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EXCEL - IDEA: XBRL DOCUMENT - ICON LEASING FUND TWELVE, LLCFinancial_Report.xls
EX-32.1 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND TWELVE, LLCex-32.1.htm
EX-32.2 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND TWELVE, LLCex-32.2.htm
EX-31.1 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND TWELVE, LLCex-31.1.htm
EX-31.2 - CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND TWELVE, LLCex-31.2.htm
EX-31.3 - CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND TWELVE, LLCex-31.3.htm
EX-32.3 - CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - ICON LEASING FUND TWELVE, LLCex-32.3.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

March 31, 2015

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:

         000-53189 

 

 

 

ICON Leasing Fund Twelve, LLC

(Exact name of registrant as specified in its charter)

 

Delaware

20-5651009

(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  

o  No

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

 

Yes  

o  No

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

 

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).

 

o Yes  

 No

 

Number of outstanding shares of limited liability company interests of the registrant on May 5, 2015 is 348,335.

   

  

 


 

       

       

 

ICON Leasing Fund Twelve, LLC

Table of Contents

 

 

Page

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

Item 1.  Consolidated Financial Statements

1

 

 

 

Consolidated Balance Sheets

1

 

 

 

Consolidated Statements of Comprehensive Income

2

 

 

 

Consolidated Statement of Changes in Equity

3

 

 

 

Consolidated Statements of Cash Flows

4

 

 

 

Notes to Consolidated Financial Statements

6

 

 

 

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

15

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

23

 

 

 

Item 4. Controls and Procedures

23

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1. Legal Proceedings

 

24

 

 

 

Item 1A. Risk Factors

 

24

 

 

 

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

24

 

 

 

Item 3. Defaults Upon Senior Securities

24

 

 

 

Item 4. Mine Safety Disclosures

24

 

 

 

Item 5. Other Information

 

24

 

 

 

Item 6. Exhibits

 

25

 

 

 

Signatures

 

26

 

          

 

 

       

 


  

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

Item 1.  Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

ICON Leasing Fund Twelve, LLC

 (A Delaware Limited Liability Company)

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

 

December 31, 2014

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

Assets

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

$

10,527,954

 

$

15,410,563

 

Current portion of net investment in notes receivable

 

6,351,339

 

 

6,482,004

 

Current portion of net investment in finance leases

 

11,083,459

 

 

12,142,423

 

Other current assets

 

504,147

 

 

620,599

 

 

 

Total current assets

 

28,466,899

 

 

34,655,589

Non-current assets:

 

 

 

 

 

 

Net investment in notes receivable, less current portion

 

46,627,526

 

 

52,238,006

 

Net investment in finance leases, less current portion

 

60,154,606

 

 

62,143,299

 

Leased equipment at cost (less accumulated depreciation of

 

 

 

 

 

 

 

$20,183,184 and $18,430,584, respectively)

 

70,999,175

 

 

72,751,775

 

Vessels (less accumulated depreciation of

 

 

 

 

 

 

 

$1,715,396 and $1,286,547, respectively)

 

17,837,828

 

 

18,266,677

 

Investment in joint ventures

 

25,581,392

 

 

25,235,827

 

Other non-current assets

 

2,086,364

 

 

2,138,020

 

 

 

Total non-current assets

 

223,286,891

 

 

232,773,604

Total assets

$

251,753,790

 

$

267,429,193

Liabilities and Equity

Current liabilities:

 

 

 

 

 

 

Current portion of non-recourse long-term debt

$

7,359,515

 

$

7,332,765

 

Deferred revenue

 

137,419

 

 

167,813

 

Due to Manager and affiliates, net

 

337,062

 

 

2,798,414

 

Accrued expenses and other current liabilities

 

1,587,749

 

 

1,941,246

 

 

 

 Total current liabilities

 

9,421,745

 

 

12,240,238

 Non-current liabilities:

 

 

 

 

 

 

Non-recourse long-term debt, less current portion

 

49,975,474

 

 

51,863,021

 

Seller's credits

 

12,404,869

 

 

12,295,998

 

Other non-current liabilities

 

150,000

 

 

150,000

 

 

 

Total non-current liabilities

 

62,530,343

 

 

64,309,019

 

 

 

Total liabilities

 

71,952,088

 

 

76,549,257

Commitments and contingencies (Note 11)

 

 

 

 

 

Equity:

 

Members’ equity:

 

 

 

 

 

 

 

Additional members

 

153,050,103

 

 

162,960,082

 

 

Manager

 

(1,565,344)

 

 

(1,465,243)

 

        

 

Total members’ equity

 

151,484,759

 

 

161,494,839

 

Noncontrolling interests

 

28,316,943

 

 

29,385,097

 

 

 

Total equity

 

179,801,702

 

 

190,879,936

Total liabilities and equity

$

251,753,790

 

$

267,429,193

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

1


      

ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Consolidated Statements of Comprehensive Income

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

2015

 

 

2014

 

Revenue and other income:

 

 

Finance income

$

3,665,065

 

$

3,475,392

 

 

Rental income

 

3,532,157

 

 

4,031,972

 

 

Time charter revenue

 

1,371,311

 

 

-

 

 

Income from investment in joint ventures

 

597,227

 

 

639,355

 

 

 

Total revenue and other income

 

9,165,760

 

 

8,146,719

 

 Expenses:

 

 

 

 

 

 

 

Management fees

 

384,836

 

 

539,190

 

 

Administrative expense reimbursements

 

439,013

 

 

460,632

 

 

General and administrative

 

907,047

 

 

1,086,521

 

 

Interest 

 

1,049,990

 

 

1,424,976

 

 

Depreciation

 

2,181,449

 

 

1,886,539

 

 

Credit loss, net

 

362,665

 

 

-

 

 

Vessel operating

 

1,496,656

 

 

-

 

 

Gain on derivative financial instruments

 

-

 

 

(36,278)

 

 

 

Total expenses

 

6,821,656

 

 

5,361,580

 

Net income

 

2,344,104

 

 

2,785,139

 

 

 

Less: net income attributable to noncontrolling interests

 

1,031,122

 

 

621,121

 

Net income attributable to Fund Twelve

 

1,312,982

 

 

2,164,018

 

Other comprehensive income:

 

 

 

 

 

 

 

Change in fair value of derivative financial instruments

 

-

 

 

282,919

 

 

Currency translation adjustment during the period

 

-

 

 

(7)

 

 

 

Total other comprehensive income

 

-

 

 

282,912

 

Comprehensive income

 

2,344,104

 

 

3,068,051

 

 

Less: comprehensive income attributable to noncontrolling interests

 

1,031,122

 

 

621,121

 

Comprehensive income attributable to Fund Twelve

$

1,312,982

 

$

2,446,930

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Fund Twelve allocable to:

 

 

 

 

 

 

 

Additional members

$

1,299,852

 

$

2,142,378

 

 

Manager

 

13,130

 

 

21,640

 

 

 

 

$

1,312,982

 

$

2,164,018

 

Weighted average number of additional shares of limited liability

 

 

 

 

 

 

 

company interests outstanding

 

348,335

 

 

348,335

 

Net income attributable to Fund Twelve per weighted average

 

 

 

 

 

 

 

 additional share of limited liability company interests outstanding

$

3.73

 

$

6.15

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

2


 

 

ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Consolidated Statement of Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Members' Equity

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limited Liability

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Company

 

 

Additional

 

 

 

 

 

Members'

 

 

Noncontrolling

 

 

Total

 

 

 

 

 

Interests

 

 

Members

 

 

Manager

 

 

Equity

 

 

Interests

 

 

Equity

Balance, December 31, 2014

348,335

 

$

162,960,082

 

$

(1,465,243)

 

$

161,494,839

 

$

29,385,097

 

$

190,879,936

 

Net income

-

 

 

1,299,852

 

 

13,130

 

 

1,312,982

 

 

1,031,122

 

 

2,344,104

 

Distributions

-

 

 

(11,209,831)

 

 

(113,231)

 

 

(11,323,062)

 

 

(2,099,276)

 

 

(13,422,338)

Balance, March 31, 2015 (unaudited)

348,335

 

$

153,050,103

 

$

(1,565,344)

 

$

151,484,759

 

$

28,316,943

 

$

179,801,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

3


  

ICON Leasing Fund Twelve, LLC

 

(A Delaware Limited Liability Company)

 

Consolidated Statements of Cash Flows

 

(unaudited)

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

2015

 

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

2,344,104

 

$

2,785,139

 

 

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

 

 

 

 

 

 

 

 

 

Finance income

 

 

(1,739,059)

 

 

(2,071,464)

 

 

 

Rental income paid directly to lenders by lessees

 

 

-

 

 

(1,088,550)

 

 

 

Income from investment in joint ventures

 

 

(597,227)

 

 

(639,355)

 

 

 

Depreciation

 

 

2,181,449

 

 

1,886,539

 

 

 

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

 

 

-

 

 

84,265

 

 

 

Interest expense from amortization of debt financing costs

 

 

45,821

 

 

87,124

 

 

 

Net accretion of seller's credit and other

 

 

108,871

 

 

504,151

 

 

 

Credit loss, net

 

 

362,665

 

 

-

 

 

 

Gain on derivative financial instruments

 

 

-

 

 

(36,278)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Collection of finance leases

 

 

4,764,191

 

 

7,323,658

 

 

 

 

Other assets

 

 

122,287

 

 

(190,801)

 

 

 

 

Accrued expenses and other current liabilities

 

 

(353,497)

 

 

946,452

 

 

 

 

Deferred revenue

 

 

(30,394)

 

 

(491,152)

 

 

 

 

Due to Manager and affiliates, net

 

 

(2,461,352)

 

 

(531,640)

 

 

 

 

Distributions from joint ventures

 

 

-

 

 

51,478

 

Net cash provided by operating activities

 

 

4,747,859

 

 

8,619,566

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

-

 

 

(46,009,722)

 

 

 

Proceeds from exercise of purchase options

 

 

70,000

 

 

293,090

 

 

 

Distributions received from joint ventures in excess of profits

 

 

251,662

 

 

2,009,458

 

 

 

Principal received on notes receivable

 

 

5,331,005

 

 

9,589,183

 

Net cash provided by (used in) investing activities

 

 

5,652,667

 

 

(34,117,991)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from non-recourse long-term debt

 

 

-

 

 

7,500,000

 

 

 

Repayment of non-recourse long-term debt

 

 

(1,860,797)

 

 

(3,174,126)

 

 

 

Proceeds from revolving line of credit, recourse

 

 

-

 

 

10,000,000

 

 

 

Payment of debt financing costs

 

 

-

 

 

(75,000)

 

 

 

Repayment of seller's credit

 

 

-

 

 

(210,000)

 

 

 

Investment by noncontrolling interests

 

 

-

 

 

13,342,298

 

 

 

Distributions to noncontrolling interests

 

 

(2,099,276)

 

 

(860,563)

 

 

 

Distributions to members

 

 

(11,323,062)

 

 

(6,377,386)

 

Net cash (used in) provided by financing activities

 

 

(15,283,135)

 

 

20,145,223

 

Effects of exchange rates on cash and cash equivalents

 

 

-

 

 

(7)

 

Net decrease in cash and cash equivalents

 

 

(4,882,609)

 

 

(5,353,209)

 

Cash and cash equivalents, beginning of period

 

 

15,410,563

 

 

13,985,307

 

Cash and cash equivalents, end of period

 

$

10,527,954

 

$

8,632,098

 

 

 

See accompanying notes to consolidated financial statements.

 

4


ICON Leasing Fund Twelve, LLC

 

(A Delaware Limited Liability Company)

 

Consolidated Statements of Cash Flows

 

(unaudited)

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

2015

 

 

2014

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

906,762

 

$

567,690

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Principal and interest on non-recourse long-term debt paid directly to lenders by lessees

 

$

-

 

$

1,088,550

 

 

Funds withheld from seller on asset acquisition

 

$

-

 

$

250,000

 

 

Vessel purchased with non-recourse long-term debt paid directly to seller

 

$

-

 

$

24,800,000

 

 

Vessel purchased with subordinated non-recourse financing provided by seller

 

$

-

 

$

2,911,254

 

 

Debt financing costs netted at funding

 

$

-

 

$

267,951

 

 

Investment by noncontrolling interests

 

$

-

 

$

635,594

 

 

Interest reserve net against principal repayment of note receivable

 

$

-

 

$

206,250

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
                         

 

5


Table of contents 

ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

March 31, 2015

(unaudited)

 

(1) Organization 

ICON Leasing Fund Twelve, LLC (the “LLC”) was formed on October 3, 2006 as a Delaware limited liability company. When used in these notes to consolidated financial statements, the terms “we,” “us,” “our” or similar terms refer to the LLC and its consolidated subsidiaries.

We operated as an equipment leasing and finance program in which the capital our members invested was pooled together to make investments, pay fees and establish a small reserve.  We primarily acquired equipment subject to lease, purchased equipment and leased it to third-party end users or financed equipment for third parties and, to a lesser degree, acquired ownership rights to items of leased equipment at lease expiration.

Our manager is ICON Capital, LLC, a Delaware limited liability company (the “Manager”).  Our Manager manages and controls our business affairs, including, but not limited to, our equipment leases and other financing transactions, pursuant to the terms of our limited liability company agreement (the “LLC Agreement”).

Our operating period ended on April 30, 2014. On May 1, 2014, we commenced our liquidation period, during which we will sell our assets and/or let our investments mature in the ordinary course of 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 Manager, 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, 2014.  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

Our Manager monitors the ongoing credit quality of our financing receivables by (i) reviewing and analyzing a borrower’s financial performance on a regular basis, including review of financial statements received on a monthly, quarterly or annual basis as prescribed in the loan or lease agreement, (ii) tracking the relevant credit metrics of each financing receivable and a borrower’s compliance with financial and non-financial covenants, (iii) monitoring a borrower’s payment history and public credit rating, if available, and (iv) assessing our exposure based on the current investment mix. As part of the monitoring process, our Manager may physically inspect the collateral or a borrower’s facility and meet with a borrower’s management to better understand such borrower’s financial performance and its future plans on an as-needed basis.

 

As our financing receivables, generally notes receivable and finance leases, are limited in number, our 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. Our Manager does not use a system of assigning internal risk ratings to each of our financing receivables. Rather, each financing receivable is analyzed quarterly and categorized as either performing or non-performing based on certain factors including, but not limited to, financial results, satisfying scheduled payments and compliance with financial covenants. A financing receivable is usually categorized as non-performing only when a borrower experiences financial difficulties and has failed to make scheduled payments. Our Manager then analyzes whether the financing receivable should be placed on a non-accrual status, a credit loss reserve should be established or the financing receivable should be restructured. As part of the assessment, updated collateral value is usually considered and such collateral value can be based on a third party industry expert appraisal or, depending on the type of collateral and accessibility to relevant published guides or market sales data, internally derived fair value. Material events would be specifically disclosed in the discussion of each financing receivable held. 

 

6


Table of contents 

ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

March 31, 2015

(unaudited)

 

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

 

When our 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, and/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.

 

In January 2015, FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items (“ASU 2015-01”), which simplifies income statement presentation by eliminating the concept of extraordinary items.  The adoption of ASU 2015-01 becomes effective for us on January 1, 2016, including interim periods within that reporting period.  Early adoption is permitted.  The adoption of ASU 2015-01 is not expected to have a material effect on our consolidated financial statements.

 

In February 2015, FASB issued ASU No. 2015-02, Consolidation – Amendments to the Consolidation Analysis (“ASU 2015-02”), which modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership, and affects the consolidation analysis by reducing the frequency of application of related party guidance and excluding certain fees in the primary beneficiary determination. The adoption of ASU 2015-02 becomes effective for us on January 1, 2016. Early adoption is permitted. We are currently in the process of evaluating the impact of the adoption of ASU 2015-02 on our consolidated financial statements.

 

In April 2015, FASB issued ASU No. 2015-03, Interest – Imputation of Interest (“ASU 2015-03”), which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of such debt liability, consistent with debt discounts. ASU 2015-03 will be applied on a retrospective basis. The adoption of ASU 2015-03 becomes effective for us on January 1, 2016, including interim periods within that reporting period.  Early adoption is permitted. We are currently in the process of evaluating the impact of the adoption of ASU 2015-03 on our consolidated financial statements.

  

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ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

March 31, 2015

(unaudited)

 

 

(3)  Net Investment in Notes Receivable

 

As of March 31, 2015 and December 31, 2014, we had net investment in notes receivable on non-accrual status of $603,694 and $966,359, respectively, and no net investment in notes receivable that was past due 90 days or more and still accruing.

 

Net investment in notes receivable consisted of the following:

  

 

 

 

 

 

 

 

 

March 31, 2015

 

December 31, 2014

 

Principal outstanding (1)

$

54,143,783

 

$

59,474,788

 

Initial direct costs

 

380,876

 

 

522,261

 

Deferred fees

 

(551,143)

 

 

(645,053)

 

Credit loss reserve (2)

 

(994,651)

 

 

(631,986)

 

 

Net investment in notes receivable (3)

 

52,978,865

 

 

58,720,010

 

Less: current portion of net investment in notes receivable

 

6,351,339

 

 

6,482,004

 

 

Net investment in notes receivable, less current portion

$

46,627,526

 

$

52,238,006

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) As of March 31, 2015 and December 31, 2014, total principal outstanding related to our impaired loan was $1,598,345.

 

(2) As of March 31, 2015 and December 31, 2014, the credit loss reserve of $994,651 and $631,986, respectively, was related to VAS (defined below).

 

(3) As of March 31, 2015 and December 31, 2014, net investment in notes receivable related to our impaired loan was $603,694 and $966,359, respectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

During the year ended December 31, 2014, VAS Aero Services, LLC (“VAS”) experienced financial hardship resulting in its failure to make the final monthly payment under the secured term loan as well as the balloon payment due on the October 6, 2014 maturity date. As a result, our Manager determined that we should record a credit loss reserve based on an estimated liquidation value of VAS’s inventory and accounts receivable. Accordingly, the loan was placed on non-accrual status and a credit loss reserve of approximately $632,000 was recorded during the year ended December 31, 2014 based on our pro-rata share of the liquidation value of the collateral. The value of the collateral was based on a third-party appraisal using a sales comparison approach. As of December 31, 2014, the net carrying value of the loan was approximately $966,000. In March 2015, the 90-day standstill period provided for in the loan agreement ended without a viable restructuring or refinancing plan agreed upon. In addition, the senior lender continues to charge VAS forbearance fees. Although discussions among the parties are still ongoing, these factors resulted in our Manager making a determination to record an additional credit loss reserve of approximately $363,000 during the three months ended March 31, 2015 to reflect a potential forced liquidation of the collateral. A portion of the forced liquidation value of the collateral was based on a third-party appraisal using a sales comparison approach. As of March 31, 2015, the net carrying value of the loan was approximately $604,000. Finance income recognized on the loan prior to recording the credit loss reserve was approximately $66,000 for the three months ended March 31, 2014. No finance income was recognized since the date the loan was considered impaired. Accordingly, no finance income was recognized for the three months ended March 31, 2015.

 

On January 30, 2015, Superior Tube Company, Inc. and Tubes Holdco Limited (collectively, “Superior”) satisfied their obligations in connection with a secured term loan scheduled to mature on September 10, 2017 by making a prepayment of approximately $4,191,000, comprised of all outstanding principal, accrued interest and a prepayment fee of approximately $122,000. As a result, we recognized additional finance income of approximately $51,000.

 

Credit loss allowance activities for the three months ended March 31, 2015 were as follows:

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ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

March 31, 2015

(unaudited)

 

 

Credit Loss Allowance

 

Allowance for credit loss as of December 31, 2014

$

631,986

 

Provisions

 

362,665

 

Write-offs, net of recoveries

 

-

 

Allowance for credit loss as of March 31, 2015

$

994,651

 

 

 

 

 

There was no allowance for credit loss as of March 31, 2014 and no related activities during the three months ended March 31, 2014.

 

(4) Net Investment in Finance Leases

 

Net investment in finance leases consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

December 31, 2014

 

Minimum rents receivable

$

90,345,805

 

$

95,179,750

 

Estimated unguaranteed residual values

 

7,975,762

 

 

7,988,228

 

Initial direct costs

 

1,756,069

 

 

1,878,164

 

Unearned income

 

(28,839,571)

 

 

(30,760,420)

 

 

Net investment in finance leases

 

71,238,065

 

 

74,285,722

 

Less: current portion of net investment in finance leases

 

11,083,459

 

 

12,142,423

 

 

Net investment in finance leases, less current portion

$

60,154,606

 

$

62,143,299

 

  

 

(5) Leased Equipment at Cost 

 

Leased equipment at cost consisted of the following:

 

 

 

 

 

 

 

 

March 31, 2015

 

December 31, 2014

 

Offshore oil field services equipment

$

84,324,285

 

$

84,324,285

 

Mining equipment

 

6,858,074

 

 

6,858,074

 

 

Leased equipment at cost

 

91,182,359

 

 

91,182,359

 

Less: accumulated depreciation

 

20,183,184

 

 

18,430,584

 

 

Leased equipment at cost, less accumulated depreciation

$

70,999,175

 

$

72,751,775

 

Depreciation expense was $2,181,449 and $1,886,539 for the three months ended March 31, 2015 and 2014, respectively. Included in depreciation expense for the three months ended March 31, 2015 was $428,849 related to the Aegean Express and the Arabian Express, which were reclassified from leased equipment at cost to vessels on our consolidated balance sheets during the year ended December 31, 2014. 

 

(6) Investment in Joint Ventures

 

On December 22, 2011, a joint venture owned 25% by us and 75% by ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P., an entity also managed by our Manager, made a $20,124,000 subordinated term loan to Jurong Aromatics Corporation Pte. Ltd. (“JAC”).

 

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ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

March 31, 2015

(unaudited)

 

On May 15, 2013, a joint venture owned 21% by us, 39% by ICON Leasing Fund Eleven, LLC (“Fund Eleven”) and 40% by ICON ECI Fund Fifteen, L.P., each an entity also managed by our Manager, purchased a portion of an approximately $208,000,000 subordinated credit facility for JAC from Standard Chartered Bank (“Standard Chartered”) at $28,462,500.

 

As of March 31, 2015, JAC was in technical default of the loan and facility as a result of its failure to provide certain financial data to us. In addition, JAC realized lower than expected operating results caused in part by a temporary shutdown of its manufacturing facility due to technical constraints that have since been resolved.  As a result, JAC failed to make the expected payments that were due to the joint ventures during the three months ended March 31, 2015.  Although these delayed payments did not trigger a payment default under the loan agreements, the interest rate payable by JAC under  the loan and facility increased from 12.5% to 15.5%. Our Manager believes that all contractual interest and principal payments are still collectible and therefore, a credit loss reserve was not required by the joint ventures as of March 31, 2015. To the extent the manufacturing facility does not resume operations in the near future, a credit loss reserve may be required by the joint ventures.

 

(7) Non-Recourse Long-Term Debt 

As of March 31, 2015 and December 31, 2014, we had non-recourse long-term debt obligations of $57,334,989 and $59,195,786, respectively. As of March 31, 2015, our non-recourse long-term debt obligations had maturity dates ranging from February 1, 2018 to April 8, 2022 and interest rates ranging from 5.04% to 7.50% per year.  

 

All of 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 borrower were to default on the underlying lease or loan, resulting in our default on the non-recourse long-term debt, the assets could be foreclosed upon and the proceeds would be remitted to the lender in extinguishment of that debt. As of March 31, 2015 and December 31, 2014, the total carrying value of assets subject to non-recourse long-term debt was $104,683,833 and $107,226,456, respectively.

 

At March 31, 2015, we were in compliance with all covenants related to our non-recourse long-term debt.

 

(8) Transactions with Related Parties

We paid distributions to our Manager of $113,231 and $63,774 for the three months ended March 31, 2015 and 2014, respectively. Additionally, our Manager’s interest in the net income attributable to us was $13,130 and $21,640 for the three months ended March 31, 2015 and 2014, respectively.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 Entity

 

 Capacity

 

 Description

 

 

2015

 

 

2014

 

ICON Capital, LLC

Manager

 

Acquisition fees(1)

 

$

-

 

$

1,612,070

 

ICON Capital, LLC

Manager

 

Management fees (2)

 

 

384,836

 

 

539,190

 

ICON Capital, LLC

Manager

 

Administrative expense

 

 

 

 

 

 

 

 

 

 

reimbursements(2)

 

 

439,013

 

 

460,632

 

 

 

 

$

823,849

 

$

2,611,892

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Amount capitalized and amortized to operations.

 

(2)

Amount charged directly to operations.

 

At March 31, 2015 and December 31, 2014, we had a net payable due to our Manager and affiliates of $337,062 and $2,798,414, respectively, primarily related to administrative expense reimbursements. The administrative expense reimbursements incurred during the year ended December 31, 2014 included approximately $2,100,000 of professional fees and other costs in connection with our Manager’s proposed sale of our assets during our liquidation period. Our Manager may continue to incur additional professional fees and costs on our behalf as it continues to pursue the sale of our assets in one or more strategic transactions.

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Table of contents 

ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

March 31, 2015

(unaudited)

 

  

 

(9) Derivative Financial Instruments

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

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

U.S. GAAP and relevant International Swaps and Derivatives Association, Inc. agreements permit a reporting entity that is a party to a master netting agreement to offset fair value amounts recognized for derivative instruments that have been offset under the same master netting agreement. We elected to present the fair value of derivative contracts on a gross basis on our consolidated balance sheets.

Interest Rate Risk

 

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements on our variable non-recourse debt. Our strategy to accomplish these objectives is to match the projected future cash flows with the underlying debt service. Each interest rate swap involves the receipt of floating-rate interest payments from a counterparty in exchange for us making fixed-rate interest payments over the life of the agreement without exchange of the underlying notional amount.

 

Counterparty Risk

 

We manage exposure to possible defaults on derivative financial instruments by monitoring the concentration of risk that we have with any individual bank and through the use of minimum credit quality standards for all counterparties. We do not require collateral or other security in relation to derivative financial instruments. Since it is our policy to enter into derivative contracts only with banks of internationally acknowledged standing and the fair value of our derivatives is in a liability position, we consider the counterparty risk to be remote.

 

As of March 31, 2015 and December 31, 2014, we no longer hold any derivative financial instruments.

 

Non-designated Derivative

 

On April 1, 2014, our only remaining interest rate swap with Standard Chartered that was not designated and not qualifying as a cash flow hedge was terminated prior to its maturity date. The lessee to the transaction associated with this interest rate swap was responsible for all costs related to such termination. Additionally, we held warrants for purposes other than hedging. On July 21, 2014, we exercised all of such warrants for cash consideration. All changes in the fair value of the interest rate swap and the warrants were recorded directly in earnings, which was included in gain or loss on derivative financial instruments.

 

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Table of contents 

ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

March 31, 2015

(unaudited)

 

Our derivative financial instruments not designated as hedging instruments generated a gain on derivative financial instruments on our consolidated statements of comprehensive income for the three months ended March 31, 2014 of $39,709. The gain recorded for the three months ended March 31, 2014 was comprised of gains of $36,656 relating to the interest rate swap contract and $3,053 relating to warrants. These amounts were recorded as a component of gain on derivative financial instruments on our consolidated statements of comprehensive income.

 

Designated Derivatives

 

On April 1, 2014, our two interest rate swaps with Standard Chartered that were designated and qualifying as cash flow hedges were terminated prior to their maturity date. The lessee to the transaction associated with the interest rate swaps was responsible for all costs related to such termination. On April 24, 2014, our two interest rate swaps with BNP Paribas that were designated and qualifying as cash flow hedges matured. As a result, $346,668 was reclassified from AOCI to interest expense and loss on derivative financial instruments during the three months ended June 30, 2014.

 

For these derivatives, we recorded the gain or loss from the effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges in AOCI and such gain or loss was subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings and within the same line item on the consolidated statements of comprehensive income as the impact of the hedged transaction. During the three months ended March 31, 2014, we recorded $3,431 of hedge ineffectiveness in earnings, which was included in gain on derivative financial instruments. At March 31, 2014, the total unrealized loss recorded to AOCI related to the change in fair value of these interest rate swaps was $352,662.

 

The table below presents the effect of our derivative financial instruments designated as cash flow hedging instruments on the consolidated statements of comprehensive income for the three months ended March 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Location of

 

 

Amount of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss

 

 

Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognized in

 

 

Recognized in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income on

 

 

Income on

 

 

 

 

 

 

Amount of

 

 

Location of

 

 

Amount of

 

 

Derivatives

 

 

Derivatives

 

 

 

 

 

 

Loss

 

 

Loss

 

 

Loss

 

 

(Ineffective

 

 

(Ineffective

 

 

 

 

 

 

Recognized in

 

 

Reclassified

 

 

Reclassified

 

 

Portion and

 

 

Portion and

 

 

 

Derivatives

 

 

AOCI on

 

 

from AOCI

 

 

from AOCI

 

 

Amounts

 

 

Amounts

 

 

 

Designated as

 

 

Derivatives

 

 

into Income

 

 

into Income

 

 

Excluded from

 

 

Excluded from

 

 

 

Hedging

 

 

(Effective

 

 

(Effective

 

 

(Effective

 

 

Effectiveness

 

 

Effectiveness

 

Period

 

Instruments

 

 

Portion)

 

 

Portion)

 

 

Portion)

 

 

Testing)

 

 

Testing)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain

 

 

 

 

Three Months

 

 

 

 

 

 

 

 

 

 

 

 

 

on derivative

 

 

 

 

Ended

 

Interest rate

 

 

 

 

 

Interest

 

 

 

 

 

financial

 

 

 

 

March 31, 2014

 

swaps

 

$

(12,821)

 

 

expense

 

$

(295,740)

 

 

instruments

 

$

(3,431)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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.

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Table of contents 

ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

March 31, 2015

(unaudited)

 

·         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 Measured at Fair Value on a Nonrecurring Basis

 

We are required, on a nonrecurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements. The valuation of our financial assets, such as notes receivable or direct financing leases, is included below only when fair value has been measured and recorded based on the fair value of the underlying collateral.

 

The following table summarizes the valuation of our material financial assets measured at fair value on a nonrecurring basis, which is presented as of the date the credit loss was recorded, while the carrying value of the assets is presented as of March 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit loss

 

 

Carrying Value at

 

Fair Value at Impairment Date

 

for the Three Months Ended

 

 

March 31, 2015

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

March 31, 2015

 

Net investment in note receivable

$

603,694

 

$

-

 

$

-

 

$

603,694

 

$

362,665

 

 

 

Our collateral dependent note receivable was valued using inputs that are generally unobservable and are supported by little or no market data and was classified within Level 3. For the credit loss recorded during the three months ended March 31, 2015, our collateral dependent note receivable was primarily valued based on the liquidation value of the collateral provided by an independent third-party appraiser.

 

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. Under 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 and liabilities, other than lease-related investments, approximates fair value due to their short-term maturities.

 

The estimated fair value of our fixed-rate notes receivable was based on the discounted value of future cash flows related to the loans at inception, adjusted for changes in variables, including, but not limited to, credit quality, industry, financial markets and other recent comparables. The estimated fair value of our fixed-rate non-recourse long-term debt and seller’s credits was based on the discounted value of future cash flows related to the debt and seller’s credits based on a discount rate derived from the margin at inception, adjusted for material changes in risk, plus the applicable fixed rate based on the current interest rate curve. Principal outstanding on fixed-rate notes receivable was discounted at rates ranging between 6.51% and 14.5% as of March 31, 2015. Principal outstanding on fixed-rate non-recourse long-term debt and the seller’s credits was discounted at rates ranging between 1.38% and 6.90% as of March 31, 2015.

 

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Table of contents 

ICON Leasing Fund Twelve, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements

March 31, 2015

(unaudited)

 

 

 

 

 

 

 

 

March 31, 2015

 

 

 

 

 

 

 

Carrying

 

Fair Value

 

 

 

 

 

 

 

Value

 

(Level 3)

 

Principal outstanding on fixed-rate notes receivable

$

53,149,132

 

$

49,413,232

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

57,334,989

 

$

58,379,136

 

 

 

 

 

 

 

 

 

 

 

 

 

Seller's credits

$

12,404,869

 

$

13,030,703

 

 

 

 

 

 

 

 

 

 

 

 

 

(11) Commitments and Contingencies       

At the time we acquire or divest of our interest in an equipment lease or other financing transaction, we may, under very limited circumstances, agree to indemnify the seller or buyer for specific contingent liabilities. Our Manager 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.

 

In connection with certain debt obligations, we are required to maintain restricted cash accounts with certain banks. At March 31, 2015, we had restricted cash of approximately $1,345,000, which is presented within other non-current assets in our consolidated balance sheets.

 

During 2008, a joint venture, ICON EAR, LLC (“ICON EAR”), owned 55% by us and 45% by Fund Eleven, purchased and simultaneously leased semiconductor manufacturing equipment to Equipment Acquisition Resources, Inc. (“EAR”) for approximately $15,730,000. On October 23, 2009, EAR filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. On October 21, 2011, the Chapter 11 bankruptcy trustee for EAR filed an adversary complaint against ICON EAR seeking the recovery of the lease payments that the trustee alleges were fraudulently transferred from EAR to ICON EAR. The complaint also sought the recovery of payments made by EAR to ICON EAR during the 90-day period preceding EAR’s bankruptcy filing, alleging that those payments constituted a preference under the U.S. Bankruptcy Code. Additionally, the complaint sought the imposition of a constructive trust over certain real property and the proceeds from the sale that the ICON EAR received as security in connection with its investment. Our Manager filed an answer to the complaint that included certain affirmative defenses. Since that time, substantial discovery was completed.  Our Manager still believes these claims are unsupported by the facts, but given the risks, costs and uncertainty surrounding litigation in bankruptcy, our Manager would engage in prudent settlement discussions to resolve this matter expeditiously. At this time, we are unable to predict the outcome of this action or loss therefrom, if any; however, an adverse ruling or settlement may have a material impact on our consolidated financial position or results of operations.

Subsequent to the filing of the bankruptcy petition, EAR disclaimed any right to its equipment and such equipment became the subject of an Illinois State Court proceeding. The equipment was subsequently sold as part of the Illinois State Court proceeding. On March 6, 2012, one of the creditors in the Illinois State Court proceeding won a summary judgment motion filed against ICON EAR, thereby dismissing ICON EAR’s claims to the proceeds resulting from the sale of the EAR equipment. ICON EAR appealed this decision. On September 16, 2013, the lower court’s ruling was affirmed by the Illinois Appellate Court. On October 21, 2013, ICON EAR filed a Petition for Leave to Appeal with the Supreme Court of Illinois appealing the decision of the Illinois Appellate Court, which petition was denied on January 29, 2014.

We have entered into remarketing agreements with third parties.  Residual proceeds received in excess of specific amounts will be shared with these third parties in accordance with the terms of the remarketing agreements.  The present value of the obligations related to these agreements was approximately $73,000 at March 31, 2015.

(12) Subsequent Event

On May 7, 2015, NARL Marketing Inc. and certain of its affiliates (collectively, “NARL”) made a partial prepayment on its secured term loan of approximately $827,000 as part of the excess cash sweep provision of the loan agreement.

 

14


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

The following is a discussion of our current financial position and results of operations. This discussion should be read together with our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2014. This discussion should also be read in conjunction with the disclosures below regarding “Forward-Looking Statements” and the “Risk Factors” set forth in Item 1A of Part II of this Quarterly Report on Form 10-Q.

As used in this Quarterly Report on Form 10-Q, references to “we,” “us,” “our” or similar terms include ICON Leasing Fund Twelve, LLC and its consolidated subsidiaries.

 

Forward-Looking Statements 

Certain statements within this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). These statements are being made pursuant to the PSLRA, with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA, and, other than as required by law, we assume no obligation to update or supplement such statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of words such as “may,” “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 operated as an equipment leasing and finance program in which the capital our members invested was pooled together to make investments, pay fees and establish a small reserve. We primarily acquired equipment subject to lease, purchased equipment and leased it to third-party end users or financed equipment for third parties and, to a lesser degree, acquired ownership rights to items of leased equipment at lease expiration.  Some of our equipment leases were acquired for cash and were expected to provide current cash flow, which we refer to as “income” leases.  For our other equipment leases, we financed the majority of the purchase price through borrowings from third parties.  We refer to these leases as “growth” leases.  These growth leases generated little or no current cash flow because substantially all of the rental payments we received from the lessee were used to service the indebtedness associated with acquiring or financing the lease.  For these leases, we anticipated that the future value of the leased equipment would exceed the cash portion of the purchase price.

 

Our Manager manages and controls our business affairs, including, but not limited to, our equipment leases and other financing transactions, under the terms of our LLC Agreement.

 

Our offering period ended on April 30, 2009 and our operating period commenced on May 1, 2009. During our offering period, we raised total equity of $347,686,947. Our operating period ended on April 30, 2014 and our liquidation period commenced on May 1, 2014. During our liquidation period, we will sell our assets and/or let our investments mature in the ordinary course of business.  If our Manager believes it would benefit our members to reinvest the proceeds received from investments in additional investments during the liquidation period, our Manager may do so. Our Manager is not paid acquisition fees or management fees for additional investments initiated during the liquidation period, although management fees continue to be paid for investments that were part of our portfolio prior to the commencement of the liquidation period.

 

Recent Significant Transactions

 

We engaged in the following significant transactions since December 31, 2014:

 

Notes Receivable

15


During the year ended December 31, 2014, VAS experienced financial hardship resulting in its failure to make the final monthly payment under the secured term loan as well as the balloon payment due on the October 6, 2014 maturity date. As a result, our Manager determined that we should record a credit loss reserve based on an estimated liquidation value of VAS’s inventory and accounts receivable. Accordingly, the loan was placed on non-accrual status and a credit loss reserve of approximately $632,000 was recorded during the year ended December 31, 2014 based on our pro-rata share of the liquidation value of the collateral. The value of the collateral was based on a third-party appraisal using a sales comparison approach. As of December 31, 2014, the net carrying value of the loan was approximately $966,000. In March 2015, the 90-day standstill period provided for in the loan agreement ended without a viable restructuring or refinancing plan agreed upon. In addition, the senior lender continues to charge VAS forbearance fees. Although discussions among the parties are still ongoing, these factors resulted in our Manager making a determination to record an additional credit loss reserve of approximately $363,000 during the three months ended March 31, 2015 to reflect a potential forced liquidation of the collateral. A portion of the forced liquidation value of the collateral was based on a third-party appraisal using a sales comparison approach. As of March 31, 2015, the net carrying value of the loan was approximately $604,000. Finance income recognized on the loan prior to recording the credit loss reserve was approximately $66,000 for the three months ended March 31, 2014. No finance income was recognized since the date the loan was considered impaired. Accordingly, no finance income was recognized for the three months ended March 31, 2015.

 

On January 30, 2015, Superior satisfied its obligations in connection with a secured term loan scheduled to mature on September 10, 2017 by making a prepayment of approximately $4,191,000, comprised of all outstanding principal, accrued interest and a prepayment fee of approximately $122,000. As a result, we recognized additional finance income of approximately $51,000.

 

Subsequent Event

 

On May 7, 2015, NARL made a partial prepayment on its secured term loan of approximately $827,000 as part of the excess cash sweep provision of the loan agreement.

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 No. 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.

 

In January 2015, FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items, which will become effective for us on January 1, 2016. The adoption of ASU 2015-01 is not expected to have a material effect on our consolidated financial statements.

In February 2015, FASB issued ASU No. 2015-02, Consolidation – Amendments to the Consolidation Analysis, which will become effective for us on January 1, 2016. We are currently in the process of evaluating the impact of the adoption of ASU 2015-02 on our consolidated financial statements.

In April 2015, FASB issued ASU No. 2015-03, Interest – Imputation of Interest, which will become effective for us on January 1, 2016. We are currently in the process of evaluating the impact of the adoption of ASU 2015-03 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 March 31, 2015 (the “2015 Quarter”) and 2014 (the “2014 Quarter”)

 

The following 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, finance income or rental income

16


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.

 

Financing Transactions 

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

 

 

 

 

 

March 31, 2015

 

 

December 31, 2014

 

 

 

 

Net

 

Percentage of

 

 

Net

 

Percentage of

 

 

 

 

Carrying

 

Total Net

 

 

Carrying

 

Total Net

 

Asset Type

 

 

Value

 

Carrying Value

 

 

Value

 

Carrying Value

 

Tanker vessels

 

$

37,526,369

 

30%

 

$

37,998,931

 

29%

 

Mining equipment

 

 

21,169,636

 

17%

 

 

22,184,672

 

17%

 

Platform supply vessels

 

 

21,002,938

 

17%

 

 

21,589,043

 

16%

 

Energy equipment

 

 

11,197,922

 

9%

 

 

11,473,409

 

9%

 

Trailers

 

 

9,817,245

 

8%

 

 

9,809,033

 

7%

 

Transportation

 

 

7,690,466

 

6%

 

 

8,360,217

 

6%

 

Printing equipment

 

 

7,662,257

 

6%

 

 

8,086,659

 

6%

 

Coal drag line

 

 

4,851,595

 

4%

 

 

5,741,902

 

4%

 

Lubricant manufacturing equipment

 

 

2,694,808

 

2%

 

 

2,703,292

 

2%

 

Aircraft engines

 

 

603,694

 

1%

 

 

966,359

 

1%

 

Tube manufacturing equipment

 

 

-

 

-

 

 

4,092,215

 

3%

 

 

 

$

124,216,930

 

100%

 

$

133,005,732

 

100%

 

The net carrying value of our financing transactions includes the balance of our net investment in notes receivable and our net investment in finance leases as of each reporting date.

 

During the 2015 Quarter and the 2014 Quarter, certain customers generated significant portions (defined as 10% or more) of our total finance income as follows:

 

 

 

 

Percentage of Total Finance Income

 

Customer

 

Asset Type

 

2015 Quarter

 

2014 Quarter

 

Técnicas Maritimas Avanzadas, S.A de C.V.

 

Platform supply vessels

 

23%

 

-

 

Siva Global Ships Limited

 

Tanker vessels

 

21%

 

-

 

Spurlock Mining, LLC

 

Mining equipment

 

18%

 

6%

 

D&T Holdings, LLC

 

Transportation

 

11%

 

1%

 

Leighton Holdings Limited

 

Offshore oil field services equipment

 

-

 

58%

 

 

 

 

 

73%

 

65%

 

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

 

Non-performing Assets within Financing Transactions

As of March 31, 2015 and December 31, 2014, the net carrying value of our impaired loan related to VAS was $603,694 and $966,359, respectively. No finance income was recognized since the date the loan was impaired during the year ended December 31, 2014. We recognized $65,952 of finance income related to VAS during the three months ended March 31, 2014 prior to the loan being impaired.

 

Operating Lease Transactions 

 

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

  

 

17


 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

Net

 

Percentage of

 

Net

 

Percentage of

 

 

 

Carrying

 

Total Net

 

Carrying

 

Total Net

 

Asset Type

 

Value

 

Carrying Value

 

Value

 

Carrying Value

 

Offshore oil field services equipment

 

$

65,007,834

 

92%

 

$

66,356,257

 

91%

 

Mining equipment

 

 

5,991,341

 

8%

 

 

6,395,518

 

9%

 

 

 

$

70,999,175

 

100%

 

$

72,751,775

 

100%

 

 

The net carrying value of our operating lease transactions represents the balance of our leased equipment at cost as of each reporting date.

 

During the 2015 Quarter and the 2014 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

 

2015 Quarter

 

2014 Quarter

 

Swiber Holdings Limited

 

Offshore oil field services equipment

 

52%

 

58%

 

Pacific Crest Pte. Ltd.

 

Offshore oil field services equipment

 

33%

 

-

 

Murray Energy Corporation

 

Mining equipment

 

15%

 

-

 

Vroon Group B.V.

 

Marine - container vessels

 

-

 

42%

 

 

 

 

 

100%

 

100%

 

Revenue and other income for the 2015 Quarter and the 2014 Quarter is summarized as follows:

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

Change

 

Finance income

 

$

3,665,065

 

$

3,475,392

 

$

189,673

 

Rental income

 

 

3,532,157

 

 

4,031,972

 

 

(499,815)

 

Time charter revenue

 

 

1,371,311

 

 

-

 

 

1,371,311

 

Income from investment in joint ventures

 

 

597,227

 

 

639,355

 

 

(42,128)

 

 

 Total revenue and other income

 

$

9,165,760

 

$

8,146,719

 

$

1,019,041

 

Total revenue and other income for the 2015 Quarter increased $1,019,041, or 12.5%, as compared to the 2014 Quarter. The increase was primarily due to the recognition of time charter revenue related to the Aegean Express and the Arabian Express as we commenced operating such vessels in April 2014. During the 2014 Quarter, the Aegean Express and the Arabian Express were on lease and therefore, income generated by such leases was included in rental income. The decrease in rental income as a result of reclassifying the Aegean Express and the Arabian Express was partially offset by our new lease with Pacific Crest Pte. Ltd. entered into subsequent to the 2014 Quarter.

 

Expenses for the 2015 Quarter and the 2014 Quarter are summarized as follows:

 

18


 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

 

Change

 

Management fees

 

$

384,836

 

$

539,190

 

$

(154,354)

 

Administrative expense reimbursements

 

 

439,013

 

 

460,632

 

 

(21,619)

 

General and administrative

 

 

907,047

 

 

1,086,521

 

 

(179,474)

 

Interest

 

 

1,049,990

 

 

1,424,976

 

 

(374,986)

 

Depreciation

 

 

2,181,449

 

 

1,886,539

 

 

294,910

 

Credit loss, net

 

 

362,665

 

 

-

 

 

362,665

 

Vessel operating

 

 

1,496,656

 

 

-

 

 

1,496,656

 

Gain on derivative financial instruments

 

 

-

 

 

(36,278)

 

 

36,278

 

 

Total expenses

 

$

6,821,656

 

$

5,361,580

 

$

1,460,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses for the 2015 Quarter increased $1,460,076, or 27.2%, as compared to the 2014 Quarter. The increase was due to (i) vessel operating expenses related to the Aegean Express and the Arabian Express as we commenced operating such vessels in April 2014, (ii) the credit loss reserve related to VAS and (iii) an increase in depreciation due to entering into two new operating leases subsequent to the 2014 Quarter. These increases were partially offset by a decrease in (i) interest expense due to the repayment of our non-recourse long-term debt associated with certain vessels and equipment that were sold subsequent to the 2014 Quarter and (ii) general and administrative expenses primarily due to legal fees incurred during the 2014 Quarter related to the arbitration proceeding and ultimate sale of certain vessels to Leighton Holdings Limited with no comparable expenses incurred in the 2015 Quarter, partially offset by state income taxes and consulting fees incurred during the 2015 Quarter.

 

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests increased $410,001, from $621,121 in the 2014 Quarter to $1,031,122 in the 2015 Quarter. The increase was primarily due to several new consolidated joint ventures that we entered into during or subsequent to the 2014 Quarter.

 

Other Comprehensive Income

Other comprehensive income decreased $282,912, from $282,912 in the 2014 Quarter to $0 in the 2015 Quarter. The decrease was primarily due to the termination or maturity of all our designated interest rates swaps in April 2014. Other comprehensive income in the 2014 Quarter was primarily due to the change in fair value of our designated interest rate swaps.

 

Net Income Attributable to Fund Twelve

 As a result of the foregoing factors, net income attributable to us for the 2015 Quarter and the 2014 Quarter was $1,312,982 and $2,164,018, respectively. Net income attributable to us per weighted average additional share of limited liability company interests (“Share”) outstanding for the 2015 Quarter and the 2014 Quarter was $3.73 and $6.15, respectively.

 

Financial Condition 

This section discusses the major balance sheet variances at March 31, 2015 compared to December 31, 2014.

 

Total Assets

Total assets decreased $15,675,403, from $267,429,193 at December 31, 2014 to $251,753,790 at March 31, 2015. The decrease was primarily due to cash generated from our investments being used to repay our non-recourse long-term debt and to pay distributions to our members and noncontrolling interests during the 2015 Quarter.

 

Current Assets

Current assets decreased $6,188,690, from $34,655,589 at December 31, 2014 to $28,466,899 at March 31, 2015. The decrease was primarily due to (i) cash generated from our investments being used to repay our non-recourse long-term debt and to pay distributions to our members and noncontrolling interests during the 2015 Quarter and (ii) a decrease in the current portion of net investment in finance leases of approximately $1,059,000 as part of a scheduled change in lease payments during the 2015 Quarter.

 

19


Total Liabilities

Total liabilities decreased $4,597,169, from $76,549,257 at December 31, 2014 to $71,952,088 at March 31, 2015. The decrease was primarily due to (i) the repayment of our non-recourse long-term debt, (ii) the partial repayment of liabilities due to our Manager for expenses incurred in connection with a proposed sale of our assets during our liquidation period in 2014 and (iii) the payment of certain accrued liabilities during the 2015 Quarter. Our Manager may continue to incur additional professional fees and costs on our behalf as it continues to pursue the sale of our assets in one or more strategic transactions.

 

Current Liabilities

Current liabilities decreased $2,818,493, from $12,240,238 at December 31, 2014 to $9,421,745 at March 31, 2015. The decrease was primarily due to the partial repayment of liabilities due to our Manager for expenses incurred in connection with a proposed sale of our assets during our liquidation period in 2014 and the payment of certain accrued liabilities during the 2015 Quarter.

 

Equity

Equity decreased $11,078,234, from $190,879,936 at December 31, 2014 to $179,801,702 at March 31, 2015. The decrease was primarily due to distributions to our members and noncontrolling interests during the 2015 Quarter, partially offset by our net income during the 2015 Quarter.

 

Liquidity and Capital Resources 

 

Summary 

 

At March 31, 2015 and December 31, 2014, we had cash and cash equivalents of $10,527,954 and $15,410,563, respectively. Pursuant to the terms of our offering, we established a cash reserve in the amount of 0.5% of the gross offering proceeds.  As of March 31, 2015, the cash reserve was $1,738,435. During our operating period, our main source of cash was typically from operating activities and our main use of cash was in investing and financing activities. During our liquidation period, which commenced on May 1, 2014, we expect our main sources of cash will be from the collection of income and principal on our notes receivable and finance leases and proceeds from the sale of assets held directly by us or indirectly by our joint ventures and our main use of cash will be for distributions to our members and noncontrolling interests. 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 meet our debt obligations, pay distributions to our members and to the extent that expenses exceed cash flows from operations and proceeds from the sale of our investments.

 

We anticipate being able to meet our liquidity requirements into the foreseeable future through the expected results of our operations, as well as cash received from our investments at maturity. However, our ability to generate cash in the future is subject to general economic, financial, competitive, regulatory and other factors that affect us and our lessees’ and borrowers’ businesses that are beyond our control.

 

Cash Flows

 

Operating Activities

 

Cash provided by operating activities decreased $3,871,707, from $8,619,566 in the 2014 Quarter to $4,747,859 in the 2015 Quarter. The decrease was primarily due to a decrease in the collection of finance income as a result of the termination or expiration of certain finance leases as well as the timing of payments of certain of our liabilities.

 

Investing Activities

 

Cash flows from investing activities increased $39,770,658, from a use of cash of $34,117,991 in the 2014 Quarter to a source of cash of $5,652,667 in the 2015 Quarter. The increase was due to the purchase of equipment during the 2014 Quarter with no comparable purchase in the 2015 Quarter, partially offset by a decrease in (i) principal received due to prepayments of several notes receivable during the year ended December 31, 2014 and (ii) distributions received from our joint ventures in excess of profit.

 

Financing Activities

 

20


Cash flows from financing activities decreased $35,428,358, from a source of cash of $20,145,223 in the 2014 Quarter to a use of cash of $15,283,135 in the 2015 Quarter. The decrease was primarily due to (i) $17,500,000 of financing from our non-recourse long-term debt and revolving line of credit during the 2014 Quarter with no comparable financing in the 2015 Quarter, (ii) no contributions from noncontrolling interests during the 2015 Quarter and (iii) increased distributions to our members and noncontrolling interests during the 2015 Quarter.

 

Non-Recourse Long-Term Debt

 

We had non-recourse long-term debt obligations at March 31, 2015 and December 31, 2014 of $57,334,989 and $59,195,786, respectively. All of 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 borrower were to default on the underlying loan or lease, resulting in our default on the non-recourse long-term debt, the assets could be foreclosed upon and the proceeds would be remitted to the lender in extinguishment of that debt. As of March 31, 2015 and December 31, 2014, the total carrying value of assets subject to non-recourse long-term debt was $104,683,833 and $107,226,456, respectively.               

At March 31, 2015, we were in compliance with all covenants related to our non-recourse long-term debt.

 

Distributions

 

We, at our Manager’s discretion, paid monthly distributions to each of our additional members beginning with the first month after each such member’s admission through the end of our operating period, which was April 30, 2014. We paid distributions of $113,231, $11,209,831 and $2,099,276 to our Manager, additional members and noncontrolling interests, respectively, during the 2015 Quarter. During our liquidation period, we have paid and will continue to pay distributions in accordance with the terms our LLC Agreement. We expect that distributions paid during our liquidation period will vary, depending on the timing of the sale of our assets and/or the maturity of our investments, and our receipt of rental, finance and other income from our investments.

 

Commitments and Contingencies and Off-Balance Sheet Transactions

 

Commitments and Contingencies

 

In connection with certain debt obligations, we are required to maintain restricted cash accounts with certain banks. At March 31, 2015, we had restricted cash of approximately $1,345,000, which is presented within other non-current assets in our consolidated balance sheets.

 

During 2008, a joint venture, ICON EAR, owned 55% by us and 45% by Fund Eleven, purchased and simultaneously leased semiconductor manufacturing equipment to EAR for approximately $15,730,000. On October 23, 2009, EAR filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. On October 21, 2011, the Chapter 11 bankruptcy trustee for EAR filed an adversary complaint against ICON EAR seeking the recovery of the lease payments that the trustee alleges were fraudulently transferred from EAR to ICON EAR. The complaint also sought the recovery of payments made by EAR to ICON EAR during the 90-day period preceding EAR’s bankruptcy filing, alleging that those payments constituted a preference under the U.S. Bankruptcy Code. Additionally, the complaint sought the imposition of a constructive trust over certain real property and the proceeds from the sale that ICON EAR received as security in connection with its investment. Our Manager filed an answer to the complaint that included certain affirmative defenses. Since that time, substantial discovery was completed.  Our Manager still believes these claims are unsupported by the facts, but given the risks, costs and uncertainty surrounding litigation in bankruptcy, our Manager would engage in prudent settlement discussions to resolve this matter expeditiously. At this time, we are unable to predict the outcome of this action or loss therefrom, if any; however, an adverse ruling or settlement may have a material impact on our consolidated financial position or results of operations.

 

Subsequent to the filing of the bankruptcy petition, EAR disclaimed any right to its equipment and such equipment became the subject of an Illinois State Court proceeding. The equipment was subsequently sold as part of the Illinois State Court proceeding. On March 6, 2012, one of the creditors in the Illinois State Court proceeding won a summary judgment motion filed against ICON EAR, thereby dismissing ICON EAR’s claims to the proceeds resulting from the sale of the EAR equipment. ICON EAR appealed this decision. On September 16, 2013, the lower court’s ruling was affirmed by the Illinois Appellate Court. On October 21, 2013, ICON EAR filed a Petition for Leave to Appeal with the Supreme Court of Illinois appealing the decision of the Illinois Appellate Court, which petition was denied on January 29, 2014.

21


We have entered into remarketing agreements with third parties.  Residual proceeds received in excess of specific amounts will be shared with these third parties in accordance with the terms of the remarketing agreements.  The present value of the obligations related to these agreements was approximately $73,000 at March 31, 2015.

 

Off-Balance Sheet Transactions

None.

22


Item 3. Quantitative and Qualitative Disclosures About Market Risk 

 

There are no material changes to the disclosures related to this item since the filing of our Annual Report on Form 10-K for the year ended December 31, 2014.

 

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 March 31, 2015, our Manager carried out an evaluation, under the supervision and with the participation of the management of our Manager, including its Co-Chief Executive Officers and the Principal Financial and Accounting Officer, of the effectiveness of the design and operation of our Manager’s disclosure controls and procedures as of the end of the period covered by this report pursuant to the Securities Exchange Act of 1934, as amended. Based on the foregoing evaluation, the Co-Chief Executive Officers and the Principal Financial and Accounting Officer concluded that our Manager’s disclosure controls and procedures were effective.

 

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

 

Evaluation of internal control over financial reporting

There have been no changes in our internal control over financial reporting during the three months ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

  

23


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. See “Commitments and Contingencies and Off-Balance Sheet Transactions” above for a complete discussion of the EAR matter. Notwithstanding our Manager’s belief that the EAR trustee’s claims against us are unsupported by the facts, an adverse ruling or settlement may have a material impact on our consolidated financial position or results of operations. We are not aware of any other material legal proceedings that are currently pending against us or against any of our assets.

 

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2014.

 

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

We did not sell or repurchase any Shares during the three months ended March 31, 2015.

Item 3.  Defaults Upon Senior Securities 

Not applicable.

 

Item 4.  Mine Safety Disclosures 

Not applicable.

 

Item 5.  Other Information 

Not applicable.

24


Item 6. Exhibits

3.1                Certificate of Formation of Registrant (Incorporated by reference to Exhibit 3.1 to Registrant’s Registration Statement on Form S-1 filed with the SEC on November 13, 2006 (File No. 333-138661)).

4.1                Limited Liability Company Agreement of Registrant (Incorporated by reference to Exhibit A to Registrant’s Prospectus filed with the SEC on May 8, 2007 (File No. 333-138661)). 

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

10.2              Loan Modification Agreement, dated as of March 31, 2013, by and between California Bank & Trust and ICON Leasing Fund Twelve, LLC (Incorporated by reference to Exhibit 10.2 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012, filed March 22, 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 Leasing Fund Twelve, LLC

(Registrant)

 

By: ICON Capital, LLC

      (Manager of the Registrant)

 

May 8, 2015

 

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

Managing Director

(Principal Financial and Accounting Officer)

 

 

 

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