Filed Pursuant To Rule 424(b)(3)
Registration No. 333-131736
COMMONWEALTH INCOME & GROWTH FUND VI
SUPPLEMENT NO. 3
DATED NOVEMBER 12, 2008
TO PROSPECTUS DATED MARCH 6, 2007,
AS SUPPLEMENTED SEPTEMBER 28, 2007 AND MARCH 18, 2008
Summary
We are providing you with this Supplement No. 3, dated November 12, 2008, to update and revise the prospectus dated March 6, 2007, as supplemented by Supplement No. 1 dated September 28, 2007 and Supplement No. 2 dated March 18, 2008. This Supplement No. 3 forms a part of, and must be accompanied or preceded by, the prospectus and Supplement No. 1.
The purposes of this supplement are to:
· | Describe the current status of the offering and the equipment we have acquired; and |
· | Update our financial information. |
You should thoroughly review the prospectus, Supplement Nos. 1 and 2 and this Supplement No. 3 prior to subscribing for units.
Forward-Looking Statements
Certain statements included in this supplement address activities, events or developments that we and our general partner anticipate, as of the date of this supplement, will or may occur in the future. For example, the words “believes,” “anticipates,” and “expects” are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Litigation Reform Act”). These forward-looking statements reflect our current beliefs and expectations with respect to future events and are based on assumptions and are subject to risks and uncertainties and other factors outside our control that may cause actual results to differ materially from those projected. We do not intend to update these forward-looking statements, except as required by law.
In accordance with the provisions of the Litigation Reform Act, we are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this Prospectus Supplement and other public statements we make. Such factors include, but are not limited to: the outcome of litigation and regulatory proceedings to which we may be a party; actions of competitors; changes and developments affecting our industry; quarterly or cyclical variations in financial results; development of new products and services; interest rates and cost of borrowing; our ability to maintain and improve cost efficiency of operations; changes in economic conditions; reliance on third parties for manufacturing of products and provision of services; and other factors that are set forth in the “Risk Factors”, “Legal Proceedings” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and other sections of the Prospectus and this Prospectus Supplement.
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Status of the Offering and Equipment Acquisitions
Our first escrow closing took place on May 10, 2007. As of October 30, 2008, we had sold a total of $22,644,370.16 in Units in our public offering. As of November 6, 2008, CIGF6 has made 32 acquisitions of leased equipment, for an aggregate purchase price of $5,364,563.63, as more particularly described in the table below:
Manufacturer | Equipment Type | Cash Equity | Debt Assumed | Total Equipment Cost | |||||||||
Panasonic | Laptops | $ | 642,388.86 | $ | 0 | $ | 642,388.86 | ||||||
Canon | Multifunction Printers | 7,658.82 | 0 | 7,658.82 | |||||||||
HP | Desktops - Tier 1 | 198,209.46 | 0 | 198,209.46 | |||||||||
Avid | Graphic Workstations | 180,193.75 | 0 | 180,193.75 | |||||||||
Avid | Graphic Workstations | 204,738.56 | 0 | 204,738.56 | |||||||||
HP | Midrange HP Servers | 224,439.95 | 0 | 224,439.95 | |||||||||
Canon | Multifunction Printers | 1,870.59 | 0 | 1,870.59 | |||||||||
IBM | Midrange IBM Servers | 270,472.86 | 0 | 270,472.86 | |||||||||
Canon | Multifunction Printers | 13,058.83 | 0 | 13,058.83 | |||||||||
Panasonic | Laptops | 360,639.36 | 0 | 360,639.36 | |||||||||
Dell | Laptops | 269,688.00 | 0 | 269,688.00 | |||||||||
Canon | Multifunction Printers | 14,823.53 | 0 | 14,823.53 | |||||||||
Canon | Multifunction Printers | 20,788.31 | 0 | 20,788.31 | |||||||||
Canon | Multifunction Printers | 12,176.47 | 0 | 12,176.47 | |||||||||
Canon | Multifunction Printers | 9,705.88 | 0 | 9,705.88 | |||||||||
Panasonic | Laptops | 243,378.12 | 0 | 243,378.12 | |||||||||
Canon | Multifunction Printers | 10,411.76 | 0 | 10,411.76 | |||||||||
IBM | Small IBM Servers | 84,592.68 | 0 | 84,592.68 | |||||||||
HP | Digital Storage | 73,509.49 | 0 | 73,509.49 | |||||||||
Sun | Midrange Sun Servers | 369,595.03 | 0 | 369,595.03 | |||||||||
Canon | Multifunction Printers | 7,729.41 | 0 | 7,729.41 | |||||||||
Dell | Laptops | 1,770.03 | 9,403.61 | 11,173.64 | |||||||||
HP | High End HP Servers | 394,582.49 | 0 | 394,582.49 | |||||||||
Panasonic | Laptops | 333,873.54 | 0 | 333,873.54 | |||||||||
HP | Small HP/Compaq Servers | 73,877.01 | 422,475.92 | 496,352.93 | |||||||||
Canon | High Volume Printers | 43,563.88 | 259,763.61 | 303,327.49 | |||||||||
Canon | Multifunction Printers | 13,235.30 | 0 | 13,235.30 | |||||||||
Canon | Multifunction Printers | 12,988.23 | 0 | 12,988.23 | |||||||||
Canon | Multifunction Printers | 17,611.77 | 0 | 17,611.77 | |||||||||
Canon | Multifunction Printers | 17,611.77 | 0 | 17,611.77 | |||||||||
Panasonic | Laptops | 324,951.09 | 0 | 324,951.09 | |||||||||
HP | High End HP Servers | 218,785.66 | 0 | 218,785.66 | |||||||||
$ | 5,364,563.63 |
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Financial Statements (Table I)
Please see the updated financial information set forth below in Table I of this Prospectus Supplement.
TABLE I – SELECTED FINANCIAL DATA
Index to Financial Statements
Commonwealth Income & Growth Fund VI | |
Condensed Balance Sheets at September 30, 2008 (unaudited) and December 31, 2007 | S-4 |
Condensed Statement of Operations for the three and nine month periods ended | |
September 30, 2008, the three month period ended September 30, 2007 and | |
the period of May 10, 2007 (commencement of operations) through September 30, 2007 (unaudited) | S-5 |
Condensed Statements of Partners' Capital for the nine months ended September 30, 2008 (unaudited) | S-6 |
Condensed Statement of Cash flow for nine months ended September 30, 2008 | |
and the period May 10, 2007 (commencement of operations) through September 30, 2007(unaudited) | S-7 |
Notes to Condensed Financial Statements (unaudited) | S-8 |
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FINANCIAL INFORMATION
Commonwealth Income & Growth Fund VI | ||||||||
Condensed Balance Sheets | ||||||||
September 30, | December 31, | |||||||
2008 | 2007 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Cash and cash equivalents | $ | 10,112,097 | $ | 6,279,821 | ||||
Lease income receivable | 16,209 | 7,733 | ||||||
Other receivables, Commonwealth Capital Corp. | 42,263 | - | ||||||
Other receivables, affiliated limited partnerships | 12,134 | 2,700 | ||||||
Prepaid expenses | 12,014 | 11,320 | ||||||
10,194,717 | 6,301,574 | |||||||
Computer equipment, at cost | 4,930,760 | 1,725,993 | ||||||
Accumulated depreciation | (900,902 | ) | (141,133 | ) | ||||
4,029,858 | 1,584,860 | |||||||
Equipment acquisition costs and deferred expenses, net | 153,838 | 61,513 | ||||||
Prepaid acquisition fees | 494,440 | 277,371 | ||||||
648,278 | 338,884 | |||||||
Total Assets | $ | 14,872,853 | $ | 8,225,318 | ||||
. | ||||||||
Liabilities and Partners' Capital | ||||||||
Liabilities | ||||||||
Accounts payable | $ | 5,368 | $ | 11,061 | ||||
Accounts payable, General Partner | 1,152 | 23,786 | ||||||
Accounts payable, Commonwealth Capital Corp. | - | 46,286 | ||||||
Other accrued expenses | 14,382 | 2,143 | ||||||
Unearned lease income | 386,520 | 82,567 | ||||||
Notes payable | 553,864 | - | ||||||
Total Liabilities | 961,286 | 165,843 | ||||||
Partners' Capital | ||||||||
General partner | 1,000 | 1,000 | ||||||
Limited partners | 13,910,567 | 8,058,475 | ||||||
Total Partners' Capital | 13,911,567 | 8,059,475 | ||||||
Total Liabilities and Partners' Capital | $ | 14,872,853 | $ | 8,225,318 |
see accompanying notes to condensed financial statements
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Commonwealth Income & Growth Fund VI | ||||||||||||||||
Condensed Statements of Operations | ||||||||||||||||
(unaudited) | ||||||||||||||||
For the period of | ||||||||||||||||
May 10, 2007 | ||||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | (Commencement of Operations) through | |||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Revenue | ||||||||||||||||
Lease | $ | 361,794 | $ | 53,869 | $ | 973,695 | $ | 53,869 | ||||||||
Interest and other | 40,539 | 35,993 | 111,441 | 38,646 | ||||||||||||
Total revenue | 402,333 | 89,862 | 1,085,136 | 92,515 | ||||||||||||
Expenses | ||||||||||||||||
Operating, excluding depreciation | 458,427 | 108,887 | 1,409,979 | 154,151 | ||||||||||||
Organizational costs | 26,698 | 44,568 | 81,554 | 81,734 | ||||||||||||
Equipment management fee - General Partner | 18,090 | 2,693 | 48,685 | 2,693 | ||||||||||||
Interest | 5,070 | - | 12,871 | - | ||||||||||||
Depreciation | 289,234 | 43,525 | 762,348 | 43,525 | ||||||||||||
Amortization of equipment acquisition costs and deferred expenses | 16,425 | 2,321 | 43,368 | 2,321 | ||||||||||||
Loss on sale of computer equipment | 6,427 | - | 8,907 | - | ||||||||||||
Total expenses | 820,371 | 201,994 | 2,367,712 | 284,424 | ||||||||||||
Net (loss) | $ | (418,038 | ) | $ | (112,132 | ) | $ | (1,282,576 | ) | $ | (191,909 | ) | ||||
Net (loss) allocated to limited partners | $ | (422,127 | ) | $ | (113,569 | ) | $ | (1,292,680 | ) | $ | (193,345 | ) | ||||
Net (loss) per equivalent limited partnership unit | $ | (0.49 | ) | $ | (0.51 | ) | $ | (1.80 | ) | $ | (0.87 | ) | ||||
Weighted average number of equivalent limited partnership units outstanding during the period | 865,077 | 222,256 | 716,762 | 222,256 |
see accompanying notes to condensed financial statements
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Commonwealth Income & Growth Fund VI | ||||||||||||||||||||
Condensed Statements of Partners' Capital | ||||||||||||||||||||
For the nine months ended September 30, 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
General Partner Units | Limited Partner Units | General Partner | Limited Partner | Total | ||||||||||||||||
Balance, January 1, 2008 | 50 | 510,583 | $ | 1,000 | $ | 8,058,475 | $ | 8,059,475 | ||||||||||||
Contributions | - | 462,442 | - | 9,218,393 | 9,218,393 | |||||||||||||||
Syndication Costs | - | - | - | (1,073,297 | ) | (1,073,297 | ) | |||||||||||||
Net Income (loss) | - | - | 10,104 | (1,292,680 | ) | (1,282,576 | ) | |||||||||||||
Distributions | - | - | (10,104 | ) | (1,000,324 | ) | (1,010,428 | ) | ||||||||||||
Balance, September 30, 2008 | 50 | 973,025 | $ | 1,000 | $ | 13,910,567 | $ | 13,911,567 |
see accompanying notes to condensed financial statements
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Commonwealth Income & Growth Fund VI | ||||||||
Condensed Statements of Cash Flow | ||||||||
For the period of | ||||||||
May 10, 2007 (Commencement of | ||||||||
Nine Months ended | Operations) through | |||||||
September 30, | September 30, | |||||||
2008 | 2007 | |||||||
(unaudited) | (unaudited) | |||||||
Net cash (used in) operating activities | $ | (423,636 | ) | $ | (28,215 | ) | ||
Investing activities: | ||||||||
Capital Expenditures | (2,529,503 | ) | (828,536 | ) | ||||
Prepaid acquisition fees | (217,069 | ) | (231,521 | ) | ||||
Net proceeds from the sale of computer equipment | 3,509 | - | ||||||
Equipment acquisition fees paid to General Partner | (128,790 | ) | (33,141 | ) | ||||
Net cash (used in) investing activities | (2,871,853 | ) | (1,093,198 | ) | ||||
Financing activities: | ||||||||
Contributions | 9,218,393 | 7,784,200 | ||||||
Syndication costs | (1,073,297 | ) | (930,212 | ) | ||||
Distributions to partners | (1,010,428 | ) | (143,611 | ) | ||||
Debt Placement fee paid to the General Partner | (6,903 | ) | - | |||||
Net cash provided by financing activities | 7,127,765 | 6,710,377 | ||||||
Net increase in cash and equivalents | 3,832,276 | 5,588,964 | ||||||
Cash and cash equivalents, beginning of period | 6,279,821 | 939 | ||||||
Cash and cash equivalents, end of period | $ | 10,112,097 | $ | 5,589,903 |
see accompanying notes to condensed financial statements
S-7
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Business
Commonwealth Income & Growth Fund VI (the “Partnership”) is a limited partnership organized in the Commonwealth of Pennsylvania on January 6, 2006. The Partnership is offering for sale up to 2,500,000 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 May 10, 2007.
The Partnership uses the proceeds of the Offering to acquire, own and lease various types of computer information technology equipment and other similar capital equipment, which is 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 Partnership and other affiliated partnerships based on certain risk factors. Approximately ten years after the commencement of operations, the Partnership intends to sell or otherwise dispose of all of its equipment, make final distributions to partners, and to dissolve. Unless sooner terminated, the Partnership will continue until December 31, 2018.
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 and Finance Association (ELFA).
2. Summary of Significant Accounting Policies
Recent Accounting Pronouncements
Management’s assessment of the following accounting pronouncements has changed since disclosed in its Form 10K for December 31, 2007
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS 162 is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to Audit Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Partnership is currently evaluating the potential impact, if any, of the adoption of SFAS 162 on its financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities, including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses will be reported on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157 “Fair Value Measurements”. As of January 1, 2008 the Partnership adopted SFAS No.159. The Partnership has not elected the fair value option for any assets or liabilities.
S-8
In September 2006, the FASB issued Statement of Financial Accounting Standards 157, “Fair Value Measurements” (“SFAS 157”), which provides guidance on measuring the fair value of assets and liabilities. SFAS 157 applies to other accounting pronouncements that require or permit assets or liabilities to be measured at fair value but does not expand the use of fair value to any new circumstances. This standard also requires additional disclosures in both annual and quarterly reports. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by the Partnership in the first quarter of its fiscal year 2008. In February 2008, the FASB issued two Staff Positions on SFAS 157: (1) FASB Staff Position No. FAS 157-1 (FAS 157-1), “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement Under Statement 13,” and (2) FASB Staff Position No. FAS 157-2 (FAS 157-2), “Effective Date of FASB Statement No 157.” FAS 157-1 excludes FASB Statement No. 13, Accounting for Leases, as well as other accounting pronouncements that address fair value measurements on lease classification or measurement under Statement 13, from SFAS 157’s scope. FAS157-2 partially defers Statement 157’s effective date. As of January 1, 2008 the Partnership partially adopted SFAS No. 157 for all financial assets. Adoption of this pronouncement did not impact the financial statements of the Partnership at September 30, 2008. In October 2008, the FASB issued FSP SFAS 157-3 "Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active" ("FSP SFAS 157-3"), which is effective upon issuance for all financial statements that have not been issued. FSP SFAS 157-3 clarifies the application of SFAS 157, in a market that is not active. The Partnership is currently evaluating the potential impact, if any, of the adoption of FSP SFAS 157-3 on its financial statements.
Basis of Presentation
The financial information presented as of any date other than December 31, 2007 has been prepared from the books and records without audit. Financial information as of December 31, 2007 has been derived from the audited financial statements of the Partnership, but does not include all disclosures required by generally accepted accounting principles to be included in audited financial statements. 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, 2007. Operating results for the nine months ended September 30, 2008 are not necessarily indicative of financial results that may be expected for the full year ended December 31, 2008.
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, 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. The Partnership determined that no impairment existed as of September 30, 2008 and 2007.
Depreciation on computer equipment for financial statement purposes is based on the straight-line method estimated generally over useful lives of three to 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.
S-9
3. Computer Equipment
The Partnership is the lessor of equipment under operating leases with periods ranging from 21 to 36 months. In general, associated costs such as repairs and maintenance, insurance and property taxes are paid by the lessee.
Through September 30, 2008, the Partnership has only entered into operating leases. Lease revenue is recognized on the monthly straight-line basis which is in accordance with the terms of the operating lease agreements. The Partnership’s leases do not contain any step-rent provisions or escalation clauses nor are lease revenues adjusted based on any index.
The Partnership participates in leases that are shared with other affiliated partnerships. The Partnership’s share of the computer equipment in which it participates with other partnerships at September 30, 2008 and December 31, 2007 was approximately $2,847,000 and $474,000, respectively, which is included in the Partnership’s fixed assets on its balance sheet. The total cost of the equipment shared by the Partnership with other partnerships at September 30, 2008 and December 31, 2007 was approximately $7,168,000 and $949,000, respectively. At September 30, 2008 the outstanding debt associated with the Partnership’s share of this equipment was approximately $351,000. The total outstanding shared debt at September 30, 2008 was approximately $1,170,000. There was no such debt at December 31, 2007.
The following is a schedule of future minimum rentals on noncancellable operating leases at September 30, 2008:
Amount | |
Three Months ended December 31, 2008 | $ 360,183 |
Year ended December 31, 2009 | 1,481,966 |
Year ended December 31, 2010 | 1,291,065 |
Year ended December 31, 2011 | 159,191 |
$ 3,292,405 | |
4. Related Party Transactions
Receivables/Payables
As of September 30, 2008, the Partnership’s related party receivables and payables are short term, unsecured, and non-interest bearing.
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 nine months ended September 30, 2008, the Partnership recorded approximately $1,122,000 for reimbursement of expenses to the General Partner. During the period of May 10, 2007 (commencement of operations) through September 30, 2007, the Partnership recorded $112,000 for reimbursement of expenses to the General Partner.
S-10
Offering Costs
Offering costs are payments for selling commissions, dealer manager fees, professional fees and other offering expenses relating to the syndication of the Partnership’s units. Selling commissions are 8% of the partners’ contributed capital and dealer manager fees are 2% of the partners’ contributed capital for the period ended September 30, 2008. These costs are included in syndication costs of approximately $1,073,000 and have been deducted from partnership capital in the accompanying financial statements for the period ended September 30, 2008. During the period of May 10, 2007 (commencement of operations) through September 30, 2007 these costs were approximately $930,000.
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. For the nine months ended September 30, 2008, equipment acquisition fees of approximately $129,000 were earned by the General Partner. For the period of May 10, 2007 (commencement of operations) through September 30, 2007, equipment acquisition fees of approximately $33,000 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. For the nine months ended September 30, 2008, debt placement fees of approximately $7,000 were earned by the General Partner. For the period of May 10, 2007 (commencement of operations) through September 30, 2007, there were no debt placement fees 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) 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. For the nine months ended September 30, 2008, equipment management fees of approximately $49,000 were earned by the General Partner. For the period of May 10, 2007 (commencement of operations) through September 30, 2007, equipment management fees of approximately $3,000 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. For the nine months ended September 30, 2008, equipment liquidation fees of $100 were earned by the General Partner. For the period of May 10, 2007 (commencement of operations) through September 30, 2007, there were no equipment liquidation fees earned by the General Partner.
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5. Notes Payable
Notes payable consisted of the following:
September 30, 2008 | |||
Installment note payable to bank; interest of 5.25%, due in quarterly installments of $1,385, including interest, with final payment in October 2009. | $ | 6,658 | |
Installment note payable to bank; interest of 5.25%; due in monthly installments of $8,003; including interest, with final payment in November 2010. | 196,275 | ||
Installment note payable to bank; interest of 5.75%, due in quarterly installments of $37,927, including interest, with final payment in January 2011. | 350,931 | ||
$ | 553,864 | ||
The notes are secured by specific computer equipment and are nonrecourse liabilities of the Partnership. Aggregate maturities of notes payable for each of the periods subsequent to September 30, 2008 are as follows:
Amount | |||
Three months ending December 31, 2008 | $ | 55,706 | |
Year ended December 31, 2009 | 230,668 | ||
Year ended December 31, 2010 | 230,100 | ||
Year ended December 31, 2011 | 37,390 | ||
$ | 553,864 | ||
6. Supplemental Cash Flow Information
Other noncash activities included in the determination of net loss are as follows:
Nine months ended September 30, | 2008 | 2007 | |||||
Lease income, net of interest expense on notes payable realized as a result of direct payment of principal by lessee to bank | $ | 136,395 | $ | - | |||
No interest or principal on notes payable was paid by the Partnership because direct payment was made by lessee to the bank in lieu of collection of lease income and payment of interest and principal by the Partnership.
Noncash investing and financing activities include the following:
Nine months ended September 30, | 2008 | 2007 | |||||
Debt assumed in connection with purchase of computer equipment | $ | 690,258 | $ | - | |||
Equipment acquisition fees earned by General Partner upon purchase of equipment from prepaid acquisition fees | $ | 128,790 | $ | 33,141 | |||
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