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 March 31, 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
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(Address of principal (Zip code)
executive offices)
(775) 825-3355
-----------------------------
Registrant's telephone number
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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 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
MARCH 31, DECEMBER 31,
2013 2012
(UNAUDITED)
------------- ------------
ASSETS
Current Assets
Cash and cash equivalents................... $ 9,510,379 $10,069,125
Short-term investments - CDs................ 249,970 249,970
Trade and other receivables, net............ 10,503 8,301
Available-for-sale securities............... 4,176,507 3,021,934
Prepaid expense............................. 40,015 352
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Total Current Assets...................... 13,987,374 13,349,682
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Long-Term Assets
Property, plant and equipment, net.......... 10,721,555 10,824,798
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Total Long-Term Assets.................... 10,721,555 10,824,798
----------- -----------
Total Assets............................. $24,708,929 $24,174,480
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable, prepaid rent, accrued
expenses and unclaimed property........ $ 45,085 $ 37,749
Related party accounts payable........... 3,904 85,601
Tenant deposits.......................... 22,599 23,699
----------- -----------
Total Liabilities........................... 71,588 147,049
----------- -----------
Commitments and Contingencies
Partners' Equity
Limited partners' equity (168,345 units
issued and outstanding at 3/31/13;
170,390 at 12/31/12)................... 23,295,284 23,283,532
Prepaid redemption....................... (2,398) (196,025)
Accumulated other comprehensive income... 700,485 301,714
General partner's equity................. 643,970 638,210
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Total Partners' Equity...................... 24,637,341 24,027,431
----------- -----------
Total Liabilities and Partners' Equity........ $24,708,929 $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
--------------------------
MARCH 31, MARCH 31,
2013 2012
------------ ------------
Revenues
Rental revenues................................. $ 87,234 $ 94,418
Related party rental revenues................... 106,148 110,323
Other revenues.................................. 5,979 12,627
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Total revenues............................... 199,361 217,368
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Costs and Expenses
Operating expenses.............................. 113,133 117,046
General and administrative...................... 39,205 51,928
Depreciation.................................... 103,243 96,764
Management fees................................. 11,781 16,602
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Total costs and expenses..................... 267,362 282,340
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Loss from operations......................... $ (68,001) $ (64,972)
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Other Income and Expenses
Interest income................................. 5,269 127,228
Gain on sale of securities...................... 293,149 15,971
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Total other income........................... 298,418 143,199
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Net income................................... 230,417 78,227
============ ============
Other Comprehensive Income
Unrealized gain from securities................. 398,771 16,644
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Comprehensive income......................... 629,188 94,871
============ ============
Net Income Attributable To:
Limited partners................................ $ 224,657 $ 76,271
General partner................................. 5,760 1,956
------------ ------------
$ 230,417 $ 78,227
============ ============
Net income per unit of limited partnership
interest (168,345 and 170,390 weighted average
units outstanding for the three months ended
March 31, 2013 and March 31, 2012, respectively) $ 1.33 $ 0.45
============ ============
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 THREE MONTHS ENDED
----------------------------
March 31, March 31,
2013 2012
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Cash flows from operating activities:
Net income.................................... $ 230,417 $ 78,227
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain from sale of securities................ (293,149) (15,971)
Depreciation ............................... 103,243 96,764
Changes in assets and liabilities:
Increase in receivables..................... (2,202) (13,175)
(Increase) decrease in prepaid expense...... (39,663) 554
(Decrease) increase in accounts payable,
accrued expenses, and other liabilities.... 6,236 75,704
Decrease in related party payables.......... (81,697) -
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Net cash (used in) provided by operating
activities................................. (76,815) 222,103
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Cash flows from investing activities:
Cash used for the purchase of securities...... (2,449,035) (262,620)
Cash received from the sale of securities..... 1,986,381 215,084
Cash received from Grand Falls note receivable - 45,000
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Net cash (used in) provided by investing
activities............................... (462,654) (2,536)
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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.................... (2,398) (10,220)
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Net cash used in financing activities...... (19,277) (103,890)
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Net (decrease) increase in cash and cash
equivalents.................................. (558,746) 115,677
Cash and cash equivalents, beginning of period.. 10,069,125 5,646,046
------------- -------------
Cash and cash equivalents, end of period........ $ 9,510,379 $ 5,761,723
============= =============
Non-Cash
Retired prepaid redemption................ $ 196,025 $ 246,280
Unrealized gain/(loss) on securities...... $ 398,771 $ 427,133
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, 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 months ended March 31, 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 March 31, 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.
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
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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 March 31, 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
March 31, 2013 or March 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 March 31, 2013, 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;
-6-
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
March 31, 2013. 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 three months ended March 31, 2013, and
170,390 for the three months ended March 31, 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. As of March 31, 2013, an aggregate of
12,358 Units had been repurchased by the Partnership at an approximate average
price of $102.98 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.
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.
-7-
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 March 31, 2013:
Fair Value Measurement
---------------------------------
Level 1 Level 2 Level 3 Total
---------- --------- --------- ----------
Stock Securities $4,866,200 $ - $ - $4,866,200
Short Option Securities (689,693) - - (689,693)
Short-Term Investments - CDs 249,970 - - 249,970
---------- --------- --------- ----------
Total $4,426,477 $ - $ - $4,426,477
========== ========= ========= ==========
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 of $700,485 as of March 31, 2013,
and had an unrealized gain of $16,644 as of March 31, 2012. During the three
months ended March 31, 2013 and 2012, the Partnership disposed of securities
resulting in realized gains of $293,149 and $15,971, respectively, using the
first-in, first-out method.
NOTE 4. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
In September 2012, the Partnership began rebuilding the facade of the
Sierra Property's building that was impacted by the Widening Project (as
defined in "Note 5. Real Estate" below). During the quarter ended March 31,
2013, the Partnership paid approximately $50,078 to Pelican, LLC, an affiliate
of the General Partner, for rebuilding the facade. The rebuilding project was
completed during the fourth quarter of 2012, and the Partnership funded the
cost of the rebuilding project with the compensation it had received from the
Regional Transportation Commission (see "NOTE 5. REAL ESTATE").
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.
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
-8-
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 12.0% of Monarch's outstanding common stock as of March
31, 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 $11,781 and $16,602 for the three months ended March 31, 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 $5,760 for the three months ended March 31, 2013 and
net income of $1,956 for the three months ended March 31, 2012.
On April 9, 2013, the Partnership issued a cash distribution of $1.70 per
unit on the outstanding limited partnership interests 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.
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 other services rendered as well. The General Partner did not
earn any mortgage placement or other fees during the three months ended March
31, 2013 or 2012.
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NOTE 5. REAL ESTATE
The Partnership's real estate is summarized as follows:
March 31, 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........ (4,428,606) (4,325,363)
------------------ -----------------
$ 10,721,555 $ 10,824,798
================== =================
On June 8, 2011, the Partnership reached final agreement (the
"Agreement") with and sold to the Regional Transportation Commission (the
"RTC") a portion of the Sierra Property for the purpose of widening a section
of Moana Lane, a main thoroughfare in Reno, Nevada on which the Sierra
Property is located (the "Widening Project"). The Widening Project was
completed in November 2012 and Moana Lane was expanded from four to six lanes.
Under the terms of the Agreement, the RTC paid the Partnership $2,731,787
($2,743,730 less $11,943 for legal and administrative expenses incurred with
the sale) for causing demolition of up to 15,800 square feet of the Sierra
Property's buildings, the RTC's acquisition of 25,306 square feet of the
Sierra Property's land and 10,026 square feet of utility easement. The RTC
paid the Partnership an additional $346,700 for relocation and demolition
costs related to the Sierra Property's buildings and improvements. As a result
of the Agreement, the Partnership allocated approximately $117,483 of the
RTC's payments to the Sierra Property's land book value and placed
approximately $542,952 ($738,611 less accumulated depreciation of $195,659)
into suspense for the portion of the Sierra Property's buildings that could be
demolished. In September 2012, the Partnership began rebuilding the facade of
the Sierra Property's building that was impacted by the Widening Project. The
rebuilding project was completed during the fourth quarter of 2012, and the
Partnership funded the cost of the rebuilding project with the compensation it
had received from the RTC. Following the completion of the rebuilding project,
the Partnership removed the $542,952 from suspense and recognized a gain on
condemnation in 2012 for this amount.
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.
-10-
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 April 9, 2013, the Partnership issued a cash distribution of $1.70 per
unit on the outstanding limited partnership interests of the Partnership to
limited partners of record at the close of business on March 28, 2013.
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 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 April 9, 2013, the Partnership issued a cash distribution of $1.70 per
limited partnership unit (each, a "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. As of March 31, 2013, an aggregate of
12,358 Units had been repurchased by the Partnership pursuant to the
Redemption Offer at an approximate average price of $102.98 per Unit.
-11-
Liquidity and Capital Resources
The Partnership's level of liquidity based on cash and cash equivalents
decreased by $558,746 to $9,510,379 during the three months ended March 31,
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 used cash 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 March 31, 2013, was the Sierra
Property, which currently has a vacancy rate of approximately 79% based on
leasable square footage. The ongoing softness in the overall economy 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 MARCH 31,
2013 AND 2012.
The Partnership earned net income of $230,417 for the three-month period
ended March 31, 2013, versus net income of $78,227 for the same period in
2012. The increase was mainly due an increase in realized gain from the sale
of securities, which was partially offset by a decrease in interest income due
to the early repayment of the Grand Falls credit facility. The Partnership
incurred a loss from operations of $68,001 during the three months ended March
31, 2013, as compared to a loss from operations of $64,972 during the
comparable period in 2012. Revenues, not including interest income or gains
from the sale of securities, decreased by $18,007 to $199,361 for the quarter
ended March 31, 2013 as compared to the same period in 2012. The decrease in
revenues is mainly due to fewer tenants at the Sierra Property during the 2013
first quarter as compared to the 2012 first quarter, as well as to lower other
revenues.
Costs and expenses decreased to $267,362 for the three-month period ended
March 31, 2013, as compared to $282,340 for the same period in the prior
year's first quarter mainly due to decreases in operating costs, general and
administrative expenses and management fees. Operating expenses decreased by
$3,913 mainly due to decreases in property taxes, insurance and utility costs
to the Sierra Property that were partially offset by increased costs to
maintain the Sierra Property as well as payroll expenses. General and
administrative expenses decreased by $12,723 primarily due to decreases in
legal and accounting fees. Management fees decreased as a result of the
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reduction in revenues and interest income. Depreciation expense increased by
$6,479. The Partnership also incurred an unrealized gain of $398,771 from its
holdings of various securities during the 2013 first quarter as compared to an
unrealized gain of $16,644 during the 2012 first quarter.
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 three months ended March 31, 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
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 Securities Exchange Act of 1934, as amended (the
"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,
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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 March 31, 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
Securities and Exchange Commission 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 March 31, 2013, that materially
affected, or are reasonably likely to materially affect, the Partnership's
internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
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. As of March 31, 2013, an aggregate of
12,358 Units had been repurchased by the Partnership at an approximate average
price of $102.98 per Unit.
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During the first 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
----------- ------------ ----------- ------------------------
1/1/13 to
1/31/13 41 $103.00 (1)
2/1/13 to
2/28/13 22 $109.00 (1)
3/1/13 to
3/31/13 112 $113.00 (1)
------------ ----------- ------------------------
Total 175 $110.15 (1)
============ =========== ========================
(1) The Partnership will continue to repurchase Units pursuant to the
Redemption Offer as liquidity allows and to the extent that the Partnership's
number of limited partners does not fall below 500.
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: 05/03/2013
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BIGGEST LITTLE INVESTMENTS, L.P.
FORM 10-Q MARCH 31, 2013
Exhibit Index
Exhibit Page No.
------- --------
31.1 Certification pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002. 18
32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. 19
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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: 05/03/2013
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EXHIBIT 32.1
BIGGEST LITTLE INVESTMENTS, L.P.
FORM 10-Q MARCH 31, 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 March 31,
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: May 3, 2013
/s/ BEN FARAHI
--------------
Ben Farahi
Manager of the General Partner
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