-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PXqTvOxnpaz8UicxvEFsNocdl/4Z2JjqbsnOzj54uT5KD/OG+gQ8vmv+BMmfCmkg tYHHWYLm8sv+C0qoPgX4jg== 0000318835-07-000026.txt : 20071114 0000318835-07-000026.hdr.sgml : 20071114 20071114164306 ACCESSION NUMBER: 0000318835-07-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071114 DATE AS OF CHANGE: 20071114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DSI REALTY INCOME FUND VII CENTRAL INDEX KEY: 0000719581 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953871044 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-83291 FILM NUMBER: 071245662 BUSINESS ADDRESS: STREET 1: PO BOX 357 CITY: LONG BEACH STATE: CA ZIP: 90801 BUSINESS PHONE: 3105957711 MAIL ADDRESS: STREET 1: PO BOX 357 CITY: LONG BEACH STATE: CA ZIP: 90801 10-Q 1 dsivii-907.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 2-83291 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. DSI REALTY INCOME FUND VII (A Limited Partnership) BALANCE SHEETS(UNAUDITED) SEPTEMBER 30, 2007 AND DECEMBER 31, 2006 September 30, December 31, 2007 2006 ASSETS CASH AND CASH EQUIVALENTS $ 834,971 $ 715,368 PROPERTY, Net 2,176,413 2,211,491 OTHER ASSETS 183,203 152,948 ---------- ---------- TOTAL $3,194,587 $3,079,807 ========== ========== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) LIABILITIES Distribution to Partners $ 242,424 $ 242,424 Incentive management fee payable to general partners 254,961 234,821 Property management fee payable 13,763 14,812 Customer deposits and other liabilities 82,484 145,026 Capital lease obligation 57,529 87,926 ---------- ---------- Total liabilities 651,161 725,009 ---------- ---------- PARTNERS' EQUITY (DEFICIT): General Partners (82,334) (84,221) Limited Partners (24,000 limited partnership units outstanding at September 30, 2007 and December 31, 2006) 2,625,760 2,439,019 ---------- ---------- Total partners' equity 2,543,426 2,354,798 ---------- ---------- TOTAL $3,194,587 $3,079,807 ========== ========== 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 $ 688,674 $ 693,176 ---------- ---------- EXPENSES: Operating 303,902 335,190 General and administrative 52,559 43,264 ---------- ---------- Total expenses 356,461 378,454 ---------- ---------- OPERATING INCOME 332,213 314,722 OTHER INCOME Interest 163 162 ---------- ---------- NET INCOME $ 332,376 $ 314,884 ========== ========== AGGREGATE NET INCOME ALLOCATED TO: Limited Partners $ 329,052 $ 311,735 General Partners 3,324 3,149 ---------- ---------- TOTAL $ 332,376 $ 314,884 ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 13.71 $ 12.99 ========== ========== 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, 2007 AND 2006 September 30, September 30, 2007 2006 REVENUES: Rental $2,051,473 $2,108,229 ---------- ---------- EXPENSES: Operating 924,897 929,456 General and administrative 211,164 202,425 ---------- ---------- Total expenses 1,136,061 1,131,881 ---------- ---------- OPERATING INCOME 915,412 976,348 OTHER INCOME Interest 488 486 ---------- ---------- NET INCOME $ 915,900 $ 976,834 ========== ========== AGGREGATE NET INCOME ALLOCATED TO: Limited Partners $ 906,741 $ 967,066 General Partners 9,159 9,768 ---------- ---------- TOTAL $ 915,900 $ 976,834 ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 37.78 $ 40.29 ========== ========== LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 24,000 24,000 ====== ====== 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 ($84,221) $2,439,019 $2,354,798 NET INCOME 9,159 906,741 915,900 DISTRIBUTIONS (7,272) (720,000) (727,272) -------- ---------- ---------- BALANCE AT SEPTEMBER 30, 2007 ($82,334) $2,625,760 $2,543,426 ======== ========== ========== 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 $ 915,900 $ 976,834 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 35,078 30,179 Changes in assets and liabilities: Increase in other assets (30,255) 0 Decrease in liabilities (43,453) (3,416) -------- -------- Net cash provided by operating activities 877,270 1,003,597 CASH FLOWS FROM FINANCING ACTIVITIES - Distributions to partners (727,272) (727,272) Payments on capital lease obligations (30,395) (28,635) -------- -------- Net cash used in financing activities (757,667) (755,907) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 119,603 247,690 CASH AND CASH EQUIVALENTS: At beginning of period 715,368 655,295 --------- --------- At end of period $ 834,971 $ 902,985 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid for interest $ 2,035 $ 718 ========= ========= NONCASH FINANCING ACTIVIITES - Distribution due partners included in partners' equity $ 242,424 $ 242,424 ========= ========= See accompanying notes to financial statements (unaudited). DSI REALTY INCOME FUND VII (A 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 Partnership has acquired six mini-storage facilities located in Chico, Fairfield, La Verne, and Riverside, California and Ft. Collins and Littleton, Colorado. 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. 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 quarterly 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 15 years. The total cost of property and accumulated depreciation is as follows: September 30, 2007 December 31, 2006 Land $ 2,089,800 $ 2,089,800 Buildings and improvements 7,792,522 7,792,522 Rental trucks under capital leases 175,116 175,116 ------------ ------------ Total 10,057,438 10,057,438 Less: Accumulated Depreciation ( 7,881,025) ( 7,845,947) ------------ ------------ Property - Net $ 2,176,413 $ 2,211,491 ============ ============ 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 5% 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 $33,434 and $34,658, for the three month periods ended September 30, 2007 and 2006, respectively, and $102,574 and $105,411 for the nine month period ended September 30, 2007 and 2006, respectively. Amounts payable to Dahn at September 30, 2007 and December 31, 2006, were $13,763 and $14,812, 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 $3,750. 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, total revenues decreased 0.7% from $693,176 to $688,674 and total expenses decreased 5.8% from $378,454 to $356,461 and other income increased from $162 to $163. As a result, net income increased 5.6% from $314,884 for the three-month period ended September 30, 2006, to $332,376 for the same period in 2007. Rental revenue remained relatively stable. Occupancy levels for the Partnerships' six mini-storage facilities averaged 83.8% for the three-month period ended September 30, 2007 and 84.0% 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 $31,300 (9.3%) primarily as a result of decreases in advertising and salaries and wages expenses. General and administrative expenses increased approxi- mately $9,300 (21.5%) primarily as a result of increases in incentive manage- ment fees, administrative and equipment and computer lease expenses. For the nine-month periods ended September 30, 2007, and 2006, total revenues decreased 2.7% from $2,108,229 to $2,051,473 and total expenses increased 0.4% from $1,131,881 to $1,136,061 and other income increased from $486 to $488. As a result, net income decreased 6.2% from $976,834 for the nine- month period ended September 30, 2006, to $915,900 for the same period in 2007. Rental revenue decreased primarily as a result of lower occupancy rates. Occupancy levels for the Partnerships' six mini-storage facilities averaged 82.1% for the nine-month period ended September 30, 2007 and 84.8% for the same period in 2006. Operating expenses decreased approximately $4,600 (0.5%) primarily as a result of decreases in advertising, purchase of locks and packing materials, salaries and wages and workers compensation expenses, partially offset by increases in legal, maintenance and repair and real estate tax expenses. Property management fees, which are based on revenue, decreased as a result of the decrease in rental revenue. General and administrative expenses increased approximately $8,700 (4.3%) primarily as a result of in- creases in administrative, state tax and equipment and computer lease expenses, partially offset by decreases in incentive management fee and legal and pro- fessional expenses. 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. 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 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. 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 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: November 14, 2007 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 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 VII; 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 VII; 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 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-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 VII (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 VII (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 -----END PRIVACY-ENHANCED MESSAGE-----