- -------------------------------------------------------------------------------- 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: 0-17600 _________________________ Common Goal Health Care Participating Mortgage Fund L.P. (Exact name of small business issuer as specified in its charter) Delaware 52-1475268 -------- ---------- (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 ___ PART 1 - Financial Information Item 1. Financial Statements COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P. (A Limited Partnership) Balance Sheets June 30, June 30, 1997 1996 (Unaudited) (Unaudited) ----------- ----------- Assets ------ Current Assets Cash and cash equivalents ....................... $1,195,146 $1,877,648 Other receivables ............................... -- 6,650 Due from affiliates ............................. -- -- Accrued interest receivable ..................... 16,183 58,273 ------ ------ Total current assets ....................... 1,211,329 1,942,571 Mortgage loan receivable ............................. 1,567,664 2,567,664 --------- --------- Total Assets ...................... $2,778,993 $4,510,235 ========== ========== Liabilities and Partners' Capital --------------------------------- Current Liabilities Accounts payable and accrued expenses ........... $ 23,501 $ 18,409 Due to affiliates ............................... 34,282 15 ------ -- Total current liabilities .................. 57,783 18,424 Partners' capital: General partners ................................ 62,063 47,397 Limited partners ................................ 2,659,147 4,444,414 --------- --------- Total partners' capital .................. 2,721,210 4,491,811 --------- --------- Total Liabilities and Partners' Capital .. $2,778,993 $4,510,235 ========== ========== See accompanying notes 2 COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P. (A Limited Partnership) Statements of Earnings (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED June 30, June 30, June 30, June 30, 1997 1996 1997 1996 ---- ---- ---- ---- Income Interest .............. $ 59,245 $ 120,394 $ 139,804 $ 55,000 Misc. income .......... -- -- -- 261,799 ------ ------- ------- ------- ------- Total Income ..... 59,245 120,394 139,804 316,799 Expenses Professional fees ..... 27,737 11,802 39,907 32,064 Fees to affiliates: Management ........... 7,647 6,331 16,662 25,323 Mortgage servicing ... 980 2,229 1,960 4,459 Other ................. 7,152 18,351 30,616 44,369 ----- ------ ------ ------ Total Expenses ... 43,516 38,713 89,145 106,215 ------ ------ ------ ------- NET INCOME ....... $ 15,729 $ 81,681 $ 50,659 $ 210,584 ========== ========== ========== ========== Net earnings per limited partner unit .............. $ .01 $ .04 $ .03 $ .11 ========== ========== ========== ========== Weighted average limited ... 1,911,411 1,911,411 1,911,411 1,911,411 ========= ========= ========= ========= partner units outstanding See accompanying notes. 3 COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P. (A Limited Partnership) 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 ----------------------------------- ------------------------------------------ Balance at beginning of period $ 61,050 $ 4,151,772 $ 4,212,822 $ 43,185 $ 4,699,352 $ 4,742,537 Net income ................... 1,013 49,645 50,658 4,212 206,372 210,584 Cash distributions to partners ( -) (1,542,270) (1,542,270) ( -) (461,310) (461,310) --------- ---------- ---------- --------- -------- -------- Balance at end of period ..... $ 62,063 $ 2,659,147 $ 2,721,210 $ 47,397 $ 4,444,414 $ 4,491,811 =========== =========== =========== =========== =========== =========== See accompanying notes. 4 COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P. (A Limited Partnership) Statements of Cash Flows (Unaudited) SIX MONTHS ENDED ------------------- JUNE 30, JUNE 30, 1997 1996 ---- ---- Cash flows from operating activities: Net income ....................................... $ 50,659 $ 210,584 Adjustments to reconcile net earnings to net cash provided by operating activities: Decrease (increase) in other receivables .... -- 17,235 Decrease (increase) in due from affiliates .. 2,664 -- Decrease (increase) in interest receivable .. (3,865) 87,126 Increase (decrease) in accounts payable and . 12,351 13,339 accrued expenses Increase (decrease) in due to affiliates .... 21,740 15 ------ -- Net cash provided by operating activities 83,549 328,299 ------ ------- Cash from investing activities: Proceeds from mortgage loan principal repayments . -- 1,000,000 ------ --------- Net cash provided by investing activities -- 1,000,000 ------ --------- Cash used in financing activities: Distribution to general partner .................. -- -- Distribution to limited partners ................. (1,542,270) (461,310) ---------- -------- Net cash used in financing activities ....... (1,542,270) (461,310) ---------- -------- Net increase (decrease) in cash and cash equivalents: . (1,458,721) 866,989 Cash and cash equivalents, beginning of period ........ 2,653,867 1,010,659 --------- --------- Cash and cash equivalents, end of period .............. $ 1,195,146 $ 1,877,648 =========== =========== See accompanying notes. 5 COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P. (A Limited Partnership) Notes to Financial Statements (Unaudited) June 30, 1997 (1) Organization and Summary of Significant Accounting, Policies ------------------------------------------------------------- Common Goal Health Care Participating Mortgage Fund L.P. (the "Partnership") was formed on August 20, 1986 to invest in and make mortgage loans to third-parties involved in health care. On February 20, 1987, the Partnership commenced a public offering of limited partner units (the "Public Offering"). On July 21, 1987, the Partnership commenced operations, having previously sold more than the specified minimum of 116,000 units ($1,160,000). The Partnership's offering terminated on February 20, 1989 with the Partnership having sold the specified maximum of 1,912,911 units ($19,129,110). The general partners are Common Goal Capital Group, Inc. as the managing general partner and Common Goal Limited Partnership I as the minority general partner. Under the terms of the Partnership's agreement of limited partnership (the "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 .75% per annum of adjusted contributions, as defined. Additionally, a mortgage servicing fee equal to .25% per annum of the Partnership's outstanding mortgage loan principal amount 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 dates of purchase of three months or less as cash equivalents. An allowance for loan losses is provided at a level which the Partnership's management considers adequate based upon an evaluation of known and inherent risks in the loan portfolio. Management believed no allowance was necessary as of June 30, 1997. 6 No provision for income taxes has been recorded as the liability for such taxes is that of the partners rather than the Partnership. Earnings per limited partner unit are 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 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. Such adjustments are normal and recurring. (2) Mortgage Loan Receivable ------------------------ Information concerning mortgage loan receivable as of June 30, 1997 is as follows: Face and Basic Carrying Interest Maturity Amount of Description Rate Date Mortgage ----------- ---- ---- -------- Honeybrook loan 13.7% January 1, 2000 1,567,664 --------- $1,567,664 ========== The loan is a second mortgage loan secured by healthcare related real properties. Interest is payable monthly with the principal balance generally due at maturity. The carrying value of the mortgage loan for tax purposes is the same as that for financial reporting purposes. All properties are subject to a first mortgage lien in each case held by unaffiliated third parties. As of June 30, 1997, the loan was current as to regular interest. (3) Distributions On January 8, 1997, the Partnership declared and paid a distribution of $224,567 ($.12 per unit) to Limited Partner unitholders of record at December 15, 1996. Additionally, a return of principal to the Limited Partners of $611,360 ($.32 per unit) was also declared and paid by the Partnership on January 8, 1997. On April 4, 1997, the Partnership declared and paid a distribution of $206,343 ($.11 per unit) to Limited Partner unitholders of record at March 15, 1997. Additionally, a return of principal to the Limited Partners of $500,000 ($.26 per unit) was also declared and paid by the Partnership on April 4, 1997. 7 (4) Subsequent Event ---------------- On July 4, 1997, the Partnership declared and paid a distribution of $199,265 ($.10 per unit) to Limited Partner unitholders of record at June 15, 1997. Item 2. Management's Discussion and Analysis or Plan of 0perations ---------------------------------------------------------- Liquidity and Capital Resources ------------------------------- Common Goal Health Care Participating Mortgage Fund L.P., a Delaware limited partnership (the "Partnership"), was formed to make mortgage loans secured by real property (the "Mortgage Loan") comprised of a mix of first and junior Mortgage Loans, secured by health-care related properties. The Public Offering commenced on February 20, 1987 and continued through February 20, 1989, when the Public Offering terminated. Total gross offering proceeds raised were $19,129,110. Partnership assets decreased from $4,236,512 at December 31, 1996 to $2,778,993 at June 30, 1997. The decrease of $1,457,519 resulted primarily from cash distributions on January 8 and April 4, to the Limited Partners that was offset by net earnings for the period. As of June 30, 1997, the Partnership's loan portfolio consisted of one mortgage loan, the aggregate outstanding principal balance of which was $1,567,664. 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's balance of cash and cash equivalents at June 30, 1997 and December 31, 1996 was $1,195,146 and $2,653,867, respectively, which consisted of operating cash and working capital reserves. The decrease in cash and cash equivalents from December 31, 1996 resulted from net earnings of $50,659, an increase in due from affiliates and interest receivables of $6,529, all of which were offset by payments of $1,542,270 in dividend distributions (which included $1,111,360 return of capital), and a $34,091 increase in accounts payable, accrued expenses and due to affiliates. The net result was a decrease of cash and cash equivalents of $1,458,721. The Partnership is required to maintain reserves not less than 1% of gross offering proceeds (not less than $191,201), but currently maintains a reserve significantly in excess of that amount. The amount of cash and cash equivalents currently maintained by the Partnership is primarily the result of proceeds from the payment of mortgage loans. The Managing General Partner continues to monitor the level of working capital reserves and may adjust the reserves as necessary to meet the Partnership's reserve requirements. 8 The Partnership's success and the resultant rate of return to Unitholders is dependent upon, among other things, the continued ability of the borrowers to pay the current interest, additional interest and principal of the Mortgage Loans. Since the Horizon Loan was charged off, the Riverview, SHALP, New Medico, Winthrop and Westwood Loans have been paid off, and the Joint Venture Loan paid down, the Partnership's rates of return have been and will be adversely impacted. The additional funds representing repayment of the above mentioned loans are being invested per Partnership guidelines. Results of Operations --------------------- The Partnership was organized in August, 1986. The Partnership funded seven Mortgage Loans between 1987 and 1990, including a loan made by a venture between the Partnership and Common Goal II in August, 1990. As of June 30, 1997, the Partnership had one Mortgage Loan. Since commencement of operations in July of 1987, the Partnership invested all available funds (funds not invested in Mortgage Loans) in short term, temporary investments. The interest earned on these investments has been and is expected to continue to be less than the interest rates achievable on Mortgage Loans made by the Partnership. During the six months ended June 30, 1997 and 1996, the Partnership had net earnings of $50,659 and $210,584 based on total revenues of $139,804 and $316,799 and total expenses of $89,145 and $106,215, respectively. The decrease in net earnings is due to decreases in interest income and miscellaneous income, but is offset partially by an increase of $7,843 in professional fees, a decrease of $8,661 in managemen fees and a decrease of $2,499 in mortgage servicing fees, and a $13,753 decrease in other expenses. The one remaining Mortgage Loan was current as to regular interest as of June 30, 1997. For the three months ended June 30, 1997 and 1996, the Partnership had net earnings of $15,729 and $81,681 based on total revenues of $59,245 and $120,394 and total expenses of $43,516 and $38,713 respectively. For the three months ended June 30, 1997 and 1996, the net earnings per limited partner unit was $.01 and $.04 respectively. Although the Partnership makes quarterly dividend distributions, the distributions may not remain at the present level (9.256% financial capital) as a result of the Horizon Loan charge-off, the payoffs and the pay downs mentioned above. The general partners are currently reviewing the distribution policy. The Partnership receives a lesser rate of return from its short-term investments than it would receive form the Mortgage Loans, (were they not paid down) thereby reducing interest income available for distribution. 9 PART II - Other Information Items 1 through 6 are omitted because of the absence of conditions under which they are required. 10 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 Participating Mortgage Fund L,P. -------------------------------------------------------- (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