UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

T QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or

 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009MARCH 31, 2010

¨ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:  333-108057

COMMONWEALTH INCOME & GROWTH FUND V
(Exact name of registrant as specified in its charter)

Pennsylvania65-1189593
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)

Brandywine Bldg. One, Suite 200
2 Christy Drive
Chadds Ford, PA 19317
(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  T      NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).YES  ¨      NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "accelerated filer, “large accelerated filer" and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company T
 (Do not check if a smaller reporting company.) 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      YES  ¨ NO T
 
 
 

 
1
FORM 10-Q
SEPTEMBER 30, 2009March 31, 2010

TABLE OF CONTENTS

 PART I 
Item 1.Financial Statements3
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations14  12
Item 3.Quantitative and Qualitative Disclosures About Market Risk18  15
Item 4T.Controls and Procedures18  15
 PART II 
Item 1.Legal Proceedings18  15
Item 1 A.Risk Factors19  15
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds19  16
Item 3.Defaults Upon Senior Securities19  16
Item 4.Submission of Matters to a Vote of Securities Holders19  16
Item 5.Other Information19  16
Item 6.Exhibits19  16
   



2
 

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Commonwealth Income & Growth Fund V 
Condensed Balance Sheets 
     
  September 30,  December 31, 
  2009  2008 
  (unaudited)    
Assets      
 
 
      
Cash $495,866  $3,053,703 
Lease income receivable, net of reserve of  $128,617 and $115,617 at September 30, 2009
and  December 31, 2008, respectively
  499,203   320,541 
Accounts receivable, Commonwealth Capital Corp.      359,048 
Accounts receivable, affiliated limited partnerships  228   300 
Prepaid expenses  6,524   6,422 
   1,001,821   3,740,014 
         
Computer equipment, at cost  23,792,945   21,267,794 
Accumulated depreciation  (16,002,140)  (12,060,593)
   7,790,805   9,207,201 
         
Equipment acquisition costs and deferred expenses, net of accumulated amortization
of  $378,213 and  $518,860 at September 30, 2009 and December 31, 2008, respectively
  204,243   247,773 
Prepaid acquisition Fees  55,893   180,205 
   260,136   427,978 
         
Total Assets $9,052,762  $13,375,193 
         
Liabilities and Partners' Capital        
         
Liabilities        
Accounts payable $110,917  $357,751 
Accounts payable, General Partner  67,211   22,596 
Accounts payable, Commonwealth Capital Corp.  14,252   - 
Other accrued expenses  17,239   11,302 
Unearned lease income  344,991   142,203 
Notes payable  528,203   1,551,477 
Total Liabilities  1,082,813   2,085,329 
         
Partners' Capital        
General partner  1,000   1,000 
Limited partners  7,968,949   11,288,864 
Total Partners' Capital  7,969,949   11,289,864 
         
Total Liabilities and Partners' Capital $9,052,762  $13,375,193 
 
Commonwealth Income & Growth Fund V
 
Condensed Balance Sheets 
       
  March 31,  December 31, 
  2010  2009 
  (unaudited)    
Assets      
Cash and cash equivalents $287,602  $556,766 
Lease income receivable, net of reserve of $58,415 at March 31, 2010 and December 31, 2009, respectively  432,675   360,920 
Accounts receivable, Commonwealth Capital Corp.  60,266   - 
Accounts receivable, affiliated limited partnerships  228   10,869 
Other receivables  24,703   16,559 
Prepaid expenses  10,313   4,447 
   815,787   949,561 
         
Computer equipment, at cost  21,668,884   22,568,787 
Accumulated depreciation  (16,264,771)  (16,197,086)
   5,404,113   6,371,701 
         
Equipment acquisition costs and deferred expenses, net of accumulated amortization of  $280,524 and  $353,192 at March 31, 2010 and December 31, 2009, respectively  131,776   160,798 
Prepaid acquisition fees  50,392   55,491 
   182,168   216,289 
         
Total Assets $6,402,068  $7,537,551 
         
Liabilities and Partners' Capital        
Liabilities        
Accounts payable $138,939  $145,883 
Accounts payable, General Partner  99,810   54,394 
Accounts payable, Commonwealth Capital Corp.  -   20,748 
Other accrued expenses  40,767   20,497 
Unearned lease income  162,529   222,701 
Notes payable  182,719   260,986 
Total Liabilities  624,764   725,209 
         
Partners' Capital        
General Partner  1,000   1,000 
Limited Partners  5,776,304   6,811,342 
Total Partners' Capital  5,777,304   6,812,342 
         
Total Liabilities and Partners' Capital $6,402,068  $7,537,551 

 
see accompanying notes to condensed financial statements


3


 
Commonwealth Income & Growth Fund V
 
Condensed Statements of Operations 
(unaudited) 
       
  Three Months Ended 
  March 31, 2010  March 31, 2009 
       
Revenue      
Lease $937,180  $1,527,745 
Interest and other  26,394   20,908 
Gain on sale of computer equipment  82,096   1,486 
Total Revenue  1,045,670   1,550,139 
         
Expenses        
Operating, excluding depreciation  268,561   374,661 
Equipment management fee, General Partner  46,859   76,992 
Interest  3,701   21,889 
Depreciation  1,074,139   1,377,584 
Amortization of equipment acquisition costs and deferred expenses  34,123   60,673 
Bad debt expense  -   13,000 
Total expenses  1,427,383   1,924,799 
         
Net (loss) $(381,713) $(374,660)
         
Net (loss) allocated to Limited Partners $(387,909) $(380,887)
         
Net (loss) per equivalent limited partnership unit $(0.31) $(0.31)
         
Weighted average number of equivalent limited partnership units outstanding during the period  1,241,923   1,245,500 
Commonwealth Income & Growth Fund V 
Condensed Statements of Operations 
(unaudited) 
             
             
  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2009  2008  2009  2008 
Revenue            
Lease $1,325,909  $1,623,117  $4,312,224  $5,190,395 
Interest and other  40,831   23,593   74,157   73,388 
Gain (loss) on sale of computer equipment  (2,120)  2,709   17,040   84,982 
Total revenue  1,364,620   1,649,419   4,403,421   5,348,765 
                 
Expenses                
Operating, excluding depreciation  266,140   327,542   1,000,680   1,123,480 
Equipment management fee, General Partner  66,295   81,156   215,611   259,520 
Interest  11,650   32,326   49,530   114,822 
Depreciation  1,549,182   1,330,147   4,381,119   4,088,315 
Amortization of equipment acquisition costs and deferred expenses  51,260   76,089   167,842   232,861 
Bad debt expense  -   30,818   13,000   30,818 
Total expenses  1,944,527   1,878,078   5,827,782   5,849,816 
                 
Net (loss) $(579,907) $(228,659) $(1,424,361) $(501,051)
                 
Net (loss) allocated to limited partners $(476,010) $(234,897) $(1,443,019) $(519,789)
                 
Net (loss) per equivalent limited partnership unit $(0.38) $(0.19) $(1.16) $(0.42)
                 
Weighted average number of equivalent limited partnership units outstanding during the period  1,243,204   1,248,010   1,243,960   1,249,082 


see accompanying notes to condensed financial statements


 

 
4
 


 
Commonwealth Income & Growth Fund V
 
Condensed Statements of Partners' Capital 
For the three months ended March 31, 2010 
(unaudited) 
                
  General Partner Units  Limited Partner Units  General Partner  Limited Partner  Total 
Balance, January 1, 2010  50   1,242,246  $1,000  $6,811,342  $6,812,342 
Net Income (loss)  -   -   6,196   (387,909)  (381,713)
Redemptions  -   (3,675)  -   (33,920)  (33,920)
Distributions  -   -   (6,196)  (613,209)  (619,405)
Balance, March 31, 2010  50   1,238,571  $1,000  $5,776,304  $5,777,304 
Commonwealth Income & Growth Fund V
Condensed Statements of Partners' Capital
For the nine months ended September 30, 2009
(unaudited)
 
 
 General
Partner Units
 Limited
Partner Units
 General
Partner
 Limited
Partner
 Total
Balance, January 1, 2009                          50               1,245,852 $               1,000 $       11,288,864 $      11,289,864
Net Income (loss)                             -                                -                     18,658             (1,443,019)          (1,424,361)
Redemptions                             -                       (2,648)                             -                  (29,654)                (29,654)
Distributions                             -                                -                   (18,658)             (1,847,242)          (1,865,900)
Balance, September 30, 200950               1,243,204 $                  1,000 $         7,968,949 $        7,969,949


see accompanying notes to condensed financial statements


 

 
5
 

Commonwealth Income & Growth Fund V 
Condensed Statements of Cash Flow 
(unaudited) 
       
  Three Months ended 
  March 31, 2010  March 31, 2009 
       
Net cash provided by operating activities $408,613  $627,014 
         
Investing activities:        
Capital expenditures  (127,499)  (1,124,779)
Net proceeds from the sale of computer equipment  103,047   10,979 
Net cash (used in) investing activities  (24,452)  (1,113,800)
         
Financing activities:        
Redemptions  (33,920)  (22,249)
Distributions to partners  (619,405)  (622,590)
Net cash (used in) financing activities  (653,325)  (644,839)
         
Net (decrease) in cash  (269,164)  (1,131,625)
         
Cash and cash equivalents at beginning of period  556,766   3,053,703 
         
Cash and cash equivalents at end of period $287,602  $1,922,078 

Commonwealth Income & Growth Fund V 
Condensed Statements of Cash Flow 
(unaudited) 
       
  Nine Months ended  Nine Months ended 
  September 30,  September 30, 
  2009  2008 
       
Net cash provided by operating activities $2,285,399  $1,708,949 
         
Investing activities:        
Capital expenditures  (3,107,805)  (770,973)
Acquisition fees paid to General Partner  -  $(14,039)
Net proceeds from the sale of computer equipment  160,123   545,652 
Net cash (used in) investing activities  (2,947,682)  (239,360)
         
Financing activities:        
Redemptions  (29,654)  (49,119)
Distributions to partners  (1,865,900)  (1,873,347)
Debt placement fee paid to General Partner  -   (2,916)
Net cash (used in) financing activities  (1,895,554)  (1,925,382)
         
Net (decrease) in cash  (2,557,837)  (455,793)
Cash beginning of period  3,053,703   4,114,953 
         
Cash end of period $495,866  $3,659,160 

see accompanying notes to condensed financial statements


 
6
 



NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Business

Commonwealth Income & Growth Fund V (the “Partnership”) is a limited partnership organized in the Commonwealth of Pennsylvania onin May 19, 2003.  The Partnership offered for sale up to 1,250,000 units of the limited partnership at the purchase price of $20 per unit (the “Offering”“offering”).  The Partnership reached the minimum amount in escrow and commenced operations on March 14, 2005.  As of February 24, 2006, the Partnership was fully subscribed.
During the three months ended March 31, 2010 limited partners redeemed 3,675 units of the partnership for a total redemption price of approximately $34,000 in accordance with the terms of the limited partnership agreement.

The Partnership used the proceeds of the Offeringoffering to acquire, own and lease various types of 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, acquires computer equipment subject to associated debt obligations and lease agreements and allocatesallocate a participation in the cost, debt and lease revenue to the various partnerships that it manages 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 and Finance Association (ELFA).  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, 2015.

2. Summary of Significant Accounting Policies

Recent Accounting Pronouncements

In June 2009, the FASB issued an accounting standard codified within Accounting Standards Codification (“ASC”) ASC 105,, Generally Accepted Accounting Principles, (“ASC 105” and formerly referred to as SFAS No. 168), which establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP.  ASC 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. As ASC 105 is not intended to change or alter existing GAAP, it will not impact the Partnership’s condensed financial statements.  The Partnership has adjusted historical GAAP references in its third quarter 2009 Form 10-Q to reflect accounting guidance references included in the Codification.

In September 2009, the FASB issued Accounting Standards Update No. 2009-07 (“ASC Update 2009-07”) Accounting for Various Topics - Technical Corrections to SEC Paragraphs.  This ASU represents technical corrections to various ASC Topics containing SEC guidance.  The technical corrections resulted from external comments received, and consisted principally of paragraph referencing and minor wording changes.   In the third quarter of 2009, the Partnership adopted this FASB ASU.  The adoption of this ASU did not have any impact on the condensed financial statements included herein.

7
In August 2009, the FASB issued Accounting Standards Update No 2009-05 (“ASC Update 2009-05”), an update to FASB ASC 820, Fair Value Measurements and Disclosures.  This update provides amendments to reduce potential ambiguity in financial reporting when measuring the fair value of liabilities.  Among other provisions, this update provides clarification that in circumstances, in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the valuation techniques described in ASC Update 2009-05.  ASC Update 2009-05 will become effective for the Partnership’s annual financial statements for the year ended December 31, 2009.  The Partnership has not determined the impact that this update may have on its financial statements.

In June 2009, the FASB issued FAS 167 “Amendments to FASB Interpretation No.46(R),” which has yet to be codified with the ASC. Once codified, the standard would amend ASC 810, “Consolidation” to address the elimination of the concept of a qualifying special purpose entity.  This guidance is effective for the Partnership beginning in the first quarter of fiscal year 2010.  The Partnership is currently evaluating the impact that the adoption of ASC 810 will have on its condensed financial statements.

In June 2009, the FASB issued FAS No. 166, “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140.”   This pronouncement has not yet been incorporated into the FASB’s codification. This standard will require more information about transferred financial assets, including securitization transactions, and where entities have continuing exposure to the risks related to transferred financial assets. This standard is effective at the start of a Partnership’s first fiscal year beginning after November 15, 2009, or January 1, 2010, for companies reporting earnings on a calendar-year basis. The Partnership is currently analyzing the impact of this statement, if any, to its condensed financial statements.

In May 2009, the FASB issued an accounting standard codified within ASC 855,” Subsequent Events”, (“ASC 855” and formerly referred to as SFAS No. 165), which modified the subsequent event guidance.  The three modifications to the subsequent events guidance are: 1) To name the two types of subsequent events either as recognized or non-recognized subsequent events, 2) To modify the definition of subsequent events to refer to events or transactions that occur after the balance sheet date, but before the financial statement are issued or available to be issued and 3) To require entities to disclose the date through which an entity has evaluated subsequent events and the basis for that date, i.e. whether that date represents the date the financial statements were issued or were available to be issued.  This guidance is effective for interim or annual financial periods ending after June 15, 2009, and should be applied prospectively.  The Partnership adopted ASC 855 during the quarter ended June 30, 2009 and it did not have a material impact on the Partnership’s condensed financial statements.

In April 2009, the FASB issued an accounting standard codified within ASC 320 (formerly referred to as FSP FAS 115-2, FAS124-2 and EITF 99-20-2), “Recognition and Presentation of Other-Than-Temporary-Impairment.”  ASC 320 (i) changes existing guidance for determining whether an impairment is other than temporary to debt securities and (ii) replaces the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security; and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis.  Under ASC 320, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses.  The amount of impairment related to other factors is recognized in other comprehensive income.  ASC 320 is effective for interim and annual periods ending after June 15, 2009.  The Partnership adopted ASC 320 in the quarter ended June 30, 2009.  The adoption did not have a material impact on the Partnership’s condensed financial statements.

8
In April 2009, the FASB issued an accounting standard codified within ASC 825, “Financial Instruments,” (“ASC 825”), ASC 825-10-65, Transition and Open Effective Date Information, (“ASC 825-10-65” and formerly referred to as FSP FAS No. 107-1 and APB Opinion No. 28-1), which requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements.  This guidance also requires those disclosures in summarized financial information at interim reporting periods.  ASC 825-10-65 is effective prospectively for interim reporting periods ending after June 15, 2009.  The Partnership adopted ASC 825 in the quarter ended June 30, 2009. Except for the disclosure requirements, the adoption of ASC 825 did not have a material impact on the Partnership’s condensed financial statements.

In April 2009, the FASB issued an accounting standard codified within ASC 820, “Fair Value Measurements and Disclosures,” ( “ASC 820” and formerly referred to as FSP FAS 157-4), ASC 820 affirms the objective of fair value when a market is not active, clarifies and includes additional factors for determining whether there has been a significant decrease in market activity, eliminates the presumption that all transactions are distressed unless proven otherwise, and requires an entity to disclose a change in valuation technique.  ASC 820 is effective for interim and annual periods ending after June 15, 2009.  The Partnership adopted ASC 820 in the quarter ended June 30, 2009.  The adoption did not have a material impact on the Partnership’s condensed financial statements

 Basis of Presentation

The financial information presented as of any date other than December 31, 20082009 has been prepared from the books and records without audit.  Financial information as of December 31, 20082009 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, 2008.2009.  Operating results for the ninethree months ended September 30, 2009March 31, 2010 are not necessarily indicative of financial results that may be expected for the full year ended December 31, 2009.

Pursuant to ASC 855, “Subsequent Events”, subsequent events have been evaluated through November 12, 2009, the date these financial statements were available to be issued, and there were no subsequent events to be reported.2010.

Disclosure of Fair Value of Financial Instruments

Effective April 2009, the Partnership has adopted ASC 825, Financial Instruments, (“ASC 825”), ASC 825-10-65, Transition and Open Effective Date Information, (“ASC 825-10-65” and formerly referred to as “SFAS 107-1” and “APB 28-1”).   This ASC requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements.  This guidance also requires those disclosures in summarized financial information at interim reporting periods. 

9
Estimated fair value was determined by management using available market information and appropriate valuation methodologies.  However, judgment was necessary to interpret market data and develop estimated fair value.  The partnershipPartnership holds no financial instruments, except notes payable. Cash, receivables, accounts payable and accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values as of September 30, 2009March 31, 2010 and December 31, 2008.2009.

The Partnership’s long-term debt consists of notes payable, which are secured by specific computer equipment and are nonrecourse liabilities of the Partnership. The estimated fair value of this debt at September 30, 2009March 31, 2010 and December 31, 20082009 approximates the carrying value of these instruments, due to the interest rates approximating current market values.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of September 30, 2009March 31, 2010 and December 31, 2008.2009. 

7
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.  FairThe fair value is determined based on estimated discounted cash flows to be generated by the asset.  The Partnershippartnership determined thatno impairment in the amount of approximately $87,000analysis was necessary at March 31, 2010 and $15,000 existed for the period ended September 30, 2009 and 2008, respectively.    Such amounts have been included in depreciation expense in the accompanying financial statements.as no impairment indicators were noted.

Depreciation on computer equipment for financial statement purposes is based on the straight-line method estimated generally over useful lives of three or four years.

Reimbursable Expenses

Reimbursable expenses, which are charged to the Partnership by CCC in connection with the administration and operation of the Partnership, are allocated to the Partnership based upon several factors including, but not limited to, the number of investors, compliance issues, and the number of existing leases.  For example, if the Partnership has more investors than another program sponsored by CCC, then higher amounts of expenses related to investor services, mailing and printing costs will be allocated to the Partnership.  Also, while a Partnership is in its offering stage, higher compliance costs are allocated to it than to a program not in its offering stage, as compliance resources are utilized to review incoming investor suitability and proper documentation.  Finally, lease related expenses, such as due diligence, correspondence,corres pondence, collection efforts and analysis staff costs, increase as programs purchase more leases, and decrease as leases terminate and equipment is sold. All of these factors contribute to CCC’s determination as to the amount of expenses to allocate to the Partnership or to other sponsored programs.  For the Partnership, all reimbursable expenses are expensed as they are incurred.

Cash and cash equivalents

At September 30, 2009,March 31, 2010 cash was held in two accounts maintained at one financial institution. The accounts were, in the aggregate, federally insured for up to $250,000.  At September 30, 2009,March 31, 2010, the total cash balance was as follows:

At September 30, 2009March 31, 2010Bank A
Total bank balance $   1,003,978308,000
FDIC insurable limit $  (250,000)
Uninsured amount $     753,97858,000

The Partnership mitigates bank failurethe risk of holding uninsured deposits by only depositing funds with major a financial institution.  The Partnership deposits its funds with a Moody's Aaa-Rated banking institution which is one of only three Aaa-Rated banks listed on the New York Stock Exchange.  The Partnership has not experienced any losses in such accounts, and believes it is not exposed to any significant credit risk. The amount in such accounts will fluctuate throughout 20092010 due to many factors, including the pace of additional revenues,cash receipts, equipment acquisitions and distributions. distributions to investors.

10
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.

ReclassificationRecent Accounting Pronouncements

Certain prior amounts have been reclassifiedIn January 2010, the FASB issued Accounting Standards Update No. 2010-06 (“ASC Update 2010-06”) Improving Disclosures about Fair Value Measurements, to conform toenhance the current presentation.usefulness of fair value measurements. ASU 2010-06 amends the disclosures about fair value measurements in FASB Accounting Standards Codification™ (ASC) 820-10, Fair Value Measurements and Disclosures.  The net resultsamended guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disaggregation requirement for the reconciliation disclosure of Level 3 measurements, which is effective for fiscal years beginning after December 15, 2010 and for interim periods within those years. The Partnership adopted this ASU in the reclassificationsfirst quarter of 2010. The adoption of this standard did not have ana material impact on the Partnership’s previously reported financial position, cash flows, or results of operations.statements.

In January 2010, the FASB issued Accounting Standards Update No. 2010-04 (“ASC Update 2010-04”) Accounting for Various Topics – Technical Corrections to SEC Paragraphs.  The purpose of this ASU is to make technical corrections to certain guidance issued by the SEC that is included in the FASB Accounting Standards Codification (ASC).  Primarily, this ASU changes references to various FASB and AICPA pronouncements to the appropriate ASC paragraph numbers. The Partnership adopted this ASU in the first quarter of 2010. The adoption of this standard did not have a material impact on the Partnership’s financial statements.

In December 2009, the FASB issued Accounting Standards Update No. 2009-17, (“ASC Update 2009-17”), Consolidations (ASC 810) – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This ASU incorporates FAS 167, Amendments to FASB Interpretation No. 46(R), into the Codification. The new requirements are effective as of the beginning of the Partnership’s first fiscal year beginning after November 15, 2009. During the first quarter of 2010, the Partnership adopted this ASU. The adoption of this s tandard did not have a material impact on the Partnership’s financial statements.

In December 2009, the FASB issued Accounting Standards Update No. 2009-16, (“ASC Update 2009-16”) Transfers and Servicing (ASC 860) – Accounting for Transfers of Financial Assets . This ASU incorporates FAS 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140, into the FASB Accounting Standards Codification (the Codification). The new requirements are effective for transfers of financial assets occurring in fiscal years beginning after November 15, 2009.This standard will require more information about transferred financial assets, including securitization transactions, and where entities have continuing exposur e to the risks related to transferred financial assets. During the first quarter of 2010, the Partnership adopted this ASU. The adoption of this standard did not have a material impact on the Partnership’s financial statements.

8
3. Computer Equipment

The Partnership is the lessor of equipment under operating leases with periods that generally rangingwill range from 12 to 48 months.  In general, associated costs such as repairs and maintenance, insurance and property taxes are paid by the lessee.

Through September 30, 2009,March 31, 2010, the Partnership has onlysolely entered into operating leases.  Lease revenue is recognized on thea monthly straight-line basis which is generally in accordance with the terms of the operating lease agreements.  

The company’sPartnership’s leases do not contain any step-rent provisions or escalation clauses nor are lease revenues adjusted based on any index.

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 and the equipment is re-leased or sold.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 minimizesis designed to minimize any conflicts the leasing company may have with a potential new leaselessee and will potentiallymay assist in maximizing overall portfolio performance.  The remarketing fee is tied into lease performance thresholds and is factoreda factor in the negotiation of the fee.  Remarketing fees incurred in connection with lease extensions are accounted for as operating costs.  Remarketing fees incurred in connectioncon nection with the sale of computer equipment are included in our gain or loss calculations.  For the ninethree months ended September 30,March 31, 2010 and 2009, and 2008, the Partnership incurred remarketing fees of approximately $51,000$23,000 and $51,000,$7,000, respectively. For the ninethree months ended September 30,March 31, 2010 and 2009 and 2008 the Partnership paid approximately $37,000$12,000 and $22,000,$5,000, respectively, in such fees.

CCC, on behalf of the Partnership and on behalf of 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 share of the computer equipment in which it participates with other partnerships at September 30, 2009 and DecemberMarch 31, 20082010 was approximately $11,564,000 and $9,480,000, respectively,$11,691,000 and 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, 2009 andMarch 31, 2010 was approximately $35,417,000.  
The Partnership’s share of the equipment in which it participates with other partnerships at December 31, 20082009 was approximately $34,907,000$11,564,000 and $23,272,000, respectively.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 December 31, 2009 was approximately $34,907,000.   The Partnership’s share of the outstanding debt associated with this equipment at September 30, 2009 and December 31, 20082009 was $435,000 and $1,183,000, respectively.$201,000.  The total outstanding debt related to the equipment shared by the Partnership at September 30, 2009 and December 31, 20082009 was approximately $1,547,000 and $3,349,000, respectively.$973,000.

As the Partnership and the other programs managed by the General Partner increase their overall portfolio size, opportunities for shared participation are expected to continue. Sharing in the acquisition of a lease portfolio gives the fund an opportunity to acquire additional assets and revenue streams, while allowing the fund to remain diversified and reducing its overall risk with respect to one portfolio.  Thus, total shared equipment and related debt should continue to trend higher for the remainder of 2010 as the Partnership builds its portfolio.
11

The following is a schedule of future minimum rentals on non-cancellable operating leases at September 30, 2009:March 31, 2010:
 
 Amount
ThreeNine Months ended December 31, 2009 $                         925,475
Year ended December 31, 2010                                                    2,015,859$   1,651,000
Year ended December 31, 2011                                                    1,212,1081,187,000
Year ended December 31, 2012                                                       303,886307,000
 $   4,457,3283,145,000

9
 
4. Related Party Transactions

Receivables/Payables

As of September 30, 2009,March 31, 2010, the Partnership’s related party receivables and payables are short term, unsecured, and non-interest bearing.
 
Nine Months Ended September 30,20092008
   
Reimbursable expenses  
Reimbursable expenses, which are charged to the Partnership by CCC in connection with the administration and operation of the Partnership, are allocated to the Partnership based upon several factors including, but not limited to, the number of investors, compliance issues, and the number of existing leases.  See “Summary of Significant Accounting Policies - Reimbursable Expenses, “above. $                926,000 $           1,068,000
   
Equipment Acquisition fee  
The General Partner earned 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.   At September 30, 2009, the remaining balance of prepaid acquisition fees was approximately $56,000, which will be earned in future periods. $                124,000 $                42,000
Three months ended March 31,20102009
   
Reimbursable expenses  
Reimbursable expenses, which are charged to the Partnership by CCC in connection with the administration and operation of the Partnership, are allocated to the Partnership based upon several factors including, but not limited to, the number of investors, compliance issues, and the number of existing leases.  See "Summary of Significant Accounting Policies - Reimbursable Expenses," above.$   227,000$   341,000
   
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. $                            - $                  3,000
   
Equipment management fee  
The General Partner is entitled to be paid for managing the equipment portfolio 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. $                216,000 $              260,000

   
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 (i) a return of their net capital contributions and a 10% per annum cumulative return, compounded daily, on adjusted capital contributions and (ii) 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. $                     5,000 $                18,000
   
   
Equipment acquisition fee  
The General Partner earned 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.   At March 31, 2010, the remaining balance of prepaid acquisition fees was approximately $50,000, which is expected to be earned in future periods.$   5,000$   45,000
   
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.$   -$   -


   
Equipment management fee  
The General Partner is entitled to be paid for managing the equipment portfolio 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.$   47,000$   77,000
   
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 (i) a return of their net capital contributions and a 10% per annum cumulative return, compounded daily, on adjusted capital contributions and (ii) 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.$   2,500$   300
   
1210
 
5. Notes Payable

Notes payable consisted of the following:following amounts:

  September 30, 2009  December 31, 2008 
       
Installment notes payable to banks; interest ranging from 5.25% to 6.20% due in quarterly or monthly
installments ranging from $6,588 to $134,671, including interest, with final payments from January through October 2009
 $190,041  $989,358 
         
Installment notes payable to banks; interest ranging from 5.40% to 5.85% due in quarterly
installments ranging from $23,643 to $31,661, including interest, with final payments from January through July 2010
  167,998   322,037 
         
Installment note payable to bank; interest at 5.75% due in quarterly installments of $22,756 including
 interest, with final payment in January 2011
  129,923   190,829 
         
Installment note payable to bank; interest at 6.21%, due in monthly installments of $1,368, including
 interest, with final payment in May 2012.
  40,241   49,253 
  $528,203  $1,551,477 
  
March 31,
 2010
  
December 31,
 2009
 
       
        
Installment notes payable to banks; interest ranging from 5.40% to 5.85% due in quarterly installments of  $23,643 and  $31,661, including interest, with final payments from January through July 2010 $62,000   $115,000 
          
Installment note payable to bank; interest at 5.75% due in quarterly installments of $22,756 including interest, with final payment in January 2011  88,000    109,000 
          
Installment note payable to bank; interest at 6.21%, due in monthly installments of $1,368, including interest, with final payment in May 2012  33,000    37,000 
  $183,000   $261,000 
 
These notes are secured by specific computer equipment and are nonrecourse liabilities of the Partnership.  As such, the notes do not contain any debt covenants with which we must comply on either an annual or quarterly basis.  Aggregate maturities of notes payable for each of the periods subsequent to September 30, 2009March 31, 2010 are as follows:
 
 Amount
ThreeNine months ending December 31, 2009 $                               267,218
Year ended December 31, 2010216,349$      138,000
Year ended December 31, 201137,90338,000
Year ended December 31, 20126,7337,000
 $      528,203183,000


13
6. Supplemental Cash Flow Information

Other noncash activities included in the determination of net loss are as follows:

Nine months ended September 30,20092008
Lease income, net of interest expense on notes payable realized as a result of direct payment of principal by lessee to bank $      1,023,374 $    1,495,243
   
Three months ended March 31, 201020102009
Lease revenue net of interest expense on notes payable realized as a result of  direct payment of principal by lessee to bank $      78,000 $    435,000
   

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.

11

Noncash investing and financing activities include the following:

Nine months ended September 30,20092008
Debt assumed in connection with purchase of computer equipment $                     - $       291,642
Equipment acquisition fees earned by General Partner upon purchase of equipment from prepaid acquisition fees $       124,312 $         42,505
Three months ended March 31, 201020102009
Equipment acquisition fees earned by General Partner, upon purchase of equipment, from prepaid acquisition fees $       5,000 $         45,000

TheAt March 31, 2010, the Partnership wrote-off fully amortized acquisition and finance fees of approximately $309,000 for the nine months ended September 30, 2009.  Additionally, the partnership wrote-off obsolete equipment with a net book value of approximately $15,000 for the nine months ended September 30, 2009.$107,000.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

Certain statements within this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). These statements are being made pursuant to the PSLRA, with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA, and, other than as required by law, we assume no obligation to update or supplement such statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of words such as “may,” “will,” “could,” “anticipate,” “believe,“b elieve,” “estimate,” “expects,” “intend,” “predict” or “project” and variations of these words or comparable words or phrases of similar meaning. 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.

CRITICAL ACCOUNTING POLICIES

The Partnership'sOur discussion and analysis of itsour financial condition and results of operations are based upon itsour financial statements which have been prepared in accordance with generally accepted accounting principles generally accepted in the United States. The preparation of these financial statements requires the Partnershipus to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Partnership bases itsWe base these 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 believesWe believe that itsour critical accounting policies affect itsour more significant judgments and estimates used in the preparation of itsour financial statements.

14
COMPUTER EQUIPMENT
 
Commonwealth Capital Corp., on our behalf and on behalf of the Partnership and other affiliated partnerships, acquires computer equipment subject to associated debt obligations and lease revenue and allocates a participation in the cost, debt and lease revenue to the various partnerships based on certain risk factors.  Depreciation on computer equipment for financial statement purposes is based on the straight-line method estimated generally over estimated useful lives of threetwo to four years.

 REVENUE RECOGNITION

Through September 30, 2009, the Partnership has onlyMarch 31, 2010, we have solely entered into operating leases.  Lease revenue is recognized on a monthly straight-line basis which is generally in accordance with the terms of the operating lease agreement. The Partnership’s

Our leases do not contain any step-rent provisions or escalation clauses nor are lease revenues adjusted based on any index.

The Partnership reviewsWe review a customer’s credit history before extending credit and establishescredit. In the event of a default, we may establish a provision for uncollectible accounts receivable based upon the credit risk of specific customers, historical trends andor other information.

12
LONG-LIVED ASSETS

The Partnership evaluates itsWe evaluate our long-lived assets when events or circumstances indicate that the value of the asset may not be recoverable.  The Partnership determinesWe determine 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 andthen impairment exists.  The amount of the impairment is determined based on the difference between the carrying value and the fair value.  FairThe fair value is determined based on estimated discounted cash flows to be generated by the asset. The PartnershipWe determined thatno impairment in the amount of approximately $87,000analysis was necessary at March 31, 2010 and $15,000 existed for the period ended September 30, 2009 and 2008, respectively.    Such amounts have been included in depreciation expense in the accompanying financial statements.as no impairment indicators were noted.

LIQUIDITY AND CAPITAL RESOURCES

The Partnership’sOur primary source of cash for the ninethree months ended September 30, 2009 and 2008March 31, 2010 was cash provided by operating activities of approximately $2,285,000$409,000 and $1,709,000, respectively.  Duringfrom the nineproceeds from the sale of equipment of approximately $103,000.  This compares to the three months ended September 30,March 31, 2009 equipmentwhere our primary source of cash was purchased in the amountfrom operating activities of approximately $3,108,000$627,000 and proceeds from the sale of equipment were approximately $11,000.

Our primary use of cash for the three months ended March 31, 2010 was for the purchase of new information technology equipment of approximately $128,000 and also for distributions to partners of approximately $619,000.  For the three months ended March 31, 2009 distributions to partners were approximately $623,000, and our capital expenditures were approximately $1,125,000.

Capital expenditures and distributions were paid in the amount of approximately $1,866,000.   Equipment was purchased in the amount of approximately $771,000are expected to increase overall during the nine months ended September 30, 2008remainder of 2010, as management focuses on additional equipment acquisitions and distributions were paid in the amount of approximately $1,873,000.  

The Partnership intendsfunding limited partner distributions. We intend to invest approximately $500,000$1,350,000 in additional equipment forduring the remainder of 2009.2010.  The acquisition of this equipment will be primarily funded by debt financing andfinancing. Any debt service will be funded from cash flows from lease rental payments.payments, and not from public offering proceeds.

ForCash was provided by operating activities for the ninethree months ended September 30, 2009, the Partnership generated cash flows from operating activitiesMarch 31, 2010 of approximately $2,285,000,$409,000, which includes a net loss of approximately $1,424,000, a gain on sale of computer equipment of approximately $17,000$382,000 and depreciation and amortization expenses of approximately $4,549,000.  Other non-cash activities included in the determination of net income include direct payments of lease income by lessees to banks of approximately $1,023,274.

15
For the nine months ended September 30, 2008, the Partnership generated cash flows from operating activities of approximately $1,709,000 which includes a net loss of approximately $501,000, and depreciation and amortization expenses of approximately $4,321,000.$1,108,000. Other non-cash activities included in the determination of net loss include direct payments of lease income by lessees to banks of approximately $1,495,000.$78,000. Additionally we had a gain on the sale of equipment in the amount of $82,000 and an increase in receivables of lease revenue of $72,000.  For the three months ended March 31, 2009 cash was also generated by operating activities of approximately $627,000, which includes a net loss of approximately $375,000 and depreciation and amortization expenses of approximately $1,438,000. Other non-cash activities included in the determination of net loss incl ude direct payments of lease income by lessees to banks of approximately $435,000.

As we continue to increase the size of our equipment portfolio, operating expenses will increase, which reflects the administrative costs of servicing the portfolio, but because of our investment strategy of leasing technology equipment primarily through triple-net leases, we avoid operating expenses related to equipment maintenance or taxes.  Depreciation expenses will likely increase more rapidly than operating expenses as we add technology equipment to our portfolio.

13
At September 30, 2009,March 31, 2010 cash was held in two accounts maintained at one financial institution. The accounts were, in the aggregate, federally insured for up to $250,000.  At September 30, 2009,March 31, 2010, the total cash balance was as follows:

At September 30, 2009March 31, 2010Bank A
Total bank balance $   1,003,978308,000
FDIC insurable limit $  (250,000)
Uninsured amount $    753,97858,000

The Partnership mitigates bank failureWe mitigate the risk of holding uninsured deposits by only depositing funds with major a financial institution.  The Partnership deposits itsWe deposit our funds with a Moody's Aaa-Rated banking institutionsinstitution which is one of only three Aaa-Rated banks listed on the New York Stock Exchange.  The Partnership hasWe have not experienced any losses in such accounts, and believes it is not exposed to any significant credit risk. The amount in such accounts will fluctuate throughout 20092010 due to many factors, including the pace of additional revenues,cash receipts, equipment acquisitions and distributions. distributions to investors.

The Partnership'sOur investment strategy of acquiring computer equipment and generally leasing it under “triple-net leases”triple-net leases to operators who generally meet specified financial standards minimizes the Partnership'sour operating expenses.  As of September 30, 2009, the PartnershipMarch 31, 2010, we had future minimum rentals on non-cancelable operating leases of approximately $925,000$1,651,000 for the balance of the year ending December 31, 20092010 and approximately $3,532,000$1,494,000 thereafter.  

As of September 30, 2009, the Partnership’s outstandingMarch 31, 2010, our debt was approximately $528,000$183,000, with interest rates ranging from 5.25%5.40% to 6.21%, and will be payable through May 2012.

The Partnership’sOur 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 Partnershipour expenses and liabilities on a short and long term basis, the Partnershipwe will attempt to obtain additional funds by disposing of or refinancing equipment, or by borrowing within itsour permissible limits.  The Partnership may, from time to time, reduce the distributions to its Partners if it deems necessary.  Since the Partnership’sour leases are on a “triple-net”triple-net basis, no reserve for maintenance and repairs is deemed necessary.
 

RESULTS OF OPERATIONS

Three months ended September 30, 2009March 31, 2010 compared to Three Monthsthree months ended September 30, 2008March 31, 2009

For the three months ended September 30, 2009, the PartnershipMarch 31, 2010, we recognized revenue of approximately $1,365,000$1,046,000 and expenses of approximately $1,945,000,$1,428,000, resulting in a net loss of approximately $580,000.$382,000.  This net loss is primarily due to depreciation and amortization expenses for the three months ended March 31, 2010 which were greater than lease revenue for the same period.  For the three months ended September 30, 2008, the PartnershipMarch 31, 2009, we recognized revenue of approximately $1,649,000$1,550,000 and expenses of approximately $1,878,000,$ 1,925,000, resulting in a net loss of approximately $229,000.$ 375,000.  

LeaseOur lease revenue decreased 18% to approximately $1,326,000$937,000 for the three months ended September 30, 2009,March 31, 2010, from approximately $1,623,000$1,528,000 for the three months ended September 30, 2008.March 31, 2009.  This decrease was primarily attributabledue to more lease agreements ending versus new leases commencing,lease agreements being acquired during the three months ended September 30, 2009.March 31, 2010.

 OperatingInterest and other revenue increased to $26,000 for the three months ended March 31, 2010 from $21,000 for the three months ended March 31, 2009 due to an increase in other income from our lessees, related to damaged equipment, partially offset by lower interest income attributable to decreased cash balances held in financial institutions. The amounts in our bank accounts that generate interest revenue will fluctuate throughout 2010 due to many factors, including the pace of cash receipts, equipment acquisitions and distributions to limited partners.

Our operating expenses, excluding depreciation, primarily consist of accounting and legal fees, outside service fees and reimbursement of expenses to CCC for administration and operation of the Partnership.  These expenses decreased 19% to approximately $266,000$269,000 for the three months ended September 30, 2009March 31, 2010, from approximately $328,000$375,000 for the three months ended September 30, 2008 primarily due to decreases in reimbursable expenses and Partnership taxes. See “Summary of Significant Accounting Policies - Reimbursable Expenses,” in note 2.

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 18% to approximately $66,000 for the three months ended September 30, 2009, from approximately $81,000 for the three months ended September 30, 2008, which is consistent with theMarch 31, 2009.  This decrease in lease revenue.

16
Depreciation and amortization expenses consist of depreciation on computer equipment and amortization of equipment acquisition fees. These expenses increased to approximately $1,600,000 for the three months ended September 30, 2009, from $1,406,000 for the three months ended September 30, 2008. This increase is primarily attributable to the acquisition of new equipment associated with the purchase of new leases.decreases in accounting, legal and various administrative expenses due to enhanced operating efficiencies.

The Partnership sold computer equipment with a net book value of approximately $109,000 for the three months ended September 30, 2009, for a net loss of approximately $2,000.  The Partnership sold computer equipment with a net book value of approximately $35,000 for the three months ended September 30, 2008, for a net gain of approximately $3,000.
 

Nine months ended September 30, 2009 compared to Nine Months ended September 30, 2008
14

For the nine months ended September 30, 2009, the Partnership recognized revenue of approximately $4,403,000, and expenses of approximately $5,828,000 resulting in a net loss of approximately $1,425,000.  For the nine months ended September 30, 2008, the Partnership recognized revenue of approximately $5,349,000, and expenses of approximately $5,850,000 resulting in a net loss of approximately $501,000.

Lease revenue decreased 17% to $4,312,000 for the nine months ended September 30, 2009, from $5,190,000, for the nine months ended September 30, 2008. This decrease was primarily attributable more lease agreements ending versus new leases commencing, during the nine months ended September 30, 2009.

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.  These expenses decreased to approximately $1,001,000 for the nine months ended September 30, 2009, from approximately $1,123,000 for the nine months ended September 30, 2009, primarily due to decreases in reimbursable expenses and Partnership taxes.   This decrease was partially offset by in increase in outside services of approximately $11,000.  See “Summary of Significant Accounting Policies - Reimbursable Expenses,” in note 2.
 
We pay an equipment management fee to our general partner for managing our equipment portfolio. 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 to approximately $216,000$47,000 for the ninethree months ended September 30, 2009,March 31, 2010 from $260,000approximately $77,000 for the ninethree months ended September 30, 2008,March 31, 2009, which is consistent with the decrease in lease income.revenue.

Depreciation and amortization expenses consist of depreciation on computer equipment and amortization of equipment acquisition fees. These expenses increaseddecreased to approximately $4,549,000$1,108,000 for the ninethree months ended September 30, 2009,March 31, 2010, from $4,321,000$1,438,000 for the ninethree months ended September 30, 2008.March 31, 2010. This increasedecrease was due to theequipment and acquisition offees being fully depreciated/amortized and not being replaced with as many new equipment attributable to the purchase of new leases.purchases.

The PartnershipWe sold computer equipment with a net book value of approximately $143,000$21,000 for the ninethree months ended September 30, 2009,March 31, 2010, for a net gain of approximately $17,000.  The Partnership$82,000. This compared to equipment that we sold computer equipmentfor the three months ended March 31, 2009 with a net book value of approximately $461,000 for the nine months ended September 30, 2008,$9,500, for a net gain of approximately $85,000.  $1,500.

17
Item 3.Quantitative and Qualitative Disclosures About Market Risk

N/A

Item 4T.  Controls and Procedures

Our management, under the supervision and with the participation of the principal executive officer and principal financial offer, have evaluated the effectiveness of our controls and procedures related to our reporting and disclosure obligations as of September 30, 2009March 31, 2010 which is the end of the period covered by this Quarterly Report on Form 10-Q.  Based on that evaluation, the principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to provide that (a) material information relating to us, including our consolidated affiliates is made known to these officers by us and our consolidated affiliates’ other employees, particularly material information related to the period for which this periodic report is being prepared; and (b) this information is recorded,recorde d, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the rules and forms promulgated by the Securities and Exchange Commission.  There have been no significant changes in the General Partner’s internal controls or in other factors that could significantly affect our disclosure controls and procedures in the thirdfirst quarter of 20092010 or subsequent to the date of the evaluation.

Part II:   OTHER INFORMATION

Item 1.  Legal Proceedings

To date, the Partnership has recorded a reserve against all outstanding rentals for Quick Loan Funding in the amount of $43,000.  As of June 30, 2009, the equipment has a net book value of zero.  Additionally, in July, known assets of Quick Loan Funding were sold at auction in Orange County, CA and were purchased by our General Partner.  The General Partner is in the process of reselling certain assets with value, with resale proceeds to be delivered to the Partnership, in an attempt to reduce equity lost on this lease transaction.  Please see the description of the Quick Loan Funding proceeding in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 under the heading “Legal Proceedings.”

The Partnership’s legal proceedings against Mobile Pro, Inc. and the City of Tempe, Arizona remain open.  Please see the description of the MobilePro and MobilePro/Tempe proceedings in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 20082009 under the heading “Legal Proceedings” for a more complete description of this matter.  The parties are currently engaged in the discovery process and have set a tentative trial date of September 13, 2010.  Our General Partner may engage in settlement discussions with the City of Tempe prior to trial.  To date, the Partnership has taken reserves against outstanding rentals of approximately $31,000 to cover potential loss exposure.

As of September 30,In October 2009 the Partnership has approximately $374,000 in accounts receivable due from Chrysler. To date, the Partnership has recorded a reserve against all outstanding rentals for Chrysler in the amount of $55,000.  We havewe entered into a cure resolution agreement with Chrysler LLC, pursuant to which Chrysler has agreed to paypaid, in November 2009, approximately $125,000$62,000 of past due amounts andto cure its pre-bankruptcy defaults under its leases. Upon receiptBased upon this cure payment, we recovered 82.4% of the cure amount, which ispre-bankruptcy receivables due on or before November 25, 2009,from Chrysler and we will have recovered 82.1 % of the outstanding receivables.are no longer involved in Chrysler’s bankruptcy proceedings. 


Item 1A.   Risk Factors

Changes in economic conditions could materially and negatively affect our business.
 
Our business is directly impacted by factors such as economic, political, and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in government monetary and fiscal policies, and inflation, all of which are beyond our control.  Beginning in 2008 and continuing through the thirdfirst quarter of 2009,2010, general worldwide economic conditions experienced a downturn due to the sequential effects of the subprime lending crisis, general credit market crisis, collateral effects on the finance and banking industries, increased energy costs, concerns about inflation, slower economic activity, decreased consumer confidence, reduced corporate profits and capital spending, adverse business conditions and liquidity concerns.  A deterioration in economic conditions, whether caused by national or locallo cal concerns, especially within our market area, could result in the following consequences, any of which could hurt business materially: lease delinquencies may increase; problem leases and defaults could increase; and demand for information technology products generally may decrease as businesses attempt to reduce expenses.

1815
 
Item 2.          Unregistered Sales of Equity Securities and Use of Proceeds
                       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


31.1 THE RULE 15d-14(a) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
31.2 THE RULE 15d-14(a) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
32.1 SECTION 1350 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
32.2 SECTION 1350 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER





SIGNATURES

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 V
 BY: COMMONWEALTH INCOME & GROWTH FUND, INC., General Partner


November 16, 2009May 17, 2010By: /s/ Kimberly A. Springsteen-Abbott
DateKimberly A. Springsteen-Abbott
 Chief Executive Officer
  
November 16, 2009May 17, 2010By: /s/  Lynn A. Franceschina
DateLynn A. Franceschina
 Executive Vice President, Chief Operating Officer