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 September 30, 2013
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO______.
Commission File No. 0-16856
BIGGEST LITTLE INVESTMENTS L.P.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3368726
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3702 S. VIRGINIA ST. UNIT G2
RENO, NEVADA 89502
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(Address of principal (Zip code)
executive offices)
(775) 825-3355
-----------------------------
Registrant?s telephone number
----------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of ?large accelerated filer,? ?accelerated filer?
and ?smaller reporting company? in Rule 12b-2 of the Exchange Act.
Large accelerated filer YES [ ] NO [X]
Accelerated filer YES [ ] NO [X]
Non-accelerated filer (Do not check if a smaller reporting company)
YES [ ] NO [X]
Smaller reporting company YES [X] NO [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
PART I ? FINANCIAL INFORMATION
ITEM 1 ? FINANCIAL STATEMENTS
BIGGEST LITTLE INVESTMENTS L.P.
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2013 2012
(UNAUDITED)
------------- ------------
ASSETS
Current Assets
Cash and cash equivalents................... $ 6,130,903 $10,069,125
Restricted cash............................. 67,659 -
Short-term investments ? CDs................ 251,096 249,970
Trade and other receivables, net............ 10,834 8,301
Available-for-sale securities............... 5,902,325 3,021,934
Prepaid expense............................. 2,324 352
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Total Current Assets...................... 12,365,141 13,349,682
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Long-Term Assets
Property, plant and equipment, net.......... 11,123,277 10,824,798
----------- -----------
Total Long-Term Assets.................... 11,123,277 10,824,798
----------- -----------
Total Assets............................. $23,488,418 $24,174,480
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable, prepaid rent, accrued
expenses and unclaimed property........ $ 113,731 $ 37,749
Related party accounts payable........... 152,159 85,601
Tenant deposits.......................... 30,011 23,699
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Total Liabilities........................... 295,901 147,049
----------- -----------
Commitments and Contingencies
Partners' Equity
Limited partners' equity (1,542.23 units
issued and outstanding at 9/30/13;
1,703.90 at 12/31/12).................. 21,682,200 23,283,532
Prepaid redemption....................... (41,496) (196,025)
Accumulated other comprehensive income... 905,752 301,714
General partner?s equity................. 646,061 638,210
----------- -----------
Total Partners' Equity...................... 23,192,517 24,027,431
----------- -----------
Total Liabilities and Partners' Equity........ $23,488,418 $24,174,480
=========== ===========
The accompanying Notes are an integral part of these Financial Statements.
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BIGGEST LITTLE INVESTMENTS L.P.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE
MONTHS ENDED
--------------------------- -------------------
--------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
SEPTEMBER 30,
2013 2012 2013
2012
------------- ------------- ------------- -----
--------
Revenues
Rental revenues........................ $ 121,399 $ 95,311 $ 308,817 $
281,100
Related party rental revenues.......... 121,779 129,109 334,074
349,776
Fee revenues........................... - 58,290 -
58,290
Other revenues......................... 13,762 13,047 37,842
39,060
------------- ------------- ------------- -----
--------
Total Revenues...................... 256,940 295,758 680,733
728,226
------------- ------------- ------------- -----
--------
Costs and Expenses
Operating expenses..................... 128,334 108,309 394,914
343,325
General and administrative............. 95,451 38,238 258,424
124,981
Depreciation........................... 106,466 96,764 312,952
290,292
Management fees........................ 28,109 17,520 186,388
50,089
------------- ------------- ------------- -----
--------
Total Costs and Expenses............ 358,360 260,831 1,152,678
808,687
------------- ------------- ------------- -----
--------
(Loss) Income From Operations.......... (101,420) 34,927 (471,945)
(80,461)
------------- ------------- ------------- -----
--------
Other Income and Expenses
Gain from sale of securities........... 582,856 117,123 1,067,128
137,556
Interest income........................ 3,032 62,762 12,367
317,122
------------- ------------- ------------- -----
--------
Total Other Income................... 585,888 179,885 1,079,495
454,678
------------- ------------- ------------- -----
--------
Net Income............................. $ 484,468 $ 214,812 $ 607,550 $
374,217
============= ============= =============
=============
Other Comprehensive Income
Unrealized gain (loss) from
securities........................... $ (12,925) $ 181,391 $ 604,038 $
300,081
------------- ------------- ------------- -----
--------
Comprehensive Income ................ $ 471,543 $ 396,203 $ 1,211,588 $
674,298
============= ============= =============
=============
Net income attributable to:
Limited partners....................... $ 472,356 $ 209,442 $ 592,361 $
364,862
General partner........................ 12,112 5,370 15,189
9,355
------------- ------------- ------------- -----
--------
$ 484,468 $ 214,812 $ 607,550 $
374,217
============= ============= =============
=============
Net income per unit of limited
partnership interest (1,576.96 and
1,703.90 weighted average units
outstanding for the three months ended
September 30, 2013 and 2012, respectively;
1,635.86 and 1,703.90 for the nine months
ended September 30, 2013 and 2012,
respectively)........................... $ 299.54 $ 122.92 $ 362.11 $
214.13
============= ============= =============
=============
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 NINE MONTHS ENDED
----------------------------
September 30, September 30,
2013 2012
------------- -------------
Cash flows from operating activities:
Net income.................................... $ 607,550 $ 374,217
Adjustments to reconcile net income to
net cash (used in) provided by operating
activities:
Gain from sale of securities................ (1,067,128) (137,556)
Depreciation ............................... 312,952 290,292
Changes in assets and liabilities:
(Increase) decrease in receivables.......... (2,533) 6,897
(Increase) decrease in prepaid expense...... (1,972) 1,977
Increase (decrease) in accounts payable,
accrued expenses, and other liabilities.... 82,294 (73,057)
Increase in short-term investments ? CDs.... (1,126) (1,869)
Increase in related party payables.......... 66,558 -
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Net cash (used in) provided by operating
Activities.................................. (3,405) 460,901
------------- -------------
Cash flows from investing activities:
Cash used for the purchase of securities...... (3,411,040) (360,830)
Cash received from the sale of securities..... 2,201,815 376,970
Cash received from Grand Falls note receivable - 4,455,000
Cash restricted for Popeye?s construction..... (67,659) -
Cash used for Popeye?s construction........... (611,432) -
------------- -------------
Net cash (used in) provided by investing
Activities............................... (1,888,316) 4,471,140
------------- -------------
Cash flows from financing activities:
Cash used for payment of redemption of
limited partnership units.................... (1,711,519) (93,670)
Cash used for prepayment of redemption of
limited partnership units.................... (41,496) (148,233)
Cash used for distribution.................... (293,486) (349,258)
------------- -------------
Net cash used in financing activities...... (2,046,501) (591,161)
------------- -------------
Net (decrease) increase in cash and cash
equivalents................................... (3,938,222) 4,340,880
Cash and cash equivalents, beginning of period.. 10,069,125 5,646,046
------------- -------------
Cash and cash equivalents, end of period........ $ 6,130,903 $ 9,986,926
============= =============
Non-Cash
Retired prepaid redemption................ $ 196,025 $ 246,280
Unrealized gain/loss on securities........ $ 604,038 $ 300,081
The accompanying Notes are an integral part of these Financial Statements.
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BIGGEST LITTLE INVESTMENTS L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL INFORMATION
Pursuant to the rules and regulations of the Securities and Exchange
Commission (the ?SEC?), certain information and footnote disclosure normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America has been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the disclosures made are adequate to make the information not
misleading. The accompanying financial statements, footnotes and discussions
should be read in conjunction with the financial statements, related footnotes
and discussions contained in the Biggest Little Investments, L.P. (the
"Partnership") Annual Report on Form 10-K for the year ended December 31,
2012. The financial information contained herein is unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature. The balance sheet at December 31, 2012, was derived from
audited financial statements at such date.
The results of operations for the three and nine months ended September
30, 2013 and 2012 are not necessarily indicative of the results to be expected
for the full year or for any other period.
On September 6, 2013, the Partnership filed a Form 15 with the SEC
following a 1-for-100 reverse split (the ?Reverse Split?) of the Partnership?s
units of limited partnership interest (the ?Units?) whereby limited partners
owning fewer than 100 Units were cashed out at a rate of $120.00 per pre-split
Unit. The Reverse Split and subsequent cash-out brought the number of limited
partners of the Partnership to below 300, which allowed the Partnership to
file the Form 15 and, thus, terminate the registration of its Units with the
SEC. As a result of this filing, the Partnership will no longer be subject to
reporting obligations under the Securities Exchange Act of 1934, as amended,
following the filing of this Quarterly Report on Form 10-Q for the period
ended September 30, 2013.
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 September 30, 2013, the
Partnership?s only operating asset was the Sierra Marketplace Shopping Center
located in Reno, Nevada (the "Sierra Property") and the Partnership determined
that none of its long-lived assets were impaired as of such date.
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
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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. As of September 30, 2013 and 2012, the Partnership did
not have any reserve for bad debt.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, the Partnership
considers all short-term investments which have original maturities of three
months or less to be cash equivalents. There were no cash equivalents as of
September 30, 2013 or December 31, 2012.
Concentration of Credit Risk
The Partnership maintains cash balances at institutions insured up to
$250,000 by the Federal Deposit Insurance Corporation. Balances in excess of
amounts required for operations are usually invested in savings, money market
accounts and certificates of deposit. Cash balances exceeded these insured
levels during the period. No losses have occurred or are expected due to this
risk.
Revenue Recognition
Rental revenues are based on lease terms and recorded as income when
earned and when they can be reasonably estimated. Rent increases are generally
based on the Consumer Price Index. Leases generally require tenants to
reimburse the Partnership for certain operating expenses applicable to their
leased premises. These costs and reimbursements have been included in
operating expenses and rental income, respectively.
Investments
Investments are classified as trading or available-for-sale.
Trading investments are recorded at fair value with unrealized gains and
losses reflected in the statements of operations. Available-for-sale
investments? unrealized gains and losses are included as a component of
accumulated other comprehensive income in the accompanying statements of
operations and comprehensive income. Interest on investments is recognized as
income when earned. Realized gains and losses on investments are included in
Other Income and Expenses in the accompanying statements of operations and
comprehensive income. As of September 30, 2013 and December 31, 2012, all of
the Partnership?s investments were classified as available-for-sale.
Long-term Notes Receivable
Long-term notes receivable bear interest and are due upon maturity.
Interest income associated with these notes receivable is reflected in the
accompanying statements of operations and comprehensive income under the
caption ?Interest Income.?
-6-
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;
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
September 30, 2013 and December 31, 2012. See ?Note 3. Fair Value
Measurements.?
Net Income Per Unit of Limited Partnership Interest
Net income per Unit is computed based upon the weighted average number of
Units outstanding (1,635.86 for the nine months ended September 30, 2013, and
1,703.90 for the nine months ended September 30, 2012) during the period then
ended.
On August 31, 2009, the Partnership initiated an offer enabling the
Partnership?s limited partners to sell their Units back to the Partnership
(the ?Redemption Offer?). On June 6, 2013, the Redemption Offer was suspended
pending final response from the SEC to a preliminary filing by the Partnership
on Schedule 14C and Schedule 13E-3 whereby the Partnership was seeking to
effect the Reverse Split and subsequent cash-out. On August 8, 2013, the SEC
approved the Schedule 14C and Schedule 13e-3 and the Partnership filed a
definitive information statement that was distributed to all holders of Units,
detailing the final terms of the Reverse Split (see ?Recent Events? under
?ITEM 2. MANAGEMENT?S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS?). The General Partner terminated the Redemption Offer
on August 9, 2013. An aggregate of 12,704 Units were repurchased by the
Partnership pursuant to the Redemption Offer at an approximate average price
of $103.26 per Unit. The Reverse Split took effect on or around September 1,
2013, and the Partnership cashed out 14,122 pre-split Units.
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.
-7-
On an ongoing basis, the Partnership evaluates its estimates, including
those related to bad debts, contingencies, litigation and valuation of the
real estate. The Partnership bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
NOTE 3. FAIR VALUE MEASUREMENTS
The Partnership holds certain financial assets which are required to be
measured at fair value on a recurring basis in accordance with ASC Section
820.
Valuation of Financial Instruments measured on a recurring basis by
hierarchy levels as of September 30, 2013:
Fair Value Measurement
---------------------------------
Level 1 Level 2 Level 3 Total
---------- --------- --------- ----------
Stock Securities $6,785,100 $ - $ - $6,785,100
Short Option Securities (882,775) - - (882,775)
Short-Term Investments ? CDs 251,096 - - 251,096
---------- --------- --------- ----------
Total $6,153,421 $ - $ - $6,153,421
========== ========= ========= ==========
Valuation of Financial Instruments measured on a recurring basis by
hierarchy levels as of December 31, 2012:
Fair Value Measurement
---------------------------------
Level 1 Level 2 Level 3 Total
---------- --------- --------- ----------
Stock Securities $3,529,590 $ - $ - $3,529,590
Short Option Securities (507,656) - - (507,656)
Short-Term Investments ? CDs 249,970 - - 249,970
---------- --------- --------- ----------
Total $3,271,904 $ - $ - $3,271,904
========== ========= ========= ==========
The Partnership had an unrealized gain from securities of $905,752 as of
September 30, 2013, and had an unrealized gain from securities of $301,714 as
of December 31, 2012. During the nine months ended September 30, 2013 and
2012, the Partnership disposed of securities resulting in realized gains of
$1,067,128 and $137,556, respectively, using the first-in, first-out method.
NOTE 4. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
Beginning in April 2007, affiliates of the General Partner began leasing
office space at the Sierra Property and pay monthly rent of $2,408. The
General Partner uses a portion of this office space and participates in such
rent payments.
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
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rent of $25,000, subject to increases every 60 months based on the Consumer
Price Index. Such an increase became effective on September 30, 2009, and the
Adjacent Property now pays monthly rent of approximately $28,400. The Adjacent
Property also uses part of the common area of the Sierra Property and pays its
proportionate share of the common area expense of the Sierra Property. The
Adjacent Property has the option to renew the lease for three five-year terms
and, at the end of the extension periods, has the option to purchase the
leased section of the Sierra Property at a price to be determined based on an
MAI Appraisal.
In addition to the driveway, the Adjacent Property also leases
approximately 6,900 square feet of storage space at the Sierra Property and
pays rent of approximately $3,450 per month for such storage space.
Ben Farahi, the manager of the General Partner, was, until May 26, 2006,
Co-Chairman of the Board, Chief Financial Officer, Secretary, and Treasurer of
Monarch Casino & Resort, Inc. (?Monarch?), the owner of the Adjacent Property.
He owned approximately 11.3% of Monarch?s outstanding common stock as of
September 30, 2013.
Accounting rules define transactions with related parties as transactions
which are not arm?s-length in nature and, therefore, may not represent fair
market value.
Compensation of the General Partner
The General Partner is the manager of the Sierra Property. The General
Partner received $186,388 and $50,089 for the nine months ended September 30,
2013 and 2012, respectively, for such management services; included in these
amounts is three percent of the monthly interest earned on the Partnership?s
cash in savings and money market accounts, which the Partnership began paying
to the General Partner in 2006. Also included in the 2013 amount, is one
percent of the average quarterly asset balance of the Partnership?s securities
portfolio as compensation for the General Partner?s services in connection
with managing the Partnership?s investments in securities. 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 $15,189 for the nine months ended
September 30, 2013 and net income of $9,355 for the nine months ended
September 30, 2012.
On April 9, 2013, the Partnership issued a cash distribution of $1.70 per
Unit on the outstanding limited partnership Units of the Partnership to
limited partners of record at the close of business on March 28, 2013. The
General Partner received $7,337 from this distribution in its capacity as the
general partner.
On May 28, 2013, the Partnership entered into a 20-year lease with a
franchisee of Popeye?s Louisiana Kitchen, a national fast food chain
(?Popeye?s?). The Partnership contributed approximately $611,000 to the
construction cost of a new building that is being occupied by Popeye?s,
including fees, utility improvements and grading. Pursuant to the Amended LP
Agreement, the General Partner earned a development fee in the amount of
$110,360 for its services in connection with securing the Popeye?s lease and
the development of assets related to the Popeye?s lease. This development fee
is included in the $186,388 management fee described above.
Also pursuant to the Amended LP Agreement, the General Partner may
receive mortgage placement fees for services rendered in connection with the
Partnership?s mortgage loans. These fees may not exceed such compensation
customarily charged in arm?s-length transactions by others rendering similar
services as an ongoing public activity in the same geographical location for
-9-
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 nine months ended
September 30, 2013 or 2012.
NOTE 5. REAL ESTATE
The Partnership's real estate is summarized as follows:
September 30, 2013 December 31, 2012
------------------ -----------------
Land............................ $ 3,198,574 $ 3,198,574
Less land taken by condemnation. (117,483) (117,483)
------------------ -----------------
3,081,091 3,081,091
------------------ -----------------
Building and improvements....... 12,680,501 12,069,070
------------------ -----------------
15,761,592 15,150,161
------------------ -----------------
Accumulated depreciation........ (4,638,315) (4,325,363)
------------------ -----------------
$ 11,123,277 $ 10,824,798
================== =================
On May 28, 2013, the Partnership entered into a 20-year lease with a
franchisee of Popeye?s Louisiana Kitchen, a national fast food chain
(?Popeye?s?). The Partnership contributed approximately $611,000 to the
construction cost of a new building that is being occupied by Popeye?s,
including fees, utility improvements and grading that were put into service on
August 9, 2013.
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 was permitted
to be utilized by the Borrower for a portion of the development and
construction costs of the casino (the ?Project?), to pay for fees and expenses
in connection with the Project and for initial working capital needs after
completion of the Project.
On August 14, 2012, the Borrower refinanced the Credit Facility, which
had been fully drawn on, and the Partnership was repaid its entire commitment.
As a result of the refinancing, the Partnership earned approximately $58,300
in call protection fees per the terms of the Credit Facility.
The First Facility was scheduled to mature on December 17, 2014; the
Second Facility was scheduled to mature on December 17, 2015.
The Borrower paid various one-time fees and other loan costs upon the
closing of the Credit Facility.
The Partnership?s General Partner received a mortgage placement fee of
1.5% of the Partnership?s total commitment under the Credit Facility for its
services in connection with the placement of the Credit Facility.
-10-
NOTE 7. SUBSEQUENT EVENTS
None.
ITEM 2 ? MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties. Biggest Little Investments,
L.P. (the "Partnership") could be affected by declining economic conditions as
a result of various factors that affect the real estate business including the
financial condition of tenants, competition, the ability to lease vacant space
within the Sierra Marketplace Shopping Center (the ?Sierra Property?) or renew
existing leases, increased operating costs (including insurance costs), and
the costs associated with, and results of, any Partnership plans to renovate
and reposition the Sierra Property, as detailed in the filings with the
Securities and Exchange Commission (the ?SEC?) made by the Partnership from
time to time. The discussion of the Partnership's liquidity, capital resources
and results of operations, including forward-looking statements pertaining to
such matters, is based on management's current expectations and does not take
into account the effects of any changes to the Partnership's operations
resulting from risks and uncertainties. Accordingly, actual results could
differ materially from those projected in the forward-looking statements.
Maxum LLC is the Partnership?s general partner (the ?General Partner?).
This item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.
Recent Events
On June 6, 2013, the Partnership filed a preliminary information
statement with the SEC seeking to effect a reverse split of the Partnership?s
outstanding limited partnership units (the ?Units?) on the basis of one new
Unit for each 100 issued and outstanding Units, such that limited partners
owning fewer than 100 Units would have their Units cancelled and converted
into the right to receive a cash consideration of $120.00 per pre-split Unit
(the ?Reverse Split?). The Reverse Split was approved by written consent in
lieu of a meeting of limited partners by two limited partners holding 57.1% of
the issued and outstanding Units. Following the effectiveness of the Reverse
Split, the Partnership intended to terminate its reporting obligations under
the Securities Exchange Act of 1934, as amended (the ?Exchange Act?). The
purpose of the Reverse Split was to reduce the number of record holders of the
Partnership?s Units in order for it to become a privately held entity, which
would be owned primarily by its affiliates and would no longer be subject to
the reporting requirements of the federal securities laws. On August 8, 2013,
the SEC approved the Partnership?s filings made with respect to the Reverse
Split and the Partnership filed a definitive information statement with the
SEC. On August 12, 2013, the Partnership mailed information packages setting
forth the details of the Reverse Split to all of its limited partners. The
Reverse Split took effect on or about September 1, 2013. The General Partner
retained the services of a financial advisory firm, Houlihan Capital, LLC
(?Houlihan?), to render an opinion as to the fairness from a financial point
of view of the consideration to be paid to the existing affiliated and
unaffiliated limited partners (including those limited partners who would be
cashed out in conjunction with the Reverse Split and those who would remain
limited partners after the effects of the Reverse Split). The Partnership
terminated the registration of its Units with the SEC by filing a Form 15 with
the SEC on September 6, 2013. As a result of the termination of the
registration of its Units with the SEC, the Partnership will no longer file
periodic reports with the SEC, including Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, following the
filing of this Quarterly Report on Form 10-Q for the period ended September
30, 2013. The definitive information statement on Schedule 14C and statement
on Schedule 13E-3 filed on August 8, 2013 and August 9, 2013, respectively, as
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well as the Form 15 filed on September 6, 2013, are incorporated herein by
reference.
On May 28, 2013, the Partnership entered into a 20-year lease with a
franchisee of Popeye?s Louisiana Kitchen, a national fast food chain
(?Popeye?s?). The Partnership contributed approximately $611,000 to the
construction cost of a new building that is part of the Sierra Property and
that was placed into service on August 9, 2013 for occupation by Popeye?s. The
Partnership will earn total rent of $585,200 during the first five years of
the lease with adjustments based on the Consumer Price Index every five years.
The tenant has two five-year options to extend the lease after the initial 20
years.
On April 9, 2013, the Partnership issued a cash distribution of $1.70 per
Unit on the outstanding Units of the Partnership to limited partners of record
at the close of business on March 28, 2013.
On August 31, 2009, the Partnership initiated an offer enabling the
Partnership?s limited partners to sell their Units back to the Partnership
(the ?Redemption Offer?). The Partnership was permitted to 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 were to be canceled, and to have the status of authorized but
unissued Units. The Partnership's obligation to repurchase any Units under the
Redemption Offer was conditioned upon its having sufficient funds available to
complete the repurchase. The Partnership was entitled to use any operating
funds as the General Partner, in its sole discretion, reserved for the purpose
of funding the Redemption Offer. On August 24, 2012, the Redemption Offer was
extended until August 31, 2013, subject to the right of the General Partner to
suspend, terminate, modify or extend the term of the Redemption Offer in its
sole discretion. On August 9, 2013, the Partnership terminated the Repurchase
Program following the announcement of the Reverse Split. An aggregate of
12,704 Units were repurchased by the Partnership pursuant to the Redemption
Offer at an approximate average price of $103.26 per Unit.
Liquidity and Capital Resources
The Partnership's level of liquidity based on cash and cash equivalents
decreased by $3,938,222 to $6,130,903 during the nine months ended September
30, 2013 as compared to December 31, 2012. The decrease was due to cash used
for the purchase of securities partially offset by cash received from the sale
of securities, cash used to cash out limited partners pursuant to the Reverse
Split, and the construction of the new Popeye?s building. The Partnership also
used cash to pay for a $1.70 per-Unit distribution, for operating activities
and for the payment and prepayment of redemption of Units pursuant to the
Redemption Offer. Cash and cash equivalents are invested in short-term
instruments and are expected to be sufficient to pay administrative expenses
during the term of the Partnership.
Real Estate Market
The Partnership's sole fixed asset as of September 30, 2013, was the
Sierra Property, which currently has a vacancy rate of approximately 77% based
on leasable square footage. The overall softness in the economy in the past
few years has hurt the retail sector, thus making it difficult to locate new
tenants for the Sierra Property. Also, in the past few years, the Sierra
Property has lost all three of its original anchor tenants and has not been
able to locate new anchor tenants with similar lease terms. One of the anchor
tenant spaces was demolished for the purpose of creating in its place a new
driveway (and traffic signal) directly between the Sierra Property and the
hotel casino property next to the Sierra Property (the ?Adjacent Property?),
and the portion of the Sierra Property that was demolished has been leased to
the owner of the Adjacent Property since September 30, 2004, enabling the
Partnership to make up much of the lost rental revenue previously generated by
the space. The other two anchor tenant spaces are vacant.
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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 SEPTEMBER
30, 2013 AND 2012.
The Partnership incurred a loss from operations of $101,420 during the
three months ended September 30, 2013, as compared to income from operations
of $34,927 during the comparable period in 2012 due to a combination of a
decrease in revenues and increases in costs and expense.
Revenues, not including interest income or gains from the sale of
securities, decreased by $38,818 to $256,940 for the quarter ended September
30, 2013 as compared to the same period in 2012. The decrease in revenues is
due to call protection fees earned from the early repayment of the Grand Falls
credit facility during the third quarter of 2012 that the Partnership did not
earn during the 2013 third quarter. Rental revenues increased by $18,758 from
more tenants at the Sierra Property during the 2013 third quarter as compared
to the 2012 third quarter. Net income for the three-month period ended
September 30, 2013 increased to $484,468 from $214,812 for the same period in
2012. This increase was mainly due a gain from the sale of securities of
$582,856. The Partnership also incurred an unrealized loss of $12,925 from its
holdings of various securities during the 2013 third quarter as compared to an
unrealized gain of $181,391 during the 2012 third quarter. These unrealized
gains and losses reflect changes in the market value of the Partnership?s
securities portfolio during the three-month periods ended September 30, 2013
and 2012.
Costs and expenses increased to $358,360 for the three-month period ended
September 30, 2013, as compared to $260,831 for the same period in the prior
year?s third quarter. Operating expenses increased by $20,025 mainly due to
overall increased costs to maintain the Sierra Property, as well as higher
payroll and taxes and insurance costs. General and administrative expenses
increased by $57,213 primarily due to increases in legal and accounting fees
in part as a result of the filings made with the SEC in connection with the
Reverse Split, and other miscellaneous expenses. Management fees increased by
$10,589 primarily as a result of a fee of one percent of the average quarterly
asset balance of the Partnership?s securities portfolio, which the Partnership
began paying to the General Partner in 2012 for its services in connection
with managing the Partnership?s investments in securities. Depreciation
expense increased by $9,702 as a result of new assets being put into use
during the 2013 third quarter.
COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30,
2013 AND 2012.
The Partnership incurred a loss from operations of $471,945 during the
nine months ended September 30, 2013, as compared to a loss from operations of
$80,461 during the comparable period in 2012 due to a combination of a
decrease in revenues and increases in costs and expense.
Revenues, not including interest income or gains from the sale of
securities, decreased by $47,493 to $680,733 for the period ended September
30, 2013, as compared to the same period in 2012. The decrease in revenues is
mainly due to the call protection fees earned from the early repayment of the
Grand Falls credit facility during the 2012 period that the Partnership did
not earn during the comparable period in 2013. Rental revenues increased by
$12,015 from more tenants at the Sierra Property during the nine months ended
September 30, 2013 as compared to the comparable period in 2012. Net income
for the nine-month period ended September 30, 2013 increased to $607,550 from
$374,217 for the same period in 2012. This increase was due mainly to a gain
from the sale of securities of $1,067,128. The Partnership also incurred an
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unrealized gain of $604,038 from its holdings of various securities during the
first nine months of 2013 as compared to an unrealized gain of $300,081 during
the 2012 nine-month period. These unrealized gains reflect changes in the
market value of the Partnership?s securities portfolio during the nine-month
periods ended September 30, 2013 and 2012.
Costs and expenses increased to $1,152,678 for the nine-month period
ended September 30, 2013, as compared to $808,687 for the same period in the
prior year. Operating expenses increased by $51,589 mainly due to increases in
payroll and commission costs that were partially offset by decreases in taxes
and insurance costs. General and administrative expenses increased by $133,443
primarily as a result of higher legal and accounting fees in part as a result
of the filings made with the SEC in connection with the Reverse Split, as well
as other miscellaneous expenses. Management fees increased by $136,299
primarily as a result of a one-time development fee paid by the Partnership to
the General Partner during the first nine months of 2013 for its services in
connection with securing the Popeye?s lease and the development of assets
related to the Popeye?s lease. The Partnership?s depreciation expense
increased by $22,660 as a result of new assets being put into use during the
first nine months of 2013.
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 nine months ended September 30, 2013 or 2012.
See ?Notes to Financial Statements ? Note 5. Real Estate.?
Investments are classified as trading or available-for-sale.
Trading investments are recorded at fair value with unrealized gains and
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.?
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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
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the SEC?s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed
to ensure that information required to be disclosed by the Partnership in its
periodic reports that are filed under the Exchange Act is accumulated and
communicated to the Partnership?s management, including its principal
executive and financial officer, as appropriate, to allow timely decisions
regarding required disclosure.
Based on an evaluation under the supervision and with the participation
of the Partnership?s management, its principal executive and financial officer
has concluded that the Partnership?s disclosure controls and procedures as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective
as of September 30, 2013, to ensure that information required to be disclosed
in reports that are filed or submitted under the Exchange Act is (i) recorded,
processed, summarized and reported within the time periods specified in the
SEC rules and forms and (ii) accumulated and communicated to the Partnership?s
management, including its principal executive and financial officer, as
appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Partnership?s internal control over
financial reporting during the quarter ended September 30, 2013, that
materially affected, or are reasonably likely to materially affect, the
Partnership?s internal control over financial reporting.
PART II ? OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On June 6, 2013, the Partnership filed a preliminary information
statement with the SEC seeking to effect the Reverse Split on the basis of one
new Unit for each 100 issued and outstanding Units, such that limited partners
owning fewer than 100 Units would have their Units cancelled and converted
into the right to receive a cash consideration of $120.00 per pre-split Unit.
The Reverse Split was approved by written consent in lieu of a meeting of
limited partners by two limited partners holding 57.1% of the issued and
outstanding Units. Following the effectiveness of the Reverse Split, the
Partnership intended to terminate its reporting obligations under the Exchange
Act. The purpose of the Reverse Split was to reduce the number of record
holders of the Partnership?s Units in order for it to become a privately held
entity, which would be owned primarily by its affiliates and would no longer
be subject to the reporting requirements of the federal securities laws. On
August 8, 2013, the SEC approved the Partnership?s filings made with respect
to the Reverse Split and the Partnership filed a definitive information
statement with the SEC. On August 12, 2013, the Partnership mailed information
packages setting forth the details of the Reverse Split to all of its limited
partners. The Reverse Split took effect on or about September 1, 2013. The
General Partner retained the services of Houlihan, a financial advisory firm,
to render an opinion as to the fairness from a financial point of view of the
consideration to be paid to the existing affiliated and unaffiliated limited
partners (including those limited partners who would be cashed out in
conjunction with the Reverse Split and those who would remain limited partners
-15-
after the effects of the Reverse Split). The Partnership terminated the
registration of its Units with the SEC by filing a Form 15 with the SEC on
September 6, 2013. As a result of the termination of the registration of its
Units with the SEC, the Partnership will no longer file periodic reports with
the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, following the filing of this Quarterly Report
on Form 10-Q for the period ended September 30, 2013. The definitive
information statement on Schedule 14C and Schedule 13E-3 filed on August 8,
2013 and August 9, 2013, respectively, as well as the Form 15 filed on
September 6, 2013, are incorporated herein by reference.
On August 31, 2009, the Partnership initiated the Redemption Offer
enabling the Partnership?s limited partners to sell their Units back to the
Partnership. The Partnership was entitled to 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 were to be canceled, and to have the status of authorized but unissued
Units. The Partnership's obligation to repurchase any Units under the
Redemption Offer was conditioned upon it having sufficient funds available to
complete the repurchase. The Partnership was permitted to use any operating
funds as the General Partner, in its sole discretion, reserved for the purpose
of funding the Redemption Offer. On August 24, 2012, the Redemption Offer was
extended until August 31, 2013, subject to the right of the General Partner to
suspend, terminate, modify or extend the term of the Redemption Offer in its
sole discretion. On August 9, 2013, the Redemption Offer was terminated
following the announcement of the Reverse Split. An aggregate of 12,704 Units
were repurchased by the Partnership at an approximate average price of $103.26
per Unit pursuant to the Redemption Offer.
The Partnership did not repurchase any Units from its limited partners
during the third quarter of 2013.
ITEM 5. OTHER INFORMATION
The Partnership is managed by its General Partner and does not have a
Board of Directors with respect to which its limited partners may recommend
nominees.
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: 11/12/2013
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BIGGEST LITTLE INVESTMENTS, L.P.
FORM 10-Q SEPTEMBER 30, 2013
Exhibit Index
Exhibit Page No.
------- --------
4.1 Schedule 13E-3/A (incorporated by reference to the
Schedule 13E-3/A filed with the Securities and Exchange
Commission on September 10, 2013).
4.2 Information Statement on Schedule 14C (incorporated by
reference to the Schedule 14C filed with the Securities
and Exchange Commission on August 8, 2013).
4.3 Certification and Notice of Termination of Registration
Under Section 12(g) of the Securities Exchange Act Of
1934 or Suspension of Duty to File Reports Under Sections
13 And 15(d) of the Securities Exchange Act of 1934 on
Form 15 (incorporated by reference to the Form 15 filed
with the Securities and Exchange Commission on September
6, 2013).
31.1 Certification pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002. 19
32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. 20
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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: 11/12/2013
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EXHIBIT 32.1
BIGGEST LITTLE INVESTMENTS, L.P.
FORM 10-Q SEPTEMBER 30, 2013
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Biggest Little Investments
L.P. (the "Partnership") on Form 10-Q for the fiscal quarter ended September
30, 2013, as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), the undersigned, in the capacity and on the date
indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and (2) the information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Partnership.
Date: November 12, 2013
/s/ BEN FARAHI
--------------
Ben Farahi
Manager of the General Partner
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