##### 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 June 30, 2008
 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 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 
 
 þ o
  Large accelerated filer oAccelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company 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  June 30, 2008 (unaudited) and December 31, 2007
    
    
    3Consolidated Statements of Operations
Three and Six Months Ended June 30, 2008 and 2007 (unaudited)
    
    
    4Consolidated Statement of Partners Capital and Comprehensive Income (Loss)
Six Months Ended June 30, 2008 (unaudited)
    
    
    5Consolidated Statements of Cash Flows
Six Months Ended June 30, 2008 and 2007 (unaudited)
    
    
    6Notes to Consolidated Financial Statements  June 30, 2008 (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
    
    
    23SIGNATURES
    
    
    
    
    24Seventh Amendment to Secured Loan AgreementCertification of CEOCertification of CFOCertification of CEO pursuant to Section 1350Certification of CFO pursuant to Section 1350
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 LEASE EQUITY APPRECIATION FUND I, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 June 30,
    
    
    December 31,2008
    
    
    2007(unaudited)
    
    
    (audited)ASSETSCash
    
    $
    566
    
    
    $
    573Restricted cash
    
    
    6,886
    
    
    
    8,008Accounts receivable
    
    
    36
    
    
    
    18Investment in direct financing leases and notes, net
    
    
    107,857
    
    
    
    100,954Investment in operating leases, net of accumulated depreciation of
$682 and $702, respectively
    
    
    1,594
    
    
    
    720Other assets
    
    
    1,047
    
    
    
    1,343$
    117,986
    
    
    $
    111,616LIABILITIES AND PARTNERS CAPITALLiabilities:Debt
    
    $
    101,516
    
    
    $
    97,302Accounts payable and accrued expenses
    
    
    374
    
    
    
    774Security deposits
    
    
    2,542
    
    
    
    2,086Fair value of interest rate swaps
    
    
    1,391
    
    
    
    1,162Due to related parties
    
    
    6,264
    
    
    
    3,670Total liabilities
    
    
    112,087
    
    
    
    104,994Partners Capital
    
    
    5,899
    
    
    
    6,622$
    117,986
    
    
    $
    111,616
  3




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LEASE EQUITY APPRECIATION FUND I, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for unit data)
(unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Income:Interest on equipment financings
    
    $
    2,316
    
    
    $
    1,807
    
    
    $
    4,910
    
    
    $
    $3,584Rental income
    
    
    84
    
    
    
    125
    
    
    
    145
    
    
    
    273Gain on sale of equipment and lease dispositions,
net
    
    
    582
    
    
    
    241
    
    
    
    761
    
    
    
    340Other
    
    
    172
    
    
    
    135
    
    
    
    390
    
    
    
    3093,154
    
    
    
    2,308
    
    
    
    6,206
    
    
    
    4,506Expenses:Interest expense
    
    
    1,408
    
    
    
    1,259
    
    
    
    2,877
    
    
    
    2,466Depreciation on operating leases
    
    
    57
    
    
    
    85
    
    
    
    96
    
    
    
    206Provision for credit losses
    
    
    646
    
    
    
    167
    
    
    
    1,113
    
    
    
    371Management fees to related party
    
    
    314
    
    
    
    276
    
    
    
    635
    
    
    
    565Administrative expense reimbursed to related party
    
    
    262
    
    
    
    161
    
    
    
    457
    
    
    
    310General and administrative expenses
    
    
    315
    
    
    
    269
    
    
    
    650
    
    
    
    5893,002
    
    
    
    2,217
    
    
    
    5,828
    
    
    
    4,507Net income (loss)
    
    $
    152
    
    
    $
    91
    
    
    $
    378
    
    
    $
    (1
    )Weighted average number of limited partner units
outstanding during the period
    
    
    171,711
    
    
    
    171,746
    
    
    
    171,728
    
    
    
    171,746Net income (loss) per weighted average limited
partner unit
    
    $
    0.88
    
    
    $
    0.52
    
    
    $
    2.18
    
    
    $
    (0.01
    )
  4




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LEASE EQUITY APPRECIATION FUND I, L.P.
CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
AND COMPREHENSIVE INCOME (LOSS)
FOR THE SIX MONTHS ENDED JUNE 30, 2008
(in thousands, except unit data)
(unaudited)
 AccumulatedGeneral
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Partners
    
    
    ComprehensivePartner
    
    
    Limited Partners
    
    
    Comprehensive
    
    
    Capital
    
    
    Income (Loss)Amount
    
    
    Units
    
    
    Amount
    
    
    Loss
    
    
    Total
    
    
    TotalBalance at January 1, 2008
    
    $
    (71
    )
    
    
    171,746
    
    
    $
    7,855
    
    
    $
    (1,162
    )
    
    $
    6,622Cash distributions paid
    
    
    (9
    )
    
    
    
    
    
    
    (860
    )
    
    
    
    
    
    
    (869
    )Redemption of limited
partner
units
    
    
    
    
    
    
    (50
    )
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Net income
    
    
    4
    
    
    
    
    
    
    
    374
    
    
    
    
    
    
    
    378
    
    
    $
    378Unrealized loss on hedging
derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (229
    )
    
    
    (229
    )
    
    
    (229
    )Balance at June 30, 2008
    
    $
    (76
    )
    
    
    171,696
    
    
    $
    7,366
    
    
    $
    (1,391
    )
    
    $
    5,899
    
    
    $
    149
  5




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LEASE EQUITY APPRECIATION FUND I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Six Months EndedJune 30,2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    378
    
    
    $
    (1
    )Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Gain on sale of equipment and lease dispositions, net
    
    
    (761
    )
    
    
    (340
    )Depreciation
    
    
    96
    
    
    
    206Amortization of deferred financing costs
    
    
    106
    
    
    
    56Provision for credit losses
    
    
    1,113
    
    
    
    371Changes in operating assets and liabilities:Accounts receivable
    
    
    (18
    )
    
    
    52Other assets
    
    
    190
    
    
    
    178Accounts payable and accrued expenses
    
    
    (400
    )
    
    
    (21
    )Due to related parties, net
    
    
    2,594
    
    
    
    1,119Net cash provided by operating activities
    
    
    3,298
    
    
    
    1,620Cash flows from investing activities:Investments in direct financing leases and notes
    
    
    (37,469
    )
    
    
    (22,389
    )Proceeds from direct financing leases and notes, net of earned income
    
    
    24,589
    
    
    
    21,735Investments in operating leases
    
    
    (1,024
    )
    
    
    Proceeds from equipment under operating lease, net
    
    
    54
    
    
    
    Proceeds from sale of leases to third parties
    
    
    5,625
    
    
    
    Increase in security deposits, net
    
    
    456
    
    
    
    225Net cash used in investing activities
    
    
    (7,769
    )
    
    
    (429
    )Cash flows from financing activities:Borrowings of debt
    
    
    34,398
    
    
    
    20,485Repayment of debt
    
    
    (30,184
    )
    
    
    (20,375
    )Decrease (increase) in restricted cash
    
    
    1,122
    
    
    
    (3,917
    )Increase in deferred financing costs
    
    
    
    
    
    
    (193
    )Cash distributed to partners
    
    
    (869
    )
    
    
    (694
    )Redemption of limited partner units
    
    
    (3
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    4,464
    
    
    
    (4,694
    )Decrease in cash
    
    
    (7
    )
    
    
    (3,503
    )Cash, beginning of period
    
    
    573
    
    
    
    4,298Cash, end of period
    
    $
    566
    
    
    $
    795
  6




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(unaudited)
 NOTE 1 ORGANIZATION AND NATURE OF BUSINESS
     NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Reclassifications
  Use of Estimates
   7




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(unaudited)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)
 Use of Estimates (continued)
     Concentration of Credit Risk
   Revenue Recognition
  Direct Financing Leases.
 Operating Leases.
 8




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
June 30, 2008
(unaudited)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)
 Revenue Recognition  (Continued)
  Notes Receivable.
  Income Taxes
  Supplemental Disclosure of Cash Flow Information
  Recently Issued Accounting Pronouncements
   Transfers of Financial Assets
  9




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
June 30, 2008
(unaudited)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)
 Transfers of Financial Assets (Continued)
  Fair Value of Financial Instruments
   NOTE 3  RESTRICTED CASH
  NOTE 4 INVESTMENT IN DIRECT FINANCING LEASES AND NOTES
  June 30,
    
    
    December 31,2008
    
    
    2007Direct financing leases
    
    $
    88,977
    
    
    $
    80,509Notes receivable
    
    
    19,430
    
    
    
    21,045108,407
    
    
    
    101,554Allowance for credit losses
    
    
    (550
    )
    
    
    (600
    )$
    107,857
    
    
    $
    100,954
 10




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
June 30, 2008
(unaudited)
 NOTE 4 INVESTMENT IN DIRECT FINANCING LEASES AND NOTES  (Continued)
  June 30,
    
    
    December 31,2008
    
    
    2007Total future minimum lease payments
    
    $
    100,828
    
    
    $
    92,388Unearned rental income
    
    
    (13,168
    )
    
    
    (12,752
    )Residuals, net of unearned residual income
    
    
    1,317
    
    
    
    873$
    88,977
    
    
    $
    80,509
  Six months endedJune 30,2008
    
    
    2007Allowance for credit losses, beginning of the period
    
    $
    600
    
    
    $
    431Provision for credit losses
    
    
    1,113
    
    
    
    371Net write-offs
    
    
    (1,163
    )
    
    
    (371
    )Allowance for credit losses, end of the period
    
    $
    550
    
    
    $
    431
  Direct FinancingPeriods Ending June 30,
    
    Leases
    
    
    Notes
    
    
    Operating Leases
    
    
    Total2009
    
    $
    39,258
    
    
    $
    7,204
    
    
    $
    487
    
    
    $
    46,9492010
    
    
    27,361
    
    
    
    4,298
    
    
    
    409
    
    
    
    32,0682011
    
    
    16,642
    
    
    
    4,219
    
    
    
    286
    
    
    
    21,1472012
    
    
    10,567
    
    
    
    2,024
    
    
    
    79
    
    
    
    12,6702013
    
    
    3,924
    
    
    
    822
    
    
    
    12
    
    
    
    4,758Thereafter
    
    
    3,076
    
    
    
    863
    
    
    
    1,001
    
    
    
    4,940$
    100,828
    
    
    $
    19,430
    
    
    $
    2,274
    
    
    $
    122,532
 NOTE 5  OTHER ASSETS
  Periods Ending June 30,2009
    
    $
    1892010
    
    
    1772011
    
    
    1772012
    
    
    1182013
    
    
    59Thereafter
    
    
    83$
    803
 11




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
June 30, 2008
(unaudited)
 NOTE 6  DEBT
  June 30, 2008
    
    
    December 31, 2007WestLB AG, New York
Branch revolving line
of credit, with an
aggregate borrowing
limit of $110 million
collateralized by
specific lease
receivables and
related equipment,
with a 1% credit
reserve of the
outstanding line of
credit. Interest on
this facility is
calculated at LIBOR
plus 0.95% per annum.
To mitigate
fluctuations in
interest rates, the
Fund has entered into
interest rate swap
agreements,
terminating at various
dates ranging from
February 2010 to June
2015. The interest
rate swap agreements
fix the interest rate
on this facility at
5.43% on a weighted
average basis.
Interest and principal
are due as payments
are received under the leases and loans. The line
expires January 31,
2011
    
    $
    100,816
    
    
    $
    95,571OFC 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.
The loan is repayable
as payments are made
under the leases or
equipment financing
transactions
collateralizing the
loan, with a final
maturity date of
February 15,
2009
    
    
    700
    
    
    
    1,731Total outstanding debt
    
    $
    101,516
    
    
    $
    97,302
   2009
    
    $
    38,7452010
    
    
    28,4542011
    
    
    17,1832012
    
    
    10,5002013
    
    
    5,048Thereafter
    
    
    1,586$
    101,516
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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
June 30, 2008
(unaudited)
 NOTE 7  DERIVATIVE INSTRUMENTS
      NOTE 8: FAIR VALUE MEASUREMENT
 , ,
  13




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LEASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
June 30, 2008
(unaudited)
 NOTE 8: FAIR VALUE MEASUREMENT (Continued)
   Fair Value measurements Using
    
    Assets / LiabilitiesLevel 1
    
    Level 2
    
    Level 3
    
    At Fair ValueLiabilitiesInterest  Rate Swaps
    
    $
    
    
    
    $
    1,391
    
    
    $
    
    
    
    $
    1,391
 NOTE 9  TRANSACTIONS WITH AFFILIATES
      14




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EASE EQUITY APPRECIATION FUND I, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
June 30, 2008
(unaudited)
 NOTE 9  TRANSACTIONS WITH AFFILIATES (Continued)
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Acquisition fees
    
    $
    391
    
    
    $
    229
    
    
    $
    721
    
    
    $
    390Asset management fees
    
    $
    314
    
    
    $
    276
    
    
    $
    635
    
    
    $
    565Reimbursed administrative expenses
    
    $
    262
    
    
    $
    161
    
    
    $
    457
    
    
    $
    310
  NOTE 10  ALLOCATION OF PARTNERSHIP INCOME, LOSS AND CASH DISTRIBUTIONS
   NOTE 11  COMPREHENSIVE INCOME (LOSS)
  NOTE 12  NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT
  NOTE 13  FIRST QUARTER ADJUSTMENT
  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 2007. 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 billion or less in total assets; or
    
    $100 million or less in total annual sales.
   16




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Our Lease Portfolio
  Direct Financing Leases and Notes
 June 30, 2008
    
    
    December 31, 2007Type of Equipment
    
    Net Investment
    
    
    Percentage
    
    
    Net Investment
    
    
    PercentageIndustrial Equipment
    
    $
    25,971
    
    
    
    24.0
    %
    
    $
    28,956
    
    
    
    28.5
    %Medical Equipment
    
    
    23,581
    
    
    
    21.8
    
    
    
    26,001
    
    
    
    25.6Office Equipment
    
    
    12,329
    
    
    
    11.4
    
    
    
    6,248
    
    
    
    6.2Computers
    
    
    10,965
    
    
    
    10.1
    
    
    
    12,501
    
    
    
    12.3Water Purification
    
    
    8,292
    
    
    
    7.6
    
    
    
    
    
    
    
    Communications
    
    
    4,822
    
    
    
    4.4
    
    
    
    4,338
    
    
    
    4.3Software
    
    
    4,432
    
    
    
    4.1
    
    
    
    4,876
    
    
    
    4.8Restaurant Equipment
    
    
    4,716
    
    
    
    4.4
    
    
    
    5,160
    
    
    
    5.1Agriculture Equipment
    
    
    3,511
    
    
    
    3.2
    
    
    
    4,375
    
    
    
    4.3Other
    
    
    9,788
    
    
    
    9.0
    
    
    
    9,099
    
    
    
    8.9$
    108,407
    
    
    
    100.0
    %
    
    $
    101,554
    
    
    
    100.0
    %
 Operating Leases
 June 30, 2008
    
    
    December 31, 2007Type of Equipment
    
    Net Investment
    
    
    Percentage
    
    
    Net Investment
    
    
    PercentageOffice Equipment
    
    $
    1,086
    
    
    
    68.1
    %
    
    $
    141
    
    
    
    19.7
    %Industrial Equipment
    
    
    278
    
    
    
    17.4
    
    
    
    344
    
    
    
    47.7Communications
    
    
    104
    
    
    
    6.5
    
    
    
    153
    
    
    
    21.3Computers and software
    
    
    101
    
    
    
    6.3
    
    
    
    67
    
    
    
    9.3Agriculture Equipment
    
    
    13
    
    
    
    0.9
    
    
    
    15
    
    
    
    2.0Water Purification
    
    
    12
    
    
    
    0.8
    
    
    
    
    
    
    
    $
    1,594
    
    
    
    100.0
    %
    
    $
    720
    
    
    
    100.0
    %
 17




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Direct Financing Leases and Notes
 June 30, 2008
    
    
    December 31, 2007Type of Business
    
    Net Investment
    
    
    Percentage
    
    
    Net Investment
    
    
    PercentageServices
    
    $
    52,409
    
    
    
    48.3
    %
    
    $
    49,004
    
    
    
    48.3
    %Retail Trade
    
    
    12,857
    
    
    
    11.9
    
    
    
    11,491
    
    
    
    11.3Manufacturing
    
    
    11,210
    
    
    
    10.3
    
    
    
    10,242
    
    
    
    10.1Transportation/Communication/Energy
    
    
    6,917
    
    
    
    6.4
    
    
    
    6,515
    
    
    
    6.4Wholesale Trade
    
    
    6,712
    
    
    
    6.2
    
    
    
    6,311
    
    
    
    6.2Construction
    
    
    5,875
    
    
    
    5.4
    
    
    
    5,687
    
    
    
    5.6Agriculture/Forestry/Fishing
    
    
    5,491
    
    
    
    5.1
    
    
    
    6,703
    
    
    
    6.6Finance/Insurance/Real Estate
    
    
    3,841
    
    
    
    3.5
    
    
    
    2,729
    
    
    
    2.7Public Administration
    
    
    853
    
    
    
    0.8
    
    
    
    335
    
    
    
    0.3Other
    
    
    2,242
    
    
    
    2.1
    
    
    
    2,537
    
    
    
    2.5$
    108,407
    
    
    
    100.0
    %
    
    $
    101,554
    
    
    
    100.0
    %
 Operating Leases
 June 30, 2008
    
    
    December 31, 2007Type of Business
    
    Net Investment
    
    
    Percentage
    
    
    Net Investment
    
    
    PercentageServices
    
    $
    615
    
    
    
    38.6
    %
    
    $
    153
    
    
    
    21.3
    %Construction
    
    
    367
    
    
    
    23.0
    
    
    
    391
    
    
    
    54.2Finance/Insurance/Real Estate
    
    
    168
    
    
    
    10.5
    
    
    
    5
    
    
    
    0.7Wholesale Trade
    
    
    167
    
    
    
    10.4
    
    
    
    103
    
    
    
    14.3Manufacturing
    
    
    107
    
    
    
    6.7
    
    
    
    15
    
    
    
    2.0Retail Trade
    
    
    49
    
    
    
    3.2
    
    
    
    6
    
    
    
    0.9Transportation/Communication/Energy
    
    
    37
    
    
    
    2.3
    
    
    
    15
    
    
    
    2.1Agriculture/Forestry/Fishing
    
    
    24
    
    
    
    1.5
    
    
    
    27
    
    
    
    3.8Other
    
    
    60
    
    
    
    3.8
    
    
    
    5
    
    
    
    0.7$
    1,594
    
    
    
    100.0
    %
    
    $
    720
    
    
    
    100.0
    %
  18




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##### Table of Contents



Results of Operations
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
  
    
    Interest income on equipment financings increased to $2.3 million for the three
months ended June 30, 2008 as compared to $1.8 million for the three months June 30,
2007, an increase of $509,000 (28%). This is due to an increase in our weighted average
net investment in financing assets to $107.8 million as of June 30, 2008 as compared to
$88.4 million as of June 30, 2007, an increase of $19.4 million (22%).
    
    Gain on sale of equipment and lease dispositions increased to $582,000 for the three
months ended June 30, 2008 as compared to $241,000 for the three months ended June 30,
2007, an increase of 341,000 (141%). Gains and losses from equipment and lease
dispositions may vary significantly from period to period. Included in gains for the
three months ended June 30, 2008 is a gain of $274,000 related to the sale of a pool of
leases to an unrelated third party.
  
    
    Rental income decreased to $84,000 for the three months ended June 30, 2008 as
compared to $125,000 for the three months ended June 30, 2007, a decrease of $41,000
(33%). This decrease is principally the result of operating leases reaching term.
  
    
    Our provision for credit losses increased to $646,000 for the three months ended June
30, 2008 as compared to $167,000 for the three months ended June 30, 2007, a increase of
$479,000 (287%). We provide for credit losses when losses are likely to occur based on
a migration analysis of past due payments and economic conditions. As our portfolio
increases and ages, we expect that our provision for credit losses will increase.
Overall losses on our portfolio to date are within managements expectations.
    
    Interest expense increased to $1.4 million for the three months ended June 30, 2008
as compared to $1.3 million for the three months ended June 30, 2007, an increase of
$149,000 (12%). This increase is primarily due to the increase of our debt incurred to
acquire equipment financing assets. Average debt increased to $100.3 million during the
three months ended June 30, 2008 as compared to $82.7 million during the three months
ended June 30, 2007, an increase of $17.6 million (21%).
    
    Our general and administrative expenses increased to $315,000 for the three months
ended June 30, 2008 as compared to $269,000 for the three months ended June 30, 2007, an
increase of $46,000 (17%). This increase is principally the result of increased legal
costs associated with collection efforts.
    
    Management fees increased to $314,000, for the three months ended June 30, 2008 as
compared to $276,000 for the three months ended June 30, 2007, an increase of $38,000
(14%). This increase is directly attributable to the increase in our portfolio of
equipment financing assets, since management fees are paid based on lease payments
received.
    
    Administrative expenses reimbursed to related party increased to $262,000 for the
three months ended June 30, 2008 as compared to $161,000 for the three months ended June
30, 2007, an increase of $101,000 million (63%). This increase is due to the hiring of
additional collection personnel to minimize any impact on delinquencies resulting from a
weakened US economy.
  
    
    Depreciation on operating leases decreased to $57,000 for the three months ended June
30, 2008 as compared to $85,000 for the three months ended June 30, 2007, a decrease of
$28,000 (33%). This decrease is principally the result of operating leases reaching
term.
  19




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##### Table of Contents



Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
  
    
    Our interest income on equipment financings increased to $4.9 million for the six months
ended June 30, 2008 as compared to $3.6 million for the six months June 30, 2007, an
increase of $1.3 million (37%). This is due to an increase in our weighted average net
investment in financing assets to $106.4 million as of June 30, 2008 as compared to $87.4
million as of June 30, 2007, an increase of $19.0 million (22%). This growth was driven by
our General Partners increased sales to us and marketing efforts supported by lines of
financing.
    
    Our gain on sale of equipment increased to $761,000 for the six months ended June 30,
2008 as compared to $340,000 for the six months ended June 30, 2007, an increase of
$421,000 (124%). Gains on sale of equipment may vary significantly from period to period
due to the portfolio maturing. As the portfolio ages, there will be increased activities
from early lease terminations and end of lease dispositions. Included in gains for the six
months ended June 30, 2008 is a gain of $274,000 related to the sale of a pool of leases to
an unrelated third party.
    
    Our other income increased to $390,000 for the six months ended June 30, 2008 as
compared to $309,000 for the six months ended June 30, 2007, an increase of $81,000 (26%).
Other income consists primarily of late fee income and handling fee income. Late fee
income has increased due to the increase of the financing portfolio and an increase in
payment collection efforts.
  
    
    Our rental income decreased to $145,000 for the six months ended June 30, 2008 as
compared to $273,000 for the six months ended June 30, 2007, a decrease of $128,000 (47%).
This decrease is due to operating leases reaching full term.
  
    
    Our interest expense increased to $2.9 million for the six months ended June 30, 2008
as compared to $2.5 million for the six months ended June 30, 2007, an increase of
$411,000 (17%). This increase is due to the increase of our debt incurred to acquire
equipment financing assets. Average debt increased to $100.5 million as of June 30, 2008
as compared to $82.1 million as of June 30, 2007, an increase of $18.4 (22%).
    
    Our provision for credit losses increased to $1.1 million for the six months ended June
30, 2008 as compared to $371,000 for the six months ended June 30, 2007, an increase of
$742,000 (200%). We provide for credit losses when losses are likely to occur based on a
migration analysis of past due payments and economic conditions. As our portfolio
increases and ages, we expect that our provision for credit losses will increase. Overall
losses on our portfolio to date are within managements expectations.
    
    Our management fees increased to $635,000 for the six months ended June 30, 2008 as
compared to $565,000 for the six months ended June 30, 2007, an increase of $70,000 (12%).
This increase is directly attributable to our growth in equipment financing assets, since
management fees are paid based on lease payments received.
    
    Our administrative expenses reimbursed to related party increased to $457,000 for the
six months ended June 30, 2008 as compared to $310,000 for the six months ended June 30,
2007, an increase of $147,000 (47%). This increase is due to the hiring of additional
collection personnel to minimize any impact on delinquencies resulting from a weakened US
economy.
  
    
    Depreciation on operating leases decreased to $96,000 for the six months ended June
30, 2008 as compared to $206,000 for the six months ended June 30, 2007, a decrease of
$110,000 (53%). This decrease is due to operating leases reaching full term.
 20




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##### Table of Contents



Liquidity and Capital Resources
    Six Months EndedJune 30,2008
    
    
    2007Net cash provided by operating activities
    
    $
    3,298
    
    
    $
    1,620Net cash used in investing activities
    
    
    (7,769
    )
    
    
    (429
    )Net cash provided by (used in) financing activities
    
    
    4,464
    
    
    
    (4,694
    )Decrease in cash
    
    $
    (7
    )
    
    $
    (3,503
    )
    21




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
    22




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##### Table of Contents



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)10.1
    
    
    Seventh Amendment to Secured Loan Agreement with WestLB AG, New York Branch, dated
June 1, 200831.1
    
    
    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.(2)
    
    Filed previously as an Exhibit to Amendment No. 1 to our Registration
Statement on Form S-1 filed on June 7, 2002. 23




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##### Table of Contents



SIGNATURES
  LEASE EQUITY APPRECIATION FUND I, L.P.
A Delaware Limited Partnership
By: LEAF Financial Corporation, its General PartnerAugust 14, 2008
    /s/ Crit DeMentCRIT DEMENTChairman and Chief Executive OfficerAugust 14, 2008
    /s/ Robert K. MoskovitzROBERT K. MOSKOVITZChief Financial OfficerAugust 14, 2008
    /s/ Tonya L. ZweierTONYA L. ZWEIERChief Accounting Officers 24