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, 2000
( ) 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 III
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2895714
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1160 West Swedesford Road
Berwyn, Pennsylvania 19312
(Address, including zip code, of principal executive offices)
(610) 647-6800
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (ii) has been subject to such filing
requirements for the past 90 days:
YES [X] NO [ ]
COMMONWEALTH INCOME & GROWTH III
Balance Sheets
March 31, March 31,
2000 1999
----------- -----------
ASSETS
Cash and cash equivalents $ 125,568 $ 336,420
Lease income receivable 95,104 54,305
ACCOUNTS RECEIVABLE - GENERAL PARTNER 3,567 11,014
Other receivables and deposits 37 9,371
Computer equipment, at cost 3,625,236 2,156,537
Accumulated depreciation (1,180,283) (355,464)
----------- -----------
2,444,953 1,215,502
Equipment acquisition costs and deferred expenses,
net of accumulated amortization of $47,295 in
1999 and $20,779 in 1998 92,354 51,748
Organization costs, net of accumulated amortization
of $7,919 in 1999 and $4,248 in 1998 -- 22,333
----------- -----------
TOTAL ASSETS $ 2,761,546 $ 1,860,336
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 26,307 $ 2,790
Accounts payable - General Partner -- --
Unearned lease income 46,505 53,101
Notes payable 1,027,895 469,735
----------- -----------
Total liabilities 1,100,707 525,626
Partners' capital:
General partner 1,000 1,000
Limited partner 1,659,876 1,766,807
----------- -----------
Total partners' capital 1,660,876 1,760,998
----------- -----------
Total Liabilities and partners' equity $ 2,761,583 $ 1,860,336
=========== ===========
See accompanying notes
Commonwealth Income & Growth Fund III
Statements of Operations
THREE MONTHS ENDED
MARCH 31,
2000 1999
--------- ---------
Income:
Lease $ 290,176 154,905
Interest and other 13,041 3,262
--------- ---------
303,217 158,167
Expenses:
Operating, excluding depreciation 57,453 15,473
Equipment management fee - General Partner 19,729 7,745
Interest 16,595 2,927
Depreciation 230,992 117,224
Amortization of organizastion costs, equipment
acquisition costs and deferred expenses 13,341 7,987
--------- ---------
338,110 151,356
--------- ---------
Net income (loss) $ (34,893) $ 6,811
========= =========
Net income (loss) per equivalent limited
partnership unit $ (0.39) $ (0.18)
========= =========
Weighted Average number of equivalent limited
partnership units outstanding during the period 136,891 118,562
========= =========
See accompanying notes
COMMONWEALTH INCOME GROWTH FUND III
STATEMENT OF PARTNERS' CAPITAL
PARTNER UNITS GENERAL LIMITED
GENERAL LIMITED PARTNER PARTNER TOTAL
-------------------------------------------------------------------
Initial contribution - January 27, 1998 50 25 $ 1,000 $ 500 $ 1,500
Contributions 107,117 2,142,340 2,142,340
Offering costs (234,641) (234,641)
Net income 1,691 16,559 18,250
Distributions (1,691) (164,760) (166,451)
-------------------------------------------------------------------
Partners' capital - December 31, 1998 50 107,142 1,000 1,759,998 1,760,998
Contributions 25,792 515,849 515,849
Offering costs (56,486) (56,486)
Net income (loss) 2,191 (310,925) (308,734)
Distributions (2,191) (225,804) (227,995)
-------------------------------------------------------------------
Partners' capital December 31, 1999 50 132,934 $ 1,000 $ 1,682,632 $ 1,683,632
Contributions 4,591 91,817 91,817
Offering costs (10,629) (10,629)
Net income (loss) 622 (34,893) (34,271)
Distributions (622) (69,051) (69,673)
-------------------------------------------------------------------
Partners' capital March 31, 2000 50 137,525 $ 1,000 1,659,876 $ 1,660,876
See accompanying notes
Commonwealth Income & Growth Fund III
Statement of Cash Flows
For theThree Months Ended March 31, 2000
and
From January 27, 1998 (Commencement of Operations) to March 31, 1999
2000 1999
-------- --------
Operating activities
Net Income (34,893) 6,811
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 244,333 125,211
Other noncash activities included in
determination of net income 49,815 (27,673)
Changes in operating assets and liabilities:
(Increase) decrease in lease income receivable 13,177 11,424
(Increase) decrease in other receivables -- (7,459)
Increase (decrease) in accounts payable (478) (35,565)
Increase (decrease) in accounts payable -
Commonwealth Capital Corp. -- --
Increase (decrease) in accounts payable -
General Partner -- (11,363)
Increase (decrease) in unearned lease income (12,753) 909
Organization cost paid to the General Partner 964 (613)
-------- --------
Net cash provided by operating activities 260,165 61,682
-------- --------
Investing activities:
Capital expenditures (270,092) (213,829)
Equipment acquisition fees paid to General Partner (13,845) (13,735)
-------- --------
Net cash provided by investing activities (283,937) (227,564)
Financing activities:
Partners' contributions 91,817 58,418
Offering costs (10,629) (6,397)
Debt placement fees paid to General Partner (1,633) (4,889)
Distributions to partners (69,051) (52,023)
-------- --------
Net cash used by financing activities 10,504 (4,891)
-------- --------
Net increase (decrease) in cash and equivalents (13,258) (170,773)
Cash and cash equivalents, begining of year 138,826 507,193
-------- --------
Cash and cash equivalents, end of period 125,568 336,420
======== ========
See accompanying notes
COMMONWEALTH INCOME & GROWTH FUND III
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
BASIS OF PRESENTATION
The financial information presented as of any date other than December 31 has
been prepared from the books and records without audit. Financial information as
of December 31 has been derived from the audited financial statements of
Commonwealth Income & Growth Fund I (the "Partnership"), but does not include
all disclosures required by generally accepted accounting principles. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial information for
the periods indicated have been included. For further information regarding the
Partnership's accounting policies, refer to the financial statements and related
notes included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1999.
NET INCOME PER EQUIVALENT LIMITED PARTNERSHIP UNIT
The net income per equivalent limited partnership unit is computed based upon
net income allocated to the limited partners and the weighted average number of
equivalent units outstanding during the period.
Commonwealth Income & Growth Fund III
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership satisfied its minimum offering requirements and commenced
operations on January 27, 1999. On that date, subscribers for 76,284 Units were
admitted as Limited Partners of the Partnership. Through March 31, 2000,
subscribers owning an additional 61,741 Units were admitted as Limited Partners.
The Partnership's primary sources of capital for the three months ended March
31, 2000 and 1999 were from Partners' contributions of $92,000 and $58,000,
respectively. The primary uses of cash for the three months ended March 31, 2000
and 1999 were for the payment of offering costs of $11,000 and $6,000,
respectively, the payment of preferred distributions to partners of $69,000 and
$51,000, respectively, the payment of acquisition fees of $92,000 and $59,000,
respectively, and capital expenditures of $270,000 for the purchase of computer
equipment for the three months ended March 31, 2000.
Currently, Partners' contributions from the Partnership's leases are invested in
money market accounts investing directly in treasury obligations pending the
Partnership's use of such funds to purchase additional computer equipment, to
pay Partnership expenses or to make distributions to the Partners. At March 31,
2000 and December 31, 1999 the Partnership had approximately $125,000 and
$139,000, respectively, invested in these money market accounts.
The Partnership's investment strategy of acquiring computer equipment and
generally leasing it under "triple-net leases" to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses. As
of March 31, 2000, the Partnership had future minimum rentals on noncancellable
operating leases of $1,137,000 for the year ending December 31, 2000 and
$1,000,000, thereafter. The Partnership intends to continue purchasing
additional computer equipment with existing cash, as well as when future cash
becomes available.
The Partnership's cash from operations is expected to continue to be adequate to
cover all operating expenses, liabilities, and preferred distributions to
Partners during the next 12 month period. If available Cash Flow or Net
Disposition Proceeds are insufficient to cover the Partnership expenses and
liabilities on a short and long term basis, the Partnership will attempt to
obtain additional funds by disposing of or refinancing Equipment, or by
borrowing within its permissible limits. The Partnership may also reduce the
distributions to its Partners if it deems necessary. Since the Partnership's
leases are on a "triple-net" basis, no reserve for maintenance and repairs are
deemed necessary.
RESULTS OF OPERATIONS
For the quarter ended March 31, 2000, the Partnership recognized income of
$303,000 and expenses of $338,000, resulting in net loss of $35,000. For the
quarter ended March 31, 1999, the Partnership recognized income of $158,000, and
expenses of $151,000, resulting in net income of $7,000.
During the three months ended March 31, 2000, the Partnership expended $25,000
and assumed debt of $270,000 to acquire six leases, which generated
approximately $16,000 in revenue.
Interest income increased 250% from $3,000 for the quarter ended March 31, 1999
to $13,000 for the quarter ended March 31, 2000, primarily due to increased cash
balances in interest bearing accounts..
Operating expenses, excluding depreciation, primarily consist of accounting,
legal and outside service fees. The expense for the three months ended March 31,
2000 was approximately $57,000.
The equipment management fee is equal to 5% of the gross lease revenue
attributable to equipment which is subject to operating leases. The expense for
the three months ended March 31, 2000, was approximately $20,000.
Depreciation and amortization expenses consist of depreciation on computer
equipment, amortization of organizational costs, and equipment acquisition fees.
The expense for the three months ended March 31, 2000, was approximately
$245,000.
For the three month period ended March 31, 2000, the Partnership generated cash
flow from operating activities of $260,000, which includes net loss of
$(35,000), and depreciation and amortization expenses of $245,000. Other noncash
activities included in the determination of net income includes direct payments
of lease income by lessees to banks of $50,000.
PART II: OTHER INFORMATION
COMMONWEALTH INCOME & GROWTH FUND III
Item 1. LEGAL PROCEEDINGS.
Inapplicable
Item 2. CHANGES IN SECURITIES.
Inapplicable
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Inapplicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
Inapplicable
Item 5. OTHER INFORMATION.
Inapplicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits: None
b) Report on Form 8-K: None
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 III
BY: COMMONWEALTH INCOME & GROWTH
FUND, INC. General Partner
May 15, 2000 By: George S. Springsteen
- ---------------- -----------------------------
Date George S. Sprinsteen
President