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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, 2005
( ) 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 (I.R.S. Employer Identification Number)
incorporation or organization)
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 (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]
FORM 10-Q
MARCH 31, 2005
TABLE OF CONTENTS
PART I
Item 1. Condensed Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4. Controls and Procedures 15
PART II
Item 1. Legal Proceedings 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Securities Holders 16
Item 5. Other Information 16
Item 6. Index to Exhibits
Signatures
Certifications
COMMONWEALTH INCOME & GROWTH FUND IV
CONDENSED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2005 2004
---------------------------------------
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 396,307 $ 719,161
Lease income receivable - 157,741
Other receivables - affiliated limited partnerships 3,796 -
Deferred revenue 631 913
Refundable deposits 2,166 1,130
---------------------------------------
402,900 878,945
---------------------------------------
Computer equipment, at cost 15,063,073 14,299,155
Accumulated depreciation (5,236,600) (4,386,199)
---------------------------------------
9,826,473 9,912,956
---------------------------------------
Equipment acquisition costs and deferred expenses, net 346,557 369,202
Other receivables - Commonwealth Capital Corp 252,796 243,435
Prepaid acquisition fees 100,138 98,321
---------------------------------------
699,491 710,958
---------------------------------------
TOTAL ASSETS $ 10,928,864 $ 11,502,859
=======================================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accounts payable, primarily for equipment purchases 65,989 118,403
Accounts payable - other affiliated partnerships - 376,552
Accounts payable - General Partner 21,025 53,075
Accounts payable - Commonwealth Capital Corp. 29,468 -
Unearned lease income 38,067 60,464
Notes payable 2,268,098 2,035,898
---------------------------------------
TOTAL LIABILITIES 2,422,647 2,644,392
---------------------------------------
PARTNERS' CAPITAL
General partner 1,000 1,000
Limited partners 8,505,217 8,857,467
---------------------------------------
TOTAL PARTNERS' CAPITAL 8,506,217 8,858,467
---------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 10,928,864 $ 11,502,859
=======================================
see accompanying notes to condensed financial statements
COMMONWEALTH INCOME & GROWTH FUND IV
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2005 2004
------------ -------------
(UNAUDITED)
INCOME
Lease $ 1,252,838 $ 967,692
Interest and other 551 7,663
------------ ------------
TOTAL INCOME 1,253,389 975,355
------------ ------------
EXPENSES
Operating, excluding depreciation 157,306 338,370
Equipment management fee - General Partner 59,986 48,385
Interest 29,253 28,052
Depreciation 912,250 686,836
Amortization of equipment
acquisition costs and deferred expenses 53,645 41,184
Loss on sale of computer equipment 8,805 2,919
------------ ------------
TOTAL EXPENSES 1,221,245 1,145,746
------------ ------------
NET INCOME (LOSS) $ 32,144 $ (170,391)
============ ===========
NET INCOME (LOSS) PER EQUIVALENT LIMITED
PARTNERSHIP UNIT $ 0.04 $ (0.23)
============ ===========
WEIGHTED AVERAGE NUMBER OF EQUIVALENT LIMITED
PARTNERSHIP UNITS OUTSTANDING DURING THE PERIOD 749,050 749,950
============ ===========
see accompanying notes to condensed financial statements
COMMONWEALTH INCOME & GROWTH FUND IV
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(UNAUDITED)
GENERAL LIMITED
PARTNER PARTNER GENERAL LIMITED
UNITS UNITS PARTNER PARTNER TOTAL
------------------------------------------------------------------------------------------
PARTNERS' CAPITAL - DECEMBER 31, 2004 50 749,950 $ 1,000 $ 8,857,466 $ 8,858,466
------------------------------------------------- ---------------------------------------
Net income (loss) - - 3,748 28,396 32,144
Redemption (9,617) (9,617)
Distributions - - (3,748) (371,028) (374,776)
-------------------------------------------------- ---------------------------------------
PARTNERS' CAPITAL - MARCH 31, 2005 50 749,950 $ 1,000 $ 8,505,217 $ 8,506,217
================================ ================ =================== ===================
see accompanying notes to condensed financial statements
COMMONWEALTH INCOME & GROWTH FUND IV
CONDENSED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
2005 2004
----------------------------------
(UNAUDITED)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 359,990 $ (2,108,215)
----------------------------------
INVESTING ACTIVITIES:
Capital expenditures (284,023) (614,091)
Acquisition fees (27,132) -
Net proceeds from sale of computer equipment 18,066 55,432
----------------------------------
NET CASH (USED IN) INVESTING ACTIVITIES (293,089) (558,659)
----------------------------------
FINANCING ACTIVITIES:
Redemptions (9,617) -
Distributions to partners (374,776) (375,492)
Other receivable, Commonwealth Capital Corp 324 (83,439)
Debt Placement fee paid to the General Partner (5,686) -
----------------------------------
(458,931)
NET CASH (USED IN) FINANCING ACTIVITIES (389,755)
----------------------------------
Net (decrease) increase in cash and cash equivalents (322,854) (3,125,805)
Cash and cash equivalents, beginning of period 719,161 4,644,293
----------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 396,307 $ 1,518,488
==================================
see accompanying notes to condensed financial statements
NOTES TO CONDENSED 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 was 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 and was
fully subscribed on September 15, 2003.
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 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,
2004. Operating results for the three-month
period ended March 31, 2005 are not
necessarily indicative of financial results
that may be expected for the full year ended
December 31, 2005.
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. The
partnership determined that no impairment had
occurred during the three months ended March
31, 2005.
Depreciation on computer equipment for
financial statement purposes is based on the
straight-line method over estimated useful
lives of four years.
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.
3. COMPUTER The Partnership is the lessor of equipment
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.
Through March 31, 2005, 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's share of the computer
equipment in which they participate at March
31, 2005 and December 31, 2004 was
approximately $909,000 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, 2005 and December 31, 2004 was
approximately $1,798,000 for both period
ends.
The following is a schedule of future minimum
rentals on noncancellable operating leases at
March 31, 2005:
Amount
-------------------------------------------------------------------------
Nine Months ended December 31, 2005 $ 3,180,000
Year Ended December 31, 2006 3,325,000
Year Ended December 31, 2007 693,000
Year Ended December 31, 2008 29,000
-----------
$ 7,227,000
-------------------------------------------------------------------------
4. RELATED PARTY
TRANSACTIONS
OTHER RECEIVABLES
As of March 31, 2005, the Partnership has an
unsecured, non-interest bearing receivable from
CCC, a related party to the Partnership, in the
amount of approximately $253,000, which primarily
originated in 2003. 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 these receivables, through acquisition
fees, debt placement fees and reimbursement of
expenses, with a minimum amount of $12,500 per
quarter, which commenced in the quarter ending
March, 2004.
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, 2005 and 2004, the Partnership recorded
$66,000 and $277,000, respectively, for
reimbursement of expenses to the General Partner.
EQUIPMENT ACQUISITION FEE
The General Partner is entitled to be paid an
equipment acquisition fee of 4% of the purchase
price of each item of equipment purchased as
compensation for the negotiation of the
acquisition of the equipment and lease thereof or
sale under a conditional sales contract. During
the three months ended March 31, 2005 and 2004,
equipment acquisition fees of approximately
$34,000 and $70,000, respectively, were earned by
the General Partner.
DEBT PLACEMENT FEE
As compensation for arranging term debt to
finance the acquisition of equipment by the
Partnership, the General Partner is paid a fee
equal to 1% of such indebtedness; provided,
however, that such fee shall be reduced to the
extent the Partnership incurs such fees to third
parties, unaffiliated with the General Partner or
the lender, with respect to such indebtedness and
no such fee will be paid with respect to
borrowings from the General Partner or its
affiliates. During the three months ended March
31, 2005, debt placement fees of approximately
$6,000 were earned by the General Partner. There
were no debt placement fees earned by the General
Partner during the three months ended March 31,
2004.
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, 2005 and 2004, equipment management
fees of approximately $60,000 and $48,000,
respectively, were earned by the General Partner.
EQUIPMENT LIQUIDATION FEE
With respect to each item of equipment sold by
the General Partner (other than in connection
with a conditional sales contract), a fee equal
to the lesser of (i) 50% of the competitive
equipment sale commission or (ii) three percent
of the sales price for such equipment is payable
to the General Partner. The payment of such fee
is subordinated to the receipt by the limited
partners of the net disposition proceeds from
such sale in accordance with the Partnership
Agreement. Such fee will be reduced to the extent
any liquidation or resale fees are paid to
unaffiliated parties. During the three months
ended March 31, 2004, equipment liquidation fees
of approximately $2,000 were earned by the
General Partner. There were no equipment
liquidation fees earned by the General Partner
during the three months ended March 31, 2005.
5. NOTES PAYABLE Notes payable consisted of the following:
MARCH 31, DECEMBER 31,
2005 2004
----------------------------------------------------------------------------------
Installment notes payable to banks; interest
ranging from 5.00% to 6.75%, due in monthly
installments ranging from $151 to $4,212,
including interest, with final payments due from
January through December 2005. 76,709 139,927
Installment notes payable to banks; interest
ranging from 4.85% to 6.00%, due in monthly
installments ranging from $155 to $22,902,
including interest, with final payments due in
January through August 2006. 617,153 865,709
Installment notes payable to banks;
interest ranging from 4.29% to
6.35%, due in monthly installments
ranging from $3,746 to $13,488,
including interest, with final
payments due in January through
December 2007. 1,332,078 1,030,262
Installment notes payable to banks;
interest ranging from 5.36% to
5.90%, due in monthly installments
ranging from $675 to $6,973
including interest, with final
payment due in January through
February 2008. 242,158 -
----------------------------------
$ 2,268,098 $ 2,035,898
----------------------------------------------------------------------------------
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, 2005 are as follows:
Amount
-------------
Nine months ended December 31, 2005 $ 981,985
Year ended December 31, 2006 852,105
Year ended December 31, 2007 419,623
Year ended December 31, 2008 14,385
-------------
$ 2,268,098
-------------
6. SUPPLEMENTAL Other noncash activities included in the
CASH FLOW determination of net loss are as follows:
INFORMATION
Three Months Ended March 31, 2005 2004
- -------------------------------------------------------------------------- ---------------
Lease income, net of interest expense on
notes payable realized as a result of
direct payment of principal by lessee to bank $ 336,417 $ 249,879
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:
Three Months Ended March 31, 2005 2004
- -------------------------------------------------------------------------- ---------------
Debt assumed in connection with purchase of
computer equipment $ 569,000 $ 816,000
- -------------------------------------------------------------------------- ---------------
Equipment acquisition fees earned by General
Partner upon purchase of equipment from prepaid
acquisition fees $ - $ 24,564
- --------------------------------------------------------------------------------------------------
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
The Partnership's discussion and analysis of its financial condition and results
of operations are based upon its financial statements which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires the Partnership
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. The Partnership bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
The Partnership believes that its critical accounting policies affect its more
significant judgments and estimates used in the preparation of its financial
statements.
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 March 31, 2005, 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 three months ended March 31,
2005 and 2004 was from net proceeds received from sale of equipment of
approximately $18,000 and $55,000, respectively. The primary uses of cash for
the three months ended March 31, 2005 and 2004 were for capital expenditures for
new equipment of approximately $284,000 and $614,000, respectively, and the
payment of preferred distributions to partners of approximately $375,000 and
$375,000, respectively. The Partnership also made an advance to CCC, a related
party to the Partnership, in the amount of approximately $83,000 for the three
months ended March 31, 2004.
For the three month period ended March 31, 2005, the Partnership generated cash
flows from operating activities of approximately $360,000, which includes net
income of approximately $32,000, payment of accounts payable, which was
primarily for the purchase of equipment of approximately $52,000, a loss on sale
of equipment of approximately $9,000, and depreciation and amortization expenses
of approximately $966,000. Other non-cash activities included in the
determination of net income include direct payments of lease income by lessees
to banks of approximately $336,000.
For the three month period ended March 31, 2004, the Partnership used cash flows
from operating activities of approximately $2,108,000, which includes a net loss
of approximately $170,000, payment of accounts payable, which was primarily for
the purchase of equipment of approximately $2,260,000, a loss on sale of
equipment of approximately $3,000, and depreciation and amortization expenses of
approximately $728,000. Other non-cash activities included in the determination
of net income include direct payments of lease income by lessees to banks of
approximately $250,000.
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 March 31, 2005, the Partnership did not have any cash invested in
these money market accounts due to a change in banks used by the Partnership.
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, 2005, the Partnership had future minimum rentals on non-cancelable
operating leases of $3,180,000 for the balance of the year ending December 31,
2005 and $4,047,000 thereafter. At March 31, 2005, the outstanding debt was
$2,268,000, with interest rates ranging from 4.29% to 6.75%, and will be payable
through February 2008.
As of March 31, 2005, the Partnership has an unsecured, non-interest bearing
receivable from CCC, a related party to the Partnership, in the amount of
approximately 253,000, which primarily originated in 2003. 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 these receivables, through acquisition fees, debt placement fees and
reimbursement of expenses, with a minimum amount of $12,500 per quarter, which
commenced in the quarter ending March, 2004.
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
March 31, 2005 and March 31, 2004 was approximately $909,000 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, 2005 and March 31, 2004 was approximately $1,798,000
for both period ends.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2005 compared to Three Months Ended March 31, 2004
For the three months ended March 31, 2005, the Partnership recognized income of
approximately $1,253,000, and expenses of approximately $1,221,000, resulting in
net income of approximately $32,000. For the three months ended March 31, 2004,
the Partnership recognized income of approximately $975,000 and expenses of
approximately $1,146,000 resulting in a net loss of approximately $170,000.
Lease income increased by 29% to $1,253,000 for the quarter ended March 31,
2005, from $968,000 for the quarter ended March 31, 2004, primarily due to the
fact that more lease agreements were entered into since the quarter ended March
31, 2005.
Operating expenses, excluding depreciation, primarily consist of accounting,
legal, outside service fees and reimbursement of expenses to CCC, a related
party, for administration and operation of the Partnership. The expense
decreased 54% to approximately $157,000 for the quarter ended March 31, 2005,
from $338,000 for the quarter ended March 31, 2004, which is primarily
attributable to an decrease in the amount charged by CCC of approximately
$201,000 to the Partnership for the administration and operation of the
partnership. There was a decrease in due diligence expenses of approximately
$39,000.
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 increased 50% to approximately $60,000 for the quarter ended
March 31, 2005, from $48,000 for the quarter ended March 31, 2004, which is
consistent with the increase in lease income.
Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of equipment acquisition fees. The expenses increased
33% to approximately $969,000 for the quarter ended March 31, 2005, from
$728,000 for the quarter ended March 31, 2004 due to additional equipment being
purchased and the associated acquisition and finance fees being recorded by the
Partnership since the quarter ended March 31, 2004.
The Partnership sold computer equipment with a net book value of approximately
$27,000 for the quarter ended March 31, 2005, for a net loss of approximately
$9,000. The Partnership sold computer equipment with a net book value of
approximately $58,000 for the quarter ended March 31, 2004, for a net loss of
approximately $3,000
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, 2005.
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.
There have been no changes in the General Partner's internal controls or in
other factors that could materially affect our disclosure controls and
procedures in the quarter ended March 31, 2005, that have materially affected or
are reasonably likely to materially affect the General Partner's internal
controls over financial reporting.
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
May 16, 2005 By: /s/ George S. Springsteen
- ------------ ------------------------------
Date George S. Springsteen
President