Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark
One)
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended September 30, 2017
OR
☐
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: 000-50837
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
California
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33-0974362
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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17782
Sky Park Circle, Irvine, CA 92614
(
Address of principle executive offices )
(714)
662-5565
(
Telephone Number )
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 ☑ No ☐
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required
to submit and post such files). Yes ☑ 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. (Check one):
Large
accelerated filer ☐ Accelerated filer
☐ Non-accelerated filer ☑
Smaller reporting
company ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
☑
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
INDEX TO FORM 10-Q
For the quarterly period ended September 30, 2017
PART I.
FINANCIAL INFORMATION
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Item
1. Financial
Statements
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3
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Condensed
Balance Sheets As of
September 30, 2017 and March 31, 2017
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3
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Condensed
Statements of Operations For the Three and
Six Months Ended September 30, 2017 and 2016
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4
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Condensed
Statement of Partners' Deficit For the Six Months
Ended September 30, 2017
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5
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Condensed
Statements of Cash Flows For the Six Months
Ended September 30, 2017 and 2016
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6
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Notes
to Condensed Financial Statements
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7
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Item
2. Management's
Discussion and Analysis of Financial Condition and
Results of Operations
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14
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Item
3.
Quantitative and Qualitative Disclosures about Market
Risks
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15
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Item
4.
Controls and Procedures
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16
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PART
II. OTHER INFORMATION
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Item
1. Legal
Proceedings
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17
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Item
1A. Risk
Factors
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17
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Item
2. Unregistered Sales
of Equity Securities and Use of Proceeds
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17
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Item
3. Defaults Upon
Senior Securities
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17
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Item
4. Mine Safety
Disclosures
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17
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Item
5. Other
Information
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17
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Item
6. Exhibits
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17
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Signatures
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18
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2
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
CONDENSED BALANCE SHEETS
(Unaudited)
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September 30,
2017
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March 31,
2017
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ASSETS
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Cash
and cash equivalents
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$36,056
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$38,303
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Investments
in Local Limited Partnerships, net (Note
2)
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-
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-
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Total
Assets
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$36,056
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$38,303
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LIABILITIES
AND PARTNERS’ DEFICIT
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Liabilities:
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Accrued
fees and expenses due to General Partner and affiliates
(Note 3)
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$1,086,236
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$1,098,095
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Total
Liabilities
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1,086,236
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1,098,095
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Partners’
Deficit:
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General
Partner
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(12,393)
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(12,403)
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Limited Partners (25,000 Partnership
Units authorized; 12,937 and 13,042 Partnership Units, respectively, issued and
outstanding)
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(1,037,787)
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(1,047,389)
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Total Partners’ Deficit
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(1,050,180)
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(1,059,792)
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Total
Liabilities and Partners’ Deficit
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$36,056
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$38,303
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See accompanying notes to condensed financial
statements
3
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
CONDENSED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended September 30, 2017 and
2016
(Unaudited)
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2017
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2016
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Three
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Six
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Three
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Six
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Months
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Months
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Months
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Months
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Operating
income:
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Reporting
fees
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$-
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$5,248
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$5,684
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$5,684
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Total
operating income
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-
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5,248
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5,684
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5,684
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Operating
expenses:
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Asset management fees (Note 3)
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12,964
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31,401
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18,437
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36,874
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Legal
and accounting fees
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5,900
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5,900
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17,500
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21,532
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Write-off
of other assets
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-
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-
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-
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2,700
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Other
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3,076
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5,764
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2,306
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3,593
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Total
operating expenses
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21,940
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43,065
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38,243
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64,699
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Loss
from operations
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(21,940)
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(37,817)
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(32,559)
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(59,015)
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Gain
on sale of Local Limited Partnerships
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18,875
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47,425
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-
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-
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Interest
income
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2
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4
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2
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4
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Net
income (loss)
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$(3,063)
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$9,612
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$(32,557)
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$(59,011)
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Net
income (loss) allocated to:
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General
Partner
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$(3)
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$10
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$(33)
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$(59)
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Limited
Partners
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$(3,060)
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$9,602
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$(32,524)
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$(58,952)
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Net
income (loss) per Partnership Unit
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$-
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$1
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$(2)
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$(4)
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Outstanding
weighted Partnership Units
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12,937
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12,937
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13,128
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13,128
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See accompanying notes to condensed financial
statements
4
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
CONDENSED STATEMENT OF PARTNERS’ DEFICIT
For the Six Months Ended September 30, 2017
(Unaudited)
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General
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Limited
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Partner
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Partners
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Total
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Partners’
deficit at March 31, 2017
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$(12,403)
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$(1,047,389)
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$(1,059,792)
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Net
income
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10
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9,602
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9,612
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Partners’
deficit at September 30, 2017
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$(12,393)
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$(1,037,787)
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$(1,050,180)
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See
accompanying notes to condensed financial
statements
5
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 2017 and 2016
(Unaudited)
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2017
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2016
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Cash
flows from operating activities:
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Net
income (loss)
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$9,612
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$(59,011)
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Adjustments
to reconcile net income (loss) to net
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cash
used in operating activities:
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Decrease
in other assets
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-
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2,700
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Increase
(decrease) in accrued fees and expenses due to General Partner and
affiliates
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(11,859)
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52,000
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Gain
on sale of Local Limited Partnerships
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(47,425)
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-
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Net
cash used in operating activities
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(49,672)
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(4,311)
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Cash
flows from investing activities:
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Net
proceeds from sale of Local Limited Partnerships
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47,425
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-
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Net
cash provided by investing activities
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47,425
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-
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Net
decrease in cash and cash equivalents
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(2,247)
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(4,311)
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Cash
and cash equivalents, beginning of period
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38,303
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41,923
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Cash
and cash equivalents, end of period
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$36,056
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$37,612
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SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
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Taxes
paid
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$-
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$-
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See
accompanying notes to condensed financial
statements
6
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Quarterly Period Ended September 30, 2017
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The
accompanying condensed unaudited financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q for quarterly
reports under Section 13 or 15(d) of the Securities Exchange Act of
1934. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in
the United States of America for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six months ended
September 30, 2017 are not necessarily indicative of the results
that may be expected for the fiscal year ending March 31, 2018. For
further information, refer to the financial statements and
footnotes thereto included in the Partnership's annual report on
Form 10-K for the fiscal year ended March 31, 2017.
Organization
WNC
Housing Tax Credit Fund VI, L.P., Series 10 (the
“Partnership”) is a California Limited Partnership
formed under the laws of the State of California on July 17, 2001,
and commenced operations on February 28, 2003. The Partnership was
formed to acquire limited partnership interests in other limited
partnerships ("Local Limited Partnerships") which own multi-family
housing complexes (“Housing Complexes”) that are
eligible for Federal low income housing tax credits (“Low
Income Housing Tax Credits”). The local general partners (the
“Local General Partners”) of each Local Limited
Partnership retain responsibility for maintaining, operating and
managing the Housing Complex. Each Local Limited Partnership is
governed by its agreement of limited partnership (the “Local
Limited Partnership Agreement”).
The
general partner of the Partnership is WNC & Associates, Inc.
(“Associates” or the “General Partner”).
The chairman and the president of Associates own all of the
outstanding stock of Associates. The business of the Partnership is
conducted primarily through the General Partner, as the Partnership
has no employees of its own.
The
Partnership shall continue in full force and effect until December
31, 2062, unless terminated prior to that date, pursuant to the
partnership agreement or law.
The
financial statements include only activity relating to the business
of the Partnership, and do not give effect to any assets that the
partners may have outside of their interests in the Partnership, or
to any obligations, including income taxes, of the
partners.
The
partnership agreement authorized the sale of up to 25,000 units of
limited partnership interest (“Partnership Units”) at
$1,000 per Partnership Unit. The offering of Partnership Units has
concluded, and 13,153 Partnership Units representing subscriptions
in the amount of $13,119,270, net of dealer discounts of $31,220
and volume discounts of $2,510, had been accepted. As of September
30, 2017 and March 31, 2017, a total of 12,937 and 13,042
Partnership Units, respectively, remain outstanding. The General
Partner has a 0.1% interest in operating profits and losses,
taxable income and losses, cash available for distribution from the
Partnership and Low Income Housing Tax Credits of the Partnership.
The investors (the “Limited Partners”) in the
Partnership will be allocated the remaining 99.9% of these items in
proportion to their respective investments.
The
proceeds from the disposition of any of the Housing Complexes will
be used first to pay debts and other obligations per the respective
Local Limited Partnership Agreement. Any remaining proceeds will
then be paid to the Partnership. The sale of a Housing Complex may
be subject to other restrictions and obligations. Accordingly,
there can be no assurance that a Local Limited Partnership will be
able to sell its Housing Complex. Even if it does so, there can be
no assurance that any significant amounts of cash will be
distributed to the Partnership. Should such distributions occur,
the Limited Partners will be entitled to receive distributions from
the proceeds remaining after payment of Partnership obligations and
funding reserves, equal to their capital contributions and their
return on investment (as defined in the Partnership Agreement). The
General Partner would then be entitled to
receive proceeds equal to its capital contributions from the
remainder. Any additional sale or refinancing proceeds will be
distributed 90% to the Limited Partners (in proportion to their
respective investments) and 10% to the General
Partner.
7
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2017
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
Risks and Uncertainties
An
investment in the Partnership and the Partnership’s
investments in Local Limited Partnerships and their Housing
Complexes are subject to risks. These risks may impact the tax
benefits of an investment in the Partnership, and the amount of
proceeds available for distribution to the Limited Partners, if
any, on liquidation of the Partnership’s investments. Some of
those risks include the following:
The Low
Income Housing Tax Credits rules are extremely complicated.
Noncompliance with these rules results in the loss of future Low
Income Housing Tax Credits and the fractional recapture of Low
Income Housing Tax Credits already taken. In most cases the annual
amount of Low Income Housing Tax Credits that an individual can use
is limited to the tax liability due on the person’s last
$25,000 of taxable income. The Local Limited Partnerships may be
unable to sell the Housing Complexes at a price which would result
in the Partnership realizing cash distributions or proceeds from
the transaction. Accordingly, the Partnership may be unable to
distribute any cash to its limited partners. Low Income Housing Tax
Credits may be the only benefit from an investment in the
Partnership.
The
Partnership has invested in a limited number of Local Limited
Partnerships. Such limited diversity means that the results of
operation of each single Housing Complex will have a greater impact
on the Partnership. With limited diversity, poor performance of one
Housing Complex could impair the Partnership’s ability to
satisfy its investment objectives. Each Housing Complex is subject
to mortgage indebtedness. If a Local Limited Partnership failed to
pay its mortgage, it could lose its Housing Complex in foreclosure.
If foreclosure were to occur during the first 15 years (the
“Compliance Period”), the loss of any remaining future
Low Income Housing Tax Credits, a fractional recapture of prior Low
Income Housing Tax Credits, and a loss of the Partnership’s
investment in the Housing Complex would occur. The Partnership is a
limited partner or a non-managing member of each Local Limited
Partnership. Accordingly, the Partnership will have very limited
rights with respect to management of the Local Limited
Partnerships. The Partnership will rely totally on the Local
General Partners. Neither the Partnership’s investments in
Local Limited Partnerships, nor the Local Limited
Partnerships’ investments in Housing Complexes, are readily
marketable. To the extent the Housing Complexes receive government
financing or operating subsidies, they may be subject to one or
more of the following risks: difficulties in obtaining tenants for
the Housing Complexes; difficulties in obtaining rent increases;
limitations on cash distributions; limitations on sales or
refinancing of Housing Complexes; limitations on transfers of
interests in Local Limited Partnerships; limitations on removal of
Local General Partners; limitations on subsidy programs; and
possible changes in applicable regulations. Uninsured casualties
could result in loss of property and Low Income Housing Tax Credits
and recapture of Low Income Housing Tax Credits previously taken.
The value of real estate is subject to risks from fluctuating
economic conditions, including employment rates, inflation, tax,
environmental, land use and zoning policies, supply and demand of
similar properties, and neighborhood conditions, among
others.
The
ability of Limited Partners to claim tax losses from the
Partnership is limited. The IRS may audit the Partnership or a
Local Limited Partnership and challenge the tax treatment of tax
items. The amount of Low Income Housing Tax Credits and tax losses
allocable to the limited partners could be reduced if the IRS were
successful in such a challenge. The alternative minimum tax could
reduce tax benefits from an investment in the Partnership. Changes
in tax laws could also impact the tax benefits from an investment
in the Partnership and/or the value of the Housing
Complexes.
The
Partnership currently has insufficient working capital to fund its
operations. Associates has agreed to continue providing advances
sufficient enough to fund the operations and working capital
requirements of the Partnership through November 30,
2018.
Anticipated
future and existing cash resources of the Partnership are not
sufficient to pay existing liabilities of the Partnership. However,
substantially all of the existing liabilities of the Partnership
are payable to the General Partner and/or its affiliates. Though
the amounts payable to the General Partner and/or its affiliates
are contractually currently payable, the Partnership anticipates
that the General Partner and/or its affiliates will not require the
payment of these contractual obligations until capital
8
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2017
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
reserves
are in excess of the aggregate of then existing contractual
obligations and then anticipated future foreseeable obligations of
the Partnership. The Partnership would be adversely affected should
the General Partner and/or its affiliates demand current payment of
the existing contractual obligations and or suspend services for
this or any other reason.
No
trading market for the Partnership Units exists or is expected to
develop. Limited Partners may be unable to sell their Partnership
Units except at a discount and should consider their Partnership
Units to be a long-term investment. Individual Limited Partners
will have no recourse if they disagree with actions authorized by a
vote of the majority of Limited Partners.
Exit Strategy
The
Compliance Period for a Housing Complex is generally 15 years
following construction or rehabilitation completion. Associates was
one of the first in the industry to offer syndicated investments in
Low Income Housing Tax Credits. The initial programs have completed
their Compliance Periods.
Upon
the sale of a Local Limited Partnership Interest or Housing Complex
after the end of the Compliance Period, there would be no recapture
of Low Income Housing Tax Credits. A sale prior to the end of the
Compliance Period could result in recapture if certain conditions
are not met. None of the remaining Housing Complexes have completed
their 15-year Compliance Period.
With
that in mind, the General Partner is continuing its review of the
Housing Complexes. The review considers many factors, including
extended use requirements (such as those due to mortgage
restrictions or state compliance agreements), the condition of the
Housing Complexes, and the tax consequences to the Limited Partners
from the sale of the Housing Complexes.
Upon
identifying those Housing Complexes with the highest potential for
a successful sale, refinancing or re-syndication, the Partnership
expects to proceed with efforts to liquidate them. The objective is
to maximize the Limited Partners’ return wherever possible
and, ultimately, to wind down the Partnership as Low Income Housing
Tax Credits are no longer available. Local Limited Partnership
interests may be disposed of any time by the General Partner in its
discretion. While liquidation of the Housing Complexes continues to
be evaluated, the dissolution of the Partnership was not imminent
as of September 30, 2017.
During the year ended March 31, 2016, the Partnership sold its
Local Limited Partnership interest in FDI-Green Manor 2003
(“Green Manor”) and FDI-Pine Meadows 2003 (“Pine
Meadows”). The Partnership received proceeds of $65,000 and
recognized a gain of $58,099 during the year ended March 31, 2016.
The Compliance Periods for Green Manor and Pine Meadows expire in
2018. Recapture Guarantee Surety Bonds were issued to the
Purchasers to guarantee the repayment of the recaptured tax credits
and interests arising from any non-compliance as provided in
Section 42 of the Internal Revenue Code arising after the date of
the sale.
During
the six months ended September 30, 2017, the Partnership sold its
Local Limited Partnership interest in Catoosa Senior Village, L.P.
(“Catoosa”). Catoosa was appraised for $920,000 and had
a mortgage balance of $2,198,475 as of December 31, 2016. The
Partnership received $31,200 in cash proceeds, $29,700 of which
were used to reimburse the General Partner or affiliates for
expenses paid on its behalf and the remaining $1,500 will be
retained in reserves for future operating expenses. The Partnership
incurred $2,650 in sale related expenses which was netted against
the proceeds from the sale in calculating the gain on sale. The
Partnership’s investment balance is zero; therefore a gain of
$28,550 was recorded. The Compliance Period for Catoosa has not yet
expired. A Recapture Guarantee Surety Bond was issued to the
Purchaser to guarantee the repayment of the recaptured tax credits
and interests arising from any non-compliance as provided in
Section 42 of the Internal Revenue Code arising after the date of
the sale.
9
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2017
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
During
the six months ended September 30, 2017, the Partnership sold its
Local Limited Partnership interest in Melodie Meadows Associates,
Ltd (“Melodie”) through a redemption agreement. Melodie
was appraised for $530,000 and had a mortgage balance of $1,258,276
as of December 31, 2016. The Partnership received $21,000 in cash
proceeds, $19,500 of which were used to reimburse the General
Partner or affiliates for expenses paid on its behalf and the
remaining $1,500 will be retained in reserves for future operating
expenses. The Partnership incurred $2,125 in sale related expenses
which was netted against the proceeds from the sale in calculating
the gain on sale. The Partnership’s investment balance is
zero; therefore a gain of $18,875 was recorded. The Compliance Period for Melodie
expires in 2017. The respective purchasers have guaranteed that the
Local Limited Partnership will stay in compliance with the Low
Income Housing Tax Credit code; therefore there is no risk of
recapture to the investors of the Partnership.
Method of Accounting for Investments in Local Limited
Partnerships
The
Partnership accounts for its investments in Local Limited
Partnerships using the equity method of accounting, whereby the
Partnership adjusts its investment balance for its share of the
Local Limited Partnerships’ results of operations and for any
contributions made and distributions received. The Partnership
reviews the carrying amount of an individual investment in a Local
Limited Partnership for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of such
investment may not be recoverable. Recoverability of such
investment is measured by the estimated value derived by
management, generally consisting of the sum of the remaining future
Low Income Housing Tax Credits estimated to be allocable to the
Partnership and the estimated residual value to the Partnership. If
an investment is considered to be impaired, the Partnership reduces
the carrying value of its investment in any such Local Limited
Partnership. The accounting policies of the Local Limited
Partnerships, generally, are expected to be consistent with those
of the Partnership. Costs incurred by the Partnership in acquiring
the investments were capitalized as part of the investment and were
being amortized over 30 years (see Note 2).
“Equity
in losses of Local Limited Partnerships” for each of the
periods ended September 30, 2017 and 2016, respectively, has been
recorded by the Partnership. Management’s estimate for the
six month periods is based on either actual unaudited results
reported by the Local Limited Partnerships or historical trends in
the operations of the Local Limited Partnerships. Equity in losses
from the Local Limited Partnerships allocated to the Partnership
are not recognized to the extent that the investment balance would
be adjusted below zero. If the Local Limited Partnerships report
net income in future years, the Partnership will resume applying
the equity method only after its share of such net income equals
the share of net losses not recognized during the period(s) the
equity method was suspended.
In
accordance with the accounting guidance for the consolidation of
variable interest entities, the Partnership determines when it
should include the assets, liabilities, and activities of a
variable interest entity (VIE) in its financial statements, and
when it should disclose information about its relationship with a
VIE. The analysis that must be performed to determine which entity
should consolidate a VIE focuses on control and economic factors. A
VIE is a legal structure used to conduct activities or hold assets,
which must be consolidated by a company if it is the primary
beneficiary because it has (1) the power to direct the activities
of the VIE that most significantly impact the VIE's economic
performance and (2) the obligation to absorb losses or receive
benefits that could potentially be significant to the VIE. If
multiple unrelated parties share such power, as defined, no party
will be required to consolidate the VIE. Further, the guidance
requires continual reconsideration of the primary beneficiary of a
VIE.
Based
on this guidance, the Local Limited Partnerships in which the
Partnership invests meet the definition of a VIE because the owners
of the equity at risk in these entities do not have the power to
direct their operations. However, management does not consolidate
the Partnership's interests in these VIEs, as it is not considered
to be the primary beneficiary since it does not have the power to
direct the activities that are considered most significant to the
economic performance of these entities. The Partnership currently
records the amount of its investment in these Local Limited
Partnerships as an asset on its balance sheets, recognizes its
share of partnership income or losses in the statements
of
10
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2017
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
operations,
and discloses how it accounts for material types of these
investments in its financial statements. The Partnership's balance
in investment in Local Limited Partnerships, plus the risk of
recapture of tax credits previously recognized on these
investments, represents its maximum exposure to loss. The
Partnership's exposure to loss on these Local Limited Partnerships
is mitigated by the condition and financial performance of the
underlying Housing Complexes as well as the strength of the Local
General Partners and their guarantee against credit recapture to
the investors in the Partnership
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could materially differ
from those estimates.
Cash and Cash Equivalents
The
Partnership considers all highly liquid investments with original
maturities of three months or less when purchased to be cash
equivalents. The Partnership had $36,056 and $38,303 of cash
equivalents as of September 30, 2017 and March 31, 2017,
respectively.
Reporting Comprehensive Income
The
Partnership had no items of other comprehensive income for all
periods presented.
Income Taxes
The
Partnership has elected to be treated as a pass-through entity for
income tax purposes and, as such, is not subject to income taxes.
Rather, all items of taxable income, deductions and tax credits are
passed through to and are reported by its owners on their
respective income tax returns. The Partnership’s federal
tax status as a pass-through entity is based on its legal status as
a partnership. Accordingly, the Partnership is not required to take
any tax positions in order to qualify as a pass-through entity. The
Partnership is required to file and does file tax returns with the
Internal Revenue Service and other taxing authorities. Accordingly,
these financial statements do not reflect a provision for income
taxes and the Partnership has no other tax positions which must be
considered for disclosure. Income tax returns filed by the
Partnership are subject to examination by the Internal Revenue
Service for a period of three years. While no income tax returns
are currently being examined by the Internal Revenue Service, tax
years since 2014 remain open.
Net Income (Loss) Per Partnership Unit
Net
income (loss) per Partnership Unit includes no dilution and is
computed by dividing income (loss) available to Limited Partners by
the weighted average number of Partnership Units outstanding during
the period. Calculation of diluted net income (loss) per
Partnership Unit is not required.
Revenue Recognition
The
Partnership is entitled to receive reporting fees from the Local
Limited Partnerships. The intent of the reporting fees is to offset
(in part) administrative costs incurred by the Partnership in
corresponding with the Local Limited Partnerships. Due to the
uncertainty of the collection of these fees, the Partnership
recognizes reporting fees as collections are made.
11
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2017
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued
Impact of Recent Accounting Pronouncements
In
February 2015, the FASB issued ASU No. 2015-02,
“Consolidation (Topic 810): Amendments to the Consolidation
Analysis”. In addition, in October 2016, the FASB issued ASU
No. 2016-17, “Consolidation (Topic 810): Interests Held
Through Related Parties That Are Under Common Control”, to
provide further clarification guidance to ASU No.
2015-02. This will
improve certain areas of consolidation guidance for reporting
organizations that are required to evaluate whether to consolidate
certain legal entities such as limited partnerships, limited
liability corporations and securitization structures.
ASU
2015-02 and ASU 2016-17 simplifies and improves
GAAP by: eliminating the presumption that a general partner should
consolidate a limited partnership, eliminating the indefinite
deferral of FASB Statement No. 167, thereby reducing the number of
Variable Interest Entity (VIE) consolidation models from four to
two (including the limited partnership consolidation model) and
clarifying when fees paid to a decision maker should be a factor to
include in the consolidation of VIEs. ASU 2015-02 is effective
for periods beginning after December 15, 2015. ASU 2016-17 is
effective for periods beginning after December 15, 2016. The
adoption of these updates did not materially affect the
Partnership's financial statements.
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
As of
September 30, 2017 and March 31, 2017, the Partnership owned
limited partnership interests in 2 and 4 Local Limited
Partnerships, respectively, each of which owns one Housing Complex,
consisting of an aggregate of 118 and 218 apartment units,
respectively. The respective Local General Partners of the Local
Limited Partnerships manage the day to day operations of the
entities. Significant Local Limited Partnership business decisions,
as defined, require approval from the Partnership. The Partnership,
as a Limited Partner, is generally entitled to 99.98%, as specified
in the Local Limited Partnership agreements, of the operating
profits and losses, taxable income and losses, and tax credits of
the Local Limited Partnerships.
Selected
financial information for the six months ended September 30, 2017
and 2016 from the unaudited combined condensed financial statements
of the Local Limited Partnerships in which the Partnership has
invested is as follows:
COMBINED
CONDENSED STATEMENTS OF OPERATIONS
|
2017
|
2016
|
Revenues
|
$400,000
|
$633,000
|
Expenses:
|
|
|
Interest
expense
|
62,000
|
80,000
|
Depreciation
and amortization
|
124,000
|
226,000
|
Operating
expenses
|
303,000
|
470,000
|
Total
expenses
|
489,000
|
776,000
|
|
|
|
Net
loss
|
$(89,000)
|
$(143,000)
|
Net loss allocable
to the Partnership
|
$(87,000)
|
$(143,000)
|
Net loss recorded
by the Partnership
|
$-
|
$-
|
Certain
Local Limited Partnerships incurred operating losses and/or have
working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses,
additional capital contributions by the Partnership and/or the
Local General Partners may be required to sustain the operations of
such Local Limited Partnerships. If additional capital
contributions are not made when they are required, the
Partnership's investment in certain of such Local Limited
Partnerships could be impaired, and the loss and recapture of the
related Low Income Housing Tax Credits could occur.
12
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A
California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Quarterly Period Ended September 30, 2017
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS
Under
the terms of the Partnership Agreement, the Partnership has paid or
is obligated to the General Partner or its affiliates for the
following fees:
(a)
An annual asset
management fee not to exceed 0.5% of the invested assets of the
Partnership, as defined. “Invested Assets” means the
sum of the Partnership’s investment in Local Limited
Partnership interests and the Partnership’s allocable share
of mortgage loans on and other debts related to the Housing
Complexes owned by such Local Limited Partnerships. Asset
management fees of $31,401 and $36,874 were incurred during the six
months ended September 30, 2017 and 2016, respectively. The
Partnership paid the General Partner and its affiliates $29,700 and
$0 during the six months ended September 30, 2017 and 2016,
respectively.
(b)
A subordinated
disposition fee in an amount equal to 1% of the sale price of real
estate sold by the Local Limited Partnerships. Payment of this fee
is subordinated to the Limited Partners receiving distributions
equal to their capital contributions and their return on investment
(as defined in the Partnership Agreement) and is payable only if
services are rendered in the sales effort. No such fee was incurred
for all periods presented.
(c)
The Partnership
reimburses the General Partner or its affiliates for operating
expenses incurred on behalf of the Partnership. Operating expense
reimbursements paid were $30,000 and $10,000 during the six months
ended September 30, 2017 and 2016, respectively.
The
accrued fees and expenses due to General Partner and affiliates
consisted of the following at:
|
September
30,
2017
|
March 31,
2017
|
|
|
|
Asset management
fee payable
|
$1,040,400
|
$1,038,699
|
Expenses paid by
the General Partner or an affiliate on behalf of the
Partnership
|
45,836
|
59,396
|
|
|
|
Total
|
$1,086,236
|
$1,098,095
|
The
General Partner and/or its affiliates do not anticipate that these
accrued fees will be paid in full until such time as capital
reserves are in excess of future foreseeable working capital
requirements of the Partnership.
13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Forward Looking Statements
With
the exception of the discussion regarding historical information,
this “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and other discussions
elsewhere in this Form 10-Q contain forward looking statements.
Such statements are based on current expectations subject to
uncertainties and other factors which may involve known and unknown
risks that could cause actual results of operations to differ
materially from those projected or implied. Further, certain
forward-looking statements are based upon assumptions about future
events which may not prove to be accurate.
Risks
and uncertainties inherent in forward looking statements include,
but are not limited to, our future cash flows and ability to obtain
sufficient financing, level of operating expenses, conditions in
the Low Income Housing Tax Credit property market and the economy
in general, as well as legal proceedings. Historical results are
not necessarily indicative of the operating results for any future
period.
Subsequent
written and oral forward looking statements attributable to the
Partnership or persons acting on its behalf are expressly qualified
in their entirety by cautionary statements in this Form 10-Q and in
other reports filed with the Securities and Exchange
Commission.
The
following discussion and analysis compares the results of
operations for the three and six months ended September 30, 2017
and 2016, and should be read in conjunction with the condensed
financial statements and accompanying notes included within this
report.
Financial Condition
The
Partnership’s assets at September 30, 2017 consisted of
$36,000 in cash and cash equivalents. Liabilities at September 30,
2017 consisted of $1,086,000 of accrued fees and expenses due to
General Partner and affiliates.
Results of Operations
Three Months Ended September 30, 2017 Compared to Three Months
Ended September 30, 2016 The Partnership's net loss for the
three months ended September 30, 2017 was $3,000, reflecting a
decrease of $30,000 from the net loss of $33,000 for the three
months ended September 30, 2016. The change was partially due to a
$19,000 increase in gain on sale of Local Limited Partnership
during the three months ended September 30, 2017. The gain on sale
of Local Limited Partnerships will vary from period to period
depending on the value and sales price of the Housing Complexes
that have been identified for disposition and the closing date of
such transaction. Asset management fees decreased by $5,000 for the
three months ended September 30, 2017. These fees are calculated
based on the value of the invested assets, which decreased due to
the sale of Local Limited Partnerships. There was a $12,000
decrease in legal and accounting fees for the three months ended
September 30, 2017 due to the timing of the accounting work
performed. Other expenses increased by $1,000 for the three months
ended September 30, 2017 compared to September 30, 2016. The change
was largely due to the professional services for proxy fulfillment
and voting performed for the three months ended September 30, 2017.
Reporting fees decreased by $6,000 for the three months ended
September 30, 2017. Reporting fees and distributions vary depending
on when the Local Limited Partnerships’ cash flows will allow
for the payment.
14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Six Months Ended September 30, 2017 Compared to Six Months Ended
September 30, 2016 The Partnership's net income for the six
months ended September 30, 2017 was $10,000, reflecting an increase
of approximately $69,000 from the net loss of $59,000 for the six
months ended September 30, 2016. The change was largely due to a
$47,000 increase in gain on sale during the six months ended
September 30, 2017. The gain on sale of Local Limited Partnerships
will vary from period to period depending on the value and sales
price of the Housing Complexes that have been identified for
disposition and the closing date of such transaction. Asset
management fees decreased by $5,000 for the six months ended
September 30, 2017. These fees are calculated based on the value of
the invested assets, which decreased due to the sale of Local
Limited Partnerships. There was a $16,000 decrease in legal and
accounting fees for the six months ended September 30, 2017 due to
the timing of the accounting work performed. Write-off of other
expenses decreased by $3,000 during the six months ended September
30, 2017 compared to six months ended September 30, 2016.
Capitalized costs from potential disposition of Local Limited
Partnerships were expensed due to the length of time it had taken
to dispose of the properties. Other expenses increased by $2,000
for the six months ended September 30, 2017 compared to September
30, 2016. The change was largely due to the professional services
for proxy fulfillment and voting performed for the three months
ended September 30, 2017.
Capital Resources and Liquidity
Six Months Ended September 30, 2017 Compared to Six Months Ended
September 30, 2016 Net cash used during the six months ended
September 30, 2017 was $2,000, compared to net cash used during the
six months ended September 30, 2016 of $4,000. During the six
months ended September 30, 2017, the Partnership received $47,000
in net proceeds from the disposition of Local Limited Partnerships
compared to no proceeds received during the six months ended
September 30, 2016. The net proceeds received from the sale of
Local Limited Partnerships will vary from period to period
depending on the values and sale prices of the Housing Complexes
that have been disposed and the closing dates of such transactions.
The Partnership paid $30,000 in accrued asset management fees and
$30,000 of operating advances to the General Partner or affiliates
during the six months ended September 30, 2017 compared to $0 and
$10,000 paid during the six months ended September 30, 2016. The
reimbursement of operating expenses and asset management fees are
paid after management reviews the cash position of the
Partnership.
During
the six months ended September 30, 2017, accrued payables, which
consist primarily of asset management fees to the General Partner
or its affiliates, decreased by $12,000, compared to the six months
ended September 30, 2016. The General Partner does not anticipate
that these accrued fees will be paid in full until such time as
capital reserves are in excess of future foreseeable working
capital requirements of the Partnership.
The
Partnership expects its future cash flows, together with its net
available assets as of September 30, 2017, to be insufficient to
meet all currently foreseeable future cash requirements. Associates
has agreed to continue providing advances sufficient enough to fund
the operations and working capital requirements of the Partnership
through November 30, 2018.
Item 3. Quantitative and Qualitative Disclosures About Market
Risks
NOT
APPLICABLE
15
Item 4. Controls and Procedures
(a)
Disclosure controls and procedures
As of
the end of the periods covered by this report, the
Partnership’s General Partner, under the supervision and with
the participation of the Chief Executive Officer and Chief
Financial Officer of Associates, carried out an evaluation of the
effectiveness of the Partnership’s “disclosure controls
and procedures” as defined in Securities Exchange Act of 1934
Rule 13a-15 and 15d-15. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that,
as of the end of the period covered by this report, the
Partnership’s disclosure controls and procedures were not
effective to ensure that material information required to be
disclosed in the Partnership’s periodic report filings with
SEC is recorded, processed, summarized and reported within the time
period specified by the SEC’s rules and forms, consistent
with the definition of “disclosure controls and
procedures” under the Securities Exchange Act of
1934.
The
Partnership must rely on the Local Limited Partnerships to provide
the Partnership with certain information necessary to the timely
filing of the Partnership’s periodic reports. Factors in the
accounting at the Local Limited Partnerships have caused delays in
the provision of such information during past reporting periods,
and resulted in the Partnership’s inability to file its
periodic reports in a timely manner.
Once
the Partnership has received the necessary information from the
Local Limited Partnerships, the Chief Executive Officer and the
Chief Financial Officer of Associates believe that the material
information required to be disclosed in the Partnership’s
periodic report filings with SEC is effectively recorded,
processed, summarized and reported, albeit not in a timely manner.
Going forward, the Partnership will use the means reasonably within
its power to impose procedures designed to obtain from the Local
Limited Partnerships the information necessary to the timely filing
of the Partnership’s periodic reports.
(b)
Changes in internal controls
There
were no changes in the Partnership’s internal control over
financial reporting that occurred during the quarter ended
September 30, 2017 that materially affected, or are reasonably
likely to materially affect, the Partnership’s internal
control over financial reporting.
16
Part II.
Other Information
Item 1.
Legal Proceedings
NONE
Item 1A.
Risk Factors
No
material changes in risk factors as previously disclosed in the
Partnership’s Form 10-K.
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
NONE
Item 3.
Defaults Upon Senior Securities
NONE
Item 4.
Mine Safety Disclosure
NOT
APPLICABLE
Item 5.
Other Information
NONE
Item 6.
Exhibits
31.1
|
|
Certification of the Chief Executive Officer pursuant to Rule
13a-14 or 15d-14, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002. (filed herewith)
|
|
|
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Rule
13a-14 or 15d-14, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002. (filed herewith)
|
|
|
|
32.1
|
|
Section 1350 Certification of the Chief Executive Officer. (filed
herewith)
|
|
|
|
32.2
|
|
Section 1350 Certification of the Chief Financial Officer. (filed
herewith)
|
|
|
|
101
|
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i)
the Condensed Balance Sheets at September 30, 2017 and March 31,
2017, (ii) the Condensed Statements of Operations for the three and
six months ended September 30, 2017 and September 30, 2016, (iii)
the Condensed Statement of Partners’ Deficit for the six
months ended September 30, 2017, (iv) the Condensed Statements of
Cash Flows for the six months ended September 30, 2017 and
September 30, 2016 and (v) the Notes to Condensed Financial
Statements.
Exhibits 32.1, 32.2 and 101 shall not be deemed
“filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, or otherwise subject to the
liability of that Section. Such exhibits shall not be deemed
incorporated by reference into any filing under the Securities Act
of 1933 or Securities Exchange Act of
1934.
|
17
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.
WNC
HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
By: WNC &
ASSOCIATES, INC. General
Partner
By:
/s/ Wilfred N. Cooper,
Jr.
Wilfred
N. Cooper, Jr.
President
and Chief Executive Officer of WNC & Associates,
Inc.
Date:
November 16, 2017
By:
/s/ Melanie R.
Wenk
Melanie
R. Wenk
Senior
Vice President - Chief Financial Officer of WNC & Associates,
Inc.
Date:
November 16, 2017
18