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 June 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
JUNE 30, 1997
(Unaudited)
ASSETS
CASH & CASH EQUIVALENTS $ 199,213
ACCOUNTS RECEIVABLE 7,904
PROPERTY:
Land 2,566,250
Building 5,370,984
7,937,234
Accumulated depreciation (472,650)
TOTAL PROPERTY 7,464,584
NET INVESTMENT IN DIRECT FINANCING LEASES 613,490
INVESTMENT IN JOINT VENTURES 1,376,785
OTHER ASSETS:
Organization costs, net of accumulated
amortization of $242,245 57,755
Accrued rental income 85,388
TOTAL OTHER ASSETS 143,143
TOTAL ASSETS 9,805,119
LIABILITIES & PARTNERSHIP EQUITY
LIABILITIES:
Accounts payable 3,794
Security deposits 12,000
TOTAL LIABILITIES 15,794
PARTNERSHIP EQUITY:
General partners 12,626
Limited partners 9,776,699
TOTAL PARTNERSHIP EQUITY 9,789,325
TOTAL LIABILITIES & PARTNERSHIP EQUITY $ 9,805,119
See Notes to Financial Statements.
2
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(Unaudited)
Quarter Year to Date
1997 1996 1997 1996
REVENUES
Rental income from operating
leases $ 214,210 $ 214,210 $ 428,420 $ 428,420
Earned income from direct
financing leases 17,505 16,015 35,010 32,048
Interest income 1,226 8,563 2,058 17,798
Equity income from investment
in joint ventures 35,511 16,986 71,014 33,971
TOTAL REVENUES 268,452 255,774 536,502 512,237
EXPENSES
Accounting 800 2,562 7,950 9,336
Administrative expenses 17,233 16,179 34,366 32,358
Amortization 15,000 15,000 30,000 30,000
Depreciation 36,117 36,495 72,233 72,989
Legal & professional fees 3,091 5,028 4,716 10,109
Other 27 1,078 133 1,600
TOTAL EXPENSES 72,268 76,342 149,398 156,392
NET INCOME $ 196,184 $ 179,432 $ 387,104 $ 355,845
ALLOCATION OF NET INCOME
General partners $ 1,962 $ 1,794 $ 3,871 $ 3,558
Limited partners 194,222 177,638 383,233 352,287
$ 196,184 $ 179,432 $ 387,104 $ 355,845
NET INCOME PER UNIT $ 17.13 $ 15.67 $ 33.80 $ 31.07
UNITS OUTSTANDING 11,454 11,454 11,454 11,454
See Notes to Financial Statements.
3
<TABLE>
<CAPTION>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(Unaudited)
Quarter Year to Date
1997 1996 1997 1996
<S>
CASH FLOWS FROM OPERATING
ACTIVITIES
<C> <C> <C> <C>
Net income $ 196,184 $ 179,432 $ 387,104 $ 355,845
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 36,117 36,495 72,233 72,989
Amortization 15,000 15,000 30,000 30,000
(Increase) decrease in accounts receivable 13,197 25,958 (7,709) 11,865
Increase (decrease) in accounts payable (5,289) (13,812) 2,385 (2,798)
Decrease in escrow deposits 0 (18,250) 0 (18,250)
Cash received from direct financing leases
in excess of (less than) income recognized (728) 765 (1,456) 1,512
Investment in joint ventures:
Equity income (35,511) (16,986) (71,014) (33,971)
Distributions received 35,511 16,986 71,014 33,971
Increase in accrued rental income (7,968) (7,969) (15,936) (15,938)
NET CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES 246,513 217,619 466,621 435,225
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in acquisition costs - (690) - (743)
Joint venture distributions in excess
of income 1,121 2,264 2,255 4,531
NET CASH FLOWS PROVIDED BY INVESTING
ACTIVITIES 1,121 1,574 2,255 3,788
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (232,010) (229,672) (463,129) (459,944)
NET CASH FLOWS USED IN FINANCING
ACTIVITIES (232,010) (229,672) (463,129) (459,944)
NET DECREASE IN CASH
AND CASH EQUIVALENTS 15,624 (10,479) 5,747 (20,931)
CASH and CASH EQUIVALENTS at beginning
of period 183,589 814,353 193,466 824,805
CASH and CASH EQUIVALENTS at end of
period $ 199,213 $ 803,874 $ 199,213 $ 803,874
See Notes to Financial Statements.
</TABLE>
4
AAA NET REALTY FUND X, LTD
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 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 six
month periods ended June 30, 1997 and June 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, $17,233 and
$34,366 were incurred and paid to AAA for the three and
six months ended June 30, 1997, respectively, and $16,179
and $32,358 were paid for the three and six months ended
June 30, 1996, respectively.
6
4. MAJOR LESSEES
The following schedule summarizes total rental income by
lessee for the three and six months ended June 30, 1997
and June 30, 1996 under both operating and direct
financing leases:
Quarter Year to Date
1997 1996 1997 1996
Golden Corral Corporation $43,241 $43,241 86,482 $86,482
TGI Friday's, Inc. 45,126 45,126 90,252 90,252
Goodyear Tire & Rubber Company 13,227 13,227 26,454 26,454
Tandy Corporation 64,155 64,155 128,310 128,310
America's Favorite Chicken Company 25,836 24,346 51,672 48,710
One Care Health Industries, Inc. 40,130 40,130 80,260 80,260
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 June 30, 1997, revenues totaled
$268,452 which included $267,226 from real estate operations and
$1,226 of interest income. Revenues for the second quarter of
1997 increased $12,678 from those of the second quarter of 1996
which was attributable to a $20,015 increase in rental income
partially offset by a $7,337 decline in interest income. Rental
income increased as the Partnership owned eight properties during
the second quarter of 1997 while seven properties were owned
during the second quarter of 1996, the eighth property coming
from a joint venture investment. Interest income declined as
funds which had been held in short term investments were used to
acquire the final property. Expenses decreased from $76,342 in
the second quarter of 1996 to $72,268 in the second quarter of
1997 primarily from a decrease in accounting fees and legal and
professional fees. The Partnership recorded $196,184 of net
income for the second quarter of 1997 compared to $179,432 for
the second quarter of 1996.
For the six months ended June 30, 1997, revenues totaled $536,502
which included $534,444 from real estate operations and $2,058 of
interest income. Revenues for the first six months of 1997
increased $24,265 from those of the first six months of 1996
which was attributable to a $40,005 increase in rental income
offset by a $15,740 decline in interest income. Rental income
increased as the Partnership owned eight properties during the
first six months of 1997 while seven properties were owned during
the first six months of 1996, the eighth property coming from a
joint venture investment. Interest income declined as funds
which had been held in short term investments were used to
acquire the final property. Expenses decreased from $156,392 in
the first six months of 1996 to $149,398 in the first six months
of 1997 primarily from a decrease in legal and professional fees.
The Partnership recorded $387,104 of net income for the first six
months of 1997 compared to $355,845 for the first six months of
1996.
8
For the three months ended June 30, 1996, revenues totaled
$255,774 which included $247,211 from real estate operations and
$8,563 of interest income. Revenues for the second quarter
decreased $2,301 from those of the second quarter of 1995
primarily from decreased interest income as a result of the
decline in interest rates over those of the second quarter of
1995. Expenses decreased in the second quarter of 1996 to
$76,342 compared to $78,962 for the second quarter of 1995
primarily from decreased professional fees and accounting fees,
partially offset by increased administrative fees. The
Partnership recorded $179,432 of net income for the second
quarter of 1996.
For the six months ended June 30, 1996, revenues totaled $512,237
which included $494,439 from real estate operations and $17,798
of interest income. Revenues for the first six months of 1996
increased $4,506 from those of the first six months of 1995 which
was attributable to a $13,760 increase in rental income offset by
a $9,254 decline in interest income. The Partnership owned seven
properties for the entire first six months of 1996 while six
properties were owned for the entire first six months of 1995 and
the seventh property was acquired during the first quarter of
1995. Expenses increased in the first six months of 1996 to
$156,392 compared to $147,483 for the first six months of 1995
primarily from increased administrative fees. The Partnership
recorded $355,845 of net income for the first six months of 1996.
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)
August 14, 1997 /s/ H. Kerr Taylor
Date H. Kerr Taylor, President of General Partner
August 14, 1997 /s/ L. Larry Mangum
Date L. Larry Mangum (Principal Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 199,213
<SECURITIES> 0
<RECEIVABLES> 7,904
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 207,117
<PP&E> 7,937,234
<DEPRECIATION> 472,650
<TOTAL-ASSETS> 9,805,119
<CURRENT-LIABILITIES> 9,083
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,789,325
<TOTAL-LIABILITY-AND-EQUITY> 9,805,119
<SALES> 534,444
<TOTAL-REVENUES> 536,502
<CGS> 0
<TOTAL-COSTS> 149,398
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 387,104
<INCOME-TAX> 0
<INCOME-CONTINUING> 387,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 387,104
<EPS-PRIMARY> 33.80
<EPS-DILUTED> 0
</TABLE>
