SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2004
Commission File Number 000-21458
TELECOMMUNICATIONS INCOME FUND IX, L.P.
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(Exact name of Small Business Issuer as specified in its charter)
Iowa 42-1367356
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Tama Street, Marion, Iowa 52302
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (319) 447-5700
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interest (the "Units")
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Title of Class
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filings requirements for the past 90 days.
[X] Yes [ ] No
As of July 14, 2004, 65,144 units were issued and outstanding.
TELECOMMUNICATIONS INCOME FUND IX, L.P.
INDEX
Page
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Part I. FINANCIAL INFORMATION
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Item 1. Financial Statements (unaudited)
Statements of Net Assets (Liquidation Basis) - June 30, 2004
and December 31, 2003 3
Statements of Changes in Net Assets (Liquidation Basis) - three months
ended and six months ended June 30, 2004 and 2003 4
Statements of Cash Flows - six months ended June 30, 2004 and 2003 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Controls and Procedures 8
Part II. OTHER INFORMATION
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Item 1. Legal Proceedings 8
Item 6. Exhibits 8
Signatures 9
2
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF NET ASSETS (LIQUIDATION BASIS)
(UNAUDITED)
June 30, 2004 December 31, 2003
------------- -----------------
ASSETS
Cash and cash equivalents $12,263 $35,283
Not readily marketable equity security 21,492 27,632
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TOTAL ASSETS $33,755 $62,915
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LIABILITIES
Accounts payable $ 750 $ 862
Reserve for estimated costs during the period of liquidation 32,102 56,912
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TOTAL LIABILITIES 32,852 57,774
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CONTINGENCIES (Note B)
NET ASSETS 903 5,141
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$33,755 $62,915
======= =======
See accompanying notes.
3
TELECOMMUNICATIONS INCOME FUND IX, LP.
STATEMENTS OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS) (UNAUDITED)
Three Months Ended June 30 Six Months Ended June 30
2004 2003 2004 2003
-------- -------- -------- --------
Net assets at beginning of period $ 12,130 $ 9,777 $ 5,141 $ 45,761
Income from direct financing leases 0 730 0 1,754
Interest and other income 2 75 1,801 191
Withdrawals of limited partners (16) 0 (16) (119)
Change in estimate of liquidation
value of net assets (11,213) 74,968 (6,023) 37,963
-------- -------- -------- --------
Net assets at end of period $ 903 $ 85,550 $ 903 $ 85,550
======== ======== ======== ========
See accompanying notes.
4
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30, 2004 June 30, 2003
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Operating Activities
Changes in net assets excluding withdrawals $ (4,222) $ 39,908
Adjustments to reconcile to net cash from operating activities:
Liquidation basis adjustments 6,023 (37,963)
Provision for possible lease losses 0 (16,152)
Changes in operating assets and liabilities:
Accounts payable (112) (415)
Reserve for estimated costs during the period of liquidation (38,810) (37,662)
-------- --------
Net cash from operating activities (37,121) (52,284)
-------- --------
Investing Activities
Repayments of direct financing leases 0 17,621
Proceeds from sale of direct financing leases 14,117 26,490
Security deposits paid 0 (831)
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Net cash from investing activities 14,117 43,280
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Financing Activities
Withdrawals paid to partners (16) (119)
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Net cash from financing activities (16) (119)
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Net decrease in cash and cash equivalents (23,020) (9,123)
Cash and cash equivalents at beginning of period 35,283 56,921
-------- --------
Cash and cash equivalents at end of period $ 12,263 $ 47,798
======== ========
See accompanying notes.
5
TELECOMMUNICATIONS INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2004
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited 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
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 have
been included. Operating results for the six months ended June 30, 2004 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2004. For further information, refer to the financial statements
and notes thereto included in the Partnership's annual report on Form 10-K for
the year ended December 31, 2003.
On May 1, 1998, the Partnership ceased reinvestment in equipment and leases and
began the orderly liquidation of the Partnership in accordance with the
partnership agreement. As a result, the unaudited financial statements have been
presented under the liquidation basis of accounting. Under the liquidation basis
of accounting, assets are stated at their estimated net realizable values and
liabilities include estimated costs associated with carrying out the plan of
liquidation.
NOTE B - CONTINGENCIES
Telcom Management Systems filed a suit against the Partnership, the General
Partner, and others in Federal Court in Dallas, Texas during February 1998. The
plaintiffs purchased equipment from the Partnership out of bankruptcy for
approximately $450,000. They alleged that when they attempted to sell the
equipment at a later date, the Partnership had not provided good title. The
General Partner filed a Motion for Summary Judgment, which was denied. After
filing the suit, the plaintiff transferred assets in lieu of bankruptcy. No
further action has been taken at this time by the plaintiff. No loss, if any,
has been recorded in the financial statements with respect to this matter.
The General Partner has $1,900,000 of notes payable due December 31, 2004 and
may not have sufficient liquid assets to repay the notes payable which could
impact its ability to continue as a going-concern. The General Partner is
pursuing refinancing and other alternatives to meet its obligations. No
assurance can be provided that the General Partner will be successful in its
efforts.
6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
On May 1, 1998, the Partnership ceased reinvestment in equipment and leases and
began the orderly liquidation of the Partnership in accordance with the
partnership agreement. As a result, the unaudited financial statements have been
presented under the liquidation basis of accounting. Under the liquidation basis
of accounting, assets are stated at their estimated net realizable values and
liabilities include estimated costs associated with carrying out the plan of
liquidation.
As discussed above, the Partnership is in liquidation and does not believe a
comparison of results would be meaningful. The Partnership realized $1,801 in
income during the first six months of 2004. Management decreased its estimate of
the liquidation value of net assets during the first six months of 2004 by
$6,023. This decrease was due to the following: a decrease in the estimated net
realizable value of an equity security held by the Partnership of $6,140; an
increase in the estimated expenses of liquidation of $14,000; and a gain of
$14,117 resulting from proceeds received on the lease residuals for contracts
sold several years ago. The Partnership has accrued the estimated expenses of
liquidation, which is $32,102 at June 30, 2004. The General Partner reviews this
estimate and will adjust quarterly, as needed.
The Partnership will make distributions to the partners, to the extent cash is
available for distribution, as its equity security (common shares of Polar
Molecular Holding Corporation) is sold. The valuation of assets and liabilities
necessarily requires many estimates and assumptions and there are uncertainties
in carrying out the liquidation of the Partnership's net assets. The actual
value of the liquidating distributions will depend on a variety of factors,
including the actual timing of distributions to the partners. The actual amounts
are likely to differ from the amounts presented in the financial statements.
The General Partner has $1,900,000 of notes payable due December 31, 2004 and
may not have sufficient liquid assets to repay the notes payable which could
impact its ability to continue as a going-concern. The General Partner is
pursuing refinancing and other alternatives to meet its obligations. No
assurance can be provided that the General Partner will be successful in its
efforts.
Market Risk
The following table provides information about the Partnership's not readily
marketable equity security that is sensitive to price changes as of June 30,
2004.
Carrying Amount Fair Value
--------------- ----------
Common Stock-Polar $21,492 $21,492
======= =======
The Partnership's primary market risk exposure is equity price. The
Partnership's general strategy in owning equity securities is long-term growth
in the equity value of emerging companies in order to increase the rate of
return to the limited partners over the life of the Partnership. The primary
risk of the security held is derived from the underlying ability of the company
invested in to satisfy debt obligations and their ability to maintain or improve
common equity values. Polar has historically had operating losses and its equity
price can be volatile. The Partnership holds 307,027 shares of Polar and at June
30, 2004, the total amount at risk was $21,492. Polar is valued at the market
price less a discount for the lack of marketability. The Partnership is subject
to lock-up agreement with respect to selling these shares until July, 2004. No
assurance can be given that any value can be realized from this investment.
7
Item 3. Controls and Procedures
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Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of
the Partnership's management, including the Chief Executive Officer (CEO) and
Chief Financial Officer (CFO), of the effectiveness of our disclosure controls
and procedures. Based on that evaluation, the CEO and CFO concluded that as of
the end of the period covered by this report, our disclosure controls and
procedures are effective to provide reasonable assurance that information
required to be disclosed by us in reports that we file or submit under the
Securities Exchange of 1934 is recorded, processed, summarized, and timely
reported as provided in the SEC's rules and forms.
Changes in Internal Controls
No changes occurred since the quarter ended March 31, 2004 in our internal
controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II
Item 1. Legal Proceedings
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Telcom Management Systems filed a suit against the Partnership, the General
Partner, and others in Federal Court in Dallas, Texas during February 1998. The
plaintiffs purchased equipment from the Partnership out of bankruptcy for
approximately $450,000. They alleged that when they attempted to sell the
equipment at a later date, the Partnership had not provided good title. The
General Partner filed a Motion for Summary Judgment, which was denied. After
filing the suit, the plaintiff transferred assets in lieu of bankruptcy. No
further action has been taken at this time by the plaintiff. No loss, if any,
has been recorded in the financial statements with respect to this matter.
Item 6. Exhibits
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31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350
8
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.
TELECOMMUNICATIONS INCOME FUND IX, L.P.
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(Registrant)
Date: July 28, 2004 /s/ Ronald O. Brendengen
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Ronald O. Brendengen, Chief Financial
Officer, Treasurer
Date: July 28, 2004 /s/ Daniel P. Wegmann
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Daniel P. Wegmann, Controller
9