FOR THE QUARTERLY PERIOD ENDED MARCH 31,JUNE 30, 2008

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

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.

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,” “estimate,” “expects,“expect,” “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.

The Partnership's discussion and analysis of its financial condition and results of operations are based upon its financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Partnership to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Partnership bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Partnership believes that its critical accounting policies affect its more significant judgments and estimates used in the preparation of its financial statements.

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

The Partnership reviews a customer’s credit history before extending credit and establishes a provision for uncollectible accounts receivable based upon the credit risk of specific customers, historical trends and other information.

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 in the amount of approximately $15,000 existed as of March 31, 2008 and March 31,June 30, 2008.   No impairment was recorded for the six months ended June 30, 2007.

The Partnership’s primary source of capital for the threesix months ended March 31,June 30, 2008 and 2007 was cash provided by operating activities of approximately $734,000$1,019,000 and $1,312,000, respectively.  During the three months ended March 31, 2008 and 2007, equipment$1,788,000.  Equipment was purchased in the amount of approximately $513,000 and $887,000, respectively,$584,000 during the six months ended June 30, 2008 and distributions were paid in the amount of approximately $625,000 for each period.$1,250,000.  Equipment was purchased in the amount of approximately $3,563,000 during the six months ended June 30, 2007 and distributions were paid in the amount of approximately $1,250,000.  

The Partnership intends to invest approximately $2,500,000$2,000,000 in additional equipment for the remainder of 2008.  The acquisition of this equipment will be funded by debt financing and cash flows from lease rental payments.

For the threesix months ended March 31,June 30, 2008, the Partnership generated cash flows from operating activities in the amount of approximately $734,000,$1,019,000, which includes a net loss of approximately $93,000,$272,000, and depreciation and amortization expenses of approximately $1,441,000.$2,915,000.  Other non-cash activities included in the determination of net income include direct payments of lease income by lessees to banks of approximately $495,000.$997,000.

For the threesix months ended March 31,June 30, 2007, the Partnership generated cash flows from operating activities in the amount of $1,312,000,approximately $1,788,000, which includes a net loss of approximately $29,000,$117,000, and depreciation and amortization expenses of approximately $1,098,000.$2,473,000.  Other non-cash activities included in the determination of net income include direct payments of lease income by lessees to banks of approximately $325,000.$796,000.

The Partnership's investment strategy of acquiring computer equipment and generally leasing it under “triple-net leases” to operators who generally meet specified financial standards minimizes the Partnership's operating expenses.  As of March 31,June 30, 2008, the Partnership had future minimum rentals on non-cancelable operating leases of approximately $4,849,000$3,041,000 for the balance of the year ending December 31, 2008 and approximately $3,829,000$3,656,000 thereafter.  As of March 31,June 30, 2008, the outstanding debt was approximately $2,639,000$2,428,000 with interest rates ranging from 4.65% to 6.3%6.30%, and will be payable through October 2010.January 2011.

The Partnership’s cash from operations is expected to continue to be adequate to cover all operating expenses, liabilities, and preferred distributions to Partners during the next 12-month period.  If available cash flow or net disposition proceeds are insufficient to cover the Partnership expenses and liabilities on a short and long term basis, the Partnership will attempt to obtain additional funds by disposing of or refinancing equipment, or by borrowing within its permissible limits.  The Partnership may, from time to time, reduce the distributions to its Partners if it deems necessary.  Since the Partnership’s leases are on a “triple-net”triple-net basis, no reserve for maintenance and repairs is considereddeemed necessary.

For the three months ended March 31,June 30, 2008, the Partnership recognized revenue of approximately $1,856,000$1,848,000 and expenses of approximately $1,949,000,$2,028,000, resulting in a net loss of approximately $93,000.$180,000.  For the three months ended March 31,June 30, 2007, the Partnership recognized revenue of approximately $1,453,000$1,784,000 and expenses of approximately $1,481,000,$1,873,000, resulting in a net loss of approximately $28,000.$89,000.  

Lease income increased by 33% to approximately $1,828,000$1,740,000 for the three months ended March 31,June 30, 2008, from approximately $1,378,000$1,737,000 for the three months ended March 31,June 30, 2007.  This increase was primarily due to more new lease agreements commencingbeing entered into versus lease agreements ending,terminating during the three months ended March 31,June 30, 2008.

Operating expenses, excluding depreciation, primarily consist of accounting, legal, outside service fees and reimbursement of expenses to CCC for administration and operation of the Partnership.  The expenses increased 32%14% to approximately $1,949,000$422,000 for the three months ended March 31,June 30, 2008, from $1,481,000$370,000 for the three months ended March 31,June 30, 2007.  This increase is primarily attributable to an increase in other Limited PartnerPartnership taxes, limited partnership expenses which was partially offset by a decrease in accounting fees, and outside office services.remarketing fees.

The equipment management fee is approximately 5% of the gross lease revenue attributable to equipment that is subject to operating leases. The equipment management fee increased 25%6% to approximately $86,000$92,000 for the three months ended March 31,June 30, 2008, from $69,000$87,000 for the three months ended March 31,June 30, 2007, which is consistent with the increase in lease income.

Depreciation and amortization expenses consist of depreciation on computer equipment and amortization of equipment acquisition fees. These expenses increased 31%7% to approximately $1,441,000$1,474,000 for the three months ended March 31,June 30, 2008, from $1,098,000$1,374,000 for the three months ended March 31,June 30, 2007. This increase was due to the acquisition of new equipment associatedattributable to the purchase of new leases.

The equipment management fee is approximately 5% of the gross lease revenue attributable to equipment that is subject to operating leases. The equipment management fee increased to approximately $178,000 for the six months ended June 30, 2008, from $156,000 for the six months ended June 30, 2007, which is consistent with the increase in lease income.

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 March 31,June 30, 2008 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, 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 firstsecond quarter of 2008 or subsequent to the date of the evaluation.

In April 2007, our lessee Quick Loan Funding, Inc. began defaulting on its lease payments.  From April 2007 through the first quarter of 2008 we attempted several times to collect payment of outstanding lease payments and to recover the equipment from this lessee. On April 2, 2008, we filed suit in the Superior Court of Orange County, California (Docket No. 30-2008-00104785) against Quick Loan Funding, Inc. and its owner, Daniel Sadek, to recover the unpaid lease payments, late fees and the equipment. The suit is in its initial stagesIn July 2008, we recovered a portion of the equipment leased to Quick Loan Funding, and we cannot predictare continuing to pursue all available means to recover the outcome withremainder of the equipment and the outstanding amounts owed to us.  We anticipate the entry of a judgment in our favor during the third quarter of 2008, and will then focus on enforcement of the judgment against any reasonable certainty at this time.available assets of Quick Loan Funding.   While we believe Quick Loan Funding is currently insolvent, to our knowledge no proceedings in bankruptcy have been initiated, and we believe that Quick Loan Funding may have sufficient assets to cover our anticipated judgment against it.  To date, the Partnership has recorded a reserve against all outstanding rentals in the amount of approximately $43,000.$43,000 and has impaired the equipment leased to Quick Loan Funding by 10% this quarter. The Partnership has not experienced any significant changes related to this matter duringdetermined that impairment in the first quarteramount of approximately $15,000 existed as of June 30, 2008.  Prior to the first quarter of 2008, the Partnership had impaired these assets by approximately 15%.