10-Q 1 bli3q12.txt 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, 2012 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO______. Commission File No. 0-16856 BIGGEST LITTLE INVESTMENTS L.P. ---------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-3368726 --------------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 3702 S. VIRGINIA ST. UNIT G2 RENO, NEVADA 89502 ----------------------------- ---------- (Address of principal (Zip code) executive offices) (775) 825-3355 ----------------------------- Registrant's telephone number ---------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer YES [ ] NO [X] Accelerated filer YES [ ] NO [X] Non-accelerated filer (Do not check if a smaller reporting company) YES [ ] NO [X] Smaller reporting company YES [X] NO [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X] PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS BIGGEST LITTLE INVESTMENTS L.P. BALANCE SHEETS

~~JUNE~~SEPTEMBER 30, DECEMBER 31, 2012 2011 (UNAUDITED) ------------- ------------ ASSETS Current Assets Cash and cash equivalents................... $ 59,~~631~~986,~~849~~926 $ 5,646,046 Short-term investments - CDs................ 249,~~348~~970 248,101 Trade and other receivables, net............ 2313,~~830~~470 20,367 Securities.................................. 2,~~216~~451,~~412~~251 2,029,754 Prepaid expense............................. ~~196~~423 2,400 ----------- ----------- Total Current Assets...................... 812,~~121~~702,~~635~~040 7,946,668 ----------- ----------- Long-Term Assets Notes receivable............................ ~~4,329,000~~- 4,455,000 Property, plant and equipment, net........... 10,~~475~~378,~~374~~610 10,668,902 ----------- ----------- Total Long-Term Assets.................... 1410,~~804~~378,~~374~~610 15,123,902 ----------- ----------- Total ~~assets~~Assets............................. $2223,~~926~~080,~~009~~650 $23,070,570 =========== =========== LIABILITIES AND PARTNERS' EQUITY Liabilities Accounts payable, prepaid rent, accrued expenses and unclaimed property........ $ ~~183~~33,~~883~~645 $ 40,770 Tenant deposits.......................... 21,386 22,808 Demolition costs......................... ~~328~~282,~~915~~190 346,700 ----------- ----------- Total ~~liabilities~~Liabilities........................... ~~534~~337,~~184~~221 410,278 ----------- ----------- Commitments and Contingencies Partners' Equity Limited partners' equity (170,390 units issued and outstanding at 69/30/12; 173,421 at 12/31/11)................... 22,~~177~~386,~~411~~853 22,702,467 Prepaid redemption....................... (~~103~~148,~~634~~233) (246,280) Accumulated other comprehensive (loss)..... (~~291~~110,~~800~~409) (410,490) General partner's equity................. ~~609~~615,~~848~~218 614,595 ----------- ----------- Total ~~partners~~Partners' ~~equity~~Equity...................... 22,~~391~~743,~~825~~429 22,660,292 ----------- ----------- Total ~~liabilities~~Liabilities and ~~partners~~Partners' ~~equity~~Equity........ $2223,~~926~~080,~~009~~650 $23,070,570 =========== ===========

The accompanying Notes are an integral part of these Financial Statements. -2- BIGGEST LITTLE INVESTMENTS L.P. STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE MONTHS ENDED FOR THE ~~SIX~~NINE MONTHS ENDED --------------------------- ------------------- -------- ~~JUNE~~SEPTEMBER 30, ~~JUNE~~SEPTEMBER 30, ~~JUNE~~SEPTEMBER 30, ~~JUNE~~SEPTEMBER 30, 2012 2011 2012 2011 ------------- ------------- ------------- ----- -------- Revenues Rental revenues.......................... $ 9195,~~382~~311 $ ~~114~~84,~~409~~558 $ ~~185~~281,~~788~~100 $ ~~235~~319,~~084~~642 Related party rental revenues............ ~~110~~129,~~333~~109 ~~106~~132,~~883~~369 ~~220~~349,~~667~~776 ~~206~~339,~~867~~236 Fee revenues............................. -58,290 101,~~457~~236 -58,290 2526,~~457~~692 Other revenues........................... 13,~~386~~047 5,~~314~~547 2639,~~013~~060 713,~~764~~311 ------------- ------------- ------------- ----- -------- Total ~~revenues~~Revenues........................ ~~215~~295,~~101~~758 ~~237~~223,~~063~~710 ~~432~~728,~~468~~226 ~~475~~698,~~172~~881 ------------- ------------- ------------- ----- -------- Costs and ~~expenses~~Expenses Operating expenses....................... ~~117~~108,~~942~~309 ~~122~~152,~~497~~361 ~~235~~343,~~021~~325 ~~252~~405,~~984~~360 General and administrative............... 3438,~~843~~238 4038,~~919~~654 86124,~~737~~981 93132,~~473~~113 Depreciation............................. 96,764 96,764 ~~193~~290,~~528~~292 ~~193~~290,~~528~~292 Management fees.......................... 1517,~~967~~520 7918,~~204~~222 3250,~~569~~089 97116,~~858~~080 ------------- ------------- ------------- ----- -------- Total ~~costs~~Costs and ~~expenses~~Expenses.............. ~~265~~260,~~516~~831 ~~339~~306,~~384~~001 ~~547~~808,~~855~~687 ~~637~~943,~~843~~845 ------------- ------------- ------------- ----- -------- Income (Loss) ~~income~~From ~~from operations~~Operations............ ~~(50~~34,~~415)~~927 (~~102~~82,~~321~~291) (~~115~~80,~~387~~461) (~~162~~244,~~671~~964) ------------- ------------- ------------- ----- -------- Other Income and Expenses Gain from condemnation................... - ~~2,071,352~~- - 2,071,352 Gain onfrom sale of securities...........~~....~~ 4117,~~462~~123 -813 20137,~~433~~556 -813 Interest income.......................... ~~127~~62,~~132~~762 83125,~~987~~812 ~~254~~317,~~360~~122 ~~147~~273,~~658~~470 Interest expense......................... - - - (160) ------------- ------------- ------------- ----- -------- Total Other Income................... ~~131~~179,~~594~~885 2126,~~155,339~~625 ~~274~~454,~~793~~678 2,~~218~~345,~~850~~475 ------------- ------------- ------------- ----- -------- Net ~~income~~Income............................... $ 81214,~~179~~812 $2 44,~~053,018~~334 $ ~~159~~374,~~406~~217 $ 2,~~056~~100,~~179~~511 ============= ============= ============= ============= Other Comprehensive Income Unrealized gain (loss) from securities........................... $ ~~(308~~181,~~444)~~391 $ (61626,~~925~~921) $ ~~(118~~300,~~689)~~081 $ (~~149~~778,~~306~~906) ------------- ------------- ------------- ----- -------- Comprehensive Income (Loss)............ $ ~~(227~~396,~~265)~~203 $1 (582,~~991,093~~587) $ 40674,~~717~~298 $ 1,~~906~~321,~~873~~605 ============= ============= ============= ============= Net income attributable to: Limited partners......................... $ 79209,~~149~~442 $2 43,~~001,693~~226 $ ~~155~~364,~~420~~862 $ 2,~~004~~047,~~774~~999 General partner.......................... 25,~~030~~370 511,~~325~~108 39,~~986~~355 5152,~~405~~512 ------------- ------------- ------------- ----- -------- $ 81214,~~179~~812 $2 44,~~053,018~~334 $ ~~159~~374,~~406~~217 $ 2,~~056~~100,~~179~~511 ============= ============= ============= ============= Net income per unit of limited partnership interest (170,390 and 173,421 weighted average units outstanding for the three and ~~six~~nine months ended ~~June~~September 30, 2012 and 2011, respectively)........................... $ 01.4623 $ 110.5425 $ 02.9114 $ 11.5681 ============= ============= ============= =============

The accompanying Notes are an integral part of these Financial Statements. -3- BIGGEST LITTLE INVESTMENTS L.P. STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE ~~SIX~~NINE MONTHS ENDED ---------------------------- ~~June~~September 30, ~~June~~September 30, 2012 2011 ------------- ------------- Cash flows from operating activities: Net income.................................... $ ~~159~~374,~~406~~217 $ 2,~~056~~100,~~179~~511 Adjustments to reconcile net income to net cash provided by operating activities: Gain onfrom property condemnation............... - (2,071,352) ~~Depreciation~~Gain from sale of securities................ (137,556) (813) Depreciation ............... ~~193,528 193,528 Gain on sale of securities~~.................. ~~(20~~290,~~433)~~292 290,292 Changes in assets and liabilities: ~~Increase~~Decrease in receivables..................... (36,~~463)~~897 ~~(22~~9,~~469)~~888 Decrease in prepaid expense................. 21,~~204~~977 7,~~739~~561 ~~Increase~~ (~~decrease~~Decrease) increase in accounts payable, accrued expenses, and other liabilities.... ~~123~~(73,~~906~~057) 5733,~~363~~256 Increase in short-term investments - CDCDs..... (1,~~247~~869) (~~264~~875) ------------- ------------- Net cash provided by operating activities.... ~~453~~460,901 ~~220~~368,~~724~~468 ------------- ------------- Cash flows from investing activities: Cash used for the purchase of securities...... (~~262~~360,~~620~~830) (12,~~024~~055,~~861~~832) Cash received from the sale of securities..... ~~215~~376,~~084~~970 -278,489 Cash received from Grand Falls note receivable ~~126~~4,455,000 - Cash received for property condemnation....... - 2,731,787 Cash received for demolition costs............ - 346,700 ------------- ------------- Net cash provided by investing activities.. 784,~~464~~471,140 21,~~053~~301,~~627~~144 ------------- ------------- Cash flows from financing activities: Cash used for payment of redemption of limited partnership units.................... (93,670) (153,940) Cash used for prepayment of redemption of limited partnership units.................... (~~103~~148,~~634~~233) (74182,~~460~~920) Cash used for distribution.................... (349,258) - ------------- ------------- Net cash used in financing activities...... (~~546~~591,~~562~~161) (~~228~~336,~~400~~860) ------------- ------------- Net ~~(decrease)/~~increase in cash and cash equivalents.......~~...........................~~ ~~(14~~4,~~197)~~340,880 21,~~045~~332,~~951~~752 Cash and cash equivalents, beginning of period.. 5,646,046 4,059,370 ------------- ------------- Cash and cash equivalents, end of period........ $ 59,~~631~~986,~~849~~926 $ 65,~~105~~392,~~321~~122 ============= ============= Non-Cash Retired prepaid redemption................ $ 246,280 $ 45,260 Draw on credit facility................... $ - $ 13,~~841~~000,~~123~~000 Unrealized gain/loss on securities........ $ ~~(118~~300,~~689)~~081 $ ~~151~~(778,~~985~~906)

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, 2011. 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, 2011, was derived from audited financial statements at such date. The results of operations for the three and nine months ended September 30, 2012 and 2011 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 September 30, 2012, 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 -5- 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, 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. A majority of the Partnership's cash and cash equivalents are held at one financial institution. 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. Rental revenues from the Adjacent Property has been reclassified into "Related Party Rental Revenues" for the period ended September 30, 2012, and the 2011 presentation has been modified to reflect such reclassification. This reclassification had no effect on the Partnership's net income for the period ended September 30, 2012, or for any other period. 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 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. 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 September 30, 2012. See "Note 3. Fair Value Measurements." Net Income Per Unit of Limited Partnership Interest Net income per unit of limited partnership interest (each individually, a "Unit" and, together, the "Units") is computed based upon the weighted average number of Units outstanding (170,390 for the nine months ended September 30, 2012, and 173,421 for the nine months ended September 30, 2011) 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 September 30, 2012, an aggregate of 11,719 Units had been repurchased by the Partnership at an approximate average price of $102.90 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 September 30, 2012: Fair Value Measurement --------------------------------- Level 1 Level 2 Level 3 Total ---------- --------- --------- ---------- Stock Securities $2,924,946 $ - $ - $2,924,946 Short Option Securities (473,695) - - (473,695) Short-Term Investments - CDs 249,970 - - 249,970 ---------- --------- --------- ---------- Total $2,701,221 $ - $ - $2,701,221 ========== ========= ========= ========== Valuation of Financial Instruments measured on a recurring basis by hierarchy levels as of December 31, 2011: Fair Value Measurement --------------------------------- Level 1 Level 2 Level 3 Total ---------- --------- --------- ---------- Stock Securities $2,253,010 $ - $ - $2,253,010 Short Option Securities (223,256) - - (223,256) Short-Term Investments - CDs 248,101 - - 248,101 Notes Receivable 4,455,000 - - 4,455,000 ---------- --------- --------- ---------- Total $6,732,855 $ - $ - $6,732,855 ========== ========= ========= ========== The Partnership recorded an unrealized loss of $110,409 for the nine months ended September 30, 2012, and recorded an unrealized loss of $776,227 for the nine months ended September 30, 2011. During the nine months ended September 30, 2012, the Partnership sold securities resulting in a realized gain of $137,556 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 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 -8- 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 12.1% of Monarch's outstanding common stock as of September 30, 2012. 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 $50,089 and $116,080 for the nine months ended September 30, 2012 and 2011, 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 $9,355 for the nine months ended September 30, 2012 and net income of $52,512 for the nine months ended September 30, 2011. On April 10, 2012, the Partnership issued a cash distribution of $2.00 per unit on the outstanding limited partnership interests of the Partnership to limited partners of record at the close of business on March 29, 2012. The General Partner received $8,733 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. -9- NOTE 5. REAL ESTATE The Partnership's real estate is summarized as follows: September 30, 2012 December 31, 2011 ------------------ ----------------- 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 Buildings - suspense............ (738,611) (738,611) ------------------ ----------------- 14,411,550 14,411,550 ------------------ ----------------- Accumulated depreciation........ (4,228,599) (3,938,307) Accumulated depreciation - suspense...................... 195,659 195,659 ------------------ ----------------- $ 10,378,610 $ 10,668,902 ================== ================= 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 (the "Widening Project") on which the Sierra Property is located. The widening will expand Moana Lane 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. The Partnership recorded a gain on asset condemnation of $2,071,352. NOTE 6. NOTES RECEIVABLE On December 17, 2010, the Partnership participated in first and second senior credit facilities with a group led by a major bank in the aggregate amount of $75 million (the "Credit Facility") to a new casino in Grand Falls, Iowa (the "Borrower"). The Partnership's commitment to the Credit Facility was $3 million under the first lien senior credit facility consisting of a $40 million term loan and a $10 million revolving loan (the "First Facility"), and $1.5 million under the second lien senior credit facility consisting of a $25 million term loan (the "Second Facility"). The Credit Facility may be utilized by the Borrower for a portion of the development and construction costs of the casino (the "Project"), to pay for fees and expenses in connection with the Project and for initial working capital needs after completion of the Project. On August 14, 2012, the Borrower refinanced the Credit Facility, which had been fully drawn on, and the Partnership was repaid its entire commitment. As a result of the refinancing, the Partnership earned approximately $58,300 in call protection fees per the terms of the Credit Facility. The First Facility was scheduled to mature on December 17, 2014; the Second Facility was scheduled to mature on December 17, 2015. -10- 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 The Partnership has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Partnership has determined that there were no such events that warrant disclosure or recognition in the financial statements. 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 In September 2012, the Partnership began rebuilding the facade of the Sierra Property's building that was impacted by the Widening Project (see Notes To Financial Statements - NOTE 5. REAL ESTATE). The rebuilding project is expected to be completed during the fourth quarter of 2012 and the Partnership is funding the cost of the remodeling project with the compensation it had received from the Regional Transportation Commission and subsequently placed into suspense. The Partnership does not expect the cost of the project to exceed the amount it has placed into suspense. On August 14, 2012, a $75 million credit facility to a new casino in Grand Falls, Iowa that the Partnership had participated in with a group led by a major bank was refinanced and, as a result, the Partnership was repaid its entire outstanding 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 Partnership's commitment had previously been recorded as a note receivable (see Notes To Financial Statements - NOTE 6. NOTES RECEIVABLE). On August 31, 2009, the Partnership initiated an offer enabling the Partnership's limited partners to sell their limited partnership interests (each, a "Unit") back to the Partnership (the "Redemption Offer"). The Partnership may repurchase whole Units only, at a price reasonably determined -11- 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 September 30, 2012, an aggregate of 11,719 Units had been repurchased by the Partnership pursuant to the Redemption Offer at an approximate average price of $102.90 per Unit. Liquidity and Capital Resources The Partnership's level of liquidity based on cash and cash equivalents increased by $4,340,880 to $9,986,926 during the nine months ended September 30, 2012 as compared to December 31, 2011. The increase was due primarily to the repayment of principal from the Grand Falls note receivable described in "Notes to Financial Statements-Note 6. Notes Receivable," as well as cash provided by operating activities. The increase was partially offset by cash used for the $2.00-per-unit distribution in April 2012, as well as the payment and prepayment of redemption of Units. 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, 2012, was the Sierra Property, which currently has a vacancy rate of approximately 77% 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 SEPTEMBER 30, 2012 AND 2011. The Partnership earned net income of $214,812 for the three-month period ended September 30, 2012, versus net income of $44,334 for the same period in 2011. The increase was due to a combination of revenue increases and lower expenses. The Partnership earned income from operations of $34,927 during the three months ended September 30, 2012, as compared to a loss from operations of $82,291 during the comparable period in 2011. Revenues, not including interest income or gains from the sale of securities, increased by $72,048 to $295,758 for the quarter ended September 30, 2012 as compared to the same period in 2011. The increase in revenues is mainly due to the call protection -12- fees earned from the early repayment of the Grand Falls credit facility as well as increased rental and other revenues. The Partnership also earned a gain from the sale of securities of $117,123, but also saw a decrease of approximately $63,000 in interest income due to the early repayment of the Grand Falls credit facility. Costs and expenses decreased to $260,831 for the three-month period ended September 30, 2012, as compared to $306,001 for the same period in the prior year mainly due to decreases in operating costs and management fees. Operating expenses decreased by $44,052 mainly due to decreases in property taxes, insurance and maintenance costs to the Sierra Property. Management fees decreased as a result of the reduction in interest income. General and administrative expenses remained relatively unchanged and depreciation expense remained constant. The Partnership also incurred unrealized income of $181,391 from its holdings of various securities during the 2012 third quarter as compared to an unrealized loss of $626,921 during the 2011 third quarter. COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2012 AND 2011. The Partnership earned net income of $374,217 for the nine-month period ended September 30, 2012, versus net income of $2,100,511 for the same period in 2011. The decrease was due mainly to a gain from property condemnation of $2,071,352 during the first nine months of 2011 that the Partnership did not have in the 2012 period. The Partnership incurred a loss from operations of $80,461 during the nine months ended September 30, 2012, as compared to a loss from operations of $244,964 during the comparable period in 2011 from a combination of increased revenues and lower expenses. Revenues, not including interest income or gains from the sale of securities, increased by $29,345 to $728,226 for the period ended September 30, 2012 as compared to the same period in 2011. The increase in revenues is mainly due to an increase in fee revenues from the early repayment of the Grand Falls note receivable, as well as other revenues. These increases were partially offset by lower rental revenues from fewer tenants and lower rents at the Sierra Property during the first nine months of 2012 as compared to the same period in the prior year. The Partnership also earned a gain from the sale of securities of $137,556 during the 2012 nine-month period as compared to a gain $813 for the 2011 comparable period. Despite the early repayment of the Grand Falls credit facility, the Partnership's interest income increased by $43,652 due to higher amounts borrowed during the first nine months of 2012 as compared to the same period in 2011. Costs and expenses decreased to $808,687 for the nine-month period ended September 30, 2012, as compared to $943,845 for the same period in the prior year mainly due to decreases in management fees, operating costs and general and administrative expenses. Management fees decreased as a result of the reductions in interest income and rental revenues, as well as a one-time fee paid by the Partnership to the General Partner during the first nine months of 2011 as compensation for its services in connection with the Widening Project. The Partnership did not incur such an expense in the 2012 period. Operating expenses decreased by $62,035 mainly due to decreases in property taxes, insurance and maintenance costs to the Sierra Property. General and administrative expenses decreased by $7,132 primarily as a result of lower legal and accounting fees. The Partnership's depreciation expense remained unchanged. The Partnership also incurred an unrealized gain of $300,081 from its holdings of various securities during the first nine months of 2012 as compared to an unrealized loss of $778,906 during the 2011 nine-month period. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the Sierra Property to adequately maintain the physical assets and the other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term and long-term needs of the Partnership, except that the Partnership may need to obtain financing for any potential renovation and/or redevelopment. -13- Critical Accounting Policies The Partnership's only significant critical accounting policy relates to the evaluation of the fair value of real estate. The Partnership evaluates the need for an impairment loss on its real estate assets when indicators of impairment are present and the undiscounted cash flows are not sufficient to recover the asset's carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. The evaluation of the fair value of real estate is an estimate that is susceptible to change and actual results could differ from those estimates. 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, 2012 or 2011. 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 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. 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, 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, 2012, 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 -14- 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 September 30, 2012, that materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 6 - EXHIBITS Exhibits required by Item 601 of Regulation S-K are filed herewith and are listed in the attached exhibit index. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BIGGEST LITTLE INVESTMENTS L.P. BY: MAXUM LLC Its General Partner BY: /S/ BEN FARAHI ------------------- Ben Farahi Manager DATE: 10/31/2012 -15- BIGGEST LITTLE INVESTMENTS, L.P. FORM 10-Q SEPTEMBER 30, 2012 Exhibit Index Exhibit Page No. ------- -------- 31.1 Certification pursuant to Section 302 of the Sarbanes- Oxley Act of 2002. 17 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 18 -16- 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: 10/31/2012 -17- EXHIBIT 32.1 BIGGEST LITTLE INVESTMENTS, L.P. FORM 10-Q SEPTEMBER 30, 2012 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, 2012, 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: October 31, 2012 /s/ BEN FARAHI -------------- Ben Farahi Manager of the General Partner -18-

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