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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2002
( ) 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 - 0-25574
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 pursuant to section 12 (g) of the Act:
Limited Partnership Interests (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 filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K (X).
As of March 4, 2003, 86,652 units were issued and outstanding. Based on the book
value at December 31, 2002 of $2.15 per unit, the aggregate market value at
March 4, 2003 was $186,302.
DOCUMENTS INCORPORATED BY REFERENCE. Portions of the Registration Statement on
Form S-1, dated August 27, 1993 are incorporated by reference into Part IV.
TELECOMMUNICATIONS INCOME FUND X, L.P.
2002 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business-------------------------------------------------------------3
Item 2. Properties-----------------------------------------------------------4
Item 3. Legal Proceedings----------------------------------------------------4
Item 4. Submission of Matters to a Vote of Unit Holders----------------------4
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholders Matters---------------------------------4
Item 6. Selected Financial Data----------------------------------------------5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations------------------------------5
Item 7A. Quantitative and Qualitative Disclosures About Market Risk-----------7
Item 8. Financial Statements and Supplementary Data--------------------------7
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure--------------------------22
PART III
Item 10. Directors and Executive Officers of the Registrant------------------22
Item 11. Executive Compensation----------------------------------------------23
Item 12. Security Ownership of Certain Beneficial Owners and Management------24
Item 13. Certain Relationships and Related Transactions----------------------24
Item 14. Controls and Procedures---------------------------------------------24
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.----25
Signatures----------------------------------------------------------26
Certifications------------------------------------------------------27
2
PART I
Item 1. Business
- ----------------
Telecommunications Income Fund X, L.P., an Iowa limited partnership (the
"Partnership"), was organized on April 20, 1993. The general partner is Berthel
Fisher & Company Leasing, Inc. (the "General Partner"), an Iowa corporation that
has been in operation since 1988. The Partnership's business and the executive
offices of the General Partner are located at 701 Tama Street, Marion, Iowa
52302. Substantially all of the voting stock of the General Partner is owned by
Berthel Fisher & Company ("Berthel Fisher").
The Partnership began offering units to the public on August 27, 1993 and
continued to offer units to the public through December 31, 1994. The
Partnership was scheduled to operate until December 31, 2002 unless dissolved
sooner due to the occurrence of any of the following events: (i) the vote by
limited partners owning a majority of the Partnership in accordance with the
Partnership Agreement; (ii) the withdrawal, bankruptcy, or dissolution and
liquidation or other cessation to exist as a legal entity of the General Partner
(unless any successor general partner elected in accordance with the provisions
of the Partnership Agreement elects to continue the business of the
Partnership); (iii) the final distribution of all liquidating distributions
among the limited partners pursuant to the Partnership Agreement; or (iv) the
sale or disposition of all or substantially all of the assets of the Partnership
without the subsequent reinvestment in equipment. The Partnership did not
liquidate by December 31, 2002 and did not ask the limited partners to vote via
a proxy statement to extend the Partnership; therefore the Partnership will be
liquidated as soon as feasibly possible.
The business of the Partnership is the acquisition and leasing of equipment,
primarily telecommunications equipment such as pay telephones and call
processing equipment. The Partnership began its primary business activities on
September 29, 1993. The Partnership entered its liquidation phase on December
31, 1999.
A significant portion of the Partnership's business is with customers who are in
the telecommunications industry. The telecommunications industry, particularly
the pay telephone and long distance facets of the industry, is heavily regulated
by the Federal Communications Commission ("FCC") and by various state public
utility commissions. Regulation is not directed at the ownership or leasing of
telecommunications equipment, but is focused primarily on the business of the
Partnership's customers that operate in the telecommunications industry.
Generally, regulation affects rates that can be charged and the relationship of
the regional Bell operating companies to the rest of the pay telephone industry.
Management does not expect regulation to have any significant negative impact
upon the business of the Partnership.
The principle objective of the Partnership is obtaining value from the sale and
collection of the Partnership's portfolio of leases and notes receivable and
sale of other assets during the liquidating phase (the period during which the
General Partner will liquidate the Partnership assets) and providing
distributions to the partners during the liquidating phase.
The Partnership acquired primarily telecommunications equipment (specifically
pay telephones and call processing equipment) and leased the equipment to third
parties generally under full payout leases. The Partnership also acquired other
types of equipment generally subject to full payout leases. Full payout leases
are leases that are expected to generate gross rental payments sufficient to
recover the purchase price of the equipment and any overhead and acquisition
costs.
Equipment acquired by the Partnership is installed in various locations by the
lessees. When the lessee installs the equipment in a location, a site location
agreement gives the lessee the right to have the equipment at this site for a
specified period of time. These site location agreements generally have a three
3
to five year term. The Partnership, in addition to its ownership of the
equipment, takes an assignment of and a first security interest in these site
location agreements. Therefore, if a lessee defaulted, the Partnership could
have the ability to re-sell or re-lease the equipment in place. This "in place"
value is generally much higher than the residual value of the equipment. The
telecommunications equipment generates revenue primarily through long distance
phone calls. The Partnership's lessee generally receives long distance revenue
from a contracted third party billing company. The Partnership also takes an
assignment of this revenue.
The General Partner acquired and approved leases on behalf of the Partnership.
The General Partner established guidelines to use in approving lessees.
Generally, before any lease was approved, there was a review of the potential
lessees' financial statements, credit references were checked, and outside
business and/or individual credit reports were obtained.
The Partnership's leases and notes receivable are concentrated in pay telephones
and the notes receivable of Murdock Communications Corporation ("Murdock"). The
portfolio related to these sources for the period ended December 31, 2002, 2001,
and 2000 is outlined in the table below.
2002 2001 2000
---- ---- ----
Pay telephones 99% 95% 32%
Murdock notes receivable -- -- 50%
Two customers accounted for 95% of the Partnership's net investment in direct
financing leases and notes receivable portfolio at December 31, 2002. The
Partnership operates in one segment.
The Partnership has no employees and utilizes the administrative services of the
General Partner for which it pays an administrative service fee.
Item 2. Properties
- ------------------
The Partnership does not own or lease any real estate. The Partnership's
materially important assets consist entirely of equipment under lease, primarily
telecommunications equipment, as described in Item 1.
Item 3. Legal Proceedings
- -------------------------
None.
Item 4. Submission of Matters to a Vote of Unit Holders
- -------------------------------------------------------
No matters were submitted to a vote of limited partners, through the
solicitation of proxies or otherwise during the year covered by this report.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- -------------------------------------------------------------------------
Matters
- -------
The Registrants' Units are not publicly traded. There is no market for the
Registrant's Units and it is unlikely that any will develop. The General Partner
will resist the development of a public market for the Units.
Number of Partners
Title of Class at March 4, 2003
---------------------------------------------------------
Limited Partner 1,564
General Partner 1
Through December 31, 2002, $17,707,518 has been paid in distributions to
partners during the life of the Partnership. Distributions to partners on a per
unit basis were $0 in 2002, $11.93 in 2001, $32.14 in 2000, and $27.00 in 1999,
and $27.00 in 1998.
4
Item 6. Selected Financial Data
- -------------------------------
YEAR ENDED DECEMBER 31
- -----------------------------------------------------------------------------------------------------------------------
(Liquidation Basis) (Historical Cost Basis)
------------------------------------------------ -------------------------------
2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
Total Revenue $ n/a $ n/a $ n/a $ 1,607,766 $ 2,802,667
Net Income n/a n/a n/a 542,733 1,664,367
Total Assets 342,186 693,649 5,418,769 11,828,955 12,647,703
Line of Credit -0- -0- -0- 2,556,214 15,433
Provision for Possible Losses 95,000 1,239,000 125,000 184,730 199,060
Distributions to Partners -0- 1,049,864 2,850,000 2,409,159 2,422,973
Net Income per Unit n/a n/a n/a 6.08 18.54
Distributions per Unit -0- 11.93 32.14 27.00 27.00
Change in net assets, excluding
distributions and withdrawals (244,542) (3,325,478) (170,052) (1,464,813) * n/a
* Upon adoption of liquidation basis of accounting
The selected financial data above was derived from the liquidation basis
financial statements of the Partnership as of and for the years ending December
31, 2002, 2001, and 2000, and the historical cost basis financial statements
prior to December 31, 1999. As of December 31, 1999, the Partnership adopted the
liquidation basis of accounting. Under liquidation basis accounting, assets are
presented at estimated net realizable value and liabilities are presented at
estimated settlement amounts. The change to liquidation basis accounting may
materially affect the comparability of the selected financial data. The above
selected financial data should be read in connection with the financial
statements and related notes appearing elsewhere in this report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations
- -------------
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 financial statements beginning with
that date 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 are stated at their anticipated settlement
amounts.
As discussed above, the Partnership is in liquidation and does not believe a
comparison of results would be meaningful. The Partnership realized $19,983 in
income from direct financing leases, notes receivable, interest, and other
income for the year ended December 31, 2002. This represents an annualized
return on average net assets, excluding the decrease in the estimate of the
liquidation value of net assets discussed below, of approximately 6.4%.
Management decreased its estimate of the liquidation value of net assets during
2002 by $264,525. This decrease resulted primarily from an increase in the
allowance for possible loan and lease losses of $95,000, an increase in the
reserve for estimated costs during the period of liquidation of $115,074, and a
decrease in the estimated net realizable value of the Partnership's assets of
$50,000. The Partnership has accrued the estimated expenses of liquidation,
which is $120,249 at December 31, 2002. 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
5
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. Through December 31, 2002,
there have been distributions totalling $17,707,518. As of December 31, 2002 the
Partnership had $49,000 of cash on hand.
As of December 31, 2002, 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
December 31, 2002. Management will monitor any past due contracts and take the
necessary steps to protect the Partnership's investment.
The General Partner is engaged directly for its own account in the business of
acquiring and leasing equipment. The General Partner serves as the general
partner of Telecommunications Income Fund IX, L.P. ("TIF IX") and
Telecommunications Income Fund XI, L.P. ("TIF XI"), publicly owned limited
partnerships that are engaged in the equipment leasing business. TIF IX is
currently in its liquidation phase and must be dissolved by December 31, 2005.
Also, an affiliate of the General Partner is the general partner of a privately
offered active limited partnership. As of December 31, 2002, the net proceeds of
the private program, TIF IX, and TIF XI have been invested in specific
equipment. The activities of the General Partner, in regards to its other
leasing activities, has had no impact on the Partnership to date in management's
opinion.
The General Partner is not aware of any regulatory issues that may have a
substantial negative impact on the telecommunications businesses to whom the
Partnership leases equipment. There are and will continue to be regulatory
issues in the telecommunications industry that the General Partner will monitor.
Berthel Fisher & Company, Inc., the parent of the General Partner, has $2.2
million of unsecured debt that was due December 31, 2002. Berthel Fisher &
Company, Inc. has not paid this debt as of the filing of this report and is in
default. Since Berthel Fisher & Company, Inc. is in default, its creditors could
take legal action to enforce their right to repayment. Ultimately, this could
result in the bankruptcy of Berthel Fisher & Company, Inc. Since the General
Partner is a subsidiary and asset of Berthel Fisher & Company, Inc., the
bankruptcy of Berthel Fisher & Company, Inc. could cause the General Partner to
be unable to continue as a going concern. If this were to happen, the
Partnership would need to elect or 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.
Liquidity and Capital Resources
The Partnership is required to establish working capital reserves of no less
than 1% of the total capital raised to satisfy general liquidity requirements,
operating costs of equipment, and the maintenance and refurbishment of
equipment. At December 31, 2002, that working capital reserve, as defined, would
be $226,025. Actual cash on hand at December 31, 2002 was $49,000. However, upon
entering the liquidation phase, the General Partner has prioritized the
liquidation of assets and distributing remaining proceeds to the partners.
Management believes that the cash on hand at December 31, 2002 and the expected
repayments of notes receivable is sufficient to satisfy current operating
expenses and costs of the Partnership.
The Partnership will continue to liquidate its assets in an orderly manner to
achieve the highest price possible for the partners and make distributions as
cash becomes available through sales of assets or collections of lease and notes
receivable.
6
Item 7A. 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 December 31,
2002.
Carrying Amount Fair Value
--------------- -------------
Common Stock-Murdock $ 59,250 $ 59,250
------------- -------------
Total Not Readily Marketable $ 59,250 $ 59,250
============= =============
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 portfolio 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. Murdock is a shell company with no operations whose stock
price can be volatile. The Partnership holds 592,500 shares of Murdock and at
December 31, 2002, the total amount at risk was $59,250. Murdock has filed an
S-4 registration with the intent to merge with another company. The Partnership
intends to hold the Murdock shares to determine if any significant value can be
achieved from this potential merger. No assurance can be given that the merger
will be consummated or that any value can be realized if the merger is
consummated.
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 December 31, 2002.
Assets
---------------------------------
Expected Fixed Rate Average
Maturity Date Notes Receivable Interest Rate
------------- ---------------- -------------
2002 $ 190,755 10.3%
2003 47,108 9.5%
2004 4,175 9.5%
2005 2,858 9.5%
-------------
Total $ 244,896
=============
Fair Value $ 174,000
=============
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 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
The following financial statements and related information as of and for the
years ended December 31, 2002, 2001, and 2000 are included in Item 8:
Independent Auditors' Report
Statements of Net Assets as of December 31, 2002 and 2001 (Liquidation
Basis)
Statements of Changes in Net Assets (Liquidation Basis) for the Years
Ended December 31, 2002, 2001, and 2000
Statements of Cash Flows for the Years Ended December 31, 2002, 2001,
and 2000
Notes to Financial Statements
7
INDEPENDENT AUDITORS' REPORT
To the Partners
Telecommunications Income Fund X, L.P.
We have audited the accompanying statements of net assets (liquidation basis) of
Telecommunications Income Fund X, L.P. (the "Partnership") as of December 31,
2002 and 2001, and the related statements of changes in net assets (liquidation
basis) and of cash flows for each of the three years in the period ended
December 31, 2002. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 1 to the financial statements, the Partnership agreement
required that the orderly liquidation of the Partnership's net assets begin on
December 31, 1999, and the Partnership commenced liquidation shortly thereafter.
As a result, the Partnership changed its basis of accounting from the going
concern basis to the liquidation basis effective December 31, 1999.
In our opinion, such financial statements present fairly, in all material
respects, the net assets of Telecommunications Income Fund X, L.P. at December
31, 2002 and 2001, the changes in its net assets and its cash flows for each of
the three years in the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of America on the
basis described in Note 1.
As discussed in Note 1 to the financial statements, because of the inherent
uncertainty of valuation when an entity is in liquidation, the amounts
realizable from the disposition of the remaining assets may differ materially
from the amounts shown in the accompanying financial statements.
/s/ DELOITTE & TOUCHE LLP
- -----------------------------
DELOITTE & TOUCHE LLP
Cedar Rapids, Iowa
March 10, 2003
8
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF NET ASSETS (LIQUIDATION BASIS)
AS OF DECEMBER 31, 2002 AND 2001
- ------------------------------------------------------------------------------------
ASSETS 2002 2001
Cash and cash equivalents $ 49,000 $ 46,197
Not readily marketable equity security (Note 2) 59,250 38,586
Net investment in direct financing leases
and notes receivable (Notes 3 and 4) 177,900 492,538
Other assets 56,036 116,328
-------- --------
Total assets 342,186 693,649
======== ========
LIABILITIES
Accounts payable 34,797 62,963
Lease security deposits 592 21,982
Reserve for estimated costs during the period of liquidation 120,249 175,000
-------- --------
Total liabilities 155,638 259,945
======== ========
CONTINGENCY (Note 10)
NET ASSETS $186,548 $433,704
======== ========
See notes to financial statements.
-9-
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF CHANGES IN NET ASSETS (LIQUIDATION BASIS)
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
- --------------------------------------------------------------------------------
NET ASSETS AS OF JANUARY 1, 2000 $ 7,881,233
Income from direct financing leases 196,982
Interest and other income 219,164
Change in estimate of liquidation value of net assets (Note 1) (586,198)
Distributions to partners ($32.14 per unit) (Note 7) (2,850,000)
Withdrawals of limited partners (35,901)
-----------
NET ASSETS AS OF DECEMBER 31, 2000 4,825,280
Income from direct financing leases 70,465
Interest and other income 29,781
Change in estimate of liquidation value of net assets (Note 1) (3,425,724)
Distributions to partners ($11.93 per unit) (Note 7) (1,049,864)
Withdrawals of limited partners (16,234)
-----------
NET ASSETS AS OF DECEMBER 31, 2001 433,704
Income from direct financing leases 2,901
Interest and other income 17,082
Change in estimate of liquidation value of net assets (Note 1) (264,525)
Withdrawals of limited partners (2,614)
-----------
NET ASSETS AS OF DECEMBER 31, 2002 $ 186,548
===========
See notes to financial statements.
-10-
TELECOMMUNICATIONS INCOME FUND X, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
- -------------------------------------------------------------------------------------------------------------
2002 2001 2000
OPERATING ACTIVITIES:
Change in net assets excluding distributions and withdrawals $ (244,542) $(3,325,478) $ (170,052)
Adjustments to reconcile to net cash from operating activities:
Liquidation basis adjustments 264,525 3,425,724 586,198
Provision for possible loan and lease losses 125,000
Impairment loss on available-for-sale security 486,041
Changes in operating assets and liabilities:
Other assets 12,807 (25,578) (2,538)
Due to affiliates (317,474)
Accounts payable (28,166) (151,994) (549,853)
Reserve for estimated costs during liquidation period (169,825) (208,991) (200,000)
Outstanding checks in excess of bank balance (37,127)
----------- ----------- -----------
Net cash from operating activities (165,201) (286,317) (79,805)
=========== =========== ===========
INVESTING ACTIVITIES:
Proceeds from sale of equipment under operating lease 240,460
Repayments of direct financing leases 90,946 505,702 1,547,093
Proceeds from sale or termination of direct financing leases 58,575 300,811 4,755,524
Repayments of notes receivable 42,487 7,588 5,363
Issuance of notes receivable (135,000)
Net lease security deposits paid (21,390) (6,550) (104,844)
----------- ----------- -----------
Net cash from investing activities 170,618 1,048,011 6,068,136
=========== =========== ===========
FINANCING ACTIVITIES:
Proceeds from line-of-credit borrowings 346,936
Repayments of line-of-credit borrowings (2,903,150)
Distributions and withdrawals paid to partners (2,614) (1,066,098) (3,085,663)
----------- ----------- -----------
Net cash from financing activities (2,614) (1,066,098) (5,641,877)
=========== =========== ===========
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,803 (304,404) 346,454
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 46,197 350,601 4,147
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 49,000 $ 46,197 $ 350,601
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 55,620
Noncash investing and financing activities:
Conversion of leases to notes receivable and not readily
marketable equity security 2,437,062
Repossession of leased equipment 1,702,644
Conversion of equipment held for sale to notes receivable $ 176,000
Conversion of leases to notes receiveable $ 129,387
See notes to financial statements.
-11-
TELECOMMUNICATIONS INCOME FUND X, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations- Telecommunications Income Fund X,
L.P. (the "Partnership") was formed on April 20, 1993 under the Iowa
Limited Partnership Act. The general partner of the Partnership is Berthel
Fisher & Company Leasing, Inc. (the "General Partner"), an Iowa
corporation. During its offering period the Partnership sold 90,470
partnership interests at a price per unit of $250.
The Partnership operates in one segment. The Partnership's operations are
conducted throughout the United States. The Partnership primarily acquired
equipment for lease to third parties under a direct finance arrangement.
The lease agreements with individual customers were generally in excess of
$500,000 and certain agreements exceed 10% of the Partnership's direct
finance lease portfolio (see Note 3). The Partnership ceased reinvestment
in equipment and leases and began the orderly liquidation of Partnership
assets on January 1, 2000 as required by the Partnership agreement. The
Partnership must dissolve on December 31, 2002 (see Note 7). State law
allows the Partnership a reasonable period of time to complete the
dissolution.
Basis of Presentation - The Partnership began the orderly liquidation of
Partnership assets in January 2000 as discussed above. As a result, on
December 31, 1999 the Partnership adopted the liquidation basis of
accounting. The statements of net assets and the statements of changes in
net assets have been prepared on the liquidation basis. Accordingly, assets
have been valued at estimated net realizable value and liabilities include
estimated costs associated with carrying out the plan of liquidation.
Changes in the estimated liquidation value of net assets during the years
ended December 31, 2002, 2001 and 2000 are summarized as follows:
2002 2001 2000
Change in estimate of liquidation value of:
Securities $ 20,664 $ (954,291) $ (992,912)
Direct financing leases and notes receivable (122,630) (1,151,249) 406,714
Equipment held for sale (1,286,184)
Other assets (47,485)
Reserve for estimated costs during the period
of liquidation (115,074) (34,000)
----------- ----------- -----------
Total $ (264,525) $(3,425,724) $ (586,198)
=========== =========== ===========
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 partners. The actual amounts are likely to
differ from the amounts presented in the financial statements.
-12-
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America 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 significantly from those estimated. Material
estimates that are particularly susceptible to significant change in the
near-term relate to the determination of the net realizable values of the
Partnership's assets and the reserve for estimated costs during the period
of liquidation.
The Partnership's equity security at December 31, 2002 consists of a common
stock investment in one company. A prospective buyer may require a
substantially lower price than currently estimated and the prospects of
this company may deteriorate. These factors, among others, could have a
material near-term impact on the net realizable value of its equity
security.
Most of the Partnership's leases and notes receivable are with customers
that are in the entrepreneurial stage and, therefore, are highly leveraged
and require financing in place of or to supplement financing from banks.
Also, the market for pay telephone equipment is volatile. Although the
Partnership attempts to mitigate its credit risk through timely collection
efforts, failure of the Partnership's customers to make scheduled payments
under their equipment leases and notes receivable could have a material
near-term impact on the net realizable value of leases and notes
receivable.
Certain Risk Concentrations - The Partnership's portfolio of leases and
notes receivable are concentrated in the pay telephone/telecommunications
industry representing approximately 99% and 95% at December 31, 2002 and
2001, respectively, of the Partnership's direct finance lease and notes
receivable portfolio.
Two customers account for approximately 95% of the Partnership's net
investment in direct financing leases and notes receivable portfolio at
December 31, 2002 (two customers represented 85% at December 31, 2001).
Related Party Transactions - In fulfilling its role as general partner,
Berthel Fisher & Company Leasing, Inc. enters into transactions with the
Partnership in the normal course of business. Further, the Partnership also
enters into transactions with affiliates of Berthel Fisher & Company
Leasing, Inc. These transactions are set forth in the notes that follow.
Management is of the opinion that these transactions are in accordance with
the terms of the Agreement of Limited Partnership.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents.
Equity Securities - The Partnership's common equity security is restricted
as to sale in the public market under rules of the Securities and Exchange
Commission. The common equity security is valued at an estimated discount
from the published market price reflective of its more illiquid nature.
The Partnership's preferred equity security was valued at its estimated net
realizable value based on benchmark comparisons to similar public
companies.
-13-
Net Investment in Direct Financing Leases - The Partnership's primary
activity consists of leasing telecommunications equipment under direct
financing leases generally over a period of three to five years. At the
time of closing a direct financing lease, the Partnership recorded the
gross lease contract receivable, the estimated unguaranteed residual value
and unearned lease income. The unearned lease income represents the excess
of the gross lease receivable plus the estimated unguaranteed residual
value over the cost of the equipment leased. In addition, the Partnership
capitalized all initial direct costs associated with originating the direct
financing lease. The unearned income and initial direct costs are amortized
to income over the lease term so as to produce a constant periodic
rate-of-return on the net investment in the lease. Lessees are responsible
for all taxes, insurance, and maintenance costs.
The realization of the estimated unguaranteed residual value of leased
equipment depends on the value of the leased equipment at the end of the
lease term and is not a part of the contractual agreement with the lessee.
Estimated residual values are based on estimates of amounts historically
realized by the Partnership for similar equipment and are periodically
reviewed by management for possible impairment.
Notes Receivable - Notes receivable are carried at the principle balance
outstanding. Interest income on notes receivable is accrued based on the
principle amount outstanding.
Allowance for Possible Loan and Lease Losses - The Partnership performed
credit evaluations prior to approval of a loan and lease. Subsequently, the
creditworthiness of the customer and the value of the underlying assets are
monitored on an ongoing basis. Under its lease agreements, the Partnership
retains legal ownership of the leased asset. The Partnership maintains an
allowance for possible loan and lease losses which could arise should
customers become unable to discharge their obligations under the loan and
lease agreements. The allowance for possible loan and lease losses is
maintained at a level deemed appropriate by management to provide for known
and inherent risks in the loan and lease portfolio. The allowance is based
upon a continuing review of past loss experience, current economic
conditions, delinquent loans and leases, an estimate of potential loss
exposure on significant customers in adverse situations, and the underlying
asset value. The consideration of such future potential losses also
includes an evaluation for other than temporary declines in value of the
underlying assets. Loans and leases, which are deemed uncollectible, are
charged off and deducted from the allowance. The provision for possible
loan and lease losses and recoveries are added to the allowance.
Net Realizable Value of Net Investment in Direct Financing Leases and Notes
Receivable - Management, in arriving at the net realizable value of the
Partnership's net investment in direct financing leases and notes
receivable, considered the contractual repayment schedule, the estimated
duration of the liquidation period, the customer and industry concentration
risks, and interest rate levels, among other factors, in arriving at a
discount to apply to the portfolio to estimate its net realizable value.
Equipment Held for Sale - The net realizable value of equipment held for
sale at December 31, 2000 was based on recent sales values for similar pay
telephone equipment.
Tax Status - Under present income tax laws, the Partnership is not liable
for income taxes, as each partner recognizes a proportionate share of the
Partnership income or loss in their income tax return. Accordingly, no
provision for income taxes is made in the financial statements of the
Partnership.
Distributions Per Partnership Unit - Distributions per partnership unit is
based on the weighted average number of units outstanding (including both
general and limited partners' units).
-14-
Reclassifications - Certain prior year amounts have been reclassified to
conform to the current year presentation.
2. EQUITY SECURITY
The Partnership's not readily marketable equity security consists of the
following at December 31, 2002 and 2001:
2002 2001
Murdock Communications Corporation, a public shell
company with no operations, 592,500 shares of common
stock at December 31, 2002 and 2001 $59,250 $38,586
======= =======
3. NET INVESTMENT IN DIRECT FINANCING LEASES AND NOTES RECEIVABLE
The Partnership's net investment in direct financing leases and notes
receivable consists of the following at December 31, 2002 and 2001:
2002 2001
Minimum lease payments receivable $ 3,116 $ 579,335
Estimated unguaranteed residual values 1,100 65,769
Unamortized initial direct costs 1 2,155
Unearned income (157) (124,298)
Notes receivable collateralized by payphones,
8.35% average rate, maturing in 2003 - 2006 244,896 186,008
Adjustment to net realizable value (71,056) (216,431)
--------- ---------
Net investment in direct financing leases and
notes receivable $ 177,900 $ 492,538
========= =========
-15-
At December 31, 2002, the contractual maturities under notes receivable,
the future minimum payments to be received under the direct financing
leases and the estimated unguaranteed residuals to be realized at the
expiration of the direct financing leases are as follows:
Notes Minimum Estimated
Receivable Lease Unguaranteed
Contractual Payments Residual
Maturities Receivable Values
Years ending December 31:
2003 $190,755 $ 3,116 $ 1,100
2004 47,108
2005 4,176
2006 2,857
-------- -------- --------
Total $244,896 $ 3,116 $ 1,100
======== ======== ========
Four customers accounted for 10% or more of the amount of income from
direct financing leases during one or more of the years presented, as
follows:
2002 2001 2000
Customer A 71 % 4 %
Customer B 21 %
Customer C 16
Customer D 47 18
4. ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES
The changes in the allowance for possible loan and lease losses for the
years ended December 31, 2002, 2001, and 2000 are as follows:
2002 2001 2000
Balance at beginning of year $ 216,431 $ 758,935 $ 582,507
Provision 95,000 1,239,000 182,776
Charge-offs, net of recoveries (242,890) (1,781,504) (6,348)
----------- ----------- -----------
Balance at end of year $ 68,541 $ 216,431 $ 758,935
=========== =========== ===========
The allowance for possible loan and lease losses consisted of specific
allowances for leases and notes receivable of $0, $185,000 and $625,512 and
a general unallocated allowance of $68,541, $31,431 and $133,423,
respectively, at December 31, 2002, 2001 and 2000. The allowance is
included in the net realizable value adjustment discussed in Note 3.
In June 2000, the Partnership's two leases with Murdock Communications
Corporation ("Murdock") were converted to notes and stock as part of a
restructuring. At the time of the restructuring, the Partnership's net
investment in the contracts, after accruing for related property taxes,
totaled $2,437,062. The Partnership received two notes and recorded these
at their estimated net realizable value of $1,535,828 and 421,181 (adjusted
for a stock split) shares of preferred stock in AcTel, a not readily
marketable security. The estimated net realizable value of the AcTel
preferred stock was $947,658 at December 31, 2000. The Partnership did not
accrue interest on the notes receivable due to the uncertainty of Murdock's
ability to pay. The Partnership established a specific allowance of
$625,512 at December 31, 2000 for the notes receivable related to this
uncertainty. The Partnership increased the allowance for loan and lease
losses by $910,000 in 2001 and wrote-off the carrying value of the notes
receivable as Murdock's primary asset was AcTel preferred stock and AcTel
filed for bankruptcy in April 2001.
-16-
Another lessee of the Partnership, LIDS Corporation, filed for Chapter 11
bankruptcy during 2001, resulting in an increase to the allowance for
possible loan and lease losses and a loan write-off of $200,000.
At December 31, 2002, the Partnership had no customers with payments over
90 days past due. At December 31, 2001, the Partnership had three customers
with payments over 90 days past due. The Partnership's net investment in
lease contracts with these customers totaled $380,153. Management has
provided a specific allowance of $185,000 at December 31, 2001 related to
two of these customers. Management believes that the underlying collateral
is adequate to recover the Partnership's net investment for the remaining
past due customer. If a lease or note receivable is past due more than 90
days, the Partnership discontinues recognizing income on the contract.
5. EQUIPMENT HELD FOR SALE
In November 2000, the Partnership exercised its right to manage the assets,
primarily pay phones, leased to Alpha Telecommunications, Inc. due to
nonpayment of lease receivables. Such equipment had been adjusted for an
impairment loss of $351,041 to reflect management's estimated net
realizable value of the equipment at December 31, 2000 of $1,702,644. The
equipment was sold during 2001 to two parties for a note receivable of
$176,000 and cash of $240,460 resulting in a loss of $1,286,184.
The significant loss on equipment in 2001 occurred because payphone site
lease contracts were not accepted by the trustee during bankruptcy of Alpha
Telecommunications, Inc. Without the contracts in place, the value of the
payphones decreased significantly. Additionally, the market value of
payphones decreased due to the general decline experienced in the industry
during 2001.
6. BORROWING AGREEMENT
The Partnership had a line-of-credit agreement with a bank, which bore
interest at a variable rate of 9.5% at December 31, 1999. The
line-of-credit was paid in full and discontinued during 2000.
7. LIMITED PARTNERSHIP AGREEMENT
The Partnership was formed pursuant to an Agreement of Limited Partnership
dated as of April 20, 1993 and amended August 12, 1993 (the "Agreement").
The Agreement outlines capital contributions to be made by the partners and
the allocation of cash distributions, net income, and net loss to the
partners. Capital contributions by the partners to the partnership consist
of the $10,000 contributed by the General Partner and the amounts
contributed by limited partners for the purchase of their units.
Net income or net loss allocated to the limited partners will be
apportioned among them based on the number of limited partnership units
held and on the number of months within the respective year that such units
were held. Any share of Partnership net loss will first be allocated to the
limited partners to the extent of their positive capital account balances.
Any share of additional net loss will be allocated to the General Partner.
Any Partnership net income will first be allocated to partners with
negative capital accounts in proportion to, and to the extent of, such
negative capital accounts. Except as provided below, any additional net
income will then be allocated to the General Partner and limited partners
based on number of units held. During liquidation of the Partnership, when
cash distributions are to be made 80% to the limited partners and 20% to
the General Partner (see below), net income will be allocated 80% to the
limited partners and 20% to the General Partner.
-17-
During the Partnership's operating phase, to the extent there is cash
available for distribution, cash distributions will be made on a monthly
basis in the following order of priority: first, to reimburse the General
Partner for administrative services it provides to the Partnership, as
further described in the Agreement (see Note 8); second, to the limited
partners up to amounts representing a 10.8% cumulative annual return on
their adjusted capital contribution (as defined); and, third, to the
General Partner, representing a monthly equipment management fee of 5% of
the gross rental payments received by the Partnership. To the extent that
cash is not available to pay all or a portion of the equipment management
fee pursuant to the above priority distributions, such fee will accrue and
accumulate. Any remaining cash distributions after payment of the above
(including arrearages) will be paid, at the discretion of the General
Partner, to the limited partners.
During the Partnership's liquidation phase, cash available for distribution
will be distributed in the following order of priority: first, for payment
of the General Partner's administrative services expense described above;
second, to the limited partners for any arrearage in their 10.8% cumulative
priority return; third, to the limited partners for 100% of their adjusted
capital contributions; fourth, to the limited partners, distributions
totaling 10.8% annually, noncompounded, on their adjusted capital
contributions; fifth, to the General Partner for any arrearage in its
equipment management fee; and, sixth, 80% to the limited partners and 20%
to the General Partner (provided, however, that the General Partner will
not receive such amounts unless the limited partners have received total
distributions equal to their capital contribution plus a 10.8% annualized
return).
8. ADMINISTRATIVE SERVICES AGREEMENT
The General Partner is reimbursed for certain other costs under an
administrative services agreement. Amounts incurred by the Partnership
pursuant to this agreement amounted to $54,000, $90,000 and $84,000 for the
years ended December 31, 2002, 2001 and 2000, respectively.
-18-
9. RECONCILIATION OF FINANCIAL AND INCOME TAX REPORTING BASIS
A reconciliation of the change in net assets (excluding distributions and
withdrawals) for financial reporting purposes with net income (loss)
reported for income tax purposes for the years ended December 31, 2002,
2001 and 2000 is as follows:
2002 2001 2000
------------------------------------------------------------------------------------------
Per Per Per
Amount Unit Amount Unit Amount Unit
-------------------------- -------------------------- --------------------------
Change in net assets
excluding distributions
and withdrawals for
financial reporting
purposes $ (244,542) $ (2.81) $(3,325,478) $ (37.80) $ (170,052) $ 1.92
Adjustment to
convert direct
financing leases to
operating leases
for income tax
purposes (212,152) (2.44) (1,525,188) (17.33) 526,134 2.10
Net change in
allowance for
possible loan and
lease losses (242,890) (2.79) (1,781,504) (20.24) 176,428 1.99
Gain (loss) on lease
terminations 266,111 3.06 (389,742) (4.43) 4,293,108 48.41
Impairment of
investment (1,236,869) (14.06)
Net realizable value
adjustment 264,525 3.04 3,425,724 38.93 586,198 6.610
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) for
income tax reporting
purposes $ (168,948) $ (1.94) $(4,833,057) $ (54.93) $ 5,411,816 $ 61.03
=========== =========== =========== =========== =========== ===========
10. CONTINGENCY
The General Partner's parent has approximately $2.2 million of unsecured
subordinated debt which was due on December 31, 2002 and does not have
sufficient liquid assets to repay such amounts. The General Partner's
parent is pursuing additional financing, refinancing, and asset sales to
meet its obligations. No assurance can be provided that the General
Partner's parent will be successful in its efforts. The inability of the
General partner to continue as a going concern as a result of the parent's
inability to restructure its debts would require the Partnership to elect a
successor 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.
-19-
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
2002 Quarters
-------------------------------------------------------------
First Second Third Fourth 2002
Income from direct
financing leases,
interest and other
income $ 6,519 $ 8,208 $ 2,050 $ 3,206 $ 19,983
Withdrawals of limited
partners (507) (776) (818) (513) (2,614)
Change in estimate of
liquidation value of
net assets (12,801) (156,138) 41,826 (137,412) (264,525)
--------- --------- --------- --------- ---------
Change in net assets $ (6,789) $(148,706) $ 43,058 $(134,719) $(247,156)
========= ========= ========= ========= =========
The change in estimate of liquidation value of net assets in the second
quarter of 2002 includes a provision for possible loan and lease losses of
$30,000, primarily the result of a deterioration in the value of the phones
and other equipment under certain lease and note contracts, and an increase
in the estimated costs expected during the period of liquidation of
$97,074.
The change in estimate of liquidation value of net assets in the fourth
quarter is due to a change in the period of time in which management
reasonably expects to complete the dissolution of the Partnership which
increased the estimated costs expected during the period of liquidation by
$18,000, a provision for possible loan and lease losses of $50,000, and a
decrease in the estimated liquidation value of a not readily marketable
security of $42,038.
2001 Quarters
--------------------------------------------------------------
First Second Third Fourth 2001
Income from direct
financing leases,
interest and other
income $ 62,014 $ 28,137 $ 3,317 $ 6,778 $ 100,246
Distributions to
partners (599,864) (300,000) (150,000) (1,049,864)
Withdrawals of limited
partners (2,640) (7,983) (2,747) (2,864) (16,234)
Change in estimate of
liquidation value of
net assets (2,271,630) (695,086) (277,011) (181,997) (3,425,724)
----------- ----------- ----------- ----------- -----------
Change in net assets $(2,812,120) $ (974,932) $ (276,441) $ (328,083) $(4,391,576)
=========== =========== =========== =========== ===========
-20-
The change in estimate of liquidation value of net assets by quarter for
2001 is as follows:
First Second Third Fourth
Bankruptcy of AcTel and its
related impact on Murdock $1,857,658
LIDS Corporation bankruptcy 200,000
Loss on partial sale of the
equipment discussed in Note 5 88,398
Management's reduced estimate
of the value of the remaining
equipment discussed in Note 5 118,439 $ 736,447 $ 338,000 $ 4,900
Other 7,135 (41,361) (60,989) 177,097
---------- ---------- ---------- ----------
Total $2,271,630 $ 695,086 $ 277,011 $ 181,997
========== ========== ========== ==========
* * * *
-21-
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
None
Part III
Item 10. Directors & Executive Officers of the Registrant
- ---------------------------------------------------------
A: The General Partner of the registrant:
Berthel Fisher & Company Leasing, Inc., an Iowa corporation.
B: Executive officers of the General Partner of the Registrant:
Thomas J. Berthel (age 51) - Mr. Berthel is the Chief Executive Officer,
President, and Director of the General Partner, a position he has held since the
General Partner's inception in 1988. Mr. Berthel is also President and a
Director of the General Partner's parent, Berthel Fisher & Company, Inc.
("Berthel Fisher"), which he founded in 1985, and Berthel Fisher's other
subsidiaries, Berthel Fisher & Company Financial Services, Inc.; Berthel Fisher
& Company Management Corp.; Berthel Fisher & Company Planning, Inc.; and one
other corporation which acts as general partner of a separate private program.
He also serves as the Chairman of the Board and Director of Amana Colonies Golf
Course, Inc. Mr. Berthel holds a bachelor's degree from St. Ambrose College in
Davenport, Iowa (1974). From 1974 to 1982, Mr. Berthel was President and
majority shareholder of Insurance Planning Services Corporation in Maquoketa,
Iowa, which was engaged in the operation of a securities and insurance business.
Mr. Berthel holds a Financial and Operation Principal license issued by the
National Association of Securities Dealers, Inc. Mr. Berthel is also a Certified
Life Underwriter. Mr. Berthel also serves as an individual general partner of
the limited partnership referred to above. Mr. Berthel received a MBA degree
from the University of Iowa in 1993.
Ronald O. Brendengen (age 48) - Mr. Brendengen is the Treasurer, Chief Operating
Officer, Chief Financial Officer, and a Director (1988 to present) of the
General Partner. He was elected to his current offices in October 1996. He
served as Treasurer and Chief Financial Officer since October 1996. He has also
served as Secretary (1994 - March, 1995), Treasurer (1988 - August 1995) and
Chief Financial Officer (1994 - August 1995) of the General Partner. He served
as Controller (1985-1993), Treasurer (1987-present), Chief Financial Officer,
Secretary and a Director (1987-present), and was also elected Chief Operating
Officer in January 1998, of Berthel Fisher & Company, the parent company of the
General Partner. Mr. Brendengen serves as the Treasurer, Chief Financial Officer
and a Director of Berthel Fisher & Company Planning, Inc., the trust advisor of
Berthel Growth & Income Trust I, a company required to file reports pursuant to
the Securities Exchange Act of 1934. He also serves in various offices and as a
Director of each subsidiary of Berthel Fisher & Company. Mr. Brendengen holds a
certified public accounting certificate and worked in public accounting during
1984 and 1985. From 1979 to 1984, Mr. Brendengen worked in various capacities
for Morris Plan and MorAmerica Financial Corp., Cedar Rapids, Iowa. Mr.
Brendengen attended the University of Iowa before receiving a bachelor's degree
in Accounting and Business Administration with a minor in Economics from Mt.
Mercy College, Cedar Rapids, Iowa, in 1978.
22
Item 11. Executive Compensation
Set forth is the information relating to all direct remuneration paid or accrued
by the Registrant during the last three years to the General Partner:
(A) (B) (C) (C1) (C2) (D)
Securities of
property
insurance Aggregate
benefits or of
Cash and Cash reimbursement contingent
Name of individual Year equivalent forms personal or forms of
and capacities served Ended of remuneration Fees benefits remuneration
- -------------------------------------------------------------------------------------------------------------------
Berthel Fisher & Co. Leasing, Inc. 2002 $0 $ 54,000 $0 $0
(General Partner) 2001 $0 $ 90,000 $0 $0
2000 $0 $ 84,000 $0 $0
23
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) No person owns of record, or is known by the Registrant to own
beneficially, more than five percent of the Partnership Units.
(b) The General Partner of the Registrant owns Units of the Registrant set
forth in the following table.
(1) (2) (3) (4)
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Ownership Beneficial Ownership of Class
- -------------- -------------------- -------------------- --------
Units Berthel Fisher & Co. Forty (40) Units; 0.05%
Leasing, Inc. sole owner.
701 Tama Street
Marion, IA 52302
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
Related party transactions are described in Notes 3 and 8 of the notes to the
financial statements.
Item 14. 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 within 90 days before the
filing date of this annual report. 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.
There have been no significant changes in the Company's internal controls or
other factors that could significantly affect these controls subsequent to the
date of their evaluation, and no corrective actions with regards to significant
deficiencies and material weaknesses, of which none were noted, were required.
24
Part IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements.
Page No.
Statements of Net Assets as of December 31, 2002 and 2001
(Liquidation Basis) 9
Statements of Changes in Net Assets (Liquidation Basis)
for the Years Ended December 31, 2002, 2001, and 2000 10
Statements of Cash Flows
for the Years Ended December 31, 2002, 2001, and 2000 11
Notes to Financial Statements 12
2. Financial Statements Schedules
Information pursuant to Rule 12-09 (Schedule II) is included
in the financial statements and notes thereto.
3. Exhibits
3,4 Amended and Restated Agreement of Telecommunications
Income Fund X, L.P. currently in effect dated as of August 19, 1993(1)
99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350
99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of 2002.
- ----------------------------
(1) Incorporated herein by reference to Exhibit A in the Partnership's
registration statement on Form S-1, effective August 27, 1993
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By Berthel Fisher & Company Leasing, Inc.
By: /s/ Thomas J. Berthel Date: March 25, 2003
----------------------------------------
Thomas J. Berthel
President
By Berthel Fisher & Company Leasing, Inc.
By: /s/ Ronald O. Brendengen Date: March 25, 2003
----------------------------------------
Ronald O. Brendengen
Chief Financial Officer, Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Thomas J. Berthel Date: March 25, 2003
- --------------------------------------------
Thomas J. Berthel
Chief Executive Officer
President, Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
/s/ Ronald O. Brendengen Date: March 25, 2003
- --------------------------------------------
Ronald O. Brendengen
Treasurer, Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
/s/ Daniel P. Wegmann Date: March 25, 2003
- --------------------------------------------
Daniel P. Wegmann
Controller
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
/s/ Leslie D. Smith Date: March 25, 2003
- --------------------------------------------
Leslie D. Smith
Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
26
FORM OF SECTION 302 CERTIFICATION
I, Thomas J. Berthel, President and Chief Executive Officer of Berthel Fisher &
Company Leasing, Inc., the General Partner of Telecommunications Income Fund X,
L.P., certify that:
1. I have reviewed this annual report on Form 10-K of Telecommunications
Income Fund X, L.P.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us by
others, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
March 25, 2003 /s/ Thomas J. Berthel
-----------------------------------
Thomas J. Berthel
President and
Chief Executive Officer
Berthel Fisher & Company
Leasing, Inc.
General Partner
Telecommunications Income Fund
X, L.P.
27
FORM OF SECTION 302 CERTIFICATION
I, Ronald O. Brendengen, Chief Financial Officer of Berthel Fisher & Company
Leasing, Inc., the General Partner of Telecommunications Income Fund X, L.P.,
certify that:
1. I have reviewed this annual report on Form 10-K of Telecommunications
Income Fund X, L.P.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us by
others, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
March 25, 2003 /s/ Ronald O. Brendengen
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Ronald O. Brendengen
Chief Financial Officer
Berthel Fisher & Company
Leasing, Inc.
General Partner
Telecommunications Income Fund
X, L.P.
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