10-Q 1 tifix10q093003.txt ENDED 09-30-03 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 2003 Commission File Number 000-21458 TELECOMMUNICATIONS INCOME FUND IX, L.P. ---------------------------------------------------- (Exact name of Registrant as specified in its charter) Iowa 42-1367356 ------------------------------ ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 701 Tama Street, Marion, Iowa 52302 -------------------------------------- -------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (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") ------------------------------------------ Title of Class Indicate by check mark whether the Registrant (1) has 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 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 Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). [ ] Yes [X] No As of October 24, 2003, 65,404 units were issued and outstanding. TELECOMMUNICATIONS INCOME FUND IX, L.P. INDEX Page ---- Part I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Statements of Net Assets (Liquidation Basis) - September 30, 2003 and December 31, 2002 3 Statements of Changes in Net Assets (Liquidation Basis)- three and nine months ended September 30, 2003 and 2002 4 Statements of Cash Flows - nine months ended September 30, 2003 and 2002 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk 8 Item 4. Controls and Procedures 8 Part II. OTHER INFORMATION Item 1. Legal Proceedings 8 Item 6. Exhibits 8 Signatures 9

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 $2,429 in income from direct financing leases and other income during the first nine months of 2003. Management decreased its estimate of the liquidation value of net assets during the first nine months of 2003 by $46,113. This decrease is due to a decrease in the estimated net realizable value of an equity security held by the Partnership of $22,047, an increase due to a gain on lease terminations of $19,687, and an increase in the reserve for estimated costs during the period of liquidation of $43,753. The Partnership also increased the estimated net realizable value of its lease portfolio by decreasing its allowance for possible lease losses by $16,152, which was credited to expense during the first quarter of 2003. The Partnership received 58,909 common shares of Polar Molecular Holding Corporation ("Polar") in July, 2003 as a recovery of a previous write-off of Murdock Communications Corporation ("Murdock"), crediting expense in the amount of $21,797. The Partnership has accrued the estimated expenses of liquidation, which is $63,026 at September 30, 2003. 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 lease portfolio is collected or sold and equity securities (common shares of Polar) are 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. One lease contract remains and this customer was current on its lease payments as of September 30, 2003. When payments are past due more than 90 days, the Partnership discontinues recognizing income on those contracts. The Partnership's portfolio of direct financing leases consists of pay telephones, representing 100% of the portfolio at September 30, 2003. Berthel Fisher & Company, Inc. ("BFC"), the parent of the General Partner, is in default on $2.2 million of its unsecured debt that was due December 31, 2002. BFC is pursuing additional financing, refinancing, and asset sales to meet its obligations and must raise a minimum of $2.4 million. Approximately $900,000 has been raised as of the filing of this report. No assurance can be provided that BFC will be successful in its efforts. Since BFC is in default, its creditors could take legal action to enforce their right to repayment. No legal action has been taken at this time. The failure of BFC to raise the minimum amount of capital or legal action taken by the creditors could impact BFC's ability to continue as a going concern. This could ultimately affect the ability of the General Partner to continue as a going concern. If this were to happen, the Partnership would need to appoint a new general partner. The new general partner could require additional fees and charges that would have a significant negative impact on the liquidation proceeds received by the limited partners. 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- Equity Price Sensitivity The following table provides information about the Partnership's not readily marketable equity security that is sensitive to price changes as of September 30, 2003. Carrying Amount Fair Value --------------- ---------- Common Stock-Polar $ 24,562 $ 24,562 ------------- ------------- Not readily marketable equity security $ 24,562 $ 24,562 ============= ============= 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. In July, 2003, Murdock merged with Polar, a company that has historically had operating losses, and therefore, the equity price can be volatile. The Partnership holds 307,027 shares of Polar and at September 30, 2003, the total amount at risk was $24,562. 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. Item 4. Controls and Procedures ----------------------- An evaluation was performed under the supervision and with the participation of the Partnership's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures as of September 30, 2003. Based on that evaluation, the Partnership's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Partnership's disclosure controls and procedures were effective in timely alerting them to material information relating to the Partnership required to be included in the Partnership's periodic SEC filings. PART II Item 1. Legal Proceedings ----------------- 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 a 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 -------- 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. --------------------------------------- (Registrant) Date: November 12, 2003 /s/ Ronald O. Brendengen ----------------- ----------------------------------- Ronald O. Brendengen, Chief Financial Officer, Treasurer Date: November 12, 2003 /s/ Daniel P. Wegmann ----------------- ----------------------------------- Daniel P. Wegmann, Controller 9

TELECOMMUNICATIONS INCOME FUND IX LP 10-Q