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EX-32.1 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON ECI FUND FIFTEEN, L.P.exhibit32.1.htm
EX-32.3 - CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON ECI FUND FIFTEEN, L.P.exhibit32.3.htm
EX-32.2 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON ECI FUND FIFTEEN, L.P.exhibit32.2.htm
EX-31.1 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON ECI FUND FIFTEEN, L.P.exhibit31.1.htm
EX-31.2 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON ECI FUND FIFTEEN, L.P.exhibit31.2.htm
EXCEL - IDEA: XBRL DOCUMENT - ICON ECI FUND FIFTEEN, L.P.Financial_Report.xls
EX-31.3 - CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON ECI FUND FIFTEEN, L.P.exhibit31.3.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

 

For the quarterly period ended

September 30, 2014

 

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:

000-54604

 

ICON ECI Fund Fifteen, L.P.

(Exact name of registrant as specified in its charter)

 

Delaware

 

27-3525849

(State or other jurisdiction of incorporation or organization)

 

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

 

3 Park Avenue, 36th Floor

 

 

New York, New York

 

10016

(Address of principal executive offices)

 

(Zip Code)

(212) 418-4700

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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).

Yes     No

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

 

 

Large accelerated filer

Accelerated filer 

Non-accelerated filer  (Do not check if a smaller reporting company)

Smaller reporting company  ☑ 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

    Yes     No ☑ 

Number of outstanding limited partnership interests of the registrant on November 7, 2014 is 197,489.

 

             

  

 


 

ICON ECI Fund Fifteen, L.P.

Table of Contents

 

 

Page

PART I – FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

1

2

3

4

6

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

14

Item 3. Quantitative and Qualitative Disclosures About Market Risk

24

Item 4. Controls and Procedures

24

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

25

Item 1A. Risk Factors

25

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

25

Item 3. Defaults Upon Senior Securities

25

Item 4. Mine Safety Disclosures

25

Item 5. Other Information  

25

Item 6. Exhibits

26

Signatures

27

   
   

  

 


 

Table of contents

  

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

Item 1. Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

 

ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Consolidated Balance Sheets

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

 

2014

 

2013

 

 

 

 

 

(unaudited)

 

 

 

Assets

 

Cash

$

24,395,121

 

$

24,297,314

 

Net investment in notes receivable

 

70,044,852

 

 

80,709,528

 

Leased equipment at cost (less accumulated depreciation of

 

 

 

 

 

 

 

$21,301,217 and $13,007,968, respectively)

 

91,995,624

 

 

100,288,873

 

Net investment in finance leases

 

50,631,194

 

 

53,985,543

 

Investment in joint ventures

 

22,170,324

 

 

13,142,459

 

Other assets

 

7,048,453

 

 

5,344,488

Total assets

$

266,285,568

 

$

277,768,205

Liabilities and Equity

Liabilities:

 

Non-recourse long-term debt

$

85,932,909

 

$

96,310,220

 

Due to General Partner and affiliates, net

 

2,686,692

 

 

2,940,943

 

Accrued expenses and other liabilities

 

10,945,425

 

 

10,718,057

 

 

Total liabilities

 

99,565,026

 

 

109,969,220

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

Partners' equity:

 

 

 

 

 

 

 

Limited partners

 

155,569,521

 

 

156,859,123

 

 

General Partner

 

(196,367)

 

 

(183,341)

 

 

 

Total partners' equity

 

155,373,154

 

 

156,675,782

 

Noncontrolling interests

 

11,347,388

 

 

11,123,203

 

 

 

Total equity

 

166,720,542

 

 

167,798,985

Total liabilities and equity

$

266,285,568

 

$

277,768,205

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

1 


 

Table of contents

ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Consolidated Statements of Operations

(unaudited)

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

 

 

 

September 30,

 

September 30,

 

 

 

 

 

 

2014

 

2013

 

2014

 

2013

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Finance income

$

5,461,488

 

$

3,162,950

 

$

12,653,010

 

$

8,258,748

 

Rental income

 

4,582,113

 

 

4,579,825

 

 

13,746,343

 

 

13,416,142

 

Income from investment in joint ventures

 

657,562

 

 

338,495

 

 

1,656,903

 

 

503,817

 

Other (loss) income

 

(266,129)

 

 

490,698

 

 

22,370

 

 

569,292

 

 

 

Total revenue

 

10,435,034

 

 

8,571,968

 

 

28,078,626

 

 

22,747,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

 299,614  

 

 

446,978

 

 

1,209,388

 

 

904,846

 

Administrative expense reimbursements

 

 372,023  

 

 

1,003,109

 

 

1,475,822

 

 

3,046,339

 

General and administrative

 

 316,226  

 

 

249,192

 

 

1,378,755

 

 

884,264

 

Interest

 

 1,267,001  

 

 

1,258,106

 

 

3,897,104

 

 

3,537,798

 

Depreciation

 

 2,764,416  

 

 

2,763,166

 

 

8,293,249

 

 

8,076,134

 

Credit loss

 

 -  

 

 

 -  

 

 

 -  

 

 

12,530

 

 

 

Total expenses

 

5,019,280

 

 

5,720,551

 

 

16,254,318

 

 

16,461,911

Net income

 

5,415,754

 

 

2,851,417

 

 

11,824,308

 

 

6,286,088

 

Less: net income attributable to noncontrolling interests

 

384,491

 

 

429,317

 

 

1,146,737

 

 

1,080,932

Net income attributable to Fund Fifteen

$

5,031,263

 

$

2,422,100

 

$

10,677,571

 

$

5,205,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Fund Fifteen allocable to:

 

 

 

 

 

 

 

 

 

 

 

 

Limited partners

$

4,980,950

 

$

2,397,879

 

$

10,570,795

 

$

5,153,105

 

General Partner

 

50,313

 

 

24,221

 

 

106,776

 

 

52,051

 

 

 

 

 

 

$

5,031,263

 

$

2,422,100

 

$

10,677,571

 

$

5,205,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of limited partnership

 

 

 

 

 

 

 

 

 

 

 

 

interests outstanding

 

197,489

 

 

197,535

 

 

197,489

 

 

182,709

Net income attributable to Fund Fifteen per weighted average

 

 

 

 

 

 

 

 

 

 

 

 

limited partnership interest outstanding

$

 25.22  

 

$

 12.14  

 

$

 53.53  

 

$

 28.20  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

2 


 

Table of contents

  

ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Consolidated Statements of Changes in Equity

 

 

 

 

 

Partners' Equity

 

 

 

 

 

 

 

 

 

Limited

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

Partnership

 

 

Limited

 

 

General

 

 

Partners'

 

 

Noncontrolling

 

 

Total

 

 

 

Interests

 

 

Partners

 

 

Partner

 

 

Equity

 

 

Interests

 

 

Equity

Balance, December 31, 2013

197,489

 

$

156,859,123

 

$

(183,341)

 

$

156,675,782

 

$

11,123,203

 

$

167,798,985

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 -  

 

 

2,712,868

 

 

27,403

 

 

2,740,271

 

 

390,438

 

 

3,130,709

 

Distributions

 -  

 

 

(3,895,749)

 

 

(39,351)

 

 

(3,935,100)

 

 

(343,508)

 

 

(4,278,608)

 

Investments by noncontrolling interests

 -  

 

 

 -    

 

 

 -    

 

 

 -    

 

 

975

 

 

975

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2014 (unaudited)

197,489

 

 

155,676,242

 

 

(195,289)

 

 

155,480,953

 

 

11,171,108

 

 

166,652,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 -  

 

 

2,876,977

 

 

29,060

 

 

2,906,037

 

 

371,808

 

 

3,277,845

 

Distributions

 -  

 

 

(3,982,322)

 

 

(40,225)

 

 

(4,022,547)

 

 

(63,277)

 

 

(4,085,824)

 

Investments by noncontrolling interests

 -  

 

 

 -    

 

 

 -    

 

 

 -    

 

 

7,940

 

 

7,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2014 (unaudited)

197,489

 

 

154,570,897

 

 

(206,454)

 

 

154,364,443

 

 

11,487,579

 

 

165,852,022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 -  

 

 

 4,980,950  

 

 

 50,313  

 

 

 5,031,263  

 

 

 384,491  

 

 

 5,415,754  

 

Distributions

 -  

 

 

(3,982,326)

 

 

(40,226)

 

 

(4,022,552)

 

 

(524,682)

 

 

(4,547,234)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2014 (unaudited)

 197,489  

 

$

 155,569,521  

 

$

 (196,367) 

 

$

 155,373,154  

 

$

 11,347,388  

 

$

 166,720,542  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

3 


 

Table of contents

  

ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Consolidated Statements of Cash Flows

(unaudited)

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

2014

 

2013

Cash flows from operating activities:

 

 

 

 

 

 

Net income

$

11,824,308

 

$

6,286,088

 

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

 

 

 

 

 

 

 

Finance income

 

1,248,362

 

 

1,016,587

 

 

Credit loss

 

 -    

 

 

12,530

 

 

Rental income paid directly to lenders by lessees

 

(4,256,169)

 

 

 -    

 

 

Income from investment in joint ventures

 

(1,656,903)

 

 

 (503,817) 

 

 

Depreciation

 

8,293,249

 

 

8,076,134

 

 

Interest expense on non-recourse financing paid directly to lenders by lessees

 

431,358

 

 

 17,538  

 

 

Interest expense from amortization of debt financing costs

 

157,099

 

 

172,673

 

 

Interest expense from amortization of seller's credit

 

223,641

 

 

 212,172  

 

 

Other financial loss (gain)

 

74,278

 

 

 (467,573) 

 

 

Paid-in-kind interest

 

32,527

 

 

123,579

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Other assets

 

(1,843,336)

 

 

(1,112,846)

 

 

 

Deferred revenue

 

(49,993)

 

 

131,403

 

 

 

Due to General Partner and affiliates, net

 

(286,778)

 

 

(681,990)

 

 

 

Distributions from joint ventures

 

485,251

 

 

 -    

 

 

 

Accrued expenses and other liabilities

 

247,864

 

 

3,002,917

Net cash provided by operating activities

 

14,924,758

 

 

16,285,395

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of equipment

 

 -    

 

 

(22,034,131)

 

Investment in joint ventures

 

(8,720,656)

 

 

 (12,297,208) 

 

Principal received on finance leases

 

3,139,427

 

 

2,441,743

 

Investment in notes receivable

 

 (9,009,923) 

 

 

(49,612,749)

 

Distributions received from joint ventures in excess of profits

 

864,443

 

 

 -    

 

Principal received on notes receivable

 

18,355,009

 

 

6,594,389

Net cash provided by (used in) investing activities

 

4,628,300

 

 

(74,907,956)

Cash flows from financing activities:

 

 

 

 

 

 

Repayment of non-recourse long-term debt

 

(6,552,500)

 

 

(5,642,500)

 

Proceeds from non-recourse long-term debt

 

 -    

 

 

6,413,574

 

Sale of limited partnership interests

 

 -    

 

 

46,247,313

 

Sales and offering expenses paid

 

 -    

 

 

(4,282,689)

 

Deferred charges paid

 

 -    

 

 

(240,000)

 

Investments by noncontrolling interests

 

8,915

 

 

8,334,601

 

Distributions to noncontrolling interests

 

(931,467)

 

 

(1,335,082)

 

Repurchase of limited partnership interests

 

 -    

 

 

(95,909)

 

Distributions to partners

 

(11,980,199)

 

 

(10,734,817)

Net cash (used in) provided by financing activities

 

(19,455,251)

 

 

38,664,491

Net increase (decrease) in cash

 

97,807

 

 

(19,958,070)

Cash, beginning of period

 

24,297,314

 

 

37,990,933

Cash, end of period

$

24,395,121

 

$

18,032,863

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

4 


 

Table of contents

  

ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Consolidated Statements of Cash Flows

(unaudited)

 

 

 

 

Nine Months Ended September 30,

 

 

2014

 

2013

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

$

3,081,352

 

$

2,473,488

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Organizational and offering expenses charged to equity

$

 -    

 

$

1,075,227

 

Equipment purchased with non-recourse long-term debt paid directly to lender

$

 -    

 

$

22,750,000

 

Equipment purchased with subordinated non-recourse financing provided by seller

$

 -    

 

$

(4,488,041)

 

Extinguishment of minimum rents receivable on net investment in finance lease

$

 -    

 

$

4,488,041

 

Interest reserve net against principal repayment of note receivable

$

206,250

 

$

 -    

 

Principal and interest on non-recourse long-term debt

 

 

 

 

 

 

paid directly to lenders by lessees

$

4,256,169

 

$

 -    

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5 


Table of contents        

 

ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements

September 30, 2014

(unaudited)

 

 

(1)      Organization

ICON ECI Fund Fifteen, L.P. (the “Partnership”) was formed on September 23, 2010 as a Delaware limited partnership. When used in these notes to consolidated financial statements, the terms “we,” “us,” “our” or similar terms refer to the Partnership and its consolidated subsidiaries. Our offering period commenced on June 6, 2011 and ended on June 6, 2013, at which time we entered our operating period.

 

We are a direct financing fund that primarily makes investments in domestic and international companies, which investments are primarily structured as debt and debt-like financings (such as loans and leases) that are collateralized by business-essential equipment and corporate infrastructure (collectively, “Capital Assets”) utilized by such companies to operate their businesses, as well as other strategic investments in or collateralized by Capital Assets that ICON GP 15, LLC, a Delaware limited liability company and our general partner (the “General Partner”), believes will provide us with a satisfactory, risk-adjusted rate of return Our General Partner makes investment decisions on our behalf and manages our business.

 

(2)      Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Our accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission for Quarterly Reports on Form 10-Q. In the opinion of our General Partner, all adjustments, which are of a normal recurring nature, considered necessary for a fair presentation have been included.  These consolidated financial statements should be read together with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2013.  The results for the interim period are not necessarily indicative of the results for the full year.

 

Credit Quality of Notes Receivable and Finance Leases and Credit Loss Reserve

ICON Capital, LLC, a Delaware limited liability company formerly known as ICON Capital Corp. (the “Investment Manager”), weighs all credit decisions based on a combination of external credit ratings as well as internal credit evaluations of all borrowers.  A borrower’s credit is analyzed using those credit ratings as well as the borrower’s financial statements and other financial data deemed relevant. 

 

As our financing receivables, generally notes receivable and finance leases, are limited in number, our Investment Manager is able to estimate the credit loss reserve based on a detailed analysis of each financing receivable as opposed to using portfolio-based metrics.  Financing receivables are analyzed quarterly and categorized as either performing or non-performing based on payment history.  If a financing receivable becomes non-performing due to a borrower’s missed scheduled payments or failed financial covenants, our Investment Manager analyzes whether a credit loss reserve should be established or whether the financing receivable should be restructured.  Material events would be specifically disclosed in the discussion of each financing receivable held.

 

Financing receivables are generally placed in a non-accrual status when payments are more than 90 days past due. Additionally, our Investment Manager periodically reviews the creditworthiness of companies with payments outstanding less than 90 days and based upon our Investment Manager’s judgment, these accounts may be placed in a non-accrual status.

 

In accordance with the cost recovery method, payments received on non-accrual financing receivables are applied to principal if there is doubt regarding the ultimate collectability of principal. If collection of the principal of non-accrual financing receivables is not in doubt, interest income is recognized on a cash basis. Financing receivables in non-accrual status may not be restored to accrual status until all delinquent payments have been received, and we believe recovery of the remaining unpaid receivable is probable.

 

6 


Table of contents        

 

ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements

September 30, 2014

(unaudited)

 

 

When our Investment Manager deems it is probable that we will not be able to collect all contractual principal and interest on a non-performing financing receivable, we perform an analysis to determine if a credit loss reserve is necessary. This analysis considers the estimated cash flows from the financing receivable, or the collateral value of the asset underlying the financing receivable when financing receivable repayment is collateral dependent. If it is determined that the impaired value of the non-performing financing receivable is less than the net carrying value, we will recognize a credit loss reserve or adjust the existing credit loss reserve with a corresponding charge to earnings. We then charge off a financing receivable in the period that it is deemed uncollectible by reducing the credit loss reserve and the balance of the financing receivable.

 

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), requiring revenue to be recognized in an amount that reflects the consideration expected to be received in exchange for goods and services. The adoption of ASU 2014-09 becomes effective for us on January 1, 2017, including interim periods within that reporting period. Early adoption is not permitted.  We are currently in the process of evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements.

 

In August 2014, FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which provides guidance about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The adoption of ASU 2014-15 becomes effective for us on our fiscal year ending December 31, 2016, and all subsequent annual and interim periods. Early adoption is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on our consolidated financial statements.

  

 

(3)       Net Investment in Notes Receivable

Net investment in notes receivable consisted of the following:

 

 

September 30,

 

December 31,

 

 

2014

 

2013

 

Principal outstanding

$

68,553,434

 

$

78,504,378

 

Initial direct costs

 

4,484,358

 

 

5,504,320

 

Deferred fees

 

(1,020,410)

 

 

(1,326,640)

 

Credit loss reserve

 

(1,972,530)

 

 

(1,972,530)

 

        Net investment in notes receivable

$

70,044,852

 

$

80,709,528

 

 

 

 

 

 

 

 

On March 9, 2012, we made a term loan in the amount of $5,000,000 to Kanza Construction, Inc. The loan bore interest at 13% per year and was for a period of 60 months. The loan was secured by a first priority security interest in all of Kanza’s assets. As a result of Kanza’s unexpected financial hardship and failure to meet certain payment obligations, the loan was placed on a non-accrual status and we recorded a total credit loss reserve of approximately $1,973,000 for the shortfall of the loan balance not covered by cash proceeds from the sale of the collateral in 2013.  As of September 30, 2014, we fully reserved the remaining balance of the loan of $1,972,530. We continue to pursue all legal remedies to obtain payment.

 

On October 4, 2013, we provided a $17,500,000 first drawdown on a secured term loan facility of up to $40,000,000 to Varada Ten Pte. Ltd. (“Varada”). The facility is comprised of three loans, each to be used toward the purchase or refinancing of a respective vessel.  As part of the facility agreement, to the extent the aggregate drawdown by Varada is less than $38,500,000 by September 30, 2014, a fee in the amount of 10% of the undrawn commitment amount (“Undrawn Commitment Fee”) will be assessed. Subsequent to the first drawdown, Varada did not further draw down on the facility. As a result, we recognized the Undrawn Commitment Fee of $2,100,000 as additional finance income during the three months ended September 30, 2014.

 

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ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements

September 30, 2014

(unaudited)

 

 

On March 18, 2014, Green Field Energy Services, Inc. and its affiliates (collectively, “Green Field”) satisfied its obligation in connection with a superpriority, secured term loan scheduled to mature on August 26, 2014 by making a prepayment of approximately $7,458,000, comprised of all outstanding principal and accrued interest. No material gain or loss was recorded as a result of this transaction.

 

On June 6, 2014, NTS Communications, Inc. and certain of its affiliates (collectively, “NTS”) satisfied their obligations in connection with three secured term loans scheduled to mature on July 1, 2017 by making a prepayment of approximately $9,522,000, comprised of all outstanding principal, accrued interest and a prepayment fee of approximately $362,000. The prepayment fee was recognized as additional finance income.

 

On July 14, 2014, we, ICON Leasing Fund Twelve, LLC (“Fund Twelve”) and ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P. (“Fund Fourteen”), each an entity also managed by our Investment Manager, entered into a secured term loan credit facility agreement with two affiliates of Técnicas Maritimas Avanzadas, S.A. de C.V. (collectively “TMA”) to provide a credit facility of up to $29,000,000, of which our commitment of $3,625,000 was funded on August 27, 2014. The facility was used by TMA to acquire and refinance two platform supply vessels. At inception, the loan bore interest at the London Interbank Offered Rate (“LIBOR”), subject to a 1% floor, plus a margin of 17%. Upon acceptance of both vessels by TMA’s sub-charterer on September 19, 2014, the margin was reduced to 13%. The loan matures five years from the date of funding. The loan is secured by, among other things, a first priority security interest in and earnings from each of the vessels.

 

On September 24, 2014, we, Fund Twelve, Fund Fourteen and ICON ECI Fund Sixteen (“Fund Sixteen”), an entity also managed by our Investment Manager, entered into a secured term loan credit facility agreement with Premier Trailer Leasing, Inc. (“Premier Trailer”) to provide a credit facility of up to $20,000,000, of which our commitment of $5,000,000 was funded on such date. The loan bears interest at LIBOR, subject to a 1% floor, plus 9% per year, and is for a period of six years. The loan is secured by a second priority security interest in all of Premier Trailer’s assets, including, without limitation, its fleet of trailers, and the equity interests of Premier Trailer.

 

(4)       Leased Equipment at Cost

Leased equipment at cost consisted of the following:

 

 

 

September 30,

 

December 31,

 

 

2014

 

2013

 

Marine vessels

$

 81,651,931  

 

$

 81,651,931  

 

Mining equipment

 

 19,388,278  

 

 

 19,388,278  

 

Oil field services equipment

 

 12,256,632  

 

 

 12,256,632  

 

        Leased equipment at cost

 

 113,296,841  

 

 

 113,296,841  

 

Less: accumulated depreciation

 

 21,301,217  

 

 

 13,007,968  

 

        Leased equipment at cost, less accumulated depreciation

$

 91,995,624  

 

$

 100,288,873  

 

Depreciation expense was $2,764,416 and $2,763,166 for the three months ended September 30, 2014 and 2013, respectively. Depreciation expense was $8,293,249 and $8,076,134 for the nine months ended September 30, 2014 and 2013, respectively.

(5)       Net Investment in Finance Leases

Net investment in finance leases consisted of the following:

 

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ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements

September 30, 2014

(unaudited)

 

 

 

 

September 30,

 

December 31,

 

 

2014

 

2013

 

Minimum rents receivable

$

65,633,022

 

$

72,098,307

 

Estimated unguaranteed residual values

 

 -  

 

 

328,192

 

Initial direct costs

 

1,053,115

 

 

1,268,037

 

Unearned income

 

(16,054,943)

 

 

(19,708,993)

 

        Net investment in finance leases

$

50,631,194

 

$

53,985,543

 

 

 

 

 

 

 

 

On May 30, 2014, Global Crossing Telecommunications, Inc. (“Global Crossing”) exercised its option to purchase certain telecommunications equipment prior to lease expiration at the purchase option price of approximately $328,000.  In accordance with the terms of the lease, Global Crossing was required to pay the final monthly lease payment of approximately $60,000.

 

(6)     Investment in Joint Ventures

 

On March 4, 2014, a joint venture owned 15% by us, 60% by Fund Twelve, 15% by Fund Fourteen and 10% by Fund Sixteen purchased mining equipment from an affiliate of Spurlock Mining, LLC (f/k/a Blackhawk Mining, LLC) (“Spurlock”). Simultaneously, the mining equipment was leased to Spurlock and its affiliates for four years. The aggregate purchase price for the mining equipment of approximately $25,359,000 was funded by approximately $17,859,000 in cash and $7,500,000 of non-recourse long-term debt.  Our contribution to the joint venture was $2,693,395.

 

On March 21, 2014, a joint venture (“ICON Siva”) owned 12.5% by us, 75% by Fund Twelve and 12.5% by Fund Fourteen, through two indirect subsidiaries, entered into memoranda of agreement to purchase two LPG tanker vessels, the SIVA Coral and the SIVA Pearl (collectively, the “SIVA Vessels”), from Siva Global Ships Limited (“Siva Global”) for an aggregate purchase price of $41,600,000. The SIVA Coral and the SIVA Pearl were delivered on March 28, 2014 and April 8, 2014, respectively. The SIVA Vessels were bareboat chartered to an affiliate of Siva Global for a period of eight years upon the delivery of each respective vessel. The SIVA Vessels were each acquired for approximately $3,550,000 in cash, $12,400,000 of financing through a senior secured loan (the “Loan”) from DVB Group Merchant Bank (Asia) Ltd. (“DVB”) and $4,750,000 of financing through a subordinated, non-interest-bearing seller’s credit. Our contribution to ICON Siva was $1,022,225.

 

On March 28, 2014, a joint venture owned 27.5% by us, 60% by Fund Twelve and 12.5% by Fund Sixteen purchased trucks, trailers and other equipment from subsidiaries of D&T Holdings, LLC (“D&T”) for $12,200,000. Simultaneously, the trucks, trailers and other equipment were leased to D&T and its subsidiaries for 57 months. Our contribution to the joint venture was $3,266,352. On September 15, 2014, the lease agreement with D&T was amended to allow D&T to increase its capital expenditure limit. In consideration for agreeing to such increase, lease payments of approximately $1,500,000 that were scheduled to be paid in 2018 were paid by October 31, 2014.  In addition, the joint venture received an amendment fee of $100,000.

 

On June 12, 2014, a joint venture owned 12.5% by us, 75% by Fund Twelve and 12.5% by Fund Fourteen purchased an offshore supply vessel from Pacific Crest Pte. Ltd. (“Pacific Crest”) for $40,000,000. Simultaneously, the vessel was bareboat chartered to Pacific Crest for ten years. The vessel was acquired for approximately $12,000,000 in cash, $26,000,000 of financing through a senior secured loan from DVB and $2,000,000 of financing through a subordinated, non-interest-bearing seller’s credit. Our contribution to the joint venture was $1,617,158.

 

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ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements

September 30, 2014

(unaudited)

 

 

(7)      Non-Recourse Long-Term Debt

 

As of September 30, 2014 and December 31, 2013, we had non-recourse long-term debt obligations of $85,932,909 and $96,310,220, respectively. As of September 30, 2014, our non-recourse debt obligations had maturity dates ranging from October 1, 2015 to December 31, 2020 and interest rates ranging from 4.0% to 6.0% per year.

 

At September 30, 2014, we were in compliance with all covenants related to our non-recourse long-term debt.

 

(8)      Revolving Line of Credit, Recourse

We entered into an agreement with California Bank & Trust (“CB&T”) for a revolving line of credit through March 31, 2015 of up to $10,000,000 (the “Facility”), which is secured by all of our assets not subject to a first priority lien. Amounts available under the Facility are subject to a borrowing base that is determined, subject to certain limitations, by the present value of the future receivables under certain loans and lease agreements in which we have a beneficial interest.

 

The interest rate for general advances under the Facility is CB&T’s prime rate. We may elect to designate up to five advances on the outstanding principal balance of the Facility to bear interest at LIBOR plus 2.5% per year. In all instances, borrowings under the Facility are subject to an interest rate floor of 4.0% per year. In addition, we are obligated to pay an annualized 0.5% fee on unused commitments under the Facility. At September 30, 2014, there were no obligations outstanding under the Facility and we were in compliance with all covenants related to the Facility.

 

At September 30, 2014, we had $10,000,000 available under the Facility pursuant to the borrowing base.

 

(9)    Transactions with Related Parties

We paid distributions to our General Partner of $40,226 and $119,802 for the three and nine months ended September 30, 2014, respectively. We paid distributions to our General Partner of $40,190 and $107,348 for the three and nine months ended September 30, 2013, respectively. Additionally, our General Partner’s interest in the net income attributable to us was $50,313 and $106,776 for the three and nine months ended September 30, 2014, respectively. Our General Partner’s interest in the net income attributable to us was $24,221 and $52,051 for the three and nine months ended September 30, 2013, respectively.

 

Fees and other expenses incurred by us to our General Partner or its affiliates were as follows:

 

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ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements

September 30, 2014

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

 

 

 

 

 

September 30,

 

September 30,

 

 Entity

 Capacity

 

 Description

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

Organizational and

 

 

 

 

 

 

 

 

 

 

  offering expense

 

 

 

 

 

 

 

 

 

 

 

 

 

ICON Capital, LLC

Investment Manager

 

   reimbursements (1)

 

$

 -  

 

$

 -  

 

$

 -  

 

$

243,063

 

ICON Securities, LLC

Dealer-manager

 

Dealer-manager fees (2)

 

 

 -  

 

 

 -  

 

 

 -  

 

 

1,319,845

 

ICON Capital, LLC

Investment Manager

 

Acquisition fees (3)

 

 

400,549

 

 

3,315,083

 

 

1,025,147

 

 

6,734,975

 

ICON Capital, LLC

Investment Manager

 

Management fees (4)

 

 

299,614

 

 

446,978

 

 

1,209,388

 

 

904,846

 

 

 

 

 

 

Administrative expense

 

 

 

 

 

 

 

 

 

 

 

 

 

ICON Capital, LLC

Investment Manager

 

  reimbursements (4)

 

 

372,023

 

 

1,003,109

 

 

1,475,822

 

 

3,046,339

 

Fund Fourteen

Noncontrolling interest

 

Interest expense (4)

 

 

103,150

 

 

101,279

 

 

304,655

 

 

295,018

 

 

 

 

$

1,175,336

 

$

4,866,449

 

$

4,015,012

 

$

12,544,086

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Amount capitalized and amortized to partners' equity.

 

(2)  Amount charged directly to partners' equity.

 

(3)  Amount capitalized and amortized to operations.

 

(4)  Amount charged directly to operations.

 

 At September 30, 2014, we had a net payable of $2,686,692 due to our General Partner and its affiliates that primarily consisted of a note payable of approximately $2,608,000 and accrued interest of $29,000 due to Fund Fourteen related to its noncontrolling interest in a vessel, the Lewek Ambassador, and administrative expense reimbursements of approximately $72,000 due to our Investment Manager. At December 31, 2013, we had a net payable of $2,940,943 due to our General Partner and its affiliates that primarily consisted of a note payable of approximately $2,575,000 and accrued interest of $30,000 due to Fund Fourteen related to its noncontrolling interest in the Lewek Ambassador, and administrative expense reimbursements of approximately $494,000 due to our Investment Manager.

 

(10)    Fair Value Measurements

Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

 

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

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

·         Level 3: Pricing inputs that are generally unobservable and are supported by little or no market data.

 

Assets and Liabilities for which Fair Value is Disclosed

 

Certain of our financial assets and liabilities, which include fixed-rate notes receivable, fixed-rate non-recourse long-term debt and seller’s credits, for which fair value is required to be disclosed, were valued using inputs that are generally unobservable and are supported by little or no market data and are therefore classified within Level 3. In accordance with U.S. GAAP, we use projected cash flows for fair value measurements of these financial assets and liabilities. Fair value information with respect to certain of our other assets and liabilities is not separately provided since (i) U.S. GAAP does not require fair value disclosures of lease arrangements and (ii) the carrying value of financial assets, other than lease-related investments, approximates fair value due to their short-term maturities and variable interest rates.

 

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ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements

September 30, 2014

(unaudited)

 

 

The estimated fair value of our fixed-rate notes receivable, fixed-rate non-recourse long-term debt and seller’s credits was based on the discounted value of future cash flows related to the loans based on recent transactions of this type. Principal outstanding on fixed-rate notes receivable was discounted at rates ranging between 10% and 17% per year. Principal outstanding on fixed-rate non-recourse long-term debt and the seller’s credits was discounted at a rate of 5.04% per year.

 

 

 

September 30, 2014

 

 

 

Carrying

 

Fair Value

 

 

 

Amount

 

(Level 3)

 

Principal outstanding on fixed-rate notes receivable

$

 66,580,904  

 

$

 66,654,619  

 

 

 

 

 

 

 

 

Principal outstanding on fixed-rate non-recourse long-term debt

$

 65,457,909  

 

$

 67,989,036  

 

 

 

 

 

 

 

 

Seller's credits

$

 6,162,561  

 

$

 6,037,930  

 

(11)   Commitments and Contingencies

At the time we acquire or divest of our interest in Capital Assets, we may, under very limited circumstances, agree to indemnify the seller or buyer for specific contingent liabilities.  Our General Partner believes that any liability of ours that may arise as a result of any such indemnification obligations will not have a material adverse effect on our consolidated financial condition or results of operations taken as a whole.

 

At September 30, 2014, we had non-recourse and other debt obligations. Each lender has a security interest in the majority of the assets collateralizing each non-recourse debt instrument and an assignment of the rental payments under the lease associated with the assets. If the lessee defaults on the lease, the assets could be returned to the lender in extinguishment of the non-recourse debt. At September 30, 2014, our outstanding non-recourse long-term indebtedness was $85,932,909.

 

We have entered into a remarketing agreement with a third party. Residual proceeds received in excess of specific amounts will be shared with this third party in accordance with the terms of the remarketing agreement. The present value of the obligation related to this agreement was approximately $141,000 at September 30, 2014 and is included in accrued expenses and other liabilities on our consolidated balance sheets.

 

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Table of contents        

 

ICON ECI Fund Fifteen, L.P.

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements

September 30, 2014

(unaudited)

 

 

(12)   Subsequent Events

             

On November 3, 2014, we filed a petition in the District Court of Dallas, Texas against Frontier Oilfield Services, Inc. and certain of its affiliates (collectively, “Frontier”) to obtain repayment of the outstanding note receivable as a result of Frontier’s breach of the terms of the loan agreement entered into in July 2012.  Our Investment Manager believes the outstanding note receivable and accrued interest due from Frontier as of September 30, 2014 are fully recoverable based on the underlying collateral value.  As a result, no credit loss was deemed necessary for the nine months ended September 30, 2014.

 

On November 5, 2014, the Taiwan Branch of ICON Inotera, LLC (“ICON TW”), our wholly owned subsidiary, entered into a master lease agreement with Inotera Memories, Inc. (“Inotera”) for the lease of a photolithograph immersion scanner (the “Equipment”) to Inotera for 24 months commencing simultaneously upon ICON TW’s purchase of the Equipment for approximately EUR 62,000,000 (the “Purchase Price”), which is anticipated to occur during the three months ending December 31, 2014.  The Purchase Price will be financed by a letter of credit facility that is scheduled to be refinanced, in part, through a senior loan facility that will have a term of 24 months.

  

 

13 


Item 2. General Partner's Discussion and Analysis of Financial Condition and Results of Operations

 

The following is a discussion of our current financial position and results of operations. This discussion should be read together with our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2013. 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 ICON ECI Fund Fifteen, L.P. and its consolidated subsidiaries.

 

Forward-Looking Statements

 

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

 

Overview

 

We are a direct financing fund that primarily makes investments in domestic and international companies, which investments are primarily structured as debt and debt-like financings (such as loans and leases) that are collateralized by Capital Assets utilized by such companies to operate their businesses, as well as other strategic investments in or collateralized by Capital Assets that our General Partner believes will provide us with a satisfactory, risk-adjusted rate of return. We were formed as a Delaware limited partnership and have elected to be treated as a partnership for federal income tax purposes. As of July 28, 2011 (the “Initial Closing Date”), we raised a minimum of $1,200,000 from the sale of our limited partnership interests (“Interests”), at which time we commenced operations. Subsequent to the Initial Closing Date, we returned the initial capital contribution of $1,000 to our Investment Manager. From the commencement of our offering on June 6, 2011 through the completion of our offering on June 6, 2013, we sold 197,597 Interests to 4,644 limited partners, representing $196,688,918 of capital contributions. Investors from the Commonwealth of Pennsylvania and the State of Tennessee were not admitted until we raised total equity in the amount of $20,000,000, which we achieved on November 17, 2011. Our operating period commenced on June 7, 2013.

 

After the net offering proceeds have been invested, it is anticipated that additional investments will be made with the cash generated from our initial investments to the extent that cash is not used for our expenses, reserves and distributions to our partners.  The investment in additional Capital Assets in this manner is called “reinvestment.”  We anticipate investing and reinvesting in Capital Assets from time to time for five years from June 6, 2013, the date we completed our offering.  This time frame is called the “operating period” and may be extended, at our General Partner’s discretion, for up to an additional three years.  After the operating period, we will then sell our assets and/or let our investments mature in the ordinary course of business, during a time frame called the “liquidation period.”

 

We seek to generate returns in three ways. We seek to:

 

·         generate current cash flow from payments of principal and/or interest (in the case of secured loans and other financing transactions) and rental payments (in the case of leases);

·         generate deferred cash flow by realizing the value of certain Capital Assets or interests therein at the maturity of the investment; and

·         generate a combination of both current and deferred cash flow from other structured investments.

 

14 


In the case of secured loans and other financing transactions, the principal and interest payments due under the loan are expected to provide a return of and a return on the amount we lend to borrowers. In the case of leases where there is significant current cash flow generated during the primary term of the lease and the value of the Capital Assets at the end of the term will be minimal or is not considered a primary reason for making the investment, the rental payments due under the lease are expected to be, in the aggregate, sufficient to provide a return of and a return on the purchase of the leased Capital Assets.

 

In the case of investments in leased Capital Assets that decline in value at a slow rate due to the long economic life of such Capital Assets, we expect that we will generate sufficient net proceeds at the end of the investment from the sale or re-lease of such Capital Assets. In the case of operating leases, we expect most, if not all, of the return of and the return on such investments to be realized upon the sale or re-lease of the Capital Assets. For leveraged leases, we expect the rental income we receive to be less than the purchase price of the Capital Assets because we will structure these transactions to utilize some or all of the lease rental payments to reduce the amount of non-recourse indebtedness used to acquire such assets.

 

In some cases with respect to the above investments, we may acquire equity interests, as well as warrants or other rights to acquire equity interests, in the borrower or lessee that may increase the expected return on our investments.

 

Our General Partner manages and controls our business affairs, including, but not limited to, our investments in Capital Assets, under the terms of our limited partnership agreement.  Our Investment Manager, an affiliate of our General Partner, originates and services our investments.  Our Investment Manager manages or is the investment manager or managing trustee for seven other public equipment funds.

 

Recent Significant Transactions

We engaged in the following significant transactions since December 31, 2013:

Notes Receivable

·          On October 4, 2013, we provided a $17,500,000 first drawdown on a secured term loan facility of up to $40,000,000 to Varada. The facility is comprised of three loans, each to be used toward the purchase or refinancing of a respective vessel.  As part of the facility agreement, to the extent the aggregate drawdown by Varada is less than $38,500,000 by September 30, 2014, the Undrawn Commitment Fee will be assessed. Subsequent to the first drawdown, Varada did not further draw down on the facility. As a result, we recognized the Undrawn Commitment Fee of $2,100,000 as additional finance income during the three months ended September 30, 2014.

 

·          On March 18, 2014, Green Field satisfied its obligation in connection with a superpriority, secured term loan scheduled to mature on August 26, 2014 by making a prepayment of approximately $7,458,000, comprised of all outstanding principal and accrued interest. No material gain or loss was recorded as a result of this transaction.

 

·          On June 6, 2014, NTS satisfied their obligations in connection with three secured term loans scheduled to mature on July 1, 2017 by making a prepayment of approximately $9,522,000, comprised of all outstanding principal, accrued interest and a prepayment fee of approximately $362,000. The prepayment fee was recognized as additional finance income.

 

·         On July 14, 2014, we, Fund Twelve and Fund Fourteen entered into a secured term loan credit facility agreement with TMA to provide a credit facility of up to $29,000,000, of which our commitment of $3,625,000 was funded on August 27, 2014. The facility was used by TMA to acquire and refinance two platform supply vessels. At inception, the loan bore interest at LIBOR, subject to a 1% floor, plus a margin of 17%. Upon acceptance of both vessels by TMA’s sub-charterer on September 19, 2014, the margin was reduced to 13%. The loan matures five years from the date of funding. The loan is secured by, among other things, a first priority security interest in and earnings from each of the vessels. The vessels were valued at $61,000,000 on the date the transaction occurred.

 

·          On September 24, 2014, we, Fund Twelve, Fund Fourteen and Fund Sixteen entered into a secured term loan credit facility agreement with Premier Trailer to provide a credit facility of up to $20,000,000, of which our commitment of $5,000,000 was funded on such date. The loan bears interest at LIBOR, subject to a 1% floor, plus 9% per year, and is for a period of six years. The loan is secured by a second priority security interest in all of Premier Trailer’s assets, including, without limitation, its fleet of trailers, and the equity interests of Premier Trailer. Premier Trailer’s assets, including its fleet of trailers, were valued at approximately $64,088,000 on the date the transaction occurred.

Mining Equipment

15 


·          On March 4, 2014, a joint venture owned 15% by us, 60% by Fund Twelve, 15% by Fund Fourteen and 10% by Fund Sixteen purchased mining equipment from an affiliate of Spurlock. Simultaneously, the mining equipment was leased to Spurlock and its affiliates for four years. The aggregate purchase price for the mining equipment of approximately $25,359,000 was funded by approximately $17,859,000 in cash and $7,500,000 of non-recourse long-term debt.  Our contribution to the joint venture was $2,693,395.

 

Marine Vessels

·          On March 21, 2014, ICON Siva, through two indirect subsidiaries, entered into memoranda of agreement to purchase the SIVA Vessels from Siva Global for an aggregate purchase price of $41,600,000. The SIVA Coral and the SIVA Pearl were delivered on March 28, 2014 and April 8, 2014, respectively. The SIVA Vessels were bareboat chartered to an affiliate of Siva Global for a period of eight years upon the delivery of each respective vessel. The SIVA Vessels were each acquired for approximately $3,550,000 in cash, $12,400,000 of financing through the Loan from DVB and $4,750,000 of financing through a subordinated, non-interest-bearing seller’s credit. Our contribution to ICON Siva was $1,022,225.

 

·          On June 12, 2014, a joint venture owned 12.5% by us, 75% by Fund Twelve and 12.5% by Fund Fourteen purchased an offshore supply vessel from Pacific Crest for $40,000,000. Simultaneously, the vessel was bareboat chartered to Pacific Crest for ten years. The vessel was acquired for approximately $12,000,000 in cash, $26,000,000 of financing through a senior secured loan from DVB and $2,000,000 of financing through a subordinated, non-interest-bearing seller’s credit. Our contribution to the joint venture was $1,617,158.

 

Trucks and Trailers

·          On March 28, 2014, a joint venture owned 27.5% by us, 60% by Fund Twelve and 12.5% by Fund Sixteen purchased trucks, trailers and other equipment from subsidiaries of D&T for $12,200,000. Simultaneously, the trucks, trailers and other equipment were leased to D&T and its subsidiaries for 57 months. Our contribution to the joint venture was $3,266,352. On September 15, 2014, the lease agreement with D&T was amended to allow D&T to increase its capital expenditure limit. In consideration for agreeing to such increase, lease payments of approximately $1,500,000 that were scheduled to be paid in 2018 were paid by October 31, 2014.  In addition, the joint venture received an amendment fee of $100,000.

 

Telecommunications Equipment

·          On May 30, 2014, Global Crossing exercised its option to purchase certain telecommunications equipment prior to lease expiration at the purchase option price of approximately $328,000.  In accordance with the terms of the lease, Global Crossing was required to pay the final monthly lease payment of approximately $60,000.

 

Acquisition Fees

·          We paid total acquisition fees to our Investment Manager of $400,549 and $1,025,147 during the three and nine months ended September 30, 2014.

 

Subsequent Events

·          On November 3, 2014, we filed a petition in the District Court of Dallas, Texas against Frontier to obtain repayment of the outstanding note receivable as a result of Frontier’s breach of the terms of the loan agreement entered into in July 2012.  Our Investment Manager believes the outstanding note receivable and accrued interest due from Frontier as of September 30, 2014 are fully recoverable based on the underlying collateral value.  As a result, no credit loss was deemed necessary for the nine months ended September 30, 2014.

 

·         On November 5, 2014, ICON TW entered into a master lease agreement with Inotera for the lease of Equipment to Inotera for 24 months commencing simultaneously upon ICON TW’s purchase of the Equipment for approximately EUR 62,000,000, which is anticipated to occur during the three months ending December 31, 2014.  The Purchase Price will be financed by a letter of credit facility that is scheduled to be refinanced, in part, through a senior loan facility that will have a term of 24 months.

 

16 


Recent Accounting Pronouncements

 

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will become effective for us on January 1, 2017. We are currently in the process of evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements.

 

In August 2014, FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which will become effective for us on our fiscal year ending December 31, 2016. The adoption of ASU 2014-15 is not expected to have a material effect on our consolidated financial statements.

 

We do not believe any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our consolidated financial statements.

 

Results of Operations for the Three Months Ended September 30, 2014 (the “2014 Quarter”) and 2013 (the “2013 Quarter”)

 

We entered into our operating period on June 7, 2013, during which we will continue to make investments with the cash generated from our initial investments to the extent that the cash is not used for expenses, reserves and distributions to limited partners. As our investments mature, we may reinvest the proceeds in additional investments in Capital Assets.

 

Financing Transactions

The following tables set forth the types of assets securing the financing transactions in our portfolio:

 

 

 

 

September 30, 2014

 

December 31, 2013

 

 

 

 

Net

 

 

Percentage of

 

 

Net

 

 

Percentage of

 

 

 

 

Carrying

 

 

Total Net

 

 

Carrying

 

 

Total Net

 

Asset Type

 

 

Value

 

 

Carrying Value

 

 

Value

 

 

Carrying Value

 

Marine - product tankers

 

$

29,964,640

 

 

25%

 

$

31,262,890

 

 

23%

 

Platform supply vessels

 

 

24,374,483

 

 

20%

 

 

22,135,705

 

 

16%

 

Oil field services equipment

 

 

20,536,999

 

 

17%

 

 

28,259,026

 

 

21%

 

Trailers

 

 

11,855,111

 

 

10%

 

 

7,105,225

 

 

5%

 

Lubricant manufacturing and blending equipment

 

 

9,360,616

 

 

8%

 

 

9,430,935

 

 

7%

 

Vessel - tanker

 

 

7,490,518

 

 

6%

 

 

7,612,365

 

 

6%

 

Marine - dry bulk vessels

 

 

5,635,387

 

 

5%

 

 

5,752,690

 

 

4%

 

Marine - asphalt carrier

 

 

5,569,862

 

 

5%

 

 

6,825,681

 

 

5%

 

Metal pipe and tube manufacturing equipment

 

 

2,497,054

 

 

2%

 

 

2,526,063

 

 

2%

 

Rail support construction equipment

 

 

1,792,837

 

 

1%

 

 

1,931,228

 

 

2%

 

Aircraft parts

 

 

1,598,539

 

 

1%

 

 

1,687,868

 

 

1%

 

Telecommunications equipment

 

 

-

 

 

-

 

 

10,165,395

 

 

8%

 

 

 

$

120,676,046

 

 

100%

 

$

134,695,071

 

 

100%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

During the 2014 Quarter and the 2013 Quarter, certain customers generated significant portions (defined as 10% or more) of our total finance income as follows:

 

17 


 

 

 

 

 

Percentage of Total Finance Income

 

Customer

 

Asset Type

 

2014 Quarter

 

2013 Quarter

 

Varada Ten Pte. Ltd.

 

Oil field services equipment

 

54%

 

-

 

Gallatin Marine Management, LLC

 

Platform supply vessel

 

11%

 

21%

 

Ardmore Shipping Ltd.

 

Marine - product tankers

 

10%

 

18%

 

Lubricating Specialties Company

 

Lubricant manufacturing and blending equipment

 

6%

 

14%

 

NTS Communications, Inc.

 

Telecommunications equipment

 

-

 

10%

 

 

 

 

 

81%

 

63%

 

 

 

 

 

 

 

 

 

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

 

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

 

Operating Lease Transactions

 

The following tables set forth the types of equipment subject to operating leases in our portfolio:

 

 

 

 

September 30, 2014

 

December 31, 2013

 

 

 

 

Net

 

 

Percentage of

 

 

Net

 

 

Percentage of

 

 

 

 

Carrying

 

 

Total Net

 

 

Carrying

 

 

Total Net

 

Asset Type

 

 

Value

 

 

Carrying Value

 

 

Value

 

 

Carrying Value

 

Marine - container vessels

 

$

 72,598,915  

 

 

79%

 

$

 76,405,717  

 

 

76%

 

Mining equipment

 

 

 9,764,661  

 

 

11%

 

 

 13,033,237  

 

 

13%

 

Oil field services equipment

 

 

 9,632,048  

 

 

10%

 

 

 10,849,919  

 

 

11%

 

 

 

$

 91,995,624  

 

 

100%

 

$

 100,288,873  

 

 

100%

 

The net carrying value of our operating lease transactions includes the balance of our leased equipment at cost, which is included in our consolidated balance sheets.

 

During the 2014 Quarter and the 2013 Quarter, certain customers generated significant portions (defined as 10% or more) of our total rental income as follows:

 

 

 

 

 

 

Percentage of Total Rental Income

 

Customer

 

Asset Type

 

2014 Quarter

 

2013 Quarter

 

Hoegh Autoliners Shipping AS

 

Marine - container vessels

 

54%

 

54%

 

Murray Energy Corporation

 

Mining equipment

 

33%

 

33%

 

Go Frac, LLC

 

Oil field services equipment

 

13%

 

13%

 

 

 

 

 

100%

 

100%

 

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

 

Revenue for the 2014 Quarter and the 2013 Quarter is summarized as follows:

 

18 


 

 

 

Three Months Ended September 30,

 

 

 

 

 

2014

 

2013

 

Change

 

Finance income

$

5,461,488

 

$

3,162,950

 

$

2,298,538

 

Rental income

 

4,582,113

 

 

4,579,825

 

 

2,288

 

Income from investment in joint ventures

 

657,562

 

 

338,495

 

 

319,067

 

Other (loss) income

 

(266,129)

 

 

490,698

 

 

(756,827)

 

 

Total revenue

$

10,435,034

 

$

8,571,968

 

$

1,863,066

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue for the 2014 Quarter increased $1,863,066, or 21.7%, as compared to the 2013 Quarter. The increase in revenue was primarily due to the recognition of the Undrawn Commitment Fee as income on our note receivable with Varada during the 2014 Quarter and entering into five new notes receivable and four new joint ventures during or subsequent to the 2013 Quarter.  This increase was partially offset by a change in other income of $490,698 in the 2013 Quarter to other loss of $266,129 in the 2014 Quarter primarily due to an unfavorable change in foreign currency exchange rates related to one note receivable during the 2014 Quarter.

 

Expenses for the 2014 Quarter and the 2013 Quarter are summarized as follows:

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

2014

 

2013

 

Change

 

Management fees

$

299,614

 

$

446,978

 

$

(147,364)

 

Administrative expense reimbursements

 

372,023

 

 

1,003,109

 

 

 (631,086) 

 

General and administrative

 

316,226

 

 

249,192

 

 

67,034

 

Interest

 

1,267,001

 

 

1,258,106

 

 

8,895

 

Depreciation

 

2,764,416

 

 

2,763,166

 

 

1,250

 

 

Total expenses

$

5,019,280

 

$

5,720,551

 

$

(701,271)

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses for the 2014 Quarter decreased $701,271, or 12.3%, as compared to the 2013 Quarter. The decrease in total expenses was primarily related to a decrease in administrative expense reimbursements due to lower costs incurred on our behalf by our Investment Manager. The decrease in management fees was primarily due to the prepayment of one note receivable during the 2013 Quarter

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests decreased $44,826, from $429,317 in the 2013 Quarter to $384,491 in the 2014 Quarter. The decrease was primarily due to an increase in interest expense related to additional non-recourse long-term debt entered into during the 2013 Quarter.

Net Income Attributable to Fund Fifteen

As a result of the foregoing factors, net income attributable to us for the 2014 Quarter and 2013 Quarter was $5,031,263 and $2,422,100, respectively. The net income attributable to us per weighted average additional Interest outstanding for the 2014 Quarter and the 2013 Quarter was $25.22 and $12.14, respectively.

 

Results of Operations for the Nine Months Ended September 30, 2014 (the “2014 Period”) and 2013 (the “2013 Period”)

Financing Transactions

During the 2014 Period and the 2013 Period, certain customers generated significant portions (defined as 10% or more) of our total finance income as follows:

 

19 


 

 

 

 

 

Percentage of Total Finance Income

 

Customer

 

Asset Type

 

2014 Period

 

2013 Period

 

Varada Ten Pte. Ltd.

 

Oil field services equipment

 

34%

 

-

 

Gallatin Marine Management, LLC

 

Platform supply vessel

 

14%

 

24%

 

Ardmore Shipping Ltd.

 

Marine - product tankers

 

12%

 

13%

 

NTS Communications, Inc.

 

Telecommunications equipment

 

7%

 

11%

 

Lubricating Specialties Company

 

Lubricating manufacturing and blending equipment

 

7%

 

10%

 

 

 

 

 

74%

 

58%

 

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

 

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

 

Operating Lease Transactions

During the 2014 Period and the 2013 Period, certain customers generated significant portions (defined as 10% or more) of our total rental income as follows:

 

 

 

Percentage of Total Rental Income

 

Customer

 

Asset Type

 

2014 Period

 

2013 Period

 

Hoegh Autoliners Shipping AS

 

Marine - container vessels

 

54%

 

55%

 

Murray Energy Corporation

 

Mining equipment

 

33%

 

34%

 

Go Frac, LLC

 

Oil field services equipment

 

13%

 

11%

 

 

100%

 

100%

 

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

 

Revenue for the 2014 Period and the 2013 Period is summarized as follows:

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

2014

 

2013

 

Change

 

Finance income

$

12,653,010

 

$

8,258,748

 

$

4,394,262

 

Rental income

 

13,746,343

 

 

13,416,142

 

 

330,201

 

Income from investment in joint ventures

 

1,656,903

 

 

503,817

 

 

1,153,086

 

Other income

 

22,370

 

 

569,292

 

 

(546,922)

 

 

Total revenue

$

28,078,626

 

$

22,747,999

 

$

5,330,627

 

Total revenue for the 2014 Period increased $5,330,627, or 23.4%, as compared to the 2013 Period. The increase in revenue was primarily due to entering into six new notes receivable and four new joint ventures during or subsequent to the 2013 Period and the recognition of the Undrawn Commitment Fee as income on our note receivable with Varada during the 2014 Period.  This increase was partially offset by the prepayment of three notes receivable during or subsequent to the 2013 Period and a decrease in other income recognized in the 2014 Period primarily due to an unfavorable change in foreign currency exchange rates related to one note receivable.

 

20 


Expenses for the 2014 Period and the 2013 Period are summarized as follows:

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

2014

 

2013

 

Change

 

Management fees

$

 1,209,388  

 

$

 904,846  

 

$

304,542

 

Administrative expense reimbursements

 

 1,475,822  

 

 

 3,046,339  

 

 

(1,570,517)

 

General and administrative

 

 1,378,755  

 

 

 884,264  

 

 

494,491

 

Interest

 

 3,897,104  

 

 

 3,537,798  

 

 

359,306

 

Depreciation

 

 8,293,249  

 

 

 8,076,134  

 

 

217,115

 

Credit loss

 

 -  

 

 

 12,530  

 

 

(12,530)

 

 

Total expenses

$

 16,254,318  

 

$

 16,461,911  

 

$

(207,593)

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses for the 2014 Period decreased $207,593, or 1.3%, as compared to the 2013 Period. The decrease primarily related to a decrease in administrative expense reimbursements due to lower costs incurred on our behalf by our Investment Manager. The decrease was partially offset by (i) an increase in general and administrative expenses due to an increase in legal and state tax expenses, (ii) an increase in interest expense due to higher interest rates on our non-recourse long-term debt, (iii) an increase in management fees primarily due to the prepayment of two notes receivable during the 2014 Period and (iv) an increase in depreciation expense due to the purchase of equipment pursuant to a new operating lease entered into during the 2013 Period.

 

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests increased $65,805, from $1,080,932 in the 2013 Period to $1,146,737 in the 2014 Period. The increase was primarily due to net income related to our joint ventures with Fund Fourteen, which invested in two new finance leases during the 2013 Period.

Net Income Attributable to Fund Fifteen

As a result of the foregoing factors, net income attributable to us for the 2014 Period and 2013 Period was $10,677,571 and $5,205,156, respectively. The net income attributable to us per weighted average additional Interest outstanding for the 2014 Period and the 2013 Period was $53.53 and $28.20, respectively.

 

Financial Condition

This section discusses the major balance sheet variances at September 30, 2014 compared to December 31, 2013.

 

Total Assets

Total assets decreased $11,482,637, from $277,768,205 at December 31, 2013 to $266,285,568 at September 30, 2014. The decrease in total assets was primarily the result of distributions paid to our partners and noncontrolling interests and depreciation of our leased equipment at cost.  These decreases were partially offset by our operating income during the 2014 Period.

 

Total Liabilities

Total liabilities decreased $10,404,194, from $109,969,220 at December 31, 2013 to $99,565,026 at September 30, 2014. The decrease was primarily the result of scheduled repayments of our non-recourse long-term debt during the 2014 Period.

 

Equity

Equity decreased $1,078,443, from $167,798,985 at December 31, 2013 to $166,720,542 at September 30, 2014. The decrease primarily related to distributions paid to our partners and noncontrolling interests, partially offset by our net income in the 2014 Period.

 

Liquidity and Capital Resources

 

21 


Summary

 

At September 30, 2014 and December 31, 2013, we had cash of $24,395,121 and $24,297,314, respectively.  Pursuant to the terms of our offering, we have established a reserve in the amount of 0.50% of the gross offering proceeds from the sale of our Interests.  As of September 30, 2014, the cash reserve was $983,445. During our operating period, our main source of cash is typically from operating activities and our main use of cash is in investing and financing activities.  Our liquidity will vary in the future, increasing to the extent cash flows from investments and proceeds from the sale of our investments exceed expenses and decreasing as we make new investments, pay distributions to our partners and to the extent that expenses exceed cash flows from operations and proceeds from the sale of our investments.

 

We believe that cash generated from the expected results of our operations will be sufficient to finance our liquidity requirements for the foreseeable future, including distributions to our partners, general and administrative expenses, new investment opportunities, management fees 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 borrowers’ and lessees’ businesses that are beyond our control.

 

We are using the net proceeds of the offering and cash from operations to invest in Capital Assets located in North America, Europe and other developed markets, including those in Asia and elsewhere.  We have sought and continue to seek to acquire a portfolio of Capital Assets that is comprised of transactions that generate (a) current cash flow from payments of principal and/or interest (in the case of secured loans and other financing transactions) and rental payments (in the case of leases), (b) deferred cash flow from realizing the value of Capital Assets or interests therein at the maturity of the investment, or (c) a combination of both.

 

Unanticipated or greater than anticipated operating costs or losses (including a borrower’s inability to make timely loan payments or a lessee’s inability to make timely lease payments) would adversely affect our liquidity. To the extent that working capital may be insufficient to satisfy our cash requirements, we anticipate that we would fund our operations from cash flow generated by investing and financing activities. As of September 30, 2014, we had $10,000,000 available to us under the Facility pursuant to the borrowing base to fund our short-term liquidity needs. For additional information, see Note 8 to our consolidated financial statements. Our General Partner does not intend to fund any cash flow deficit of ours or provide other financial assistance to us.

 

From the commencement of our offering period on June 6, 2011 through the completion of our offering on June 6, 2013, we sold 197,597 Interests to 4,644 limited partners, representing $196,688,918 of capital contributions. From the commencement of our offering period through June 6, 2013, we paid sales commissions to third parties of $13,103,139 and dealer-manager fees to ICON Securities, LLC, formerly known as ICON Securities Corp., an affiliate of our General Partner and the dealer-manager of the offering of the Interests (“ICON Securities”), of $5,749,021.  In addition, organizational and offering expenses of $2,730,919 were paid or incurred by us, our General Partner or its affiliates during the offering period.

 

Cash Flows

 

Operating Activities

 

Cash provided by operating activities decreased $1,360,637, from $16,285,395 in the 2013 Period to $14,924,758 in the 2014 Period. The decrease was primarily related to the receipt of a security deposit during the 2013 Period, partially offset by an increase in our receipt of finance income and distributions from joint ventures during the 2014 Period.

 

Investing Activities

 

Cash from investing activities increased $79,536,256, from a use of cash of $74,907,956 in the 2013 Period to a source of cash of $4,628,300 in the 2014 Period. The increase was primarily related to (i) our investment in equipment and notes receivable during the 2013 Period with fewer investments made during the 2014 Period, (ii) an increase in our receipt of principal on finance leases and notes receivable during the 2014 Period and (iii) a decrease in cash used to invest in joint ventures during the 2014 Period as compared to the 2013 Period.

 

Financing Activities

 

22 


Cash from financing activities decreased $58,119,742, from a source of cash $38,664,491 in the 2013 Period to a use of cash of $19,455,251 in the 2014 Period. The decrease was primarily due to (i) our offering period ending on June 6, 2013, (ii) a decrease in contributions in joint ventures by noncontrolling interests, (iii) an increase in distributions to our partners in the 2014 Period and (iv) an increase in repayment of our non-recourse long-term debt during the 2014 Period.

 

Non-Recourse Long-Term Debt

 

We had non-recourse long-term debt obligations at September 30, 2014 and December 31, 2013 of $85,932,909 and $96,310,220, respectively, related to certain vessels, the Lewek Ambassador, the Hoegh Copenhagen, the Ardmore Capella and the Ardmore Calypso, and certain mining and oil field services equipment. Our non-recourse long-term debt obligations consist of notes payable in which the lender has a security interest in the underlying assets. If the lessee were to default on the underlying lease, resulting in our default on the non-recourse long-term debt, the assets could be returned to the lender in extinguishment of that debt.

 

At September 30, 2014, we were in compliance with all covenants related to our non-recourse long-term debt.

 

Distributions

 

We, at our General Partner’s discretion, pay monthly distributions to each of our limited partners beginning with the first month after each such limited partner’s admission and expect to continue to pay such distributions until the termination of our operating period. We paid distributions of $119,802, $11,860,397 and $931,467 to our General Partner, limited partners and noncontrolling interests, respectively, during the 2014 Period.

 

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At the time we acquire or divest of our interest in Capital Assets, we may, under very limited circumstances, agree to indemnify the seller or buyer for specific contingent liabilities.  Our General Partner believes that any liability of ours that may arise as a result of any such indemnification obligations will not have a material adverse effect on our consolidated financial condition or results of operations taken as a whole.

 

At September 30, 2014, we had non-recourse and other debt obligations. Each lender has a security interest in the majority of the assets collateralizing each non-recourse debt instrument and an assignment of the rental payments under the lease associated with the assets. If the lessee defaults on the lease, the assets could be returned to the lender in extinguishment of the non-recourse debt. At September 30, 2014, our outstanding non-recourse long-term indebtedness was $85,932,909.

 

We have entered into a remarketing agreement with a third party. Residual proceeds received in excess of specific amounts will be shared with this third party in accordance with the terms of the remarketing agreement. The present value of the obligation related to this agreement was approximately $141,000 at September 30, 2014 and is included in accrued expenses and other liabilities on our consolidated balance sheets.

 

Off-Balance Sheet Transactions

None.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

Smaller reporting companies are not required to provide the information required by this item.

 

Item 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures  

 

In connection with the preparation of this Quarterly Report on Form 10-Q for the three months ended September 30, 2014, our General Partner carried out an evaluation, under the supervision and with the participation of the management of our General Partner, including its Co-Chief Executive Officers and the Principal Financial and Accounting Officer, of the effectiveness of the design and operation of our General Partner’s disclosure controls and procedures as of the end of the period covered by this report pursuant to the Securities Exchange Act of 1934, as amended. Based on the foregoing evaluation, the Co-Chief Executive Officers and the Principal Financial and Accounting Officer concluded that our General Partner’s disclosure controls and procedures were effective.

 

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

 

Evaluation of internal control over financial reporting

There have been no changes in our internal control over financial reporting during the three months ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

  

 

Item 1. Legal Proceedings  

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

 

Item 1A. Risk Factors

 

Smaller reporting companies are not required to provide the information required by this item.

 

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

We did not sell or repurchase any Interests during the three months ended September 30, 2014.

 

Item 3. Defaults Upon Senior Securities

                    Not applicable.

 

Item 4. Mine Safety Disclosures

                    Not applicable.

 

Item 5. Other Information

                    Not applicable.

 

  

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Item 6. Exhibits

 

  3.1    Certificate of Limited Partnership of Registrant (Incorporated by reference to Exhibit 3.1 to Registrant’s Registration Statement on Form S-1 filed with the SEC on October 6, 2010 (File No. 333-169794)).

 

  4.1    Limited Partnership Agreement of Registrant (Incorporated by reference to Appendix A to Registrant’s Prospectus Supplement No. 3 filed with the SEC on December 28, 2011 (File No.333-169794)).

 

10.1    Investment Management Agreement, by and between ICON ECI Fund Fifteen, L.P. and ICON Capital Corp., dated as of June 3, 2011 (Incorporated by reference to Exhibit 10.2 to Amendment No. 6 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on June 3, 2011 (File No. 333-169794)).

 

10.2    Commercial Loan Agreement, by and between California Bank & Trust and ICON ECI Fund Fifteen, L.P., dated as of May 10, 2011 (Incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, filed on August 12, 2011).

 

    10.3   Loan Modification Agreement, dated as of March 31, 2013, by and between California Bank & Trust and ICON ECI Fund Fifteen, L.P. (Incorporated by reference to Exhibit 10.3 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012, filed March 28, 2013).

 

31.1    Rule 13a-14(a)/15d-14(a) Certification of Co-Chief Executive Officer.

 

31.2    Rule 13a-14(a)/15d-14(a) Certification of Co-Chief Executive Officer.

 

31.3    Rule 13a-14(a)/15d-14(a) Certification of Principal Financial and Accounting Officer.

 

32.1    Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2    Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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

 

101. INS* XBRL Instance Document.

 

101. SCH* XBRL Taxonomy Extension Schema Document.

 

101. CAL* XBRL Taxonomy Extension Calculation Linkbase Document.

 

101. DEF* XBRL Taxonomy Extension Definition Linkbase Document.

 

101. LAB* XBRL Taxonomy Extension Labels Linkbase Document.

 

101. PRE* XBRL Taxonomy Extension Presentation Linkbase Document.

__________________________________________________________________________________________________

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

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SIGNATURES

 

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

 

ICON ECI Fund Fifteen, L.P.

(Registrant)

 

By: ICON GP 15, LLC

      (General Partner of the Registrant)

 

November 12, 2014

 

By: /s/ Michael A. Reisner

Michael A. Reisner

Co-Chief Executive Officer and Co-President

(Co-Principal Executive Officer)

 

By: /s/ Mark Gatto

Mark Gatto

Co-Chief Executive Officer and Co-President

(Co-Principal Executive Officer)

 

By: /s/ Christine H. Yap

Christine H. Yap

Principal Financial and Accounting Officer

 

 

 

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