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, 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
(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)
(303) 705-6000
(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 ___
PART 1 - Financial Information
Item 1. Financial Statements
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Balance Sheets
September 30, December 31,
1996 1995
(Unaudited) (Audited)
---------------------------
Assets
Current Assets
Cash and cash equivalents ....................... $3,536,382 $3,774,001
Accrued interest receivable ..................... 11,976 12,254
Other assetss ................................... 4,478 --
-----
Total current assets ....................... 3,552,836 3,786,255
Mortgage loan receivable ............................. 450,590 450,590
------- -------
Total Assets ......................................... $4,003,426 $4,236,845
========== ==========
Liabilities and Partners' Capital
Current Liabilities
Deferred revenue ................................ $ 400,000 $ 400,000
Accrued expenses ................................ -- 7,422
Due to affiliate ................................ -- 491
Total Current Liabilities .................. 400,000 407,913
Partners' capital .................................... 3,603,426 3,828,932
--------- ---------
Total Liabilities and Partners' Capital .............. $4,003,426 $4,236,845
========== ==========
See accompanying notes
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Statements of Earnings
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
------- ---------- ------- ---------
Income
Interest ................. $ 69,533 $ 73,205 $ 203,581 $ 287,704
Gain on Sale of Investment
in Operating Properties . -- -- -- 1,532,085
---------
TOTAL INCOME .......... $ 69,533 $ 73,205 $ 203,581 $1,819,789
Expenses
Professional fees ........ 540 6,765 12,416 152,886
Fees to affiliates:
Management .............. 8,923 13,053 27,327 39,159
Mortgage Company ........ 282 -- 845 3,640
Other .................... 8,684 10,153 27,224 31,576
----- ------ ------ ------
TOTAL EXPENSES ........ 18,429 29,971 67,812 227,261
------ ------ ------ -------
NET EARNINGS .......... $ 51,104 $ 43,234 $ 135,769 $1,592,528
========== ========== ========== ==========
Net earnings per limited
partner unit ................. .10 .08 .26 3.05
=== === === ====
Weighted average limited ...... $ 522,116 $ 522,116 $ 522,116 $ 522,116
partner units outstanding ========== ========== ========== ==========
See accompanying notes.
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Statements of Partners' Capital
(Unaudited)
NINE MONTHS ENDED
SEPT. 30,
1996 1995
------------------------------------- ------------------------------------
TOTAL TOTAL
GENERAL LIMITED PARTNERS' GENERAL LIMITED PARTNERS'
PARTNERS PARTNERS CAPITAL PARTNERS PARTNERS CAPITAL
-------------------------------------- ---------------------------------------
Balance at beginning of period $ 30,299 $ 3,798,633 $ 3,828,932 $( 691) $ 2,603,753 $ 2,603,062
Net earnings ................. 3,394 132,375 135,769 39,813 1,552,715 1,592,528
Unclaimed distributions ...... -- 945 945 -- 1,107 1,107
Cash distributions to partners -- (362,220) (362,220) (10,000) ( 283,122) ( 293,122)
-------- -------- ------- - ------- - -------
Balance at end of period ..... $ 33,693 $ 3,569,733 $ 3,603,426 $ 29,122 $ 3,874,453 $ 3,903,575
=========== =========== =========== =========== =========== ===========
See accompanying notes.
COMMON GOAL HEALTH CARE PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Statements of Cash Flows
(Unaudited)
NINE MONTHS ENDED
SEPT. 30, SEPT. 30,
1996 1995
------- ----------
Cash flows from operating activities:
Net earnings ..................................... $ 135,769 $ 1,592,528
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 .. 278 (8,298)
Decrease (increase) in other assets ......... (4,478) --
Increase (decrease) in accrued expenses ..... (7,422) (2,636)
Increase (decrease) in due to affiliates .... (491) 1,012
Increase in due from affiliates ............. -- (1,636)
------
Net cash provided by operating activities 123,656 48,885
------- ------
Cash flows from investing activities:
Proceeds from sale of investment
in operating properties ..................... -- 3,905,280
Distribution received from operating
properties .................................. -- 67,646
------
Net cash used in investing activities .... -- 3,972,926
---------
Cash flows from financing activities:
Unclaimed distributions .......................... 945 1,107
Distributions to limited partners ................ (362,220) (293,122)
-------- --------
Net cash used in financing activities ..... (361,275) (292,015)
-------- --------
Net increase (decrease) in cash and cash equivalents: . (237,619) 3,729,796
Cash and cash equivalents, beginning of period ........ 3,774,001 113,197
--------- -------
Cash and cash equivalents, end of period .............. $ 3,536,382 $ 3,842,993
=========== ===========
See accompanying notes.
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
September 30, 1996
(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.
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, 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 "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.
The principal balances outstanding for these loans as of September 30, 1996
were as follows:
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
========
(3) Subsequent Events
On October 5, 1996, the Partnership declared and paid a quarterly
distribution of $121,732 to Unitholders of record as of September 15, 1996.
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.
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 September 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 September 30, 1996 and 1995, the Partnership had
net earnings of $51,104 and $43,234, based on total revenue of $69,533 and
$73,205 and total expenses of $18,429 and $29,971. For the three months ended
September 30, 1996 and 1995, the net earnings per limited partner unit was $.10
and $.08, respectively. The net earnings per unit for the nine month period
ending September 30, 1996 and 1995 was $.26 and $3.05, respectively.
The Partnership made distributions totalling $362,220 in January, April and
July 1996 of which $226,451 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.
PART II - OTHER INFORMATION
Items 1 through 6 are omitted because of the absence of conditions under
which they are required.
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 8, 1996 __________________________________
Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer