UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2013

OR

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

For the transition period from to

Commission file number 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     ¨ 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. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (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).    ¨ 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

PART I	FINANCIAL INFORMATION	PAGE
ITEM 1.	Financial Statements	3
	Consolidated Balance Sheets – September 30, 2013 (Unaudited) and December 31, 2012	3
	Consolidated Statements of Operations –Three and Nine Months Ended September 30, 2013 and 2012 (Unaudited)	4
	Consolidated Statements of Comprehensive Income (Loss) – Three and Nine Months Ended September 30, 2013 and 2012 (Unaudited)	5
	Consolidated Statement of Changes in Partners’ Deficit – Nine Months Ended September 30, 2013 (Unaudited)	6
	Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2013 and 2012 (Unaudited)	7
	Notes to Consolidated Financial Statements – September 30, 2013 (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	23
ITEM 4.	Controls and Procedures	23
PART II	OTHER INFORMATION	24
ITEM 6.	Exhibits	24
SIGNATURES		25

2

PART 1. FINANCIAL INFORMATION

ITEM I – FINANCIAL STATEMENTS

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

Consolidated Balance Sheets

(In thousands)

	September 30, 2013			December 31, 2012
	(Unaudited)
ASSETS
Cash	$	7		$	35
Restricted cash		115			422
Investment in leases and loans, net		1,037			2,825
Deferred financing costs, net		18			63
Other assets		24			31
Total assets	$	1,201		$	3,376
LIABILITIES AND PARTNERS’ DEFICIT
Liabilities:
Bank debt	$	1,479		$	3,393
Accounts payable and accrued expenses		98			162
Other liabilities		27			58
Derivative liabilities, at fair value		23			99
Due to affiliates		7,469			7,635
Total liabilities		9,096			11,347
Commitments and contingencies (Note 10)
Partners’ Deficit:
General partner		(226	)		(225	)
Limited partners		(7,605	)		(7,488	)
Accumulated other comprehensive loss		(64	)		(258	)
Total partners’ deficit		(7,895	)		(7,971	)
Total liabilities and partners' deficit	$	1,201		$	3,376

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

3

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 September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenues:
Interest on equipment financings	$	7		$	142		$	149		$	577
Rental income		3			11			15			57
Gains on sales of equipment and lease dispositions, net		128			14			214			118
Other income		11			36			68			143
		149			203			446			895
Expenses:
Interest expense		35			132			143			415
Depreciation on operating leases		3			8			4			37
Provision for credit losses		89			255			52			384
General and administrative expenses		39			50			203			266
Administrative expenses reimbursed to affiliate		15			16			45			61
Loss on derivative activities		31			178			117			203
		212			639			564			1,366
Net loss	$	(63	)	$	(436	)	$	(118	)	$	(471	)
Net loss allocated to limited partners	$	(62	)	$	(432	)	$	(117	)	$	(466	)
Weighted average number of limited partner units outstanding during the period		171,696			171,696			171,696			171,696
Net loss per weighted average limited partner unit	$	(0.36	)	$	(2.51	)	$	(0.68	)	$	(2.72	)

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

4

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

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Net loss	$	(63	)	$	(436	)	$	(118	)	$	(471	)
Amortization of loss on financial derivatives reclassified from accumulated other comprehensive loss		49			238			194			439
Comprehensive (loss) income	$	(14	)	$	(198	)	$	76		$	(32	)

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

5

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
Balance, January 1, 2013		$	(225	)		171,696		$	(7,488	)		$	(258	)		$	(7,971	)
Net loss			(1	)		-			(117	)			-				(118	)
Other comprehensive income			-			-			-				194				194
Balance, September 30, 2013		$	(226	)		171,696		$	(7,605	)		$	(64	)		$	(7,895	)

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

6

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

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2013			2012
Cash flows from operating activities:
Net loss	$	(118	)	$	(471	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Gains on sales of equipment and lease dispositions, net		(214	)		(118	)
Depreciation on operating leases		4			37
Provision for credit losses		52			384
Amortization of deferred financing costs		45			74
Net loss on derivative activities		117			474
Changes in operating assets and liabilities:
Other assets		7			38
Accounts payable and accrued expenses, and other liabilities		(95	)		(325	)
Due to affiliates		(166	)		(17	)
Net cash (used in) provided by operating activities		(368	)		76
Cash flows from investing activities:
Purchases of leases and loans		–			(7	)
Proceeds from leases and loans		2,011			6,004
Security deposits returned		(64	)		(173	)
Net cash provided by investing activities		1,947			5,824
Cash flows from financing activities:
Repayment of debt		(1,914	)		(6,168	)
Decrease in restricted cash		307			517
Increase in deferred financing costs		–			(89	)
Cash distributions to partners		–			(203	)
Net cash used in financing activities		(1,607	)		(5,943	)
Decrease in cash		(28	)		(43	)
Cash, beginning of period		35			48
Cash, end of period	$	7		$	5
Supplemental cash flow disclosure:
Cash paid for interest	$	101		$	73

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

7

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

Notes To Consolidated Financial Statements

September 30, 2013

(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 was expected to have a minimum of 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. All of the Fund’s leases and loans mature by the end of 2027. 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 was to generate regular cash distributions to its partners from its equipment finance portfolio over the life of the Fund.

As of September 30, 2013 and 2012, in addition to its 1% general partnership interest, the General Partner also had invested approximately $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 September 30, 2013, and the results of its operations and cash flows for the periods presented. The results of operations for the three and nine month periods ended September 30, 2013 are not necessarily indicative of results of the Fund’s operations for the 2013 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, 2012, as filed with the SEC on March 28, 2013.

Reclassification

Certain reclassifications have been made to 2012 reported amounts to conform to the current year presentation.  Amortization of accumulated other comprehensive loss on the Fund’s interest rate swaps of approximately $238,000 and $439,000 for the three and nine months ended September 30, 2012, respectively, was reclassified from interest expense to loss on derivative activities. Interest rate swap payments of approximately $66,000 and $270,000 for the three and nine month periods ended September 30, 2012, respectively, were reclassified from loss on derivative activities to interest expense. These reclassifications did not impact the Fund’s financial position, net loss or cash flows for the periods presented.

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, 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.

8

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

Notes To Consolidated Financial Statements – (Continued)

September 30, 2013

(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 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 Fund 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.

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 progresses 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, past due accounts are referred to our internal recovery group consisting of a team of credit specialists and collectors. The group utilizes several resources in an attempt to maximize recoveries on past due accounts including: 1) initiating litigation against the end user customer and any personal guarantor, 2) referring the account to an outside law firm or collection agency and/or 3) repossessing and remarketing the equipment through third parties. 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. The Fund discontinues the recognition of revenue for leases and loans for which payments are more than 90 days past due.  Payments received while leases and loans are on non-accrual status are recorded as a reduction of principal.  Generally, 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.

9

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

Notes To Consolidated Financial Statements – (Continued)

September 30, 2013

(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.

Effective October 1, 2010, the Fund discontinued the use of hedge accounting. Therefore, 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 in 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 the 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 loss as of September 30, 2013 is being reclassified into earnings 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.  The Fund recognizes late fee income as fees are collected.  Late fee income was $9,000 and $57,000 for the three and nine month periods ended September 30, 2013, respectively, and $32,000 and $126,000 for the three and nine month periods ended September 30, 2012, respectively.

10

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

Notes To Consolidated Financial Statements – (Continued)

September 30, 2013

(Unaudited)

NOTE 3 – INVESTMENT IN LEASES AND LOANS

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

	September 30,			December 31,
	2013			2012
Direct financing leases (a)	$	500		$	1,880
Loans (b)		617			1,194
Operating leases		–			11
		1,117			3,085
Allowance for credit losses		(80	)		(260	)
	$	1,037		$	2,825

(a) The Fund’s direct financing leases are for initial lease terms generally ranging from 24 to 144 months.

(b) The interest rates on loans generally range from 6% to 19%.

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

	September 30, 2013						December 31, 2012
	Leases			Loans			Leases			Loans
Total future minimum lease payments	$	527		$	725		$	1,841		$	1,418
Unearned income		(73	)		(103	)		(172	)		(174	)
Residuals, net of unearned residual income		53			-			229			-
Security deposits		(7	)		(5	)		(18	)		(50	)
	$	500		$	617		$	1,880		$	1,194

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

	September 30,			December 31,
	2013			2012
Equipment	$	47		$	160
Accumulated depreciation		(47	)		(149	)
	$	-		$	11

11

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

Notes To Consolidated Financial Statements – (Continued)

September 30, 2013

(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) as of September 30, 2013 and December 31, 2012, respectively (in thousands):

	September 30, 2013					December 31, 2012
Age of receivable	Investments in leases and loans		%			Investments in leases and loans		%
Current	$	968		86.66	%	$	2,719		88.14	%
Delinquent:
31 to 91 days past due		71		6.36	%		84		2.72	%
Greater than 91 days (a)		78		6.98	%		282		9.14	%
	$	1,117		100	%	$	3,085		100	%

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

The Fund had $78,000 and $282,000 of leases and loans on nonaccrual status as of September 30, 2013 and December 31, 2012, respectively.  The credit quality of the Fund’s investment in leases and loans as of September 30, 2013 and December 31, 2012 is as follows (in thousands):

	September 30,  2013		December 31,  2012
Performing	$	1,039	$	2,803
Nonperforming		78		282
	$	1,117	$	3,085

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Allowance for credit losses, beginning of period	$	35		$	150		$	260		$	150
Provision for credit losses		89			255			52			384
Charge-offs		(77	)		(170	)		(374	)		(497	)
Recoveries		33			25			142			223
Allowance for credit losses, end of period (a)	$	80		$	260		$	80		$	260

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

NOTE 5 – DEFERRED FINANCING COSTS

As of September 30, 2013 and December 31, 2012, deferred financing costs include $18,000 and $63,000, respectively, of unamortized deferred financing costs which are being amortized over the estimated life of the related debt. Accumulated amortization as of September 30, 2013 and December 31, 2012 was approximately $1.2 million each period.

NOTE 6 – BANK DEBT

The Fund has a secured term loan agreement with Portigon Financial Services (“Portigon” or the “Lender”), previously known as WestLB AG, New York Branch, which is collateralized by specific lease receivables and related equipment.

12

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

Notes To Consolidated Financial Statements – (Continued)

September 30, 2013

(Unaudited)

As of September 30, 2013 and December 31, 2012, the outstanding balance under this financing arrangement was $1.5 million and $3.4 million, respectively. 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 (maturity date). 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 5.2%.  As of September 30, 2013, $1.1 million of leases and loans and $92,000 of restricted cash were pledged as collateral under this facility.

On June 29, 2012, the Fund amended its agreement with the Lender to remove certain covenants from the loan agreement.  In exchange for the foregoing, the Fund and the parent of the Fund’s General Partner agreed to a limited guaranty of a portion of the remaining amount due to the Lender.  The Lender has further agreed to accept a discount on a payoff of the loan at the maturity date, up to a maximum of $250,000, in the event the natural runoff of the portfolio had not paid off the loan balance prior to such date.  As of September 30, 2013 the Fund was in compliance with the term facility.

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. To manage interest rate risk, the Fund employs a hedging strategy using derivative financial instruments such as interest rate swaps.  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 September 30, 2013, the Fund has not posted any collateral related to these agreements. If the Fund had breached any of these provisions at September 30, 2013, it could be required to settle its obligations under the agreements at their termination value of $25,000.

At September 30, 2013, the Fund had 9 interest rate swap contracts that generally terminate on various dates ranging through 2015, which coincide with the maturity period of our portfolio of leases and loans which collateralize the credit facility.

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 September 30, 2013 and December 31, 2012 and on the consolidated statements of operations for the nine months ended September 30, 2013 and 2012 (dollars in thousands):

	2013			2012
Fixed swaps (notional amount)	$	1,575		$	3,677
Range of receive rate		0.19% - 0.24	%		0.21% - 0.24	%
Range of pay rate		2.90% - 5.36	%		2.90% - 5.74	%

The following table indicates the fair value of the derivative contracts as of September 30, 2013 and December 31, 2012 (in thousands):

	Balance Sheet Location		Derivative Assets		Derivative Liabilities
2013	Derivative liabilities, at fair value	$	-	$	23
2012	Derivative liabilities, at fair value	$	-	$	99

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

Notes To Consolidated Financial Statements – (Continued)

September 30, 2013

(Unaudited)

The following table summarizes the effect of the interest rate swaps on the consolidated statement of operations and other comprehensive income for the nine months ended September 30, 2013 and 2012 (in thousands):

	Location of loss reclassified from AOCI to the statement of operations	Amount of loss reclassified from AOCI to the statements of operations		Location of loss recognized  in the statements of operations	Amount of loss recognized in the statements of operations
2013	(a)	$	194	(b)	$	2
2012	(a)	$	439	(b)	$	35

(a) Losses reclassified from accumulated other comprehensive loss were recognized in loss on derivative activities on the accompanying statements of operations.

(b) All changes in fair value were recognized in loss on derivative activities and all cash payments on derivatives were recognized in interest expense. The Fund recognized an expense of $79,000 and $270,000 in interest expense for the nine month periods ended September 30, 2013 and 2012, respectively, related to cash payments on derivatives.  Changes in fair value of $77,000 and $236,000 were recognized as a reduction to expense within loss on derivative activities for the nine month periods ended September 2013 and 2012, respectively.

As of September 30, 2013, $64,000 of the remaining balance in accumulated other comprehensive loss is expected to be charged to earnings over the next 12 months.

NOTE 8 – FAIR VALUE MEASUREMENT

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.

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 September 30, 2013	$	-	$	(23	)	$	-	$	(23	)
Interest Rate Swaps at December 31, 2012	$	-	$	(99	)	$	-	$	(99	)

14

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

Notes To Consolidated Financial Statements – (Continued)

September 30, 2013

(Unaudited)

The Fund is also required to disclose the fair value of financial instruments not measured at fair value for which it is practicable to estimate that value.  For cash, restricted cash, receivables, and payables, the carrying amounts approximate fair value because of the short term maturity of these instruments.

The Fund is also required to disclose the methods used to estimate fair value on financial instruments not measured at fair value and the level within the fair value hierarchy that those fair value measurements are categorized. The carrying value and fair value of the Fund’s debt at September 30, 2013 and December 31, 2012 is as follows:

	Carrying			Fair Value Measurements Using							Liabilities
	Value			Level 1		Level 2			Level 3		At Fair Value
Bank debt, at September 30, 2013	$	(1,479	)	$	-	$	(1,257	)	$	-	$	(1,257	)
Bank debt, at December 31, 2012	$	(3,393	)	$	-	$	(3,301	)	$	-	$	(3,301	)

The fair value of debt as of September 30, 2013 and December 31, 2012 was determined using quoted prices from broker-dealers of comparable securities as of the measurement date.

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 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 September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Administrative expenses	$	15	$	16	$	45	$	61

Management Fees. The General Partner has waived all future management fees. Through September 30, 2013, the General Partner has earned and waived management fees of $1.9 million, of which $47,000 related to the nine months ended September 30, 2013.

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

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

Distributions. The General Partner owns a 1% general partner interest and a 6% limited partner interest in the Fund. The General Partner was paid cash distributions of $2,000 and $10,000 for its general partner and limited partner interests in the Fund, respectively, for the nine months ended September 30, 2012.  The Fund ceased making regular cash distributions in July 2012.

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.

NOTE 11 – SUBSEQUENT EVENTS

The Fund has evaluated its September 30, 2013 financial statements for subsequent events through the date the financial statements were issued.  The Fund is not aware of any subsequent events which would require recognition or disclosure in the financial statements.

15

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, 2012.

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 were expected to have a minimum of 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. All of our leases and loans mature by the end of 2027. We will terminate on December 31, 2027, unless sooner dissolved or terminated as provided in the 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 an affiliate of 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.  Limited partners have received total distributions ranging from approximately 52% to 66% of their original amount invested, depending upon when the investment was made.  Distributions to our limited partners were made at a rate of 2.0% of their original capital invested in 2011 and through June of 2012.  In July 2012, we ceased making regular cash distributions to our partners, as we are in our final liquidation process, which will continue until all of our leases are collected or sold and our debts are paid.  Our General Partner will continue to work to maximize the amount that can be distributed to our limited partners in the future.  Future cash distributions are not guaranteed, are solely dependent on our performance, and are impacted by a number of factors, which include lease and loan defaults by our customers, accelerated principal payments on our debt facilities required per our agreements, and prevailing economic conditions.  Based on our recent performance, which was negatively impacted by the economic recession, and due to the relatively small portfolio size and fixed administrative partnership maintenance costs, it does not appear that there will be future distributions to limited partners.  Any such distributions to our limited partners are dependent upon excess cash remaining after we have repaid our obligations.  We are currently exploring alternatives to terminate the Fund since future distributions to limited partners are not likely.

16

General Economic Overview

For the quarter ended September 30, 2013, U. S. economic activity showed overall growth and improvement in many sectors of the economy.  The overall improvement was insufficient for the Federal Reserve to begin the highly anticipated tapering of asset purchases under the Quantitative Easing program. Failure to begin tapering resulted in some equity and debt market gyrations which quickly settled down and business sentiment seemed to adjust favorably to the prospect of continued monetary stimulus from the Federal Reserve in the absence of any fiscal policy direction from the Congress.  Toward the end of the quarter the Congressional inaction with respect to the impending government shutdown, debate over the debt ceiling, and the implementation of the Affordable Care Act dominated the economic discussion.

Some specific key economic indicators and reports that were released in the second quarter of 2013 are summarized below.  These indicators have especially important relevance to the performance of small and medium-sized businesses, and loans and leases to small and medium-sized businesses comprise the majority of the LEAF Funds portfolios.

· The National Association of Realtors Pending Home Sales Index, a forward-looking indicator based on contract signings released in September 2013, showed that pending home sales have declined recently but still remain above levels from a year ago.  Rising interest rates, rising home prices, and tight inventory are contributing to the slowing home sales.

· The S&P Case-Shiller Home Price Indices released in September 2013 for the 10- and 20-City Composites showed 12% increases year over year for the last 12 months.

· One sign that the economy continues to improve for small businesses, the number of commercial bankruptcy filings (as reported by the American Bankruptcy Institute) for the first nine months of 2013 were down 23% as compared to the same period in 2012.

· In September 2013, The Bureau of Labor Statistics reported that the unemployment rate continued to drop slightly and is now at 7.3%.

· In September 2013, The Bureau of Labor Statistics reported a continuation of monthly new jobs creation, albeit at a pace that is not sufficient to produce a significant reduction in the unemployment rate.

· The Monthly Confidence Index for the Equipment Finance Industry continued to increase, demonstrating equipment finance industry participants’ increasing optimism despite continued moderate demand for equipment.  The September 2013 Index increased to 61.3 from 61.0 in August 2013.

· The National Association of Credit Management Index for September 2013 showed continued improvement in business credit conditions. The Index takes into account activities like credit extended, credit approval rates, delinquencies, and bankruptcies. The Index measured 56.4 (any number over 50 shows improving conditions), and is at the highest level since the start of the Great Recession.

· The September 2013 Institute of Supply Management report on manufacturing showed expansion for the fourth straight month and the PMI index registered 56.2, which is the highest reading for 2013, and demonstrated that the manufacturing sector is continuing to grow in tandem with the overall economy, which has shown growth for 52 consecutive months.

· The Thomson Reuters/PayNet Small Business Lending Index, which measures the volume of lending to small businesses, rose to its highest level since August 2007.  At the same time, delinquencies of 31 to 180 days fell to an all time low as measured by the Thomson Reuters/PayNet Small Business Delinquency Index.

· The National Federation of Independent Business (NFIB) reported in September 2013 that the NFIB Small Business Optimism Index remained flat as compared to the previous month. The Index measures ten different items including small business sentiment about business expansion, hiring, and sales trends.  Of the ten items measured, five were down, four were up, and one was unchanged as compared to the prior month.

· The Equipment Leasing & Finance Foundation’s Q4 U.S. Economic Outlook indicates improving fundamentals weighed down by a number of headwinds (primarily related to monetary and fiscal policies), resulting in subpar growth. The Q4 forecast is that the U. S. economy will generate positive but slow growth.

Taken altogether, these indicators point to an economy that is continuing to grow steadily but slowly.  It is also an economy that is facing some significant challenges.  An extended government shutdown is projected to cause a meaningful reduction in GDP.  The extent and magnitude of consequences of a government default are unknown. The outcomes, or lack of outcomes with respect to the government shutdown, debt ceiling negotiations, Affordable Care Act implementation, and a potential government default, add a great deal of uncertainty for economic performance in Q4 and beyond.  This economic uncertainty may have an effect on the performance of leases and loans which have been largely extended to small to medium-sized businesses which are particularly sensitive to economic dislocations.

17

Finance Receivables and Asset Quality

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

	September 30, 2013			December 31, 2012
Investment in leases and loans, net	$	1,037		$	2,825
Number of contracts		700			2,500
Number of individual end users (a)		600			2,300
Average original equipment cost	$	32.8		$	15.7
Average initial lease term (in months)		68			65
Average remaining lease term (in months)		26			21
States accounting for more than 10% of lease and loan portfolio:
California		27	%		20	%
Florida		17	%		11	%
New Jersey		12	%		6	%
Types of equipment accounting for more than 10% of lease and loan portfolio:
Medical Equipment		47	%		35	%
Industrial Equipment		35	%		25	%
Office Equipment		5	%		14	%
Types of businesses accounting for more than 10% of lease and loan portfolio:
Services		66	%		60	%
Manufacturing		13	%		9	%

(a) Located in most of 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 23% of our portfolio based on original cost of the equipment.

18

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):

	As of and for the
	Nine Months Ended September 30,
							Change
	2013			2012			$			%
Investment in leases and loans before allowance for credit losses	$	1,117		$	4,698		$	(3,851	)		(76	)%
Less: allowance for credit losses		(80	)		(260	)		(180	)		(69	)%
Investment in leases and loans, net	$	1,037		$	4,438		$	(3,401	)		(77	)%
Weighted average investment in direct financing leases and loans before allowance for credit losses	$	1,828		$	7,528		$	(5,700	)		(76	)%
Non-performing assets	$	78		$	478		$	(400	)		(84	)%
Charge-offs, net of recoveries	$	232		$	274		$	(42	)		(15	)%
As a percentage of finance receivables:
Allowance for credit losses		7.2	%		5.5	%
Non-performing assets		7.0	%		10.2	%
As a percentage of weighted average finance receivables:
Charge-offs, net of recoveries		12.69	%		3.6	%

Our allowance for credit losses is our estimate of losses inherent in our commercial finance receivables at the current time. The allowance is based on a number of qualitative and quantitative 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 portfolio is comprised of a large number of leases and loans that were originated prior to the recession.  Whereas payment delinquencies have improved, we have qualitatively reflected in our allowance continued uncertainty as to the performance of our portfolio. 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.

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 have continued as the U.S. economy recovers, as evidenced by our charge-offs (net of recoveries) as a percentage of our weighted average finance receivables of 12.69% for the nine month period ended September 30, 2013.  Our non-performing assets as a percentage of finance receivables decreased from 10.2% at September 30, 2012 to 7.0% at September 30, 2013, largely due to our significant charge-offs.  Our allowance for credit losses increased to 7.2% of our portfolio at September 30, 2013 as compared to 5.5% of our portfolio at September 30, 2012 as a result of our migration analysis and other qualitative factors as noted above.

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, 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 2012 under “Management’s Discussion and Analysis of Financial Condition and Analysis of Financial Condition and Results of Operations- Critical Accounting Policies and Estimates.”  There have been no material changes to those policies through September 30, 2013.

19

Results of Operations

Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012

							Increase (Decrease)
	2013			2012			$			%
Revenues:
Interest on equipment financings	$	7		$	142		$	(135	)		(95	)%
Rental income		3			11			(8	)		(73	)%
Gains on sales of equipment and lease dispositions, net		128			14			114			814	%
Other income		11			36			(25	)		(69	)%
		149			203			(54	)		(27	)%
Expenses:
Interest expense		35			132			(97	)		(73	)%
Depreciation on operating leases		3			8			(5	)		(63	)%
Provision for credit losses		89			255			(166	)		(65	)%
General and administrative expenses		39			50			(11	)		(22	)%
Administrative expenses reimbursed to affiliate		15			16			(1	)		(6	)%
Loss on derivative activities		31			178			(147	)		(83	)%
		212			639			(427	)		(67	)%
Net loss	$	(63	)	$	(436	)	$	373
Net loss allocated to limited partners	$	(62	)	$	(432	)	$	370

The overall decrease in revenues is primarily a result of a decreasing lease and loan portfolio, as we are in our liquidation phase, whereby we are 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 $1.3 million for the three months ended September 30, 2013 as compared to $5.6 million for the three months ended September 30, 2012, a decrease of $4.3 million or 77%.  As we entered our liquidation phase in August 2009, we are not permitted under the Partnership Agreement to acquire additional leases and loans. 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 from $14,000 for the three months ended September 30, 2012 to $128,000 for the three months ended September 30, 2013, an increase of 814%. Gains and losses on sales of equipment may vary significantly from period to period.

• Other income decreased from $36,000 for the three months ended September 30, 2012 to $11,000 for the three months ended September 30, 2013, a decrease of $25,000 or 69%.  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 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.

• A decrease in interest expense primarily due to the decrease in our bank debt caused by the ongoing maturities of our portfolio of leases and loans. Weighted average borrowings for the three months ended September 30, 2013 were $1.7 million as compared to $5.6 million for the three months ended September 30, 2012.

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

• A decrease in our general and administrative expenses and administrative expenses reimbursed to affiliate due to the continued maturity of our lease and loan portfolio.

The net loss per limited partner unit, after the net loss allocated to our General Partner, for the three months ended September 30, 2013 was $0.36 compared to a net loss per limited partner unit of $2.51 for the three month period ended September 30, 2012.  The weighted average number of limited partner units outstanding was 171,696 for both periods.

20

Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012

							Increase (Decrease)
	2013			2012			$			%
Revenues:
Interest on equipment financings	$	149		$	577		$	(428	)		(74	)%
Rental income		15			57			(42	)		(74	)%
Gains on sales of equipment and lease dispositions, net		214			118			96			81	%
Other income		68			143			(75	)		(52	)%
		446			895			(449	)		(50	)%
Expenses:
Interest expense		143			415			(272	)		(66	)%
Depreciation on operating leases		4			37			(33	)		(89	)%
Provision for credit losses		52			384			(332	)		(86	)%
General and administrative expenses		203			266			(63	)		(24	)%
Administrative expenses reimbursed to affiliate		45			61			(16	)		(26	)%
Loss on derivative activities		117			203			(86	)		(42	)%
		564			1,366			(802	)		(59	)%
Net loss	$	(118	)	$	(471	)	$	353
Net loss allocated to limited partners	$	(117	)	$	(466	)	$	349

The overall decrease in revenues is primarily a result of a decreasing lease and loan portfolio as we are in our liquidation phase whereby we are 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 $1.8 million for the nine months ended September 30, 2013 as compared to $7.5 million for the nine months ended September 30, 2012, a decrease of $5.7 million or 76%.  As we entered our liquidation phase in August 2009, we are not permitted under the Partnership Agreement to acquire additional leases and loans. 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 $214,000 for the nine months ended September 30, 2013 compared to a net gain of $118,000 for the nine months ended September 30, 2012. Gains and losses on sales of equipment may vary significantly from period to period.

• Other income decreased from $143,000 for the nine months ended September 30, 2012 to $68,000 for the nine months ended September 30, 2013, a decrease of $75,000 or 52%.  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 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.

• A decrease in interest expense primarily due to the decrease in our bank debt caused by the ongoing maturities of our portfolio of leases and loans. Weighted average borrowings for the nine months ended September 30, 2013 were $2.2 million as compared to $7.6 million for the nine months ended September 30, 2012.

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

• A decrease in our general and administrative expenses and administrative expenses reimbursed to affiliate due to the continued maturity of our lease and loan portfolio.

The net loss per limited partner unit, after the net loss allocated to our General Partner, for the nine months ended September 30, 2013 and 2012 was $0.68 and $2.72, respectively, based on a weighted average number of limited partner units outstanding of 171,696 for both periods.

21

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 prior to July 2012, distributions to our limited partners. As noted previously, we ceased making regular cash distributions to our limited partners in July 2012 and it is not probable that there will be any more distributions.

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 September 30, 2013, the total future minimum lease and loan payments scheduled to be received was $1.3 million which excludes the $80,000 allowance for credit losses. The Fund also derives cash from fees paid by our customers and from recoveries of previous bad debts. The following table sets forth our sources and uses of cash for the periods indicated (in thousands):

	Nine Months Ended September 30,
	2013			2012
Net cash (used in) provided by operating activities	$	(368	)	$	76
Net cash provided by investing activities		1,947			5,824
Net cash used in financing activities		(1,607	)		(5,943	)
Decrease in cash	$	(28	)	$	(43	)

Cash decreased by $28,000 primarily due to debt repayments of $1.9 million and cash used in operations of $368,000 partially offset by net proceeds from leases and loans of $1.9 million.

As of September 30, 2013, $1.5 million was outstanding under our secured term loan agreement with Portigon Financial Services (“Portigon” or the “Lender”), previously known as WestLB AG, New York Branch. No further borrowings are available under the secured term loan agreement. This facility is secured by eligible leases and loans that have been pledged as collateral. As of September 30, 2013, $1.1 million of leases and loans and $92,000 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 5.2%. 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 (maturity date).

On June 29, 2012, we amended our agreement with the Lender to remove certain covenants from the loan agreement.  In exchange for the foregoing, we and the parent of our General Partner agreed to a limited guaranty of a portion of the remaining amount due to the Lender.  The Lender has further agreed to accept a discount on a payoff of the loan at the maturity date, up to a maximum of $250,000, in the event the natural runoff of the portfolio had not paid off the loan balance prior to such date.  We expect that the lease portfolio collateralizing this loan will be sufficient to repay the debt, but due to uncertain economic conditions this cannot be assured.

As of September 30, 2013 we were in compliance with the term facility.

As noted previously, we ceased making regular distributions to our partners in July 2012.  Partners’ distributions paid for the nine months ended September 30, 2012 were $202,000.  Cumulative partner distributions paid from our inception to September 30, 2013 were approximately $9.6 million.  Any future cash distributions to our limited partners are dependent upon excess cash remaining after we have repaid our obligations.  Based on our recent performance and small portfolio size, which was negatively impacted by the economic recession, it does not appear probable that there will be further distributions to limited partners.

The General Partner waived its management fees beginning May 1, 2009. Accordingly, we did not record any management fee expense for the nine months ended September 30, 2013. 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 September 30, 2013, the General Partner has earned and waived management fees of $1.9 million, of which $47,000 related to the nine month period ended September 30, 2013.

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 September 30, 2013, our analysis indicated a need for an allowance for credit losses of $80,000. As our lease portfolio ages, and if the economy in the United States deteriorates, we may need to increase our allowance for credit losses.

22

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 quarter ended September 30, 2013 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

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)
10.9	Ninth Amendment to WestLB AG, New York Branch, Secured Loan Agreement (11)
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 September 30, 2013 and December 31, 2012; (ii) the Consolidated Statements of Operations for the three and nine month periods ended September 30, 2013 and 2012; (iii) the Consolidated Statements of Comprehensive Income (Loss) for the three and nine month periods ended September 30, 2013 and 2012; (iv) the Consolidated Statement of Changes in Partners’ Deficit for the nine months ended September 30, 2013; (iv) the Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2013 and 2012; and, (iv) the Notes to Consolidated Financial Statements.

(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.
(11)	Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 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, its General Partner
November 14, 2013	By:	/s/ CRIT S. DEMENT
		CRIT S. DEMENT
		Chief Executive Officer
November 14, 2013	By:	/s/ ROBERT K. MOSKOVITZ
		ROBERT K. MOSKOVITZ
		Chief Financial Officer

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