-----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, OqKn9vHLK9Gznd3mbs8auXBL8vwwPXd5dLco+e6/0wzlZ15p5/jCXj3uvNScuxWH oFWl66LTbE6fxcN5q8nU9Q== 0000804671-02-000006.txt : 20020814 0000804671-02-000006.hdr.sgml : 20020814 20020813173510 ACCESSION NUMBER: 0000804671-02-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESOURCES ACCRUED MORTGAGE INVESTORS 2 LP CENTRAL INDEX KEY: 0000804671 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 133368726 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16856 FILM NUMBER: 02730953 BUSINESS ADDRESS: STREET 1: 5 CAMBRIDGE CENTER CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6172343000 MAIL ADDRESS: STREET 1: 5 CAMBRIDGE CENTGER CITY: CAMBRIDGE STATE: MA ZIP: 02142 FORMER COMPANY: FORMER CONFORMED NAME: RESOURCES ACCRUED MORTGAGE INVESTORS LP SERIES 87 DATE OF NAME CHANGE: 19870518 FORMER COMPANY: FORMER CONFORMED NAME: RESOURCES ACCRUED MORTGAGE INVESTORS LP SERIES 88 DATE OF NAME CHANGE: 19880327 10-Q 1 ram2q02e.txt FOR THE QUARTER ENDED JUNE 30, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 Or [ ] 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 RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P. ---------------------------------------------------- (Exact name of small business issuer as specified in its charter) DELAWARE 13-3368726 --------------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1175 W. MOANA LANE, SUITE 200 RENO, NEVADA 89509 ----------------------------- ---------- (Address of principal (Zip code) executive offices) Issuer's telephone number: (775) 825-3355 ------------------------- Transitional small business disclosure format: YES ___ NO _X_ PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P. BALANCE SHEETS
JUNE 30, DECEMBER 31, 2002 2001 ------------ ------------ (UNAUDITED) ASSETS Investment in mortgage loan................. $15,979,355 $15,979,355 Cash and cash equivalents................... 1,484,150 754,136 Other Assets................................ 15,845 - ----------- ----------- Total assets............................. $17,479,350 $16,733,491 =========== =========== LIABILITIES AND PARTNERS' EQUITY Liabilities Accounts payable and accrued expenses.... $ 53,201 $ 124,147 ----------- ----------- Total liabilities........................... 53,201 124,147 ----------- ----------- Commitments and contingencies Partners' equity Limited partners' equity (187,919 units issued and outstanding)................ 16,990,531 16,194,146 General partners' equity................. 435,618 415,198 ----------- ----------- Total partners' equity...................... 17,426,149 16,609,344 ----------- ----------- Total liabilities and partners' equity........ $17,479,350 $16,733,491 =========== ===========
The accompanying Notes to the Financial Statements are an integral part of these statements. -2- RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P. STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED -------------------------- ------------------------ JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2002 2001 2002 2001 ------------ ------------ ---------- ---------- Revenues Short-term investment interest........... $ - $ 45,764 $ - $ 104,271 Interest income on mortgage loan......... 485,284 533,172 919,182 533,172 Interest and other income................ 5,552 150 9,096 7,850 ----------- ----------- ---------- ---------- Total revenues........................ 490,836 579,086 928,278 645,293 Costs and expenses General and administrative............... 46,528 80,107 111,473 103,267 ----------- ----------- ---------- ---------- Total costs and expenses.............. 46,528 80,107 111,473 103,267 ----------- ----------- ---------- ---------- Net income............................... $ 444,308 $ 498,979 $ 816,805 $ 542,026 =========== =========== ========== ========== Net income attributable to: Limited partners......................... $ 433,200 $ 486,504 $ 796,385 $ 528,475 General partners......................... 11,108 12,475 20,420 13,551 ----------- ----------- ---------- ---------- $ 444,308 $ 498,979 $ 816,805 $ 542,026 =========== =========== ========== ========== Net income per unit of limited partnership interest (187,919 units outstanding)..... $ 2.31 $ 2.59 $ 4.24 $ 2.81
The accompanying Notes to the Financial Statements are an integral part of these statements. -3- RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P. STATEMENT OF PARTNERS' EQUITY (UNAUDITED) Limited General Total Partners' Partners' Partners' Equity Equity Equity ----------- ----------- ----------- Balance - January 1, 2002 $16,194,146 $ 415,198 $16,609,344 Net income 796,385 20,420 816,805 ----------- ----------- ----------- Balance - June 30, 2002 $16,990,531 $ 435,618 $17,426,149 =========== =========== =========== The accompanying Notes to the Financial Statements are an integral part of these statements. -4- RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P. STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30 ---------------------- 2002 2001 ---------- ---------- Cash flows from operating activities Net income..................................... $ 816,805 $ 542,026 Changes in operating assets and liabilities: Other assets.............................. (15,845) - Accounts payable and accrued expenses..... (70,946) (19,363) ---------- ---------- Net increase in cash and cash equivalents...... 730,014 522,663 Cash and cash equivalents, beginning of period. 754,136 4,342,270 ---------- ---------- Cash and cash equivalents, end of period....... $1,484,150 $4,864,933 ========== ==========
The accompanying Notes to the Financial Statements are an integral part of these statements. -5- RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P. NOTES TO FINANCIAL STATEMENTS NOTE 1. INTERIM FINANCIAL INFORMATION The accompanying financial statements, footnotes and discussions should be read in conjunction with the financial statements, related footnotes and discussions contained in the Resources Accrued Mortgage Investors 2, L.P. (the "Partnership") Annual Report on Form 10-KSB for the year ended December 31, 2001. 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, 2001, was derived from audited financial statements at such date. The results of operations for the three and six month periods ended June 30, 2002, and 2001 are not necessarily indicative of the results to be expected for the full year. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Investment in mortgage loan The Partnership was originally formed to invest principally in zero coupon senior and junior mortgage loans on properties owned or acquired by limited partnerships originally sponsored by affiliates of Integrated Resources, Inc., one of which the Partnership continues to own. These loans generally contained provisions whereby the Partnership may be entitled to additional interest represented by participation in the appreciation of the underlying property. The Partnership accounts for its investments in mortgage loans under the following methods: Investment Method Mortgage loans representing transactions in which the Partnership is considered to have substantially the same risks and potential rewards as the borrower are accounted for as investments in real estate rather than as loans. Although the transactions are structured as loans, due to the terms of the zero coupon mortgage, it is not readily determinable at inception that the borrower will continue to maintain a minimum investment in the property. Under the method of accounting, the Partnership will recognize as revenue the lesser of the amount of interest as contractually provided for in the mortgage loan, or its pro rata share of the actual cash flow from operations of the underlying property inclusive of depreciation and interest expense on any senior indebtedness. Interest Method Under this method of accounting, the Partnership recognizes revenue as interest income over the term of the mortgage loan so as to produce a constant periodic rate of return. Interest income will not be recognized as revenue during periods where there are concerns about the ultimate realization of the interest or loan principal. -6- Allowance for Loan Losses An allowance for loan losses is established based upon a periodic review of each of the mortgage loans in the Partnership's portfolio. In performing this review, management considers the estimated net realizable value of the mortgage loan or collateral as well as other factors, such as the current occupancy, the amount and status of any senior debt, the prospects for the property and the economic situation in the region where the property is located. Because this determination of net realizable value is based upon projections of future economic events which are inherently subjective, the amounts ultimately realized at disposition may differ materially from the carrying value at each year end. The allowance is inherently subjective and is based upon management's best estimate of current conditions and assumptions about expected future conditions. The Partnership may provide for additional losses in subsequent periods and such provisions could be material. Cash and Cash Equivalents For the purpose of the statements of cash flows, the Partnership considers all short-term investments which have original maturities of three months or less to be cash equivalents. Substantially all of the Partnership's cash and cash equivalents are held at one financial institution. Fair Value of Financial Instruments The fair value of financial instruments is determined by reference to market data and other valuation techniques as appropriate. The Partnership's financial instruments include cash and cash equivalents and an investment in a mortgage loan. Unless otherwise disclosed, the fair value of financial instruments approximates their recorded value. Net Income Per Unit of Limited Partnership Interest Net income per unit of limited partnership interest is computed based upon the number of units outstanding (187,919) during the year. Income Taxes No provisions have been made for federal, state and local income taxes, since they are the personal responsibility of the partners. 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 and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. -7- Recently Issued Accounting Standards The Financial Accounting Standards Board ("FASB") has issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of SFAS No. 133." These statements require entities to recognize all derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether they qualify for hedge accounting. These statements were effective for fiscal years beginning after June 15, 2000. There was no effect from these statements on the Partnership's financial statements for 2001. In July 2001, the FASB issued SFAS No. 141 "Business Combinations". SFAS No. 141 requires that all business combinations be accounted for under the purchase method of accounting. SFAS No. 141 also changes the criteria for the separate recognition of intangible assets acquired in a business combination. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001. This statement will not effect the Partnership's financial statements. In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS No. 142 addresses accounting and reporting for intangible assets acquired, except for those acquired in a business combination. SFAS No. 142 presumes that goodwill and certain intangible assets have indefinite useful lives. Accordingly, goodwill and certain intangibles will not be amortized but rather will be tested at least annually for impairment. SFAS No. 142 also addresses accounting and reporting for goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. This statement should not have a material effect on the Partnership's financial statements. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of a Disposal of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business. This Statement also amends ARB No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The provisions of this Statement generally are to be applied prospectively. It is not expected that this statement will have a material effect on the Partnership's results of operations. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections," which updates, clarifies and simplifies existing accounting pronouncements. This statement rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt an amendment of Accounting Principals Board Opinion ("APB") No. 30 "Reporting the Results of Operations - Reporting the -8- Effects of a Disposal of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business. As a result, the criteria in APB 30 will be used to classify those gains and losses. FASB No. 64, "Extinguishments of Debts Made to Satisfy Sinking-Fund Requirements (an amendment of FASB No. 4)" is no longer necessary because FASB No. 4 has been rescinded. FASB No. 44, "Accounting for Intangible Assets of Motor Carriers" is no longer necessary since the transition to the Motor Carrier Act of 1980 has been completed. FASB No. 145 amends FASB No. 13, "Accounting for Leases" to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. FASB No. 145 also makes technical corrections to existing pronouncements. While these corrections are not substantive in nature, in some instances, they may change accounting practice. FASB No. 145 will be effective for fiscal years beginning after May 15, 2002, with early adoption encouraged. Upon adoption, enterprises must reclassify prior period items that do not meet the extraordinary item classification criteria in APB 30. The Partnership does not expect that this statement will have a material effect on the Partnership's financial statements. NOTE 3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES Through December 31, 2001, the managing general partner of the Partnership was RAM Funding, Inc. and the associate general partner was Presidio AGP Corp. ("Presidio"). Effective January 1, 2002, pursuant to the General and Limited Partner Interest Assignment Agreement (the "Assignment Agreement"), the managing general partner and associate general partner interests in the Partnership were acquired by Maxum LLC ("Maxum" or the "General Partner"). The General Partner does not believe that this transaction will have a material effect on the operations of the Partnership. As of December 31, 2001, affiliates of both Presidio and Maxum had acquired 57,695 and 10,389 units, respectively, of limited partnership interest of the Partnership. Effective January 1, 2002, in accordance with the Assignment Agreement, the units previously held by affiliates of Presidio were acquired by affiliates of Maxum. On March 29, 2002, another affiliate of Maxum initiated a tender offer. The tender offer is to expire on August 14, 2002, unless extended. Currently, Maxum affiliates own 76,694 units, which represent 40.8% of the issued and outstanding limited partnership units of the Partnership. An affiliate of Maxum currently controls the property adjacent to the Sierra Marketplace in Reno, Nevada. Another affiliate of Maxum oversees the management of Sierra Marketplace. No distributions were made for the fiscal quarter ended June 30, 2002. An affiliate of the General Partner controls the property adjacent to the Sierra Marketplace. Another affiliate of the General Partner oversees the management of the Sierra Marketplace. In order to increase traffic flow to the center, the management of Sierra Marketplace and the Registrant have begun construction and development to make it easier for customers from the adjacent property to visit the center. -9- NOTE 4 - INVESTMENTS IN MORTGAGE LOAN AND ALLOWANCE FOR LOAN LOSSES The Partnership, which originally invested in zero-coupon, nonrecourse senior and junior mortgage loans, currently holds an interest in one outstanding mortgage loan. During the first quarter of 1997, the obligor under the Partnership's remaining mortgage loan wrote the property down to what its management believed to be its estimated fair market value of $15,875,000. Management of the Partnership performed its own evaluation at that time and determined that this amount was a fair estimate of the property value. The outstanding balance of the loan at December 31, 1996, was approximately $15,979,000 and it was unlikely that any additional interest accrued on the loan would ultimately be recovered from the value of the underlying property. Consequently, as of January 1, 1997, the Partnership ceased accruing interest on the loan. In December 2000, the Partnership and the borrower agreed on an extension to the loan as follows: 1. To extend the term of the loan until February 28, 2003. 2. The borrower placed in escrow a deed as well as documents necessary to convey the property, which documents will be released to the Partnership on the earlier (A) March 1, 2003, (B) at such time as a third-party purchaser is identified to acquire the Sierra Marketplace located in Reno, Nevada, the property securing the loan (the "Sierra property") or (C) at any time after March 1, 2002 if the Partnership deems it necessary to protect its economic interest. As of June 30, 2002, the Partnership has not deemed it necessary to protect its economic interests and, therefore, the deed and documents remain in escrow. 3. The borrower will pay to the Partnership, to be applied towards the Sierra loan, all cash flow generated from the property in excess of $100,000 per year. 4. The borrower will have an appraisal prepared on the Sierra property to determine if an excess payment was due and, if such a payment was due, to make such payment. On March 27, 2001, the Partnership received an appraisal from the borrower which valued the Sierra property at $20,000,000. As a result, based on current information available to the Partnership, no excess payment is presently required. 5. The borrower has the right to prepay the loan after the initial maturity date (February 2001) by paying to the Partnership the sum of the then unpaid principal balance of the loan together with accrued interest and other charges due under the loan and 66% of the value of the Sierra property in excess of such amount. In addition, the Partnership acquired significantly more input over the operation of the Sierra property, including the selection of the management company, leasing programs and capital improvements. In this regard, an affiliate of Presidio provided property management services at the Sierra property from March 2001 to December 31, 2001, and, effective February 1, 2002, property management services are overseen by an affiliate of the General Partner. -10- A summary of mortgage activity is as follows:
Six Months Ended Year Ended June 30, 2002 December 31, 2001 --------------------------------------- ------------------------------------ Investment Interest Investment Interest Method Method Total Method Method Total ---------- -------- --------- ---------- ---------- ----------- Opening balance $ - $15,979,355 $15,979,355 $ - $15,979,355 $15,979,355 Recovery of loan losses - - - - - - Payments received, net - - - - - - ---------- -------- --------- ---------- ---------- ---------- Ending balance $ - $15,979,355 $15,979,355 $ - $15,979,355 $15,979,355 ========== ======== ========= ========== ========== ==========
Information with regard to the partnership's mortgage loan is as follows:
Current Mortgage Mortgage Interest Compound Loan Maturity Amount Placement Description Rate % Period Type Date Date Advanced Fees - ----------- -------- -------- ---- ------ -------- ---------- --------- Shopping Center Sierra Marketplace Reno, Nevada 11.220 Monthly 1st 2/10/89 3/01/03 $6,500,000 $ 385,757
-11-
Interest Recognized Carrying Value Contractual Balance ----------------------- -------------------------- -------------------------- June 30, 2001 and Reserves/ June 30, December 31, June 30, December 31, 2002 Prior Write-offs Proceeds 2002 2001 2002 2001 --------- ----------- ---------- -------- ----------- ------------ ---------- ------------ Shopping Center Sierra Marketplace Reno, Nevada $ 919,182 $10,377,518 $ - $ - $15,979,355 $15,979,355 $26,622,081 $26,062,593 ========= =========== ========== ======== =========== =========== =========== ===========
-12- ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (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, and increased operating costs, including insurance costs) detailed in the disclosure contained in this Form 10-QSB and the other 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, does not take into account the effects of any changes to the Partnership's operations. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. This item should be read in conjunction with the financial statements and other items contained elsewhere in the report. Liquidity and Capital Resources The Partnership initially invested the net proceeds of its 1988 initial public offering in four zero coupon first and junior mortgage loans aggregating $23,300,000. These loans were secured by properties owned principally by privately and publicly syndicated limited partnerships originally sponsored by affiliates of the general partners. The Partnership currently retains an investment in one of the original four mortgage loans, which had an initial principal balance of approximately $6,500,000. During the first quarter of 1997, the obligor under the Partnership's remaining mortgage loan wrote the property down to what its management believed to be its estimated fair market value of $15,875,000. Management of the Partnership performed its own evaluation at that time and determined that this amount was a fair estimate of the property value. The outstanding balance of the loan at December 31, 1996, was approximately $15,979,000 and it was unlikely that any additional interest accrued on the loan would ultimately be recovered from the value of the underlying property. Consequently, as of January 1, 1997, the Partnership ceased accruing interest on the loan. At June 30, 2002, the contractual balance of principal and accrued interest on this loan was $26,622,081 and the Partnership had a carrying value in this loan of $15,979,355. The Registrant's remaining mortgage note contains a provision which requires the borrower to provide a current appraisal based upon certain conditions or in some cases upon request. If an appraisal indicates the value of all indebtedness senior to and including the Partnership's loan, taking into account principal plus accrued interest in excess of 5% per annum, exceeds 85% of the then current appraisal, the borrower must repay the indebtedness to a point where the 85% loan to value ratio is restored. The borrower advised the Partnership in 2000 that it believed that the value of the Sierra property had increased since the beginning of 1997 and that, depending on the results of an appraisal, the value of the Partnership's mortgage loan may exceed the value at which the mortgage loan was then being carried on the Partnership's financial statements. In addition, the loan, which was scheduled to mature on February 1, 2001, was extended and modified. -13- See "Item 1. Financial Statements," Note 3. On March 27, 2001, the Partnership received an appraisal from the borrower which valued the Sierra property at $20,000,000. As a result, based on current information available to the Partnership, no excess payment is presently required. The Partnership's level of liquidity based on cash and cash equivalents increased by $730,014 to $1,484,150 during the six months ended June 30, 2002, as compared to December 31, 2001. The increase is due to cash provided by operating activities. Cash and cash equivalents are invested in short-term instruments and are expected to be sufficient to pay administrative expenses during the term of the Partnership. From the settlement of the class action litigation (see "Part II, Item 1. Legal Proceedings"), the Partnership will make a distribution to its partners, as well as other members of the plaintiffs class in an amount of approximately $37.00 per unit. The distribution should be made by August 31, 2002. On March 29, 2002, Virginia Springs Limited Liability Company ("Virginia Springs"), an affiliate of Maxum, commenced a tender offer to purchase 28,000 units of the Partnership's limited partner interests, representing approximately 15% of the total outstanding units, for a price of $80 per unit. On April 24, 2002, Virginia Springs increased its offer price to $95 per unit and extended the termination date to June 14, 2002, unless extended. The termination date was extended again on June 14, 2002, and, once again, on July 10, 2002, until August 14, 2002. Should this tender offer be fully subscribed, Virginia Springs, along with its affiliates, will control the majority of the outstanding units and, therefore, will be in a position to influence the outcome of all voting decisions with respect to the Partnership. Real Estate Market There has been substantial development of retail space in the Reno area over the past few years especially in close vicinity to the Sierra property. Also in the past few years, the Sierra property has lost two of its original anchor tenants and has not been able to locate new anchor tenants with similar lease terms. One of the spaces is currently being leased at a substantially reduced rental rate. The second space is currently being subleased by the original lessor at a substantial discount to a tenant until November 30, 2003, the date at which the lease expires. The remaining anchor tenant's original lease expires in August 2008. Management does not currently expect this tenant to exercise its renewal option at that time. The Partnership's potential for realizing the full value of its investment in the Sierra property is currently considered unlikely. Results of Operations Comparison of operating results for the three-month periods ended June 30, 2002, and 2001. Net income decreased by $54,671 for the three-month period ended June 30, 2002, as compared to the same period in 2001, due to decreases in revenues offset partially by decreases in costs and expenses. Revenues decreased by $88,250 for the three-month period ended June 30, 2002, as compared to the same period in 2001, due to decreases in investment interest and mortgage loan. During the second quarter of 2002 and 2001, the Partnership received all excess cash flow (as defined in the modification agreement) from the property in the form of interest payments. -14- Costs and expenses for the three-month period ended June 30, 2002, as compared to the same period in 2001, decreased to $46,528 from $80,107, a difference of $33,579. The decrease was due to better control of costs. Comparison of operating results for the six-month periods ended June 30, 2002, and 2001. Net income increased by $274,279 for the six-month period ended June 30, 2002, as compared to the same period in 2001, due to increases in revenues offset partially by increases in costs and expenses. Revenues increased by $282,985 for the six-month period ended June 30, 2002, as compared to the same period in 2001, due to increases in interest income on the mortgage loan offset partially by a decrease in short term investment interest. During the six- month period ended June 30, 2002, and the second quarter of 2001, the Partnership received all excess cash flow (as defined in the modification agreement) from the property in the form of interest payments. Costs and expenses for the six-month period ended June 30, 2002, as compared to the same period in 2001, increased slightly to $111,473 from $103,267, a difference of $8,206. Quantitative and Qualitative Disclosures about Market Risk The Partnership is not subject to market risk as its cash and cash equivalents are invested with banks. The Partnership has no loans outstanding. -15- PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS On or about May 19, 2000, Dr. Warren Heller, a limited partner of the Partnership, on behalf of himself and all others similarly situated, commenced a putative class action and derivative lawsuit in the Delaware Chancery Court against RAM Funding, Inc., Presidio AGP Corp., NorthStar Capital Investment Corporation and Charbird Enterprises, LLC, defendants, and the Partnership, as nominal defendant, seeking, among other things, monetary damages resulting from purported breaches of fiduciary duties and breaches of the Partnership's partnership agreement in connection with the March 1999 sale of the second loan made by the Partnership to Harborista Associates, LP (the "Harborista Loan") and the marketing of Harbor Plaza, the office building which secured the Harborista Loan. In addition, the action alleges breaches of fiduciary duty in connection with the purported failure of the Partnership to distribute cash and the purported failure of the Partnership to enforce the provisions of the loan secured by the Sierra property. On January 22, 2002, the parties entered into a Settlement Agreement (the "Settlement Agreement") that (i) provides for a $9,000,000 payment by the defendants to the Partnership and (ii) requires that the Partnership distribute to its partners the $9,000,000 payment, less fees and expenses awarded by the court to plaintiff's counsel (which amount is not expected to exceed approximately 20% of the settlement amount). The Settlement Agreement is subject to the approval of the court. The objection period expired on April 1, 2002 and a hearing on the approval of the Settlement Agreement was scheduled for April 15, 2002. At the hearing on April 15, 2002, due to objections to the proposed settlement, the settlement was not approved by the court and a decision was postponed to a later date. On June 4, 2002, the court approved the settlement agreement. From the settlement of this litigation, the Partnership will make a distribution to its partners, as well as other members of the plaintiffs' class in the amount of approximately $37.00 per unit, which distribution should be made by August 31, 2002. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K No Reports on Form 8-K were filed during the period ended June 30, 2002. -16- SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P. BY: MAXUM LLC General Partner BY: /S/ BEN FARAHI ------------------- Ben Farahi, Manager DATE: 08/12/2002 -17- Exhibit 99.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Resources Accrued Mortgage Investors 2, L.P. (the "Partnership"), on Form 10-QSB for the quarterly period ended June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities 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 and 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: August 12, 2002 /s/ Ben Farahi ---------------------------- Ben Farahi President and Director (Principal Executive and Financial Officer) -18- -----END PRIVACY-ENHANCED MESSAGE-----