<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 September 30, 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)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Assets
Cash and cash equivalents.......................................................... $ 502,479 $ 1,082,795
Lease income receivable............................................................ 140,560 259,050
Other receivables and deposits..................................................... 4,920 23,584
Accounts receivable--General Partner............................................... -- 6,772
Computer equipment, at cost........................................................ 18,363,210 16,080,646
Accumulated depreciation........................................................... (7,996,494) (6,527,143)
------------- -------------
10,366,716 9,553,503
Organization costs and deferred expenses, net of accumulated amortization of
$533,159 in 1997 and $435,215 in 1996............................................ 424,282 447,499
------------- -------------
Total assets....................................................................... $ 11,438,957 $ 11,373,203
------------- -------------
------------- -------------
Liabilities and partners' capital
Accounts payable................................................................... $ 35,046 $ 64,382
Accounts payable--General Partner.................................................. 98,302 --
Unearned lease income.............................................................. 67,067 228,817
Payable for computer equipment..................................................... 1,013,472 529,124
Notes payable...................................................................... 4,545,838 3,502,523
------------- -------------
Total liabilities.................................................................. 5,759,725 4,324,846
Partners' capital:
General partner.................................................................. 1,000 1,000
Limited partners................................................................. 5,678,232 7,047,357
------------- -------------
Total partners' capital............................................................ 5,679,232 7,048,357
------------- -------------
Total liabilities and partners' capital............................................ $ 11,438,957 $ 11,373,203
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------------ ------------ ------------ ------------
Income:
Lease.................................................. $ 1,266,963 $ 1,460,707 $ 4,005,780 $ 4,176,064
Interest and other..................................... 7,557 13,785 51,372 33,402
Gain on sale of computer equipment..................... 10,806 -- -- 4,208
------------ ------------ ------------ ------------
1,285,326 1,474,492 4,057,152 4,213,674
Expenses:
Operating, excluding depreciation...................... 6,666 6,271 29,474 38,729
Equipment management fee--General Partner.............. 63,348 73,035 200,289 208,803
Interest............................................... 90,620 73,908 263,654 235,071
Depreciation........................................... 1,113,300 1,209,885 3,536,928 3,473,084
Amortization of organization costs and deferred
expenses............................................. 71,963 77,408 237,264 232,283
Loss on sale of computer equipment..................... -- -- 202,064 --
------------ ------------ ------------ ------------
1,345,897 1,440,507 4,469,673 4,187,970
------------ ------------ ------------ ------------
Net income (loss)........................................ $ (60,571) $ 33,985 $ (412,521) $ 25,704
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income (loss) per equivalent limited partnership
unit................................................... $ (0.10) $ 0.05 $ (0.65) $ 0.04
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of equivalent limited partnership
units outstanding during the period.................... 631,358 631,358 631,358 631,358
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
STATEMENT OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNER GENERAL LIMITED
UNITS UNITS PARTNER PARTNERS' TOTAL
--------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Partners' capital--December 31, 1994........... $ 50 $ 413,719 $ 1,000 $ 6,990,641 $ 6,991,641
Contributions................................ 217,639 -- 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........... 50 631,358 1,000 9,642,571 9,643,571
Net income................................... 12,755 (1,332,502) (1,319,747)
Distributions................................ (12,755) (1,262,712) (1,275,467)
--------- ----------- ----------- ------------ ------------
Partners' capital--December 31, 1996........... 50 631,358 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.............. 50 631,358 1,000 6,761,329 6,762,329
Net income (loss)............................ 3,189 (387,979) (384,790)
Distributions................................ (3,189) (315,679) (318,868)
--------- ----------- ----------- ------------ ------------
Partners' capital--June 30, 1997............... 50 631,358 1,000 6,057,671 6,058,671
Net income (loss)............................ 3,189 (63,760) (60,571)
Distributions................................ (3,189) (315,679) (318,868)
--------- ----------- ----------- ------------ ------------
Partners' capital--September 30, 1997.......... $ 50 $ 631,358 $ 1,000 $ 5,678,232 $ 5,679,232
--------- ----------- ----------- ------------ ------------
--------- ----------- ----------- ------------ ------------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Operating activities
Net income (loss)...................................................................... $ (412,521) $ 25,704
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization........................................................ 3,774,192 3,705,367
Loss (gain) on sale of computer equipment............................................ 176,906 (4,208)
Other noncash activities included in the determination of net income................. (2,047,864) (1,283,289)
Changes in operating assets and liabilities:
Lease income receivable.............................................................. 118,490 38,857
Other receivables.................................................................... 25,436 22,744
Accounts payable..................................................................... (29,336) (78,735)
Accounts payable--General Partner.................................................... 98,302 51,156
Equipment payable.................................................................... -- (138,079)
Unearned lease income................................................................ (161,750) 45,129
----------- -----------
Net cash provided by operating activities.............................................. 1,541,855 2,384,646
Investing activities
Capital expenditures................................................................... (1,286,019) (858,088)
Net proceeds from sale of computer equipment........................................... 334,499 227,308
Payment of computer equipment payable.................................................. -- (399,172)
Equipment acquisition fees paid to the General Partner................................. (183,267) (127,253)
----------- -----------
Net cash used in investing activities.................................................. (1,134,787) (1,157,205)
Financing activities
Distributions to partners.............................................................. (956,604) (956,604)
Debt placement fees paid to the General Partner........................................ (30,780) (19,585)
----------- -----------
Net cash used in financing activities.................................................. (987,384) (976,189)
----------- -----------
Net increase (decrease) in cash and cash equivalents................................... (580,316) 251,252
Cash and cash equivalents at beginning of period....................................... 1,082,795 341,838
----------- -----------
Cash and cash equivalents at end of period............................................. $ 502,479 $ 593,090
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
Notes to Financial Statements
September 30, 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 I (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 Income (Loss) per Equivalent Limited Partnership Unit
The net income (loss) per equivalent limited partnership unit is computed based
upon net income (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 nine month period ended
September 30, 1997 and 1996 were cash from operations of $1,542,000 and
$2,385,000, respectively, and net proceeds from the sale of computer equipment
for the quarter ended September 30, 1997 and 1996 of $334,000 and $227,000,
respectively. The primary uses of cash for the nine month period ended September
30, 1997 and 1996 were for capital expenditures for new equipment totaling
$1,286,000 and $858,000, respectively, and the payment of preferred
distributions to partners of $957,000, respectively, for each of the quarters
ended September 30, 1997 and 1996.
Currently, 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 September
30, 1997 and December 31, 1996 the Partnership had approximately $502,000 and
$1,083,000, respectively, invested in these money market accounts.
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 September 30, 1997, the Partnership had future minimum rentals on
noncancellable operating leases of $1,229,000 for the year ending December 31,
1997 and $7,883,000, thereafter. During the nine month period ended September
30, 1997 and 1996, the Partnership incurred debt in connection with the purchase
of computer equipment totaling $3,078,000 and $1,736,000 respectively. At
September 30, 1997, the outstanding debt was $4,546,000, with interest rates
ranging from 6.22% to 8.75%, and will be payable through July 2000. 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.
Results of Operations
For the quarter ended September 30, 1997, the Partnership recognized income of
$1,285,000 and expenses of $1,346,000, resulting in a net loss of $61,000. For
the quarter ended June 30, 1997, the Partnership recognized income of $1,345,000
and expenses of $1,730,000, resulting in a net loss of $385,000. For the
quarter ended March 31, 1997, the Partnership recognized income of $1,442,000
and expenses of $1,409,000, resulting in net income of $33,000.
Lease income decreased by 13% from $1,461,000 for the quarter ended September
30, 1996 to $1,267,000 for the quarter ended September 30, 1997. During the
nine months ended September 30, 1997, the Partnership expended $1,286,000 in
cash, and assumed debt and accounts payable of $4,119,000 for equipment, to
acquire nine leases, which generated approximately $901,000 in revenue.
<PAGE>
Commonwealth Income & Growth Fund I
Interest income decreased by 43% from $14,000 for the quarter ended September
30, 1996 to $8,000 for the quarter ended September 30, 1997. In addition, the
Partnership recognized a gain on sale of computer equipment of $11,000 for the
quarter ended September 30, 1997.
Operating expenses, excluding depreciation, primarily consist of accounting,
legal, and outside service fees. The 17% increase from approximately $6,000 for
the quarter ended September 30, 1996 to $7,000 for the quarter ended September
30, 1997 is attributable to an increase 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 $63,000 and $73,000, respectively, for the quarters ended
September 30, 1997 and 1996.
Interest expense increased 23% from approximately $74,000 for the quarter ended
September 30, 1996 to $91,000 for the quarter ended September 30, 1997, as a
result of additional debt incurred for the purchase of computer equipment.
Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of organizational costs, equipment acquisition fees,
and debt placement fees. These expenses decreased by 8% from approximately
$1,287,000 for the quarter ended September 30, 1996 to $1,185,000 for the
quarter ended September 30, 1997, due to a change in estimate recorded in prior
period.
For the nine month period ended September 30, 1997, the Partnership generated
cash flows from operating activities of $1,542,000, which includes a net loss
of $413,000, and depreciation and amortization expenses of $3,774,000. Other
noncash activities included in the determination of net income includes direct
payments of lease income by lessees to banks of $2,035,000 and lease income paid
to original lessors in lieu of cash payments for computer equipment of $13,000.
For the nine month period ended September 30, 1996, the Partnership generated
cash flows from operating activities of $2,385,000, which includes net income of
$26,000, and depreciation and amortization expenses of $3,705,000. Other
noncash activities included in the determination of net income includes direct
payments of lease income by lessees to banks of $1,279,000 and lease income paid
to original lessors in lieu of cash payments for computer equipment of $4,000.
<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
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 502,479
<SECURITIES> 0
<RECEIVABLES> 145,480
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 424,282
<PP&E> 18,363,210
<DEPRECIATION> (7,996,494)
<TOTAL-ASSETS> 11,438,957
<CURRENT-LIABILITIES> 5,759,725
<BONDS> 0
0
0
<COMMON> 5,679,232
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,438,957
<SALES> 0
<TOTAL-REVENUES> 4,057,152
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,206,019
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 263,654
<INCOME-PRETAX> (412,521)
<INCOME-TAX> 0
<INCOME-CONTINUING> (412,521)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (412,521)
<EPS-PRIMARY> (.65)
<EPS-DILUTED> 0
</TABLE>
