<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 March 31, 1997
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 Identification 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)
MARCH 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Assets
Cash and cash equivalents...................................... $ 722,287 $ 1,082,795
Lease income receivable........................................ 216,854 259,050
Other receivables and deposits................................. 16,710 23,584
Accounts receivable--General Partner........................... 6,772
Computer equipment, at cost.................................... 18,399,478 16,080,646
Accumulated depreciation....................................... (7,708,801) (6,527,143)
------------- -------------
10,690,677 9,553,503
Organization costs and deferred expenses, net of accumulated
amortization of $477,935 in 1997 and $435,215 in 1996........ 475,707 447,499
------------- -------------
Total assets................................................... $ 12,122,235 $ 11,373,203
------------- -------------
------------- -------------
Liabilities and partners' capital
Accounts payable............................................... $ 28,810 $ 64,382
Accounts payable--General Partner.............................. 52,110 0
Unearned lease income.......................................... 157,952 228,817
Payable for computer equipment................................. 436,370 529,124
Notes payable.................................................. 4,684,664 3,502,523
------------- -------------
Total liabilities.............................................. 5,359,906 4,324,846
Partners' capital:
General partner................................................ 1,000 1,000
Limited partners............................................... 6,761,329 7,047,357
------------- -------------
Total partners' capital........................................ 6,762,329 7,048,357
------------- -------------
Total liabilities and partners' capital........................ $ 12,122,235 $ 11,373,203
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
Income Statements
For the three months ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Income:
Lease........................................................... $ 1,426,868 $ 1,420,976
Interest and other.............................................. 10,690 8,785
Gain on sale of computer equipment.............................. 4,148 --
------------ ------------
1,441,706 1,429,761
Expenses:
Operating, excluding depreciation............................... 10,729 14,683
Equipment management fee--General Partner....................... 71,343 71,049
Interest........................................................ 76,054 64,681
Depreciation.................................................... 1,169,072 1,161,365
Amortization of organization costs and deferred expenses........ 81,668 71,972
------------ ------------
1,408,866 1,383,750
------------ ------------
Net income........................................................ $ 32,840 $ 46,011
------------ ------------
------------ ------------
Net income per equivalent limited partnership unit................ $ 0.05 $ 0.07
------------ ------------
------------ ------------
Weighted average number of equivalent limited partnership units
outstanding during the period................................... 631,358 631,358
------------ ------------
------------ ------------
</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, 1993........................................ $ 1,000 $ 500 $ 1,500
Contributions............................................................. -- 8,271,511 8,271,511
Offering costs............................................................ -- (932,803) (932,803)
Net income................................................................ 4,436 90,611 95,047
Distributions............................................................. (4,436) (439,178) (443,614)
--------- ----------- -----------
Partners' capital--December 31, 1994........................................ 1,000 6,990,641 6,991,641
Contributions............................................................. -- 4,352,171 4,352,171
Offering costs............................................................ -- (459,421) (459,421)
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 (loss)......................................................... 12,755 (1,332,502) (1,319,747)
Distributions............................................................. (12,755) (1,262,712) (1,275,467)
--------- ----------- -----------
Partners' capital--December 31, 1996........................................ 1,000 7,047,357 7,048,357
Net income................................................................ 3,189 29,651 32,840
Distributions............................................................. (3,189) (315,679) (318,868)
--------- ----------- -----------
Partners' capital--March 31, 1997........................................... $ 1,000 $ 6,761,329 $ 6,762,329
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
Statement of Cash Flows
For the three months ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Operating activities
Net Income.......................................................... $ 32,840 $ 46,011
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 1,250,740 1,233,337
Gain on sale of computer equipment............................... 4,148 --
Other noncash activities included in the determination of net
income............................................................ (608,995) (476,911)
Changes in operating assets and liabilities:
Lease income receivable......................................... 42,196 161,547
Interest and other receivables.................................. 13,646 30,209
Accounts payable................................................ (35,572) (77,927)
Accounts payable--General Partner............................... 52,110 50,887
Unearned lease income........................................... (70,865) (49,918)
---------- ----------
Net cash provided by operating activities........................... 680,248 917,235
Investing activities
Capital expenditures................................................ (704,895) (325,578)
Net proceeds from sale of computer equipment........................ 92,883 --
Equipment acquisition fees paid to the General Partner.............. (92,236) (38,562)
---------- ----------
Net cash used in investing activities............................... (704,248) (364,140)
Financing activities
Distributions to partners........................................... (318,868) (318,868)
Debt placement fees paid to the General Partner..................... (17,640) (1,354)
---------- ----------
Net cash used in financing activities............................... (336,508) (320,222)
---------- ----------
Net increase in cash and cash equivalents........................... (360,508) 232,873
Cash and cash equivalents at beginning of period.................... 1,082,795 341,838
---------- ----------
Cash and cash equivalents at end of period.......................... $ 722,287 $ 574,711
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
Notes to Financial Statements
March 31, 1997
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, 1996.
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.
<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 sources of capital for the three month period ended
March 31, 1997 and 1996 were cash from operations of $680,000 and $917,000,
respectively, and $93,000 net proceeds from the sale of computer equipment for
the quarter ended March 31, 1997. The primary uses of cash for the three month
period ended March 31, 1997 and 1996 were for capital expenditures for new
equipment totaling $705,000 and $326,000, respectively, and the payment of
preferred distributions to partners of $319,000 for each of the quarters ended
March 31, 1997 and 1996.
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 March 31, 1997 and December 31, 1996 the Partnership had
approximately $722,000 and $1,083,000, respectively, invested in these money
market accounts.
Accounts payable included approximately $52,000, payable to the General Partner
for management, acquisition and finance fees on leases as of March 31, 1997.
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 March 31, 1997, the Partnership had future minimum rentals on
noncancellable operating leases of $3,194,000 for the year ending December
31, 1997 and $3,771,000, thereafter. During the three month period ended
March 31, 1997 and 1996, the Partnership incurred debt in connection with the
purchase of computer equipment totaling $1,764,000 and $635,000,
respectively. At March 31, 1997, the outstanding debt was $4,685,000, with
interest rates ranging from 5.75% to 8.75%, and will be payable through
December 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 March 31, 1997, the Partnership recognized income of
$1,442,000 and expenses of $1,409,000, resulting in a net income of $33,000.
Lease income increased by .42% from $1,421,000 for the quarter ended March 31,
1996 to $1,427,000 for the period ended March 31, 1997. During the three months
ended March 31, 1997, the Partnership expended $705,000 in cash, and assumed
debt and accounts payable for equipment of $2,200,000 to acquire 4 leases, which
generated approximately $153,000 in revenue.
Interest income increased by 22% from $9,000 for the quarter ended March 31,
1996 to $11,000 for the quarter ended March 31, 1997. In addition, the
Partnership recognized a gain from the sale of computer equipment of $4,000 for
the quarter ended March 31, 1997.
Operating expenses, excluding depreciation, primarily consist of accounting,
legal, and outside service fees. The 27% decrease from approximately $15,000
for the quarter ended March 31, 1996 to $11,000 for the quarter ended March 31,
1997 is attributable to a decrease in 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 was $71,000 for the quarter ended March 31, 1997 and 1996.
Interest expense increased (17%) from approximately $65,000 for the quarter
ended March 31, 1996 to $76,000 for the quarter ended March 31, 1997, 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 expense increased by 1% from approximately $1,161,000
for the quarter ended March 31, 1996 to $1,169,000 for the quarter ended March
31, 1997.
For the three month period ended March 31, 1997, the Partnership generated cash
flows from operating activities of $680,000, which includes net income of
$33,000, and depreciation and amortization expenses of $1,251,000. Other
noncash activities included in the determination of net income includes direct
payments of lease income by lessees to banks of $582,000 and lease income paid
to original lessors in lieu of cash payments for computer equipment of $27,000.
For the three month period ended March 31, 1996, the Partnership generated cash
flows from operating activities of $917,000, which includes net income of
$46,000, and depreciation and amortization expenses of $1,233,000. Other
noncash activities included in the determination of net income includes direct
payments of lease income by lessees to banks of $472,000 and lease income paid
to original lessors in lieu of cash payments for computer equipment of $5,000.
<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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 722,287
<SECURITIES> 0
<RECEIVABLES> 233,564
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 475,707
<PP&E> 18,399,478
<DEPRECIATION> (7,708,801)
<TOTAL-ASSETS> 12,122,235
<CURRENT-LIABILITIES> 5,359,906
<BONDS> 0
0
0
<COMMON> 6,762,329
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,122,235
<SALES> 0
<TOTAL-REVENUES> 1,441,706
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,332,812
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,054
<INCOME-PRETAX> 32,840
<INCOME-TAX> 0
<INCOME-CONTINUING> 32,840
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,840
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
