<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1996
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: 33-69996
COMMONWEALTH INCOME & GROWTH FUND I
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2735641
(State or other jurisdiction of (I.R.S. Employer indentification No.)
incorporation or organization)
1160 West Swedesford Road
Berwyn, Pennsylvania 19312
(Address, including zip code, of principal executive offices)
(610) 647-6800
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports 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 [ ]
<PAGE>
Part I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
COMMONWEALTH INCOME & GROWTH FUND I
BALANCE SHEETS
<TABLE>
<CAPTION>
(AUDITED)
JUNE 30, DECEMBER 31,
1996 1995
---------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 554,981 $ 341,838
Lease income receivable 143,419 310,455
Other receivables and deposits 266,262 35,777
Computer equipment, at cost 17,244,472 17,149,693
Accumulated depreciation (6,141,446) (4,524,429)
---------------------------
11,103,026 12,625,264
Organization costs and deferred expenses, net of
accumulated amortization of $398,128
in 1996 and $278,108 in 1995 494,203 597,374
---------------------------
Total assets $12,561,891 $13,910,708
---------------------------
---------------------------
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 19,796 $ 76,127
Accounts payable - General Partner 1,708 83,874
Accounts payable - Commonwealth Capital Corp. - 22,222
Unearned lease income 223,954 242,353
Payable for computer equipment - 537,251
Notes payable 3,318,879 3,305,310
---------------------------
Total liabilities 3,564,337 4,267,137
---------------------------
---------------------------
Partners' capital:
General partner 1,000 1,000
Limited partners 8,996,554 9,642,571
---------------------------
Total partners' capital 8,997,554 9,643,571
---------------------------
Total liabilities and partners' capital $12,561,891 $13,910,708
---------------------------
---------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
COMMONWEALTH INCOME & GROWTH FUND I
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME:
Lease $ 1,294,381 $ 922,701 $ 2,715,357 $ 1,677,868
Interest 10,832 49,186 19,617 86,338
Gain on sale of computer equipment 4,208 - 4,208 -
--------------------------------------------------------
1,309,421 971,887 2,739,182 1,764,206
EXPENSES:
Operating, excluding depreciation 17,775 20,637 32,458 38,548
Equipment management fee - General Partner 64,719 46,135 135,768 83,893
Interest 96,482 26,774 161,163 54,578
Depreciation 1,101,834 772,862 2,263,199 1,404,114
Amortization of organization costs and deferred
expenses 82,903 50,367 154,875 91,851
--------------------------------------------------------
1,363,713 916,775 2,747,463 1,672,984
--------------------------------------------------------
Net income (loss) $ (54,292) $ 55,112 $ (8,281) $ 91,222
--------------------------------------------------------
--------------------------------------------------------
Net income (loss) per equivalent limited
partnership unit $ (0.09) $ 0.09 $ (0.01) $ 0.16
--------------------------------------------------------
--------------------------------------------------------
Weighted average number of equivalent limited
partnership units outstanding during the period 631,358 611,046 631,358 556,922
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
COMMONWEALTH INCOME & GROWTH FUND I
STATEMENT OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS' TOTAL
-----------------------------------
<S> <C> <C> <C>
Partners' capital - December 31, 1994 $ 1,000 $ 6,990,641 $ 6,991,641
Contributions - 4,352,169 4,352,169
Offering costs - (459,419) (459,419)
Net income (loss) 11,956 (57,191) (45,235)
Distributions (11,956) (1,183,629) (1,195,585)
-----------------------------------
Partners' capital - December 31, 1995 1,000 9,642,571 9,643,571
Net income 3,189 42,822 46,011
Distributions (3,189) (315,679) (318,868)
-----------------------------------
Partners' capital - March 31, 1996 1,000 9,369,714 9,370,714
Net income (loss) 3,189 (57,481) (54,292)
Distributions (3,189) (315,679) (318,868)
-----------------------------------
Partners' capital - June 30, 1996 $ 1,000 $ 8,996,554 $ 8,997,554
-----------------------------------
-----------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
COMMONWEALTH INCOME & GROWTH FUND I
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
--------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (8,281) $ 91,222
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,418,074 1,559,296
Other noncash activities included in the
determination of net income (1,156,762) (557,292)
Changes in operating assets and liabilities:
Lease income receivable 167,036 (22,252)
Accounts receivable - affiliate - 74,139
Other receivables 22,696 66,981
Accounts payable (78,553) (24,214)
Accounts payable - General Partner (82,166) (595)
Unearned lease income - 61,841
--------------------------
Net cash provided by operating activities 1,282,044 1,249,126
INVESTING ACTIVITIES
Capital expenditures (98,945) (2,644,135)
Net proceeds from sale of computer equipment 229,424 -
Payment of computer equipment payable (537,251) -
Increase in organization costs and
deferred expenses (51,704) (312,667)
--------------------------
Net cash used in investing activities (458,476) (2,956,802)
FINANCING ACTIVITIES
Partners' contributions - 4,352,169
Offering costs - (459,419)
Distributions to partners (637,736) (557,924)
--------------------------
Net cash provided by financing activities (637,736) 3,334,826
--------------------------
Net increase in cash and cash equivalents 185,832 1,627,150
Cash and cash equivalents at beginning of period 341,838 2,020,362
--------------------------
Cash and cash equivalents at end of period $ 527,670 $ 3,647,512
--------------------------
--------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Commonwealth Income & Growth Fund I
Notes to Financial Statements
June 30, 1996
BASIS OF PRESENTATION
The financial information presented as of any date other than December 31 has
been prepared from the books and records without audit. Financial information
as of December 31 has been derived from the audited financial statements of
Commonwealth Income & Growth Fund II (the "Partnership"), but does not include
all disclosures required by generally accepted accounting principles. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial information for
the periods indicated have been included. For further information regarding the
Partnership's accounting policies, refer to the financial statements and related
notes included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1995.
NET LOSS PER EQUIVALENT LIMITED PARTNERSHIP UNIT
The net loss per equivalent limited partnership unit is computed based upon net
loss allocated to the limited partners and the weighted average number of
equivalent units outstanding during the period.
RECLASSIFICATION
Certain balances in the prior period financial statements have been reclassified
to conform with the current period presentation.
<PAGE>
Commonwealth Income & Growth Fund I
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership satisfied its minimum offering requirements and commenced
operations on March 14, 1994. On that date, subscribers for 128,787 Units were
admitted as Limited Partners of the Partnership. On May 11,1995, the
Partnership terminated its offering of Units with 631,358 ($12,623,682) Units
sold.
The Partnership's primary source of capital for the six month period ended June
30, 1996 was cash from operations of $1,282,000 and net proceeds from the sale
of computer equipment of $229,000. The Partnership's primary sources of capital
for the six month period ended June 30, 1995, were from Partners' contributions
of $4,352,000, and cash from operations of $1,249,000. The primary uses of cash
for the six month period ended June 30, 1996 and 1995 were for capital
expenditures for new equipment totaling $99,000 and $2,644,000, respectively,
the payment of preferred distributions to partners of $638,000 and $558,000,
respectively, and the payment of offering costs of $459,000 for the six month
period ended June 30, 1995.
Currently, Partners' contributions and rental income from the Partnership's
leases are invested in money market accounts investing directly in treasury
obligations pending the Partnership's use of such funds to purchase additional
computer equipment, to pay Partnership expenses or to make distributions to the
Partners. At June 30, 1996 and December 31, 1995 the Partnership had
approximately $555,000 and $342,000, respectively, invested in these money
market accounts.
Accounts payable included approximately $2,000 and $84,000, payable to the
General Partner for management, acquisition and finance fees on leases as of
June 30, 1996 and December 31, 1995, respectively. As of December 31, 1995, the
Partnership had an additional payable of $22,000 to Com Cap Corp. for the
purchase of equipment from a third party, which was subsequently paid in January
1996.
The Partnership's investment strategy of acquiring computer equipment and
generally leasing it under "triple-net leases" to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
As of June 30, 1996, the Partnership had future minimum rentals on
noncancellable operating leases of $2,556,000 for the year ending December 31,
1996 and $4,816,000, thereafter. During the six month period ended June 30,
1996, and 1995, the Partnership incurred debt in connection with the purchase of
computer equipment totaling $1,148,000 and $157,000, respectively. At June 30,
1996, the outstanding debt was $3,319,000, with interest rates ranging from
5.75% to 10%, and will be payable through January 1999. The Partnership intends
to continue purchasing additional computer equipment with existing cash, as
well as when future cash becomes available. In addition, the Partnership may
incur additional debt in purchasing computer equipment in the future.
The Partnership's cash from operations is expected to continue to be adequate to
cover all operating expenses, liabilities, and preferred distributions to
Partners during the next 12 month period. If available Cash Flow or Net
Disposition Proceeds are insufficient to cover the Partnership expenses and
liabilities on a short and long term basis, the Partnership will attempt to
obtain additional funds by disposing of or refinancing Equipment, or by
borrowing within its permissible limits. The Partnership may also reduce the
distributions to its Partners if it deems necessary. Since the Partnership's
leases are on a "triple-net" basis, no reserve for maintenance and repairs are
deemed necessary.
<PAGE>
Commonwealth Income & Growth Fund I
RESULTS OF OPERATIONS
For the quarter ended June 30, 1996, the Partnership recognized income of
$1,309,000 and expenses of $1,364,000, resulting in a net loss of $54,000. For
the quarter ended March 31, 1995, the Partnership recognized income of $972,000
and expenses of $917,000 , resulting in net income of $55,000.
Lease income increased by 40% from $923,000 for the quarter ended June 30, 1995
to $1,294,000 for the period ended June 30, 1996, primarily due to utilizing
cash available from Partners' contributions for the purchase of Equipment, which
in turn generated more lease income. During the six months ended June 30, 1996,
the Partnership expended $383,000 in cash, and assumed debt and accounts payable
for equipment of $1,148,000 to acquire 4 leases, which generated approximately
$180,000 in revenue.
Interest income decreased (78%) from $49,000 for the quarter ended June 30,
1995 to $11,000 for the quarter ended June 30, 1996, as a result of utilizing
cash (which primarily consisted of capital contributions which were temporarily
invested in money market accounts) for the purchase of Equipment.
Operating expenses, excluding depreciation, primarily consist of accounting,
legal, and outside service fees. The 14% decrease from approximately $21,000
for the quarter ended June 30, 1995 to $18,000 for the quarter ended June 30,
1996 is attributable to a decrease in legal and outside service fees.
The equipment management fee is equal to 5% of the gross lease revenue
attributable to equipment which is subject to operating leases. The equipment
management fee increased (40%) from approximately $46,000 for the quarter ended
June 30, 1995 to $65,000 for the quarter ended June 30, 1996, which is
consistent with the increase in lease income.
Interest expense increased (260%) from approximately $27,000 for the quarter
ended June 30, 1995 to $96,000 for the quarter ended June 30, 1996, as a result
of additional debt incurred for the purchase of Equipment.
Depreciation and amortization expenses consist of depreciation on computer
equipment, amortization of organizational costs, equipment acquisition fees, and
debt placement fees. The increase (44%) from approximately $823,000 for the
quarter ended June 30, 1995 to $1,185,000 for the quarter ended June 30, 1996 is
attributable to the purchase of approximately $5,282,000 in additional
equipment.
For the six month period ended June 30, 1996, the Partnership generated cash
flows from operating activities of $1,282,000, which includes a net loss of
$8,000, and depreciation and amortization expenses of $2,418,000. Other noncash
activities included in the determination of net income includes direct payments
of lease income by lessees to banks of $1,135,000 and lease income paid to
original lessors in lieu of cash payments for computer equipment of $22,000.
For the six month period ended June 30, 1995, the Partnership generated cash
flows from operating activities of $1,249,000, which includes net income of
$91,000, and depreciation and amortization expenses of $1,559,000. Other
noncash activities included in the determination of net income includes direct
payments of lease income by lessees to banks of $400,000 and lease income paid
to original lessors in lieu of cash payments for computer equipment of $157,000.
<PAGE>
Commonwealth Income & Growth Fund I
PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Inapplicable
Item 2. CHANGES IN SECURITIES.
Inapplicable
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Inapplicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
Inapplicable
Item 5. OTHER INFORMATION.
Inapplicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits: None
b) Report on Form 8-K: None
<PAGE>
SIGNATURE
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.
COMMONWEALTH INCOME & GROWTH FUND I
BY: COMMONWEALTH INCOME & GROWTH
FUND, INC. General Partner
By:
- ------------------ ----------------------------------
Date David A. Kintzer, CPA
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000913141
<NAME> CIGF-I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 554,981
<SECURITIES> 0
<RECEIVABLES> 409,681
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 964,662
<PP&E> 18,136,803
<DEPRECIATION> 6,539,574
<TOTAL-ASSETS> 12,561,891
<CURRENT-LIABILITIES> 3,564,337
<BONDS> 0
0
0
<COMMON> 8,997,554
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,561,891
<SALES> 0
<TOTAL-REVENUES> 2,739,182
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,586,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 161,163
<INCOME-PRETAX> (8,281)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,281)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,281)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
