10-Q 1 dsi07904.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, 2004 /___/ Transition report pursuant to Section 13 or 15(d) of the Securities Act of 1934 for the transition period from ______________ to ________________. Commission File Number 2-83291 DSI REALTY INCOME FUND VII, A California Limited Partnership (Exact name of registrant as specified in its charter) California_______________________________________95-3871044 (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. The information required by Rule 10-01 of Regulation S-X is included in the Quarterly Report to the Limited Partners of Registrant for the period ended September 30, 2004,which is attached hereto as Exhibit "20" and incorporated herein by this reference. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Registrant incorporates by this reference its Quarterly Report to Limited Partners for the period ended September 30, 2004. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8K. (a) Attached hereto as Exhibit "20" is Registrant's Quarterly Report to Limited Partners for the period ended September 30, 2004. (b) Registrant did not file any reports on Form 8-K for the period reported upon. 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: October 29, 2004 DSI REALTY INCOME FUND VII 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: October 29, 2004 DSI REALTY INCOME FUND VII 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 October 29, 2004 QUARTERLY REPORT TO THE LIMITED PARTNERS OF DSI REALTY INCOME FUND VII DEAR LIMITED PARTNERS: We are pleased to enclose the Partnership's unaudited financial statements for the period ended September 30, 2004. 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, 2004 and 2003, total revenues decreased 2.6% from $652,525 to $635,270 and total expenses decreased 10.7% from $361,792 to $323,105 and other income remained constant. As a result, net income increased 7.4% from $290,895 for the three-month period ended September 30, 2003, to $312,327 for the same period in 2004. Rental revenue decreased as a result of lower occupancy rates partially offset by higher unit rental rates. Occupancy levels for the Partnership's six mini-storage facilities averaged 84.8% for the three-month period ended September 30, 2004 and 86.7% for the same period in 2003. The Partnership is continuing its marketing efforts to attract and keep new tenants in its various mini-storage facilities. Operating expenses increased approximately $20,700 (8.0%) primarily as a result of increases in advertising, maintenance and repair and office supplies expenses. General and administrative expenses decreased approximately $59,400 (58.5%) primarily as a result of a decrease in legal and professional expense. The decrease in legal and professional expense is related to unsuccessful legal challenges by two dissident Limited Partners to an amendment to the Partnership Agreement in the prior period. For the nine-month periods ended September 30, 2004, and 2003, total revenues decreased 2.1% from $1,952,007 to $1,911,132 and total expenses decreased 1.5% from $999,100 to $984,355 and other income increased from $465 to $482. As a result, net income decreased 2.7% from $953,372 for the nine months ended September 30, 2003, to $927,259 for the same period in 2004. Rental revenue decreased as a result of lower occupancy rates partially offset by higher unit rental rates. Operating expenses increased approximately $47,500 (6.2%) primarily as a result of increases in maintenance and repair and office expenses, partially offset by a decrease in advertising expnese. General and administrative expenses decreased approximately $62,300 (26.1%) primarily as a result of a decrease in legal and professional expnese. The decrease in legal and professional expnese was discussed above. The General Partners will continue their policy of funding improvements and maintenance of Partnership properties with cash generated from operations. The Partnership's financial resources appear to be adequate to meet its needs. The General Partners anticipate distributions to the Limited Partners to remain at the current level for the foreseeable future. We are not enclosing a copy of the Partnership Form 10-Q as filed with the Securities and Exchange Commission since all the information set forth therein is contained either in this letter or in the attached financial statements. However, if you wish to receive a copy of said report, please send a written request to DSI Realty Income Fund VII, P.O. Box 357, Long Beach, California 90801. Very truly yours, DSI REALTY INCOME FUND VII By: DSI Properties, Inc., as General Partner By /s/ Robert J. Conway ____________________________ ROBERT J. CONWAY, President DSI REALTY INCOME FUND VII (A California Real Estate Limited Partnership) BALANCE SHEETS(UNAUDITED) SEPTEMBER 30, 2004 AND DECEMBER 31, 2003 September 30, December 31, 2004 2003 ASSETS CASH AND CASH EQUIVALENTS $ 886,161 $ 674,918 PROPERTY, Net 2,089,800 2,089,800 OTHER ASSETS 68,916 68,718 TOTAL $3,044,877 $2,833,436 LIABILITIES AND PARTNERS' EQUITY(DEFICIT) LIABILITIES $ 616,428 $ 604,974 PARTNERS' EQUITY (DEFICIT): General Partners (83,484) (85,484) Limited Partners 2,511,933 2,313,946 Total partners' equity 2,428,449 2,228,462 TOTAL $3,044,877 $2,833,436 See accompanying notes to financial statements (unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 September 30, September 30, 2004 2003 REVENUES: Rental $ 635,270 $ 652,525 EXPENSES: Operating 281,021 260,275 General and administrative 42,084 101,517 Total expenses 323,105 361,792 OPERATING INCOME $ 312,165 $ 290,733 OTHER INCOME Interest 162 162 NET INCOME 312,327 290,895 AGGREGATE NET INCOME ALLOCATED TO: Limited partners $ 309,204 $ 287,986 General partners 3,123 2,909 TOTAL $ 312,327 $ 290,895 NET INCOME PER LIMITED PARTNERSHIP UNIT $ 12.88 $ 12.00 LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 24,000 24,000 See accompanying notes to financial statements (unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 September 30, September 30, 2004 2003 REVENUES: Rental $1,911,132 $1,952,007 EXPENSES: Operating 807,541 760,030 General and administrative 176,814 239,070 Total expenses 984,355 999,100 OPERATING INCOME $ 926,777 $ 952,907 OTHER INCOME Interest 482 465 NET INCOME 927,259 953,372 AGGREGATE NET INCOME ALLOCATED TO: Limited partners 917,987 943,838 General partners 9,272 9,534 TOTAL 927,259 953,372 NET INCOME PER LIMITED PARTNERSHIP UNIT $38.25 $39.33 LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 24,000 24,000 See accompanying notes to financial statements (unaudited). STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)(UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 GENERAL LIMITED PARTNERS PARTNERS TOTAL BALANCE AT JANUARY 1, 2004 ($85,484) $2,313,946 $2,228,462 NET INCOME 9,272 917,987 927,259 DISTRIBUTIONS (7,272) (720,000) (727,272) BALANCE AT SEPTEMBER 30, 2004 ($83,484) $2,511,933 $2,428,449 See accompanying notes to financial statements(unaudited). STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 September 30, September 30, 2004 2003 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 927,259 $ 953,371 Adjustments to reconcile net income to net cash provided by operating activities: Changes in assets and liabilities: Increase in assets (198) 0 Increase in liabilities: 11,454 116,784 Net cash provided by operating activities 938,515 1,070,155 CASH FLOWS FROM FINANCING ACTIVITIES - Distributions to partners (727,272) (727,272) NET INCREASE IN CASH AND CASH EQUIVALENTS 211,243 342,883 CASH AND CASH EQUIVALENTS: At beginning of period 674,918 497,970 At end of period $ 886,161 $ 840,853 See accompanying notes to financial statements(unaudited). DSI REALTY INCOME FUND VII (A California Real Estate Limited Partnership) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL DSI Realty Income Fund VII (the "Partnership"), has two general partners (DSI Properties, Inc., and Diversified Investors Agency) and limited partners owning 24,000 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 financial information as of September 30, 2004, and for the periods ended September 30, 2004, and 2003 is unaudited. Such financial information includes all adjustments, which are considered necessary by the Partnership's management for a fair presentation of the results for the periods indicated. 2. PROPERTY Properties owned by the Partnership are all mini-storage facilities. Depreciation was calculated using the straight line method over the estimated useful life of 15 years. The total cost of property and accumulated depreciation at September 30, 2004, is as follows: Land $ 2,089,800 Buildings and improvements 7,685,522 Equipment 60,760 Total 9,836,082 Less: Accumulated Depreciation ( 7,746,282) Property - Net $ 2,089,800 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. CONTROLS AND PROCEDURES Within 90 days prior to the date of this report, 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 information is communicated to the certifying officers on a timely basis. Based on this evaluation, the Partnership con- cluded 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. DSI REALTY INCOME FUND VII Form 10-Q CERTIFICATION Each of the undersigned hereby certifies in his capacity as an officer of DSI Properties, Inc. (corporate General Partner) of DSI REALTY INCOME FUND VII (the "Partnership") that the Quarterly Report of the Partnership on Form 10-Q for the periods ended September 30, 2004 fully complies with the requirements of Section 13(a) of the Securities and Exchange Act of 1934 and that inform- ation contained in such report fairly presents, in all material respects, the financial condition of the Partnership at the end of such periods and the results of operations of the Partnership for such periods. ROBERT J. CONWAY, CEO RICHARD P. CONWAY, VP CERTIFICATIONS I, Robert Conway, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DSI Realty Income Fund VII; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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, including its consoli- dated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly 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 quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effec- tiveness of the disclosure controls and procedures based on our evalu- ation 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 com- mitee of registrant's board of directors (or persons performing the equivalent functions): 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 quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls sub- sequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November, 2004 Robert Conway President CERTIFICATIONS I, Richard Conway, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DSI Realty Income Fund VII; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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, including its consoli- dated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly 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 quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effec- tiveness of the disclosure controls and procedures based on our evalu- ation 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 com- mitee of registrant's board of directors (or persons performing the equivalent functions): 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 quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls sub- sequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November, 2004 Richard Conway Vice President