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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

For the Quarterly Period Ended March 31, 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: 000-53904

 

 

MACQUARIE EQUIPMENT LEASING

FUND, LLC

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   26-3291543

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

225 Franklin St, 17th Floor, Suite 1700

Boston, Massachusetts 02110

(Address of Principal Executive Offices) (Zip Code)

(617) 457-0645

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report): N/A

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2

of the Exchange Act. (Check one):

 

Large Accelerated Filer   ¨    Accelerated Filer   ¨
Non-accelerated Filer   ¨    Smaller Reporting Company   x

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

There were 9,488,337 shares of limited liability company membership interests outstanding at May 15, 2013.

 

 

 


Table of Contents

MACQUARIE EQUIPMENT LEASING FUND, LLC

Table of Contents

 

Part I.

 

Financial Information

  

Item 1.

 

Financial Statements

  
 

Balance Sheets as of March 31, 2013 and December 31, 2012 (Unaudited)

     3   
 

Statements of Operations for the Quarters Ended March 31, 2013 and 2012 (Unaudited)

     4   
 

Statements of Cash Flows for the Quarters Ended March 31, 2013 and 2012 (Unaudited)

     5   
 

Statements of Changes in Members’ Equity for the Quarter Ended March 31, 2013 (Unaudited)

     6   
 

Notes to Financial Statements (Unaudited)

     7   

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     14   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     17   

Item 4.

 

Controls and Procedures

     17   

Part II.

 

Other Information

  

Item 1.

 

Legal Proceedings

     18   

Item 1A.

 

Risk Factors

     18   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     18   

Item 3.

 

Defaults Upon Senior Securities

     18   

Item 4.

 

Mine Safety Disclosures

     18   

Item 5.

 

Other Information

     18   

Item 6.

 

Exhibits

     18   
 

Signatures

     19   

Macquarie Equipment Leasing Fund, LLC is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and its obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of Macquarie Equipment Leasing Fund, LLC.


Table of Contents

Part I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

MACQUARIE EQUIPMENT LEASING FUND, LLC

BALANCE SHEETS

(Unaudited)

 

     March 31, 2013      December 31, 2012  

ASSETS

     

Current Assets

     

Cash and cash equivalents

   $ 26,231,195       $ 32,121,997   

Restricted cash

     1,821,870         1,785,172   

Net investment in finance lease

     725,506         792,557   

Lease receivable

     1,243,745         1,319,633   

Maintenance reserve and other receivables

     387,738         410,198   

Other assets

     309,320         —      
  

 

 

    

 

 

 

Total Current Assets

     30,719,374         36,429,557   

Non-current Assets

     

Net investment in finance lease

     1,655,320         1,789,347   

Leased equipment at cost (net of accumulated depreciation of $4,469,714 and $3,563,548, respectively)

     51,532,410         46,262,573   
  

 

 

    

 

 

 

Total Non-current Assets

     53,187,730         48,051,920   
  

 

 

    

 

 

 

Total Assets

   $ 83,907,104       $ 84,481,477   
  

 

 

    

 

 

 

LIABILITIES AND MEMBERS’ EQUITY

     

Current Liabilities

     

Fees payable (related party)

   $ 104,499       $ 33,784   

Deferred finance and rental income

     454,267         215,691   

Distribution payable

     647,178         649,885   

Other payables

     296,365         176,516   
  

 

 

    

 

 

 

Total Current Liabilities

     1,502,309         1,075,876   

Non-current Liabilities

     

Maintenance reserves and other payables

     2,755,736         2,354,943   
  

 

 

    

 

 

 

Total Non-current Liabilities

     2,755,736         2,354,943   
  

 

 

    

 

 

 

Total Liabilities

   $ 4,258,045       $ 3,430,819   
  

 

 

    

 

 

 

Commitments and Contingencies (Note 7)

     

Members’ Equity

     

Shares of membership interests, $10.00 par value as may be reduced (i) under a distribution reinvestment plan, (ii) for volume discounts, or (iii) for reductions in selling commissions

     

Authorized: 15,800,500 shares;

     

Issued and outstanding: 9,524,980 shares as of March 31, 2013 and 9,564,814 shares as of December 31, 2012, net of repurchases

     70,153,504         72,382,031   

Accumulated surplus

     9,495,555         8,668,627   
  

 

 

    

 

 

 

Total Members’ Equity

     79,649,059         81,050,658   
  

 

 

    

 

 

 

Total Liabilities and Members’ Equity

   $ 83,907,104       $ 84,481,477   
  

 

 

    

 

 

 

See accompanying notes to the Financial Statements.

 

3


Table of Contents

MACQUARIE EQUIPMENT LEASING FUND, LLC

STATEMENTS OF OPERATIONS

(Unaudited)

 

     Quarter Ended  
     March 31, 2013      March 31, 2012  

REVENUE

     

Participating interest income (related party)

   $ —          $ 36,637   

Finance and rental income

     2,054,037         2,142,641   

Gain on sale of participating interest (related party)

     —            1,859,964   

Other income

     6,856         —     
  

 

 

    

 

 

 

Total revenue

     2,060,893         4,039,242   
  

 

 

    

 

 

 

EXPENSES

     

Operating expenses (related party)

     94,710         145,363   

Management fees (related party)

     109,156         109,958   

Depreciation

     906,166         1,152,834   

Other expenses

     123,932         124,152   
  

 

 

    

 

 

 

Total expenses

     1,233,964         1,532,307   
  

 

 

    

 

 

 

Net income

   $ 826,929       $ 2,506,935   
  

 

 

    

 

 

 

Basic and diluted earnings per share

   $ 0.09       $ 0.30   

Weighted average number of shares outstanding: basic and diluted

     9,534,717         8,299,816   
  

 

 

    

 

 

 

See accompanying notes to the Financial Statements.

 

4


Table of Contents

MACQUARIE EQUIPMENT LEASING FUND, LLC

STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Quarter Ended  
     March 31, 2013     March 31, 2012  

Cash flow from operating activities:

    

Net income

   $ 826,929      $ 2,506,935   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation

     906,166        1,152,834   

Gain on sale of participating interest

     —          (1,859,964

Changes in operating assets and liabilities:

    

Fees payable (related party)

     70,715        40,922   

Lease receivables

     75,888        (904,762

Net investment in finance lease

     201,078        70,088   

Other receivables

     31,910        192,618   

Other payables

     119,849        (85,032

Deferred finance and rental income

     238,576        (232,923

Other assets

     (309,320     —     
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,161,791        880,716   
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Proceeds from participating interest—Future lease income (related party)

     —          165,495   

Purchase of equipment

     (6,176,003     (223,000

Restricted cash

     (36,698     (62,415

Security Deposit

     354,645        —     
  

 

 

   

 

 

 

Net cash (used in) investing activities

     (5,858,056     (119,920
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Proceeds from issuance of shares

     —          24,002,606   

Payment of offering related expenses

     —          (2,554,654

Distribution paid to members

     (1,881,602     (979,791

Capital contributions received in advance

     —          (10,000

Repurchase of shares

     (349,633     —     

Maintenance reserves

     36,698        62,415   
  

 

 

   

 

 

 

Net cash (used in)/provided by financing activities

     (2,194,537     20,520,576   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (5,890,802     21,281,372   

Cash and cash equivalents, beginning of the period

     32,121,997        10,328,871   
  

 

 

   

 

 

 

Cash and cash equivalents, end of the period

   $ 26,231,195      $ 31,610,243   
  

 

 

   

 

 

 

Supplemental disclosures of cash flow information

    

Non cash investing and financing activities

    

Issuance of shares under distribution reinvestment plan

   $ —        $ 500,092   

Accrued offering cost

   $ —        $ 123,067   

Maintenance reserve receivable

   $ 9,450      $ 228,594   

Accrued purchase of equipment

   $ 61,257      $ —     

See accompanying notes to the Financial Statements.

 

5


Table of Contents

MACQUARIE EQUIPMENT LEASING FUND, LLC

STATEMENT OF CHANGES IN MEMBERS’ EQUITY

(Unaudited)

 

           Membership interests     Accumulated surplus         
     Members’
shares
    Additional
members  (1)
    Managing
member
    Additional
members  (1)
     Managing
member
     Total  

Balance at December 31, 2012

     9,564,814      $ 71,301,468      $ 1,080,564      $ 8,608,829       $ 59,797       $ 81,050,658   

Repurchase of shares

     (39,834     (349,633     —          —           —           (349,633

Distribution to members

       (1,846,980     (31,915     —           —           (1,878,895

Net income

       —          —          812,883         14,046         826,929   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Balance at March 31, 2013

     9,524,980      $ 69,104,855      $ 1,048,649      $ 9,421,712       $ 73,843       $ 79,649,059   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

(1) Additional members represent all members other than the Managing member.

See accompanying notes to the Financial Statements.

 

6


Table of Contents

MACQUARIE EQUIPMENT LEASING FUND, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND BUSINESS OPERATIONS

Macquarie Equipment Leasing Fund, LLC ( the “Fund” or the “Company”), a Delaware limited liability company, was formed on August 21, 2008 for the purpose of being an equipment leasing program that will acquire a diversified portfolio of equipment, equipment leases and other equipment-related investments. The majority of the equipment is expected to be leased to corporate clients. The Fund’s objective is to generate income through the collection of lease rentals and other revenues, through the sale of leased and off lease equipment and other portfolio investments. The Fund’s fiscal year end is December 31.

The manager of the Fund is Macquarie Asset Management Inc. (the “Manager” or the “Managing member”), a member of the Macquarie Group of Companies which is comprised of Macquarie Group Limited and its subsidiaries and affiliates worldwide (the “Macquarie Group”). Macquarie Group Limited is headquartered in Australia and is listed on the Australian Stock Exchange. The Manager made an initial capital contribution of $5,000. The Manager made additional capital contributions to the fund on March 31, 2010 and June 22, 2010 for $500,000 and $1,000,000, respectively. The Manager earns fees by providing or arranging all services necessary and desirable for the operations of the Fund, including those relating to equipment acquisitions and disposals, asset management and administrative, reporting and regulatory services. The Fund reimburses the Manager for costs incurred for managing the Fund and the Fund’s portfolio of equipment, equipment lease and other equipment-related investments.

The Fund filed Supplement No. 6 to Registration Statement on Form S-1 (the “Registration Statement on Form S-1”) with the Securities and Exchange Commission on February 1, 2012.

The initial closing date for the Fund was March 5, 2010, the date at which the Fund raised over $2,500,000 and reached the minimum offering amount. The Fund’s offering period ceased on March 19, 2012 and the operating period commenced.

As of March 31, 2013, the Fund has received and accepted cumulative subscriptions shares (including the Distribution Reinvestment Plan, or “DRP”, shares and net of repurchase of shares) for 9,524,980 of limited liability company interest (“shares”) for $83,697,297 net of offering costs, including the capital contributions from the Manager.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Use of Estimates

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Fund considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents are maintained with one financial institution.

Restricted Cash

Restricted cash consists of cash collected from the lessee for aircraft maintenance costs.

Income Taxes

The Fund is treated as a partnership for federal and state income tax purposes. As a partnership, the Fund itself is not subject to federal and state income taxes, while each member will be individually liable for income taxes, if any, on their share of net taxable income from the Fund. Interest, dividends and other income realized by the Fund may be subject to withholding tax in the jurisdiction in which the income is sourced.

Leased Equipment at Cost

Investment in leased equipment is stated at cost less accumulated depreciation. Leased equipment is depreciated on a straight-line basis over the lease term to the assets’ residual value. Initial direct costs associated (such as freight, installation, acquisition expenses, legal fees and inspection fees) with the leases are capitalized as part of the cost of the leased equipment and depreciated over the lease term.

The useful life of an asset is based on an asset’s lease term. Once an asset comes off lease or is re-leased, the Fund reassesses the useful life of the asset.

 

7


Table of Contents

MACQUARIE EQUIPMENT LEASING FUND, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

The lease term of each type of leased equipment is as follows:

 

     Lease
term (in years)

Aircraft engines (2 x CFM56-7B jet engines)

   9

Aircraft (CRJ 700 ER aircraft and 2 x CF 34 jet engines)

   3

Self-serve checkout equipment

   5

Flat bed rail cars

   2

Racetrack equipment

   4

Smart safes

   5

Machine tool equipment

   5

The residual values are determined by the Fund’s Manager and are calculated using information from both internal (i.e. from affiliates) and external sources, such as trade publications, auction data, internal sales data, equipment dealers, wholesalers and industry experts, as well as inspection of the physical asset and other economic indicators.

The residual values of the Fund’s significant assets are reviewed at least annually. If the review results in a lower estimate than had been previously established, the Fund will determine whether the decline in the estimated residual value is other than temporary. If the decline in estimated residual value is judged to be other than temporary, the accounting for the transaction shall be revised using the changed estimate and the resulting reduction in the net investment shall be recognized as a loss in the period in which the estimate is changed. An upward adjustment of a leased asset’s estimated residual value (including any guaranteed portion) shall not be made.

Costs incurred in extending the useful life and/or increasing the resale value of leased equipment are capitalized into the cost of an asset. No such costs have been incurred to date.

Upon the end of a lease term, if the lessee has not met the return conditions as set out in the lease, the Fund is entitled in certain cases to additional compensation from the lessee. The Fund’s accounting policy for recording such payments is to treat such payments as revenue.

The lessee is generally responsible for the ongoing maintenance costs of the equipment.

Net investment in finance lease

If a lease meets specific criteria under GAAP at the inception of the lease, then the Fund recognizes the lease as a Net Investment in finance lease on its Balance Sheets. The amounts recognized for finance leases consist of lease receivables, plus the estimated unguaranteed residual value of the leased equipment on the lease termination date, less the unearned income.

Maintenance reserve

For the Fund’s aircraft asset, the lessee is responsible for performing major maintenance on the components of the aircraft, including the engines, airframe, landing gear etc, at an approved maintenance facility in accordance with the manufacturer’s recommended maintenance guidelines and the lease agreement. The lessee is required under the lease agreement to pay the Fund additional rentals, calculated monthly, which are based on the prior month’s flight hours and flight cycles. These additional rentals are recognized as maintenance reserve on the Fund’s Balance Sheets. As the maintenance is performed, and to the extent that the lessee has met all of its obligations under the lease, the lessee is reimbursed for costs incurred up to, but not exceeding, the related additional rentals the Fund receives from the lessee. At the completion of each major maintenance event, the difference between the liability and reimbursement paid to the lessee is recorded as revenue if management is satisfied that the remaining reserve is considered sufficient to cover future maintenance or repairs. During November 2012, one of the two CF 34 8C1 engines from the CRJ700 ER Bombardier regional jet was sent to a U.S. maintenance shop for upgrade to 8C5B1. The scheduled engine upgrade to 8C5B1 was completed during March 2013, however, the lessee has not yet provided details of the work performed which would allow the Fund to determine the portion of the maintenance reserves collected that can be reimbursed to the lessee. The Fund does not expect to recognize any revenue from this shop visit nor any additional costs. Based on the current accumulated flight hours and cycles, it is likely that the second CF 34 8C1 engine will need to be sent to shop for upgrade during 2014.

The CFM 56 – 7B aircraft engines have not yet gone on wing and have not clocked up any flight hours/cycles and accordingly are not expected to go for a maintenance shop visit during 2013.

Maintenance reserves are only applicable to the Fund’s aviation assets.

 

8


Table of Contents

MACQUARIE EQUIPMENT LEASING FUND, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

Revenue recognition

For finance leases, at inception date, the Fund records the total minimum lease payments receivable from the lessee, the estimated unguaranteed residual value of the equipment at lease termination, the initial direct costs related to the lease and the related unearned income. Unearned income represents the difference between the sum of the minimum lease payments receivable, plus the estimated unguaranteed residual value, minus the cost of the leased equipment. Unearned income is recognized as finance income over the term of the lease using the effective interest rate method.

For operating leases, rental income is recognized on a straight-line basis over the lease term.

Gains or losses from sales of leased and off lease equipment are recorded on a net basis in the Fund’s Statement of Operations.

Allowance for doubtful accounts

The Fund evaluates the collectability of its receivables by analyzing the counterparties’ payment history, general credit worthiness and current economic trends. The Fund records an allowance when the analysis indicates that the probability of full collection is unlikely. No allowance was recorded for the quarter ended March 31, 2013 and 2012.

Write offs

The Fund takes write offs when it determines that a receivable is uncollectible and when all economically sensible means of recovery have been exhausted. No write offs were recorded for the quarter ended March 31, 2013 and 2012.

Impairments

The significant assets in the Fund’s portfolio are reviewed for impairment at least annually or when indicators of impairment exist. An impairment loss will be recognized only if the carrying value of a long-lived asset is not recoverable and exceeds its fair market value. The Manager’s assessment for impairment (i.e. undiscounted cash flows used in the recoverability assessment) includes review of published values for similar assets, recent transactions for similar assets, lease terms, asset condition, adverse changes in market conditions for specific asset types and the occurrence of significant adverse changes in general industry and market conditions that could affect the fair value of the asset. No impairment charges were recorded for the quarter ended March 31, 2013 and 2012.

3. LEASED EQUIPMENT AT COST

In March 2013, as part of a master lease program, the Fund purchased additional new smart safes for $407,037, including initial direct costs, from a U.S. safe manufacturer. These safes are on lease to a company which owns, operates or franchises over 3,200 restaurants in 42 U.S. states and in 28 countries, for a period of 60 months. The safes are deployed in restaurants throughout the U.S. No leverage was used to finance this acquisition by the Fund. Rentals of $8,184 are to be received monthly for the safes purchased by the Fund in U.S. dollars. At the end of the lease term, the lessee may return the equipment or continue to rent the equipment under a renewed lease agreement. The lease is recorded as an operating lease with rental income recognized on a straight-line basis over the lease term. The Fund has simultaneously entered into a Service and Remarketing agreement with a major U.S. cash logistics company who has been appointed as the exclusive service provider for the Fund and is responsible for billing, collecting and servicing the safes. In certain circumstances, the service provider has an option to request the purchase of the safes from the Fund at fair market value not exceeding 29% of the asset’s cost, at the end of the lease term of 60 months.

In March 2013, the Fund entered into a sale and leaseback arrangement over a machine tool equipment line for $5,768,966. The equipment is used in the manufacture of aluminum wheels and consists of seventeen individual high volume automated precision machine tool items including a Mori Seiki 5 Axis Milling Center and an Okuma Vertical Turning Center. The equipment is on lease to a leading U.S. manufacturer and supplier of steel and aluminum wheels for a period of 55 months. No leverage was used to finance this acquisition by the Fund. Rentals of $118,215 are to be received monthly by the Fund in U.S. dollars. At the end of the lease term, the lessee may continue to rent the equipment under a renewed lease agreement or purchase the equipment. The lease is recorded as an operating lease with rental income recognized on a straight-line basis over the lease term.

 

9


Table of Contents

MACQUARIE EQUIPMENT LEASING FUND, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

Leased equipment at cost consists of the following:

 

     March 31, 2013     December 31, 2012  

Aircraft engines (2 x CFM56-7B jet engines)

   $ 25,338,321      $ 25,338,321   

Aircraft (CRJ 700 ER aircraft and 2 x CF 34 jet engines)

     9,758,734        9,758,734   

Self-serve checkout equipment

     2,097,353        2,097,353   

Flat bed rail cars

     6,742,510        6,742,510   

Racetrack equipment

     3,763,611        3,763,611   

Smart safes

     2,532,629        2,125,592   

Machine tool equipment

     5,768,966        —      

Less: Accumulated depreciation

     (4,469,714     (3,563,548
  

 

 

   

 

 

 
   $ 51,532,410      $ 46,262,573   
  

 

 

   

 

 

 

Annual minimum future rental receivable over the next 5 years consist of the following:

 

For the period April 1 to December 31, 2013

   $ 7,934,621   

For the year ending December 31, 2014

     6,365,030   

For the year ending December 31, 2015

     5,526,724   

For the year ending December 31, 2016

     5,100,824   

For the year ending December 31, 2017

     3,938,741   

Thereafter

     6,348,850   
  

 

 

 
   $ 35,214,790   
  

 

 

 

The Fund is exposed to risks under these transactions, including risk associated with a leasing client’s creditworthiness and the future market value of the equipment. Although the Fund currently has no reason to believe that its clients will fail to meet their contractual obligations, a risk of loss to the Fund exists should a client fail to meet its payment obligations under the lease. As at March 31, 2013 and December 31, 2012, the Fund did not have a reserve for allowance for credit losses for its lease receivables.

A risk of loss or lower than expected returns also exists if the market value of the equipment at the end of the lease term is lower than anticipated.

4. NET INVESTMENT IN FINANCE LEASE

The Fund’s net investments in finance leases primarily relate to racing track equipment and furniture.

Net investment in finance lease (current and non-current) consists of the following:

 

     March 31, 2013     December 31, 2012  

Minimum lease payments receivable

   $ 2,412,519      $ 2,686,145   

Estimated residual values of leased property (unguaranteed)

     478,495        478,495   

Less: Unearned income

     (510,188     (582,736
  

 

 

   

 

 

 

Net investment in finance lease

   $ 2,380,826      $ 2,581,904   
  

 

 

   

 

 

 

 

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MACQUARIE EQUIPMENT LEASING FUND, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

Annual minimum future rental receivable over the next 5 years consist of the following:

 

For the period April 1 to December 31, 2013

   $ 701,299   

For the year ending December 31, 2014

     673,326   

For the year ending December 31, 2015

     618,032   

For the year ending December 31, 2016

     419,862   

For the year ending December 31, 2017

     —      
  

 

 

 
   $ 2,412,519   
  

 

 

 

The Fund is exposed to risks under this transaction, including risk associated with the leasing client’s creditworthiness and risk associated with the future market value of the equipment. Although the Fund currently has no reason to believe that the client will fail to meet their contractual obligations, a risk of loss to the Fund exists should the client fail to meet its payment obligations under the lease. As at March 31, 2013 and December 31, 2012, the Fund did not have a reserve for allowance for credit losses for its lease receivables.

A risk of loss or lower than expected returns also exists if the market value of the equipment at the end of the lease term is lower than anticipated.

5. TRANSACTIONS WITH AFFILIATES

As discussed in Note 1, the Fund is required to pay fees to the Manager and its affiliates for providing or arranging all services necessary for its operations, including those relating to equipment acquisitions and disposals, asset management and administrative, reporting and regulatory services.

Macquarie Capital (USA) Inc. (the “dealer manager”), a member of the Macquarie Group of companies, acted as dealer manager for the Fund during the Fund offering period and managed a group of selling dealers, including other unaffiliated broker dealers.

The Manager and the dealer manager received fees from the Fund for offering services during the offering period (ceased on March 19, 2012) including:

 

   

Selling commission of up to 7% of the offering proceeds from each share sold by the dealer manager or selling dealers, payable to the dealer manager (and re-allowed to unaffiliated selling dealers);

 

   

Due diligence expense reimbursement for detailed and itemized bona fide accountable due diligence expenses, payable to the dealer manager (and re-allowed to unaffiliated selling dealers);

 

   

Dealer manager fees of 3% of the offering proceeds from each share sold, payable to the dealer manager; and

 

   

Organization and offering expense allowance, which varies based upon the actual organization and offering expenses incurred by the Manager and its affiliates and the number of shares sold, payable to the Manager.

The organization and offering expense allowance will not exceed the actual fees and expenses incurred by the Manager or its affiliates in connection with the Fund’s organization and offering and will be calculated as follows:

 

   

up to 2.433% of the offering proceeds from each share sold for the first 3,500,000 shares;

 

   

up to 2.09% of the offering proceeds from each share sold for shares sold that exceed 3,500,000 but amount to 7,500,000 or fewer shares; and

 

   

up to 1.60% of the offering proceeds from each share sold for shares sold that exceed 7,500,000 shares.

The Fund pays the Manager and its affiliates’ fees for operating services performed during the offering period and on an ongoing basis once the Fund has commenced operations, including:

 

   

Acquisition fees of 3% of the purchase price that the Fund pays for each item of equipment or direct or indirect interest in equipment acquired, including under lease agreements, trading transactions, residual value guarantees, pay per use agreements, forward purchase agreements, total lease return swaps, participation agreements, equipment purchase options, other equipment-related transactions, joint ventures, special purpose vehicles and other Fund arrangements;

 

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MACQUARIE EQUIPMENT LEASING FUND, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

   

Asset management fees equal to the lesser of: (a) (i) 5% of gross rental payments from non-full payout leases (except that 1% of gross rental payments shall be payable with respect to non-full payout leases for which management services are performed by non-affiliates under the Manager’s supervision); (ii) 2% of gross rental payments from full payout leases which contain net lease provisions; and (iii) 7% of gross rental payments from equipment for which the Fund provides services in addition to equipment management relating to the continued and active operation of the Fund’s equipment such as, but not limited to, ongoing marketing and re-leasing of equipment and hiring or arranging for the hiring of crews or operating personnel for the Fund’s equipment and similar services; or (b) the amount of fees which are competitive for similar services;

 

   

Remarketing fees equal to the lesser of (i) 3% of the purchase price paid to the Fund by the purchaser of the investment, or (ii) one-half of reasonable, customary and competitive brokerage fees paid for services rendered in connection with the sale of equipment of similar size, type and location. Payment of remarketing fees shall be subordinated until such time when investor return has been achieved. “Investor return” means such time when the aggregate amount of distributions to the members equals, as of any determination date, an amount equal to a pre-tax eight percent (8.0%) per annum internal rate of return compounded daily on all capital contributions of members;

 

   

Out-performance fees depending upon the extent to which investor return has been achieved prior to the time that investor return is achieved, cash distributions will be made 99.0% to the Fund’s members and 1.0% to the Manager. After the time that investor return is achieved, cash distributions will be made 81.0% to the Fund’s members and 19.0% to the Manager; and

 

   

Reimbursement of operating expenses depending upon the scope of services the Manager provides to the Fund.

For the quarters ended March 31, 2013 and 2012, the Fund has accrued, in commissions and fees payable (related party) in the Fund’s balance sheet, or paid to the Manager or its affiliates the following amounts:

 

Entity

   Capacity   

Description

   Quarter ended  
         March 31,
2013
     March 31,
2012
 

Macquarie Asset Management Inc.

   Manager    Organization and Offering expense allowance (1)    $ —          $ 410,293   

Macquarie Capital (USA) Inc.

   Dealer Manager    Selling commission and Dealer Manager fees (1)    $ —          $ 540,027   

Macquarie Capital (USA) Inc.

   Dealer Manager    Due diligence expense (1)    $ —          $ 2,083   

Macquarie Asset Management Inc.

   Manager    Acquisition fees (2)    $ 178,355       $ —      

Macquarie Asset Management Inc.

   Manager    Management fee (3)    $ 109,156       $ 109,958   

Macquarie Asset Management Inc.

   Manager    Operating Expenses (3)    $ 94,710       $ 145,363   

Macquarie Asset Management Inc.

   Manager    Outperformance fee (3)    $ 18,816       $ 14,799   

 

(1) Amount charged directly to member’s equity.
(2) Amount is capitalized into the cost of an asset when it is classified as an operating or a finance lease.
(3) Amount charged directly to operations.

6. EQUITY CONTRIBUTION

As at March 31, 2013, the Fund received and accepted subscriptions (including the DRP shares and net of repurchase of shares) for 9,524,980 shares of limited liability company interest for $83,697,297 net of offering costs. The subscriptions received include total contributions of $1,505,000 from the Manager, excluding the offering costs.

7. COMMITMENTS AND CONTINGENCIES

On March 19, 2013, the Fund entered into a commitment to acquire an aircraft for $19 million and paid a commitment fee of $250,000 to the seller, which is included in Other assets. The aircraft is a 2003 vintage Airbus model A320-200 aircraft, bearing manufacturer’s serial number 2090 equipped with two engines.

 

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MACQUARIE EQUIPMENT LEASING FUND, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

8. SUBSEQUENT EVENTS

The Fund finalized the acquisition of an Airbus A320 aircraft for approximately $19 million on May 5, 2013. The aircraft is a 2003 vintage Airbus model A320-200 aircraft, bearing manufacturer’s serial number 2090 equipped with two engines. The aircraft is on lease to a major airline in Oceania and operates internationally. Rentals of $705,000 are to be received quarterly in advance until end of lease in September 2015 at which time the carrier may return the aircraft or continue to rent it under a renewed lease agreement. No leverage was used to finance this acquisition by the Fund.

 

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Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our current financial position and results of operations. This discussion should be read together with our unaudited financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, the audited financial statements and related notes included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on February 15, 2013, and with our Registration Statement on Form S-1 as filed with the Securities and Exchange Commission on October 15, 2008, as amended (“Registration Statement”). This discussion should also be read in conjunction with the disclosures below regarding “Forward-Looking Statements.”

As used in this Quarterly Report on Form 10-Q, references to “we,” “us,” “our” or similar terms include Macquarie Equipment Leasing Fund, LLC (the “Fund”).

Forward-Looking Statements

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

Overview

Macquarie Equipment Leasing Fund, LLC, a Delaware limited liability company, was formed on August 21, 2008 for the purpose of acquiring a diversified portfolio of equipment and equipment leases. The Fund will also make investments in other equipment-related transactions which will allow it to directly or indirectly participate in the benefits and risks of equipment ownership or usage.

The Fund offering was for a total of 15,000,000 Shares for a price of $10.00 per share, subject to certain reductions. The Fund was offering up to 800,000 Shares pursuant to its Distribution Reinvestment Plan (“DRP”) at a public offering price of $9.00 per Share. The Fund’s manager, Macquarie Asset Management Inc. (“Manager”), has contributed a total of $1,505,000. The Fund’s fiscal year end is December 31.

The Fund’s offering period ended on March 19, 2012 and the Fund’s operating period commenced on that date. The Fund will continue to make investments in equipment, equipment leases and other equipment-related transactions. As at March 31, 2013, the Fund has received and accepted subscriptions (including the DRP shares and net of repurchase of shares) for 9,524,980 shares of limited liability company interest for $83,697,297 net of offering costs. The subscriptions received include total contributions of $1,505,000 from the Manager, excluding the offering costs. As of May 15, 2013, the Fund has received and accepted cumulative subscriptions (including the DRP shares and net of repurchase of shares) for 9,488,337 shares for $83,380,220, net of offering costs.

Recent Transactions

We engaged in the following transactions during quarter ended March 2013:

In March 2013, the Fund entered into a sale and leaseback arrangement over a machine tool equipment line for $5,768,966. The equipment is used in the manufacture of aluminum wheels and consists of seventeen individual high volume automated precision machine tool items including a Mori Seiki 5 Axis Milling Center and an Okuma Vertical Turning Center. The equipment is on lease to a leading U.S. manufacturer and supplier of steel and aluminum wheels for a period of 55 months. No leverage was used to finance this acquisition by the Fund. Rentals of $118,215 are to be received monthly by the Fund in U.S. dollars. At the end of the lease term, the lessee may continue to rent the equipment under a renewed lease agreement or purchase the equipment. The lease is recorded as an operating lease with rental income recognized on a straight-line basis over the lease term.

In March 2013, as part of a master lease program, the Fund purchased additional new smart safes for $407,037, including initial direct costs, from a U.S. safe manufacturer. These safes are on lease to a company which owns/operates franchises with over 3,200 restaurants in the U.S. for a period of 60 months. The safes are deployed in restaurants throughout the U.S. No leverage was used to finance this acquisition by the Fund. Rentals of $8,184 are to be received monthly for the safes purchased by the Fund in U.S. dollars. At the end of the lease term, the lessee may return the equipment or continue to rent the equipment. The lease is recorded as an operating lease with rental income recognized on a straight-line basis over the lease term. The Fund has simultaneously entered into a Service and Remarketing agreement with a major U.S. cash logistics company who has been appointed as the exclusive service provider for the Fund and is responsible for billing, collecting and servicing the safes. In certain circumstances, the service provider also has an option to request the purchase of the safes for fair market value but not exceeding 29% of the asset’s cost, at the end of the lease term of 60 months.

 

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Table of Contents

Results of Operations for the Quarters Ended March 31, 2013 and 2012

Total revenue for the quarter ended March 31, 2013 decreased by $1,978,349 as compared to quarter ended March 31, 2012. The decrease in revenue is primarily due to a non-recurring gain on sale of an interest in a portfolio of aircraft engines on lease in Australia, which took place in first quarter of 2012.

Total expenses for the quarter ended March 31, 2013 decreased by $298,343 as compared to quarter ended March 31, 2012. This decrease is primarily related to a decrease in depreciation expense, due to various equipment sale transactions during the first and second quarter of 2012. As a result of the foregoing factors, the net income for the quarter ended March 31, 2013 was $826,929.

The Fund worked on a number of equipment transactions during the first quarter of 2013 and closed some of these transactions. No leverage was used to finance these transactions. The Fund is almost fully invested but will continue to review additional investment and debt leverage opportunities on an ongoing basis.

Financial Condition

This section discusses the major balance sheet variances from March 31, 2013 compared to December 31, 2012.

Total Assets

Total assets decreased by $574,373, from $84,481,477 as of December 31, 2012 to $83,907,104 as of March 31, 2013. The decrease in total assets is primarily due to various equipment sale transactions during the first and second quarter of 2012. This decrease is offset by additional equipment purchased in the first quarter of 2013.

Total Liabilities

Total liabilities increased by $827,226, from $3,430,819 as of December 31, 2012 to $4,258,045 as of March 31, 2013. The increase in total liabilities is primarily the result of additional rentals accrued for maintenance reserves for one of our aircraft assets, which are recognized as a liability and the lease rentals security deposit received from the lessee of the machine tool equipment. The increase is also due to additional amounts of rental received in advance in 2013 as compared to 2012 and the amount payable to service providers for the acquisition of additional equipment.

Equity

Equity decreased by $1,401,599, from $81,050,658 as of December 31, 2012 to $79,649,059 as of March 31, 2013. The decrease in equity is primarily due to distribution made to investors and shares redeemed in first quarter of 2013. This decrease was offset by net income earned during the first quarter of 2013.

Liquidity and Capital Resources

Cash Flows Summary

The following table sets forth summary cash flow data for the quarter ended March 31, 2013 and 2012.

 

     March 31, 2013     March 31, 2012  

Net cash provided by (used in) :

    

Operating activities

   $ 2,161,791      $ 880,716   

Investing activities

     (5,858,056     (119,920

Financing activities

     (2,194,537     20,520,576   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

   $ (5,890,802   $ 21,281,372   
  

 

 

   

 

 

 

See Statements of Cash Flows included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information.

At March 31, 2013, the Fund had cash and cash equivalents of $26,231,195. The increase in cash provided by operating activities is primarily attributable to outstanding rentals received and rentals received in advance on some of our leases. It is also due to the increase in the finance and rental income due to additional lease transactions. The increase in cash used in investing activities is primarily attributable to the purchase of machine tool equipment for $5,768,966 and the purchase of additional new smart safes for $407,037. This decrease was offset by the lease rentals security deposit of $354,645 received from the lessee of the machine tool equipment. Cash provided by financing activities decreased primarily due to our offering period ending on March 19, 2012. During November 2012, one of the two CF 34 8C1 engines from the CRJ700 ER Bombardier regional jet was sent to a U.S. maintenance shop for upgrade to 8C5B1. The engine upgrade to 8C5B1 was completed during March 2013. The Fund will reimburse (only up to the amount of cash already collected from the lessee that relates to the maintenance work performed) the lessee for the cost of the maintenance to the extent that the lessee has met its obligations under the lease.

 

15


Table of Contents

Cash and cash equivalents include cash in banks and highly liquid investments with original maturities of three months or less. Until offering proceeds are used for the acquisition or operation of the Fund’s portfolio, the offering proceeds are held in an operating and a money market account at Wells Fargo Bank, N.A.

Sources and Uses of Cash

Our offering period ended and our operating period commenced on March 19, 2012. As at March 31, 2013, the Fund has received and accepted cumulative subscriptions (including the Distribution Reinvestment Plan, or “DRP”, shares and net of repurchase of shares) for 9,524,980 shares of limited liability company interest (“shares”) for $83,697,297 net of offering costs, including the capital contributions from the Manager. We raised less than the maximum $157,200,000 in total capital in the period from the inception of the Fund to the end of our offering period. The rate of our capital raising was initially impacted by poor general economic conditions in the U.S., which produced a number of consequential industry effects which further dampened our rate of capital raising. We believe that this amount is sufficient to meet our investment objectives.

The Fund’s main activities and our main use of cash will be to acquire a diversified portfolio of equipment, equipment leases and other equipment-related investments. We will also make investments in other equipment-related transactions which will allow us to directly or indirectly participate in the benefits and risks of equipment ownership or usage.

Sources of Liquidity

Cash generated from our financing activities was our most significant source of liquidity during our offering period. We believe that cash generated from our financing activities (from debt borrowings, if required), as well as the expected results of our operations, will be sufficient to finance our liquidity requirements for the foreseeable future, including distributions to our members, new investment opportunities, management fees, equipment maintenance events and administrative expense reimbursements. Our ability to generate cash in the future is subject to general economic, financial, competitive, regulatory and other factors that affect us and our lessees’ businesses that are beyond our control.

The Fund’s liquidity may be adversely affected by unanticipated or greater than anticipated operating costs or losses, including the inability of a client of the Fund to make timely lease payments. The Fund anticipates that it will fund its operations from cash flow generated by operating and financing activities. The Manager has no intent to permanently fund any cash flow deficit of the Fund or provide other financial assistance to the Fund.

The Fund also intends to incur indebtedness in purchasing its portfolio. During periods of general illiquidity in financial markets, it may not be possible for the Manager to source debt on the Fund’s behalf at an appropriate interest rate, on appropriate terms, at appropriate levels or at all.

Distributions

The Fund began making monthly cash distributions on April 15, 2010. We paid cash distributions to our members in the amount of $1,881,602 for quarter ended March 31, 2013.

While the Fund anticipates making monthly cash distributions, it may vary the amount of, or completely suspend making distributions at any time and without notice.

Commitments, Contingencies and Off-Balance Sheet Transactions

Purchase Commitments

On March 19, 2013, the Fund entered into a commitment to acquire an aircraft for $19 million and paid a commitment fee of $250,000 to the seller. The aircraft is a 2003 vintage Airbus model A320-200 aircraft, bearing manufacturer’s serial number 2090 equipped with two engines. The aircraft is on lease to a major airline in Oceania and operates internationally. The transaction closed on May 5, 2013. Rentals of $705,000 are to be received quarterly in advance until end of lease in September 2015 at which time the carrier may return the aircraft or continue to rent it under a renewed lease agreement.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our 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 expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions.

 

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Table of Contents

Accounting Policies, Accounting Changes and Future Application of Accounting Standards

See Note 2, “Significant Accounting Policies”, in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part I, Item 1, of this Form 10-Q for financial information and further discussions, for a summary of the Company’s significant accounting policies, including a discussion of recently adopted and issued accounting pronouncements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the disclosures reported in our Form 10-K, dated February 15, 2013.

 

Item 4. Controls and Procedures

Under the direction and with the participation of our Manager’s President and Principal Financial Officer, we evaluated our disclosure controls and procedures (as such term is defined under Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Manager’s President and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2013. There has been no change in our internal controls over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

17


Table of Contents

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

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

 

Item 1A. Risk Factors

Not applicable.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) None.

(b) We registered 15,800,000 shares of limited liability company interest, (SEC File No. 333-154278, effective June 19, 2009), of which we registered 15,000,000 shares at $10.00 per share to be offered to the public in a primary offering and 800,000 shares offered to our investors pursuant to our DRP at $9.00 per share.

As at May 15, 2013 we have used approximately $92.25 million of the offering proceeds to acquire a participation interest in a portfolio of commercial jet aircraft engines (sold in March 2012), a 2002 vintage Bombardier CRJ-700ER aircraft, 451 self-serve kiosks on lease to a major U.S. retailer, an ETS-364B semiconductor test system (sold in May 2012), various items of furniture, office and other related equipments on lease to leading U.S. owner and operator of senior housing and retirement communities, semiconductor manufacturing tools of various makes on lease to a major global manufacturer of semiconductor products (sold in June 2012), aircraft engines on lease to a leading Dubai based low cost airline, flat bed rail cars on lease to the U.S. subsidiary of a leading global manufacturer of wind turbines, machine tool equipment on lease to a U.S. aluminum wheel manufacturer and an Airbus A320 aircraft on lease to an Oceanian airline.

 

Item 3. Defaults Upon Senior Securities

Not applicable.

 

Item 4. Mine Safety Disclosures

Not applicable.

 

Item 5. Other Information

None.

 

Item 6. Exhibits

An exhibit index has been filed as part of this Report on page E-1.

 

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Table of Contents

SIGNATURES

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

 

MACQUARIE EQUIPMENT LEASING FUND, LLC
By:  

/S/    DAVID FAHY        

Name:   David Fahy
Title:   President of the Manager and Principal Executive Officer of Registrant
  Date: May 15, 2013
By:  

/S/    JOHN PAPATSOS        

Name:   John Papatsos
Title:   Principal Financial Officer of the Manager and Principal Accounting Officer of Registrant
  Date: May 15, 2013

 

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Exhibit Index

Exhibit

Number

 

Description

31.1*   Rule 13a-14(a)/15d-14(a) Certification of President of the Manager and Principal Executive Officer of Registrant.
31.2*   Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer of the Manager and Principal Accounting Officer of Registrant
32.1*   Section 1350 Certification of President of the Manager and Principal Executive Officer of Registrant
32.2*   Section 1350 Certification of Principal Financial Officer of the Manager and Principal Accounting Officer of Registrant
101.0**   The following materials from the Quarterly Report on Form 10-Q of Macquarie Equipment Leasing Fund, LLC for the quarter ended March 31, 2013, filed on May 15, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets as of March 31, 2013 and December 31, 2012 (Unaudited), (ii) the Statement of Operations for the Quarters Ended March 31, 2013 and 2012 (Unaudited), (iii) the Statements of Cash Flows for the Quarters Ended March 31, 2013 and 2012 (Unaudited) (iv) the Statements of Changes in Members’ Equity for the Quarter Ended March 31, 2013 (Unaudited) and (v) the Notes to Financial Statements (Unaudited).

 

* Filed herewith.
** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

E-1