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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, 1995
[ ] 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
1218 St. Andrews Way
Baltimore, Maryland 21239
(Address of Principal Executive Offices)
(410) 828-4344
(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 priod 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 ____
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PART I - Financial Information
Item 1. Financial Statements
COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Balance Sheets
June 30, December 31,
1995 1994
(Unaudited)
------------ ------------
Assets
------
Current Assets
Cash and cash equivalents $1,482,941 7,002,601
Mortgage interest receivable 75,881 180,114
---------- ----------
Total current assets 1,558,822 7,182,715
Mortgage loans receivable 3,567,664 3,567,664
---------- ----------
$5,126,486 10,750,379
---------- ----------
Liabilities and Partners' Capital
---------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 16,028 22,973
Due to Affiliates 1,835 --
---------- ----------
17,863 22,973
Partners' capital 5,108,623 10,727,406
---------- ----------
$5,126,486 10,750,379
========== ==========
See accompanying notes.
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COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Partners' Capital
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
1995 1994
--------------------------------------------- ------------------------------------------
TOTAL TOTAL
GENERAL LIMITED PARTNERS' GENERAL LIMITED PARTNERS'
PARTNERS PARTNERS CAPITAL PARTNERS PARTNERS CAPITAL
---------- --------- ----------- ---------- ----------- ---------
Balance at beginning of period $147,246 10,580,160 10,727,406 145,688 14,546,499 14,692,187
Net earnings 3,767 184,586 188,353 8,661 424,387 433,048
Cash distributions to partners (111,830) (5,695,306) (5,807,136) -- (849,388) (849,388)
--------- ---------- ---------- ------- --------- ---------
Balance at end of period $39,183 5,069,440 5,108,623 154,349 14,121,498 14,275,847
========= ========== ========== ======= ========== ==========
See accompanying notes.
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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,
1995 1994 1995 1994
---- ---- ---- ----
Income
Interest $ 188,981 313,195 412,594 624,538
---------- ---------- ---------- ----------
188,981 313,195 412,594 624,538
---------- ---------- ---------- ----------
Expenses
Professional fees 22,244 35,386 102,394 76,468
Fees to affiliates:
Management 25,242 33,992 53,609 67,984
Mortgage servicing 5,168 5,355 10,335 10,710
Other 37,371 16,554 57,903 36,328
---------- ---------- ---------- ----------
90,025 91,287 224,241 191,490
---------- ---------- ---------- ----------
NET EARNINGS $ 98,956 221,908 188,353 433,048
========== ========== ========== ==========
Net earnings per
limited partner unit $ .05 .12 .10 .23
========== ========== ========== ==========
Weighted average
limited units
outstanding 1,911,411 1,911,411 1,911,411 1,911,411
========== ========== ========== ==========
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COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Cash Flows
(Unaudited)
SIX MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1995
Cash flows from operating activities:
Net earnings $ 188,353 433,048
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Increase in due from affiliates -- (5,701)
Decrease in interest receivable 104,233 173,787
Decrease in accounts
payable and accrued expenses (6,945) (21,252)
Increase (decrease) in due to
affiliates 1,835 (415)
----------- ---------
Net cash provided by operating
activities 287,476 579,467
Cash from investing activities -
Proceeds from mortgage loan
principal repayments -- 300,000
---------- ---------
Cash used in financing activities -
Distribution to general partner (111,830) --
Distributions to limited partners (5,695,306) (849,388)
---------- ---------
(5,807,136) (849,388)
---------- ---------
Net increase (decrease) in cash
and cash equivalents (5,519,660) (30,079)
Cash and cash equivalents,
beginning of period 7,002,601 7,224,916
---------- ---------
Cash and cash equivalents,
end period $1,482,241 7,254,995
---------- ---------
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COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
June 30, 1995
(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 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 partners 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, 1995.
No provision for income taxes has been recorded as the liability for such
taxes is that of the partners rather than the Partnership.
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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 months and six months ended June 30, 1995 and 1994 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 result of operations of the Partnership. Such
adjustments are normal and recurring.
(2) Mortgage Loans Receivable
Information concerning mortgage loans receivable as of June 30, 1995
is as follows:
Basic
Interest Face and carrying
Description Rate Maturity Date Prior Liens Amount of Mortgages
----------- -------- ------------- ----------- -------------------
Westwood loan 11.5% March 10, 1998 3,200,000 1,000,000
Winthrop loan 11.5% March 25, 1998 7,200,000 1,000,000
Honeybrook loan 13.7% January 1, 2000 8,810,000 1,567,664
---------- ---------
19,210,000 3,567,664
========== =========
The loans are second mortgage loans secured by health care-related real
properties. Interest is payable monthly with the principal balance
generally due at maturity. The loans generally provide for the payment
of additional interest based upon gross revenues of the properties and
the payment of participation interests ranging from 9-30% of the
increase in the fair market value of the properties at maturity or
redemption, as defined.
On July 7, 1994, the borrowers on the SHALP Loan repaid the principal
balance of $3,300,000, and paid the related prepayment penalty of
$132,000, additional interest of $60,752, based on 1994 gross revenues
through May, 1994, and $23,421 in basic interest. The Participation in
the SHALP property will be forthcoming upon the determination of the
appreciation in value. Determination of the Participation has been
delayed due to the selection of an appraiser. The Managing General
Partner has chosen Urban Information Services to perform the appraisal
during July, 1995 and currently believes that a determination will be
made during the third quarter of 1995. The appraisal will be based on
the value as of July 7, 1994. No accrual for appreciation has been made
as of June 30, 1995.
Income received on the SHALP Loan since its inception is $2,412,788 in
basis interest, $900,885 in additional interest based upon gross
revenues, and $132,000 prepayment penalty (a total of $3,445,673 earned
on $3,300,000 over six years and nine months).
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The carrying value of the mortgage loans 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, 1995, none of the loans were delinquent as to regular interest
and all loans have paid the annual gross revenue interest.
(3) Subsequent Event
----------------
On July 5, 1995, the Partnership declared and paid a quarterly
distribution of $236,840 to Unitholders of record at June 15, 1995.
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Item 2. Management's Discussion and Analysis or Plan of Operations
----------------------------------------------------------
Liquidity and Capital Resources
-------------------------------
Common Goal Health Care Participating Mortgage Fund L.P., a Delaware
limited partnership (the "Partnership"), was forced 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 $10,750,379 at December 31, 1994 to
$5,126,486 at June 30, 1995 primarily due to principal pay-backs to
the limited partners. As of June 30, 1995, the portfolio consists of 3
Mortgage Loans with an aggregate outstanding principal balance of
$3,567,664.
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, 1995
and December 31, 1994 was $1,482,941 and $7,002,601, respectively,
which consisted of operating cash and working capital reserves. The
decrease in cash and cash equivalents from December 31, 1994 to
June 30, 1995 resulted from the payment of a $5,000,000 ($2.616 per
Unit) capital distribution to the limited partners and payment of
$695,306 in dividend distributions to the limited partners (which
included $506,953 [$.265 per Unit] as a return of capital), $111,830
distributed to the general partner, and a $6,945 decrease in accounts
payable and accrued expenses. However, the decrease in cash and cash
equivalents was partially offset by net earnings of $188,353, a
decrease of $104,233 in interest receivable, and an increase of $1,835
is due to affiliates.
The Partnership is required to maintain reserves of not less than 1%
of gross offering proceeds (not less than $191,291), but maintains a
reserve in excess of that amount. The Managing General Partner
continues to monitor the level of working capital reserves and pay
adjust the reserves as necessary to meet the Partnership reserve
requirements.
The Partnership's success and the resultant rate of return to Unit
holders is dependent upon, among other things, (a) the ability of the
Managing General Partners to identify suitable opportunities for the
Partnership to invest and reinvest its assets and (b) the
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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 and New Medico
Loans have been paid off, and the Joint Venture Loan and the Westwood Loan have
been paid down, the Partnership rates of return have been and will be adversely
impacted. However, the Partnership will continue to pursue its pending
litigation against the original Horizon borrower and its general partners and
affiliates of the original lessee, certain Adventist groups. Also, the
additional funds representing repayment of the above-mentioned loans are being
invested per Partnership guidelines.
Results of Operations
Since commencement of operations in July of 1987, the Partnership has invested
all available funds (funds not yet 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. Although the Partnership's earnings were
expected to increase slowly once its portfolio of Mortgage Loans was
substantially completed and borrowers commended payments of Additional
Interest, the default on the Partnership's $1,400,000 Horizon Loan (made in
July 1988) which occurred in July of 1990 has adversely impacted such
expectation.
During the quarters ended June 30, 1995 and 1994, the Partnership had net
earnings of $98,956 and $221,908 based on total revenues of $188,981 and
$313,195, and total expenses of $90,025 and $91,287, respectively. The decrease
in net earnings is due to a decrease in interest income caused by the 1994
payoffs of the New Medico, Riverview and SHALP Loans, and the 1994 pay downs of
the Joint Venture and Westwood Loans. The Mortgage Loans were all current as of
June 30, 1995. The General Partners expect these loans will continue to perform
pursuant to the loan documents.
On April 25, 1994 the Circuit Court of DuPage County entered an order granting
the Partnership's Motion to Dismiss the counterplaintiffs' counterclaim with
prejudice in the Horizon Loan Litigation. The court found that the
counterplaintiffs did not have standing to assert the claims against the
Partnership. Without determining the validity of any such claims, the Court
determined that the claims could only be asserted by HHC, Inc., the successor to
Horizon Healthcare (the original borrower) which filed a bankruptcy petition in
November 1990. Subsequently, Horizon Healthcare moved to have the above motion
vacated. On July 5, 1994, the Circuit Court denied the Horizon Healthcare
motion to vacate. The Court set the Close of Discovery for January 26, 1995 and
set a Final Status as of that same date. The Court then subsequently extended
this date to April 5, 1995. A Hearing was held April 6, 1995 at which a trial
date of October 23, 1995 was set. Discovery has been completed and an amended
complaint
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was filed by the Partnership in early May, 1995. The
Partnership is presently preparing for the October 23, 1995 trial. The
Partnership is seeking $1.4 million (principal amount of the loan to
Horizon) plus interest owing any punitive damages. As the General
Partners cannot presently predict the outcome of the other actions
being considered in connection with the Horizon Loan default, they
cannot predict with any accuracy the impact thereof for future years.
The General Partners anticipate that the Partnership's expenses (other
than those relating to the Horizon Loan Litigation) incurred in 1995
will approximate this expenses incurred in 1994.
Although the Partnership made dividend distributions of $349,574,
$345,732, and $236,840 in January, April, and July 1995, the
distributions may not remain at the present level (9.256% of invested
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
from the Mortgage Loans (were they not paid down) thereby reducing
interest income available for distribution. The Partnership
distributed $5,000,000 as a return of capital on May 1, 1995.
On April 10, 1995, the Board of Directors of the Common Goal Capital
Group, Inc. appointed Mr. Anthony L. Jones as a member of the Board of
Directors. Mr. Jones is a Director, Vice-President, and Founder of
Capital Access Group, Inc., a Michigan based business financial
consulting firm. Capital Access Group, Inc. (CAG) assists its clients
in marketing, capital formation, and public relations. CAG's current
client list includes such publicly traded companies as Fila Golf
(NASDAQ:FGLF) and Royal Energy (NASDAQ:ROYL). Prior to forming Capital
Access Group, Inc., Mr. Jones was Director of Marketing for Common
Goal Capital Group, Inc. where he assisted in the development and
implementation of marketing strategies and was responsible for raising
25 million dollars for the Common Goal public investment programs.
From 1975-1979 Mr. Jones served in the United States Marine Corps. Mr.
Jones currently holds a NASD Series 7 securities license.
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Part II - Other Information
Items 1 through 5 are omitted because of the absence of conditions
under which they are required.
Item 6. Exhibits and Reports on Form 8-K
(a) N/A
(b) Reports on Form 8-K
A Current Report on Form 8-K dated March 31, 1995 was filed on
April 12, 1995. The Form 8-K contained a disclosure related to the
filing of resignations of 2 members of the Board of Directors of
Common Goal Capital Group, Inc., the Managing General Partners of
the Partnership.
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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 HealthCare Participating Mortgage Fund L.P.
-------------------------------------------------------
(Registrant)
By: Common Goal Capital Group Inc.,
Managing General Partner
DATED: July 28, 1995 /s/ Albert E. Jenkins, III
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Albert E. Jenkins, III
President, Chief Executive Officer
and Acting Chief Financial Officer
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