<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, 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
incorporation or organization) identification No.)
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,
1997 1996
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<S> <C> <C>
ASSETS
Cash and cash equivalents.......................................................... $ 272,633 $ 1,082,795
Lease income receivable............................................................ 348,471 259,050
Other receivables and deposits..................................................... 19,879 23,584
Accounts receivable--General Partner............................................... 14,456 6,772
Computer equipment, at cost........................................................ 18,497,940 16,080,646
Accumulated depreciation........................................................... (8,113,461) (6,527,143)
------------- -------------
10,384,479 9,553,503
Organization costs and deferred expenses, net of accumulated amortization of
$514,179 in 1997 and $435,215 in 1996............................................ 446,837 447,499
------------- -------------
Total assets....................................................................... $ 11,486,755 $ 11,373,203
------------- -------------
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable................................................................... $ 18,109 $ 64,382
Unearned lease income.............................................................. 136,981 228,817
Payable for computer equipment..................................................... 0 529,124
Notes payable...................................................................... 5,272,994 3,502,523
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Total liabilities.................................................................. 5,428,084 4,324,846
Partners' capital:
General partner.................................................................. 1,000 1,000
Limited partners................................................................. 6,057,671 7,047,357
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Total partners' capital............................................................ 6,058,671 7,048,357
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Total liabilities and partners' capital............................................ $ 11,486,755 $ 11,373,203
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</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,
-------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------------ ------------ ------------ ------------
INCOME:
Lease.................................................. $ 1,311,949 $ 1,294,381 $ 2,738,817 $ 2,715,357
Interest and other..................................... 33,125 10,832 43,815 19,617
Gain on sale of computer equipment..................... -- 4,208 -- 4,208
------------ ------------ ------------ ------------
1,345,074 1,309,421 2,782,632 2,739,182
EXPENSES:
Operating, excluding depreciation...................... 12,079 17,775 22,808 32,458
Equipment management fee--General Partner.............. 65,598 64,719 136,941 135,768
Interest............................................... 96,980 96,482 173,034 161,163
Depreciation........................................... 1,254,556 1,101,834 2,423,628 2,263,199
Amortization of organization costs and deferred
expenses............................................. 83,633 82,903 165,301 154,875
Loss on sale of computer equipment..................... 217,018 -- 212,870 --
------------ ------------ ------------ ------------
1,729,864 1,363,713 3,134,582 2,747,463
------------ ------------ ------------ ------------
Net loss................................................. $ (384,790) $ (54,292) $ (351,950) $ (8,281)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss per equivalent limited partnership unit......... $ (0.61) $ (0.09) $ (0.56) $ (0.01)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
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 -- 4,352,171 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..................... 50 631,358 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..................... 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
---------- ------------- ---------- ------------ -------------
---------- ------------- ---------- ------------ -------------
See accompanying notes.
</TABLE>
<PAGE>
COMMONWEALTH INCOME & GROWTH FUND I
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................................................ $ (351,950) $ (8,281)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization................................................... 2,588,929 2,418,074
Loss on sale of computer equipment.............................................. 212,870 --
Other noncash activities included in the determination of net loss.............. (1,292,814) (1,156,762)
Changes in operating assets and liabilities:
Lease income receivable....................................................... (89,421) 167,036
Other receivables............................................................. 3,705 22,696
Accounts receivable--General Partner.......................................... (7,684) --
Accounts payable.............................................................. (46,273) (78,553)
Accounts payable--General Partner............................................. -- (82,166)
Unearned lease income......................................................... (91,836) --
------------- -------------
Net cash provided by operating activities........................................... 925,526 1,282,044
INVESTING ACTIVITIES
Capital expenditures................................................................ (932,258) (98,945)
Net proceeds from sale of computer equipment........................................ 204,214 229,424
Payment of computer equipment payable............................................... (205,269) (537,251)
Equipment acquistion fees paid to the General Partner............................... (143,564) (38,647)
------------- -------------
Net cash used in investing activities............................................... (1,076,877) (445,419)
FINANCING ACTIVITIES
Distributions to partners........................................................... (637,736) (637,736)
Debt placement fees paid to the General Partner..................................... (21,075) (13,057)
------------- -------------
Net cash used in financing activities............................................... (658,811) (650,793)
------------- -------------
Net increase in cash and cash equivalents........................................... (810,162) 185,832
Cash and cash equivalents at beginning of year...................................... 1,082,795 341,838
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Cash and cash equivalents at end of period.......................................... $ 272,633 $ 527,670
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</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
Notes to Financial Statements
June 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 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 six month period ended
June 30, 1997 and 1996 were cash from operations of $926,000 and $1,282,000,
respectively, and net proceeds from the sale of computer equipment for the
quarter ended June 30, 1997 and 1996 of $204,000 and $229,000, respectively.
The primary uses of cash for the six month period ended June 30, 1997 and
1996 were for capital expenditures for new equipment totaling $932,000 and
$99,000, respectively, and the payment of preferred distributions to
partners of $638,000 for each of the quarters ended June 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 June
30, 1997 and December 31, 1996 the Partnership had approximately $273,000 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 June 30, 1997, the Partnership had future minimum rentals on
noncancellable operating leases of $2,613,000 for the year ending December
31, 1997 and $6,056,000 , thereafter. During the six month period ended June
30, 1997 and 1996, the Partnership incurred debt in connection with the
purchase of computer equipment totaling $3,078,000 and $1,148,000
respectively. At June 30, 1997, the outstanding debt was $5,273,000, 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 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 increased by 1% from $1,294,000 for the quarter ended June 30,
1996 to $1,312,000 for the quarter ended June 30, 1997. During the six
months ended June 30, 1997, the Partnership expended $1,138,000 in cash, and
assumed debt and accounts payable for equipment of $3,078,000 to acquire six
leases, which generated approximately $448,000 in revenue.
Interest income increased by 67% from $11,000 for the quarter ended June
30, 1996 to $33,000 for the quarter ended June 30, 1997. In addition, the
Partnership recognized a loss on sale of computer equipment of $217,000 for
the quarter ended June 30, 1997.
<PAGE>
Operating expenses, excluding depreciation, primarily consist of accounting,
legal, and outside service fees. The 33% decrease from approximately $18,000
for the quarter ended June 30, 1996 to $12,000 for the quarter ended June
30, 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 $66,000 and $65,000, respectively, for the quarters ended
June 30, 1997 and 1996.
Interest expense increased 1% from approximately $96,000 for the quarter
ended June 30, 1996 to $97,000 for the quarter ended June 30, 1997, as a
result of additional debt incurred for the purchase of Equipment.
Depreciation and amortization expenses consist of depreciation on computer
equipment, and amortization of organizational costs, equipment acquisition
fees, and debt placement fees. These expense increased by 13% from
approximately $1,185,000 for the quarter ended June 30, 1996 to $1,338,000
for the quarter ended June 30, 1997, due to the acquisition of additional
equipment.
For the six month period ended June 30, 1997, the Partnership generated cash
flows from operating activities of $926,000 , which includes a net loss of
$352,000, and depreciation and amortization expenses of $2,589,000. Other
noncash activities included in the determination of net income includes
direct payments of lease income by lessees to banks of $1,293,000.
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.
<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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 272,633
<SECURITIES> 0
<RECEIVABLES> 382,806
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 446,837
<PP&E> 18,497,940
<DEPRECIATION> (8,113,461)
<TOTAL-ASSETS> 11,486,755
<CURRENT-LIABILITIES> 5,428,084
<BONDS> 0
0
0
<COMMON> 6,058,671
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,486,755
<SALES> 0
<TOTAL-REVENUES> 2,782,632
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,961,548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 173,034
<INCOME-PRETAX> (351,950)
<INCOME-TAX> 0
<INCOME-CONTINUING> (351,950)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (351,950)
<EPS-PRIMARY> (.56)
<EPS-DILUTED> 0
</TABLE>
