<PAGE>
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, 1999
[_] 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 issuer (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 issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. [X] Yes [_] No
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
ASSETS
Cash and cash equivalents $ 284,429
Accounts receivable 14,412
Property:
Land 2,566,250
Buildings 5,370,984
-----------
7,937,234
Accumulated depreciation (797,700)
-----------
Total property 7,139,534
-----------
Net investment in direct financing leases 618,565
Investment in joint ventures 1,363,834
Other assets:
Accrued rental income 143,165
Deferred lease costs 31,765
Accumulated amortization (2,352)
-----------
Total other assets 172,578
-----------
TOTAL ASSETS $ 9,593,352
===========
LIABILITIES AND PARTNERSHIP EQUITY
Liabilities:
Accounts payable $ 66,413
Security deposit 12,000
-----------
TOTAL LIABILITIES 78,413
-----------
Partnership equity:
General partners 19,441
Limited partners 9,495,498
-----------
TOTAL PARTNERSHIP EQUITY 9,514,939
-----------
TOTAL LIABILITIES AND PARTNERSHIP EQUITY $ 9,593,352
===========
See Notes to Financial Statements.
2
<PAGE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
QUARTER YEAR TO DATE
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Rental income from operating leases $ 217,362 $ 214,210 $ 651,926 $ 644,540
Earned income from direct financing leases 17,668 17,594 53,004 52,782
Interest income 436 1,846 1,986 3,958
Equity income from investment in joint ventures 35,594 35,554 106,750 106,633
--------- --------- --------- ---------
Total revenues 271,060 269,204 813,666 807,913
--------- --------- --------- ---------
Expenses:
Advisory fees to related party 19,716 17,283 59,148 51,849
Amortization 784 - 2,352 27,755
Depreciation 36,117 36,116 108,350 108,350
Professional fees 857 6,509 11,777 22,798
--------- --------- --------- ---------
Total expenses 57,474 59,908 181,627 210,752
--------- --------- --------- ---------
Net income $ 213,586 $ 209,296 $ 632,039 $ 597,161
========= ========= ========= =========
Allocation of net income:
General partners $ 2,135 $ 2,093 $ 6,320 $ 5,972
Limited partners 211,451 207,203 625,719 591,189
--------- --------- --------- ---------
$ 213,586 $ 209,296 $ 632,039 $ 597,161
========= ========= ========= =========
Net income per unit $ 18.65 $ 18.27 $ 55.18 $ 52.14
========= ========= ========= =========
Weighted average units outstanding 11,454 11,454 11,454 11,454
========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
AAA NET REALTY FUND X, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Quarter Year To Date
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 213,586 $ 209,296 $ 632,039 $ 597,161
Adjustments to reconcile net income to net cash
flows from operating activities:
Amortization 784 - 2,352 27,755
Depreciation 36,117 36,116 108,350 108,350
(Increase) decrease in accounts receivable (13,632) - (13,242) 14,399
Increase (decrease) in accounts payable 33,747 (5,193) 64,799 (17,953)
Cash received from direct financing leases
greater (less) than income recognized 1,456 (817) (326) (2,451)
Investment in joint ventures:
Equity income (35,594) (35,554) (106,750) (106,633)
Distributions received 35,594 35,554 106,750 106,633
Increase in accrued rental income (7,512) (4,728) (22,823) (16,092)
Increase in leasing commissions - - (31,765) -
--------- --------- --------- ---------
Net cash provided by operating activities 264,546 234,674 739,384 711,169
--------- --------- --------- ---------
Cash flows from investing activities:
Joint venture distributions in excess of income 2,974 1,082 6,372 3,269
--------- --------- --------- ---------
Net cash provided by investing activities 2,974 1,082 6,372 3,269
--------- --------- --------- ---------
Cash flows from financing activities:
Distributions paid to partners (234,360) (233,715) (702,963) (699,928)
--------- --------- --------- ---------
Net cash used in financing activities (234,360) (233,715) (702,963) (699,928)
--------- --------- --------- ---------
Net increase in cash and cash equivalents 33,160 2,041 42,793 14,510
Cash and cash equivalents at beginning of period 251,269 234,888 241,636 222,419
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 284,429 $ 236,929 $ 284,429 $ 236,929
========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
AAA NET REALTY FUND X, LTD
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(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 Partnership was formed to acquire commercial properties for cash, own,
lease, operate, manage and eventually sell the properties. Prior to June 5,
1998, the selection, acquisition, and supervision of the operations of the
properties was managed by American Asset Advisers Realty Corporation ("AAA"),
a related party. Beginning June 5, 1998, the supervision of the operations of
the properties is managed by AmREIT Realty Investment Corporation, ("ARIC"), 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 1999 or 1998.
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.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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. The Partnership owns a minority interest and
does not exercise control over the management of the joint ventures.
5
<PAGE>
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 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, 1999 and
1998.
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-KSB for the year ended December 31,
1998.
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 payment for 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, a total of $19,716 and $59,148 were incurred and paid
to ARIC for the three and nine months ended September 30, 1999, respectively
and $17,283 and $51,849 were incurred and paid to AAA or ARIC for the three
and nine months ended September 30, 1998, respectively.
4. MAJOR LESSEES
The following schedule summarizes total rental income by lessee for the three
and nine months ended September 30, 1999 and 1998 under both operating and
direct financing leases:
<TABLE>
<CAPTION>
Quarter Year to Date
1999 1998 1999 1998
-------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Golden Corral Corporation (Texas) $ 43,241 $ 43,241 $129,723 $129,723
TGI Friday's, Inc. (Texas) 45,126 45,126 135,378 135,378
Goodyear Tire & Rubber Company (Texas) 13,227 13,227 39,681 39,681
Tandy Corporation (Minnesota) 64,155 64,155 192,465 192,465
America's Favorite Chicken Company (Georgia) 25,745 25,925 77,075 77,777
One Care/Memorial Hermann Hospital (Texas) 43,536 40,130 130,608 122,298
-------- -------- -------- --------
Total $235,030 $231,804 $704,930 $697,322
======== ======== ======== ========
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Partnership was organized on April 15, 1992, to acquire, on a debt-free
basis, existing and newly constructed commercial properties located in the
continental United States and particularly in the Southwest, to lease these
properties to tenants under generally "triple net" leases, to hold the
properties with the expectation of equity appreciation and eventually to resell
the properties.
The Partnership's overall investment objectives are to acquire properties that
offer investors the potential for (i) preservation and protection of the
Partnership's capital; (ii) partially tax-deferred cash distributions from
operations; and (iii) long-term capital gains through appreciation in value of
the Partnership's properties realized upon sale.
The operations of the Partnership are relatively simple and are managed by ARIC,
a subsidiary of AmREIT, Inc. (the "Company"). The following disclosure has been
made in the Form 10-KSB of the Company.
The Year 2000 problem ("Y2K") concerns the inability of information and non-
information technology systems to properly recognize and process date-sensitive
information beyond January 1, 2000. The Company's information technology system
consists of a network of personal computers and servers built using hardware and
software from mainstream suppliers. The Company has no internally generated
programmed software coding to correct, as all of the software utilized by the
Company is purchased or licensed from external providers.
In 1998, the Company formed a Year 2000 committee (the "Y2K Team") for the
purpose of identifying, understanding and addressing the various issues
associated with the Year 2000 problems. The Y2K Team consists of members from
the Company, including representatives from senior management, accounting and
computer consultants. The Y2K Team's initial step in assessing the Company's Y2K
readiness consists of identifying any systems that are date-sensitive and,
accordingly, could have potential Y2K problems. The Y2K Team is in the process
of conducting inspections, interviews and tests to identify which of the
Company's systems could have a potential Y2K problem.
The Company's information system is comprised of hardware and software
applications from mainstream suppliers; accordingly, the Y2K Team is in the
process of contacting the respective vendors and manufacturers to verify the Y2K
compliance of their products. In addition, the Y2K Team has also requested and
is evaluating documentation from other companies with which the Company has a
material third party relationship, including the Company's tenants, major
vendors, financial institutions and the Company's transfer agent. The Company
depends on its tenants for rents and cash flows, its financial institutions for
availability of cash and financing and its transfer agent to maintain and track
investor information. Although the Company continues to receive positive
responses from its third party relationships regarding their Y2K compliance, the
Company cannot be assured that the tenants, financial institutions, transfer
agent and other vendors have adequately considered the impact of the Year 2000.
The Company does not expect the Y2K impact of third parties to have a materially
adverse effect on its results of operation or financial position.
The Company has identified and has implemented upgrades for certain hardware
equipment. In addition, the Company has identified certain software applications
which will require upgrades to become Year 2000 compliant. The Company expects
all of these upgrades as well as any other necessary remedial measures on the
information technology systems used in the business activities and operations of
the Company to be completed by December 31, 1999. The Company does not expect
the aggregate cost of the Year 2000 remedial measures to exceed $10,000.
7
<PAGE>
Based upon the progress the Company has made in addressing its Year 2000 issues,
the Company does not foresee significant risks associated with its Year 2000
compliance at this time. The Company plans to address its significant Year 2000
issues prior to being affected by them; therefore, it has not developed a
comprehensive contingency plan. However, if the Company identifies significant
risks related to its Year 2000 compliance, the Company will develop contingency
plans as deemed necessary at that time.
RESULTS OF OPERATIONS
For the three months ended September 30, 1999, revenues totaled $271,060 which
included $270,624 from real estate operations and $436 of interest income.
Revenues for the third quarter of 1999 increased slightly from those of the
third quarter of 1998. Expenses decreased from $59,908 in the third quarter of
1998 to $57,474 in the third quarter of 1999 primarily from a decrease in
professional fees partially offset by an increase in advisory fees. The
Partnership recorded $213,586 of net income for the third quarter of 1999
compared to $209,296 for the third quarter of 1998.
For the nine months ended September 30, 1999, revenues totaled $813,666 which
included $811,680 from real estate operations and $1,986 of interest income.
Revenues for the first nine months of 1999 increased $5,753 from those of the
first nine months of 1998 which was attributable to a $7,725 increase in rental
income partially offset by a decrease of $1,972 in interest income. Rental
income increased based upon a specified rental adjustment during the first nine
months of 1999. Expenses decreased from $210,752 in the first nine months of
1998 to $181,627 in the first nine months of 1999 primarily from a decrease in
professional and amortization fees partially offset by an increase in advisory
fees. The Partnership recorded $632,039 of net income for the first nine months
of 1999 compared to $597,161 for the first nine months of 1998.
8
<PAGE>
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
9
<PAGE>
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.
---------------------------------------------
(Issuer)
November 15, 1999 /s/ H. Kerr Taylor
- ----------------- ---------------------------------------------
Date H. Kerr Taylor, President of General Partner
November 15, 1999 /s/ L. Larry Mangum
- ----------------- ---------------------------------------------
Date L. Larry Mangum (Principal Accounting Officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 284,429
<SECURITIES> 0
<RECEIVABLES> 14,412
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 298,841
<PP&E> 7,937,234
<DEPRECIATION> 797,700
<TOTAL-ASSETS> 9,593,352
<CURRENT-LIABILITIES> 78,413
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,514,939
<TOTAL-LIABILITY-AND-EQUITY> 9,593,352
<SALES> 811,680
<TOTAL-REVENUES> 813,666
<CGS> 0
<TOTAL-COSTS> 181,627
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 632,039
<INCOME-TAX> 0
<INCOME-CONTINUING> 632,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 632,039
<EPS-BASIC> 55.18
<EPS-DILUTED> 0
</TABLE>
