<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, 1999
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,
1999 1998
-------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents 24,186 1,565
Lease income receivable 234,132 148,204
Other receivables and deposits 4,273 3,303
Accounts receivable - General Partner - 9,199
Computer equipment, at cost 13,250,912 13,864,309
Accumulated depreciation (10,335,461) (8,306,508)
-----------------------------------
2,915,451 5,557,801
Equipment acquisition costs and deferred expenses,
net of accumulated amortization of $501,478 in
1999 and $448,421 in 1998 70,125 169,252
Organization costs, net of accumulated amortization
of $136,248 in 1999 and $121,778 in 1998 3,090 17,560
-----------------------------------
Total Assets 3,251,257 5,906,884
============ =============
Liabilities and partners' equity
Accounts payable 25,361 50,310
Accounts payable - General Partner 66,966 -
Accounts payable - Commonwealth Capital Corp. - 22,480
Unearned lease income 58,065 116,968
Notes payable 1,030,744 2,401,080
-----------------------------------
Total liabilities 1,181,136 2,590,838
Partners' capital:
General partner 1,000 1,000
Limited partner 2,069,121 3,315,046
-----------------------------------
Total partners' capital 2,070,121 3,316,046
-----------------------------------
Total Liabilities and partners' equity 3,251,257 5,906,884
============ ============
</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,
1999 1998 1999 1998
------------------------- ---------- -------------
<S> <C> <C> <C> <C>
INCOME:
Lease $ 764,031 $1,025,069 $2,377,448 $3,599,908
Interest and other 1,921 12,857 2,918 18,219
Gain on sale of computer equipment 110,071 274,734 336,179 149,148
---------- ----------- ---------- ----------
876,023 1,312,660 2,716,545 3,767,275
EXPENSES:
Operating, excluding depreciation 80,436 53,012 227,501 97,243
Equipment management fee - General Partner 34,368 51,253 116,864 179,995
Interest 22,008 59,231 89,897 219,796
Depreciation 502,458 894,458 1,878,648 3,011,942
Amortization of organizastion costs, equipment
acquisition costs and deferred expenses 34,362 58,777 111,942 187,202
Loss on sale of computer equipment - - - -
---------- ----------- ---------- ---------
673,632 1,116,731 2,424,852 3,696,178
---------- ----------- ---------- ----------
Net income (loss) 202,391 195,929 291,693 71,097
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
Net income (loss) per equivalent limited
partnership unit $ 0.32 $ 0.31 $ 0.46 $ 0.11
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>
PARTNER UNITS GENERAL LIMITED
GENERAL LIMITED PARTNER PARTNER TOTAL
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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)
Distribution (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)
Distribution (12,755) (1,262,712) (12,756,467)
----------------------------------------------------------------------------------
Partners' capital - December 31, 1997 50 631,358 1,000 4,865,767 $ 4,866,767
Net income (loss) 12,755 (288,009) (275,254)
Distribution (12,755) (1,262,712) (1,275,467)
----------------------------------------------------------------------------------
Partners' capital - December 31, 1998 50 631,358 1,000 3,315,046 $ 3,316,046
Net income (loss) 9,567 (291,693) (282,126)
Distribution (9,567) (954,232) (963,799)
----------------------------------------------------------------------------------
Partners' capital - September 30, 1999 50 631,358 1,000 2,069,121 2,070,121
</TABLE>
See accompanying notes
<PAGE>
COMMONWEALTH INCOME & GROWTH FUND I
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income 291,693 71,097
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,989,000 3,199,144
(Gain) loss on sale of computer equipment (336,179) (149,148)
Other noncash activities included in
determination of net income (1,030,744) (2,347,491)
Changes in operating assets and liabilities:
Accounts receivable - General Partner - -
(Increase) decrease in lease income receivable (85,928) 69,975
(Increase) decrease in other receivables (970) (9,719)
Increase (decrease) in accounts payable (24,949) 55,278
Increase (decrease) in accounts payable -
Commonwealth Capital Corp. - (40,929)
Increase (decrease) in accounts payable -
General Partner 66,966 (27,764)
Increase (decrease) in unearned lease income (58,903) (80,281)
------------- --------------
Net cash provided by operating activities 809,986 740,162
------------- --------------
Investing activities:
Capital expenditures - (359,044)
Net proceeds from the sale of property 336,179 816,083
Equipment acquisition fees paid to General Partner 4,910 (23,890)
------------- --------------
Net cash provided by investing activities 341,089 433,149
Financing activities:
Distributions to partners (963,799) (956,604)
Debt placement fees paid to General Partner - (2,328)
------------- --------------
Net cash used by financing activities (963,799) (958,932)
------------- --------------
Net increase (decrease) in cash and equivalents 22,621 214,379
Cash and cash equivalents, begining of year 1,565 116,259
------------- --------------
Cash and cash equivalents, end of year 24,186 330,638
------------- --------------
------------- --------------
</TABLE>
See accompanying notes
<PAGE>
COMMONWEALTH INCOME & GROWTH FUND I
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
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, 1998.
NET LOSS PER EQUIVALENT LIMITED PARTNERSHIP UNIT
The net 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>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of capital for the nine month period ended
September 30, 1999 and 1998 were cash from operations of $809,000 and
$740,000, respectively; and net proceeds from the sale of computer equipment
of $110,000 and $149,000 for the nine month period ended September 30, 1999
and 1998. The primary uses of cash for the nine month period ended September
30, 1999 were for capital expenditures for new equipment totaling $90,000 the
payment of acquisition fees to the General Partner of $13,000, the payment of
debt placement fees to the General Partner of $2,000, and preferred
distributions to partners of $963,000.
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, 1999, and December 31, 1998 the Partnership had approximately
$1,000 and $2,000, 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, 1999, the Partnership had future minimum
rentals on noncancellable operating leases of $2,800,000 for the year ending
December 31, 1999 and $1,500,000, thereafter. At September 30, 1999, the
outstanding debt was $1,030,000, with interest rates ranging from 6.4% to
8.5%, and will be payable through September 2002. 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, 1999, the Partnership recognized income
of $876,000 and expenses of $673,000, resulting in net income of $202,000.
For the quarter ended September 30, 1998, the Partnership recognized income
of $1,312,000 and expenses of $1,116,000, resulting in net income of $195,000.
Lease income decreased by 25% from $1,025,000 for the quarter ended
September 30, 1998, to $764,000 for the quarter ended September 30, 1999.
Interest income decreased from $12,000 for the quarter ended September 30,
1998, to $2,000 for the quarter ended September 30, 1999. In addition, the
Partnership recognized a gain on sale of computer equipment of $110,000 for
the quarter ended September 30, 1999.
The operating expenses, excluding depreciation, primarily consist of
accounting, legal and outside office services. The 52% increase from
approximately $53,000 for the quarter ended September 30, 1998, to $80,000
for the quarter ended September 30, 1999, is attributable to the accrual of
accounting fees.
<PAGE>
The equipment management fee is equal to 5% of the gross lease revenue
attributable to equipment that is subject to operating leases. The equipment
management fee was $34,000 and $51,000, respectively, for the quarters ended
September 30, 1999 and 1998.
Interest expense decreased 49% from approximately $59,000 for the quarter
ended September 30, 1998, to $22,000 for the quarter ended September 30,
1999.
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 44% from
approximately $952,000 for the quarter ended September 30, 1998, to $536,000
for the quarter ended September 30, 1999.
For the nine month period ended September 30, 1999, the Partnership generated
cash flows from operating activities of $809,000, which includes a net gain
of $291,000, and depreciation and amortization expenses of $1,989,000. Other
noncash activities included in the determination of net income includes
direct payments of lease income by lessees to banks of $1,196,000.
For the nine month period ended September 30, 1998, the Partnership generated
cash flows from operating activities of $433,000, which includes a net loss
of $71,000, and depreciation and amortization expenses of $3,198,000. Other
noncash activities included in the determination of net income includes
direct payments of lease income by lessees to banks of $3,063,000.
YEAR 2000 ISSUE
The Partnership and the General Partner are not responsible for ensuring that
the computer peripheral equipment that it leases to customers is Year 2000
compliant, however, this equipment may be subject to declines in value or
technological obsolescence. Management has considered these factors in
determining the recovery of its equipment at September 30, 1999, in
accordance with FASB Statement No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". Based on its
current assessment, the Partnership does not believe that the reduction in
carrying values of equipment, if any, due to the Year 2000 issues, will have
a significant effect on operations.
Based on recent assessments, the General Partner has determined that it will
be required to modify or replace portions of its own system so that its
operation will function properly with respect to dates in the year 2000 and
thereafter. The General Partner presently believes that with modifications to
existing software and conversions to new software, the Year 2000 issue will
not pose significant operational problems for its computer system. The
General Partner expects that its modifications will be complete by the third
quarter of 1999 and a percentage of these costs will be charged to the
Partnership. As of September 30, 1999, the General Partner has not incurred
any significant expenses.
<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
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Balance Sheets and Consolidated Statements of Operations found on pages 3 and 4
of the Company's Form 10Q for the year to date and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 24,186
<SECURITIES> 0
<RECEIVABLES> 238,405
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 73,215
<PP&E> 13,250,912
<DEPRECIATION> 10,335,461
<TOTAL-ASSETS> 3,251,257
<CURRENT-LIABILITIES> 1,181,136
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,070,121
<TOTAL-LIABILITY-AND-EQUITY> 3,251,257
<SALES> 0
<TOTAL-REVENUES> 2,716,545
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,334,955
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 89,897
<INCOME-PRETAX> 291,693
<INCOME-TAX> 0
<INCOME-CONTINUING> 291,693
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 291,693
<EPS-BASIC> .46
<EPS-DILUTED> 0
</TABLE>
