10-Q 1 tifx10q-093003.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: 000-25574 TELECOMMUNICATIONS INCOME FUND X, L.P. ---------------------------------------------------- (Exact name of Registrant 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 -------------------------------------- -------- (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, 86,290 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, 2003 and December 31, 2002 3 Statement 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 6. Exhibits 8 Signatures 9 2 TELECOMMUNICATIONS INCOME FUND X, L.P. STATEMENTS OF NET ASSETS (LIQUIDATION BASIS) (UNAUDITED) September 30, December 31, 2003 2002 -------- -------- ASSETS Cash and cash equivalents $178,334 $ 49,000 Not readily marketable equity security 107,473 59,250 Net investment in direct financing leases and notes receivable (Note B) 30,761 177,900 Other assets 14,045 56,036 -------- -------- TOTAL ASSETS 330,613 342,186 -------- -------- LIABILITIES Accounts payable 35,811 34,797 Lease security deposits 178 592 Reserve for estimated costs during the period of liquidation 72,251 120,249 -------- -------- TOTAL LIABILITIES 108,240 155,638 -------- -------- CONTINGENCY (Note C) NET ASSETS $222,373 $186,548 ======== ======== See accompanying notes. 3

Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results 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 $16,193 in income from direct financing leases, notes receivable, and other income during the first nine months of 2003. Management increased its estimate of the liquidation value of net assets during the first nine months of 2003 by $20,062. This increase resulted primarily from a recovery of a previous write off of $277,836, a decrease in the estimated value of equity securities of $229,613, and an increase in the reserve for estimated costs during the period of liquidation of $28,179. The recovery of a previous write-off resulted from the Partnership receiving 750,907 common shares of Polar Molecular Holding Corporation ("Polar") in July, 2003 as a recovery of a previous write-off of Murdock Communications Corporation ("Murdock"). The Partnership has accrued the estimated expenses of liquidation, which is $72,251 at September 30, 2003. 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 leases, 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 September 30, 2003 the Partnership had $178,334 of cash on hand. As of September 30, 2003, 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 September 30, 2003. Management will monitor any past due contracts and take the necessary steps to protect the Partnership's investment. The Partnership's portfolio of leases and notes receivable is concentrated in pay telephones, representing 99% of the portfolio at September 30, 2003. One customer accounts for over 90% of the Partnership's portfolio of leases and notes receivable 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 table below provides information about the Partnership's not readily marketable equity security that is sensitive to price changes as of September 30, 2003. Carrying Fair Amount Value ---------- ---------- Common Stock-Polar $ 107,473 $ 107,473 ---------- ---------- Total Not Readily Marketable Equity Security $ 107,473 $ 107,473 ========== ========== 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 1,343,407 shares of Polar and at September 30, 2003, the total amount at risk was $107,473. 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. Interest Rate Sensitivity 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, 2003. Expected Fixed Rate Average Maturity Date Notes Receivable Interest Rate ------------- ---------------- ------------- 2003 $ 125,634 8.1% 2004 3,808 9.5% 2005 4,179 9.5% 2006 2,798 9.5% ------------- Total $ 136,419 ============= Fair Value $ 30,011 ============= 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 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 6. Exhibits -------- Exhibit 31.1 Certification of Chief Executive Officer Exhibit 31.2 Certification of Chief Financial Officer Exhibit 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 Exhibit 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 X, 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 X LP 10-Q