UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-25436
AAA NET REALTY FUND X, LTD.
NEBRASKA LIMITED PARTNERSHIP IRS IDENTIFICATION NO.
76-0381949
8 GREENWAY PLAZA, SUITE 824 HOUSTON, TX 77046
(713) 850-1400
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 filing requirements for the past 90 days. X Yes No
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEET
SEPTEMBER 30, 1997
(Unaudited)
ASSETS
CASH & CASH EQUIVALENTS $ 207,114
ACCOUNTS RECEIVABLE 7,615
PROPERTY:
Land 2,566,250
Building 5,370,984
7,937,234
Accumulated depreciation (508,767)
TOTAL PROPERTY 7,428,467
NET INVESTMENT IN DIRECT FINANCING LEASES 614,218
INVESTMENT IN JOINT VENTURES 1,375,669
OTHER ASSETS:
Organization costs, net of accumulated
amortization of $257,245 42,755
Accrued rental income 93,356
TOTAL OTHER ASSETS 136,111
TOTAL ASSETS 9,769,194
LIABILITIES & PARTNERSHIP EQUITY
LIABILITIES:
Accounts payable 3,923
Security deposits 12,000
TOTAL LIABILITIES 15,923
PARTNERSHIP EQUITY:
General partners 13,536
Limited partners 9,739,735
TOTAL PARTNERSHIP EQUITY 9,753,271
TOTAL LIABILITIES & PARTNERSHIP EQUITY $ 9,769,194
See Notes to Financial Statements.
2
<TABLE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
(Unaudited)
<CAPTION>
Quarter Year to Date
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES
Rental income from operating
leases $ 214,213 $ 216,662 $ 642,633 $ 647,670
Earned income from direct
financing leases 17,505 14,701 52,515 44,161
Interest income 496 6,972 2,554 24,770
Equity income from investment
in joint ventures 35,517 20,826 106,531 54,797
TOTAL REVENUES 267,731 259,161 804,233 771,398
EXPENSES
Accounting 800 450 8,750 9,786
Administrative expenses 17,283 16,179 51,649 48,537
Amortization 15,000 15,000 45,000 45,000
Depreciation 36,117 35,360 108,350 108,349
Legal & professional fees 2,504 2,339 7,220 12,448
Other 34 149 167 1,749
TOTAL EXPENSES 71,738 69,477 221,136 225,869
NET INCOME $ 195,993 $ 189,684 $ 583,097 $ 545,529
ALLOCATION OF NET INCOME
General partners $ 1,960 $ 1,897 $ 5,831 $ 5,455
Limited partners 194,033 187,787 577,266 540,074
$ 195,993 $ 189,684 $ 583,097 $ 545,529
NET INCOME PER UNIT $ 17.11 $ 16.56 $ 50.91 $ 47.63
UNITS OUTSTANDING 11,454 11,454 11,454 11,454
See Notes to Financial Statements.
</TABLE>
3
<TABLE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
(Unaudited)
<CAPTION>
Quarter Year to Date
1997 1996 1997 1996
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 195,993 $ 189,684 $ 583,097 $ 545,529
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 36,117 35,360 108,350 108,349
Amortization 15,000 15,000 45,000 45,000
(Increase) decrease in accounts
receivable 289 2,615 (7,420) 14,480
Increase in accounts payable 129 3,153 2,514 355
Decrease in escrow deposits - 18,250 - -
Cash received from direct financing
leases in excess of (less than)
income recognized (728) 785 (2,184) 2,297
Investment in joint ventures:
Equity income (35,517) (20,826) (106,531) (54,797)
Distributions received 35,517 20,826 106,531 54,797
Increase in accrued rental income (7,968) (7,969) (23,904) (23,907)
NET CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES 238,832 256,878 705,453 692,103
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in joint venture - (662,252) - (662,252)
Decrease in acquisition costs - 23,974 - 23,231
Joint venture distributions in excess 1,115 1,130 3,370 5,661
NET CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES 1,115 (637,148) 3,370 (633,360)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (232,046) (229,972) (695,175) (689,916)
NET CASH FLOWS USED IN FINANCING
ACTIVITIES (232,046) (229,972) (695,175) (689,916)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 7,901 (610,242) 13,648 (631,173)
CASH and CASH EQUIVALENTS at beginning
of period 199,213 803,874 193,466 824,805
CASH and CASH EQUIVALENTS at end of
period $ 207,114 $ 193,632 $ 207,114 $ 193,632
See Notes to Financial Statements.
</TABLE>
4
AAA NET REALTY FUND X, LTD
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AAA Net Realty Fund X, Ltd. ("the Partnership"), is a limited
partnership formed April 15, 1992, under the laws of the State of
Nebraska. American Asset Advisers Management Corporation X (a
Nebraska corporation) is the managing general partner and H. Kerr
Taylor is the individual general partner. The offering period for
subscriptions terminated September 1, 1994 with a total of
11,453.61 units having been subscribed at an offering price of
$1,000 per unit.
The Partnership was formed to acquire commercial properties for
cash. The Partnership will own, lease, operate, manage and
eventually sell the properties. The selection, acquisition, and
supervision of the operations of the properties is managed by
American Asset Advisers Realty Corporation ("AAA"), a related
party.
The financial records of the Partnership are maintained on the
accrual basis of accounting whereby revenues are recognized when
earned and expenses are reflected when incurred.
For purposes of the statement of cash flows the Partnership
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. There
has been no cash paid for income taxes or interest during 1997 or
1996.
Real estate is leased to others on a net lease basis whereby all
operating expenses related to the properties including property
taxes, insurance and common area maintenance are the
responsibility of the tenant. The leases are accounted for under
the operating method or the direct financing method.
Under the operating method, the properties are recorded at cost.
Rental income is recognized ratably over the life of the lease and
depreciation is charged as incurred.
Under the direct financing method, the properties are recorded at
their net investment. Unearned income is deferred and amortized
to income over the life of the lease so as to produce a constant
periodic rate of return.
The Partnership's interests in joint venture investments are
accounted for under the equity method whereby the Partnership's
investment is increased or decreased by its share of earnings or
losses in the joint venture and also decreased by any
distributions.
Organization costs are amortized on a straight line basis over
five years.
5
All income and expense items flow through to the partners for tax
purposes. Consequently, no provision for federal or state income
taxes is provided in the accompanying financial statements.
The accompanying unaudited financial statements have been prepared
in accordance with the instructions to Form 10-QSB and do not
include all of the disclosures required by generally accepted
accounting principles. The financial statements reflect all
normal and recurring adjustments which are, in the opinion of
management, necessary to present a fair statement of results for
the three and nine month periods ended September 30, 1997 and
September 30, 1996.
The financial statements of AAA Net Realty Fund X, Ltd. contained
herein should be read in conjunction with the financial statements
included in the Partnership's annual report on Form
10-K for the year ended December 31, 1996.
2. PARTNERSHIP EQUITY
The managing general partner, American Asset Advisers Management
Corporation X, and the individual general partner, H. Kerr Taylor,
have made capital contributions in the amounts of $990 and $10,
respectively. The general partners shall not be obligated to make
any other contributions to the Partnership, except that, in the
event that the general partners have negative balances in their
capital accounts after dissolution and winding up of, or
withdrawal from, the Partnership, the general partners will
contribute to the Partnership an amount equal to the lesser of the
deficit balances in their capital accounts or 1.01% of the total
capital contributions of the limited partners' over the amount
previously contributed by the general partners.
3. RELATED PARTY TRANSACTIONS
The Partnership Agreement provides for the reimbursement for
administrative services necessary for the prudent operation of the
Partnership and its assets with the exception that no
reimbursement is permitted for rent, utilities, capital equipment,
salaries, fringe benefits or travel expenses allocated to the
individual general partner or to any controlling persons of the
managing general partner. In connection therewith, $17,283 and
$51,649 were incurred and paid to AAA for the three and nine
months ended September 30, 1997, respectively, and $16,179 and
$48,537 were paid for the three and nine months ended September
30, 1996, respectively.
6
4. MAJOR LESSEES
The following schedule summarizes total rental income by lessee
for the three and nine months ended September 30, 1997 and
September 30, 1996 under both operating and direct financing
leases:
<TABLE>
<CAPTION>
Quarter Year to Date
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Golden Corral Corporation $43,241 $43,241 $129,723 $129,723
TGI Friday's, Inc. 45,126 45,125 135,378 135,377
Goodyear Tire & Rubber Company 13,227 13,227 39,681 39,681
Tandy Corporation 64,155 64,155 192,465 192,465
America's Favorite Chicken Company 25,839 25,485 77,511 74,195
One Care Health Industries, Inc. 40,130 40,130 120,390 120,390
</TABLE>
5. CONTINGENCY
The Partnership had determined that, beginning on December 1,
1993, it inadvertently failed to update its then outstanding
prospectus with current information as required by Section
10(a)(3) of the Securities Act of 1933 as amended (the "33 Act")
and by the standard undertakings made by the Partnership in its
amended registration statement filed pursuant to the 33 Act.
However, the Partnership did publicly disclose such information in
its Form 8-K and 10-Q filings with the Securities and Exchange
Commission.
As a result of the above information, the Partnership has been
advised that it has a contingent liability to investors for
recession rights or damages which, at a maximum, would not exceed
approximately $5.5 million. Management anticipates that
recessions, if any, will not be material.
7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
AAA Net Realty Fund X, Ltd., a Nebraska limited partnership, was
formed April 15, 1992. The offering for 20,000 units was
effective September 17, 1992. The offering period for
subscriptions terminated September 1, 1994 with a total of
11,453.61 units having been subscribed at $1,000 per unit. In
addition, the general partners had previously made contributions
of $1,000.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership had determined that, beginning on December 1,
1993, it inadvertently failed to update its then outstanding prospectus
with current information as required by Section 10(a)(3) of the
Securities Act of 1933 as amended (the "33 Act") and by the standard
undertakings made by the Partnership in its amended registration statement
filed pursuant to the 33 Act. However, the Partnership did publicly
disclose such information in its Form 8-K and 10-Q filings with
the Securities and Exchange Commission.
As a result of the above information, the Partnership has been
advised that it has a contingent liability to investors for
recession rights or damages which, at a maximum, would not exceed
approximately $5.5 million. Management anticipates that
recessions, if any, will not be material.
RESULTS OF OPERATIONS
For the three months ended September 30, 1997, revenues totaled
$267,731 which included $267,235 from real estate operations and
$496 of interest income. Revenues for the third quarter of 1997
increased $8,570 from those of the third quarter of 1996 which was
attributable to a $15,046 increase in rental income partially
offset by a $6,476 decline in interest income. Rental income
increased as the Partnership owned eight properties during the
third quarter of 1997 while seven properties were owned at the
beginning of the third quarter of 1996 and the eighth property was
purchased at the end of the third quarter of 1996. Interest
income declined as funds which had been held in short term
investments were used to acquire the final property. Expenses
increased from $69,477 in the third quarter of 1996 to $71,738 in
the third quarter of 1997 primarily from an increase in
administrative expenses and depreciation. The Partnership
recorded $195,993 of net income for the third quarter of 1997
compared to $189,684 for the third quarter of 1996.
For the nine months ended September 30, 1997, revenues totaled
$804,233 which included $801,679 from real estate operations and
$2,554 of interest income. Revenues for the first nine months of
1997 increased $32,835 from those of the first nine months of 1996
which was attributable to a $55,051 increase in rental income
offset by a $22,216 decline in interest income. Rental income
increased as the Partnership owned eight properties during the
first nine months of 1997 while seven properties were owned for
the entire first nine months of 1996 and the eighth property was
purchased in September of 1996. Interest income declined as funds
which had been held in short term investments were used to acquire
the final property. Expenses decreased from $225,869 in the first
nine months of 1996 to $221,136 in the first nine months of 1997
primarily from a decrease in legal and professional fees. The
Partnership recorded $583,097 of net income for the first nine
months of 1997 compared to $545,529 for the first nine months of
1996.
8
For the three months ended September 30, 1996, revenues totaled
$259,161 which included $252,189 from real estate operations and
$6,972 of interest income. Revenues for the third quarter
increased $3,118 from those of the third quarter of 1995 which was
attributable to a $6,232 increase in rental income offset by a
$3,114 decline in interest income. Expenses decreased in the
third quarter of 1996 to $69,477 compared to $80,769 for the third
quarter of 1995 primarily from decreased administrative expenses,
professional fees and accounting fees. The Partnership recorded
$189,684 of net income for the third quarter of 1996 compared to
$175,274 for the third quarter of 1995.
For the nine months ended September 30, 1996, revenues totaled
$771,398 which included $746,628 from real estate operations and
$24,770 of interest income. Revenues for the first nine months of
1996 increased $7,624 from those of the first nine months of 1995
which was attributable to a $19,992 increase in rental income
offset by a $12,368 decline in interest income. The Partnership
owned seven properties for the entire first nine months of 1996
and the eighth property was acquired in September of 1996 while
six properties were owned for the entire first nine months of 1995
and the seventh property was acquired during the first quarter of
1995. Expenses decreased in the first nine months of 1996 to
$225,869 compared to $228,252 for the first nine months of 1995
primarily from decreased professional expenses resulting from
legal fees that were incurred in 1995 on a property which was not
acquired by the Partnership. The Partnership recorded $545,529 of
net income for the first nine months of 1996 compared to $535,522
for the first nine months of 1995.
9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
10
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.
AAA Net Realty Fund X, Ltd.
(Registrant)
November 14, 1997 /s/ H. Kerr Taylor
Date H. Kerr Taylor, President of General Partner
November 14, 1997 /s/ L. Larry Mangum
Date L. Larry Mangum (Principal Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 207,114
<SECURITIES> 0
<RECEIVABLES> 7,615
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 214,729
<PP&E> 7,937,234
<DEPRECIATION> 508,767
<TOTAL-ASSETS> 9,769,194
<CURRENT-LIABILITIES> 15,923
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,753,271
<TOTAL-LIABILITY-AND-EQUITY> 9,769,194
<SALES> 801,679
<TOTAL-REVENUES> 804,233
<CGS> 0
<TOTAL-COSTS> 221,136
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 583,097
<INCOME-TAX> 0
<INCOME-CONTINUING> 583,097
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 583,097
<EPS-PRIMARY> 50.91
<EPS-DILUTED> 0
</TABLE>
