- --------------------------------------------------------------------------------
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 June 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
June 30, June 30,
1997 1996
(Unaudited) (Unaudited)
----------- -----------
Assets
------
<S> <C> <C>
Current Assets
Cash and cash equivalents ....................... $2,580,028 $3,614,473
Due from affiliates ............................. -- --
Accrued interest receivable ..................... 35,221 11,550
------ ------
Total current assets ....................... 2,615,249 3,626,023
Mortgage loans receivable ............................ 950,590 450,590
------- -------
Total Assets ........................ $3,565,839 $4,076,613
========== ==========
Liabilities and Partners' Capital
---------------------------------
Current Liabilities
Accounts payable and accrued expenses ........... $ 7,971 $ 1,011
Due to affiliates ............................... 25,980 1,547
Deferred revenue ................................ 400,000 400,000
------- -------
Total Current Liabilities .................. 433,951 402,558
Partners' capital:
General partner ................................. 58,435 32,416
Limited partner ................................. 3,073,453 3,641,639
--------- ---------
Total partners' capital .................... 3,131,888 3,674,055
--------- ---------
Total Liabilities and Partners' Capital $3,565,839 $4,076,613
========== ==========
</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 SIX MONTHS ENDED
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income
Interest ................. $ 69,244 $ 65,887 $ 145,444 $ 134,048
Miscellaneous income ..... -- -- -- --
-------- ------- -------- --------
Total Income .......... 69,244 65,887 145,444 134,048
Expenses
Professional fees ........ 22,575 (800) 28,444 11,876
Fees to affiliates:
Management .............. 7,691 5,351 16,261 18,404
Mortgage Servicing ...... 281 282 563 563
Other .................... 3,353 8,381 5,790 18,539
----- ----- ----- ------
Total Expenses ........ 33,900 13,214 51,058 49,382
------ ------ ------ ------
Net Income ............... $ 35,344 $ 52,673 $ 94,386 $ 84,666
========= ========= ========= =========
Net earnings per limited
partner unit ................. $ .07 $ .10 $ .18 $ .16
========= ========= ========= =========
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)
SIX MONTHS ENDED
JUNE 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 ................... 23,597 70,790 94,387 2,117 82,549 84,666
Unclaimed distributions ...... -- -- -- -- 945 945
Cash distributions to partners -- (490,484) (490,484) ( -) (240,488) (240,488)
------- -------- -------- - -------- --------
Balance at end of period ..... $ 58,435 $ 3,073,453 $ 3,131,888 $ 32,416 $ 3,641,639 $ 3,674,055
=========== =========== =========== =========== =========== ===========
</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)
SIX MONTHS ENDED
-------------------
JUNE 30, JUNE 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................... $ 94,386 $ 84,666
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 .. (24,133) 704
Increase (decrease) in accounts payables
and accrued expenses ...................... 7,972 (6,411)
Increase (decrease) in due to affiliates .... 25,980 1,056
------ -----
Net cash provided by operating activities 106,410 80,015
------- ------
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 ............................... 500,000 --
Unclaimed distributions .......................... -- 945
Distributions to limited partners ................ (490,484) (240,488)
-------- --------
Net cash used in financing activities ..... (990,484) (239,543)
-------- --------
Net increase (decrease) in cash and cash equivalents: . (884,074) (159,528)
Cash and cash equivalents, beginning of period ........ 3,464,102 3,774,001
--------- ---------
Cash and cash equivalents, end of period .............. $ 2,580,028 $ 3,614,473
=========== ===========
</TABLE>
5
See accompanying notes.
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
June 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
six months ended June 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
7
<PAGE>
$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 June 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
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
8
<PAGE>
on the real properties owned by each of the foregoing, said 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 this loan on
April 10, 1997. On June 18, 1997, the Partnership funded an additional
$75,000 loan to St. Catherine's Care Centers.
(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.
(4) Subsequent Events
-----------------
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.
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
$2,580,028 at June 30, 1997. The decrease of $1,347,957 resulted primarily
from cash distributions on January 8, and April 4, to the Limited Partners
and a loan to affiliates that was offset by net earnings for the period. As
of June 30, 1997 the Partnership's loan portfolio consisted of seven
mortgage loans, the aggregate outstanding principal balance of which was
$950,590.
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 June 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 six months ended June 30, 1997 and 1996, the Partnership had net
earnings of $94,386 and $84,666, based on total revenue of $145,444 and
$134,048 and total expenses of $51,058 and $49,382. For the six months
ended June 30, 1997 and 1996, the net earnings per limited partner unit was
$.18 and $.16, respectively. The remaining Mortgage Loans were current as
to regular interest as of June 30, 1997. During the three months ended June
30, 1997 and 1996, the Partnership had net earnings of $35,344 and $52,673
based on total revenue of $69,244 and $65,887 and total expenses of $33,900
and $13,214, respectively. For the three months ended June 30, 1997 and
1996, the net earnings per limited partner unit was $.07 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: August 14, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,580,028
<SECURITIES> 0
<RECEIVABLES> 35,221
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,615,249
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,565,839
<CURRENT-LIABILITIES> 433,951
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,131,888
<TOTAL-LIABILITY-AND-EQUITY> 3,565,839
<SALES> 0
<TOTAL-REVENUES> 69,244
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 33,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 35,344
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,344
<EPS-PRIMARY> .07
<EPS-DILUTED> .00
</TABLE>
