<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, 1998
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>
Commonwealth Income & Growth Fund I
Balance Sheets
<TABLE>
<CAPTION>
(Audited)
September 30, December 31,
1998 1997
-----------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 330,638 $ 116,259
Lease income receivable 76,587 146,562
Other receivables and deposits 18,286 8,567
Accounts receivable - General Partner 8,954 --
Computer equipment, at cost 14,438,696 17,355,551
Accumulated depreciation (8,093,573) (7,928,798)
---------- ----------
6,345,123 9,426,753
Organization costs and deferred expenses, net of
accumulated amortization of $568,474
in 1998 and $532,265 in 1997 222,519 383,503
----------- -----------
Total assets $ 7,002,107 $10,081,644
----------- -----------
----------- -----------
Liabilities and partners' capital
Accounts payable $ 79,887 $ 24,609
Accounts payable - General Partner -- 18,810
Accounts payable - Commonwealth Capital Corp. -- 40,929
Unearned lease income 81,500 161,781
Notes payable 2,859,460 4,968,748
--------- ---------
Total liabilities 3,020,847 5,214,877
Partners' capital:
General partner 1,000 1,000
Limited partners 3,980,260 4,865,767
--------- ---------
Total partners' capital 3,981,260 4,866,767
--------- ---------
Total liabilities and partners' capital $ 7,002,107 $10,081,644
----------- -----------
----------- -----------
</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,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Lease $ 1,025,069 $ 1,266,963 $ 3,599,908 $ 4,005,780
Interest and other 12,857 7,557 18,219 51,372
Gain on sale of computer equipment 274,734 10,806 149,148 --
--------- --------- --------- ---------
1,312,660 1,285,326 3,767,275 4,057,152
Expenses:
Operating, excluding depreciation 53,012 6,666 97,243 29,474
Equipment management fee - General Partner 51,253 63,348 179,995 200,289
Interest 59,231 90,620 219,796 263,654
Depreciation 894,458 1,113,300 3,011,942 3,536,928
Amortization of organization costs and deferred
expenses 58,777 71,963 187,202 237,264
Loss on sale of computer equipment -- -- -- 202,064
--------- --------- --------- ---------
1,116,731 1,345,897 3,696,178 4,469,673
--------- --------- --------- ---------
Net income (loss) $ 195,929 $ (60,571) $ 71,097 $ (412,521)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (loss) per equivalent limited
partnership unit $ 0.31 $ (0.10) $ 0.11 $ (0.65)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
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 (loss) 12,755 (918,878) (906,123)
Distributions (12,755) (1,262,712) (1,275,467)
--------------------------------------------------------------------
Partners' capital - December 31, 1997 50 631,358 1,000 4,865,767 4,866,767
Net income (loss) 3,189 (174,005) (170,816)
Distributions (3,189) (315,679) (318,868)
--------------------------------------------------------------------
Partners' capital - March 31, 1998 50 631,358 1,000 4,376,083 4,377,083
Net income 3,189 42,795 45,984
Distributions (3,189) (315,679) (318,868)
--------------------------------------------------------------------
Partners' capital - June 30, 1998 50 631,358 1,000 4,103,199 4,104,199
Net income 3,189 192,740 195,929
Distributions (3,189) (315,679) (318,868)
--------------------------------------------------------------------
Partners' capital - September 30, 1998 50 631,358 $ 1,000 $ 3,980,260 $ 3,981,260
--------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
Statements of Cash Flows
For the nine months ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------- -----------
<S> <C> <C>
Operating activities
Net income (loss) $ 71,097 (412,521)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 3,199,144 3,774,192
Loss (gain) on sale of computer equipment (149,148) 176,906
Other noncash activities included in the
determination of net income (2,347,491) (2,047,864)
Changes in operating assets and liabilities:
Lease income receivable 69,975 118,490
Other receivables (9,719) 25,436
Accounts payable 55,278 (29,336)
Accounts payable - General Partner (27,764) 98,302
Accounts payable - Commonwealth Capital Corp. (40,929) --
Unearned lease income (80,281) (161,750)
------- --------
Net cash provided by operating activities 740,162 1,541,855
Investing activities
Capital expenditures (359,044) (1,286,019)
Net proceeds from sale of computer equipment 816,083 334,499
Equipment acquisition fees paid to the General Partner (23,890) (183,267)
------- --------
Net cash provided by (used in) investing activities 433,149 (1,134,787)
Financing activities
Distributions to partners (956,604) (956,604)
Debt placement fees paid to the General Partner (2,328) (30,780)
------ -------
Net cash used in financing activities (958,932) (987,384)
-------- --------
Net increase (decrease) in cash and cash equivalents 214,379 (580,316)
Cash and cash equivalents at beginning of period 116,259 1,082,795
------- ---------
Cash and cash equivalents at end of period $ 330,638 $ 502,479
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
Notes to Financial Statements
September 30, 1998
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, 1997.
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, 1998 and 1997 were cash from operations of $740,000 and
$1,542,000, respectively, and net proceeds from the sale of computer equipment
of $816,000 and $334,000, respectively. The primary uses of cash for the nine
month period ended September 30, 1998, and 1997 were for capital expenditures
for new equipment totaling $359,000 and $1,286,000, respectively, the payment of
acquisition fees to the General Partner of $24,000 and $183,000, respectively,
the payment of debt placement fees to the General Partner of $2,000 and $31,000,
respectively, and preferred distributions to partners of $957,000, respectively,
for the nine month period ended September 30, 1998 and 1997.
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, 1998, and December 31, 1997 the Partnership had approximately $331,000 and
$116,000, 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, 1998, the Partnership had future minimum rentals on
noncancellable operating leases of $809,000 for the year ending December 31,
1998 and $2,955,000, thereafter. During the nine month period ended September
30, 1998 and 1997, the Partnership incurred debt in connection with the purchase
of computer equipment totaling $233,000 and $3,078,000 respectively. At
September 30, 1998, the outstanding debt was $2,859,000, with interest rates
ranging from 6.2% to 8.5%, and will be payable through November 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, 1998, the Partnership recognized income of
$1,313,000 and expenses of $1,117,000, resulting in net income of $196,000. For
the quarter ended June 30, 1998, the Partnership recognized income of $1,364,000
and expenses of $1,318,000, resulting in net income of $46,000. For the quarter
ended March 31, 1998, the Partnership recognized income of $1,216,000 and
expenses of $1,387,000, resulting in a net loss of $171,000.
Lease income decreased by 19% from $1,267,000 for the quarter ended September
30, 1997, to $1,025,000 for the quarter ended September 30, 1998. During the
nine months ended September 30, 1998, the Partnership expended $359,000 in cash,
and assumed debt in connection with the purchase of computer equipment of
$233,000 for equipment, to acquire three leases, which generated approximately
$286,000 in revenue.
<PAGE>
Commonwealth Income & Growth Fund I
Interest income increased by 63% from $8,000 for the quarter ended September 30,
1997, to $13,000 for the quarter ended September 30, 1998. In addition, the
Partnership recognized a gain on sale of computer equipment of $275,000 and
$11,000, respectively for the quarters ended September 30, 1998 and 1997.
The operating expenses, excluding depreciation, primarily consist of accounting,
legal and outside office services. The 657% increase from approximately $7,000
for the quarter ended September 30, 1997, to $53,000 for the quarter ended
September 30, 1998, is attributable to the accrual of accounting 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 $51,000 and $63,000, respectively, for the quarters ended
September 30, 1998 and 1997.
Interest expense decreased 35% from approximately $91,000 for the quarter ended
September 30, 1997, to $59,000 for the quarter ended September 30, 1998.
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 20% from approximately
$1,185,000 for the quarter ended September 30, 1997, to $953,000 for the quarter
ended September 30, 1998, due to a change in estimate recorded in prior period.
For the nine period ended September 30, 1998, the Partnership generated cash
flows from operating activities of $740,000, which includes net income of
$71,000, and depreciation and amortization expenses of $3,199,000. Other noncash
activities included in the determination of net income includes direct payments
of lease income by lessees to banks of $2,342,000, and lease income paid to
original lessors in lieu of cash payments for computer equipment of $5,000.
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 income
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.
<PAGE>
Part II: OTHER INFORMATION
Commonwealth Income & Growth Fund I
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 George S. Springsteen
President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000913141
<NAME> CIGFI
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 330,638
<SECURITIES> 0
<RECEIVABLES> 103,827
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 222,519
<PP&E> 14,438,696
<DEPRECIATION> (8,093,573)
<TOTAL-ASSETS> 7,002,107
<CURRENT-LIABILITIES> 3,020,847
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,981,260
<TOTAL-LIABILITY-AND-EQUITY> 7,002,107
<SALES> 0
<TOTAL-REVENUES> 3,767,275
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,476,382
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 219,796
<INCOME-PRETAX> 71,097
<INCOME-TAX> 0
<INCOME-CONTINUING> 71,097
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,097
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
