ICON LEASING FUND ELEVEN, LLC - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - ICON LEASING FUND ELEVEN, LLC	Financial_Report.xls
EX-32.1 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND ELEVEN, LLC	ex32-1.htm
EX-32.2 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND ELEVEN, LLC	ex32-2.htm
EX-31.1 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND ELEVEN, LLC	ex31-1.htm
EX-32.3 - CERTIFICATION OF PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND ELEVEN, LLC	ex32-3.htm
EX-31.2 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND ELEVEN, LLC	ex31-2.htm
EX-31.3 - CERTIFICATION OF PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND ELEVEN, LLC	ex31-3.htm

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

June 30, 2011

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

For the transition period from

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)	(I.R.S. Employer Identification No.)

100 Fifth Avenue, 4th Floor, New York, New York	10011
(Address of principal executive offices)	(Zip code)

(212) 418-4700

(Registrant'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.

[X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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 [X] No

Number of outstanding shares of limited liability company interests of the registrant on August 8, 2010 is 362,656.

ICON Leasing Fund Eleven, LLC Table of Contents


PART I - FINANCIAL INFORMATION		Page

Item 1. Consolidated Financial Statements		1

Consolidated Balance Sheets		1

Consolidated Statements of Operations		2

Consolidated Statements of Changes in Equity		3

Consolidated Statements of Cash Flows		4

Notes to Consolidated Financial Statements		6

Item 2. Manager’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3. Quantitative and Qualitative Disclosures About Market Risk		26

Item 4. Controls and Procedures		26

PART II – OTHER INFORMATION

Item 1. Legal Proceedings		27

Item 1A. Risk Factors		27

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		27

Item 3. Defaults Upon Senior Securities		27

Item 4. (Removed and Reserved)		27

Item 5. Other Information		27

Item 6. Exhibits		28

Signatures		29

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ICON Leasing Fund Eleven, LLC
(A Delaware Limited Liability Company)
Consolidated Balance Sheets

Assets

	June 30,
	2011			December 31,
	(unaudited)			2010
Current assets:
Cash and cash equivalents	$	9,115,548		$	4,621,512
Current portion of notes receivable		5,213,028			1,520,408
Current portion of net investment in finance leases		2,130,692			4,795,901
Assets held for sale, net		674,866			16,004,231
Other current assets		274,780			1,740,901

Total current assets		17,408,914			28,682,953

Non-current assets:
Notes receivable, less current portion		13,229,153			6,691,681
Mortgage notes receivable		12,722,006			12,722,006
Net investment in finance leases, less current portion		14,023,188			14,705,170
Leased equipment at cost (less accumulated depreciation of
$34,261,434 and $29,762,549, respectively)		75,088,527			79,587,412
Investments in joint ventures		1,700,560			5,749,598
Deferred income taxes, net		1,106,113			1,026,931
Other non-current assets, net		3,266,197			9,048,190

Total non-current assets		121,135,744			129,530,988

Total Assets	$	138,544,658		$	158,213,941

Liabilities and Equity

Current liabilities:
Current portion of non-recourse long-term debt	$	27,256,797		$	14,371,257
Revolving line of credit, recourse		-			1,450,000
Derivative instruments		964,109			1,694,776
Due to Manager and affiliates		167,675			286,590
Deferred revenue, accrued expenses and other liabilities		1,495,523			2,038,100

Total current liabilities		29,884,104			19,840,723

Non-current liabilities:
Non-recourse long-term debt, less current portion		-			38,163,700

Total Liabilities		29,884,104			58,004,423

Commitments and contingencies (Note 12)

Equity:
Members' Equity:
Additional members		108,060,839			99,715,745
Manager		(2,136,439	)		(2,220,734	)
Accumulated other comprehensive loss		(774,203	)		(1,739,624	)

Total Members' Equity		105,150,197			95,755,387

Noncontrolling Interests		3,510,357			4,454,131

Total Equity		108,660,554			100,209,518

Total Liabilities and Equity	$	138,544,658		$	158,213,941

See accompanying notes to consolidated financial statements.

Table of Contents

ICON Leasing Fund Eleven, LLC
(A Delaware Limited Liability Company)
Consolidated Statements of Operations
(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenue:
Finance income	$	1,876,717		$	1,403,854		$	3,699,304		$	3,169,109
Rental income		4,328,461			9,169,223			9,307,745			18,612,659
Time charter revenue		-			2,801,002			-			5,711,479
Loss from investments in joint ventures		(21,295	)		(462,937	)		(19,463	)		(144,352	)
Loss on assets held for sale		-			(120,168	)		-			(120,168	)
Net loss on lease termination		-			(218,890	)		-			(218,890	)
Net gain on sales of leased equipment		-			-			11,411,941			-

Total revenue		6,183,883			12,572,084			24,399,527			27,009,837

Expenses:
Management fees - Manager		-			186,728			-			541,090
Administrative expense reimbursements - Manager		413,086			507,171			671,095			844,995
General and administrative		756,866			975,159			1,525,562			1,612,002
Vessel operating expense		-			3,580,958			-			6,618,058
Depreciation and amortization		2,303,690			10,250,311			4,609,887			20,722,756
Interest		593,528			1,964,220			1,287,704			4,076,807
Impairment loss		17,780			517,432			17,780			517,432
Gain on financial instruments		(129,754	)		(1,018,495	)		(284,155	)		(1,592,566	)
Loss on guaranty		-			1,355,738			-			1,355,738

Total expenses		3,955,196			18,319,222			7,827,873			34,696,312

Income (loss) before income taxes		2,228,687			(5,747,138	)		16,571,654			(7,686,475	)

Provision for income taxes		(160,897	)		(103,900	)		(159,011	)		(105,239	)

Net income (loss)		2,067,790			(5,851,038	)		16,412,643			(7,791,714	)

Less: Net income attributable to noncontrolling interests		146,904			167,773			656,875			395,118

Net income (loss) attributable to Fund Eleven	$	1,920,886		$	(6,018,811	)	$	15,755,768		$	(8,186,832	)

Net income (loss) attributable to Fund Eleven allocable to:
Additional Members	$	1,901,677		$	(5,958,623	)	$	15,598,210		$	(8,104,964	)
Manager		19,209			(60,188	)		157,558			(81,868	)

	$	1,920,886		$	(6,018,811	)	$	15,755,768		$	(8,186,832	)

Weighted average number of additional shares of
limited liability company interests outstanding		362,656			362,654			362,656			362,695

Net income (loss) attributable to Fund Eleven per weighted
average additional share of limited liability company interests outstanding	$	5.24		$	(16.43	)	$	43.01		$	(22.35	)

See accompanying notes to consolidated financial statements.

Table of Contents

ICON Leasing Fund Eleven, LLC
(A Delaware Limited Liability Company)
Consolidated Statements of Changes in Equity

	Members' Equity
	Additional
	Shares of Limited Liability								Accumulated Other			Total
	Company Interests		Additional Members			Manager			Comprehensive (Loss) Income			Members' Equity			Noncontrolling Interests			Total Equity
Balance, December 31, 2010		362,656	$	99,715,745		$	(2,220,734	)	$	(1,739,624	)	$	95,755,387		$	4,454,131		$	100,209,518

Comprehensive income:
Net income		-		13,696,533			138,349			-			13,834,882			509,971			14,344,853
Change in valuation of derivative instruments		-		-			-			317,715			317,715			-			317,715
Currency translation adjustments		-		-			-			309,859			309,859			-			309,859
Total comprehensive income		-		-			-			627,574			14,462,456			509,971			14,972,427
Cash distributions		-		(3,626,558	)		(36,632	)		-			(3,663,190	)		(1,266,075	)		(4,929,265	)

Balance, March 31, 2011 (unaudited)		362,656		109,785,720			(2,119,017	)		(1,112,050	)		106,554,653			3,698,027			110,252,680

Comprehensive income:
Net income		-		1,901,677			19,209			-			1,920,886			146,904			2,067,790
Change in valuation of derivative instruments		-		-			-			272,344			272,344			-			272,344
Currency translation adjustments		-		-			-			65,503			65,503			-			65,503
Total comprehensive income		-		-			-			337,847			2,258,733			146,904			2,405,637
Cash distributions		-		(3,626,558	)		(36,631	)		-			(3,663,189	)		(334,574	)		(3,997,763	)

Balance, June 30, 2011 (unaudited)		362,656	$	108,060,839		$	(2,136,439	)	$	(774,203	)	$	105,150,197		$	3,510,357		$	108,660,554

See accompanying notes to consolidated financial statements.

Table of Contents

ICON Leasing Fund Eleven, LLC
(A Delaware Limited Liability Company)
Consolidated Statements of Cash Flows
(unaudited)


	Six Months Ended June 30,
	2011			2010
Cash flows from operating activities:
Net income (loss)	$	16,412,643		$	(7,791,714	)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Finance income		(801,036	)		(973,539	)
Rental income paid directly to lenders by lessees		(6,052,000	)		(6,052,000	)
Income from investments in joint ventures		19,463			144,352
Net gain on sales of leased equipment		(11,411,941	)		-
Loss on assets held for sale		-			120,168
Net loss on lease termination		-			218,890
Depreciation and amortization		4,609,887			20,722,756
Impairment loss		17,780			517,432
Amortization of deferred time charter expense		57,711			466,331
Interest expense on non-recourse financing paid directly to lenders by lessees		1,088,751			1,766,499
Interest expense from amortization of debt financing costs		-			146,034
Gain on financial instruments		(284,155	)		(1,592,566	)
Loss on guaranty		-			1,355,738
Deferred tax (benefit) provision		(55,069	)		93,129
Changes in operating assets and liabilities:
Collection of finance leases		3,120,604			4,457,065
Accounts receivable		(1,695	)		8,020
Other assets, net		(852,154	)		(9,074,704	)
Payables, deferred revenue and other current liabilities		(1,048,817	)		(1,997,055	)
Due to/from Manager and affiliates		(107,516	)		(137,181	)
Distributions from joint ventures		14,786			573,503

Net cash provided by operating activities		4,727,242			2,971,158

Cash flows from investing activities:
Proceeds from sales of leased equipment		24,911,474			217,600
Repayments of notes receivable		1,443,498			7,579,899
Distributions received from joint ventures in excess of profits		425,861			2,158,828
Other assets		(9,238	)		(517	)

Net cash provided by investing activities		26,771,595			9,955,810

Cash flows from financing activities:
Repayments of non-recourse long-term debt		(16,635,200	)		(1,147,500	)
Repayments of revolving line of credit, recourse		(1,450,000	)		(2,260,000	)
Repurchase of additional shares of limited liability company interests		-			(333,216	)
Cash distributions to members		(7,326,379	)		(16,671,731	)
Distributions to noncontrolling interests		(1,600,649	)		(1,766,058	)

Net cash used in financing activities		(27,012,228	)		(22,178,505	)

Effects of exchange rates on cash and cash equivalents		7,427			11,760

Net increase (decrease) in cash and cash equivalents		4,494,036			(9,239,777	)
Cash and cash equivalents, beginning of period		4,621,512			18,615,323

Cash and cash equivalents, end of period	$	9,115,548		$	9,375,546

See accompanying notes to consolidated financial statements.

Table of Contents

ICON Leasing Fund Eleven, LLC
(A Delaware Limited Liability Company)
Consolidated Statements of Cash Flows
(unaudited)

	Six Months Ended June 30,
	2011		2010
Supplemental disclosure of cash flow information:

Cash paid during the year for interest	$	159,468	$	1,743,199

Supplemental disclosure of non-cash investing and financing activities:

Principal and interest paid on non-recourse long term debt
directly to lenders by lessees	$	6,052,000	$	6,052,000

Exchange of noncontrolling interest in a joint venture for
notes receivable	$	3,588,928	$	-

See accompanying notes to consolidated financial statements.

Table of Contents

ICON Leasing Fund Eleven, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2011

(unaudited)

(1)	Basis of Presentation

The accompanying 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 interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission for Quarterly Reports on Form 10-Q. In the opinion of ICON Capital Corp., a Delaware Corporation (the “Manager”), all adjustments considered necessary for a fair presentation have been included. These 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, 2010. The results for the interim period are not necessarily indicative of the results for the full year.

Reclassifications

Certain reclassifications have been made to the accompanying consolidated financial statements in prior periods to conform to the current presentation. Interest and other income, primarily related to notes receivable interest income, has been reclassified to finance income within the consolidated statements of operations.

Recent Accounting Pronouncements

In 2010, the LLC adopted the accounting pronouncement related to the disclosures about the credit quality of financing receivables and the allowance for credit losses. The pronouncement requires entities to provide disclosures designed to facilitate financial statements users’ evaluation of (i) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (iii) the changes and reasons for those changes in the allowances for credit losses. Disclosures must be disaggregated by portfolio segment, the level at which an entity develops and documents a systematic method for determining its allowance for credit losses and class of financing receivable. The required disclosures include, among other things, a rollforward of the allowance for credit losses as well as information about modified, impaired, non-accrual and past due loans and credit quality indicators. Disclosures that relate to activity during a reporting period are required for the LLC’s financial statements effective January 1, 2011. The adoption of these additional disclosures did not have a material effect on the LLC’s consolidated financial statements as of June 30, 2011.

In June 2011, the FASB issued ASU No 2011-05, Presentation of Comprehensive Income ("ASU 2011-05"), which revises the manner in which companies present comprehensive income in their financial statements. The new guidance removes the current option to report other comprehensive income and its components in the statement of changes in equity and instead requires presentation in one continuous statement of comprehensive income or two separate but consecutive statements. The adoption of ASU 2011-05 becomes effective for the LLC's interim and annual periods beginning January 1, 2012. The LLC does not believe the adoption of this guidance will have a material impact on its consolidated financial statements, as it only requires a change in the format of presentation.

(2)	Notes Receivable

Effective January 1, 2011, the LLC exchanged its 35% ownership interest in a joint venture for its proportionate share of notes receivable from Northern Capital Associates XIV, L.P. The aggregate principal balance of the notes was approximately $3,534,000, and the notes accrue interest at rates ranging from 9.47% to 9.90% and mature between December 15, 2011 and February 15, 2013. No gain or loss was recorded as a result of this transaction. Upon completion of the exchange, the joint venture was terminated.

Table of Contents

ICON Leasing Fund Eleven, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2011

(unaudited)

(2)	Notes Receivable - continued

Credit Quality of Notes Receivable and Allowance for Credit Losses

The Manager weighs all credit decisions on a combination of external credit ratings as well as internal credit evaluations of all potential borrowers. A potential borrower’s credit application is analyzed using those credit ratings as well as the potential borrower’s financial statements and other financial data deemed relevant.

The LLC’s notes receivable are limited in number and are spread across a wide range of industries. Accordingly, the LLC does not aggregate notes receivable into portfolio segments or classes. Due to the limited number of notes receivable, the LLC is able to estimate the allowance for credit losses based on a detailed analysis of each note receivable as opposed to using portfolio based metrics and allowance for credit losses. Notes are analyzed quarterly and categorized as either performing or nonperforming based on payment history. If a note becomes non-performing due to a borrower’s missed scheduled payments or failed financial covenants, the Manager analyzes whether a reserve should be established or the note should be restructured. Such events are specifically disclosed in the discussion of each note held. As of June 30, 2011 and December 31, 2010, the Manager determined that no allowance for credit losses was required.

Interest income recognized on notes receivable is included in finance income in the consolidated statements of operations.

(3)	Net Investment in Finance Leases

Net investment in finance leases consisted of the following:

	June 30,			December 31,
	2011			2010
Minimum rents receivable	$	15,675,138		$	18,357,633
Estimated residual values		3,220,801			4,404,224
Initial direct costs, net		149,173			211,846
Unearned income		(2,891,232	)		(3,472,632	)

Net investment in finance leases		16,153,880			19,501,071

Less: Current portion of net investment in finance leases		2,130,692			4,795,901

Net investment in finance leases, less current portion	$	14,023,188		$	14,705,170

On January 3, 2011, at the expiration of the lease and in accordance with its terms, the LLC sold telecommunications equipment to Global Crossing Telecommunications, Inc. (“Global Crossing”) for approximately $2,077,000. As a result, the LLC recorded a net gain on the sale of this leased equipment of approximately $779,000 during the first quarter of 2011.

Table of Contents

ICON Leasing Fund Eleven, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2011

(unaudited)

(4)	Leased Equipment at Cost

Leased equipment at cost consisted of the following:

	June 30,		December 31,
	2011		2010

Marine vessels	$	90,798,632	$	90,798,632
Manufacturing equipment		12,971,832		12,971,831
Telecommunications equipment		5,579,497		5,579,498

		109,349,961		109,349,961

Less: Accumulated depreciation		34,261,434		29,762,549

	$	75,088,527	$	79,587,412

Depreciation expense was $2,249,443 and $10,183,706 for the three months ended June 30, 2011 and 2010, respectively. Depreciation expense was $4,498,885 and $20,608,944 for the six months ended June 30, 2011 and 2010, respectively.

(5)	Assets Held for Sale

On February 28, 2011 and March 16, 2011, the LLC sold the container vessels, the M/V ZIM Hong Kong and the M/V ZIM Israel (collectively, the “ICON European Container II Vessels”) to unaffiliated third parties for $11,250,000 per vessel. The proceeds of each sale were used to satisfy its obligations under a secured loan agreement in the amounts of approximately $10,869,000 and $5,751,000, respectively. As a result, the LLC recorded a net gain on the sale of this leased equipment of approximately $10,633,000 during the first quarter of 2011.

During 2011, the LLC, in conjunction with ICON Leasing Fund Twelve, LLC (“Fund Twelve”), an entity also managed by the Manager, sold certain parcels of real property for a net purchase price of approximately $1,403,000, of which the LLC’s portion was approximately $407,000. We recorded a loss of approximately $18,000 as a result of these transactions.

(6)	Non-Recourse Long-Term Debt

As of June 30, 2011 and December 31, 2010, the LLC had outstanding non-recourse long-term debt obligations of $27,256,797 and $52,534,957, respectively. The outstanding balance as of June 30, 2011 has a maturity date of April 11, 2012 and an interest rate of 6.125% per year, fixed after giving effect to the respective interest rate swap agreements.

On February 28, 2011 and March 16, 2011, the LLC sold the ICON European Container II Vessels and used the proceeds to satisfy its obligations under a secured loan agreement in the amounts of approximately $10,869,000 and $5,751,000, respectively.

Table of Contents

ICON Leasing Fund Eleven, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2011

(unaudited)

(7)	Revolving Line of Credit, Recourse

As of March 31, 2011, the LLC and certain entities managed by the Manager were party to a Commercial Loan Agreement, as amended (the “Prior Loan Agreement”), with California Bank & Trust (“CB&T”). The Prior Loan Agreement was terminated effective May 10, 2011.

On May 10, 2011, the LLC entered into a Commercial Loan Agreement (the “Loan Agreement”) with CB&T. The Loan Agreement provides for a revolving line of credit of up to $5,000,000 pursuant to a senior secured revolving loan facility (the “Facility”), which is secured by all of the LLC’s assets not subject to a first priority lien, as defined in the Loan Agreement. 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 loans and lease agreements in which the LLC has a beneficial interest.

The Facility expires on March 31, 2013 and the LLC may request a one year extension to the revolving line of credit within 390 days of the then-current expiration date, but CB&T has no obligation to extend. The interest rate for general advances under the Facility is CB&T’s prime rate and the interest rate on up to five separate non-prime rate advances that are permitted to be made under the Facility is the 90-day rate at which U.S. dollar deposits can be acquired by CB&T in the London Interbank Eurocurrency Market plus 2.5% per year, provided that neither interest rate is permitted to be less than 4.0% per year. In addition, the LLC is obligated to pay a commitment fee based on an annual rate of 0.50% on unused commitments under the Facility. At June 30, 2011, there were no obligations outstanding under the Loan Agreement.

Pursuant to the Loan Agreement, the LLC is required to comply with certain covenants. At June 30, 2011, the LLC was in compliance with all covenants under the Loan Agreement.

(8)	Transactions with Related Parties

During the three and six months ended June 30, 2011, the Manager suspended collection of management fees.

Fees and other expenses paid or accrued by the LLC to the Manager or its affiliates were as follows:

			Three Months Ended June 30,				Six Months Ended June 30,
Entity	Capacity	Description	2011		2010		2011		2010
ICON Capital Corp.	Manager	Management fees (1) (2)	$	-	$	186,728	$	-	$	541,090
ICON Capital Corp.	Manager	Administrative expense
		reimbursements (1)		413,086		507,171		671,095		844,995
			$	413,086	$	693,899	$	671,095	$	1,386,085

(1) Charged directly to operations.
(2) The Manager suspended the collection of management fees in the amount of $333,599 and $646,575 during the three and six months ended June 30, 2011, respectively. The Manager suspended the collection of a portion of its management fees in the amount of $308,328 and $492,689 during the three and six months ended June 30, 2010, respectively.

At June 30, 2011, the LLC had a payable of $167,675 due to the Manager and its affiliates primarily relating to administrative expense reimbursements.

Table of Contents

ICON Leasing Fund Eleven, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2011

(unaudited)

(9)	Derivative Financial Instruments

The LLC may enter into derivative transactions for purposes of hedging specific financial exposures, including movements in foreign currency exchange rates and changes in interest rates on its non-recourse long-term debt. The LLC enters into these instruments only for hedging underlying exposures. The LLC does not hold or issue derivative financial instruments for purposes other than hedging, except for warrants, which are not hedges. Certain derivatives may not meet the established criteria to be designated as qualifying accounting hedges, even though the LLC believes that these are effective economic hedges.

The LLC recognizes all derivatives as either assets or liabilities on the consolidated balance sheets and measure those instruments at fair value. The LLC recognizes the fair value of all derivatives as either assets or liabilities on the consolidated balance sheets and changes in the fair value of such instruments are recognized immediately in earnings unless certain accounting criteria established by the accounting pronouncements are met. These criteria demonstrate that the derivative is expected to be highly effective at offsetting changes in the fair value or expected cash flows of the underlying exposure at both the inception of the hedging relationship and on an ongoing basis and include an evaluation of the counterparty risk and the impact, if any, on the effectiveness of the derivative. If these criteria are met, which the LLC must document and assess at inception and on an ongoing basis, the LLC recognizes the changes in fair value of such instruments in accumulated other comprehensive income or loss (“AOCI”), a component of equity on the consolidated balance sheets. Changes in the fair value of the ineffective portion of all derivatives are recognized immediately in earnings.

Interest Rate Risk

The LLC’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements on its variable non-recourse debt. The LLC’s hedging strategy to accomplish this objective is to match the projected future cash flows with the underlying debt service. Interest rate swaps designated as cash flow hedges involve the receipt of floating-rate interest payments from a counterparty in exchange for the LLC making fixed interest rate payments over the life of the agreements without exchange of the underlying notional amount.

As of June 30, 2011, the LLC had two floating-to-fixed interest rate swaps relating to ICON Senang, LLC and ICON Sebarok, LLC designated and qualifying as cash flow hedges with an aggregate notional amount of approximately $27,256,797. These interest rate swaps have a maturity date of April 11, 2012.

For these derivatives, the LLC records the gain or loss from the effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges in AOCI and such gain or loss is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings and within the same line item on the statements of operations as the impact of the hedged transaction. During the three and six months ended June 30, 2011, the LLC recorded $133,420 and $290,561 of hedge ineffectiveness in earnings, respectively. For the six months ended June 30, 2011, the accumulated unrealized loss recorded to AOCI related to the change in fair value of these interest rate swaps was approximately $842,000.

During the twelve months ending June 30, 2012, the LLC estimates that approximately $820,225 will be transferred from AOCI to interest expense.

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ICON Leasing Fund Eleven, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2011

(unaudited)

(9)	Derivative Financial Instruments - continued

Non-designated Derivatives

The LLC holds warrants that are held for purposes other than hedging. All changes in the fair value of the warrants are recorded directly in earnings.

The table below presents the fair value of the LLC’s derivative financial instruments as well as their classification within the LLC’s consolidated balance sheets as of June 30, 2011 and December 31, 2010:

		Asset Derivatives					Liability Derivatives
		June 30,		December 31,			June 30,		December 31,
		2011		2010			2011		2010
	Balance Sheet Location	Fair Value		Fair Value		Balance Sheet Location	Fair Value		Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps		$	-	$	-	Derivative instruments	$	964,109	$	1,694,776

Derivatives not designated as hedging instruments:
Warrants	Other non-current assets, net	$	64,263	$	70,669		$	-	$	-

The table below presents the effect of the LLC’s derivative financial instruments designated as cash flow hedging instruments on the consolidated statements of operations for the three and six months ended June 30, 2011:

Three Months Ended June 30, 2011

Derivatives	Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amounts Excluded from Effectiveness Testing)	Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amounts Excluded from Effectiveness Testing)

Interest rate swaps	$	(40,584	)	Interest expense	$	(312,928	)	Gain on financial instruments	$	133,420

Six Months Ended June 30, 2011

Derivatives	Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amounts Excluded from Effectiveness Testing)	Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amounts Excluded from Effectiveness Testing)

Interest rate swaps	$	(69,670	)	Interest expense	$	(659,729	)	Gain on financial instruments	$	290,561

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ICON Leasing Fund Eleven, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2011

(unaudited)

(9)	Derivative Financial Instruments - continued

Three Months Ended June 30, 2010

Derivatives	Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amounts Excluded from Effectiveness Testing)	Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amounts Excluded from Effectiveness Testing)

Interest rate swaps	$	(705,885	)	Interest expense	$	(780,878	)	Gain on financial instruments	$	1,020,827

Six Months Ended June 30, 2010

Derivatives	Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amounts Excluded from Effectiveness Testing)	Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amounts Excluded from Effectiveness Testing)

Interest rate swaps	$	(1,250,601	)	Interest expense	$	(1,611,783	)	Gain on financial instruments	$	1,596,687

The LLC’s derivative financial instruments not designated as hedging instruments generated a loss on financial instruments on the statements of operations for the three and six months ended June 30, 2011 of $3,666 and $6,406, respectively. The LLC’s derivative financial instruments not designated as hedging instruments generated a gain on financial instruments on the statements of operations for the three and six months ended June 30, 2010 of $1,018,495 and $1,592,566, respectively. The loss recorded for the three and six months ended June 30, 2011 related to warrants. The gain (loss) recorded for the three months ended June 30, 2010 was comprised of a gain of $1,020,827 relating to interest rate swap contracts and a loss of $2,332 relating to warrants. The gain (loss) recorded for the six months ended June 30, 2010 was comprised of a gain of $1,596,687 relating to interest rate swap contracts and a loss of $4,121 relating to warrants.

Derivative Risks

The LLC manages exposure to possible defaults on derivative financial instruments by monitoring the concentration of risk that the LLC has with any individual bank and through the use of minimum credit quality standards for all counterparties. The LLC does not require collateral or other security in relation to derivative financial instruments. Since it is the LLC’s policy to enter into derivative contracts with banks of internationally acknowledged standing only, the LLC considers the counterparty risk to be remote.

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ICON Leasing Fund Eleven, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2011

(unaudited)

(9)	Derivative Financial Instruments – continued

As of June 30, 2011, the fair value of the derivatives in a liability position was $964,109. In the event that the LLC would be required to settle its obligations under the agreements as of June 30, 2011, the termination value was $975,343.

(10)	Accumulated Other Comprehensive Loss

AOCI includes accumulated losses on derivative financial instruments and a (gain) on currency translation adjustments of $841,531 and ($67,328), respectively, at June 30, 2011 and accumulated losses on derivative financial instruments and currency translation adjustments of $1,431,590 and $308,034, respectively, at December 31, 2010.

Total comprehensive income for the three and six months ended June 30, 2011 was $2,405,637 and $17,378,064, respectively. Total comprehensive loss for the three and six months ended June 30, 2010 was $6,586,155 and $8,814,414, respectively.

(11)	Fair Value Measurements

Assets and liabilities carried at fair value are 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 cannot be corroborated by market data.

Financial Assets and Liabilities Measured on a Recurring Basis

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 June 30, 2011:

	Level 1		Level 2		Level 3		Total
Assets:

Warrants	$	-	$	-	$	64,263	$	64,263

Liabilities:

Derivative liabilities	$	-	$	964,109	$	-	$	964,109

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ICON Leasing Fund Eleven, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2011

(unaudited)

(11)	Fair Value Measurements - continued

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 December 31, 2010:

	Level 1		Level 2		Level 3		Total
Assets:

Warrants	$	-	$	-	$	70,669	$	70,669

Liabilities:

Derivative liabilities	$	-	$	1,694,776	$	-	$	1,694,776

The LLC’s derivative contracts, including interest rate swaps and warrants, are valued using models based on readily observable or unobservable market parameters for all substantial terms of the LLC’s derivative contracts and are classified within Level 2 or Level 3. As permitted by the accounting pronouncements, the LLC uses market prices and pricing models for fair value measurements of its derivative instruments. The fair value of the warrants was recorded in other non-current assets and the fair value of the derivative liabilities was recorded in derivative instruments within the consolidated balance sheets.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The LLC is required, on a nonrecurring basis, to adjust the carrying value or provide valuation allowances for certain assets and liabilities using fair value measurements. The LLC’s non-financial assets, such as leased equipment at cost, are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized. The following table summarizes the valuation of the LLC’s material non-financial assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2011:

		June 30, 2011				Level 1				Level 2				Level 3				Total Impairment Loss
Assets held for sale, net		$	674,866			$	-			$	-			$	674,866			$	17,780

The following table summarizes the valuation of the LLC’s material non-financial assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2010:

		June 30, 2010				Level 1				Level 2				Level 3				Total Impairment Loss
Assets held for sale, net		$	1,387,006			$	-			$	1,387,006			$	-			$	517,432

The LLC’s non-financial assets are valued using inputs that are generally unobservable and cannot be corroborated by market data and are classified within Level 3. As permitted by the accounting pronouncements, the LLC uses projected cash flows, market prices and prices determined based on arm’s length negotiated transactions with a third party for fair value measurements of its non-financial assets.

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ICON Leasing Fund Eleven, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

June 30, 2011

(unaudited)

(11)	Fair Value Measurements - continued

Fair value information with respect to the LLC’s leased assets and liabilities is not separately provided since (i) the current accounting pronouncements do not require fair value disclosures of lease arrangements and (ii) the carrying value of financial assets, other than lease-related investments, approximate fair value due to their short-term maturities and variable interest rates. The carrying value of the LLC’s non-recourse debt approximates its fair value due to its floating interest rates. The estimated fair value of the LLC’s notes receivable and mortgage note receivable was based on the discounted value of future cash flows expected to be received from the loans based on terms consistent with the range of the LLC’s internal pricing strategies for transactions of this type.

	June 30, 2011
	Carrying Amount		Fair Value

Mortgage notes receivable and interest	$	15,161,184	$	15,214,644
Notes receivable	$	18,442,181	$	18,502,440

(12)	Commitments and Contingencies

At the time the LLC acquires or divests of its interest in an equipment lease or other financing transaction, the LLC may, under very limited circumstances, agree to indemnify the seller or buyer for specific contingent liabilities. The Manager believes that any liability of the LLC that may arise as a result of any such indemnification obligations will not have a material adverse effect on the consolidated financial condition of the LLC taken as a whole.

The LLC has entered into remarketing agreements with various third parties. In connection with these agreements, residual proceeds received in excess of specific amounts will be shared with these third parties based on specific formulas. The obligation related to these agreements is recorded at fair value.

From November 2010 through March 2011, the LLC, through its wholly-owned subsidiaries, sold four container vessels previously on bareboat charter to ZIM Integrated Shipping Services Ltd. (“ZIM”) to unaffiliated third parties. During June 2011, the LLC received notices from ZIM claiming it was allegedly owed various amounts for unpaid seller’s credits in the aggregate amount of approximately $7,300,000. The Manager believes any obligation to repay the seller's credits was extinguished when ZIM defaulted by failing to fulfill certain of its obligations under the bareboat charters. On August 8, 2011, the Manager agreed to a three party arbitration panel to hear such claims but to date ZIM has not filed any arbitration proceedings. The Manager believes that ZIM’s claims are frivolous and intends to vigorously contest them in the event ZIM files an arbitration proceeding. At this time the LLC is unable to predict the outcome of any threatened arbitration or loss therefrom, if any.

(13)	Subsequent Event

On July 1, 2011, at the expiration of the lease and in accordance with its terms, the LLC sold certain telecommunications equipment to Global Crossing for the aggregate purchase price of approximately $1,084,000.

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

The following is a discussion of our current financial position and results of operations. This discussion should be read together with our unaudited 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, 2010. This discussion should also be read in conjunction with the disclosures below regarding “Forward-Looking Statements” and the “Risk Factors” set forth in Item 1A of Part II of this Quarterly Report on Form 10-Q.

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 and finance program in which the capital our members invested was pooled together to make investments, pay fees and establish a small reserve. We primarily acquire equipment subject to lease, purchase equipment and lease it to third parties, provide equipment and other financing and, to a lesser degree, acquire ownership rights to items of leased equipment at lease expiration.

Our Manager manages and controls our business affairs, including, but not limited to, our equipment leases and other financing transactions, under the terms of our amended and restated limited liability company agreement.

We are currently in our operating period. During our operating period, additional investments will continue to be made with the cash generated from our initial investments and our additional investments to the extent that the cash is not used for expenses, reserves and distributions to members. The investment in additional equipment leases and other financing transactions in this manner is called “reinvestment.” We anticipate investing in equipment leases, other financing transactions and residual ownership rights in leased equipment from time to time until April 2012, unless that date is extended, at our Manager’s sole discretion, for up to an additional three years.

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Recent Significant Transactions

We engaged in the following significant transactions since December 31, 2010:

Dispositions

On January 3, 2011, at the expiration of the lease and in accordance with its terms, we sold telecommunications equipment to Global Crossing for approximately $2,077,000. As a result, we recorded a net gain on the sale of this leased equipment of approximately $779,000 during the first quarter of 2011.

On February 28, 2011 and March 16, 2011, we sold the ICON European Container II Vessels to unaffiliated third parties for $11,250,000 per vessel. The proceeds of each sale were used to satisfy its obligations under a secured loan in the amounts of approximately $10,869,000 and $5,751,000, respectively. As a result, we recorded a net gain on the sale of this leased equipment of approximately $10,633,000 during the first quarter of 2011.

During 2011, we, in conjunction with Fund Twelve, an entity also managed by the Manager, sold certain parcels of real property for a net purchase price of approximately $1,403,000, of which our portion was approximately $407,000. We recorded a loss of approximately $18,000 as a result of these transactions.

Notes Receivable

Effective January 1, 2011, we exchanged our 35% ownership interest in a joint venture for its proportionate share of notes receivable from Northern Capital Associates XIV, L.P. The aggregate principal balance of the notes was approximately $3,534,000, and the notes accrue interest at rates ranging from 9.47% to 9.90% and mature between December 15, 2011 and February 15, 2013. No gain or loss was recorded as a result of this transaction. Upon completion of the exchange, the joint venture was terminated.

Subsequent Event

On July 1, 2011, at the expiration of the lease and in accordance with its terms, we sold certain telecommunications equipment to Global Crossing for the aggregate purchase price of approximately $1,084,000.

Recent Accounting Pronouncements

There are no recent accounting pronouncements that are expected to have a significant impact on our consolidated financial statements as of June 30, 2011. See Note 1 to our consolidated financial statements for a discussion of recent accounting pronouncements.

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Results of Operations for the Three Months Ended June 30, 2011 (the “2011 Quarter”) and 2010 (the “2010 Quarter”)

Financing Transactions

We finance assets in diverse industries. The following tables set forth the types of assets financed by us that secure the investments in our portfolio as of June 30, 2011 and December 31, 2010:

	June 30, 2011				December 31, 2010

			Percentage of Total				Percentage of Total
Asset Type	Net Carrying Value		Net Carrying Value		Net Carrying Value		Net Carrying Value
Lumber processing equipment	$	23,639,470		50%	$	25,303,677		63%
Marine - Container Vessels		16,299,259		34%		8,212,089		20%
Auto parts manufacturing equipment		4,820,647		10%		4,418,395		11%
Point of sale equipment		2,142,922		5%		-		-
Telecommunications equipment		415,769		1%		2,501,005		6%
	$	47,318,067		100%	$	40,435,166		100%

The net carrying value of our financing transactions include the balances of our notes receivable and our net investment in finance leases, which are included in our consolidated balance sheets.

During the 2011 Quarter and the 2010 Quarter, certain customers generated significant portions (defined as 10% or more) of our total finance income as follows:


		Percentage of Total Finance Income
Customer	Asset Type	2011 Quarter		2010 Quarter
Teal Jones Group	Lumber processing equipment		52%		70%
ZIM Integrated Shipping Services Ltd.	Marine - Container Vessels		33%		-
W Forge Holdings	Forging equipment		-		14%
Global Crossing Telecommunications, Inc.	Telecommunications equipment		-		16%
			85%		100%

Interest income from our notes receivable and finance income from our net investment in finance leases are included in finance income in our consolidated statements of operations.

The foregoing percentages are only as of a stated period and are not expected to be comparable in future periods. Further, these percentages are only representative of the percentage of the carrying value of such assets or finance income as of a stated period, as applicable, and as such are not indicative of the concentration of any asset type or customer by the amount of equity invested or our investment portfolio as a whole.

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Operating Lease Transactions

We have also financed a diversified portfolio of equipment pursuant to operating leases. The equipment has been leased to customers in various industries. The following tables set forth the types of equipment subject to the operating leases in our portfolio as of June 30, 2011 and December 31, 2010:

	June 30, 2011				December 31, 2010

			Percentage of Total				Percentage of Total
Asset Type	Net Carrying Value		Net Carrying Value		Net Carrying Value		Net Carrying Value
Marine - Crude oil tanker	$	65,816,985		88%	$	68,772,998		87%
Plastic processing and printing equipment		8,188,145		11%		8,984,689		11%
Telecommunications equipment		1,083,397		1%		1,829,725		2%
	$	75,088,527		100%	$	79,587,412		100%

During the 2011 Quarter and the 2010 Quarter, certain customers generated significant portions (defined as 10% or more) of our total rental income as follows:


		Percentage of Total Rental Income
Customer	Asset Type	2011 Quarter		2010 Quarter
Teekay Corporation	Marine - Crude oil tanker		72%		26%
Pliant Corporation	Plastic processing and printing equipment		17%		6%
Global Crossing Telecommunications, Inc.	Telecommunications equipment		11%		4%
ZIM Integrated Shipping Services Ltd.	Marine - Container Vessels		-		39%
Top Tankers, Inc.	Marine - Product tankers		-		23%
			100%		98%

The foregoing percentages are only as of a stated period and are not expected to be comparable in future periods. Further, these percentages are only representative of the percentage of the carrying value of such assets or rental income as of a stated period, as applicable, and as such are not indicative of the concentration of any asset type or customer by the amount of equity invested or our investment portfolio as a whole.

Revenue for the 2011 Quarter and the 2010 Quarter is summarized as follows:

	Three Months Ended June 30,
	2011			2010			Change
Finance income	$	1,876,717		$	1,403,854		$	472,863
Rental income		4,328,461			9,169,223			(4,840,762	)
Time charter revenue		-			2,801,002			(2,801,002	)
Loss from investments in joint ventures		(21,295	)		(462,937	)		441,642
Loss on assets held for sale		-			(120,168	)		120,168
Net loss on lease termination		-			(218,890	)		218,890

Total revenue	$	6,183,883		$	12,572,084		$	(6,388,201	)

Total revenue for the 2011 Quarter decreased $6,388,201, or 50.8%, as compared to the 2010 Quarter. The decrease in total revenue was primarily due to decreases in rental income and time charter revenue as a result of the sale of certain vessels during 2010 and 2011.

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Expenses for the 2011 Quarter and the 2010 Quarter are summarized as follows:

	Three Months Ended June 30,
	2011			2010			Change
Management fees - Manager	$	-		$	186,728		$	(186,728	)
Administrative expense reimbursements - Manager		413,086			507,171			(94,085	)
General and administrative		756,866			975,159			(218,293	)
Vessel operating expense		-			3,580,958			(3,580,958	)
Depreciation and amortization		2,303,690			10,250,311			(7,946,621	)
Interest		593,528			1,964,220			(1,370,692	)
Impairment loss		17,780			517,432			(499,652	)
Gain on financial instruments		(129,754	)		(1,018,495	)		888,741
Loss on guaranty		-			1,355,738			(1,355,738	)

Total expenses	$	3,955,196		$	18,319,222		$	(14,364,026	)

Total expenses for the 2011 Quarter decreased $14,364,026, or 78.4%, as compared to the 2010 Quarter. The decrease in total expenses was primarily due to a decrease in (i) depreciation and amortization expense, (ii) vessel operating expense and (iii) interest expense, as a result of the sale of certain vessels during 2010 and 2011. The decrease in total expenses was also due to the loss on guaranty recorded in the 2010 Quarter.

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 2011 Quarter, the provision for income taxes was comprised of a provision of $198,784 in current taxes and a benefit of $37,887 in deferred taxes.

Noncontrolling Interests

Net income attributable to noncontrolling interests for the 2011 Quarter is consistent with the 2010 Quarter.

Net Income (Loss) Attributable to Fund Eleven

As a result of the foregoing factors, net income (loss) attributable to us for the 2011 Quarter and the 2010 Quarter was $1,920,886 and ($6,018,811), respectively. Net income (loss) attributable to us per weighted average additional share of limited liability company interests outstanding (“Share”) for the 2011 Quarter and the 2010 Quarter was $5.24 and ($16.43), respectively.

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Results of Operations for the Six Months Ended June 30, 2011 (the “2011 Period”) and 2010 (the “2010 Period”)

Financing Transactions

During the 2011 Period and the 2010 Period, certain customers generated significant portions (defined as 10% or more) of our total finance income as follows:


		Percentage of Total Finance Income
Customer	Asset Type	2011 Period		2010 Period
Teal Jones Group	Lumber processing equipment		52%		65%
ZIM Integrated Shipping Services Ltd.	Marine - Container Vessels		31%		-
Heuliez S.A	Auto parts manufacturing equipment		10%		-
W Forge Holdings	Forging equipment		-		18%
Global Crossing Telecommunications, Inc.	Telecommunications equipment		-		17%
			93%		100%

Interest income from our notes receivable and finance income from our net investment in finance leases are included in finance income in our consolidated statements of operations.

The foregoing percentages are only as of a stated period and are not expected to be comparable in future periods. Further, these percentages are only representative of the percentage of finance income as of a stated period, as applicable, and as such are not indicative of the concentration of any asset type or customer by the amount of equity invested or our investment portfolio as a whole.

Operating Lease Transactions

During the 2011 Period and the 2010 Period, certain customers generated significant portions (defined as 10% or more) of our total rental income as follows:


		Percentage of Total Rental Income
Customer	Asset Type	2011 Period		2010 Period
Teekay Corporation	Marine - Crude oil tanker		67%		26%
Pliant Corporation	Plastic processing and printing equipment		16%		6%
Global Crossing Telecommunications, Inc.	Telecommunications equipment		10%		4%
ZIM Integrated Shipping Services Ltd.	Marine - Container Vessels		7%		39%
Top Tankers, Inc.	Marine - Product tankers		-		23%
			100%		98%

The foregoing percentages are only as of a stated period and are not expected to be comparable in future periods. Further, these percentages are only representative of the percentage of rental income as of a stated period, as applicable, and as such are not indicative of the concentration of any asset type or customer by the amount of equity invested or our investment portfolio as a whole.

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Revenue for the 2011 Period and the 2010 Period is summarized as follows:

	Six Months Ended June 30,
	2011			2010			Change
Finance income	$	3,699,304		$	3,169,109		$	530,195
Rental income		9,307,745			18,612,659			(9,304,914	)
Time charter revenue		-			5,711,479			(5,711,479	)
Loss from investments in joint ventures		(19,463	)		(144,352	)		124,889
Loss on assets held for sale		-			(120,168	)		120,168
Net loss on lease termination		-			(218,890	)		218,890
Net gain on sales of leased equipment		11,411,941			-			11,411,941

Total revenue	$	24,399,527		$	27,009,837		$	(2,610,310	)

Total revenue for the 2011 Period decreased $2,610,310, or 9.7%, as compared to the 2010 Period. The decrease in total revenue was primarily due to decreases in rental income and time charter revenue as a result of the sale of certain vessels during 2010 and 2011, which was partially offset by the net gain on sales of leased equipment from the sale of the ICON European Container II Vessels during the 2011 Period.

Expenses for the 2011 Period and the 2010 Period are summarized as follows:

	Six Months Ended June 30,
	2011			2010			Change
Management fees - Manager	$	-		$	541,090		$	(541,090	)
Administrative expense reimbursements - Manager		671,095			844,995			(173,900	)
General and administrative		1,525,562			1,612,002			(86,440	)
Vessel operating expense		-			6,618,058			(6,618,058	)
Depreciation and amortization		4,609,887			20,722,756			(16,112,869	)
Interest		1,287,704			4,076,807			(2,789,103	)
Impairment loss		17,780			517,432			(499,652	)
Gain on financial instruments		(284,155	)		(1,592,566	)		1,308,411
Loss on guaranty		-			1,355,738			(1,355,738	)

Total expenses	$	7,827,873		$	34,696,312		$	(26,868,439	)

Total expenses for the 2011 Period decreased $26,868,439, or 77.4%, as compared to the 2010 Period. The decrease in total expenses was primarily due to a decrease in (i) depreciation and amortization expense, (ii) vessel operating expense and (iii) interest expense, as a result of the sale of certain vessels during 2010 and the 2011 Period. The decrease in total expenses was also due to the loss on guaranty recorded in the 2010 Period.

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 2011 Period, the provision for income taxes was comprised of a provision of $214,080 in current taxes and a benefit of $55,069 in deferred taxes.

Noncontrolling Interests

Net income attributable to noncontrolling interests for the 2011 Period increased $261,757 as compared to the 2010 Period due to the net gain recorded on the sale of certain assets of a joint venture during the 2011 Period.

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Net Income (Loss) Attributable to Fund Eleven

As a result of the foregoing factors, net income (loss) attributable to us for the 2011 Period and the 2010 Period was $15,755,768 and ($8,186,832), respectively. Net income (loss) attributable to us per weighted average additional Share for the 2011 Period and the 2010 Period was $43.01 and ($22.35), respectively.

Financial Condition

This section discusses the major balance sheet variances at June 30, 2011 compared to December 31, 2010.

Total Assets

Total assets decreased $19,669,283, from $158,213,941 at December 31, 2010 to $138,544,658 at June 30, 2011. The decrease was primarily due to the sale of the ICON European Container II Vessels. The resulting proceeds were used to satisfy our obligations related to our non-recourse debt during the 2011 Period.

Current Assets

Current assets decreased $11,274,039, from $28,682,953 at December 31, 2010 to $17,408,914 at June 30, 2011. The decrease was primarily due to the sale of the ICON European Container II Vessels. The resulting proceeds were used to satisfy our obligations related to our non-recourse debt during the 2011 Period.

Total Liabilities

Total liabilities decreased $28,120,319, from $58,004,423 at December 31, 2010 to $29,884,104 at June 30, 2011. The decrease was primarily due to satisfying our obligations in connection with the sale of the ICON European Container II Vessels and the scheduled repayments of our non-recourse debt during the 2011 Period.

Current Liabilities

Current liabilities increased $10,043,381, from $19,840,723 at December 31, 2010 to $29,884,104 at June 30, 2011. The increase was primarily due to scheduled repayments of our non-recourse debt maturing within the next twelve months which was previously classified as non-recourse long-term debt.

Equity

Equity increased $8,451,036, from $100,209,518 at December 31, 2010 to $108,660,554 at June 30, 2011. The increase was primarily due to the net income recorded during the 2011 Period, offset by distributions to our members and noncontrolling interests.

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Liquidity and Capital Resources

Summary

At June 30, 2011 and December 31, 2010, we had cash and cash equivalents of $9,115,548 and $4,621,512. During our operating period, our main source of cash has been from rental and finance lease payments and our main use of cash has been in (i) investments in leasing and other financing transactions, (ii) distributions to our members and noncontrolling interests and (iii) repayment of our non-recourse long-term debt. Our liquidity will vary in the future, increasing to the extent cash flows from investments and proceeds from the sale of our investments exceed expenses and decreasing as we enter into new investments, pay distributions to our members and to the extent that expenses exceed cash flows from operations and the proceeds from the sale of our investments.

We currently have adequate cash balances and generate a sufficient amount of cash flow from operations to meet our short-term working capital requirements. We expect to generate sufficient cash flows from operations to sustain our working capital requirements in the foreseeable future. In the event that our working capital is not adequate to fund our short-term liquidity needs, we could borrow against our Facility, which replaced the loan facility provided under the Prior Loan Agreement (the “Prior Facility”) which was terminated on May 10, 2011. For additional information, see Note 7 to our consolidated financial statements.

We anticipate that our liquidity requirements for the remaining life of the fund will be financed by the expected results of our operations, as well as cash received from our investments at maturity and if required, borrowings under our Facility.

We anticipate being able to meet our liquidity requirements into the foreseeable future. However, our ability to generate cash in the future is subject to general economic, financial, competitive, regulatory and other factors that affect us and our lessees’ and borrowers’ businesses that are beyond our control.

Pursuant to the terms of our offering, we established a cash reserve in the amount of 0.5% of the gross offering proceeds. As of June 30, 2011, the cash reserve was $1,825,993.

Cash Flows

Operating Activities

Cash provided by operating activities increased $1,756,084, from $2,971,158 in the 2010 Period to $4,727,242 in the 2011 Period. Net cash provided by operating activities during the 2011 Period increased as a result of the increase in net income recorded during the 2011 Period.

Investing Activities

Cash provided by investing activities increased $16,815,785, from $9,955,810 in the 2010 Period to $26,771,595 in the 2011 Period. This increase was primarily due to the proceeds received from sales of leased equipment relating to the ICON European Container II Vessels and certain telecommunications equipment in the 2011 Period.

Financing Activities

Cash used in financing activities increased $4,833,723, from $22,178,505 in the 2010 Period to $27,012,228 in the 2011 Period. This increase was primarily due to satisfying our obligations related to our non-recourse long-term debt in connection with the sale of the ICON European Container II Vessels, which was partially offset by a decrease in cash distributions to our members.

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Financings and Borrowings

Non-Recourse Long-Term Debt

We had non-recourse long-term debt obligations at June 30, 2011 of $27,256,797. Most of our non-recourse long-term debt obligations consist of notes payable in which the lender has a security interest in the equipment and an assignment of the rental payments under the lease, in which case the lender is being paid directly by the lessee. In other cases, we receive the rental payments and pay the lender. If the lessee were 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.

Distributions

We, at our Manager’s discretion, pay monthly distributions to our members and noncontrolling interests starting with the first month after each member’s admission and the commencement of our joint venture operations, respectively, and we expect to continue to pay such distributions until the end of our operating period. We paid distributions to our Manager, additional members and noncontrolling interests of $73,263, $7,253,116 and $1,600,649, respectively, for the 2011 Period.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At June 30, 2011, we had non-recourse debt obligations. The lender has a security interest in the majority of the equipment collateralizing each non-recourse long-term debt instrument and an assignment of the rental payments under the lease associated with the equipment. In such cases, the lender is being paid directly by the lessee. If the lessee defaults on the lease, the equipment would be returned to the lender in extinguishment of the non-recourse debt. At June 30, 2011, our outstanding non-recourse long-term indebtedness, inclusive of certain accrued interest, was $27,256,797. We are a party to the Facility, which replaced the facility provided under the Prior Loan Agreement, and had no borrowings under the Facility at June 30, 2011.

We have entered into remarketing agreements with certain third parties. In connection with these agreements, residual proceeds received in excess of specific amounts will be shared with these third parties based on specific formulas. The obligation related to these agreements is recorded at fair value.

From November 2010 through March 2011, we, through our wholly-owned subsidiaries, sold four container vessels previously on bareboat charter to ZIM to unaffiliated third parties. During June 2011, we received notices from ZIM claiming it was allegedly owed various amounts for unpaid seller’s credits in the aggregate amount of approximately $7,300,000. The Manager believes any obligation to repay the seller's credits was extinguished when ZIM defaulted by failing to fulfill certain of its obligations under the bareboat charters. On August 8, 2011, the Manager agreed to a three party arbitration panel to hear such claims but to date ZIM has not filed any arbitration proceedings. The Manager believes that ZIM’s claims are frivolous and intends to vigorously contest them in the event ZIM files an arbitration proceeding. At this time we are unable to predict the outcome of any threatened arbitration or loss therefrom, if any.

Off-Balance Sheet Transactions

None.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There are no material changes to the disclosures related to this item since the filing of our Annual Report on Form 10-K for the year ended December 31, 2010.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

In connection with the preparation of this Quarterly Report on Form 10-Q for the six months ended June 30, 2011, 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 the Principal Accounting and 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, as amended. Based on the foregoing evaluation, the Co-Chief Executive Officers and the Principal Accounting and 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 the three months ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of conducting our business, we may be subject to certain claims, suits and complaints filed against us. In our Manager’s opinion, the outcome of such matters, if any, will not have a material impact on our consolidated financial position, cash flows or results of operations. We are not aware of any material legal proceedings that are currently pending 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, 2010.

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

We did not sell or repurchase any Shares during the three months ended June 30, 2011.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. (Removed and Reserved)

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

3.1	Certificate of Formation of Registrant (Incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Registration Statement on Form S-1 filed with the SEC on February 15, 2005 (File No. 333-121790)).

4.1	Amended and Restated Limited Liability Company Agreement of Registrant (Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form S-1 filed with the SEC on June 29, 2006 (File No. 333-133730)).

4.2	Amendment No. 1 to the Amended and Restated Limited Liability Company Agreement of Registrant (Incorporated by reference to Exhibit 4.3 to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006, filed August 23, 2006).

10.1	Commercial Loan Agreement, dated as of August 31, 2005, by and among 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 August 31, 2005).

10.2	Loan Modification Agreement, dated as of December 26, 2006, 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 26, 2006).

10.3	Loan Modification Agreement, dated as of June 20, 2007, 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 for the quarterly period ended September 30, 2009, filed November 16, 2009).

10.4	Third 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 for the quarterly period ended March 31, 2008, filed June 6, 2008).

10.5	Fourth Loan Modification Agreement, dated as of August 12, 2009, 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, ICON Leasing Fund Twelve, LLC and ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P. (Incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, filed August 14, 2009).

10.6	Termination of Commercial Loan Agreement, by and among California Bank & Trust and ICON Income Fund Eight B L.P., ICON Income Fund Nine, LLC, ICON Income Fund Ten, LLC, ICON Leasing Fund Eleven, LLC, ICON Leasing Fund Twelve, LLC and ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P., dated as of May 10, 2011 (Incorporated by reference to Exhibit 10.6 to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011, filed May 16, 2011).

10.7	Commercial Loan Agreement, by and between California Bank & Trust and ICON Leasing Fund Eleven, LLC, dated as of May 10, 2011 (Incorporated by reference to Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011, filed May 16, 2011).

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 Principal Accounting and 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 Principal Accounting and Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*	XBRL Instance Document.

101.SCH*	XBRL Taxonomy Extension Schema Document.

101.CAL*	Taxonomy Extension Calculation Linkbase Document.

101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

*	XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ICON Leasing Fund Eleven, LLC

(Registrant)

By: ICON Capital Corp.

(Manager of the Registrant)

August 11, 2011

By: /s/ Michael A. Reisner

Michael A. Reisner

Co-Chief Executive Officer and Co-President

(Co-Principal Executive Officer)

By: /s/ Mark Gatto

Mark Gatto

Co-Chief Executive Officer and Co-President

(Co-Principal Executive Officer)

By: /s/ Keith S. Franz

Keith S. Franz

Senior Vice President - Finance

(Principal Accounting and Financial Officer)

Attached files

ICON LEASING FUND ELEVEN, LLC Reports

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