LEASE EQUITY APPRECIATION FUND I LP - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - LEASE EQUITY APPRECIATION FUND I LP	Financial_Report.xls
EX-31.2 - EXHIBIT 31.2 - LEASE EQUITY APPRECIATION FUND I LP	ex31_2.htm
EX-32.1 - EXHIBIT 32.1 - LEASE EQUITY APPRECIATION FUND I LP	ex32_1.htm
EX-32.2 - EXHIBIT 32.2 - LEASE EQUITY APPRECIATION FUND I LP	ex32_2.htm
EX-31.1 - EXHIBIT 31.1 - LEASE EQUITY APPRECIATION FUND I LP	ex31_1.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 March 31, 2012

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 333-84730

LEASE EQUITY APPRECIATION FUND I, L.P.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		68-0492247
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

110 South Poplar Street, Suite 101, Wilmington Delaware 19801

(Address of principal executive offices) (Zip Code)

(800) 819-5556

(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 o 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 o 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. (Check one):

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller Reporting Company x

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

There is no public market for the Registrant’s securities.

LEASE EQUITY APPRECIATION FUND I, L.P.

INDEX TO QUARTERLY REPORT

ON FORM 10-Q

		PAGE
PART I	FINANCIAL INFORMATION
ITEM 1.	Financial Statements	3
	Consolidated Balance Sheets – March 31, 2012 and December 31, 2011 (Unaudited)	3
	Consolidated Statements of Operations – Three Months Ended March 31, 2012 and 2011 (Unaudited)	4
	Consolidated Statements of Comprehensive Income (Loss) - Three Months Ended March 31, 2012 and 2011 (Unaudited)	5
	Consolidated Statement of Changes in Partners’ Capital (Deficit) – Three Months Ended March 31, 2012 (Unaudited)	6
	Consolidated Statements of Cash Flows – Three Months Ended March 31, 2012 and 2011 (Unaudited)	7
	Notes to Consolidated Financial Statements – March 31, 2012 (Unaudited)	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	22
ITEM 4.	Controls and Procedures	22

PART II	OTHER INFORMATION
ITEM 6.	Exhibits	23

SIGNATURES		24

Index

PART 1. FINANCIAL INFORMATION

ITEM I – FINANCIAL STATEMENTS

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Balance Sheets

(In thousands)

(Unaudited)

	March 31,			December 31,
	2012			2011
ASSETS
Cash	$	2		$	48
Restricted cash		985			1,089
Accounts receivable		2			2
Investment in leases and loans, net		8,393			10,565
Deferred financing costs, net		31			45
Other assets		78			68
Total assets	$	9,491		$	11,817

LIABILITIES AND PARTNERS’ DEFICIT
Liabilities:
Bank debt	$	8,462		$	10,889
Accounts payable and accrued expenses		160			152
Other liabilities		76			89
Derivative liabilities at fair value		289			381
Due to affiliates		7,748			7,649
Total liabilities		16,735			19,160

Commitments and contingencies (Note 10)

Partners’ Deficit:
General partner		(213	)		(211	)
Limited partners		(6,304	)		(6,299	)
Accumulated other comprehensive loss		(727	)		(833	)
Total partners’ deficit		(7,244	)		(7,343	)
Total liabilities and partners' deficit	$	9,491		$	11,817

The accompanying notes are an integral part of these consolidated financial statements.

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Statements of Operations

(In thousands, except unit and per unit data)

(Unaudited)

	Three Months Ended March 31,
	2012		2011
Revenues:
Interest on equipment financings	$	251	$	516
Rental income		27		81
Gains (losses) on sales of equipment and lease dispositions, net		73		(23	)
Other income		52		81
		403		655

Expenses:
Interest expense		151		218
Depreciation on operating leases		18		69
Provision for credit losses		20		983
General and administrative expenses		85		58
Administrative expenses reimbursed to affiliate		25		64
Mark to market changes on derivative liabilities		23		12
		322		1,404
Net income (loss)	$	81	$	(749	)
Net income (loss) allocated to limited partners	$	80	$	(742	)

Weighted average number of limited partner units outstanding during the period		171,696		171,696
Net income (loss) per weighted average limited partner unit	$	0.47	$	(4.32	)

The accompanying notes are an integral part of these consolidated financial statements.

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Statement of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2012		2011

Net income (loss)	$	81	$	(749	)
Amortization of loss on financial derivatives		106		113

Comprehensive income (loss)	$	187	$	(636	)

The accompanying notes are an integral part of these consolidated financial statements.

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Statement of Changes in Partners’ Deficit

(In thousands, except unit data)

(Unaudited)

									Accumulated
	General								Other			Total
	Partner			Limited Partners					Comprehensive			Partners’
	Amount			Units		Amount			(Loss) Income			(Deficit) Capital

Balance at January 1, 2012	$	(211	)		171,696	$	(6,299	)	$	(833	)	$	(7,343	)

Cash distributions paid		(3	)				(85	)		-			(88	)
Net income		1					80			-			81
Amortization of loss on financial derivatives		-					-			106			106

Balance, March 31, 2012	$	(213	)		171,696	$	(6,304	)	$	(727	)	$	(7,244	)

The accompanying notes are an integral part of this consolidated financial statement.

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended March 31
	2012			2011
Cash flows from operating activities:
Net income (loss)	$	81		$	(749	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
(Gains) losses on sales of equipment and lease dispositions, net		(73	)		23
Depreciation on operating leases		18			69
Provision for credit losses		20			983
Amortization of deferred financing costs		14			35
Net loss (gain) on derivative hedging activities		14			(132	)
Changes in operating assets and liabilities:
Accounts receivable		-			2
Other assets		(10	)		(4	)
Accounts payable and accrued expenses and other liabilities		(5	)		28
Due to affiliates		99			(35	)
Net cash provided by operating activities		158			220

Cash flows from investing activities:
Proceeds from leases and loans		2,364			4,381
Security deposits returned		(157	)		(33	)
Net cash provided by investing activities		2,207			4,348

Cash flows from financing activities:
Repayment of debt		(2,427	)		(4,558	)
Decrease in restricted cash		104			41
Cash distributions to partners		(88	)		(86	)
Net cash used in financing activities		(2,411	)		(4,603	)

Decrease in cash		(46	)		(35	)
Cash, beginning of period		48			37
Cash, end of period	$	2		$	2

Supplemental cash flow disclosure:
Cash paid for interest	$	149		$	336

The accompanying notes are an integral part of these consolidated financial statements.

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Notes To Consolidated Financial Statements

March 31, 2012

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Lease Equity Appreciation Fund I, L.P. (“LEAF I” or the “Fund”) is a Delaware limited partnership formed on January 31, 2002 by its General Partner, LEAF Financial Corporation (the “General Partner”). The General Partner manages the Fund. The General Partner is a subsidiary of Resource America, Inc. (“RAI”). RAI is a publicly-traded company (NASDAQ: REXI) that uses industry specific expertise to evaluate, originate, service, and manage investment opportunities through its commercial finance, real estate and financial fund management segments. Through its offering termination date of August 15, 2004, the Fund raised $17.1 million by selling 171,746 of its limited partner units. The Fund commenced operations in March 2003.

The Fund is expected to have a nine-year life, consisting of an offering period of up to two years, a five-year reinvestment period and a subsequent liquidation period of two years, during which the Fund’s leases and secured loans will either mature or be sold. The Fund’s five-year reinvestment period has ended and the Fund entered the liquidation period in August 2009. In the event the Fund is unable to sell its leases and loans during the liquidation period, the Fund expects to continue to return capital to its partners as those leases and loans mature. Substantially all of the Fund’s leases and loans mature by the end of 2013. Contractually, the Fund will terminate on December 31, 2027, unless sooner dissolved or terminated as provided in the Limited Partnership Agreement (“The Partnership Agreement”).

The Fund acquired diversified portfolios of equipment to finance to end users throughout the United States as well as the District of Columbia and Puerto Rico. The Fund also acquired existing portfolios of equipment subject to existing financings from other equipment finance companies, primarily an affiliate of its General Partner. The primary objective of the Fund is to generate regular cash distributions to its partners from its equipment finance portfolio over the life of the Fund.

As of March 31, 2012 and 2011, in addition to its 1% general partnership interest, the General Partner also had invested $800,000 for a 6% limited partnership interest in the Fund.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of the Fund and its wholly-owned subsidiary, LEAF Fund I, LLC. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited financial statements reflect all adjustments that are, in the opinion of management, of a normal and recurring nature and necessary for a fair statement of the Fund’s financial position as of March 31, 2012, and the results of its operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2012 are not necessarily indicative of results of the Fund’s operations for the 2012 calendar year. The financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations. These interim financial statements should be read in conjunction with the Fund’s financial statements and notes thereto presented in the Fund’s Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the SEC on March 28, 2012.

The Fund has evaluated subsequent events through the date the consolidated financial statements were issued and determined there were no events that have occurred that would require adjustments to the consolidated financial statements.

Reclassification

Certain reclassifications have been made to 2011 reported amounts to conform to the current year presentation. In the statement of operations, renewal income of approximately $11,000 was reclassified to interest on equipment financings from other income for the three months ended March 31, 2011. Additionally, amortization of other comprehensive income on the Fund’s interest rate swaps of approximately $113,000 for the three months ended March 31, 2011 was reclassified from loss on derivative activities to interest expense.

Use of Estimates

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the allowance for credit losses, the estimated unguaranteed residual values of leased equipment, impairment of long-lived assets and the fair value and effectiveness of interest rate swaps. The Fund bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Notes To Consolidated Financial Statements – (Continued)

March 31, 2012

(Unaudited)

Investments in Leases and Loans

The Fund’s investments in leases and loans consist of direct financing leases, operating leases and loans.

Direct Financing Leases. Certain of the Fund’s lease transactions are accounted for as direct financing leases (as distinguished from operating leases). Such leases transfer substantially all benefits and risks of equipment ownership to the customer. The Fund’s investment in direct financing leases consists of the sum of the total future minimum lease payments receivable plus the estimated unguaranteed residual value of leased equipment, less unearned finance income. Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum contracted payments plus the estimated unguaranteed residual value over the cost of the related equipment.

Unguaranteed residual value represents the estimated amount to be received at lease termination from lease extensions or ultimate disposition of the leased equipment. The estimates of residual values are based upon the Fund’s history with regard to the realization of residuals, available industry data and the General Partner’s senior management’s experience with respect to comparable equipment. The estimated residual values are recorded as a component of investments in leases. Residual values are reviewed periodically to determine if the current estimate of the equipment’s fair market value appears to be below its recorded estimate. If required, residual values are adjusted downward to reflect adjusted estimates of fair market values. Upward adjustments to residual values are not permitted.

Operating Leases. Leases not meeting any of the criteria to be classified as direct financing leases are deemed to be operating leases. Under the accounting for operating leases, the cost of the leased equipment, including acquisition fees associated with lease placements, is recorded as an asset and depreciated on a straight-line basis over the equipment’s estimated useful life, generally up to seven years. Rental income consists primarily of monthly periodic rental payments due under the terms of the leases. The Fund recognizes rental income on a straight line basis.

A review for impairment of operating leases is performed whenever events or changes in circumstances indicate that the carrying amount of the operating leases may not be recoverable. The Company writes down its rental equipment to its estimated net realizable value when it is probable that its carrying amount exceeds its fair value and the excess can be reasonably estimated; gains are only recognized upon actual sale of the rental equipment. There were no write-downs of equipment for the three month periods ended March 31, 2012 or 2011.

Loans. For term loans, the investment in loans consists of the sum of the total future minimum loan payments receivable less unearned finance income. Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum contracted loan payments over the cost of the related equipment. For all other loans, interest income is recorded at the stated rate on the accrual basis to the extent that such amounts are expected to be collected.

Allowance for Credit Losses. The Fund evaluates the adequacy of the allowance for credit losses (including investments in leases and loans) based upon, among other factors, management’s historical experience on the portfolios it manages, an analysis of contractual delinquencies, economic conditions and trends and equipment finance portfolio characteristics, adjusted for expected recoveries. In evaluating historic performance, the Fund performs a migration analysis, which estimates the likelihood that an account will progress through delinquency stages to ultimate charge-off. After an account becomes 180 or more days past due, any remaining balance is fully-reserved less an estimated recovery amount. Generally, the account is then charged-off and referred to our internal recovery group consisting of a team of collectors. The Fund’s policy is to charge off to the allowance those financings which are in default and for which management has determined the probability of collection to be remote. Income is not recognized on leases and loans when a default on monthly payment exists for a period of 90 days or more. Income recognition resumes when a lease or loan becomes less than 90 days delinquent. Fees from delinquent payments are recognized when received and are included in other income.

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Notes To Consolidated Financial Statements – (Continued)

March 31, 2012

(Unaudited)

Derivative Instruments

The Fund recognizes all derivatives at fair value as either assets or liabilities in the consolidated balance sheets. The accounting for subsequent changes in the fair value of these derivatives depended on whether the derivative had been designated and qualified for hedge accounting treatment pursuant to U. S. GAAP.

Prior to October 1, 2010, the Fund entered into derivative contracts, including interest rate swaps, substantially all of which were accounted for as cash flow hedges. Under hedge accounting, the effective portion of the overall gain or loss on a derivative designated as a cash flow hedge was reported in accumulated other comprehensive income on the consolidated balance sheets and was then reclassified into earnings as an adjustment to interest expense over the term of the related borrowing.

Effective October 1, 2010, the Fund discontinued the use of hedge accounting. Therefore, any subsequent changes in the fair value of derivative instruments, including those that had previously been accounted for under hedge accounting, and periodic settlements of contracts, are recognized immediately on the accompanying consolidated statements of operations. While the Fund will continue to use derivative financial instruments to reduce exposure to changing interest rates, this accounting change may create volatility in the Fund’s results of operations, as the fair value of Fund’s derivative financial instruments change.

For the forecasted transactions that are probable of occurring, the derivative gain or loss remaining in accumulated other comprehensive income as of March 31, 2012 is being reclassified into earnings as an adjustment to interest expense over the terms of the related forecasted borrowings, consistent with hedge accounting treatment. In the event that the related forecasted borrowing is no longer probable of occurring, the related gain or loss in accumulated other comprehensive income will be recognized in earnings immediately.

Other Income

Other income includes miscellaneous fees charged by the Fund such as late fee income, among others. Late fee income was $35,000 and $63,000 for the three months ended March 31, 2012 and 2011, respectively.

Recent Accounting Standards

Accounting Standards Recently Adopted

Comprehensive Income - In June 2011, the FASB issued an amendment to eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendment requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The Fund adopted the two-statement approach for the period beginning January 1, 2012.

Fair Value Measurements - In May 2011, the FASB issued an amendment to revise the wording used to describe the requirements for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendments to result in a change in the application of the current requirements. Some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements, such as specifying that the concepts of highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of nonfinancial assets. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements such as specifying that, in the absence of a Level 1 input, a reporting entity should apply premiums or discounts when market participants would do so when pricing the asset or liability. This guidance was adopted by the Fund for the period beginning January 1, 2012 and did not significantly impact the Fund’s consolidated financial statements.

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Notes To Consolidated Financial Statements – (Continued)

March 31, 2012

(Unaudited)

NOTE 3 – INVESTMENT IN LEASES AND LOANS

The Fund’s investment in leases and loans, net, consists of the following (in thousands):

	March 31,			December 31,
	2012			2011
Direct financing leases (a)	$	5,868		$	7,612
Loans (b)		2,599			3,023
Operating leases		56			80
		8,523			10,715
Allowance for credit losses		(130	)		(150	)
	$	8,393		$	10,565

(a)	The Fund’s direct financing leases are for initial lease terms generally ranging from 24 to 108 months.

(b)	The interest rates on loans generally range from 6% to 14%.

The components of direct financing leases and loans are as follows (in thousands):

	March 31,						December 31,
	2012						2011
	Leases			Loans			Leases			Loans
Total future minimum lease payments	$	6,002		$	3,008		$	7,895		$	3,486
Unearned income		(462	)		(346	)		(619	)		(397	)
Residuals, net of unearned residual income (a)		361			-			519			-
Security deposits		(33	)		(63	)		(183	)		(66	)
	$	5,868		$	2,599		$	7,612		$	3,023

(a)	Unguaranteed residuals for direct financing leases represent the estimated amounts recoverable at lease termination from lease extensions or disposition of the equipment.

The Fund’s investment in operating leases, net, consists of the following (in thousands):

	March 31,			December 31,
	2012			2011
Equipment	$	417		$	539
Accumulated depreciation		(361	)		(459	)
	$	56		$	80

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Notes To Consolidated Financial Statements – (Continued)

March 31, 2012

(Unaudited)

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

The following table is an age analysis of the Fund’s receivables from leases and loans (presented gross of allowance for credit losses of $130,000 and $150,000) as of March 31, 2012 and December 31, 2011, respectively (in thousands):

	March 31, 2012					December 31, 2011
Age of receivable	Investment in leases and loans		%			Investment in leases and loans		%
Current	$	8,038		94.3	%	$	10,016		93.5	%
Delinquent:
31 to 91 days past due		288		3.4	%		562		5.2	%
Greater than 91 days (a)		197		2.3	%		137		1.3	%

	$	8,523		100.0	%	$	10,715		100.0	%

(a)	Balances in this age category are collectively evaluated for impairment.

The Fund had $197,000 and $137,000 of leases and loans on nonaccrual status as of March 31, 2012 and December 31, 2011, respectively. The credit quality of the Fund’s investment in leases and loans as of March 31, 2012 and December 31, 2011 are as follows (in thousands):

	March 31,		December 31,
	2012		2011
Performing	$	8,326	$	10,578
Nonperforming		197		137
	$	8,523	$	10,715

The following table summarizes the annual activity in the allowance for credit losses (in thousands):

	Three Months Ended March 31,
	2012			2011
Allowance for credit losses, beginning of year	$	150		$	1,680
Provision for credit losses		20			983
Charge-offs		(126	)		(864	)
Recoveries		86			122
Allowance for credit losses, end of period (a)	$	130		$	1,921

(a)	End of period lease and loan balances are collectively evaluated for impairment.

NOTE 5 – DEFERRED FINANCING COSTS

As of March 31, 2012 and December 31, 2011, deferred financing costs include $31,000 and $45,000, respectively, of unamortized deferred financing costs which are being amortized over the estimated useful life of the related debt. Accumulated amortization as of March 31, 2012 and December 31, 2011 was $1.1 million and $1.1 million, respectively.

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Notes To Consolidated Financial Statements – (Continued)

March 31, 2012

(Unaudited)

NOTE 6 – BANK DEBT

The Fund has a secured term loan agreement with WestLB AG, New York Branch which is collateralized by specific lease receivables and related equipment.

As of March 31, 2012 and December 31, 2011, the outstanding balance under this financing arrangement was $8.5 million and $10.9 million, respectively. Interest and principal are due as payments are received on the underlying leases and loans pledged as collateral, with any remaining balance expected to be paid in March, 2014. Interest on this facility is calculated at London Interbank Offered Rate (“LIBOR”) plus 0.95% per annum. To mitigate fluctuations in interest rates, the Fund has entered into interest rate swap agreements which fix the interest rate on this facility at 5.3%. The interest rate swap agreements terminate at various dates ranging from April 2012 to June 2015. Recourse under this facility is limited to the amount of collateral pledged. As of March 31, 2012, $8.5 million of leases and loans and $738,000 of restricted cash were pledged as collateral under this facility. As of March 31, 2012, the Fund is in compliance with all covenants under this agreement.

Debt repayments: Estimated annual principal payments on the Fund’s aggregate borrowings for each of the three succeeding annual periods ending March 31 are as follows (in thousands):

March 31, 2013	$	5,184
March 31, 2014		3,278
	$	8,462

NOTE 7 – DERIVATIVE INSTRUMENTS

Since the Fund’s assets are structured on a fixed-rate basis, and funds borrowed through bank debt are obtained on a floating-rate basis, the Fund is exposed to interest rate risk if rates rise because it will increase the Fund’s borrowing costs. In addition, when the Fund acquires assets, it bases its pricing in part on the spread it expects to achieve between the interest rate it charges its customers and the effective interest cost the Fund will pay when it funds those loans. Increases in interest rates that increase the Fund’s permanent funding costs between the time the assets are originated and the time they are funded could narrow, eliminate or even reverse this spread.

To manage interest rate risk, the Fund employs a hedging strategy using derivative financial instruments such as interest rate swaps. As discussed previously, effective October 1, 2010, the Fund elected not to use hedge accounting. The Fund does not use derivative financial instruments for trading or speculative purposes. The Fund manages the credit risk of possible counterparty default in these derivative transactions by dealing primarily with counterparties with investment grade ratings. The Fund has agreements with certain of its derivative counterparties that contain a provision where if the Fund defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Fund could also be declared in default on its derivative obligations. As of March 31, 2012, the Fund has not posted any collateral related to these agreements. If the Fund had breached any of these provisions at March 31, 2012, it could be required to settle its obligations under the agreements at their termination value of $309,000.

At March 31, 2012, the Fund had 27 interest rate swap contracts that terminate on various dates ranging from April 2012 to June 2015 which generally coincide with the maturity period of our portfolio of leases and loans which collateralize the credit facility.

In the fourth quarter of 2010, the Fund made an election to discontinue the use of hedge accounting for its derivative financial instruments resulting in an unrealized loss in accumulated other comprehensive income which is being amortized into earnings over the remaining term of the Fund’s debt. While this change may create future volatility in the Fund’s reported income statement results, it is not expected to have any impact on the Fund’s future cash flows. The following tables present the fair value of the Fund’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2012 and December 31, 2011 and on the consolidated statements of operations for the three month periods ended March 31, 2012 and 2011(in thousands):

	March 31,			December 31,
	2012			2011
Fixed swaps (notional amount)	$	9,891		$	12,657
Range of receive rate		0.24% - 0.38	%		0.23% - 0.57	%
Range of pay rate		2.90% - 5.74	%		2.90% - 5.74	%

Index

LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Notes To Consolidated Financial Statements – (Continued)

March 31, 2012

(Unaudited)

The following table indicates the fair value of the derivative contracts as of March 31, 2012 and 2011(in thousands):

	Balance Sheet Location	Derivative Assets		Derivative Liabilities
2012	Derivative liabilities, at fair value	$	-	$	289
2011	Derivative liabilities, at fair value	$	-	$	381

The following table summarizes the effect of the interest rate swaps on the March 31, 2012 and 2011 consolidated statement of operations and other comprehensive income (in thousands):

	Location of loss reclassified from OCI to the statement of operations	Amount of loss reclassified from OCI to the statement of operations		Location of loss recognized in the statement of operations	Amount of loss recognized in the statement of operations
2012	Interest expense	$	106	(a)	$	23
2011	Interest expense	$	113	(a)	$	12

(a) All changes in fair value of derivatives subsequent to dedesignation as cash flow hedges were realized in mark to market changes on derivative liabilities on the accompanying statement of operations.

Assuming market rates remain consistent with those at March 31, 2012, $369,000 of the remaining balance in accumulated other comprehensive loss would be expected to be charged to earnings over the next 12 months.

NOTE 8 – FAIR VALUE MEASUREMENT

For cash, receivables and payables, the carrying amounts approximate fair values because of the short term maturity of these instruments. The carrying value of debt approximates fair market value since interest rates approximate current market rates.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the measurement date (exit price). U.S. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement in its entirety.

•

Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

•

Level 2 – Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

•

Level 3 – Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The Fund employs a hedging strategy to manage exposure to the effects of changes in market interest rates. All derivatives are recorded on the consolidated balance sheets at their fair value as either assets or liabilities. Because the Fund’s derivatives are not listed on an exchange, these instruments are valued by a third-party pricing agent using an income approach and utilizing models that use as their primary basis readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit factors and volatility factors. Although the Fund has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, the Fund has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Fund has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

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LEASE EQUITY APPRECIATION FUND I, L.P. AND SUBSIDIARY

Notes To Consolidated Financial Statements – (Continued)

March 31, 2012

(Unaudited)

Liabilities measured at fair value on a recurring basis included the following (in thousands):

	Fair Value Measurements Using							Liabilities
	Level 1		Level 2			Level 3		At Fair Value
Interest Rate Swaps at March 31, 2012	$	-	$	(289	)	$	-	$	(289	)
Interest Rate Swaps at December 31, 2011	$	-	$	(381	)	$	-	$	(381	)

NOTE 9 – CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH AFFILIATES

The Fund relies on the General Partner and its affiliates to manage the Fund’s operations and pays the General Partner or its affiliates fees to manage the Fund in accordance with the Partnership Agreement (the “Partnership Agreement”). The following is a summary of fees and costs of services and materials charged by the General Partner or its affiliates (in thousands):

	Three Months Ended March 31,
	2012		2011
Management fees	$	-	$	-
Administrative expenses		25		64

Management Fees. Pursuant to the Partnership Agreement the General Partner is entitled to receive a subordinated annual asset management fee equal to 3% or 2% of gross rental payments for operating leases or full payout leases, respectively, or a competitive fee, whichever is less. During the reinvestment period, management fees are subordinated to the payment of distributions to the Funds limited partners of a cumulative annual return of 8% on their capital contributions, as adjusted by distributions deemed to be a return of capital. On May 1, 2009, the General Partner waived management fees and subsequently waived all future management fees. Through March 31, 2012, the General Partner has waived $1.8 million of asset management fees, of which $59,000 related to the three months ended March 31, 2012.

Administrative Expenses. The General Partner and its affiliates are reimbursed by the Fund for administrative services reasonably necessary to operate which do not exceed the General Partner’s cost of those fees or services.

Due to Affiliates. Due to affiliates includes amounts due to the General Partner related to acquiring and managing portfolios of equipment from its General Partner, management fees and reimbursed expenses.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

The Fund is party to various routine legal proceedings arising in the ordinary course of its business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the Fund’s financial condition or results of operations.

In connection with a sale of leases and loans to a third-party in July of 2008, the Fund contractually agreed to repurchase delinquent leases up to a maximum of $120,000, calculated as 7.5% of total proceeds received from the sale (“Repurchase Commitment”). As of March 31, 2012, the Fund has $75,000 remaining as a Repurchase Commitment, of which $0 was recorded as a liability at March 31, 2012.

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

When used in this Form 10-Q, the words “believes” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties more particularly described in other documents filed with the Securities and Exchange Commission. These risks and uncertainties could cause actual results to differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release the results of any revisions to forward-looking statements which we may make to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.

The following discussion provides an analysis of our operating results, an overview of our liquidity and capital resources and other items related to us. The following discussion and analysis should be read in conjunction with (i) the accompanying interim financial statements and related notes and (ii) our consolidated financial statements, related notes, and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2011.

As used herein, the terms “we,” “us,” or “our” refer to Lease Equity Appreciation Fund I, L.P. and subsidiary.

Business

We are a Delaware limited partnership formed on January 31, 2002 by our General Partner, LEAF Financial Corporation (the “General Partner”), which manages us. Our General Partner is a subsidiary of Resource America, Inc. (“RAI”). RAI is a publicly-traded company (NASDAQ: REXI) that uses industry specific expertise, to evaluate, originate, service and manage investment opportunities through its commercial finance, real estate and financial fund management segments. Through our offering termination date of August 15, 2004, we raised $17.1 million by selling 171,746 of our limited partner units. We commenced operations in March 2003.

We are expected to have a nine-year life, consisting of an offering period of up to two years, a five year reinvestment period and a subsequent liquidation period of two years, during which our leases and secured loans will either mature or be sold. Our five year reinvestment period has ended and we entered the liquidation period in August 2009. In the event we are unable to sell our remaining leases and secured loans during the liquidation period, to the extent that there is excess cash, we expect to continue to return capital to our partners as those leases and loans mature. Substantially all of our leases and loans mature by the end of 2013. We will terminate on December 31, 2027, unless sooner dissolved or terminated as provided in the Limited Partnership Agreement.

We acquired a diversified portfolio of new, used or reconditioned equipment that we lease to third-parties. We also acquired portfolios of equipment subject to existing leases from other equipment lessors. Our financings were typically acquired from our General Partner. In addition, we made secured loans to end users to finance their purchase of equipment. We attempted to structure our secured loans so that, in an economic sense, there was no difference to us between a secured loan and a full payout equipment lease. We financed business-essential equipment including, but not limited to, computers, copiers, office furniture, water filtration systems, machinery used in manufacturing and construction, medical equipment and telecommunications equipment. We focused on the small to mid-size business market, which generally includes businesses with:

·	500 or fewer employees;

·	$1 billion or less in total assets;

·	Or $100 million or less in total annual sales.

Our principal objective was to generate regular cash distributions to our limited partners.

General Economic Overview

Economic indicators for the quarter ending March 31, 2012 point to continuation of a slow but uncertain recovery from the “Great Recession.” Among positive trends was further job growth, reduction in jobless claims, and reduction in the unemployment rate. Growth in manufacturing continued, driven largely by the recovering auto industry. At the same time rising oil prices and the persistent problems in housing markets pose a serious threat to a sustained pattern of economic growth. Capital markets remain on edge with the continuing flow of troublesome news related to sovereign debt in the euro-zone.

Certain key indicators of economic activity that were reported in the quarter ending March 31, 2012 are described below. While these indicators show an overall favorable trend, they also highlight unbalanced economic performance. While the following uncertainties in the economic outlook persist, and while the economy remains unsettled, our portfolio performance may be affected.

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The National Federation of Independent Business Small-Business Optimism Index posted a gain in February 2012 which was the sixth consecutive month of gains. The National Federation of Independent Business reports that while the increase is a sign that economic recovery is likely to continue, the Index remains at a historically low level. This is an important economic indicator for us because small businesses comprise the majority of the borrowers and lessees in our portfolio and consequently the health of the small business community is critical to our portfolio performance.

In March 2012, The National Association of Realtors reported that existing home sales in February 2012 declined from the pace in January 2012 but increased as compared to the prior year period. The National Association of Realtors also reported that the pending home sales index, which is a forward looking indicator, posted a decline in February 2012 as compared to January 2012.

The S&P Case-Shiller Home Price Index from March 2012 reported annual decreases in home prices of 3.9% and 3.8% for the 10 and 20- City Composite Indices and a decline of 0.8% for both indices in the month of January 2012.

During March 2012 the nation added 120,000 jobs and the unemployment rate at the end of March 2012 fell to 8.2% from 8.5% at the end of December 2011.

The Institute of Supply Management reported, in March 2012, a broad based growth in U.S. manufacturing. The Institute of Supply Management’s Employment Index also grew in March 2012, the 30th consecutive month of such gains, which generally supports the national job growth trends.

The Equipment Lease and Finance Foundation’s Monthly Confidence Index in March 2012 was 61.7, up significantly from the December 2011 Index of 57.2. This signifies general optimism among members of the equipment leasing and finance industry fueled largely by growth in business volumes and improving receivables performance. Similarly the March 2012 Credit Manager’s Index published by the National Association of Credit Managers increased to 56.2 from 54.4 in December 2011 driven largely by growth in new business, improved business payment habits, and declines in business bankruptcies.

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Finance Receivables and Asset Quality

Information about our portfolio of leases and loans is as follows (dollars in thousands):

	March 31,			December 31,
	2012			2011
Investment in leases and loans, net	$	8,393		$	10,565

Number of contracts		3,300			3,700
Number of individual end users (a)		3,000			3,500
Average original equipment cost	$	17.1		$	17.6
Average initial lease term (in months)		63			62
Average remaining lease term (in months)		20			21
States accounting for more than 10% of lease and loan portfolio:
California		15	%		15	%
Florida		10	%		9	%

Types of equipment accounting for more than 10% of lease and loan portfolio:
Industrial Equipment		24	%		24	%
Medical Equipment		21	%		20	%
Office Equipment		15	%		16	%
Water Purification		15	%		15	%

Types of businesses accounting for more than 10% of lease and loan portfolio:
Services		48	%		48	%
Manufacturing		12	%		12	%
Retail Trade		11	%		12	%

(a)	Located in the 50 states as well as the District of Columbia and Puerto Rico. No individual end user or single piece of equipment accounted for more than 4% of our portfolio based on original cost of the equipment.

Portfolio Performance

The table below provides information about our finance receivables including non-performing assets, which are those assets that are not accruing income due to non-performance or impairment (dollars in thousands):

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	As of and for the
	Three Months Ended March 31,
							Change
	2012			2011			$			%
Investment in leases and loans before allowance for credit losses	$	8,523		$	23,637		$	(15,114	)		(64	)%
Less: allowance for credit losses		130			1,921			(1,791	)		(93	)%
Investment in leases and loans, net	$	8,393		$	21,716		$	(13,323	)		(61	)%

Weighted average investment in direct financing leases and loans before allowance for credit losses	$	9,580		$	26,212		$	(16,632	)		(63	)%
Non-performing assets	$	197		$	2,458		$	(2,261	)		(92	)%
Charge-offs, net of recoveries	$	40		$	742		$	(702	)		(95	)%
As a percentage of finance receivables:
Allowance for credit losses		1.53	%		8.13	%
Non-performing assets		2.31	%		10.40	%
As a percentage of weighted average finance receivables:
Charge-offs, net of recoveries		0.42	%		2.83	%

Our allowance for credit losses is our estimate of losses inherent in our commercial finance receivables. The allowance is based on factors which include our historical loss experience on equipment finance portfolios we manage, an analysis of contractual delinquencies, current economic conditions and trends and equipment finance portfolio characteristics, adjusted for recoveries. In evaluating historic performance, we perform a migration analysis, which estimates the likelihood that an account progresses through delinquency stages to ultimate charge-off. Our policy is to charge-off to the allowance those financings which are in default and for which management has determined the probability of collection to be remote. Substantially all of our assets are collateral for our debt and, therefore, significantly greater delinquencies than anticipated will have an adverse impact on our cash flow and distributions to our partners.

We focused on financing equipment used by small to mid-sized businesses. The recent economic recession in the U.S. made it more difficult for some of our customers to make payments on their financings with us on a timely basis, which adversely affected our operations in the form of higher delinquencies. These higher delinquencies may continue as the U.S. economy recovers. Despite this, our non-performing assets as a percentage of finance receivables decreased from 10.40% at March 31, 2011 to 2.3% at March 31, 2012, reflecting an improvement in the aging of our portfolio. Our allowance for credit losses as a percentage of our investments in leases and loans also reflects this, decreasing from 8.1% at March 31, 2011 to 1.5% at March 31, 2012.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and cost and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including the allowance for credit losses, the estimated unguaranteed residual values of leased equipment, impairment of long-lived assets and the fair value and effectiveness of interest rate swaps. We base our estimates on historical experience, current economic conditions and on various other assumptions that we believe reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a complete discussion of our critical accounting procedures and estimates, see our annual report on Form 10-K for fiscal 2011 under “Management’s Discussion and Analysis of Financial Condition and Analysis of Financial Condition and Results of Operation- Critical Accounting Policies and Estimates.” There have been no material changes to those policies through March 31, 2012.

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Results of Operations

Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

						Increase (Decrease)
	2012		2011			$			%
Revenues:
Interest on equipment financings	$	251	$	516		$	(265	)		(51	)%
Rental income		27		81			(54	)		(67	)%
Gains (losses) on sales of equipment and lease dispositions, net		73		(23	)		96			417	%
Other income		52		81			(29	)		(36	)%
		403		655			(252	)		(38	)%

Expenses:
Interest expense		151		218			(67	)		(31	)%
Depreciation on operating leases		18		69			(51	)		(74	)%
Provision for credit losses		20		983			(963	)		(98	)%
General and administrative expenses		85		58			27			47	%
Administrative expenses reimbursed to affiliate		25		64			(39	)		(61	)%
Mark to market changes on derivative liabilities		23		12			11			92	%
		322		1,404			(1,082	)		(77	)%
Net income (loss)	$	81	$	(749	)	$	830
Net income (loss) allocated to limited partners	$	80	$	(742	)	$	822

The overall decrease in revenues is primarily a result of the Fund being in its liquidation phase whereby it is prohibited from acquiring any more leases and loans. A more specific discussion follows:

The decrease in total revenues was primarily attributable to the following:

A significant decrease in interest on equipment financings and rental income, due to a decrease in our weighted average net investment in financing assets to $9.6 million for the three months ended March 31, 2012 as compared to $26.2 million for the three months ended March 31, 2011, a decrease of $16.6 million or 63%. As we entered our liquidation phase in August 2009, we are not permitted under the Partnership Agreement to acquire additional leases and loans since the first quarter of 2009. Therefore, our revenues are expected to continue to decline as our weighted average net investment in financing assets declines.

Gains on the sale of equipment and lease dispositions increased $96,000 to $73,000 for the three months ended March 31, 2012 compared to a net loss of $23,000 for the three months ended March 31, 2011. Gains and losses on sales of equipment may vary significantly from period to period.

Other income decreased from $81,000 for the three months ended March 31, 2011 to $52,000 for the three months ended March 31, 2012, a decrease of $29,000 or 36%. The decrease in other income is primarily related to a decrease in late fee income, which is driven by the decrease in the size of our portfolio.

The decrease in total expenses was primarily attributable to the following:

A decrease in interest expense primarily due to the decrease in our bank debt caused by the ongoing maturities of our portfolio of lease and loans. Weighted average borrowings for the three months ended March 31, 2012 were $9.7 million as compared to $23.6 million as of March 31, 2011. Borrowings for the three months ended March 31, 2012 and 2011 were at an effective interest rate of 6.6% and 6.2%, respectively. We amended our debt facility effective March 6, 2009, such that it is now a term facility which is contractually repaid over time. As a result, our interest expense is expected to continue to decrease.

A decrease in depreciation on operating leases due to continued maturity of our lease and loan portfolio.

A decrease in our provision for credit losses. We provide for credit losses when losses are likely to occur based on a migration analysis of past due payments and economic conditions.

The net income (loss) per limited partner unit, after the net loss allocated to our General Partner, for the three months ended March 31, 2012 and 2011 was $0.47 and ($4.32), respectively, based on a weighted average number of limited partner units outstanding of 171,696 for both periods.

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Liquidity and Capital Resources

General

Our major source of liquidity is excess cash derived from the collection of lease payments, after payment of debt principal and interest on debt. Our other cash requirements, in addition to debt service, are for normal operating expenses and distributions to partners. We plan to fund our other cash requirements for operating expenses and distributions to partners from cash remaining after payments for debt service.

We believe that our future net cash inflows can be estimated as the total scheduled future payments to be received from leases and loans less our debt service payments. At March 31, 2012, the total future minimum lease and loan payments scheduled to be received was $9.0 million which excludes the $130,000 allowance for credit losses. The outstanding principal balance owed on our debt facility was $8.5 million. We believe at this time that future net cash inflows will be sufficient to finance operations and meet debt service payments. The following table sets forth our sources and uses of cash for the periods indicated (in thousands):

	Period Ended March 31,
	2012			2011
Net cash provided by operating activities	$	158		$	220
Net cash provided by investing activities		2,207			4,348
Net cash used in financing activities		(2,411	)		(4,603	)
Decrease in cash	$	(46	)	$	(35	)

Cash decreased by $46,000 primarily due to net proceeds from leases and loans of $2.2 million and operating cash flows of $158,000, partially offset by debt repayments of $2.4 million and distributions to our partners of $88,000.

As of March 31, 2012, $8.5 million was outstanding under our secured term loan agreement with WestLB. No further borrowings are available under the secured term loan agreement. This facility is secured by the pledging of eligible leases and loans. Recourse under this facility is limited to the amount of collateral pledged. As of March 31, 2012, $8.5 million of leases and loans and $737,000 of restricted cash were pledged as collateral under this facility. Interest on this facility is calculated at LIBOR plus 0.95% per annum. Interest rate swap agreements fix the interest rate on this facility at 5.3%. Interest and principal are due as payments are received on the underlying leases and loans pledged as collateral, with any remaining balance due in March 2014. As of March 31, 2012, we were in compliance with all covenants contained in this agreement.

Partners’ distributions paid during the three months ended March 31, 2012 and 2011 were $88,000 and $86,000, respectively. Cumulative partner distributions paid from our inception to March 31, 2012 were approximately $9.5 million. To date, limited partners have received total distributions of approximately 56% of their original amount invested, depending upon when the investment was made. Our General Partner is working to maximize the amount that can be distributed to our limited partners in the future. Partner distributions for the three months ended March 31, 2012 and 2011 were made at a rate of 2% of capital invested. Future cash distributions are not guaranteed and are solely dependent on our performance and are impacted by a number of factors which include lease and loan defaults by our customers and prevailing economic conditions.

The General Partner waived its management fees beginning May 1, 2009. Accordingly, we did not record any management fee expense for the three months ended March 31, 2012. The General Partner has also waived all future management fees. The cash savings on management fees and distributions is expected to be used to pay down our liabilities. Through March 31, 2012, the General Partner has waived $1.8 million of asset management fees, of which $59,000 related to the three months ended March 31, 2012.

As discussed above, our liquidity has been and may continue to be adversely affected by higher than expected equipment lease defaults, which result in a loss of anticipated revenues. These losses affect our ability to make distributions to our partners and, if the level of defaults is sufficiently large, result in our inability to fully recover our investment in the underlying equipment. In evaluating our allowance for losses on uncollectible leases, we consider our contractual delinquencies, economic conditions and trends, lease portfolio characteristics and our General Partner’s prior experience with similar lease assets. At March 31, 2012, our credit evaluation indicated a need for an allowance for credit losses of $130,000. As our lease portfolio ages, and if the economy in the United States deteriorates, we may need to increase our allowance for credit losses.

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosures about Market Risk have been omitted as permitted under rules applicable to smaller reporting companies.

ITEM 4 – CONTROLS AND PROCEDURES

Disclosure Controls

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our General Partner’s chief executive officer and chief financial officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our General Partner’s chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level discussed above.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the three months ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 6 – EXHIBITS

Exhibit
No.	Description
3.1	Amended and Restated Agreement of Limited Partnership (1)
3.2	Certificate of Limited Partnership (2)
4.1	Forms of letters sent to limited partners confirming their investment (2)
10.1	Origination and Servicing Agreement among LEAF Financial Corporation, Lease Equity Appreciation Fund I, L.P. and LEAF Funding, Inc., dated April 4, 2003 (4)
10.2	Secured Loan Agreement dated as of December 31, 2004 among LEAF Fund I, LLC, LEAF Funding, Inc., Lease Equity Appreciation Fund I, L.P., LEAF Financial Corporation, U.S. Bank National Association, and WestLB, New York Branch (3)
10.3	First Amendment to WestLB AG, New York Branch, Secured Loan Agreement (5)
10.4	Third Amendment to WestLB AG , New York Branch, Secured Loan Agreement (6)
10.5	Fourth Amendment to WestLB AG, New York Branch, Secured Loan Agreement (7)
10.6	Fifth Amendment to WestLB AG, New York Branch, Secured Loan Agreement (8)
10.7	Seventh Amendment WestLB AG, New York Branch, Secured Loan Agreement (9)
10.8	Eighth Amendment to WestLB AG, New York Branch, Secured Loan Agreement (10)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Interactive data file containing the following financial statements formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at March 31, 2012 and December 31, 2011; (ii) the Consolidated Statements of Operations for the three month periods ended March 31, 2012 and 2011; (iii) the Consolidated Statements of Comprehensive Income for the three month period ended March 31, 2012; (iv) the Consolidated Statements of Changes in Partners’ (Deficit) Capital for the three month period ended March 31, 2012; (iv) the Consolidated Statements of Cash Flows for the periods ended March 31, 2012 and 2011; and, (iv) the Notes to Consolidated Financial Statements, tagged as blocks of text.

(1)

Filed previously as Appendix A to our Post-Effective Amendment No. 3 to our Registration Statement on Form S-1, filed on January 26, 2004 and by this reference incorporated herein.

(2)

Filed previously as an exhibit to Amendment No. 1 to our Registration Statement on Form S-1 filed on June 7, 2002 and by this reference incorporated herein.

(3)

Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2004 and by this reference incorporated herein.

(4)

Filed previously on Form 8-K, filed on September 19, 2003 and by this reference incorporated herein.

(5)

Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2005 and by this reference incorporated herein.

(6)

Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 and by this reference incorporated herein.

(7)

Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 and by this reference incorporated herein.

(8)

Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2007 and by this reference incorporated herein.

(9)

Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and by this reference incorporated herein.

(10)

Filed previously as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2008 and by this reference incorporated herein.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	LEASE EQUITY APPRECIATION FUND I, L.P.
	Delaware Limited Partnership
	By:	LEAF Financial Corporation, the General Partner

May 15, 2012	By:	/s/ CRIT S. DEMENT
		CRIT S. DEMENT
		Chief Executive Officer

May 15, 2012	By:	/s/ ROBERT K. MOSKOVITZ
		ROBERT K. MOSKOVITZ
		Chief Financial Officer

LEASE EQUITY APPRECIATION FUND I LP - FORM 10-Q - May 15, 2012

Attached files

LEASE EQUITY APPRECIATION FUND I LP Reports