Quarterly Report — Form 10-Q — Sect. 13 / 15(d) – SEA’34 Filing Table of Contents
Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 223K
2: EX-31.1 Certification -- §302 - SOA'02 HTML 21K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 21K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 16K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 17K
25: R1 Document and Entity Information HTML 44K
41: R2 Condensed Balance Sheets HTML 85K
35: R3 Condensed Balance Sheets (Parenthetical) HTML 20K
15: R4 Condensed Statements of Operations HTML 59K
27: R5 Condensed Statement of Partners' Capital HTML 32K
43: R6 Condensed Statements of Cash Flow HTML 36K
37: R7 Business HTML 24K
13: R8 Summary of Significant Accounting Policies HTML 32K
29: R9 Information Technology, Medical Technology, HTML 37K
Telecommunications Technology, Inventory
Management Equipment (''Equipment'')
36: R10 Related Party Transactions HTML 24K
42: R11 Notes Payable HTML 32K
28: R12 Supplemental Cash Flow Information HTML 20K
16: R13 Commitments and Contingencies HTML 23K
34: R14 Summary of Significant Accounting Policies HTML 40K
(Policies)
40: R15 Summary of Significant Accounting Policies HTML 18K
(Tables)
26: R16 Information Technology, Medical Technology, HTML 31K
Telecommunications Technology, Inventory
Management Equipment (Tables)
14: R17 Related Party Transactions (Tables) HTML 23K
38: R18 Notes Payable (Tables) HTML 32K
39: R19 Supplemental Cash Flow Information (Tables) HTML 19K
23: R20 Business (Details) HTML 17K
18: R21 Summary of Significant Accounting Policies HTML 21K
(Details)
31: R22 Information Technology, Medical Technology, HTML 25K
Telecommunications Technology, Inventory
Management Equipment (Details)
46: R23 Information Technology, Medical Technology, HTML 23K
Telecommunications Technology, Inventory
Management Equipment (Details 1)
22: R24 Information Technology, Medical Technology, HTML 25K
Telecommunications Technology, Inventory
Management Equipment (Details 2)
17: R25 Information Technology, Medical Technology, HTML 23K
Telecommunications Technology, Inventory
Management Equipment (Details 3)
30: R26 Information Technology, Medical Technology, HTML 23K
Telecommunications Technology, Inventory
Management Equipment (Details Narrative)
45: R27 Related Party Transactions (Details) HTML 19K
21: R28 Notes Payable (Details) HTML 55K
20: R29 Notes Payable (Details 1) HTML 28K
12: R30 Notes Payable (Details Narrative) HTML 17K
24: R31 Supplemental Cash Flow Information (Details) HTML 18K
44: R32 Supplemental Cash Flow Information (Details 1) HTML 18K
33: XML IDEA XML File -- Filing Summary XML 78K
32: EXCEL IDEA Workbook of Financial Reports XLSX 36K
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(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
☒ 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 ☒
(Do not
check if a smaller reporting company.)
Emerging
growth company ☐
Indicate
by check mark whether the registrant is an emerging growth company
(as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
☒
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). YES ☐ NO
☒
Net
(decrease) increase in cash and cash equivalents
(16,125)
10,516
Cash
and cash equivalents, beginning of period
19,695
12,338
Cash
and cash equivalents, end of period
$3,570
$22,854
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 in May 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”).
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.
The Partnership used the proceeds of the offering to acquire, own
and lease various types of information technology, medical
technology, telecommunications technology, inventory management
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 equipment
subject to associated debt obligations and lease agreements and
allocates a participation in the cost, debt and lease revenue to
the various partnerships that it manages based on certain risk
factors.
The Partnership’s investment objective is to acquire
primarily high technology equipment. Information technology has
developed rapidly in recent years and is expected to continue to do
so. Technological advances have permitted reductions in the cost of
information technology processing capacity, speed, and utility. In
the future, the rate and nature of equipment development may cause
equipment to become obsolete more rapidly. The Partnership also
acquires high technology medical, telecommunications and inventory
management equipment. The Partnership’s general partner will
seek to maintain an appropriate balance and diversity in the types
of equipment acquired. The market for high technology medical
equipment is growing each year. Generally, this type of equipment
will have a longer useful life than other types of technology
equipment. This allows for increased re-marketability, if it is
returned before its economic or announcement cycle is
depleted.
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. Approximately ten years after the commencement
of operations (the “operational phase”), the
Partnership intended to sell or otherwise dispose of all of its
equipment; make final distributions to partners, and to dissolve.
The Partnership was originally scheduled to end its operational
phase on February 4, 2017. During the year ended December 31, 2015,
the operational phase was officially extended to December 31, 2020
through an investor proxy vote. The Partnership is expected to
terminate on December 31, 2022.
For the first, second and third quarters of 2019, the
General Partner elected to forgo distributions and allocations of
net income owed to it and suspended limited partner distributions.
The General Partner will
reassess the funding of limited partner distributions on a
quarterly basis, throughout 2019.
Liquidity and Going Concern
The General Partner and CCC have committed to fund, either through
cash contributions and/or forgiveness of indebtedness, any
necessary operational cash shortfalls of Commonwealth Income and
Growth Fund V (“CIGF5” or “the
Partnership”) through November 30, 2020. The General Partner
will continue to reassess the funding of limited partner
distributions throughout 2019 and will continue to waive certain
fees. The General Partner and CCC will also determine if related
party payables owed to them, the Partnership, may be deferred (if
deemed necessary in an effort to further increase the
Partnership’s cash flow). 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 may attempt to obtain additional funds by disposing of
or refinancing equipment, or by borrowing within its permissible
limits.
The
Partnership has incurred recurring losses and has a working capital
deficit at September 30, 2019. The Partnership believes it has
alleviated these conditions as discussed above. Allocations of
income and distributions of cash are based on the Agreement.
7
2. Summary of Significant Accounting Policies
Basis of Presentation
The
unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission. Financial information as of December 31, 2018
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. Operating results for
the nine months ended September 30, 2019 are not necessarily
indicative of financial results that may be expected for the full
year ended December 31, 2019.
Disclosure of Fair Value of Financial Instruments
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. Cash and cash equivalents, receivables,
accounts payable and accrued expenses and other liabilities are
carried at amounts which reasonably approximate their fair values
as of September 30, 2019 and December 31, 2018 due to the short
term nature of these financial instruments.
The
Partnership’s long-term debt consists of notes payable, which
are secured by specific equipment and are nonrecourse liabilities
of the Partnership. The estimated fair value of this debt at
September 30, 2019 and December 31, 2018 approximates the carrying
value of these instruments, due to the interest rates on the debt
approximating current market interest rates. The Partnership
classifies the fair value of its notes payable within Level 2 of
the valuation hierarchy based on the observable inputs used to
estimate fair value.
Cash and cash equivalents
We
consider cash equivalents to be highly liquid investments with the
original maturity dates of 90 days or less.
At
September 30, 2019, cash and cash equivalents was held in one
account maintained at one financial institution with an aggregate
balance of approximately $5,000. Bank accounts are federally
insured up to $250,000 by the FDIC. At September 30, 2019, the
total cash bank balance was as follows:
The
Partnership’s bank balances are fully insured by the FDIC.
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 2019 due to many factors, including cash receipts,
equipment acquisitions and interest rates.
8
Recently Adopted Accounting Pronouncements
In
December 2018, the Financial Accounting Standard Board
(“FASB”) issued ASU No. 2018-20, Leases (Topic 842): Narrow-Scope Improvements
for Lessors, which is expected to reduce a lessor’s
implementation and ongoing costs associated with applying the new
leases standard. The ASU also clarifies a specific lessor
accounting requirement. Specifically, this ASU addresses
the following issues facing lessors when applying the leases
standard: Sales taxes and other similar taxes collected from
lessees, certain lessor costs paid directly by lessees and
recognition of variable payments for contracts with lease and
non-lease components. The Partnership concluded, upon adoption of
this update that there was no significant change to their
accounting.
In
March 2016, the FASB issued Accounting Standards Update No.
2016-02, Leases (Topic 842)
Section A—Leases: Amendments to the FASB Accounting Standards
Codification® Section B—Conforming Amendments Related to
Leases: Amendments to the FASB Accounting Standards
Codification® Section C—Background Information and Basis
for Conclusions- Effective for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal
years, for any of the following: A public business entity; A
not-for-profit entity that has issued, or is a conduit bond obligor
for, securities that are traded, listed, or quoted on an exchange
or an over-the-counter market; An employee benefit plan that files
financial statements with the U.S. Securities and Exchange
Commission (SEC). The new standard requires the recognition and
measurement of leases at the beginning of the earliest period
presented using a modified retrospective approach, which includes a
number of optional practical expedients that entities may elect to
apply. This guidance also expands the requirements for
lessees to record leases embedded in other arrangements and the
required quantitative and qualitative disclosures surrounding
leases. Additionally, our business involves lease agreements with
our customers whereby we are the lessor in the transaction.
Accounting guidance for lessors is largely unchanged. The
amendments are effective for fiscal years beginning after December15, 2018, and interim periods within those fiscal
years. We adopted Topic 842 at the required adoption
date of January 1, 2019. We used the package of practical
expedients permitted under the transition guidance that allowed us
not to reassess: (1) lease classification for expired or existing
leases and (2) initial direct costs for any expired or existing
leases. We did not recognize an adjustment to the opening balance
of partner’s capital upon adoption.
In
March 2019, the FASB issued Accounting Standards Update No.
2019-01, Leases (Topic 842)
Codification Improvements — Effective for fiscal years
beginning after December 15, 2019, including interim periods within
those fiscal years, for any of the following: A public business
entity; A not-for-profit entity that has issued, or is a conduit
bond obligor for, securities that are traded, listed, or quoted on
an exchange or an over-the-counter market; An employee benefit plan
that files financial statements with the U.S. Securities and
Exchange Commission (SEC). The amendments in this Update include
the following items brought to the Board’s attention through
those interactions with stakeholders:
●
Determining the
fair value of the underlying asset by lessors that are not
manufacturers or dealers (Issue 1).
●
Presentation on the
statement of cash flows—sales-type and direct financing
leases (Issue 2).
●
Transition
disclosures related to Topic 250, Accounting Changes and Error
Corrections (Issue 3).
We
adopted Topic 842 at the required adoption date of January 1, 2019.
The Partnership concluded that the sales taxes and other similar
taxes collected from the lessees are recorded in the current period
in the Condensed Statement of Operations as gross revenues and
expenses. As permitted by the guidance, we elected the practical
expedient that allows us not to restate comparative periods in the
financial statements. Upon adoption of this update, there was no
significant change to the Partnership accounting.
9
Recent
Accounting Pronouncements Not Yet Adopted
FASB issued a new guidance, Accounting Standards Update No.
2016-13, Financial Instruments –
Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments, as
clarified and amended by ASU 2018-19, Codification Improvements to
Topic 326, Financial Instruments – Credit Losses and
ASU 2019-05, Financial Instruments –
Credit Losses (Topic 326): Targeted Transition Relief.
The new guidance is effective for
fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019. Thus, for a calendar-year
company, it would be effective January 1, 2020. The new guidance
requires an allowance for credit losses based on the expectation of
lifetime credit losses on financial receivables carried at
amortized cost, including, but not limited to, mortgage loans,
premium receivables, reinsurance receivables and certain leases.
The new current expected credit loss (“CECL”)
impairment model for financial assets reported at amortized cost
will be applicable to receivables associated with sales-type and
direct financing leases but not to operating lease receivables. The
Partnership continues to evaluate the impact of the new guidance on
its condensed financial statements.
3. Information Technology, Medical Technology, Telecommunications
Technology, Inventory Management Equipment and other
Business-Essential Capital Equipment
(“Equipment”)
The
Partnership is the lessor of equipment under operating leases with
periods that generally will range from 12 to 48 months. In general,
associated costs such as repairs and maintenance, insurance and
property taxes are paid by the lessee.
Remarketing
fees are paid to the leasing companies from which the Partnership
purchases leases. These are fees that are earned by the leasing
companies when the initial terms of the lease have been met. The
General Partner believes that this strategy adds value since it
entices the leasing company to remain actively involved with the
lessee and encourages potential extensions, remarketing or sale of
equipment. This strategy is designed to minimize any conflicts the
leasing company may have with a new lessee and may assist in
maximizing overall portfolio performance. The remarketing fee is
tied into lease performance thresholds and is a 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 connection with the sale of equipment
are included in the gain or loss calculations. For the nine months
ended September 30, 2019 and 2018, no remarketing fees were
incurred or paid.
Gains
from the termination of leases are recognized when the lease is
modified and terminated concurrently. Gains from lease termination
included in lease revenue for the nine months ended September 30,2019 and 2018 were approximately $0 and $3,000,
respectively.
CCC, on behalf of the Partnership and on behalf of other affiliated
companies and partnerships (“partnerships”), acquires
equipment subject to associated debt obligations and lease
agreements and allocates a participation in the cost, debt and
lease revenue to the various companies based on certain risk
factors.
The
Partnership’s share of the cost of the equipment in which it
participates with other partnerships at September 30, 2019 was
approximately $1,765,000 and is included in the Partnership’s
equipment on its balance sheet. The total cost of the equipment
shared by the Partnership with other partnerships at September 30,2019 was approximately $7,433,000. The Partnership’s share of
the outstanding debt associated with this equipment at September,
2019 was approximately $92,000 and is included in the
Partnership’s notes payable on its balance sheet. The total
outstanding debt related to the equipment shared by the Partnership
at September 30, 2019 was approximately $1,013,000.
The
Partnership’s share of the cost of the equipment in which it
participates with other partnerships at December 31, 2018 was
approximately $1,853,000 and is included in the Partnership’s
equipment on its balance sheet. The total cost of the equipment
shared by the Partnership with other partnerships at December 31,2018 was approximately $7,609,000. The Partnership’s share of
the outstanding debt associated with this equipment at December 31,2018 was approximately $218,000 and is included in the
Partnership’s notes payable on its balance sheet. The total
outstanding debt related to the equipment shared by the Partnership
at December 31, 2018 was approximately $1,696,000.
As the
Partnership and the other programs managed by the General Partner
continue to acquire new equipment for the portfolio, 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.
10
The
following is a schedule of approximate future minimum rentals on
non-cancellable operating leases at September 30,2019:
Estimated residual
value of leased equipment (unguaranteed)
3,000
7,000
Less: unearned
income
(1,000)
(1,000)
Net investment in
finance leases
$10,000
$21,000
We assess credit risk for all of our customers, including those
that lease under finance leases. This credit risk is assessed using
an internally developed model which incorporates credit scores from
third party providers and our own customer risk ratings and is
periodically reviewed. Our internal ratings are weighted based on
the industry that the customer operates in. Factors taken into
consideration when assessing risk include both general and industry
specific qualitative and quantitative metrics. We separately take
into consideration payment history, open lawsuits, liens and
judgments. Typically, we will not extend credit to a company that
has been in business for less than 5 years or that has filed for
bankruptcy within the same period. Our internally based model may
classify a company as high risk based on our analysis of their
audited financial statements. Additional considerations of high
risk may include history of late payments, open lawsuits and liens
or judgments. In an effort to mitigate risk, we typically require
deposits from those in this category.
A
reserve for credit losses is deemed necessary when payment has not
been received for one or more months of receivables due on the
equipment held under finance leases. At the end of each period,
management evaluates the open receivables due on this equipment and
determines the need for a reserve based on payment history and any
current factors that would have an impact on payments.
The
following table presents the credit risk profile, by
creditworthiness category, of our direct finance lease receivables
at September 30, 2019:
Risk Level
Percent of Total
Low
-%
Moderate-Low
-%
Moderate
-%
Moderate-High
100%
High
-%
Net finance lease receivable
100%
As of
September 30, 2019 and December 31, 2018, we determined that we did
not have a need for an allowance for uncollectible accounts
associated with any of our finance leases, as the customer payment
histories with us, associated with these leases, has been positive,
with no late payments.
11
The
following is a schedule of approximate future minimum rentals on
non-cancellable finance leases at September 30, 2019:
The
Partnership was originally scheduled to end its operational phase
on February 4, 2017. During the year ended December 31, 2015, the
operational phase was officially extended to December 31, 2020
through an investor proxy vote (see note 1). The Partnership is
expected to terminate on December 31, 2022. If the Partnership
should terminate, CCC will assume all remaining active leases at
their fair market value and related remaining revenue stream and
any associated debt obligation for the duration of the remaining
lease term.
The General Partner
and its affiliates are entitled to reimbursement by the Partnership
for the cost of goods, supplies or 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 of certain expenses
incurred by the General Partner and its affiliates in connection
with the administration and operation of the Partnership. For the
three months ended September 30, 2019 and 2018, the General Partner
waived certain reimbursable expenses due to it by the Partnership.
For the nine months ended September 30, 2019 and 2018, the
Partnership was charged approximately $0 in Other LP
expense.
$59,000
$99,000
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% and 2% of the gross lease revenues
attributable to equipment which is subject to operating leases,
respectively. In an effort to increase future cash flow for the
fund our General Partner had elected to reduce the percentage of
equipment management fees paid to it from 5% to 2.5% of the gross
lease revenues attributable to equipment which is subject to
operating leases. The reduction was effective beginning in July
2010 and remained in effect for the nine months ended September 30,2019 and 2018. For the nine months ended September 30, 2019 and
2018, equipment management fees of approximately $10,000 and
$11,000 were earned but were waived by the General Partner,
respectively.
$-
$-
12
5. Notes Payable
Notes
payable consisted of the following approximate
amounts:
Installment
note payable to bank; interest at 4.47% due in monthly installments
of $2,208, including interest, with final payment in February
2019
-
2,000
Installment
notes payable to bank; interest at 6.00%, due in monthly
installments ranging from $803 to $1,216, including interest, with
final payment in February 2019
-
2,000
Installment
note payable to bank; interest at 1.80% due in monthly installments
of $2,116, including interest, with final payment in February
2019
-
4,000
Installment
note payable to bank; interest at 1.80% due in monthly installments
of $175, including interest, with final payment in March
2019
-
1,000
Installment
notes payable to bank; interest at 1.80% due in monthly
installments ranging from $121 to $175, including interest, with
final payment in April 2019
-
2,000
Installment
note payable to bank; interest at 4.98% due in monthly installments
of $2,847, including interest, with final payment in December
2019
9,000
33,000
Installment
note payable to bank; interest at 5.25% due in quarterly
installments of $8,102, including interest, with final payment in
December 2019
8,000
31,000
Installment
note payable to bank; interest at 4.87% due in quarterly
installments of $11,897, including interest, with final payment in
January 2020
23,000
57,000
Installment
note payable to bank; interest at 5.25% due in monthly installments
of $679, including interest, with final payment in June
2020
6,000
12,000
Installment
note payable to bank; interest at 5.56% due in monthly installments
of $2,925, including interest, with final payment in June
2020
26,000
50,000
Installment
note payable to bank; interest at 4.87% due in monthly installments
of $1,902, including interest, with final payment in July
2020
7,000
13,000
Installment
note payable to bank; interest at 6.28% due in quarterly
installments of $722, including interest, with final payment in
September 2020
3,000
5,000
Installment
note payable to bank; interest at 5.75% due in monthly installments
of $857, including interest, with final payment in November
2020
12,000
19,000
Installment
note payable to bank; interest at 5.31% due in quarterly
installments of $4,618, including interest, with final payment in
January 2021
27,000
39,000
Installment
note payable to bank; interest at 4.70% due in monthly installments
of $1,360, including interest, with final payment in February
2021
22,000
34,000
$143,000
$304,000
13
These
notes are secured by specific equipment with a carrying value of
approximately $291,000 and are nonrecourse liabilities of the
Partnership. As such, the notes do not contain any financial debt
covenants with which we must comply on either an annual or
quarterly basis. Aggregate approximate maturities of notes payable
for each of the periods subsequent to September 30, 2019 are as
follows:
The
Partnership was originally scheduled to end its operational phase
on February 4, 2017. During the year ended December 31, 2015, the
operational phase was officially extended to December 31, 2020
through an investor proxy vote (see note 1). The Partnership is
expected to terminate on December 31, 2022. If the Partnership
should terminate, CCC will assume the obligation related to the
remaining notes payable for the duration of the remaining lease
term.
During
2015, the General Partner executed a collateralized debt financing
agreement on behalf of certain affiliates for a total shared loan
amount of approximately $847,000, of which the Partnership’s
share was approximately $101,000. The Partnership’s portion
of the current loan amount at September 30, 2019 and December 31,2018 was approximately $0 and $2,000, respectively, and is secured
by specific equipment under both operating and finance leases. The
carrying value of the secured equipment under operating leases at
both September 30, 2019 and December 31, 2018 is $0. The carrying
value of the secured equipment under finance leases at September30, 2019 and December 31, 2018 is approximately $10,000 and
$22,000, respectively.
6. Supplemental Cash Flow Information
No
interest or principal on notes payable was paid by the Partnership
during 2019 and 2018 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.
Other
noncash activities included in the determination of net loss are as
follows:
Lease revenue net
of interest expense on notes payable realized as a result of direct
payment of principal by lessee to bank
$161,000
$229,000
During
the nine months ended September 30, 2019 and 2018, the Partnership
wrote-off fully depreciated equipment of approximately
$0.
14
7. Commitments and Contingencies
FINRA
On May3, 2013, the FINRA Department of Enforcement filed a complaint
naming Commonwealth Capital Securities Corp. (“CCSC”)
and the owner of the firm, Kimberly Springsteen-Abbott, as
respondents; however on October 22, 2013, FINRA filed an amended
complaint that dropped the allegations against CCSC and reduced the
scope of the allegations against Ms. Springsteen-Abbott. The
sole remaining charge was that Ms. Springsteen-Abbott had approved
the misallocation of some expenses to certain Funds.
Management believes that the expenses at issue include amounts that
were proper and that were properly allocated to Funds, and also
identified a smaller number of expenses that had been allocated in
error, but were adjusted and repaid to the affected Funds when they
were identified in 2012. During the period in question,
Commonwealth Capital Corp. (“CCC”) and Ms.
Springsteen-Abbott provided important financial support to the
Funds, voluntarily absorbed expenses and voluntarily waived fees in
amounts aggregating in excess of any questioned allocations.
A Hearing Panel ruled on March 30, 2015, that Ms.
Springsteen-Abbott should be barred from the securities industry
because the Panel concluded that she allegedly misallocated
approximately $208,000 of expenses involving certain Funds over the
course of three years. As such, management had allocated
approximately $87,000 of the $208,000 in allegedly misallocated
expenses back to the affected funds as a contingency accrual in
CCC’s financial statements and a good faith payment for the
benefit of those Income Funds.
The
decision of the Hearing Panel was stayed when it was appealed to
FINRA's National Adjudicatory Council (the “NAC”)
pursuant to FINRA Rule 9311. The NAC issued a decision that
upheld the lower panel’s ruling and the bar took effect on
August 23, 2016. Ms. Springsteen-Abbott appealed the
NAC’s decision to the U.S. Securities and Exchange Commission
(the “SEC”). On March 31, 2017, the SEC
criticized that decision as so flawed that the SEC could not even
review it, and remanded the matter back to FINRA for further
consideration consistent with the SEC’s remand, but did not
suggest any view as to a particular outcome.
On July21, 2017, FINRA reduced the list of 1,840 items totaling $208,000
to a remaining list of 84 items totaling $36,226 (which includes
approximately $30,000 of continuing education expenses for
personnel providing services to the Funds), and reduced the
proposed fine from $100,000 to $50,000, but reaffirmed its position
on the bar from the securities industry. Respondents promptly
appealed FINRA’s revised ruling to the SEC. That appeal is
pending as of November 13, 2019. All requested or allowed
briefs have been filed with the SEC. Management believes that
whatever final resolution of this may be, it will not result in any
material adverse financial impact on the Funds, although, a final
assurance cannot be provided until the legal matter is
resolved.
Leased Equipment
The General Partner is in the process of negotiations with a lessee
to “Buy-out” certain equipment currently under lease
contract. If a “Buy-out” agreement is not
reached, the lessee will continue to lease the equipment as written
under the original lease contract. The equipment to be
included in the “Buy-out” represents approximately
12.5% of the Partnership’s total equipment at cost as of
September 30, 2019.
15
Item 2: Management’s Discussion and Analysis of Financial
Condition and Results of Operations
FORWARD LOOKING STATEMENTS
This
section, as well as other portions of this document, includes
certain forward-looking statements about our business and our
prospects, tax treatment of certain transactions and accounting
matters, sales of securities, expenses, cash flows, distributions,
investments and operating and capital requirements. Such
forward-looking statements include, but are not limited to:
acquisition policies of our general partner; the nature of present
and future leases; provisions for uncollectible accounts; the
strength and sustainability of the U.S. economy; the continued
difficulties in the credit markets and their impact on the economy
in general; and the level of future cash flow, debt levels,
revenues, operating expenses, amortization and depreciation
expenses. You can identify those statements by the use of words
such as “could,”“should,”“would,”“may,”“will,”“project,”“believe,”“anticipate,”“expect,”“plan,”“estimate,”“forecast,”“potential,”“intend,”“continue” and “contemplate,” as well as
similar words and expressions.
Actual
results may differ materially from those in any forward-looking
statements because any such statements involve risks and
uncertainties and are subject to change based upon various
important factors, including, but not limited to, nationwide
economic, financial, political and regulatory conditions; the
health of debt and equity markets, including interest rates and
credit quality; the level and nature of spending in the
information, medical and telecommunications technologies markets;
and the effect of competitive financing alternatives and lease
pricing.
Readers
are also directed to other risks and uncertainties discussed in
other documents we file with the SEC, including, without
limitation, those discussed in Item 1A. “Risk Factors”
of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2018 filed with the SEC. We undertake no obligation to
update or revise any forward-looking information, whether as a
result of new information, future developments or
otherwise.
INDUSTRY OVERVIEW
The Equipment
Leasing and Finance Association’s (ELFA) Monthly
Leasing and Finance Index (MLFI-25), which reports economic
activity from 25 companies representing a cross section of the $1
trillion equipment finance sector, showed their overall new
business volume for September was $10 billion, up 18 %
year-over-year from new business volume in September 2018. Volume
was up 9 % month-to-month from $9.2 billion in August. Year to
date, cumulative new business volume was up 5 % compared to 2018.
Receivables over 30 days were 1.70 %, down from 2.0 % the previous
month and up from 1.60 % the same period in 2018. Charge-offs was
0.40 %, down from 0.42 % the previous month, and unchanged from the
year-earlier period. Credit approvals totaled 76.3 %, down from
76.6 % in August. Total headcount for equipment finance companies
was down 2.1 % year-over-year. Separately, the Equipment Leasing
& Finance Foundation’s Monthly Confidence Index (MCI-EFI)
in October is 51.4, down from the September index of
54.7.
CRITICAL ACCOUNTING POLICIES
Our
discussion and analysis of our financial condition and results of
operations are based upon our financial statements which have been
prepared in accordance with generally accepted accounting
principles in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses.
We 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.
We
believe that our critical accounting policies affect our more
significant judgments and estimates used in the preparation of our
financial statements.
See
Note 2 to our condensed financial statements included herein for a
discussion related to recent accounting
pronouncements.
16
LEASE INCOME RECEIVABLE
Lease
income receivable includes current lease income receivable net of
allowances for uncollectible accounts, if any. The Partnership
monitors lease income receivable to ensure timely and accurate
payment by lessees. Its Lease Relations department is responsible
for monitoring lease income receivable and, as necessary, resolving
outstanding invoices. Lease revenue is recognized on a monthly
straight-line basis which is in accordance with the terms of the
lease agreement.
The
Partnership reviews a customer’s credit history before
extending credit. When the analysis indicates that the probability
of full collection is unlikely, the Partnership may establish an
allowance for uncollectible lease income receivable based upon the
credit risk of specific customers, historical trends and other
information. The Partnership writes off its lease income receivable
when it determines that it is uncollectible and all economically
sensible means of recovery have been exhausted.
REVENUE RECOGNITION
Through
September 30, 2019, the Partnership’s lease portfolio
consisted of operating and finance leases. For operating leases,
lease revenue is recognized on a straight-line basis in accordance
with the terms of the lease agreements.
Finance
lease interest income is recorded over the term of the lease using
the effective interest method. For finance leases, we record, at
lease inception, unearned finance lease income which is calculated
as follows: total lease payments, plus any residual values and
initial direct costs, less the cost of the leased
equipment.
Upon
the end of the lease term, if the lessee has not met the return
conditions as set out in the lease, the Partnership is entitled, in
certain cases, to additional compensation from the lessee. The
Partnership’s accounting policy for recording such payments
is to treat them as revenue.
Gain or
losses from sales of leased and off lease equipment are recorded on
a net basis in the Fund’s condensed Statement of
Operations.
Our
leases do not contain any step-rent provisions or escalation
clauses nor are lease revenues adjusted based on any
index.
Gains
from the termination of leases are recognized when the lease is
modified and terminated concurrently. Gains from lease termination
included in lease revenue for the nine months ended September 30,2019 and 2018 were approximately $0 and $3,000,
respectively.
LONG-LIVED ASSETS
Depreciation
on equipment for financial statement purposes is based on the
straight-line method estimated generally over useful lives of two
to four years. Once an asset comes off lease or is re-leased, the
Partnership reassesses the useful life of an asset.
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 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 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,
third party appraisals or comparable sales of similar assets, as
applicable, based on asset type.
Residual
values are determined by management and are calculated using
information from both internal and external sources, as well as
other economic indicators.
17
LIQUIDITY AND CAPITAL RESOURCES
Our
primary source of cash for the nine months ended September 30, 2019
is net proceeds from the sale of equipment of approximately
$15,000. This compares to the nine months ended September 30, 2018
where our primary sources of cash were payments from finance leases
of approximately $22,000 and net proceeds from the sale of
equipment of approximately $20,000.
Our
primary uses of cash for the nine months ended September 30, 2019
was cash used in operating activities of approximately $31,000. Our
primary uses of cash for the nine months ended September 30, 2018
was for the purchase of new equipment of approximately
$30,000.
For the
nine months ended September 30, 2019 and 2018, the Partnership had
no financing activities.
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 equipment primarily through triple-net leases, we avoid
operating expenses related to equipment maintenance or
taxes.
Cash
was used in operating activities for the nine months ended
September 30, 2019 of approximately $31,000, which includes net
income of approximately $88,000 and depreciation and amortization
expenses of approximately $218,000. Other non-cash activities
included in the determination of net loss include direct payments
of lease income by lessees to banks of approximately $161,000. Cash
was used in operating activities for the nine months ended
September 30, 2018 of approximately
$400, which includes a net income of approximately $32,000 and
depreciation and amortization expenses of approximately $296,000.
Other non-cash activities included in the determination of
net gain include direct payments of lease income by lessees to
banks of approximately $229,000 and a gain on sale of equipment in
the amount of approximately $13,000.
During
2015, the General Partner executed a collateralized debt financing
agreement on behalf of certain affiliates for a total shared loan
amount of approximately $847,000, of which the Partnership’s
share was approximately $101,000. The Partnership’s portion
of the current loan amount at September 30, 2019 and December 31,2018 was approximately $0 and $2,000, respectively, and is secured
by specific equipment under both operating and finance leases. The
carrying value of the secured equipment under operating leases at
both September 30, 2019 and December 31, 2018 is $0. The carrying
value of the secured equipment under finance leases at September30, 2019 and December 31, 2018 is approximately $10,000 and
$22,000, respectively.
We
consider cash equivalents to be highly liquid investments with the
original maturity dates of 90 days or less.
At
September 30, 2019, cash and cash equivalents was held in one
account maintained at one financial institution with an aggregate
balance of approximately $5,000. Bank accounts are federally
insured up to $250,000 by the FDIC. At September 30, 2019, the
total cash bank balance was as follows:
The
Partnership’s bank balances are fully insured by the FDIC.
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 2019 due to many factors, including cash receipts,
equipment acquisitions, interest rates, and distributions to
limited partners.
Our
investment strategy of acquiring equipment and generally leasing it
under triple-net leases to operators who generally meet specified
financial standards minimizes our operating expenses. As of
September 30, 2019, we had future minimum rentals on non-cancelable
operating leases of approximately $90,000 for the balance of the
year ending December 31, 2019 and approximately $109,000
thereafter. As of September30, 2019, we had future minimum rentals on non-cancelable finance
leases of approximately $2,000 for the balance of the year ending
December 31, 2019 and approximately $6,000
thereafter.
As of
September 30, 2019, our non-recourse debt was approximately
$143,000, with interest rates ranging from 1.8% to 6.28%, and will
be payable through February 2021.
The
Partnership was originally scheduled to end its operational phase
on February 4, 2017. During the year ended December 31, 2015,
the operational phase was officially extended to December 31, 2020
through an investor proxy vote. The Partnership is expected to
terminate on December 31, 2022. As such, the Partnership will
continue to report its financial statements on a going concern
basis until a formal plan of liquidation is approved by the General
Partner.
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 in fiscal year 2019, as the Partnership
builds its portfolio.
The
General Partner elected to forgo distributions and allocations of
net income owed to it, and suspended limited partner distributions
for the nine months ended September 30, 2019. The General Partner
will continue to reassess the funding of limited partner
distributions throughout 2019 and will continue to waive certain
fees if the General Partner determines it is in the best interest
of the Partnership to do so. 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 may attempt to obtain additional funds by disposing of
or refinancing equipment, or by borrowing within its permissible
limits.
The
General Partner and CCC have committed to fund, either through cash
contributions and/or forgiveness of indebtedness, any necessary
operational cash shortfalls of the Partnership through September30, 2020. The General Partner will continue to reassess the funding
of limited partner distributions throughout 2019 and will continue
to waive certain fees if the General Partner determines it is in
the best interest of the Partnership to do so. 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 may attempt to obtain additional funds by
disposing of or refinancing equipment, or by borrowing within its
permissible limits. Additionally, the Partnership will seek to
enhance portfolio returns and maximize cash flow through the use of
leveraged lease transactions; the acquisition of lease equipment
through financing. This strategy allows the General
Partner to acquire additional revenue generating leases without the
use of investor funds, thus maximizing overall return.
Our
lease revenue decreased to approximately $124,000 for the three
months ended September 30, 2019, from approximately $144,000 for
the three months ended September, 2018. This decrease is primarily
due to more lease agreements ending versus new lease agreements
being acquired.
The Partnership had 61 and 71 operating leases during the three
months ended September 30, 2019 and 2018, respectively. The decline in
number of active leases is consistent with the overall decrease in
lease revenue. Management expects to add new leases to our
portfolio throughout the remainder of 2019, funded primarily through debt
financing. As the operational phase of the Partnership has been
extended to December 31, 2020, management will continue to seek
lease opportunities to enhance portfolio returns and cash
flow.
Sale of Equipment
For the
three months ended September 30, 2019, the Partnership sold
equipment with a net book value of approximately $5,000 for a net
gain of approximately $2,000. For the
three months ended September 30, 2018, the Partnership sold
equipment with a net book value of approximately $4,000 for a net
gain of approximately $3,000.
Operating Expenses
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 to approximately $3,000 for
the three months ended September 30, 2019, from approximately
$45,000 for the three months ended September 30, 2018. This
decrease is primarily attributable to a decrease in legal fees of
approximately $43,000.
Equipment Management Fees
We pay
an equipment management fee to our general partner for managing our
equipment portfolio. The equipment management fee is approximately
2.5% of the gross lease revenue attributable to equipment that is
subject to operating leases. An equipment management fee of
approximately $3,000 and $4,000 was earned but waived by the
General Partner for both the three months ended September 30, 2019
and 2018, respectively.
20
Depreciation and Amortization Expenses
Depreciation
and amortization expenses consist of depreciation on equipment and
amortization of equipment acquisition fees. These expenses
decreased to approximately $64,000 for the three months ended
September 30, 2019, from $93,000 for the three months ended
September 30, 2018. This decrease is primarily due to significant
leases that became fully depreciated.
Net Income
For the
three months ended September 30, 2019, we recognized revenue of
approximately $134,000 and expenses of approximately $76,000,
resulting in net income of approximately $58,000. For the three months ended September 30, 2018, we
recognized revenue of approximately $148,000 and expenses of
approximately $143,000, resulting in a net income of approximately
$5,000. This change in net income due to the changes in
revenue and expenses as described above.
Our
lease revenue decreased to approximately $379,000 for the nine
months ended September 30, 2019, from approximately $441,000 for
the nine months ended September 30, 2018. The Partnership had 63 and 80 operating
leases during the nine months ended September 30, 2019 and 2018,
respectively. The decline in number of active leases is consistent
with the overall decrease in lease revenue. Management expects to
add new leases to our portfolio throughout the remainder of 2019,
funded primarily through debt financing. As the operational phase
of the Partnership has been extended to December 31, 2020,
management will continue to seek lease opportunities to enhance
portfolio returns and cash flow.
Sale of Equipment
The Partnership sold equipment with net book value of
approximately $12,000 for the nine months ended September 30, 2019
for a net gain of approximately $3,000. This compared to equipment
sold for the nine months ended September 30, 2018 with net book
value of approximately $7,000, for a net gain of approximately
$13,000.
Operating Expenses
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 to approximately $68,000 for
the nine months ended September 30, 2019, from approximately
$110,000 for the nine months ended September 30, 2018. This
decrease is primarily attributable to a decrease in legal fees of
approximately $43,000.
21
Equipment Management Fees
We pay
an equipment management fee to our general partner for managing our
equipment portfolio. The equipment management fee is approximately
2.5% of the gross lease revenue attributable to equipment that is
subject to operating leases. The equipment management fee of
approximately $10,000 and $11,000 for the nine months ended
September 30, 2019 and 2018 was earned but waived by the General
Partner.
Depreciation and Amortization Expenses
Depreciation
and amortization expenses consist of depreciation on equipment and
amortization of equipment acquisition fees. These expenses
decreased to approximately $218,000 for the nine months ended
September 30, 2019, from $296,000 for the nine months ended
September, 2018.
Net Income
For the
nine months ended September 30, 2019, we recognized revenue of
approximately $405,000 and expenses of approximately $317,000,
resulting in net income of approximately $88,000. For the nine months ended September 30, 2018, we
recognized revenue of approximately $456,000 and expenses of
approximately $424,000, resulting in net income of approximately
$32,000. This change in net income is due to the changes in
revenue and expenses as described above.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
N/A
Item 4. Controls and Procedures
Our
management, under the supervision and with the participation of the
General Partner’s Chief Executive Officer and Principal
Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures related to our reporting and
disclosure obligations as of the end of the period covered by this
Quarterly Report on Form 10-Q. Based on such evaluation, the
General Partner’s Chief Executive Officer and Principal
Financial Officer have concluded that, as of September 30, 2019,
our disclosure controls and procedures are effective in ensuring
that information relating to us which is required to be disclosed
in our periodic reports filed or submitted under the Securities
Exchange Act of 1934 is (a) recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and (b) accumulated
and communicated to management, including the General
Partner’s Chief Executive Officer and Principal Financial
Officer, as appropriate, to allow timely decisions regarding
required disclosure. There were no changes in the
Partnership’s internal control over financial reporting
during the third quarter of 2019 that have materially affected or
are reasonably likely to materially affect its internal control
over financial reporting.
22
Part II: OTHER INFORMATION
Item 1. Commitments and Contingencies
Leased Equipment
The General Partner is in the process of negotiations with a lessee
to “Buy-out” certain equipment currently under lease
contract. If a “Buy-out” agreement is not
reached, the lessee will continue to lease the equipment as written
under the original lease contract. The equipment to be
included in the “Buy-out” represents approximately
12.5% of the Partnership’s total equipment at cost as of
September 30, 2019.
Item 2. Legal Proceedings
FINRA
On May3, 2013, the FINRA Department of Enforcement filed a complaint
naming Commonwealth Capital Securities Corp. (“CCSC”)
and the owner of the firm, Kimberly Springsteen-Abbott, as
respondents; however on October 22, 2013, FINRA filed an amended
complaint that dropped the allegations against CCSC and reduced the
scope of the allegations against Ms. Springsteen-Abbott. The
sole remaining charge was that Ms. Springsteen-Abbott had approved
the misallocation of some expenses to certain Funds.
Management believes that the expenses at issue include amounts that
were proper and that were properly allocated to Funds, and also
identified a smaller number of expenses that had been allocated in
error, but were adjusted and repaid to the affected Funds when they
were identified in 2012. During the period in question,
Commonwealth Capital Corp. (“CCC”) and Ms.
Springsteen-Abbott provided important financial support to the
Funds, voluntarily absorbed expenses and voluntarily waived fees in
amounts aggregating in excess of any questioned allocations.
A Hearing Panel ruled on March 30, 2015, that Ms.
Springsteen-Abbott should be barred from the securities industry
because the Panel concluded that she allegedly misallocated
approximately $208,000 of expenses involving certain Funds over the
course of three years. As such, management had allocated
approximately $87,000 of the $208,000 in allegedly misallocated
expenses back to the affected funds as a contingency accrual in
CCC’s financial statements and a good faith payment for the
benefit of those Income Funds.
The
decision of the Hearing Panel was stayed when it was appealed to
FINRA's National Adjudicatory Council (the “NAC”)
pursuant to FINRA Rule 9311. The NAC issued a decision that
upheld the lower panel’s ruling and the bar took effect on
August 23, 2016. Ms. Springsteen-Abbott appealed the
NAC’s decision to the U.S. Securities and Exchange Commission
(the “SEC”). On March 31, 2017, the SEC
criticized that decision as so flawed that the SEC could not even
review it, and remanded the matter back to FINRA for further
consideration consistent with the SEC’s remand, but did not
suggest any view as to a particular outcome.
On July21, 2017, FINRA reduced the list of 1,840 items totaling $208,000
to a remaining list of 84 items totaling $36,226 (which includes
approximately $30,000 of continuing education expenses for
personnel providing services to the Funds), and reduced the
proposed fine from $100,000 to $50,000, but reaffirmed its position
on the bar from the securities industry. Respondents promptly
appealed FINRA’s revised ruling to the SEC. That appeal is
pending as of November 13, 2019. All requested or allowed
briefs have been filed with the SEC. Management believes that
whatever final resolution of this may be, it will not result in any
material adverse financial impact on the Funds, although a final
assurance cannot be provided until the legal matter is
resolved.
23
Item 2A. Risk
Factors
N/A
Item
3. Unregistered Sales of Equity Securities and Use of
Proceeds
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