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 September 30, 2005
Commission File Number: 000-25574
TELECOMMUNICATIONS INCOME FUND X, L.P.
---------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
Iowa 42-1401715
------------------------------ -----------------
(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
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
As of October 6, 2005, 86,177 units were issued and outstanding.
TELECOMMUNICATIONS INCOME FUND X, L.P.
INDEX
Page
Part I. FINANCIAL INFORMATION
- -----------------------------
Item 1. Financial Statements (unaudited)
Statements of Net Assets (Liquidation Basis)-
September 30, 2005 and December 31, 2004 3
Statement of Changes in Net Assets (Liquidation Basis)-
three months and nine months ended September 30, 2005 and 2004 4
Statements of Cash Flows-nine months ended September 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
2
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF NET ASSETS (LIQUIDATION BASIS) (UNAUDITED)
September 30, December 31,
2005 2004
-------- --------
ASSETS
Cash and cash equivalents $ 75,465 $ 46,069
Not readily marketable equity security -- 43,661
Notes receivable, net (Note B) 39,229 45,216
Other assets 8,318 10,568
-------- --------
TOTAL ASSETS $123,012 $145,514
======== ========
LIABILITIES
Accounts payable $ 2,570 $ 3,040
Reserve for estimated costs during the
period of liquidation 28,821 39,594
-------- --------
TOTAL LIABILITIES 31,391 42,634
-------- --------
NET ASSETS 91,621 102,880
-------- --------
$123,012 $145,514
======== ========
See accompanying notes.
3
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENT OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS) (UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
---- ---- ---- ----
Net assets at beginning of period $ 63,517 $ 190,272 $ 102,880 $ 232,040
Income from direct financing leases,
interest, and other income 1,841 2,347 9,301 7,551
Withdrawals of limited partners -- (78) -- (181)
Change in estimate of liquidation
value of net assets 26,263 (47,019) (20,560) (93,888)
--------- --------- --------- ---------
Net assets at end of period $ 91,621 $ 145,522 $ 91,621 $ 145,522
========= ========= ========= =========
See accompanying notes.
4
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months
Ended September 30
2005 2004
---- ----
Operating Activities
Changes in net assets excluding withdrawals and distributions $ (11,259) $ (86,337)
Adjustments to reconcile to net cash from operating activities:
Liquidation basis adjustments 20,560 93,888
Changes in operating assets and liabilities:
Other assets 4,498 20,484
Accounts payable (470) (6,481)
Reserve for estimated costs during the period of liquidation (50,773) (50,503)
--------- ---------
Net cash from operating activities (37,444) (28,949)
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Investing Activities
Proceeds from the sale of not readily marketable security 54,941 --
Repayments of notes receivable 11,899 23,258
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Net cash from investing activities 66,840 23,258
--------- ---------
Financing Activities
Withdrawals paid to partners -- (181)
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Net cash from financing activities -- (181)
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Net increase (decrease) in cash and cash equivalents 29,396 (5,872)
Cash and cash equivalents at beginning of period 46,069 111,642
--------- ---------
Cash and cash equivalents at end of period $ 75,465 $ 105,770
========= =========
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 nine months ended September 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)
September 30, 2005 December 31, 2004
Notes receivable $ 78,458 $ 90,433
Adjustment to net realizable value (39,229) (45,217)
--------------- ---------------
Notes receivable, net $ 39,229 $ 45,216
=============== ===============
6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
-------------
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 $9,301 in
income from direct financing leases, notes receivable, and other income during
the first nine months of 2005. Management decreased its estimate of the
liquidation value of net assets during the first nine months of 2005 by $20,560.
This decrease was due to a net increase in the value of an equity security
$11,280, a decrease in the reserve for estimated losses on notes receivable of
$8,160, and an increase in the estimated expenses of liquidation of $40,000. The
net increase in the value of an equity security was the result of the
Partnership's sale of its holdings in Polar Molecular Holding Corporation. The
Partnership sold its entire holdings of 1,343,407 shares, resulting in cash
proceeds of $54,941 and a realized loss of $993,145 (along with an unrealized
gain of $1,004,425, reversing prior year's unrealized losses). The Partnership
has accrued the estimated expenses of liquidation, which are $28,821 at
September 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 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 September 30, 2005, the Partnership had
$75,465 of cash on hand.
As of September 30, 2005, one customer was over 90 days past due. The principal
balance of this note receivable is $75,452 as of September 30, 2005. Management
believes its reserves are adequate as of September 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 September 30, 2005. One customer accounts
for over 90% of the Partnership's notes receivable at September 30, 2005 and is
past due as stated above.
Market Risk
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 September 30, 2005.
Expected Fixed Rate Average
Maturity Date Notes Receivable Interest Rate
------------- ---------------- -------------
2005 $ 75,452 8.1%
2006 3,006 9.5%
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Total $ 78,458
=============
Fair Value $ 39,229
=============
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.
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 June 30, 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: November 4, 2005 /s/ Ronald O. Brendengen
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Ronald O. Brendengen,
Chief Financial Officer,
Treasurer
Date: November 4, 2005 /s/ Daniel P. Wegmann
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Daniel P. Wegmann, Controller
9