##### Table of Contents



United States
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 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 ofincorporation or organization)
    
    (I.R.S. Employer Identification No.)
 
 
 þ o
  o o þ
 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  September 30, 2007 (unaudited) and December 31, 2006
    
    
    3Consolidated Statements of Income Three and Nine Months Ended September 30, 2007 and 2006 (unaudited)
    
    
    4Consolidated Statement of Partners Capital and Comprehensive Income (Loss) For the Nine Months Ended September 30, 2007 (unaudited)
    
    
    5Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2007 and 2006 (unaudited)
    
    
    6Notes to Consolidated Financial Statements  September 30, 2007 (unaudited)
    
    
    7ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16ITEM 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    22ITEM 4.
    
    Controls and Procedures
    
    
    22PART II
    
    OTHER INFORMATIONITEM 6.
    
    Exhibits
    
    
    22SIGNATURES
    
    
    23




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LEASE EQUITY APPRECIATION FUND I, L.P.
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands)
 September 30,
    
    
    December 31,2007
    
    
    2006(unaudited)ASSETSCash
    
    $
    631
    
    
    $
    4,298Restricted cash
    
    
    5,675
    
    
    
    1,739Due from lockbox
    
    
    685
    
    
    
    896Accounts receivable
    
    
    50
    
    
    
    76Investment in direct financing leases and notes, net
    
    
    88,555
    
    
    
    87,861Investment in operating leases, net of accumulated depreciation of
$930 and $1,378, respectively
    
    
    789
    
    
    
    1,039Other assets
    
    
    1,043
    
    
    
    1,136Fair value of interest rate swap
    
    
    
    
    
    
    392$
    97,428
    
    
    $
    97,437LIABILITIES AND PARTNERS CAPITALLiabilities:Debt
    
    $
    82,402
    
    
    $
    82,364Accounts payable and accrued expenses
    
    
    265
    
    
    
    316Security deposits
    
    
    2,020
    
    
    
    1,783Due to related parties
    
    
    4,240
    
    
    
    3,013Fair value of interest rate swap
    
    
    315
    
    
    
    Total liabilities
    
    
    89,242
    
    
    
    87,476Partners Capital
    
    
    8,186
    
    
    
    9,961$
    97,428
    
    
    $
    97,437
  3




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##### Table of Contents



LEASE EQUITY APPRECIATION FUND I, L.P.
 
 CONSOLIDATED
STATEMENTS OF INCOME
 (in thousands, except for unit data)
 (unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Income:Interest on equipment financings
    
    $
    1,755
    
    
    $
    1,747
    
    
    $
    5,339
    
    
    $
    4,836Rental income
    
    
    94
    
    
    
    173
    
    
    
    367
    
    
    
    604Gain on sale of equipment and lease
dispositions, net
    
    
    434
    
    
    
    193
    
    
    
    774
    
    
    
    359Other
    
    
    204
    
    
    
    145
    
    
    
    513
    
    
    
    4202,487
    
    
    
    2,258
    
    
    
    6,993
    
    
    
    6,219Expenses:Interest expense
    
    
    1,258
    
    
    
    1,194
    
    
    
    3,724
    
    
    
    3,352Depreciation on operating leases
    
    
    64
    
    
    
    136
    
    
    
    270
    
    
    
    492Provision for credit losses
    
    
    244
    
    
    
    230
    
    
    
    615
    
    
    
    569Management fee to related party
    
    
    305
    
    
    
    265
    
    
    
    870
    
    
    
    800Administrative expense reimbursed to related
party
    
    
    98
    
    
    
    151
    
    
    
    408
    
    
    
    420General and administrative expenses
    
    
    484
    
    
    
    92
    
    
    
    1,073
    
    
    
    3682,453
    
    
    
    2,068
    
    
    
    6,960
    
    
    
    6,001Net income
    
    $
    34
    
    
    $
    190
    
    
    $
    33
    
    
    $
    218Weighted average number of limited partner units
outstanding during the period
    
    
    171,746
    
    
    
    171,746
    
    
    
    171,746
    
    
    
    171,746Net income attributed to limited partners per
unit
    
    $
    0.20
    
    
    $
    1.10
    
    
    $
    0.19
    
    
    $
    1.26
  4




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LEASE EQUITY APPRECIATION FUND I, L.P.
 
 CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
 AND COMPREHENSIVE INCOME(LOSS)
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007
 (in thousands, except for unit data)
 (unaudited)
 AccumulatedGeneral
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Partners
    
    
    ComprehensivePartner
    
    
    Limited Partners
    
    
    Comprehensive
    
    
    Capital
    
    
    Income (Loss)Amount
    
    
    Units
    
    
    Amount
    
    
    Income (Loss)
    
    
    Total
    
    
    TotalBalance, January 1, 2007
    
    $
    (53
    )
    
    
    171,746
    
    
    $
    9,622
    
    
    $
    392
    
    
    $
    9,961Cash distributions paid
    
    
    (11
    )
    
    
    
    
    
    
    (1,090
    )
    
    
    
    
    
    
    (1,101
    )Net income
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    33
    
    
    $
    33Unrealized loss on hedging
derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )
    
    
    (707
    )
    
    
    (707
    )Balance, September 30, 2007
    
    $
    (64
    )
    
    
    171,746
    
    
    $
    8,565
    
    
    $
    (315
    )
    
    $
    8,186
    
    
    $
    (674
    )
  5




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LEASE EQUITY APPRECIATION FUND I, L.P.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 (unaudited)
 Nine Months EndedSeptember 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    33
    
    
    $
    218Adjustments to reconcile net income to net cash provided by
operating activities:Gain on sale of equipment and lease dispositions net
    
    
    (774
    )
    
    
    (359
    )Depreciation
    
    
    270
    
    
    
    492Amortization of deferred financing costs
    
    
    95
    
    
    
    96Provision for credit losses, net of recoveries
    
    
    615
    
    
    
    569Changes in operating assets and liabilities:Due from lockbox
    
    
    211
    
    
    
    815Accounts receivable
    
    
    26
    
    
    
    39Other assets
    
    
    190
    
    
    
    (228
    )Accounts payable and accrued expenses
    
    
    (51
    )
    
    
    (134
    )Due to related parties, net
    
    
    1,227
    
    
    
    1,616Net cash provided by operating activities
    
    
    1,842
    
    
    
    3,124Cash flows from investing activities:Investments in direct financing leases and notes
    
    
    (34,933
    )
    
    
    (33,818
    )Acquisitions of equipment under operating leases, net
    
    
    
    
    
    
    (35
    )Proceeds from direct financing leases and notes, net of earned income
    
    
    34,379
    
    
    
    28,311Security deposits, net
    
    
    237
    
    
    
    146Net cash used in investing activities
    
    
    (317
    )
    
    
    (5,396
    )Cash flows from financing activities:Decrease in restricted cash
    
    
    (3,936
    )
    
    
    (120
    )Deferred financing costs
    
    
    (193
    )
    
    
    (3
    )Proceeds from debt
    
    
    31,880
    
    
    
    31,703Repayment of debt
    
    
    (31,842
    )
    
    
    (26,858
    )Partners distributions paid
    
    
    (1,101
    )
    
    
    (1,042
    )Net cash used in (provided by) financing activities
    
    
    (5,192
    )
    
    
    3,680(Decrease) increase in cash
    
    
    (3,667
    )
    
    
    1,408Cash, beginning of period
    
    
    4,298
    
    
    
    3,206Cash, end of period
    
    $
    631
    
    
    $
    4,614
  6




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LEASE EQUITY APPRECIATION FUND I, L.P.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 September 30, 2007
  NOTE 1  ORGANIZATION AND NATURE OF BUSINESS
     NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Classification
  7




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
September 30, 2007
(unaudited)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)
 Use of Estimates
      Concentration of Credit Risk
  Revenue Recognition
  8




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
September 30, 2007
(unaudited)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)
 Revenue Recognition  (Continued)
 Direct Financing Leases.
 Operating Leases.
 Notes Receivable.
  Income Taxes
  Supplemental Disclosure of Cash Flow Information
  2007
    
    
    2006Cash paid for:Interest
    
    $
    3,640
    
    
    $
    3,240
 9




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
September 30, 2007
(unaudited)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)
 Recently Issued Accounting Pronouncements
   Transfers of Financial Assets
  Fair Value of Financial Instruments
   10




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
September 30, 2007
(unaudited)
 NOTE 3  RESTRICTED CASH
  NOTE 4  DUE FROM LOCKBOX
  NOTE 5
 INVESTMENT IN LEASES AND NOTES
  September 30,
    
    
    December 31,2007
    
    
    2006Direct financing leases
    
    $
    74,558
    
    
    $
    78,470Notes receivable
    
    
    14,467
    
    
    
    9,82289,025
    
    
    
    88,292Allowance for possible losses
    
    
    (470
    )
    
    
    (431
    )$
    88,555
    
    
    $
    87,861
  September 30,
    
    
    December 31,2007
    
    
    2006Total future minimum lease payments
    
    $
    82,873
    
    
    $
    88,238Unearned income
    
    
    (9,120
    )
    
    
    (10,651
    )Residuals, net of unearned residual income
    
    
    805
    
    
    
    883$
    74,558
    
    
    $
    78,470
  Nine Months EndedSeptember 30,2007
    
    
    2006Allowance for possible losses, beginning of the period
    
    $
    431
    
    
    $
    405Provision for credit losses
    
    
    615
    
    
    
    569Net write-offs
    
    
    (576
    )
    
    
    (674
    )Allowance for possible losses, end of the period
    
    $
    470
    
    
    $
    300
 11




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
September 30, 2007
(unaudited)
 NOTE 6 - OTHER ASSETS
  NOTE 7  DEBT
  September 30, 2007
    
    
    December 31, 2006WestLB AG, New York
Branch revolving line
of credit, with an
aggregate borrowing
limit of $125.0 million
collateralized by
specific lease
receivables and related
equipment, with a 1%
credit reserve of the
outstanding line of
credit. As of September
30, 2006 interest on
this facility was
reduced to LIBOR plus
..95% per annum from
1.10% per annum. To
mitigate fluctuations
in interest rates the
Fund has entered into
interest rate swap
agreements. The
interest rate swap
agreements terminate at
various dates ranging
from September 2010 to
July 2014. As of
September 30, 2007, the
interest rate swap
agreements fix the
interest rate on the
outstanding balance at
5.81% on a weighted
average basis.
Interest and principal
are due monthly. The
line of credit is
renewable for a one
year period on December
31, 2007
    
    $
    78,551
    
    
    $
    74,589OFC Capital, a division
of ALFA Financial
Corporation,
collateralized by
specific lease
receivables equal to
93% of the aggregate
payments due under the
related equipment lease
or equipment finance
transaction, discounted
at an interest rate of
6.9%, funded subject to
a credit reserve of 3%
of the loan amount.
Interest and principal
are due monthly, with a
final maturity date of
February 15, 2009
    
    
    2,383
    
    
    
    4,408National City
Commercial Capital
Corporation f/k/a
Information Leasing
Corporation,
collateralized by
specified lease
receivables, generally
equal to the sum of the
receivables, discounted
to present value at
5.79%, less a credit
reserve of 8% after
security deposit.
Interest and principal
are due monthly, with a
final maturity date of
September 10, 2010
    
    
    1,468
    
    
    
    3,367Total outstanding debt
    
    $
    82,402
    
    
    $
    82,364
  2008
    
    $
    33,4222009
    
    
    24,6252010
    
    
    14,3302011
    
    
    5,9702012
    
    
    2,409Thereafter
    
    
    1,646$
    82,402
  12




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
September 30, 2007
(unaudited)
 NOTE 8  DERIVATIVE INSTRUMENTS
      NOTE 9  TRANSACTIONS WITH AFFILIATES
   13




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
September 30, 2007
(unaudited)
 NOTE 9  TRANSACTIONS WITH AFFILIATES  (Continued)
     Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Acquisition fees
    
    $
    210
    
    
    $
    124
    
    
    $
    600
    
    
    $
    536Asset management fees
    
    $
    305
    
    
    $
    265
    
    
    $
    870
    
    
    $
    800Reimbursed administrative expenses
    
    $
    98
    
    
    $
    151
    
    
    $
    408
    
    
    $
    420
  NOTE 10  ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS
   NOTE 11  COMPREHENSIVE INCOME (LOSS)
  14




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
September 30, 2007
(unaudited)
 NOTE 12  NET INCOME PER LIMITED PARTNERSHIP UNIT
  15




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (unaudited)
 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 Item 1A, under the caption Risks
Inherent in Our Business, in our annual report on Form 10-K for year ended December 31, 2006.
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.
     16




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Our Lease Portfolio
  Direct Financing Leases and Notes
 September 30, 2007
    
    
    December 31, 2006Type of Equipment
    
    Net Investment
    
    
    Percentage
    
    
    Net Investment
    
    
    PercentageMedical Equipment
    
    $
    28,574
    
    
    
    32.1
    %
    
    $
    29,140
    
    
    
    33.0
    %Industrial Equipment
    
    
    23,234
    
    
    
    26.1
    
    
    
    19,100
    
    
    
    21.6Computers
    
    
    12,226
    
    
    
    13.7
    
    
    
    13,477
    
    
    
    15.3Office Equipment
    
    
    5,528
    
    
    
    6.3
    
    
    
    6,944
    
    
    
    7.9Software
    
    
    4,483
    
    
    
    5.0
    
    
    
    3,683
    
    
    
    4.2Communications
    
    
    4,074
    
    
    
    4.6
    
    
    
    3,172
    
    
    
    3.6Garment Care
    
    
    2,512
    
    
    
    2.8
    
    
    
    3,373
    
    
    
    3.8Restaurant Equipment
    
    
    2,070
    
    
    
    2.4
    
    
    
    2,432
    
    
    
    2.7Building systems
    
    
    1,610
    
    
    
    1.8
    
    
    
    2,048
    
    
    
    2.3Other
    
    
    4,714
    
    
    
    5.2
    
    
    
    4,923
    
    
    
    5.6$
    89,025
    
    
    
    100.0
    %
    
    $
    88,292
    
    
    
    100.0
    %
 Operating Leases
 September 30, 2007
    
    
    December 31, 2006Type of Equipment
    
    Net Investment
    
    
    Percentage
    
    
    Net Investment
    
    
    PercentageIndustrial Equipment
    
    $
    291
    
    
    
    36.8
    %
    
    $
    266
    
    
    
    25.6
    %Office Equipment
    
    
    186
    
    
    
    23.6
    
    
    
    283
    
    
    
    27.2Communications
    
    
    174
    
    
    
    22.1
    
    
    
    205
    
    
    
    19.7Computers and software
    
    
    101
    
    
    
    12.8
    
    
    
    250
    
    
    
    24.1Medical Equipment
    
    
    22
    
    
    
    2.8
    
    
    
    33
    
    
    
    3.2Restaurant Equipment
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    0.2Other
    
    
    15
    
    
    
    1.9
    
    
    
    
    
    
    
    $
    789
    
    
    
    100.0
    %
    
    $
    1,039
    
    
    
    100.0
    %
 17




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Direct Financing Leases and Notes
 September 30, 2007
    
    
    December 31, 2006Type of Business
    
    Net Investment
    
    
    Percentage
    
    
    Net Investment
    
    
    PercentageServices
    
    $
    46,958
    
    
    
    52.8
    %
    
    $
    51,425
    
    
    
    58.2
    %Manufacturing
    
    
    10,631
    
    
    
    11.9
    
    
    
    9,030
    
    
    
    10.2Retail Trade
    
    
    7,306
    
    
    
    8.2
    
    
    
    7,747
    
    
    
    8.8Wholesale Trade
    
    
    5,138
    
    
    
    5.8
    
    
    
    4,694
    
    
    
    5.3Construction
    
    
    5,020
    
    
    
    5.6
    
    
    
    4,386
    
    
    
    5.0Transportation/Communication/Energy
    
    
    4,899
    
    
    
    5.5
    
    
    
    3,409
    
    
    
    3.9Agriculture/Forestry/Fishing
    
    
    3,948
    
    
    
    4.4
    
    
    
    2,829
    
    
    
    3.2Finance/Insurance/Real Estate
    
    
    2,819
    
    
    
    3.2
    
    
    
    2,552
    
    
    
    2.9Public Administration
    
    
    315
    
    
    
    0.4
    
    
    
    620
    
    
    
    0.7Other
    
    
    1,991
    
    
    
    2.2
    
    
    
    1,600
    
    
    
    1.8$
    89,025
    
    
    
    100.0
    %
    
    $
    88,292
    
    
    
    100.0
    %
 Operating Leases
 September 30, 2007
    
    
    December 31, 2006Type of Business
    
    Net Investment
    
    
    Percentage
    
    
    Net Investment
    
    
    PercentageConstruction
    
    $
    353
    
    
    
    44.8
    %
    
    $
    313
    
    
    
    30.1
    %Services
    
    
    257
    
    
    
    32.5
    
    
    
    438
    
    
    
    42.2Wholesale Trade
    
    
    107
    
    
    
    13.6
    
    
    
    82
    
    
    
    7.9Manufacturing
    
    
    19
    
    
    
    2.5
    
    
    
    63
    
    
    
    6.1Transportation/Communication/Energy
    
    
    18
    
    
    
    2.3
    
    
    
    61
    
    
    
    5.9Agriculture/Forestry/Fishing
    
    
    15
    
    
    
    1.9
    
    
    
    
    
    
    
    Finance/Insurance/Real Estate
    
    
    6
    
    
    
    0.7
    
    
    
    66
    
    
    
    6.3Retail Trade
    
    
    7
    
    
    
    0.9
    
    
    
    4
    
    
    
    0.4Public Administration
    
    
    1
    
    
    
    0.1
    
    
    
    2
    
    
    
    0.2Other
    
    
    6
    
    
    
    0.7
    
    
    
    10
    
    
    
    0.9$
    789
    
    
    
    100.0
    %
    
    $
    1,039
    
    
    
    100.0
    %
  18




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##### Table of Contents



Results of Operations
 Three Months Ended September 30, 2007 compared to Three Months Ended September 30, 2006
  
    
    Gain on sale of equipment and lease dispositions increased to $434,000 for the three
months ended September 30, 2007 as compared to $193,000 for the three months ended
September 30, 2006 an increase of $241,000 (125%). This increase
is due to increase in our commercial financing assets coming to
term. The number of commercial finance assets terminated increased to
134 for the three months ended September 30, 2007 as compared to
93 for the three months ended September 30, 2006 an increase
of 41 (44%).
  
    
    Rental income decreased to $94,000 for the three months ended September 30, 2007 as
compared to $173,000 for the three months ended September 30, 2006, a decrease of
$79,000 (45.7%). This decrease is principally the result of operating leases reaching
term.
  
    
    Our general and administrative expenses increased to $484,000 for the three months
ended September 30, 2007 as compared to $92,000 for the three months ended September
30, 2006, an increase of $392,000 (426.1%). This increase is principally the result of
increased legal costs associated with collection efforts.
  
    
    Depreciation on operating leases decreased to $64,000 for the three months ended
September 30, 2007 as compared to $136,000 for the three months ended September 30,
2006, a decrease of $72,000 (52.9%). This decrease is principally the result of
operating leases reaching term.
   19




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##### Table of Contents



Nine Months Ended September 30, 2007 compared to Nine Months Ended September 30, 2006
  
    
    Interest income on equipment financings increased to $5.3 million for the nine
months ended September 30, 2007 as compared to $4.8 million for the nine months
September 30, 2006 an increase of $503,000 (10.4%). Our average
investment in direct financing leases and notes increased to
$87.5 million for the nine months ended September 30, 2007
as compared to $78.7 million for the nine months ended
September 30, 2006, an increase of $8.8 million (11.2%).
    
    Gain on sale of equipment and lease dispositions increased to $774,000 for the nine
months ended September 30, 2007 as compared to $359,000 for the nine months ended
September 30, 2006, an increase of $415,000 (115.6%). This
increase is due to our increase in commercial financing assets coming
to term. The number of commercial financing assets terminated
increased to 511 for the nine months ended September 30, 2007 as
compared to 221 for the nine months ended September 30, 2006, an
increase of 290 (131%).
  
    
    Rental income decreased to $367,000 for the nine months ended September 30, 2007 as
compared to $604,000 for the nine months ended September 30, 2006, a decrease of
$237,000 (39.2%) as a result of operating leases reaching full term.
  
    
    Interest expense increased to $3.7 million for the nine months ended September 30,
2007 as compared to $3.4 million for the nine months ended September 30, 2006, an
increase of $372,000 (11.1%).This increase in interest expense is due
to an increase in our average debt balance which was partially offset by
reduction in our interest rates from LIBOR plus 1.10% per annum to
LIBOR plus 0.95% per annum on our West LB credit facility for the
nine months ended September 30, 2007 as compared to nine months
ended September 30, 2006. Average debt increased to $81.8
million during the nine months ended September 30, 2007 as compared to $75.5 million
during the nine months ended September 30, 2006, an increase of $6.3 million (8.3%).
    
    Our provision for credit losses increased to $615,000 for the nine months ended
September 30, 2007 as compared to $569,000 for the nine months ended September 30,
2006, an increase of $46,000 (8.1%). This increase was within our expectation. We
provide for bad debts when losses are likely to occur based on a migration analysis of
past due payments and economic conditions.
    
    Management fees increased to $870,000 for the nine months ended September 30, 2007
as compared to $800,000 for the nine months ended September 30, 2006, an increase of
$70,000 (8.8%).
    
    General and administrative expenses increased to $1.1 million for the nine months
ended September 30, 2007 as compared to $368,000 for the nine months ended September
30, 2006, an increase of $705,000 (191.6%). This increase is principally the result of
increased legal costs associated with collection efforts.
  
    
    Depreciation on operating leases decreased to $270,000 for the nine months ended
September 30, 2007 as compared to $492,000 for the nine months ended September 30,
2006, a decrease of $222,000 (45.1%). This is a result of operating leases reaching
full term.
    
    Administrative expenses reimbursed to related party decreased to $408,000 for the
nine months ended September 30, 2007 as compared to $420,000 for the nine months ended
September 30, 2006, a decrease of $12,000 (2.9%).
 20




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##### Table of Contents



Nine Months Ended September 30, 2007 compared to Nine Months Ended September 30, 2006
   Liquidity and Capital Resources
    September 30,2007
    
    
    2006Net cash provided by operating activities
    
    $
    1,842
    
    
    $
    3,124Net cash used in investing activities
    
    
    (317
    )
    
    
    (5,396
    )Net cash used in (provided by) financing activities
    
    
    (5,192
    )
    
    
    3,680(Decrease) increase in cash
    
    $
    (3,667
    )
    
    $
    1,408
      21




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
    
 PART II  OTHER INFORMATION
 
 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
    
    Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer.31.2
    
    Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Financial Officer.32.1
    
    Certification of Chief Executive Officer pursuant to Section 1350 of Chapter 63 of
Title 18 of the United States Code.32.2
    
    Certification of Chief Financial Officer pursuant to Section 1350 of Chapter 63 of
Title 18 of the United States Code.
 
 (1)
    
    Filed previously as Appendix A to our Post-Effective Amendment
No. 3 to our Registration Statement on Form S-1, filed on January 24, 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 September 7, 2002 and by this
reference incorporated herein. (3) 22




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##### Table of Contents



SIGNATURES
  LEASE EQUITY APPRECIATION FUND I, L.P.A Delaware Limited PartnershipBy: LEAF Financial Corporation, its General PartnerNovember 14, 2007
    
    /s/ Crit DeMent

CRIT DEMENTChairman and Chief Executive Officer of the General PartnerNovember 14, 2007
    
    /s/ Robert K. Moskovitz

ROBERT K. MOSKOVITZChief Financial Officer and Treasurer of the General Partner
 23