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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 2003
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 Number)
470 John Young Way Suite 300
Exton, Pennsylvania 19341
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(Address, including zip code, of principal executive offices)
(610) 594-9600
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(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (ii) has been subject to such filing
requirements for the past 90 days:
YES [X] NO [ ]
Commonwealth Income & Growth Fund I
Balance Sheets
June 30, December 31,
2003 2002
--------- ------------
(unaudited)
Assets
Cash and cash equivalents $ 5,852 $ 438
Lease income receivable, net of allowance for
doubtful accounts reserve of $314,164 as of
June 30, 2003 and December 31, 2002 249,493 250,141
Net investment in direct financing lease 27,102 31,620
Other receivables 200 200
--------------- -----------
282,647 282,399
--------------- -----------
Computer equipment, at cost 2,626,539 2,669,518
Accumulated depreciation (2,096,743) (2,009,051)
--------------- -----------
529,796 660,467
--------------- -----------
Equipment acquisition costs and deferred expenses, net 16,897 25,259
--------------- -----------
Total assets $ 829,340 $ 968,125
=============== ===========
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 2,466 $ 5,184
Accounts payable - Other LP Affiliates 141,065 126,526
Accounts payable - General Partner 222,282 153,113
Accounts payable - Commonwealth Capital Corp. 45,061 17,641
Unearned lease income 19,631 19,769
Notes payable 305,959 444,732
------------------------------------
Total liabilities 736,434 766,965
------------------------------------
Partners' Capital
General partner 1,000 1,000
Limited partners 91,876 200,160
------------------------------------
Total partners' capital 92,876 201,160
------------------------------------
Total liabilities and partners' capital $ 829,340 $ 968,125
====================================
see accompanying notes to financial statements
Commonwealth Income & Growth Fund I
Statements of Operations
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
---------- ----------- ---------- ----------
(unaudited) (unaudited)
Income
Lease $ 83,494 $ 109,886 $ 171,775 $ 215,964
Interest and other - 576 - 2,573
Gain on sale of computer equipment 3,267 11,685 8,907 17,726
---------- ----------- ---------- ----------
Total Income 86,761 122,147 180,682 236,263
---------- ----------- ---------- ----------
Expenses
Operating, excluding depreciation 70,658 70,069 131,459 136,810
Equipment management fee - General Partner 4,157 5,494 8,589 10,798
Interest 6,402 11,690 14,152 20,417
Depreciation 59,562 72,639 126,204 143,910
Amortization of equipment
acquisition costs and deferred expenses 4,171 4,436 8,562 8,385
Bad Debt Expense - 1,308 - 1,308
---------- ----------- ---------- ----------
Total expenses 144,950 165,636 288,966 321,628
---------- ----------- ---------- ----------
Net (loss) $ (58,189) $ (43,489) $ (108,284) $ (85,365)
=========== =========== =========== ==========
Net (loss) per equivalent limited
partnership unit $ (0.09) $ (0.07) $ (0.17) $ (0.14)
=========== =========== =========== ==========
Weighted Average number of equivalent limited
partnership units outstanding during the period 631,124 631,124 631,124 631,124
=========== =========== =========== ==========
see accompanying notes to financial statements
Commonwealth Income & Growth Fund I
Statements of Partners' Capital
For the Six Months ended June 30, 2003
(unaudited)
General Limited
Partner Partner General Limited
Units Units Partner Partner Total
------------------------------------------------------------------------
Partners' capital - December 31, 2002 50 631,124 $ 1,000 $ 200,160 $ 201,160
Net (loss) - (108,284) (108,284)
------------------------------------------------------------------------
Partners' capital - June 30, 2003 50 631,124 $ 1,000 $ 91,876 $ 92,876
========================================================================
see accompanying notes to financial statements
Commonwealth Income & Growth Fund I
Statements of Cash Flow
For the Six Months Ended June 30, 2003 and 2002
2003 2002
-------------- ------------
(unaudited)
Operating activities
Net (loss) $ (108,284) $ (85,365)
Adjustments to reconcile net (loss) to net cash
(used in) provided by operating activities
Depreciation and amortization 134,766 152,295
(Gain) on sale of computer equipment (8,907) (17,726)
Other noncash activities included in
determination of net (loss) (134,255) (132,648)
Changes in assets and liabilities
(Increase) decrease in assets
Lease income receivable 648 24,132
Prepaid Items - (3,000)
Increase (decrease) in liabilities
Accounts payable (2,718) (8,449)
Accounts payable, Common Capital Corp. 27,420 28,193
Accounts payable, affiliated limited
partnerships 14,539 (1,275)
Accounts payable, General Partner 69,169 44,564
Unearned lease income (138) 10,469
-------------- -----------
Net cash (used in) provided by operating activities (7,760) 11,190
-------------- -----------
Investing activities:
Capital Expenditures (5,000) (25,000)
Net proceeds from the sale of computer equipment 18,374 23,914
Equipment acquisition fees paid to General Partner (200) (9,145)
-------------- -----------
Net cash provided by (used in) investing activities 13,174 (10,231)
-------------- -----------
Financing activities:
Debt Placement fee paid to the General Partner - (2,036)
-------------- -----------
Net increase (decrease) in cash and equivalents 5,414 (1,077)
Cash and cash equivalents, beginning of period 438 1,082
-------------- -----------
Cash and cash equivalents, end of period $ 5,852 $ 5
============== ===========
see accompanying notes to financial statements
NOTES TO FINANCIAL STATEMENTS
1. Business Commonwealth Income & Growth Fund I (the
"Partnership") is a limited partnership
organized in the Commonwealth of Pennsylvania
to acquire, own and lease various types of
computer peripheral equipment and other
similar capital equipment, which will be
leased primarily to U.S. corporations and
institutions. Commonwealth Capital Corp
("CCC"), on behalf of the Partnership and
other affiliated partnerships, acquires
computer equipment subject to associated debt
obligations and lease agreements and
allocates a participation in the cost, debt
and lease revenue to the various partnerships
based on certain risk factors. The
Partnership's General Partner is Commonwealth
Income & Growth Fund, Inc. (the "General
Partner"), a Pennsylvania corporation which
is an indirect wholly owned subsidiary of
Commonwealth Capital Corp. Approximately ten
to twelve years after the commencement of
operations, the Partnership intends to sell
or otherwise dispose of all of its computer
equipment, make final distributions to
partners, and to dissolve. Unless sooner
terminated, the Partnership will continue
until approximately December 31, 2006.
2. Summary of Basis of Presentation
Significant
Accounting The financial information presented as of any
Policies 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 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,
2002. Operating results for the six-month
period ended June 30, 2003 are not
necessarily indicative of financial results
that may be expected for the full year ended
December 31, 2003.
Revenue Recognition
Through June 30, 2003, the Partnership's
leasing operations consist substantially of
operating leases and one direct financing
lease. Operating lease revenue is recognized
on a monthly basis in accordance with the
terms of the lease agreement. Unearned
revenue from direct financing agreements is
amortized to revenue over the lease term.
The Partnership reviews a customer's credit
history before extending credit and
establishes a provision for uncollectible
accounts receivable based upon the credit
risk of specific customers, historical trends
and other information.
Use of Estimates
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities
and disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of
revenues and expenses during the reporting
period. Actual results could differ from
those estimates.
Long-Lived Assets
The Partnership evaluates its long-lived
assets when events or circumstances indicate
that the value of the asset may not be
recoverable. The Partnership determines
whether an impairment exists by estimating
the undiscounted cash flows to be generated
by each asset. If the estimated undiscounted
cash flows are less than the carrying value
of the asset then an impairment exists. The
amount of the impairment is determined based
on the difference between the carrying value
and the fair value. Fair value is determined
based on estimated discounted cash flows to
be generated by the asset. As of June 30,
2003, there is no impairment.
Depreciation on computer equipment for
financial statement purposes is based on the
straight-line method over estimated useful
lives of four years.
Intangible Assets
Equipment acquisition costs and deferred
expenses are amortized on a straight-line
basis over two- to-four year lives.
Unamortized acquisition fees and deferred
expenses are charged to amortization expense
when the associated leased equipment is sold.
Cash and Cash Equivalents
The Partnership considers all highly liquid
investments with a maturity of three months
or less to be cash equivalents. Cash
equivalents have been invested in a money
market fund investing directly in Treasury
obligations.
Income Taxes
The Partnership is not subject to federal
income taxes; instead, any taxable income
(loss) is passed through to the partners and
included on their respective income tax
returns.
Taxable income differs from financial
statement net income as a result of reporting
certain income and expense items for tax
purposes in periods other than those used for
financial statement purposes, principally
relating to depreciation, amortization, and
lease income.
Offering Costs
Offering costs were payments for selling
commissions, dealer manager fees,
professional fees and other offering expenses
relating to the syndication. Selling
commissions were 7% of the partners'
contributed capital and dealer manager fees
were 2% of the partners' contributed capital.
These costs have been deducted from
partnership capital in the accompanying
financial statements.
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 limited partner units outstanding
during the period.
Reimbursable Expenses
Reimbursable expenses, which are charged to
the Partnership by CCC in connection with the
administration and operation of the
Partnership, are allocated to the Partnership
based upon several factors including, but not
limited to, the number of investors,
compliance issues, and the number of existing
leases.
3. Net Investment in The following lists the components of the net
Direct Financing Lease investment in a direct financing lease as of
June 30, 2003 and December 31, 2002:
June 30, December 31,
2003 2002
--------------------------------------------------------------------------
Minimum lease payments receivable $ 36,108 $ 42,126
Less: Unearned Revenue 9,006 10,506
--------------------------------------------------------------------------
Net investment in direct financing lease $ 27,102 $ 31,620
--------------------------------------------------------------------------
The following is a schedule of future minimum
rentals on the noncancellable direct
financing lease at June 30, 2003:
Amount
------------------------------------------------------------------------
Six Months Remaining December 31, 2003 $ 6,018
Year Ended December 31, 2004 12,036
Year Ended December 31, 2005 12,036
Year Ended December 31, 2006 6,018
---------------
$ 36,108
------------------------------------------------------------------------
4. Computer The Partnership is the lessor of equipment
Equipment under operating leases with periods
ranging from 14 to 48 months. In general,
associated costs such as repairs and
maintenance, insurance and property taxes are
paid by the lessee.
The Partnership's share of the computer
equipment in which they participate with
other partnerships at June 30, 2003 and
December 31, 2002 was approximately $448,000
and $443,000, respectively, which is included
in the Partnership's fixed assets on their
balance sheet, and the total cost of the
equipment shared by the Partnership with
other partnerships at June 30, 2003 and
December 31, 2002 was approximately
$2,258,000 and $2,210,000, respectively. The
Partnership's share of the outstanding debt
associated with this equipment at June 30,
2003 and December 31, 2002 was approximately
$163,000 and $233,000, respectively, which is
included in the Partnership's liabilities on
the balance sheet, and the total outstanding
debt at June 30, 2003 and December 31, 2002
related to the equipment shared by the
Partnership was approximately $867,000 and
$1,197,000, respectively.
The following is a schedule of future minimum
rentals on noncancellable operating leases at
June 30, 2003:
Amount
---------------------------------------------------------------------
Six months ended December 31, 2003 $ 160,000
Year ended December 31, 2004 172,000
Year ended December 31, 2005 9,000
Year ended December 31, 2006 3,000
------------
$ 344,000
============
5. Notes Payable Notes payable consisted of the following:
June 30, December 31,
2003 2002
----------------------------------------------------------------------------------
Installment notes payable to Banks,
interest ranging from 7.50% to 9.50%;
due in monthly installments ranging from
$182 to $1,320, including interest, with
final payments due from January
through December 2003. $ 7,509 $ 20,977
Installment notes payable to Banks, interest
ranging from 6.25% to 9.25%; due in monthly
installments ranging from $138 to $7,720,
including interest, with final payments due
from January through December 2004. 265,725 386,168
Installment note payable to a Bank, interest
at 6.50%; due in monthly installments of
$1,003, including interest, with final
payment due June 2006. 32,725 37,587
----------------------------------
$ 305,959 $ 444,732
================== ===============
These notes are secured by specific computer
equipment and are nonrecourse liabilities of
the Partnership. Aggregate maturities of
notes payable for each of the periods
subsequent to June 30, 2003 are as follows:
Amount
--------------------------------------------------------------------------------
Six months ended December 31, 2003 $ 137,617
Year ended December 31, 2004 151,185
Year ended December 31, 2005 11,252
Year ended December 31, 2006 5,905
------------
$ 305,959
============
6. Supplemental Other noncash activities included in the
Cash Flow determination of net income are as follows:
Information
Six months ended June 30, 2003 2002
- --------------------------------------------------------------------------------------
Lease income, net of interest expense on
notes payable realized as a result of
direct payment of principal by lessee to
bank $ 134,255 $ 132,648
- --------------------------------------------------------------------------------------
No interest or principal on notes payable was
paid by the Partnership because direct
payment was made by lessee to the bank in
lieu of collection of lease income and
payment of interest and principal by the
Partnership.
Noncash investing and financing activities
include the following:
Six months ended June 30, 2003 2002
- ----------------------------------------------------------------------------------
Debt assumed in connection with purchase
of computer equipment $ - $ 203,627
- ----------------------------------------------------------------------------------
7. Litigation The Partnership, through CCC, has initiated a
lawsuit against a customer for the non-return
of leased equipment. Management believes that
the Partnership will prevail in this matter
and that the outcome of this uncertainty is
not expected to have a material adverse
impact to the financial statements of the
Partnership. The Partnership has
approximately $250,000 of unreserved accounts
receivable relating to this matter. The
complaint alleges that the named defendant
has not returned the proper equipment stated
in the master lease agreement and is seeking
restitution for lost monthly rentals, taxes,
attorney fees and costs, plus interest. A
court date has been rescheduled for September
8, 2003.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
CRITICAL ACCOUNTING POLICIES
Financial Reporting Release No. 60, which was released by the Securities and
Exchange Commission, requires all companies to include a discussion of critical
accounting policies or methods used in the preparation of financial statements.
Our significant accounting policies are described in Note 1 of the Notes to the
Financial Statements. The significant accounting policies that we believe are
the most critical to aid in fully understanding our reported financial results
include the following:
COMPUTER EQUIPMENT
Commonwealth Capital Corp, on behalf of the Partnership and other affiliated
partnerships, acquires computer equipment subject to associated debt obligations
and lease revenue and allocates a participation in the cost, debt and lease
revenue to the various partnerships based on certain risk factors.
REVENUE RECOGNITION
Through June 30, 2003, the Partnership's leasing operations consist
substantially of operating leases and one direct financing lease. Operating
lease revenue is recognized on a monthly basis in accordance with the terms of
the lease agreement. Unearned revenue from direct financing agreements is
amortized to revenue over the lease term.
The Partnership reviews a customer's credit history before extending credit and
establishes a provision for uncollectible accounts receivable based upon the
credit risk of specific customers, historical trends and other information.
LONG-LIVED ASSETS
The Partnership evaluates its long-lived assets when events or circumstances
indicate that the value of the asset may not be recoverable. The Partnership
determines whether an impairment exists by estimating the undiscounted cash
flows to be generated by each asset. If the estimated undiscounted cash flows
are less than the carrying value of the asset then an impairment exists. The
amount of the impairment is determined based on the difference between the
carrying value and the fair value. Fair value is determined based on estimated
discounted cash flows to be generated by the asset. Depreciation on computer
equipment for financial statement purposes is based on the straight-line method
over estimated useful lives of four years.
Liquidity and Capital Resources
The Partnership's primary sources of capital for the six months ended June 30,
2003 was net proceeds received from the sale of equipment totaling approximately
$18,000. Primary sources of capital for the six months ended June 30, 2002 were
cash from operations of $11,000, and the net proceeds received from sale of
equipment of approximately $24,000. The primary use of cash for the six months
ended June 30, 2003 was for operating activities of approximately $8,000 and the
purchase of computer equipment in the amount of approximately $5,000. The
primary use of cash for the six months ended June 30, 2002 was for the purchase
of computer equipment in the amount of approximately $25,000. There were no
distributions paid for the six months ended June 30, 2003 and 2002.
For the six-month period ended June 30, 2003, the Partnership used cash for
operating activities of $8,000, which includes a net operating loss of $108,000,
a net gain from the sale of computer equipment of $9,000 and depreciation and
amortization expenses of $135,000. Other noncash activities included in the
determination of net income include direct payments of lease income by lessees
to banks of $134,000.
For the six-month period ended June 30, 2002, the Partnership generated cash
flows from operating activities of $11,000, which includes a net operating loss
of $85,000, a net gain from the sale of computer of $18,000 and depreciation and
amortization expenses of $152,000. Other noncash activities included in the
determination of net income include direct payments of lease income by lessees
to banks of $133,000.
Cash is invested in money market accounts that invest 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.
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, 2003, the Partnership had future minimum rentals on non-cancelable
operating leases of $160,000 for the balance of the year ending December 31,
2003 and $184,000 thereafter. At June 30, 2003, outstanding debt was $306,000,
with interest rates ranging from 6.25% to 9.50%, payable through June 2006.
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, the Partnership will attempt to obtain additional funds by
disposing of or refinancing Equipment, or by borrowing within its permissible
limits. The Partnership may, from time to time, 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.
The Partnership's share of the computer equipment in which they participate with
other partnerships at June 30, 2003 and December 31, 2002 was approximately
$448,000 and $443,000, respectively, which is included in the Partnership's
fixed assets on their balance sheet, and the total cost of the equipment shared
by the Partnership with other partnerships at June 30, 2003 and December 31,
2002 was approximately $2,258,000 and $2,210,000, respectively. The
Partnership's share of the outstanding debt associated with this equipment at
June 30, 2003 and December 31, 2002 was approximately $163,000 and $233,000,
respectively, which is included in the Partnership's liabilities on the balance
sheet, and the total outstanding debt at June 30, 2003 and December 31, 2002
related to the equipment shared by the Partnership was approximately $867,000
and $1,197,000, respectively.
Results of Operations
Three Months Ended June 30, 2003 compared to Three Months Ended June 30, 2002
- -----------------------------------------------------------------------------
For the quarter ended June 30, 2003, the Partnership recognized income of
$87,000 and expenses of $145,000, resulting in a net loss of $58,000. For the
quarter ended June 30, 2002, the Partnership recognized income of $122,000 and
expenses of $166,000, resulting in a net loss of $44,000.
Lease income decreased by 24% to $83,000 for the quarter ended June 30, 2003,
from $110,000 for the quarter ended June 30, 2002, primarily due to the fact
that more lease agreements terminated than new lease agreements entered into
since the quarter ended June 30, 2002.
Operating expenses, excluding depreciation, primarily consist of accounting,
legal, outside service fees and reimbursement of expenses to CCC for
administration and operation of the Partnership. The expenses are approximately
$71,000 for the quarter ended June 30, 2003, and $70,000 for the quarter ended
June 30, 2002. There was an increase in partnership taxes of approximately
$6,000, a decrease in other insurances of approximately $5,000, a decrease in
recruiting fees of approximately $3,000 and an increase in miscellaneous office
expenses of approximately $1,000,
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 decreased 24% to approximately $4,000 for the quarter ended June
30, 2003, from $5,000 for the quarter ended June 30, 2002, which is consistent
with the decrease in lease revenue.
Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of equipment acquisition fees. The expenses decreased
17% to approximately $64,000 for the quarter ended June 30, 2003, from $77,000
for the quarter ended June 30, 2002 due to the older equipment becoming fully
depreciated and certain acquisition and finance fees being fully amortized and
only a small amount of new additions.
The Partnership sold computer equipment with a net book value of approximately
$9,000 for the quarter ended June 30, 2003, for a net gain of approximately
$3,000. The Partnership sold computer equipment with no net book value for the
quarter ended June 30, 2002, for a net gain of $12,000.
Interest expense decreased 45% to $6,000 for the quarter ended June 30, 2003
from $12,000 for the quarter ended June 30, 2002; primarily due to the decrease
in equipment purchased that has an outstanding debt and older equipment's
associated debt being fully paid.
Six Months Ended June 30, 2003 compared to Six Months Ended June 30, 2002
- -------------------------------------------------------------------------
For the six months ended June 30, 2003, the Partnership recognized income of
$181,000 and expenses of $289,000, resulting in a net loss of $108,000. For the
six months ended June 30, 2002, the Partnership recognized income of $236,000
and expenses of $321,000, resulting in a net loss of $85,000.
Lease income decreased by 20% to $172,000 for the six months ended June 30,
2003, from $216,000 for the six months ended June 30, 2002, primarily due to the
fact that more lease agreements terminated than new lease agreements entered
into since the six months ended June 30, 2002.
Operating expenses, excluding depreciation, primarily consist of accounting,
legal, outside service fees and reimbursement of expenses to CCC for
administration and operation of the Partnership. The expenses decreased 4%, to
approximately $131,000 for the six months ended June 30, 2003, from $137,000 for
the six months ended June 30, 2002. There was an increase in reimbursable
expenses with the administration and operation of the Partnership charged by
CCC., a related party, of approximately $10,000, an increase in partnership
taxes of approximately $6,000, a decrease in conventions of approximately
$4,000, and a decrease in accounting fees of approximately $19,000.
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 decreased 20% to approximately $9,000 for the six months ended
June 30, 2003, from $11,000 for the six months ended June 30, 2002, which is
consistent with the decrease in lease revenue.
Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of equipment acquisition fees. The expenses decreased
12% to approximately $135,000 for the six months ended June 30, 2003, from
$152,000 for the six months ended June 30, 2002 due to the older equipment
becoming fully depreciated and certain acquisition and finance fees being fully
amortized and only a small amount of new additions.
The Partnership sold computer equipment with a net book value of approximately
$9,000 for the six months ended June 30, 2003, for a net gain of approximately
$9,000. The Partnership sold computer equipment with a net book value of
approximately $6,000 for the six months ended June 30, 2002, for a net gain of
$18,000.
Interest expense decreased 31% to $14,000 for the six months ended June 30, 2003
from $20,000 for the six months ended June 30, 2002; primarily due to the
decrease in equipment purchased that has an outstanding debt and older
equipment's associated debt being fully paid.
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS 150
In May 2003, the FASB issued FASB Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity, which
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. SFAS is applicable immediately for
financial instruments entered into or modified after May 31, 2003 and otherwise
shall be effective at the beginning of the first interim period beginning after
June 15, 2003. The Partnership believes that the adoption of SFAS 150 will not
have an impact on its financial position and results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Partnership believes its exposure to market risk is not material due to the
fixed interest rate of its long-term debt.
Item 4. Controls and Procedures
The Chief Executive Officer and a Financial Officer of the Partnership have
conducted a review of the Partnership's disclosure controls and procedures as of
June 30, 2003.
The Company's disclosure controls and procedures include the Partnership's
controls and other procedures designed to ensure that information required to be
disclosed in this and other reports filed under the Securities Exchange Act of
1934, as amended (the "Exchange Act") is accumulated and communicated to the
Partnership's management, including its chief executive officer and a financial
officer, to allow timely decisions regarding required disclosure and to ensure
that such information is recorded, processed, summarized and reported with the
required time periods.
Based upon this review, the Partnership's Chief Executive Officer and a
Financial Officer of the Partnership have concluded that the Partnership's
disclosure controls (as defined in pursuant to Rule 13a-14 c promulgated under
the Exchange Act) are sufficiently effective to ensure that the information
required to be disclosed by the Partnership in the reports it files under the
Exchange Act is recorded, processed, summarized and reported with adequate
timeliness.
Part II: OTHER INFORMATION
Commonwealth Income & Growth Fund I
Item 1. Legal Proceedings.
On or about May 8, 2000, a complaint captioned
Commonwealth Capital Corp V. Getronics, Inc. was
filed by Commonwealth Capital Corp against Getronics,
Inc. (formerly known as Wang Laboratories, Inc.) with
the Federal District Court of the Eastern District of
Pennsylvania, No. 00-CV-2381 on behalf of the
Partnership. The complaint alleges that the named
defendant has not returned the proper equipment
stated in the master lease agreement and is seeking
restitution for lost monthly rentals, taxes, attorney
fees and costs, plus interest.
The defendant filed for a Summary Judgment on
February 20, 2001, and the plaintiff has filed an
opposition to this Summary Judgment. On September 29,
2001, the Federal District Court of the Eastern
District of Pennsylvania denied the defendant's
request for Summary Judgment. As of March 29, 2002,
the pre-trial conference was completed. On February
13, 2003, the Federal District Court of the Eastern
District of Pennsylvania originally assigned a trial
date for May 14, 2003, and then rescheduled for June
9, 2003. Currently, the trial date has been postponed
until September 8, 2003.
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:
31.1 THE RULE 15d-14(a)
31.2 THE RULE 15d-14(a)
32.1 SECTION 1350 CERTIFICATION OF CEO
32.2 SECTION 1350 CERTIFICATION OF CFO
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
August 12, 2003 By: George S. Springsteen
- --------------- ------------------------
Date George S. Springsteen
President