Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO______.
Commission File No. 0-16856
BIGGEST LITTLE INVESTMENTS L.P.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3368726
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3702 S. VIRGINIA ST. UNIT G2
RENO, NEVADA 89502
----------------------------- ----------
(Address of principal (Zip code)
executive offices)
(775) 825-3355
-----------------------------
Registrant's telephone number
----------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer"
and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer YES [ ] NO [X]
Accelerated filer YES [ ] NO [X]
Non-accelerated filer (Do not check if a smaller reporting company)
YES [ ] NO [X]
Smaller reporting company YES [X] NO [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BIGGEST LITTLE INVESTMENTS L.P.
BALANCE SHEETS
JUNE 30, DECEMBER 31,
2013 2012
(UNAUDITED)
------------- ------------
ASSETS
Current Assets
Cash and cash equivalents................... $ 8,030,150 $10,069,125
Restricted cash............................. 571,145 -
Short-term investments - CDs................ 249,970 249,970
Trade and other receivables, net............ 45,379 8,301
Available-for-sale securities............... 5,139,610 3,021,934
Prepaid expense............................. 2,706 352
----------- -----------
Total Current Assets...................... 14,038,960 13,349,682
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Long-Term Assets
Property, plant and equipment, net.......... 10,618,312 10,824,798
Construction in progress.................... 38,522 -
----------- -----------
Total Long-Term Assets.................... 10,656,834 10,824,798
----------- -----------
Total Assets............................. $24,695,794 $24,174,480
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable, prepaid rent, accrued
expenses and unclaimed property........ $ 115,547 $ 37,749
Related party accounts payable........... 138,321 85,601
Tenant deposits.......................... 26,313 23,699
----------- -----------
Total Liabilities........................... 280,181 147,049
----------- -----------
Commitments and Contingencies
Partners' Equity
Limited partners' equity (168,345 units
issued and outstanding at 6/30/13;
170,390 at 12/31/12)................... 22,904,482 23,283,532
Prepaid redemption....................... (41,496) (196,025)
Accumulated other comprehensive income... 918,677 301,714
General partner's equity................. 633,950 638,210
----------- -----------
Total Partners' Equity...................... 24,415,613 24,027,431
----------- -----------
Total Liabilities and Partners' Equity........ $24,695,794 $24,174,480
=========== ===========
The accompanying Notes are an integral part of these Financial Statements.
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BIGGEST LITTLE INVESTMENTS L.P.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS
ENDED
-------------------------- ----------------
--------
JUNE 30, JUNE 30, JUNE 30,
JUNE 30,
2013 2012 2013
2012
------------ ------------ ----------- ---
--------
Revenues
Rental revenues.......................... $ 100,384 $ 91,382 $ 187,418 $
185,788
Related party rental revenues............ 106,147 110,333 212,295
220,667
Other revenues........................... 18,101 13,386 24,081
26,013
----------- ----------- ----------- --
--------
Total revenues........................ 224,632 215,101 423,794
432,468
----------- ----------- ----------- --
--------
Costs and expenses
Operating expenses....................... 155,517 117,942 266,537
235,021
General and administrative............... 121,698 34,843 163,016
86,737
Depreciation............................. 103,243 96,764 206,487
193,528
Management fees.......................... 146,498 15,967 158,279
32,569
----------- ----------- ----------- --
--------
Total costs and expenses.............. 526,956 265,516 794,319
547,855
----------- ----------- ----------- --
--------
Loss from operations..................... (302,324) (50,415) (370,525)
(115,387)
Other Income and Expenses
Gain on sale of securities............... 191,123 4,462 484,272
20,433
Interest income.......................... 4,066 127,132 9,335
254,360
----------- ----------- ----------- --
--------
Total Other Income 195,189 131,594 493,607
274,793
----------- ----------- ----------- --
--------
Net (loss) income........................ $ (107,135) $ 81,179 $ 123,082 $
159,406
=========== =========== ===========
==========
Other Comprehensive Income
Unrealized gain (loss) from securities.. $ 218,192 $ (308,444) $ 616,963
$(118,689)
----------- ----------- ----------- --
--------
Comprehensive Income (Loss)............ $ 111,057 $ (227,265) $ 740,045 $
40,717
=========== =========== ===========
==========
Net (loss) income attributable to:
Limited partners......................... $ (104,456) $ 79,149 $ 120,005 $
155,420
General partner.......................... (2,679) 2,030 3,077
3,986
----------- ----------- ----------- --
--------
$ (107,135) $ 81,179 $ 123,082 $
159,406
=========== =========== ===========
==========
Net (loss) income per unit of limited
partnership interest (168,345 and 170,390
average units outstanding for
the three and six months ended June 30,
2013 and 2012, respectively)............. $ (0.62) $ 0.46 $ 0.71 $
0.91
=========== =========== ===========
==========
The accompanying Notes are an integral part of these Financial Statements.
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BIGGEST LITTLE INVESTMENTS L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
----------------------------
June 30, June 30,
2013 2012
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Cash flows from operating activities:
Net income.................................... $ 123,082 $ 159,406
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation ............................... 206,487 193,528
Gain on sale of securities.................. (484,272) (20,433)
Changes in assets and liabilities:
Increase in receivables..................... (37,078) (3,463)
(Increase) decrease in prepaid expense...... (2,354) 2,204
Increase in accounts payable, accrued
expenses, and other liabilities............ 80,412 123,906
Increase in short-term investments - CD..... - (1,247)
Increase in related party payables.......... 52,720 -
------------- -------------
Net cash (used in) provided by operating
activities.................................. (61,003) 453,901
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Cash flows from investing activities:
Cash used for the purchase of securities...... (3,002,825) (262,620)
Cash received from the sale of securities..... 1,986,381 215,084
Cash received from Grand Falls note receivable - 126,000
Cash restricted for Popeye's construction..... (571,145) -
Cash used for construction in process......... (38,522) -
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Net cash (used in) provided by investing
Activities............................... (1,626,111) 78,464
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Cash flows from financing activities:
Cash used for payment of redemption of
limited partnership units................... (16,879) (93,670)
Cash used for prepayment of redemption of
limited partnership units................... (41,496) (103,634)
Cash used for distribution.................... (293,486) (349,258)
------------- -------------
Net cash used in financing activities...... (351,861) (546,562)
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Net decrease in cash and cash equivalents....... (2,038,975) (14,197)
Cash and cash equivalents, beginning of period.. 10,069,125 5,646,046
------------- -------------
Cash and cash equivalents, end of period........ $ 8,030,150 $ 5,631,849
============= =============
Non-Cash
Retired prepaid redemption................ $ 196,025 $ 246,280
Unrealized gain/loss on securities........ $ 616,963 $ (118,689)
The accompanying Notes are an integral part of these Financial Statements.
-4-
BIGGEST LITTLE INVESTMENTS L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL INFORMATION
Pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"), certain information and footnote disclosure normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America has been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the disclosures made are adequate to make the information not
misleading. The accompanying financial statements, footnotes and discussions
should be read in conjunction with the financial statements, related footnotes
and discussions contained in the Biggest Little Investments, L.P. (the
"Partnership") Annual Report on Form 10-K for the year ended December 31,
2012. The financial information contained herein is unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature. The balance sheet at December 31, 2012, was derived from
audited financial statements at such date.
The results of operations for the three and six months ended June 30,
2013 and 2012 are not necessarily indicative of the results to be expected for
the full year or for any other period.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Provision for Impairment
Property is stated at cost, less accumulated depreciation. Since
acquisition, property has been depreciated principally on a straight-line
basis over the estimated service lives as follows:
Land improvements ........... 5 years
Site work ................... 15 years
Buildings ................... 30 years
Building improvements ....... 5-30 years
In accordance with the Accounting Standards Codification ("ASC") Section
360, the Partnership evaluates the carrying value of its long-lived assets for
impairment at least annually or whenever events or changes in circumstances
indicate that the carrying value of the assets may not be recoverable from
related future undiscounted cash flows. As of June 30, 2013, the Partnership's
only operating asset was the Sierra Marketplace Shopping Center located in
Reno, Nevada (the "Sierra Property") and the Partnership determined that none
of its long-lived assets were impaired as of such date.
Construction-in-Progress
Construction-in-progress is stated at cost and not depreciated. Depreciation
on capital work-in-progress commences when the assets are ready for their
intended use.
Allowance for Doubtful Accounts
The Partnership monitors its accounts receivable balances on a monthly
basis to ensure they are collectible. On a quarterly basis, the Partnership
uses its historical experience to determine its accounts receivable reserve.
The Partnership's allowance for doubtful accounts is an estimate based on
specifically identified accounts as well as general reserves. The Partnership
evaluates specific accounts where it has information that the customer may
have an inability to meet its financial obligations. In these cases,
management uses judgment, based upon the best available facts and
circumstances, and records a specific reserve for that customer against
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amounts due to reduce the receivable to the amount that is expected to be
collected. These specific reserves are reevaluated and adjusted as additional
information is received that impacts the amount reserved. The Partnership also
establishes a general reserve based upon a range of percentages applied to
aging categories. These percentages are based on historical collection and
write-off experience. If circumstances change, the Partnership's estimate of
the recoverability of amounts due the Partnership could be reduced or
increased by a material amount. Such a change in estimated recoverability
would be accounted for in the period in which the facts that give rise to the
change become known. As of June 30, 2013 and 2012, the Partnership did not
have any reserve for bad debt.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, the Partnership
considers all short-term investments which have original maturities of three
months or less to be cash equivalents. There were no cash equivalents as of
June 30, 2013 or December 31, 2012.
Concentration of Credit Risk
The Partnership maintains cash balances at institutions insured up to
$250,000 by the Federal Deposit Insurance Corporation. Balances in excess of
amounts required for operations are usually invested in savings, money market
accounts and certificates of deposit. Cash balances exceeded these insured
levels during the period. No losses have occurred or are expected due to this
risk.
Revenue Recognition
Rental revenues are based on lease terms and recorded as income when
earned and when they can be reasonably estimated. Rent increases are generally
based on the Consumer Price Index. Leases generally require tenants to
reimburse the Partnership for certain operating expenses applicable to their
leased premises. These costs and reimbursements have been included in
operating expenses and rental income, respectively.
Investments
Investments are classified as trading or available-for-sale.
Trading investments are recorded at fair value with unrealized gains and
losses reflected in the statements of operations. Available-for-sale
investments' unrealized gains and losses are included as a component of
accumulated other comprehensive income in the accompanying statements of
operations and comprehensive income. Interest on investments is recognized as
income when earned. Realized gains and losses on investments are included in
Other Income and Expenses in the accompanying statements of operations and
comprehensive income. As of June 30, 2013 and December 31, 2012, all of the
Partnership's investments were classified as available-for-sale.
Long-term Notes Receivable
Long-term notes receivable bear interest and are due upon maturity.
Interest income associated with these notes receivable is reflected in the
accompanying statements of operations and comprehensive income under the
caption "Interest Income."
Fair Value of Financial Instruments
The Partnership uses the following hierarchy to prioritize the inputs
used in measuring fair value in accordance with ASC Section 820:
Level 1 Quoted prices (unadjusted) in active markets for identical assets
or liabilities;
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Level 2 Inputs other than quoted prices included within Level 1 that are
either directly or indirectly observable;
Level 3 Unobservable inputs in which little or no market activity exists,
therefore requiring an entity to develop its own assumptions about
the assumptions that market participants would use in pricing.
Financial instruments including cash and cash equivalents, trade and
notes receivable, securities, accounts payable and accrued expenses are
carried in the financial statements at amounts that approximated fair value at
June 30, 2013 and December 31, 2012. See "Note 3. Fair Value Measurements."
Net Income Per Unit of Limited Partnership Interest
Net income per unit of limited partnership interest (each individually, a
"Unit" and, together, the "Units") is computed based upon the average number
of Units outstanding (168,345 for the six months ended June 30, 2013, and
170,390 for the six months ended June 30, 2012) during the period then ended.
On August 31, 2009, the Partnership initiated an offer enabling the
Partnership's limited partners to sell their Units back to the Partnership
(the "Redemption Offer"). The Partnership may repurchase whole Units only, at
a price reasonably determined by the general partner of the Partnership (the
"General Partner") based on market considerations. Units repurchased by the
Partnership under the Redemption Offer will be canceled, and will have the
status of authorized but unissued Units. The Partnership's obligation to
repurchase any Units under the Redemption Offer is conditioned upon it having
sufficient funds available to complete the repurchase. The Partnership will
use any operating funds as the General Partner, in its sole discretion, may
reserve for the purpose of funding the Redemption Offer. On August 24, 2012,
the Redemption Offer was extended until August 31, 2013, subject to the right
of the General Partner to suspend, terminate, modify or extend the term of the
Redemption Offer in its sole discretion. On June 6, 2013, the Redemption Offer
was suspended pending final response from the SEC to a preliminary filing by
the Partnership on Schedule 14C and Schedule 13E-3 whereby the Partnership was
seeking to effect a reverse split of the Partnership's outstanding Units at a
ratio of one-for-100, with holders of fractional Units receiving cash for
their Units, for the purpose of reducing the number of holders of Units in
order for the Partnership to become a privately held entity (the "Reverse
Split"). On August 8, 2013, the SEC approved the Schedule 14C and Schedule
13e-3 and the Partnership filed a definitive information statement to be
distributed to all holders of Units, detailing the final terms of the Reverse
Split. As a result of the Reverse Split, the Partnership's limited partners
owning fractional shares following the reverse split will be paid a $120-per-
Unit cash consideration based on the number of Units held before the effective
date, and will no longer be limited partners of the Partnership. Subsequently,
the number of limited partners of the Partnership will fall below 300, which
will make the Partnership eligible to terminate the registration of its Units
under the Securities Exchange Act of 1934, as amended, and, accordingly, the
Partnership will no longer be subject to the reporting requirements of the
federal securities laws (see "Recent Events" under "ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS").
The General Partner terminated the Redemption Offer on August 9, 2013. An
aggregate of 12,704 Units were repurchased by the Partnership pursuant to the
Redemption Offer at an approximate average price of $103.26 per Unit.
Income Taxes
Partnership earnings are allocated between the partners in accordance
with each partner's ownership interest and are taxed individually and not at
the partnership level. Correspondingly, no provisions for federal, state and
local income taxes are included in the financial statements.
The income tax returns of the Partnership are subject to examination by
federal, state and local taxing authorities. Such examinations could result
in adjustments to Partnership income, which changes could affect the tax
liability of the individual partners.
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Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amount
of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities.
On an ongoing basis, the Partnership evaluates its estimates, including
those related to bad debts, contingencies, litigation and valuation of the
real estate. The Partnership bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
NOTE 3. FAIR VALUE MEASUREMENTS
The Partnership holds certain financial assets which are required to be
measured at fair value on a recurring basis in accordance with ASC Section
820.
Valuation of Financial Instruments measured on a recurring basis by
hierarchy levels as of June 30, 2013:
Fair Value Measurement
---------------------------------
Level 1 Level 2 Level 3 Total
---------- --------- --------- ----------
Stock Securities $5,779,399 $ - $ - $5,779,399
Short Option Securities (639,789) - - (639,789)
Short-Term Investments - CDs 249,970 - - 249,970
---------- --------- --------- ----------
Total $5,389,581 $ - $ - $5,389,581
========== ========= ========= ==========
Valuation of Financial Instruments measured on a recurring basis by
hierarchy levels as of December 31, 2012:
Fair Value Measurement
---------------------------------
Level 1 Level 2 Level 3 Total
---------- --------- --------- ----------
Stock Securities $3,529,590 $ - $ - $3,529,590
Short Option Securities (507,656) - - (507,656)
Short-Term Investments - CDs 249,970 - - 249,970
---------- --------- --------- ----------
Total $3,271,904 $ - $ - $3,271,904
========== ========= ========= ==========
The Partnership had an unrealized gain from securities of $918,677 as of
June 30, 2013, and had an unrealized loss from securities of $291,800 as of
June 30, 2012. During the six months ended June 30, 2013 and 2012, the
Partnership disposed of securities resulting in realized gains of $484,272 and
$20,433, respectively, using the first-in, first-out method.
NOTE 4. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
Beginning in April 2007, affiliates of the General Partner began leasing
office space at the Sierra Property and pay monthly rent of $2,408. The
General Partner uses a portion of this office space and participates in such
rent payments.
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In 2004, the Partnership began renovation efforts in an attempt to
maximize the financial viability of the Sierra Property (the "Renovation"). As
part of the Renovation, a portion of the shopping center previously occupied
by an anchor tenant was demolished for the purpose of creating in its place a
new driveway (and traffic signal) directly between the Sierra Property and a
hotel casino property located next to the Sierra Property (the "Adjacent
Property"). The Adjacent Property entered into a lease with the Partnership
for a section of the Sierra Property (including the new driveway). The
Adjacent Property has a minimum lease term of 15 years at an initial monthly
rent of $25,000, subject to increases every 60 months based on the Consumer
Price Index. Such an increase became effective on September 30, 2009, and the
Adjacent Property now pays monthly rent of approximately $28,400. The Adjacent
Property also uses part of the common area of the Sierra Property and pays its
proportionate share of the common area expense of the Sierra Property. The
Adjacent Property has the option to renew the lease for three five-year terms
and, at the end of the extension periods, has the option to purchase the
leased section of the Sierra Property at a price to be determined based on an
MAI Appraisal.
In addition to the driveway, the Adjacent Property also leases
approximately 6,900 square feet of storage space at the Sierra Property and
pays rent of approximately $3,450 per month for such storage space.
Ben Farahi, the manager of the General Partner, was, until May 26, 2006,
Co-Chairman of the Board, Chief Financial Officer, Secretary, and Treasurer of
Monarch Casino & Resort, Inc. ("Monarch"), the owner of the Adjacent Property.
He owned approximately 11.9% of Monarch's outstanding common stock as of June
30, 2013.
Accounting rules define transactions with related parties as transactions
which are not arm's-length in nature and, therefore, may not represent fair
market value.
Compensation of the General Partner
The General Partner is the manager of the Sierra Property. The General
Partner received $47,919 and $32,569 for the six months ended June 30, 2013
and 2012, respectively, for such management services; included in these
amounts is three percent of the monthly interest earned on the Partnership's
cash in savings and money market accounts, which the Partnership began paying
to the General Partner in 2006. Also, pursuant to the Partnership's Second
Amended and Restated Agreement of Limited Partnership (the "Amended LP
Agreement"), the General Partner is entitled to receive 2.5% of the
Partnership's income, loss, capital and distributions, including, without
limitation, the Partnership's cash flow from operations, disposition proceeds
and net sale or refinancing proceeds. Accordingly, the General Partner was
allocated net income of $3,077 for the six months ended June 30, 2013 and net
income of $3,986 for the six months ended June 30, 2012.
On April 9, 2013, the Partnership issued a cash distribution of $1.70 per
Unit on the outstanding limited partnership Units of the Partnership to
limited partners of record at the close of business on March 28, 2013. The
General Partner received $7,337 from this distribution in its capacity as the
general partner.
On May 28, 2013, the Partnership entered into a 20-year lease with a
franchisee of Popeye's Louisiana Kitchen, a national fast food chain
("Popeye's"). The Partnership is contributing approximately $571,000 to the
construction cost of a new building that will be occupied by Popeye's, plus
approximately $100,000 for fees, utility improvements and grading. Pursuant to
the Amended LP Agreement, the General Partner earned a development fee in the
amount of $110,360 for its services in connection with securing the Popeye's
lease and the development of assets related to the Popeye's lease.
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Also pursuant to the Amended LP Agreement, the General Partner may
receive mortgage placement fees for services rendered in connection with the
Partnership's mortgage loans. These fees may not exceed such compensation
customarily charged in arm's-length transactions by others rendering similar
services as an ongoing public activity in the same geographical location for
comparable mortgage loans. The General Partner is entitled to certain fees for
compensation of other services rendered as well. The General Partner did not
earn any mortgage placement or other fees during the six months ended June 30,
2013 or 2012.
NOTE 5. REAL ESTATE
The Partnership's real estate is summarized as follows:
June 30, 2013 December 31, 2012
------------------ -----------------
Land............................ $ 3,198,574 $ 3,198,574
Less land taken by condemnation. (117,483) (117,483)
------------------ -----------------
3,081,091 3,081,091
------------------ -----------------
Building and improvements....... 12,069,070 12,069,070
------------------ -----------------
15,150,161 15,150,161
------------------ -----------------
Accumulated depreciation........ (4,531,849) (4,325,363)
------------------ -----------------
$ 10,618,312 $ 10,824,798
================== =================
NOTE 6. NOTES RECEIVABLE
On December 17, 2010, the Partnership participated in first and second
senior credit facilities with a group led by a major bank in the aggregate
amount of $75 million (the "Credit Facility") to a new casino in Grand Falls,
Iowa (the "Borrower"). The Partnership's commitment to the Credit Facility was
$3 million under the first lien senior credit facility consisting of a $40
million term loan and a $10 million revolving loan (the "First Facility"), and
$1.5 million under the second lien senior credit facility consisting of a $25
million term loan (the "Second Facility"). The Credit Facility may be utilized
by the Borrower for a portion of the development and construction costs of the
casino (the "Project"), to pay for fees and expenses in connection with the
Project and for initial working capital needs after completion of the Project.
On August 14, 2012, the Borrower refinanced the Credit Facility, which
had been fully drawn on, and the Partnership was repaid its entire commitment.
As a result of the refinancing, the Partnership earned approximately $58,300
in call protection fees per the terms of the Credit Facility.
The First Facility was scheduled to mature on December 17, 2014; the
Second Facility was scheduled to mature on December 17, 2015.
The Borrower paid various one-time fees and other loan costs upon the
closing of the Credit Facility.
The Partnership's General Partner received a mortgage placement fee of
1.5% of the Partnership's total commitment under the Credit Facility for its
services in connection with the placement of the Credit Facility.
NOTE 7. SUBSEQUENT EVENTS
On August 8, 2013, the Partnership filed a definitive information
statement with the SEC announcing a 1-for-100
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reverse split of the Partnership's outstanding Units (the "Reverse Split").
The Reverse Split was approved upon the written consent by two of the
Partnership's limited partners who, together, own approximately 57% of the
Partnership's Units. As a result of the Reverse Split, the Partnership's
limited partners owning fractional shares following the Reverse Split will be
cashed out of their ownership interest at a rate of $120.00 per pre-split Unit
and, as a result, will no longer be limited partners of the Partnership.
Subsequently, the number of limited partners of the Partnership will fall
below 300, which will deem the Partnership eligible to terminate the
registration of its Units under the Securities Exchange Act of 1934, as
amended. On August 12, 2013, the Partnership mailed information packages
setting forth the details of the Reverse Split to all of its limited partners.
The Reverse Split will take effect approximately twenty days following the
mailing of the information packages. The General Partner of the Partnership
retained the services of a financial advisory firm, Houlihan Capital, LLC
("Houlihan"), to render an opinion as to the fairness from a financial point
of view of the consideration to be paid to the existing affiliated and
unaffiliated limited partners (including those limited partners who would be
cashed out in conjunction with the Reverse Split and those who would remain
limited partners after the effects of the Reverse Split). After the Reverse
Split becomes effective, the General Partner intends to terminate the
registration of the Partnership's Units with the SEC. As a result of the
termination of the registration of its Units with the SEC, the Partnership
will no longer file periodic reports with the SEC, including Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties. Biggest Little Investments,
L.P. (the "Partnership") could be affected by declining economic conditions as
a result of various factors that affect the real estate business including the
financial condition of tenants, competition, the ability to lease vacant space
within the Sierra Marketplace Shopping Center (the "Sierra Property") or renew
existing leases, increased operating costs (including insurance costs), and
the costs associated with, and results of, any Partnership plans to renovate
and reposition the Sierra Property, as detailed in the filings with the
Securities and Exchange Commission (the "SEC") made by the Partnership from
time to time. The discussion of the Partnership's liquidity, capital resources
and results of operations, including forward-looking statements pertaining to
such matters, is based on management's current expectations and does not take
into account the effects of any changes to the Partnership's operations
resulting from risks and uncertainties. Accordingly, actual results could
differ materially from those projected in the forward-looking statements.
Maxum LLC is the Partnership's general partner (the "General Partner").
This item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.
Recent Events
On June 6, 2013, the Partnership filed a preliminary information
statement with the SEC seeking to effect a reverse split of the Partnership's
outstanding limited partnership units (the "Units") on the basis of one new
Unit for each 100 issued and outstanding Units, such that limited partners
owning fewer than 100 Units will have their Units cancelled and converted into
the right to receive a cash consideration of $120.00 per pre-split Unit (the
"Reverse Split"). The Reverse Split was approved by written consent in lieu of
a meeting of limited partners by two limited partners holding 57.1% of the
issued and outstanding Units. Following the effectiveness of the Reverse
Split, the Partnership will terminate its reporting obligations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The purpose
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of the Reverse Split is to reduce the number of record holders of the
Partnership's Units in order for it to become a privately held entity, which
will be owned primarily by its affiliates and will no longer be subject to the
reporting requirements of the federal securities laws. On August 8, 2013, the
SEC approved the Partnership's filings made with respect to the Reverse Split
and the Partnership filed a definitive information statement with the SEC
setting forth the details and rights of the limited partners of the Reverse
Split. On August 12, 2013, the Partnership mailed information packages setting
forth the details of the Reverse Split to all of its limited partners. The
Reverse Split will take effect approximately twenty days following the mailing
of the information packages. The General Partner retained the services of a
financial advisory firm, Houlihan Capital, LLC ("Houlihan"), to render an
opinion as to the fairness from a financial point of view of the consideration
to be paid to the existing affiliated and unaffiliated limited partners
(including those limited partners who would be cashed out in conjunction with
the Reverse Split and those who would remain limited partners after the
effects of the Reverse Split). After the Reverse Split becomes effective, the
General Partner intends to terminate the registration of the Partnership's
Units with the SEC. As a result of the termination of the registration of its
Units with the SEC, the Partnership will no longer file periodic reports with
the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K. The definitive information statement on
Schedule 14C and statement on Schedule 13E-3 filed on August 8, 2013 and
August 9, 2013, respectively, are incorporated herein by reference.
On May 28, 2013, the Partnership entered into a 20-year lease with a
franchisee of Popeye's Louisiana Kitchen, a national fast food chain
("Popeye's"). The Partnership is contributing approximately $571,000 to the
construction cost of a new building that will be occupied by Popeye's, plus
approximately $100,000 for fees, utility improvements and grading. The
Partnership will earn total rent of $585,200 during the first five years of
the lease with adjustments based on the Consumer Price Index every five years.
The tenant has two five-year options to extend the lease after the initial 20
years.
On April 9, 2013, the Partnership issued a cash distribution of $1.70 per
Unit on the outstanding Units of the Partnership to limited partners of record
at the close of business on March 28, 2013.
On August 31, 2009, the Partnership initiated an offer enabling the
Partnership's limited partners to sell their Units back to the Partnership
(the "Redemption Offer"). The Partnership may repurchase whole Units only, at
a price reasonably determined by the General Partner based on market
considerations. Units repurchased by the Partnership under the Redemption
Offer will be canceled, and will have the status of authorized but unissued
Units. The Partnership's obligation to repurchase any Units under the
Redemption Offer is conditioned upon its having sufficient funds available to
complete the repurchase. The Partnership will use any operating funds as the
General Partner, in its sole discretion, may reserve for the purpose of
funding the Redemption Offer. On August 24, 2012, the Redemption Offer was
extended until August 31, 2013, subject to the right of the General Partner to
suspend, terminate, modify or extend the term of the Redemption Offer in its
sole discretion. On August 9, 2013, the Partnership terminated the Repurchase
Program following the announcement of the Reverse Split. An aggregate of
12,704 Units were repurchased by the Partnership pursuant to the Redemption
Offer at an approximate average price of $103.26 per Unit.
Liquidity and Capital Resources
The Partnership's level of liquidity based on cash and cash equivalents
decreased by $2,038,975 to $8,030,150 during the six months ended June 30,
2013 as compared to December 31, 2012. The decrease was due primarily to cash
used for the purchase of securities partially offset by cash received from the
sale of securities. The Partnership also placed approximately $571,145 into an
account that is restricted for the construction of the Popeye's building at
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the Sierra Property. The Partnership also used cash to pay for a $1.70 per-
Unit distribution, for operating activities and for the payment and prepayment
of redemption of Units pursuant to the Redemption Offer. Cash and cash
equivalents are invested in short-term instruments and are expected to be
sufficient to pay administrative expenses during the term of the Partnership.
Real Estate Market
The Partnership's sole fixed asset as of June 30, 2013, was the Sierra
Property, which currently has a vacancy rate of approximately 78% based on
leasable square footage. The overall softness in the economy in the past few
years has hurt the retail sector, thus making it difficult to locate new
tenants for the Sierra Property. Also, in the past few years, the Sierra
Property has lost all three of its original anchor tenants and has not been
able to locate new anchor tenants with similar lease terms. One of the anchor
tenant spaces was demolished for the purpose of creating in its place a new
driveway (and traffic signal) directly between the Sierra Property and the
hotel casino property next to the Sierra Property (the "Adjacent Property"),
and the portion of the Sierra Property that was demolished has been leased to
the owner of the Adjacent Property since September 30, 2004, enabling the
Partnership to make up much of the lost rental revenue previously generated by
the space. The other two anchor tenant spaces are vacant.
The Partnership continues to market the Sierra Property to potential
tenants. There can be no assurances that the Partnership's efforts to increase
the Sierra Property's occupancy will be successful.
Results of Operations
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED JUNE 30,
2013 AND 2012.
The Partnership earned a net loss of $107,135 for the three-month period
ended June 30, 2013, versus net income of $81,179 for the same period in 2012.
The decrease was mainly due increases in all expense categories that were
partially offset by an increase in the realized gain from the sale of
securities and a slight increase in revenues. The Partnership incurred a loss
from operations of $302,324 during the three months ended June 30, 2013, as
compared to a loss from operations of $50,415 during the comparable period in
2012. Revenues, not including interest income or gains from the sale of
securities, increased by $9,531 to $224,632 for the quarter ended June 30,
2013 as compared to the same period in 2012. The increase in revenues is
mainly due to slightly higher rental revenue from the Sierra Property during
the 2013 second quarter as compared to the 2012 second quarter, as well as to
higher other revenues.
Costs and expenses increased to $526,956 for the three-month period ended
June 30, 2013, as compared to $265,516 for the same period in the prior year's
second quarter. Operating expenses increased by $37,575 mainly due to
increases in commissions and payroll costs that were partially offset by
decreases in taxes and insurance costs as well as overall lower costs to
maintain the Sierra Property. General and administrative expenses increased by
$86,855 primarily due to increases in legal and accounting fees in part as a
result of the filings made with the SEC in connection with the Reverse Split,
and other miscellaneous expenses. Management fees increased primarily as a
result of the one-time development fee earned by the General Partner for its
services in connection with the development of the Popeye's building.
Depreciation expense increased by $6,479. The Partnership also incurred an
unrealized gain of $218,192 from its holdings of various securities during the
2013 second quarter as compared to an unrealized loss of $308,444 during the
2012 second quarter.
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COMPARISON OF OPERATING RESULTS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2013
AND 2012.
The Partnership earned net income of $123,082 for the six-month period
ended June 30, 2013, versus net income of $159,406 for the same period in
2012. The decrease was due mainly to increases in expenses and a slight
decrease in revenues that were partially offset by an increase in a gain from
the sale of securities during the first six months of 2013 as compared to the
2012 period. The Partnership incurred a loss from operations of $370,525
during the six months ended June 30, 2013, as compared to a loss from
operations of $115,387 during the comparable period in 2012. Revenues, not
including interest income, decreased by $8,674 to $423,794 for the period
ended June 30, 2013, as compared to the same period in 2012. The decrease in
revenues is mainly due to lower rental income from fewer tenants at the Sierra
Property during the first six months of 2013 as compared to the same period in
the prior year.
Costs and expenses increased to $794,319 for the six-month period ended
June 30, 2013, as compared to $547,855 for the same period in the prior year.
Operating expenses increased by $31,516 mainly due to increases in payroll and
commission costs that were partially offset by decreases in taxes and
insurance costs. General and administrative expenses increased by $76,279
primarily as a result of higher legal and accounting fees in part as a result
of the filings made with the SEC in connection with the Reverse Split, as well
as other miscellaneous expenses. Management fees increased primarily as a
result of a one-time development fee paid by the Partnership to the General
Partner during the first six months of 2013 for its services in connection
with securing the Popeye's lease and the development of assets related to the
Popeye's lease. The Partnership's depreciation expense increased by $12,959 as
a result of additional assets being put into use during the first six months
of 2013. The Partnership also incurred an unrealized gain of $616,963 from its
holdings of various securities during the first six months of 2013 as compared
to an unrealized loss of $118,689 during the 2012 six-month period.
The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the Sierra Property to adequately maintain the
physical assets and the other operating needs of the Partnership. Such assets
are currently thought to be sufficient for any near-term and long-term needs
of the Partnership, except that the Partnership may need to obtain financing
for any potential renovation and/or redevelopment.
Critical Accounting Policies
The Partnership's significant critical accounting policies include the
evaluation of the fair value of real estate. The Partnership evaluates the
need for an impairment loss on its real estate assets when indicators of
impairment are present and the undiscounted cash flows are not sufficient to
recover the asset's carrying amount. The impairment loss is measured by
comparing the fair value of the asset to its carrying amount. The evaluation
of the fair value of real estate is an estimate that is susceptible to change
and actual results could differ from those estimates. The sufficiency of
existing liquid assets to meet future liquidity and capital expenditure
requirements is directly related to the level of capital expenditures required
at the property to adequately maintain the physical assets and the other
operating needs of the Partnership. Such assets are currently thought to be
sufficient for any near-term and long-term needs of the Partnership, except
that the Partnership may need to obtain financing for any future renovation
efforts or other capital projects. The Partnership did not incur any
impairment charges during the six months ended June 30, 2013 or 2012. See
"Notes to Financial Statements - Note 5. Real Estate."
Investments are classified as trading or available-for-sale.
Trading investments are recorded at fair value with unrealized gains and
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losses reflected in the statements of operations. Available-for-sale
investments' unrealized gains and losses are included as a component of
accumulated other comprehensive income in the accompanying statements of
operations and comprehensive income. Interest on investments is recognized as
income when earned. Realized gains and losses on investments are included in
the accompanying statements of operations and comprehensive income under the
caption "gain on sale of securities."
Long-term notes receivable bear interest and are due upon maturity.
Interest income associated with these notes receivable is reflected in the
accompanying statements of operations and comprehensive income under the
caption "interest income."
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4 - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that
are designed to provide reasonable assurance that information required to be
disclosed by the Partnership in its periodic reports filed or submitted by the
Partnership under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Partnership in its periodic reports that are filed under the
Exchange Act is accumulated and communicated to the Partnership's management,
including its principal executive and financial officer, as appropriate, to
allow timely decisions regarding required disclosure.
Based on an evaluation under the supervision and with the participation
of the Partnership's management, its principal executive and financial officer
has concluded that the Partnership's disclosure controls and procedures as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective
as of June 30, 2013, to ensure that information required to be disclosed in
reports that are filed or submitted under the Exchange Act is (i) recorded,
processed, summarized and reported within the time periods specified in the
SEC rules and forms and (ii) accumulated and communicated to the Partnership's
management, including its principal executive and financial officer, as
appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Partnership's internal control over
financial reporting during the quarter ended June 30, 2013, that materially
affected, or are reasonably likely to materially affect, the Partnership's
internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On August 31, 2009, the Partnership initiated the Redemption Offer
enabling the Partnership's limited partners to sell their Units back to the
Partnership. The Partnership may repurchase whole Units only, at a price
reasonably determined by the General Partner based on market considerations.
Units repurchased by the Partnership under the Redemption Offer will be
canceled, and will have the status of authorized but unissued Units. The
Partnership's obligation to repurchase any Units under the Redemption Offer is
conditioned upon it having sufficient funds available to complete the
repurchase. The Partnership will use any operating funds as the General
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Partner, in its sole discretion, may reserve for the purpose of funding the
Redemption Offer. On August 24, 2012, the Redemption Offer was extended until
August 31, 2013, subject to the right of the General Partner to suspend,
terminate, modify or extend the term of the Redemption Offer in its sole
discretion. On June 6, 2013, the Redemption Offer was suspended pending the
SEC's final response to the Partnership's initial filings with regards to the
Reverse Split. As of June 6, 2013, an aggregate of 12,704 Units had been
repurchased by the Partnership at an approximate average price of $103.26 per
Unit.
During the second quarter of 2013, the Partnership repurchased Units from
some of its limited partners. All repurchased Units during this period were
made pursuant to the Redemption Offer as follows:
Maximum Number of Units
Total Number Average That May Yet Be
Of Units Price Paid Purchased Under The
Period Repurchased Per Unit Redemption Offer
----------- ------------ ----------- ------------------------
4/1/13 to
4/30/13 223 $113.00 (1)
5/1/13 to
5/31/13 109 $113.00 (1)
6/1/13 to
6/30/13 - - (1)
------------ ----------- ------------------------
Total 332 $113.00 (1)
============ =========== ========================
(1) On August 9, 2013, the Redemption Offer was terminated following approval
by the SEC of the Reverse Split.
ITEM 5. OTHER INFORMATION
On June 6, 2013, the Partnership filed a preliminary information statement
with the SEC seeking to effect the Reverse Split of the Partnership's
outstanding limited partnership Units on the basis of one new Unit for each
100 issued and outstanding Units. In connection with the Reverse Split,
limited partners owning fewer than 100 Units will have their Units cancelled
and converted into the right to receive a cash consideration of $120.00 per
pre-split Unit (the "Reverse Split"). The Reverse Split was approved by
written consent in lieu of a meeting of limited partners by two limited
partners holding 57.1% of the issued and outstanding Units. Following the
effectiveness of the Reverse Split, the Partnership will terminate its
reporting obligations under the Exchange Act. The purpose of the Reverse Split
is to reduce the number of record holders of the Partnership's Units in order
for it to become a privately held entity, which will be owned primarily by its
affiliates and will no longer be subject to the reporting requirements of the
federal securities laws. On August 8, 2013, the SEC approved the Schedule 13e-
3 and preliminary information statement on Schedule 14C filed by the
Partnership in connection with the Reverse Split and the Partnership filed a
definitive information statement with the SEC setting forth the details and
rights of the limited partners of the Reverse Split. On August 12, 2013, the
Partnership mailed information packages setting forth the details of the
Reverse Split to all of its limited partners. The Reverse Split will take
effect approximately twenty days following the mailing of the information
packages. The General Partner retained the services of Houlihan, a financial
advisory firm, to render an opinion as to the fairness from a financial point
-16-
of view of the consideration to be paid to the Partnership's existing
affiliated and unaffiliated limited partners (including those limited partners
who would be cashed out in connection with the Reverse Split and those who
would remain limited partners after the effects of the Reverse Split). After
the Reverse Split becomes effective, the General Partner intends to terminate
the registration of the Partnership's Units with the SEC. As a result of the
termination of the registration of its Units with the SEC, the Partnership
will no longer file periodic reports with the SEC, including annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The
definitive information statement on Schedule 14C and statement on Schedule
13E-3 filed on August 8, 2013 and August 9, 2013, respectively, are
incorporated herein by reference.
ITEM 6 - EXHIBITS
Exhibits required by Item 601 of Regulation S-K are filed herewith and
are listed in the attached exhibit index.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIGGEST LITTLE INVESTMENTS L.P.
BY: MAXUM LLC
Its General Partner
BY: /S/ BEN FARAHI
-------------------
Ben Farahi
Manager
DATE: 08/14/2013
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BIGGEST LITTLE INVESTMENTS, L.P.
FORM 10-Q JUNE 30, 2013
Exhibit Index
Exhibit Page No.
------- --------
31.1 Certification pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002. 20
32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. 21
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ben Farahi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Biggest Little
Investments L.P.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Registrant and I have:
a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed, under my
supervision, to ensure that material information relating to the
Registrant is made known to me, particularly during the
period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
my supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
c) evaluated the effectiveness of the Registrant's disclosure controls
and procedures and presented in this report my conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
d) disclosed in this report any change in the Registrant's
internal control over financial reporting that occurred during the
Registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting to the Registrant's auditors:
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrant's
ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal control over financial reporting.
/s/ BEN FARAHI
--------------
Ben Farahi
Manager of the General Partner
Date: 08/14/2013
-20-
EXHIBIT 32.1
BIGGEST LITTLE INVESTMENTS, L.P.
FORM 10-Q JUNE 30, 2013
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Biggest Little Investments
L.P. (the "Partnership") on Form 10-Q for the fiscal quarter ended June 30,
2013, as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), the undersigned, in the capacity and on the date indicated
below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and (2) the information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Partnership.
Date: August 14, 2013
/s/ BEN FARAHI
--------------
Ben Farahi
Manager of the General Partner
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