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 March 31, 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
March 31, March 31,
1997 1996
(Unaudited) (Unaudited)
----------- -----------
Assets
------
<S> <C> <C>
Current Assets
Cash and cash equivalents ....................... $3,404,985 $3,684,150
Due from affiliates ............................. 3,170 11,277
Accrued interest receivable ..................... 22,961 --
------ ---------
Total current assets ....................... 3,431,116 3,695,427
Mortgage loans receivable ............................ 450,590 450,590
------- -------
Total Assets ......................................... $3,881,706 $4,146,017
========== ==========
Liabilities and Partners' Capital
---------------------------------
Current Liabilities
Accounts payable and accrued expenses ........... $ 7,226 $ 3,626
Due to affiliates ............................... 8,852 1,517
Deferred revenue ................................ 400,000 400,000
------- -------
Total Current Liabilities .................. 416,078 405,143
Partners' capital:
General partner ................................. 49,598 31,099
Limited partner ................................. 3,416,030 3,709,775
--------- ---------
Total partners' capital .............................. 3,465,628 3,740,874
--------- ---------
Total Liabilities and Partners' Capital .............. $3,881,706 $4,146,017
========== ==========
</TABLE>
See accompanying notes
<PAGE>
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
<TABLE>
<CAPTION>
Statements of Earnings
(Unaudited)
THREE MONTHS ENDED
March 31, March 31,
1997 1996
---- ----
<S> <C> <C>
Income
Interest .......................... $ 76,200 $ 68,161
Miscellaneous income .............. -- --
------- -------
TOTAL INCOME ................... 76,200 68,161
Expenses
Professional fees ................. 5,869 12,676
Fees to affiliates:
Management ....................... 8,570 13,053
Mortgage Servicing ............... 282 281
Other ............................. 2,437 10,158
----- ------
TOTAL EXPENSES ................. 17,158 36,168
------ ------
NET EARNINGS ...................... $ 59,042 $ 31,993
======== ========
Net earnings per limited
partner unit .......................... $ .11 $ .06
======== ========
Weighted average limited ............... 522,116 522,116
======= =======
partner units outstanding
</TABLE>
See accompanying notes.
<PAGE>
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
<TABLE>
<CAPTION>
Statements of Partners' Capital
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
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 earnings ............................... 14,760 44,282 59,042 800 31,193 31,993
Unclaimed distributions .................... -- -- -- -- 358 358
Cash distributions to partners ............. -- (121,399) (121,399) ( -) (120,409) (120,409)
------- -------- -------- - -------- --------
Balance at end of period $49,598 $3,416,030 $ 3,465,628 $ 31,099 $ 3,709,775 $ 3,740,874
======= ========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
<TABLE>
<CAPTION>
Statements of Cash Flows
(Unaudited)
THREE MONTHS ENDED
------------------
MARCH 31, MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings ..................................... $ 59,042 $ 31,993
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Decrease (increase) in due from affiliates .. (965) --
Decrease (increase) in interest receivable .. (11,873) 977
Increase (decrease) in accounts payables
and accrued expenses ...................... 7,226 (3,796)
Increase (decrease) in due to affiliates .... 8,852 1,026
----- -----
Net cash provided by operating activities 62,282 30,200
------ ------
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:
Unclaimed distributions .......................... -- 358
Distributions to limited partners ................ (121,399) (120,409)
-------- --------
Net cash used in financing activities ..... (121,399) (120,051)
-------- --------
Net increase (decrease) in cash and cash equivalents: . (59,117) (89,851)
Cash and cash equivalents, beginning of period ........ 3,464,102 3,774,001
--------- ---------
Cash and cash equivalents, end of period .............. $ 3,404,985 $ 3,684,150
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
March 31, 1997
(1) Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
Common Goal Health Care Pension and Income Fund L.P. 11 (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.
<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 months ended March 31, 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 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 "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 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 March 31,
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
approximately $400,000 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., affiliates of the
Managing General Partner. It is estimated that the loan will bear interest
at the rate of 13% per annum and will mature five years after the date of
the loan. The Partnership has not yet funded this loan. (3) Distribution
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.
(4) Subsequent Events
-----------------
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.
<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
$3,881,706 at March 31, 1997. The decrease of $46,279 resulted primarily
from cash distributions on January 8, to the Limited Partners that was
offset by net earnings for the period. As of March 31, 1997 the
Partnership's loan portfolio consisted of six mortgage loans, the aggregate
outstanding principal balance of which was $450,950.
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 March 31, 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.
<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 quarters ended March 31, 1997 and 1996, the Partnership had
net earnings of $59,042 and $31,993, based on total revenue of $76,200 and
$68,161 and total expenses of $17,158 and $36,168. For the three months
ended March 31, 1997 and 1996, the net earnings per limited partner unit
was $.11 and $.06, respectively. The remaining Mortgage Loans were current
as to regular interest as of March 31, 1997.
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.
<PAGE>
PART II - OTHER INFORMATION
Items 1 through 6 are omitted because of the absence of conditions under
which they are required.
<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: May 15, 1997 /s/Albert E. Jenkins, III
----------------------------------
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,404,985
<SECURITIES> 0
<RECEIVABLES> 476,721
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,881,706
<CURRENT-LIABILITIES> 416,078
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,465,628
<TOTAL-LIABILITY-AND-EQUITY> 3,881,706
<SALES> 0
<TOTAL-REVENUES> 76,200
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 59,042
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,042
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
