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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
 
       TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number:   33-62526
 
COMMONWEALTH INCOME & GROWTH FUND IV
(Exact name of registrant as specified in its charter)
 
Pennsylvania
 
23- 3080409
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
470 John Young Way  Suite 300
Exton, PA 19341
(Address, including zip code, of principal executive offices)
 
 
 
(610) 594-9600
(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 (III) has been subject to such filing requirements for the past 90 days:
 
YES       NO  
 
 
Commonwealth Income & Growth Fund IV
Balance Sheets
 
 
 
September 30,
2003
 
December 31,
2002
 
 
 
 
 
 
 
(unaudited)
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
6,212,232
 
$
510,780
 
Lease income receivable
 
 
39,963
 
 
30,957
 
Other receivables - Commonwealth Capital Corp
 
 
120,513
 
 
—
 
Other receivables - General Partner
 
 
1,015
 
 
—
 
Other receivables - affiliated limited partnerships
 
 
45,755
 
 
6,000
 
Other receivables
 
 
—
 
 
103,610
 
Deferred revenue
 
 
2,819
 
 
—
 
Refundable deposits
 
 
1,130
 
 
—
 
Prepaid expenses
 
 
24,370
 
 
—
 
 
 
 
 
 
 
 
6,447,797
 
 
651,347
 
 
 
 
 
Computer equipment, at cost
 
 
5,787,293
 
 
2,110,606
 
Accumulated depreciation
 
 
(787,899
)
 
(92,931
)
 
 
 
 
 
 
 
4,999,394
 
 
2,017,675
 
 
 
 
 
Equipment acquisition costs and deferred expenses, net
 
 
194,321
 
 
79,672
 
Prepaid acquisition fees
 
 
309,055
 
 
33,905
 
 
 
 
 
 
 
 
503,376
 
 
113,577
 
 
 
 
 
Total assets
 
$
11,950,567
 
$
2,782,599
 
 
 
 
 
Liabilities and Partners’ Capital
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Accounts payable
 
 
64,353
 
 
20,486
 
Accounts payable - General Partner
 
 
—
 
 
806
 
Accounts payable - Commonwealth Capital Corp.
 
 
—
 
 
61,807
 
Other accrued expenses
 
 
13,150
 
 
—
 
Unearned lease income
 
 
37,006
 
 
6,514
 
Notes payable
 
 
574,076
 
 
—
 
 
 
 
 
Total liabilities
 
 
688,585
 
 
89,613
 
 
 
 
 
Partners’ Capital
 
 
 
 
 
 
 
General partner
 
 
1,000
 
 
1,000
 
Limited partners
 
 
11,260,982
 
 
2,691,986
 
 
 
 
 
Total partners’ capital
 
 
11,261,982
 
 
2,692,986
 
 
 
 
 
Total liabilities and partners’ capital
 
$
11,950,567
 
$
2,782,599
 
 
 
 
 
 
see accompanying notes to financial statements
 
Commonwealth Income & Growth Fund IV
Statements of Operations
 
 
 
Three Months
Ended
September 30,
2003
 
For the period
July 8, 2002
(Commencement of
Operation) through
September 30, 2002 (1)
 
Nine Months
Ended
September 30,
2003
 
For the period
July 8, 2002
(Commencement of
Operation) through
September 30, 2002 (1)
 
 
 
 
 
 
 
 
 
(unaudited)
 
(unaudited)
 
Income
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease
 
$
387,503
 
$
17,647
 
$
970,995
 
$
17,647
 
Interest and other
 
 
8,940
 
 
1,797
 
 
15,469
 
 
1,797
 
 
 
 
 
 
 
Total Income
 
 
396,443
 
 
19,444
 
 
986,464
 
 
19,444
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating, excluding depreciation
 
 
380,198
 
 
191,540
 
 
1,045,210
 
 
191,540
 
Organizational costs
 
 
33,893
 
 
22,492
 
 
99,735
 
 
22,492
 
Equipment management fee - General Partner
 
 
19,378
 
 
882
 
 
48,553
 
 
882
 
Interest
 
 
9,877
 
 
—
 
 
31,526
 
 
—
 
Depreciation
 
 
307,279
 
 
11,707
 
 
694,968
 
 
11,707
 
Amortization of equipment acquisition costs and deferred expenses
 
 
16,919
 
 
624
 
 
40,579
 
 
624
 
 
 
 
 
 
 
Total expenses
 
 
767,544
 
 
227,245
 
 
1,960,571
 
 
227,245
 
 
 
 
 
 
 
Net (loss)
 
$
(371,101
)
$
(207,801
)
$
(974,107
)
$
(207,801
)
 
 
 
 
 
 
Net (loss) per equivalent limited partnership unit
 
$
(0.55
)
$
(11.22
)
$
(2.25
)
$
(11.22
)
 
 
 
 
 
 
Weighted Average number of equivalent limited partnership units outstanding during the period
 
 
669,054
 
 
18,528
 
 
433,440
 
 
18,528
 
 
 
 
 
 
 
 
(1)
Although the Partnership was formed on May 15, 2001, the Fund did not commence operations until July 8, 2002.
 
see accompanying notes to financial statements
Commonwealth Income & Growth Fund IV
Statements of Partners’ Capital
 
 
 
For the nine months ended September 30, 2003
 
 
 
(unaudited)
 
 
 
General
Partner
Units
 
Limited
Partner
Units
 
General
Partner
 
Limited
Partner
 
Total
 
 
 
 
 
 
 
 
Partners’ capital - December 31, 2002
 
 
50
 
 
181,566
 
$
1,000
 
$
2,691,986
 
$
2,692,986
 
Contributions
 
 
—
 
 
568,384
 
 
—
 
 
11,340,160
 
 
11,340,160
 
Offering costs
 
 
—
 
 
—
 
 
—
 
 
(1,219,286
)
 
(1,219,286
)
Net income (loss)
 
 
—
 
 
—
 
 
5,777
 
 
(979,884
)
 
(974,107
)
Distributions
 
 
—
 
 
—
 
 
(5,777
)
 
(571,994
)
 
(577,771
)
 
 
 
 
 
 
 
Partners’ capital - September 30, 2003
 
 
50
 
 
749,950
 
$
1,000
 
$
11,260,982
 
$
11,261,982
 
 
 
 
 
 
 
 
 
see accompanying notes to financial statements
Commonwealth Income & Growth Fund IV
Statements of Cash Flow
For the nine months ended September 30, 2003 and the period of July 8, 2002
(Commencement of Operations) through September 30, 2002 (1)
 
 
 
2003
 
2002
 
 
 
 
 
 
 
(unaudited)
 
Operating activities
 
 
 
 
 
 
 
Net (loss)
 
$
(974,107
)
$
(207,801
)
Adjustments to reconcile net (loss) to net cash (used in) provided by operating activities
 
 
 
 
 
 
 
Depreciation and amortization
 
 
735,547
 
 
12,331
 
Other noncash activities included in determination of net (loss)
 
 
(241,928
)
 
—
 
Changes in assets and liabilities (Increase) decrease in assets
 
 
 
 
 
 
 
Lease income receivable
 
 
(9,006
)
 
(1,200
)
Deferred revenue
 
 
(2,819
)
 
—
 
Other receivable, General Partner
 
 
(1,015
)
 
—
 
Other receivables - affiliated limited partnerships
 
 
(39,755
)
 
(1,540
)
Other receivables
 
 
103,610
 
 
—
 
Refundable deposits
 
 
(1,130
)
 
 
 
Prepaid expenses
 
 
(24,370
)
 
—
 
Increase (decrease) in liabilities
 
 
 
 
 
 
 
Accounts payable
 
 
43,867
 
 
38,353
 
Accounts payable, Common Capital Corp.
 
 
(61,807
)
 
—
 
Accounts payable, General Partner
 
 
(806
)
 
154,283
 
Other accrued expenses
 
 
13,150
 
 
—
 
Unearned lease income
 
 
30,492
 
 
12,473
 
 
 
 
 
Net cash (used in) provided by operating activities
 
 
(430,077
)
 
6,899
 
 
 
 
 
Investing activities:
 
 
 
 
 
 
 
Capital Expenditures
 
 
(2,860,683
)
 
(805,266
)
Prepaid acquisition fees
 
 
(275,150
)
 
(40,439
)
Equipment acquisition fees paid to General Partner
 
 
(147,068
)
 
(32,211
)
 
 
 
 
Net cash (used in) investing activities
 
 
(3,282,901
)
 
(877,916
)
 
 
 
 
Financing activities:
 
 
 
 
 
 
 
Contributions
 
 
11,340,160
 
 
2,142,090
 
Offering Costs
 
 
(1,219,286
)
 
(227,596
)
Distributions to partners
 
 
(577,771
)
 
(23,196
)
Other receivable, CCC
 
 
(120,513
)
 
—
 
Debt Placement fee paid to the General Partner
 
 
(8,160
)
 
—
 
 
 
 
 
Net cash provided by financing activities
 
 
9,414,430
 
 
1,891,298
 
 
 
 
 
Net increase in cash and cash equivalents
 
 
5,701,452
 
 
1,020,281
 
Cash and cash equivalents, beginning of period
 
 
510,780
 
 
1,000
 
 
 
 
 
Cash and cash equivalents, end of period
 
$
6,212,232
 
$
1,021,281
 
 
 
 
 
 
 
(1)
Although the Partnership was formed on May 15, 2001, the Fund did not commence operations until July 8, 2002.
 
see accompanying notes to financial statements
NOTES TO FINANCIAL STATEMENTS
 
1.
Business
Commonwealth Income & Growth Fund IV (the “Partnership”) is a limited partnership organized in the Commonwealth of Pennsylvania on May 15, 2001.  The Partnership is offering for sale up to 750,000 units of the limited partnership at the purchase price of $20 per unit (the “Offering”).  The Partnership reached the minimum amount in escrow and commenced operations on July 8, 2002.  As of September 30, 2003, the Partnership has received $14,966,714 in contributions from limited partners, amounting to 749,950 units.  For the quarter ended September 30, 2003, the Partnership has received $5,054,569 in contributions from limited partners, amounting to 253,253 units. 
 
The Partnership uses the proceeds of the Offering 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, will acquire computer equipment subject to associated debt obligations and lease agreements and allocate 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 CCC.  CCC is a member of the Investment Program Association (IPA), Financial Planning Association (FPA), and the Equipment Leasing Association (ELA).  Approximately ten 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 December 31, 2012.
 
2.
Summary of
Significant
Accounting
Policies
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  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 nine-month period ended September 30, 2003 are not necessarily indicative of financial results that may be expected for the full year ended December 31, 2003.
 
 
 
Revenue Recognition
 
Through September 30, 2003, the Partnership has only entered into operating leases.  Lease revenue is recognized on a monthly basis in accordance with the terms of the operating lease agreements.
 
The Partnership reviews a customer’s credit history before extending credit and may establish 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.  The fair value is determined based on estimated discounted cash flows to be generated by the asset.  As of September 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 are payments for selling commissions, dealer manager fees, professional fees and other offering expenses relating to the syndication.  Selling commissions are 8% of the partners’ contributed capital and dealer manager fees are 1% 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 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.
Computer
Equipment
 
The Partnership is the lessor of equipment under operating leases with periods ranging from 16 to 36 months.  In general, the lessee pays associated costs such as repairs and maintenance, insurance and property taxes.
 
The Partnership’s share of the computer equipment in which they participate at September 30, 2003 was approximately $8,000, 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 September 30, 2003 was approximately $48,000.  The Partnership did not participate in shared equipment as of December 31, 2002.
 
 
 
The following is a schedule of future minimum rentals on noncancellable operating leases at September 30, 2003:
 
 
 
Amount
 
 
 
 
Three Months ended December 31, 2003
 
$
524,000
 
Year Ended December 31, 2004
 
 
1,978,000
 
Year Ended December 31, 2005
 
 
1,581,000
 
Year Ended December 31, 2006
 
 
522,000
 
 
 
 
 
 
$
4,605,000
 
 
 
 
 
4.
Related Party
Transactions
 
Other Receivables
 
During the nine-months ended September 30, 2003, the Partnership made a non-interest bearing advance to CCC, a related party to the Partnership, in the amount of approximately $120,000.  This advance, as well as potential future advances, was and will be made at the discretion of the General Partner.  CCC, through its indirect subsidiaries, including the General Partner of the Partnership, earns fees based on revenues and new lease purchases from this fund.  CCC, through its indirect subsidiaries, including the General Partner of the Partnership, earns fees based on revenues and new lease purchases from this fund.  CCC intends to repay the receivable via the offsetting of acquisition and debt placement fees over the next several fiscal years.
5.
Notes Payable
Notes payable consisted of the following:
 
 
 
September 30,
2003
 
December 31,
2002
 
 
 
 
 
Installment notes payable to banks; interest ranging from 5.75% to 7.75%, due in monthly installments ranging from $60 to $1,980, including interest, with final payments due from June through December 2004.
 
$
74,668
 
 
—
 
Installment notes payable to banks; interest ranging from 5.50% to 6.75%, due in monthly installments ranging from $151 to $4,212, including interest, with final payments due from January through December 2005.
 
 
444,442
 
 
—
 
Installment notes payable to banks; interest ranging from 5.50% to 6.00%, due in monthly installments ranging from $155 to $1,445, including interest, with final payments due in January 2006.
 
 
54,966
 
 
—
 
 
 
 
 
 
 
$
574,076
 
 
—
 
 
 
 
 
 
 
 
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 September 30, 2003 are as follows:
 
 
 
Amount
 
 
 
 
Three months ended December 31, 2003
 
$
86,273
 
Year ended December 31, 2004
 
 
341,539
 
Year ended December 31, 2005
 
 
144,174
 
Year ended December 31, 2006
 
 
2,090
 
 
 
 
 
 
$
574,076
 
 
 
 
 
6.
Supplemental
Cash Flow
Information
Other noncash activities included in the determination of net loss are as follows:
 
 
 
Nine months
ended
September
30,
2003
 
For the
period
July 8, 2002
(Commencement
of
Operation)
through
September 30,
2002
 
 
 
 
 
Lease income, net of interest expense on notes payable realized as a result of direct payment of principal by lessee to bank
 
$
241,928
 
$
—
 
 
 
 
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:
 
 
 
Nine months
ended
September 30,
2003
 
For the period
July 8, 2002
(Commencement
of
Operation)
through
September 30,
2002
 
 
 
 
 
Debt assumed in connection with purchase of computer equipment
 
$
816,004
 
$
—
 
 
 
 
 
 
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.  The Partnership will acquire equipment with no associated debt obligations with the original contributions.  The Partnership plans on acquiring equipment leases with associated debt obligations from the monthly rental payments associated with the equipment acquired with its original capital contributions. Depreciation on computer equipment for financial statement purposes is based on the straight-line method over estimated useful lives of four years.
 
REVENUE RECOGNITION
 
Through September 30, 2003, the Partnership has only entered into operating leases.  Lease revenue is recognized on a monthly basis in accordance with the terms of the operating lease agreements.
 
The Partnership reviews a customer’s credit history extending credit and establishes provisions for uncollectible accounts 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. 
 
Liquidity and Capital Resources
 
The Partnership’s primary source of capital for the nine months ended September 30, 2003 was contributions of approximately $11,340,000.  The primary uses of cash for the nine months ended September 30, 2003 were for capital expenditures of new equipment totaling $2,861,000, offering costs of approximately $1,219,000, payment of an advance made by the Partnership to CCC, a related party to the Partnership, of approximately $120,000 and payments of preferred distributions to partners of approximately $578,000. 
 
The Partnership’s primary source of capital for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002 was contributions of approximately $2,142,000.  The primary uses of cash for the nine months ended September 30, 2002 were for capital expenditures of new equipment totaling $805,000, offering costs of approximately $228,000 and payments of preferred distributions to partners of approximately $23,000.
 
For the nine month period ended September 30, 2003, the Partnership used cash flows from operating activities of $430,000, which includes a net loss of $974,000, depreciation and amortization expenses of $736,000. Other noncash activities included in the determination of net income include direct payments of lease income by lessees to banks of $242,000. 
For the for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002, the Partnership generated cash flows from operating activities of $7,000, which includes a net loss of $208,000, depreciation and amortization expenses of $12,000, and a payable to the General Partner of approximately $154,000.
 
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.  At September 30, 2003, the Partnership had approximately $5,978,000 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, 2003, the Partnership had future minimum rentals on non-cancelable operating leases of $524,000 for the balance of the year ending December 31, 2003 and $4,081,000 thereafter.  At September 30, 2003, the outstanding debt was $574,000, with interest rates ranging from 5.50% to 7.75%, and will be payable through January 2006.
 
During the nine-months ended September 30, 2003, the Partnership made a non-interest bearing advance to CCC, a related party to the Partnership, in the amount of approximately $120,000.  This advance, as well as potential future advances, was and will be made at the discretion of the General Partner.  CCC, through its indirect subsidiaries, including the General Partner of the Partnership, earns fees based on revenues and new lease purchases from this fund.  CCC, through its indirect subsidiaries, including the General Partner of the Partnership, earns fees based on revenues and new lease purchases from this fund.  CCC intends to repay the receivable by the offsetting of acquisition and debt placement fees over the next several fiscal years.
 
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, 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 at September 30, 2003 was approximately $8,000, 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 September 30, 2003 was approximately $48,000.  The Partnership did not participate in shared equipment as of December 31, 2002.
 
Results of Operations
 
Three Months Ended September 30, 2003 compared to the period of July 8, 2002
(Commencement of Operations) through September 30, 2002
 
For the three months ended September 30, 2003, the Partnership recognized income of $397,000, and expenses of $768,000, resulting in a net loss of $371,000. For the period of
July 8, 2002 (Commencement of Operations) through September 30, 2002, the Partnership recognized income of $19,000 and expenses of $227,000  resulting in a net loss of $208,000.
 
Lease income was approximately $388,000 for the three months ended September 30, 2003.  The Partnership has entered into approximately seven new leases during the quarter ended September 30, 2003.  Lease income was approximately $18,000 for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002.  The Partnership entered into approximately twenty-two leases for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002
 
For the three months ended September 30, 2003, operating expenses of approximately $380,000, excluding depreciation, primarily consist of professional fees of approximately $15,000, due diligence of approximately $40,000, outside service fees of approximately $30,000, advertising and promotions of approximately $16,000, printing services or approximately $29,000, postage of approximately $13,000, wholesalers’ travel expenses of approximately $35,000, conventions of $10,000 and reimbursement of expenses to CCC for administration and operation of the Partnership of approximately $85,000.
 
For the period of July 8, 2002 (Commencement of Operations) through September 30, 2002, operating expenses of $192,000, excluding depreciation, primarily consists of the amount charged by Commonwealth Capital Corp, a related party, to the Partnership for the administration and operation of approximately $154,000.  This amount includes approximately $103,000 that was incurred by CCC on behalf of the Partnership through the date the Partnership broke escrow, July 8, 2002.
 
Organizational costs were approximately $34,000 for the three months ended September 30, 2003 and approximately $23,000 for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002. 
 
The equipment management fee is approximately 5% of the gross lease revenue attributable to equipment that is subject to operating leases. The equipment management fee is approximately $19,000 for the three months ended September 30, 2003 and approximately $1,000 for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002. 
 
Depreciation and amortization expenses consist of depreciation on computer equipment and amortization of equipment acquisition fees. The expenses totaled approximately $324,000 for the three months ended September 30, 2003 and approximately $12,000 for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002. 
 
Nine Months Ended September 30, 2003 compared to the period of July 8, 2002
(Commencement of Operations) through September 30, 2002
 
For the nine months ended September 30, 2003, the Partnership recognized income of $987,000 and expenses of $1,961,000 resulting in a net loss of $974,000.  For the period of July 8, 2002 (Commencement of Operations) through September 30, 2002, the Partnership recognized income of $19,000 and expenses of $227,000 resulting in a net loss of $208,000.
Lease income was approximately $971,000 for the nine months ended September 30, 2003.  The Partnership has entered into approximately ninety-one leases through the nine months ended September 30, 2003.  Lease income was approximately $18,000 for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002.  The Partnership entered into approximately 22 leases for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002.
 
For the nine months ended September 30, 2003, operating expenses of approximately $1,045,000, excluding depreciation, primarily consist of professional fees of approximately $90,000, due diligence of approximately $112,000, outside service fees of approximately $49,000, postage of approximately $26,000, printing services of approximately $87,000, wholesalers’ travel expenses of approximately $100,0000, advertising and promotions of approximately $26,000 and reimbursement of expenses to CCC for administration and operation of the Partnership of approximately $222,000. Operating expenses of $192,000, excluding depreciation, primarily consists of the amount charged by Commonwealth Capital Corp, a related party, to the Partnership for the administration and operation of approximately $154,000 for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002.  This amount includes approximately $103,000 that was incurred by CCC on behalf of the Partnership through the date the Partnership broke escrow, July 8, 2002.
 
For the nine months ended September 30, 2003, organizational costs were approximately $100,000 and approximately $23,000 for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002. 
 
The equipment management fee is approximately 5% of the gross lease revenue attributable to equipment that is subject to operating leases. The equipment management fee is approximately $49,000 for the nine months ended September 30, 2003 and approximately $1,000 for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002. 
 
Depreciation and amortization expenses consist of depreciation on computer equipment and amortization of equipment acquisition fees. The expenses totaled approximately $736,000 for the nine months ended September 30, 2003 and approximately $12,000 for the period of July 8, 2002 (Commencement of Operations) through September 30, 2002. 
 
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
 
Inapplicable
 
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 September 30, 2003.
 
The Partnership’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 quarters.
 
Based upon this review, the Partnership’s Chief Executive Officer and a Financial Officer 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 IV
 
 
 
 
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:
 
 
 
 
 
 
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
 
 
 
 
 
b)
Report on Form 8-K:   None
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 IV
 
 
BY: COMMONWEALTH INCOME & GROWTH FUND, INC. General Partner
 
 
 
November 10, 2003
By:
/s/ GEORGE S. SPRINGSTEEN
Date
George S. Springsteen
 
President