10-Q 1 dvi907.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q /_x_/ Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended September 30, 2007. /___/ Transition report pursuant to Section 13 or 15(d) of the Securities Act of 1934 for the transition period from ______________ to ________________. Commission File Number 2-68926 DSI REALTY INCOME FUND VI, A California Limited Partnership (Exact name of registrant as specified in its charter) California_______________________________________95-3633566 (State or other jurisdiction of (I.R.S. Employer incorporation) Identification No.) 6700 E. Pacific Coast Hwy, Long Beach, California 90803 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code-(562)493-8881 _________________________________________________________________ Former name, former address and former fiscal year, if changed since last report. 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___. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. DSI REALTY INCOME FUND VI (A Limited Partnership) BALANCE SHEETS(UNAUDITED), SEPTEMBER 30, 2007 AND DECEMBER 31, 2006 September 30, December 31, 2007 2006 ASSETS CASH AND CASH EQUIVALENTS $ 781,354 $ 622,755 PROPERTY,NET 1,582,870 1,618,705 OTHER ASSETS 232,533 206,259 ---------- ---------- TOTAL $2,596,757 $2,447,719 ========== ========== LIABILITIES AND PARTNERS' EQUITY LIABILITIES Distribution to Partners $209,938 $209,938 Incentive management fee payable to general partners 31,793 0 Property management fee payable 12,390 12,564 Customer deposits and other liabilities 65,520 110,638 Capital lease obligation 51,840 81,067 -------- -------- Total liabilities 371,481 414,207 -------- -------- PARTNERS' EQUITY (DEFICIT): General Partners (68,933) (70,851) Limited Partners (23,753 limited partnership units outstanding at September 30, 2007 and December 31, 2006) 2,294,209 2,104,363 --------- --------- Total partners' equity 2,225,276 2,033,512 --------- --------- TOTAL $2,596,757 $2,447,719 ========= ========= See accompanying notes to financial statements (unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 September 30, September 30, 2007 2006 REVENUES: Rental $656,819 $688,863 -------- -------- EXPENSES: Operating 295,179 320,225 General and administrative 50,314 49,415 -------- -------- Total expenses 345,493 369,640 -------- -------- OPERATING INCOME 311,326 319,223 OTHER INCOME Interest 194 193 -------- -------- NET INCOME $311,520 $319,416 ======== ======== AGGREGATE NET INCOME ALLOCATED TO : Limited partners $308,405 $316,222 General partners 3,115 3,194 -------- -------- TOTAL $311,520 $319,416 ======== ======== NET INCOME PER LIMITED PARTNERSHIP UNIT $12.98 $13.31 ====== ====== LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 23,753 23,753 ====== ====== See accompanying notes to financial statements (unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 September 30, September 30, 2007 2006 REVENUES: Rental $1,969,666 $1,967,640 ---------- ---------- EXPENSES: Operating 932,180 872,605 General and administrative 216,489 201,338 ---------- ---------- Total expenses 1,148,669 1,073,943 ---------- ---------- OPERATING INCOME 820,997 893,697 OTHER INCOME Interest 581 578 ---------- ---------- NET INCOME $ 821,578 $ 894,275 ========== ========== AGGREGATE NET INCOME ALLOCATED TO : Limited partners $ 813,362 $ 885,332 General partners 8,216 8,943 ---------- ---------- TOTAL $ 821,578 $ 894,275 ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $34.24 $37.27 ====== ====== LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 23,753 23,753 ====== ====== See accompanying notes to financial statements (unaudited). STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)(UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 GENERAL LIMITED PARTNERS PARTNERS TOTAL BALANCE AT JANUARY 1, 2007 ($70,851) $2,104,363 $2,033,512 NET INCOME 8,216 813,362 821,578 DISTRIBUTIONS (6,298) (623,516) (629,814) -------- ---------- ---------- BALANCE AT SEPTEMBER 30, 2007 ($68,933) $2,294,209 $2,225,276 ======== ========== ========== See accompanying notes to financial statements (unaudited). STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 September 30, September 30, 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 821,578 $ 894,275 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 35,835 30,864 Changes in assets and liabilities: Increase in other assets (26,274) - Increase in incentive management fees payable to general partners 31,793 - Decrease in property management fee payable (174) - (Decrease)Increase in customer deposits and other liabilities (45,120) 5,295 --------- -------- Net cash provided by operating activities 817,638 930,434 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES- Distributions to partners (629,814) (629,814) Payments on capital lease obligations (29,225) (28,402) --------- --------- Net cash used in financing obligations (659,039) (658,216) --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 158,599 272,218 CASH EQUIVALENTS: At beginning of period 622,755 481,960 --------- --------- At end of period $ 781,354 $ 754,178 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid for interest $ 3,355 $ 3,377 ========= ========= NONCASH FINANCING ACTIVITIES: Distributions due partners included in partners' equity $ 209,938 $ 209,938 ========= ========= See accompanying notes to financial statements (unaudited). DSI REALTY INCOME FUND VI (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL DSI Realty Income Fund VI (the "Partnership"), a limited partnership, has two general partners (DSI Properties, Inc., and Diversified Investors Agency) and limited partners owning 23,753 limited partnership units. The Partnership was formed under the California Uniform Limited Partnership Act for the primary purpose of acquiring and operating real estate. The Partnership owns six mini-storage facilities located in Vallejo, California; Arvada, Federal Heights and Colorado Springs, Colorado; and two in Santa Rosa, California. All facilities were purchased from Dahn Corporation ("Dahn"). Dahn is not affiliated with the Partnership. Dahn is affiliated with other partnerships in which DSI Properties, Inc. is a general partner (Note 5). The accompanying interim financial statements have been prepared by the Company's management in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regu- lations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a normal and recurring nature which are considered necessary for a fair presentation of the results for the interim periods presented. However, the results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2006. 2. PROPERTY Properties owned by the Partnership are all mini-storage facilities. Depreciation is calculated using the straight line method over the estimated useful life of 20 years. The total cost of property and accumulated depreciation is as follows: September 30, December 31, 2007 2006 Land $ 1,512,000 $ 1,512,000 Buildings and improvements 7,515,836 7,515,836 Rental trucks under capital leases 161,181 161,181 ----------- ----------- Total 9,189,017 9,189,017 Less: Accumulated Depreciation ( 7,606,147) ( 7,570,312) ----------- ----------- Property - Net $ 1,582,870 $ 1,618,705 =========== ===========
3. NET INCOME PER LIMITED PARTNERSHIP UNIT Net income per limited partnership unit is calculated by dividing the net income allocated to the limited partners by the number of limited partnership units outstanding during the period. 4. ALLOCATION OF PROFITS AND LOSSES AND GENERAL PARTNERS' INCENTIVE MANAGEMENT FEE Under the Agreement of limited Partnership, the general partners are to be allocated 1% of the net profits or losses from operations, and the limited partners are to be allocated the balance of the net profits or losses from operations in proportion to their limited partnership interests. The General Partners are also entitled to receive a percentage, based on a predetermined formula, of any cash distribution from the sale, other disposition or refinancing of the project. In addition, the General Partners are entitled to receive an incentive management fee for supervising the operations of the Partnership. The fee is to be paid in an amount equal to 9% per annum of the cash available for distribution on a cumulative basis, calculated as cash generated from operations less capital expenditures. 5. RELATED-PARTY TRANSACTIONS The Partnership has entered into a management agreement with Dahn to operate its mini-storage facilities. The management agreement provides for a management fee equal to 6% of gross revenue from operations, which is defined as the entire amount of all receipts from the renting or leasing of storage compartments and sale of locks. The management agreement is renewable annually. Dahn earned management fees equal to $39,409 and $41,331, for the three month periods ended September 30, 2007 and 2006, respectively,and $118,180 and $118,058 for the nine month periods ended September 30, 2007 and 2006. Amounts payable to Dahn at September 30, 2007 and December 31, 2006, were $12,390 and $12,564, respectively. In 2004, the Partnership entered into truck lease agreements with KMD Trucks, LLC ("KMD"). The president of Dahn, Brian Dahn, is also a member of KMD. Trucks are leased under 48-month leases with total monthly payments in the amount of $3,457. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. We are pleased to enclose the Partnership's unaudited financial statements for the period ended September 30, 2007. The following is Management's discussion and analysis of the Partnership's financial condition and results of its operations. For the three-month periods ended September 30, 2007 and 2006, revenues decreased 4.7% from $688,863 to $656,819 and total expenses decreased 6.5% from $369,640 to $345,493 and other income increased from $193 to $194. As a result, net income decreased 2.5% from $319,416 for the three-month period ended September 30, 2006, to $311,520 for the same period in 2007. The rental revenue decrease can be attributed to a decrease in rental income as a result of lower occupancy rates. Occupancy levels for the Partnership's five mini-storage facilities averaged 83.3% for the three-month period ended September 30, 2007, compared to 87.3% for the same period in 2006. The Partnership is continuing its marketing efforts to attract and keep new tenants in its various mini-storage facilities. Operating expenses decreased approximately $25,000 (7.8%) primarily as a result of decreases in advertising and salaries and wages expenses, partially offset by increases in legal and maintenance and repair expenses. General and administrative expenses remained constant. For the nine-month periods ended September 30, 2007, and 2006, total revenues increased 0.1% from $1,967,640 to $1,969,666, total expenses increased 7.0% from $1,073,943 to $1,148,669 and other income increased from $578 to $581. As a result, net income decreased (8.1%) from $894,275 for the nine months ended September 30, 2006, to $821,578 for the same period in 2007. Revenue remained relatively constant as an increase in rental revenue as a result of higher unit rental rates and truck rentals was offset by a decrease in revenue from the sale of locks and packing materials. Occupancy levels for the Partnership's five mini-storage facilities averaged 83.1% for the nine- month period ended September 30, 2007 as compared to 85.1% for the same period in 2006. Operating expenses increased approximately $59,600 (6.9%) primarily due to increases in legal, repair and maintenance, office supplies, real estate tax and trash collection expenses, partially offset by a decrease in advertising expense. General and administrative expenses increased approxi- mately $15,200 (7.5%) primarily as a result of increases in administrative, equipment and computer lease expenses and state tax payments, partially off- set by a decrease in incentive management fee expense. In August 2007, the Partnership received a non-refundable payment from Industrial Waste and Debris Box Rental, Inc. for a six-month option to purchase the Partnership's property in Santa Rosa, California. Due to the uncertainty in the real estate and financing markets, it is indeterminable as to whether or not the property wil be sold. The General Partners plan to continue their policy of funding the continuing improvement and maintenance of Partnership properties with cash generated from operations. The Partnership's resources appear to be adequate to meet its needs for the next twelve months and beyond. The General Partners anti- cipate distributions to the Limited Partners to remain at the current level for the foreseeable future. Item 3. Quantitative and Qualitative Disclosures About Market Risk NONE Item 4. CONTROLS AND PROCEDURES The Partnership evaluated the effectiveness of its disclosure controls and procedures. This evaluation was performed by the Partnership's Controller with the assistance of the Partnership's President and the Chief Executive Officer. These disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Partnership in its periodic reports filed with the Securities and Exchange Commission (the Commission) is recorded, processed, summarized and reported, within the time periods specified by the Commission's rules and forms, and that the inform- ation is communicated to the certifying officers on a timely basis. Based on this evaluation, the Partnership concluded that its disclosure controls and procedures were effective. There have been no significant changes in the Partnership's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation. PART II - OTHER INFORMATION Item 1. Legal Proceedings Registrant is not a party to any material pending legal proceedings. Item 1A. Risk Factors Please refer to the risk factors disclosed by the partnership in response to Item 1A, part I of the Form 10-K filed on March 30, 2007. There has been no material change to the risk factors disclosed therein. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds NONE Item 3. Defaults Upon Senior Securities NONE Item 4. Submission of Matters to a Vote of Security Holders NONE Item 5. Other Information NONE Item 6. Exhibits NONE SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: November 14, 2007 DSI REALTY INCOME FUND VI A California Limited Partnership (Registrant) By__/s/ Robert J. Conway______ DSI Properties, Inc., as General Partner by ROBERT J. CONWAY, President and Chief Financial Officer SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: November 14, 2007 DSI REALTY INCOME FUND VI A California Limited Partnership (Registrant) By___/s/ Robert J. Conway_____ DSI Properties, Inc., as General Partner by ROBERT J. CONWAY, President and Chief Financial Officer CERTIFICATIONS I, Robert J. Conway, certify that: 1. I have reviewed this report on Form 10-Q for the quarter ended September 30, 2007 of DSI Realty Income Fund VI; 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 cover- ed by this report. 3. Based on my knowledge, the financial statements and other financial information included in this 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 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-15e and 15d-15e) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our super- vision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of our annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and general partners (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to affect the registrant's ability to record, pro- cess, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's in- ternal controls over financial reporting. Date: November 14, 2007 Robert J. Conway Chief Executive Officer CERTIFICATIONS I, Richard P. Conway, certify that: 1. I have reviewed this report on Form 10-Q for the quarter ended September 30, 2007 of DSI Realty Income Fund VI; 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 cover- ed by this report. 3. Based on my knowledge, the financial statements and other financial information included in this 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 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-15e and 15d-15e) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our super- vision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of our annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and general partners (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to affect the registrant's ability to record, pro- cess, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's in- ternal controls over financial reporting. Date: November 14, 2007 Richard P. Conway Vice President CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DSI Realty Income Fund VI (the "Partnership") on Form 10-Q for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Conway, Chief Executive Officer of the Partnership, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. Robert J. Conway Chief Executive Officer November 14, 2007 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DSI Realty Income Fund VI (the "Partnership") on Form 10-Q for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard P. Conway, Vice President of the Corporate General Partner, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. Richard P. Conway Vice President November 14, 2007