SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 2005
Commission File Number: 000-25574
TELECOMMUNICATIONS INCOME FUND X, L.P.
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(Exact name of Small Business Issuer as specified in its charter)
Iowa 42-1401715
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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")
------------------------------------------
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 11, 2005, 86,177 units were issued and outstanding.
TELECOMMUNICATIONS INCOME FUND X, 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, 2005 and December 31, 2004 3
Statement of Changes in Net Assets (Liquidation Basis)-
three months and six months ended June 30, 2005 and 2004 4
Statements of Cash Flows-six months ended June 30, 2005
and 2004 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
- --------------------------
Item 6. Exhibits 8
Signatures 9
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF NET ASSETS (LIQUIDATION BASIS) (UNAUDITED)
June 30, December 31,
2005 2004
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ASSETS
Cash and cash equivalents $ 19,442 $ 46,069
Not readily marketable equity security 30,227 43,661
Notes receivable, net (Note B) 40,645 45,216
Other assets 8,452 10,568
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TOTAL ASSETS $ 98,766 $145,514
======== ========
LIABILITIES
Accounts payable $ 2,571 $ 3,040
Reserve for estimated costs during the
period of liquidation 32,678 39,594
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TOTAL LIABILITIES 35,249 42,634
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NET ASSETS 63,517 102,880
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$ 98,766 $145,514
======== ========
See accompanying notes.
3
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENT OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS) (UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30
2005 2004 2005 2004
---- ---- ---- ----
Net assets at beginning of period $ 72,610 $ 298,720 $ 102,880 $ 232,040
Income from direct financing leases,
interest, and other income 1,713 2,487 7,460 5,204
Withdrawals of limited partners -- (103) -- (103)
Change in estimate of liquidation
value of net assets (10,806) (110,832) (46,823) (46,869)
--------- --------- --------- ---------
Net assets at end of period $ 63,517 $ 190,272 $ 63,517 $ 190,272
========= ========= ========= =========
See accompanying notes.
4
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30
2005 2004
---- ----
Operating Activities
Changes in net assets excluding withdrawals and distributions $ (39,363) $ (41,665)
Adjustments to reconcile to net cash from operating activities:
Liquidation basis adjustments 46,823 46,869
Changes in operating assets and liabilities:
Other assets 4,230 5,168
Accounts payable (469) (830)
Reserve for estimated costs during the period of liquidation (46,915) (47,342)
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Net cash from operating activities (35,694) (37,800)
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Investing Activities
Repayments of notes receivable 9,067 13,398
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Net cash from investing activities 9,067 13,398
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Financing Activities
Withdrawals paid to partners -- (103)
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Net cash from financing activities -- (103)
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Net decrease in cash and cash equivalents (26,627) (24,505)
Cash and cash equivalents at beginning of period 46,069 111,642
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Cash and cash equivalents at end of period $ 19,442 $ 87,137
========= =========
See accompanying notes.
5
TELECOMMUNICATIONS INCOME FUND X, L.P.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles in the United States 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, 2005 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2005. For further information, refer to the financial statements
and notes thereto included in the Partnership's annual report on Form 10-KSB for
the year ended December 31, 2004.
On December 31, 1999, 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 - NOTES RECEIVABLE, NET
The Partnership's net notes receivable consists of the following:
(Liquidation Basis) (Liquidation Basis)
June 30, 2005 December 31, 2004
--------------- ---------------
Notes receivable $ 81,290 $ 90,433
Adjustment to net realizable value (40,645) (45,217)
--------------- ---------------
Notes receivable, net $ 40,645 $ 45,216
=============== ===============
6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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On December 31, 1999, 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 $7,460 in
income from direct financing leases, notes receivable, and other income during
the first six months of 2005. Management decreased its estimate of the
liquidation value of net assets during the first six months of 2005 by $46,823.
This decrease was due to a decrease in the estimated net realizable value of an
equity security held by the Partnership of $13,434, a decrease in the reserve
for estimated losses of $6,611, and an increase in the estimated expenses of
liquidation of $40,000. The Partnership has accrued the estimated expenses of
liquidation, which is $32,678 at June 30, 2005. The General Partner reviews this
estimate and will adjust quarterly, as needed.
Management is attempting to liquidate the remaining assets of the Partnership as
soon as feasibly possible while trying to obtain the highest proceeds possible.
The Partnership will make distributions to the partners, to the extent cash is
available, as notes receivable, equity securities, and other assets are
collected or 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. As of June 30, 2005, the
Partnership had $19,442 of cash on hand.
As of June 30, 2005, no customers were over 90 days past due. When payments are
past due more than 90 days, the Partnership discontinues recognizing income on
those customer contracts. Management believes its reserves are adequate as of
June 30, 2005. Management will monitor any past due contracts and take the
necessary steps to protect the Partnership's investment.
The Partnership's notes receivable are concentrated in pay telephones,
representing 100% of the portfolio at June 30, 2005. One customer accounts for
over 90% of the Partnership's notes receivable at June 30, 2005.
Market Risk
The table below provides information about the Partnership's not readily
marketable equity security that is sensitive to price changes as of June 30,
2005.
Carrying Amount Fair Value
------------- -------------
Common Stock-Polar Molecular Holding Corporation $ 30,227 $ 30,227
============= =============
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 1,343,407 shares of Polar and at
June 30, 2005, the total amount at risk was $30,227. Polar is valued at the
market price less a discount for the lack of marketability as these shares are
unregistered. No assurance can be given that any value can be realized from this
investment.
7
The table below provides information about the Partnership's notes receivable
that are sensitive to changes in interest rates. The table presents the
principal amounts and related weighted average interest rates by expected
maturity dates as of June 30, 2005.
Expected Fixed Rate Average
Maturity Date Notes Receivable Interest Rate
------------- ---------------- -------------
2005 $ 77,220 8.1%
2006 4,070 9.5%
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Total $ 81,290
=============
Fair Value $ 40,645
=============
The Partnership manages interest rate risk, its primary market risk exposure
with respect to notes receivable, by limiting the terms of notes receivable to
no more than five years.
Item 3. Controls and Procedures
-----------------------
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, 2005 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 6. Exhibits
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Exhibit 31.1 Certification of Chief Executive Officer
Exhibit 31.2 Certification of Chief Financial Officer
Exhibit 32.1 Certification of Financial Statements-Chief Executive Officer
Exhibit 32.2 Certification of Financial Statements-Chief Financial Officer
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 X, L.P.
(Registrant)
Date: August 10, 2005 /s/ Ronald O. Brendengen
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Ronald O. Brendengen,
Chief Financial Officer,
Treasurer
Date: August 10, 2005 /s/ Daniel P. Wegmann
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Daniel P. Wegmann, Controller
9