10-Q 1 dsi010-308.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: March 31, 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: 33-5327 ________ DSI REALTY INCOME FUND X, A California Limited Partnership __________________________________________________________________ (Exact name of registrant as specified in its charter) California 33-0195079 __________________________________________________________________ (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 31,783 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 X (A Limited Partnership) BALANCE SHEETS(UNAUDITED), MARCH 31, 2008 AND DECEMBER 31, 2007 March 31, December 31, 2008 2007 ASSETS CASH AND CASH EQUIVALENTS $ 602,320 $ 615,871 PROPERTY, NET 2,206,938 2,293,855 OTHER ASSETS 222,087 257,472 ---------- ---------- TOTAL $3,031,345 $3,167,198 ========== ========== LIABILITIES AND PARTNERS' EQUITY LIABILITIES Distribution to Partners $240,780 $240,780 Incentive management fee payable to general partners 302,603 280,934 Property management fees payable 410,553 409,074 Customer deposits and other liabilities 263,593 359,111 Capital lease obligation 29,348 39,942 -------- -------- Total liabilities 1,246,877 1,329,841 ---------- ---------- PARTNERS' EQUITY (DEFICIT): General Partners (124,183) (123,654) Limited Partners (31,783 limited partnership units outstanding at March 31, 2008 and December 31, 2007) 1,908,651 1,961,011 ---------- ---------- Total partners' equity 1,784,468 1,837,357 ---------- ---------- TOTAL $3,031,345 $3,167,198 ========== ========== See accompanying notes to financial statements (unaudited). STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 March 31, March 31, 2008 2007 REVENUES: Rental revenue $618,068 $623,868 Ancillary operating revenue 61,700 52,244 Interest and other income 138 157 -------- -------- Total revenues 679,906 676,269 EXPENSES: Operating 409,612 429,174 General and administrative 82,403 91,158 -------- -------- Total expenses 492,015 520,332 -------- -------- NET INCOME $187,891 $155,937 ======== ======== AGGREGATE NET INCOME ALLOCATED TO : Limited partners $186,012 $154,378 General partners 1,879 1,559 -------- -------- TOTAL $187,891 $155,937 ======== ======== NET INCOME PER LIMITED PARTNERSHIP UNIT $ 5.85 $ 4.86 ====== ====== LIMITED PARTNERSHIP UNITS USED IN PER UNIT CALCULATION 31,783 31,783 ====== ====== See accompanying notes to financial statements (unaudited). STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)(UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2008 GENERAL LIMITED PARTNERS PARTNERS TOTAL BALANCE AT JANUARY 1, 2008 ($123,654) $1,961,011 $1,837,357 NET INCOME 1,879 186,012 187,891 DISTRIBUTIONS (2,408) (238,372) (240,780) --------- ---------- ---------- BALANCE AT MARCH 31, 2008 ($124,183) $1,908,651 $1,784,468 ========= ========== ========== See accompanying notes to financial statements (unaudited). STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 March 31, March 31, 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 187,891 $ 155,937 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 86,917 144,628 Changes in assets and liabilities: Decrease in other assets 35,385 - Increase in incentive management fee payable to general partners 21,670 28,894 Increase in property management fee payable 1,479 324 Decrease in customer deposits and other liabilities (95,518) (54,587) --------- --------- Net cash provided by operating activities 237,824 275,196 CASH FLOWS FROM FINANCING ACTIVITIES - Distributions to partners (240,780) (321,041) Payments on capital lease obligations (10,595) (8,984) --------- --------- Net cash used in financing activities (251,375) (330,025) NET DECREASE IN CASH AND CASH EQUIVALENTS (13,551) (54,829) --------- --------- CASH AND CASH EQUIVALENTS: At beginning of period 615,871 601,812 --------- --------- At end of period $ 602,320 $ 546,983 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid for interest $ 655 $ 1,143 ========= ========= NONCASH FINANCING ACTIVITIES - Distributions due partners included in partners' equity $ 240,780 $ 321,041 ========= ========= See accompanying notes to financial statements (unaudited). DSI REALTY INCOME FUND X (A Limited Partnership) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. GENERAL DSI Realty Income Fund X (the "Partnership") has three general partners (DSI Properties, Inc., Robert J. Conway and Joseph W. Conway) and limited partners owning 31,783 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 five mini-storage properties, two of which are located in Warren, Michigan; one in Crestwood, Illinois; one in Troy, Michigan; and one in Forestville, Maryland. The facilities were acquired from Dahn Corporation ("Dahn"). Dahn is not affiliated with the Partnership. Dahn is affiliated with other partnerships in which DSI Properties, Inc., Robert J. Conway and Joseph W. Conway are the general partners. The accompanying interim financial statements have been prepared by the Company's management in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regu- lations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a normal and recurring nature which are considered necessary for a fair presentation of the results for the interim periods presented. However, the results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2006. 2. PROPERTY The Partnership owns five mini-storage facilities. Two facilities are located in Warren, Michigan; one facility is located in Troy, Michigan; one facility is located in Crestwood, Illinois; and one facility is located in Forestville, Maryland. The total cost and accumulated depreciation of the mini-storage facilities is as follows: March 31, December 31, 2008 2007 Land $ 2,076,627 $ 2,076,627 Buildings and Improvements 10,898,481 10,898,481 Rental trucks under capital leases 157,604 157,604 ----------- ----------- Total 13,132,712 13,132,712 Less: Accumulated Depreciation (10,925,774) (10,838,857) ----------- ----------- Property - Net $ 2,206,938 $ 2,293,855
=========== =========== 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 Partnership distributions made from cash available for distribution, calculated as cash generated from operations less capital expenditures, and the payment of such fee is subordinated to a cumulative return to the limited partners of 8.1% of the offering proceeds. 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 $35,660 and $33,822 for the three month periods ended March 31, 2008 and 2007, respectively. Amounts payable to Dahn at March 31, 2008 and December 31, 2007, were $410,553 and $409,074, 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 March 31, 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 March 31, 2008 and 2007, revenues increased 0.5% from $676,269 to $679,906 and total expenses decreased 5.4% from $520,332 to $492,015. As a result, net income increased 20.5% from $155,937 to $187,891 for the three-month period ended March 31, 2008, as compared to the same period in 2007. Rental revenues remained relatively constant. Occupancy levels for the Partnership's five mini-storage facilities averaged 77.5% for the three month period ended March 31, 2008, as compared to 77.4% for the same period in 2007. The Partnership is continuing its marketing efforts to attract and keep new tenants in its various mini-storage facil- ities. Operating expenses decreased approximately $19,600 (4.6%) primarily as a result of lower maintenance and repair and depreciation expenses, partially offset by increases in advertising, real estate tax, salaries and wages and power and sweeping expenses. General and administrative expenses decreased approximately $8,800 (9.7%) primarily as a result of a decrease in incentive management fee expense. The General Partners will continue their policy of funding the continuing improvement and maintenance of Partnership properties with cash generated from operations. The Partnership's financial resources appear to be adequate to meet its needs. Item 3. Quantitative and Qualitative Disclosures About Market Risk NONE Item 4. CONTROLS AND PROCEDURES The Partnership evaluated the effectiveness of its disclosure controls and procedures. This evaluation was performed by the Partnership's Controller with the assistance of the Partnership's President and the Chief Executive Officer. These disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Partnership in its periodic reports filed with the Securities and Exchange Commission (the Commission) is recorded, processed, summarized and reported, within the time periods specified by the Commission's rules and forms, and that the inform- ation is communicated to the certifying officers on a timely basis. Based on this evaluation, the Partnership concluded that its disclosure controls and procedures were effective. There have been no significant changes in the Partnership's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation. PART II - OTHER INFORMATION Item 1. Legal Proceedings Registrant is not a party to any material pending legal proceedings. Item 1A. Risk Factors Please refer to the risk factors disclosed by the partnership in response to Item 1A, part I of the Form 10-K filed on 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) Certifications of Chief Executive Officer 31.2 Rule 13a-14(a)/15d-14(a) Certifications of Principal Financial Officer 32.1 Section 1350 Certifications by Principal Executive Officer and 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 X, a California Limited Partnership by: DSI Properties, Inc., a California corporation, as General Partner /s/ ROBERT J. CONWAY By_____________________________ Dated: May 15, 2008 ROBERT J. CONWAY, President, Chief Executive Officer, Chief Financial Officer, and Director /s/ JOSEPH W. CONWAY By_____________________________ Dated: May 15, 2008 JOSEPH W. CONWAY, Executive Vice President and Director 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 on Form 10-Q of DSI Realty Income Fund X; 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 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 in- ternal controls over financial reporting. Date: May 15, 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 on Form 10-Q of DSI Realty Income Fund X; 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 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 in- ternal controls over financial reporting. Date: May 15, 2008 /s/ RICHARD P. CONWAY By_____________________________ RICHARD P. CONWAY, SR. VICE PRESIDENT (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) 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 X (the "Partnership") on Form 10-Q for the period ending March 31, 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 May 15, 2008 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 X (the "Partnership") on Form 10-Q for the period ending March 31, 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) May 15, 2008