UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 2008
[ ] 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.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3368726
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3650 S. VIRGINIA ST. UNIT K2
RENO, NEVADA 89502
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(Address of principal (Zip code)
executive offices)
Issuer's telephone number: (775) 825-3355
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(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 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 [ ]
Accelerated filer Yes [ ] No [ ]
Non-accelerated filer (Do not check if a smaller reporting company) Yes [ ] No
[ ]
Smaller reporting company Yes [X] No [ ]
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BIGGEST LITTLE INVESTMENTS L.P.
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2008 2007
(UNAUDITED)
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ASSETS
Real estate, net............................ $12,704,196 $13,082,125
Cash and cash equivalents................... 9,349,951 8,739,802
Receivables................................. 9,679 22,613
Prepaid expense............................. 11,860 2,027
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Total assets............................. $22,075,686 $21,846,567
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LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable, accrued expenses and
unclaimed property..................... $ 42,674 $ 73,417
Rent prepaid............................. 15,484 4,374
Tenant deposits.......................... 22,387 35,219
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Total liabilities........................... 80,545 113,010
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Commitments and contingencies
Partners' equity
Limited partners' equity (180,937 units
issued and outstanding at 9/30/08 and
12/31/07).............................. 21,432,424 21,177,380
General partner's equity................. 562,717 556,177
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Total partners' equity...................... 21,995,141 21,733,557
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Total liabilities and partners' equity........ $22,075,686 $21,846,567
=========== ===========
The accompanying Notes to the Financial Statements are an integral part of
these statements.
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BIGGEST LITTLE INVESTMENTS L.P.
STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- --------------------------
2008 2007 2008 2007
------------- ------------- ------------ -------------
Revenues
Rental income......................... $ 319,567 $ 484,250 $ 1,071,605 $ 1,252,560
Interest income....................... 53,133 110,585 181,345 317,777
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Total revenues..................... 372,700 594,835 1,252,950 1,570,337
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Costs and expenses
Operating expenses.................... 146,914 168,841 430,758 415,711
General and administrative............ 31,099 14,385 113,595 124,872
Depreciation.......................... 125,976 116,635 377,929 377,759
Management fee........................ 19,442 32,134 69,084 84,328
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Total costs and expenses........... 323,431 331,995 991,366 1,002,670
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Net income............................ $ 49,269 262,840 $ 261,584 $ 567,667
============= ============= ============ =============
Net income attributable to:
Limited partners...................... $ 48,037 $ 256,269 $ 255,044 $ 553,475
General partner....................... 1,232 6,571 6,540 14,192
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$ 49,269 $ 262,840 $ 261,584 $ 567,667
============= ============= ============ =============
Net income per unit of limited
partnership interest (180,937 weighted
average units outstanding for the
three and nine months ended September
30, 2008 and 2007..................... $ 0.27 $ 1.42 $ 1.41 $ 3.06
============= ============= ============ =============
The accompanying Notes to the Financial Statements are an integral part of
these statements.
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BIGGEST LITTLE INVESTMENTS L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
----------------------------
September 30, September 30,
2008 2007
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Cash flows from operating activities
Net income....................................... $ 261,584 $ 567,667
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ............................... 377,929 377,759
Loss due to vandalism....................... - 10,000
Decrease in tenant receivables.............. 12,934 6,874
Increase in prepaid expense................. (9,833) (8,106)
Decrease in accounts payable, accrued
expenses and other liabilities............. (32,465) (1,230)
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Net cash provided by operating activities.... 610,149 952,964
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Cash flows from investing activities
Cash received from insurance for claims
settlement................................. - 208,595
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Cash used in investing activities............ - 208,595
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Net increase in cash and cash equivalents........ 610,149 1,161,559
Cash and cash equivalents, beginning of period... 8,739,802 7,264,486
----------- -----------
Cash and cash equivalents, end of period......... $ 9,349,951 $ 8,426,045
=========== ===========
The accompanying Notes to the Financial Statements are an integral part of
these statements.
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BIGGEST LITTLE INVESTMENTS L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL INFORMATION
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-KSB for the year ended December 31,
2007. 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, 2007, was derived from
audited financial statements at such date.
The results of operations for the three and nine months ended September
30, 2008 and 2007 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 historical cost, less accumulated depreciation.
Since acquisition, property has been depreciated 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 Statement of Financial Accounting Standard ("SFAS")
No. 144, "Accounting for the Impairment and Disposal of Long-Lived Assets,"
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 September 30, 2008, 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.
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
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. The Partnership currently does not believe a reserve for
bad debt is appropriate.
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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. Substantially all of the Partnership's
cash and cash equivalents are held at two financial institutions.
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 and money
market accounts. 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.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate their fair values due to the
short-term maturity of these instruments.
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 weighted average
number of units outstanding (180,937 for the three and nine months ended
September 30, 2008 and 2007) during the period then ended.
Income Taxes
No provisions have been made for federal, state and local 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.
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.
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.
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Recently Issued Accounting Standards
In March 2008, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 161, Disclosures about
Derivative Instruments and Hedging Activities - an amendment of FASB Statement
No. 133 ("SFAS 161"). SFAS 161 seeks to improve financial reporting of
derivative instruments and hedging activities by requiring enhanced
disclosures regarding the impact on financial position, financial performance,
and cash flows. SFAS 161 is effective for fiscal years and interim periods
beginning after November 15, 2008. As the Partnership does not currently, nor
does it plan to engage in transactions involving derivative instruments or
hedging activities, the adoption of SFAS 161 is not expected to have an impact
on the financial statements.
In December 2007, the FASB issued Statement of Financial Accounting
Standards No. 141 (revised 2007), "Business Combinations" ("FAS 141R"). The
standard establishes principles and requirements for how the acquirer in a
business combination recognizes and measures in its financial statements the
fair value of identifiable assets acquired, the liabilities assumed and any
noncontrolling interest in the acquiree at the acquisition date. The standard
also establishes what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. The standard is effective for fiscal years beginning after
December 15, 2008. We are currently evaluating the impact of adopting FAS 141R
on our consolidated results of operations and financial condition and plan to
adopt it as required in the first quarter of fiscal year 2009, if applicable
to the Partnership at such time.
In December 2007, the FASB issued SFAS 160, "Noncontrolling Interests in
Consolidated Financial Statements" ("FAS 160"), an amendment of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements." The standard
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. Minority
interests will be recharacterized as noncontrolling interests and will be
reported as a component of equity separate from the parent's equity, and
purchases or sales of equity interests that do not result in a change in
control will be accounted for as equity transactions. In addition, net income
attributable to the noncontrolling interest will be included in consolidated
net income on the face of the income statement and upon a loss of control, the
interest sold, as well as any interest retained, will be recorded at fair
value with any gain or loss recognized in earnings. This pronouncement is
effective for fiscal years beginning after December 15, 2008. We are currently
evaluating the impact of adopting FAS 160 on our consolidated results of
operations and financial condition and plan to adopt it as required in the
first quarter of fiscal year 2009, if applicable to the Partnership at such
time.
NOTE 3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
Effective October 1, 2008, Mr. Ben Farahi, the manager of the
Partnership's general partner but acting in his individual capacity, purchased
20 Units from a limited partner in an open market transaction.
Effective July 1, 2008, Mr. Farahi, in his individual capacity, purchased
100 Units from a limited partner in an open market transaction.
On September 23, 2008, articles of dissolution were filed with the
Secretary of State of the State of Nevada with respect to Western Real Estate
Investments, LLC, a Nevada limited liability company and an affiliate of the
General Partner ("Western"), and such dissolution was effective as of
September 30, 2008. All three members of Western, John Farahi, Bob Farahi and
Ben Farahi consented to the dissolution and all signed the dissolution
documents. As a result of the dissolution, Western's 4,596 Units were equally
distributed to John Farahi, Bob Farahi and Ben Farahi based on
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each member's one-third ownership of Western. Each member received 1,532 Units
from the transfer, which was made effective October 1, 2008.
The Partnership demolished and rebuilt some parts of the Sierra Property
and may remodel, demolish and renovate other parts, of the Sierra Property
(the "Renovation") in an attempt to improve the financial viability of the
Sierra Property. 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 a monthly rent of $25,000, subject to increases every 60 months based on
the Consumer Price Index. 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.
As part of the driveway lease, Monarch Casino & Resort, Inc. ("Monarch"),
the owner of the Adjacent Property, has reserved the gaming rights associated
with the Sierra Property for the initial five-year term, or until September
30, 2009. Before the end of the initial five-year term, Monarch may purchase
an extension of the gaming restriction within the Sierra Property at a price
to be determined based on an MAI Appraisal. Monarch has indicated that it will
likely purchase such extension. The Partnership believes that such extension
has substantial value and will be one of the determining factors in how the
Sierra Property will be redeveloped. The Partnership continues to market the
Sierra Property to potential tenants.
In addition to the driveway lease, the Adjacent Property is currently
leasing approximately 3,400 square feet of office space at the Sierra Property
and is paying approximately $4,400 per month in rent plus common area expenses
for such space. The Adjacent Property had given the Partnership a notice to
vacate this office space by June 30, 2008, but subsequently requested an
extension; the Partnership has granted the request for extension and the
Adjacent Property has notified the Partnership that it will vacate this space
no later than December 31, 2008.
Effective August 1, 2008, the Adjacent Property cancelled its lease of a
sign space at the Sierra Property, which it had been leasing for $1,060 per
month.
In June 2007, the Adjacent Property began leasing a portion of the
parking lot at the Sierra Property consisting of a total of approximately 276
parking spaces for a monthly fee of $25,000. Effective November 4, 2007, this
month-to-month lease was amended reducing the number of parking spaces leased
to 125 and reducing the monthly rent to $17,500. The Adjacent Property
cancelled its lease for these parking spaces effective June 30, 2008.
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 $69,084 and $84,328 for the nine months ended September 30,
2008 and 2007, 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
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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 income of $6,540 for the nine months ended September 30, 2008 and
income of $14,192 for the nine months ended September 30, 2007.
Also pursuant to the Amended LP Agreement, the General Partner shall
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 services rendered; these include acquisition fees in an amount
equal to 2% of the price of such acquired fixed assets, refinancing fees equal
to the lesser of 1% of the refinancing proceeds of the related fixed asset or
fees which are competitive for similar services in the geographical area where
the fixed asset is located, development fees equal to 10% of the total
development cost, construction fees equal to 10% of the total cost of
development of a fixed asset of the Partnership, and guarantee fees for any
guarantees the General Partner may provide in order for the Partnership to
secure indebtedness for a fee that is competitive with guarantee fees of
similar nature. The General Partner may also be compensated for property
management services in amounts to be equal to the lesser of (a) fees which are
competitive for similar services in the same geographical area or (b)(i) 5% of
the gross revenues with respect to residential properties or (ii) 6% of
revenues with respect to industrial and commercial properties or (iii) 1% of
gross revenues with respect to industrial and commercial properties which are
leased on a long-term net basis (except for a one-time initial leasing fee of
3% of gross revenues). The General Partner may also receive real estate
commissions from the Partnership for real estate brokerage services for
properties acquired upon foreclosure of mortgage loans or fixed assets of the
Partnership, the fees for which shall not exceed the lesser of (i) a
percentage of the gross sales price of a fixed asset of the Partnership equal
to one-half of brokerage fees which are customary, competitive and reasonable
or (ii) 3% of the gross sales price of such fixed asset. Insurance commissions
may also be paid to insurance agencies affiliated with the General Partner so
long as conditions to the General Partner's purchase of insurance brokerage
services from an affiliate are met. The General Partner did not earn any of
the above fees for the fiscal quarters ended September 30, 2008 and 2007.
NOTE 4. REAL ESTATE
The Partnership's real estate is summarized as follows:
September 30, 2008 December 31, 2007
------------------ -----------------
Land........................... $ 3,198,574 $ 3,198,574
Building and improvements...... 12,069,070 12,387,906
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15,267,644 15,586,480
Impairment..................... - (318,836)
------------------ -----------------
15,267,644 15,267,644
Accumulated depreciation....... (2,563,448) (2,185,519)
------------------ -----------------
12,704,196 13,082,125
================== =================
The Sierra Property was acquired from the former owner in lieu of
foreclosure on a mortgage note receivable to the Partnership issued by the
former owner, which was collateralized by such fixed assets.
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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, the Partnership's most likely plan
to totally redevelop the Sierra Property for a higher use, as detailed in the
filings with the Securities and Exchange Commission 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.
This item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.
Recent Events
Effective October 1, 2008, Mr. Ben Farahi, the manager of the
Partnership's general partner but acting in his individual capacity, purchased
20 Units from a limited partner in an open market transaction.
Effective July 1, 2008, Mr. Farahi, in his individual capacity, purchased
100 Units from a limited partner in an open market transaction.
On September 23, 2008, articles of dissolution were filed with the
Secretary of State of the State of Nevada with respect to Western Real Estate
Investments, LLC, a Nevada limited liability company and an affiliate of the
General Partner ("Western"), and such dissolution was effective as of
September 30, 2008. All three members of Western, John Farahi, Bob Farahi and
Ben Farahi consented to the dissolution and all signed the dissolution
documents. As a result of the dissolution, Western's 4,596 Units were equally
distributed to John Farahi, Bob Farahi and Ben Farahi based on each member's
one-third ownership of Western. Each member received 1,532 Units from the
transfer, which was made effective on October 1, 2008.
Liquidity and Capital Resources
The Partnership's level of liquidity based on cash and cash equivalents
increased by $610,149 to $9,349,951 during the nine months ended September 30,
2008 as compared to December 31, 2007. The increase was due entirely to cash
provided by operating activities. 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. The Partnership does not
anticipate making any distributions of net cash provided by operating
activities in the near future because such cash will be needed for the
potential redevelopment of the Sierra Property, as well as for other possible
investments.
None of the recently issued accounting standards had an effect on the
Partnership's financial statements.
Real Estate Market
The Partnership's sole fixed asset as of September 30, 2008, is the
Sierra Property, which currently has a vacancy rate of approximately 78% based
on leasable square footage. There has been substantial development of
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retail space in the Reno area over the past few years, which has created
substantial competition 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 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.
It is the General Partner's intention to try to maximize the long-term
value of the Partnership's property, even if it means sacrificing some short-
term income.
Results of Operations
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER
30, 2008 AND 2007.
Net income decreased by $213,571 to $49,269 for the three-month period
ended September 30, 2008, as compared to the same period in 2007. Revenues
decreased by $222,135 to $372,700 for the quarter ended September 30, 2008 as
compared to the same period in 2007. The decrease in revenues is mainly due to
decreased rental income during the third quarter of 2008 as compared to the
same period in the prior year due to fewer tenants at the Sierra Property, as
well as a decrease in interest income from lower interest rates.
Costs and expenses decreased by $8,564 for the three-month period ended
September 30, 2008, as compared to the same period in the prior year. The
decrease was mainly due to decreases in operating and management expenses,
partially offset by increased general and administrative and depreciation
expense. Operating expenses decreased primarily due to lower payroll, utility
and overall property maintenance expenses during the third quarter of 2008 as
compared to the same period of the previous year. Management expense is
determined based on a percentage of revenue earned and has decreased due to
the lower revenues. General and administrative expenses increased primarily as
a result of increased payroll and audit expenses. Depreciation expense was
lower in the third quarter of 2007 as a result of an entry made during the
third quarter of 2007 to correct an overstatement in depreciation.
COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30,
2008 AND 2007.
Net income decreased by $306,083 to $261,584 for the nine-month period
ended September 30, 2008, as compared to the same period in 2007. Revenues
decreased by $317,387 to $1,252,950 for the nine-month period ended September
30, 2008 as compared to the same period in 2007. The decrease in revenues is
mainly due to decreased rental income during the first nine months of 2008 as
compared to the same period in the prior year due to fewer tenants at the
Sierra Property, as well as a decrease in interest income from lower interest
rates.
Costs and expenses decreased by $11,304 for the nine-month period ended
September 30, 2008, as compared to the same period in the prior year. The
decrease was mainly due to decreases in general and administrative expenses,
and management expense partially offset by an increase in operating expenses.
General and administrative expenses decreased mainly due to decreases in
legal, accounting and other professional services fees during the first nine
months of 2008 as compared to the same period in the prior year. Management
expenses decreased due to the decreases in revenues. Operating expenses
increased mainly due to higher commissions, insurance, property taxes,
utilities and general maintenance costs associated with the Sierra Property,
partially offset by lower payroll expense. Depreciation expense remained
relatively unchanged.
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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 the potential renovation and/or redevelopment.
Critical Accounting Policies
The Partnership's only significant critical accounting policy relates to
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.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is not subject to market risk as its cash and cash
equivalents are invested in short term money market mutual funds. The
Partnership has no loans outstanding.
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 Securities Exchange Act of 1934, as amended ("Exchange
Act")is recorded, processed, summarized and reported,within the time periods
specified in the Securities and Exchange Commission'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 our management,including our Principal
Executive Officer, as appropriate to allow timely decisions regarding required
disclosure.
Based on an evaluation under the supervision and with the participation
of our management, our principal executive officer and principal financial
officer have concluded that our disclosure controls and procedures as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of
September 30, 2008 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
Securities and Exchange
Commission rules and forms and (ii) accumulated and communicated to our
management, including our principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required
disclosure.
There were no changes in our internal controls that could materially
affect the disclosure controls and procedures subsequent to the date of their
evaluation, nor were there any significant deficiencies or material weaknesses
in our internal controls.
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS
Exhibits required by Item 601 of Regulation S-K are filed herewith and
are listed in the attached exhibit index.
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: 11/12/2008
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BIGGEST LITTLE INVESTMENTS, L.P.
FORM 10-Q SEPTEMBER 30, 2008
Exhibit Index
Exhibit Page No.
- ------- --------
31.1 Certification pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002. 15
32 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. 16
-14-
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 quarterly 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
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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 small business issuer 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
small business issuer is made known to me, particularly during the
period in which this quarterly report is being prepared:
b) evaluated the effectiveness of the small business issuer'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 quarterly
report based on such evaluation; and
c) disclosed in this quarterly 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 year that has
materially affected, or is reasonably likely to materially affect,
the small business issuer'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 small business issuer's auditors and
the audit committee of 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 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 small business
issuer's internal control over financial reporting.
/s/ BEN FARAHI
--------------
Ben Farahi
Manager of the General Partner
Date: 11/12/08
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EXHIBIT 32
BIGGEST LITTLE INVESTMENTS L.P.
FORM 10-Q SEPTEMBER 30, 2008
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 September
30, 2008, 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: November 12, 2008
/s/ BEN FARAHI
--------------
Ben Farahi
Manager of the General Partner
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