UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





[x]         Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the





quarterly
      period ended
            September 30, 2008


or


[  ]         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
            000-51916





ICON Leasing Fund Eleven,
    LLC(Exact
      name of registrant as specified in its
charter)





Delaware
            20-1979428(State
      or other jurisdiction of incorporation or organization)
            (IRS
      Employer Identification Number)





100 Fifth Avenue, 4thFloor, New York, New York
            10011-1505(Address
      of principal executive offices)
            (Zip
      code)





(212) 418-4700Registrant's
      telephone number, including area
code





Indicate
by check mark whether the registrant (1) 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 (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [x]   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
the definitions of “large accelerated filer’’, ‘‘accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large
accelerated filer [  ]  Accelerated
filer [  ]    Non-accelerated filer
[x]   Smaller reporting
company [  ]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [  ]  No [x]





Number of
outstanding limited liability company shares of the registrant on November
1, 2008 is 363,256.













ICON Leasing Fund Eleven, LLC
              Table
      of ContentsPART I - FINANCIAL INFORMATION
            PageItem 1.  Condensed Consolidated Financial
      StatementsCondensed Consolidated Balance Sheets
            1Condensed Consolidated Statements of
      Operations
            2Condensed Consolidated Statements of Changes in Members’
      Equity
            3Condensed Consolidated Statements of Cash
      Flows
            4Notes to Condensed Consolidated Financial
      Statements
            6Item 2. Manager’s Discussion and Analysis of Financial
      Condition and Results of Operations
            21Item 3. Quantitative and Qualitative Disclosures About
      Market Risk
            33Item 4T. Controls and Procedures
            33PART II – OTHER INFORMATIONItem 1. Legal Proceedings
            
            34Item 1A.   Risk
Factors
            
            34Item 2. Unregistered Sales of Equity Securities and Use of
      Proceeds
            34Item 3. Defaults Upon Senior
Securities
            34Item 4. Submission of Matters to a Vote of Security
      Holders
            34Item 5. Other Information
            
            34Item 6. Exhibits
            
            35Signatures
            
            36







Table of Contents





PART I – FINANCIAL INFORMATION





Item 1.  Condensed Consolidated Financial
Statements








ICON Leasing Fund Eleven, LLC(A
      Delaware Limited Liability Company)Condensed
      Consolidated Balance SheetsAssetsSeptember
      30,2008
            
            
            December
      31,(unaudited)
            
            
            2007Current
      assetsCash
      and cash equivalents
            
            $
            15,339,498
            
            
            $
            42,339,549Current
      portion of net investment in finance leases
            
            
            7,297,766
            
            
            
            10,442,124Accounts
      receivable (net of allowancefor
      doubtful accounts of $0 and $73,321, respectively)
            
            
            1,549,023
            
            
            
            4,087,034Restricted
      cash
            
            
            260,826
            
            
            
            1,426,170Equipment
      held for sale or lease, net
            
            
            -
            
            
            
            2,226,905Deferred
      income taxes
            
            
            344,355
            
            
            
            -Income
      taxes receivable
            
            
            1,306,741
            
            
            
            2,037,851Other
      current assets
            
            
            1,485,569
            
            
            
            1,604,967Total
      current assets
            
            
            27,583,778
            
            
            
            64,164,600Non-current
      assetsNet
      investment in finance leases, less current portion
            
            
            25,905,609
            
            
            
            89,080,301Leased
      equipment at cost (less accumulated depreciation of$106,961,447
      and $109,756,923, respectively)
            
            
            347,227,976
            
            
            
            417,738,629Note
      receivable on financing facility, net
            
            
            -
            
            
            
            4,087,568Mortgage
      note receivable
            
            
            12,722,006
            
            
            
            12,722,006Investments
      in joint ventures
            
            
            7,923,517
            
            
            
            4,638,393Deferred
      income taxes
            
            
            911,311
            
            
            
            963,595Other
      non-current assets, net
            
            
            1,990,811
            
            
            
            2,356,913Total
      non-current assets
            
            
            396,681,230
            
            
            
            531,587,405Total
      Assets
            
            $
            424,265,008
            
            
            $
            595,752,005Liabilities
      and Members' EquityCurrent
      liabilitiesCurrent
      portion of non-recourse long-term debt
            
            $
            42,421,742
            
            
            $
            79,084,120Interest
      rate swap contracts
            
            
            4,810,203
            
            
            
            4,556,116Deferred
      revenue
            
            
            4,299,918
            
            
            
            11,869,874Current
      portion of leasing payables and other lease liabilities
            
            
            -
            
            
            
            5,253,451Due
      to Manager and affiliates, net
            
            
            343,310
            
            
            
            296,476Income
      taxes payable
            
            
            364,805
            
            
            
            139,310Accrued
      expenses and other current liabilities
            
            
            1,163,921
            
            
            
            3,995,256Total
      current liabilities
            
            
            53,403,899
            
            
            
            105,194,603Non-current
      liabilitiesNon-recourse
      long-term debt, net of current portion
            
            
            131,475,883
            
            
            
            206,410,288Leasing
      payables and other lease liabilities, net of current
    portion
            
            
            -
            
            
            
            10,533,826Total
      non-current liabilities
            
            
            131,475,883
            
            
            
            216,944,114Total
      Liabilities
            
            
            184,879,782
            
            
            
            322,138,717Minority
      Interest
            
            
            15,699,053
            
            
            
            12,389,412Commitments
      and contingencies (Note 13)Members'
      EquityManager
            
            
            (938,294
            )
            
            
            (643,560
            )Additional
      Members
            
            
            227,136,371
            
            
            
            256,754,095Accumulated
      other comprehensive (loss) income
            
            
            (2,511,904
            )
            
            
            5,113,341Total
      Members' Equity
            
            
            223,686,173
            
            
            
            261,223,876Total
      Liabilities and Members' Equity
            
            $
            424,265,008
            
            
            $
            595,752,005







See
accompanying notes to condensed consolidated financial
statements.


1
 Table of Contents





ICON Leasing Fund Eleven, LLC(A
      Delaware Limited Liability Company)Condensed
      Consolidated Statements of Operations(unaudited)Three Months Ended September
      30,
            
            
            Nine Months Ended September
    30,2008
            
            
            2007
            
            
            2008
            
            
            2007Revenue:Rental
      income
            
            $
            19,982,514
            
            
            $
            26,503,336
            
            
            $
            70,202,950
            
            
            $
            75,714,659Finance
      income
            
            
            641,882
            
            
            
            1,736,842
            
            
            
            3,871,390
            
            
            
            5,715,097Income
      from investments in joint ventures
            
            
            176,587
            
            
            
            36,790
            
            
            
            1,570,572
            
            
            
            57,722Net
      gain on sales of  new equipment
            
            
            -
            
            
            
            164,871
            
            
            
            278,082
            
            
            
            716,579Net
      loss on sales of  leased equipment
            
            
            -
            
            
            
            (590,605
            )
            
            
            (720,385
            )
            
            
            (637,659
            )Net
      loss on sale of portfolio
            
            
            (271,988
            )
            
            
            -
            
            
            
            (11,921,785
            )
            
            
            -Interest
      and other income
            
            
            451,854
            
            
            
            1,554,296
            
            
            
            1,972,464
            
            
            
            4,073,158Total
      revenue
            
            
            20,980,849
            
            
            
            29,405,530
            
            
            
            65,253,288
            
            
            
            85,639,556Expenses:Management
      fees - Manager
            
            
            1,037,806
            
            
            
            1,739,929
            
            
            
            4,216,992
            
            
            
            4,895,421Administrative
      expense reimbursements - Manager
            
            
            557,413
            
            
            
            1,192,107
            
            
            
            3,167,296
            
            
            
            4,181,934General
      and administrative
            
            
            341,981
            
            
            
            458,712
            
            
            
            2,383,577
            
            
            
            1,461,535Interest
            
            
            3,076,106
            
            
            
            4,671,432
            
            
            
            9,872,200
            
            
            
            13,051,443Depreciation
      and amortization
            
            
            13,857,807
            
            
            
            20,534,370
            
            
            
            51,237,519
            
            
            
            60,998,815Impairment
      loss
            
            
            -
            
            
            
            122,774
            
            
            
            -
            
            
            
            122,774(Gain)
      loss on financial instruments
            
            
            (148,692
            )
            
            
            1,965,541
            
            
            
            41,628
            
            
            
            1,530,916Total
      expenses
            
            
            18,722,421
            
            
            
            30,684,865
            
            
            
            70,919,212
            
            
            
            86,242,838Income
      (loss) before minority interest and income taxes
            
            
            2,258,428
            
            
            
            (1,279,335
            )
            
            
            (5,665,924
            )
            
            
            (603,282
            )Minority
      interest
            
            
            (594,777
            )
            
            
            (263,621
            )
            
            
            (1,471,225
            )
            
            
            (779,271
            )Income
      (loss) before income taxes
            
            
            1,663,651
            
            
            
            (1,542,956
            )
            
            
            (7,137,149
            )
            
            
            (1,382,553
            )Provision
      (benefit) for income taxes
            
            
            337,139
            
            
            
            428,484
            
            
            
            (2,707,715
            )
            
            
            (74,768
            )Net
      income (loss)
            
            $
            1,326,512
            
            
            $
            (1,971,440
            )
            
            $
            (4,429,434
            )
            
            $
            (1,307,785
            )Net
      income (loss) allocable to:Additional
      Members
            
            $
            1,313,247
            
            
            $
            (1,951,726
            )
            
            $
            (4,385,139
            )
            
            $
            (1,294,707
            )Manager
            
            
            13,265
            
            
            
            (19,714
            )
            
            
            (44,295
            )
            
            
            (13,078
            )$
            1,326,512
            
            
            $
            (1,971,440
            )
            
            $
            (4,429,434
            )
            
            $
            (1,307,785
            )Weighted
      average number of additionalmember
      shares outstanding
            
            
            363,355
            
            
            
            363,946
            
            
            
            363,430
            
            
            
            348,262Net
      income (loss) per weighted averageadditional
      member share outstanding
            
            $
            3.61
            
            
            $
            (5.36
            )
            
            $
            (12.07
            )
            
            $
            (3.72
            )






See
accompanying notes to condensed consolidated financial
statements.


2
 Table of Contents








ICON Leasing Fund Eleven, LLC(A
      Delaware Limited Liability Company)Condensed
      Consolidated Statements of Changes in Members' EquityAccumulatedOther
            
            
            TotalAdditional
            
            
            Additional
            
            
            
            
            
            Comprehensive
            
            
            Members'Member Shares
            
            
            Members
            
            
            Manager
            
            
            Income/(Loss)
            
            
            EquityBalance,
      December 31, 2007
            
            
            363,859
            
            
            $
            256,754,095
            
            
            $
            (643,560
            )
            
            $
            5,113,341
            
            
            $
            261,223,876Net
      loss
            
            
            -
            
            
            
            (364,888
            )
            
            
            (3,686
            )
            
            
            -
            
            
            
            (368,574
            )Change
      in valuation of interest rate swap contracts
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3,253,516
            )
            
            
            (3,253,516
            )Currency
      translation adjustments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (123,652
            )
            
            
            (123,652
            )Comprehensive
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3,745,742
            )Additional
      member shares redeemed
            
            
            (355
            )
            
            
            (280,039
            )
            
            
            -
            
            
            
            -
            
            
            
            (280,039
            )Cash
      distributions to members
            
            
            -
            
            
            
            (8,272,273
            )
            
            
            (83,406
            )
            
            
            -
            
            
            
            (8,355,679
            )Period
      ended March 31, 2008 (unaudited)
            
            
            363,504
            
            
            $
            247,836,895
            
            
            $
            (730,652
            )
            
            $
            1,736,173
            
            
            $
            248,842,416Net
      loss
            
            
            -
            
            
            
            (5,333,498
            )
            
            
            (53,874
            )
            
            
            
            
            
            
            (5,387,372
            )Change
      in valuation of interest rate swap contracts
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,785,260
            
            
            
            2,785,260Currency
      translation adjustments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (6,038,879
            )
            
            
            (6,038,879
            )Comprehensive
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (8,640,991
            )Additional
      member shares redeemed
            
            
            (36
            )
            
            
            (29,734
            )
            
            
            
            
            
            
            -
            
            
            
            (29,734
            )Cash
      distributions to members
            
            
            -
            
            
            
            (8,269,163
            )
            
            
            (83,527
            )
            
            
            -
            
            
            
            (8,352,690
            )Period
      ended June 30, 2008 (unaudited)
            
            
            363,468
            
            
            $
            234,204,500
            
            
            $
            (868,053
            )
            
            $
            (1,517,446
            )
            
            $
            231,819,001Net
      income
            
            
            -
            
            
            
            1,313,247
            
            
            
            13,265
            
            
            
            
            
            
            
            1,326,512Change
      in valuation of interest rate swap contracts
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            196,912
            
            
            
            196,912Currency
      translation adjustments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,191,370
            )
            
            
            (1,191,370
            )Comprehensive
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            332,054Additional
      member shares redeemed
            
            
            (135
            )
            
            
            (114,540
            )
            
            
            
            
            
            
            -
            
            
            
            (114,540
            )Cash
      distributions to members
            
            
            -
            
            
            
            (8,266,836
            )
            
            
            (83,506
            )
            
            
            -
            
            
            
            (8,350,342
            )Period
      ended September 30, 2008 (unaudited)
            
            
            363,333
            
            
            $
            227,136,371
            
            
            $
            (938,294
            )
            
            $
            (2,511,904
            )
            
            $
            223,686,173






See
accompanying notes to condensed consolidated financial
statements.


3
 Table of Contents








ICON Leasing Fund Eleven, LLC(A
      Delaware Limited Liability Company)Condensed
      Consolidated Statements of Cash Flows(unaudited)Nine Months Ended September
    30,2008
            
            
            2007Cash
      flows from operating activities:Net
      loss
            
            $
            (4,429,434
            )
            
            $
            (1,307,785
            )Adjustments
      to reconcile net loss to net cashprovided
      by operating activities:Rental
      income paid directly to lenders by lessees
            
            
            (9,838,051
            )
            
            
            (7,928,631
            )Finance
      income
            
            
            (3,871,390
            )
            
            
            (5,715,097
            )Income
      from investments in joint ventures
            
            
            (1,570,572
            )
            
            
            (57,722
            )Net
      loss (gain) on sales of new and leased equipment
            
            
            442,303
            
            
            
            (78,920
            )Net
      loss on sale of portfolio
            
            
            11,921,785
            
            
            
            -Depreciation
      and amortization
            
            
            51,237,519
            
            
            
            60,998,815Impairment
      loss
            
            
            -
            
            
            
            122,774Interest
      expense on non-recourse financing paid directly to lenders by
      lessees
            
            
            2,986,271
            
            
            
            1,884,884Loss
      on financial instruments
            
            
            41,628
            
            
            
            1,530,916Minority
      interest
            
            
            1,471,225
            
            
            
            779,271Deferred
      tax benefit
            
            
            (361,966
            )
            
            
            (737,667
            )Changes
      in operating assets and liabilities:Collection
      of finance leases
            
            
            17,271,450
            
            
            
            25,668,997Accounts
      receivable
            
            
            (2,182,305
            )
            
            
            (255,123
            )Other
      assets, net
            
            
            1,168,377
            
            
            
            (363,024
            )Payables,
      deferred revenue and other current liabilities
            
            
            (10,902,456
            )
            
            
            (6,836,443
            )Due
      to/from Manager and affiliates, net
            
            
            127,301
            
            
            
            (128,881
            )Distributions
      to/from minority interest  and joint ventures
            
            
            (903,604
            )
            
            
            (678,699
            )Net
      cash provided by operating activities
            
            
            52,608,081
            
            
            
            66,897,665Cash
      flows from investing activities:Investments
      in leased assets
            
            
            (44,513,142
            )
            
            
            (114,676,027
            )Proceeds
      from sales of new and leased equipment
            
            
            7,315,210
            
            
            
            20,918,533Proceeds
      from sale of portfolio
            
            
            7,316,137
            
            
            
            -Investment
      in financing facility
            
            
            (164,822
            )
            
            
            (3,475,507
            )Investment
      in short-term note receivable
            
            
            -
            
            
            
            (6,500,000
            )Repayment
      of financing facility
            
            
            4,367,055
            
            
            
            -Investments
      in joint ventures
            
            
            (4,056,373
            )
            
            
            -Change
      in restricted cash
            
            
            452,098
            
            
            
            (456,112
            )Distributions
      received from joint ventures in excess of profits
            
            
            786,496
            
            
            
            9,925,586Net
      cash used in investing activities
            
            
            (28,497,341
            )
            
            
            (94,263,527
            )Cash
      flows from financing activities:Proceeds
      from non-recourse long-term debt
            
            
            14,534,777
            
            
            
            30,103,769Repayments
      of non-recourse long-term debt
            
            
            (43,308,853
            )
            
            
            (59,191,174
            )Issuance
      of additional member shares, net of sales and offering expenses
      paid
            
            
            -
            
            
            
            64,494,671Redemption
      of additional member shares
            
            
            (424,313
            )
            
            
            (1,031,846
            )Cash
      distributions to members
            
            
            (25,058,711
            )
            
            
            (29,164,208
            )Minority
      interest contribution in joint venture
            
            
            5,615,733
            
            
            
            -Distributions
      to minority interest holders in joint ventures
            
            
            (2,469,424
            )
            
            
            (1,344,415
            )Net
      cash (used in) provided by financing activities
            
            
            (51,110,791
            )
            
            
            3,866,797Effects
      of exchange rates on cash and cash equivalents
            
            
            -
            
            
            
            3,834,157Net
      decrease in cash and cash equivalents
            
            
            (27,000,051
            )
            
            
            (19,664,908
            )Cash
      and cash equivalents, beginning of the period
            
            
            42,339,549
            
            
            
            61,258,267Cash
      and cash equivalents, end of the period
            
            $
            15,339,498
            
            
            $
            41,593,359






See
accompanying notes to condensed consolidated financial
statements.


4
 Table of Contents







ICON
      Leasing Fund Eleven, LLC(A
      Delaware Limited Liability Company)Condensed
      Consolidated Statements of Cash Flows(unaudited)Nine Months Ended September
    30,2008
            
            
            2007Supplemental
      disclosure of cash flow information:Cash
      paid during the period for interest
            
            $
            4,860,831
            
            
            $
            11,547,103Supplemental
      disclosure of non-cash investing and financing activities:Equipment
      purchased with non-recourse long-term debtpaid
      directly by lender
            
            $
            -
            
            
            $
            66,656,754Principal
      and interest paid on non-recourse long-term debtdirectly
      to lenders by lessees
            
            $
            9,282,000
            
            
            $
            8,462,121Transfer
      of non-recourse long-term debt in connection with saleof
      Leasing Portfolio
            
            $
            73,187,369
            
            
            $
            -











See
accompanying notes to condensed consolidated financial statements.  5
 Table of Contents
 ICON Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)


(1)
            Basis
      of Presentation and Consolidation





The
accompanying condensed consolidated financial statements of ICON Leasing Fund
Eleven, LLC (the “LLC”) have been prepared in accordance with U.S. generally
accepted accounting principles (“US GAAP”) for the interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission for Quarterly Reports on Form 10-Q.  Accordingly, they do
not include all of the information and footnotes required by US GAAP for
complete financial statements.  In the opinion of ICON Capital Corp.
(the “Manager”), all adjustments considered necessary for a fair presentation
have been included.  These condensed consolidated financial statements
should be read together with the consolidated financial statements and notes
included in the LLC’s Annual Report on Form 10-K for the year ended December 31,
2007.  The results for the interim period are not necessarily
indicative of the results for the full year.





The
condensed consolidated financial statements include the accounts of the LLC and
its majority-owned subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation.





The LLC
accounts for its noncontrolling interests in joint ventures where the LLC has
influence over financial and operational matters, generally 50% or less
ownership interest, under the equity method of accounting. In such cases, the
LLC’s original investments are recorded at cost and adjusted for its share of
earnings, losses and distributions.  The LLC accounts for investments
in joint ventures where the LLC has virtually no influence over financial and
operational matters using the cost method of accounting.  In such
cases, the LLC’s original investments are recorded at cost and any distributions
received are recorded as revenue.  All of the LLC’s investments in
joint ventures are subject to its impairment review policies.





In joint
ventures where the LLC’s interest is majority owned, the financial condition and
results of operations of the joint venture are consolidated.  Minority
interest represents the minority owner’s proportionate share of its equity in
the joint venture. The minority interest is adjusted for the minority owner’s
share of the earnings, losses and distributions of the joint
venture.





(2)
            Organization





The LLC
was formed on December 2, 2004 as a Delaware limited liability company and
commenced operations on May 6, 2005 when the LLC admitted its first
additional members.  Additional members represent all members other
than the Manager.  The LLC is engaged in one business segment, the
business of purchasing equipment and leasing it to third-party end users,
providing equipment and other financing, acquiring equipment subject to lease
and, to a lesser degree, acquiring ownership rights to leased equipment at lease
expiration.  The LLC also purchased equipment and sold it to its leasing
customers. The LLC will continue until December 31, 2024, unless terminated
sooner.





The
Manager of the LLC is a Delaware corporation. The Manager manages and controls
the business affairs of the LLC, including, but not limited to, the equipment
leases and financing transactions that the LLC enters into pursuant to the terms
of the LLC’s amended and restated limited liability company agreement (the “LLC
Agreement”).  Additionally, the Manager has a 1% interest in the
profits, losses, cash distributions and liquidation proceeds of the
LLC.




The LLC’s
offering period ended on April 20, 2007 and its operating period
commenced.  The LLC invests most of the net proceeds from its offering
in equipment leases and financing transactions. After the net offering proceeds
are fully invested, additional investments will be made with the cash generated
from the LLC’s initial investments, to the extent that cash is not needed for
expenses, reserves, or distributions to members. The investment in additional
equipment leases and financing
transactions in this manner is called “reinvestment.” The LLC currently
anticipates investing in equipment leases and financing transactions from time
to time until approximately April 2012, unless that date is extended, at the
Manager’s sole discretion, for up to an additional three years. After the
operating period, the LLC will then sell its assets in the ordinary course of
business, a time frame called the “liquidation period.”




6
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)






(2)
              Organization
      - continued





Members’
capital accounts are increased for their initial capital contribution plus their
proportionate share of earnings and decreased by their proportionate share of
losses and distributions. Profits, losses, cash distributions and liquidation
proceeds are allocated 99% to the additional members and 1% to the Manager until
each additional member has (a) received cash distributions and liquidation
proceeds sufficient to reduce their adjusted capital contribution account to
zero and (b) received, in addition, other distributions and allocations that
would provide an 8% per year cumulative return on their outstanding adjusted
capital account. After such time, the distributions will be allocated 90% to the
additional members and 10% to the Manager.





(3)
            Summary
      of Significant Accounting Policies





Use of
Estimates





The
preparation of financial statements in conformity with US GAAP requires the
Manager to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities as
of the date of the condensed consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Significant
estimates primarily include the determination of allowance for doubtful
accounts, depreciation and amortization, impairment losses, estimated useful
lives and residual values. Actual results could differ from those
estimates.





Reclassifications





Certain
reclassifications have been made to the accompanying condensed consolidated
financial statements in prior periods to conform to the current period
presentation.





Financial
Instruments





In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157, “Accounting
for Fair Value Measurements” (“SFAS No. 157”).  SFAS No. 157 defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles and establishes a hierarchy that categorizes and
prioritizes the sources to be used to estimate fair value. SFAS No. 157 also
expands financial statement disclosures about fair value measurements. On
February 12, 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-2
(“FSP 157-2”), which delayed the effective date of SFAS No. 157 for one year for
all non-financial assets and non-financial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually).  On February 14, 2008, the FASB issued FSP
No. 157-1, which amended SFAS No. 157 to exclude SFAS No. 13, “Accounting for
Leases” and other accounting pronouncements that address fair value measurements
of leases from the provisions of SFAS No. 157.  SFAS No. 157 and FSP
157-2 are effective for the LLC’s financial statements beginning January 1,
2008.  The LLC adopted the provisions of SFAS No. 157 beginning
January 1, 2008 for all financial assets and financial liabilities that are
recognized at fair value.




7
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)


(3)
              Summary
      of Significant Accounting Policies -
  continued




Additionally
for all non-financial assets and non-financial liabilities that are recognized
at fair value in the financial statements on a nonrecurring basis, the LLC has
adopted the provisions of FSP 157-2 and delayed the effective date of SFAS No.
157 until January 1, 2009.  The Manager believes that the impact of
partially adopting SFAS No. 157 effective January 1, 2008 is not material to the
condensed consolidated financial statements.





SFAS No.
157 requires that assets and liabilities carried at fair value be classified and
disclosed in one of the following three categories:





·
            Level
      1: Quoted market prices available in active markets for identical assets
      or liabilities as of the reporting
date.


·
            Level
      2: Pricing inputs other than quoted prices in active markets included in
      Level 1, which are either directly or indirectly observable as of the
      reporting date.


·
            Level
      3: Pricing inputs that are generally unobservable and can not be
      corroborated by market data.





Financial
assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement. The Manager’s
assessment, on the LLC’s behalf, of the significance of a particular input to
the fair value measurement requires judgment, and may affect the valuation of
the assets and liabilities being measured and their placement within the fair
value hierarchy.





The
following table summarizes the valuation of the LLC’s material financial assets
and liabilities measured at fair value on a recurring basis as of September 30,
2008:





Level
      1 (1)
            
            
            Level
      2 (2)
            
            
            Level
      3(3)
            
            
            TotalAssets:Warrants
            
            $
            -
            
            
            $
            80,931
            
            
            $
            -
            
            
            $
            80,931Liabilities:Derivative
      Liabilities
            
            $
            -
            
            
            $
            4,810,203
            
            
            $
            -
            
            
            $
            4,810,203(1)
      quoted prices in active markets for identical assets or
      liabilities(2)
      observable inputs other than quoted prices in active markets for identical
      assets and liabilities(3)
      no observable pricing inputs in the market





The LLC’s
derivative contracts, including interest rate swaps and warrants, are valued
using models based on readily observable market parameters for all substantial
terms of the LLC’s derivative contracts and are classified within Level
2.  As permitted by SFAS No. 157, the LLC uses market prices and
pricing models for fair value measurements of its derivative instruments. The
fair value of the warrants are recorded in other non-current assets and the
derivative liabilities are recorded in derivative instruments.




8
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)


(3)
              Summary
      of Significant Accounting Policies -
  continued





Recent
Accounting Pronouncements





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities — including an Amendment of SFAS No.
115” (“SFAS No. 159”), which permits but does not require the LLC to measure
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected are
reported in earnings. The LLC has not elected to fair value any of its financial
instruments under the provisions of SFAS No. 159.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements — an Amendment of ARB No. 51” (“SFAS No.
160”). SFAS No. 160 establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the retained interest and gain
or loss when a subsidiary is deconsolidated. This statement is effective for
financial statements issued for fiscal years beginning on or after
December 15, 2008 with earlier adoption prohibited. The Manager is
currently evaluating the impact of SFAS No. 160 on the LLC’s condensed
consolidated financial statements.





On March
19, 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities — an Amendment of SFAS No. 133” (“SFAS No.
161”). SFAS No. 161 enhances required disclosures regarding derivatives and
hedging activities, including enhanced  disclosures regarding how: (a)
an entity uses derivative instruments; (b) derivative instruments and related
hedged items are accounted for under SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities;” and (c) derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows. SFAS No. 161 is effective for fiscal years and interim periods
beginning after November 15, 2008 and, therefore, the LLC will be required to
provide such disclosures beginning with the interim period ended March 31,
2009.





(4)
            Leasing
      Portfolio





On March
7, 2006, the LLC acquired substantially the entire equipment leasing portfolio
(the “Leasing Portfolio”) of Clearlink Capital Corporation, which was based in
Mississauga, Ontario, Canada.





On May
19, 2008, the LLC sold substantially all of the remaining net assets in the
Leasing Portfolio (“Remaining Net Assets”) to affiliates of U.S. Micro
Corporation (“U.S. Micro”), an unaffiliated third party.  The gross
cash purchase price was $19,000,000 and was subject to post-closing adjustments
of approximately $11,684,000, bringing the net cash purchase price to
approximately $7,316,000.  The LLC recognized a book loss of
approximately $17,476,000, which was offset by a realized foreign currency gain
of approximately $5,593,000 less an insignificant intercompany
settlement.  As a result, the LLC recognized a net book loss of
approximately $11,922,000 on the sale of the Remaining Net Assets. During the
three months ended September 30, 2008, the LLC recorded a loss of approximately
$272,000, relating to post closing adjustments.


9
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)


(5)
              Net
      Investment in Finance Leases


Net
investment in finance leases consisted of the following at September 30, 2008
and December 31, 2007:





September
      30,2008
            
            
            December
      31,(unaudited)
            
            
            2007Minimum
      rents receivable
            
            $
            35,788,757
            
            
            $
            104,858,623Estimated
      residual values
            
            
            3,070,296
            
            
            
            7,440,417Initial
      direct costs, net
            
            
            631,335
            
            
            
            2,583,319Unearned
      income
            
            
            (6,287,013
            )
            
            
            (15,359,934
            )Net
      investment in finance leases
            
            
            33,203,375
            
            
            
            99,522,425Less:
      Current portion of net investment in finance leases
            
            
            7,297,766
            
            
            
            10,442,124Net
      investment in finance leases, less current portion
            
            $
            25,905,609
            
            
            $
            89,080,301





On
September 23, 2008, the LLC, through its wholly-owned subsidiary ICON Global
Crossing III, LLC (“ICON Global Crossing III”), acquired additional
telecommunications equipment for a purchase price of approximately
$3,991,000.  The equipment is subject to a lease with Global Crossing
Telecommunications, Inc.  The base lease term is 36 months and
commenced on October 1, 2008.  The LLC paid acquisition fees to the
Manager of approximately $120,000 in connection with this
transaction.





As
discussed in Note 4, on May 19, 2008, the LLC sold the Remaining Net Assets in
the Leasing Portfolio, which included approximately $60,520,000 of net
investment in finance leases.





Non-cancelable
minimum annual amounts due on investment in finance leases over the next five
years were as follows at September 30, 2008:





Years Ending December 31,For
      October 1 to December 31, 2008
            
            $
            2,438,5522009
            
            
            9,909,6632010
            
            
            10,254,8702011
            
            
            5,296,2132012
            
            
            4,378,809Thereafter
            
            
            3,510,650$
            35,788,757





10
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)




(6)
              Leased
      Equipment at Cost


Leased
equipment at cost consisted of the following at September 30, 2008 and December
31, 2007:





September
      30,2008
            
            
            December
      31,(unaudited)
            
            
            2007Marine
      vesselsContainer
      vessels
            
            $
            142,500,324
            
            
            $
            142,500,324Tanker
      vessels
            
            
            115,097,430
            
            
            
            115,097,430Product
      tankers
            
            
            90,798,632
            
            
            
            90,798,632Manufacturing
      equipment
            
            
            57,526,824
            
            
            
            38,770,027Telecommunications
      equipment
            
            
            48,266,213
            
            
            
            42,686,715Leasing
      Portfolio
            
            
            -
            
            
            
            97,642,424454,189,423
            
            
            
            527,495,552Less:
      Accumulated depreciation
            
            
            (106,961,447
            )
            
            
            (109,756,923
            )$
            347,227,976
            
            
            $
            417,738,629





Depreciation
expense was $13,765,919 and $20,516,533 for the three months ended September 30,
2008 and 2007, respectively.  Depreciation expense was $50,701,257 and
$60,812,962 for the nine months ended September 30, 2008 and 2007,
respectively.





ICON
Senang and ICON Sebarok





On April
11, 2007, the LLC, through its wholly-owned subsidiaries, ICON Senang, LLC and
ICON Sebarok, LLC (the “Teekay Purchasers”), acquired two Aframax 95,649 DWT
product tankers, the Senang Spirit and the Sebarok Spirit (collectively, the
“Teekay Vessels”), from an affiliate of Teekay Corporation (“Teekay”). The
purchase price for the Teekay Vessels was approximately $88,000,000, comprised
of (i) a cash payment of approximately $21,300,000 funded in the form of a
capital contribution and (ii) borrowings of approximately $66,700,000 of
non-recourse long-term debt under a secured loan agreement with Fortis Capital
Corp. (‘Fortis Capital”). The LLC paid an acquisition fee to the Manager of
approximately $2,640,000 in connection with this
transaction.  Simultaneously with the closing of the purchase of the
Teekay Vessels, two bareboat charters were entered into by an affiliate of
Teekay for a term of 60 months.  The charters commenced on April 11,
2007.





ICON
French Equipment I





On March
30, 2007, the LLC, through its wholly-owned subsidiary, ICON French
Equipment I, LLC (“ICON Heuliez”), entered into a purchase and sale agreement
(the “Agreement”) with Heuliez SA (“HSA”) and Heuliez Investissements SNC (“HI”)
to purchase certain auto parts manufacturing equipment from HSA and HI.  In
connection with the Agreement, ICON Heuliez agreed to lease back the equipment
to HSA and HI, respectively, for an initial term of 60 months.  The
aggregate purchase price for the equipment was approximately $11,994,000
(€9,000,000). The LLC incurred professional fees of approximately $51,000
and paid an acquisition fee to the Manager of approximately $360,000 relating to
this transaction.  These fees were capitalized as part of the
acquisition cost of the equipment. The leases commenced on April 1,
2007.




11
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)





(6)
            Leased
      Equipment at Cost - continued





On
October 26, 2007, HSA and Groupe Henri Heuliez, the guarantor of the leases with
ICON Heuliez, filed for “procedure de sauvegarde,” a procedure only available to
a solvent company seeking to reorganize its business affairs under French
law.  HSA and HI paid all amounts due under the lease through January 1,
2008.  As of February 1, 2008, ICON Heuliez entered into an agreement
with the administrator of the “procedure de sauvegarde” to accept reduced
payments from HSA and HI for the period beginning February 1, 2008 and ending
July 31, 2008. On August 13, 2008, the administrator of the “procedure de
sauvegarde” confirmed a continuation plan for HSA, HI and Groupe Henri Heuliez.
The terms of such plan include HSA and HI making reduced payments to ICON
Heuliez until January 31, 2009.  Beginning February 1, 2009, full
payments under the lease will resume.  In addition, each lease with
ICON Heuliez will be extended a year.  During the one year extension
HSA and HI will make monthly payments to repay the shortfall resulting from the
reduced payments ICON Heuliez received between February 1, 2008 and January 31,
2009.  The lease remains in full force and effect.





MW
Universal





On
September 28, 2007, the LLC completed the acquisitions of and simultaneously
leased back all of the manufacturing assets of W Forge Holdings, Inc. (“W
Forge”), MW Scott, Inc. (“Scott”), and MW Gilco, LLC (“Gilco”), wholly-owned
subsidiaries of MW Universal, Inc. (“MWU”), for purchase prices of $21,000,000,
$600,000 and $600,000, respectively.  The LLC paid acquisition fees to
the Manager for W Forge, Scott, and Gilco of approximately $630,000, $18,000 and
$18,000, respectively, in connection with these transactions.  Each
lease commenced on January 1, 2008 and continues for a period of 60
months.





On
December 10, 2007, the LLC completed the acquisitions of and simultaneously
leased back substantially all of the manufacturing assets of MW General, Inc.
(“General”) and AMI Manchester, LLC (“AMI”), wholly-owned subsidiaries of MWU,
for purchase prices of $400,000 and $1,700,000, respectively.  The LLC
paid acquisition fees to the Manager for General and AMI of approximately
$12,000 and $51,000, respectively in connection with these
transactions.  Each lease commenced on January 1, 2008 and continues
for a period of 60 months.





Simultaneously
with the closing of the transactions for W Forge, Scott, Gilco, General and AMI,
ICON Income Fund Ten, LLC (“Fund Ten”) and ICON Leasing Fund Twelve, LLC (“Fund
Twelve”), entities also managed by the Manager (together with the LLC, the
“Participating Funds”), completed similar acquisitions with four other
subsidiaries of MWU pursuant to which the respective funds purchased
substantially all of the machining and metal working equipment of each
subsidiary.  Each subsidiary’s obligations under its respective leases
(including those of W Forge, Scott, Gilco, General and AMI) are
cross-collateralized, cross-defaulted, and all subsidiaries’ obligations are
guaranteed by MWU. Each of the Participating Funds has also entered into a
credit support agreement pursuant to which losses incurred by a Participating
Fund with respect to any MWU subsidiary are shared among the Participating Funds
in proportion to their respective capital investment.





On June
9, 2008, the Participating Funds and IEMC Corp. (“IEMC”), a subsidiary of the
Manager, entered into a Forbearance Agreement with MWU, W Forge, Scott, Gilco,
General, AMI and four other subsidiaries of MWU to cure certain non-payment
related defaults under its lease covenants with the LLC. The terms of the
Forbearance Agreement include, among other things, additional collateral being
pledged and the grant of a warrant for the purchase of 300 shares of the capital
stock of W Forge at an exercise price of $0.01 per share, exercisable for a
period of five years beginning September 5, 2008. As of September 30, 2008, the
LLC’s current proportionate share is 100%.




12
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)





(6)
            Leased
      Equipment at Cost - continued




On
September 5, 2008, the Participating Funds and IEMC entered into a Forbearance
Agreement with MWU, W Forge, Scott, Gilco, General, AMI and four other
subsidiaries of MWU to cure certain non-payment related defaults under its lease
covenants with the LLC. The terms of the Forbearance Agreement include, among
other things, additional collateral being pledged and the grant of a warrant for
the purchase of 180 shares of the capital stock of MWU at an exercise price of
$0.01 per share, exercisable for a period of five years beginning September 5,
2008. As of September 30, 2008, the LLC’s current proportionate share is
57.3%.





ICON EAR
II





On April
24, 2008, the LLC, through its wholly-owned subsidiary ICON EAR II, LLC (“ICON
EAR II”), completed the acquisition of and simultaneously leased back
semiconductor manufacturing equipment from Equipment Acquisition Resources, Inc.
(“EAR”) for approximately $6,348,000. The LLC paid
acquisition fees of approximately $190,000 to the Manager in connection with
this transaction. The base lease term is 60 months and commenced on July 1,
2008.





ICON
Pliant





On June
30, 2008, the LLC and Fund Twelve, through their joint venture ICON Pliant, LLC
(“ICON Pliant”), entered into an agreement with Pliant Corporation (“Pliant”) to
acquire manufacturing equipment. The LLC and Fund Twelve have ownership
interests in ICON Pliant of 55% and 45%, respectively.





On July
16, 2008, the LLC and Fund Twelve completed the acquisition of and
simultaneously leased back the manufacturing equipment to Pliant. The purchase
price was $12,115,000, of which the LLC paid approximately $6,663,000. The base
lease term commenced on October 1, 2008 and continues for 60 months. Total
acquisition fees paid to the Manager were approximately $363,000, of which the
LLC’s portion was approximately $200,000.





ICON
Global Crossing III, LLC





On June
26, 2008 and June 27, 2008, the LLC, through its wholly-owned subsidiary ICON
Global Crossing III, LLC, acquired additional telecommunications equipment for
an aggregate purchase price of approximately $5,417,000.  The
equipment is subject to a lease with Global Crossing Telecommunications,
Inc.  The base lease term is 36 months and commenced on July 1,
2008.  The LLC paid acquisition fees to the Manager of approximately
$163,000 in connection with this transaction.





Leasing
Portfolio





For the
nine months ended September 30, 2008 and 2007, the LLC purchased approximately
$7,954,000 and $27,543,000 of new equipment related to the Leasing Portfolio,
respectively. As discussed in Note 4, on May 19, 2008, the LLC sold the
Remaining Net Assets in the Leasing Portfolio, which included approximately
$45,403,000 of leased equipment at cost, net of accumulated
depreciation.




13
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)





(6)
            Leased
      Equipment at Cost - continued





Aggregate
annual minimum future rentals receivable from each of the LLC’s non-cancelable
operating leases over the next five years consisted of the following at
September 30, 2008:





Years Ending December 31,For
      October 1 to December 31, 2008
            
            $
            19,267,5022009
            
            $
            77,062,7512010
            
            $
            68,546,7072011
            
            $
            29,053,4892012
            
            $
            15,033,176Thereafter
            
            $
            5,230,763




(7)
              Note
      Receivable on Financing Facility,
net


On August
13, 2007, the LLC, along with a consortium of other lenders, entered into an
equipment financing facility with Solyndra, Inc. (“Solyndra”), a privately-held
manufacturer of solar panels, for the building of a new production facility. The
financing facility was to mature on June 30, 2013 and was secured by the
equipment as well as all other assets of Solyndra. The LLC was to receive
principal payments starting in October 2008. In the interim period, interest was
paid on a quarterly basis using a range of rates from 6.20% to 6.74%. In
connection with the transaction, the LLC received warrants for the purchase of
up to 40,290 shares of Solyndra common stock at an exercise price of $4.96 per
share. The fair value of these warrants was approximately $115,000 on the
transaction date and was reflected as a discount on the face amount of the note
receivable.





At
September 30, 2008, the Manager determined, based on the Black-Scholes option
pricing model, that the aggregate fair value of the warrants was $80,931. The
assumptions used for the Black-Scholes option pricing model were as follows:
Strike price $4.96, share price $2.01, expiration date of April 6, 2014, a
volatility of 300%, and the risk free interest rate of 2.16%. The volatility
percentage was determined by taking a sampling of six similar businesses from
their initial public offering date to present and placing a percentage based on
the performance of the share price of this sampling.





The
financing facility was for a maximum amount of $93,500,000, of which the LLC
committed to invest up to $5,000,000. At June 30, 2008, the LLC had loaned
approximately $4,367,000. The LLC paid acquisition fees of approximately
$131,000 to the Manager in relation to this financing facility.





On July
27, 2008, Solyndra fully repaid the outstanding note receivable and the entire
financing facility was terminated. The LLC received approximately $4,437,000
from the repayment, which consisted of principal and interest receivable as of
such date. As a result of the repayment, the LLC recognized a net loss of
$18,375. The repayment does not affect the warrants held by the LLC and the LLC
retains its rights thereunder.





(8)
            Investments
      in Joint Ventures





ICON
AeroTV, LLC





On
December 22, 2005, the LLC, along with Fund Ten, formed ICON AeroTV, LLC (“ICON
AeroTV”) and each contributed approximately $2,776,000 for a 50%
interest.  ICON AeroTV’s sole purpose was to own equipment leased to
AeroTV Ltd (“AeroTV”). In February 2007, AeroTV’s customer, the largest
scheduled bus line in Europe, terminated its service agreement with
AeroTV.  Shortly
thereafter, AeroTV notified the Manager of its inability to pay certain rent
owed to ICON AeroTV and subsequently filed for insolvency protection in the
United Kingdom. In February 2007, ICON AeroTV sent a notice to AeroTV
terminating the master lease agreement. Shortly thereafter, certain facts came
to light that gave the Manager serious concerns regarding the propriety of
AeroTV's actions during and after the execution of the lease with AeroTV. On
April 18, 2007, ICON AeroTV filed a lawsuit in the United Kingdom’s High Court
of Justice, Queen’s Bench Division, against AeroTV and one of its directors for
fraud. ICON AeroTV obtained a default judgment against the AeroTV director,
which was subsequently set aside. On April 17, 2008, the judgment was
reinstated. At this time, it is not possible to determine ICON AeroTV’s ability
to collect the judgment.


14
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)
  (8)
              Investments
      in Joint Ventures -
continued





Information
as to the results of operations of ICON AeroTV is summarized below:





Three
      Months Ended September 30,
            
            
            Nine
      Months Ended September 30,(unaudited)
            
            
            (unaudited)2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      loss
            
            $
            -
            
            
            $
            5,868
            
            
            $
            -
            
            
            $
            272,424LLC's
      share of net loss
            
            $
            -
            
            
            $
            2,934
            
            
            $
            -
            
            
            $
            136,212





ICON EAM,
LLC





The LLC
had a 50% interest in ICON EAM, LLC (“ICON EAM”), a joint venture with Fund Ten,
whose sole purpose was to lease gas meters and accompanying data gathering
equipment to EAM Assets Ltd. (“EAM”).  All amounts funded by ICON EAM
in anticipation of purchasing the industrial gas meters and accompanying data
gathering equipment were deposited into an interest-bearing escrow account
controlled by ICON EAM's legal counsel.  In May 2007, ICON EAM’s
initial investment and all accrued interest of approximately $13,695,000 were
returned to the LLC and Fund Ten, of which the LLC’s share was approximately
$6,848,000.





Information
as to the results of operations of ICON EAM is summarized below:





Three
      Months Ended September 30,
            
            
            Nine
      Months Ended September 30,(unaudited)
            
            
            (unaudited)2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      income
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            186,724LLC's
      share of net income
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            93,362





15
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)




(8)
              Investments
      in Joint Ventures -
continued





ICON
Global Crossing II, LLC





The LLC,
along with Fund Ten and ICON Income Fund Nine, LLC (“Fund Nine”) formed ICON
Global Crossing II, LLC (“ICON Global Crossing II”) with interest of
approximately 13.3%, 72.3% and 14.4%, respectively. ICON Global Crossing II was
formed for the sole purpose to lease telecommunications equipment to Global
Crossing and Global Crossing North American Networks, Inc.





Information
as to the results of operations of ICON Global Crossing II is summarized
below:





Three
      Months Ended September 30,
            
            
            Nine
      Months Ended September 30,(unaudited)
            
            
            (unaudited)2008
            
            
            2007
            
            
            2008
            
            
            2007Total
      revenue
            
            $
            980,952
            
            
            $
            980,952
            
            
            $
            2,942,856
            
            
            $
            2,942,856Net
      income
            
            $
            300,210
            
            
            $
            299,576
            
            
            $
            873,347
            
            
            $
            758,459LLC's
      share of net income
            
            $
            39,808
            
            
            $
            39,724
            
            
            $
            115,806
            
            
            $
            100,572





ICON EAR,
LLC





On
December 28, 2007, the LLC and Fund Twelve formed ICON EAR, LLC (“ICON EAR”),
with interests of 45% and 55%, respectively.  ICON EAR completed the
acquisition and simultaneous lease back of semiconductor manufacturing equipment
from EAR for a purchase price of $6,935,000. The base lease term commenced on
July 1, 2008 and continues for a period of 60 months. The LLC paid an
acquisition fee to the Manager of approximately $94,000 relating to this
transaction.





During
June 2008, the LLC and Fund Twelve made additional contributions to ICON EAR,
which were used to complete another acquisition from EAR and simultaneously
leased back additional semiconductor manufacturing equipment to EAR for a total
purchase price of $8,794,500. The LLC and Fund Twelve retained ownership
interests of 45% and 55%, respectively, subsequent to this transaction. The base
lease term commenced on July 1, 2008 and continues for a period of 60 months.
The LLC paid acquisition fees to the Manager of approximately $119,000 relating
to this transaction.





(9)
            Non-Recourse
      Long-Term Debt





Containership
Vessels





On June
21, 2006, the LLC, through its wholly-owned subsidiaries ICON European
Container, LLC (“ICON European Container”) and ICON European Container II, LLC
(“ICON European Container II”), acquired four container vessels (collectively,
the “ZIM Vessels”).  The ZIM Vessels are owned by two Norwegian
limited partnerships, European Container KS and European Container KS II
(collectively, the “KS Companies”), which are wholly-owned subsidiaries of ICON
European Container and ICON European Container II .





In
connection with the acquisition of the ZIM Vessels, the LLC assumed
approximately $93,325,000 of senior non-recourse long-term
debt.  Pursuant to the terms of the loan agreement with HSH Nordbank
AG (“HSH”), there are two separate portions to the senior non-recourse long-term
debt obligation.  HSH has first priority security interest in the ZIM
Vessels.  The KS Companies are jointly and severally liable for the
obligations under the loan agreement and the ZIM Vessels are
cross-collateralized.







16
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)




(9)
              Non-Recourse
      Long-Term Debt - continued


The
portion of the senior non-recourse long-term debt obligation relating to the
acquisition of the M/V ZIM Japan and M/V Adaman Sea (f/k/a ZIM America)
(collectively, “Portion I”) matures on November 18, 2010 and accrues interest at
the London Interbank Offered Rate (“LIBOR”) plus 1.25% per year.  The
LLC may, at its discretion, make periodic prepayments of the outstanding
principal balance without penalty. On February 18, 2008, the LLC prepaid
$400,000, which was applied against the outstanding principal balance and
reduced the balloon payment due on the maturity date.





The
portion of the senior non-recourse long-term debt obligation relating to the
acquisition of the M/V ZIM Hong Kong and M/V ZIM Israel (collectively, “Portion
II”) matures on January 27, 2011 and accrues interest at LIBOR plus 1.25% per
year.  On January 27, 2011, a balloon payment of approximately
$14,000,000 was originally due.  On February 4, 2008, the LLC prepaid
$300,000 which was applied against the outstanding principal balance and reduced
the balloon payment due on the maturity date.





On April
24, 2008, the LLC amended the loan agreement with HSH changing the payment terms
from quarterly payments to monthly payments.  As a result of this
amendment, Portion I has a balloon payment due November 18, 2010 of
approximately $7,300,000 and Portion II has a balloon payment due January 27,
2011 of approximately $13,900,000.





As part
of the acquisition of the ZIM Vessels, the LLC assumed three interest rate swap
contracts. These interest rate swap contracts were established in order to fix
the variable interest rates on the senior non-recourse long-term debt obligation
and minimize the LLC’s risk of interest rate fluctuations.  The
interest rate swap contracts have a fixed interest rate of 4.16% for M/V ZIM
Japan, 4.72% for M/V Adaman Sea (f/k/a ZIM America), and 4.74% for M/V ZIM Hong
Kong and M/V ZIM Israel.





On April
28, 2008 the LLC terminated these three interest rate swap contracts and entered
into two new interest rate swaps.  These transactions resulted in a
gain of approximately $160,000.  The two new interest rate swaps had
notional amounts of approximately $26,620,000 and $33,190,000 with fixed
interest rates of 4.50% and 4.74%, respectively.  As of June 6, 2008,
the LLC designated these interest rate swaps as cash flow hedges with the M/V
ZIM Hong Kong and M/V ZIM Israel and M/Z ZIM Japan and M/V Adaman Sea senior
non-recourse long-term debt obligations, respectively to fix the variable
interest rates, however one of the swaps was determined to be ineffective at
inception and the other became ineffective in the current quarter. The LLC
recorded approximately $327,000 of ineffectiveness relating to
these swaps as of September 30, 2008, which has been recorded as a
realized gain in the statements of operations.





Tanker
Vessels





On April
11, 2007, the LLC, through the Teekay Purchasers acquired the Teekay Vessels. In
connection with the acquisition of the Teekay Vessels, the LLC assumed
approximately $66,657,000 of non-recourse long-term debt. Pursuant to the terms
of the loan agreement with Fortis Capital, the non-recourse long-term debt
obligations mature on April 11, 2012 and accrue interest at LIBOR plus 1.00% per
year. At September 30, 2008, the aggregate outstanding balance of the
non-recourse long-term debt obligations related to the Teekay Vessels was
approximately $54,279,000.


17
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)
  (9)
                Non-Recourse
      Long-Term Debt - continued


Simultaneously
with the execution of the non-recourse long-term debt agreements mentioned
above, the LLC entered into interest rate swap contracts with Fortis Capital in
order to hedge the variable interest rates on the non-recourse long-term debt
and minimize the LLC’s risk of interest rate fluctuation. The interest rate swap
contracts, which were initially deemed highly effective, fixed the interest
rates of the Teekay Vessels at 5.125%. During the current quarter, the interest
rate swap contracts were determined to be ineffective. Therefore, the change in
the fair value of the swap contracts during the current quarter, of
ineffectiveness, of approximately $12,000, has been recorded as a
realized gain in the statements of operations.





Leasing
Portfolio





The
Leasing Portfolio had non-recourse long-term debt obligations, which accrued
interest at rates ranging from 4.30% to 8.09% per year.  On May 19,
2008, the non-recourse long-term debt obligations of approximately $73,187,000
were assumed by U.S. Micro in conjunction with the sale of the Remaining Net
Assets.





Aggregate
Maturities of Non-Recourse Long-Term Debt





The
aggregate maturities of non-recourse long-term debt over the next five years
were as follows at September 30, 2008:





Years Ending December 31,For
      October 1 to December 31, 2008
            
            $
            10,512,8212009
            
            
            42,995,3462010
            
            
            55,161,0592011
            
            
            43,517,6992012
            
            
            21,710,700$
            173,897,625





(10)
            Revolving
      Line of Credit, Recourse





The LLC,
along with ICON Income Fund Eight B L.P. (“Fund Eight B”), Fund Nine, Fund Ten
and Fund Twelve (entities sponsored and organized by the
Manager) (collectively, the “Borrowers”), are parties to a Commercial Loan
Agreement (the “Loan Agreement”) with California Bank & Trust (the
“Lender”). The Loan Agreement originally provided for a revolving line of credit
of up to $17,000,000 pursuant to a senior secured revolving loan facility (the
“Facility”), which is secured by all assets of the Borrowers not subject to a
first priority lien, as defined in the Loan Agreement. Each of the Borrowers is
jointly and severally liable for all amounts borrowed under the Facility.
Amounts available under the Facility are subject to a borrowing base that is
determined, subject to certain limitations, on the present value of the future
receivables under certain lease agreements in which the Borrowers have a
beneficial interest.





The
Facility was originally set to expire on September 30, 2008 and established (i)
the interest rate for advances under the Facility at the Lender’s prime rate and
(ii) the interest rate on the five separate advances that are permitted to be
made under the Facility at which United States dollar deposits can be acquired
by the Lender at the London Interbank Eurocurrency Market Rate plus 2.5%.
The interest rate at September 30, 2008 was 5.0%.




18
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)


(10)
                Revolving
      Line of Credit, Recourse -
continued





On May 1,
2008, the Borrowers entered into a Loan Modification Agreement. The agreement
increased the revolving line of credit up to $30,000,000 and extended the
expiration date to April 30, 2010. The Borrowers may request a one year
extension to the revolving line of credit within 390 days of the expiration
date, but the Lender has no obligation to extend. The quarterly unused
commitment fee of 0.5% was reduced to 0.25% on unused commitments under the
Facility.





The
Borrowers were in compliance with the covenants under the Loan Agreement at
September 30, 2008.





Aggregate
borrowings by all Borrowers under the Facility amounted to $1,255,000 at
September 30, 2008, all of which was borrowed by Fund Eight B. Subsequent to
September 30, 2008, Fund Eight B repaid $70,000, which reduced the outstanding
loan balance to $1,185,000.





(11)
            Income
      Tax





Certain
of the LLC’s direct and indirect wholly-owned subsidiaries are unlimited
liability companies and are taxed as corporations under the laws of
Canada.  Other indirect wholly-owned subsidiaries are taxed as
corporations in Barbados.  For the nine months ended September 30,
2008, the benefit from income taxes was comprised of $2,345,749 in current
taxes and $361,966 in deferred taxes.  The LLC’s Canadian
subsidiaries, under the laws of Canada, are subject to income tax examination
from 2006 through 2007 periods.





As a
result of the sale of the Leasing Portfolio, the LLC elected to carry back
certain cumulative net operating losses to prior periods, and accordingly,
recognized an income tax receivable of approximately $2,700,000.  The
LLC has a deferred tax asset of approximately $3,000,000, relating to the
sale of the Leasing Portfolio, that has a valuation allowance of approximately
$2,541,000. The remaining deferred tax asset of approximately $459,000 is
expected to be utilized in 2009.





(12)
            Transactions
      with Related Parties





The
Manager performs certain services relating to the management of the LLC’s
equipment leasing and financing activities.  Such services include,
but are not limited to, the collection of lease payments from the lessees of the
equipment, re-leasing services in connection with equipment which is off-lease,
inspections of the equipment, liaising with and general supervision of lessees
to assure that the equipment is being properly operated and maintained,
monitoring performance by the lessees of their obligations under the leases and
the payment of operating expenses.





Administrative
expense reimbursements are costs incurred by the Manager or its affiliates that
are necessary to the LLC’s operations.  These costs include the Manager’s
and its affiliates’ legal, accounting, investor relations and operations
personnel, as well as professional fees and other costs that are charged to the
LLC based upon the percentage of time such personnel dedicate to the
LLC. Excluded are salaries and related costs, travel expenses and other
administrative costs incurred by individuals with a controlling interest in the
Manager.





The
Manager also has a 1% interest in the LLC’s profits, losses, cash distributions
and liquidation proceeds. The LLC paid distributions to the Manager of $250,439
for the nine months ended September 30, 2008.  The Manager’s interest
in the LLC’s net income (loss) for the three months ended September 30, 2008 and
2007 was $13,265 and $(19,714), respectively.  The Manager’s interest
in the LLC’s net loss for the nine months ended September 30, 2008 and 2007 was
$44,295 and $13,078, respectively.





19
 Table of Contents
 ICON
Leasing Fund Eleven, LLC
 (A
Delaware Limited Liability Company)
 Notes to
Condensed Consolidated Financial Statements
 September
30, 2008
 (unaudited)
  (12)
                Transactions
      with Related Parties -
continued





Fees and
other expenses paid or accrued by the LLC to the Manager or its affiliates for
the three and nine months ended September 30, 2008 and 2007, were as follows
(unaudited):





Three
      Months Ended
            
            
            Nine
      Months EndedSeptember 30,
            
            
            September 30,Entity
            Capacity
            Description
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007ICON
      Capital Corp.
            Manager
            Organization
      andoffering
      expenses (1)
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            1,095,103ICON
      Securities Corp.
            Managing
      broker-dealer
            Underwriting
      fees (1)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,460,137ICON
      Capital Corp.
            Manager
            Acquisition
      fees (2)
            
            
            119,719
            
            
            
            1,172,500
            
            
            
            1,159,820
            
            
            
            5,553,112ICON
      Capital Corp.
            Manager
            Management
      fees (3)
            
            
            1,037,806
            
            
            
            1,739,929
            
            
            
            4,216,992
            
            
            
            4,895,421ICON
      Capital Corp. and affiliate
            Manager
            Administrative
      fees (3)
            
            
            557,413
            
            
            
            1,192,107
            
            
            
            3,167,296
            
            
            
            4,181,934Total
      fees paid to the Managerand
      its affiliates
            
            
            $
            1,714,938
            
            
            $
            4,104,536
            
            
            $
            8,544,108
            
            
            $
            17,185,707(1)  Charged
      directly to members' equity.(2) 
      Capitalized and amortized to operations over the estimated service period
      in accordance with the LLC's accounting policies.(3)  Charged
      directly to operations.








At
September 30, 2008, the LLC had a net payable due to its Manager that consisted
of an accrual due to the Manager for administrative expense reimbursements of
$383,035, offset by a deal deposit of $39,725.





(13)
            Commitments
      and Contingencies and Off Balance Sheet
Risk





On
September 28, 2007 and December 10, 2007, the LLC completed its simultaneous
acquisitions and leasing back of substantially all of the machining and metal
working equipment of W Forge, Scott, Gilco, General and AMI, wholly-owned
subsidiaries of MWU.  Simultaneously with the closing of the
transactions with W Forge, Scott, Gilco, General and AMI, Fund Ten and Fund
Twelve completed similar acquisitions with four other subsidiaries of MWU
pursuant to which the respective funds purchased substantially all of the
machining and metal working equipment of each subsidiary.  Each
subsidiary’s obligations under its respective leases (including those of W
Forge, Scott, Gilco, General and AMI) are cross-collateralized and
cross-defaulted, and all subsidiaries’ obligations are guaranteed by
MWU.  Each of the Participating Funds has also entered into a credit
support agreement, pursuant to which losses incurred by a Participating Fund
with respect to any MWU subsidiary are shared among the Participating Funds in
proportion to their respective capital investment. The term of each credit
support agreement matches that of the lease agreements.  No amounts
were accrued at September 30, 2008 and the Manager cannot reasonably estimate at
this time the maximum potential amounts that may become payable under the credit
support agreement, if any.





(14)
            Concentrations





For the
three and nine months ended September 30, 2008, the LLC had three lessees that
accounted for approximately 63.6% and 53.1% of total rental and finance income,
respectively.





For the
three and nine months ended September 30, 2007, the LLC had five and four
lessees that accounted for approximately 78.8% and 71.8% of total rental and
finance income, respectively.






20
 Table of Contents







Item 2.  Manager’s Discussion and Analysis of Financial
Condition and Results of Operations





The
following is a discussion of our results of operations and current financial
position. This discussion should be read together with our unaudited condensed
consolidated financial statements and related notes included elsewhere in this
Quarterly Report on Form 10-Q and the audited consolidated financial
statements and related notes included in our Annual Report on Form 10-K for the
year ended December 31, 2007. This discussion should also be read in conjunction
with the disclosure below regarding “Forward-Looking Statements” and the “Risk
Factors” set forth in Item 1A herein.





As used
in this Quarterly Report on Form 10-Q, references to “we,” “us,” “our” or
similar terms include ICON Leasing Fund Eleven, LLC and its consolidated
subsidiaries.





Forward-Looking
Statements





Certain
statements within this Quarterly Report on Form 10-Q may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (“PSLRA”).  These statements are being
made pursuant to the PSLRA, with the intention of obtaining the benefits of the
“safe harbor” provisions of the PSLRA, and, other than as required by law, we
assume no obligation to update or supplement such
statements.  Forward-looking statements are those that do not relate
solely to historical fact.  They include, but are not limited to, any
statement that may predict, forecast, indicate or imply future results,
performance, achievements or events.  You can identify these
statements by the use of words such as “may,” “will,” “could,” “anticipate,”
“believe,” “estimate,” “expect,” “continue,” “further,” “plan,” “seek,”
“intend,” “predict” or “project” and variations of these words or comparable
words or phrases of similar meaning.  These forward-looking statements
reflect our current beliefs and expectations with respect to future events and
are based on assumptions and are subject to risks and uncertainties and other
factors outside our control that may cause actual results to differ materially
from those projected. We undertake no obligation to update publicly or review
any forward-looking statement, whether as a result of new information, future
developments or otherwise.





Overview





We
operate as an equipment leasing program formed on December 2,
2004.  We began active operations on May 6, 2005.  We
primarily engage in the business of purchasing equipment and leasing it to
third-party end users, equipment financing, acquiring equipment subject to lease
and, to a lesser degree, acquiring ownership rights to leased equipment at lease
expiration. Some of our equipment leases will be acquired for cash and are
expected to provide current cash flow, which we refer to as "income"
leases.  For our other equipment leases, we finance the majority of
the purchase price from borrowings from third parties. We refer to these leases
as “growth leases”. These growth leases generate little or no current cash flow
because substantially all of the rental payments received from the lessee are
used to service the indebtedness associated with acquiring or financing the
lease. For these leases, we anticipate that the future value of the leased
equipment will exceed the cash portion of the purchase price.





We intend
to invest most of the net proceeds from our offering in equipment subject to
lease. After the net offering proceeds have been invested, it is anticipated
that additional investments will be made with the cash generated from our
initial investments to the extent that cash is not needed for expenses, reserves
and distributions to members. The investment in additional equipment in this
manner is called “reinvestment.” We anticipate purchasing equipment from time to
time for the next five years. This time frame is called the “operating period,”
and may be extended, at the sole discretion of our Manager, for up to an
additional three years.  After the operating period, we will then sell
our assets in the ordinary course of business during a time frame called the
“liquidation period.”








21
 Table of Contents





At
September 30, 2008, our portfolio, which we hold either directly or through
joint venture investments with affiliates, consisted primarily of the following
equipment subject to lease or financing:





Lumber
Processing Equipment





·
            We
      own equipment, plant and machinery, which is subject to a lease with The
      Teal Jones Group and Teal Jones Lumber Services, Inc.  The lease
      expires in November 2013. We also own a mortgage note receivable that is
      due on December 1, 2013.





Marine
Vessels





Containership
Vessels





·
            On
      June 21, 2006, we acquired, through our wholly-owned subsidiaries ICON
      European Container, LLC (“EC I”) and ICON European Container II, LLC (“EC
      II”) (collectively, the “ZIM Purchasers”), four container vessels
      from Old Course Investments, LLC (“Old Course”).  The M/V Adaman
      Sea (f/k/a ZIM America) and the M/V ZIM Japan (both owned by EC I) are
      subject to bareboat charters that expire in November 2010.  The
      M/V ZIM Hong Kong and the M/V ZIM Israel (both owned by EC II) are subject
      to bareboat charters that expire in January 2011.  These vessels
      (collectively, the “ZIM Vessels”) are subject to bareboat charters with
      ZIM Integrated Shipping Services Ltd.
(“ZIM”).





Tanker
Vessels





·
            On
      April 11, 2007, we acquired, through our wholly-owned subsidiaries, ICON
      Senang, LLC and ICON Sebarok, LLC, two Aframax 95,649 DWT product
      tankers, the Senang Spirit and the Sebarok Spirit (collectively, the
      “Teekay Vessels”). The purchase price for the Teekay Vessels was
      approximately $88,000,000, comprised of (i) a cash payment of
      approximately $21,300,000 funded in the form of a capital contribution and
      (ii) borrowings of approximately $66,700,000 of non-recourse long-term
      debt under a secured loan agreement with Fortis Capital
      Corp.  We paid an acquisition fee to our Manager of
      approximately $2,640,000 relating to this
      transaction.  Simultaneously with the closing of the purchase of
      the Teekay Vessels, a bareboat charter was entered into by an affiliate of
      Teekay Corporation for a term of 60 months.  The charter commenced on
      April 11, 2007.





Product
Vessels





·
            We
      own four product carrying vessels, the M/T Doubtless, the M/T Faithful,
      the M/T Spotless, and the M/T Vanguard (“Top Ships Vessels”), which are
      subject to bareboat charters with subsidiaries of Top Ships, Inc. (“Top
      Ships”) that will expire in February
2011.





Telecommunications
Equipment





·
            We
      have a 61.4% interest in ICON Global Crossing, LLC (“ICON Global
      Crossing”), which purchased telecommunications equipment from various
      vendors and which was then leased to Global Crossing Telecommunications,
      Inc. (“Global Crossing”). The lease expires on March 31,
      2010.





·
            We
      have a 13.3% interest in ICON Global Crossing II, LLC (“ICON Global
      Crossing II”), which purchased telecommunications equipment from various
      vendors and which was then leased to Global Crossing and Global Crossing
      North American Networks, Inc. (“Global Crossing Group”).  The
      lease expires on October 31, 2010.





·
            We
      own, through our wholly-owned subsidiary ICON Global Crossing III, LLC
      (“ICON Global Crossing III”), telecommunications equipment on lease to
      Global Crossing.  On June 27, 2008 and September 23, 2008,
      respectively, we acquired additional telecommunications equipment from
      various vendors for an aggregate purchase price of approximately
      $5,417,000 and $3,991,000, respectively, which was then leased to Global
      Crossing.  The base lease terms are 36 months and commenced on
      July 1, 2008 and October 1, 2008, respectively.  We paid
      acquisition fees to our Manager of approximately $163,000 and $120,000,
      respectively, in connection with these
  transactions.






22
 Table of Contents





·
            On
      December 20, 2007, we, along with ICON Income Fund Ten, LLC (“Fund Ten”),
      an entity also managed by our Manager, formed ICON Global Crossing V, LLC
      (“ICON Global Crossing V”), with interests of 55% and 45%, respectively,
      to purchase telecommunications equipment from various vendors for
      approximately $12,982,000 in cash. This equipment is subject to a lease
      with Global Crossing. The base lease term is 36 months and commenced on
      January 1, 2008. The total capital contributions made to ICON Global
      Crossing V were approximately $12,982,000, of which our share was
      approximately $7,140,000.  We paid an acquisition fee to our
      Manager of approximately $214,000 in connection with this
      transaction.





Manufacturing
Equipment





·
            On
      March 30, 2007, we, through our wholly-owned subsidiary, ICON French
      Equipment I, LLC (“ICON Heuliez”), entered into a purchase and sale
      agreement (the “Agreement”) with Heuliez SA (“HSA”) and Heuliez
      Investissements SNC (“HI”) to purchase certain auto parts manufacturing
      equipment from HSA and HI.  In connection with the Agreement, ICON
      Heuliez agreed to lease back the equipment to HSA and HI, respectively,
      for an initial term of 60 months.  The aggregate purchase price
      for the equipment was approximately $11,994,000
      (€9,000,000).  We incurred professional fees of approximately
      $51,000 and paid an acquisition fee to our Manager of approximately
      $360,000 relating to this transaction.  These fees were
      capitalized as part of the acquisition cost of the equipment. The
      leases commenced on April 1, 2007.





·
            On
      September 28, 2007, we completed the acquisitions of and simultaneously
      leased back all of the manufacturing assets of W Forge Holdings, Inc. (“W
      Forge”), MW Scott, Inc. (“Scott”), and MW Gilco, LLC (“Gilco”),
      wholly-owned subsidiaries of MW Universal, Inc. (“MWU”), for purchase
      prices of $21,000,000, $600,000 and $600,000, respectively.  We
      paid acquisition fees to our Manager for W Forge, Scott, and Gilco of
      approximately $630,000, $18,000 and $18,000, respectively, in connection
      with this transaction.





·
            On
      December 10, 2007, we completed the acquisitions of and simultaneously
      leased back substantially all of the manufacturing assets of MW General,
      Inc. (“General”), and AMI Manchester, LLC (“AMI”), wholly-owned
      subsidiaries of MWU, for purchase prices of $400,000 and $1,700,000,
      respectively.  We paid acquisition fees to our Manager for
      General and AMI of approximately $12,000 and $51,000, respectively, in
      connection with this transaction.





·
            We
      have a 45% interest in ICON EAR, LLC (“ICON EAR”).  ICON EAR
      owns certain semiconductor manufacturing equipment, which was purchased
      from and leased back to Equipment Acquisition Resources, Inc.
      (“EAR”).





·
            On
      April 24, 2008, we, through our wholly-owned subsidiary ICON EAR II, LLC
      (“ICON EAR II”), completed the acquisition of and simultaneously leased
      back semiconductor manufacturing equipment to EAR for a purchase price of
      approximately $6,348,000.  We paid an acquisition fee of
      approximately $190,000 to our Manager in connection with this
      transaction.  The equipment is subject to a 60 month lease and
      commenced on July 1, 2008.





·
            On
      June 30, 2008, we and ICON Leasing Fund Twelve, LLC (“Fund
      Twelve”) entered into an agreement with Pliant Corporation (“Pliant”)
      to acquire manufacturing equipment for a purchase price of $12,115,000. On
      July 16, 2008, we and Fund Twelve completed the acquisition of and
      simultaneously leased back the manufacturing equipment to Pliant. We and
      Fund Twelve have ownership interests of 55% and 45% in ICON Pliant, LLC
      (“ICON Pliant”), respectively. The base lease term is 60 months, commenced
      on October 1, 2008 and rent will be paid in advance quarterly
      installments. Total acquisition fees paid to our Manager were
      approximately $363,000, of which our portion was approximately
      $200,000.






23
 Table of Contents





Lease
and Other Significant Transactions





·
            On
      December 22, 2005, we along with Fund Ten, formed ICON AeroTV, LLC (“ICON
      AeroTV”) and each contributed approximately $2,776,000 for a 50% interest.
      ICON AeroTV’s sole purpose was owning equipment leased to AeroTV Ltd
      (“AeroTV”).   On February 13, 2007, AeroTV’s customer, the
      largest scheduled bus line in Europe, terminated its service agreement
      with AeroTV. Shortly thereafter, AeroTV notified our Manager of its
      inability to pay certain rent owed to ICON AeroTV and subsequently filed
      for insolvency protection in the United Kingdom. In February 2007, ICON
      AeroTV sent a notice to AeroTV terminating the master lease agreement.
      Shortly thereafter, certain facts came to light that gave our Manager
      serious concerns regarding the propriety of AeroTV's actions during and
      after the execution of the lease with AeroTV. On April 18, 2007, ICON
      AeroTV filed a lawsuit in the United Kingdom’s High Court of Justice,
      Queen’s Bench Division against AeroTV and one of its directors for fraud.
      ICON AeroTV obtained a default judgment against the AeroTV director, which
      was subsequently set aside. On April 17, 2008, the judgment was
      reinstated. At this time, it is not possible to determine ICON AeroTV’s
      ability to collect the judgment.





·
            On
      March 7, 2006, we acquired substantially the entire equipment leasing
      portfolio (the “Leasing Portfolio”) of Clearlink Capital Corporation
      (“Clearlink”), which was based in Mississauga, Ontario,
      Canada.  The Leasing Portfolio was acquired by us from our
      Manager and ICON Canada, Inc., an affiliate of our Manager. On May 19,
      2008, we sold substantially all of our net assets in the Leasing Portfolio
      (“Remaining Net Assets”) to affiliates of U.S. Micro Corporation (“U.S.
      Micro”), an unaffiliated third party.  The gross cash purchase
      price was $19,000,000 and was subject to post-closing adjustments of
      approximately $11,684,000, bringing the net cash purchase price to
      approximately $7,316,000.  We recognized a book loss of
      approximately $17,476,000, which was offset by a realized foreign currency
      gain of approximately $5,593,000 less an insignificant intercompany
      settlement. As a result, we recognized a net book loss of approximately
      $11,922,000 from the sale of the Remaining Net Assets.  During
      the three months ended September 30, 2008, we recorded a loss of
      approximately $272,000, relating to post closing adjustments. The
      non-recourse long-term debt obligations were assumed by U.S. Micro upon
      the sale of the Remaining Net Assets.  Although we recorded a
      net book loss on the sale of the Remaining Net Assets, our aggregate
      investment in the Leasing Portfolio yielded a gross cash on cash return in
      excess of 110%.  We calculated the cash on cash return by
      dividing the total amount of cash received from the Leasing Portfolio
      from rental proceeds, financing proceeds, residual proceeds, and the cash
      received in connection with the sale of the Remaining Net Assets
      by the total amount of the equity invested in the acquisition of the
      Leasing Portfolio, plus all subsequent equity investments in the Leasing
      Portfolio.





·
            On
      June 9, 2008, we, along with Fund Ten and Fund Twelve (collectively, the
      “Participating Funds”) entered into a Forbearance Agreement with MWU, W
      Forge, Scott, Gilco, General, AMI and four other subsidiaries of MWU to
      cure certain defaults under the lease covenants with
      us.  The terms of the Forbearance Agreement include, among other
      things, additional collateral being pledged and the grant of a
      warrant to us to purchase 300 shares of the capital stock of W Forge for a
      purchase price of $0.01 per share, exercisable for a period of five years
      beginning June 9, 2008.





·
            On
      August 13, 2007, we completed a participation investment in an equipment
      financing facility with Solyndra, Inc. (“Solyndra”), a privately-held
      manufacturer of solar panels for the building of a new production
      facility.  The financing facility was set to mature on June 30,
      2013 and was secured by the equipment as well as all other assets of
      Solyndra.  The equipment was comprised of two fully-automated
      manufacturing lines that combine glass tubes and thin film semiconductors
      to produce solar panels.  Included as part of the consideration
      in the acquisition were warrants for the purchase of 40,290 shares of
      Solyndra common stock at an exercise price of $4.96 per
      share.  The warrants are set to expire on April 6, 2014. On July
      27, 2008, Solyndra fully repaid the outstanding note receivable and the
      entire financing facility was terminated. We received approximately
      $4,437,000 from the repayment, which consisted of principal and interest
      receivable as of such date. As a result of the repayment, we recognized a
      net loss of $18,375. The repayment does not affect the warrants held by
      us, and we retain our rights
thereunder.






24
 Table of Contents





·
            On
      October 26, 2007, HSA and Groupe Henri Heuliez, the guarantor of the
      leases with ICON Heuliez, filed for “procedure de sauvegarde,” a procedure
      only available to a solvent company seeking to reorganize its business
      affairs under French law.  HSA and HI paid all amounts due under the
      lease through January 1, 2008.  As of February 1, 2008, ICON
      Heuliez entered into an agreement with the administrator of the “procedure
      de sauvegarde” to accept reduced payments from HSA and HI for the period
      beginning February 1, 2008 and ending July 31, 2008. On August 13, 2008,
      the administrator of the “procedure de sauvegarde” confirmed a
      continuation plan for HSA, HI and Groupe Henri Heuliez. The terms of such
      plan include HSA and HI making reduced payments to ICON Heuliez until
      January 31, 2009.  Beginning February 1, 2009, full payments
      under the lease will resume.  In addition, each lease with ICON
      Heuliez will be extended a year.  During the one year extension
      HSA and HI will make monthly payments to repay the shortfall resulting
      from the reduced payments ICON Heuliez received between February 1, 2008
      and January 31, 2009.  The lease remains in full force and
      effect.





·
            On
      September 5, 2008, the Participating Funds and IEMC Corp., a subsidiary of
      our Manager, entered into a Forbearance Agreement with MWU, W Forge,
      Scott, Gilco, General, AMI and four other subsidiaries of MWU to cure
      certain non-payment related defaults under its lease covenants with us.
      The terms of the Forbearance Agreement include, among other things,
      additional collateral being pledged and the grant of a warrant for the
      purchase of 180 shares of the capital stock of MWU at an exercise price of
      $0.01 per share, exercisable for a period of five years beginning
      September 5, 2008. As of September 30, 2008, our current proportionate
      share is 57.3%.





Recent
Accounting Pronouncements





In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities — including an Amendment
of SFAS No. 115” (“SFAS No. 159”), which permits but does not require us to
measure financial instruments and certain other items at fair value. Unrealized
gains and losses on items for which the fair value option has been elected are
reported in earnings, as we did not elect to fair value any of our financial
instruments under the provisions of SFAS No. 159.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements — an Amendment of ARB No. 51” (“SFAS No.
160”). SFAS No. 160 establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the retained interest and gain
or loss when a subsidiary is deconsolidated. This statement is effective for
financial statements issued for fiscal years beginning on or after
December 15, 2008 with earlier adoption prohibited. Our Manager is
currently evaluating the impact of SFAS No. 160 on our condensed consolidated
financial statements.





On March
19, 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities — an Amendment of SFAS No. 133” (“SFAS No.
161”). SFAS No. 161 enhances required disclosures regarding derivatives and
hedging activities, including enhanced disclosures regarding how: (a) an entity
uses derivative instruments; (b) derivative instruments and related hedged items
are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and
Hedging Activities;” and (c) derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash flows.
SFAS No. 161 is effective for fiscal years and interim periods beginning after
November 15, 2008 and, therefore, we will be required to provide such
disclosures beginning with the interim period ended March 31, 2009.






25
 Table of Contents





Results
of Operations for the Three Months Ended September 30, 2008 (the “2008 Quarter”)
and 2007 (the “2007 Quarter”)





Revenue
for the 2008 Quarter and the 2007 Quarter are summarized as
follows:





Three
      Months Ended September 30,(unaudited)2008
            
            
            2007
            
            
            ChangeRental
      income
            
            $
            19,982,514
            
            
            $
            26,503,336
            
            
            $
            (6,520,822
            )Finance
      income
            
            
            641,882
            
            
            
            1,736,842
            
            
            
            (1,094,960
            )Income
      from investments in joint ventures
            
            
            176,587
            
            
            
            36,790
            
            
            
            139,797Net
      gain on sales of  new equipment
            
            
            -
            
            
            
            164,871
            
            
            
            (164,871
            )Net
      loss on sales of  leased equipment
            
            
            -
            
            
            
            (590,605
            )
            
            
            590,605Net
      loss on sale of portfolio
            
            
            (271,988
            )
            
            
            -
            
            
            
            (271,988
            )Interest
      and other income
            
            
            451,854
            
            
            
            1,554,296
            
            
            
            (1,102,442
            )Total
      revenue
            
            $
            20,980,849
            
            
            $
            29,405,530
            
            
            $
            (8,424,681
            )





Total
revenue for the 2008 Quarter decreased $8,424,681, or 28.6%, as compared to the
2007 Quarter.  The decrease in total revenue was primarily due to the
sale of the Remaining Net Assets on May 19, 2008. The decrease in rental income
was largely attributable to the sale of the Remaining Net Assets, which
accounted for approximately $9,487,000 of the decrease in rental income. The
decrease was partially offset by an increase in rental income of approximately
$2,939,000 related to (i) the manufacturing equipment on lease with the
subsidiaries of MWU, which were entered into during September and December 2007,
(ii) the manufacturing equipment owned by ICON EAR II, which was acquired in
April 2008, (iii) the telecommunications equipment owned by ICON Global Crossing
III, which was acquired in June 2008 and (iv) the manufacturing equipment owned
by ICON Pliant, which was acquired in July 2008. The decrease in finance income
was largely attributable to the sale of the Remaining Net Assets, which
accounted for approximately $1,410,000 of the decrease in finance income. The
decrease was partially offset by an increase in finance income of approximately
$363,000 related to the telecommunications equipment owned by ICON Global
Crossing V, which was acquired in December 2007. The decrease in interest and
other income was largely attributable to (i) lower cash balances in
interest-bearing accounts during the 2008 Quarter and (ii) the sale of the
Remaining Net Assets.





Expenses
for the 2008 Quarter and the 2007 Quarter are summarized as
follows:





Three
      Months Ended September 30,(unaudited)2008
            
            
            2007
            
            
            ChangeManagement
      fees - Manager
            
            $
            1,037,806
            
            
            $
            1,739,929
            
            
            $
            (702,123
            )Administrative
      expense reimbursements - Manager
            
            
            557,413
            
            
            
            1,192,107
            
            
            
            (634,694
            )General
      and administrative
            
            
            341,981
            
            
            
            458,712
            
            
            
            (116,731
            )Interest
            
            
            3,076,106
            
            
            
            4,671,432
            
            
            
            (1,595,326
            )Depreciation
      and amortization
            
            
            13,857,807
            
            
            
            20,534,370
            
            
            
            (6,676,563
            )Impairment
      loss
            
            
            -
            
            
            
            122,774
            
            
            
            (122,774
            )(Gain)
      loss on financial instruments
            
            
            (148,692
            )
            
            
            1,965,541
            
            
            
            (2,114,233
            )Total
      expenses
            
            $
            18,722,421
            
            
            $
            30,684,865
            
            
            $
            (11,962,444
            )






26
 Table of Contents





Total
expenses for the 2008 Quarter decreased $11,962,444, or 39.0%, as compared to
the 2007 Quarter.  The decrease was primarily due to the sale of the
Remaining Net Assets, which resulted in an overall reduction in expenses, and a
decrease in the loss on derivative instruments recognized in the 2008 Quarter.
The decrease in depreciation and amortization was largely attributable to the
sale of the Remaining Net Assets, which resulted in a decrease of approximately
$8,494,000 in depreciation and amortization expense. This decrease was
partially offset by an increase in depreciation and amortization expense of
approximately $1,791,000 related to (i) the telecommunications equipment owned
by ICON Global Crossing V, which was acquired in December 2007, (ii) the
manufacturing equipment on lease with the subsidiaries of MWU, which was
acquired during September and December 2007, (iii) the manufacturing equipment
owned by ICON EAR II, which was acquired in April 2008, (iv) the
telecommunications equipment owned by ICON Global Crossing III, which was
acquired in June 2008, and (v) the manufacturing equipment owned by ICON Pliant,
which was acquired in July 2008. The decrease in interest expense was
predominantly due to a reduction in the balance of the non-recourse long-term
debt outstanding resulting from the sale of the Remaining Net Assets. The
decrease in management fees – Manager and administrative expense reimbursements
– Manager was primarily due to the sale of the Remaining Net
Assets.





Minority
Interest





The
increase in minority interest for the 2008 Quarter primarily related to (i) the
investment by Fund Ten in ICON Global Crossing V during December 2007, and
(ii) the investment by Fund Twelve in ICON Pliant during July 2008.





Provision
for Income Taxes





Certain
of our direct and indirect wholly-owned subsidiaries are unlimited liability
companies and are taxed as corporations under the laws of
Canada.  Other indirect wholly-owned subsidiaries are taxed as
corporations in Barbados.  For the 2008 Quarter, the provision for
income taxes was comprised of $166,292 in current taxes and an additional
valuation allowance of $170,847 on deferred taxes.





Net
Income (Loss)





As a
result of the foregoing factors, net income (loss) for the 2008 Quarter and 2007
Quarter was $1,326,512 and $(1,971,440), respectively.  The net income
(loss) per weighted average additional member share outstanding for the 2008
Quarter and 2007 Quarter was $3.61 and $(5.36), respectively.




Results
of Operations for the Nine Months Ended September 30, 2008 (the “2008 Period”)
and 2007 (the “2007 Period”)





Revenue
for the 2008 Period and the 2007 Period are summarized as follows:





Nine
      Months Ended September 30,(unaudited)2008
            
            
            2007
            
            
            ChangeRental
      income
            
            $
            70,202,950
            
            
            $
            75,714,659
            
            
            $
            (5,511,709
            )Finance
      income
            
            
            3,871,390
            
            
            
            5,715,097
            
            
            
            (1,843,707
            )Income
      from investments in joint ventures
            
            
            1,570,572
            
            
            
            57,722
            
            
            
            1,512,850Net
      gain on sales of  new equipment
            
            
            278,082
            
            
            
            716,579
            
            
            
            (438,497
            )Net
      loss on sales of  leased equipment
            
            
            (720,385
            )
            
            
            (637,659
            )
            
            
            (82,726
            )Net
      loss on sale of portfolio
            
            
            (11,921,785
            )
            
            
            -
            
            
            
            (11,921,785
            )Interest
      and other income
            
            
            1,972,464
            
            
            
            4,073,158
            
            
            
            (2,100,694
            )Total
      revenue
            
            $
            65,253,288
            
            
            $
            85,639,556
            
            
            $
            (20,386,268
            )






27
 Table of Contents





Total
revenue for the 2008 Period decreased $20,386,268, or 23.8%, as compared to the
2007 Period.  The decrease in total revenue was primarily due to the
sale of the Remaining Net Assets on May 19, 2008, which resulted in a net loss
of approximately $11,922,000 in the 2008 Period.  The decrease in
rental income was largely attributable to the sale of the Remaining Net Assets,
which accounted for approximately $16,340,000 of the decrease in rental income.
The decrease was partially offset by an increase in rental income of
approximately $10,827,000 related to (i) the manufacturing equipment owned by
ICON Heuliez, which was acquired in March 2007, (ii) the Teekay Vessels, which
were acquired in April 2007, (iii) the manufacturing equipment on lease with the
subsidiaries of MWU, which was acquired during September and December 2007, (iv)
the manufacturing equipment owned by ICON EAR II, which was acquired in April
2008, (v) the telecommunications equipment owned by ICON Global Crossing III,
which was acquired in June 2008 and (vi) the manufacturing equipment owned by
ICON Pliant, which was acquired in July 2008. The decrease in interest and
other income was largely attributable to (i) lower cash balances in
interest-bearing accounts during the 2008 Period and (ii) the sale of the
Remaining Net Assets. The decrease in finance income was largely attributable to
the sale of the Remaining Net Assets, which accounted for approximately
$2,918,000 of the decrease in finance income. The decrease was partially
offset by an increase in finance income of approximately $1,173,000 related to
the telecommunications equipment owned by ICON Global Crossing V, which was
acquired in December 2007. The decrease in total revenue was partially offset by
increase in income from investments in joint ventures, primarily due to the
recognition of a gain on foreign currency translation of approximately
$1,147,000 during the 2008 Period; no such gain was recognized during the 2007
Period.




Expenses
for the 2008 Period and the 2007 Period are summarized as follows:





Nine
      Months Ended September 30,(unaudited)2008
            
            
            2007
            
            
            ChangeManagement
      fees - Manager
            
            $
            4,216,992
            
            
            $
            4,895,421
            
            
            $
            (678,429
            )Administrative
      expense reimbursements - Manager
            
            
            3,167,296
            
            
            
            4,181,934
            
            
            
            (1,014,638
            )General
      and administrative
            
            
            2,383,577
            
            
            
            1,461,535
            
            
            
            922,042Interest
            
            
            9,872,200
            
            
            
            13,051,443
            
            
            
            (3,179,243
            )Depreciation
      and amortization
            
            
            51,237,519
            
            
            
            60,998,815
            
            
            
            (9,761,296
            )Impairment
      loss
            
            
            -
            
            
            
            122,774
            
            
            
            (122,774
            )Loss
      on financial instruments
            
            
            41,628
            
            
            
            1,530,916
            
            
            
            (1,489,288
            )Total
      expenses
            
            $
            70,919,212
            
            
            $
            86,242,838
            
            
            $
            (15,323,626
            )





Total
expenses for the 2008 Period decreased $15,323,626, or 17.8%, as compared to the
2007 Period.  The decrease was primarily due to the sale of the
Remaining Net Assets, which resulted in an overall reduction in expenses and a
decrease in the loss on derivative instruments recognized in the 2008 Period.
The decrease in depreciation and amortization was largely attributable to the
sale of the Remaining Net Assets, which resulted in a decrease of approximately
$15,993,000 in depreciation and amortization expense. This decrease was
partially offset by an increase in depreciation and amortization expense of
approximately $6,062,000 related to (i) the Teekay Vessels, which were acquired
in April 2007, (ii) the manufacturing equipment owned by ICON Heuliez, which was
acquired in March 2007, (iii) the telecommunications equipment owned by ICON
Global Crossing V, which was acquired in December 2007, (iv) the manufacturing
equipment on lease with the subsidiaries of MWU, which was acquired during
September and December 2007, (v) the manufacturing equipment owned by ICON EAR
II, which was acquired in April 2008, (vi) the telecommunications equipment
owned by ICON Global Crossing III, which was acquired in June 2008, and (vii)
the manufacturing equipment owned by ICON Pliant, which was acquired in July
2008. The decrease in interest expense was due to the continued reduction of our
non-recourse long-term debt on the ZIM Vessels and Top Ships Vessels, which was
acquired in June 2006 and the reduction of the balance of the non-recourse
long-term debt outstanding resulting from the sale of the Remaining Net Assets,
partly offset by an increase due to a full nine months impact from the
acquisition of the Teekay Vessels in April 2007. The decrease in total expense
was partly offset by an increase in general and administrative expense,
primarily related to professional fees.





Minority
Interest





The
increase in minority interest for the 2008 Period primarily related to (i) the
investment by Fund Ten in ICON Global Crossing V during December 2007, and
(ii) the investment by Fund Twelve in ICON Pliant during July 2008.





Provision
for Income Taxes





Certain
of our direct and indirect wholly-owned subsidiaries are unlimited
liability companies and are taxed as corporations under the laws of
Canada.  Other indirect wholly-owned subsidiaries are taxed as
corporations in Barbados.  For the 2008 Period, the benefit for
income taxes was comprised of $2,345,749 in current taxes and $361,966 in
deferred taxes predominately due to the sale of the Remaining Net
Assets.






28
 Table of Contents





Net
Loss





As a
result of the foregoing factors, the net loss for the 2008 Period and 2007
Period was $4,429,434 and $1,307,785, respectively. The net loss per
weighted average additional member share outstanding for the 2008 Period and
2007 Period was $12.07 and $3.72, respectively.








Financial
Condition





This
section discusses the major balance sheet variances at September 30, 2008
compared to December 31, 2007.





Total
Assets





Total
assets decreased by $171,486,997 from $595,752,005 at December 31, 2007 to
$424,265,008 at September 30, 2008.  The decrease was primarily
due to the sale of the Remaining Net Assets, which caused reductions in our net
investment in finance leases and leased equipment at cost. Additionally, the
decrease was due to the continued depreciation of our leased equipment and cash
distributions to our additional members during the 2008 Period. This decrease
was partially offset by increases in investments in joint ventures due to our
investment in ICON EAR during June 2008 and increases in leased equipment at
cost due to the acquisitions completed by ICON Global Crossing III, ICON EAR II
and ICON Pliant during the 2008 Period.





Current
Assets





Current
assets decreased by $36,580,822 from $64,164,600 at December 31, 2007 to
$27,583,778 at September 30, 2008.  The decrease was mainly due to
cash distributions made to our additional members and the sale of the Remaining
Net Assets, which caused reductions in our accounts receivable, equipment held
for sale or lease and current portion of net investment in finance
leases.





Total
Liabilities





Total
liabilities decreased by $137,258,935 from $322,138,717 at December 31,
2007 to $184,879,782 at September 30, 2008. The decrease was predominantly due
to a reduction in our leasing liabilities, non-recourse long-term debt and
deferred revenue from the sale of the Remaining Net Assets.





Current
Liabilities





Current
liabilities decreased by $51,790,704 from $105,194,603 at December 31, 2007 to
$53,403,899 at September 30, 2008. The decrease was primarily due to a reduction
in our leasing liabilities, non-recourse long-term debt and deferred revenue
from the sale of the Remaining Net Assets and the continued reduction in our
non-recourse long-term debt obligations related to the normal course of
business.





Members’
Equity





Members’
Equity decreased by $37,537,703 from $261,223,876 at December 31, 2007 to
$223,686,173 at September 30, 2008. The decrease resulted primarily from
distributions to our additional members and foreign currency translation
adjustments.  We also recorded a net loss during the 2008
Period.






29
 Table of Contents





Liquidity
and Capital Resources





Sources
and Uses of Cash





At
September 30, 2008 and December 31, 2007, we had cash and cash equivalents of
$15,339,498 and $42,339,549, respectively.  During our offering
period, our main source of cash was from financing activities and our main use
of cash was from investing activities. During our operating period, we
anticipate our main source of cash will be from operating activities and our
main use of cash will be from investing and financing activities, which we
expect will continue during our liquidation period.  Our offering
period ended on April 20, 2007 and our operating period commenced.





A
significant portion of our investments will be the purchase of equipment that
will be subject to lease.  From this type of investment, we will be
legally entitled to receive rental payments from leasing the equipment and, as
owner of the equipment, may sell or re-lease it at lease
expiration.  We will purchase equipment subject to lease either
directly or through subsidiary entities.  We may, in some cases,
jointly purchase equipment with other businesses our Manager sponsors and
manages or with unaffiliated third parties.  In such cases, we may
co-own a joint venture with other parties.





We will
seek to acquire a portfolio of equipment that is comprised of both (a)
transactions that provide current cash flow in the form of rental payments made
directly to us, and (b) transactions where the cash flow in the form of rental
payments has been pledged or assigned, in whole or in part, to a lender. We
refer to leases that provide current cash flows as income leases.  We
call leases where a substantial portion of the cash flow (and perhaps a portion
of the expected residual value of the equipment) has been pledged or assigned to
a lender or where a significant portion of the expected cash flow is deferred as
growth leases. We expect that most of the indebtedness incurred by us to pay a
portion of the purchase price for leveraged growth leases will be non-recourse
to our other assets, meaning that in the event the lender is not paid, our other
assets would not be at risk as a source of payment; only the particular item or
items of financed equipment would be at risk.





Unanticipated
or greater than anticipated operating costs or losses (including a lessee’s
inability to make timely lease payments) would adversely affect our liquidity.
To the extent that working capital reserves may be insufficient to satisfy our
cash requirements, we anticipate that we would fund our operations from cash
flow generated by operating and financing activities.  In addition, we
may use a portion of cash on hand to re-establish working capital
reserves.





Operating
Activities




Sources
of Cash




Sources
of cash from operating activities decreased $14,289,584 from $66,897,665 in
the 2007 Period to $52,608,081 in the 2008 Period. The decrease primarily
related to the sale of the Remaining Net Assets (primarily a reduction in the
collection of rental and finance lease payments, which was offset by a decline
in the payment of accrued liabilities), partly offset by the collection of
rental and finance lease payments (mainly due to the acquisition of leased
equipment by ICON Heuliez, ICON Global Crossing III, ICON EAR II and ICON Pliant
as well as the equipment acquired on lease with the subsidiaries of
MWU).





Investing
Activities




Sources
of Cash




Sources of cash from investing
activities decreased $10,607,123 from $30,844,119 in the 2007 Period to
$20,236,996 in the 2008 Period. The decrease in sources of cash resulted from a
reduction in the distributions from our joint venture investments of $9,925,586
in the 2007 Period to $786,496 in the 2008 Period. This was predominantly due to
the return of our initial investment plus accrued interest in ICON AeroTV and
ICON EAM, LLC in the 2007 Period. Additionally, the decrease in sources of cash
was from sales of new and leased equipment of $7,315,210 in the 2008 Period as
compared to $20,918,533 in the 2007 Period. These reductions were offset by
the sale of the Remaining Net Assets and the collection of a notes receivable on
a financing facility in the 2008 Period, which accounted for an increase of
$11,683,192.




Uses
of Cash




Uses of
cash from investing activities decreased $76,373,309 from $125,107,646 in the
2007 Period to $48,734,337 in the 2008 Period.  The decrease was
predominantly due to a reduction in the total number of acquisitions during the
2008 Period. During the 2008 Period and 2007 Period, we purchased $44,513,142
and $114,676,027 in leased assets, respectively.






30
 Table of Contents




Financing
Activities




Sources
of Cash




Sources
of cash from financing activities decreased $74,447,930 from $94,598,440 in the
2007 Period to $20,150,510 in the 2008 Period.  The decrease was
primarily due to the absence of any issuance of additional member shares during
the 2008 Period since our offering period ended in April 2007. During the 2007
Period, we sold 72,982 additional member shares, which provided net proceeds of
$64,494,671.  In addition, we had a decrease in proceeds from
non-recourse long-term debt. During the 2008 Period and 2007 Period, we received
proceeds from non-recourse long-term debt of $14,534,777 and $30,103,769,
respectively. These reductions were partially offset by a $5,615,733
contribution by Fund Twelve for a minority interest in ICON Pliant during the
2008 Period.




Uses
of Cash




Uses of
cash from financing activities decreased $19,470,342 from $90,731,643 in the
2007 Period to $71,261,301 in the 2008 Period. The decrease was mainly due to a
decrease in repayments on our non-recourse long-term debt obligations, which
were lower by $15,882,321. This was primarily driven by the sale of the
Remaining Net Assets. In addition, our distributions to our members were lower
by $4,105,497 during the 2008 Period.




Financings and
Borrowings




Non-Recourse
Long-Term Debt





We had
non-recourse long-term debt obligations at September 30, 2008 and December 31,
2007 of $173,897,625 and $285,494,408, respectively.  All of our
non-recourse long-term debt consisted of debt in which the lender has a security
interest in an asset.  In addition to the security interest, the
lender has an assignment of the rental payments under certain
leases.  In such cases, the lender is being paid directly by the
lessee.





Leasing
Portfolio





The
Leasing Portfolio had non-recourse long-term debt obligations, which accrued
interest at rates ranging from 4.30% to 8.09% per year.  On May 19,
2008, the non-recourse long-term debt obligations of approximately $73,187,000
were assumed by U.S. Micro in conjunction with the sale of the Remaining Net
Assets.





Revolving
Line of Credit, Recourse





We, along
with ICON Income Fund Eight B L.P. (“Fund Eight B”), ICON Income Fund Nine,
LLC, Fund Ten and Fund Twelve (entities sponsored and organized by our Manager)
(collectively, the “Borrowers”), are parties to a Commercial Loan Agreement (the
“Loan Agreement”) with California Bank & Trust (the “Lender”). The Loan
Agreement originally provided for a revolving line of credit of up to
$17,000,000 pursuant to a senior secured revolving loan facility (the
“Facility”), which is secured by all assets of the Borrowers not subject to a
first priority lien, as defined in the Loan Agreement. Each of the Borrowers is
jointly and severally liable for all amounts borrowed under the Facility.
Amounts available under the Facility are subject to a borrowing base that is
determined, subject to certain limitations, on the present value of the future
receivables under certain lease agreements in which the Borrowers have a
beneficial interest.






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 Table of Contents





The
Facility was originally set to expire on September 30, 2008 and established (i)
the interest rate for advances under the Facility at the Lender’s prime rate and
(ii) the interest rate on the five separate advances that are permitted to be
made under the Facility at which United States dollar deposits can be acquired
by the Lender at the London Interbank Eurocurrency Market Rate plus 2.5%. The
interest rate at September 30, 2008 was 5.0%.





On May 1,
2008, the Borrowers entered into a Loan Modification Agreement. The agreement
increased the revolving line of credit up to $30,000,000 and extended the
expiration date to April 30, 2010. The Borrowers may request a one year
extension to the revolving line of credit within 390 days of the expiration
date, but the Lender has no obligation to extend. The quarterly unused
commitment fee of 0.5% was reduced to 0.25% on unused commitments under the
Facility.





The
Borrowers were in compliance with the covenants under the Loan Agreement at
September 30, 2008.





Aggregate
borrowings by all Borrowers under the Facility amounted to $1,255,000 at
September 30,2008, all of
which was borrowed by Fund Eight B. Subsequent to September 30, 2008, Fund Eight
B repaid $70,000, which reduced the outstanding loan balance to
$1,185,000.





Distributions





We pay
monthly distributions to our members starting with the first month after the
additional members’ admission and continue to pay such distributions until the
termination of the operating period.  We paid distributions to our
additional members and to our Manager of $24,808,272 and $250,439, respectively,
in the 2008 Period.





Contractual
Obligations and Commitments





Contractual
Obligations





At
September 30, 2008, we had non-recourse long-term debt obligations. The lenders
have security interests in the equipment relating to each non-recourse long-term
debt instrument and, in some cases, an assignment of the rental payments under
the leases associated with the equipment.  In such cases, the lender
is being paid directly by the lessee. If the lessee was to default on the
non-recourse long-term debt, the equipment would be returned to the lender in
extinguishment of the non-recourse long-term debt. At September 30, 2008, our
outstanding non-recourse long-term debt obligations were
$173,897,625.  We are a party to the Facility, as discussed in the
financing and borrowings section above. We had no borrowings outstanding under
the Facility at September 30, 2008.





Commitments





On
September 28, 2007 and December 10, 2007, we completed our simultaneous
acquisitions and leasing back of substantially all of the machining and metal
working equipment of W Forge, Scott, Gilco, General and AMI, wholly-owned
subsidiaries of MWU.  Simultaneously with the closing of the
transactions with W Forge, Scott, Gilco, General and AMI, Fund Ten and Fund
Twelve completed similar acquisitions with four other subsidiaries of MWU
pursuant to which the respective funds purchased substantially all of the
machining and metal working equipment of each subsidiary.  Each
subsidiary’s obligations under its respective leases (including those of W
Forge, Scott, Gilco, General and AMI) are cross-collateralized and
cross-defaulted, and all subsidiaries’ obligations are guaranteed by
MWU.  Each of the Participating Funds has also entered into a credit
support agreement, pursuant to which losses incurred by a Participating Fund
with respect to any MWU subsidiary are shared among the Participating Funds in
proportion to their respective capital investment.  The term of each
credit support agreement matches that of the lease agreements.  No
amounts were accrued at September 30, 2008 and our Manager cannot reasonably
estimate at this time the maximum potential amounts that may become payable
under the credit support agreement, if any.







32
 Table of Contents




Item 3.  Quantitative and Qualitative Disclosures About
Market Risk





We, like
most other companies, are exposed to certain market risks, which include changes
in interest rates and the demand for equipment (and the related residuals) owned
by us.  We believe that our exposure to other market risks, including
foreign currency exchange rate risk, commodity risk and equity price risk, are
insignificant, at this time, to both our financial position and our results of
operations.  There were no other material changes to the disclosure
related to these items since the filing of our Annual Report on Form 10-K for
the year ended December 31, 2007.





We have
outstanding notes payable, all of which are non-recourse long-term
debt.  With respect to the non-recourse long-term debt that is subject
to variable interest, the interest rate for each non-recourse long-term debt
obligation is fixed pursuant to an interest rate swap to allow us to mitigate
interest rate fluctuations.  As a result, we consider this a fixed
position and, therefore, the conditions in the credit markets as of September
30, 2008 have not had any impact on us.  In addition, we have
considered the risk of counterparty performance of our interest rate swaps by
considering, among other things, the credit agency ratings of our
counterparties.  Based on this assessment, we believe that the risk of
counterparty non-performance is minimal.  With respect to our
revolving line of credit, which is subject to variable interest and, under which
we have no outstanding borrowings, our Manager has evaluated the impact of the
condition of the credit markets on our future cash flows and we do not expect
any adverse impact on our cash flows should credit conditions in general remain
the same or deteriorate further.





Item 4T. Controls and Procedures





Evaluation of disclosure controls
and procedures





In
connection with the preparation of this Quarterly Report on Form 10-Q for the
period ended September 30, 2008, as well as the financial statements for our
Manager, our Manager carried out an evaluation, under the supervision and with
the participation of the management of our Manager, including its Co-Chief
Executive Officers and Chief Financial Officer, of the effectiveness of the
design and operation of our Manager’s disclosure controls and procedures as of
the end of the period covered by this Report pursuant to the Securities Exchange
Act of 1934. Based on the foregoing evaluation, the Co-Chief Executive Officers
and the Chief Financial Officer concluded that our Manager’s disclosure controls
and procedures were effective.





In
designing and evaluating our Manager’s disclosure controls and procedures, our
Manager recognized that disclosure controls and procedures, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the disclosure controls and procedures are met. Our
Manager’s disclosure controls and procedures have been designed to meet
reasonable assurance standards. Disclosure controls and procedures cannot detect
or prevent all error and fraud. Some inherent limitations in disclosure controls
and procedures include costs of implementation, faulty decision-making, simple
error and mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of controls is based, in
part, upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all anticipated and unanticipated future conditions. Over time, controls
may become inadequate because of changes in conditions, or the degree of
compliance with established policies or procedures.





Evaluation of internal control over
financial reporting





There
have been no changes in our internal control over financial reporting during our
most recently completed fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.







33
 Table of Contents


PART II - OTHER INFORMATION





Item 1.  Legal Proceedings





In the
ordinary course of conducting our business, there may be certain claims, suits
and complaints filed against us.  In the opinion of management, the
outcome of such matters, if any, will not have a material impact on our
consolidated financial position or results of operations.  No material
legal proceedings are currently pending or threatened, to our knowledge, against
us or against any of our assets.





Item 1A.  Risk Factors





There
have been no material changes from the risk factors disclosed in “Item 1A. Risk
Factors” of our Annual Report on Form 10-K for the year ended December 31,
2007.





Item 2.  Unregistered Sales of Equity Securities and Use
of Proceeds





Our
Manager consented to us redeeming 526 additional member shares during the
2008 Period. The redemption amounts are calculated according to a specified
redemption formula in accordance with our LLC agreement.  Redeemed
additional member shares have no voting rights and do not share in
distributions.  Our LLC agreement limits the number of additional
member shares that can be redeemed in any one year and redeemed additional
member shares may not be reissued. The following table details our additional
member redemptions:





Total
      Number of
            
            Price
      Paid PerAdditionalMember
            
            AdditionalMemberShares Redeemed
            
            ShareJanuary
      1, 2008 through January 31, 2008
            
            
            355
            
            
            
            $
            788.84February
      1, 2008 through February 29, 2008
            
            
            -
            
            
            
            $
            -March
      1, 2008 through March 31, 2008
            
            
            -
            
            
            
            $
            -April
      1, 2008 through April 30, 2008
            
            
            36
            
            
            
            $
            825.94May
      1, 2008 through May 31, 2008
            
            
            -
            
            
            
            $
            -June
      1, 2008 through June 30, 2008
            
            
            -
            
            
            
            $
            -July
      1, 2008 through July 31, 2008
            
            
            135
            
            
            
            $
            848.45August
      1, 2008 through August 31, 2008
            
            
            -
            
            
            
            $
            -September
      1, 2008 through September 30, 2008
            
            
            -
            
            
            
            $
            -





Item 3.  Defaults Upon Senior Securities





Not
applicable.





Item 4.  Submission of Matters to a Vote of Security
Holders





No
matters were submitted to a vote of security holders during the 2008
Quarter.





Item 5.  Other Information





Not
applicable.






34
 Table of Contents








Item 6. Exhibits





3.1
            Certificate
      of Formation of ICON Leasing Fund Eleven, LLC (Incorporated by reference
      to Exhibit 3.1 to Amendment No. 1 to Registrants Registration Statement on
      Form S-1 filed with the SEC on February 15, 2005 (File No.
      333-121790)).4.1
            ICON
      Leasing Fund Eleven, LLC Amended and Restated Limited Liability Company
      Agreement (Incorporated by reference to Exhibit A to Amendment No. 1
      to Registrant’s Registration Statement on Form S-1 filed with the SEC on
      June 29, 2006 (File No. 333-133730)).10.1
            Commercial
      Loan Agreement, by and between California Bank & Trust, ICON Income
      Fund Eight B L.P., ICON Income Fund Nine, LLC, ICON Income Fund Ten,
      LLC and ICON Leasing Fund Eleven, LLC, dated August 31, 2005 (Incorporated
      by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K
      dated September 7, 2005).10.2
            Loan
      Modification Agreement, dated as of December 26, 2006, by and between
      California Bank & Trust and ICON Income Fund Eight B L.P., ICON
      Income Fund Nine, LLC, ICON Income Fund Ten, LLC and ICON Leasing Fund
      Eleven, LLC (Incorporated by reference to Exhibit 10.1 to Registrant’s
      Current Report on Form 8-K dated December 29, 2006).10.3
            Loan
      Modification Agreement dated as of May 1, 2008 between California
      Bank & Trust, ICON Income Fund Eight B L.P., ICON Income Fund
      Nine, LLC, ICON Income Fund Ten, LLC, ICON Leasing Fund Eleven, LLC and
      ICON Leasing Fund Twelve, LLC (Incorporated by reference to Exhibit 10.3
      to Registrant’s Quarterly Report on Form 10-Q dated June 6,
      2008).31.1
            Rule
      13a-14(a)/15d-14(a). Certification of Co-Chief Executive
      Officer.31.2
            Rule
      13a-14(a)/15d-14(a). Certification of Co-Chief Executive
      Officer.31.3
            Rule
      13a-14(a)/15d-14(a). Certification of Chief Financial
      Officer.32.1
            Certification
      of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2
            Certification
      of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.3
            Certification
      of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.







35
 Table of Contents







SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacity and on the dates indicated.





File No.
000-51916


ICON
Capital Corp.


Manager
of the Registrant





November 12,
2008





/s/Mark Gatto___


Mark
Gatto


Co-Chief
Executive Officer and Co-President


(Co-Principal
Executive Officer)








November 12,2008





/s/Michael A.
Reisner___


Michael
A. Reisner


Co-Chief
Executive Officer and Co-President


(Co-Principal
Executive Officer)








November 12, 2008





/s/Anthony J.
Branca__


Anthony
J. Branca


Chief
Financial Officer


(Principal
Accounting and Financial Officer)




36