10-Q 1 dsi006-908.txt UNITED STATES 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, 2008. ________________ /__/ 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: 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 or organization) Identification No.) 6700 E. Pacific Coast Hwy, Long Beach, California 90803 __________________________________________________________________ (Address of principal executive offices) (Zip Code) (562)493-8881 __________________________________________________________________ (Registrant's telephone number, including area code) 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The issuer is a limited partnership. All 23,753 limited partnership units originally sold for $500 per unit. There is no trading market for the limited partnership units. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. DSI REALTY INCOME FUND VI (A Limited Partnership) BALANCE SHEETS(UNAUDITED), SEPTEMBER 30, 2008 AND DECEMBER 31, 2007 September 30, December 31, 2008 2007 ASSETS CASH AND CASH EQUIVALENTS $ 935,593 $ 670,913 PROPERTY,NET 1,535,442 1,570,680 OTHER ASSETS 245,523 223,588 ---------- ---------- TOTAL $2,716,558 $2,465,181 ========== ========== LIABILITIES AND PARTNERS' EQUITY LIABILITIES Distribution to Partners $209,938 $209,938 Incentive management fee payable to general partners 34,395 0 Property management fee payable 13,901 13,264 Customer deposits and other liabilities 113,018 104,241 Capital lease obligation 12,467 41,076 -------- -------- Total liabilities 383,719 368,519 -------- -------- PARTNERS' EQUITY (DEFICIT): General Partners (67,858) (70,220) Limited Partners (23,753 limited partnership units outstanding at September 30, 2008 and December 31, 2007) 2,400,697 2,166,882 --------- --------- Total partners' equity 2,332,839 2,096,662 --------- --------- TOTAL $2,716,558 $2,465,181 ========= ========= See accompanying notes to financial statements (unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED September 30, 2008 AND 2007 September 30, September 30, 2008 2007 REVENUES: Rental revenue $636,108 $603,830 Ancilary operating revenue 58,312 52,989 Interest and other income 503 194 -------- -------- Total revenues 694,923 657,013 -------- -------- EXPENSES: Operating 323,414 295,179 General and administrative 62,101 50,314 -------- -------- Total expenses $385,515 $345,493 ======== ======== NET INCOME $309,408 $311,520 ======== ======== AGGREGATE NET INCOME ALLOCATED TO : Limited partners $306,314 $308,405 General partners 3,094 3,115 -------- -------- TOTAL $309,408 $311,520 ======== ======== NET INCOME PER LIMITED PARTNERSHIP UNIT $12.90 $12.98 ====== ====== 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, 2008 AND 2007 September 30, September 30, 2008 2007 REVENUES: Rental revenue $1,846,608 $1,804,423 Ancilary operating revenue 171,577 165,243 Interest and other income 25,828 581 -------- -------- Total revenues 2,044,013 1,970,247 -------- -------- EXPENSES: Operating 942,044 932,180 General and administrative 216,812 216,489 -------- -------- Total expenses $1,158,856 $1,148,669 ======== ======== NET INCOME $885,157 $821,578 ======== ======== AGGREGATE NET INCOME ALLOCATED TO : Limited partners $876,305 $813,362 General partners 8,852 8,216 -------- -------- TOTAL $885,157 $821,578 ======== ======== NET INCOME PER LIMITED PARTNERSHIP UNIT $36.89 $34.24 ====== ====== 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, 2008 GENERAL LIMITED PARTNERS PARTNERS TOTAL BALANCE AT JANUARY 1, 2008 ($70,220) $2,166,882 $2,096,662 NET INCOME 8,852 876,305 885,157 DISTRIBUTIONS (6,490) (642,490) (648,980) -------- ---------- ---------- BALANCE AT SEPTEMBER 30, 2008 ($67,858) $2,400,697 $2,332,839 ======== ========== ========== See accompanying notes to financial statements (unaudited). STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED September 30, 2008 AND 2007 September 30, September 30, 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 885,157 $ 821,578 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 35,238 35,835 Changes in assets and liabilities: Increase in other assets (21,935) (26,274) Increase(decrease) in liabilities 43,809 (13,501) --------- -------- Net cash provided by operating activities 942,269 817,638 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES- Distributions to partners (648,980) (629,814) Payments on capital lease obligations (28,609) (29,225) --------- --------- Net cash used in financing obligations (677,589) (659,039) --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 264,680 158,599 CASH EQUIVALENTS: At beginning of period 670,913 622,755 --------- --------- At end of period $ 935,593 $ 781,354 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid for interest $ 2,508 $ 3,355 ========= ========= NONCASH FINANCING ACTIVITIES - Distribution 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 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, 2008. 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, 2007. 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. Property under capital leases is amortized over the lives of the respective leases. The total cost of property and accumulated depreciation at September 30, 2008, is as follows: September 30, December 31, 2008 2007 Land $ 1,512,000 $ 1,512,000 Buildings and improvements 7,515,006 7,515,006 Rental trucks under capital leases 161,181 161,181 ----------- ----------- Total 9,188,187 9,188,187 Less: Accumulated Depreciation ( 7,652,745) ( 7,617,507) ----------- ----------- Property - Net $ 1,535,442 $ 1,570,680 =========== ===========
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 $42,363 and $39,409, for the three month periods ended September 30, 2008 and 2007, respectively, and $120,637 and $118,180 for the nine month periods ended September 30, 2008 and 2007 respectively. Amounts payable to Dahn at September 30, 2008 and December 31, 2007, were $13,901 and $13,264, 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, 2008. 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, 2008 and 2007, total revenues increased 5.8% from $657,013 to $694,923 and total expenses increased 11.6% from $345,493 to $385,515. As a result, net income decreased 0.7% from $311,520 for the three-month period ended September 30, 2007, to $309,408 for the same period in 2008. The rental revenue increased as a result of higher unit rental rates. Occupancy levels for the Partnership's five mini- storage facilities averaged 82.2% for the three-month period ended September 30, 2008, compared to 83.3% for the same period in 2007. The Partnership is continuing its marketing efforts to attract and keep new tenants in its various mini-storage facilities. Operating expenses increased approximately $28,200 or 9.6% primarily as a result of increases in advertising, real estate tax and salaries and wages expenses, partially offset by a decrease in legal expense. General and administrative expenses increased approximately $11,800 or 23.4% primarily as a result of increases in legal and professional and equipment and computer lease expenses. For the nine-month periods ended September 30, 2008, and 2007, total revenues increased 3.7% from $1,970,247 to $2,044,013, total expenses increased 0.9% from $1,148,669 to $1,158,856. As a result, net income increased 7.7% from $821,578 for the nine months ended September 30, 2007, to $885,157 for the same period in 2008. Rental revenue increased as a result of higher unit rental rates. Occupancy levels for the Partnership's five mini-storage facilities average 80.9% for the nine-month period ended September 30, 2008 as compared to 83.1% for the same period in 2007. Operating expenses increased approximately $9,900 or 1.1% primarily due to increases in advertising, real estate taxes and salaries and wages expenses, partially offset by decreases in legal, maintenance and repair and trash collection expenses. General and administrative expenses remained constant as increases in legal and profes- sional and equipment and computer lease expenses was offset by a decrease in state tax payments. 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. On January 28, 2008, the Partnership received notification that the option would not be exercised and therefore the payment has been recorded as other income in the current period. The General Partners plan to continue their policy of funding improvements 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 4T. CONTROLS AND PROCEDURES Evaluation of Effectiveness of Disclosure 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 informa- tion 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. Changes in Internal Control Over Financial Reporting There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. 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-KSB filed on April 15, 2008. 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 (a) Exhibits 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer 32.1 Section 1350 Certification by Chief Executive Officer 32.2 Section 1350 Certification by Principal Financial Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DSI REALTY INCOME FUND VI, a California Limited Partnership by: DSI Properties, Inc., a By: Diversified Investors Agency California corporation, a general partnership, as General Partner as General Partner /s/ ROBERT J. CONWAY /s/ ROBERT J. CONWAY By_____________________________ By_____________________________ Dated: November 14, 2008 Dated: November 14, 2008 ROBERT J. CONWAY, President, ROBERT J. CONWAY, Chief Executive Officer, Chief General Partner Financial Officer, and Director /s/ JOSEPH W. CONWAY /s/ JOSEPH W. CONWAY By_____________________________ By_____________________________ Dated: November 14, 2008 Dated: November 14, 2008 JOSEPH W. CONWAY, Executive JOSEPH W. CONWAY, Vice President and Director General Partner EXHIBIT 31.1 RULE 13A-14(A)/15D-14(A) CERTIFICATION BY CHIEF EXECUTIVE OFFICER I, Robert J. Conway, certify that: 1. I have reviewed this quarterly report 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 covered 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effective- ness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) 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 an 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 officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (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 adversely affect the registrant's ability to record, process, 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 internal control over financial reporting. Date: November 14, 2008 /s/ ROBERT J. CONWAY By_____________________________ ROBERT J. CONWAY, President, Chief Executive Officer, Chief Financial Officer, and Director EXHIBIT 31.2 RULE 13A-14(A)/15D-14(A) CERTIFICATION BY PRINCIPAL FINANCIAL OFFICER I, Richard P. Conway, certify that: 1. I have reviewed this quarterly report 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 covered 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effective- ness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) 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 an 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 officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (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 adversely affect the registrant's ability to record, process, 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 internal control over financial reporting. Date: November 14, 2008 /s/ RICHARD P. CONWAY By_____________________________ RICHARD P. CONWAY, SR. VICE PRESIDENT (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) EXHIBIT 32.1 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, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Conway, Chief Executive Officer 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. /s/ ROBERT J. CONWAY By_____________________________ ROBERT J. CONWAY, Chief Executive Officer November 14, 2008 EXHIBIT 32.2 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, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard P. Conway, Senior 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. /s/ RICHARD P. CONWAY By_____________________________ Richard P. Conway Senior Vice President (Principal Financial and Accounting Officer) November 14, 2008