United States
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission file number 333-84730
 LEASE EQUITY APPRECIATION FUND I, L.P.
  Delaware
    
    68-0492247(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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LEASE EQUITY APPRECIATION FUND I, L.P.
INDEX TO QUARTERLY REPORT
 ON FORM 10-Q
 PAGEPART I FINANCIAL INFORMATIONITEM 1. Financial StatementsConsolidated Balance Sheets  March 31, 2009 (unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Operations
Three Months Ended March 31, 2009 and 2008 (unaudited)
    
    
    4Consolidated Statement of Partners Capital
Three Months Ended March 31, 2009 (unaudited)
    
    
    5Consolidated Statements of Cash Flows
Three Months Ended March 31, 2009 and 2008 (unaudited)
    
    
    6Notes to Consolidated Financial Statements  March 31, 2009 (unaudited)
    
    
    7ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    12ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    18ITEM 4. Controls and Procedures
    
    
    19PART II OTHER INFORMATIONITEM 6. Exhibits
    
    
    20SIGNATURES
    
    
    21
 2




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##### 



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY
 
 Consolidated Balance Sheets
(in thousands)
 March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCash
    
    $
    449
    
    
    $
    275Restricted cash
    
    
    5,056
    
    
    
    7,367Accounts receivable
    
    
    24
    
    
    
    31Investment in leases and loans, net
    
    
    88,773
    
    
    
    95,844Deferred financing costs, net
    
    
    636
    
    
    
    701Other assets
    
    
    238
    
    
    
    217$
    95,176
    
    
    $
    104,435LIABILITIES AND PARTNERS CAPITALLiabilities:Bank debt
    
    $
    82,815
    
    
    $
    91,057Accounts payable and accrued expenses
    
    
    223
    
    
    
    219Other liabilities
    
    
    174
    
    
    
    157Derivative liabilities at fair value
    
    
    3,338
    
    
    
    3,858Due to affiliates
    
    
    7,789
    
    
    
    7,590Total liabilities
    
    
    94,339
    
    
    
    102,881Commitments and contingenciesPartners Capital:General partner
    
    
    (106
    )
    
    
    (94
    )Limited partners
    
    
    4,281
    
    
    
    5,506Accumulated other comprehensive loss
    
    
    (3,338
    )
    
    
    (3,858
    )Total partners capital
    
    
    837
    
    
    
    1,554$
    95,176
    
    
    $
    104,435
  3




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##### 



LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY
 
 Consolidated Statements of Operations
(in thousands, except unit data)
(unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Revenues:Interest on equipment financings
    
    $
    2,098
    
    
    $
    2,594Rental income
    
    
    137
    
    
    
    61Gains on sales of equipment and lease dispositions, net
    
    
    142
    
    
    
    179Other
    
    
    172
    
    
    
    2182,549
    
    
    
    3,052Expenses:Interest expense
    
    
    1,196
    
    
    
    1,469Depreciation on operating leases
    
    
    110
    
    
    
    39Provision for credit losses
    
    
    1,040
    
    
    
    467Management fees to affiliate
    
    
    293
    
    
    
    321Administrative expenses reimbursed to affiliate
    
    
    327
    
    
    
    195General and administrative expenses
    
    
    393
    
    
    
    3353,359
    
    
    
    2,826Net (loss) income
    
    $
    (810
    )
    
    $
    226Weighted average number of limited partner units
outstanding during the period
    
    
    171,696
    
    
    
    171,746Net (loss) income per weighted average limited partner unit
    
    $
    (4.67
    )
    
    $
    1.30
  4




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##### 



LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY
 
 Consolidated Statement of Partners Capital
For the Three Months Ended March 31, 2009
(in thousands, except unit data)
(unaudited)
 AccumulatedGeneral
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalPartner
    
    
    Limited Partners
    
    
    Comprehensive
    
    
    Partners
    
    
    ComprehensiveAmount
    
    
    Units
    
    
    Amount
    
    
    Income (Loss)
    
    
    Capital
    
    
    Income (Loss)Balance, January 1,
2009
    
    $
    (94
    )
    
    
    171,696
    
    
    $
    5,506
    
    
    $
    (3,858
    )
    
    $
    1,554Cash distributions
    
    
    (4
    )
    
    
    
    
    
    
    (423
    )
    
    
    
    
    
    
    (427
    )Net loss
    
    
    (8
    )
    
    
    
    
    
    
    (802
    )
    
    
    
    
    
    
    (810
    )
    
    $
    (810
    )Unrealized gains
on financial
derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    520
    
    
    
    520
    
    
    
    520Balance, March 31,
2009
    
    $
    (106
    )
    
    
    171,696
    
    
    $
    4,281
    
    
    $
    (3,338
    )
    
    $
    837
    
    
    $
    (290
    )
  5




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##### 



LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Cash flows from operating activities:Net (loss) income
    
    $
    (810
    )
    
    $
    226Adjustments to reconcile net (loss) income to net cash provided
by operating activities:Gains on sales of equipment and lease dispositions, net
    
    
    (142
    )
    
    
    (179
    )Depreciation
    
    
    110
    
    
    
    39Provision for credit losses
    
    
    1,040
    
    
    
    467Amortization of deferred financing costs
    
    
    67
    
    
    
    52Changes in operating assets and liabilitiesAccounts receivable
    
    
    7
    
    
    
    5Other assets
    
    
    (21
    )
    
    
    140Accounts payable and accrued expenses and other liabilities
    
    
    21
    
    
    
    (398
    )Due to affiliates, net
    
    
    199
    
    
    
    2,341Net cash provided by operating activities
    
    
    471
    
    
    
    2,693Cash flows from investing activities:Purchases of leases and loans
    
    
    (3,646
    )
    
    
    (16,925
    )Proceeds from leases and loans
    
    
    9,646
    
    
    
    9,821Security deposits collected, net of returns
    
    
    63
    
    
    
    (38
    )Net cash provided by (used in) investing activities
    
    
    6,063
    
    
    
    (7,142
    )Cash flows from financing activities:Borrowings of bank debt
    
    
    4,145
    
    
    
    16,620Repayment of bank debt
    
    
    (12,387
    )
    
    
    (12,656
    )Decrease  in restricted cash
    
    
    2,311
    
    
    
    657Increase in deferred financing costs
    
    
    (2
    )
    
    
    Cash distributions to partners
    
    
    (427
    )
    
    
    (432
    )Net cash (used in) provided by financing activities
    
    
    (6,360
    )
    
    
    4,189Increase (decrease) in cash
    
    
    174
    
    
    
    (260
    )Cash, beginning of period
    
    
    275
    
    
    
    573Cash, end of period
    
    $
    449
    
    
    $
    313
  6




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LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY
 
 Notes To Consolidated Financial Statements
March 31, 2009
(unaudited)
 NOTE 1  ORGANIZATION AND NATURE OF BUSINESS
      NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Newly Adopted Accounting Principles
 Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS 133
 7




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LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY
Notes To Consolidated Financial Statements  (Continued)
March 31, 2009
(unaudited)
 NOTE 3  INVESTMENT IN LEASES AND LOANS
  March 31,
    
    
    December 31,2009
    
    
    2008Direct financing leases
    
    $
    72,682
    
    
    $
    77,652Loans
    
    
    16,797
    
    
    
    18,769Operating leases
    
    
    1,224
    
    
    
    1,17390,703
    
    
    
    97,594Allowance for credit losses
    
    
    (1,930
    )
    
    
    (1,750
    )$
    88,773
    
    
    $
    95,844
  March 31,
    
    
    December 31,2009
    
    
    2008Leases
    
    
    Loans
    
    
    Leases
    
    
    LoansTotal future minimum lease payments
    
    $
    82,654
    
    
    $
    20,151
    
    
    $
    88,805
    
    
    $
    22,787Unearned income
    
    
    (9,868
    )
    
    
    (2,931
    )
    
    
    (11,053
    )
    
    
    (3,347
    )Residuals, net of unearned residual income
    
    
    1,406
    
    
    
    
    
    
    
    1,257
    
    
    
    Security deposits
    
    
    (1,510
    )
    
    
    (423
    )
    
    
    (1,357
    )
    
    
    (671
    )$
    72,682
    
    
    $
    16,797
    
    
    $
    77,652
    
    
    $
    18,769
  March 31,
    
    
    December 31,2009
    
    
    2008Equipment
    
    $
    2,115
    
    
    $
    2,003Accumulated depreciation
    
    
    (886
    )
    
    
    (821
    )Security deposits
    
    
    (5
    )
    
    
    (9
    )$
    1,224
    
    
    $
    1,173
 8




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##### 



LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY
Notes To Consolidated Financial Statements  (Continued)March 31, 2009(unaudited)
 NOTE 3  INVESTMENT IN LEASES AND LOANS (Continued)
  Three Months EndedMarch 31,2009
    
    
    2008Allowance for credit losses, beginning of period
    
    $
    1,750
    
    
    $
    600Provision for credit losses
    
    
    1,040
    
    
    
    467Charge-offs
    
    
    (877
    )
    
    
    (582
    )Recoveries
    
    
    17
    
    
    
    65Allowance for credit losses, end of period
    
    $
    1,930
    
    
    $
    550
  NOTE 4  BANK DEBT
  Debt repayments.
 2010
    
    $
    33,7042011
    
    
    23,7212012
    
    
    14,3662013
    
    
    7,8892014
    
    
    3,135$
    82,815
 9




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LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY
Notes To Consolidated Financial Statements  (Continued)
March 31, 2009
(unaudited)
 NOTE 5  DERIVATIVE INSTRUMENTS
      Notional
    
    
    
    
    
    
    FairAmount
    
    
    Balance Sheet Location
    
    
    ValueDerivatives designated as hedging instruments
under SFAS 133Interest rate swap contracts
    
    $
    77,058
    
    
    Derivative liabilities at fair value
    
    $
    3,338Accumulated
other comprehensive loss
    
    $
    (3,338
    )
  10




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##### 



LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY
Notes To Consolidated Financial Statements  (Continued)
March 31, 2009
(unaudited)
 NOTE 6  CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH AFFILIATES
  Three Months EndedMarch 31,2009
    
    2008Acquisition fees
    
    $
    77
    
    
    $
    330Management fees
    
    
    293
    
    
    
    321Administrative expenses
    
    
    327
    
    
    
    195
 Acquisition Fees.
 Management Fees.
 Administrative Fees
  NOTE 7  COMMITMENTS AND CONTINGENCIES
  11




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##### 



ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 When used in this Form 10-Q, the words believes anticipates, expects and similar expressions
are intended to identify forward-looking statements. Such statements are subject to certain risks
and uncertainties more particularly described in other documents filed with Securities and Exchange
Commission. These risks and uncertainties could cause actual results to differ materially.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. We undertake no obligation to publicly release the results of any
revisions to forward-looking statements which we may make to reflect events or circumstances after
the date of this Form 10-Q or to reflect the occurrence of unanticipated events.
 Overview
   
    
    500 or fewer employees;
    
    $1.0 billion or less in total assets; or
    
    $100.0 million or less in total annual sales.
    12




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##### 



Finance Receivables and Asset Quality
  March 31,
    
    December 31,2009
    
    2008Investment in leases and loans, net
    
    $
    88,773
    
    
    $
    95,844Number of contracts
    
    
    10,600
    
    
    
    12,700Number of individual end users (a)
    
    
    9,700
    
    
    
    11,600Average original equipment cost
    
    $
    18.7
    
    
    $
    15.7Average initial term (in months)
    
    
    51
    
    
    
    53States accounting for more than 10% of lease and loan portfolio:California
    
    
    12
    %
    
    
    11
    %Types of equipment accounting for more than 10% of lease and
loan portfolio:Industrial equipment
    
    
    22
    %
    
    
    23
    %Medical equipment
    
    
    19
    %
    
    
    19
    %Office equipment
    
    
    14
    %
    
    
    13
    %Water purification
    
    
    11
    %
    
    
    11
    %Types of businesses accounting for more than 10% of lease and
loan portfolio:Services
    
    
    47
    %
    
    
    47
    %Retail trade
    
    
    13
    %
    
    
    13
    %Manufacturing
    
    
    10
    %
    
    
    10
    %
 
 (a)
    
    Located in the 50 states as well as the District of Columbia and Puerto Rico.
No individual end user or single piece of equipment accounted for more than 2% of our
portfolio based on original cost of the equipment.   13




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##### 



As of and forAs of and for the
    
    theThree Months Ended March 31,
    
    Year EndedChange
    
    December 31,2009
    
    2008
    
    $
    
    %
    
    2008Investment in direct financing leases
and loans before allowance for credit
losses
    
    $
    89,479
    
    
    $
    108,757
    
    
    $
    (19,278
    )
    
    
    (18
    )%
    
    $
    96,421Weighted average investment in direct
financing leases and loans before
allowance for credit losses
    
    
    93,074
    
    
    
    105,094
    
    
    
    (12,020
    )
    
    
    (11
    )%
    
    
    105,908Allowance for credit losses
    
    
    1,930
    
    
    
    550
    
    
    
    1,380
    
    
    
    251
    %
    
    
    1,750Non-performing assets
    
    
    4,415
    
    
    
    2,750
    
    
    
    1,665
    
    
    
    61
    %
    
    
    4,142Charge-offs, net of recoveries
    
    $
    860
    
    
    $
    517
    
    
    $
    343
    
    
    
    66
    %
    
    $
    1,789As a percentage of finance receivables:Allowance for credit losses
    
    
    2.16
    %
    
    
    0.51
    %
    
    
    
    
    
    
    
    
    
    
    1.81
    %Non-performing assets
    
    
    4.93
    %
    
    
    2.53
    %
    
    
    
    
    
    
    
    
    
    
    4.30
    %As a percentage of weighted average
finance receivables:Charge-offs, net of recoveries
    
    
    0.92
    %
    
    
    0.49
    %
    
    
    
    
    
    
    
    
    
    
    1.69
    %
    14




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##### 



Critical Accounting Policies
   Results of Operations
 Three Months Ended March 31, 2009 compared to the Three Months Ended March 31, 2008
  Increase (Decrease)2009
    
    
    2008
    
    
    $
    
    
    %Revenues:Interest on equipment financings and loans
    
    $
    2,098
    
    
    $
    2,594
    
    
    $
    (496
    )
    
    
    (19
    )%Rental income
    
    
    137
    
    
    
    61
    
    
    
    76
    
    
    
    125
    %Gains on sales of equipment and lease dispositions, net
    
    
    142
    
    
    
    179
    
    
    
    (37
    )
    
    
    (21
    )%Other
    
    
    172
    
    
    
    218
    
    
    
    (46
    )
    
    
    (21
    )%2,549
    
    
    
    3,052
    
    
    
    (503
    )
    
    
    (16
    )%Expenses:Interest expense
    
    
    1,196
    
    
    
    1,469
    
    
    
    (273
    )
    
    
    (19
    )%Depreciation on operating leases
    
    
    110
    
    
    
    39
    
    
    
    71
    
    
    
    182
    %Provision for credit losses
    
    
    1,040
    
    
    
    467
    
    
    
    573
    
    
    
    123
    %Management fees to affiliate
    
    
    293
    
    
    
    321
    
    
    
    (28
    )
    
    
    (9
    )%Administrative expenses reimbursed to affiliate
    
    
    327
    
    
    
    195
    
    
    
    132
    
    
    
    68
    %General and administrative expenses
    
    
    393
    
    
    
    335
    
    
    
    58
    
    
    
    17
    %3,359
    
    
    
    2,826
    
    
    
    533
    
    
    
    19
    %Net (loss) income
    
    $
    (810
    )
    
    $
    226
    
    
    $
    (1,036
    )
    
    
    (458
    )%
 15




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##### 




    
    a decrease in interest income due to a decrease in our weighted average net
investment in financing assets which decreased to $93.1 million for the three months
ended March 31, 2009 as compared to $105.1 million for the three months ended March 31,
2008, a decrease of $12.0 million (11%). This decrease was offset by the increased
yields on leases acquired in 2008 due to an increase in the rates we were able to
charge as a result of the current scarcity of credit available to small and mid-size
businesses.
  
    
    an increase in our provision for credit losses. We provide for credit losses when
losses are likely to occur based on migration analysis of past due payments and
economic conditions. Our provision for credit losses has increased due to the impact
of the economic recession in the United States on our customers ability to make
payments on their leases and loans, resulting in an increase in non-performing assets
as a percentage of finance receivables to 4.93% as of March 31, 2009 as compared to
4.30% as of December 31, 2008 and 2.53% at March 31, 2008.
    
    an increase in administrative expenses reimbursed to affiliate due to the hiring of
additional collection personnel by our General Partner to attempt to control the impact
of delinquencies resulting from the economic recession in the United States.
    
    an increase in depreciation on operating leases related to our increase in our
investment in operating leases since March 31, 2008.
  
    
    a decrease in interest due to a decrease in average debt outstanding. Weighted
average borrowings decreased to $88.0 million for the 2009 period compared to $100.8
million for the 2008 period, a decrease of $12.8 million (15%). Borrowings for the 2009
and 2008 periods were at an effective interest rate of 5.4% and 5.8%, respectively.
    
    a decrease in management fees attributable to the decrease in our portfolio of
equipment financing assets, since management fees are paid based on lease payments
received.
  Liquidity and Capital Resources
   Three Months EndedMarch 31,2009
    
    
    2008Net cash provided by operating activities
    
    $
    471
    
    
    $
    2,693Net cash provided by (used in) investing activities
    
    
    6,063
    
    
    
    (7,142
    )Net cash (used in) provided by financing activities
    
    
    (6,360
    )
    
    
    4,189Increase (decrease) in cash
    
    $
    174
    
    
    $
    (260
    )
   16




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##### 



Contractual Obligations and Commercial Commitments
  Payments Due by PeriodLess than
    
    1  3
    
    4  5
    
    After 5Total
    
    1 Year
    
    Years
    
    Years
    
    YearsBank debt (1)
    
    $
    82,815
    
    
    $
    33,704
    
    
    $
    38,087
    
    
    $
    11,024
    
    
    $
 
 (1)
    
    To mitigate interest rate risk on the variable rate debt, we employ a
hedging strategy using derivative financial instruments, such as interest rate
swaps, which fix the weighted average interest rates. Not included in the table
above are estimated interest payments calculated at rates in effect at March 31,
2009: Less than 1 year: $3.5 million; 1-3 years: $2.9 million; 4-5 years:
$470,000; and after 5 years: $11,000. The fair value of the swap liability as of
March 31, 2009 is $3.3 million.  17




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##### 



Legal Proceedings
  
 ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Interest rates
    
    
    
    
    
    Interest ratesfall 100 basis
    
    
    
    
    
    rise 100 basispoints
    
    Unchanged
    
    pointsHedging instrumentsFair value
    
    $
    (4,702
    )
    
    $
    (3,338
    )
    
    $
    (2,396
    )Change in fair value
    
    $
    (1,364
    )
    
    
    
    
    
    $
    942Change as a percent of fair value
    
    
    (41
    )%
    
    
    
    
    
    
    28
    %
  18




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##### 



ITEM 4  CONTROLS AND PROCEDURES
 Disclosure Controls
   Changes in Internal Control over Financial Reporting
  19




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##### 



ITEM 6  EXHIBITS
 Exhibit No.
    
    Description3.1
    
    Amended and Restated Agreement of Limited Partnership (1)3. 2
    
    Certificate of Limited Partnership (2)4.1
    
    Forms of letters sent to limited partners confirming their investment (2)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Filed previously as Appendix A to our post effective Amendment No. 3 to our
Registration Statement on Form S-1 filed on January 26, 2004 and by this reference
incorporated herein.(2)
    
    Filed previously as an exhibit to Amendment No. 1 to our Registration Statement on Form
S-1 filed on June 7, 2002 and by this reference incorporated herein. 
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SIGNATURES
  LEASE EQUITY APPRECIATION FUND I, L.PBy: LEAF Financial Corporation, its General PartnerMay 15, 2009
    
    /s/ Crit DeMent

CRIT DEMENTChairman and Chief Executive OfficerMay 15, 2009
    
    /s/ Robert K. MoskovitzROBERT K. MOSKOVITZChief Financial OfficerMay 15, 2009
    
    /s/ Tonya L. ZweierTONYA L. ZWEIERChief Accounting Officer
 21