UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________to _________
Commission file number 0-15758
JACQUES-MILLER INCOME FUND, L.P. - II
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 62-1244325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JACQUES-MILLER INCOME FUND, L.P. - II
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2004
Assets
Cash and cash equivalents $ 46
Note receivable (net of allowance of approximately
$1,028) (Note B) --
$ 46
Liabilities and Partners' (Deficiency) Capital
Liabilities
Other liabilities $ 17
Due to affiliates (Note C) 10
Partners' (Deficiency) Capital
General partner $ (114)
Limited partners (12,400 units issued and
outstanding) 133 19
$ 46
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Revenues:
Interest income $ -- $ -- $ -- $ 13
Expenses:
General and administrative 10 19 41 48
Net loss $ (10) $ (19) $ (41) $ (35)
Net loss allocated to
general partner (1%) $ -- $ -- $ -- $ --
Net loss allocated to
limited partners (99%) (10) (19) (41) (35)
$ (10) $ (19) $ (41) $ (35)
Net loss per limited
partnership unit $ (.81) $(1.53) $(3.31) $(2.82)
Distributions per limited
partnership unit $ -- $ -- $ -- $49.35
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Partners' (deficiency) capital
at December 31, 2003 12,400 $ (114) $ 174 $ 60
Net loss for the nine months
ended September 30, 2004 -- -- (41) (41)
Partners' (deficiency) capital
at September 30, 2004 12,400 $ (114) $ 133 $ 19
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2004 2003
Cash flows from operating activities:
Net loss $ (41) $ (35)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Change in accounts:
Due to affiliates (1) 5
Other assets -- 730
Other liabilities 10 22
Net cash (used in) provided by operating activities (32) 722
Cash flow used in financing activity:
Distribution to partners -- (618)
Net (decrease) increase in cash and cash equivalents (32) 104
Cash and cash equivalents at beginning of period 78 15
Cash and cash equivalents at end of period $ 46 $ 119
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Jacques-Miller Income Fund,
L.P. - II ("Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Jacques-Miller, Inc. (the "Corporate General Partner"), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
months ended September 30, 2004, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2004. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2003. The Corporate General Partner is an affiliate of Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust.
Note B - Note Receivable
Note receivable consists of the following (in thousands):
September 30,
2004
Note receivable $ 413
Accrued interest receivable 615
1,028
Provision for uncollectible note
receivable (including
approximately $615 of
deferred interest revenue) (1,028)
$ --
The Partnership holds a note receivable (the "Catawba Club Note") at September
30, 2004, totaling approximately $413,000 with approximately $615,000 of related
accrued interest, which matured November 1, 1997, and is fully reserved. This
promissory note bears interest at 12.5%, and is unsecured by the unrelated
partnership and is subordinated to the underlying mortgage of the unrelated
partnership. Payments on the note are restricted to excess cash flow after
payment on the first mortgage. No payments on the note were received during the
nine months ended September 30, 2004 and 2003, respectively.
During the year ended December 31, 2000, the first and second mortgages
encumbering Catawba Club were replaced with a new first mortgage. However, after
payment of transaction costs and establishing a repair escrow, as required by
the lender, there were no proceeds available for a payment on the Catawba Club
Note. The note was in default at September 30, 2004. The Partnership has
obtained a default judgment with respect to the Catawba Club Note. The Corporate
General Partner is currently evaluating its options to collect upon this
judgment.
During the nine months ended September 30, 2003, the Partnership received
approximately $743,000 representing full repayment of the Quail Run note
receivable. This payment occurred as a result of the refinancing that occurred
at Quail Run in November 2002. Of the payment received, approximately $454,000
and $289,000 was attributable to the note receivable and accrued interest,
respectively. This payment satisfied in full the obligation related to the note.
Note C - Transactions with Affiliated Parties
An affiliate of the Corporate General Partner charged reimbursements of
accountable administrative expenses amounting to approximately $21,000 and
$16,000 for the nine months ended September 30, 2004 and 2003, respectively,
which is included in general and administrative expenses. At September 30, 2004,
the Partnership owed approximately $10,000 in reimbursements.
Note D - Contingencies
The Partnership is unaware of any pending or outstanding litigation matters
involving itself that are not of a routine nature arising in the ordinary course
of business.
As previously disclosed, the Central Regional Office of the United States
Securities and Exchange Commission (the "SEC") is conducting a formal
investigation relating to certain matters. Although the staff of the SEC is not
limited in the areas that it may investigate, AIMCO believes the areas of
investigation include AIMCO's miscalculated monthly net rental income figures in
third quarter 2003, forecasted guidance, accounts payable, rent concessions,
vendor rebates, capitalization of payroll and certain other costs, and tax
credit transactions. AIMCO is cooperating fully. AIMCO is not able to predict
when the matter will be resolved. AIMCO does not believe that the ultimate
outcome will have a material adverse effect on its financial condition or
results of operations. Similarly, the Corporate General Partner does not believe
that the ultimate outcome will have a material adverse effect on the
Partnership's consolidated financial condition or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; litigation, including costs associated with
prosecuting and defending claims and any adverse outcomes, and possible
environmental liabilities. Readers should carefully review the Partnership's
financial statements and the notes thereto, as well as the risk factors
described in the documents the Partnership files from time to time with the
Securities and Exchange Commission.
Results of Operations
The Partnership's net loss for the three and nine months ended September 30,
2004 was approximately $10,000 and $41,000 compared to a net loss of
approximately $19,000 and $35,000 for the three and nine months ended September
30, 2003, respectively. The decrease in net loss for the three month period is
due to a decrease in total expenses. The increase in net loss for the nine month
period is attributable to a decrease in total revenues partially offset by a
decrease in total expenses. The decrease in total revenues is attributable to
interest income recognized on the Quail Run note receivable during the nine
months ended September 30, 2003. The decrease in total expenses for both periods
is due to a decrease in the expected costs of the annual audit. The Partnership
currently holds a note from an unrelated partnership, which requires payments
from excess cash flow after payments on the mortgage of the unrelated
partnership (see discussion below).
Liquidity and Capital Resources
At September 30, 2004, the Partnership held cash and cash equivalents of
approximately $46,000 compared to approximately $119,000 at September 30, 2003.
Cash and cash equivalents decreased approximately $32,000 from December 31,
2003. The decrease is due to cash used in operating activities. The Partnership
invests its working capital reserves in interest bearing accounts.
The Corporate General Partner monitors developments in the area of legal and
regulatory compliance. For example, the Sarbanes-Oxley Act of 2002 mandates or
suggests additional compliance measures with regard to governance, disclosure,
audit and other areas. In light of these changes, the Partnership expects that
it will incur higher expenses related to compliance, including increased legal
and audit fees.
The Partnership holds a note receivable (the "Catawba Club Note") at September
30, 2004, totaling approximately $413,000 with approximately $615,000 of related
accrued interest, which matured November 1, 1997, and is fully reserved. During
the year ended December 31, 2000, the first and second mortgages encumbering
Catawba Club were replaced with a new first mortgage. However, after payment of
transaction costs and establishing a repair escrow, as required by the lender,
there were no proceeds available for a payment on the Catawba Club Note. The
note was in default at September 30, 2004. The Partnership has obtained a
default judgment with respect to the note. The Corporate General Partner is
currently evaluating its options to collect upon this judgment. Payments on the
note are restricted to excess cash flow after payment on the first mortgage. No
payments on the note were received during the nine months ended September 30,
2004 and 2003, respectively.
During the nine months ended September 30, 2003, the Partnership received
approximately $743,000 representing full repayment of the Quail Run note
receivable. This payment occurred as a result of the refinancing that occurred
at Quail Run in November 2002. Of the payment received, approximately $454,000
and $289,000 was attributable to the note receivable and accrued interest,
respectively. This payment satisfied in full the obligation related to the note.
The Partnership distributed the following amounts during the nine months ended
September 30, 2004 and 2003 (in thousands, except per unit data):
Nine Months Per Nine Months Per
Ended Limited Ended Limited
September 30, Partnership September 30, Partnership
2004 Unit 2003 Unit
Note
Repayments (1) $ -- $ -- $ 618 $ 49.35
(1) Proceeds from note repayments from Quail Run during 2003.
The Partnership's cash available for distribution is reviewed on a monthly
basis. Future cash distributions will depend on the levels of net cash generated
from the collection of notes receivable and the availability of cash reserves.
There can be no assurance, however, that the Partnership will generate
sufficient funds from collection of the remaining note receivable to permit
distributions to its partners during the remainder of 2004 or subsequent
periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 4,059.01 limited partnership units
(the "Units") in the Partnership representing 32.73% of the outstanding Units at
September 30, 2004. A number of these Units were acquired pursuant to tender
offers made by AIMCO or its affiliates. It is possible that AIMCO or its
affiliates will acquire additional units of limited partnership interest in the
Partnership in exchange for cash or a combination of cash and units in AIMCO
Properties, L.P., the operating partnership of AIMCO, either through private
purchases or tender offers. Under the Partnership Agreement, unitholders holding
a majority of the Units are entitled to take action with respect to a variety of
matters which would include voting on certain amendments to the Partnership
Agreement and voting to remove the Corporate General Partner. Although the
Corporate General Partner owes fiduciary duties to the limited partners of the
Partnership, the Corporate General Partner also owes fiduciary duties to AIMCO
as its sole stockholder. As a result, the duties of the Corporate General
Partner, as corporate general partner, to the Partnership and its limited
partners may come into conflict with the duties of the Corporate General Partner
to AIMCO as its sole stockholder.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Corporate General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Corporate General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
See Exhibit Index Attached.
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.
JACQUES-MILLER INCOME FUND, L.P. - II
By: Jacques-Miller, Inc
Corporate General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: November 12, 2004
EXHIBIT INDEX
Exhibit
3 Partnership Agreement is incorporated by reference to Exhibit
A of the Prospectus contained in the Registrant's Registration
Statement (2-99745) as filed with the Commission pursuant to
Rule 424(b) under the Act.
4 Form of Certificate representing interests in the Registrant.
(Exhibit 4 to Registration Statement on Form S-ii dated
October 16, 1985, Registration Number 2-99745 is incorporated
herein by reference).
10A Promissory Note dated July 20, 1990 in the amount of
$476,000.00 payable to the Registrant executed by Balanced
Holding Partners, L.P. (Filed as Exhibit 10A to Form 10K for
the year ended December 30, 1990, and incorporated herein by
reference.)
10B Settlement Agreement dated July 25, 1991 between
Jacques-Miller Income Fund L.P. II and Balanced Holdings
Partners, L.P., Jacques-Miller, Inc., and Jacques-Miller
Mortgage, Inc. of Tennessee. (Filed as Exhibit 10B to Form
10K for the year ended December 31, 1991, and incorporated
herein by reference.)
10C Advisory Agreement, dated December 30, 1991, between
Jacque-Miller Income Fund L.P. II and Insignia GP Corporation.
(Filed as Exhibit 10C to Form 10K for the year ended December
31, 1991, and incorporated herein by reference.)
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Jacques-Miller
Income Fund, L.P.-II;
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 small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
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
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(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 small business issuer'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 small business
issuer's internal control over financial reporting.
Date: November 12, 2004
/s/Martha L. Long
Martha L. Long
Senior Vice President of
Jacques-Miller, Inc., equivalent of
the chief executive officer of the
Partnership
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Jacques-Miller
Income Fund, L.P.-II;
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. The small business issuer's other certifying officer(s) and I are
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 have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
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
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(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 small business issuer'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 small business
issuer's internal control over financial reporting.
Date: November 12, 2004
/s/Stephen B. Waters
Stephen B. Waters
Vice President of Jacques-Miller,
Inc., equivalent of the chief
financial officer of the Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Jacques Miller Income
Fund, L.P. II (the "Partnership"), for the quarterly period ended September 30,
2004 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), Martha L. Long, as the equivalent of the chief executive officer
of the Partnership, and Stephen B. Waters, as the equivalent of the chief
financial officer of the Partnership, each hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:
(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.
/s/Martha L. Long
Name: Martha L. Long
Date: November 12, 2004
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 12, 2004
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.