FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996
Commission File Number: 33-93310
95 TCI, Inc.
(Exact Name of registrant as specified in its charter)
Florida
(State or Other Jurisdiction of Incorporation or Organization)
59-3312856
(IRS Employer Identification Number)
150 Second Avenue North, Suite 800
St Petersburg, Fl 33701
(Address of Principal Offices)
(813) 898-1500
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant has (1) 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 than the
registrant was required to file such reports), and (2) been subject to such
filing requirements for the past 90 days.
YES X NO
Common Stock $1.00 Par Value
(Class)
200 Shares of Common Stock Outstanding as of October 24, 1996
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95 TCI, INC.
Table of Contents
Page No.
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet 2
Statement of Operations 3
Statement of Cash Flows 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II Other Information 7
Part 1: Financial Information
Item 1. Financial Statements
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95 TCI, Inc.
BALANCE SHEET
September 30, 1996
ASSETS
Cash ($1,156,369, restricted) $1,156,517
Investments in Tax Certificates, at cost 1,494,712
Investments in Deeded Properties, at cost 431,615
Deferred management fees 350,850
Offering costs, net of amortization 58,584
$3,492,278
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Interest payable $ 73,005
Due to shareholders 10,000
Debentures payable 4,867,000
Total liabilities 4,950,005
Stockholders' equity:
Common stock, $ 1.00 par value;
7,500 authorized,
200 issued and outstanding $ 200
Retained earnings (1,457,927) (1,457,727)
$3,492,278
The accompanying notes are an integral part of these statements.
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95 TCI, Inc.
Statement of Operations
For The Three & Nine Months Ended September 30, 1996
Three Months Nine Months
Revenues $125,490 $177,652
Operating Expenses:
Management fees 459,839 594,533
Interest expense 184,508 561,912
Trust management fees 4,489 13,824
Professional fees 6,257 27,364
Officers life insurance 2,665
Bank charges 30
Taxes and licenses 540
Postage 69
Miscellaneous expense 4 102
Total operating expenses 655,097 1,201,038
Net Loss $(529,607) $(1,023,385)
The accompanying notes are an integral part of these statements.
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95 TCI, INC.
Statement of Cash Flows
For The Nine Months Ended September 30, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,023,387)
Adjustments to reconcile net income to
net cash provided by operating
activities
Decrease in liabilities (190,695)
Amortization of offering costs 44,169
Amortization of deferred management fees 208,132
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (961,781)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of Debentures (993,000)
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (993,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of tax certificates 2,638,111
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 2,638,111
NET INCREASE (DECREASE) IN CASH 683,330
CASH AT BEGINNING OF YEAR 473,187
CASH AT END OF YEAR $ 1,156,517
The accompanying notes are an integral part of these statements.
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95 TCI, Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
Note 1 - Summary of organization:
95 TCI,Inc. (The Company) was formed in the State of Florida on March 10,
1995 for the purpose of acquiring, selling, exchanging, and disposing of tax
certificates issued by the counties of the State of Indiana, and to the
extent necessary, the operation, management, and disposition of properties
acquired as a result of its ownership of tax certificates.
The Company is managed by an affiliated company, TCI Management, Inc.
(TCI Management). The principal officer of TCI Management has seventeen
years of experience in identifying, evaluating, acquiring, and selling the
tax deed property acquired or derived from such tax certificate
investments.
The Company's primary source of revenues is generated by the redemption of
tax certificate repayments or through the subsequent sale, exchange or other
disposition of tax deed property. The tax certificates may be redeemed at a
price greater than the acquisition cost of the tax certificate. There have
been $2,638,111 redemptions to date during the current period.
The Company currently has $1,494,710 invested in tax certificates, with an
additional $431,615 invested in real estate to which the Company has taken
deed. At this time the Company's best estimates of future revenue to be
derived from future certificate redemption and real estate sales indicate
that additional equity capital will be required to continue normal
operations.
Note 2 - Summary of significant accounting policies:
A) Deferred Offering Costs
Costs of $196,380 incurred in connection with the public note
offering have been deferred and will be amortized over the life
of the bonds. During the period ended September 30, 1996 costs of
$44,169 have been amortized and expensed as an addition to
interest expense.
B) Deferred Management Fees
The Company pays management fees for the identification,
acquisition and management of tax certificates purchased for
investment. These fees were paid in accordance with the
management agreement described in note 4, at the time of the
issuance of the notes described in note 3. Terms of the agreement
provide that the fees shall provide for management of the
portfolio until certificates are sold or redeemed. The Company
recognizes as expense a pro rata amount relative to the sale or
redemption of tax certificates previously purchased plus any
additional fees in excess of the original contract amount. Total
management fees remaining deferred are $350,850, amounts recognized
as current expense are $594,533.
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95 TCI, Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
C) Income taxes
The shareholders elected to be treated as a Sub-S Corporation for
tax purposes with the shareholders becoming liable for tax on
Company taxable income. Therefore, the shareholders will be personally
liable for substantially all income taxes.
Note 3 - Debentures Payable
The Company has outstanding $4,867,000 of 12% Callable Fixed Rate
Thirty-Six Month Term Notes. The notes are secured by pledged collateral
with a book value of $1,926,325, which is described as tax certificates,
proceeds from redeemed tax certificates and promissory notes from the
Company to the trustee for tax deed properties acquired by the surrender
of unredeemed tax certificates.
SouthTrust acts as trustee for the funds to be invested in pledged
collateral. The trustee disburses the funds directly to the issuing
Indiana county and collects the amounts from certificate redemptions, and
when directed by the Company redeems the debentures.
Note 4 - Related Party Transactions
The Company has entered into a management and agency agreement with TCI
Management, Inc. Under the terms of the agreement the management company
is to be compensated at a rate of nine percent (9%) of the note offering
proceeds on a graduated scale. As of September 30, 1996 current these fees
amounted to $386,400. Certain directors of the Company are shareholders
and directors of the management company.
The Company is affiliated with Pritchard, Hubble and Herr, Inc., a
registered investment advisor. The debentures were offered through
specified officers and directors of the Company. No commissions were
paid on account of such sales efforts.
Certain shareholders have loaned working capital for operating expenses.
The loans to date amount to $10,000. The loans will be repaid from
earnings of the Company, and interest is charged at the rate the
shareholders pay for the funds.
Note 5 - Contingencies
The company in the normal course of operations is involved in
litigation
with respect to its investment in tax certificates. Management believes
that such litigation will have no material financial effect.
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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
The issuance of the debentures began on August 15, 1995. The Company had
raised $10,160,000 from the issuance of these debentures. The proceeds were
earmarked for the purchase of tax certificates at auctions in the State of
Indiana during the fall of 1995. The auctions in which the company participated
resulted in purchases of only $5,068,954 in certificates. The Company
subsequently redeemed $4,300,000 in debentures no longer needed in its
acquisition activities. Further redemptions have reduced the debenture
balance as of September 30, 1996 to $4,867,000. Shareholders loaned $80,000
toward startup costs, of this amount $10,000 remains owing. The Company holds
tax certificates and deeded properties with a cost basis of $1,926,325, as of
that date.
The Company had two major expenditures during this period, the first being
$561,912 in interest expense of which $263,700 was accrued from a prior period.
The second was $594,533 in management fees to TCI Management, Inc. the
management company, of which 316,838 represents fees deferred from a prior
period.
The management fees to the related company, TCI Management, Inc., which have
totalled $1,043,168 since inception of the contract to cover the management of
the portfolio until liquidation. Of this amount $350,850 is reflected as a
deferred charge to be amortized as the portfolio is liquidated during the
remainder of portfolio life.
Of the cash on hand, $1,156,369, is on deposit with the escrow agent and its
use is restricted in accordance with the provisions summarized in the footnotes
to the financial statements.
RESULTS OF OPERATIONS
Revenues in this industry are generated as the tax certificates redeem.
Additional revenue is generated as the property owners fail to redeem and the
company acquires deed to the underlying property, and subsequently sells the
property in the market place. The inability of the Company to acquire tax
certificates in the amount originally planned ($12,000,000) has adversely
affected the financial performance of the Company due to the high fixed costs
associated with the offering of debentures and management fees calculated based
on the offering. Cash flows from portfoerties, historically are greatest
during the second and third years of existence as sales of deeded properties
increase and greater profits are realized as properties are sold. Management's
best current estimates of future cash flow indicate that additional equity
capital will be required to continue normal operations.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITIES HOLDERS
Not applicable.
Item 3. DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
95 TCI, Inc.
(Registrant)
October 25, 1996 G. Kurtis Ulrich
Date G. Kurtis Ulrich, President
October 25, 1996
