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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 MARCH 31, 2004
( ) 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 Identification Number)
incorporation or organization)
470 John Young Way Suite 300
Exton, Pennsylvania 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 (ii) has been subject to such filing
requirements for the past 90 days: YES [X] NO [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12c-2 of the Act): YES [ ] NO [X]
COMMONWEALTH INCOME & GROWTH FUND I
BALANCE SHEETS
MARCH 31, DECEMBER 31,
2004 2003
------------- ------------
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 6,420 $ 1,409
Lease income receivable, net of allowance for
doubtful accounts reserve of $299,578 as of
March 31, 2004 and December 31, 2003 253,750 250,764
Net investment in direct financing lease 20,327 22,585
Prepaid expenses 685 -
Other receivables - 200
------------ ------------
281,182 274,958
------------ ------------
Computer equipment, at cost 2,610,749 2,610,749
Accumulated depreciation (2,266,107) (2,210,289)
------------ ------------
344,642 400,460
------------ ------------
Equipment acquisition costs and deferred expenses, net 5,731 8,733
------------ ------------
TOTAL ASSETS $ 631,555 $ 684,151
============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accounts payable $ 1,676 $ 2,097
Accounts payable - affiliated limited partnerships 124,393 124,393
Accounts payable - General Partner 267,847 261,756
Accounts payable - Commonwealth Capital Corp. 20,423 21,220
Accrued expenses 3,000 -
Unearned lease income 18,181 19,769
Notes payable 118,280 168,343
------------ ------------
TOTAL LIABILITIES 553,800 597,578
------------ ------------
PARTNERS' CAPITAL
General partner 1,000 1,000
Limited partners 76,755 85,573
------------ ------------
TOTAL PARTNERS' CAPITAL 77,755 86,573
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 631,555 $ 684,151
============ ============
see accompanying notes to financial statements
COMMONWEALTH INCOME & GROWTH FUND I
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
2004 2003
--------- ---------
(UNAUDITED)
INCOME
Lease $ 64,953 $ 88,281
Gain on sale of computer equipment - 5,640
--------- ---------
TOTAL INCOME 64,953 93,921
--------- ---------
EXPENSES
Operating, excluding depreciation 10,117 60,801
Equipment management fee - General Partner 2,302 4,432
Interest 2,532 7,750
Depreciation 55,818 66,642
Amortization of equipment
acquisition costs and deferred expenses 3,002 4,391
--------- ---------
TOTAL EXPENSES 73,771 144,016
--------- ---------
NET (LOSS) $ (8,818) $ (50,095)
========= =========
NET (LOSS) PER EQUIVALENT LIMITED
PARTNERSHIP UNIT $ (0.01) $ (0.08)
========= =========
WEIGHTED AVERAGE NUMBER OF EQUIVALENT LIMITED
PARTNERSHIP UNITS OUTSTANDING DURING THE PERIOD 631,124 631,124
========= =========
see accompanying notes to financial statements
COMMONWEALTH INCOME & GROWTH FUND I
STATEMENTS OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED)
GENERAL LIMITED
PARTNER PARTNER GENERAL LIMITED
UNITS UNITS PARTNER PARTNER TOTAL
PARTNERS' CAPITAL - DECEMBER 31, 2003 50 631,124 $ 1,000 $ 85,573 $ 86,573
-------- -------- ------- -------- --------
Net (loss) - (8,818) (8,818)
-------- -------- ------- -------- --------
PARTNERS' CAPITAL - MARCH 31, 2004 50 631,124 $ 1,000 $ 76,755 $ 77,755
======== ======== ======= ======== ========
see accompanying notes to financial statements
COMMONWEALTH INCOME & GROWTH FUND I
STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
2004 2003
----------- ----------
OPERATING ACTIVITIES (UNAUDITED)
Net (loss) $ (8,818) $ (50,095)
Adjustments to reconcile net (loss) to net cash
provided by operating activities
Depreciation and amortization 58,820 71,033
(Gain) on sale of computer equipment - (5,820)
Other noncash activities included in
determination of net (loss) (47,805) (68,277)
Changes in assets and liabilities
(Increase) decrease in assets
Lease income receivable (2,986) (2,005)
Other receivables 200 -
Prepaid expenses (685) -
Increase (decrease) in liabilities
Accounts payable (421) 4,097
Accounts payable, General Partner 6,091 38,931
Accounts payable, Common Capital Corp. (797) 3,434
Accounts payable, affiliated limited
partnerships - 10,696
Other accrued expenses 3,000 -
Unearned lease income (1,588) (138)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,011 1,856
---------- ----------
INVESTING ACTIVITIES:
Capital expenditures - (5,000)
Net proceeds from the sale of computer equipment - 5,820
Equipment acquisition fees paid to General Partner - (200)
---------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES - 620
---------- ----------
Net increase in cash and cash equivalents 5,011 2,476
Cash and cash equivalents, beginning of period 1,409 438
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,420 $ 2,914
========== ===========
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
CCC. 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. BUSINESS PLAN The Partnership, has suffered recurring
losses from operations, declining cash
provided by operating activities, has not
paid partner distributions since June 2001,
has a partners' capital of approximately
$78,000 at March 31, 2004 and CCC filed a
lawsuit on the Partnership's behalf (see Note
8), alleging that the named defendant has not
returned the proper leased equipment.
The lawsuit, which was originally filed in
2001, still has not been heard by the court
due to several postponements by the judge
assigned to the lawsuit. The Partnership has
made several attempts to transfer the case to
another judge. The General Partner has
decided that if the court does not hear the
lawsuit by June 30, 2004, then the General
Partner will seek to transfer the lawsuit and
the related lease receivable to a trust on
behalf of the Partnership and begin the
liquidation phase of the Partnership as
provided for in the original Partnership
agreement. If the court hears the lawsuit by
June 30, 2004, and if the outcome of the
lawsuit is favorable, the General Partner
plans to use the proceeds from the lawsuit to
continue current Partnership operations and
purchase additional equipment leases, without
paying fees to the General Partner, with
terms of approximately 12-24 months. If the
outcome of the lawsuit is not to the General
Partner's satisfaction, then the General
Partner plans to begin the liquidation phase
of the Partnership. If the Partnership's cash
is insufficient from operations or if the
trust has insufficient cash, the General
Partner and CCC intend to pay the legal
expenses associated with the lawsuit on
behalf on the Partnership.
The General Partner intends to review and
reassess the Partnership's business plan on a
quarterly basis.
3. SUMMARY OF BASIS OF PRESENTATION
SIGNIFICANT
ACCOUNTING
POLICIES 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,
2003. Operating results for the three-month
period ended March 31, 2004 are not
necessarily indicative of financial results
that may be expected for the full year ended
December 31, 2004.
REVENUE RECOGNITION
Through March 31, 2004, 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 March 31,
2004, 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.
4. NET INVESTMENT The following lists the components of the net
IN DIRECT FINANCING investment in a direct financing lease as of
LEASE March 31, 2004 and December 31, 2003:
MARCH 31, December 31,
2004 2003
-------- ------------
Minimum lease payments
receivable $27,081 $30,090
Less: Unearned Revenue 6,754 7,505
------- -------
Net investment in direct
financing lease $20,327 $ 22,585
======= ========
The following is a schedule of future minimum
rentals on the noncancellable direct
financing lease at March 31, 2004:
Amount
---------
Nine Months Remaining December 31, 2004 $ 9,027
Year Ended December 31, 2005 12,036
Year Ended December 31, 2006 6,018
--------
$ 27,081
========
5. 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 March 31, 2004 and
December 31, 2003 was approximately $448,000
for both period ends, 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 March 31, 2004 and
December 31, 2003 was approximately
$2,258,000 for both period ends. The
Partnership's share of the outstanding debt
associated with this equipment at March 31,
2004 and December 31, 2003 was approximately
$69,000 and $96,000, respectively, which is
included in the Partnership's liabilities on
the balance sheet, and the total outstanding
debt at March 31, 2004 and December 31, 2003
related to the equipment shared by the
Partnership was approximately $381,000 and
$537,000, respectively.
The following is a schedule of future minimum
rentals on noncancellable operating leases at
March 31, 2004:
Amount
---------
Nine months ended December 31, 2004 $ 119,000
Year ended December 31, 2005 12,000
Year ended December 31, 2006 5,000
---------
$ 136,000
=========
6. RELATED PARTY
TRANSACTIONS REIMBURSABLE EXPENSES
The General Partner and its affiliates are
entitled to reimbursement by the Partnership
for the cost of supplies and services
obtained and used by the General Partner in
connection with the administration and
operation of the Partnership from third
parties unaffiliated with the General
Partner. In addition, the General Partner and
its affiliates are entitled to reimbursement
for certain expenses incurred by the General
Partner and its affiliates in connection with
the administration and operation of the
Partnership. During the three months ended
March 31, 2004 and 2003, the Partnership
recorded $4,000 and $41,000, respectively,
for reimbursement of expenses to the General
Partner.
EQUIPMENT MANAGEMENT FEE
The General Partner is entitled to be paid a
monthly fee equal to the lesser of (i) the
fees which would be charged by an independent
third party for similar services for similar
equipment or (ii) the sum of (a) two percent
of (1) the gross lease revenues attributable
to equipment which is subject to full payout
net leases which contain net lease provisions
plus (2) the purchase price paid on
conditional sales contracts as received by
the Partnership and (b) 5% of the gross lease
revenues attributable to equipment which is
subject to operating and capital leases.
During the three months ended March 31, 2004
and 2003, equipment management fees of
approximately $2,000 and $4,000,
respectively, were earned by the General
Partner.
7. NOTES PAYABLE Notes payable consisted of the following:
MARCH 31, December 31,
2004 2003
--------- -----------
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. 93,149 140,640
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. 25,131 27,703
--------- ---------
$ 118,280 $ 168,343
========= =========
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 March 31, 2004 are as follows:
Amount
---------
Nine months ended December 31, 2004 $ 101,123
Year ended December 31, 2005 11,252
Year ended December 31, 2006 5,905
---------
$ 118,280
=========
8. SUPPLEMENTAL Other noncash activities included in the
CASH FLOW determination of net income are as follows:
INFORMATION
Three months ended March 31, 2004 2003
- ---------------------------- -------- ---------
Lease income, net of interest expense on
notes payable realized as a result of
direct payment of principal by lessee
to bank
$ 47,805 $ 68,277
========= ========
No interest or principal on notes payable was
paid by the Partnership because direct
payment was made by lessees to the bank in
lieu of collection of lease income and
payment of interest and principal by the
Partnership.
9. 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. The
lawsuit had been scheduled for February 9,
2004, but that has been postponed. A new date
has not yet been scheduled for the lawsuit.
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. 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 March 31, 2004, 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.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary source of capital for the three months ended March 31,
2004 was cash from operations of approximately $5,000. Primary sources of
capital for the three months ended March 31, 2003 were cash from operations of
approximately $2,000, and the net proceeds received from sale of equipment of
approximately $6,000. The primary use of cash for the three months ended March
31, 2003 was for the purchase of computer equipment in the amount of
approximately $5,000. There were no distributions paid for the three months
ended March 31, 2004 and 2003.
For the three-month period ended March 31, 2004, the Partnership generated cash
from operating activities of approximately $5,000, which includes a net loss of
approximately $9,000 and depreciation and amortization expenses of approximately
$59,000. Other non-cash activities included in the determination of net income
include direct payments of lease income by lessees to banks of $48,000.
For the three-month period ended March 31, 2003, the Partnership generated cash
flows from operating activities of approximately $2,000, which includes a net
loss of approximately $50,000, a net gain from the sale of computer of
approximately $6,000 and depreciation and amortization expenses of approximately
$71,000. Other non-cash activities included in the determination of net income
include direct payments of lease income by lessees to banks of approximately
$68,000.
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 March 31, 2004, the Partnership had future minimum rentals on non-cancelable
operating leases of $119,000 for the balance of the year ending December 31,
2004 and $17,000 thereafter. At March 31, 2004, outstanding debt was $118,000,
with interest rates ranging from 6.25% to 9.25%, payable through June 2006.
The Partnership's share of the computer equipment in which they participate with
other partnerships at March 31, 2004 and December 31, 2003 was approximately
$448,000 for both period ends, 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 March 31, 2004 and December 31, 2003 was
approximately $2,258,000 for both period ends. The Partnership's share of the
outstanding debt associated with this equipment at March 31, 2004 and December
31, 2003 was approximately $69,000 and $96,000, respectively, which is included
in the Partnership's liabilities on the balance sheet, and the total outstanding
debt at March 31, 2004 and December 31, 2003 related to the equipment shared by
the Partnership was approximately $381,000 and $537,000, respectively.
The Partnership, has suffered recurring losses from operations, declining cash
provided by operating activities, has not paid partner distributions since June
2001, has a partners' capital of approximately $78,000 at March 31, 2004 and CCC
filed a lawsuit on the Partnership's behalf (see Note 8), alleging that the
named defendant has not returned the proper leased equipment.
The lawsuit, which was originally filed in 2001, still has not been heard by the
court due to several postponements by the judge assigned to the lawsuit. The
Partnership has made several attempts to transfer the case to another judge. The
General Partner has decided that if the court does not hear the lawsuit by June
30, 2004, then the General Partner will seek to transfer the lawsuit and the
related lease receivable to a trust on behalf of the Partnership and begin the
liquidation phase of the Partnership as provided for in the original Partnership
agreement. If the court hears the lawsuit by June 30, 2004, and if the outcome
of the lawsuit is favorable, the General Partner plans to use the proceeds from
the lawsuit to continue current Partnership operations and purchase additional
equipment leases, without paying fees to the General Partner, with terms of
approximately 12-24 months. If the outcome of the lawsuit is not to the General
Partner's satisfaction, then the General Partner plans to begin the liquidation
phase of the Partnership. If the Partnership's cash is insufficient from
operations or if the trust has insufficient cash, the General Partner and CCC
intend to pay the legal expenses associated with the lawsuit on behalf of the
Partnership.
The General Partner intends to review and reassess the Partnership's business
plan on a quarterly basis.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2004 compared to Three Months Ended March 31, 2003
For the quarter ended March 31, 2004, the Partnership recognized income of
approximately $65,000 and expenses of approximately $74,000, resulting in a net
loss of approximately $9,000. For the quarter ended March 31, 2003, the
Partnership recognized income of approximately $94,000 and expenses of
approximately $144,000, resulting in a net loss of approximately $50,000.
Lease income decreased by 26% to approximately $65,000 for the quarter ended
March 31, 2004, from approximately $88,000 for the quarter ended March 31, 2003,
primarily due to the fact that lease agreements terminated since the quarter
ended March 31, 2003.
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 expense decreased 83% to
approximately $10,000 for the quarter ended March 31, 2004, from $61,000 for the
quarter ended March 31, 2003, which is primarily attributable to a decrease in
the amount charged by CCC, a related party, to the Partnership for the
administration and operation of approximately $30,000. There was also a decrease
in outside office services of approximately $3,000, a decrease in other
insurances of approximately $9,000, a decrease in office supplies of
approximately $3,000, a decrease in postage of approximately $2,000 and a
decrease in due diligence expenses of approximately $2,000.
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 48% to approximately $2,000 for the quarter ended March
31, 2004, from approximately $4,000 for the quarter ended March 31, 2003. The
General Partner has decided, in an effort to maintain operations of the
Partnership, to stop charging equipment management fees effective February 29,
2004.
Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of equipment acquisition fees. The expenses decreased
17% to approximately $59,000 for the quarter ended March 31, 2004, from
approximately $71,000 for the quarter ended March 31, 2003 due to the older
equipment becoming fully depreciated and certain acquisition and finance fees
being fully amortized.
The Partnership sold computer equipment with no net book value for the quarter
ended March 31, 2003, for a net gain of approximately $6,000. The Partnership
did not sell any computer equipment for the quarter ended March 31, 2004.
Interest expense decreased 67% to approximately $3,000 for the quarter ended
March 31, 2004 from approximately $8,000 for the quarter ended March 31, 2003;
primarily due to older equipment's associated debt being fully paid.
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
March 31, 2004.
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 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. The lawsuit had been scheduled for February
9, 2004, but that has been postponed. A new date has
not yet been scheduled for the lawsuit.
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 I
BY: COMMONWEALTH INCOME & GROWTH FUND, INC.
General Partner
May 17, 2004 By: /s/ George S. Springsteen
- ------------ ----------------------------
Date George S. Springsteen
President