10-Q 1 dsi9-606.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 June 30, 2006 /___/ Transition report pursuant to Section 13 or 15(d) of the Securities Act of 1934 for the transition period from ______________ to ________________. Commission File Number 2-96364 DSI REALTY INCOME FUND IX, A California Limited Partnership (Exact name of registrant as specified in its charter) California_______________________________________33-0103989 (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 IX (A California Real Estate Limited Partnership) CONSOLIDATED BALANCE SHEETS(UNAUDITED) JUNE 30, 2006 AND DECEMBER 31, 2005 June 30, December 31, 2006 2005 ASSETS CASH AND CASH EQUIVALENTS $ 535,594 $ 520,071 PROPERTY, NET 2,954,890 3,190,797 OTHER ASSETS 94,896 92,355 ---------- ---------- TOTAL $3,585,380 $3,803,223 ========== ========== LIABILITIES AND PARTNERS' EQUITY LIABILITIES Distribution to Partners $232,523 $232,468 Capital lease obligation 128,928 151,662 Other liabilities 274,097 345,200 -------- -------- Total liabilities 635,548 729,330 -------- -------- MINORITY INTEREST IN REAL ESTATE JOINT VENTURE 181,554 182,223 -------- -------- PARTNERS' EQUITY (DEFICIT): General Partners (109,757) (108,524) Limited Partners 2,878,035 3,000,194 --------- --------- Total partners' equity 2,768,278 2,891,670 --------- --------- TOTAL $3,585,380 $3,803,223 ========== ========== See accompanying notes to consolidated financial statements(unaudited). CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005 June 30, June 30, 2006 2005 REVENUES: Rental $ 732,405 $ 658,264 ---------- ---------- EXPENSES: Operating 485,423 505,804 General and administrative 63,909 55,845 ---------- --------- Total expenses 549,332 561,649 ---------- --------- OPERATING INCOME 183,073 96,615 OTHER INCOME Interest 48 64 ---------- --------- INCOME BEFORE MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE 183,121 96,679 MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE (23,628) (23,973) ---------- ---------- NET INCOME $ 159,493 $ 72,706 ========== ========== AGGREGATE NET INCOME ALLOCATED TO: Limited partners $ 157,898 $ 71,979 General partners 1,595 727 ---------- ---------- TOTAL $ 159,493 $ 72,706 ========== ========== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 5.14 $ 2.35 ========== ========== LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 30,693 30,693 ====== ====== See accompanying notes to consolidated financial statements(unaudited). CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005 June 30, June 30, 2006 2005 REVENUES Rental $1,470,017 $1,322,225 ---------- ---------- EXPENSES: Operating 932,624 917,962 General and administrative 141,606 134,396 ---------- ---------- Total expenses 1,074,230 1,052,358 ---------- ---------- OPERATING INCOME 395,787 269,867 OTHER INCOME Interest 96 193 ---------- ---------- INTEREST BEFORE MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE 395,883 270,060 MINORITY INTEREST IN INCOME OF REAL ESTATE JOINT VENTURE (54,230) (52,124) --------- --------- NET INCOME $ 341,653 $ 217,936 ========= ========= AGGREGATE NET INCOME ALLOCATED TO: Limited Partners 338,236 215,757 General Partners 3,417 2,179 --------- --------- TOTAL $ 341,653 $ 217,936 ========= ========= NET INCOME PER LIMITED PARTNERSHIP UNIT $ 11.02 $ 7.03 ========= ========= LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 30,693 30,693 ====== ====== CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)(UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 2006 GENERAL LIMITED PARTNERS PARTNERS TOTAL BALANCE AT JANUARY 30, 2006 ($108,524) $3,000,194 $2,891,670 NET INCOME 3,417 338,236 341,653 DISTRIBUTIONS (4,650) (460,395) (465,045) --------- ---------- ---------- BALANCE AT JUNE 30, 2006 ($109,757) $2,878,035 $2,768,278 ========= ========== ========== See accompanying notes to consolidated financial statements(unaudited). CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005 June 30, June 30, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 341,653 $ 217,936 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 235,907 230,086 Minority interest in income real estate joint venture 54,230 52,124 Changes in assets and liabilities: Increase in other assets (2,541) (7,919) Decrease in other liabilities (71,103) (131,341) -------- --------- Net cash provided by operating activities 558,146 360,886 -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES - Distributions to partners (464,990) (465,045) Distributions paid to minority interest in real estate joint venture (54,899) (46,800) Payment on capital lease obligations (22,734) 0 -------- --------- Net cash used in financing activities (542,623) (511,845) -------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,523 (150,959) CASH AND CASH EQUIVALENTS: At beginning of period 520,071 486,736 --------- --------- At end of period $ 535,594 $ 335,777 ========= ========= See accompanying notes to consolidated financial statements(unaudited). DSI REALTY INCOME FUND IX (A California Real Estate Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL DSI Realty Income Fund IX (the "Partnership"), a limited partnership, has three general partners (DSI Properties, Inc., Robert J. Conway and Joseph W. Conway) and limited partners owning 30,693 limited partnership units. The Partnership has acquired five mini-storage facilities located in Monterey Park and Azusa, California; Everett, Washington; and Romeoville and Elgin, Illinois. The Partnership has also entered into a joint venture with DSI Realty Income Fund VIII through which the Partnership has a 70% interest in a mini-storage facility in Aurora, Colorado. The Partnership is a general partner in the joint venture. The facilities were acquired from Dahn Corporation ("Dahn"). Dahn is not affiliated with the Partner- ship. Dahn is affiliated with other partnerships in which DSI Properties, Inc., Robert J. Conway and Joseph W. Conway are the general partners. The mini-storage facilities are operated for the Partnership by Dahn under various agreements which are subject to renewal annually. Under the terms of the agreements, the Partnership is required to pay Dahn a property management fee equal to 5% of gross revenue from operations, defined as the entire amount of all receipts from the renting or leasing of storage compartments and sale of locks. The accompanying consolidated financial information 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 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: June 30, December 31, 2006 2005 Land $ 2,729,790 $ 2,729,790 Buildings and equipment 11,110,430 11,110,430 Rental trucks under capital lease 210,138 210,138 ------------ ------------ Total 14,050,358 14,050,358 Less: Accumulated Depreciation (11,095,468) (10,859,561) ------------ ------------ Property - Net $ 2,954,890 $ 3,190,797
============ ============ 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. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. We are pleased to enclose the Partnership's unaudited consolidated financial statements for the period ended June 30, 2006. 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 June 30, 2006 and 2005, total revenues increased 11.3% from $658,264 to $732,405 and total expenses decreased 2.2% from $561,649 to $549,332 and other income decreased from $64 to $48. Minority interest in income of real estate joint venture decreased 1.4% from $23,973 to $23,628. As a result, net income increased 119.4% from $72,706 to $159,493 for the three-month period ended June 30, 2006, as compared to the same period in 2005. Rental revenue increased as a result of higher occupancy and unit rental rates. Occupancy levels for the Partnership's six mini- storage facilities averaged 83.7% for the three-month period ended June 30, 2006 as compared to 74.7% for the same period in 2005. The Partnership is continuing its marketing efforts to attract and keep new tenants in its various mini-storage facilities. Operating expenses decreased approximately $20,400 (4.0%) due primarily to a decrease in advertising expense, salaries and wages, bank and credit card fees and lock and packing material purchases. General and administrative increased approximately $8,100 (14.4%) primarily as a result of an increase in legal and professional expense. For the six-month periods ended June 30, 2006 and 2005, total revenues increased 11.2% from $1,322,225 to $1,470,017 and total expenses increased 2.1% from $1,052,358 to $1,074,230 and other income decreased from $193 to $96. Minority interest in income of real estate joint venture increased 4.0% from $52,124 to $54,230. As a result, net income increased 56.8% from $217,936 to $341,653 for the six-month period ended June 30, 2006, as com- pared to the same period in 2005. Rental revenue increased as a result of higher occupancy and unit rental rates. Operating expenses increased approx- imately $14,700 (1.6%) due primarily to increases in maintenance and repair, property management fees, real estate tax, salaries and wages and depreciation expenses, partially offset by a decrease in advertising, purchase of locks and office supplies expenses. General and administrative expenses increased approximately $7,200 (5.4%) primarily as a result of an increase in incentive management fee, office expenses, and legal and professional expense, partially offset by a decrease in equipment and computer lease expense. Minority interest in income of real estate joint venture increased as a result of higher rental revenue, partially offset by higher operating expenses at that facility. 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. The General Partners anticipate distributions to the Limited Partners to remain at the current level for the foreseeable future. Item 3. Quantative 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 27, 2006. 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 and Reports on Form 8K. (a) Attached hereto as Exhibit "20" is Registrant's Quarterly Report to Limited Partners for the period ended June 30, 2006. (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: July 31, 2006 DSI REALTY INCOME FUND IX 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: July 31, 2006 DSI REALTY INCOME FUND IX 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 quarterly report on Form 10-Q of DSI Realty Income Fund IX; 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 cover- ed 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-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: July 31, 2006 Robert J. Conway Chief Executive Officer CERTIFICATIONS I, Richard P. Conway, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DSI Realty Income Fund IX; 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 cover- ed 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-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: July 31, 2006 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 IX (the "Partnership") on Form 10-Q for the period ending June 30, 2006 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 July 31, 2006 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 IX (the "Partnership") on Form 10-Q for the period ending June 30, 2006 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 July 31, 2006