<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, 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)
March 31, December 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 166,902 $ 116,259
Lease income receivable 155,363 146,562
Other receivables and deposits 8,789 8,567
Accounts receivable - General Partner 1,495 -
Computer equipment, at cost 17,232,806 17,355,551
Accumulated depreciation (8,750,571) (7,928,798)
--------------- ---------------
8,482,235 9,426,753
Organization costs and deferred expenses, net of
accumulated amortization of $576,617
in 1998 and $532,265 in 1997 330,109 383,503
--------------- ---------------
Total assets $ 9,144,893 $ 10,081,644
--------------- ---------------
--------------- ---------------
Liabilities and partners' capital
Accounts payable $ 38,003 $ 24,609
Accounts payable - General Partner - 18,810
Accounts payable - Commonwealth Capital Corp. 39,100 40,929
Unearned lease income 100,215 161,781
Payable for computer equipment 206,306 -
Notes payable 4,384,186 4,968,748
--------------- ---------------
Total liabilities 4,767,810 5,214,877
Partners' capital:
General partner 1,000 1,000
Limited partners 4,376,083 4,865,767
--------------- ---------------
Total partners' capital 4,377,083 4,866,767
--------------- ---------------
Total liabilities and partners' capital $ 9,144,893 $ 10,081,644
--------------- ---------------
--------------- ---------------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
Statements of Operations
For the three months ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Income:
Lease $ 1,212,993 $ 1,426,868
Interest and other 2,846 10,690
Gain on sale of computer equipment - 4,148
--------------- ---------------
1,215,839 1,441,706
Expenses:
Operating, excluding depreciation 15,275 10,729
Equipment management fee - General Partner 60,650 71,343
Interest 69,857 76,054
Depreciation 1,114,345 1,169,072
Amortization of organization costs and deferred
expenses 68,331 81,668
Loss on sale of computer equipment 58,197 -
--------------- ---------------
--------------- ---------------
1,386,655 1,408,866
--------------- ---------------
Net income (loss) $ (170,816) $ 32,840
--------------- ---------------
--------------- ---------------
Net income (loss) per equivalent limited partnership unit $ (0.27) $ 0.05
--------------- ---------------
--------------- ---------------
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 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 (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 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
----------- ----------- ----------- ----------------- --------------
----------- ----------- ----------- ----------------- --------------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
Statements of Cash Flows
For the three months ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Operating activities
Net Income (loss) $ (170,816) $ 32,840
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,182,676 1,250,740
Loss on sale of computer equipment 58,197 4,148
Other noncash activities included in the
determination of net income (625,884) (608,995)
Changes in operating assets and liabilities:
Lease income receivable (8,801) 42,196
Interest and other receivables (222) 13,646
Accounts payable 13,393 (35,572)
Accounts payable - General Partner (20,305) 52,110
Accounts payable - Commonwealth Capital Corp. (1,829) -
Unearned lease income (61,566) (70,865)
------------- -------------
Net cash provided by operating activities 364,843 680,248
Investing activities
Capital expenditures (74,846) (704,895)
Net proceeds from sale of computer equipment 94,450 92,883
Equipment acquisition fees paid to the General Partner (12,659) (92,236)
------------- -------------
Net cash provided by (used in) investing activities 6,945 (704,248)
Financing activities
Distributions to partners (318,868) (318,868)
Debt placement fees paid to the General Partner (2,277) (17,640)
------------- -------------
Net cash used in financing activities (321,145) (336,508)
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Net increase (decrease) in cash and cash equivalents 50,643 (360,508)
Cash and cash equivalents at beginning of period 116,259 1,082,795
------------- -------------
Cash and cash equivalents at end of period $ 166,902 $ 722,287
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
Commonwealth Income & Growth Fund I
Notes to Financial Statements
March 31, 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 three month period ended
March 31, 1998 and 1997 were cash from operations of $365,000 and $680,000,
respectively, and net proceeds from the sale of computer equipment of $94,000
and $93,000, respectively. The primary uses of cash for the three month period
ended March 31, 1998, and 1997 were for capital expenditures for new equipment
totaling $75,000 and $705,000, respectively, the payment of acquisition fees to
the General Partner of $13,000 and $92,000, respecitively, the payment of debt
placement fees to the General Partner of $2,000 and $17,000, respectively, and
preferred distributions to partners of $319,000, respectively, for each of the
quarters ended March 31, 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 March 31,
1998, and December 31, 1997 the Partnership had approximately $167,000 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 March 31, 1998, the Partnership had future minimum rentals on noncancellable
operating leases of $2,795,000 for the year ending December 31, 1998 and
$2,507,000, thereafter. During the three month period ended 1,764,000. At March
31, 1998, the outstanding debt was $4,384,000, with interest rates ranging from
6.4% to 8.8%, and will be payable through October 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 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. 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 15% from $1,427,000 for the quarter ended March 31,
1997, to $1,213,000 for the quarter ended March 31, 1998. During the three
months ended March 31, 1998, the Partnership expended $75,000 in cash, and
assumed accounts payable of $206,000 for equipment, to acquire two leases, which
generated approximately $29,000 in revenue.
Interest income decreased by 73% from $11,000 for the quarter ended March 31,
1997, to $3,000 for the quarter ended March 31, 1998. In addition, the
Partnership recognized a gain on sale of computer equipment of $4,000 for the
quarter ended March 31, 1997.
<PAGE>
Commonwealth Income & Growth Fund I
The operating expenses, excluding depreciation, primarily consist of accounting,
legal and outside office services. The 36% increase from approximately $11,000
for the quarter ended March 31, 1997, to $15,000 for the quarter ended March 31,
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 $71,000 and $61,000, respectively, for the quarters ended
March 31, 1998 and 1997.
Interest expense decreased 20% from approximately $76,000 for the quarter ended
March 31, 1997, to $61,000 for the quarter ended March 31, 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 5% from approximately
$1,251,000 for the quarter ended March 31, 1997, to $1,183,000 for the quarter
ended March 31, 1998, due to a change in estimate recorded in prior period.
For the three period ended March 31, 1998, the Partnership generated cash flows
from operating activities of $365,000, which includes a net loss of $171,000,
and depreciation and amortization expenses of $1,183,000. Other noncash
activities included in the determination of net income includes direct payments
of lease income by lessees to banks of $585,000 and lease income paid to
original lessors in lieu of cash payments for computer equipment of $41,000.
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.
<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 George S. Springsteen
President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000913141
<NAME> CIGFI
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 166,902
<SECURITIES> 0
<RECEIVABLES> 165,647
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 330,109
<PP&E> 17,232,806
<DEPRECIATION> (8,750,571)
<TOTAL-ASSETS> 9,144,893
<CURRENT-LIABILITIES> 4,767,810
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,377,083
<TOTAL-LIABILITY-AND-EQUITY> 9,144,893
<SALES> 0
<TOTAL-REVENUES> 1,215,839
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,316,798
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,857
<INCOME-PRETAX> (170,816)
<INCOME-TAX> 0
<INCOME-CONTINUING> (170,816)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (170,816)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> 0
</TABLE>
