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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1995
[ ] Transition Report under Section 13 or 15(d) of the Exchange Act
For the Transition period from to
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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
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
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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
March 31, December 31,
1995 1994
(Unaudited) (Audited)
----------- ---------
Assets
------
Current Assets
Cash and cash equivalents $ 6,751,779 7,002,601
Due from affiliates --- ---
Mortgage interest receivable 161,973 180,114
---------------- -----------------
Total current assets 6,913,752 7,182,715
Mortgage loans receivable 3,567,664 3,567,664
---------------- -----------------
$ 10,481,416 10,750,379
================ =================
Liabilities and Partners' Capital
---------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 17,318 22,973
Due to affiliates 8,078 ---
---------------- -----------------
Total current liabilities 25,396 22,973
Partners' capital 10,456,020 10,727,406
---------------- -----------------
$ 10,481,416 10,750,379
================ =================
See accompanying notes.
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COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statement of Earnings
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
1995 1994
---- ----
Income
------
Interest $ 223,613 311,343
Misc. income --- ---
------------------- ------------------
223,613 311,343
------------------- ------------------
Expenses
--------
Professional fees 80,150 41,082
Fees to affiliates:
Management 28,367 33,992
Mortgage servicing 5,167 5,355
Other 20,532 19,774
------------------- ------------------
134,216 100,203
------------------- ------------------
NET EARNINGS $ 89,397 211,140
=================== ==================
Net earnings per limited partner unit $ .05 .11
=================== ==================
Weighted average limited partner units outstanding 1,911,411 1,911,411
=================== ==================
See accompanying notes.
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COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Partners' Capital
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
1995
--------------------------------------------------------
TOTAL
GENERAL LIMITED PARTNERS'
PARTNERS PARTNERS CAPITAL
-------- -------- -------
Balance at beginning of period $ 147,246 10,580,160 10,727,406
Net earnings 1,788 87,609 89,397
Cash distributions to limited
partners ( 11,209) ( 349,574) ( 360,783)
---------------- ---------------- ----------------
Balance at end of period $ 137,825 10,318,195 10,456,020
================ ================ ================
THREE MONTHS ENDED
MARCH 31,
1994
--------------------------------------------------------
TOTAL
GENERAL LIMITED PARTNERS'
PARTNERS PARTNERS CAPITAL
-------- -------- -------
Balance at beginning of period $ 145,688 14,546,499 14,692
Net earnings 4,223 206,917 211,140
Cash distributions to limited
partners --- ( 435,231) ( 435,231)
----------------- ---------------- ----------------
Balance at end of period $ 149,911 14,318,185 14,468,096
================= ================ ================
See accompanying notes.
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COMMON GOAL HEALTH CARE PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Statements of Cash Flows
(Unaudited)
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1995 1994
------------------- ------------------
Cash flows from operating activities:
Net earnings $ 89,397 211,140
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Decrease in due from affiliates --- 5,668
Decrease (increase) in interest receivable 18,140 ( 30,904)
Increase (decrease) in accounts payable and accrued
expenses ( 5,656) 18,776
Increase (decrease) in due to affiliates 8,078 ( 430)
------------------ -----------------
Net cash provided by operating activities
109,959 204,250
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Cash from investing activities-
Proceeds from mortgage loan principal repayments
--- ---
------------------ -----------------
Cash used in financing activities-
Distribution to general partner ( 11,209) ---
Distribution to limited partners ( 349,574) ( 435,231)
------------------ -----------------
( 360,783) ( 435,231)
------------------ -----------------
Net increase (decrease) in cash and cash equivalents ( 250,824) ( 230,981)
Cash and cash equivalents, beginning of period 7,002,603 7,224,916
------------------ -----------------
Cash and cash equivalents, end of period $ 6,751,779 6,993,935
================== =================
See accompanying notes.
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COMMON GOAL HEALTH CARE
PARTICIPATING MORTGAGE FUND L.P.
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
March 31, 1995
(1) Organization and Summary of Significant Accounting Policies
Common Goal Health Care Participating Mortgage Fund L.P.
(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 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 March 31, 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 ended March 31, 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. Such
adjustments are normal and recurring.
(2) Mortgage Loans Receivable
Information concerning mortgage loans receivable as of March 31,
1995 is as follows:
Face and
Basic carrying
interest Maturity Prior amount of
Description rate date liens 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 1,567,644
-------------------- -------------------
$ 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
6-30% 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
and the Managing General Partner currently believes that a
determination will be made during the second quarter of 1995. No
accrual for appreciation has been made as of March 31, 1995.
Income received on the SHALP Loan since its inception is $2,412,788
in basic 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).
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
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case held by unaffiliated third parties. As of March 31, 1995, none
of the loans were delinquent as to regular interest. However, none
of the loans had paid the annual gross revenue interest as of March
31, 1995. Honeybrook has subsequently paid their full amount and
IFIDA has paid $21,619 of the $43,238.00, with an agreement to pay
the remainder, plus interest, in May. Westwood will be making
payment of their gross revenue interest by May 15, 1995.
(3) Subsequent Event
On April 5, 1995, the Partnership declared and paid a quarterly
distribution of $345,732 to Unitholders of records at March 15,
1995.
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Item 2. Management's Discussion and Analysis or Plan Condition Financial of
Operations
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 $14,736,438 at December 31, 1993
to $10,750,379 at December 31, 1994. The decrease from 1993 to 1994
($3,986,059 or approximately 27.05%) resulted primarily from payoffs
of mortgage loans of $3,600,000 (of which $3,000,000 was returned to
the Limited Partners as a principal pay-back), a decrease of accrued
interest receivable by $158,076 (due primarily to payoffs and pay
downs), a decrease in due from affiliate by $5,668, and a decrease
of cash and cash equivalents by $222,313. As of December 31, 1994,
the Partnership's loan portfolio consisted of three mortgage loans,
the aggregate outstanding principal balance of which was $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 December
31, 1994 and 1993 was $7,002,601 and $7,224,916, respectively, which
consisted of operating cash and working capital reserves. The net
result was a decrease of cash and cash equivalents by $222,315. The
cash and cash equivalents increased because of net earnings of
$827,967, a $5,668 decrease in due from affiliates, a $158,076
decrease in interest receivables, and $3,600,000 in loan principal
repayments. However, the increase in cash and cash equivalents from
these sources was offset by a payment of $1,777,746 ($.93 per Unit)
in dividend distributions (which included $949,779 [$.50 per Unit]
as a return of capital), $3,000,000 ($1.57 per Unit) return of
capital, $15,000 distributed to a general partner, Common Goal
Capital Group, Inc., and a decrease in accrued expenses and payable
of $21,278.
The General Partner made a distribution of $5,000,000 on May 1, 1995
as a return of capital. 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
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amount. 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.
The Partnership's success and the resultant rate of return to
Unitholders is dependent upon, among other things, (a) the ability
of the Managing General Partner to identify suitable opportunities
for the Partnership to invest and reinvest its assets and (b) the
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's 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 commenced 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 March 31, 1995 and 1994, the Partnership
had net earnings of $89,397 and $211,140 based on total revenues of
$223,613 and $311,343, and total expenses of $134,216 and $100,203,
respectively. The decrease in net earnings is due to an increase in
professional fees (primarily due to an increase in legal fees
relating to the Horizon Litigation) as well as reduced 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 March 31,
1995, except for the annual gross revenue interest. (See "Note (2) -
Mortgage Loans Receivable" for a further discussion of this matter.)
However, the General Partners currently 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
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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 moved
to have the above motion vacated. On July 5, 1994, the Court denied
the Horizon 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,
1.995 was set. Discovery has been substantially completed and an
amended complaint was filed by the Partnership in early May, 1995.
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 the expenses
incurred in 1994.
Although the Partnership made dividend distributions of $360,783,
and $345,732 in January and April, 1995, the distributions may not
remain at the present level 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 12, 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 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 Partner 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 Health Care Participating Mortgage Fund L.P.
(Registrant)
By: Common Goal Capital Group, Inc.,
Managing General Partner
DATED: May 10, 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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