair presentation of the
financial position and results of operations of the Partnership. All
such adjustments are normal and recurring.
(2) Mortgage Loans 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 "SC
7
<PAGE>
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
subsequently were assumed by an affiliated entity, Will Care of Ohio,
Inc., and are 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.
<TABLE>
<CAPTION>
The principal balances outstanding for these loans as of September 30,
1997 were as follows:
<S> <C>
Joint Venture Loan $ 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
========
</TABLE>
On March 13, 1997 the Managing General Partner approved a loan of
$425,000 (the "St. Catherine's Loan") to St. Catherine's Care Center
of Tiffin, Inc., St. Catherine's Care Center of Bloomville, Inc., St.
Catherine's Care Center of Washington Court House, Inc., St.
Catherine's Care Center of Fostoria, Inc. and St. Catherine's Care
Center of Findlay, Inc., (collectively, "St Catherine's Care Centers")
affiliates of the Managing General Partner and to be secured by
mortgages on the real properties owned by each of the foregoing, said
8
<PAGE>
mortgages being subordinated to senior indebtedness in the amount of
$10,650,000 held by South Trust Bank of Alabama, N.A. and indebtedness
of the Partnership in the amount of $400,000. The loan will bear
interest at the rate of 13% per annum and will mature August 31, 2000.
The Partnership funded $425,000 of the St. Catherine's loan on April
10, 1997. On June 18, 1997, the Partnership funded an additional
$75,000 loan to St. Catherine's Care Centers. On September 23 and
September 29, 1997, the Partnership funded an additional $50,000 loan
respectively to St. Catherine's Care Centers. As of September 30, 1997
the St. Catherine's loan had an outstanding primary balance of
$600,000.
(3) Distributions
-------------
On January 8, 1997, the Partnership declared and paid a distribution
of $121,399 ($.23 per unit) to Limited Partner unitholders of record
at December 15, 1996. On April 4, 1997, the Partnership declared and
paid a distribution of $119,085 ($.23 per unit) to Limited Partner
unitholders of record at March 15, 1997. Additionally, a return of
principal to the Limited Partners of $250,000 ($.48 per unit) was also
declared and paid by the Partnership on April 4, 1997. On July 4,
1997, the Partnership declared and paid a distribution of $115,903
($.22 per unit) to Limited Partner unitholders of record at June 15,
1997.
(4) Subsequent Events
-----------------
On October 5, 1997, the Partnership declared and paid a distribution
of $115,903 ($.22 per unit) to Limited Partner unitholders of record
at September 15, 1997. On November 13, 1997, the Managing General
Partner ratified an increase in the St. Catherine's Loan to $850,000.
The St. Catherine's Loan had an outstanding principal balance of
$700,000 as of that date.
9
<PAGE>
Item 2. Managements 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.
Partnership assets decreased from $3,927,985 at December 31, 1996 to
$3,478,102 at September 30, 1997. The decrease of $449,883 resulted
primarily from cash distributions on January 8, April 4, and July 4,
to the Limited Partners and loans to affiliates that was offset by net
earnings for the period. As of September 30, 1997 the Partnership's
loan portfolio consisted of seven mortgage loans, the aggregate
outstanding principal balance of which was $1,050,590.
The Partnership has structured its Mortgage Loans to provide for
payment of quarterly distributions from investment income. The
interest derived from the Mortgage Loans, repayments of Mortgage Loans
and interest earned on short-term investments contribute to the
Partnership's liquidity. These funds are used to make cash
distributions to Limited Partners, to pay normal operating expenses as
they arise and, in the case of repayment proceeds, may, subject to
certain exceptions, be used to make additional Mortgage Loans.
The Partnership intends to maintain working capital reserves equal to
approximately 2% of gross proceeds of the offering (approximately
$104,423 at December 31, 1996 and at September 30, 1997), 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.
10
<PAGE>
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 nine months ended September 30, 1997 and 1996, the
Partnership had net earnings of $146,472 and $135,769, based on total
revenue of $213,716 and $203,581 and total expenses of $67,244 and
$67,812. For the nine months ended September 30, 1997 and 1996, the
net earnings per limited partner unit was $.28 and $.26, respectively.
During the three months ended September 30, 1997 and 1996, the
Partnership had net earnings of $51,845 and $51,104 based on total
revenue of $67,847 and $69,533 and total expenses of $16,002 and
$18,429, respectively. For the three months ended September 30, 1997
and 1996, the net earnings per limited partner unit was $.10 and $.10
respectively.
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.
11
<PAGE>
PART II - OTHER INFORMATION
Items 1 through 6 are omitted because of the absence of conditions under
which they are required.
12
<PAGE>
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: November 14, 1997 /s/Albert E. Jenkins, III
-------------------------
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,361,008
<SECURITIES> 0
<RECEIVABLES> 1,117,094
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,478,102
<CURRENT-LIABILITIES> 410,032
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,068,070
<TOTAL-LIABILITY-AND-EQUITY> 3,478,102
<SALES> 213,716
<TOTAL-REVENUES> 213,716
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 67,244
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 146,472
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,472
<EPS-PRIMARY> .28
<EPS-DILUTED> .00
</TABLE>
