-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BcpsmLZdTasK0EnGCOBJ89dUY/u9R4kAAjZxLRoqRjpsMIHhq++qIUiBlo7b47zQ 89OguhIOcVc8eFgg2SYtQQ== 0000797331-07-000002.txt : 20070119 0000797331-07-000002.hdr.sgml : 20070119 20070118182615 ACCESSION NUMBER: 0000797331-07-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060630 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20070119 DATE AS OF CHANGE: 20070118 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECURED INVESTMENT RESOURCES FUND LP II CENTRAL INDEX KEY: 0000797331 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363451000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16798 FILM NUMBER: 07538939 BUSINESS ADDRESS: STREET 1: 199 S. LOS ROBLES AVENUE STREET 2: SUITE 200 CITY: PASADENA STATE: CA ZIP: 91101 BUSINESS PHONE: 626-585-5920 MAIL ADDRESS: STREET 1: 199 S. LOS ROBLES AVENUE STREET 2: SUITE 200 CITY: PASADENA STATE: CA ZIP: 91101 8-K 1 sir2_8k2q2006-10qsb011707.htm 2QUARTER 6-30-06 10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 17, 2007

 

SECURED INVESTMENT RESOURCES FUND, L.P. II

(Exact name of Registrant as specified in its charter)

 

 

Kansas

 

000-14542

 

48-0979566

(State or other jurisdiction of incorporation)

 

(Commission File Number)

 

(I.R.S. Employer Identification Number)

 

 

199 S. Los Robles Ave., Suite 200
Pasadena, CA 9110

 

(626) 585-5920

(Address of principal executive offices)

 

(Registrant’s telephone number)

 

 

 

 

 

 

4200 Blue Ridge Blvd., Ste. LH-06, Kansas City, Missouri 64133

(Former Name or Former Address)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

 

o Written communications pursuant to Rule 425 under the Securities Act (17

 

CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17

 

CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the

 

Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the

 

Exchange Act (17 CFR 240.13e-4(c))

 


Item 2.02 Results of Operations and Financial Condition

 

In 2002, while under management of the prior general partners, Secured Investment Resources Fund, L.P. II (“SIR II” or the “Partnership”) ceased filing certain reports required under the Securities Exchange Act of 1934 (“Exchange Act”) with the Securities and Exchange Commission (“SEC”). Due to SIR II’s financial condition, SIR II has not been able to obtain the audit work necessary to resume the filing of audited financial statements or to otherwise file Exchange Act reports. In order to provide SIR II unit holders with current financial information, certain unaudited financial and other information concerning the quarter ended June 30, 2006, was prepared by Millenium Management, LLC (SIR II’s current general partner), and is being provided with this Form 8-K as Exhibit 99.1. Such financial information has not been reviewed by an independent registered public accounting firm.

 

While the unaudited financial and other information contained in Exhibit 99.1 is in a format similar to that required by Form 10-QSB, the information contained therein does not purport to fully comply with the requirements of Form 10-QSB. Due to the lapse in time since the filing of the last audited financial statements with the SEC, the financial information contained in Exhibit 99.1 should not be read in conjunction with those audited financial statements. SIR II intends to continue filing unaudited financial and other information with the SEC under cover of Form 8-K with respect to quarterly and annual financial information until such time as it has the financial wherewithal to resume filing Forms 10-KSB and 10-QSB or until its reporting obligations under the Exchange Act are either terminated or suspended.

 

Exhibits

 

99.1     Unaudited Financial and Other Information for the Quarter Ended June 30, 2006

 

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 hereunto duly authorized.

 

 

 

SECURED INVESTMENT RESOURCES FUND, L.P. II

 

 

 

By: Millenium Management, LLC, General Partner

 

 

By: 


/s/ W. Robert Kohorst

 

 

 

W. Robert Kohorst,

 

 

 

President

 

 

Date: January 17, 2007

 

 

 

EX-99 2 sir2_8k2q2006-10qsb011707ex.htm UNAUDITED FINANICAL INFO

Exhibit 99.1

 

PART I - FINANCIAL INFORMATION

--------------------------------------------------

 

ITEM 1. FINANCIAL STATEMENTS

----------

------------------------------------

 

SECURED INVESTMENT RESOURCES FUND, L.P. II

(A LIMITED PARTNERSHIP)

 

BALANCE SHEETS

 

(UNAUDITED)

 

 

 

 

June 30

 

December 31

 

 

 

2006

 

2005

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property at cost:

 

 

 

 

 

 

 

Building and improvements

 

$

24,673,555

 

$

24,561,711

 

Less: accumulated depreciation

 

 

(14,977,953

)

 

(14,522,653

)

 

 

 

 

 

 

 

 

Building and improvements net

 

 

9,695,602

 

 

10,039,058

 

 

 

 

 

 

 

 

 

Land

 

 

2,281,958

 

 

2,281,958

 

Property net

 

 

11,977,560

 

 

12,321,016

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

515,990

 

 

423,304

 

Accounts receivable, net

 

 

1,256,730

 

 

1,163,827

 

Restricted cash

 

 

1,640,199

 

 

1,527,755

 

Debt financing costs, net

 

 

597,451

 

 

586,116

 

Prepaid expenses

 

 

117,860

 

 

64,577

 

Other assets, net

 

 

253,720

 

 

262,746

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

16,359,510

 

$

16,349,341

 

 

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans payable

 

$

11,833,857

 

$

11,932,378

 

Bonds payable

 

 

9,000,000

 

 

9,000,000

 

Accrued interest

 

 

126,870

 

 

93,741

 

Real estate taxes payable

 

 

245,462

 

 

142,406

 

Security deposits

 

 

143,245

 

 

130,904

 

Accounts payable and other accrued expenses

 

 

227,048

 

 

293,225

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

$

21,576,482

 

$

21,592,654

 

 

 

 

 

 

 

 

 

PARTNERS’ CAPITAL / (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority interest

 

 

801,000

 

 

801,000

 

Limited Partners

 

 

(5,994,897

 

 

(6,020,975

)

General Partner

 

 

(23,075

)

 

(23,338

)

 

 

 

 

 

 

 

 

TOTAL PARTNERS’ CAPITAL / (DEFICIT)

 

 

($5,216,972

)

 

($5,243,313

)

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND PARTNERS CAPITAL / (DEFICIT)’

 

$

16,359,510

 

$

16,349,341

 

 

See Accompanying Notes to Financial Statements

 

 

1

 


SECURED INVESTMENT RESOURCES FUND, L.P. II

(A LIMITED PARTNERSHIP)

 

STATEMENTS OF REVENUES AND EXPENSES

 

(UNAUDITED)

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

 

June 30

 

 

June 30

 

 

 

 

2006

 

 

2005

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rent

 

$

1,262,547

 

$

1,101,468

 

Other Property income

 

 

140,771

 

 

207,398

 

Interest

 

 

84,303

 

 

8,986

 

 

 

 

 

 

 

 

 

TOTAL REVENUE

 

$

1,487,621

 

$

1,317,852

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries

 

 

170,937

 

 

161,155

 

Maintenance and repairs

 

 

76,567

 

 

89,208

 

Utilities

 

 

92,272

 

 

97,273

 

Real estate taxes

 

 

103,312

 

 

112,535

 

General administrative

 

 

233,192

 

 

283,983

 

Contract Services

 

 

170,256

 

 

171,401

 

Insurance

 

 

34,375

 

 

32,342

 

Interest

 

 

358,260

 

 

308,726

 

Depreciation and amortization

 

 

247,664

 

 

170,622

 

Property management fees

 

 

45,610

 

 

44,363

 

 

 

 

 

 

 

 

 

TOTAL EXPENSES

 

$

1,532,445

 

$

1,469,608

 

 

 

 

 

 

 

 

 

NET INCOME / (LOSS)

 

 

($44,824

)

 

($151,756

)

 

 

 

 

 

 

 

 

NET INCOME / (LOSS) ATTRIBUTABLE TO;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limited Partners

 

 

($44,376

)

 

($150,238

)

General Partner

 

 

(448

)

 

(1,518

)

 

 

 

 

 

 

 

 

TOTAL

 

 

($44,824

)

 

($13,756

)

 

 

 

 

 

 

 

 

NET INCOME / (LOSS) PER UNIT

 

 

($0.83

)

 

($2.80

)

 

 

 

 

 

 

 

 

PARTNERSHIP UNITS OUTSTANDING

 

 

53,661

 

 

53,661

 

 

See Accompanying Notes to Financial Statements

 

 

2

 


SECURED INVESTMENT RESOURCES FUND, L.P. II

(A LIMITED PARTNERSHIP)

 

STATEMENTS OF REVENUES AND EXPENSES

 

(UNAUDITED)

 

 

 

 

Six Months Ended

 

Six Months Ended

 

 

 

 

June 30

 

 

June 30

 

 

 

 

2006

 

 

2005

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rent

 

$

2,508,138

 

$

2,303,101

 

Other Property income

 

 

234,595

 

 

274,102

 

Interest

 

 

284,856

 

 

13,425

 

 

 

 

 

 

 

 

 

TOTAL REVENUE

 

$

3,027,589

 

$

2,590,628

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries

 

 

346,334

 

 

307,508

 

Maintenance and repairs

 

 

144,311

 

 

152,157

 

Utilities

 

 

189,635

 

 

184,097

 

Real estate taxes

 

 

207,148

 

 

200,139

 

General administrative

 

 

456,139

 

 

416,058

 

Contract Services

 

 

321,276

 

 

310,530

 

Insurance

 

 

61,114

 

 

69,574

 

Interest

 

 

690,689

 

 

760,392

 

Depreciation and amortization

 

 

495,327

 

 

395,976

 

Property management fees

 

 

89,275

 

 

104,539

 

 

 

 

 

 

 

 

 

TOTAL EXPENSES

 

$

3,001,248

 

$

2,900,970

 

 

 

 

 

 

 

 

 

NET INCOME / (LOSS)

 

$

26,341

 

 

($310,342

)

 

 

 

 

 

 

 

 

NET INCOME / (LOSS) ATTRIBUTABLE TO;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limited Partners

 

$

26,078

 

 

($307,239

)

General Partner

 

$

263

 

 

($3,103

)

 

 

 

 

 

 

 

 

TOTAL

 

$

26,341

 

 

($310,342

)

 

 

 

 

 

 

 

 

NET INCOME / (LOSS) PER UNIT

 

$

0.49

 

 

($5.73

)

 

 

 

 

 

 

 

 

PARTNERSHIP UNITS OUTSTANDING

 

 

53,661

 

 

53,661

 

 

See Accompanying Notes to Financial Statements

 

 

3

 


SECURED INVESTMENT RESOURCES FUND, L.P. II

(A LIMITED PARTNERSHIP)

 

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

 

(UNAUDITED)

 

FOR THE SIX MONTHS ENDED JUNE 30, 2006

 

 

 

 

TOTAL

 

GENERAL

PARTNER

 

LIMITED

INTERESTS

 

 

 

 

 

 

 

 

 

 

 

 

PARTNERS’ CAPITAL / (DEFICIT)

 

 

 

 

 

 

 

 

 

 

January 1, 2006

 

$

(6,044,313

)

$

(23,338

)

$

(6,020,975

)

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

 

(-

)

 

(-

)

 

(-

)

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

26,341

 

$

263

 

$

26,078

 

 

 

 

 

 

 

 

 

 

 

 

PARTNERS’ CAPITAL / (DEFICIT)

 

 

 

 

 

 

 

 

 

 

June 30, 2006

 

$

(6,017,972

)

$

(23,075

)

$

(5,994,897

)

 

See Accompanying Notes to Financial Statements

 

 

4

 


SECURED INVESTMENT RESOURCES FUND, L.P. II

(A LIMITED PARTNERSHIP)

 

STATEMENTS OF CASH FLOWS

 

(UNAUDITED)

 

 

 

 

June 30

 

June 30

 

 

 

2006

 

2005

 

CASH FLOW FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net Income / (Loss)

 

$

26,341

 

 

($301,342

)

Adjustments to reconcile net income to net cash

 

 

 

 

 

 

 

provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

495,327

 

 

395,976

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable , net

 

 

(92,903

)

 

90,113

 

(Increase) decrease in prepaid expenses

 

 

(53,283

)

 

(180,981

)

Decrease (increase) in accrued interest

 

 

33,129

 

 

(1,046,709

)

Decrease (increase) in real estate taxes payable

 

 

103,056

 

 

269,046

 

Decrease (increase) in security deposit liability

 

 

12,341

 

 

5,337

 

Decrease (increase) in accounts

 

 

 

 

 

 

 

payable and other accrued expenses

 

 

(66,177

)

 

(309,431

)

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

457,831

 

 

($1,078,991

)

 

 

 

 

 

 

 

 

CASH FLOW FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

Property improvements

 

 

($111,844

)

 

($94,873

)

 

 

 

 

 

 

 

 

CASH FLOW FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

(Increase) decrease in restricted cash

 

 

(112,444

)

 

(280,354

)

Principal repayments on mortgage loans payable

 

 

(98,521

)

 

(192,514

)

(Increase) decrease in debt financing and other

 

 

 

 

 

 

 

assets

 

 

(42,336

)

 

(1,079

)

Capital contributions

 

 

0

 

 

800,001

 

 

 

 

 

 

 

 

 

Net cash provided (used) in financing activities

 

 

($253,301

)

 

328,211

 

 

 

 

 

 

 

 

 

NET INCREASE / (DECREASE) IN CASH AND

 

 

 

 

 

 

 

CASH EQUIVALENTS

 

$

92,686

 

 

($845,653

)

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, BEGINNING

 

 

 

 

 

 

 

OF PERIOD

 

$

423,304

 

$

1,448,607

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

515,990

 

$

602,954

 

 

See Accompanying Notes to Financial Statements

 

 

5

 


SECURED INVESTMENT RESOURCES FUND, L.P. II

(A LIMITED PARTNERSHIP)

 

NOTES TO FINANCIAL STATEMENTS

 

(UNAUDITED)

 

FOR THE SIX MONTHS ENDED JUNE 30, 2006

 

NOTE A--BASIS OF PRESENTATION

 

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of these quarterly periods have been included. The financial statements as of and for the periods ended June 30, 2006 and 2005, as well as December 31, 2005, are unaudited. The results of operations for the interim periods shown in this report are not necessarily indicative of the results of operations that may be expected for any other interim period or for the full fiscal year. Certain amounts for 2005 have been reclassified to conform with the 2006 presentation.

 

NOTE B--REAL ESTATE DEBT

 

 

Mortgage debt consists of the following:

 

 

June 30,

December 31,

 

2006

2005

Bonds Payable: Oak Terrace

$9,000,000

$9,000,000

 

 

 

First Mortgages:

 

 

Sunwood Village Apartments

$9,458,562

$9,539,055

Bayberry Crossing Shopping Ctr.

2,375,295

2,393,323

 

$11,833,857

$11,932,328

 

Interest expense totaled $690,689 and $760,392 during the first two quarters of 2006 and 2005, respectively.

 

NOTE C--RELATED PARTY TRANSACTIONS

 

Millenium Management, LLC performs various professional services for the Partnership, primarily tax accounting, audit preparation, SEC report preparation, and investor services. No fees were paid by the Partnership to

 

 

6

 


Millenium Management, LLC or its agents in the three months ended June 30, 2006 or 2005.

 

 

Amounts due from related parties consist of the following:

 

 

 

June 30,

December 31,

 

2006

2005

 

 

 

Secured Investment Resources
     Fund, L.P.

 

$ 994,281

 

$817,261

 

 

 

 

 

The Partnership has no employees and depends on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.

 

No affiliate of the General Partner receives any compensation from the Partnership for providing management services.

 

The Partnership carries insurance (where applicable) for property/excess property risks, boiler and machinery risks, earthquake, and general/excess liability through insurance polices obtained by Everest Properties II, LLC, an affiliate of the General Partner, from insurers unaffiliated with the General Partner. During the six months ended June 30, 2006, the Partnership paid directly to AON, an insurance broker engaged by Everest Properties II, LLC $117,546 for its insurance coverage. This payment reflects coverage for the Partnership for the period from May 1, 2006 to April 30, 2007. The Partnership paid approximately $104,594 to AON for its insurance coverage during the year ended December 31, 2005 (reflecting coverage for the period from May 1, 2005 to April 30, 2006).

 

NOTE D--CASH DISTRIBUTIONS

 

No cash distributions have been made since October 1998. Future distributions will only be made from excess cash flow not needed for working capital reserves.

 

NOTE E--CONTINGENCIES

 

Environmental

 

Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for,

 

 

7

 


the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of properties, we could potentially be liable for environmental liabilities or costs associated with our properties or properties we acquire or manage in the future.

 

We have made no determination concerning whether our legal obligations, if any, to remove or remediate hazardous substances may be conditional asset retirement obligations as defined in FASB Interpretation No. 47, Conditional Asset Retirement Obligations. Except in limited circumstances where the asset retirement activities are expected to be performed in connection with a planned construction project or property casualty, we believe that the fair value of our asset retirement obligations, if any, cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations.

 

Mold

 

The Partnership has not been named as a defendant in any lawsuits that have alleged personal injury and property damage as a result of the presence of mold. However, we are aware of lawsuits against owners and managers of other multi-family properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. We do not have insurance coverage for property damage loss claims specifically arising from the presence of mold and for personal injury claims related to mold exposure. We believe our current policies and procedures will prevent or eliminate mold exposure from our properties and will minimize the effects that mold may have on our residents. To date, we have not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change, we can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on our consolidated financial condition or results of operations.

 

 

8

 


Litigation

Sunwood Village Litigation

On March 8, 2005, Mega Ventures, LLC filed Case No. A500656 in the District Court of Clark County, Nevada, to enforce an agreement to sell the Partnership’s Sunwood Village Apartments, which agreement was signed by the Partnership’s former general partners. The Partnership believes that the underlying agreement was terminated or is otherwise not enforceable and that it is in the best interest of the Partnership not to sell Sunwood Village for the price to which the former general partners agreed. The Partnership believes that the outcome of this litigation will likely have a material impact on the value of the Partnership.

Litigation Against Former General Partner

On November 9, 2005, the Partnership filed Case No. 05CV08810 in the District Court of Johnson County, Kansas, alleging that the Partnership’s former general partner, James R. Hoyt, failed to make the first required payment on a promissory note Mr. Hoyt signed in order to repay $2,500,000 that he owed/owes to the Partnership. This litigation was settled in January 2007. Pursuant to the settlement, Mr. Hoyt agreed to have judgment entered in the Partnership’s favor in the amount of $2,750,000, and to pay $100,000 to the Partnership in cash immediately. As part of the settlement, Mr. Hoyt has provided information regarding his assets and income that, if true, indicates that the Partnership is unlikely to be able to collect any significant portion of the balance of the judgment. The settlement requires Mr. Hoyt to provide documents and to testify under oath regarding his financial situation, and provides the Partnership with a year to investigate further in order to attempt to verify such information. If Mr. Hoy misrepresented his financial condition, the Partnership will be entitled to attempt to collect the balance of the judgment. Otherwise, the judgment will be discharged at the end of such time. The general partner believes the settlement is more favorable to the Partnership than what the Partnership would likely have been able to achieve through contested litigation. The Partnership does not believe that the ultimate outcome of this litigation will have a material adverse effect on the Partnership’s consolidated financial condition or results of operations.

The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature.

 

NOTE F--SUBSEQUENT EVENT

 

On September 12, 2006, Sunwood Village Joint Venture, Limited Partnership, a Nevada limited partnership, filed a voluntary petition for relief under the provisions of Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Nevada, Case No. BK-S-06-12463. The registrant holds a limited partnership interest in Sunwood that represents a material portion, but not substantially all, of the assets of the registrant.

 

 

9

 


The bankruptcy is occasioned by the maturity of the mortgage loan on Sunwood’s property at the same time Sunwood is effectively prevented from selling or refinancing the property because of the lis pendens recorded by Mega Ventures against the property relating to the litigation over their attempt to purchase the property.

 

The Sunwood Village litigation described above was removed to the bankruptcy court and will continue in that forum. Pursuant to Chapter 11 of the U.S. Bankruptcy Code, Sunwood retains possession and control of its assets and is operating its business as a debtor in possession while being subject to the jurisdiction of the Bankruptcy Court.

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

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GENERAL

--------------

 

The information contained herein and the documents incorporated herein by reference, if any, contain forward-looking statements that have been made within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are based on current expectations, estimates and projections about the Partnership’s industry, management beliefs, and certain assumptions made by the Partnership’s management and involve known and unknown risks, uncertainties and other factors. Such factors include the following: general economic and business conditions, which will, among other things, affect the demand for retail space or apartment rentals, availability and creditworthiness of prospective tenants, lease rents and the terms and availability of financing; risks of real estate development and acquisition; governmental actions and initiatives; and environmental and safety requirements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Forward-looking statements that were true, or reasonably expected, at the time made, may ultimately prove to be incorrect or false. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of future events or changes to future operating results.

 

ORGANIZATION AND CAPITALIZATION

--------------------------------------------------------

 

Secured Investment Resources Fund, L.P. II, a Delaware limited partnership (the “Partnership”), was formed on July 1, 1986, for the purpose of investing in existing income-producing commercial and residential real estate.

 

 

10

 


The current general partner is Millenium Management, LLC, having taken over the management of the Partnership from a receiver, in March 2005. The Partnership began operations on September 24, 1988, and as of June 30, 2006, owned and operated one shopping center located in Kansas City, Missouri and two multi family residential apartment complexes located in Las Vegas, Nevada and Springfield, Illinois.

 

The Partnership commenced a public offering on September 25, 1986 in order to fund the Partnership’s real property acquisitions. The partnership terminated its public offering on September 24, 1988, raising $26,830,500 from the sale of 53,661 limited partner interests.

 

RESULTS OF OPERATIONS

--------------------------------------

 

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2006 TO THREE

MONTHS ENDED JUNE 30, 2005

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The Partnership recognized a net loss of $44,824 for the three months ended June 30, 2006 as compared to net loss of $151,756 for the same period in 2005. The increase is primarily due to the following factors:

 

an increase in revenues of $169,769 or 12.8%, to $1,487,621 for the three months ended June 30, 2006 as compared to $1,317,852 for the three months ended June 30, 2005 due to an increase in occupancy at the Las Vegas and Springfield properties; and

 

the increase in revenues was partially offset by an increase in expenses (due in part to inflation) of $62,837 or 4.3%, to $1,532,445 for the three months ended June 30, 2006 as compared to $1,469,608 for the three months ended June 30, 2005.

 

 

 

11

 


COMPARISON OF SIX MONTHS ENDED JUNE 30, 2006 TO SIX MONTHS ENDED JUNE 30, 2005

--------------------------------------------------------------------------------------------------

 

The Partnership recognized net income of $26,341 for the six months ended June 30, 2006 as compared to net loss of ($310,342) for the same period in 2005. The increase is primarily due to the following factors:

 

interest income increased by $271,431 to $284,856 for the six months ended June 30, 2006 as compared to $13,425 for the six months ended June 30, 2005. The net increase is due to the recognition of prior years’ interest on a note from Secured Investment Resources Fund, LP; and

 

rental revenues increased by $205,037 or 8.9%, to $2,508,138 for the six months ended June 30, 2006 as compared to $2,303,101 for the six months ended June 30, 2005 due to an increase in occupancy at the Las Vegas and Springfield properties.

 

The effect of the increase in revenue was partially offset by an increase in expenses of $100,278 or 3.5%, to $3,001,248 for the six months ended June 30, 2006 as compared to $2,900,970 for the six months ended June 30, 2005. The increase is primarily due to an increase in depreciation of $99,351.

 

LIQUIDITY AND CAPITAL RESOURCES

-------------------------------------------------------

 

The Partnership has had insufficient funds to hire an independent registered public accounting firm to complete audits of the Partnership’s annual financial statements and reviews of the Partnership’s quarterly financial statements. The General Partner has concluded that the Partnership’s expected cash flow, revenues and working capital is insufficient to meet the Partnership’s current and foreseeable future operating requirements. Because the cash flow, revenues and expenses of the Partnership will depend on future facts and circumstances relating to the Partnership’s properties, as well as market and other conditions beyond the control of the Partnership, a possibility exists that cash flow deficiencies have occurred, are continuing to occur and may occur and continue to occur for an extended period of time.

 

The cash on hand at June 30, 2006 may be used for (a) the capital improvement requirements of the Partnership’s properties, (b) legal costs regarding the Mega Ventures, LLC lawsuit, and (c) for other general Partnership purposes, including the costs of leasing vacant or soon to be vacant space, and costs of compliance with Section 404 of the Sarbanes-Oxley Act of 2002, and other regulatory and public company costs.

 

Other than as described above, management is not aware of any significant trends, events, commitments for capital expenditures or uncertainties that will or are likely to materially impact the Partnership’s liquidity.

 

 

12

 


Net cash provided by operating activities of $457,831 for the six months ended June 30, 2006 included (i) net income of $26,341, (ii) non-cash adjustments of $495,327 for depreciation and amortization expense, and (iii) a net change in operating assets and liabilities of ($63,837).

 

Net cash used by operating activities of ($1,078,991) for the six months ended June 30, 2005 included (i) net loss of ($310,342), (ii) non cash adjustments of $395,976 for depreciation and amortization expense, and (iii) a net change in operating assets and liabilities of ($1,164,625).

 

Net cash used in investing activities of $111,844 for the six months ended June 30, 2006 was for capital expenditures on the Partnership’s property investments.

 

Net cash used in investing activities of $94,873 for the six months ended June 30, 2005 was for capital expenditures on the Partnership’s property investments.

 

Net cash used in financing activities of $253,301 for the six months ended June 30, 2006 included (i) principal repayments on mortgage loans payable of $98,521, (ii) an increase in restricted cash of $112,444, and (iii) an increase in debt financing and other assets of $42,336.

 

Net cash used in financing activities of $472,868 for the six months ended June 30, 2005 included (i) principal repayments on mortgage loans payable of $192,514, (ii) an increase in restricted cash of $280,354.This was offset by an infusion of capital in Sunwood JV subsidiary of $801,000.

 

OFF-BALANCE SHEET ARRANGEMENTS

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The Partnership has no off-balance sheet arrangements as contemplated by Item 303(c) of Regulation S-B.

 

ITEM 3. CONTROLS AND PROCEDURES.

----------

-----------------------------------------------

 

The President and Chief Financial Officer of Millenium Management, LLC, the general partner of the Partnership, are the principal executive officer and principal financial officer of the Partnership. However, as the Partnership has been unable to engage an independent certified accountant to audit the books and records of the Partnership for the period in which Millenium has been the general partner of the Partnership and the period relating back to the prior general partner, neither the President nor the Chief Financial Officer of Millenium have been able to evaluate, in accordance with Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (the “Act”), the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-(e) of the Act) as of the end of the period covered by this report. However, the President and the Chief Financial Officer of Millenium Management

 

 

13

 


LLC believe that as of the end of the period covered by this report the Partnership’s disclosure controls and procedures are effective to provide reasonable assurance that information disclosed by the Partnership and its subsidiaries is accurate.

 

There were no changes in the Partnership’s internal control over financial reporting that occurred during the Partnership’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

---------------------------------------------

 

Item 1.

LEGAL PROCEEDINGS

 

Sunwood Village Litigation

On March 8, 2005, Mega Ventures, LLC filed Case No. A500656 in the District Court of Clark County, Nevada, to enforce an agreement to sell the Partnership’s Sunwood Village Apartments, which agreement was signed by the Partnership’s former general partners. The Partnership believes that the underlying agreement was terminated or is otherwise not enforceable and that it is in the best interest of the Partnership not to sell Sunwood Village for the price to which the former general partners agreed. The Partnership believes that the outcome of this litigation will likely have a material impact on the value of the Partnership.

Litigation Against Former General Partner

On November 9, 2005, the Partnership filed Case No. 05CV08810 in the District Court of Johnson County, Kansas, alleging that the Partnership’s former general partner, James R. Hoyt, failed to make the first required payment on a promissory note Mr. Hoyt signed in order to repay $2,500,000 that he owed/owed to the Partnership. This litigation was settled in January 2007. Pursuant to the settlement, Mr. Hoyt agreed to have judgment entered in the Partnership’s favor in the amount of $2,750,000, and to pay $100,000 to the Partnership in cash immediately. As part of the settlement, Mr. Hoyt has provided information regarding his assets and income that, if true, indicates that the Partnership is unlikely to be able to collect any significant portion of the balance of the judgment. The settlement requires Mr. Hoyt to provide documents and to testify under oath regarding his financial situation, and provides the Partnership with a year to investigate further in order to attempt to verify such information. If Mr. Hoy misrepresented his financial condition, the Partnership will be entitled to attempt to collect the balance of the judgment. Otherwise, the judgment will be discharged at the end of such time. The general partner believes the settlement is more favorable to the Partnership than what the Partnership would likely have been able to achieve through contested litigation. The Partnership does not believe that the ultimate outcome of this litigation will have a material adverse effect on the Partnership’s consolidated financial condition or results of operations.

 

 

14

 


The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising outside of the ordinary course of business.

 

Item 2.

CHANGES IN SECURITIES

 

 

Inapplicable.

 

Item 3.

DEFAULTS UPON SENIOR SECURITIES

 

 

None.

 

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

 

Inapplicable.

 

Item 5.

OTHER INFORMATION

 

 

Inapplicable.

 

Item 6.

EXHIBIT AND REPORTS ON FORM 8-K

 

 

(a) Exhibits

 

 

None.

 

 

 

15

 

 

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