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 March 31, 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 May 13, 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
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Part 1: Financial Information
Item 1. Financial Statements
95 TCI, Inc.
BALANCE SHEET
March 31, 1996
ASSETS
Cash ($875,509, restricted) $ 875,658
Investments in Tax Certificates, at cost 3,714,461
Deferred management fees 550,022
Offering costs, net of amortization 86,388
$5,226,529
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Interest payable $ 87,900
Due to shareholders 10,000
Debentures payable 5,860,000
Total liabilities 5,957,900
Stockholders' equity:
Common stock, $ 1.00 par value;
7,500 authorized,
200 issued and outstanding $ 200
Retained earnings (731,571) (731,371)
$5,226,529
The accompanying notes are an integral part of these statements.
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95 TCI, Inc.
Statement of Operations
For The Three Months Ended March 31, 1996
Revenues $ 29,833
Operating Expenses:
Management fees 125,861
Interest expense 192,165
Trust management fees 5,076
Professional fees 3,363
Bank charges 30
Taxes and licenses 200
Postage 69
Miscellaneous expense 98
Total operating expenses 326,862
Net Loss $(297,029)
The accompanying notes are an integral part of these statements.
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95 TCI, INC.
Statement of Cash Flows
For The Three Months Ended March 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(297,029)
Adjustments to reconcile net income to
net cash provided by operating
activities
Decrease in interest payable (175,800)
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (472,829)
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of tax certificates 849,975
Deferred management fees 8,960
Offering costs 16,365
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 875,300
NET INCREASE (DECREASE) IN CASH 402,471
CASH AT BEGINNING OF YEAR 473,187
CASH AT END OF YEAR $ 875,658
The accompanying notes are an integral part of these statements.
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95 TCI, Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 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. To the extent that revenues generated by the Company exceed
its expenses, including the payment of the obligations under the notes,
and management fees, the Company intends to acquire additional tax
certificates. There have been $849,975 redemptions to date during the
current period.
The Company currently has $3,714,461 invested in tax certificates. At
this time the income to be derived from this investment is uncertain.
The ultimate redemption or other disposition of the certificates is
based on decisions made by the underlying property owner, who may
redeem the certificate by paying the amount due plus interest or who
may wait and force the certificate holder to take steps to acquire the
property underlying the certificate. Since the future income stream
is uncertain and the Company will incur substantial expenses regardless
of the status of the tax certificate portfolio, additional equity
capital may 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 March 31, 1996 costs of
$16,365 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
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95 TCI, Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
B) Deferred Management Fees (continued)
recognizes as expense a pro rata amount relative to the sale or
redemption of tax certificates previously purchased. Total
management fees remaining deferred are $550,022, amounts
recognized as current expense are $125,861.
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 $5,860,000 of 12% Callable Fixed Rate
Thirty-Six Month Term Notes. The notes are secured by pledged
collateral with a book value of $3,714,491, 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 March 31, 1996
these fees amounted to $116,900. 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.
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95 TCI, Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
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. The debenture balance as of March 31, 1996 is
$5,860,000. Shareholders loaned $80,000 toward startup costs of this amount
$10,000 remains owing. The Company holds tax certificates with a cost basis
of $3,714,461, as of that date.
The Company had two major expenditures during this period, the first being
$351,600 in interest expense of which $263,700 was accrued from a prior
period. The second was $116,900 in management fees to TCI Management, Inc.
the management company.
The management fees to the related company, TCI Management, Inc., which
have totalled $737,668 since inception of the contract to cover the
management of the portfolio until liquidation. Of this amount $550,022 is
reflected as a deferred charge to be amortized as the portfolio is
liquidated during the second and third years of portfolio life.
Of the cash on hand, $875,509, 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
The loss from operations is expected in this industry in the first year due
to the start up expenses which are expected in the due course of business.
Revenues 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 portfolios of tax certificates and deeded
properties, 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. The timing of such cash flows however is
uncertain, since the tax certificate may be redeemed in the near term, or
the property may be sold if no redemption takes place. Accordingly the
future income stream will fluctuate and the Company will incur continuing
expenses regardless of the status of the tax certificate portfolio, and
additional equity capital may 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)
May 13, 1996 G. Kurtis Ulrich
Date G. Kurtis Ulrich, President
May 13, 1996
