UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 33-89476
COMMONWEALTH INCOME & GROWTH FUND II
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2795120
(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
JUNE 30, 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 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4. Controls and Procedures 15
PART II
Item 1. Legal Proceedings 16
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
2
COMMONWEALTH INCOME & GROWTH FUND II
STATEMENT OF NET ASSETS IN LIQUIDATION
JUNE 30,
2005
------------
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 63,344
Lease income receivable 30,619
Net investment in direct financing leases 43,783
Other receivables - affiliated partnerships 18,026
Deposits 25
-------------
155,797
-------------
Computer equipment, at cost 2,416,137
Accumulated depreciation (2,280,748)
-------------
135,389
-------------
Equipment acquisition costs and deferred expenses, net 650
Accounts receivable, Commonwealth Capital Corp 12,783
-------------
13,433
-------------
TOTAL ASSETS $ 304,619
=============
LIABILITIES AND NET ASSETS
LIABILITIES
Accounts payable $ 97,660
Accounts payable - General Partner 126,135
Accounts payable - Commonwealth Capital Corp 12,691
Unearned lease income 4,608
Notes payable 63,525
-------------
TOTAL LIABILITIES 304,619
-------------
NET ASSETS IN LIQUIDATION $ -
=============
see accompanying notes to condensed financial statements
3
COMMONWEALTH INCOME & GROWTH FUND II
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
THREE MONTHS ENDED
JUNE 30,
2005
------------------
(UNAUDITED)
Net Assets in liquidation - April 1, 2005 $ (34,651)
Lease income 20,793
Interest and other 193
Gain on sale of computer equipment 31,771
Operating, excluding depreciation (50,335)
Equipment management fee - General Partner (2,294)
Interest (1,153)
Depreciation (91,968)
Distributions to Investors (46,187)
Changes in estimated liquidation values
of assets and liabilities (173,831)
-------------
NET ASSETS IN LIQUIDATION - JUNE 30, 2005 $ -
=============
see accompanying notes to condensed financial statements
4
COMMONWEALTH INCOME & GROWTH FUND II
CONDENSED BALANCE SHEETS
DECEMBER 31,
2004 (a)
-------------
ASSETS
Cash and cash equivalents $ 1,085
Lease income receivable 9,478
Net investment in direct financing leases 86,487
Other receivables - affiliated partnerships 16,792
Deposits 25
-------------
113,867
-------------
Computer equipment, at cost 2,850,669
Accumulated depreciation (2,460,366)
-------------
390,303
-------------
Equipment acquisition costs and deferred expenses, net 2,601
Accounts receivable, Commonwealth Capital Corp 16,100
-------------
18,701
-------------
TOTAL ASSETS $ 522,871
=============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accounts payable $ 51,515
Accounts payable - General Partner 79,488
Accounts payable - Commonwealth Capital Corp 42,499
Unearned lease income 94,576
Notes payable 115,967
-------------
TOTAL LIABILITIES 384,045
-------------
PARTNERS' CAPITAL
General partner 1,000
Limited partners 137,826
-------------
TOTAL PARTNERS' CAPITAL 138,826
-------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 522,871
=============
(a) Derived from the audited financial statements as of and
for the year ended December 31, 2004
see accompanying notes to condensed financial statements
5
COMMONWEALTH INCOME & GROWTH FUND II
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, JUNE 30, JUNE 30,
2005 2004 2004
-------------------------------------------- ------------------
(UNAUDITED) (UNAUDITED)
INCOME
Lease $ 28,792 $ 217,069 $ 449,843
Interest and other - 278 415
--------------------------------------------------------------------
TOTAL INCOME 28,792 217,347 450,258
--------------------------------------------------------------------
EXPENSES
Operating, excluding depreciation 83,491 55,690 167,130
Equipment management fee - General Partner 300 10,853 22,492
Interest 2,093 7,861 18,888
Depreciation 109,294 183,422 375,152
Amortization of equipment
acquisition costs and deferred expenses 1,473 12,370 24,593
Loss on sale of computer equipment 5,618 13,861 23,752
--------------------------------------------------------------------
TOTAL EXPENSES $ 202,269 284,057 632,007
--------------------------------------------------------------------
NET (LOSS) $ (173,477) $ (66,710) $ (181,749)
====================================================================
NET (LOSS) PER EQUIVALENT LIMITED
PARTNERSHIP UNIT $ (0.38) $ (0.15) $ (0.40)
====================================================================
WEIGHTED AVERAGE NUMBER OF EQUIVALENT LIMITED
PARTNERSHIP UNITS OUTSTANDING DURING THE PERIOD 460,067 460,067 460,067
====================================================================
see accompanying notes to condensed financial statements
6
COMMONWEALTH INCOME & GROWTH FUND II
CONDENSED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND THE SIX MONTHS ENDED JUNE 30, 2004
2005 2004
--------------------------------
(UNAUDITED)
NET CASH PROVIDED BY OPERATING ACTIVITIES (5,421) 63,284
--------------------------------
INVESTING ACTIVITIES:
Net proceeds from the sale of computer equipment 13,249 67,351
Equipment acquisition fees paid to General Partner - (846)
Capital Expenditures - (4,049)
--------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 13,249 62,456
--------------------------------
FINANCING ACTIVITIES:
Distributions to partners - (230,880)
Debt placement fee paid to General Partner - (171)
Other receivables-Commonwealth Capital Corp 3,317 132,151
--------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,317 (98,900)
--------------------------------
Net increase in cash and equivalents 11,145 26,840
Cash and cash equivalents, beginning of period 1,085 37,758
--------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,230 $ 64,598
================================
see accompanying notes to condensed financial statements
7
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BUSINESS Commonwealth Income & Growth Fund II (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. CCC is a
member of the Investment Program Association (IPA),
Financial Planning Association (FPA), and the Equipment
Leasing Association (ELA). The Partnership has begun
liquidation effective April 1, 2005. Particular items of
equipment may be sold at any time if, in the judgment of
the General Partner, it is in the best interest of the
Partnership to do so. The determination of whether
particular items of partnership equipment should be sold
will be made by the General Partner after consideration
of all relevant factors (including prevailing economic
conditions, the cash requirements of the Partnership,
potential capital appreciation, cash flow and federal
income tax considerations), with a view toward achieving
the principal investment objectives of the Partnership.
2. SUMMARY OF BASIS OF PRESENTATION
SIGNIFICANT
ACCOUNTING As a result of the General Partner's approval of the
POLICIES plan of liquidation and the imminent nature of such
liquidation, we changed our basis of accounting to the
liquidation basis effective as of April 1, 2005. This
basis of accounting is considered appropriate when,
among other things, liquidation of a company is probable
and the net realizable value of assets is reasonably
determinable. Under the liquidation basis of accounting,
assets are stated at their estimated net realizable cash
value and liabilities are stated at their anticipated
settlement amounts. There are substantial risks and
uncertainties associated with carrying out the
liquidation of the Partnership. The valuations presented
in the accompanying Statement of Net Assets in
Liquidation represent estimates, based on present facts
and circumstances, of the net realizable values of
assets and the costs associated with carrying out the
liquidation. The actual costs and values are expected to
differ from the amounts shown herein and could be
greater or lesser than the amounts recorded.
Upon changing to the liquidation basis of accounting, we
recorded a $30,000 increase to net assets. This increase
represents the present value of future lease payments of
leases. We recorded $22,000 of accrued costs of
liquidation representing the estimate of the costs to be
incurred during liquidation. Unearned revenue was
8
decreased by $82,000, and payables to affiliates were
decreased by $84,000 to represent the expected
settlement value of these liabilities.
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, 2004.
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 six months ended June 30, 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. NET INVESTMENT IN
DIRECT FINANCING The following lists the components of the net investment
LEASES in direct financing leases as of June 30, 2005 and
December 31, 2004:
JUNE 30, December 31,
2005 2004
-------------------------
Minimum lease payments receivable $ 66,001 $ 103,927
Less: Unearned revenue 22,218 17,440
--------------------------------------------------------------
Net investment in direct financing
leases $ 43,783 $ 86,487
==============================================================
The following is a schedule of future minimum rentals on
noncancellable direct financing leases at June 30, 2005
Amount
------------
Six Months Remaining December 31, 2005 $ 32,808
Year Ended December 31, 2006 33,193
--------------------------------------------------------------
$ 66,001
--------------------------------------------------------------
9
4. COMPUTER The Partnership is the lessor of equipment under
EQUIPMENT operating leases with periods ranging from 24 to 48
months. In general, the lessee pays associated costs
such as repairs and maintenance, insurance and property
taxes.
Through June 30, 2005, the Partnership's leasing
operations consist substantially of operating leases and
seven direct-financing leases. 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.
Remarketing fees are paid to the leasing companies from
which the Partnership purchases leases. These are fees
that are earned by the leasing companies when the
initial terms of the lease have been met. The General
Partner believes that this strategy adds value since it
entices the leasing company to "stay with the lease" for
potential extensions, remarketing or sale of equipment.
This strategy potentially minimizes any conflicts the
leasing company may have with a potential new lease and
will potentially assist in maximizing overall portfolio
performance. The remarketing fee is tied into lease
performance thresholds and is factored in the
negotiation of the fee. Remarketing fees incurred in
connection with lease extensions are accounted for as
operating costs. Remarketing fees incurred in connection
with the sale of computer equipment are included in our
gain or loss calculations. For the six months ended June
30, 2005 and 2004, remarketing fees were paid in the
amounts of $15,000 and $2,000, respectively.
10
The Partnership's share of the computer equipment in
which they participate with other partnerships at June
30, 2005 and December 31, 2004 was approximately
$1,281,000 and $1,307,000, respectively, which is
included in the Partnership's fixed assets on their
balance sheet. The total cost of the equipment shared by
the Partnership with other partnerships at June 30, 2005
and December 31, 2004 was approximately $2,131,000 and
$2,249,000, respectively. The Partnership's share of the
outstanding debt associated with this equipment at June
30, 2005 and December 31, 2004 was approximately $0 and
$700, respectively, which is included in the
Partnership's liabilities on the balance sheet, and the
total outstanding debt at June 30, 2005 and December 31,
2004 related to the equipment shared by the Partnership
was approximately $0 and $1,000, respectively.
The following is a schedule of future minimum rentals on
noncancellable operating leases at June 30, 2005:
Amount
--------------------------------------------------------------
Six Months ended December 31, 2005 $ 16,116
Year Ended December 31, 2006 14,030
--------------------------------------------------------------
$ 30,146
==============================================================
5. RELATED PARTY REIMBURSABLE EXPENSES
TRANSACTIONS
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 six months ended June 30, 2005 and 2004, the
Partnership recorded $62,000 and $110,000, 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. There were no equipment acquisition fees
earned by the General Partner during the six months
ended June 30, 2005. During the six months ended June
30, 2004, equipment acquisition fees of approximately
$1,000 were earned by 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) 2%
of (1) the gross lease revenues attributable to
equipment which is subject to full payout net leases
11
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 six months ended June 30,
2005 and 2004, equipment management fees of
approximately $2,600 and $23,000, 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) 3% 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 six months
ended June 30, 2005 and June 30, 2004, equipment
liquidation fees of approximately $1,000 and $2,000,
respectively, were earned by the General Partner.
6. NOTES PAYABLE Notes payable consisted of the following:
JUNE 30, DECEMBER 31,
2005 2004
-------------------------------------------------------------
Installment notes payable to
banks; interest ranging from
6.25% to 6.75%, due in monthly
installments ranging from $240
to $1,875, including interest,
with final payments due from
February through April 2005. $ -0- $ 82,902
Installment notes payable to
banks, interest ranging from
5.0% to 6.50%: due in monthly
installments ranging from $507
to $1,736, including interest,
with final payments due June,
2006. 63,525 33,065
------------------------
$ 63,525 $ 115,967
=============================================================
These notes are secured by specific computer equipment
and are nonrecourse liabilities of the Partnership.
Aggregate maturities of notes payable for each of the
periods subsequent to June 30, 2005 are as follows:
12
Amount
-----------
Six months ended December 31, 2005 $ 31,286
Year ended December 31, 2006 32,239
-----------
$ 63,525
-----------
7. SUPPLEMENTAL Other noncash activities included in the determination
CASH FLOW of net loss are as follows:
INFORMATION
Six months ended June 30, 2005 2004
- --------------------------------------------------------------------------------
Lease income, net of interest expense on
notes payable realized as a result of
direct payment of principal by lessee
to bank $ 12,049 $ 360,331
================================================================================
No interest or principal on notes payable was paid by the Partnership
because direct payment was made by lessee to the bank in lieu of
collection of lease income and payment of interest and principal by
the Partnership.
Noncash investing and financing activities include the following:
Six months ended June 30, 2005 2004
- --------------------------------------------------------------------------------
================================================================================
Offsetting of receivables from CCC with payables to
General Partner $ - $ 107,356
================================================================================
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the General Partner's approval of the plan of dissolution and the
imminent nature of the liquidation, we changed our basis of accounting to the
liquidation basis as of April 1, 2005. This basis of accounting is considered
appropriate when, among other things, liquidation of a company is probable and
the net realizable value of assets is reasonably determinable. Under the
liquidation basis of accounting, assets are stated at their estimated net
realizable cash value and liabilities are stated at their anticipated settlement
amounts. Particular items of equipment may be sold at any time if, in the
judgment of the General Partner, it is in the best interest of the Partnership
to do so. The determination of whether particular items of partnership equipment
should be sold will be made by the General Partner after consideration of all
relevant factors (including prevailing economic conditions, the cash
requirements of the Partnership, potential capital appreciation, cash flow and
federal income tax considerations), with a view toward achieving the principal
investment objectives of the Partnership.
The Partnership's primary sources of capital for the six months ended June 30,
2005 and 2004 were net proceeds received from sale of equipment totaling
approximately $38,000 and $67,000, and the repayment of receivables from CCC of
approximately $132,000 for the six months ended June 30, 2004. The primary uses
of cash for the six months ended June 30, 2005 and 2004 were for the payment of
preferred distributions to partners of approximately $46,187 and $231,000,
respectively. There were no capital expenditures for the periods ending June 30,
2005 and June 30, 2004.
13
For the six month period ended June 30, 2005, the Partnership generated cash
flows from operating activities of approximately $67,000. This includes a net
loss of approximately $253,000, and depreciation and amortization expenses of
approximately $203,000. Other noncash activities included in the determination
of net income include direct payments of lease income by lessees to banks of
approximately $12,000.
For the six month period ended June 30, 2004, the Partnership used cash flows
from operating activities of approximately $63,000, which includes a net loss of
approximately $182,000 and depreciation and amortization expenses of
approximately $400,000. Other noncash activities included in the determination
of net loss include direct payments of lease income by lessees to banks of
approximately $360,000.
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.
As of June 30, 2005, the Partnership had future minimum rentals on
non-cancelable operating leases of $16,000 for the balance of the year ending
December 31, 2005 and $14,000 thereafter. As of June 30, 2005, the Partnership
had future minimum rentals on noncancellable capital leases of $33,000 for the
balance of the year ending December 31, 2005 and $33,000 thereafter. At June 30,
2005, the outstanding debt was $64,000, with interest rates ranging from 5.00%
to 6.5%, and will be payable through June 2006.
The Partnership's share of the computer equipment in which they participate with
other partnerships at June 30, 2005 and December 31, 2004 was approximately
$1,281,000 and $1,307,000, respectively, which is included in the Partnership's
fixed assets on their balance sheet. The total cost of the equipment shared by
the Partnership with other partnerships at June 30, 2005 and December 31, 2004
was approximately $2,131,000 and $2,249,000, respectively. The Partnership's
share of the outstanding debt associated with this equipment at June 30, 2005
and December 31, 2004 was approximately $0 and $700, respectively, which is
included in the Partnership's liabilities on the balance sheet, and the total
outstanding debt at June 30, 2005 and December 31, 2004 related to the equipment
shared by the Partnership was approximately $0 and $1,000, respectively.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2005 compared to Six Months Ended June 30, 2004
----------------------------------------------------------------------------
For the quarter ended March 31, 2005, the Partnership recognized income of
approximately $29,000 and expenses of approximately $202,000, resulting in a net
loss of approximately $173,000. For the six months ended June 30, 2004, the
Partnership recognized income of approximately $450,000 and expenses of
approximately $632,000, resulting in a net loss of approximately $182,000.
Lease income decreased by 94% to approximately $29,000 for the three months
ended March 31, 2004, from approximately $450,000 for the six months ended June
30, 2004, due to the fact that more lease agreements ended since the six months
ended June 30, 2004 and no new leases were purchased during that time period.
14
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 operating expenses
decreased 50% to approximately $83,000 for the three months ended March 31,
2005, from approximately $167,000 for the six months ended June 30, 2004, 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 the fund and a
decrease in professional fees.
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 decreased 99% to approximately $300 for the three months ended
March 31, 2005, from approximately $22,000 for the six months ended June 30,
2004, which is consistent with the decrease in lease income.
Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of equipment acquisition fees. The expenses decreased
72% to approximately $110,000 for the three months ended March 31, 2005, from
approximately $400,000 for the six months ended June 30, 2004 due to equipment
and acquisition fees being fully depreciated/amortized and not being replaced
with new purchases.
The Partnership sold computer equipment with a net book value of approximately
$19,000 for the three months ended March 31, 2005, for a net loss of
approximately $6,000. The Partnership sold computer equipment with a net book
value of approximately $91,000 for the six months ended June 30, 2004, for a net
loss of approximately $24,000.
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 and its associated fixed revenue
streams.
ITEM 4. CONTROLS AND PROCEDURES
The Chief Executive Officer and a Financial Officer of the General Partner have
conducted a review of the Partnership's disclosure controls and procedures as of
June 30, 2005.
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 General Partner'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
15
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 June 30, 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 II
Item 1. LEGAL PROCEEDINGS.
N/A
Item 2. CHANGES IN SECURITIES.
N/A
Item 3. DEFAULTS UPON SENIOR SECURITIES.
N/A
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
N/A
Item 5. OTHER INFORMATION.
N/A
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
16
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 II
BY: COMMONWEALTH INCOME & GROWTH
FUND, INC. General Partner
August 18, 2005 By: /s/ Kimberly A. Springsteen
- --------------- -------------------------------
Date Kimberly A. Springsteen
President
17